<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 21, 1996
REGISTRATION NO. 333-
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
CONSERVER CORPORATION OF AMERICA
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 0723 65-0675901
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
2655 LEJEUNE ROAD, SUITE 535
CORAL GABLES, FLORIDA 33134
(305) 444-3888
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
CHARLES H. STEIN, PRESIDENT
2655 LEJEUNE ROAD, SUITE 535
CORAL GABLES, FLORIDA 33134
(305) 444-3888
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
IRA ROXLAND, ESQ. LAWRENCE B. FISHER, ESQ.
PARKER DURYEE ROSOFF & HAFT ORRICK, HERRINGTON & SUTCLIFFE LLP
529 FIFTH AVENUE 666 FIFTH AVENUE
NEW YORK, NEW YORK 10017 NEW YORK, NEW YORK 10103
(212) 599-0500 (212) 506-5000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If this Form is filed to register additional securities for an Offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same Offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same Offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act,
check the following box. [X]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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- ------------------------------------------------------------------------------------------------------------------------------
TITLE OF EACH CLASS PROPOSED MAXIMUM PROPOSED MAXIMUM
OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED(1) PER SECURITY(2) OFFERING PRICE(2) REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $0.001 per share(3)...... 4,600,000 $6.00 $27,600,000 $8,363.64
- ------------------------------------------------------------------------------------------------------------------------------
Redeemable Common Stock Purchase Warrants(4)..... 4,600,000 $0.10 $460,000 $139.39
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Common Stock, par value $0.001 per share,
issuable upon exercise of Redeemable Common
Stock Purchase Warrants........................ 4,600,000 $8.40 $38,640,000 $11,709.09
- ------------------------------------------------------------------------------------------------------------------------------
Representative's Warrants(5)..................... 400,000 $0.0001 $40 $0.01
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Common Stock, par value $0.001 per share,
issuable upon exercise of Representative's
Warrants....................................... 400,000 $7.20 $2,880,000 $872.73
- ------------------------------------------------------------------------------------------------------------------------------
Redeemable Common Stock Purchase Warrants
issuable upon exercise of Representative's
Warrants....................................... 400,000 $0.12 $48,000 $14.55
- ------------------------------------------------------------------------------------------------------------------------------
Common Stock, par value $0.001 per share,
issuable upon exercise of Redeemable Common
Stock Purchase Warrants issuable upon exercise
of Representative's Warrants................... 400,000 $8.40 $3,360,000 $1,018.18
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Totals................................... $72,988,040 $22,117.59
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</TABLE>
(1) Pursuant to Rule 416, there are also being registered such additional
securities as may become issuable pursuant to the anti-dilution provisions
of the Redeemable Common Stock Purchase Warrants (the "Warrants"), the
Representative's Warrants and the Warrants underlying the Representative's
Warrants.
(2) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457.
(3) Includes 600,000 shares of Common Stock which the Underwriters have the
option to purchase to cover over-allotments, if any.
(4) Includes 600,000 Warrants which the Underwriters have the option to purchase
to cover over-allotments, if any.
(5) In connection with the Registrant's sale of the Securities offered hereby,
the Registrant is granting to the Representative of the several Underwriters
(the "Representative") warrants (the "Representative's Warrants") to
purchase 400,000 shares of Common Stock and/or 400,000 Warrants. The
purchase price per Representative's Warrant is $0.0001.
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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<PAGE> 2
SUBJECT TO COMPLETION, DATED NOVEMBER 21, 1996
PROSPECTUS
<TABLE>
<S> <C>
LOGO CONSERVER CORPORATION OF AMERICA
4,000,000 SHARES OF COMMON STOCK AND
4,000,000 REDEEMABLE COMMON STOCK PURCHASE WARRANTS
</TABLE>
------------------------
This Prospectus relates to the offering (the "Offering") of 4,000,000
shares (the "Shares") of common stock, $0.001 par value per share (the "Common
Stock"), and 4,000,000 Redeemable Common Stock Purchase Warrants (the
"Warrants") of Conserver Corporation of America, a Delaware corporation (the
"Company"). The Shares and Warrants are sometimes hereinafter collectively
referred to as the "Securities." Until the completion of this Offering, the
Shares and Warrants may only be purchased together on the basis of one Share and
one Warrant. Each Warrant entitles the registered holder thereof to purchase one
share of Common Stock at an initial exercise price of $ per share [140%
of the initial public offering price per Share] at any time during the period
commencing six (6) months from the date of this Prospectus and terminating five
(5) years from the date of this Prospectus. The Warrant exercise price is
subject to adjustment under certain circumstances. Commencing eighteen (18)
months after the date of this Prospectus, the Company may redeem all, but not
less than all, of the Warrants at $0.10 per Warrant on thirty (30) days' prior
written notice to the warrantholders if the average closing sale price of the
Common Stock as reported on the American Stock Exchange ("AMEX") equals or
exceeds 250% of the initial public offering price per Share for any twenty (20)
trading days within a period of thirty (30) consecutive trading days ending on
the fifth trading day prior to the date of the notice of redemption.
Prior to this Offering, there has been no public market for the Common
Stock or the Warrants, and there can be no assurance that such a market will
develop after the completion of this Offering or, if developed, that it will be
sustained. It is currently anticipated that the initial public offering prices
will be $6.00 per Share and $.10 per Warrant. For information regarding the
factors considered in determining the initial public offering prices of the
Shares and Warrants and the terms of the Warrants, see "Risk Factors" and
"Underwriting." It is anticipated that upon consummation of the Offering the
Shares and Warrants will be listed on AMEX and will trade separately immediately
after the Offering under the symbols "CCA" and "CCAW", respectively.
------------------------
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND IMMEDIATE
SUBSTANTIAL DILUTION. SEE "RISK FACTORS" COMMENCING ON PAGE 7 AND "DILUTION."
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<TABLE>
<S> <C> <C> <C>
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</TABLE>
<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO PUBLIC DISCOUNT(1) COMPANY(2)
<S> <C> <C> <C>
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Per Share....................... $ $ $
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Per Warrant..................... $ $ $
- ---------------------------------------------------------------------------------------------------------
Total(3)........................ $ $ $
- ---------------------------------------------------------------------------------------------------------
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</TABLE>
(1) Does not include additional compensation payable to National Securities
Corporation, the representative of the several Underwriters (the
"Representative"), in the form of a non-accountable expense allowance. In
addition, see "Underwriting" for information concerning indemnification and
contribution arrangements with the Underwriters and other compensation
payable to the Representative.
(2) Before deducting estimated expenses of $424,000 payable by the Company,
excluding the non-accountable expense allowance payable to the
Representative.
(3) The Company has granted to the Underwriters an option exercisable within 45
days after the date of this Prospectus to purchase up to an aggregate of
600,000 additional shares of Common Stock and/or 600,000 additional Warrants
upon the same terms and conditions as set forth above, solely to cover
over-allotments, if any (the "Over-allotment Option"). If the Over-allotment
Option is exercised in full, the total Price to Public, Underwriting
Discount and Proceeds to Company will be $ , $ and
$ , respectively. See "Underwriting."
------------------------
The Securities are being offered by the Underwriters, subject to prior
sale, when, as and if delivered to and accepted by the Underwriters, and subject
to approval of certain legal matters by their counsel and subject to certain
other conditions. The Underwriters reserve the right to withdraw, cancel or
modify this Offering and to reject any order in whole or in part. It is expected
that delivery of the Securities offered hereby will be made against payment at
the offices of National Securities Corporation, Seattle, Washington on or about
, 1996.
NATIONAL SECURITIES CORPORATION
The date of this Prospectus is , 1996.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
<PAGE> 3
Sketched characters showing the progression of produce life extension
techniques.
Sketch of vegetables and fruits showing ethylene and gases passing through
Conserver 21.
The Company intends to furnish its stockholders with annual reports
containing financial statements audited by its independent auditors and
quarterly reports for the first three quarters of each fiscal year containing
unaudited interim financial information.
------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES AT A
LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE AMEX, IN THE OVER-THE-COUNTER MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the Financial Statements and Notes thereto appearing elsewhere
in this Prospectus, including the information under "Risk Factors." Unless
otherwise indicated, all information in this Prospectus (i) assumes the
Over-allotment Option is not exercised, (ii) reflects the 2.128874-for-one stock
split effected by the Company in November 1996 and (iii) assumes the Warrants
and the Representative's Warrants to purchase 400,000 shares of Common Stock
and/or 400,000 Warrants issued to the Representative in connection with this
Offering (the "Representative's Warrants") are not exercised. Such information
also assumes (i) that $750,000 in principal amount of outstanding indebtedness
of the Company which, by its terms, can be converted into 319,331 shares of
Common Stock, is not converted, (ii) outstanding options to acquire 457,709
shares of Common Stock, as well as up to 450,000 shares of Common Stock issuable
upon exercise of future stock option grants under the Company's Stock Option
Plan, are not exercised, (iii) outstanding warrants to purchase 691,884 shares
of Common Stock are not exercised, and (iv) warrants to be issued to a holder of
convertible debt and its affiliate, upon the consummation of the Offering, to
purchase 1,170,881 shares of Common Stock are not exercised.
This Prospectus contains forward-looking statements which involve risks and
uncertainties. The Company's actual performance may differ materially from those
anticipated in these forward-looking statements as a result of many factors,
including those set forth under "Risk Factors" and elsewhere in this Prospectus.
THE COMPANY
Conserver Corporation of America (the "Company") has licensed the exclusive
right to import, promote, distribute, market and sell Conserver 21(TM)
("Conserver 21") to commercial users in the United States and Canada through May
2005, subject to extension. The Company believes, and independent laboratory
tests have demonstrated, that Conserver 21 retards the spoilage of perishable
fruits, vegetables and flowers, lengthens their post-harvest life and reduces
shrinkage during transport and storage for a longer period of time than any
other currently utilized technique. This results in fresher, higher quality
fruits, vegetables and flowers for the consumer.
Fresh fruits and vegetables, as well as fresh-cut flowers, are subject to
natural decay which reduces their desirability. Fruits and vegetables are also
subject to shrinkage which reduces the weight of product available for sale to
consumers. In an effort to reduce such decay and shrinkage, additional costs are
incurred by growers and distributors through the use of more expensive storage
and transportation methods. Certain fruits and vegetables are often picked and
shipped prior to being fully ripened in an effort to reduce spoilage while being
transported, often resulting in uneven ripening and compromised taste for the
ultimate consumer.
Utilizing Conserver 21, the Company will offer growers and distributors an
innovative quality assurance management program from point of packing to point
of retail sale (the "Conserver 21 Program"). The Company believes that the
Conserver 21 Program should offer the following potential benefits:
- Higher Level of Customer Satisfaction -- Conserver 21 allows fruits and
vegetables to be harvested at the height of ripeness, resulting in a
longer shelf-life, higher sugar content, richer color and better taste.
- Increased Profit Potential -- Conserver 21 reduces shrinkage and spoilage
during transport and storage, thus resulting in a better product yield for
sale by supermarkets and other retailers.
- Extended Selling Season -- Conserver 21 extends the selling season for
many fruits and vegetables by allowing them to be harvested at the peak of
ripeness, stored for a period of time and then delivered for retail sale
"out of season" at premium prices.
- Reduced Shipping Costs -- Conserver 21 extends the post-harvest life of
highly perishable fruits, vegetables and flowers, so that they can be
shipped by less expensive means of transportation.
Conserver 21 is a natural and non-toxic product composed of the mineral
sepiolite and other mineral salts. Conserver 21 works like a sponge, adsorbing
gases (notably ethylene) produced by maturing fruits, vegetables and flowers.
Without the use of Conserver 21 adsorbing such gases, these gases would be
3
<PAGE> 5
reintroduced and absorbed by such products, increasing their rate of decay while
also hastening the maturation process. Conserver 21 is a non-invasive product
which is manufactured in the form of cylindrical granules and enclosed in
filters or packets which are then positioned so as not to come into direct
contact with the product requiring protection during storage and transport.
The Company plans to target supermarket chains and other retailers who will
profit from the Conserver 21 Program. The Company also intends to purchase
seasonal fruits and vegetables and store them utilizing the Conserver 21 Program
for resale "out of season".
The Company was incorporated in the State of Delaware in March 1996. The
principal executive offices of the Company are located at 2655 LeJeune Road,
Suite 535, Coral Gables, Florida 33134 and its telephone number is (305)
444-3888.
THE OFFERING
Securities Offered by the
Company....................... 4,000,000 Shares of Common Stock and 4,000,000
Warrants. The Shares and the Warrants will be
separately transferable immediately following
the completion of this Offering.
Exercise Price of Warrants.... Each Warrant entitles the registered holder
thereof to purchase, at any time over a
fifty-four (54) month period commencing six (6)
months after the date of this Prospectus, one
share of Common Stock at a price of $
per share [140% of the initial public offering
price per Share]. The Warrant exercise price is
subject to adjustment under certain
circumstances. See "Description of Securities."
Redemption of Warrants........ Commencing eighteen (18) months after the date
of this Prospectus, the Company may redeem all,
but not less than all, of the Warrants at $0.10
per Warrant on thirty (30) days' prior written
notice to the warrantholders if the average
closing sale price of the Common Stock equals
or exceeds 250% of the initial public offering
price per Share of Common Stock for any twenty
(20) trading days within a period of thirty
(30) consecutive trading days ending on the
fifth trading day prior to the date of the
notice of redemption. See "Description of
Securities."
Common Stock Outstanding
Before the Offering........... 8,963,418 shares
Common Stock to be Outstanding
After the Offering.......... 12,910,196 shares(1)
Use of Proceeds............... The net proceeds of this Offering will be used
for direct and collaborative marketing and
distribution, Conserver 21 inventory purchases,
end-of-season fruit purchases, research and
development, storage and sales, possible
investment in non-U.S. manufacturing
facilities, repayment of indebtedness and
working capital and general corporate purposes.
See "Use of Proceeds."
Risk Factors and Dilution..... An investment in the Securities offered hereby
involves a high degree of risk and immediate
and substantial dilution. Prospective investors
should consider carefully the factors set forth
under "Risk Factors" and "Dilution."
4
<PAGE> 6
Proposed Symbols for AMEX(2)
Common Stock................ "CCA"
Warrants.................... "CCAW"
- ---------------
(1) Assumes the Company's re-acquisition of an aggregate of 53,222 shares upon
the consummation of this Offering from an affiliate of a holder of a
convertible debenture issued by the Company (the "SES Reacquisition"). See
"Management's Discussion and Analysis of Financial Condition and Plan of
Operation."
(2) The AMEX listing does not imply that a liquid and active market will
develop, or be sustained, for the Securities upon completion of the
Offering. There can be no assurance that the Securities will be accepted for
listing on the AMEX.
The Company has been granted non-exclusive rights to use the Conserver 21
licensed trademark in the United States and Canada.
5
<PAGE> 7
SUMMARY FINANCIAL INFORMATION
The following summary financial data have been derived from the audited
financial statements of the Company. The statement of operations data set forth
below with respect to the period from March 6, 1996 (date of incorporation) to
August 31, 1996 and the balance sheet and pro forma balance sheet data at August
31, 1996 are derived from, and are qualified by reference to, the audited
Financial Statements included elsewhere in this Prospectus and should be read in
conjunction with those financial statements and notes thereto.
STATEMENT OF OPERATIONS DATA(1):
<TABLE>
<CAPTION>
MARCH 6, 1996
(DATE OF
INCORPORATION) TO
AUGUST 31, 1996
-----------------
<S> <C>
Revenues.............................................................. $ --
Compensation charges in connection with issuance of options and
warrants(2)......................................................... 907,201
General and administrative expenses................................... 393,611
Operating (loss)...................................................... (1,300,812)
Interest expense, net of $8,741 interest income....................... 21,259
Net (loss)............................................................ (1,322,071)
Net (loss) per share of Common Stock.................................. (.13)
Weighted average number of shares of Common Stock outstanding......... 10,463,000
</TABLE>
BALANCE SHEET DATA:
<TABLE>
<CAPTION>
AUGUST 31, 1996
------------------------------------------
PRO FORMA
AS
ACTUAL PRO FORMA(3) ADJUSTED(4)
----------- ------------ -----------
<S> <C> <C> <C>
Working capital.............................. $ 2,242,643 2,618,776 $22,718,776
Total assets................................. 2,446,177 2,819,810 22,919,810
Total current liabilities.................... 199,156 196,656 196,656
Deficit accumulated during development
stage...................................... (1,322,071) (1,322,071) (3,662,071)(5)
Stockholders' equity......................... 1,247,021 1,273,154 22,403,154
</TABLE>
- ---------------
(1) The Company is in the development stage, and has had no commercial
operations to date. See Note A of Notes to Financial Statements.
(2) Relates to non-cash charges recorded by the Company in connection with the
value attributed to options and warrants issued by the Company in March and
August 1996, respectively. See "Management's Discussion and Analysis of
Financial Condition and Plan of Operation" and Note E of Notes to Financial
Statements.
(3) Gives effect on a pro forma basis to (i) the issuance of an aggregate of
645,049 shares of Common Stock at a purchase price of $2.34866 per share
between September 1, 1996 and November 15, 1996 (the "Private Placement
Shares"), (ii) the repurchase by the Company, for an aggregate of
$1,800,000, in October and November 1996 of 2,909,461 of the 3,548,123
shares of Common Stock originally acquired by Conserver Investments, SA (an
affiliate of Groupe Conserver) in March 1996 (the "Conserver Shares
Repurchase") and (iii) the issuance by the Company of an aggregate of
$750,000 of 10% convertible debentures, including the issuance of 133,063
shares of Common Stock in connection therewith (the "10% Convertible
Debentures"). See "Management's Discussion and Analysis of Financial
Condition and Plan of Operation" and Notes A, D and J of Notes to Financial
Statements.
(4) Gives effect on a pro forma, as adjusted basis to (i) the issuance of the
Private Placement Shares, (ii) the Conserver Shares Repurchase, (iii) the
issuance of the 10% Convertible Debentures and (iv) the sale by the Company
of the Securities offered hereby at an assumed initial public offering price
of $6.00 per Share and $.10 per Warrant and the initial application of the
estimated net proceeds therefrom. See "Use of Proceeds" and "Certain
Transactions."
(5) Includes non-cash compensation charges of approximately $2,300,000 expected
to be recorded by the Company in connection with the value attributed to
warrants, issuable upon the consummation of this Offering to a holder of
convertible debentures and an affiliate thereof, exercisable for 1,170,881
shares of Common Stock at an exercise price of $.94 per share.
6
<PAGE> 8
RISK FACTORS
An investment in the Securities offered hereby involves a high degree of
risk. In addition to the other information contained in this Prospectus, the
following factors should be considered carefully in evaluating the Company and
its business before purchasing the Securities offered hereby. Prospective
investors should be in a position to risk the loss of their entire investment.
This Prospectus contains forward-looking statements which involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including those set forth below and elsewhere in this Prospectus.
DEVELOPMENT STAGE COMPANY; NO OPERATING REVENUES; ACCUMULATED DEFICIT. The
Company is in the development stage and its operations are subject to all of the
risks inherent in the establishment of a new business enterprise, including the
need to obtain financing, lack of revenues and the uncertainty of market
acceptance of its business. Its activities since inception have been primarily
limited to negotiating the distribution agreement for Conserver 21 (the "Groupe
Conserver Distribution Agreement") with Conserver 21 S.A., Conserver
International, B.V., Conserver North America, Inc. and Conserver Engineering
Ltd. (collectively, "Groupe Conserver") and privately raising approximately
$4,925,514 in both debt and equity funding to defray its organizational expenses
and the development of its initial business plan. The Company has not as yet
derived any revenues from operations and has incurred losses since inception.
Its accumulated deficit at August 31, 1996 was $1,322,071. No operating revenues
are anticipated until such time, if ever, as the Company can demonstrate the
commercial viability of its Conserver 21 Program. There can be no assurance
regarding whether or when the Company will successfully implement its business
plan or operate profitably. See "Management's Discussion and Analysis of
Financial Condition and Plan of Operation" and "Business."
UNCERTAIN IMPLEMENTATION OF MARKETING STRATEGY. The Company will initially
market its Conserver 21 Program to selected supermarkets and other retailers
and, if successful in securing a contract for the provision of such services,
seek additional customers by asserting that such contractual arrangements had
successfully demonstrated the commercial viability of the Conserver 21 Program.
The Company currently has no customers and there can be no assurance that
potential customers will be willing to incur the costs of the Conserver 21
Program, that the Conserver 21 Program will be contracted for by any
supermarkets or other retailers or, even if accepted by any such entities, that
it will prove profitable or attractive to other potential customers. In
addition, there can be no assurance that other competing services will not be
more economical or attractive to the Company's potential customers. Accordingly,
there can be no certainty that the Company's marketing strategy can be
successfully implemented. See "Business."
RESTRICTED SCOPE OF BUSINESS. The proposed Conserver 21 Program currently
is the Company's initial line of business and will account for substantially all
of the Company's revenues, if any, for the foreseeable future. The use of
Conserver 21 to extend post-harvest life and facilitate the transport of fruits,
vegetables and other foodstuffs, as well as flowers, has not as yet been
demonstrated on a large-scale commercial basis, or any basis in the United
States. There can be no assurance that, when utilized on a large-scale basis,
Conserver 21 will be effective or that it will be more effective than competing
products or technologies, or capable of being manufactured in commercial
quantities at acceptable costs, or successfully marketed. If the Company's
Conserver 21 Program cannot be successfully commercialized or if Conserver 21
cannot be marketed on a stand-alone basis, it is likely that the Company's
business operations would cease. See "Business -- Conserver 21."
DISTRIBUTION AGREEMENT; SOLE SOURCE OF SUPPLY. The Groupe Conserver
Distribution Agreement provides the Company exclusive rights in both the United
States and Canada to distribute, market and sell Conserver 21 to commercial
users, excluding domestic consumers, until May 2005, subject to extension.
However, both the Company and Groupe Conserver may unilaterally terminate such
agreement prior to its scheduled expiration date upon the occurrence of
specified events. Groupe Conserver may terminate the Distribution Agreement, if,
among other things, the Company fails to meet 75% of minimum sales levels (to be
mutually agreed upon by the parties) or the Company fails to comply with
marketing guidelines established by Groupe Conserver. There can be no assurance
that such will not occur or that Groupe Conserver will not
7
<PAGE> 9
default on its obligations. In addition, the Company will initially be wholly
dependent upon Groupe Conserver for its supply of Conserver 21. Under the terms
of the Distribution Agreement, Groupe Conserver is entitled to replace Conserver
21 with a new product, or to change the specifications for the production of
Conserver 21. There can be no assurance that Groupe Conserver will not elect
either of the foregoing options, and if so elected, that such new or different
products will meet the Company's needs as effectively as Conserver 21 in its
current form. Early termination of the Groupe Conserver Distribution Agreement
or the failure of Groupe Conserver to meet all of the Company's supply
requirements for Conserver 21 could have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Business -- Groupe Conserver Distribution Agreement."
NO CURRENT MANUFACTURING CAPABILITIES; DELAYS INHERENT IN
ESTABLISHMENT. The Company does not intend to develop its own manufacturing
facilities in the near future as it intends to rely upon the contractual
commitment of Groupe Conserver to furnish the Company with all of its Conserver
21 needs. The Groupe Conserver Distribution Agreement, however, grants the
Company the right to establish its own domestic manufacturing facilities in the
event Groupe Conserver cannot satisfy the Company's reasonable delivery demands,
either by increasing its production capacity or implementing other corrective
measures. The Company may construct its own manufacturing facility, if and when
permitted by the terms of the Groupe Conserver Distribution Agreement and if
then deemed necessary or desirable by the Company's management. Delays inherent
in the design, location and equipping of any such facilities may impair the
Company's ability to successfully manufacture and market its Conserver 21
Program, as well as satisfy its contractual commitments to render such services
to any future customers, in the event of any unforeseen curtailment or cessation
of Groupe Conserver's own manufacturing capabilities. See "Business -- Sources
of Supply; Manufacturing."
UNPROVEN ON LARGE-SCALE COMMERCIAL BASIS. Conserver 21 has never been
utilized on a large-scale commercial basis. All of the tests utilizing Conserver
21 conducted to date by Groupe Conserver have been performed on limited
quantities of fruits and vegetables, and there can be no assurance that the same
or similar results would or could be obtained on a large-scale commercial basis
or on any specific project. The Company has never utilized Conserver 21 under
the conditions and in the volumes that will be required to be profitable and
cannot predict all of the difficulties that may arise. The Company has not
conducted its own independent tests and to date, has relied on the tests
performed by Groupe Conserver. Thus, it is possible that Conserver 21 may
require further research, development, design and testing, as well as regulatory
clearances, prior to larger-scale commercialization. Additionally, the Company's
ability to operate its business successfully will depend on a variety of
factors, many of which are outside the Company's control, including competition,
cost and availability of the product and changes in regulatory requirements. See
"Business."
SIGNIFICANT CAPITAL REQUIREMENTS; DEPENDENCE ON OFFERING PROCEEDS; NEED FOR
ADDITIONAL FINANCING. The Company's capital requirements in connection with its
development and marketing of the Conserver 21 Program are expected to be
significant. Since the Company is not currently generating any operating
revenues nor are any such revenues anticipated prior to the demonstration of the
Conserver 21 Program's commercial viability, it will be materially dependent
upon the net proceeds of this Offering to defray the cost of these ongoing
activities. The Company believes that the net proceeds of the Offering will be
sufficient to finance the Company's working capital requirements for a period of
at least 18 months following the completion of this Offering. The continued
expansion and operation of the Company's business beyond such 18 month period
may be dependent upon its ability to obtain additional financing. There can be
no assurance that additional financing will be available on terms acceptable to
the Company, or at all. Furthermore, any additional equity financing may be
dilutive to stockholders, and debt financing, if available, will likely include
restrictive covenants, including financial maintenance covenants restricting the
Company's ability to incur additional indebtedness and to pay dividends. The
failure of the Company to raise capital on acceptable terms when needed could
have a material adverse effect on the Company. See "Use of Proceeds" and
"Management's Discussion and Analysis of Financial Condition and Plan of
Operation -- Liquidity and Capital Resources."
LIMITED RELIANCE ON PATENTS AND PROPRIETARY RIGHTS. A combination of
patents, trademarks and trade secrets protect the rights and know-how relating
to Conserver 21. Certain patent applications have been filed in Spain and The
Hague by Groupe Conserver. Pursuant to the Groupe Conserver Distribution
Agreement,
8
<PAGE> 10
Groupe Conserver has agreed to use their best efforts to secure patent
protection in the United States and Canada for the inventions and know-how upon
which Conserver 21 is based. There can be no assurance that such patents will be
accepted, or if accepted, that they will be accepted on a timely basis, or not
be infringed upon, or that trade secrets relating to Conserver 21 will not
otherwise become known to or independently developed by competitors. In
addition, there can be no assurance that others will not be issued patents which
may prevent the use of Conserver 21 by the Company.
DEPENDENCE ON KEY PERSONNEL. The Company's success is dependent upon the
Company's senior corporate management, particularly Charles H. Stein, its Chief
Executive Officer and President. The loss of Mr. Stein's services would have a
material adverse effect on the Company. The Company will enter into a three year
employment agreement with Mr. Stein commencing on the consummation of the
offering and intends to apply for "key man" life insurance policy on the life of
Mr. Stein in the amount of $10,000,000 prior to the consummation of this
Offering. The success of the Company will also depend upon the ability to
attract and retain highly qualified additional management personnel as the
Company grows. The failure to obtain, or delays in obtaining, other key
employees could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Management."
COMPETITION. There are several methods of food preservation commercially
available that compete directly or indirectly with the Company's Conserver 21
Program. Many of the Company's competitors have substantially greater financial,
human and other resources than the Company as well as more experience in the
marketing and selling of post-harvest life extension products. There can be no
assurance that the Conserver 21 Program will gain commercial acceptance or any
meaningful market share. Furthermore, any such market share, if and when
achieved, could be lost or reduced by enhanced competition or the emergence of
new and more effective preservation technologies. See "Business -- Fruit,
Vegetable and Flower Preservation Methods."
LIMITED EXPERTISE IN MARKETING POST-HARVEST LIFE EXTENSION PRODUCTS. The
Company's initial marketing activities will be performed by its executive
officers. Such persons have each had prior experience to varying degrees in the
food industry and marketing food products and services. However, none have had
any experience in marketing the Conserver 21 Program. In order to market and
sell the Conserver 21 Program, as well as any future products and services, the
Company will need to develop a sales force with technical expertise in the food
preservation and transportation industries. There can be no assurance that the
Company will be able to gain such expertise or that such marketing efforts will
be successful. See "Business -- Marketing Research."
BROAD DISCRETION IN APPLICATION OF OFFERING PROCEEDS. Approximately
$3,000,000, or 14.2%, of the net proceeds of this Offering, will be set aside
for possible investment in the expansion of Groupe Conserver's non-U.S.
manufacturing facilities. Management, however, reserves the right to reallocate
the use of such proceeds in whole or in part as may be required by future
business circumstances. An additional sum of approximately $7,100,000, or 33.6%,
of such net proceeds, will be applied to working capital and other unspecified
general corporate purposes. Accordingly, management of the Company will have
broad discretion over the use of proceeds. See "-- No Current Manufacturing
Capabilities; Delays Inherent in Establishment" and "Use of Proceeds."
CONCENTRATION OF OWNERSHIP. Upon completion of this Offering, the current
stockholders of the Company will beneficially own approximately 69% of the
outstanding shares of Common Stock. The Company's executive officers, directors
and their affiliates will beneficially own approximately 31% of all the
outstanding shares of Common Stock after this Offering. Consequently, these
stockholders will be able to determine the outcome of certain corporate actions
requiring stockholder approval, and will be able to elect the Board of Directors
of the Company. Such concentration of ownership may have the effect of
preventing a change in control of the Company. See "Dilution," "Principal
Stockholders" and "Description of Securities."
LIMITATION OF DIRECTOR LIABILITY. The Company's Certificate of
Incorporation provides that a director of the Company will not be personally
liable to the Company or its stockholders for monetary damages for breach of the
fiduciary duty of care as a director, including breaches which constitute gross
negligence, subject to certain limitations imposed by the Delaware General
Corporation Law (the "DGCL"). Thus, under certain
9
<PAGE> 11
circumstances, neither the Company nor the stockholders will be able to recover
damages even if directors take actions which harm the Company. See
"Management -- Indemnification of Directors and Officers and Related Matters."
IMMEDIATE SUBSTANTIAL DILUTION; DISPARITY OF CONSIDERATION. Purchasers of
Securities in this Offering will experience immediate and substantial dilution
in the net tangible book value of the shares of Common Stock and Warrants
purchased by them in this Offering. The immediate dilution to purchasers of the
Securities offered hereby is $4.26, or 71%, per share of Common Stock.
Additional dilution to future net tangible book value per share may occur upon
the exercise of the Warrants, the Representative's Warrants, currently
outstanding options and warrants, options to be issued under the Company's 1996
Stock Option Plan and warrants to be issued to a holder of convertible
debentures and its affiliates. The current stockholders of the Company,
including the Company's executive officers and directors and persons or entities
affiliated with them, acquired their shares of Common Stock for consideration
substantially less than the public offering price of the shares of Common Stock
offered hereby. As a result, new investors in this Offering will bear
substantially all of the risks inherent in an investment in the Company. See
"Capitalization," "Dilution" and "Certain Transactions."
NO DIVIDENDS AND NONE ANTICIPATED. To date, no dividends have been
declared or paid on the Common Stock, and the Company does not anticipate
declaring or paying any dividends in the foreseeable future, but rather intends
to reinvest profits, if any, in its business. See "Dividend Policy."
LACK OF PUBLIC MARKET; DETERMINATION OF OFFERING PRICE; VOLATILITY OF
PRICES OF THE SECURITIES. Prior to this Offering, there has been no public
market for the Securities. Although the Company will apply for listing of the
Common Stock and the Warrants on the AMEX under the symbols "CCA" and "CCAW",
respectively, there can be no assurance that they will be quoted on such
exchange or under such symbols or that an active public market for the
Securities will be developed or be sustained after this Offering. The initial
public offering prices of the Securities offered hereby and the exercise price
and terms of the Warrants have been arbitrarily determined by negotiations
between the Company and the Representative and bear no relationship to the
Company's current earnings, book value, net worth or other established valuation
criteria. The factors considered in determining the initial public offering
prices included an evaluation by management and the Representative of the
history of and prospects for the industry in which the Company proposes to
compete, an assessment of the Company's management, the prospects of the
Company, its capital structure and certain other factors deemed relevant.
Furthermore, the trading prices of the Securities could be subject to wide
fluctuations in response to variations in the Company's operating results,
announcements by the Company or others, developments affecting the Company or
its competitors, suppliers or customers and other events or factors. In
addition, the stock market has experienced extreme price and volume fluctuations
in recent years. These fluctuations have had a substantial impact on the market
prices of many companies, often unrelated to their performance, and may
adversely affect the market prices for any or all of the Securities. See
"Underwriting."
POTENTIAL ADVERSE IMPACT ON MARKET PRICE OF SECURITIES; SHARES ELIGIBLE FOR
FUTURE SALE; ADDITIONAL REGISTERED SECURITIES. Sales of substantial amounts of
the Company's securities in the public market after this Offering or the
perception that such sales may occur could materially adversely affect the
market prices of the Securities and may impair the Company's ability to raise
additional capital by the sale of its equity securities. Of the 12,910,196
shares of Common Stock (assuming the SES Reacquisition), the 691,884 warrants
exercisable at $2.34866 per share (the "$2.35 Warrants") and the 4,000,000
Warrants to be outstanding upon completion of this Offering, the 4,000,000
Shares of Common Stock and 4,000,000 Warrants offered hereby (4,600,000 Shares
and 4,600,000 Warrants if the Over-Allotment Option is exercised in full) will
be immediately freely tradeable without restriction under the Securities Act of
1933, as amended (the "Securities Act") except for any Securities purchased by
an "affiliate" of the Company (as that term is defined under the rules and
regulations of the Securities Act), which will be subject to the resale
limitations of Rule 144 under the Securities Act. The remaining 8,910,196 shares
of Common Stock and all the $2.35 Warrants outstanding prior to consummation of
this Offering are "restricted" securities within the meaning of Rule 144 under
the Securities Act and may be sold under the conditions of such rule, including
satisfaction of certain holding period requirements. The Company expects that
all officers, directors and stockholders of the
10
<PAGE> 12
Company and all holders of any options, warrants or other securities
convertible, exercisable or exchangeable for shares of Common Stock will agree
not to, directly or indirectly, issue, offer, agree or offer to sell, sell,
transfer, assign, encumber, grant an option for the purchase or sale of, pledge,
hypothecate or otherwise dispose of any beneficial interest in such shares of
Common Stock for a period of twelve (12) months following the effective date of
the Registration Statement without the prior written consent of the Company and
the Representative, except in connection with private transactions (not
involving a public offering) in which the transferee(s) agrees in writing to be
similarly bound. The Company expects that certain officers, directors and
stockholders of the Company will also agree not to, directly or indirectly,
issue, offer, agree or offer to sell, sell, transfer, assign, encumber, grant an
option for the purchase or sale of, pledge, hypothecate or otherwise dispose of
more than ten percent (10%) of any shares of Common Stock or any options,
warrants or other securities convertible, exercisable or exchangeable for shares
of Common Stock, whether or not owned by them, for a period of twenty-four (24)
months following the effective date of the Registration Statement without the
prior written consent of the Company and the Representative. It is not known
what effect, if any, future sales of additional securities or the availability
of such securities for sale will have on the market price of the Securities
prevailing from time to time. Nevertheless, the sale or availability for sale of
significant quantities of securities could materially adversely affect the
market prices of the Securities. See "Shares Eligible for Future Sale."
POTENTIAL ADVERSE EFFECT OF FUTURE ISSUANCES OF AUTHORIZED PREFERRED
STOCK. The Company's Certificate of Incorporation authorizes the issuance of
preferred stock with such designations, rights and preferences as may be
determined from time to time by the Board of Directors. Accordingly, the Board
of Directors is empowered, without stockholder approval, to issue preferred
stock with such rates of dividends, redemption provisions, liquidation
preferences, voting rights, conversion privileges and other characteristics as
the Board of Directors may deem necessary. Such preferred stock, if issued,
could adversely affect the holders of the Common Stock. In addition, the
preferred stock could discourage, delay or prevent a takeover of the Company.
The Company has no present intention to issue any shares of preferred stock. See
"Description of Securities."
POTENTIAL ADVERSE EFFECT OF REPRESENTATIVE'S WARRANTS. At the consummation
of the Offering, the Company will sell to the Representative and/or its
designees, for nominal consideration, warrants to purchase up to 400,000 shares
of Common Stock and/or 400,000 Warrants (the "Representative's Warrants"). The
Representative's Warrants will be exercisable for a period of four years
commencing one year after the effective date of this Offering, at an exercise
price of $ per share [120% of the initial public offering price per
Share] and $ per Warrant [120% of the initial public offering price per
Warrant]. The Warrants obtained upon exercise of the Representative's Warrants
will be exercisable for a period of four years commencing one year after the
date of this Prospectus, at an exercise price of $ per share [140% of
the initial public offering price per Share]. For the term of the
Representative's Warrants, the holders thereof will have, at nominal cost, the
opportunity to profit from a rise in the market price of the Securities without
assuming the risk of ownership, with a resulting dilution in the interest of
other security holders. As long as the Representative's Warrants remain
unexercised, the Company's ability to obtain additional capital might be
adversely affected. Moreover, the Representative may be expected to exercise the
Representative's Warrants at a time when the Company would, in all likelihood,
be able to obtain any needed capital through a new offering of its securities on
terms more favorable than those provided by the Representative's Warrants. See
"Underwriting."
THE AMEX LISTING AND MAINTENANCE REQUIREMENTS; POSSIBLE DELISTING OF
SECURITIES FROM AMEX; RISKS OF LOW-PRICED STOCKS. The Company intends to apply
for listing of the Common Stock and Warrants on AMEX upon the date of this
Prospectus. The Securities and Exchange Commission has approved rules imposing
criteria for listing of securities on AMEX, including standards for maintenance
of such listing. If the Company is unable to satisfy AMEX's maintenance criteria
in the future, its securities may be delisted from AMEX. In the event the
Company's Securities are delisted from AMEX, and not traded on any other
exchange, trading, if any, in the Securities would thereafter be conducted in
the over-the-counter market on the OTC Bulletin Board. Consequently, an investor
may find it more difficult to dispose of, or to obtain accurate quotations as to
the price of the Company's Securities. Quotation on AMEX does not imply that a
11
<PAGE> 13
meaningful, sustained market for the Company's Securities will develop or, if
developed, that it will be sustained for any period of time. See "Description of
Securities."
POTENTIAL ADVERSE EFFECT OF REDEMPTION OF WARRANTS; MARKET
OVERHANG. Commencing eighteen (18) months after the date of this Prospectus,
the Company may redeem all, but not less than all, of the Warrants at $0.10 per
Warrant on thirty (30) days' prior written notice to the holders of the Warrants
if the per share closing sale price of the Common Stock as reported on AMEX
equals or exceeds 250% of the initial public offering price per Share for any
twenty (20) trading days within a period of thirty (30) consecutive trading days
ending on the fifth trading day prior to the date of the notice of redemption.
Redemption of the Warrants could force the holders to exercise the Warrants and
pay the exercise price at a time when it may be disadvantageous for the holders
to do so, to sell the Warrants at the then current market price when they might
otherwise wish to hold the Warrants for possible additional appreciation, or to
accept the redemption price, which is likely to be substantially less than the
market value of the Warrants at the time of redemption. Any holder who does not
exercise its Warrants prior to their expiration or redemption, as the case may
be, will forfeit his, her or its right to purchase the shares of Common Stock
underlying the Warrants. See "Description of Securities -- Warrants."
CURRENT PROSPECTUS AND STATE BLUE SKY REGISTRATION REQUIRED TO EXERCISE
WARRANTS. Holders of the Warrants will have the right to exercise the Warrants
for the purchase of shares of Common Stock only if a current prospectus relating
to such shares is then in effect and only if the shares have been qualified for
sale under the securities laws of the applicable state or states. The Company
has undertaken to use its best efforts to file and keep effective and current a
prospectus which will permit the purchase and sale of the Warrants and the
Common Stock underlying the Warrants, but there can be no assurance that the
Company will be able to do so. Although the Company has undertaken to use its
best efforts to qualify for sale the Warrants and the shares of Common Stock
underlying the Warrants in those states in which the Securities are to be
offered, no assurance can be given that such qualifications will occur. The
Warrants may lose or be of no value if a prospectus covering the shares issuable
upon the exercise thereof is not kept current or if such underlying shares are
not, or cannot be, registered in the applicable states. See "Description of
Securities -- Warrants."
REPRESENTATIVE'S POTENTIAL INFLUENCE ON THE MARKET. A significant number
of the Securities offered hereby may be sold to customers of the Representative.
Such customers may engage in transactions for the sale or purchase of such
Securities through or with the Representative. Although it has no obligation to
do so, the Representative intends to make a market in the Securities and may
otherwise effect transactions in such securities. If it participates in such
market, the Representative may influence the market, if one develops, for the
Securities. Such market-making activity may be discontinued at any time.
Moreover, if the Representative sells the securities issuable upon exercise of
the Representative's Warrants or acts as a warrant solicitation agent for the
Warrants, it may be required under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), to temporarily suspend its marketmaking
activities. The prices and liquidity of the Securities may be significantly
affected by the degree, if any, of the Representative's participation in such
market. See "Underwriting."
12
<PAGE> 14
USE OF PROCEEDS
The net proceeds to the Company from the sale of the shares of Common Stock
and Warrants in this Offering are estimated to be approximately $21,170,000
($24,409,100 if the Over-allotment Option is exercised in full), after deducting
the estimated underwriting discounts and commissions and other offering expenses
payable by the Company. The Company intends to use the estimated net proceeds as
follows:
<TABLE>
<CAPTION>
PERCENTAGE OF
PURPOSE AMOUNT NET PROCEEDS
---------------------------------------------------------- ------------ -------------
<S> <C> <C>
Marketing and distribution(1)............................. $2,000,000 9.4%
Inventory purchases of Conserver 21(2).................... 2,000,000 9.4
Purchase, storage and resale of end-of-season fruits(3)... 4,000,000 18.9
Development of new applications and products(4)........... 2,000,000 9.4
Investment in non-U.S. manufacturing facilities(5)........ 3,000,000 14.2
Repayment of indebtedness(6).............................. 1,070,000 5.1
Working capital and general corporate purposes............ 7,100,000 33.6
---------- -----
Total........................................... $21,170,000 100.0%
========== =====
</TABLE>
- ---------------
(1) Includes the costs of implementing the Company's business strategy including
identification of potential customers, researching their needs and providing
services during a short term testing period. The Company also intends to
explore marketing and other strategic alliances with growers, shippers and
retailers. Also includes the cost of establishing, and acquiring computer
and laboratory equipment for, field offices to support the evaluation and
testing of products by the Company's technical representatives. See
"Business -- Business Strategy -- Initial Market Entry."
(2) Includes the costs of acquiring a sufficient supply of Conserver 21 to be
used for market tests as well as providing customer services. See
"Business."
(3) Includes the cost of purchasing and storing out-of-season fruits as well as
costs to be incurred in connection with their resale. See
"Business -- Business Strategy -- Market Opportunities."
(4) To be used in connection with research and development relating to
additional uses of Conserver 21, as well as investigating other products
that may be complementary to the Company's use of Conserver 21. See
"Business -- Marketing Research."
(5) Groupe Conserver has informed the Company that it intends to expand its
non-U.S. manufacturing capacity, either by expansion of existing facilities
or new construction. Groupe Conserver has also informed the Company that it
would be interested in the Company's investment in such expansion. The
Company has reserved a portion of the net proceeds of this offering for such
investment if it deems such investment to be in the best interests of the
Company. The Company has not engaged in any negotiations with respect to the
foregoing to date, and there can be no assurance that the Company will be
able to successfully negotiate an agreement which is in the Company's best
interest. In the event the Company does not elect to make the foregoing
investment, the funds allocated will be reallocated to working capital. See
"Risk Factors -- Broad Discretion in Application of Offering Proceeds."
(6) Includes the repayment of $1,000,000 and accrued interest at a rate 12% per
annum to a non-affiliate. See "Management's Discussion and Analysis of
Financial Condition and Plan of Operation -- Liquidity and Capital
Resources."
The foregoing represents the Company's best estimate of the allocation of
the net proceeds of the Offering, based upon the current status of its
operations and anticipated business plans. It is possible, however, that the
application of funds will differ considerably from the estimates set forth
herein due to changes in the economic climate and/or the Company's planned
business operations or unanticipated complications, delays and expenses. Any
reallocation of the net proceeds will be at the discretion of the Board of
Directors of the Company. See "Risk Factors -- Broad Discretion in Application
of Offering Proceeds."
13
<PAGE> 15
Pending the foregoing uses, the net proceeds of this Offering will be
invested in short-term investment grade, interest bearing securities.
The Company currently estimates that the net proceeds from this Offering
will be sufficient to meet the Company's liquidity and working capital
requirements for a period of at least 18 months from the completion of this
Offering. However, there can be no assurance that the net proceeds of this
Offering will satisfy the Company's requirements for any particular period of
time. Additional financing may be required to implement the Company's long-term
business plans. There can be no assurance that such additional financing will be
available when needed on terms acceptable to the Company, if at all. See
"Management's Discussion and Analysis of Financial Condition and Plan of
Operation -- Liquidity and Capital Resources."
DIVIDEND POLICY
The Company plans to retain any future earnings for use in its business
and, accordingly, the Company does not anticipate paying dividends in the
foreseeable future. Payment of dividends is within the discretion of the
Company's Board of Directors and will depend, among other factors, upon the
Company's earnings, financial condition and capital requirements.
14
<PAGE> 16
CAPITALIZATION
The following table sets forth (i) the actual capitalization of the Company
at August 31, 1996, (ii) the pro forma capitalization of the Company giving
effect to (a) the issuance of the Private Placement Shares, (b) the Conserver
Shares Repurchase and (c) the issuance of the 10% Convertible Debentures and
(iii) the pro forma capitalization as adjusted to reflect the sale of the
4,000,000 shares of Common Stock and 4,000,000 Warrants offered by the Company
hereby and the initial application of the estimated net proceeds therefrom after
deducting underwriting discounts and commissions and estimated offering expenses
payable by the Company. See "Use of Proceeds," "Management's Discussion and
Analysis of Financial Condition and Plan of Operation" and Notes A, D and J of
Notes to Financial Statements. This section should be read in conjunction with
the Company's financial statements and related notes appearing elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
AUGUST 31, 1996
-----------------------------------------
PRO FORMA AS
ACTUAL PRO FORMA ADJUSTED
----------- ------------ ------------
<S> <C> <C> <C>
Total long-term debt, excluding current
portion................................... $ 1,000,000 $ 1,350,000 $ 350,000
Preferred Stock, $.01 par value; 5,000
shares authorized; none issued and
outstanding............................... -- -- --
Common Stock, $.001 par value, 30,000,000
shares authorized; 11,094,768 shares
issued and outstanding; 8,963,418 shares
issued and outstanding on a pro forma
basis; 12,910,196 shares issued and
outstanding on a pro forma basis as
adjusted(1)............................... 11,095 8,963 12,910
Additional paid-in capital.................. 2,557,997 2,586,262 26,052,315
Deficit accumulated during the development
stage..................................... (1,322,071) (1,322,071) (3,662,071)(2)
-------- -------- --------
Total stockholders' equity............. 1,247,021 1,273,154 22,403,154
-------- -------- --------
Total capitalization.............. $ 2,247,021 $ 2,623,154 $ 22,753,154
======== ======== ========
</TABLE>
- ---------------
(1) Number of shares issued and outstanding on a pro forma basis as adjusted
assumes the consummation of the SES Reacquisition.
(2) Includes non-cash compensation charges of approximately $2,300,000 expected
to be recorded by the Company in connection with the value attributed to
warrants, issuable upon the consummation of this Offering to a holder of
convertible debentures and an affiliate thereof, exercisable for 1,170,881
shares of Common Stock at an exercise price of $.94 per share.
15
<PAGE> 17
DILUTION
At August 31, 1996, after giving pro forma effect to (i) the issuance of
the Private Placement Shares, (ii) the Conserver Shares Repurchase and (iii) the
issuance of the 10% Convertible Debentures, the Company had a pro forma net
tangible book value of $1,273,154, or approximately $.14 per share of
outstanding Common Stock. Pro forma net tangible book value per share represents
the Company's total tangible assets less total liabilities, divided by the
number of shares of Common Stock outstanding. After giving effect to receipt of
the estimated net proceeds from the Company's sale of 4,000,000 shares of Common
Stock at the assumed initial public offering price of $6.00 per share and
4,000,000 Warrants at the assumed initial public offering price of $.10 per
Warrant (after deducting offering discounts and commissions and estimated
offering expenses payable by the Company), the pro forma as adjusted net
tangible book value of the Company at August 31, 1996 would have been
approximately $22,403,154, or approximately $1.74 per share. This represents an
immediate increase in net tangible book value of $1.60, or 1143%, to existing
stockholders and an immediate dilution of $4.26 per share, or 71%, to purchasers
of Common Stock in this Offering.
The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share of Common Stock...... $6.00
Pro forma net tangible book value per share as of August 31, 1996.... .14
Increase per share attributable to this Offering..................... 1.60
------
--
Pro forma as adjusted net tangible book value per share after this
Offering........................................................... 1.74
------
--
Dilution per share to new investors.................................. $4.26
========
</TABLE>
The following table summarizes, on a pro forma basis to reflect the same
adjustments described above, the number of shares of Common Stock purchased from
the Company, the total consideration paid and the average price per share paid
by (i) existing stockholders of the Company at August 31, 1996 and (ii) new
investors purchasing Shares in this Offering, before deducting the underwriting
discounts and commissions and estimated Offering expenses:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION WEIGHTED
-------------------- ----------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders............ 8,963,418 69% $ 3,175,514 11.7% $ .35
New investors.................... 4,000,000 31% $24,000,000(1) 88.3% $6.00
---------- --- -------- ---
Total.................. 12,963,418 100% $27,175,514 100%
========== === ======== ===
</TABLE>
- ---------------
(1) Attributes no value to the Warrants.
16
<PAGE> 18
SELECTED FINANCIAL DATA
The following selected financial data have been derived from the audited
financial statements of the Company. The statement of operations data set forth
below with respect to the period from March 6, 1996 (date of incorporation) to
August 31, 1996 and the balance sheet data at August 31, 1996 are derived from,
and are qualified by reference to, the audited Financial Statements included
elsewhere in this Prospectus and should be read in conjunction with those
financial statements and notes thereto.
STATEMENT OF OPERATIONS DATA(1):
<TABLE>
<CAPTION>
MARCH 6, 1996
(DATE OF
INCORPORATION) TO
AUGUST 31, 1996
-----------------
<S> <C>
Revenues.............................................................. $ --
Compensation charges in connection with issuance of options and
warrants(2)......................................................... 907,201
General and administrative expenses................................... 393,611
Operating (loss)...................................................... (1,300,812)
Interest expense, net of $8,741 interest income....................... 21,259
Net (loss)............................................................ (1,322,071)
Net (loss) per share of Common Stock.................................. (.13)
Weighted average number of shares of Common Stock outstanding......... 10,463,000
</TABLE>
BALANCE SHEET DATA:
<TABLE>
<CAPTION>
AUGUST 31, 1996
------------------------------------------
PRO FORMA
AS
ACTUAL PRO FORMA(3) ADJUSTED(4)
----------- ------------ -----------
<S> <C> <C> <C>
Working capital.............................. $ 2,242,643 $ 2,618,776 $22,718,776
Total assets................................. 2,446,177 2,819,810 22,919,810
Total current liabilities.................... 199,156 196,656 196,656
Deficit accumulated during development
stage...................................... (1,322,071) (1,322,071) (3,662,071)(5)
Stockholders' equity......................... 1,247,021 1,273,154 22,403,154
</TABLE>
- ---------------
(1) The Company is in the development stage, and has had no commercial
operations to date. See Note A of Notes to Financial Statements.
(2) Relates to non-cash charges recorded by the Company in connection with the
value attributed to options and warrants issued by the Company in March and
August 1996, respectively. See "Management's Discussion and Analysis of
Financial Condition and Plan of Operation" and Note E of Notes to Financial
Statements.
(3) Gives effect on a pro forma basis to (i) the issuance of the Private
Placement Shares, (ii) the Conserver Shares Repurchase and (iii) the
issuance of the 10% Convertible Debentures. See "Management's Discussion and
Analysis of Financial Condition and Plan of Operation" and Notes A, D and J
of Notes to Financial Statements.
(4) Gives effect on a pro forma, as adjusted basis to (i) the issuance of the
Private Placement Shares, (ii) the Conserver Shares Repurchase, (iii) the
issuance of the 10% Convertible Debentures and (iv) the sale by the Company
of the Securities offered hereby at an assumed initial public offering price
of $6.00 per Share and $.10 per Warrant and the initial application of the
estimated net proceeds therefrom. See "Use of Proceeds" and "Certain
Transactions."
(5) Includes non-cash compensation charges of approximately $2,300,000 expected
to be recorded by the Company in connection with the value attributed to
warrants, issuable upon the consummation of this Offering to a holder of
convertible debentures and an affiliate thereof, exercisable for 1,170,881
shares of Common Stock at an exercise price of $.94 per share.
17
<PAGE> 19
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND PLAN OF OPERATION
The following discussion and analysis should be read in conjunction with
the Financial Statements and related Notes contained elsewhere in this
Prospectus.
GENERAL
The Company, which was organized in March 1996, is in the development stage
and its activities since the date of incorporation have been primarily limited
to negotiating the Groupe Conserver Distribution Agreement, privately raising
both debt and equity funding and recruiting management personnel. The Company
has received the exclusive license to import, promote, distribute, market, sell,
use and generally exploit commercially Conserver 21 to commercial users in the
United States and Canada.
BUSINESS STRATEGY
The Company believes that there are significant opportunities to provide
technologies and services which can retard spoilage and decay in fruits,
vegetables and flowers during the course of storage and transportation from
point of packing to point of retail sale. The Company intends to offer a quality
assurance management program to its customers pursuant to which technical
representatives will provide inspection services prior to shipping to ensure
that the inspected products meet certain quality standards and to oversee the
proper use of Conserver 21 in the packing and transportation of fruits,
vegetables and flowers.
RESULTS OF OPERATIONS
The Company has a limited operating history upon which an evaluation of its
performance and prospects can be made. During the period from March 6, 1996
(date of incorporation) to August 31, 1996, the Company's activities were
primarily limited to organizational efforts and privately raising capital to
defray its organizational expenses and the development of its business plan.
During such period the Company had no revenues and incurred a net loss of
$1,322,071. Included in the net loss were non-cash compensation charges of
$907,201 recorded in connection with the value attributed to options and
warrants issued by the Company in March and August 1996. In addition, during
this period the Company did not pay any salary to Charles Stein, its President
and Chief Executive Officer, who will receive an annual salary of not less than
$125,000, commencing on the closing of this Offering. To date, the Company has
spent $180,000 for the purchase of inventory and $625,000 to fund its
operations, such expenditures consisting primarily of travel expenses and
professional and consulting fees.
LIQUIDITY AND CAPITAL RESOURCES
Since its date of incorporation, the Company has relied upon privately
raised debt and equity funding to fund its operations. From March through
November 1996, the Company raised $3,172,000 through the private placement of
Common Stock at a purchase price of $2.34866 per share. In May 1996, the Company
issued a convertible debenture to the SES Family Trading and Investment
Partnership, L.P. ("SES") in the aggregate principal amount of $1,000,000.
Pursuant to the terms of such debenture, as amended, interest accrues at the
rate of 12% per annum, with principal and interest to be paid out of the net
proceeds of this Offering. See "Use of Proceeds." The Company and SES agreed to
amend the terms of the debenture to eliminate the conversion rights contained
therein which the Company estimates would have entitled such holder to receive
in excess of 2,200,000 shares of Common Stock upon conversion. Instead, SES and
its affiliate will receive warrants upon the consummation of the Offering to
purchase 1,170,881 shares of Common Stock at an exercise price of $.94 per
share, exercisable for a period of 6 years commencing one year from the date of
issuance. The Company expects to record non-cash compensation charges of
approximately $2,300,000 in connection with the value attributed to the issuance
of such warrants. The Company will also re-acquire 53,222 shares of Common Stock
from the SES affiliate upon the consummation of the Offering.
In September and November 1996, the Company issued convertible debentures
in the aggregate principal amounts of $600,000 and $150,000, respectively.
Principal, and accrued interest at a rate of 10% per annum, is
18
<PAGE> 20
payable on the one year anniversary of the date of issuance. The holders of the
debentures may elect to convert, at any time, all unpaid principal and accrued
interest into shares of Common Stock at a rate of $2.34866 per share. In
addition, the holders of the debentures aggregating $150,000 issued in November
1996 can elect to be paid in full upon the consummation of the Offering.
In October and November 1996, the Company repurchased 2,909,461 shares of
Common Stock from Conserver Investments, SA for an aggregate purchase price of
$1,800,000.
The Company is dependent upon Groupe Conserver as its sole source of
Conserver 21. Although the Company has the right, under certain circumstances,
to manufacture Conserver 21 itself, there can be no assurance that the Company
would be able to meet its needs for supply of Conserver 21. See "Risk Factors --
Distribution Agreement; Sole Source of Supply" and "-- No Current Manufacturing
Capabilities; Delays Inherent in Establishment."
The provisions of Financial Accounting Standard No. 123 "Accounting for
Stock-Based Compensation" ("FAS 123") became effective for the Company's first
fiscal year-end. Pursuant to the choice afforded it in FAS 123, the Company has
elected to report under the basis of Accounting Principles Board Opinion No. 25.
Disclosures required by the Company's election may be found in Note E(2) of the
financial statements.
The Company is in the development stage and its operations are subject to
all of the risks inherent in the establishment of a new business enterprise,
including the need to obtain financing, lack of revenues and the uncertainty of
market acceptance of its business. The Company has not as yet derived any
revenues from operations and has incurred losses since inception. Its
accumulated deficit at August 31, 1996 was $1,322,071. No operating revenues are
anticipated until such time, if ever, as the Company can demonstrate the
commercial viability of its Conserver 21 Program. There can be no assurance
regarding whether or when the Company will successfully implement its business
plan or operate profitably.
The Company currently estimates that the net proceeds from this Offering
will be sufficient to meet the Company's liquidity and working capital
requirements for a period of at least 18 months following the consummation of
this Offering. The continued expansion and operation of the Company's business
beyond such 18 month period may be dependent on its ability to obtain additional
financing. In the event the Company's plans change, its assumptions prove to be
inaccurate or the net proceeds of this Offering together with the privately
raised funds prove to be insufficient to fund operations (as a result of future
changes in the industry, general economic conditions, unanticipated increases in
expenses or other factors) the Company may be required to seek additional
financing. Any additional equity financing may be dilutive to stockholders and
debt financing, if available, will likely include restrictive covenants,
including financial maintenance covenants restricting the Company's ability to
incur additional indebtedness and to pay dividends. The Company has no current
arrangement with respect to, or sources of, additional financing and there can
be no assurance that any needed financing would be available to the Company on
acceptable terms, or at all. The Company's ability to obtain additional
financing will depend upon, among other things, the willingness of financial
organizations to participate in funding and the Company's financial condition
and results of operations.
The Company's future performance will be subject to a number of business
and other factors, including those beyond the Company's control, such as
economic downturns and changes in the marketplace, as well as the level of
competition and the ability of the Company to successfully implement its
business strategy and effectively monitor and control its costs. Further, there
can be no assurance that the Company will be able to generate significant
revenues or achieve profitable operations.
19
<PAGE> 21
BUSINESS
THE COMPANY
Conserver Corporation of America has licensed the exclusive right to
import, promote, distribute, market and sell Conserver 21 to commercial users in
the United States and Canada through May 2005, subject to extension. The Company
believes, and independent laboratory tests have demonstrated, that Conserver 21
retards the spoilage of perishable fruits, vegetables and flowers, lengthens
their post-harvest life and reduces shrinkage during transport and storage for a
longer period of time than any other currently utilized technique. This results
in fresher, higher quality fruits, vegetables and flowers for the consumer.
Fresh fruits and vegetables, as well as fresh-cut flowers, are subject to
natural decay which reduces their desirability. Fruits and vegetables are also
subject to shrinkage which reduces the weight of product available for sale to
consumers. In an effort to reduce such decay and shrinkage, additional costs are
incurred by growers and distributors through the use of more expensive storage
and transportation methods. Certain fruits and vegetables are often picked and
shipped prior to being fully ripened in an effort to reduce spoilage while being
transported, often resulting in uneven ripening and compromised taste for the
ultimate consumer.
Utilizing Conserver 21, the Company will offer growers and distributors an
innovative quality assurance management program from point of packing to point
of retail sale. The Company believes that the Conserver 21 Program should offer
the following potential benefits:
- Higher Level of Customer Satisfaction -- Conserver 21 allows fruits and
vegetables to be harvested at the height of ripeness, resulting in a
longer shelf-life, higher sugar content, richer color and better taste.
- Increased Profit Potential -- Conserver 21 reduces shrinkage and spoilage
during transport and storage, thus resulting in a better product yield for
sale by supermarkets and other retailers.
- Extended Selling Season -- Conserver 21 extends the selling season for
many fruits and vegetables by allowing them to be harvested at the peak of
ripeness, stored for a period of time and then delivered for retail sale
"out of season" at premium prices.
- Reduced Shipping Costs -- Conserver 21 extends the post-harvest life of
highly perishable fruits, vegetables and flowers, so that they can be
shipped by less expensive means of transportation.
Conserver 21 is a natural and non-toxic product composed of the mineral
sepiolite and other mineral salts. Conserver 21 works like a sponge, adsorbing
gases (notably ethylene) produced by maturing fruits, vegetables and flowers.
Without the use of Conserver 21 adsorbing such gases, these gases would be
reintroduced and absorbed by such products, increasing their rate of decay while
also hastening the maturation process. Conserver 21 is a non-invasive product
which is manufactured in the form of cylindrical granules and enclosed in
filters or packets which are then positioned so as not to come into direct
contact with the product requiring protection during storage and transport.
The Company plans to target supermarket chains and other retailers who will
profit from the Conserver 21 Program. The Company also intends to purchase
seasonal fruits and vegetables and store them utilizing the Conserver 21 Program
for resale "out of season".
20
<PAGE> 22
MARKET OVERVIEW
The Company has targeted the fruit, vegetable and flower markets for the
initial introduction of its Conserver 21 Program. The fresh fruit market
generated (in billions) $16.7 and $15.9 in U.S. retail sales in 1995 and 1994,
respectively, while the fresh vegetable market generated (in billions) $42.0 and
$38.9 in U.S. retail sales in 1995 and 1994, respectively. The flower market
generated (in billions) $14.1, $13.2, and $12.9 in U.S. retail sales in 1995,
1994, and 1993, respectively.
Over the last decade, there has been a significant increase in demand for
high quality fresh fruits and vegetables. The Company believes that this demand
is evidenced by the increase in vine-ripened and organic products, the increased
availability of fresh-cut salads and fruits and the trend among growers to
employ company branding for fresh produce. Recent studies indicate that
consumers are seeking high quality produce, and are willing to pay more for it.
The Company believes that today's consumers are purchasing branded produce
because of the expectation of uniform quality associated with established
brands. Names like Dole and Chiquita have become synonymous with premium quality
pineapples and bananas. As a result, food processors are focusing on the branded
food market. The Company believes that its Conserver 21 Program will be
attractive to growers and retailers who want to offer branded fruits and
vegetables with an extended post-harvest life as well as uniform quality.
The Company also believes that the Conserver 21 Program will be attractive
to flower growers and retailers in that approximately 48%, or approximately $6.7
billion, of flowers sold in the United States are from foreign countries, and
most of such flowers are transported by airplane. Using Conserver 21 would
enable them to be transported by cargo ship or other means, thereby reducing the
cost of transport. The flower market represents an opportunity for the Company's
Conserver 21 Program as flower growers, shippers and retailers seek better ways
to increase profit margins.
FRUIT, VEGETABLE AND FLOWER PRESERVATION METHODS
There are several different methods utilized today to extend the
post-harvest life of fruits, vegetables and flowers. The most commonly used
methods are ethylene "adsorbers," controlled atmosphere storage and packaging,
modified atmosphere packaging and irradiation.
In addition, there are a number of products available for purchase which
reduce the amount of ethylene in the atmosphere surrounding produce, or adsorb
the ethylene being produced by the produce. These products adsorb or "scrub"
ethylene until they reach their point of saturation. Without an organized system
of inspection and management, these products often reach their level of
saturation, after which they essentially stop working, allowing the produce to
rapidly decay and spoil. Additionally, they are often not marketed in an
integrated fashion which provides a simultaneous service and benefit to the
shippers, retailers and consumers. The Company believes that, unlike Conserver
21, these products are of significantly reduced efficacy and value in a humid
environment, which greatly limits their usefulness on a practical basis.
Modified atmosphere systems involve changing the mixture of gases (usually
nitrogen and carbon dioxide) in the atmosphere in which fruits, vegetables and
flowers are stored or shipped to prevent the growth and spread of mold. In a
typical modified atmosphere system, gases are introduced to control the enzyme
systems that cause tissue respiration. Although modified atmosphere systems can
assist in the reduction of mold, they do not restrict the normal spoilage and
decay process of fruit and vegetables and each variety of produce has to be
stored separately because of differing requirements for preservation.
Controlled atmosphere systems maintain a pre-defined mixture of gases in
the atmosphere surrounding fruit or vegetables, by constantly measuring and
replenishing the component gases as needed. When fruit is released from such an
artificial environment, however, there is a significant possibility of the
entire stored load being spoiled and unfit for sale or consumption (sources
normally estimate this likelihood at 2-5%). In addition, fruits and vegetables
spoil extremely quickly and unpredictably after release from the artificial
environment. As a result, the Company believes that the controlled atmosphere
process represents only a
21
<PAGE> 23
partial solution to some of the problems of long-term storage. Additionally, it
is publicly unpopular to treat foods in a poisonous gas environment, however
scientifically harmless to the foods.
Carefully controlled dosages of gamma irradiation can be effective in
controlling decay and insect infestations on such produce as papayas, mangos,
bananas, pineapples and grapefruits. In a less costly and sophisticated
solution, ultraviolet lamps are sometimes used to control bacteria and mold in
refrigerated storage. Although ultraviolet light can play a role in the control
of bacteria and fungi, it has no effect on preventing or slowing the
decomposition and decay of fruits, vegetables or flowers. Commercial application
of gamma irradiation is limited due to the cost and size of the equipment
required for the treatment, as well as public reluctance to purchase and consume
irradiated foods.
CONSERVER 21
Conserver 21, which is composed of the mineral sepiolite and other mineral
salts, works like a sponge. When placed in a storage or transport area with
fresh fruit, vegetables and flowers, it adsorbs gases detrimental to the
preservation of food, most notably ethylene, and stimulates the creation of
carbon dioxide and water vapors, which helps delay the food maturation process.
Unlike other methods of extending post-harvest life, Conserver 21 is not applied
directly to the fruits, vegetables or flowers nor is it placed on the product or
into the environment.
Conserver 21 is manufactured in the form of cylindrical granules and is
currently available in two packaged forms, filters and packets. The filters are
placed in front of the vents of air conditioning or ventilation systems of
storage areas and transport vehicles so that the gases emitted by fruits,
vegetables and flowers can be adsorbed. Each filter provides the equivalent
coverage of a 20 foot container, or approximately 30 cubic meters. Generally,
filters may be attached to air vents through the use of a universal bracket, and
do not require any change to the existing air conditioning or ventilation
equipment. The packets can be strategically placed in boxes or crates containing
the produce being stored or shipped. The granules within the packet are
spontaneously activated by the gases emitted by the ripening fruits, vegetables
and/or flowers. Filters and packets are expected to remain efficacious for
approximately 30 days from their initial use.
Conserver 21 may be stored for up to 18 months in its original sealed
packaging prior to being opened for use. After the sealed packaging is opened,
Conserver 21 retains its effectiveness for up to 30 days, depending on the
particular environment in which the product is being used. Each filter or packet
will be bar coded or otherwise identified, to insure its use only prior to its
expiration date and so each filter or packet can be tracked from its initial
point of installation until it is returned to the Company.
Tests conducted by independent laboratories in France, Spain, The
Netherlands, Denmark, Israel and the United States, as well as the Company's own
market tests with potential customers, have demonstrated that Conserver 21 can
retard the spoilage of perishable produce and flowers, lengthen their harvested
life and reduce shrinkage in the transport process. The Company believes that
use of its Conserver 21 Program offers a natural, non-invasive method of
extending the post-harvest life of fruits, vegetables and flowers for a longer
period of time than any other currently utilized technique.
CONSERVER 21 PROGRAM
The Company's Conserver 21 Program is intended to ensure that fruits,
vegetables and flowers purchased from growers meet quality standards of
freshness which are maintained through the packing and transportation process
until delivery to the point of retail distribution.
Pre-Transport Inspection. Prior to shipping, the fruits, vegetables or
flowers will be inspected by one of the Company's technical representatives. The
Company intends to primarily hire retired or off-duty inspectors from the United
States Department of Agriculture, already experienced in the area of food and
flower inspection, to act as technical representatives.
22
<PAGE> 24
The Company's inspection standards will be formulated to ensure that the
fruits, vegetables or flowers subject to inspection are:
- at the optimal level of maturation and ripeness, freshly harvested and
free from visually apparent disease; and
- in conformity with quality standards established by the Company's
customers relating to taste, smell and appearance.
Conserver 21 Installation. After inspection, the Company's technical
representatives will install, or oversee the installation of, Conserver 21
filters or packets at appropriate sites, including trucks, storage areas,
cooling rooms and warehouse areas, in accordance with protocols being developed
by the Company for each particular line of fruits, vegetables and flowers.
Post-Transportation Inspection and Collection. Shipped items may be
re-inspected at the point of retail delivery by a technical representative
(depending upon customer wishes) during unloading and delivery to ensure that
the Company's quality standards have been maintained during the storage and
shipping process. Conserver 21 filters and packets used in storage and shipment
will either be collected by the Company's technical representative at the time
of inspection, or will be returned directly to the Company via pre-paid return
packages or other methods arranged by the Company, for subsequent use.
Potential Benefits.
- Higher Level of Consumer Satisfaction. Retail distributors using the
Conserver 21 Program will be able to offer customers higher quality
produce without a significant increase in cost. Foods which were
previously harvested before maximum ripeness to avoid spoilage in shipping
can now be harvested when ripe. Generally, harvesting at peak maturation
means that most fruits and vegetables will have a higher sugar content,
richer color and better taste. In addition, the selling season for produce
which is not available year-round can be extended because ripe produce can
be harvested, stored with reduced spoilage and delivered for retail sale
"out of season." Unusual and exotic produce and flowers which currently
have to be shipped overseas via air transport can be shipped via slower,
less expensive means of transport.
- Reduced Shipping Costs. In some instances, retail distributors' cost of
products may decrease significantly due to the use of the Conserver 21
Program. The Conserver 21 Program can slow the decay of highly perishable
items, thereby allowing shipment by less expensive means of transport than
otherwise used.
- Increased Weight. The use of the Conserver 21 Program should generally
result in a higher weight yield of fruits, vegetables and flowers upon
delivery because of reduced spoilage. In addition, the production of water
vapor attributable to the use of Conserver 21 reduces the amount of
shrinkage. The retail distributor often pays the grower by weight at the
time of transport. Consequently, if there is less spoilage and shrinkage
through the use of Conserver 21, the weight of fruits and vegetables
delivered for retail sale is higher. Further, since many fruits and
vegetables are sold by weight to the retail consumer, the retail
distributor can realize greater profits on original purchases by weight
from growers.
BUSINESS STRATEGY
Market Opportunities. The following examples (based on tests performed by
Groupe Conserver) highlight some of the market opportunities for the Company's
Conserver 21 Program.
-- StrawberriesGrowers and distributors in California ship more than 600
million pounds of strawberries annually. The post-harvest life
of strawberries being shipped long distances can be extended
for up to 10 additional days utilizing Conserver 21 resulting
in greater volume and higher quality berries for distributors
to sell.
-- Oranges Approximately 18 billion pounds of oranges are grown in Florida
annually. Utilizing Conserver 21, the Company can extend the
post-harvest life of oranges from 35 days to
23
<PAGE> 25
as much as 90 days. This significantly extended post-harvest
life creates opportunities to harvest the fruit at the end of
the season when the oranges are at their highest quality.
-- Tomatoes Most tomatoes are harvested before they are ripe and then
ripened to specific customer specifications by repackers using
a "forced ripening" system. This forced ripening system results
in compromised taste and an added expense for growers. The
Company believes that its Conserver 21 Program can extend the
post-harvest life of tomatoes from 12 to as much as 40 days,
enabling tomatoes to be harvested when they are vine ripe. The
Company believes these vine ripened tomatoes may then be sold
directly to supermarkets at a premium price, at their maximum
weight and at their height of natural ripeness.
-- Flowers Historically, approximately 48% of the flowers sold in the
United States are imported from foreign countries, utilizing
daily air freight shipments. The Company believes that its
Conserver 21 Program can increase the post-harvest life of
gladioli and carnations by as much as 19 days, and by as much
as 16 days for roses. As with produce, there is a two-fold
benefit to the retail distributors. Because of the extended
post-harvest life, these flowers can be shipped by less
expensive means of transport. In addition, flowers can be
harvested and stored longer to meet peak demand for the major
holidays for flower sales -- Valentine's Day, Mother's Day and
Easter.
-- "Out of
Season"
Produce In addition to offering its Conserver 21 Program to
supermarkets and other retailers, the Company intends to
purchase harvested seasonal fruits and vegetables, and store
them utilizing Conserver 21 preservation techniques, with the
anticipation that these stored fruits and vegetables will be
marketed after their normal season is past, when they may be
sold at prices higher than normal market prices. The Company
plans to use a portion of the net proceeds of this Offering for
such purpose. See "Use of Proceeds."
Initial Market Entry. In order to demonstrate anticipated savings to the
Company's prospective customers, primarily expected to be supermarket chains and
other retail distributors, from the use of the Conserver 21 Program, the Company
intends to initially approach two or three smaller supermarket chains (150 to
300 retail stores) on the East Coast and offer to conduct free short-term
demonstrations of its Conserver 21 Program.
Before initial contact with a particular supermarket chain is established,
the Company intends to perform research to secure information relative to such
chain's:
- Specific sources of supply of fruits and vegetables;
- Distribution and storage policies; and
- Warehouse and delivery procedures.
After analyzing the results of such research, initial contact will be made
with the chain's most senior fruit and vegetable purchasing employee for an
introductory presentation about the Company and its Conserver 21 Program. In
particular, the Company will address the following issues:
- the specific fruits and vegetables to be the subject of the Conserver 21
Program demonstrations;
- scope of the Conserver 21 Program; and
- operational procedures to be utilized, including points of inspection,
installation and return of the filters and packets, interaction with
trucking companies and other common carriers and reporting procedures.
If the prospective customer is amenable, a short term test period
encompassing three to five shipments will be implemented, after which an
evaluation can be made by the prospective customer's own staff of the potential
benefits realizable through use of the Conserver 21 Program. A long-term
agreement will be sought
24
<PAGE> 26
if the test results support the Company's assertion of such benefits. The
Company has no current customers for its Conserver 21 Program. There can be no
assurance that the Company's attempts at initial market entry will be
successful.
Price. The Company expects to charge for the use of its Conserver 21
Program for fruits and vegetables based on the weight of product subject to its
supervision.
Branded Service. The Company intends to establish the Conserver 21
Freshness Seal as a quality brand identifying fruit and vegetables which have
satisfied the Conserver 21 Program taste and appearance standards, and flowers
which have satisfied the Conserver 21 Program freshness and appearance
standards.
MARKETING RESEARCH
In connection with the development of its marketing plan, the Company
expects to implement Conserver 21 product tests in a variety of areas. The
Company is developing protocols for the use of Conserver 21 to ensure that the
Conserver 21 Program can be used effectively with a variety of fruits and
vegetables grown in the United States. The Company has engaged Mr. Elie Toledano
as a consultant to assist the Company with the development of its protocols,
marketing strategies and research, as well as identifying the products with
which Conserver 21 can be effectively utilized. Mr. Toledano served as Groupe
Conserver's scientific coordinator for almost two years, during which time he
was responsible for organizing and supervising the testing of Conserver 21 in
laboratories around the world.
The Company expects to perform studies to demonstrate the specific
advantages of Conserver 21 over ethylene adsorbers and other methods of produce
life extension. The Company also expects to explore additional uses of Conserver
21, including its potential use in pre-packaged produce items such as salads, as
well as its potential in minimizing the effect of smoke in public areas such as
restaurants, hotels and offices.
GROUPE CONSERVER DISTRIBUTION AGREEMENT
Conserver 21 S.A. ("Conserver SA"), and Conserver Engineering Ltd.
("Engineering"), Conserver International B.V. ("BV") and Conserver North
America, Inc. ("Nord"), (each an affiliate of Conserver SA and collectively,
with Conserver SA, the "Groupe Conserver") own the Conserver 21 trademark, as
well as certain patent applications and other intellectual property rights with
respect to the manufacture of Conserver 21 and other preservatives for
foodstuffs and flowers (collectively, "Conserver 21 Products").
On October 9, 1996, the Company entered into a Distribution Agreement (the
"Groupe Conserver Distribution Agreement"), superseding a prior agreement
entered into in March 1996, with BV and Nord pursuant to which BV and Nord, as
sublicensees of Conserver SA, granted the Company the exclusive right to import,
promote, distribute, market and sell Conserver 21 Products in the United States
and its possessions, territories and dependencies, as well as in Canada, for
commercial users, excluding domestic consumers. The Company has agreed to buy
all Conserver 21 Products as it may require from BV.
The Company's price for Conserver 21 Products purchased by it shall be
equal to those prices paid by other Conserver 21 distributors. The Company is
also required to pay a royalty to BV equal to 6% of the net sales of Conserver
21 Products for up to $100,000,000, increasing to 7% thereafter. Such royalties
are payable to BV 45 days after the end of each calendar quarter. Net sales is
defined as the gross proceeds from the sale of Conserver 21 Products reduced by
the cost of packing, freight, insurance, federal, state and local taxes. The
Company is required to provide to BV, among other things, quarterly financial
statements and detailed sales summaries.
BV has the right, upon 60 days' written notice to the Company, to
substitute a new product for any Conserver 21 Product and to modify the
specifications, the manufacture or the design of any Conserver 21 Product if and
when it deems necessary or desirable. The Company has a right of first refusal
for a license or distributorship with respect to (i) any proposed use of
Conserver 21 Products for uses other than the preservation of foodstuffs and
flowers and for individual use and (ii) any products acquired or developed by
any member of BV or Engineering for use as a preserver of foodstuffs and
flowers.
25
<PAGE> 27
Pursuant to the terms of the Distribution Agreement, the Company has also
received the non-exclusive right in the United States and Canada to use the
trademark "Conserver 21" for use in connection with the marketing of Conserver
21 Products.
The Groupe Conserver Distribution Agreement shall remain in effect for an
initial term equal to the duration of the license granted to BV and Engineering
(currently expiring on May 12, 2005); provided, however, that, to the extent BV
or Engineering succeeds in obtaining a license for a longer duration, or
succeeds in obtaining exclusive proprietary rights to the intellectual property
rights or the Conserver 21 trademark and on all rights relating to the know-how
and inventions upon which the Conserver 21 Products are based, the initial term
shall be extended for a total duration of 20 years (the "Initial Term").
The Groupe Conserver Distribution Agreement is automatically renewable
beyond the Initial Term for subsequent periods of three years; provided,
however, that the Groupe Conserver Distribution Agreement can be terminated by
either party by written notice one year prior to the end of the Initial Term and
thereafter by written notice six months prior to the end of each succeeding
three year term.
The Groupe Conserver Distribution Agreement may be terminated by either
party in case of insolvency or bankruptcy of the other party; substantial breach
of any material provision if the breaching party has not cured such breach
within 30 days of written notice thereof; failure of the Company to meet 75% of
minimum sales levels (to be mutually agreed upon by the parties) for two
consecutive years, commencing January 1, 1998; and failure of the Company to
comply with marketing guidelines established by Conserver BV. Conserver BV may
also terminate the Agreement if the Company does not pay amounts due within 20
days of receipt of notice to that effect.
SOURCES OF SUPPLY; MANUFACTURING
Conserver 21 is currently manufactured in Spain at Groupe Conserver's own
facility with a maximum production capability of four tons per day. The Company
believes that its supply needs will comprise 20% of the current manufacturing
capability. Groupe Conserver has advised the Company that it expects to open a
new production facility in France with a production capacity of 10 to 20 tons
per day after completion of this Offering. A portion of the net proceeds of this
Offering will be used to purchase Conserver 21 inventory. See "Use of Proceeds."
The Groupe Conserver Distribution Agreement requires BV to establish a
manufacturing facility in either the United States, Canada or Mexico to supply
Conserver 21 Products to the Company if the volume of the Company's orders for
Conserver 21 Products is such that BV is unable to deliver orders in a timely
fashion after making reasonable efforts to increase production.
INSURANCE
The Company currently maintains comprehensive general liability and
property insurance with coverage of $1,000,000 per occurrence and umbrella
insurance of $2,000,000 per occurrence. There can be no assurance that such
coverage will be adequate to protect the Company from all potential losses.
EMPLOYEES
As of October 31, 1996, the Company had six employees, including its four
executive officers.
FACILITIES
The Company's offices are located in an executive office suite comprising
600 square feet in Coral Gables, Florida on a month-to-month rental basis at a
cost of approximately $5,000 per month. After the Offering the Company expects
to move its offices to a larger facility in the same area, although the Company
has not entered into any negotiations for such facilities.
LEGAL PROCEEDINGS
The Company is not a party to any material legal proceedings.
26
<PAGE> 28
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
------------------------------------- ---- -------------------------------------
<S> <C> <C>
Charles H. Stein..................... 64 Chairman, President and Chief
Executive Officer
James V. Stanton..................... 64 Vice Chairman and Director
Douglas C. Rice...................... 53 Vice President -- Corporate
Development
Miles R. Greenberg................... 39 Vice President -- Finance, Treasurer
and Chief Financial Officer
Gerald M. Breslauer.................. 59 Vice President -- Administration and
Secretary
Bruce Denis Allet.................... 33 Director
Brian J. Bryce....................... 62 Director
Jay M. Haft.......................... 61 Director
Michael Jay Scharf................... 54 Director
</TABLE>
CHARLES H. STEIN has been Chairman, President and Chief Executive Officer
of the Company since its inception in March 1996. From June 1994 until March
1996, Mr. Stein was a private investor and consultant. From October 1993 until
June 1994, Mr. Stein was Chairman of HMI International Ltd., a Florida based
distributor of watches and retail close-out merchandise. Prior thereto and from
1983, Mr. Stein, who pioneered the concept of packaging fresh orange juice in
"milk-type" cartons, was a private investor. From December 1968 to October 1983,
Mr. Stein was Chairman and Chief Executive Officer of Hardwicke Companies Inc.,
which built, developed, or operated more than 50 restaurants (including Tavern
on the Green, Maxwell's Plum, and Benihana), health spas, theme parks in North
America, Europe and Asia (including Great Adventure in New Jersey), and
duty-free shops. He was previously President and Chief Executive Officer of
Kitchens of Sara Lee, the world's largest bakery, as well as a director, member
of the Executive Committee, and a Vice President of Consolidated Foods
Corporation, the parent company of Sara Lee.
JAMES V. STANTON has been Vice Chairman and a director of the Company since
its inception. Mr. Stanton has been an attorney and a registered lobbyist in
Washington, D.C. since 1988, and represented the 20th Congressional District of
Ohio in the United States House of Representatives from 1971 to 1977, where he
served on the Select Committee on Intelligence, the Government Operations
Committee, and the Public Works and Transportation Committee.
DOUGLAS C. RICE has been Vice President -- Corporate Development of the
Company since May 1996. Prior to joining the Company and from 1986, Mr. Rice was
an independent food technologies consultant, during which time, among other
engagements, he provided advice and guidance for six years to the Charoen
Pokphand Group, one of Asia's largest food producers, on the operation,
financing, management and distribution aspects of businesses specializing in
shrimp, fish, and chicken products. From 1984 to 1986, he was Executive Vice
President of Prudential Bache Trade Corp., a London-based merchant banking firm.
MILES R. GREENBERG was appointed Vice President and Chief Financial Officer
of the Company in September 1996. From 1994 until joining the Company, Mr.
Greenberg served as Vice President and Chief Financial Officer of F3 Software
Corporation ("F3"), a developer and marketer of electronic forms composition and
automation software. From 1992 until assuming his positions at F3, he served as
Controller of BLOC Development Corporation (former parent company of F3), a
publicly held entity primarily engaged in the development, publishing and direct
marketing of computer software and hardware products. From 1985 to 1992, Mr.
Greenberg served as Vice President and Chief Financial Officer of The Levenshon
Companies, Inc. and its affiliates, a group specializing in real estate
development and management, oil and gas drilling and operations, and portfolio
investment and management.
27
<PAGE> 29
GERALD M. BRESLAUER has been Vice President -- Administration of the
Company since its inception. From 1991 until he joined the Company in March
1996, Mr. Breslauer, who is an attorney, was an agent of The Equitable Life
Assurance Society of the United States and the Equitable Variable Life Insurance
Company and was a registered representative of Equico Securities, Inc. From 1989
to 1991, Mr. Breslauer was President of Sterling Financial Corporation, a
Florida consulting and investment service firm.
BRUCE DENIS ALLET has been a director of the Company since March 1996. Mr.
Allet has been employed by Groupe Conserver since 1993, most recently as its
Chairman and President. From 1985 to 1993, Mr. Allet managed several
international trading companies and operated various international venture
investment funds.
BRIAN J. BRYCE has been a director of the Company since July 1996. Since
1988, Mr. Bryce has been the sole principal and a director of Bryce & Company,
Limited, a consulting firm engaged in venture capital projects. Mr. Bryce was
employed by Hyatt International Corporation from 1969 until 1988, initially as a
Vice President, ultimately becoming Vice Chairman of Hyatt International
Corporation in 1981.
JAY M. HAFT has served as a director of the Company since October 1996. A
practicing attorney for over 25 years and a strategic consultant for growth
stage companies, Mr. Haft also serves as Chairman of Noise Cancellation
Technologies, Inc., Extech, Inc., and Healthcare Acquisition Corp., each a
public company whose respective securities are traded on the Nasdaq SmallCap
Market. He is a Managing General Partner of Venture Capital Associates, Ltd. and
of Gen Am "1" Venture Fund, a domestic and an international venture capital
fund, respectively. Mr. Haft is a director of the following public companies:
Robotic Vision Systems, Inc. (OTC), Noise Cancellation Technologies, Inc. (OTC),
Extech Inc. (OTC), Healthcare Acquisition Corp. (OTC), Viragen, Inc. (OTC), PC
Service Source, Inc. (OTC), DUSA Pharmaceuticals, Inc. (OTC) and Oryx Technology
Corp. (OTC). From 1989 until 1994, he was a partner at Parker Duryee Rosoff &
Haft, counsel to the Company, in New York, New York. He is currently of counsel
to such firm.
MICHAEL JAY SCHARF has been a director of the Company since September 1996.
Mr. Scharf has been Chairman, President and Chief Executive Officer of Niagara
Corporation (formerly International Metals Acquisition Corporation), a publicly
held specialty steel and metal company, since 1993. From 1989 until 1993, Mr.
Scharf was a private investor. From 1983 until 1989, he was Chairman and Chief
Executive Officer of Edgecomb Corporation, a leading independent metals
distribution company which was sold in 1989 to the Blackstone Group. Mr. Scharf
is also a director of Financial Services Acquisition Corp., a publicly held
company.
The Company has agreed that, for a period of five years from the effective
date of the Registration Statement, the Representative may designate one person
to attend all meetings of the Company's Board of Directors and to receive all
notices of meetings of the Company's Board of Directors and all other
correspondence and communications sent by the Company to members of its Board of
Directors. The Company has agreed to reimburse designees of the Representative
for their reasonable out-of-pocket expenses incurred in connection with their
attendance of meetings of the Company's Board of Directors. The Representative
has not designated an individual to serve in such capacity. See "Underwriting."
BOARD COMMITTEES
The Company's Board of Directors has an Audit Committee, a Compensation
Committee and a Stock Option Committee. The responsibility of the Audit
Committee (which, upon completion of this Offering, will consist of Messrs.
Stanton, Bryce and Scharf) include recommending to the Board of Directors the
firm of independent accountants to be retained by the Company, reviewing with
the Company's independent accountants the scope and result of their audits, and
reviewing with the independent accountants and management the Company's
accounting and reporting principles, policies and practices, as well as the
Company's accounting, financial and operating controls and staff. The
Compensation Committee (which, upon completion of this Offering, will consist of
Messrs. Stein, Haft and Scharf) has responsibility for establishing and
reviewing employee compensation. The Stock Option Committee (which, upon
completion
28
<PAGE> 30
of this Offering, will consist of Messrs. Stein, Haft and Scharf) has
responsibility for administering and interpreting the Company's 1996 Stock
Option Plan (the "Plan"), and determining the recipients, amounts and other
terms (subject to the requirements of the Plan) of options which may be granted
under the Plan from time to time.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth certain summary information concerning the
aggregate total annual salary and bonus paid or accrued by the Company for
services rendered from inception through October 31, 1996 to its chief executive
officer.
ANNUAL COMPENSATION
<TABLE>
<CAPTION>
PRINCIPAL ALL OTHER
NAME POSITION SALARY$ BONUS$ OPTIONS COMPENSATION$
- ------------------------- ------------------------ ------- ------ ------- -------------
<S> <C> <C> <C> <C> <C>
Charles H. Stein......... Chief Executive Officer 0(1) 0 0 0
</TABLE>
- ---------------
(1) Pursuant to his employment agreement with the Company, Mr. Stein will begin
drawing an annual salary of no less than $125,000 upon the consummation of
this Offering.
EMPLOYMENT AGREEMENT
Upon consummation of this Offering, the Company will enter into an
employment agreement with Charles H. Stein, President and Chief Executive
Officer of the Company. The agreement will have a three-year term which renews
for an additional year on each anniversary of the agreement, and will provide
for an annual base compensation of not less than $125,000. The agreement
provides for certain employee benefits including medical insurance, vacation and
a car allowance, and also contains a non-competition provision covering the term
of the agreement plus one year following termination.
STOCK OPTION PLAN
The Company's Board of Directors has adopted the Plan for officers,
employees, directors and consultants of the Company or any of its subsidiaries.
The Plan authorizes the granting of stock options to purchase an aggregate of
not more than 450,000 shares of the Company's Common Stock.
The Plan is administered by the Stock Option Committee of the Company's
Board of Directors (the "Committee"). In general, the Committee will select the
persons to whom options will be granted and will determine, subject to the terms
of the Plan, the number, the exercise period and other provisions of such
options. The options granted under the Plan will be exercisable in such
installments as may be provided in the grant.
Options granted to employees may be either incentive stock options ("ISOs")
under the Internal Revenue Code of 1986, as amended (the "Code") or non-ISOs.
The Committee may determine the exercise price, provided that, in the case of
ISOs, such price may not be less than 100% (110% in the case of ISOs granted to
holders of 10% of the voting power of the Company's stock) of the fair market
value (as defined in the Plan) of the Company's Common Stock at the date of
grant. The aggregate fair market value (determined at time of option grant) of
stock with respect to which ISOs become exercisable for the first time in any
year cannot exceed $100,000.
All options will be evidenced by a written agreement containing the above
terms and such other terms and conditions consistent with the Plan as the
Committee may impose. Each option, unless sooner terminated, shall expire no
later than 10 years (five years in the case of ISOs granted to holders of 10% of
the voting power of the Company's stock) from the date of the grant, as the
Committee may determine. The Committee has the right to amend, suspend or
terminate the Plan at any time, provided, however, that unless ratified by the
Company's stockholders within 12 months thereafter, no amendment or change in
the Plan will be effective: (a) increasing the total number of shares which may
be issued under the Plan; (b) reducing below fair market value on the date of
grant the price per share at which any option which is an ISO may be granted;
(c)
29
<PAGE> 31
extending the term of the Plan or the period during which any option which is an
ISO may be granted or exercised; (d) altering in any way the class of persons
eligible to participate in the Plan; (e) materially increasing the benefits
accruing to participants under the Plan; or (f) with respect to options which
are ISOs, amending the Plan in any respect which would cause such options to no
longer qualify for ISO treatment pursuant to the Code.
As of the date hereof, no options have been granted under the Plan.
COMPENSATION OF DIRECTORS
Following the consummation of this Offering, directors who are not employed
by the Company will be paid a fee, to be determined by the Board of Directors,
for each meeting attended. In addition, all directors will be reimbursed for
expenses incurred on behalf of the Company.
INDEMNIFICATION OF DIRECTORS AND OFFICERS AND RELATED MATTERS
The Company's Certificate of Incorporation limits, to the maximum extent
permitted by the DGCL, the personal liability of directors and officers for
monetary damages for breach of their fiduciary duties as directors and officers
(other than liabilities arising from acts or omissions which involve intentional
misconduct, fraud or knowing violations of law or the payment of distributions
in violation of the DGCL). The Certificate of Incorporation provides further
that the Company shall indemnify to the fullest extent permitted by the DGCL any
person made a party to an action or proceeding by reason of the fact that such
person was a director, officer, employee or agent or the Company. Subject to the
Company's Certificate of Incorporation, the By-laws provide that the Company
shall indemnify directors and officers for all costs reasonably incurred in
connection with any action, suit or proceeding in which such director or officer
is made a party by virtue of his being an officer or director of the Company,
except where such director or officer is finally adjudged to have been derelict
in the performance of his duties as such director or officer.
The Company expects to enter into separate indemnification agreements with
its officers and directors containing provisions which are in some respects
broader than the specific indemnification provisions contained in the Company's
Certificate of Incorporation and By-laws. The indemnification agreements may
require the Company, among other things, to indemnify such directors and
officers against certain liabilities that may arise by reason of their status as
directors and officers (other than liabilities arising from willful misconduct
of a culpable nature), to advance their expenses incurred as a result of any
proceeding against them as to which they could be indemnified, and to obtain
directors' and officers' insurance, if available on reasonable terms. The
Company believes these agreements are necessary to attract and retain qualified
persons as directors and officers.
At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent of the Company where indemnification will
be required or permitted. The Company is not aware of any threatened litigation
or proceeding which may result in a claim for such indemnification.
30
<PAGE> 32
CERTAIN TRANSACTIONS
Following the Company's incorporation in March 1996, the Company issued an
aggregate of 10,389,259 shares of Common Stock to 24 persons, including Messrs.
Stein, Stanton, Breslauer, Haft and Scharf and Conserver Investments, SA, at a
price of $.001 per share.
During the period from April 1996 through November 1996, the Company issued
an aggregate of 1,350,558 shares of Common Stock to 49 persons at a price of
$2.34866 per share, including two persons who had previously acquired shares of
Common Stock at $.001 per share and 63,866 shares to two adult children of James
V. Stanton, a director of the Company.
In March 1996, options to purchase 159,666 shares of Common Stock at an
exercise price of $.234866 per share were granted to Douglas Rice, Vice
President -- Corporate Development. The Company recorded compensation charges of
$337,500 in connection with the issuance of such options. See "Management's
Discussion and Analysis of Financial Condition and Plan of Operation." In August
1996, warrants to purchase 319,331 shares at a purchase price of $2.34866 per
share were granted to each of Messrs. Haft and Stanton, and options to purchase
74,511 shares of Common Stock at an exercise price of $2.34866 per share were
granted to Michael Stanton, an employee of the Company and James Stanton's son.
In September 1996, options to purchase 95,799 shares of Common Stock at an
exercise price of $2.34866 per share were granted to Miles R. Greenberg, Vice
President and Chief Financial Officer.
In October and November 1996, the Company repurchased, for an aggregate
repurchase price of $1,800,000, 2,909,461 of the 3,548,123 shares of Common
Stock originally acquired by Conserver Investments, SA (an affiliate of Groupe
Conserver) ("CI") in March 1996.
Pursuant to a Stockholder Agreement dated March 7, 1996 by and among
Charles Stein, Bruce Denis Allet on behalf of CI and a non-affiliate
stockholder, Mr. Allet has served on the Board of Directors as a designee of CI.
This agreement terminated effective upon the disposition by CI of its remaining
shares of Common Stock in November 1996.
Jay M. Haft, a director of the Company, is of counsel to Parker Duryee
Rosoff & Haft A Professional Corporation, which firm will be passing upon the
validity of the Securities being offered by the Company.
31
<PAGE> 33
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Common Stock as of November 21, 1996 for (i) each executive
officer and director of the Company, (ii) each stockholder known by the Company
to be the beneficial owner of more than 5% of the outstanding Common Stock, and
(iii) all executive officers and directors as a group. Except as otherwise
indicated, the Company believes that the beneficial owners of the Common Stock
listed below, based on information furnished by such owners, have sole
investment and voting power with respect to such shares, subject to community
property laws where applicable.
<TABLE>
<CAPTION>
PERCENTAGE
NUMBER OF BENEFICIALLY OWNED
SHARES ---------------------
NAME AND ADDRESS OF BENEFICIALLY BEFORE AFTER
BENEFICIAL OWNER(1) OWNED OFFERING OFFERING
- ------------------------------------------------------------ ------------ -------- --------
<S> <C> <C> <C>
Charles H. Stein............................................ 2,128,874(2) 23.8% 16.5%
James V. Stanton............................................ 489,641(3) 5.3% 3.7%
Douglas C. Rice............................................. 0 -- --
Miles R. Greenberg.......................................... 0 -- --
Gerald M. Breslauer......................................... 106,444 1.2% *
Bruce Denis Allet........................................... 0 -- --
Avenue d'Auderghem,
272 1040 Brussels, Belgium
Brian J. Bryce.............................................. 1,064,437(4) 11.9% 8.2%
Jay M. Haft................................................. 425,775(5) 4.6% 3.2%
201 S. Biscayne Boulevard, Suite 300
Miami, FL 33133
Michael Jay Scharf.......................................... 425,775(6) 4.8% 3.3%
704 Spinnakers Reach
Ponte Vedra, FL 32082
Jasmine Trustees Ltd........................................ 1,064,437(4) 11.9% 8.2%
P.O. Box 675
St. Helier, Jersey Channel Islands
Dori Kallan, Daniel Kallan and 638,662 7.1% 4.9%
Joshua Kallan as joint tenants............................
19999 Back Nine Drive
Boca Raton, FL 33498
All executive officers and directors as a group (9 persons) 4,640,946 48.3% 34.3%
(2)(3)(4)(5) and (6)......................................
</TABLE>
- ---------------
* Represents beneficial ownership of less than 1% of the Common Stock.
(1) Unless otherwise indicated, the holders' address is c/o the Company, 2655
LeJeune Road, Suite 535, Coral Gables, Florida 33134.
(2) Represents shares held by a trust for the benefit of Mr. Stein's spouse and
children. Mr. Stein disclaims voting and investment power with respect to
the shares.
(3) Includes 42,577 shares held jointly by Mr. Stanton and his spouse and
319,331 shares of Common Stock underlying warrants exercisable within 60
days of the date of the Prospectus. Does not include 63,866 shares owned by
Mr. Stanton's adult children.
(4) Represents shares held by Jasmine Trustees Ltd., a trust established for the
benefit of Mr. Bryce and his children. Mr. Bryce does not have voting or
dispositive power with respect to such shares.
(5) Includes 319,331 shares of Common Stock underlying warrants exercisable
within 60 days of the date of this Prospectus.
(6) Includes 425,775 shares held by the Scharf Family 1989 Trust for the benefit
of Mr. Scharf and his family.
32
<PAGE> 34
DESCRIPTION OF SECURITIES
The following descriptions of the Company's securities are qualified in all
respects by reference to the Certificate of Incorporation and By-laws of the
Company and the warrant agreement (the "Warrant Agreement"), dated ,
1996, by and among the Company, the Representative and Continental Stock
Transfer & Trust Company (the "Warrant Agent"), copies of which are filed as
Exhibits to the Registration Statement of which this Prospectus is a part. The
Certificate of Incorporation of the Company authorizes the Company to issue up
to 5,000 shares of preferred stock, par value $.01 per share (the "Preferred
Stock"), none of which is outstanding and 30,000,000 shares of Common Stock, par
value $.001 per share. As of the date hereof, there are no Warrants outstanding.
COMMON STOCK
As of November 20, 1996, there were 8,963,418 shares of Common Stock
outstanding. There will be 12,910,196 shares of Common Stock outstanding after
giving effect to the sale of the Shares of Common Stock offered hereby and the
SES Reacquisition. The holders of Common Stock are entitled to one vote for each
share held of record on all matters submitted to a vote of the stockholders.
Subject to preferential rights with respect to any outstanding Preferred Stock,
holders of Common Stock are entitled to receive ratably such dividends as may be
declared by the Board of Directors out of funds legally available therefor. In
the event of a liquidation, dissolution or winding up of the Company, holders of
Common Stock are entitled to share ratably in all assets remaining after payment
of liabilities and satisfaction of preferential rights and have no rights to
convert their Common Stock into any other securities. All shares of Common Stock
have equal, non-cumulative voting rights, and have no preference, exchange,
preemptive or redemption rights. The outstanding shares of Common Stock are, and
the Common Stock to be outstanding upon completion of the Offering will be,
fully paid and nonassessable. See "Capitalization."
WARRANTS
Exercise Price and Terms. Each Warrant entitles the registered holder
thereof to purchase, at any time over a fifty-four month period commencing six
(6) months after the date of this Prospectus, one share of Common Stock at a
price of $ per Share [140% of the initial public offering price per
Share], subject to adjustment in accordance with the anti-dilution and other
provisions referred to below. The holder of any Warrant may exercise such
Warrant by surrendering the certificate representing the Warrant to the Warrant
Agent, with the subscription form thereon properly completed and executed,
together with payment of the exercise price. The Warrants may be exercised at
any time in whole or in part at the applicable exercise price until expiration
of the Warrants. No fractional shares will be issued upon the exercise of the
Warrants.
The exercise price of the Warrants bears no relationship to any objective
criteria of value and should in no event be regarded as an indication of any
future market price of the Securities offered hereby.
Adjustments. The holders of the Warrants are protected against dilution of
their interests by adjustments, as set forth in the Warrant Agreement, of the
exercise price and the number of shares of Common Stock purchasable upon the
exercise of the Warrants upon the occurrence of certain events, including stock
dividends, stock splits, combinations or reclassification of the Common Stock,
or sale by the Company of shares of its Common Stock or other securities
convertible into Common Stock at a price below the then-applicable exercise
price of the Warrants. Additionally, an adjustment would be made in the case of
a reclassification or exchange of Common Stock, consolidation or merger of the
Company with or into another corporation (other than a consolidation or merger
in which the Company is the surviving corporation) or sale of all or
substantially all of the assets of the Company in order to enable warrantholders
to acquire the kind and number of shares of stock or other securities or
property receivable in such event by a holder of the number of shares of Common
Stock that might otherwise have been purchased upon the exercise of the Warrant.
Redemption Provisions. Commencing eighteen (18) months after the date of
this Prospectus, all, but not less than all, of the Warrants are subject to
redemption at $0.10 per Warrant on not less than thirty (30) days' prior written
notice to the holders of the Warrants provided the per share closing sale price
of the
33
<PAGE> 35
Common Stock as reported on AMEX equals or exceeds $ [250% of the
initial public offering price per Share] per Share for any twenty (20) trading
days within a period of thirty (30) consecutive trading days ending on the fifth
(5th) trading day prior to the date on which the Company gives notice of
redemption. The Warrants will be exercisable until the close of business on the
day immediately preceding the date fixed for redemption in such notice. If any
Warrant called for redemption is not exercised by such time, it will cease to be
exercisable and the holder will be entitled only to the redemption price.
Transfer, Exchange and Exercise. The Warrants are in registered form and
may be presented to the Warrant Agent for transfer, exchange or exercise at any
time on or prior to their expiration date five (5) years from the date of this
Prospectus, at which time the Warrants become wholly void and of no value. If a
market for the Warrants develops, the holder may sell the Warrants instead of
exercising them. There can be no assurance, however, that a market for the
Warrants will develop or continue.
The Warrants are not exercisable unless, at the time of the exercise, the
Company has a current prospectus covering the shares of Common Stock issuable
upon exercise of the Warrants, and such shares have been registered, qualified
or deemed to be exempt under the securities laws of the state of residence of
the exercising holder of the Warrants. Although the Company will use its best
efforts to have all the shares of Common Stock issuable upon exercise of the
Warrants registered or qualified on or before the exercise date and to maintain
a current prospectus relating thereto until the expiration of the Warrants,
there can be no assurance that it will be able to do so.
The Warrants are separately transferable immediately upon issuance.
Although the Warrants will not knowingly be sold to purchasers in jurisdictions
in which the Warrants are not registered or otherwise qualified for sale or
exemption, purchasers may buy Warrants in the after-market in, or may move to,
jurisdictions in which Warrants and the Common Stock underlying the Warrants are
not so registered or qualified or are exempt. In this event, the Company would
be unable lawfully to issue Common Stock to those persons desiring to exercise
their Warrants (and the Warrants would not be exercisable by those persons)
unless and until the Warrants and the underlying Common Stock are registered, or
qualified for sale in jurisdictions in which such purchasers reside, or an
exemption from registration or qualification exists in such jurisdiction.
Warrantholder Not a Stockholder. The Warrants do not confer upon holders
any voting, dividend or other rights as stockholders of the Company.
Modification of Warrants. The Company and the Warrant Agent may make such
modifications to the Warrants as they deem necessary and desirable that do not
adversely affect the interests of the warrantholders. The Company may, in its
sole discretion, lower the exercise price of the Warrants for a period of not
less than thirty (30) days on not less than thirty (30) days' prior written
notice to the warrantholders and the Representative. Modification of the number
of securities purchasable upon the exercise of any Warrant, the exercise price
and the expiration date with respect to any Warrant requires the consent of
two-thirds of the warrantholders. No other modifications may be made to the
Warrants, without the consent of two-thirds of the warrantholders.
OTHER WARRANTS AND CONVERTIBLE SECURITIES
Prior to the Offering, in August 1996, as a means of compensating certain
founders of the Company for their efforts in connection with the organization
and development of the business, the Company issued warrants to purchase
319,311, 319,311 and 53,222 shares of Common Stock to Jay M. Haft, James V.
Stanton and Greg Pilkington, respectively, at an exercise price of $2.34866 per
share. The Company has recorded compensation charges in the amount of $457,201
in connection with the value attributed to the issuance of such warrants. In
September and November 1996, the Company issued 10% Convertible Debentures in
the aggregate principal amounts of $600,000 and $150,000, respectively. The
holders of the debentures may elect to convert at any time all unpaid principal
and accrued interest into shares of Common Stock at a rate of $2.34866 per
share. The holders of the debentures aggregating $150,000 issued in November
1996 can elect to be paid in full upon the consummation of the Offering. In
addition, the Company has agreed to issue, upon the completion of the Offering,
1,170,881 warrants at an exercise price of $.94 to SES and one of its
affiliates. The Company anticipates that it will record a non-cash compensation
charge of approximately $2,300,000 in
34
<PAGE> 36
connection with the value attributed to such issuance. See "Management's
Discussion and Analysis of Financial Condition and Plan of
Operation -- Liquidity and Capital Resources."
PREFERRED STOCK
The Company's Certificate of Incorporation authorizes the issuance of 5,000
shares of Preferred Stock with designations, rights and preferences determined
from time to time by its Board of Directors. Accordingly, the Company's Board of
Directors is empowered, without stockholder approval, to issue Preferred Stock
with dividend, liquidation, conversion, voting or other rights that could
adversely affect the voting power or other rights of the holders of the Common
Stock. In the event of issuance, the Preferred Stock could be used, under
certain circumstances, as a method of discouraging, delaying or preventing a
change in control of the Company. Although the Company has no present intention
to issue any shares of its Preferred Stock, there can be no assurance that it
will not do so in the future.
OPTIONS
As of the date of this Prospectus, options to purchase 212,888 shares of
Common Stock at an exercise price of $.234866 and options to purchase 244,821
shares of Common Stock at an exercise price of $2.34866 per share have been
granted to 5 persons. These options vest pro-rata over three years commencing
one year from the date of grant. The Company has recorded compensation charges
of $450,000 in connection with the issuance of the 212,888 options exercisable
at $.234866 per share. No options have been granted under the Company's 1996
Stock Option Plan. See "Stock Option Plan."
SECTION 203 OF THE DGCL
Section 203 of the DGCL prohibits a publicly-held Delaware corporation from
engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
became an interested stockholder, unless (i) prior to the date of the business
combination, the transaction is approved by the board of directors of the
corporation; (ii) upon consummation of the transactions which resulted in the
stockholder becoming an interested stockholder, the interested stockholder owns
at least 85% of the outstanding voting stock, or (iii) on or after such date,
the business combination is approved by the board of directors and by the
affirmative vote of at least 66 2/3% of the outstanding voting stock that is not
owned by the interested stockholder. A "business combination" includes mergers,
asset sales and other transactions resulting in a financial benefit to the
stockholder. An "interested stockholder" is a person, who, together with
affiliates and associates, owns (or within three years, did own) 15% or more of
the corporation's voting stock.
TRANSFER AND WARRANT AGENT
The transfer agent for the Common Stock and the Warrant Agent for the
Warrants is Continental Stock Transfer & Trust Company, New York, New York.
35
<PAGE> 37
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this Offering, there has been no market for the Common Stock or
Warrants. No predictions can be made with respect to the effect, if any, that
public sales of shares of the Common Stock or Warrants or the availability of
Shares or Warrants for sale will have on the market price of the Common Stock or
Warrants after this Offering. Sales of substantial amounts of the Common Stock
or Warrants in the public market following this Offering, or the perception that
such sales may occur, could adversely affect the market price of the Common
Stock and Warrants or the ability of the Company to raise capital through sales
of its equity securities.
Upon completion of this Offering, the Company will have 12,910,196 shares
of Common Stock outstanding (after giving effect to the SES Reacquisition). Of
these shares, the 4,000,000 shares and 4,000,000 Warrants sold in this Offering
will be freely tradeable without restriction or further registration under the
Securities Act.
The remaining 8,910,196 shares and the 691,884 $2.35 Warrants held by
existing stockholders will be restricted securities as that term is defined in
Rule 144 under the Securities Act ("Restricted Shares"). Restricted Shares may
be sold in the public market only if registered under the Securities Act or if
they qualify for an exemption from registration under Rule 144 which is
summarized below. Sales of the Restricted Shares in the public market, or the
availability of such shares for sale, could adversely affect the market prices
of the Common Stock and Warrants.
In general, under Rule 144, a person (or persons whose shares are
aggregated) who has beneficially owned Restricted Shares for at least two years,
including the holding period of any securities which converted into the
Restricted Shares and including the holding period of any prior owner except an
affiliate of the Company, would be entitled to sell within any three-month
period a number of shares that does not exceed the greater of one percent of the
then outstanding shares of Common Stock (129,102 shares upon completion of this
Offering) or the average weekly trading volume of the Common Stock reported
during the four calendar weeks preceding such sale. Sales under Rule 144 are
also subject to certain manner of sale provisions, notice requirements and the
availability of current public information about the Company. Any person (or
persons whose shares are aggregated with such person) who is not deemed to have
been an affiliate of the Company at any time during the 90 days preceding a
sale, and who has beneficially owned shares for at least three years (including
any period of ownership of preceding non-affiliated holders), would be entitled
to sell such shares under Rule 144(k) without regard to the volume limitations,
manner of sale provisions, public information requirements or notice
requirements.
The Company expects that all officers, directors and stockholders of the
Company and all holders of any options, warrants or other securities
convertible, exercisable or exchangeable for shares of Common Stock will agree
not to, directly or indirectly, issue, offer, agree or offer to sell, sell,
transfer, assign, encumber, grant an option for the purchase or sale of, pledge,
hypothecate or otherwise dispose of any beneficial interest in such shares of
Common Stock for a period of twelve (12) months following the effective date of
the Registration Statement without the prior written consent of the Company and
the Representative, except in connection with private transactions (not
involving a public offering) in which the transferee(s) agrees in writing to be
similarly bound. The Company expects that certain officers, directors and
stockholders of the Company will also agree not to, directly or indirectly,
issue, offer, agree or offer to sell, sell, transfer, assign, encumber, grant an
option for the purchase or sale of, pledge, hypothecate or otherwise dispose of
more than ten percent (10%) of any shares of Common Stock or any options,
warrants or other securities convertible, exercisable or exchangeable for shares
of Common Stock, whether or not owned by them, for a period of twenty-four (24)
months following the effective date of the Registration Statement without the
prior written consent of the Company and the Representative.
36
<PAGE> 38
UNDERWRITING
The Underwriters named below (the "Underwriters"), for whom National
Securities Corporation is acting as representative (in such capacity, the
"Representative"), have severally agreed, subject to the terms and conditions of
the Underwriting Agreement (the "Underwriting Agreement") to purchase from the
Company and the Company has agreed to sell to the Underwriters on a firm
commitment basis, the respective number of Shares and Warrants set forth
opposite their names:
<TABLE>
<CAPTION>
NUMBER NUMBER OF
UNDERWRITER OF SHARES WARRANTS
-------------------------------------------------------------- --------- ---------
<S> <C> <C>
National Securities Corporation...............................
--------- ---------
Total............................................... 4,000,000 4,000,000
========= =========
</TABLE>
The Underwriters are committed to purchase all the Shares of Common Stock
and Warrants offered hereby, if any of such securities are purchased. The
Underwriting Agreement provides that the obligations of the several Underwriters
are subject to conditions precedent specified therein.
The Company has been advised by the Representative that the Underwriters
propose initially to offer the Securities to the public at the initial public
offering prices set forth on the cover page of this Prospectus and to certain
dealers at such prices less concessions not in excess of $ per Share
and $ per Warrant. Such dealers may reallow a concession not in excess
of $ per Share and $ per Warrant to certain other dealers.
After the commencement of the Offering, the public offering prices, concession
and reallowance may be changed by the Representative.
The Representative has informed the Company that it does not expect sales
to discretionary accounts by the Underwriters to exceed five percent (5%) of the
Securities offered hereby.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute to
payments that the Underwriters may be required to make. The Company has also
agreed to pay to the Representative a non-accountable expense allowance equal to
3% of the gross proceeds derived from the sale of the Securities underwritten.
The Company has granted to the Underwriters an over-allotment option,
exercisable during the forty-five (45) day period from the date of this
Prospectus, to purchase up to an additional 600,000 shares of Common Stock
and/or 600,000 Warrants at the initial public offering price per Share and
Warrant, respectively, offered hereby, less underwriting discounts and the
non-accountable expense allowance. Such option may be exercised only for the
purpose of covering over-allotments, if any, incurred in the sale of the
Securities offered hereby. To the extent such option is exercised in whole or in
part, each Underwriter will have a firm commitment, subject to certain
conditions, to purchase the number of the additional securities proportionate to
its initial commitment.
In connection with this Offering, the Company has agreed to sell to the
Representative, for nominal consideration, warrants to purchase from the Company
up to 400,000 shares of Common Stock and/or 400,000 Warrants (the
"Representative's Warrants"). The Representative's Warrants are initially
exercisable at a price of $ per share of Common Stock [120% of the
initial public offering price per Share] and $.12 per Warrant for a period of
four (4) years, commencing at the beginning of the second year after their
issuance and sale and are restricted from sale, transfer, assignment or
hypothecation for a period of twelve (12) months from the date hereof, except to
officers of the Representative. The Representative's Warrants provide for
adjustment in the number of shares of Common Stock and Warrants issuable upon
the exercise thereof and in the exercise price of the Representative's Warrants
as a result of certain events, including
37
<PAGE> 39
subdivisions and combinations of the Common Stock. The Representative's Warrants
grant to the holders thereof certain rights of registration for the securities
issuable upon exercise thereof.
The Company expects that all officers, directors and stockholders of the
Company and all holders of any options, warrants or other securities
convertible, exercisable or exchangeable for shares of Common Stock will agree
not to, directly or indirectly, issue, offer, agree or offer to sell, sell,
transfer, assign, encumber, grant an option for the purchase or sale of, pledge,
hypothecate or otherwise dispose of any beneficial interest in such shares of
Common Stock for a period of twelve (12) months following the effective date of
the Registration Statement without the prior written consent of the Company and
the Representative, except in connection with private transactions (not
involving a public offering) in which the transferee(s) agrees in writing to be
similarly bound. The Company expects that certain officers, directors and
stockholders of the Company will also agree not to, directly or indirectly,
issue, offer, agree or offer to sell, sell, transfer, assign, encumber, grant an
option for the purchase or sale of, pledge, hypothecate or otherwise dispose of
more than ten percent (10%) of any shares of Common Stock or any options,
warrants or other securities convertible, exercisable or exchangeable for shares
of Common Stock, whether or not owned by them, for a period of twenty-four (24)
months following the effective date of the Registration Statement without the
prior written consent of the Company and the Representative. An appropriate
legend shall be marked on the face of certificates representing all such
securities.
The Company has agreed not to, without the prior written consent of the
Representative, issue, sell, agree or offer to sell, grant an option for the
purchase or sale of, or otherwise transfer or dispose of any of its securities
for a period of eighteen (18) months following the effective date of the
Registration Statement.
The Underwriting Agreement provides that the Representative has a right of
first refusal for a period of three (3) years from the effective date of the
Registration Statement with respect to any sale of securities by the Company or
any of its present or future affiliates or subsidiaries; provided, however, that
the Company may terminate such right of first refusal upon the payment of
$100,000 to the Representative.
The Company has agreed that, for a period of five (5) years from the
effective date of the Registration Statement, the Representative may designate
one person to attend all meetings of the Company's Board of Directors and to
receive all notices of meetings of the Company's Board of Directors and all
other correspondence and communications sent by the Company to members of its
Board of Directors. The Company has agreed to reimburse designees of the
Representative for their reasonable out-of-pocket expenses incurred in
connection with their attendance of meetings of the Company's Board of
Directors.
Prior to this Offering, there has been no public market for the Common
Stock or the Warrants. Consequently, the initial public offering prices of the
Securities have been determined by negotiation between the Company and the
Representative and do not necessarily bear any relationship to the Company's
asset value, net worth, or other established criteria of value. The factors
considered in such negotiations, in addition to prevailing market conditions,
included the history of and prospects for the industry in which the Company
competes, an assessment of the Company's management, the prospects of the
Company, its capital structure, the market for initial public offerings and
certain other factors as were deemed relevant.
Upon the exercise of any Warrants more than one year after the date of this
Prospectus, which exercise was solicited by the Representative, and to the
extent not inconsistent with the guidelines of the National Association of
Securities Dealers, Inc. and the Rules and Regulations of the Commission, the
Company has agreed to pay the Representative a commission of five percent (5%)
of the aggregate exercise price of such Warrants in connection with bona fide
services provided by the Representative relating to any warrant solicitation
undertaken by the Representative. However, no compensation will be paid to the
Representative in connection with the exercise of the Warrants if (a) the market
price of the Common Stock is lower than the exercise price, (b) the Warrants
were held in a discretionary account, or (c) the Warrants are exercised in an
unsolicited transaction where the holder of the Warrants has not stated in
writing that the transaction was solicited and has not designated in writing the
Representative as soliciting agent. Unless granted an exemption by the
Commission from its Rule 10b-6 under the Exchange Act, the Representative and
any soliciting broker-dealers will be prohibited from engaging in any
market-making activities or solicited brokerage activities with regard to the
Company's securities for the period from nine (9) business days (or other such
38
<PAGE> 40
applicable periods as Rule 10b-6 may provide) prior to any solicitation of the
exercise of the Warrants until the later of the termination of such solicitation
activity or the termination (by waiver or otherwise) of any right the
Representative or any soliciting broker-dealers may have to receive a fee for
the exercise of the Warrants following such solicitation. As a result, the
Representative and any soliciting broker-dealers may be unable to continue to
provide a market for the Common Stock or Warrants during certain periods while
the Warrants are exercisable. If the Representative has engaged in any of the
activities prohibited by Rule 10b-6 during the periods described above, the
Representative undertakes to waive unconditionally its right to receive a
commission on the exercise of such Warrants.
The foregoing is a summary of the principal terms of the agreements
described above and does not purport to be complete. Reference is made to a copy
of each such agreement which are filed as exhibits to the Registration
Statement. See "Additional Information."
LEGAL MATTERS
The validity of the securities being offered hereby will be passed upon for
the Company by Parker Duryee Rosoff & Haft A Professional Corporation, New York,
New York. Jay M. Haft, a director and stockholder of the Company, is counsel to
such Firm. Orrick, Herrington & Sutcliffe LLP, New York, New York, has acted as
counsel to the Underwriters in connection with this Offering.
EXPERTS
The financial statements of the Company as at August 31, 1996 and for the
period from March 6, 1996 (date of incorporation) through August 31, 1996,
included in this Prospectus, have been audited by Richard A. Eisner & Company,
LLP, independent auditors, as set forth in their report thereon appearing
elsewhere herein. Such financial statements are included herein and in the
Registration Statement in reliance upon such report and upon the authority of
said firm as experts in auditing and accounting.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), Washington, D.C. 20549, a Registration Statement on Form S-1 in
accordance with the provisions of the Securities Act of 1933, as amended, with
respect to the Securities offered hereby. This Prospectus, filed as part of the
Registration Statement, does not contain all the information set forth in the
Registration Statement and the exhibits filed thereto. For further information
regarding the Company and the Securities offered hereby, reference is made to
such Registration Statement and to the exhibits filed therewith. Statements
herein contained concerning the provisions of any document are not necessarily
complete and, in each instance, reference is made to the copy of such document
filed as an exhibit to the Registration Statement. The Registration Statement
and the exhibits may be inspected without charge at the offices of the
Commission and, upon payment to the Commission of prescribed fees and rates,
copies of all or any part thereof may be obtained from the Commission's
principal office at the Public Reference Section, Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549 or at the Northeast Regional
Office, 7 World Trade Center, New York, New York 10048. The Registration
Statement may also be accessed on the World Wide Web through the Commission's
Internet address at "http://www.sec.gov."
39
<PAGE> 41
CONSERVER CORPORATION OF AMERICA
(A DEVELOPMENT STAGE COMPANY)
-INDEX TO FINANCIAL STATEMENTS -
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
REPORT OF INDEPENDENT AUDITORS..................................................... F-2
BALANCE SHEET AS AT AUGUST 31, 1996 AND AUGUST 31, 1996 (PRO FORMA)................ F-3
STATEMENT OF OPERATIONS FOR THE PERIOD FROM MARCH 6, 1996 (DATE OF INCORPORATION)
THROUGH AUGUST 31, 1996.......................................................... F-4
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE PERIOD FROM MARCH 6, 1996
(DATE OF INCORPORATION) THROUGH AUGUST 31, 1996 AND AUGUST 31, 1996 (PRO
FORMA)........................................................................... F-5
STATEMENT OF CASH FLOWS FOR THE PERIOD FROM MARCH 6, 1996 (DATE OF INCORPORATION)
THROUGH AUGUST 31, 1996.......................................................... F-6
NOTES TO FINANCIAL STATEMENTS...................................................... F-7
</TABLE>
F-1
<PAGE> 42
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
Conserver Corporation of America
Coral Gables, Florida
We have audited the accompanying balance sheet of Conserver Corporation of
America (a development stage company) as at August 31, 1996, and the related
statements of operations, changes in stockholders' equity and cash flows for the
period from March 6, 1996 (date of incorporation) through August 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements enumerated above present fairly,
in all material respects, the financial position of Conserver Corporation of
America at August 31, 1996 and the results of its operations and cash flows for
the period from March 6, 1996 (date of incorporation) through August 31, 1996 in
conformity with generally accepted accounting principles.
/s/ Richard A. Eisner & Company, LLP
New York, New York
September 27, 1996
With respect to Notes A, E, H[2] and J
November 19, 1996
F-2
<PAGE> 43
CONSERVER CORPORATION OF AMERICA
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
AS AT AUGUST 31, 1996
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ---------------
--------------- (NOTE J)
<S> <C> <C>
ASSETS
Current assets:
Cash................................................ $ 2,403,588 $ 2,779,962
Accounts receivable................................. 10,812 10,812
Advances to officers and employees.................. 17,968 17,968
Other current assets................................ 9,431 6,690
--------------- ---------------
Total current assets............................. 2,441,799 2,815,432
Fixed assets, net (Notes B[2] and C).................. 4,378 4,378
--------------- ---------------
TOTAL............................................ $ 2,446,177 $ 2,819,810
--------------- ---------------
--------------- ---------------
LIABILITIES
Current liabilities:
Return of subscription funds (Note H[2])............ $ 90,000 $ --
Due to officers and employees....................... 3,839 3,839
Notes payable -- current portion (net of $62,500
discount pro forma) (Note J[1]).................. -- 87,500
Accrued expenses.................................... 75,317 75,317
Accrued interest.................................... 30,000 30,000
--------------- ---------------
Total current liabilities........................ 199,156 196,656
Notes payable net of current portion (net of $250,000
discount pro forma) (Notes D and J[1]).............. 1,000,000 1,350,000
--------------- ---------------
Total liabilities................................ 1,199,156 1,546,656
--------------- ---------------
Commitments and other matters (Note H)
STOCKHOLDERS' EQUITY
(Notes A, D, E and J)
Preferred stock, par value $.01, 5,000 shares
authorized, none issued and outstanding
Common stock, par value $.001, 30,000,000 shares
authorized, 11,094,768 shares (pro forma 8,963,418
shares) issued and outstanding...................... 11,095 8,963
Additional paid-in capital............................ 2,557,997 2,586,262
(Deficit) accumulated during the development stage.... (1,322,071) (1,322,071)
--------------- ---------------
Total stockholders' equity....................... 1,247,021 1,273,154
--------------- ---------------
TOTAL............................................ $ 2,446,177 $ 2,819,810
--------------- ---------------
--------------- ---------------
</TABLE>
The accompanying notes to financial statements are an integral part hereof.
F-3
<PAGE> 44
CONSERVER CORPORATION OF AMERICA
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM MARCH 6, 1996 (DATE OF INCORPORATION)
THROUGH AUGUST 31, 1996
<TABLE>
<S> <C>
Compensation charges in connection with issuance of options (Note
E[2]).................................................................. $ 450,000
Compensation charges in connection with issuance of warrants (Note
E[1]).................................................................. 457,201
General and administrative expenses...................................... 393,611
---------------
Operating (loss)......................................................... (1,300,812)
Interest expense, net of $8,741 interest income.......................... 21,259
---------------
NET (LOSS)............................................................... $(1,322,071)
---------------
---------------
Net (loss) per share of common stock..................................... $ (.13)
---------------
---------------
Weighted average number of common shares outstanding..................... $10,463,000
---------------
---------------
</TABLE>
The accompanying notes to financial statements are an integral part hereof.
F-4
<PAGE> 45
CONSERVER CORPORATION OF AMERICA
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(NOTE E)
<TABLE>
<CAPTION>
DEFICIT
COMMON STOCK ACCUMULATED
PAR VALUE $.001 ADDITIONAL DURING THE
------------------------- PAID-IN DEVELOPMENT
SHARES AMOUNT CAPITAL STAGE TOTAL
--------- ------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Issuance of common stock for
cash of $3,514 and
subscriptions in March
1996......................... 10,389,259 $4,881 $ 4,881
Effect of recapitalization..... 5,508 $ (5,508) -- 0 --
Issuance of common stock for
cash from April through
August 1996 ($2.34866 per
share)....................... 705,509 706 1,656,304 1,657,010
Compensation charges in
connection with issuance of
options (Note E[2]).......... 450,000 450,000
Compensation charges in
connection with issuance of
warrants (Note E[1])......... 457,201 457,201
Net (loss) for the period from
March 6, 1996 (date of
incorporation) through August
31, 1996..................... $(1,322,071) (1,322,071)
--------- ------ ---------- ---------- ----------
Balance -- August 31, 1996..... 11,094,768 11,095 2,557,997 (1,322,071 ) (1,247,021)
Pro forma adjustments:
Repurchase and cancellation of
shares originally issued
(Note J[2]).................. (2,909,461) (2,910 ) (1,798,457) (1,801,367)
Shares issued and treated as
debt discount.............. 133,063 133 312,367 312,500
Sale of common stock
($2.34866 per share) from
September 1, 1996 to
November 7, 1996........... 645,048 645 1,514,355 1,515,000
--------- ------ ---------- ---------- ----------
BALANCE -- AUGUST 31, 1996 PRO
FORMA........................ 8,963,418 $8,963 $2,586,262 $(1,322,071) $1,273,154
--------- ------ ---------- ---------- ----------
--------- ------ ---------- ---------- ----------
</TABLE>
The accompanying notes to financial statements are an integral part hereof.
F-5
<PAGE> 46
CONSERVER CORPORATION OF AMERICA
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM MARCH 6, 1996 (DATE OF INCORPORATION)
THROUGH AUGUST 31, 1996
<TABLE>
<S> <C>
Cash flows from operating activities:
Net (loss)................................................................. $(1,322,071)
Adjustments to reconcile net (loss) to net cash provided by operating
activities:
Depreciation and amortization........................................... 487
Compensation expense relating to stock options and warrants............. 907,201
Changes in operating assets and liabilities:
(Increase) in accounts receivable..................................... (10,812)
(Increase) in advances to officers and employees...................... (14,129)
(Increase) in other assets............................................ (8,064)
Increase in accrued expenses.......................................... 105,317
-----------
Net cash used in operating activities.............................. (342,071)
-----------
Cash flows from investing activities:
Acquisition of fixed assets................................................ (4,865)
-----------
Cash flows from financing activities:
Proceeds from notes payable................................................ 1,000,000
Return of subscription funds............................................... 90,000
Proceeds from sale of common stock......................................... 1,660,524
-----------
Net cash provided by financing activities.......................... 2,750,524
-----------
CASH -- END OF PERIOD........................................................ $ 2,403,588
-----------
-----------
Supplemental disclosure of cash flow information:
Cash paid during the period for interest................................... $ -- 0 --
-----------
-----------
</TABLE>
The accompanying notes to financial statements are an integral part hereof.
F-6
<PAGE> 47
CONSERVER CORPORATION OF AMERICA
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1996
(NOTE A) -- THE COMPANY:
Conserver Corporation of America (the "Company") is a development stage
company that has the rights for the exclusive distribution of a product which
can be used to retard spoilage and decay in food and flowers for commercial use
in the United States and Canada. The Company was incorporated in Delaware on
March 6, 1996 and has adopted a fiscal year ending August 31. The Company's
activities since inception have largely consisted of organizational matters,
negotiating agreements and obtaining funds to finance the Company's operations
and development of its marketing and business plan.
In connection with the organization of the Company, 3,548,123 shares of
common stock were subscribed to by Conserver International, S.A., which together
with certain of its affiliates are referred to hereafter as the "Conserver
Group".
In March 1996, the Company entered into an agreement with the Conserver
Group, which granted it commercial distribution rights in the United States for
certain products designed to preserve foodstuffs and flowers. In October 1996,
the distribution agreement was amended to include Canada.
The agreement requires the Company to buy such products as it may need from
one of the affiliates at its regular distributor price. In addition, the Company
will pay one of the affiliates royalties of 6% on the first $100,000,000 of net
sales and 7% thereafter.
Subsequent to August 31, 1996, the Company in a series of transactions
repurchased 2,909,461 of such shares for an aggregate sum of $1,800,000.
Management's business plan will require financing; the Company has received
a letter of intent from an underwriter for a proposed public offering of its
common stock (see Note G). There is no assurance that the public offering will
be successful, or that any other additional financing will be available. If the
Company is unable to raise additional funds, it may be forced to change or delay
its contemplated marketing and business plans.
In November 1996, the Board of Directors approved a 2.128874 for 1 stock
split. The stock split has been accounted for retroactively in the accompanying
financial statements.
(NOTE B) -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
[1] Use of estimates in the preparation of financial statements:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
[2] Fixed assets:
Office equipment is carried at cost. Depreciation is provided using the
straight-line method over 5 years, the useful lives of the assets.
[3] Loss per share of common stock:
Net loss per share of common stock is based on the weighted average number
of shares outstanding during the period. Common shares issued and options and
warrants granted by the Company at prices less
F-7
<PAGE> 48
CONSERVER CORPORATION OF AMERICA
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
AUGUST 31, 1996
than the proposed offering price during the twelve months preceding the offering
date have been included in the calculation of common and common equivalent
shares outstanding as if they were outstanding since inception using the
treasury stock method and an assumed initial public offering price of $6.00 per
share.
[4] Income taxes:
The Company has applied to the accompanying financial statements provisions
required by accounting standards under which deferred income taxes are provided
for temporary differences between financial statement and taxable income or
loss.
[5] Stock based compensation:
The Company accounts for employee stock based compensation including stock
options under the basis of Accounting Principles Board Opinion No. 25.
Disclosures required by Financial Accounting Standards Board No. 123 are to be
found in Note E[2] to the financial statements.
[6] Fair value of financial instruments:
The carrying value of cash, accounts receivable and accounts payable
approximates fair value because of the short-term maturity of those instruments.
For other debt instruments, the carrying value approximates the fair value
in consideration of the subsequent and pending financings.
(NOTE C) -- FIXED ASSETS:
Fixed assets at August 31, 1996 are summarized as follows:
<TABLE>
<S> <C>
Office equipment............................................... $4,865
Less accumulated depreciation.................................. (487)
------
Balance...................................................... $4,378
------
------
</TABLE>
(NOTE D) -- DEBT:
The Company's convertible note payable is due June 30, 2001. Interest at
12% is payable quarterly commencing September 30, 1997. The note is convertible
into common stock after March 31, 1999 at a price equal to the lesser of $2.82
or the book value per share. If the Company completes a public offering, half of
the note may be converted at that time and the other half six months later.
In the event that the Company has not completed a public offering by June
30, 2001, the Company is required to pay an additional 50% of any then remaining
balance not converted to common stock.
In the event that the Company has not completed a public offering by July
10, 2003, the holder of any shares received pursuant to the conversion of the
note may require the Company to purchase all such shares at the greater of book
value or the original amount paid by the holder of the convertible note with
respect to such shares plus 50% of such investment.
In November 1996, the Company entered into an agreement suspending certain
provisions of the agreement with the lender for six months. The new agreement
provides for repayment of the note and accrued interest from proceeds of an
effective public offering. In addition, the Company will issue warrants for the
F-8
<PAGE> 49
CONSERVER CORPORATION OF AMERICA
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
AUGUST 31, 1996
purchase of 1,170,881 shares of common stock at $.94 per share. The warrants are
expected to be valued at approximately $2,300,000 and charged to expense
concurrent with the effectiveness of the public offering. Should the warrants be
issued, 53,222 shares of previously issued common stock are to be surrendered to
the Company. If no public offering is consummated during the six-month
suspension period, the original provisions of the agreement are to be in effect.
(NOTE E) -- STOCKHOLDERS' EQUITY:
[1] Warrants:
In August 1996, the Company issued three-year warrants to purchase 691,884
shares of the Company's common stock at $2.34866 per share. The warrants have
been valued at $457,201 in the accompanying financial statements.
[2] Options granted:
The Company has granted options for the purchase of 212,888 shares of
common stock at $.234866 per share and options for the purchase of 244,821
shares of common stock at $2.34866 per share. The options vest 1/3 on each
anniversary date of their issue. The Company has recorded compensation expense
of $450,000 in connection with options exercisable at $.234866 per share.
In estimating the value of options pursuant to the accounting provisions of
Financial Accounting Standards No. 123 ("FAS 123"), the Company used the
following assumptions:
<TABLE>
<S> <C>
Risk free interest rate........................................... 6%
Expected life..................................................... 3 years
Expected volatility............................................... .3
Dividend yield.................................................... .00
</TABLE>
If such accounting provisions of FAS 123 were applied then the Company's
net loss and net loss per share would have been $1,331,482 and $.13,
respectively.
[3] Stock option plan:
In November 1996, the Company adopted a stock option plan. Under the plan,
which authorizes the granting of incentive stock options or non-incentive stock
options, the maximum number of shares of common stock for which options may be
granted is 450,000 shares. As of the date hereof, no options have been granted
under this stock option plan.
(NOTE F) -- RELATED PARTY TRANSACTIONS:
The Company incurred approximately $51,000 in legal fees to a related
party.
(NOTE G) -- PROPOSED PUBLIC OFFERING:
The Company has signed a letter of intent with an underwriter with respect
to a proposed public offering of the Company's securities. There is no assurance
that such offering will be consummated. In connection
F-9
<PAGE> 50
CONSERVER CORPORATION OF AMERICA
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
AUGUST 31, 1996
therewith the Company anticipates incurring substantial expenses which, if the
offering is not consummated, will be charged to expense.
(NOTE H) -- COMMITMENTS AND OTHER MATTERS:
[1] Employment contract:
The Company expects to enter into a three-year employment contract with
its Chief Executive Officer which will take effect upon the consummation of the
Company's proposed public offering of securities. The Officer is also a member
of the Board of Directors. The contract is expected to provide for an annual
salary of an amount not less than $125,000 and a one-year noncompete clause upon
termination.
[2] Return of subscription funds:
Based on a subsequent review of their qualifications, certain
individuals who had subscribed to shares of the Company's common stock were
found not to be "Qualified Investors" within the meaning of rules promulgated
under the Securities Act of 1933, as amended. Accordingly, subsequent to August
31, 1996, the Company returned their subscription amounts.
(NOTE I) -- INCOME TAXES:
The Company, for tax purposes, does not have any operations or net
operating loss, as its expenses are pre-operating, and accordingly will be
capitalized and amortized when operations commence.
(NOTE J) -- PRO FORMA BALANCE SHEET:
Subsequent to August 31, 1996, the Company entered into the following
transactions. The pro forma balance sheet and statements of changes in
stockholders' equity give effect to such transactions as if they had occurred on
August 31, 1996.
[1] The Company issued one-year 10% convertible subordinated debentures in
the aggregate amount of $750,000. The holders of $150,000 of such debentures
have the option of requiring repayment upon consummation of the proposed initial
public offering. The debentures and accrued interest are convertible into common
shares at $2.34866 per share.
In connection with the sale of the debentures, the Company issued
133,063 shares of its common stock. The issuance of the shares has been valued
at $312,500 and is being accounted for as debt discount which will be charged to
expense over the term of the note.
[2] The Company repurchased 2,909,461 shares of its common stock for
$1,800,000 (Note A).
[3] Through November 12, 1996, 645,049 shares of the Company's common stock
were sold for $1,515,000.
[4] Refunds due to subscribers were paid (Note H[2]).
F-10
<PAGE> 51
Sketch of a box of fruit with Conserver 21 packet on top.
Sketch of a box of fruit with Conserver 21 filter.
<PAGE> 52
- ------------------------------------------------------
- ------------------------------------------------------
NO UNDERWRITER, DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED
IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY
UNDERWRITER. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE
HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY ANY SECURITIES OFFERED HEREBY BY ANYONE IN ANY JURISDICTION
IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON
MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM
IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 7
Use of Proceeds....................... 13
Dividend Policy....................... 14
Capitalization........................ 15
Dilution.............................. 16
Selected Financial Data............... 17
Management's Discussion and Analysis
of Financial Condition and Plan of
Operation........................... 18
Business.............................. 20
Management............................ 27
Certain Transactions.................. 31
Principal Stockholders................ 32
Description of Securities............. 33
Shares Eligible for Future Sale....... 36
Underwriting.......................... 37
Legal Matters......................... 39
Experts............................... 39
Additional Information................ 39
Index to Financial Statements......... F-1
</TABLE>
------------------------
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATIONS OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
LOGO
CONSERVER
CORPORATION OF
AMERICA
4,000,000 SHARES OF
COMMON STOCK
AND
4,000,000 REDEEMABLE
COMMON STOCK
PURCHASE WARRANTS
--------------------
PROSPECTUS
--------------------
NATIONAL SECURITIES
CORPORATION
, 1996
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 53
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth various expenses, other than underwriting
discounts, which will be incurred in connection with this offering. Other than
the SEC registration fee, NASD filing fee and the non-accountable expense
allowance of National Securities Corporation (the "Underwriter"), amounts set
forth below are estimates:
<TABLE>
<S> <C>
SEC registration fee..................................................... $22,117.59
NASD filing fee.......................................................... 7,798.80
Underwriter's nonaccountable expense allowance........................... 732,000
AMEX listing fee......................................................... 50,000
Blue sky legal fees...................................................... 35,000
Printing and engraving expenses.......................................... 95,000
Legal fees............................................................... 125,000
Accounting fees.......................................................... 40,000
Transfer and Warrant Agent fees.......................................... 3,500
Miscellaneous expenses................................................... 45,583.61
----------
$1,156,000
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under Section 145 of the Delaware General Corporation Law (the "DGCL"), the
Registrant has broad powers to indemnify its directors, officers and other
employees. This section (i) provides that the statutory indemnification and
advancement of expenses provisions of the DGCL are not exclusive, provided that
no indemnification may be made to or on behalf of any director or officer if a
judgment or other final adjudication adverse to the director or officer
establishes that his acts were committed in bad faith or were the result of
active and deliberate dishonesty and were material to the cause of action so
adjudicated, or that he personally gained in fact a financial profit or other
advantage to which he was not legally entitled, (ii) establishes procedures for
indemnification and advancement of expenses that may be contained in the
certificate of incorporation or by-laws, or, when authorized by either of the
foregoing, set forth in a resolution of the stockholders or directors or an
agreement providing for indemnification and advancement of expenses, (iii)
applies a single standard for statutory indemnification for third-party and
derivative suits by providing that indemnification is available if the director
or officer acted in good faith, for a purpose which he reasonably believed to be
in the best interests of the corporation, and, in criminal actions, had no
reasonable cause to believe that his conduct was unlawful, and (iv) permits the
advancement of litigation expenses upon receipt of an undertaking to repay such
advance if the director or officer is ultimately determined not be entitled to
indemnification or to the extent the expenses advanced exceed the
indemnification to which the director or officer is entitled. Section 145(g) of
the DGCL permits the purchase of insurance to indemnify a corporation or its
officers and directors to the extent permitted.
Article Sixth (b) of the Certificate of Incorporation of Conserver
Corporation of America ("Registrant") provides that no director shall have any
personal liability to Registrant or its stockholders for monetary damages for
breach of fiduciary duty as a director, except with respect to (1) a breach of
the director's duty of loyalty to Registrant or its stockholders, (2) acts or
omissions not in good faith which involve intentional misconduct or a knowing
violation of law, (3) liability under Section 174 of the Delaware General
Corporation Law or (4) a transaction from which the director derived an improper
personal benefit. Article Sixth (a) of the Certificate of Incorporation of
Registrant provides that Registrant shall indemnify, to the fullest extent
permitted by Section 145 of the Delaware General Corporation Law, as amended
from time to time, any and all persons whom it shall have power to indemnify
under such section.
II-1
<PAGE> 54
Article Sixth (c) of the Registrant's Certificate of Incorporation provides
that the Registrant will indemnify its directors, officers and employees against
judgments, fines, amounts paid in settlement and reasonable expenses.
Reference is also made to Section 7 of the Underwriting Agreement, which
provides for indemnification of the officers and directors of Registrant under
certain circumstances.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The following sets forth information relating to all securities of
Registrant sold within the past three years without registering the securities
under the Securities Act of 1933, as amended (the "Securities Act"):
In March 1996 the Company issued its Common Stock to founders as follows:
(a) 1,000,000 shares to Charles Stein Intervivos Trust for a purchase price of
$1,000;
(b) 300,000 shares to Dori Kallan, Daniel Kallan and Joshua Kallan for a
purchase price of $300;
(c) 200,000 shares to Argus Investors, LLC for a purchase price of $200;
(d) 500,000 shares to Jasmine Trustee Ltd. for a purchase price of $500;
(e) 200,000 shares to Doree Harr Peltz for a purchase price of $200;
(f) 100,000 shares to Irv Tobocman for a purchase price of $100;
(g) 50,000 shares to James V. Stanton for a purchase price of $50;
(h) 50,000 shares to Jay Haft for a purchase price of $50;
(i) 25,000 shares to Rosenbaum Investment Company for a purchase price of
$25;
(j) 15,000 shares to Steve Shulman for a purchase price of $15;
(k) 10,000 shares to Lester Weingarten for a purchase price of $10;
(l) 75,000 shares to Paul Arora for a purchase price of $75;
(m) 100,000 shares to Francis Hoogewerf for a purchase price of $100;
(n) 10,000 shares to Nick Torregiani for a purchase price of $10;
(o) 20,000 shares to Clive Vlielland-Boddy for a purchase price of $20;
(p) 1,666,667 shares to Conserver Investments, S.A. for a purchase price of
$1,667 of which 1,366,667 shares were repurchased by the Company in
October and November 1996;
(q) 25,000 shares to Farhat Tabbah for a purchase price of $25;
(r) 25,000 shares to Gerald N. Agranoff for a purchase price of $25;
(s) 200,000 shares to the Scharf Family Trust for a purchase price of $200;
(t) 200,000 shares to Steven Greenberg for a purchase price of $200;
(u) 50,000 shares to Gerald Breslauer for a purchase price of $50;
(v) 6,000 shares to Greg Kroning for a purchase price of $6;
(w) 27,500 shares to Lions Holding Company for a purchase price of $27.50; and
(x) 25,000 shares to Gregory Pilkington for a purchase price of $25.
From March through October 1996, the Company issued its Common Stock as
follows:
(a) 10,000 shares to Doree Harr Peltz for a purchase price of $50,000;
(b) 10,000 shares to James V. Stanton for a purchase price of $50,000;
II-2
<PAGE> 55
(c) 10,000 shares to Alan Shulman for a purchase price of $50,000;
(d) 10,000 shares to F. Lorenzo Crutchfield for a purchase price of $50,000;
(e) 8,000 shares to Carl F. Steinfield for a purchase price of $40,000;
(f) 2,000 shares to Herbert Goldman for a purchase price of $10,000;
(g) 5,000 shares to Wilcox Family Trust 12/29/70 for a purchase price of
$25,000;
(h) 5,000 shares to Gordon Conner for a purchase price of $25,000;
(i) 5,400 shares to Paul King Investment Co. Profit Sharing Trust for a
purchase price of $27,000;
(j) 15,000 shares to Bridget M. Stanton for a purchase price of $75,000;
(k) 15,000 shares to Michael J. Stanton for a purchase price of $75,000;
(l) 20,000 shares to James V. Stanton and Margaret M. Stanton, joint tenants
for a purchase price of $100,000;
(m) 5,000 shares to Thomas H. Ford for a purchase price of $25,000;
(n) 95,000 shares to Rogers Family Investments, LP for a purchase price of
$475,000;
(o) 5,000 shares to Robert J. Rogers for a purchase price of $25,000;
(p) 19,000 shares to Rogers Family Properties, LP for a purchase price of
$95,000;
(q) 1,000 shares to Robert J. Rogers for a purchase price of $5,000;
(r) 11,000 shares to Claude and Linda Rogers for a purchase price of $55,000;
(s) 3,000 shares to Robert J. Rogers for a purchase price of $15,000;
(t) 6,000 shares to Claude and Linda Rogers for a purchase price of $30,000;
(u) 6,000 shares to Jerry R. Smith for a purchase price of $30,000;
(v) 10,000 shares to Randolph W. Hunter for a purchase price of $50,000;
(w) 6,000 shares to Marshall H. Cole for a purchase price of $30,000;
(x) 2,000 shares to Marshall H. Cole IRA for a purchase price of $10,000;
(y) 2,000 shares to Melissa W. Cole IRA for a purchase price of $10,000;
(z) 20,000 shares to Teleco Inc. Profit Sharing Plan for a purchase price of
$100,000;
(aa) 5,000 shares to Marc Katzenberg for a purchase price of $25,000;
(bb) 5,000 shares to Robert Mufson for a purchase price of $25,000;
(cc) 5,000 shares to Robert Mufson, Trustee -- Harris Brett Whitney Dev
Retirement Account for a purchase price of $25,000;
(dd) 5,000 shares to Alan Shulman for a purchase price of $25,000;
(ee) 5,000 shares to Elizabeth Shulman for a purchase price of $25,000;
(ff) 10,000 shares to G & G Overseas Investments Co. LTD for a purchase price
of $50,000;
(gg) 13,000 shares to Thomas M. Ward, MD for a purchase price of $65,000;
(hh) 20,000 shares to James J. Donohue & Assoc. Defined Benefit Pension Plan
for a purchase price of $100,000;
(ii) 100,000 shares to Winstar Investment Trust for a purchase price of
$500,000;
II-3
<PAGE> 56
(jj) 19,000 shares to William Rogers for a purchase price of $95,000;
(kk) 5,000 shares to Smith Family Trust for a purchase price of $25,000;
(ll) 10,000 shares to O'Neill and Athy Profit Sharing Plan for a purchase
price of $50,000;
(mm) 20,000 shares to DH Strategic Partners for a purchase price of $100,000;
and
(nn) 10,000 shares to David Shulman for a purchase price of $50,000.
In May 1996, the Company issued a 12% convertible debenture in the
aggregate principal amount of $1,000,000 to the SES Family Investment and
Trading Partnership, L.P.
From September to November 1996, the Company issued 10% Convertible
Debentures and shares of Common Stock as follows:
(a) To D&M Capital Investment Corp. in the aggregate principal amount of
$210,000 and 17,500 shares;
(b) To Chana Sasha Foundation in the aggregate principal amount of $150,000
and 12,500 shares;
(c) To Morris Wolfson Family Limited Partnership in the aggregate amount of
$115,000 and 9,584 shares;
(d) To Quest Enterprises, Inc. in the aggregate principal amount of $25,000
and 2,084 shares;
(e) To Daniel Federbush in the aggregate principal amount of $100,000 and
8,334 shares;
(f) To Bernard Leff in the aggregate principal amount of $25,000 and 2,084
shares;
(g) To Dr. Ronald Krenick in the aggregate principal amount of $100,000 and
8,334 shares; and
(h) To Jeffrey Kaplan in the aggregate principal amount of $25,000 and 2,084
shares.
In November 1996, the Company effected a 2.128874-for-one stock split with
respect to the foregoing shares.
Exemption from registration under the Securities Act is claimed for the
sales of Common Stock referred to above in reliance upon the exemption afforded
by Section 4(2) of the Securities Act for transactions not involving a public
offering. Each certificate evidencing such shares of Common Stock bears an
appropriate restrictive legend. None of these sales involved participation by an
underwriter or a broker-dealer.
ITEM 16. EXHIBITS
(a) The following is a list of exhibits filed herewith as part of the
Registration Statement:
<TABLE>
<S> <C>
1.1 Form of Underwriting Agreement between Registrant and the National Securities
Corporation, as representative of the several underwriters named therein (the
"Representative")
3.1 Certificate of Incorporation and amendments thereto of Registrant
3.2 By-laws of Registrant
4.1* Form of certificate evidencing Warrants
4.2* Form of certificate evidencing shares of Common Stock
4.3 Form of Representative's Warrant Agreement between Registrant and the Representative
(including form of Representative's Warrant)
4.4 Form of Warrant Agreement between Registrant, the Representative and Continental
Stock Transfer and Trust Company, as Warrant Agent (including form of Redeemable
Common Stock Purchase Warrant)
4.5 Amendatory Agreement dated November 6, 1996 between the Registrant and The SES Family
Investment and Trading Partnership, L.P.
4.6 Form of 10% Debenture, dated September 1996
4.7 Form of 10% Convertible Debenture dated November 1996
</TABLE>
II-4
<PAGE> 57
<TABLE>
<S> <C>
5.1* Opinion of Parker Duryee Rosoff & Haft A Professional Corporation
10.1 1996 Stock Option Plan
10.2 Distribution Agreement dated October 9, 1996 between Registrant and Conserver
International, B.V. and Conserver North America, Inc.
10.3* Form of Employment Agreement between Charles H. Stein and the Registrant
10.4 Form of $2.35 Warrant Agreement dated August 1996
21.1 Subsidiaries of Registrant
23.1 Consent of Richard A. Eisner & Company, LLP
23.2* Consent of Parker Duryee Rosoff & Haft (included in Exhibit 5.1)
24.1 Power of Attorney (included on the signature page of Part II of this Registration
Statement)
27.1 Financial Data Schedule
</TABLE>
- ---------------
* To be filed by Amendment to this Registration Statement.
(b) Financial Statement Schedules. Financial statement schedules are
omitted because the conditions requiring their filing do not exist or the
information required thereby is included in the financial statements filed,
including the notes thereto.
ITEM 17. UNDERTAKINGS
Registrant hereby undertakes:
(1) That for purposes of determining any liability under the
Securities Act, 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 Registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this Registration Statement as of the time it was declared
effective.
(2) That for the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of
prospectus 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.
(3) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(a) To include any Prospectus required by Section 10(a)(3) of the
Securities Act;
(b) To reflect in the Prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) under the Securities Act of
1933 if, in the aggregate, the changes in volume and price represent no
more than a 20% change in the maximum aggregate offering price set forth
in the "Calculation of Registration Fee" table in the effective
registration statement.
(c) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement.
(4) 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-5
<PAGE> 1
[Form of Underwriting Agreement - Subject to Additional Review]
4,000,000 SHARES OF COMMON STOCK
AND 4,000,000 REDEEMABLE WARRANTS
CONSERVER CORPORATION OF AMERICA
UNDERWRITING AGREEMENT
New York, New York
, 1996
NATIONAL SECURITIES CORPORATION
As Representative of the
Several Underwriters listed on Schedule A hereto
1001 Fourth Avenue
Suite 2200
Seattle, Washington 98154
Ladies and Gentlemen:
Conserver Corporation of America, a Delaware corporation (the
"Company"), confirms its agreement with National Securities Corporation
("National") and each of the underwriters named in Schedule A hereto
(collectively, the "Underwriters," which term shall also include any underwriter
substituted as hereinafter provided in Section 11), for whom National is acting
as representative (in such capacity, National shall hereinafter be referred to
as "you" or the "Representative"), with respect to the sale by the Company and
the purchase by the Underwriters, acting severally and not jointly, of the
respective numbers of shares ("Shares") of the Company's common stock, $.001 par
value per share ("Common Stock"), and redeemable common stock purchase warrants
(the "Redeemable Warrants"), each to purchase one share of Common Stock, set
forth in Schedule A hereto. The aggregate 4,000,000 Shares and 4,000,000
Redeemable Warrants will be separately tradeable upon issuance and are
hereinafter referred to as the "Firm Securities." Each Redeemable Warrant is
exercisable commencing on
<PAGE> 2
____________, 1997 [6 months from the date of this Agreement] until
____________, 2001 [54 months from the date of this Agreement], unless
previously redeemed by the Company, at an initial exercise price of $_______
[140% of the initial public offering price] per share of Common Stock. The
Redeemable Warrants may be redeemed by the Company at a redemption price of $.10
per Redeemable Warrant at any time after _____________, 1998 [18 months from the
date of this Agreement] on thirty (30) days' prior written notice, provided that
the average closing sale price of the Common Stock equals or exceeds
$_____________ [250% of the initial public offering price] per share for any
twenty (20) trading days within a period of thirty (30) consecutive trading days
ending on the fifth trading day prior to the date of the notice of redemption,
all in accordance with the terms and conditions of the Warrant Agreement (as
hereinafter defined).
Upon your request, as provided in Section 2(b) of this Agreement, the
Company shall also issue and sell to the Underwriters, acting severally and not
jointly, up to an additional 600,000 shares of Common Stock and/or 600,000
Redeemable Warrants for the purpose of covering over-allotments, if any. Such
600,000 shares of Common Stock and 600,000 Redeemable Warrants are hereinafter
collectively to as the "Option Securities." The Company also proposes to issue
and sell to you warrants (the "Representative's Warrants") pursuant to the
Representative's Warrant Agreement (the "Representative's Warrant Agreement")
for the purchase of an additional 400,000 shares of Common Stock and/or 400,000
Redeemable Warrants. The shares of Common Stock and Redeemable Warrants issuable
upon exercise of the Representative's Warrants are hereinafter referred to as
the "Representative's Securities." The Firm Securities, the Option Securities,
the Representative's Warrants and the Representative's Securities (collectively,
hereinafter referred to as the "Securities") 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, each of the Underwriters as of the date
hereof, and as of the Closing Date (as hereinafter defined) and each Option
Closing Date (as hereinafter defined), if any, as follows:
a. The Company has prepared and filed with the Securities and
Exchange Commission (the "Commission") a registration statement, and an
amendment or amendments thereto, on Form S-1 (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 Underwriters and will not file any other
amendment thereto to which the Underwriters shall have objected in writing 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) and all information
deemed to be a part thereof as of such time pursuant to paragraph (b) of
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<PAGE> 3
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 Securities
Exchange Act of 1934, as amended (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 any part of any thereof and no
proceedings for a stop order suspending the effectiveness of the Registration
Statement or any of the Company's securities have been instituted or are pending
or threatened. Each of the Preliminary Prospectus, the Registration Statement
and Prospectus at the time of filing thereof conformed 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 or 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 to statements made in
reliance upon and in conformity with written information furnished to the
Company with respect to the Underwriters by or on behalf of the Underwriters
expressly for use in such Preliminary Prospectus, Registration Statement or
Prospectus or any amendment thereof or supplement thereto.
c. When the Registration Statement becomes effective and at all
times subsequent thereto up to the Closing Date (as defined herein) and each
Option Closing Date (as defined herein), if any, and during such longer period
as the Prospectus may be required to be delivered in connection with sales by
the Underwriters or a dealer, the Registration Statement and the Prospectus will
contain all statements which are required to be stated therein in accordance
with the Act and the Rules and Regulations, and will conform to the requirements
of the Act and the Rules and Regulations; neither the Registration Statement nor
the Prospectus, nor any amendment or supplement thereto, will contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, provided, however,
that this representation and warranty does not apply to statements made or
statements omitted in reliance upon and in strict conformity with information
furnished to the Company in writing by or on behalf of any Underwriter expressly
for use in the Preliminary Prospectus, Registration Statement or Prospectus or
any amendment thereof or supplement thereto.
d. The Company has been duly organized and is validly existing as
a corporation in good standing under the laws of the state of its incorporation.
Except as set forth in the Prospectus, the Company does not own an interest in
any corporation, partnership, trust, joint venture or other business entity. The
Company is duly qualified and licensed and in good standing as a foreign
corporation in each jurisdiction in which its ownership or leasing of any
properties or the character of its operations requires such qualification or
licensing. The Company has all requisite power and authority (corporate and
other), and has 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
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<PAGE> 4
having jurisdiction over environmental or similar matters), domestic or foreign,
to own or lease its properties and conduct its business as described in the
Prospectus; the Company is and has been doing business in compliance with all
such authorizations, approvals, orders, licenses, certificates, franchises and
permits and all applicable federal, state, local and foreign laws, rules and
regulations; and the Company has not 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,
position, prospects, value, operation, properties, business or results of
operations of the Company. The disclosures in the Registration Statement
concerning the effects of federal, state, local, and foreign laws, rules and
regulations on the Company's business as currently conducted and as contemplated
are correct in all material respects and do not omit to state a material fact
required to be stated therein or necessary to make the statements contained
therein not misleading in light of the circumstances under which they were made.
e. The Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus under "Capitalization" and
"Description of Securities" and will have the adjusted capitalization set forth
therein on the Closing Date and each Option Closing Date, if any, based upon the
assumptions set forth therein, 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,
the Warrant Agreement, the Representative's Warrant Agreement and as described
in the Prospectus. The Securities and all other securities issued or issuable by
the Company 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 have
been duly authorized and validly issued and are fully paid and non-assessable
and 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 similar contractual rights granted by
the Company. The Securities 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 hereof, will be
validly issued, fully paid and non-assessable and will 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 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 Underwriters
or the Representative, as the case may be, 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, together with the
related notes and schedules thereto, included in the Registration Statement,
each Preliminary Prospectus and the Prospectus fairly present the financial
position, income, changes in cash flow, changes in stockholders' equity and the
results of operations of the Company at the respective dates and for the
respective periods to which they apply and such financial statements have been
prepared in
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<PAGE> 5
conformity with generally accepted accounting principles and the Rules and
Regulations, consistently applied throughout the periods involved and such
financial statements as are audited have been examined by Richard A. Eisner &
Company, LLP, who are independent certified public accountants within the
meaning of the Act and the Rules and Regulations, as indicated in their report
filed therewith. There has been no adverse change or development involving a
prospective adverse change in the condition, financial or otherwise, or in the
earnings, position, prospects, value, operation, properties, business, or
results of operations of the Company, whether or not arising in the ordinary
course of business, since the date 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, conform
in all material respects to the descriptions thereof contained in the
Registration Statement and the Prospectus. Financial information (including,
without limitation, any pro forma financial information) set forth in the
Prospectus under the headings "Summary Financial Information", "Capitalization,"
"Selected Financial Data," and "Management's Discussion and Analysis of
Financial Condition and Plan of Operation," fairly present, on the basis stated
in the Prospectus, the information set forth therein, and have been derived from
or compiled on a basis consistent with that of the audited financial statements
included in the Prospectus; and, in the case of pro forma financial information,
if any, the assumptions used in the preparation thereof are reasonable and the
adjustments used therein are appropriate to give effect to the transactions and
circumstances referred to therein. The amounts shown as accrued for current and
deferred income and other taxes in such financial statements are sufficient for
the payment of all accrued and unpaid federal, state, local and foreign income
taxes, interest, penalties, assessments or deficiencies applicable to the
Company, whether disputed or not, for the applicable period then ended and
periods prior thereto; adequate allowance for doubtful accounts has been
provided for unindemnified losses due to the operations of the Company; and the
statements of income do not contain any items of special or nonrecurring income
not earned in the ordinary course of business, except as specified in the notes
thereto.
g. The Company (i) has paid all federal, state, local, and foreign
taxes for which it is liable, including, but not limited to, withholding taxes
and amounts payable under Chapters 21 through 24 of the Internal Revenue Code of
1986, as amended (the "Code"), and has furnished all information returns it is
required to furnish pursuant to the Code, (ii) has established adequate reserves
for such taxes which are not due and payable, and (iii) does not have any tax
deficiency or claims outstanding, proposed or assessed against it.
h. No transfer tax, stamp duty or other similar tax is payable by
or on behalf of the Underwriters in connection with (i) the issuance by the
Company of the Securities, (ii) the purchase by the Underwriters of the Firm
Securities and the Option Securities from the Company and the purchase by the
Representative of the Representative's Warrants from the Company, (iii) the
consummation by the Company of any of its obligations under this Agreement, or
(iv) resales of the Firm Securities and the Option Securities in connection with
the distribution contemplated hereby.
i. The Company maintains insurance policies, including, but not
limited to, general liability, product and property insurance, which insures the
Company and its employees, against such losses and risks generally insured
against by comparable businesses. The Company (A)
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<PAGE> 6
has not failed to give notice or present any insurance claim with respect to any
matter, including but not limited to the Company's business, property or
employees, under any insurance policy or surety bond in a due and timely manner,
(B) does not have any disputes or claims against any underwriter of such
insurance policies or surety bonds or has failed to pay any premiums due and
payable thereunder, or (C) has not failed to comply with all conditions
contained in such insurance policies and surety bonds. There are no facts or
circumstances under any such insurance policy or surety bond which would relieve
any insurer of its obligation to satisfy in full any valid claim of the Company.
j. There is no action, suit, proceeding, inquiry, arbitration,
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, this
Agreement, the Warrant Agreement or the Representative's Warrant Agreement, or
of any action taken or to be taken by the Company pursuant to or in connection
with this Agreement, the Warrant Agreement or the Representative's Warrant
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 material respects), or (iii) might
materially and adversely affect the condition, financial or otherwise, or the
earnings, position, prospects, stockholders' equity, value, operation,
properties, business or results of operations of the Company.
k. The Company has full legal right, power and authority to
authorize, issue, deliver and sell the Securities, enter into this Agreement,
the Warrant Agreement and the Representative's Warrant Agreement and to
consummate the transactions provided for in this Agreement, the Warrant
Agreement and the Representative's Warrant Agreement; and this Agreement, the
Warrant Agreement and the Representative's Warrant Agreement have each been duly
and properly authorized, executed and delivered by the Company. Each of this
Agreement, the Warrant Agreement and the Representative's Warrant Agreement
constitutes a legal, valid and binding agreement of the Company enforceable
against the Company in accordance with its terms, and none of the Company's
issue and sale of the Securities, execution or delivery of this Agreement, the
Warrant Agreement or the Representative's Warrant 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
certificate of incorporation or by-laws of the Company, (ii) any license,
contract, collective bargaining agreement, indenture, mortgage, deed of trust,
lease, 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 the Company is or may be bound or to which any of its respective
properties or assets (tangible or intangible) is or may be subject, or any
indebtedness, or (iii) any statute, judgment, decree, order, rule or regulation
applicable to the
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<PAGE> 7
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.
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,
the Warrant Agreement and the Representative's Warrant Agreement and the
transactions contemplated hereby and thereby, including without limitation, any
waiver of any preemptive, first refusal or other rights that any entity or
person may have for the issue and/or sale of any of the Securities, 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 Underwriters' purchase and
distribution of the Firm Securities and the Option Securities, and the
Representative's Warrants to be sold by the Company hereunder.
m. All executed agreements, contracts or other documents or copies
of executed agreements, contracts or other documents filed as exhibits to the
Registration Statement to which the Company is a party or by which it may be
bound or to which any of its respective assets, properties or business may be
subject have been duly and validly authorized, executed and delivered by the
Company and constitute the legal, valid and binding agreements of the Company
enforceable against the Company in accordance with its terms. The descriptions
in the Registration Statement of agreements, contracts and other documents are
accurate and fairly present the information required to be shown with respect
thereto by Form S-1, 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 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 of any class, and
there has not been any change in the capital stock, or any change in the debt
(long or short term) or liabilities or material adverse change in or affecting
the general affairs, management, financial operations, stockholders' equity or
results of operations of the Company.
o. No default exists in the due performance and observance of any
term, covenant or condition of any license, contract, collective bargaining
agreement, indenture, mortgage, installment sale agreement, lease, deed of
trust, voting trust agreement, stockholders agreement, partnership agreement,
note, loan or credit agreement, purchase order, or any other agreement or
instrument evidencing an obligation for borrowed money, or any other material
agreement or instrument to which the Company is a party or by which the Company
may be bound or to which the property or assets (tangible or intangible) of the
Company is subject or affected.
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<PAGE> 8
p. The Company has generally enjoyed a satisfactory
employer-employee relationship with its employees and is in compliance 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 by the U.S.
Department of Labor, or any other governmental 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
pending before the National Labor Relations Board, or any comparable foreign
agency, or any lockout, 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, and no collective bargaining
agreement or modification thereof is currently being negotiated by the Company.
No grievance or arbitration proceeding is pending under any expired or existing
collective bargaining agreements of the Company. No labor dispute with the
employees of the Company exists, or, is imminent.
q. 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
maintain or contribute, 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 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 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 never completely or partially withdrawn
from a "multiemployer plan."
r. Neither the Company nor any of its respective employees,
directors, stockholders, partners, or affiliates (within the meaning of the
Rules and Regulations) of any of the foregoing has taken or will take, directly
or indirectly, any action designed to or which has constituted or which might be
expected to cause or result in, under the Exchange Act, or otherwise,
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Securities or otherwise.
s. Except as otherwise disclosed in the Prospectus, none of the
patents, patent applications, trademarks, service marks, trade names and
copyrights, and licenses and rights to the foregoing presently owned or held by
the Company, are in dispute so far as known by the Company or are in any
conflict with the right of any other person or entity. The Company (i) owns or
has 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
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<PAGE> 9
of any person, corporation or other entity under or with respect to any of the
foregoing and (ii) is not obligated or under any liability whatsoever to make
any payment 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.
t. The Company owns and has 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 property") that are material
to the development, manufacture, operation and sale of all products and services
sold or proposed to be sold by the Company, 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,
or any of its respective employees or agents, could have developed trade secrets
or items of technical information similar or identical to those of the Company.
The Company is not aware of any such development of similar or identical trade
secrets or technical information by others.
u. The Company has taken reasonable security measures to protect
the secrecy, confidentiality and value of its intellectual property in all
material respects.
v. The Company has 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.
w. Richard A. Eisner & Company, LLP, 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.
x. The Company has caused to be duly executed legally binding and
enforceable agreements ("Lock-up Agreements") pursuant to which each of the
Company's officers, directors and stockholders and all holders of securities
convertible into, exercisable or exchangeable for shares of Common Stock, has
agreed for a period of twelve (12) months following the effective date of the
Registration Statement (i) not to, directly or indirectly, issue, offer, agree
or offer to sell, sell, grant an option for the purchase or sale of, transfer,
pledge, assign, hypothecate, distribute or otherwise encumber or dispose of any
shares of Common Stock or options, rights, warrants or other securities
convertible into, exercisable or exchangeable for or evidencing any right to
purchase or subscribe for shares of Common Stock (whether or not beneficially
owned by any such holder), or any beneficial interest therein without the prior
written consent of the Company and the Representative, except in connection with
private transactions (not involving a public offering) in which the
transferee(s) agrees in writing to be bound by the terms of a Lock-up Agreement
and (ii) to waive all rights to request or demand the registration pursuant to
the Act of any securities of the Company which are registered in the name of or
beneficially
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<PAGE> 10
owned by any such holder. In addition, _____________, _________________, and
______________ have agreed pursuant to the terms of their respective Lock-up
Agreements for a period of twenty-four (24) months following the effective date
of the Registration Statement not to, directly or indirectly, without the prior
written consent of the Representative and the Company, issue, offer, agree or
offer to sell, sell, grant an option for the purchase or sale of, transfer,
pledge, assign, hypothecate, distribute or otherwise encumber or dispose of more
than ten percent (10%) of any securities of the Company which are registered in
the name of or beneficially owned by any such holder, without the prior written
consent of the Representative and the Company. In addition, none of the Company
or any present or future subsidiaries or affiliates shall sell or offer for sale
any of their securities for a period of eighteen (18) months commencing on the
effective date of the Registration Statement, except pursuant to options
existing on the date hereof, without the prior written consent of the
Representative. The Company will cause the Transfer Agent (as hereinafter
defined) to mark an appropriate legend on the face of stock certificates
representing all of such securities and to place "stop transfer" orders on the
Company's stock ledgers.
y. There are no claims, payments, issuances, arrangements or
understandings, whether oral or written, for services in the nature of a
finder's or origination fee 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 respective officers, directors,
stockholders, partners, employees or affiliates, that may affect the
Underwriters' compensation, as determined by the National Association of
Securities Dealers, Inc. ("NASD").
z. The Common Stock has been approved for listing on the American
Stock Exchange ("AMEX").
aa. Neither 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 the 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
material 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,
condition, financial or otherwise, earnings, position, properties, value,
operations or prospects of the Company. The Company's internal accounting
controls are sufficient to cause the Company to comply with the Foreign Corrupt
Practices Act of 1977, as amended.
bb. Except as set forth in the Prospectus, no officer, director,
stockholder or partner of the Company, or any "affiliate" or "associate" (as
these terms are defined in Rule 405 promulgated under the Rules and Regulations)
of any of the foregoing persons or entities has or
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<PAGE> 11
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 it may be bound or affected. Except as set forth in the Prospectus under
"Certain Transactions," there are no existing agreements, arrangements,
understandings or transactions, or proposed agreements, arrangements,
understandings or transactions, between or among the Company, and any officer,
director, or 5% or greater securityholder of the Company, or any partner,
affiliate or associate of any of the foregoing persons or entities.
cc. Any certificate signed by any officer of the Company, and
delivered to the Underwriters or to Underwriters' Counsel (as defined herein)
shall be deemed a representation and warranty by the Company to the Underwriters
as to the matters covered thereby.
dd. The minute books of the Company have been made available to
the Underwriters and contain a complete summary of all meetings and actions of
the directors (including committees thereof) and stockholders of the Company,
since the time of its incorporation, and reflect all transactions referred to in
such minutes accurately in all material respects.
ee. Except and to the extent described in the Prospectus, no
holders of any securities of the Company or of any options, warrants or other
convertible or exchangeable securities of the Company have the right to include
any securities issued by the Company in the Registration Statement or any
registration statement to be filed by the Company or to require the Company to
file a registration statement under the Act and no person or entity holds any
anti-dilution rights with respect to any securities of the Company.
ff. The Company has as of the effective date of the Registration
Statement (i) entered into an employment agreement with Charles H. Stein in the
form filed as Exhibit 10.3 to the Registration Statement and (ii) purchased term
key person life insurance on the life of Mr. Stein in the amount of $____
million, which policy names the Company as the sole beneficiary thereof.
gg. As of the date hereof, the Company does not have more than
________________ shares of Common Stock issued and outstanding (including
securities with equivalent rights as the Common Stock and shares of Common
Stock, or such equivalent securities at prices not less than the higher of the
market value of the shares at the date of the grant or the offering price per
share).
hh. The Company confirms as of the date hereof that it is in
compliance with all provisions of Section 1 of Laws of Florida, Chapter 92-198,
An Act Relating to Disclosure of Doing Business with Cuba, and the Company
further agrees that if it or any affiliate commences engaging in business with
the government of Cuba or with any person or affiliate located in Cuba after the
date the Registration Statement becomes or has become effective with the
Commission or with the Florida Department of Banking and Finance (the
"Department"), whichever date is later, or if the information reported or
incorporated by reference in the Prospectus, if any, concerning the Company's,
or any affiliate's, business with Cuba or with any
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<PAGE> 12
person or affiliate located in Cuba changes in any material way, the Company
will provide the Department notice of such business or change, as appropriate,
in a form acceptable to the Department.
ii. The Company is not, and upon the issuance and sale of the
Securities as herein contemplated and the application of the net proceeds
therefrom as described in the Prospectus under the caption "Use of Proceeds"
will not be, an "investment company" or an entity "controlled" by an "investment
company" as such terms are defined in the Investment Company Act of 1940, as
amended (the "1940 Act").
jj. The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are executed in
accordance with management's general or specific authorizations; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorizations; and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
kk. The Company has entered into a warrant agreement substantially
in the form filed as Exhibit 4.4 to the Registration Statement (the "Warrant
Agreement") with the Representative and Continental Stock Transfer & Trust
Company, as Warrant Agent, in form and substance satisfactory to the
Representative, with respect to the Redeemable Warrants.
2. Purchase, Sale and Delivery of the Securities.
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 each Underwriter, and each Underwriter,
severally and not jointly, agrees to purchase from the Company at a price of
$_______ [91.5% of the initial public offering price] per Share and $_______
[91.5% of the initial public offering price] per Redeemable Warrant, that number
of Firm Securities set forth in Schedule A opposite the name of such
Underwriter, subject to such adjustment as the Representative in its sole
discretion shall make to eliminate any sales or purchases of fractional shares,
plus any additional number of Firm Securities which such Underwriter may become
obligated to purchase pursuant to the provisions of Section 11 hereof.
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
Underwriters, severally and not jointly, to purchase all or any part of an
additional 600,000 shares of Common Stock at a price of $ ____ [91.5% of the
initial public offering price] per share of Common Stock and/or an additional
600,000 Redeemable Warrants at a price of $______ [91.5% of the initial public
offering price] per Redeemable Warrant. The option granted hereby will expire
forty-five (45) days after (i) the date the Registration Statement becomes
effective, if the Company has elected not to rely on Rule 430A under the Rules
and Regulations, or (ii) the date of this Agreement if the Company has elected
to rely upon Rule 430A under the Rules and Regulations, and may be exercised in
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<PAGE> 13
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 Representative to the
Company setting forth the number of Option Securities as to which the several
Underwriters are then exercising the option and the time and date of payment and
delivery for any such Option Securities. Any such time and date of delivery (an
"Option Closing Date") shall be determined by the Representative, but shall not
be later than three (3) full business days after the exercise of said option,
nor in any event prior to the Closing Date, as hereinafter defined, unless
otherwise agreed upon by the Representative and the Company. Nothing herein
contained shall obligate the Underwriters to make 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 Representative at
1001 Fourth Avenue, Suite 2200, Seattle, Washington 98154, or at such other
place as shall be agreed upon by the Representative 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
Representative and the Company, but not less than three (3) nor more than five
(5) full business days after the effective date of the Registration Statement
(such time and date of payment and delivery being herein called the "Closing
Date"). In addition, in the event that any or all of the Option Securities are
purchased by the Underwriters, payment of the purchase price for, and delivery
of certificates for, such Option Securities shall be made at the above-mentioned
office of the Representative or at such other place as shall be agreed upon by
the Representative and the Company on each Option Closing Date as specified in
the notice from the Representative to the Company. Delivery of the certificates
for the Firm Securities and the Option Securities, if any, shall be made to the
Underwriters against payment by the Underwriters, severally and not jointly, of
the purchase price for the Firm Securities and the Option Securities, if any, to
the order of the Company for the Firm Securities and the Option Securities, if
any, by New York Clearing House funds. In the event such option is exercised,
each of the Underwriters, acting severally and not jointly, shall purchase that
proportion of the total number of Option Securities then being purchased which
the number of Firm Securities set forth in Schedule A hereto opposite the name
of such Underwriter bears to the total number of Firm Securities, subject in
each case to such adjustments as the Representative in its discretion shall make
to eliminate any sales or purchases of fractional shares. Certificates for 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 Underwriters may request in
writing at least two (2) business days prior to the Closing Date or the relevant
Option Closing Date, as the case may be. The certificates for the Firm
Securities and the Option Securities, if any, shall be made available to the
Representative at such office or such other place as the Representative may
designate for inspection, checking and packaging no later than 9:30 a.m. on the
last business day prior to the Closing Date or the relevant Option Closing Date,
as the case may be.
d. On the Closing Date, the Company shall issue and sell to the
Representative Representative's Warrants at a purchase price of $.0001 per
warrant, which Representative's Warrants shall entitle the holders thereof to
purchase an aggregate of 400,000 shares of Common
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<PAGE> 14
Stock and/or 400,000 Redeemable Warrants. The Representative's Warrants shall be
exercisable for a period of four (4) years commencing one (1) year from the
effective date of the Registration Statement at a price equaling one hundred
twenty percent (120%) of the respective initial public offering price of the
Shares and the Redeemable Warrants. The Representative's Warrant Agreement and
form of Warrant Certificate shall be substantially in the form filed as Exhibit
4.3 to the Registration Statement. Payment for the Representative's Warrants
shall be made on the Closing Date.
3. Public Offering of the Shares and Redeemable Warrants. As soon after
the Registration Statement becomes effective as the Representative deems
advisable, the Underwriters shall make a public offering of the Shares and
Redeemable Warrants (other than to residents of or in any jurisdiction in which
qualification of the Shares and Redeemable Warrants is required and has not
become effective) at the price and upon the other terms set forth in the
Prospectus. The Representative may from time to time increase or decrease the
respective public offering price after distribution of the Shares and Redeemable
Warrants has been completed to such extent as the Representative, in its sole
discretion deems advisable. The Underwriters may enter into one or more
agreements as the Underwriters, in each of their sole discretion, deem advisable
with one or more broker-dealers who shall act as dealers in connection with such
public offering.
4. Covenants and Agreements of the Company. The Company covenants and
agrees with each of the Underwriters 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 Act or Exchange Act before termination of the offering of the Shares
and Redeemable Warrants by the Underwriters of which the Representative shall
not previously have been advised and furnished with a copy, or to which the
Representative 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 Representative 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 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 of proceedings for that purpose; (iii) of the issuance by the
Commission or by any state securities commission of any proceedings for the
suspension of the qualification of any 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
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<PAGE> 15
additional information. If the Commission or any state securities commission
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 Representative) or transmit the Prospectus by a means
reasonably calculated to result in filing with the Commission pursuant to Rule
424(b)(1) (or, if applicable and if consented to by the Representative, 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 Representative 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 Underwriters 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), and will furnish the Representative 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 Representative or Orrick, Herrington & Sutcliffe LLP ("Underwriters'
Counsel") shall object.
e. The Company shall endeavor in good faith, in cooperation with
the Representative, 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 Representative may designate to permit the
continuance of sales and dealings therein for as long as may be necessary to
complete the distribution, 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 Representative 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.
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
Underwriters' 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
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<PAGE> 16
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 Representative 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 satisfactory to
Underwriters' Counsel, and the Company will furnish to the Underwriters copies
of such amendment or supplement as soon as available and in such quantities as
the Underwriters may request.
g. As soon as practicable, but in any event not later than
forty-five (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 (ninety (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
Representative, an earnings statement which will be in the detail required by,
and will otherwise comply with, the provisions of Section 11(a) of the 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 twelve (12)
consecutive months after the effective date of the Registration Statement.
h. During a period of seven (7) 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 of earnings, and will deliver to the Representative:
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
certified public accountants;
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 its
affairs, which was released or prepared by or on behalf of the Company;
and
vi. any additional information of a public nature concerning the
Company (and any future subsidiary) or its businesses which the
Representative may request.
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<PAGE> 17
During such seven-year period, if the Company has an active subsidiary,
the foregoing financial statements will be on a consolidated basis to the extent
that the accounts of the Company and its subsidiary(ies) 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 warrant agent
("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 and Redeemable Warrants.
j. The Company will furnish to the Representative or on the
Representative's order, without charge, at such place as the Representative may
designate, copies of each Preliminary Prospectus, the Registration Statement and
any pre-effective or post-effective amendments thereto (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 Representative may request.
k. On or before the effective date of the Registration Statement,
the Company shall provide the Representative with true original copies of duly
executed, legally binding and enforceable Lock-up Agreements pursuant to which,
for a period of twelve (12) months from the effective date of the Registration
Statement, each of the Company's officers, directors and stockholders and all
holders of securities convertible into, exercisable or exchangeable for shares
of Common Stock, has agreed (i) not to, directly or indirectly, issue, offer,
agree or offer to sell, sell, grant an option for the purchase or sale of,
transfer, pledge, assign, hypothecate, distribute or otherwise encumber or
dispose of any shares of Common Stock or options, rights, warrants or other
securities convertible into, exercisable or exchangeable for or evidencing any
right to purchase or subscribe for shares of Common Stock (whether or not
beneficially owned by any such holder), or any beneficial interest therein
without the prior written consent of the Company and the Representative, except
in connection with private transactions (not involving a public offering) in
which the transferee(s) agrees in writing to be bound by the terms of a Lock-up
Agreement and (ii) to waive all rights to request or demand the registration
pursuant to the Act of any securities of the Company which are registered in the
name of or beneficially owned by any such holder. On or before the effective
date of the Registration Statement, the Company shall also provide the
Representative with true original copies of duly executed, legally binding and
enforceable Lock-up Agreements pursuant to which, for a period of twenty-four
(24) months following the effective date of the Registration Statement,
_____________, _________________, and ______________ have agreed not to,
directly or indirectly, without the prior written consent of the Representative
and the Company, issue, offer, agree or offer to sell, sell, grant an option for
the purchase or sale of, transfer, pledge, assign, hypothecate, distribute or
otherwise encumber or dispose of more than ten percent (10%) of any securities
of the Company which are registered in the name of or beneficially owned by any
such holder, without the prior written consent of the Representative and the
Company. During the eighteen (18) month period commencing with the effective
date of the Registration Statement, none of the Company or any present or future
subsidiaries or affiliates shall sell or offer for sale any of their securities,
except pursuant to options existing on the date hereof, without the prior
written consent of the Representative. On or before the Closing Date, the
Company shall deliver
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<PAGE> 18
instructions to the Transfer Agent authorizing it to place appropriate legends
on the certificates representing all of the securities subject to the Lock-up
Agreements and to place appropriate "stop transfer" orders on the Company's
stock ledgers.
l. Neither the Company, nor any of its respective officers,
directors, stockholders, nor any of its affiliates (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 Representative 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 Sections 6(k) and 6(l) hereof.
p. The Company shall cause the Common Stock and Redeemable
Warrants to be listed on AMEX and, for a period of seven (7) years from the date
hereof, use its best efforts to maintain the AMEX listing of the Common Stock
and the Redeemable Warrants to the extent outstanding.
q. For a period of five (5) years from the Closing Date, the
Company shall furnish to the Representative at the Company's sole expense, (i)
daily consolidated transfer sheets relating to the Common Stock and Redeemable
Warrants (ii) the list of holders of all of the Company's securities and (iii) a
Blue Sky "Trading Survey" for secondary sales of the Company's securities
prepared by counsel to the Company.
r. As soon as practicable, (i) but in no event more than five (5)
business days before the effective date of the Registration Statement, file a
Form 8-A with the Commission providing for the registration under the Exchange
Act of the Securities and (ii) but in no event more than thirty (30) days after
the effective date of the Registration Statement, 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 seven (7) years.
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<PAGE> 19
s. The Company hereby agrees that it will not, for a period of
eighteen (18) months from the effective date of the Registration Statement,
adopt, propose to adopt or otherwise permit to exist any employee, officer,
director, consultant or compensation plan or similar arrangement permitting (i)
the grant, issue, sale or entry into any agreement to grant, issue or sell any
option, warrant or other contract right (x) at an exercise price that is less
than the greater of the public offering price of the Shares set forth herein and
the fair market value on the date of grant or sale or (y) to any of its
executive officers or directors or to any holder of 5% or more of the Common
Stock, except as provided in subsection (ii) of this subparagraph; (ii) the
maximum number of shares of Common Stock or other securities of the Company
purchasable at any time pursuant to options or warrants issued by the Company to
exceed the aggregate 900,000 shares reserved for future issuance under the
Company's Stock Option Plan described in "Management-Stock Option Plan" section
of the Prospectus; (iii) the payment for such securities with any form of
consideration other than cash; or (iv) the existence of stock appreciation
rights, phantom options or similar arrangements.
t. Until the completion of the distribution of the Securities, the
Company shall not, without the prior written consent of the Representative and
Underwriters' Counsel, issue, directly or indirectly, any press release or other
communication or hold any press conference with respect to the Company or its
activities or the offering contemplated hereby, other than trade releases issued
in the ordinary course of the Company's business consistent with past practices
with respect to the Company's operations.
u. 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 Representative's
Securities, the Company will not take any action or actions which may prevent or
disqualify the Company's use of Form S-1 (or other appropriate form) for the
registration under the Act of the Representative's Securities. The Company
further agrees to use its best efforts to file such post-effective amendments to
the Registration Statement, as may be necessary, in order to maintain its
effectiveness and to keep such Registration Statement effective while any of the
Redeemable Warrants or Representative's Warrants remain outstanding.
v. For a period of five (5) years after the effective date of the
Registration Statement, the Company hereby agrees that the Representative shall
have the right to designate one (1) individual selected by the Representative,
to attend all meetings of the Board of Directors of the Company (the "Board"),
which person shall be entitled to all fees, payments, expense reimbursements and
other rights and privileges generally accorded to the other members of the
Board. The Company shall send to the Representative's designee all notices and
other correspondence and communications sent by the Company to members of the
Board.
w. For a period of three (3) years from the effective date of the
Registration Statement, the Company hereby agrees to grant the Representative a
preferential right of first refusal on the terms and subject to the conditions
set forth in this paragraph, to purchase for its account, or to sell for the
account of the Company, or of any present or future subsidiaries or affiliates
thereof, any securities issued or to be issued by the Company, or any present or
future subsidiaries or affiliates thereof, with respect to which the Company, or
any present or future subsidiaries or affiliates thereof may seek a sale of such
securities and the Company will consult,
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<PAGE> 20
and will cause any such present or future subsidiaries or affiliates to consult
with the Representative with regard to any such offering or placement and will
offer, or cause any of its present or future subsidiaries or affiliates to
offer, to the Representative the opportunity, on terms not more favorable to the
Company, or any present or future subsidiary or affiliate thereof than they can
secure elsewhere, to purchase or sell any such securities. If the Representative
fails to accept in writing such proposal made by the Company, or any present or
future subsidiaries or affiliates thereof within thirty (30) business days after
receipt of a notice containing such proposal (which notice may be delivered to
the Representative simultaneously), then the Representative shall have no
further claim or right with respect to the proposal contained in such notice.
If, thereafter such proposal is modified, the Company shall again consult, and
cause any present or future subsidiary or affiliate to consult, with the
Representative 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,
except that the thirty (30) business day period provided hereinabove shall
instead be twenty (20) business days. Notwithstanding the foregoing, the Company
may terminate such right of first refusal upon the payment of $100,000 to the
Representative in the event that the Company elects to proceed with a firm
commitment public offering through an investment banking firm other than the
Representative.
x. Commencing one year and one day from the date hereof, if the
Company engages the Representative as a warrant solicitation agent under the
terms of the Warrant Agreement, the Company shall pay the Representative a
commission equal to five percent (5%) of the exercise price of the Redeemable
Warrants, payable on the date of the exercise thereof on the terms provided in
the Warrant Agreement;provided, however, the Representative shall be entitled to
receive the commission contemplated by this Section 4(x) only if: (i) the
Representative has provided actual services in connection with the solicitation
of the exercise of a Redeemable Warrant by a Warrantholder and (ii) the
Warrantholder exercising a Redeemable Warrant affirmatively designates in
writing on the exercise form on the reverse side of the Redeemable Warrant
Certificate that the exercise of such Warrantholder's Redeemable Warrant was
solicited by the Representative.
5. Payment of Expenses.
a. The Company hereby agrees to pay on each of the Closing Date
and each Option Closing Date, if any (to the extent not paid at the Closing
Date), all expenses and fees (other than fees of Underwriters' Counsel, except
as provided in (iv) below) incident to the performance of the obligations of the
Company under this Agreement, the Warrant Agreement and the Representative's
Warrant 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 (including mailing and
handling charges), 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 (including
the payment of postage with respect thereto) and delivery of this Agreement, the
Warrant Agreement, the Representative's Warrant Agreement, the Agreement Among
Underwriters, 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
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<PAGE> 21
amendments thereof or supplements thereto supplied to the Underwriters and such
dealers as the Underwriters may request, in quantities as hereinabove stated,
(iii) the printing, engraving, issuance and delivery of the Securities
including, but not limited to, (x) the purchase by the Underwriters of the Firm
Securities and the Option Securities and the purchase by the Representative of
the Representative's Warrants from the Company, (y) the consummation by the
Company of any of its obligations under this Agreement, the Warrant Agreement
and the Representative's Warrant Agreement, and (z) resale of the Firm
Securities and the Option Securities by the Underwriters in connection with the
distribution contemplated hereby, (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 and "tomb-stone" advertisement expenses; (vi) costs and expenses in
connection with due diligence investigations, including but not limited to the
fees of any independent counsel, expert or consultant retained, (vii) fees and
expenses of the Transfer Agent and registrar and all issue and transfer taxes,
if any, (viii) applications for assignment of a rating of the Securities by
qualified rating agencies, (ix) the fees payable to the Commission and the NASD,
and (x) the fees and expenses incurred in connection with the listing of the
Securities on AMEX and any other exchange. It is agreed that the services to be
provided under clause (iv) of the foregoing sentence shall be performed by
Underwriters' Counsel.
b. If this Agreement is terminated by the Underwriters in
accordance with the provisions of Section 6 or Section 12, the Company shall
reimburse and indemnify the Underwriters for all of their actual out-of-pocket
expenses, including the fees and disbursements of Underwriters' Counsel, less
any amounts already paid pursuant to Section 5(c) hereof.
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
Representative on the Closing Date by certified or bank cashier's check or, at
the election of the Representative, by deduction from the proceeds of the
offering contemplated herein, 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. In the event the
Representative elects to exercise the over-allotment option described in Section
2(b) hereof, the Company agrees to pay to the Representative on each Option
Closing Date (by certified or bank cashier's check or, at the Representative's
election, by deduction from the proceeds of the offering) a non-accountable
expense allowance equal to three percent (3%) of the gross proceeds received by
the Company from the sale of the Option Securities.
6. Conditions of the Underwriters' Obligations. The obligations of the
Underwriters hereunder shall be subject to the continuing accuracy of the
representations and warranties of the Company herein as of the date hereof and
as of the Closing Date and 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 the officers of the Company made pursuant to the provisions
hereof;
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and the performance by the Company on and as of the Closing Date and each Option
Closing Date, if any, of its covenants and obligations hereunder and to the
following further conditions:
a. The Registration Statement shall have become effective not
later than 12:00 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 Representative,
and, at the 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 Underwriters' Counsel. If the Company has elected to
rely upon Rule 430A of the Rules and Regulations, the price of the Shares and
Redeemable Warrants 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 the Closing
Date, the Company shall have provided evidence satisfactory to the
Representative of such timely filing, or a post-effective amendment providing
such information shall have been promptly filed and declared effective in
accordance with the requirements of Rule 430A of the Rules and Regulations.
b. The Representative shall not have advised the Company that the
Registration Statement, or any amendment thereto, contains an untrue statement
of fact which, in the Representative's opinion, is material, or omits to state a
fact which, in the Representative'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, or that the
Prospectus, or any supplement thereto, contains an untrue statement of fact
which, in the Representative's opinion, is material, or omits to state a fact
which, in the Representative'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 each of the Closing Date and each Option Closing
Date, if any, the Representative shall have received from Underwriters' Counsel,
such opinion or opinions with respect to the organization of the Company, the
validity of the Securities, the Registration Statement, the Prospectus and other
related matters as the Representative may request and Underwriters' Counsel
shall have received such papers and information as they request to enable them
to pass upon such matters.
d. At the Closing Date, the Underwriters shall have received the
favorable opinion of Parker Duryee Rosoff & Haft, counsel to the Company, dated
the Closing Date, addressed to the Underwriters and in form and substance
satisfactory to Underwriters' Counsel, to the effect that:
i. The Company (A) has been duly organized and is validly existing
as a corporation in good standing under the laws of its jurisdiction,
(B) is duly qualified and licensed and in good standing as a foreign
corporation in each jurisdiction in which its ownership or leasing of
any properties or the character of its operations requires such
qualification or licensing, and (C) has all requisite corporate power
and authority, and has obtained any
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<PAGE> 23
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 its properties and conduct its business as described in the
Prospectus; the Company is and has 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, the Company has not 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 adversely
affect the business, operations, condition, financial or otherwise, or
the earnings, business affairs, position, prospects, value, operation,
properties or results of operations of the Company. The disclosures in
the Registration Statement concerning the effects of federal, state,
local and foreign laws, rules and regulations on the Company's business
as currently conducted and as contemplated are correct in all material
respects and do not omit to state a fact required to be stated therein
or necessary to make the statements contained therein not misleading in
light of the circumstances in which they were made.
ii. the Company does not own an interest in any other corporation,
partnership, joint venture, trust or other business entity;
iii. the Company has a duly authorized, issued and outstanding
capitalization 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, sell, transfer, purchase or redeem any
capital stock, rights, warrants, options or other securities, except for
this Agreement, the Warrant Agreement and the Representative's Warrant
Agreement and as described in the Prospectus. The Securities and all
other securities issued or issuable by the Company conform in all
material 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 holders of any security of the Company or any similar rights granted
by the Company. The Securities to be sold by the Company hereunder and
under the Warrant Agreement and the Representative's Warrant Agreement
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 hereof, will be
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 are in due and proper form. The
Representative's Warrants and the Redeemable 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
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<PAGE> 24
issuance and delivery pursuant to this Agreement of the Firm Securities
and the Option Securities and the Representative's Warrants to be sold
by the Company, the Underwriters and the Representative, respectively,
will acquire good and marketable title to the Firm Securities and the
Option Securities and the Representative's Warrants free and clear of
any pledge, lien, charge, claim, encumbrance, pledge, security interest,
or other restriction or equity of any kind whatsoever. No transfer tax
is payable by or on behalf of the Underwriters in connection with (A)
the issuance by the Company of the Securities, (B) the purchase by the
Underwriters and the Representative of the Firm Securities and the
Option Securities and the Representative's Warrants, respectively, from
the Company, (C) the consummation by the Company of any of its
obligations under this Agreement, the Warrant Agreement or the
Representative's Warrant Agreement, or (D) resales of the Firm
Securities and the Option Securities in connection with the distribution
contemplated hereby.
iv. 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
use of the Preliminary Prospectus, the Registration Statement or
Prospectus or any part of any thereof or 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 such
counsel's knowledge, threatened or contemplated under the Act;
v. each of the Preliminary Prospectus, the Registration Statement,
and the Prospectus and any amendments or supplements thereto (other than
the financial statements and 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.
vi. to the best of such counsel's knowledge, (A) there are no
agreements, contracts or other documents required by the Act to be
described in the Registration Statement and the Prospectus and filed as
exhibits to the Registration Statement other than those described in the
Registration Statement (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 S-1; (C) there is no action, arbitration, suit, proceeding,
inquiry, investigation, litigation, governmental or other 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
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<PAGE> 25
are accurately summarized in all respects), (y) questions the validity
of the capital stock of the Company or this Agreement, the Warrant
Agreement or the Representative's Warrant Agreement, or of any action
taken or to be taken by the Company pursuant to or in connection with
any of the foregoing; (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 or official
(or any basis thereof known to such counsel) in which there is a
reasonable possibility of a decision which may result in a material
adverse change in the condition, financial or otherwise, or the
earnings, position, prospects, stockholders' equity, value, operation,
properties, business or results of operations of the Company, which
could adversely affect the present or prospective ability of the Company
to perform its obligations under this Agreement, the Warrant Agreement
or the Representative's Warrant Agreement or which in any manner draws
into question the validity or enforceability of this Agreement, the
Warrant Agreement or the Representative's Warrant Agreement;
vii. the Company has full legal right, power and authority to
enter into each of this Agreement, the Warrant Agreement and the
Representative's Warrant Agreement, and to consummate the transactions
provided for therein; and each of this Agreement, the Warrant Agreement
and the Representative's Warrant Agreement has been duly authorized,
executed and delivered by the Company. Each of this Agreement, the
Warrant Agreement and the Representative's Warrant Agreement, assuming
due authorization, execution and delivery by each other party thereto
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
Warrant Agreement and the Representative's Warrant 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, 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,
(A) the certificate of incorporation or by-laws of the Company, (B) any
license, contract, collective bargaining agreement, indenture, mortgage,
deed of trust, lease, 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 it is or may be bound or to
which any of its 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
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<PAGE> 26
similar matters), domestic or foreign, having jurisdiction over the
Company or any of its respective activities or properties.
viii. no consent, approval, authorization or order, and no filing
with, any court, regulatory body, government agency or other body (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
Firm Securities and the Option Securities pursuant to the Prospectus and
the Registration Statement, the issuance of the Representative's
Warrants, the performance of this Agreement, the Warrant Agreement and
the Representative's Warrant Agreement, and the transactions
contemplated hereby and thereby;
ix. the properties and business of the Company conform in all
material respects to the description thereof contained in the
Registration Statement and the Prospectus; and the Company has 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;
x. the Company is not in breach of, or in default under, any term
or provision of any license, contract, collective bargaining agreement,
indenture, mortgage, installment sale agreement, deed of trust, lease,
voting trust agreement, stockholders' agreement, partnership 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 the property or assets (tangible or intangible) of
the Company is subject or affected; and the Company is not in violation
of any term or provision of its Articles of Incorporation or By-Laws or
in violation of any franchise, license, permit, judgment, decree, order,
statute, rule or regulation, domestic or foreign;
xi. the statements in the Prospectus under "RISK FACTORS,"
"BUSINESS," "MANAGEMENT," "PRINCIPAL STOCKHOLDERS," "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;
xii. the Securities have been accepted for listing on the AMEX;
xiii. 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;
xiv. neither the Company nor any of its respective officers,
stockholders, employees or agents, nor any other person acting on behalf
of the Company has, directly or
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<PAGE> 27
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 or
instrumentality of any government (domestic or foreign) or any political
party or candidate for office (domestic or foreign) or other person who
is or may be in a position to help or hinder the business of the Company
(or assist it in connection with any actual or proposed transaction)
which (A) might subject the Company to any damage or penalty in any
civil, criminal or governmental litigation or proceeding, (B) if not
given in the past, might have had an adverse effect on the assets,
business or operations of the Company, as reflected in any of the
financial statements contained in the Registration Statement, or (C) if
not continued in the future, might adversely affect the assets,
business, operations or prospects of the Company;
xv. 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;
xvi. 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 arrangements or any other
arrangements, agreements, understandings, payments or issuances that may
affect the Underwriters' compensation, as determined by the NASD;
xvii. assuming due execution by the parties thereto other than the
Company, the Lock-up Agreements are legal, valid and binding obligations
of the parties thereto, enforceable against the party and any subsequent
holder of the securities subject thereto 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);
xviii. except as described in the Prospectus, the Company (A) does
not maintain, sponsor or contribute to any ERISA Plans, (B) does not
maintain or contribute, now or at any time previously, to a defined
benefit plan, as defined in Section 3(35) of ERISA, and (C) has never
completely or partially withdrawn from a "multiemployer plan";
xix. the minute books of the Company have been made available to
the Underwriters and contain a complete summary of all meetings and
actions of the directors and stockholders of the Company since the time
of its incorporation and reflect all transactions referred to in such
minutes accurately in all material respects;
xx. except as set forth in the Prospectus and to the best
knowledge of such counsel, 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
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<PAGE> 28
of the foregoing persons or entities has or has had, either directly or
indirectly, (A) an interest in any person or entity which (x) furnishes
or sells services or products which are furnished or sold or are
proposed to be furnished or sold by the Company, or (y) purchases from
or sells or furnishes to the Company any goods or services, or (B) a
beneficial interest in any contract or agreement to which the Company is
a party or by which of either them may be bound or affected. Except as
set forth in the Prospectus under "CERTAIN TRANSACTIONS," there are no
existing agreements, arrangements, understandings or transactions, or
proposed agreements, arrangements, understandings or transactions,
between or among the Company, and any officer, director, or 5% or
greater securityholder of the Company, or any affiliate or associate of
any such person or entity;
xxi. the Company is in compliance with all provisions of Section 1
of Laws of Florida, Chapter 92-198, An Act Relating to Disclosure of
Doing Business with Cuba;
xxii. neither the Company nor any of its respective affiliates
shall be subject to the requirements of or shall be deemed an
"Investment Company," pursuant to and as defined under, respectively,
the Investment Company Act.
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 Preliminary Prospectus, the
Registration Statement, the Prospectus, and related matters 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
Preliminary Prospectus, 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 any 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 the Prospectus). Such counsel shall
further state that its opinion may be relied upon by Underwriters' Counsel in
rendering its opinion to the Underwriters.
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 satisfactory to Underwriters' Counsel) of
other counsel acceptable to Underwriters' 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 Underwriters' Counsel if requested. The opinion
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<PAGE> 29
of such counsel for the Company shall state that the opinion of any such other
counsel is in form satisfactory to such counsel and that the Representative,
Underwriters' Counsel and they are each justified in relying thereon. Any
opinion of counsel for the Company shall not state that it is to be governed or
qualified by, or that it is otherwise subject to, any treatise, written policy
or other document relating to legal opinions, including, without limitation, the
Legal Opinion Accord of the ABA Section of Business Law (1991) or any comparable
state accord.
e. At the Closing Date, the Underwriters shall have received the
favorable opinion of _______________, special patent counsel to the Company,
dated the Closing Date, addressed to the Underwriters, in form and substance
satisfactory to Underwriters' Counsel, and in substantially the form of Schedule
B attached hereto.
f. At each Option Closing Date, if any, the Underwriters shall
have received the favorable opinions of each of Parker Duryee Rosoff & Haft,
counsel to the Company, and __________________, special patent counsel to the
Company, dated such Option Closing Date, addressed to the Underwriters and in
form and substance satisfactory to Underwriters' Counsel confirming as of such
Option Closing Date the statements made by each of Parker Duryee Rosoff & Haft
and __________________, in their respective opinions delivered on the Closing
Date.
g. On or prior to each of the Closing Date and each Option Closing
Date, if any, Underwriters' 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.
h. Prior to each of the Closing Date and each Option Closing Date,
if any, (i) there shall have been no adverse change nor development involving a
prospective change in the condition, financial or otherwise, earnings, position,
value, properties, results of operations, prospects, stockholders' equity 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 adverse to
the Company; (iii) the Company shall not be in default under any provision of
any instrument relating to any outstanding indebtedness; (iv) the Company shall
not have issued any securities (other than the Securities) or declared or paid
any dividend or made any distribution in respect of its capital stock of any
class and there has not been any change in the capital stock or any change in
the debt (long or short term) or liabilities or obligations of the Company
(contingent or otherwise); (v) 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; (vi) no action, suit or proceeding, at law or in
equity, shall have been pending or threatened (or circumstances giving rise to
same) against the Company, or affecting any of its 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
adversely
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<PAGE> 30
affect the business, operations, earnings, position, value, properties, results
of operations, prospects or financial condition or income of the Company; and
(vii) no stop order shall have been issued under the Act and no proceedings
therefor shall have been initiated, threatened or contemplated by the
Commission.
i. At each of the Closing Date and each Option Closing Date, if
any, the Underwriters 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 or any part thereof 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, after due inquiry, 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, in light of the circumstances under which
they were made, 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, (a) the Company
has not 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; (b) the Company has not paid or declared any dividends or
other distributions on its capital stock; (c) the Company has not
entered into any transactions not in the ordinary course of business;
(d) there has not been any change in the capital stock or long-term debt
or any increase in the short-term borrowings (other than any increase in
the short-term borrowings in the ordinary course of business) of the
Company; (e) the Company has not sustained any loss or damage to any of
its respective properties or assets, whether or not insured; (f) there
is no litigation which is pending or threatened (or circumstances giving
rise to same) against the Company or any affiliated party of any of the
foregoing which is required to be set forth in an amended or
supplemented Prospectus
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which has not been set forth; and (g) there has occurred no 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
(i) are to such documents as amended and supplemented at the date of such
certificate.
j. By the Closing Date, the Underwriters will have received
clearance from the NASD as to the amount of compensation allowable or payable to
the Underwriters, as described in the Registration Statement.
k. At the time this Agreement is executed, the Underwriters shall
have received a letter, dated such date, addressed to the Underwriters in form
and substance satisfactory (including the non-material nature of the changes or
decreases, if any, referred to in clause (iii) below) in all respects to the
Underwriters and Underwriters' Counsel, from Richard A. Eisner & Company, LLP:
i. confirming that they are independent certified 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 that 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 Representative may rely upon the opinion of
Richard A. Eisner & Company, LLP 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, 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 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 August 31, 1996 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 September 1, 1996 to a specified date not
more than five (5) days prior to the effective date of the Registration
Statement, there
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<PAGE> 32
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 June 1, 1996, 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 break-down 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;
vi. statements as to such other matters incident to the
transaction contemplated hereby as the Representative may request.
l. At the Closing Date and each Option Closing Date, if any, the
Underwriters shall have received from Richard A. Eisner & Company, LLP a letter,
dated as of the Closing Date or the Option Closing Date, as the case may be, to
the effect that they reaffirm that statements made in the letter furnished
pursuant to subsection (k) of this Section, except that the specified date
referred to shall be a date not more than five (5) days prior to the Closing
Date or the Option Closing Date, as the case may be, and, if the Company has
elected to rely on Rule 430A of the Rules and Regulations, to the further effect
that they have carried out procedures as specified in clause (v) of subsection
(k) of this Section with respect to certain amounts, percentages and financial
information as specified by the Representative and deemed to be a part of the
Registration Statement pursuant to Rule 430A(b) and have found such amounts,
percentages and financial information to be in agreement with the records
specified in such clause (v).
m. On each of the Closing Date and each Option Closing Date, if
any, there shall have been duly tendered to the Representative for the several
Underwriters' accounts the appropriate number of Firm Securities and Option
Securities, as the case may be.
n. No order suspending the sale of the Firm Securities and Option
Securities in any jurisdiction designated by the Representative 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 shall be contemplated.
o. On or before the Closing Date, the Company shall have executed
and delivered to the Representative, (i) the Representative's Warrant Agreement
substantially in the form filed
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<PAGE> 33
as Exhibit 4.3 to the Registration Statement, in final form and substance
satisfactory to the Representative, and (ii) the Representative's Warrants in
such denominations and to such designees as shall have been provided to the
Company.
p. On or before the Closing Date, the Firm Securities and Option
Securities shall have been duly approved for listing on AMEX, subject to
official notice of issuance.
q. On or before the Closing Date, there shall have been delivered
to the Representative all of the Lock-up Agreements, in form and substance
satisfactory to Underwriters' Counsel.
r. On or before the Closing Date, the Company shall have executed
and delivered to the Representative and the Transfer Agent the Warrant Agreement
substantially in the form filed as Exhibit 4.4 to the Registration Statement, in
final form and substance satisfactory to the Representative.
If any condition to the Underwriters' obligations hereunder to be
fulfilled prior to or at the Closing Date or the relevant Option Closing Date,
as the case may be, is not so fulfilled, the Representative may terminate this
Agreement or, if the Representative so elects, it may waive any such conditions
which have not been fulfilled or extend the time for their fulfillment.
7. Indemnification.
a. The Company agrees to indemnify and hold harmless each of the
Underwriters (for purposes of this Section 7 "Underwriter" shall include the
officers, directors, partners, employees, agents and counsel of the Underwriter,
including specifically each person who may be substituted for an Underwriter as
provided in Section 11 hereof), 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, from and against any and all losses,
claims, damages, expenses or liabilities, joint or several (and actions,
proceedings, investigations, inquiries, suits and litigation in respect
thereof), whatsoever (including but not limited to any and all expenses
whatsoever reasonably incurred in investigating, preparing or defending against
any such claim, action, proceeding, investigation, inquiry, suit or litigation,
commenced or threatened, or any claim whatsoever), as such are incurred, to
which the Underwriter or such controlling person may become subject under the
Act, the Exchange Act or any other statute or at common law or otherwise or
under the laws of foreign countries, arising out of or based upon any untrue
statement or alleged untrue statement of a material fact contained (i) in any
Preliminary Prospectus, the Registration Statement or the Prospectus (as from
time to time amended and supplemented); (ii) in any post-effective amendment or
amendments or any new registration statement and prospectus in which is included
securities of the Company issued or issuable upon exercise of the Securities; 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 Securities under the securities laws thereof or filed with the
Commission, any state securities commission or agency, AMEX 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
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<PAGE> 34
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 strict 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. Each of 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. The
Company acknowledges that the statements with respect to the public offering of
the Firm Securities and the Option Securities set forth under the heading
"Underwriting" and the stabilization legend in the Prospectus 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.
c. Promptly after receipt by an indemnified party under this
Section 7 of notice of the commencement of any claim, action, suit,
investigation, inquiry, proceeding or litigation, 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 claim, action, suit, investigation, inquiry,
proceeding or litigation is brought against any indemnified party, and it
notifies an indemnifying party or parties of the commencement thereof, the
indemnifying party or parties will be entitled to participate therein, and to
the extent it may elect by written notice delivered to the indemnified party
promptly after receiving the aforesaid notice from such indemnified party, to
assume the defense thereof with counsel reasonably satisfactory to such
indemnified party. Notwithstanding the foregoing, the indemnified party or
parties shall have the right to employ its or their own counsel in any such case
but the fees and expenses of such counsel shall be at the expense of such
indemnified party or parties unless (i) the employment of such counsel shall
have been authorized in writing by the indemnifying parties in connection with
the defense thereof at the expense of the indemnifying party, (ii) the
indemnifying parties shall not have
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<PAGE> 35
employed counsel reasonably satisfactory to such indemnified party to have
charge of the defense thereof within a reasonable time after notice of
commencement thereof, or (iii) such indemnified 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 thereof 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 claim, action, suit,
investigation, inquiry, proceeding or litigation or separate but similar or
related claims, actions, suits, investigations, inquiries, proceedings or
litigation 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, action,
suit, investigation, inquiry, proceeding or litigation effected without its
written consent; provided, however, that such consent was not unreasonably
withheld. An indemnifying party will not, without the prior written consent of
the indemnified parties, settle, compromise or consent to the entry of any
judgment with respect to any pending or threatened claim, action, suit,
investigation, inquiry, proceeding or litigation in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim, action, suit,
investigation, inquiry, proceeding or litigation), unless such settlement,
compromise or consent (i) includes an unconditional release of each indemnified
party from all liability arising out of such claim, action, suit, investigation,
inquiry, proceeding or litigation and (ii) does not include a statement as to or
an admission of fault, culpability or a failure to act by or on behalf of any
indemnified party.
d. In order to provide for just and equitable contribution in any
case in which (i) an indemnified party makes claim for indemnification pursuant
to this Section 7, but it is judicially determined (by the entry of a final
judgment or decree by a court of competent jurisdiction and the expiration of
time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
the express provisions of this Section 7 provide for indemnification in such
case, or (ii) contribution under the 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 Firm Securities and the Option Securities or (B) if the allocation provided
by clause (A) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (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 the contributing party and the Underwriters are
the indemnified party, the relative benefits received by the Company on the one
hand, and the Underwriters, on the other, shall be deemed to be in the same
proportion as the total net proceeds from the offering of the Firm Securities
and the Option Securities (before deducting expenses) bear to the total
underwriting discounts received by the Underwriters hereunder, in
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<PAGE> 36
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 subsection (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 subsection (d), the Underwriters shall
not be required to contribute any amount in excess of the underwriting discount
applicable to the Firm Securities and the Option Securities 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 subsection (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 subsection (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 subsection
(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, any controlling person of any Underwriter or the Company, and shall
survive termination of this Agreement or the issuance and delivery of the
Securities to the Underwriters and the Representative, as the case may be.
9. Effective Date. This Agreement shall become effective at 10:00 a.m.,
New York City time, on the next full business day following the date hereof, or
at such earlier time after the Registration Statement becomes effective as the
Representative, in its discretion, shall release the Securities for 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 Representative of telegrams to securities
dealers releasing such securities for
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<PAGE> 37
offering or the release by the Representative for publication of the first
newspaper advertisement which is subsequently published relating to the
Securities.
10. Termination.
a. Subject to subsection (b) of this Section 10, the
Representative shall have the right to terminate this Agreement, (i) if any
domestic or international event or act or occurrence has disrupted, or in the
Representative's opinion will in the immediate future disrupt, the financial
markets; or (ii) if any material adverse change in the financial markets shall
have occurred; or (iii) if trading generally shall have been suspended or
materially limited on or by, as the case may be, any of the New York Stock
Exchange, the American Stock Exchange, the NASD, the Boston Stock Exchange, any
over-the-counter market, the Commission or any other government authority having
jurisdiction, or if 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 or other authority having jurisdiction; or (iv) if trading of any of
the securities of the Company shall have been suspended, or any of the
securities of the Company shall have been delisted, on any exchange or in any
over-the-counter market; or (v) if the United States shall have become involved
in a war or major hostilities, or if there shall have been an escalation in an
existing war or major hostilities or a national emergency shall have been
declared in the United States; or (vi) if a banking moratorium has been declared
by a state or federal authority; or (vii) if a moratorium in foreign exchange
trading has been declared; or (viii) if the Company shall have 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 Representative's opinion,
make it inadvisable to proceed with the offering, sale and/or delivery of the
Securities; or (ix) if there shall have been such a material adverse change in
the conditions or prospects of the Company, or such material adverse change in
the general market, political or economic conditions, in the United States or
elsewhere, that, in each case, in the Representative's judgment, would make it
inadvisable to proceed with the offering, sale and/or delivery of the Securities
or (x) if Charles H. Stein shall no longer serve the Company in his present
capacity.
b. If this Agreement is terminated by the Representative in
accordance with the provisions of Section 10(a) the Company shall promptly
reimburse and indemnify the Representative for all of its actual out-of-pocket
expenses, including the fees and disbursements of counsel for the Underwriters
(less amounts previously paid pursuant to Section 5(c) above). Notwithstanding
any contrary provision contained in this Agreement, if this Agreement shall not
be carried out within the time specified herein, or any extension thereof
granted by the Representative, by reason of any failure on the part of the
Company to perform any undertaking or satisfy any condition of this Agreement by
it to be performed or satisfied (including, without limitation, pursuant to
Section 6 or Section 12) then, the Company shall promptly reimburse and
indemnify the Representative for all of its actual out-of-pocket expenses,
including the fees and disbursements of counsel for the Underwriters (less
amounts previously paid pursuant to Section 5(c) above). In addition, the
Company shall remain liable for all Blue Sky counsel fees and disbursements,
expenses and filing fees. Notwithstanding any contrary provision contained in
this Agreement, any election hereunder or any termination of this Agreement
(including, without
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<PAGE> 38
limitation, pursuant to Sections 6, 10, 11 and 12 hereof), and whether or not
this Agreement is otherwise carried out, the provisions of Section 5 and Section
7 shall not be in any way affected by such election or termination or failure to
carry out the terms of this Agreement or any part hereof.
11. Substitution of the Underwriters. If one or more of the Underwriters
shall fail (otherwise than for a reason sufficient to justify the termination of
this Agreement under the provisions of Section 6, Section 10 or Section 12
hereof) to purchase the Securities which it or they are obligated to purchase on
such date under this Agreement (the "Defaulted Securities"), the Representative
shall have the right, within 24 hours thereafter, to make arrangement for one or
more of the non-defaulting Underwriters, or any other underwriters, to purchase
all, but not less than all, of the Defaulted Securities in such amounts as may
be agreed upon and upon the terms herein set forth; if, however, the
Representative shall not have completed such arrangements within such 24-hour
period, then:
(a) if the number of Defaulted Securities does not exceed 10% of
the total number of Firm Securities to be purchased on such date, the
non-defaulting Underwriters shall be obligated to purchase the full
amount thereof in the proportions that their respective underwriting
obligations hereunder bear to the underwriting obligations of all
non-defaulting Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the total
number of Firm Securities, this Agreement shall terminate without
liability on the part of any non-defaulting Underwriters (or, if such
default shall occur with respect to any Option Securities to be
purchased on an Option Closing Date, the Underwriters may at the
Representative's option, by notice from the Representative to the
Company, terminate the Underwriters' obligation to purchase Option
Securities from the Company on such date).
No action taken pursuant to this Section 11 shall relieve any defaulting
Underwriter from liability in respect of any default by such Underwriter under
this Agreement.
In the event of any such default which does not result in a termination
of this Agreement, the Representative shall have the right to postpone the
Closing Date for a period not exceeding seven (7) days in order to effect any
required changes in the Registration Statement or Prospectus or in any other
documents or arrangements.
12. Default by the Company. If the Company shall fail at the Closing
Date or at 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
Underwriters may at the Representative's option, by notice from the
Representative to the Company, terminate the Underwriters' obligation to
purchase Option Securities from the Company on such date) without any liability
on the part of any non-defaulting party other than pursuant to Section 5,
Section 7 and Section 10 hereof. No action taken pursuant to this Section 12
shall relieve the Company from liability, if any, in respect of such default.
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<PAGE> 39
13. 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 Underwriters shall be directed to the
Representative at National Securities Corporation, 1001 Fourth Avenue, Suite
2200, Seattle, Washington 98154, Attention: Steven A. Rothstein, Chairman, with
a copy to Orrick, Herrington & Sutcliffe LLP, 666 Fifth Avenue, New York, New
York 10103, Attention: Lawrence B. Fisher, Esq. Notices to the Company shall be
directed to the Company at 2655 LeJeune Road, Suite 535, Coral Gables, Florida
33134, Attention: Charles H. Stein, with a copy to Parker Duryee Rosoff & Haft,
529 Fifth Avenue, New York, New York 10017, Attention: Ira Roxland, Esq.
14. Parties. This Agreement shall inure solely to the benefit of and
shall be binding upon, the Underwriters, the Company and the controlling
persons, directors and officers referred to in Section 7 hereof, and their
respective successors, legal representatives and assigns, 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.
15. 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.
16. 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.
17. Entire Agreement; Amendments. This Agreement, the Warrant Agreement
and the Representative's Warrant Agreement constitute the entire agreement of
the parties hereto and supersede all prior written or oral agreements,
understandings and negotiations with respect to the subject matter hereof. This
Agreement may not be amended except in a writing, signed by the Representative
and the Company.
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<PAGE> 40
If the foregoing correctly sets forth the understanding between the
Underwriters 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,
CONSERVER CORPORATION OF AMERICA
By:__________________________________________
Charles H. Stein
Chairman, President and Chief Executive
Officer
Confirmed and accepted as of the date first above written.
NATIONAL SECURITIES CORPORATION
For itself and as Representative
of the several Underwriters named
in Schedule A hereto.
By:________________________________
Steven A. Rothstein
Chairman
<PAGE> 41
SCHEDULE A
<TABLE>
<CAPTION>
NUMBER OF SHARES NUMBER OF REDEEMABLE
NAME OF UNDERWRITERS TO BE PURCHASED WARRANTS TO BE PURCHASED
- -------------------- --------------- ------------------------
<S> <C> <C>
National Securities Corporation........................
- -----------------------------------------------------------------------------------------------------------------------------------
Total.................................................. 4,000,000 4,000,000
========= =========
</TABLE>
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<PAGE> 42
SCHEDULE B
[FORM OF INTELLECTUAL PROPERTY OPINION]
___________________, 1996
NATIONAL SECURITIES CORPORATION
As Representative of the several
Underwriters named in Schedule A
to the Underwriting Agreement
1001 Fourth Avenue
Suite 2200
Seattle, Washington 98154
Re: Initial Public Offering of 4,000,000 Shares of Common
Stock and 4,000,000 Redeemable Common Stock Purchase
Warrants of Conserver Corporation of America
--------------------------------------------
Gentlemen:
We have acted as special counsel to Conserver Corporation of
America, a Delaware corporation (the "Company"), in connection with the entering
into by the Company of that certain Underwriting Agreement by and between
National Securities Corporation (as representative of the several underwriters
named therein) (the "Representative") and the Company, dated _______________,
1996 (the "Underwriting Agreement"). This opinion is provided to you pursuant to
Section 6(e) of the Underwriting Agreement.
For the purpose of rendering the opinions set forth below we
have reviewed the following (collectively, the "Documents"):
(i) the Underwriting Agreement;
(ii) that certain Form S-1 as filed by the Company with the
Securities and Exchange Commission on ______, 1996, together
with any and all exhibits and schedules and all heretofore
filed amendments thereto (collectively, the "Registration
Statement");
(iii) the Company's prospectus dated _______________, 1996
(the "Prospectus");
<PAGE> 43
-2-
___________________, 1996
(iv) a search of the United States Patent and Trademark Office
records relevant to ownership of any and all:
patents and patent applications (including, without
limitation, the patents and patent applications listed
on Schedule A annexed hereto and hereby incorporated
by reference herein (collectively, the "Patents")),
and trademarks, trademark applications, service marks
and service mark applications (collectively, the
"Marks") (including, without limitation, the Marks
listed on Schedule B annexed hereto and hereby
incorporated by reference herein (collectively, the
"Trademarks")),
owned, purportedly owned or licensed by the Company
(including, those patents, patent applications and Marks
licensed, without limitation, pursuant to the licenses listed
on Schedule C annexed hereto and hereby incorporated by
reference herein (collectively, the "Licenses")), conducted by
______________________________ and certified as true and
correct as of _______________________, 1996 (no earlier than 5
days prior to the effective date of the Registration
Statement);
(v) a search of the United States Copyright Office records
relevant to ownership of any and all copyrighted material
(including, without limitation, the copyright in, or license
permitting the Company's actual use of, the material licensed
or otherwise distributed by the Company and listed on Schedule
D annexed hereto and hereby incorporated by reference herein
(collectively, the "Copyrighted Material")), owned,
purportedly owned or licensed by the Company conducted by
_____________________ and certified as true and correct as of
__________________, 1996 (no earlier than 5 days prior to the
effective date of the Registration Statement);
(vi) an intellectual property litigation search with respect
to all Patents, Trademarks, Licenses and Copyrighted Material,
listed on Schedules A, B, C and D, respectively;
(vii) a search of the Uniform Commercial Code ("UCC")
recordation offices, in the following jurisdictions --
Delaware, Florida and New York, with respect to the following
two categories of general intangibles:
(a) the intellectual property general intangibles of
the Company, including, without limitation, the
Company's patents, patent applications, inventions,
know how, trademarks, service marks, copyrights,
service and trade names, intellectual property
licenses and other rights, and
(b) the intellectual property general intangibles
licensed to the Company, including, without
limitation, the patents, patent applications,
inventions,
<PAGE> 44
-3-
___________________, 1996
know how, trademarks, service marks, copyrights,
service and trade names and other intellectual
property rights licensed to the Company pursuant to
the Licenses (listed on Schedule C),
said search certified to us as complete and accurate by
________________ and current through ________________________,
1996 (no earlier than 5 days prior to the effective date of
the Registration Statement) and said jurisdictions being the
only jurisdictions in which filing of UCC financing statements
or other documents may be filed to effectively evidence a
security or other interest in said general intangibles; and
(viii) any and all records, documents, instruments and
agreements in our possession or under our control relating to
the Company.
We have also examined such corporate records, documents,
instruments and agreements, and inquired into such other matters, as we have
deemed necessary or appropriate as a basis for the opinions set forth herein.
Whenever our opinion herein is qualified by the phrase "to the best of our
knowledge" or "to the best of our knowledge, after due inquiry," such language
means that, based upon (i) our inquiries of officers of the Company, (ii) our
review of the Documents, and (iii) our review of such other corporate records,
documents, instruments and agreements described in the first sentence of this
paragraph, we believe that such opinions are factually correct.
To the best of our knowledge, as to all matters of fact
represented to you by the Company, we advise you that nothing has come to our
attention that would cause us to believe that such facts are incorrect,
incomplete or misleading or that reliance thereon is not warranted under the
circumstances. We call to your attention that our opinion is limited to such
facts as they exist on the date hereof and do not take into account any change
of circumstances, fact or law subsequent thereto.
Based upon and subject to the foregoing, we are of the opinion
that:
1. To the best of our knowledge, after due inquiry,
except as described in the Prospectus, the Company owns or has
the right to use, free and clear of all liens, encumbrances,
pledges, security interests, defects or other restrictions or
equities of any kind whatsoever,
(i) all patents and patent applications (including,
without limitation, the Patents),
(ii) all trademarks and service marks (including,
without limitation, the Trademarks),
<PAGE> 45
-4-
___________________, 1996
(iii) all copyrights (including, without limitation,
the Copyrighted Material),
(iv) all service and trade names, and
(v) all intellectual property licenses (including,
without limitation, the Licenses),
used in, or required for, the conduct of the Company's
business.
2. To the best of our knowledge, after due inquiry,
the Company possesses all material intellectual property
licenses or rights used in, or required for, the conduct of
its respective business (including, the Licenses and without
limitation, any such licenses or rights described in the
Prospectus as being owned, possessed or licensed by the
Company, as the case may be) and such licenses and rights are
in full force and effect.
3. To the best of our knowledge, after due inquiry,
there is no claim or action, pending, threatened or potential,
which affects or could affect the rights of the Company with
respect to any trademarks, service marks, copyrights, service
names, trade names, patents, patent applications or licenses
used in, or required for, the conduct of the Company's
business.
4. To the best of our knowledge, after due inquiry,
there is no intellectual property based claim or action,
pending, threatened or potential, which affects or could
affect the rights of the Company with respect to any products,
services, processes or licenses, including, without
limitation, the Licenses used in the conduct of the Company's
business.
5. To the best of our knowledge, after due inquiry,
except as described in the Prospectus, the Company is not
under any obligation to pay royalties or fees to any third
party with respect to any material, technology or intellectual
properties developed, employed, licensed or used by the
Company.
6. To the best of our knowledge, after due inquiry,
the statements in the Prospectus under the headings, "Risk
Factors - Distribution Agreement; Sole Source of Supply,"
"Risk Factors - Limited Reliance on Patents and Proprietary
Rights" and "Business - Groupe Conserver Distribution
Agreement", are accurate in all material respects, fairly
represent the information disclosed therein and do not omit to
state any fact necessary to make the statements made therein
complete and accurate.
<PAGE> 46
-5-
___________________, 1996
7. To the best of our knowledge, after due inquiry,
the statements in the Registration Statement and Prospectus do
not contain any untrue statement of a material fact with
respect to the intellectual property position of the Company,
or omit to state any material fact relating to the
intellectual property position of the Company which is
required to be stated in the Registration Statement and the
Prospectus or is necessary to make the statements therein not
misleading.
We call your attention to the fact that the members of this
firm are licensed to practice law in the State of ______________ and before the
United States Patent and Trademark Office as Registered Patent Attorneys.
Accordingly, we express no opinion with respect to the laws, rules and
regulations of any jurisdictions other than the State of ___________ and the
United States of America.
The opinions expressed herein are for the sole benefit of, and
may be relied upon only by, the several Underwriters named in Schedule A to the
Underwriting Agreement and Orrick, Herrington & Sutcliffe LLP.
Very truly yours,
<PAGE> 1
Exhibit 3.1
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
CONSERVER CORPORATION OF AMERICA
CONSERVER CORPORATION OF AMERICA, a Delaware corporation (the
"Corporation"), hereby certifies as follows:
FIRST: That the Board of Directors of the Corporation, by unanimous
written consent dated November 19, 1996 in lieu of a meeting of such Board,
adopted a resolution proposing and declaring advisable the following amendments
to the Certificate of Incorporation of the Corporation, and declaring that such
proposed amendments be submitted for consideration by the stockholders of the
Corporation entitled to vote in respect thereof. The resolution setting forth
the proposed amendments is as follows:
RESOLVED, that the Certificate of Incorporation of this
Corporation be amended, as follows:
I. Paragraph FOURTH of the Certificate of Incorpora-
tion, relating to the capitalization of the Corporation,
is hereby deleted and a new Paragraph FOURTH is added as
follows:
FOURTH: a) Authorized Shares. The total number of
shares of stock which the Corporation shall have authori-
ty to issue is 30,005,000, which shall consist of
30,000,000 shares, $.001 par value, designated as Common
Stock, and 5,000 shares, $.01 par value, designated as
Preferred Stock.
b) Preferred Stock. Shares of the Preferred Stock may
be issued from time to time in series or otherwise and
the Board of Directors of the Corporation is hereby
authorized, subject to the limitations provided by law,
<PAGE> 2
to establish and designate series, if any, of the Preferred
Stock, to fix the number of shares constituting any such
series, and to fix the voting powers, designations, and
relative, participating, optional, conversion, redemption and
other rights of the shares of Preferred Stock or series
thereof, and the qualifications, limitations and restrictions
thereof, and to increase and to decrease the number of shares
of Preferred Stock or shares constituting any such series.
The authority of the Board of Directors of the Corporation
with respect to shares of Preferred Stock or any series
thereof shall include but shall not be limited to the
authority to determine the following:
I. The designation of any series.
II. The number of shares initially constituting
any such series.
III. The increase, and the decrease to a number not
less than the number of the outstanding shares
of any such series, of the number of shares
constituting such series theretofore fixed.
IV. The rate or rates and the times at which
dividends on the shares of Preferred Stock
or any series thereof shall be paid, and
whether or not such dividends shall be
cumulative, and, if such dividends shall be
cumulative, the date or dates from and
after which they shall accumulate.
V. Whether or not the shares of Preferred Stock
or series thereof shall be redeemable, and, if
such shares shall be redeemable, the terms and
conditions of such redemption, including but
not limited to the date or dates upon or after
which such shares shall be redeemable and the
amount per share which shall be payable upon
such redemption, which amount may vary under
different conditions and at different redemp-
tion dates.
VI. The amount payable on the shares of Preferred
Stock or series thereof in the event of the
voluntary or involuntary liquidation, dissolu-
tion or winding up of the Corporation; provid-
ed, however, that the holders of shares rank-
2
<PAGE> 3
ing senior to other shares shall be entitled
to be paid, or to have set apart for payment,
not less than the liquidation value of such
shares before the holders of shares of the
Common Stock or the holders of any other
series of Preferred Stock ranking junior to
the Preferred Stock as to rights on liquida-
tion shall be entitled to be paid any amount
or to have any amount set apart for payment.
VII. Whether or not the shares of Preferred Stock
or series thereof shall have voting rights, in
addition to the voting rights provided by law,
and, if such shares shall have such voting
rights, the terms and conditions thereof,
including but not limited to the right of the
holders of such shares to vote as a separate
class either alone or with the holders of
shares of one or more other class or series of
Preferred Stock and the right to have more
than one vote per share.
VIII. Whether or not a sinking fund shall be
provided for the redemption of the shares
of Preferred Stock or series thereof, and,
if such a sinking fund shall be provided,
the terms and conditions thereof.
IX. Whether or not a purchase fund shall be pro-
vided for the shares of Preferred Stock or
series thereof, and, if such a purchase fund
shall be provided, the terms and conditions
thereof.
X. Whether or not the shares of Preferred Stock or
series thereof shall have conversion privileges,
and, if such shares shall have conversion
privileges, the terms and conditions of conversion,
including but not limited to any provision for the
adjustment of the conversion rate or the conversion
price.
XI. Any other relative rights, preferences, quali-
fications, limitations and restrictions.
3
<PAGE> 4
c) Common Stock.
I. Dividends. Subject to the preferential divi-
dend rights applicable to shares of
Preferred Stock, the holders of shares of
Common Stock shall be entitled to receive
such dividends as may be declared by the
Board of Directors.
II. Liquidation. In the event of any voluntary
or involuntary liquidation, dissolution or
winding up of the Corporation, after
distribution in full of the preferential
amounts to be distributed to the holders of
shares of Preferred Stock, the holders of
shares of Common Stock shall be entitled to
receive all of the remaining assets of the
Corporation available for distribution to
holders of Common Stock, ratably in
proportion to the number of shares of the
Common Stock held by them.
III. Voting Rights. Except as otherwise required
by statute or as otherwise provided in this
Certificate of Incorporation, the holders
of shares of Common Stock shall be entitled
to vote on all matters at all meetings of
the stockholders of the Corporation, and
shall be entitled to one vote for each
share of the Common Stock entitled to vote
at such meeting, voting together, as one
class with the holders of shares of the
Preferred Stock who are entitled to vote,
if any such shares are then outstanding,
and not as a separate class.
II. Paragraph SIXTH of the Certificate of Incorporation,
relating to the indemnification of directors and officers is
hereby deleted and a new Paragraph SIXTH is added as follows:
SIXTH: a) The Corporation shall, to the full
extent permitted by Section 145 of the Delaware
General Corporation law, as amended, from time to
time, indemnify all persons whom it may indemnify
pursuant thereto.
b) A director of the Corporation shall not
be personally liable to the Corporation or its
stockholders for monetary damages for breach
4
<PAGE> 5
of fiduciary duty as a director, except for
liability (i) for any breach of the directors duty
of loyalty to the Corporation or its stockholders,
(ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the
Delaware General Corporation Law, or (iv) for any
transaction from which the director derived an im-
proper personal benefit.
c) Each person who was or is made a party or is
threatened to be made a party to or is involved in
any action, suit or proceeding, whether civil,
criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact
that he or she, or a person of whom he or she is the
legal representative, is or was a director or
officer, of the Corporation or is or was serving at
the request of the Corporation as a director,
officer, employee or agent of another corporation
or of a partnership, joint venture, trust or other
enterprise, including service with respect to
employee benefit plans, whether the basis of such
proceeding is alleged action in an official
capacity as a director, officer, employee or agent
or in any other capacity while serving as a
director, officer, employee or agent, shall be
indemnified and held harmless by the Corporation to
the fullest extent authorized by the Delaware
General Corporation Law, as the same exists or may
hereafter be amended (but, in the case of any such
amendment, only to the extent that such amendment
permits the Corporation to provide broader
indemnification rights than said law permitted the
Corporation to provide prior to such amendment),
against all expense, liability and loss (including
attorney's fees, judgments, fines, ERISA excise
taxes or penalties and amounts paid or to be paid in
settlement) reasonably incurred or suffered by such
person in connection therewith and such
indemnification shall continue as to a person who
has ceased to be a director, officer, employee or
agent and shall inure to the benefit of his or her
heirs, executors and administrators; provided, howev-
5
<PAGE> 6
er, that, except as provided in paragraph d) hereof,
the Corporation shall indemnify any such person
seeking indemnification in connection with a
proceeding (or part thereof) initiated by such
person only if such proceeding (or part thereof)
was authorized by the Board of Directors of the
Corporation. The right to indemnification conferred
in this Paragraph SIXTH shall be a contract right
and shall include the right to be paid by the
Corporation the expenses incurred in defending any
such proceeding in advance of its final disposition;
provided, however, that if the Delaware General
Corporation Law requires, the payment of such
expenses incurred by a director or officer in his
or her capacity as a director or officer (and not in
any other capacity in which service was or is
rendered by such person while a director or officer,
including, without limitation, service to an
employee benefit plan) in advance of the final
disposition of a proceeding, shall be made only upon
delivery to the Corporation of an undertaking, by or
on behalf of such director or officer, to repay all
amounts so advanced if it shall ultimately be
determined that such director or officer is not
entitled to be indemnified under this Paragraph
SIXTH or otherwise. The Corporation may, by action
of its Board of Directors, provide indemnification
to employees and agents of the Corporation with the
same scope and effect as the foregoing
indemnification of directors and officer.
d) If a claim under sub-paragraph c) of this
Paragraph SIXTH is not paid in full by the
Corporation within thirty days after a written claim
has been received by the Corporation, the claimant
may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the
claim and, if successful in whole or in part, the
claimant shall be entitled to be paid also the
expense of prosecuting such claim. It shall be a
defense to any such action (other than an action
brought to enforce a claim for expenses incurred in
defending any proceeding in advance of its
6
<PAGE> 7
final disposition where the required undertaking, if
any is required, has been tendered to the
Corporation) that the claimant has not met the
standards of conduct which make it permissible
under the Delaware General Corporation Law for the
Corporation to indemnify the claimant for the amount
claimed, but the burden of proving such defense
shall be on the Corporation. Neither the failure of
the Corporation (including its Board of Directors,
independent legal counsel, or its stockholders) to
have mae a determination prior to the commencement
of such action that indemnification of the claimant
is proper in the circumstances because he or she has
met the applicable standard of conduct set forth in
the Delaware General Corporation Law, nor an actual
determination by the Corporation (including its
Board of Directors, independent legal counsel, or
its stockholders) that the claimant has not met such
applicable standard or conduct, shall be a defense
to the action or create a presumption that the
claimant has not met the applicable standard of
conduct.
e) The right to indemnification and the payment of
expenses incurred in defending a proceeding in
advance of its final disposition conferred in this
Paragraph SIXTH shall not be exclusive of any other
right which any person may have or hereafter acquire
under any statute, provision of the Certificate of
Incorporation, by-laws, agreement, vote of
stockholders or disinterested directors or
otherwise.
f) The Corporation may maintain insurance, at its
expense, to protect itself and any director,
officer, employee or agent of the Corporation or
another corporation, partnership, joint venture,
trust or other enterprise against any such expense,
liability or loss, whether or not the Corporation
would have the power to indemnify such person
against such expense, liability or loss under the
Delaware General Corporation Law.
7
<PAGE> 8
SECOND: The amendments effected herein were authorized on November 19,
1996 by the consent in writing, setting forth the action so taken, signed by the
holders of at least a majority of all of the outstanding shares of the
Corporation entitled to vote thereon pursuant to Section 228 of the General
Corporation Law of the State of Delaware.
THIRD: The amendments effected herein were duly adopted in accordance
with the applicable provisions of Section 242 of the General Corporation Law of
the State of Delaware.
IN WITNESS WHEREOF, Conserver Corporation of America has caused this
Certificate to be signed by Charles H. Stein, its Chairman, and attested to by
Gerald Breslauer, its Secretary this 19th day of November, 1996.
CONSERVER CORPORATION OF AMERICA
By: /s/ Charles H. Stein
-----------------------------
Charles H. Stein, Chairman
ATTEST:
/s/ Gerald Breslauer
- -------------------------
Gerald Breslauer
Secretary
8
<PAGE> 9
CERTIFICATE OF INCORPORATION
OF
CONSERVER CORPORATION OF AMERICA
The undersigned, being a natural person of at least 18 years of age and
acting as the incorporator of the corporation hereby being formed under the
General Corporation Law, certifies that:
FIRST: The name of the corporation is Conserver Corporation of America
(the "Corporation").
SECOND: The address of the registered office and the name and address
of the registered agent of the Corporation required to be maintained by sections
131 and 132 of the Delaware General Corporation Law are The Prentice-Hall
Corporation System, Inc. 1013 Centre Road, Wilmington, Delaware 19805, in New
Castle County.
THIRD: The Corporation is formed for the following purpose or purposes:
To engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law, provided that the
Corporation is not formed to engage in any act or activity requiring
the consent or approval of any state official, department, board,
agency, or other body without such consent or approval first being
obtained.
FOURTH: The aggregate number of shares which the Corporation shall have
authority to issue is five million. All such shares are to be Common Stock with
a par value of $0.001 per share, and are to be of the same class.
FIFTH: The incorporator of the Corporation is Maxwell Stolzberg whose
mailing address is 460 Park Avenue, New York, N.Y. 10022.
SIXTH: A director of the corporation shall not be liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except to the extent such exemption from liability or
limitation thereof is not permitted under the General Corporation Law of the
State of Delaware as the same exists or may hereafter be amended. Any amendment,
modification or repeal of the foregoing sentence shall not adversely affect any
right or protection of a director of the
<PAGE> 10
Corporation hereunder in respect of any act or omission occurring prior to the
time of such amendment, modification or repeal.
IN WITNESS WHEREOF, the undersigned incorporator acknowledges that the
foregoing certificate of incorporation is his act and deed on the 6th day of
March, 1996.
/s/ Maxwell Stolzberg
------------------------------------
Maxwell Stolzberg, Incorporator
Mezan, Stolzberg & Schwartzman, P.C
460 Park Avenue
New York, New York 10022
STATE OF NEW YORK )
) SS.:
COUNTY OF NEW YORK )
On the date hereinafter set forth, before me came Maxwell Stolzberg, to
me known to be the individual who is described in and signed the foregoing
Certificate of Incorporation, and he acknowledged to me that he signed the same
Sworn to before me
March 6, 1996
/s/ Suzanne Roccisano
- ----------------------------------
Notary Public
[Notary Public Seal]
2-28-98
2
<PAGE> 11
CERTIFICATE OF AMENDMENT
OF CERTIFICATE OF INCORPORATION
BEFORE THE ISSUANCE OF STOCK
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
CONSERVER CORPORATION OF AMERICA
Conserver Corporation of America, a corporation organized and existing
under the General Corporation Law of the State of Delaware (the "Corporation"),
does hereby certify:
FIRST: The Corporation has not received any payment for
any of its stock.
SECOND: The amendment to the Corporation's Certificate of Incorporation
set forth in the following resolution was approved by a majority of the
Corporation's directors and was duly adopted in accordance with the provisions
of Section 241 of the General Corporation Law of the State of Delaware:
RESOLVED, that the Certificate of Incorporation of the
corporation be amended by striking Article FOURTH in its entirety and
replacing therefor; `FOURTH: The aggregate number of shares which the
corporation shall have authority to issue is ten million. All such
shares are to be Common Stock with a par value of $0.001 per share, and
are to be of the same class.'
IN WITNESS WHEREOF, the Conserver Corporation of America has caused
this Certificate to be signed and attested by its duly authorized officer, this
7th day of March, 1996.
CONSERVER CORPORATION OF
AMERICA
By:/s/ Charles Stein
-------------------------
Charles Stein
Title: Chairman of the Board
<PAGE> 1
BY-LAWS
OF
CONSERVER CORPORATION OF AMERICA
ARTICLE I. OFFICES
Section 1.1. Registered Office. The registered office of the
Corporation within the State of Delaware shall be located at the principal place
of business in said state of the corporation or individual acting as the
Corporation's registered agent in Delaware.
ARTICLE II. MEETINGS OF STOCKHOLDERS
Section 2.1. Time and Place. All meetings of stockholders shall be held
at such time and place, whether within or without the State of Delaware, as
shall be stated in the notice of the meeting or in a duly executed waiver of
notice thereof.
Section 2.2. Annual Meetings. An annual meeting of stockholders shall
be held on the third Thursday in March of each year, or, if such day be a legal
holiday, on the next business day following; provided, that if the Board of
Directors shall determine that in any year it is not advisable or convenient to
hold the meeting on such day, then in such year the annual meeting shall instead
be held on such other day, not more than sixty (60) days before or after the
third Thursday in March and not a legal holiday, as the Board shall prescribe.
At each annual meeting, the stockholders shall elect a board of directors and
transact such other business as may properly be brought before the meeting.
Section 2.3. Special Meetings. Special meetings of stockholders, for
any purpose or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation, may be called by the President or the Board of
Directors, and shall be called by the Chairman of the Board, the President or
the Secretary at the request in writing of any one or more stockholders owning
at least twenty-five percent (25%) in amount of the shares of the Corporation
issued and outstanding and entitled to vote. Any such request shall state the
purpose or purposes of the proposed meeting.
Section 2.4. Notice of Meetings. Written notice of each meeting of
stockholders stating the place, date and hour thereof, and, in the case of a
special meeting, specifying the purpose or purposes thereof and the person or
persons by whom or at whose direction such meeting has been called, shall be
given, in the manner prescribed by Section 6.1 of these By-Laws, to each
<PAGE> 2
stockholder entitled to vote thereat, not less than ten (10) nor more than sixty
(60) days prior to the meeting.
Section 2.5. Quorum. Except as otherwise provided by statute or the
Certificate of Incorporation, the holders of a majority of the stock of the
Corporation issued and outstanding entitled to vote thereat, present in person
or by proxy, shall be necessary to and shall constitute a quorum for the
transaction of business at each meeting of stockholders.
If a quorum shall not be present at the time fixed for any meeting, the
stockholders present in person or by proxy and entitled to vote thereat shall
have power to adjourn the meeting from time to time, without notice other than
an announcement at the meeting of the place, date and hour of the adjourned
meeting, until a quorum shall be present; and at any such adjourned meeting at
which a quorum shall be present, any business may be transacted which might have
been transacted had a quorum been present at the time originally fixed for the
meeting; provided, that if any meeting is so adjourned for more than thirty (30)
days, or if after any such adjournment, a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder entitled to vote thereat.
Section 2.6. Vote Required. At any meeting of stockholders at which a
quorum is present, all elections shall be determined by plurality vote and all
other matters shall be determined by the vote of the holders of a majority of
the stock present in person or by proxy and entitled to vote, unless the matter
is one which, by express provision of the statute, of the Certificate of
Incorporation or these By-Laws, a different vote is required, in which case such
express provision shall govern and control the determination of such matter.
Section 2.7. Voting. At any meeting of stockholders, each stockholder
having the right to vote shall be entitled to vote in person or by proxy; and
except as otherwise provided by statute or the Certificate of Incorporation,
each stockholder of record shall be entitled to one vote for each outstanding
stock standing in his name on the books of the Corporation as of the record date
for determining the stockholders entitled to notice of and to vote at such
meeting.
Section 2.8. Proxies. Each proxy shall be in writing executed by the
stockholder giving the proxy or his duly authorized attorney. No proxy shall be
valid after the expiration of three (3) years from its date, unless a longer
period is provided for in the proxy. Unless and until voted, every proxy shall
be revocable at the pleasure of the person who executed it or of his legal
representatives or assigns, except in those cases where an irrevocable proxy
permitted by statute has been given.
2
<PAGE> 3
When ever a vote of stockholders at a meeting thereof is required or
permitted to be taken in connection with any corporate action by any provision
of statute or of the Certificate of Incorporation or these By-Laws, the meeting,
prior notice thereof and vote of stockholders may be dispensed with if the
holders of stock having not less than the minimum number of votes that would
have been necessary to authorize or take such action at a meeting at which all
stock entitled to vote thereon were present and voted shall consent in writing
to the taking of such action. Where corporate action is taken in such manner by
less than unanimous written consent, prompt written notice of the taking of such
action shall be given to all stockholders who have not consented in writing
thereto.
ARTICLE III. DIRECTORS
Section 3.1. Board of Directors. The property and business of the
Corporation shall be managed by its Board of Directors, which may exercise all
such powers of the Corporation and do all such lawful acts and things on its
behalf as are not, by statute or by the Certificate of Incorporation or by these
By-Laws, directed or required to be exercised or done by the stockholders.
Section 3.2. Number; Election and Tenure. The first Board of Directors
shall consist of three (3) members and thereafter the number of directors
constituting the entire Board of Directors shall be three (3) or such multiple
thereof not exceeding nine (9) as may be fixed from time to time by the
stockholders at any annual or special meeting; provided, that no decrease in the
number of directors shall shorten the term of any incumbent director. With the
exception of the first Board of Directors, which shall be elected by the
incorporator of the Corporation, and except as otherwise provided in these
By-Laws, directors shall be elected at the annual meeting of stockholders. Each
director shall hold office for a term expiring at the annual meeting of
stockholders next succeeding his election and until his successor is elected and
has qualified or until his earlier displacement from office by resignation,
removal or otherwise.
Section 3.3. Resignation and Removal. Any director may resign at any
time by written notice to the Corporation. Any director may be removed, for
cause or without cause, by the stockholders at a special meeting called for the
purpose.
Section 3.4. Vacancies. Any vacancy in the Board of Directors occurring
by reasons of the death, resignation or disqualification of any director, the
removal of any director from office for cause or without cause, an increase in
the number of directors, or otherwise, may be filled by a majority of the
directors then in office, although such majority is less than a quorum or by the
stockholders in accordance with Section 3.2. Each
3
<PAGE> 4
director elected to fill a vacancy shall hold office for a term expiring at the
next succeeding annual meeting of stockholders at which the terms of the class
of directors of which he is a member expire and until his successor s elected
and has qualified or until his earlier displacement form office by resignation,
removal or otherwise.
Section 3.5. Compensation. Directors, as such, shall not receive any
stated salary not receive any stated salary for their services, but, by
resolution of the Board of Directors, a fixed sum and expenses of attendance, if
any, may be allowed to any director for attendance at each regular or special
meeting of the Board or any meeting of any committee of the Board of which such
director is a member or alternate member; provided, that nothing herein
contained shall be construed to preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor.
ARTICLE IV. MEETINGS OF THE BOARD
Section 4.1. Time and Place. Meetings of the Board of Directors may be
held at such time and place, within or without the State of Delaware, as shall
be determined in accordance with these By-Laws.
Section 4.2. First Meeting. The directors elected at each annual
meeting of stockholders shall hold their first meeting within ten (10) days
following the annual meeting, at such time and place as shall be fixed by
resolution of the Board of Directors prior to the annual meeting or by the
consent in writing of all of the newly-elected directors, and no notice of such
meeting to the newly-elected directors shall be necessary in order legally to
constitute the meeting, provided a quorum shall be present.
Section 4.3. Regular Meetings. Regular meetings of the Board of
Directors may be held, without notice, at such time and place as shall from time
to time be fixed in advance by resolution of the Board.
Section 4.4. Special Meetings. Special meetings of the Board of
Directors may be called by the Chairman of the Board, President, and, at the
written request of any two (2) directors shall be called by the Chairman of the
Board, the President or the Secretary. Written notice of each special meeting of
directors stating the time and place, and, if deemed appropriate by the person
or persons by whom or at whose request the meeting is being called, the purpose
or purposes thereof, shall be served on each director, in the manner provided in
Section 6.1 of these By-Laws, at least forty-eight (48) hours before such
meeting. The time and place of any special meeting of directors may also be
fixed by a duly executed waiver of notice thereof.
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Section 4.5. Quorum and Voting. At all meetings of the Board of
Directors or of any committee of the Board, a majority of the entire Board of
Directors or a majority of the entire membership of such committee shall be
necessary and sufficient to constitute a quorum for the transaction of business,
and the vote of a majority of the directors or members of the committee present
at any meeting at which a quorum is present shall be the act of the Board of
Directors or such committee, except as may be otherwise specifically provided by
statute or by the Certificate of Incorporation or these By-Laws. If a quorum
shall not be present at any meeting of the Board of Directors or any committee
of the Board, the members of the Board or such committee present thereat may
adjourn the meeting from time to time, without notice other than an announcement
at the meeting, until a quorum shall be present. For purposes of the foregoing,
any director who participates in any meeting of the Board of Directors or of any
committee of which he is a member or alternate member by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other shall be deemed to be present
in person at such meeting.
Section 4.6. Consents. Whenever any action is required or permitted to
be taken at a meeting of the Board of Directors or any committee of the Board,
such action may be taken without a meeting if, prior or subsequent to the taking
of such action, all members of the Board of Directors or of such committee
consent thereto in writing and such written consent or consents are filed with
the minutes of the proceedings of the Board or of such committee; and such
written consent or consents shall have the same effect as a unanimous vote at a
meeting of the Board of Directors or of such committee at which all members
thereof were present and voted.
ARTICLE V. COMMITTEES OF THE BOARD
Section 5.1. Designation. The Board of Directors, by resolution adopted
by a majority of the whole Board, may designate one or more committees, each
consisting of one (1) or more directors and having such title as the Board may
consider to be properly descriptive of its function (except that only one
committee, consisting of three (3) or more directors, shall be designated as the
Executive Committee), each of which, to the extent provided in such resolution,
shall have and may exercise all of the powers and authority of the Board in the
management of the business and affairs of the Corporation. However, no such
committee shall have power or authority in reference to:
(a) amending the certificate of incorporation;
(b) adopting an agreement of merger or consolidation;
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(c) recommending to the stockholders the sale, lease or exchange of
all or substantially all of the Corporation's property and assets;
(d) recommending to the stockholders a dissolution of the Corporation
or a revocation of a dissolution; or
(e) amending these By-Laws; and unless expressly so provided by
resolution of the Board, no such committee shall have power or
authority in reference to;
(f) declaring a dividend; or
(g) authorizing the issuance of stock of the Corporation of any class.
The Board of Directors may designate one or more directors as alternate
members of any committee, who may replace any absent or disqualified member at
any meeting of the committee.
In the absence or disqualification of any member of any committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the board of Directors to act at the meeting in the place and
stead of such absent or disqualified member.
Section 5.2. Tenure; Reports; Procedures. Each such committee shall
serve at the pleasure of the Board of Directors. It shall keep minutes of its
meetings and report the same to the Board of Directors as and when requested by
the Board, and it shall observe such other procedures with respect to its
meetings as are prescribed in these By-Laws or, to the extent not prescribed
herein, as may be prescribed by the Board.
ARTICLE VI. NOTICES
Section 6.1. Delivery of Notices. Notices to directors and stockholders
shall be in writing and may be delivered personally or by mail. Notice by mail
shall be deemed to be given at the time when deposited in the post office or a
letter box, enclosed in a post-paid sealed wrapper, and addressed to directors
or stockholders at their respective addresses appearing on the books of the
Corporation, unless any such director or stockholder shall have filed with the
Secretary of the Corporation a written request that notices intended for him be
mailed or delivered to some other address, in which case the notice shall be
mailed to or delivered at the address designated in such request. Notice to
directors may also be given by telegram or by leaving the notice at the
residence or usual place of business of a director.
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Section 6.2. Waiver of Notice. Whenever notice is required to be given
by statute, the Certificate of Incorporation or these By-Laws, a waiver thereof
in writing, signed by the person or persons entitled to such notice whether
before or after the time stated therein, shall be deemed equivalent to the
giving of such notice. Attendance of a person at a meeting of stockholders,
directors or any committee of directors, as the case may be, shall constitute a
waiver of notice of such meeting, except where the person is attending for the
express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of stockholders, directors or committee of directors
need be specified in any written waiver of notice.
ARTICLE VII. OFFICERS
Section 7.1. Executive Officers. The executive officers of the
Corporation shall be a Chairman of the Board, a President, one or more Vice
Presidents, a Treasurer and a Secretary. The Chairman of the Board and the
President shall be selected from among the directors, but no other executive
officer need be a member of the Board. Two or more offices, except those of
Chairman of the Board or President and Vice President and those of Chairman of
the Board or President and Secretary, may be held by the same person, but no
officer shall execute, acknowledge or verify any instrument in more than one
capacity. The executive officers of the Corporation shall be elected annually by
the Board of Directors at its first meeting following the meeting of
stockholders at which the Board was elected.
Section 7.2. Other Officers and Agents. The Board of Directors may also
elect one or more Assistant Vice Presidents, Assistant Treasurers and Assistant
Secretaries, and such other officers and agents as the Board may at any time or
from time to time determine to be advisable.
Section 7.3. Tenure; Resignation; Removal; Vacancies. Each officer of
the Corporation shall hold office until his successor is elected or appointed or
until his earlier displacement from office by resignation, removal or otherwise;
provided, that if the term of office of any officer elected or appointed
pursuant to Section 7.2 of these By-Laws shall have been fixed by the Board of
Directors, he shall cease to hold such office no later than the date of
expiration of such term, regardless of whether any other person shall have been
elected or appointed to succeed him. Any officer may resign by written notice to
the Corporation and may be removed for cause or without cause by the Board of
Directors stockholders, provided, that any such removal shall be without
prejudice to the rights, if any, of the officer so removed under any employment
contract or other agreement with the Corporation. If the office of
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any officer becomes vacant for any reason, the vacancy may be filled by the
Board of Directors.
Section 7.4. Compensation. The compensation of all officers
of the Corporation shall be fixed by the Board of Directors.
Section 7.5. Authority and Duties. All officers as between themselves
and the Corporation, shall have such authority and perform such duties in the
management of the Corporation as may be provided in these By-Laws, or, to the
extent not provided, as may be prescribed by the Board of Directors.
Section 7.6. The Chairman of the Board. The Chairman of the Board shall
be the Chief Executive Officer of the Corporation. He shall preside at all
meetings of the shareholders and the directors, and shall be ex officio, a
member of all standing committees. He shall have general and active management
of the business of the Corporation, shall see to it that all resolutions and
orders of the Board of Directors are carried into effect, and, in connection
therewith, shall be authorized to delegate to the President and the other
executive officers such of his powers and duties as Chairman of the Board at
such times and in such manner as he may deem to be advisable.
Section 7.7. The President. The President shall be the Chief Operating
Officer of the Corporation and its executive officer next in authority to the
Chairman of the Board. He shall assist the Chairman of the Board in the
management of the business of the Corporation and, in the absence or disability
of the Chairman, he shall preside at all meetings of the stockholders and the
directors, and exercise the other powers and perform the other duties of the
Chairman or designate the executive officers of the Corporation by whom such
other powers shall be exercised and other duties performed; he shall be ex
officio a member of all standing committees; and he shall have such other powers
and duties as may from time to time be assigned to him by the Board of
Directors.
Section 7.8. The Vice Presidents. The Vice President or, if there be
more than one, the Vice Presidents, shall assist the President in the management
of the business of the Corporation and the implementation of resolutions and
orders of the Board of Directors at such times and in such manner as the
President may deem to be advisable. If there be more than one Vice President,
the Board of Directors may designate one of them as Executive Vice President, in
which case he shall be first in order of seniority, and shall be the chief
administrative officer and may also grant to others such titles as shall be
descriptive of their respective functions or indicative of their relative
seniority. The Vice President, or, if there by more than one, the Vice
Presidents in the order of their seniority as indicated by their titles or as
otherwise determined by the Board of Directors shall in the absence or
disability of the President exercise the powers and perform the
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duties of President; and he or they shall have such other powers and duties as
the Board of Directors, or the President may from time to time prescribe.
Section 7.9. The Treasurer. The Treasurer shall have the care and
custody of the corporate funds, and other valuable effects, including
securities, and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and shall deposit all moneys
and other valuable effect in the name and to the credit of the Corporation in
such depositories as may be designated by the Board of Directors. The Treasurer
shall disburse the funds of the Corporation as may be ordered by the Board of
Directors, taking proper vouchers for such disbursements, and shall render to
the President and the Board of Directors at meetings or whenever they may
require it, an account of all his transactions as Treasurer and of the financial
condition of the Corporation.
Section 7.10. The Assistant Treasurers. The Assistant Treasurer, if
any, or, if there be more than one, the Assistant Treasurers, in the order
determined by the Board of Directors or by the President, shall, in the absence
or disability of the Treasurer, exercise the powers and perform the duties of
the Treasurer; and he or they shall perform such other duties as the Board of
Directors or the President may from time to time prescribe.
Section 7.11. The Secretary. The Secretary shall attend all meetings of
the stockholders and of the Board of Directors and shall record the minutes of
all proceedings taken at such meetings, or maintain all documents evidencing
corporate actions taken by written consent of the stockholders or of the Board
of Directors, in a book to be kept for that purpose; and he shall perform like
duties for any committees of the Board of Directors when required. he shall see
to it that all notices of meetings of the stockholders and of special meetings
of the Board of Directors are duly given in accordance with these By-Laws or as
required by statute; he shall be the custodian of the seal of the Corporation,
and, when authorized by the Board of Directors, he shall cause the corporate
seal to be affixed to any document requiring it, and, when so affixed, attested
by his signature as Secretary or by the signature of an Assistant Secretary; and
he shall perform such other duties as may from time to time be prescribed by the
Board of Directors or by the President.
Section 7.12. The Assistant Secretaries. The Assistant Secretary, if
any, or, if there be more than one, the Assistant Secretaries, in the order
determined by the Board of Directors or by the President, shall, in the absence
or disability of the Secretary, exercise the powers and perform the duties of
the Secretary; and he or they shall perform such other duties as the
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Board of Directors or the President may from time to time prescribe.
ARTICLE VIII. STOCK CERTIFICATES
Section 8.1. Form and Signature. The certificates for stock of the
Corporation shall be in such form as shall be determined by the Board of
Directors, and shall be numbered and entered in the books of the Corporation as
they are issued. Each certificate shall exhibit the registered holder's name and
the number and class of stocks, and the designation of any series, that it
evidenced, shall set forth such other statements as may be required by statute,
and shall be signed by the President or a Vice President and by the Treasurer or
by the Secretary or an Assistant Secretary, any or all of whose signatures may
be facsimile. In case any one or more of the officers who have signed or whose
facsimile signatures appear on any such certificate appear on any such
certificate shall cease to be such officer or officers of the Corporation,
whether because of death, resignation or otherwise, before such certificate is
issued and delivered, it may nonetheless be issued and delivered with the same
effect as if such officer or officers had continued in office.
Section 8.2. Lost Certificates. The Board of Directors may direct that
a new stock certificate or certificates be issued in place of any certificate or
certificates theretofore issued by the Corporation which have been mutilated or
which are alleged to have been lost, stolen or destroyed, upon presentation of
each such mutilated certificate or the making by the person claiming any such
certificate to have been lost, stolen or destroyed of an affidavit as to the
fact and circumstances of the loss, theft or destruction thereof. The Board of
Directors, in its discretion and as a condition precedent to the issuance of any
new certificate, may require the owner of any certificate alleged to have lost,
stolen or destroyed, or his legal representative, to furnish the Corporation
with a bond, in such sum and with such surety or sureties as it may direct, as
indemnity against any claim that may be made against the Corporation in respect
of such lost, stolen or destroyed certificate.
Section 8.3. Registration of Transfer. Upon surrender to the
Corporation or any transfer agent of the Corporation of a certificate for stocks
duly indorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, the Corporation shall issue or cause its transfer agent
to issue a new certificate to the person entitled thereto, cancel the old
certificate and record the transaction upon its books.
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ARTICLE IX. GENERAL PROVISIONS
Section 9.1. Record Date.
(a) For the purposes of determining the stockholders entitled to notice
of, or to vote at, any meeting of stockholder or at any adjournment thereof in
respect of which a new record date is not fixed, or to express written consent
to the taking of corporate action without a meeting, or to receive notice that
any such corporate action was taken without a meeting or for the purpose of
determining the stockholders entitled to receive payment of any dividend or
other distribution or allotment of any rights, or to exercise any rights in
respect of any change, conversion or exchange of stocks, or for the purpose of
any other lawful action, the Board of Directors may fix, in advance, a date as
the record date for any such determination for stockholders. Such date shall not
be more than sixty (60) nor less than ten (10) days before the date of any such
meeting nor more than sixty (60) days before any such other action.
(b) If no record date is fixed:
(1) The record date for determining the stockholders entitled to
notice of or to vote at a meeting shall be at the close of
business on the day next preceding the date on which notice is
given, or, if no notice is given, the day next preceding the
day on which the meeting is held;
(2) The record date for determining the stockholders entitled to
express written consent to the taking of any corporate action
without a meeting, when no prior action by the Board of
Directors is necessary, shall be the day on which the first
written consent is expressed; and
(3) The record date for determining stockholders for any purpose
other than those specified in subparagraphs (1) and (2) shall
be at the close of business on the day on which the resolution
of the Board of Directors relating thereto is adopted.
Section 9.2. Registered Stockholders. Except as otherwise required by
law, the Corporation shall be entitled to recognize a person registered on its
books as the holder of stock as the sole owner of such stock for all purposes,
and shall not be bound to recognize any equitable or legal claim to or interest
in such stock on the part of any person other than such registered holder,
regardless of whether it shall have knowledge or notice of any such claim or
interest. Without limiting the generality of the foregoing, the Corporation
shall be entitled to recognize the exclusive right of a person whose holding of
stock is so
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registered on its books as of any record date fixed or determined pursuant to
section 9.1 of these By-Laws to be treated as the sole owner of such stock for
the purpose for which such record date was so fixed or determined and to hold a
person registered on its books as the holder of stock liable for class and
assessments in respect of such stock.
Section 9.3. Dividends and Distributions; Reserves. Subject to all
applicable requirements of law and to any applicable provisions of the
Certificate of Incorporation, these By-Laws and any indenture or other agreement
to which the Corporation is a party or by which it is bound, the Board of
Directors may declare to be payable, in cash, in other property or in stocks of
the Corporation of any class or series, such dividends and distributions upon or
in respect of outstanding stocks of the Corporation of any class or series as
the Board may at any time or from time to time deem to be advisable. Before
declaring any such dividend or distribution, the Board of Directors may cause to
be set aside, out of any funds or other property or assets of the Corporation
legally available for the payment of dividends or distributions, such sum or
sums as the Board, in their absolute discretion, may consider to be proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for such other
purpose as the Board may deem conducive to the interest of the Corporation, and
the Board may modify or abolish any such reserve in the manner in which it was
created.
Section 9.4. Annual Statement. The Board of Directors shall present at
each annual meeting, and at any special meeting of the stockholders when called
for by vote of the stockholders, a full and clear statement of the business and
financial condition of the Corporation including a balance sheet, profit and
loss statement, statement of surplus and statement of changes in financial
position prepared in accordance with generally accepted principles of accounting
and certified by independent public accountants.
Section 9.5. Checks, Notes, etc. All checks or other orders for the
payment of money and all notes or other instruments evidencing indebtedness of
the Corporation shall be signed on its behalf by such officer or officers or
such other person or persons as the Board of Directors may from time designate.
Section 9.6. Fiscal Year. The fiscal year of the Corporation shall be
fixed and may from time to time be changed by resolution of the Board of
Directors; provided, that if a different fiscal year shall not have been fixed
by the Board on or before December 31, 1996 the first fiscal year of the
Corporation shall end on that date, and thereafter, unless and
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until the Board shall fix a different fiscal year, it shall be the period of
twelve (12) consecutive calendar months ending on the 31st day of December in
each calendar year.
Section 9.7. Seal. The corporate seal shall have inscribed thereon the
name of the Corporation, the year of its organization and the words "Corporate
Seal Delaware". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or otherwise reproduced.
Section 9.8. voting of Securities of Other Corporations. In the event
that the Corporation, shall at any time or from time to time own and have power
to vote any securities (including but not limited to shares of stock) of any
other issuer, they shall be voted by such person or persons, to such extent and
in such manner, as may be determined by the Board of Directors.
ARTICLE X. INDEMNIFICATION
Section 10.1. Indemnification. The Corporation shall (a) indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that he is
or was a director or officer of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit, and (b)
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the Corporation), by reason of the fact that he is or was a
director or officer of the Corporation, or served at the request of the
Corporation as a director, officer employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with any such action, suit or
proceeding, in each case to the fullest extent permissible under subsections (a)
through (e) of Section 145 of the General Corporation Law of the State of
Delaware or the indemnification provisions of any successor statute. The
foregoing right of indemnification shall in no way be exclusive of any other
rights of indemnification to which any such person may be entitled, under any
by-law, agreement, vote of stockholders or disinterested directors or otherwise,
and shall inure to the benefit of the heirs, executors and administrators of
such a person.
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ARTICLE XI. AMENDMENTS
Section 11.1 Power to Amend. These By-Laws may be amended or repealed,
and new By-Laws may be adopted, by vote of the stockholders entitled at the time
to vote for the election of directors or by resolution adopted by a majority of
the Board of Directors at any regular or special meeting; provided, however,
that any By-Law or amendment to the By-Laws so adopted by the Board of Directors
may be amended or repealed, and any By-Law so repealed by the Board may be
reinstated, by vote of the stockholders entitled at the time to vote for the
election of directors, in which case the Board shall not thereafter take action
with respect to the By-Laws which is inconsistent with the action so taken by
such stockholders.
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EXHIBIT 4.3
OHS DRAFT
11/12/96
[FORM OF REPRESENTATIVE'S WARRANT AGREEMENT]
[SUBJECT TO ADDITIONAL REVIEW]
CONSERVER CORPORATION OF AMERICA
AND
NATIONAL SECURITIES CORPORATION
REPRESENTATIVE'S
WARRANT AGREEMENT
DATED AS OF ________, 1996
<PAGE> 2
REPRESENTATIVE'S WARRANT AGREEMENT dated as of _______, 1996
between CONSERVER CORPORATION OF AMERICA, a Delaware corporation (the
"Company"), and NATIONAL SECURITIES CORPORATION (hereinafter referred to
variously as the "Holder" or the "Representative").
W I T N E S S E T H:
WHEREAS, the Company proposes to issue to the Representative
warrants ("Warrants") to purchase up to an aggregate of 400,000 shares of Common
Stock, $.01 par value, of the Company and/or 400,000 redeemable common stock
purchase warrants of the Company ("Redeemable Warrants"), each Redeemable
Warrant to purchase one additional share of Common Stock; and
WHEREAS, the Representative has agreed pursuant to the
underwriting agreement (the "Underwriting Agreement") dated as of the date
hereof between the Company and the several Underwriters listed therein to act as
the Representative in connection with the Company's proposed public offering of
up to 4,000,000 shares of Common Stock and 4,000,000 Redeemable Warrants (the
"Public Warrants") at an initial public offering price of $____ per share of
Common Stock and $.10 per Public Warrant; and
WHEREAS, the Warrants to be issued pursuant to this Agreement
will be issued on the Closing Date (as such term is defined in the Underwriting
Agreement) by the Company to the Representative in consideration for, and as
part of the Representative's compensation in connection with, the Representative
acting as the Representative pursuant to the Underwriting Agreement;
<PAGE> 3
NOW, THEREFORE, in consideration of the premises, the payment
by the Representative to the Company of an aggregate forty dollars ($40.00), the
agreements herein set forth and other good and valuable consideration, hereby
acknowledged, the parties hereto agree as follows:
1. Grant. The Representative (and/or its designees) is hereby
granted the right to purchase, at any time from _______, 1997 [one year from the
effective date of the Registration Statement], until 5:30 P.M., New York time,
on _______, 2001 [five years from the effective date of the Registration
Statement], up to an aggregate of 400,000 shares of Common Stock and/or 400,000
Redeemable Warrants at an initial exercise price (subject to adjustment as
provided in Section 8 hereof) of $____ per share of Common Stock [120% of the
initial public offering price per share] and $____ per Redeemable Warrant [120%
of the initial public offering price per Redeemable Warrant], subject to the
terms and conditions of this Agreement. One Redeemable Warrant is exercisable to
purchase one additional share of Common Stock at an initial exercise price of
$_____ [140% of the initial public offering price per share] from _______, 1997
[six months from the effective date of the Registration Statement] until 5:30
p.m. New York time on _____, 2001 [five years from the effective date of the
Registration Statement], at which time the Redeemable Warrants shall expire.
Except as set forth herein, the shares of Common Stock and the Redeemable
Warrants issuable upon exercise of the Warrants are in all respects identical to
the shares of Common Stock and the Public Warrants being purchased by the
Underwriters for resale to the public pursuant to the terms and provisions of
the Underwriting Agreement. The shares of Common Stock and the Redeemable
Warrants issuable upon exercise of the Warrants are sometimes hereinafter
referred to collectively as the "Securities."
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<PAGE> 4
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 insertions, omissions, substitutions, and other
variations as required or permitted by this Agreement.
3. Exercise of Warrant.
Section 3.1 Method of Exercise. The Warrants initially are
exercisable at an aggregate initial exercise price (subject to adjustment as
provided in Section 8 hereof) per share of Common Stock and Redeemable Warrant
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 of a Warrant Certificate with the annexed Form of
Election to Purchase duly executed, together with payment of the Exercise Price
(as hereinafter defined) for the shares of Common Stock and/or Redeemable
Warrants purchased at the Company's principal executive offices in Coral Gables,
Florida (presently located at 2655 Le Jeune Road, Suite 535, Coral Gables,
Florida 33134) 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 so purchased and a certificate or certificates for the
Redeemable Warrants so purchased. The purchase rights represented by each
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 and
Redeemable Warrants underlying the Warrants). In the event the Company redeems
all of the Public Warrants (other than the Redeemable Warrants underlying the
Warrants), then the Warrants may only be exercised if such exercise is
accompanied by the simultaneous exercise of the Redeemable Warrant(s) underlying
the Warrants being so exercised. Warrants may be exercised to purchase all or
part of the shares of Common Stock together with an equal or unequal number of
the Redeemable Warrants represented thereby. In the case of the purchase
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<PAGE> 5
of less than all the shares of Common Stock and/or Redeemable Warrants
purchasable under any Warrant Certificate, the Company shall cancel said Warrant
Certificate upon the surrender thereof and shall execute and deliver a new
Warrant Certificate of like tenor for the balance of the shares of Common Stock
and/or Redeemable Warrants purchasable thereunder.
Section 3.2 Exercise by Surrender of Warrant. In addition to
the method of payment set forth in Section 3.1 and in lieu of any cash payment
required thereunder, the Holder(s) of the Warrants shall have the right at any
time and from time to time to exercise the Warrants in full or in part by
surrendering the Warrant Certificate in the manner specified in Section 3.1 in
exchange for the number of shares of Common Stock equal to the quotient derived
from DIVIDING the NUMERATOR (X) an amount equal to the DIFFERENCE BETWEEN (A)
the SUM OF (1) the number of shares of Common Stock as to which the Warrants are
being exercised MULTIPLIED by the per share Market Price, AND (2) the number of
Redeemable Warrants as to which the Warrants are being exercised MULTIPLIED by
the per Redeemable Warrant Market Price, AND (3) the number of shares of Common
Stock issuable upon exercise of the Redeemable Warrants underlying the Warrants
being exercised MULTIPLIED by the per share Market Price, AND (B) the SUM OF (1)
the number of Warrants which are being exercised MULTIPLIED by the Exercise
Price AND (2) the number of Redeemable Warrants included in the Warrants which
are being exercised MULTIPLIED by the exercise price per Redeemable Warrant (as
calculated pursuant to the Redeemable Warrant Agreement (hereinafter defined))
as then in effect, BY the DENOMINATOR (Y) the per share Market Price of the
Common Stock. Solely for the purposes of this paragraph, Market Price shall be
calculated either (i) on the date on which the form of election attached hereto
is deemed to have been sent to the Company pursuant to Section 14 hereof
("Notice
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<PAGE> 6
Date") or (ii) as the average of the Market Prices for each of the five trading
days preceding the Notice Date, whichever of (i) or (ii) is greater.
Section 3.3 Definition of Market Price. As used herein, the
phrase "Market Price" at any date shall be deemed to be (i) when referring to
the Common Stock, the last reported sale price, or, in case no such reported
sale takes place on such day, the average of the last reported sale prices for
the last three (3) trading days, in either case as officially reported by the
American Stock Exchange ("AMEX") or the principal securities exchange on which
the Common Stock is listed or admitted to trading, or, if the Common Stock is
not listed or admitted to trading on AMEX or any national securities exchange or
quoted by the National Association of Securities Dealers Automated Quotation
System ("Nasdaq"), the average closing bid price as furnished by the National
Association of Securities Dealers, Inc. ("NASD") through Nasdaq or similar
organization if Nasdaq is no longer reporting such information, or if the Common
Stock is not quoted on Nasdaq, as determined in good faith (using customary
valuation methods) by resolution of the members of the Board of Directors of the
Company, based on the best information available to it or (ii) when referring to
a Redeemable Warrant, the last reported sale price, or, in the case no such
reported sale takes place on such day, the average of the last reported sale
prices for the last three (3) trading days, in either case as officially
reported by AMEX or the principal securities exchange on which the Redeemable
Warrants are listed or admitted to trading, or, if the Redeemable Warrants are
not listed or admitted to trading on AMEX or any national securities exchange or
quoted by Nasdaq, the average closing bid price as furnished by the NASD through
Nasdaq or similar organization if Nasdaq is no longer reporting such
information, or if the Redeemable Warrants are not quoted on Nasdaq or are no
longer outstanding, the Market Price of a Redeemable Warrant shall equal the
difference
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between the Market Price of the Common Stock and the Exercise Price of the
Redeemable Warrant.
4. Issuance of Certificates. Upon the exercise of the
Warrants, the issuance of certificates for shares of Common Stock and/or
Redeemable Warrants and/or other securities, properties or rights underlying
such Warrants and, upon the exercise of the Redeemable Warrants, the issuance of
certificates for shares of Common Stock and/or other securities, properties or
rights underlying such Redeemable Warrants shall be made forthwith (and in any
event within five (5) 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 Holder, 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 Warrant Certificates and the certificates representing the
shares of Common Stock and the Redeemable Warrants underlying the Warrants and
the shares of Common Stock underlying the Redeemable Warrants (and/or other
securities, properties or rights issuable upon the exercise of the Warrants or
the Redeemable Warrants) shall be executed on behalf of the Company by the
manual or facsimile signature of the then Chairman or Vice Chairman of the Board
of Directors or President or Vice President of the Company. Warrant Certificates
shall be dated the date of execution by the Company upon initial issuance,
division, exchange,
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substitution or transfer. Certificates representing the shares of Common Stock
and the Redeemable Warrants underlying the Warrants, and the shares of Common
Stock underlying each Redeemable Warrant (and/or other securities, properties or
rights issuable upon exercise of the Warrants or the Redeemable Warrants) shall
be dated as of the Notice Date (regardless of when executed or delivered) and
dividend bearing securities so issued shall accrue dividends from the Notice
Date.
5. Restriction On Transfer of Warrants. The Holder of a
Warrant Certificate, by its acceptance thereof, covenants and agrees that the
Warrants are being acquired as an investment and not with a view to the
distribution thereof; that the 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 hereof, except to officers of the Representative.
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
Warrant shall be $____ [120% of the initial public offering price] per share of
Common Stock and $_____ per Redeemable Warrant [120% of the initial public
offering price per Public Warrant]. 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.
Any transfer of a Warrant shall constitute an automatic transfer and assignment
of the registration rights set forth in Section 7 hereof with respect to the
Securities or other securities, properties or rights underlying the Warrants.
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 or unless otherwise specified.
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7. Registration Rights.
Section 7.1 Registration Under the Securities Act of 1933. The
Warrants, the shares of Common Stock and Redeemable Warrants issuable upon
exercise of the Warrants, the shares of Common Stock issuable upon exercise of
the Redeemable Warrants issuable upon exercise of the Warrants and any of the
other securities issuable upon exercise of the Warrants or Redeemable Warrants
(collectively, the "Warrant Securities") have been registered under the
Securities Act of 1933, as amended (the "Act"), pursuant to the Company's
Registration Statement on Form SB-2 (Registration No. ________) (the
"Registration Statement"). All of the representations and warranties of the
Company contained in the Underwriting Agreement relating to the Registration
Statement, the Preliminary Prospectus and the Prospectus (as such terms are
defined in the Underwriting Agreement) and made as of the dates provided
therein, are incorporated by reference herein. The Company agrees and covenants
promptly to file post-effective amendments to such Registration Statement as may
be necessary in order to maintain its effectiveness and otherwise to take such
action as may be necessary to maintain the effectiveness of the Registration
Statement as long as any Warrants are outstanding. In the event that, for any
reason whatsoever, the Company shall fail to maintain the effectiveness of the
Registration Statement, the certificates representing the Warrant Securities
shall bear the following legend:
The securities represented by this certificate have
not been registered under the Securities Act of
1933, as amended ("Act"), and may not be offered or
sold except pursuant to (i) an effective
registration statement under the Act, (ii) to the
extent applicable, Rule 144 under the 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 to the issuer, that an
exemption from registration under such Act is
available.
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Section 7.2 Piggyback Registration. If, at any time commencing
after the date hereof and expiring seven (7) years thereafter, the Company
proposes to register any of its securities under the Act (other than pursuant to
Form S-4, Form S-8 or a comparable registration statement) it will give written
notice by registered mail, at least thirty (30) days prior to the filing of each
such registration statement, to the Representative and to all other Holders of
the Warrants and/or the Warrant Securities of its intention to do so. If the
Representative or other Holders of the Warrants and/or Warrant Securities notify
the Company within twenty (20) business 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 the Representative and such Holders of the
Warrants and/or Warrant Securities the opportunity to have any such Warrant
Securities registered under such registration statement (sometimes referred to
herein as a "Piggyback Registration").
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.
If a Piggyback Registration is an underwritten primary
registration on behalf of the Company, and the managing underwriters advise the
Company in writing that in their good faith opinion the number of securities
requested to be included in such registration exceeds the number which can be
sold in such offering, the Company will include in such registration (i) first,
the securities the Company proposes to sell, (ii) second, the Warrant Securities
requested to be included in such registration, pro rata among the Holders of
such Warrant Securities on
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<PAGE> 11
the basis of the number of Warrant Securities of such Holders requested to be
included in such registration, and (iii) third, other securities requested to be
included in such registration.
If a Piggyback Registration is an underwritten secondary
registration on behalf of holders of the Company's Common Stock, and the
managing underwriters advise the Company in writing that in their good faith
opinion the number of securities requested to be included in such registration
exceeds the number which can be sold in such offering, the Company will include
in such registration (i) first, the securities requested to be included therein
by the holders requesting such registration pursuant to a demand registration
right, pro rata among such holders, (ii) second, the Warrant Securities
requested to be included by Holders under this Section 7.2 on a pro rata basis
based upon the number of Warrant Securities of such Holders requested to be
included in such registration and (iii) third, other securities requested to be
included in such registration.
Section 7.3 Demand Registration.
(a) At any time commencing after the date hereof and expiring
five (5) years thereafter, the Holders of the Warrants and/or Warrant Securities
representing a "Majority" (as hereinafter defined) of such securities (assuming
the exercise of all of the 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
Securities and Exchange Commission (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
Representative and Holders, in order to comply with the provisions of the Act,
so as to permit a public offering and sale of their respective Warrant
Securities for nine (9) consecutive months by such Holders and any
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other Holders of the Warrants and/or Warrant Securities 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 Warrants and the Warrant Securities 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 the date
hereof and expiring five (5) years thereafter, any Holder of Warrants and/or
Warrant Securities 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 of its Warrant Securities
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.
(d) Notwithstanding anything to the contrary contained herein,
if the Company shall not have filed a registration statement for the Warrant
Securities 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 Warrants and/or Warrant Securities, the Company may, at its option, upon the
written notice of election of a Majority of the Holders of the Warrants and/or
Warrant Securities requesting such registration, repurchase (i) any and all
Warrant Securities of such Holders at the higher of the Market Price per share
of Common Stock and per Redeemable Warrant 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 of such
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Holders at such Market Price less the Exercise Price 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 Sections 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 demand
therefor, shall use its best efforts to have any registration statements
declared effective at the earliest possible time, and shall furnish each Holder
desiring to sell Warrant Securities 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, blue sky fees and expenses. The
Holder(s) whose Warrant Securities are the subject of such registration
statement will pay all costs, fees and expenses in connection with any
registration statement filed pursuant to Section 7.3(c).
(c) The Company will take all necessary action which may be
required in qualifying or registering the Warrant Securities 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 any general
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<PAGE> 14
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 Warrant
Securities 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 each of the Underwriters contained in Section 7
of the Underwriting Agreement.
(e) The Holder(s) of the Warrant Securities 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, expense or liability (including all expenses reasonably incurred in
investigating, preparing or defending against any claim whatsoever) to which
they may become 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 Underwriters have agreed to
indemnify the Company.
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<PAGE> 15
(f) Nothing contained in this Agreement shall be construed as
requiring the Holder(s) to exercise their 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 Warrant Securities 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 Warrants and Warrant Securities 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 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, make "generally available
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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 memoranda
described below and to 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 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 or underwriter 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 Warrant Securities requested to be included in such
underwriting, which may be the Representative. Such agreement shall be
satisfactory in form and substance to the Company, each Holder and such managing
underwriter(s), 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(s). The Holders shall be parties
to any underwriting agreement relating to an underwritten sale of their Warrant
Securities and may, at their option, require that any or all of the
representations, warranties and covenants of the Company to or for the benefit
of such underwriter(s) shall also be made to and for the benefit of such
Holders.
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Such Holders shall not be required to make any representations or warranties to
or agreements with the Company or the underwriter(s) except as they may relate
to such Holders and their intended methods of distribution.
(l) In addition to the Warrant Securities, upon the written
request therefor by any Holder(s), the Company shall include in the registration
statement any other securities of the Company held by such Holder(s) as of the
date of filing of such registration statement, including without limitation
restricted shares of Common Stock, options, warrants or any other securities
convertible into shares of Common Stock.
(m) For purposes of this Agreement, the term "Majority" in
reference to the Holders of Warrants or Warrant Securities, shall mean in excess
of fifty percent (50%) of the then outstanding Warrants or Warrant Securities
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 family,
persons acting as nominees or in conjunction therewith and (ii) have not been
resold to the public pursuant to a registration statement filed with the
Commission under the Act.
8. Adjustments to Exercise Price and Number of Securities
Section 8.1 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 8.2 Stock Dividends and Distributions. In case the
Company shall pay a dividend in, or make a distribution of, shares of Common
Stock or of the Company's capital stock convertible into Common Stock, the
Exercise Price shall forthwith be proportionately
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decreased. An adjustment made pursuant to this Section 8.2 shall be made as of
the record date for the subject stock dividend or distribution.
Section 8.3 Adjustment in Number of Securities. Upon each
adjustment of the Exercise Price pursuant to the provisions of this Section 8,
the number of Warrant Securities issuable upon the exercise at the adjusted
exercise price of each Warrant 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 Warrant Securities issuable upon exercise of
the Warrants immediately prior to such adjustment and dividing the product so
obtained by the adjusted Exercise Price.
Section 8.4 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
may be 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 securities 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 exercise of any Warrant either the Warrant Securities or a like
number of such securities with greater or superior voting rights.
Section 8.5 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 the Holder a supplemental warrant agreement providing
that the
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holder of each Warrant then outstanding or to be outstanding 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 securities of the Company for which such Warrant might
have been exercised immediately prior to such consolidation, merger, sale or
transfer. 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 8.6 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 Warrants or the
Warrant Securities issuable upon the exercise of the Warrants;
(b) If the amount of said adjustment shall be less
than two cents (2(cent)) per Warrant Security, 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 (2(cent)) per
Warrant Security.
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 purchase the same number of Warrant Securities in such denominations as
shall be designated by the Holder thereof at the time of such surrender.
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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 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 or Redeemable Warrants upon the exercise of the Warrants, 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 Redeemable Warrants 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 Warrants and
the Redeemable Warrants, such number of shares of Common Stock or other
securities, properties or rights as shall be issuable upon the exercise thereof.
The Company covenants and agrees that, upon exercise of the Warrants and payment
of the Exercise Price therefor, all shares of Common Stock, Redeemable Warrants
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. The Company further covenants and agrees that upon exercise of
the Redeemable Warrants underlying the Warrants and payment of the respective
Redeemable Warrant exercise price therefor, all shares of Common Stock and other
securities issuable upon such exercises shall be duly and validly issued, fully
paid, non-assessable and not subject to the preemptive rights
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of any stockholder. As long as the Warrants shall be outstanding, the Company
shall use its best efforts to cause all shares of Common Stock issuable upon the
exercise of the Warrants and Redeemable Warrants and all Redeemable Warrants
underlying the Warrants to be listed (subject to official notice of issuance) on
all securities exchanges on which the Common Stock or the Public Warrants 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 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 or capital surplus
(in accordance with applicable law), as indicated by the
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
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(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 said events, the Company shall give written notice
of such event at least thirty (30) 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 rights, options or warrants, or any proposed dissolution,
liquidation, winding up or sale.
13. Redeemable Warrants.
The form of the certificate representing Redeemable Warrants
(and the form of election to purchase shares of Common Stock upon the exercise
of Redeemable Warrants and the form of assignment printed on the reverse
thereof) shall be substantially as set forth in Exhibit "A" to the Warrant
Agreement dated as of the date hereof by and among the Company, the
Representative and Continental Stock Transfer & Trust Company (the "Redeemable
Warrant Agreement"). Each Redeemable Warrant issuable upon exercise of the
Warrants shall evidence the right to initially purchase a fully paid and
non-assessable share of Common Stock at an initial purchase price of $______
[140% of the initial public offering price per share] from ______ 1997 [six
months from the effective date of the Registration Statement] until 5:30 p.m.
New York time on _________ 2001 [5 years from the effective date of the
Registration
-21-
<PAGE> 23
Statement] at which time the Redeemable Warrants, unless the exercise period has
been extended, shall expire. The exercise price of the Redeemable Warrants and
the number of shares of Common Stock issuable upon the exercise of the
Redeemable Warrants are subject to adjustment, whether or not the Warrants have
been exercised and the Redeemable Warrants have been issued, in the manner and
upon the occurrence of the events set forth in Section 8 of the Redeemable
Warrant Agreement, which is hereby incorporated herein by reference and made a
part hereof as if set forth in its entirety herein. Subject to the provisions of
this Agreement and upon issuance of the Redeemable Warrants underlying the
Warrants, each registered holder of such Redeemable Warrant shall have the right
to purchase from the Company (and the Company shall issue to such registered
holders) up to the number of fully paid and non-assessable shares of Common
Stock (subject to adjustment as provided herein and in the Redeemable Warrant
Agreement), free and clear of all preemptive rights of stockholders, provided
that such registered holder complies with the terms governing exercise of the
Redeemable Warrant set forth in the Redeemable Warrant Agreement, and pays the
applicable exercise price, determined in accordance with the terms of the
Redeemable Warrant Agreement. Upon exercise of the Redeemable Warrants, the
Company shall forthwith issue to the registered holder of any such Redeemable
Warrant in his name or in such name as may be directed by him, certificates for
the number of shares of Common Stock so purchased. Except as otherwise provided
in this Agreement, the Redeemable Warrants underlying the Warrants shall be
governed in all respects by the terms of the Redeemable Warrant Agreement. The
Redeemable Warrants shall be transferable in the manner provided in the
Redeemable Warrant Agreement, and upon any such transfer, a new Redeemable
Warrant Certificate shall be issued promptly to the transferee. The Company
covenants to, and agrees with, the Holder(s) that without the prior written
consent of the Holder(s), which will not be
-22-
<PAGE> 24
unreasonably withheld, the Redeemable Warrant Agreement will not be modified,
amended, canceled, altered or superseded, and that the Company will send to each
Holder, irrespective of whether or not the Warrants have been exercised, any and
all notices required by the Redeemable Warrant Agreement to be sent to holders
of Redeemable Warrants.
14. Notices.
All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been duly made and
sent when delivered, or mailed by registered or certified mail, return receipt
requested:
(a) If to the registered Holder of the Warrants, to
the address of such Holder as shown on the books of the
Company;
(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; or
(c) If to the Representative, to National Securities
Corporation, 1001 Fourth Avenue, Suite 2200, Seattle,
Washington 98154, Attention: General Counsel.
15. Supplements and Amendments. The Company and the
Representative may from time to time supplement or amend this Agreement without
the approval of any Holders of Warrant Certificates (other than the
Representative) 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 Representative may deem
necessary or desirable and which the Company and the Representative deem shall
not adversely affect the interests of the Holders of Warrant Certificates.
-23-
<PAGE> 25
16. Successors. All the covenants and provisions of this
Agreement shall be binding upon and inure to the benefit of the Company, the
Representative, the Holders and their respective successors and assigns
hereunder.
17. 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 _______, 2009.
18. 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 said State without giving effect to the
rules of said State governing the conflicts of laws.
The Company, the Representative 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 Representative 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
Representative and the Holders (at the option of the party bringing such action,
proceeding or claim) may be 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 14 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 Representative and the Holders
agree that the prevailing party(ies) in any such action or proceeding shall be
entitled to recover from the other
-24-
<PAGE> 26
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.
19. Entire Agreement; Modification. This Agreement
(including the Underwriting Agreement and the Redeemable Warrant 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.
20. 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.
21. 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.
22. Benefits of this Agreement. Nothing in this Agreement
shall be construed to give to any person or corporation other than the Company
and the Representative and any other registered Holder(s) of the Warrant
Certificates or Warrant Securities any legal or equitable right, remedy or claim
under this Agreement; and this Agreement shall be for the sole benefit of the
Company and the Representative and any other registered Holders of Warrant
Certificates or Warrant Securities.
23. 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.
-25-
<PAGE> 27
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, as of the day and year first above written.
CONSERVER CORPORATION OF AMERICA
By:
------------------------------
Name:
Title:
Attest:
- ----------------------------------
Secretary
NATIONAL SECURITIES CORPORATION
By:
------------------------------
Name:
Title:
<PAGE> 28
EXHIBIT A
[FORM OF WARRANT CERTIFICATE]
THE 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 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- Warrants to Purchase
____ Shares of Common Stock and/or
____ Redeemable Warrants
WARRANT CERTIFICATE
This Warrant Certificate certifies that_________, or registered
assigns, is the registered holder of__________Warrants to purchase initially, at
any time from __________, 1997 [one year from the effective date of the
Registration Statement] until 5:30 p.m. New York time on ___________, 2001 [five
years from the effective date of the Registration Statement] ("Expiration
Date"), up to __________ fully-paid and non-assessable shares of common stock,
$.01 par value ("Common Stock"), of CONSERVER CORPORATION OF AMERICA, a Delaware
corporation (the "Company"), and/or _____ redeemable common stock purchase
warrants of the Company ("Redeemable Warrants") (one Redeemable Warrant
entitling the owner to purchase one fully-paid and non-assessable share of
Common Stock) at the initial exercise price, subject to adjustment in certain
events (the "Exercise Price"), of $______ [120% of the initial public offering
price] per share of Common Stock and $____ [120% of the initial public offering
price] per Redeemable Warrant 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 Representative's Warrant Agreement
dated as of _______, 1996 between the Company and NATIONAL SECURITIES
CORPORATION
A-1
<PAGE> 29
(the "Warrant 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 or by surrender of this Warrant Certificate.
No Warrant may be exercised after 5:30 p.m., New York time, on
the Expiration Date, at which time all Warrants evidenced hereby, unless
exercised prior thereto, shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of a
duly authorized issue of Warrants issued pursuant to the Warrant Agreement,
which Warrant 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 Warrants.
The Warrant Agreement provides that upon the occurrence of
certain events the Exercise Price and the type 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 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 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 Warrants shall be issued to the transferee(s) in
exchange for this Warrant Certificate, subject to the limitations provided
herein and in the 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 Warrants evidenced by
this Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such number of unexercised 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 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 Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
A-2
<PAGE> 30
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed under its corporate seal.
Dated as of ___________, 1996
CONSERVER CORPORATION OF AMERICA
By:
-----------------------------
Name:
Title:
<PAGE> 31
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 3.1]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase:
[ ] shares of Common Stock;
[ ] Redeemable Warrants;
[ ] shares of Common Stock together with an
equal number of Redeemable Warrants; or
[ ] shares of Common Stock together with
Redeemable 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 Conserver
Corporation of America in the amount of $_______________________________, all in
accordance with the terms of Section 3.1 of the Representative's Warrant
Agreement dated as of______________1996 between Conserver Corporation of America
and National Securities Corporation. The undersigned requests that a certificate
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)
A-4
<PAGE> 32
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 3.2]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase:
[ ] shares of Common Stock;
[ ] Redeemable Warrants;
[ ] shares of Common Stock together with an
equal number of Redeemable Warrants; or
[ ] shares of Common Stock together with
Redeemable Warrants.
and herewith tenders in payment for such securities______________Warrants all in
accordance with the terms of Section 3.2 of the Representative's Warrant
Agreement dated as of____________________, 1996 between Conserver Corporation of
America and National Securities Corporation. The undersigned requests that a
certificate 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.)
y
-------------------------------------------------
(Insert Social Security or Other Identifying
Number of Holder)
A-5
<PAGE> 33
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED hereby sells,
assigns and transfers unto
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint____________________Attorney,
to transfer the within Warrant Certificate on the books of the within-named
Company, with full power of substitution.
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 Assignee)
A-6
<PAGE> 1
Exhibit 4.4
DRAFT
11/07/96
- -------------------------------------------------------------------------------
[FORM OF WARRANT AGREEMENT - SUBJECT TO ADDITIONAL REVIEW]
CONSERVER CORPORATION OF AMERICA
AND
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
AND
NATIONAL SECURITIES CORPORATION
WARRANT AGREEMENT
DATED AS OF ____________ __, 1996
- -------------------------------------------------------------------------------
<PAGE> 2
AGREEMENT, dated this __ day of ___________ , 1996, by and
among CONSERVER CORPORATION OF AMERICA, a Delaware corporation (the "Company"),
CONTINENTAL STOCK TRANSFER & TRUST COMPANY, as Warrant Agent (the "Warrant
Agent"), and NATIONAL SECURITIES CORPORATION, its successors and assigns
(collectively, "National" or the "Representative") .
W I T N E S S E T H:
WHEREAS, in connection with (i) the offering to the public of
up to 4,000,000 shares of Common Stock (as defined in Section 1) and 4,000,000
redeemable common stock purchase warrants (the "Warrants"), each Warrant
entitling the holder thereof to purchase one additional share of Common Stock,
(ii) the over-allotment option to purchase up to an additional 600,000 shares of
Common Stock and/or 600,000 Warrants (the "Over-allotment Option"), and (iii)
the sale to National of warrants (the "Representative's Warrants") to purchase
up to 400,000 shares of Common Stock and/or 400,000 Warrants, the Company will
issue up to 5,000,000 Warrants (subject to increase as provided herein and in
the Representative's Warrant Agreement); and
WHEREAS, the Company desires to provide for the issuance of
certificates representing the Warrants; and
WHEREAS, the Company desires the Warrant Agent to act on
behalf of the Company, and the Warrant Agent is willing to so act, in connection
with the issuance, registration, transfer, exchange and redemption of the
Warrants, the issuance of certificates representing the Warrants, the exercise
of the Warrants and the rights of the holders thereof.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements hereinafter set forth and for the purpose of defining the
terms and provisions of the Warrants
<PAGE> 3
and the certificates representing the Warrants and the respective rights and
obligations thereunder of the Company, National, the holders of certificates
representing the Warrants and the Warrant Agent, the parties hereto agree as
follows:
SECTION 1. Definitions. As used herein, the following terms
shall have the following meanings, unless the context shall otherwise require:
(a) "Act" shall mean the Securities Act of 1933, as amended.
(b) "AMEX" shall mean the American Stock Exchange.
(c) "Common Stock" shall mean the authorized stock of the
Company of any class, whether now or hereafter authorized, which has the right
to participate in the voting and in the distribution of earnings and assets of
the Company without limit as to amount or percentage which at the date hereof
consists of __________ shares of Common Stock, $.01 par value per share.
(d) "Commission" shall mean the Securities and Exchange
Commission.
(e) "Corporate Office" shall mean the office of the Warrant
Agent (or its successor) at which at any particular time its business in New
York, New York, shall be administered, which office is located on the date
hereof at 2 Broadway, New York, New York 10004.
(f) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
(g) "Exercise Date" shall mean, subject to the provisions of
Section 5(b) hereof, as to any Warrant, the date on which the Warrant Agent
shall have received both (i) the Warrant Certificate representing such Warrant,
with the exercise form thereon duly executed by the Registered Holder thereof or
his attorney duly authorized in writing, and (ii) payment in
2
<PAGE> 4
cash or by official bank or certified check made payable to the Warrant Agent
for the account of the Company, of the amount in lawful money of the United
States of America equal to the applicable Purchase Price (as hereinafter
defined) in good funds.
(h) "Initial Warrant Exercise Date" shall mean _____________
__, 1997 [6 months from the date of the Prospectus].
(i) "Initial Warrant Redemption Date" shall mean
_______________ __, 1998 [18 months from the date of the Prospectus].
(j) "NASD" shall mean the National Association of Securities
Dealers, Inc.
(k) "Nasdaq" shall mean the Nasdaq Stock Market.
(l) "Purchase Price" shall mean, subject to modification and
adjustment as provided in Section 8, $_____ per share of Common Stock [140% of
the initial public offering price of the Common Stock] and further subject to
the Company's right, in its sole discretion, to decrease the Purchase Price for
a period of not less than 30 days on not less than 30 days' prior written notice
to the Registered Holders and National.
(m) "Redemption Date" shall mean the date (which may not occur
before the Initial Warrant Redemption Date) fixed for the redemption of the
Warrants in accordance with the terms hereof.
(n) "Redemption Price" shall mean the price at which the
Company may, at its option, redeem the Warrants, in accordance with the terms
hereof, which price shall be $0.10 per Warrant, subject to adjustment from time
to time pursuant to the provisions of Section 9 hereof.
3
<PAGE> 5
(o) "Registered Holder" shall mean the person in whose name
any certificate representing the Warrants shall be registered on the books
maintained by the Warrant Agent pursuant to Section 6.
(p) "Representative's Warrant Agreement" shall mean the
agreement dated as of _______________ __, 1996 [the date of the Prospectus]
between the Company and National relating to and governing the terms and
provisions of the Representative's Warrants.
(q) "Transfer Agent" shall mean Continental Stock Transfer &
Trust Company, or its authorized successor.
(r) "Underwriting Agreement" shall mean the underwriting
agreement dated ______________ __, 1996 [the date of the Prospectus] between the
Company and the several underwriters listed therein relating to the purchase for
resale to the public of the 4,000,000 shares of Common Stock and 4,000,000
Warrants.
(s) "Warrant Certificate" shall mean a certificate
representing each of the Warrants substantially in the form annexed hereto as
Exhibit A.
(t) "Warrant Expiration Date" shall mean, unless the Warrants
are redeemed as provided in Section 9 hereof prior to such date, 5:30 p.m. (New
York time), on ______________ __, 2001 [60 months after the date of the
Prospectus], or the Redemption Date as defined herein, whichever date is
earlier; provided that if such date shall in the State of New York be a holiday
or a day on which banks are authorized to close, then 5:30 p.m. (New York time)
on the next following day which, in the State of New York, is not a holiday or a
day on which banks are authorized to close. Upon five business days' prior
written notice to the Registered Holders, the Company shall have the right to
extend the Warrant Expiration Date.
4
<PAGE> 6
SECTION 2. Warrants and Issuance of Warrant Certificates.
(a) Each Warrant shall initially entitle the Registered Holder
of the Warrant Certificate representing such Warrant to purchase at the Purchase
Price therefor from the Initial Warrant Exercise Date until the Warrant
Expiration Date one share of Common Stock upon the exercise thereof in
accordance with the terms hereof, subject to modification and adjustment as
provided in Section 8.
(b) Upon execution of this Agreement, Warrant Certificates
representing the number of Warrants sold pursuant to the Underwriting Agreement
(subject to modification and adjustment as provided in Section 8) shall be
executed by the Company and delivered to the Warrant Agent.
(c) Upon exercise of the Representative's Warrants as provided
therein, Warrant Certificates representing all or a portion of 400,000 Warrants
to purchase up to an aggregate of 400,000 shares of Common Stock (subject to
modification and adjustment as provided in Section 8 hereof and in the
Representative's Warrant Agreement) shall be countersigned, issued and delivered
by the Warrant Agent upon written order of the Company signed by its Chairman of
the Board, Chief Executive Officer, President or a Vice President and by its
Treasurer or an Assistant Treasurer or its Secretary or an Assistant Secretary.
(d) From time to time, up to the Warrant Expiration Date or
the Redemption Date, whichever date is earlier, the Warrant Agent shall
countersign and deliver Warrant Certificates in required denominations of one or
whole number multiples thereof to the person entitled thereto in connection with
any transfer or exchange permitted under this Agreement. Except as provided
herein, no Warrant Certificates shall be issued except (i) Warrant Certificates
initially issued hereunder, those issued pursuant to the exercise of the Over-
5
<PAGE> 7
allotment Option and those issued on or after the Initial Warrant Exercise Date,
upon the exercise of fewer than all Warrants held by the exercising Registered
Holder, (ii) Warrant Certificates issued upon any transfer or exchange of
Warrants, (iii) Warrant Certificates issued in replacement of lost, stolen,
destroyed or mutilated Warrant Certificates pursuant to Section 7, (iv) Warrant
Certificates issued pursuant to the Representative's Warrant Agreement, and (v)
at the option of the Company, Warrant Certificates in such form as may be
approved by its Board of Directors, to reflect any adjustment or change in the
Purchase Price, the number of shares of Common Stock purchasable upon exercise
of the Warrants or the Redemption Price therefor made pursuant to Section 8
hereof.
SECTION 3. Form and Execution of Warrant Certificates.
(a) The Warrant Certificates shall be substantially in the
form annexed hereto as Exhibit A (the provisions of which are hereby
incorporated herein) and may have such letters, numbers or other marks of
identification or designation and such legends, summaries or endorsements
printed, lithographed or engraved thereon as the Company may deem appropriate
and as are not inconsistent with the provisions of this Agreement, or as may be
required to comply with any law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange on which the
Warrants may be listed, or to conform to usage. The Warrant Certificates shall
be dated the date of issuance thereof (whether upon initial issuance, transfer,
exchange or in lieu of mutilated, lost, stolen or destroyed Warrant
Certificates) and issued in registered form. Warrants shall be numbered serially
with the letter W on the Warrants.
(b) Warrant Certificates shall be executed on behalf of the
Company by its Chairman of the Board, Chief Executive Officer, President or any
Vice President and by its
6
<PAGE> 8
Treasurer or an Assistant Treasurer or its Secretary or an Assistant Secretary,
by manual signatures or by facsimile signatures printed thereon, and shall have
imprinted thereon a facsimile of the Company's seal. Warrant Certificates shall
be manually countersigned by the Warrant Agent and shall not be valid for any
purpose unless so countersigned. In case any officer of the Company who shall
have signed any of the Warrant Certificates shall cease to be such officer of
the Company before the date of issuance of the Warrant Certificates or before
countersignature by the Warrant Agent and issue and delivery thereof, such
Warrant Certificates, nevertheless, may be countersigned by the Warrant Agent,
issued and delivered with the same force and effect as though the person who
signed such Warrant Certificates had not ceased to be such officer of the
Company. After countersignature by the Warrant Agent, Warrant Certificates shall
be delivered by the Warrant Agent to the Registered Holder promptly and without
further action by the Company, except as otherwise provided by Section 4(a)
hereof.
SECTION 4. Exercise.
(a) Warrants in denominations of one or whole number multiples
thereof may be exercised by the Registered Holder thereof commencing at any time
on or after the Initial Warrant Exercise Date, but not after the Warrant
Expiration Date, upon the terms and subject to the conditions set forth herein
and in the applicable Warrant Certificate. A Warrant shall be deemed to have
been exercised immediately prior to the close of business on the Exercise Date
and the person entitled to receive the securities deliverable upon such exercise
shall be treated for all purposes as the holder, upon exercise thereof, as of
the close of business on the Exercise Date. If Warrants in denominations other
than whole number multiples thereof shall be exercised at one time by the same
Registered Holder, the number of full shares of Common Stock which shall be
issuable upon exercise thereof shall be computed on the basis of
7
<PAGE> 9
the aggregate number of full shares of Common Stock issuable upon such exercise.
As soon as practicable on or after the Exercise Date and in any event within
five business days after such date, if one or more Warrants have been exercised,
the Warrant Agent on behalf of the Company shall cause to be issued to the
person or persons entitled to receive the same a Common Stock certificate or
certificates for the shares of Common Stock deliverable upon such exercise, and
the Warrant Agent shall deliver the same to the person or persons entitled
thereto. Upon the exercise of any one or more Warrants, the Warrant Agent shall
promptly notify the Company in writing of such fact and of the number of
securities delivered upon such exercise and, subject to subsection (b) below,
shall cause all payments of an amount in cash or by check made payable to the
order of the Company, equal to the Purchase Price, to be deposited promptly in
the Company's bank account.
(b) At any time upon the exercise of any Warrants after one
year and one day from the date hereof, the Warrant Agent shall, on a daily
basis, within two business days after such exercise, notify National of the
exercise of any such Warrants and shall, on a weekly basis (subject to
collection of funds constituting the tendered Purchase Price, but in no event
later than five business days after the last day of the calendar week in which
such funds were tendered), remit to National an amount equal to five percent
(5%) of the Purchase Price of such Warrants then being exercised unless National
shall have notified the Warrant Agent that the payment of such amount with
respect to such Warrant is violative of the General Rules and Regulations
promulgated under the Exchange Act, or the rules and regulations of the NASD or
applicable state securities or "blue sky" laws, or the Warrants are those
underlying the Representative's Warrants in which event, the Warrant Agent shall
have to pay such amount to the Company; provided, that the Warrant Agent shall
not be obligated to pay any amounts
8
<PAGE> 10
pursuant to this Section 4(b) during any week that such amounts payable are less
than $1,000 and the Warrant Agent's obligation to make such payments shall be
suspended until the amount payable aggregates $1,000, and provided further,
that, in any event, any such payment (regardless of amount) shall be made not
less frequently than monthly. Notwithstanding the foregoing, National shall be
entitled to receive the commission contemplated by this Section 4(b) as Warrant
solicitation agent only if: (i) National has provided actual services in
connection with the solicitation of the exercise of a Warrant(s) by a Registered
Holder and (ii) the Registered Holder exercising a Warrant(s) affirmatively
designates in writing on the exercise form on the reverse side of the Warrant
Certificate that the exercise of such Registered Holder's Warrant(s) was
solicited by National.
(c) The Company shall not be required to issue fractional
shares on the exercise of Warrants. Warrants may only be exercised in such
multiples as are required to permit the issuance by the Company of one or more
whole shares. If one or more Warrants shall be presented for exercise in full at
the same time by the same Registered Holder, the number of whole shares which
shall be issuable upon such exercise thereof shall be computed on the basis of
the aggregate number of shares purchasable on exercise of the Warrants so
presented. If any fraction of a share would, except for the provisions provided
herein, be issuable on the exercise of any Warrant (or specified portion
thereof), the Company shall pay an amount in cash equal to such fraction
multiplied by the then current market value of a share of Common Stock,
determined as follows:
(1) If the Common Stock is listed, or admitted to unlisted
trading privileges on AMEX or a national securities exchange, or is traded on
Nasdaq, the current market value of a share of Common Stock shall be the closing
sale price of the Common Stock at the end of
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the regular trading session on the last business day prior to the date of
exercise of the Warrants on whichever of such exchanges or Nasdaq had the
highest average daily trading volume for the Common Stock on such day; or
(2) If the Common Stock is not listed or admitted to unlisted
trading privileges on AMEX or any national securities exchange, or listed,
quoted or reported for trading on Nasdaq, but is traded in the over-the-counter
market, the current market value of a share of Common Stock shall be the average
of the last reported bid and asked prices of the Common Stock reported by the
National Quotation Bureau, Inc. on the last business day prior to the date of
exercise of the Warrants; or
(3) If the Common Stock is not listed, admitted to unlisted
trading privileges on AMEX or any national securities exchange, or listed,
quoted or reported for trading on Nasdaq, and bid and asked prices of the Common
Stock are not reported by the National Quotation Bureau, Inc., the current
market value of a share of Common Stock shall be an amount, not less than the
book value thereof as of the end of the most recently completed fiscal quarter
of the Company ending prior to the date of exercise, determined by the members
of the Board of Directors of the Company exercising good faith and using
customary valuation methods.
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SECTION 5. Reservation of Shares; Listing; Payment of Taxes; etc.
(a) The Company covenants that it will at all times reserve
and keep available out of its authorized Common Stock, solely for the purpose of
issue upon exercise of Warrants, such number of shares of Common Stock as shall
then be issuable upon the exercise of all outstanding Warrants. The Company
covenants that all shares of Common Stock which shall be issuable upon exercise
of the Warrants shall, at the time of delivery thereof, be duly and validly
issued and fully paid and nonassessable and free from all preemptive or similar
rights, taxes, liens and charges with respect to the issue thereof, and that
upon issuance such shares shall be listed on each securities exchange, if any,
on which the other shares of outstanding Common Stock of the Company are then
listed.
(b) The Company covenants that if any securities to be
reserved for the purpose of exercise of Warrants hereunder require registration
with, or approval of, any governmental authority under any federal securities
law before such securities may be validly issued or delivered upon such
exercise, then the Company will file a registration statement under the federal
securities laws or a post-effective amendment, use its best efforts to cause the
same to become effective and to keep such registration statement current while
any of the Warrants are outstanding and deliver a prospectus which complies with
Section 10(a)(3) of the Act, to the Registered Holder exercising the Warrant
(except, if in the opinion of counsel to the Company, such registration is not
required under the federal securities laws or if the Company receives a letter
from the staff of the Commission stating that it would not take any enforcement
action if such registration is not effected). The Company will use its best
efforts to obtain appropriate approvals or registrations under state "blue sky"
securities laws with respect to any such
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securities. However, Warrants may not be exercised by, or shares of Common Stock
issued to, any Registered Holder in any state in which such exercise would be
unlawful.
(c) The Company shall pay all documentary, stamp or similar
taxes and other governmental charges that may be imposed with respect to the
issuance of Warrants, or the issuance or delivery of any shares of Common Stock
upon exercise of the Warrants; provided, however, that if shares of Common Stock
are to be delivered in a name other than the name of the Registered Holder of
the Warrant Certificate representing any Warrant being exercised, then no such
delivery shall be made unless the person requesting the same has paid to the
Warrant Agent the amount of transfer taxes or charges incident thereto, if any.
(d) The Warrant Agent is hereby irrevocably authorized as the
Transfer Agent to requisition from time to time certificates representing shares
of Common Stock or other securities required upon exercise of the Warrants, and
the Company will comply with all such requisitions.
SECTION 6. Exchange and Registration of Transfer.
(a) Warrant Certificates may be exchanged for other Warrant
Certificates representing an equal aggregate number of Warrants of the same
class or may be transferred in whole or in part. Warrant Certificates to be
exchanged shall be surrendered to the Warrant Agent at its Corporate Office,
and, upon satisfaction of the terms and provisions hereof, the Company shall
execute and the Warrant Agent shall countersign, issue and deliver in exchange
therefor the Warrant Certificate or Certificates which the Registered Holder
making the exchange shall be entitled to receive.
(b) The Warrant Agent shall keep, at its office, books in
which, subject to such reasonable regulations as it may prescribe, it shall
register Warrant Certificates and the
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transfer thereof in accordance with customary practice. Upon due presentment for
registration of transfer of any Warrant Certificate at such office, the Company
shall execute and the Warrant Agent shall issue and deliver to the transferee or
transferees a new Warrant Certificate or Certificates representing an equal
aggregate number of Warrants of the same class.
(c) With respect to all Warrant Certificates presented for
registration of transfer, or for exchange or exercise, the subscription or
exercise form, as the case may be, on the reverse thereof shall be duly endorsed
or be accompanied by a written instrument or instruments of transfer and
subscription, in form satisfactory to the Company and the Warrant Agent, duly
executed by the Registered Holder thereof or his attorney-in-fact duly
authorized in writing.
(d) A service charge may be imposed by the Warrant Agent for
any exchange or registration of transfer of Warrant Certificates. In addition,
the Company may require payment by such Holder of a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection therewith.
(e) All Warrant Certificates surrendered for exercise or for
exchange in case of mutilated Warrant Certificates shall be promptly canceled by
the Warrant Agent and thereafter retained by the Warrant Agent until termination
of this Agreement.
(f) Prior to due presentment for registration of transfer
thereof, the Company and the Warrant Agent may deem and treat the Registered
Holder of any Warrant Certificate as the absolute owner thereof and of each
Warrant represented thereby (notwithstanding any notations of ownership or
writing thereon made by anyone other than a duly authorized officer of the
Company or the Warrant Agent) for all purposes and shall not be affected by any
notice to the contrary.
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SECTION 7. Loss or Mutilation. Upon receipt by the Company and
the Warrant Agent of evidence satisfactory to them of the ownership of and the
loss, theft, destruction or mutilation of any Warrant Certificate and (in the
case of loss, theft or destruction) of indemnity satisfactory to them, and (in
case of mutilation) upon surrender and cancellation thereof, the Company shall
execute and the Warrant Agent shall (in the absence of notice to the Company
and/or the Warrant Agent that a new Warrant Certificate has been acquired by a
bona fide purchaser) countersign and deliver to the Registered Holder in lieu
thereof a new Warrant Certificate of like tenor representing an equal aggregate
number of Warrants. Applicants for a substitute Warrant Certificate shall also
comply with such other reasonable regulations and pay such other reasonable
charges as the Warrant Agent may prescribe.
SECTION 8. Adjustment of Purchase Price and Number of Shares of
Common Stock Deliverable.
(a) Except as hereinafter provided, in the event the Company
shall, at any time or from time to time after the date hereof and prior to the
Warrant Expiration Date, issue or sell any shares of Common Stock for a
consideration per share less than the Purchase Price or issue any shares of
Common Stock as a stock dividend to the holders of Common Stock, or subdivide or
combine the outstanding shares of Common Stock into a greater or lesser number
of shares (any such issuance, subdivision or combination being herein called a
"Change of Shares"), then, and thereafter upon each further Change of Shares,
the Purchase Price for the Warrants (whether or not the same shall be issued and
outstanding) in effect immediately prior to such Change of Shares shall be
changed to a price (including any applicable fraction of a cent to the nearest
cent) determined by dividing (i) the sum of (x) the total number of shares of
Common Stock outstanding immediately prior to such Change of Shares, multiplied
by the
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<PAGE> 16
Purchase Price in effect immediately prior to such Change of Shares and (y) the
consideration, if any, received by the Company upon such sale, issuance,
subdivision or combination, by (ii) the total number of shares of Common Stock
outstanding immediately after such Change of Shares; provided, however, that in
no event shall the Purchase Price be adjusted pursuant to this computation to an
amount in excess of the Purchase Price in effect immediately prior to such
computation, except in the case of a combination of outstanding shares of Common
Stock.
For the purposes of any adjustment to be made in accordance
with this Section 8(a), the following provisions shall be applicable:
(A) In case of the issuance or sale of shares of Common
Stock (or of other securities deemed hereunder to involve the issuance or sale
of shares of Common Stock) for a consideration part or all of which shall be
cash, the amount of the cash portion of the consideration therefor deemed to
have been received by the Company shall be (i) the subscription price, if
shares of Common Stock are offered by the Company for subscription, or (ii) the
public offering price (before deducting therefrom any compensation paid or
discount allowed in the sale, underwriting or purchase thereof by underwriters
or dealers or others performing similar services, or any expenses incurred in
connection therewith), if such securities are sold to underwriters or dealers
for public offering without a subscription offering, or (iii) the gross amount
of cash actually received by the Company for such securities, in any other case.
(B) In case of the issuance or sale (otherwise than as a
dividend or other distribution on any stock of the Company, and otherwise than
on the exercise of options, rights or warrants or the conversion or exchange of
convertible or exchangeable securities) of shares of Common Stock (or of other
securities deemed hereunder to involve the issuance or sale of
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<PAGE> 17
shares of Common Stock) for a consideration part or all of which shall be other
than cash, the amount of the consideration therefor other than cash deemed to
have been received by the Company shall be the value of such consideration as
determined in good faith by the Board of Directors of the Company, using
customary valuation methods and on the basis of prevailing market values for
similar property or services.
(C) Shares of Common Stock issuable by way of dividend or
other distribution on any stock of the Company shall be deemed to have been
issued immediately after the opening of business on the day following the record
date for the determination of shareholders entitled to receive such dividend or
other distribution and shall be deemed to have been issued without
consideration.
(D) The reclassification of securities of the Company other
than shares of Common Stock into securities including shares of Common Stock
shall be deemed to involve the issuance of such shares of Common Stock for a
consideration other than cash immediately prior to the close of business on the
date fixed for the determination of security holders entitled to receive such
shares, and the value of the consideration allocable to such shares of Common
Stock shall be determined as provided in subsection (B) of this Section 8(a).
(E) The number of shares of Common Stock at any one time
outstanding shall be deemed to include the aggregate maximum number of shares
issuable (subject to readjustment upon the actual issuance thereof) upon the
exercise of options, rights or warrants and upon the conversion or exchange of
convertible or exchangeable securities.
(b) Upon each adjustment of the Purchase Price pursuant to
this Section 8, the number of shares of Common Stock purchasable upon the
exercise of each Warrant shall be the number derived by multiplying the number
of shares of Common Stock purchasable
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<PAGE> 18
immediately prior to such adjustment by the Purchase Price in effect prior to
such adjustment and dividing the product so obtained by the applicable adjusted
Purchase Price.
(c) In case the Company shall at any time after the date
hereof issue options, rights or warrants to subscribe for shares of Common
Stock, or issue any securities convertible into or exchangeable for shares of
Common Stock, for a consideration per share (determined as provided in Sections
8(a) and 8(b) and as provided below) less than the Purchase Price in effect
immediately prior to the issuance of such options, rights or warrants, or such
convertible or exchangeable securities, or without consideration (including the
issuance of any such securities by way of dividend or other distribution), the
Purchase Price for the Warrants (whether or not the same shall be issued and
outstanding) in effect immediately prior to the issuance of such options, rights
or warrants, or such convertible or exchangeable securities, as the case may be,
shall be reduced to a price determined by making the computation in accordance
with the provisions of Sections 8(a) and 8(b) hereof, provided that:
(A) The aggregate maximum number of shares of Common
Stock, as the case may be, issuable or that may become issuable under such
options, rights or warrants (assuming exercise in full even if not then
currently exercisable or currently exercisable in full) shall be deemed to be
issued and outstanding at the time such options, rights or warrants were
issued, for a consideration equal to the minimum purchase price per share
provided for in such options, rights or warrants at the time of issuance, plus
the consideration, if any, received by the Company for such options, rights or
warrants; provided, however, that upon the expiration or other termination of
such options, rights or warrants, if any thereof shall not have been exercised,
the number of shares of Common Stock deemed to be issued and outstanding
pursuant to this subsection (A) (and for the purposes of subsection (E) of
Section 8(a) hereof) shall be
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reduced by the number of shares as to which options, warrants and/or rights
shall have expired, and such number of shares shall no longer be deemed to be
issued and outstanding, and the Purchase Price then in effect shall forthwith be
readjusted and thereafter be the price that it would have been had adjustment
been made on the basis of the issuance only of the shares actually issued plus
the shares remaining issuable upon the exercise of those options, rights or
warrants as to which the exercise rights shall not have expired or terminated
unexercised.
(B) The aggregate maximum number of shares of Common Stock
issuable or that may become issuable upon conversion or exchange of any
convertible or exchangeable securities (assuming conversion or exchange in full
even if not then currently convertible or exchangeable in full) shall be deemed
to be issued and outstanding at the time of issuance of such securities, for a
consideration equal to the consideration received by the Company for such
securities, plus the minimum consideration, if any, receivable by the Company
upon the conversion or exchange thereof; provided, however, that upon the
termination of the right to convert or exchange such convertible or exchangeable
securities (whether by reason of redemption or otherwise), the number of shares
of Common Stock deemed to be issued and outstanding pursuant to this subsection
(B) (and for the purposes of subsection (E) of Section 8(a) hereof) shall be
reduced by the number of shares as to which the conversion or exchange rights
shall have expired or terminated unexercised, and such number of shares shall no
longer be deemed to be issued and outstanding, and the Purchase Price then in
effect shall forthwith be readjusted and thereafter be the price that it would
have been had adjustment been made on the basis of the issuance only of the
shares actually issued plus the shares remaining issuable upon conversion or
exchange of those convertible or exchangeable securities as to which the
conversion or exchange rights shall not have expired or terminated unexercised.
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(C) If any change shall occur in the price per share provided
for in any of the options, rights or warrants referred to in subsection (A) of
this Section 8(c), or in the price per share or ratio at which the securities
referred to in subsection (B) of this Section 8(c) are convertible or
exchangeable, such options, rights or warrants or conversion or exchange rights,
as the case may be, to the extent not theretofore exercised, shall be deemed to
have expired or terminated on the date when such price change became effective
in respect of shares not theretofore issued pursuant to the exercise or
conversion or exchange thereof, and the Company shall be deemed to have issued
upon such date new options, rights or warrants or convertible or exchangeable
securities.
(d) In case of any reclassification or change of outstanding
shares of Common Stock issuable upon exercise of the Warrants (other than a
change in par value, or from par value to no par value, or from no par value to
par value or as a result of a subdivision or combination), or in case of any
consolidation or merger of the Company with or into another corporation (other
than a merger with a subsidiary of the Company in which merger the Company is
the continuing corporation) and which does not result in any reclassification or
change of the then outstanding shares of Common Stock or other capital stock
issuable upon exercise of the Warrants (other than a change in par value, or
from par value to no par value, or from no par value to par value or as a result
of subdivision or combination) or in case of any sale or conveyance to another
corporation of the property of the Company as an entirety or substantially as an
entirety, then, as a condition of such reclassification, change, consolidation,
merger, sale or conveyance, the Company, or such successor or purchasing
corporation, as the case may be, shall make lawful and adequate provision
whereby the Registered Holder of each Warrant then outstanding shall have the
right thereafter to receive on exercise of such Warrant
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<PAGE> 21
the kind and amount of securities and property receivable upon such
reclassification, change, consolidation, merger, sale or conveyance by a holder
of the number of securities issuable upon exercise of such Warrant immediately
prior to such reclassification, change, consolidation, merger, sale or
conveyance and shall forthwith file at the Corporate Office of the Warrant Agent
a statement signed by its Chief Executive Officer, President or a Vice President
and by its Treasurer or an Assistant Treasurer or its Secretary or an Assistant
Secretary evidencing such provision. Such provisions shall include provision for
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in Sections 8(a), (b) and (c). The above provisions of
this Section 8(d) shall similarly apply to successive reclassifications and
changes of shares of Common Stock and to successive consolidations, mergers,
sales or conveyances.
(e) Irrespective of any adjustments or changes in the Purchase
Price or the number of shares of Common Stock purchasable upon exercise of the
Warrants, the Warrant Certificates theretofore and thereafter issued shall,
unless the Company shall exercise its option to issue new Warrant Certificates
pursuant to Section 2(d) hereof, continue to express the Purchase Price per
share and the number of shares purchasable thereunder as the Purchase Price per
share and the number of shares purchasable thereunder were expressed in the
Warrant Certificates when the same were originally issued.
(f) After each adjustment of the Purchase Price pursuant to
this Section 8, the Company will promptly prepare a certificate signed by the
Chairman, Chief Executive Officer or President, and by the Treasurer or an
Assistant Treasurer or the Secretary or an Assistant Secretary, of the Company
setting forth: (i) the Purchase Price as so adjusted, (ii) the number of shares
of Common Stock purchasable upon exercise of each Warrant, after such
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<PAGE> 22
adjustment, and (iii) a brief statement of the facts accounting for such
adjustment. The Company will promptly file such certificate with the Warrant
Agent and cause a brief summary thereof to be sent by ordinary first class mail
to each Registered Holder at his last address as it shall appear on the registry
books of the Warrant Agent. No failure to mail such notice nor any defect
therein or in the mailing thereof shall affect the validity thereof except as to
the holder to whom the Company failed to mail such notice, or except as to the
holder whose notice was defective. The affidavit of an officer of the Warrant
Agent or the Secretary or an Assistant Secretary of the Company that such notice
has been mailed shall, in the absence of fraud, be prima facie evidence of the
facts stated therein.
(g) No adjustment of the Purchase Price shall be made as a
result of or in connection with (A) the issuance or sale of shares of Common
Stock pursuant to options, warrants, stock purchase agreements and convertible
or exchangeable securities outstanding or in effect on the date hereof and on
the terms described in the final prospectus relating to the public offering
contemplated by the Underwriting Agreement; or (B) the issuance or sale of
shares of Common Stock if the amount of said adjustment shall be less than
$0.10, 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 that shall amount,
together with any adjustment so carried forward, to at least $0.10. In addition,
Registered Holders shall not be entitled to cash dividends paid by the Company
prior to the exercise of any Warrant or Warrants held by them.
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SECTION 9. Redemption.
(a) Commencing on the Initial Warrant Redemption Date, the
Company may, on 30 days' prior written notice, redeem all, but not less than
all, of the Warrants at ten cents ($0.10) per Warrant, provided, however, that
before any such call for redemption of Warrants can take place, the average
closing sale price for the Common Stock as reported by AMEX, if the Common Stock
is then traded on AMEX (or the average closing sale price, if the Common Stock
is then traded on another national securities exchange) shall have equalled or
exceeded $________ [250% of the initial public offering price] per share for any
twenty (20) trading days within a period of thirty (30) consecutive trading days
ending on the fifth trading day prior to the date on which the notice
contemplated by subsections (b) and (c) below is given (subject to adjustment in
the event of any stock splits or other similar events as provided in Section 8
hereof).
(b) In case the Company shall exercise its right to redeem all
of the Warrants, it shall give or cause to be given notice to the Registered
Holders of the Warrants, by mailing to such Registered Holders a notice of
redemption, first class, postage prepaid, at their last address as shall appear
on the records of the Warrant Agent. Any notice mailed in the manner provided
herein shall be conclusively presumed to have been duly given whether or not the
Registered Holder receives such notice. Not less than five (5) business days
prior to the mailing to the Registered Holders of the Warrants of the notice of
redemption, the Company shall deliver or cause to be delivered to National a
similar notice telephonically and confirmed in writing together with a list of
the Registered Holders (including their respective addresses and number of
Warrants beneficially owned) to whom such notice of redemption has been or will
be given.
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(c) The notice of redemption shall specify (i) the Redemption
Price, (ii) the Redemption Date, which shall in no event be less than thirty
(30) days after the date of mailing of such notice, (iii) the place where the
Warrant Certificate shall be delivered and the Redemption Price shall be paid,
(iv) if National is engaged as a Warrant solicitation agent, that National shall
receive the commission contemplated by Section 4(b) hereof, and (v) that the
right to exercise the Warrant shall terminate at 5:30 p.m. (New York time) on
the business day immediately preceding the date fixed for redemption. No failure
to mail such notice nor any defect therein or in the mailing thereof shall
affect the validity of the proceedings for such redemption except as to a holder
(a) to whom notice was not mailed or (b) whose notice was defective. An
affidavit of the Warrant Agent or the Secretary or Assistant Secretary of the
Company that notice of redemption has been mailed shall, in the absence of
fraud, be prima facie evidence of the facts stated therein.
(d) Any right to exercise a Warrant shall terminate at 5:30
p.m. (New York time) on the business day immediately preceding the Redemption
Date. The Redemption Price payable to the Registered Holders shall be mailed to
such persons at their addresses of record.
(e) The Company shall indemnify National and each person, if
any, who controls National within the meaning of Section 15 of the Act or
Section 20(a) of the 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 the
registration statement or prospectus referred to in Section 5(b) hereof to the
same extent and with the same effect (including the provisions regarding
contribution) as the provisions pursuant
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<PAGE> 25
to which the Company has agreed to indemnify National contained in Section 7 of
the Underwriting Agreement.
(f) Five business days prior to the Redemption Date, the
Company shall furnish to National (i) an opinion of counsel to the Company,
dated such date and addressed to National, and (ii) a "cold comfort" letter
dated such date addressed to National, 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.
SECTION 10. Concerning the Warrant Agent.
(a) The Warrant Agent acts hereunder as agent and in a
ministerial capacity for the Company and National, and its duties shall be
determined solely by the provisions hereof. The Warrant Agent shall not, by
issuing and delivering Warrant Certificates or by any other act hereunder, be
deemed to make any representations as to the validity or value or authorization
of the Warrant Certificates or the Warrants represented thereby or of any
securities or other property delivered upon exercise of any Warrant or whether
any stock issued upon exercise of any Warrant is fully paid and nonassessable.
(b) The Warrant Agent shall not at any time be under any duty
or responsibility to any holder of Warrant Certificates to make or cause to be
made any adjustment of the Purchase Price or the Redemption Price provided in
this Agreement, or to determine whether any fact exists which may require any
such adjustments, or with respect to the nature
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<PAGE> 26
or extent of any such adjustments, when made, or with respect to the method
employed in making the same. It shall not (i) be liable for any recital or
statement of fact contained herein or for any action taken, suffered or omitted
by it in reliance on any Warrant Certificate or other document or instrument
believed by it in good faith to be genuine and to have been signed or presented
by the proper party or parties, (ii) be responsible for any failure on the part
of the Company to comply with any of its covenants and obligations contained in
this Agreement or in any Warrant Certificate, or (iii) be liable for any act or
omission in connection with this Agreement except for its own negligence, bad
faith or willful misconduct.
(c) The Warrant Agent may at any time consult with counsel
satisfactory to it (who may be counsel for the Company or for National) and
shall incur no liability or responsibility for any action taken, suffered or
omitted by it in good faith in accordance with the opinion or advice of such
counsel.
(d) Any notice, statement, instruction, request, direction,
order or demand of the Company shall be sufficiently evidenced by an instrument
signed by the Chairman of the Board of Directors, Chief Executive Officer,
President or any Vice President (unless other evidence in respect thereof is
herein specifically prescribed). The Warrant Agent shall not be liable for any
action taken, suffered or omitted by it in accordance with such notice,
statement, instruction, request, direction, order or demand reasonably believed
by it to be genuine.
(e) The Company agrees to pay the Warrant Agent reasonable
compensation for its services hereunder and to reimburse it for its reasonable
expenses hereunder; the Company further agrees to indemnify the Warrant Agent
and save it harmless from and against any and all losses, expenses and
liabilities, including judgments, costs and counsel fees, for anything done or
omitted by the Warrant Agent in the execution of its duties
25
<PAGE> 27
and powers hereunder except losses, expenses and liabilities arising as a result
of the Warrant Agent's negligence, bad faith or willful misconduct.
(f) The Warrant Agent may resign its duties and be discharged
from all further duties and liabilities hereunder (except liabilities arising as
a result of the Warrant Agent's own gross negligence or willful misconduct),
after giving 30 days' prior written notice to the Company. At least 15 days
prior to the date such resignation is to become effective, the Warrant Agent
shall cause a copy of such notice of resignation to be mailed to the Registered
Holder of each Warrant Certificate at the Company's expense. Upon such
resignation, or any inability of the Warrant Agent to act as such hereunder, the
Company shall appoint in writing a new warrant agent. If the Company shall fail
to make such appointment within a period of 15 days after it has been notified
in writing of such resignation by the resigning Warrant Agent, then the
Registered Holder of any Warrant Certificate may apply to any court of competent
jurisdiction for the appointment of a new warrant agent. Any new warrant agent,
whether appointed by the Company or by such a court, shall be a bank or trust
company having a capital and surplus, as shown by its last published report to
its stockholders, of not less than $10,000,000 or a stock transfer company.
After acceptance in writing of such appointment by the new warrant agent is
received by the Company, such new warrant agent shall be vested with the same
powers, rights, duties and responsibilities as if it had been originally named
herein as the Warrant Agent, without any further assurance, conveyance, act or
deed; but if for any reason it shall be necessary or expedient to execute and
deliver any further assurance, conveyance, act or deed, the same shall be done
at the expense of the Company and shall be legally and validly executed and
delivered by the resigning Warrant Agent. Not later than the effective date of
any such appointment the Company shall file notice thereof with the resigning
Warrant Agent and
26
<PAGE> 28
shall forthwith cause a copy of such notice to be mailed to the Registered
Holder of each Warrant Certificate.
(g) Any corporation into which the Warrant Agent or any new
warrant agent may be converted or merged, any corporation resulting from any
consolidation to which the Warrant Agent or any new warrant agent shall be a
party, or any corporation succeeding to the corporate trust business of the
Warrant Agent or any new warrant agent shall be a successor warrant agent under
this Agreement without any further act, provided that such corporation is
eligible for appointment as successor to the Warrant Agent under the provisions
of the preceding paragraph. Any such successor warrant agent shall promptly
cause notice of its succession as warrant agent to be mailed to the Company, the
Representative and to the Registered Holders of each Warrant Certificate.
(h) The Warrant Agent, its subsidiaries and affiliates, and
any of its or their officers or directors, may buy and hold or sell Warrants or
other securities of the Company and otherwise deal with the Company in the same
manner and to the same extent and with like effect as though it were not Warrant
Agent. Nothing herein shall preclude the Warrant Agent from acting in any other
capacity for the Company or for any other legal entity.
(i) The Warrant Agent shall retain for a period of two years
from the date of exercise any Warrant Certificate received by it upon such
exercise.
SECTION 11. Modification of Agreement.
The Warrant Agent and the Company may by supplemental
agreement make any changes or corrections in this Agreement (i) that they shall
deem appropriate to cure any ambiguity or to correct any defective or
inconsistent provision or manifest mistake or error herein contained; or (ii)
that they may deem necessary or desirable and which shall not adversely
27
<PAGE> 29
affect the interests of the holders of Warrant Certificates; provided, however,
that this Agreement shall not otherwise be modified, supplemented or altered in
any respect except with the consent in writing of the Registered Holders
representing not less than 66-2/3% of the Warrants then outstanding; provided,
further, that no change in the number or nature of the securities purchasable
upon the exercise of any Warrant, or to increase the Purchase Price therefor or
to accelerate the Warrant Expiration Date, shall be made without the consent in
writing of the Registered Holder of the Warrant Certificate representing such
Warrant, other than such changes as are presently specifically prescribed by
this Agreement as originally executed. In addition, this Agreement may not be
modified, amended or supplemented without the prior written consent of National,
other than to cure any ambiguity or to correct any provision which is
inconsistent with any other provision of this Agreement or to make any such
change that is necessary or desirable and which shall not adversely affect the
interests of National and except as may be required by law.
SECTION 12. Notices.
All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been made when
delivered or mailed first-class registered or certified mail, postage prepaid,
as follows: if to the Registered Holder of a Warrant Certificate, at the address
of such holder as shown on the registry books maintained by the Warrant Agent;
if to the Company at 2655 Le Jeune Road, Suite 535, Coral Gables, Florida 33134,
Attention: Charles H. Stein, President, or at such other address as may have
been furnished to the Warrant Agent in writing by the Company; and if to the
Warrant Agent, at its Corporate Office. Copies of any notice delivered pursuant
to this Agreement shall also be delivered to National Securities Corporation,
1001 Fourth Avenue, Suite 2200, Seattle,
28
<PAGE> 30
Washington 98154-1100, Attention: General Counsel, or at such other address as
may have been furnished to the Company and the Warrant Agent in writing.
SECTION 13. Governing Law.
This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without giving effect to
conflicts of laws.
SECTION 14. Binding Effect.
This Agreement shall be binding upon and inure to the benefit
of the Company, National, the Warrant Agent and their respective successors and
assigns and the holders from time to time of Warrant Certificates or any of
them. Nothing in this Agreement is intended or shall be construed to confer upon
any other person any right, remedy or claim, in equity or at law, or to impose
upon any other person any duty, liability or obligation.
SECTION 15. Termination.
This Agreement shall terminate at the close of business on the
Expiration Date of all of the Warrants or such earlier date upon which all
Warrants have been exercised or redeemed, except that the Warrant Agent shall
account to the Company for cash held by it and the provisions of Section 10
hereof shall survive such termination.
SECTION 16. Counterparts.
This Agreement may be executed in several counterparts, which
taken together shall constitute a single document.
29
<PAGE> 31
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first above written.
[SEAL]
CONSERVER CORPORATION
OF AMERICA
By:_________________________________________
Name:
Title:
Attest:
By:______________________________
Name:
Title:
CONTINENTAL STOCK TRANSFER &
TRUST COMPANY,
As Warrant Agent
By:___________________________________________
Name:
Title:
NATIONAL SECURITIES CORPORATION
By:___________________________________________
Name:
Title:
<PAGE> 32
EXHIBIT A
No. W VOID AFTER _________, 2001
___________ WARRANTS
REDEEMABLE WARRANT CERTIFICATE TO
PURCHASE ONE SHARE OF COMMON STOCK
CONSERVER CORPORATION OF AMERICA
CUSIP_____________
THIS CERTIFIES THAT, FOR VALUE RECEIVED
or registered assigns (the "Registered Holder") is the owner of the number of
Redeemable Warrants (the "Warrants") specified above. Each Warrant initially
entitles the Registered Holder to purchase, subject to the terms and conditions
set forth in this Certificate and the Warrant Agreement (as hereinafter
defined), one fully paid and nonassessable share of Common Stock, $.01 par
value, of Conserver Corporation of America, a Delaware corporation (the
"Company"), at any time between , 1997 (the "Initial Warrant Exercise Date"),
and the Expiration Date (as hereinafter defined) upon the presentation and
surrender of this Warrant Certificate with the Subscription Form on the reverse
hereof duly executed, at the corporate office of The Bank of New York, as
Warrant Agent, or its successor (the "Warrant Agent"), accompanied by payment of
$_____ per share of Common Stock, [140% of the initial public offering price of
the Common Stock] subject to adjustment (the "Purchase Price"), in lawful money
of the United States of America in cash or by check made payable to the Warrant
Agent for the account of the Company.
This Warrant Certificate and each Warrant represented hereby are
issued pursuant to and are subject in all respects to the terms and conditions
set forth in the Warrant Agreement (the "Warrant Agreement"), dated , 1996 [date
of the Prospectus], by and among the Company, National Securities Corporation
("National") and the Warrant Agent.
In the event of certain contingencies provided for in the
Warrant Agreement, the Purchase Price and the number of shares of Common Stock
subject to purchase upon the exercise of each Warrant represented hereby are
subject to modification or adjustment.
Each Warrant represented hereby is exercisable at the option of
the Registered Holder, but no fractional interests will be issued. In the case
of the exercise of less than all the Warrants represented hereby, the Company
shall cancel this Warrant Certificate upon the surrender hereof and shall
execute and deliver a new Warrant Certificate or Warrant Certificates of like
tenor, which the Warrant Agent shall countersign, for the balance of such
Warrants.
A-1
<PAGE> 33
The term "Expiration Date" shall mean 5:30 p.m. (New York time)
on ____________, 2001 [fifty-four (54) months after the Initial Warrant Exercise
Date]. If each such date shall in the State of New York be a holiday or a day on
which the banks are authorized to close, then the Expiration Date shall mean
5:30 p.m. (New York time) on the next following day which in the State of New
York is not a holiday or a day on which banks are authorized to close.
The Company shall not be obligated to deliver any securities
pursuant to the exercise of this Warrant unless a registration statement under
the Securities Act of 1933, as amended (the "Act"), with respect to such
securities is effective or an exemption thereunder is available. The Company has
covenanted and agreed that it will file a registration statement under the
Federal securities laws, use its best efforts to cause the same to become
effective, use its best efforts to keep such registration statement current, if
required under the Act, while any of the Warrants are outstanding, and deliver a
prospectus which complies with Section 10(a)(3) of the Act to the Registered
Holder exercising this Warrant. This Warrant shall not be exercisable by a
Registered Holder in any state where such exercise would be unlawful.
This Warrant Certificate is exchangeable, upon the surrender
hereof by the Registered Holder at the corporate office of the Warrant Agent,
for a new Warrant Certificate or Warrant Certificates of like tenor representing
an equal aggregate number of Warrants, each of such new Warrant Certificates to
represent such number of Warrants as shall be designated by such Registered
Holder at the time of such surrender. Upon due presentment and payment of any
tax or other charge imposed in connection therewith or incident thereto, for
registration of transfer of this Warrant Certificate at such office, a new
Warrant Certificate or Warrant Certificates representing an equal aggregate
number of Warrants will be issued to the transferee in exchange therefor,
subject to the limitations provided in the Warrant Agreement.
Prior to the exercise of any Warrant represented hereby, the
Registered Holder shall not be entitled to any rights of a stockholder of the
Company, including, without limitation, the right to vote or to receive
dividends or other distributions, and shall not be entitled to receive any
notice of any proceedings of the Company, except as provided in the Warrant
Agreement.
Subject to the provisions of the Warrant Agreement, this Warrant
may be redeemed at the option of the Company, at a redemption price of $0.10 per
Warrant, at any time commencing after ______________, 1998 [18 months after the
date of the Prospectus], provided that the average closing sale price for the
Common Stock as reported by the American Stock Exchange ("AMEX"), if the Common
Stock is then traded on the AMEX (or the average closing sale price, if the
Common Stock is then traded on another national securities exchange), shall have
equalled or exceeded $_____ [250% of the initial public offering price per
share] per share for any twenty (20) trading days within a period of thirty (30)
consecutive trading days ending on the fifth trading day prior to the Notice of
Redemption, as defined below (subject to adjustment in the event of any stock
splits or other similar events). Notice of redemption (the "Notice of
Redemption") shall be given not later than the thirtieth day before the date
fixed for redemption, all as provided in the Warrant Agreement. On and after the
date fixed for redemption, the Registered Holder shall have no rights with
respect to the Warrants except to receive the $0.10 per Warrant upon surrender
of this Warrant Certificate.
A-2
<PAGE> 34
Under certain circumstances, National may be entitled to receive
an aggregate of five percent (5%) of the Purchase Price of the Warrants
represented hereby.
Prior to due presentment for registration of transfer hereof,
the Company and the Warrant Agent may deem and treat the Registered Holder as
the absolute owner hereof and of each Warrant represented hereby
(notwithstanding any notations of ownership or writing hereon made by anyone
other than a duly authorized officer of the Company or the Warrant Agent) for
all purposes and shall not be affected by any notice to the contrary, except as
provided in the Warrant Agreement.
This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of New York without giving effect to
conflicts of laws.
This Warrant Certificate is not valid unless countersigned by
the Warrant Agent.
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed, manually or in facsimile by two of its officers
thereunto duly authorized and a facsimile of its corporate seal to be imprinted
hereon.
Dated:
CONSERVER CORPORATION
OF AMERICA
[SEAL]
By:_____________________________________
Name:
Title:
By:_____________________________________
__________________
Secretary
COUNTERSIGNED:
CONTINENTAL STOCK TRANSFER
& TRUST COMPANY,
as Warrant Agent
By:___________________________________
Authorized Officer
A-3
<PAGE> 35
SUBSCRIPTION FORM
To Be Executed by the Registered Holder
in Order to Exercise Warrants
The undersigned Registered Holder hereby irrevocably elects to
exercise ____________ Warrants represented by this Warrant Certificate, and to
purchase the securities issuable upon the exercise of such Warrants, and
requests that certificates for such securities shall be issued in the name of
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
_________________________
_________________________
_________________________
_________________________
(please print or type name and address)
and be delivered to
_________________________
_________________________
_________________________
_________________________
(please print or type name and address)
and if such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, that a new Warrant Certificate for the balance of such
Warrants be registered in the name of, and delivered to, the Registered Holder
at the address stated below.
A-4
<PAGE> 36
IMPORTANT: PLEASE COMPLETE THE FOLLOWING:
1. The exercise of this Warrant was solicited by
National Securities Corporation. / /
2. The exercise of this Warrant was solicited by
/ /.
3. The exercise of this Warrant was not
solicited. / /
Dated:_______________ X____________________________________
____________________________________
____________________________________
Address
____________________________________
Social Security or Taxpayer
Identification Number
____________________________________
Signature Guaranteed
____________________________________
A-5
<PAGE> 37
ASSIGNMENT
To Be Executed by the Registered Holder
in Order to Assign Warrants
FOR VALUE RECEIVED, ________________, hereby sells, assigns and
transfers unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER
_________________________
_________________________
_________________________
_________________________
(please print or type name and address)
____________________________ of the Warrants represented by this Warrant
Certificate, and hereby irrevocably constitutes and appoints __________________
Attorney to transfer this Warrant Certificate on the books of the Company, with
full power of substitution in the premises.
Dated:____________________ X____________________________________
Signature Guaranteed
____________________________________
THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO THE
NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER AND MUST BE
GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS
AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE
GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.
A-6
<PAGE> 1
EXHIBIT 4.5
AMENDATORY AGREEMENT dated November
6, 1996 among CONSERVER CORPORATION
OF AMERICA, a Delaware corporation
with an office at 44 East 67th
Street, Suite 3B, New York, New York
10021 (the "Company"), THE SES
FAMILY INVESTMENT AND TRADING
PARTNERSHIP, L.P. with an office at
2859 Queens Courtyard Drive, Las
Vegas, Nevada 89109 ("SES") and
GERALD N. AGRANOFF with an office at
717 Fifth Avenue, New York, New York
10022 ("GNA").
________________________
SES and the Company entered into a Note Purchase Agreement dated May
31, 1996 (the "Original Agreement") pursuant to which, among other matters, the
Company issued and SES purchased a promissory note in the principal amount of
$1,000,000, bearing interest at the rate of 12 percent per annum and
convertible, on the terms set forth therein, into shares of common stock of the
Company (the "Note"). In connection with the execution and delivery of the
Original Agreement and the Note, GNA acquired 25,000 shares (the "Original
Shares") of common stock, par value $.001 per share, of the Company ("Common
Stock").
The Company anticipates, in the near term, filing a registration
statement under the Securities Act of 1933, as amended (the "Act"), to publicly
offer and sell its securities. The Company has been advised that the prospects
of successfully consummating a public offering of its securities will be
enhanced if the terms of the Original Agreement and Note were changed in the
manner set forth below, and the Company reacquired the Shares from GNA. The
Company has requested SES and GNA, respectively, to consent to such changes and
reacquisition, and they have agreed on the terms set forth below:
1. SUSPENSION OF PROVISIONS OF OLD AGREEMENT
(a) For a period of six months commencing on the date of this Agreement
(the "Suspension Period"), SES and the Company agree to suspend the operation
and effectiveness of Sections 5(b) through 5(c), 6, 9 and 12 of the Original
Agreement (collectively, the "Affected Provisions").
(b) At the end of the Suspension Period, if the Note has not previously
been paid in full as contemplated by Section 2 hereof, then the Affected
Provisions shall again be effective, retroactively, as if the Suspension Period
had not taken place. For example, if during the Suspension Period the Company
had issued rights or warrants to purchase Common Stock at prices which, in the
absence of the first sentence of this Section , would have resulted in an
adjustment of the Conversion Price referred to in the Original Agreement, then
such adjustment shall be made on the first business day following the end of the
Suspension Period.
<PAGE> 2
2. PAYMENT OF NOTE AND TERMINATION OF ORIGINAL AGREEMENT; EXCHANGE OF ORIGINAL
SHARES FOR GNA WARRANT
(a) The Company covenants with SES that, if during the Suspension
Period a registration statement filed by the Company becomes effective under the
Act and a closing of the sale of the securities offered thereby takes place (the
date of any such closing being the "Closing Date"), the Company (i), out of the
net proceeds of such sale on the Closing Date, shall retire the Note by payment
in full of all accrued interest and the unpaid principal amount thereof
outstanding on the Closing Date and (ii) on the Closing Date issue to SES a
common stock purchase warrant, in substantially the form set forth in Schedule
2(a) hereto (the "SES Warrant"), covering the purchase of up to 500,000
pre-split shares of Common Stock at an initial exercise price of $2.00 per
share, subject to adjustment if on the Closing Date, the book value per share of
pre-split Common Stock, calculated on a fully diluted basis (including the
Company's receipt of any consideration payable upon conversion of other
convertible securities and exercise of options and warrants), reflecting the
Distribution Agreement (as hereinafter defined) as an $8 million asset on the
Company's balance sheet but otherwise calculated in accordance with the
generally accepted accounting principles, is less than $2.00, then the number of
shares of Common Stock subject to the Warrant and the exercise price thereof
will be proportionally adjusted. For example, if the pre-split book value per
share of Common Stock, as so calculated, is $1.00, then the Warrant would be
adjusted to one million pre-split shares of Common Stock with an initial
exercise price of $1.00 per share. The number of shares of Common Stock subject
to the Warrant and the exercise price would be subject to further adjustment to
reflect stock splits or stock dividends on or prior to the Closing Date.
(b) The shares of Common Stock issuable upon exercise of the SES
Warrant and the SES Warrant shall be subject to the registration rights,
procedures and restrictions upon transfer set forth in Schedule 3.1 to the form
of SES Warrant appended hereto, and each of the Company and SES agree to be
bound by such registration rights, procedures and restrictions upon transfer.
(c) Upon payment in full of the Note and the issuance of the SES
Warrant referred to in Section 2(b), the Original Agreement shall terminate and
all rights and obligations of the parties thereunder and under the Note shall
terminate, and SES shall deliver the Note to the Company for cancellation.
(d) On the Closing Date, the Company covenants with GNA that, in
consideration of and against delivery to the Company of the certificate
representing the Original Shares endorsed in blank, the Company shall issue and
deliver to GNA a common stock purchase warrant, in substantially the form of
Schedule 2(a) hereto, but with (i) the number of shares covered thereby equal to
1/10 or ten percent of the number of shares covered by the SES Warrant and (ii)
the warrant shall be issued in the name of GNA (the "GNA Warrant"; and together
with the SES Warrant, collectively, the "Warrants").
2
<PAGE> 3
GNA covenants to deliver the Original Shares (endorsed for transfer) to the
Company against delivery of the GNA Warrant.
(e) The shares of Common Stock issuable upon exercise of the GNA
Warrant and the GNA Warrant shall be subject to the registration rights,
procedures and restrictions upon transfer set forth in Schedule 3.1 to the form
of Warrant appended hereto, and each of the Company and GNA agree to be bound by
such registration rights, procedures and transfers.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to SES and GNA as follows:
(a) Organization, Standing and Qualification of Company. The Company is
a corporation duly organized and existing and in good standing under the laws of
the State of Delaware, and has the corporate power to own its properties and to
carry on its business as now being conducted and as proposed to be conducted.
The Company is qualified to do business as a foreign corporation and is in good
standing in every jurisdiction in which such qualification is necessary under
applicable provisions of law.
(b) The Company has full power, authority and legal right to execute,
deliver and carry out the terms and conditions of this Agreement and to issue
and to carry out the terms and conditions of the Warrants. This Agreement has
been duly and validly authorized by all necessary corporate actions, executed
and delivered by the Company, and constitutes the legal, valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms, except as the same may be limited by bankruptcy or other laws affecting
the enforcement of creditors rights generally, or by considerations of public
policy or equitable considerations.
(c) The execution, delivery and performance of this Agreement by the
Company will not violate, conflict with or result in any violation or breach of,
or constitute a default (with or without notice or lapse of time or both) under,
or require the consent of any federal, state or local governmental or regulatory
authority or other party to, any contract, agreement or arrangement to which the
Company is a party or by which its properties are bound.
(d) The issuance of the Warrants has been duly authorized by all
necessary corporate action of the Company and the shares of Common Stock
issuable upon exercise of the Warrants have been duly reserved for issuance and,
upon issuance in accordance with the terms of Warrants, such shares of Common
Stock will be duly authorized, validly issued, fully paid and non-assessable
shares of Common Stock.
3
<PAGE> 4
(e) The Company's authorized and outstanding capital stock consist of
10,000,000 shares of Common Stock,* of which 4,318,567 shares are currently
outstanding. All of the Company's outstanding Common Stock has been duly and
validly authorized and issued and is fully paid and nonassessable. The Company
has not granted or issued or agreed to grant or issue options or warrants or
similar rights to others to acquire or receive any of its authorized but
unissued shares of Common Stock or Preferred Stock or securities convertible
into the Common Stock or Preferred Stock other than the Note and the Warrants
and as referred to in the schedule to the balance sheet identified in Section
5(f) below.
(f) The Company has heretofore delivered to SES an unaudited balance
sheet of the Company as at October 31, 1996 (the "Balance Sheet"). Such balance
sheet and the notes thereto fairly presents the assets (exclusive of the
carrying value of the Distribution Agreement which has been agreed to by the
Company and SES and GNA for purposes of this Amendatory Agreement), liabilities
and financial condition of the Company as at the date thereof in accordance with
generally accepted accounting principles and practices, consistently followed.
(g) The Company has no liabilities or obligations of any nature
(absolute, accrued, contingent or otherwise) which were not fully reflected or
reserved against in the Balance Sheet, except for liabilities and obligations
incurred in the ordinary course of business and consistent with past practices
since the date thereof; and the reserves reflected in the Balance Sheet are
adequate, appropriate and reasonable.
(h) Since the date of the Balance Sheet, the Company has not suffered
any adverse change in its working capital, financial condition, assets,
liabilities (absolute, accrued, contingent or otherwise), reserves, business,
operations or prospects.
(i) The Distribution Agreement dated October 9, 1996 (the "Distribution
Agreement") among Conserver International, B.V., Conserver North America, Inc.,
Conserver Engineering Ltd. and the Company remains in full force and effect and
has not been amended. The Company is not in default under or in violation of,
nor is there any basis for any claim of default under or violation of, any
provision of the Distribution Agreement.
- ------------------
*Company has authorized but there has yet to be filed an amendment to its
certificate of incorporation increasing authorized capital stock to 30,000,000
shares of Common Stock and 5,000 shares of Preferred Stock.
4
<PAGE> 5
4. REPRESENTATIONS AND WARRANTIES OF SES
SES represents and warrants to the Company as follows:
(a) SES has full power, authority and legal right to execute, deliver
and carry out the terms and conditions of this Agreement. This Agreement has
been duly and validly executed and delivered by SES, and constitutes the legal,
valid and binding obligation of SES enforceable against SES in accordance with
its terms, except as the same may be limited by bankruptcy or other laws
affecting the enforcement of creditors rights generally, or by considerations of
public policy or equitable considerations.
(b) The execution, delivery and performance of this Agreement by SES
will not violate, conflict with or result in any violation or breach of, or
constitute a default (with or without notice or lapse of time or both) under, or
require the consent of any other party to, any contract, agreement or
arrangement to which SES is a party.
(c) SES is the sole owner of the Note free and clear of all liens,
claims and encumbrances.
5. REPRESENTATIONS AND WARRANTIES OF GNA
GNA represents and warrants to the Company as follows:
(a) GNA has full power, authority and legal right to execute, deliver
and carry out the terms and conditions of this Agreement. This Agreement has
been duly and validly executed and delivered by GNA, and constitutes the legal,
valid and binding obligation of GNA enforceable against GNA in accordance with
its terms, except as the same may be limited by bankruptcy or other laws
affecting the enforcement of creditors rights generally, or by considerations of
public policy or equitable considerations.
(b) The execution, delivery and performance of this Agreement by GNA
will not violate, conflict with or result in any violation or breach of, or
constitute a default (with or without notice or lapse of time or both) under, or
require the consent of any other party to, any contract, agreement or
arrangement to which he is a party.
(c) GNA is the sole owner of the Original Shares free and clear of all
liens, claims and encumbrances.
6. RETENTION DURING SUSPENSION PERIOD
(a) SES covenants with the Company that during the Suspension Period it
shall not transfer or assign or take any other action with respect to the Note
that would prevent or hinder consummation of the transactions contemplated by
Section 2(a) hereof. Nothing herein shall prohibit SES from transferring or
assigning the Note or any interest therein subject to this Agreement, provided
that
5
<PAGE> 6
the transferee or assignee agrees in writing to be bound by the terms of this
Agreement.
(b) GNA covenants with the Company that during the Suspension Period he
shall not transfer or assign or take any other action with respect to the
Original Shares that would prevent or hinder consummation of the transactions
contemplated by Section 2(d) hereof. Nothing herein shall prohibit GNA from
transferring or assigning the Original Shares or any interest therein subject to
this Agreement, provided that the transferee or assignee agrees in writing to be
bound in the terms of this Agreement.
7. ACQUISITION FOR INVESTMENT
Each of SES and GNA represent to the Company, as to the respective
Warrant being acquired by each, that such Warrant is being acquired for purposes
of investment with no present intention of distribution.
8. NOTICES.
Any notice or demand upon any party hereto shall be deemed to have been
sufficiently given for all purposes hereof if in writing and delivered
(including by courier service) or if mailed, postage prepaid, by registered
mail, certified mail, return receipt requested, or if delivered, to such party
at its office first set forth above or at such other address or addresses as
such party may theretofore have designated in writing to the other parties by a
notice given in accordance with the provisions of this Section , and
notice shall be effective only upon actual receipt.
9. GOVERNING LAW.
This Agreement and the rights and obligations of the parties hereunder
shall be construed in accordance with and be governed by the laws of the State
of New York, without giving effect to the conflict of law principles thereof.
10. EXPENSES OF SES AND GNA
The Company agrees to pay the reasonable fees and out-of-pocket
disbursements of one counsel for SES and GNA in connection with the preparation,
execution and delivery of this Agreement in an amount not to exceed $5,000.
11. ENTIRE AGREEMENT
This Agreement, including the Schedules attached hereto, and the
Original Agreement sets forth the entire understanding of the parties with
respect to the subject matter hereof, and it incorporates and merges any and all
previous communications, understandings, oral or written, as to the subject
matter hereof, and cannot be amended or changed except in writing, signed by the
parties.
6
<PAGE> 7
12. RATIFICATION
Except as amended hereby, the provisions of the Note and the Original
Agreement are hereby ratified and confirmed in all respects. If the transactions
contemplated by Section 2 hereof do not take place by the end of the Suspension
Period, this Amendatory Agreement shall terminate and be of no force and effect,
except that Section 1(b) hereof shall survive any termination.
IN WITNESS WHEREOF, the Company, SES and the GNA have executed this
Amendatory Agreement as of the date first above written.
CONSERVER CORPORATION OF AMERICA
By: ________________________________
Name:
Title:
THE SES FAMILY INVESTMENT AND
TRADING PARTNERSHIPS, L.P.
By: ________________________________
Name: Gerald N. Agranoff
Title: General Partner
____________________________________
GERALD N. AGRANOFF
7
<PAGE> 8
SCHEDULE 2.1(a)
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, OFFERED FOR SALE, ASSIGNED, TRANSFERRED OR
OTHERWISE DISPOSED OF, UNLESS REGISTERED PURSUANT TO THE PROVISIONS OF THAT ACT
OR AN OPINION OF COUNSEL TO THE COMPANY IS OBTAINED STATING THAT SUCH
DISPOSITION IS IN COMPLIANCE WITH AN AVAILABLE EXEMPTION FROM SUCH REGISTRATION.
CONSERVER CORPORATION OF AMERICA
(Incorporated under the laws of the State of Delaware)
VOID AFTER 5:00 P.M., NEW YORK CITY TIME, ON * , 200_
DATED: , 199_ WARRANT TO PURCHASE
500,000 SHARES OF
COMMON STOCK**
WARRANT FOR THE PURCHASE OF SHARES OF COMMON STOCK
FOR VALUE RECEIVED, CONSERVER CORPORATION OF AMERICA, a Delaware
corporation (the "Company"), hereby certifies that THE SES FAMILY INVESTMENT AND
TRADING PARTNERSHIP, L.P. or assigns (the "Holder") is entitled, subject to the
provisions of this warrant (the "Warrant"), to purchase from the Company during
the period commencing on the day hereof and expiring at 5:00 p.m. New York City
local time, on * , 200_ (the "Expiration Date") up to 500,000** fully paid and
nonassessable shares of Common Stock of the Company at a price of $2.00** per
share (such exercise price per share in effect at any time and as adjusted from
time to time being hereinafter referred to as the "Exercise Price").
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*Six years from original issue date.
**$2.00 per share exercise price and number of shares covered by
warrant subject to adjustment as set forth in the Amendatory Agreement to which
this Schedule is annexed.
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The term "Common Stock" means the common shares of the Company as
constituted on *** , 199_ (the "Base Date"), together with any other equity
securities that may be issued by the Company in addition thereto or in
substitution therefor. The number of shares of Common Stock to be received upon
the exercise of this Warrant may be adjusted from time to time as hereinafter
set forth. The shares of Common Stock deliverable upon such exercise, and as
adjusted from time to time, are hereinafter sometimes referred to as "Warrant
Stock".
Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of this Warrant, and (in the case
of loss, theft or destruction) of reasonably satisfactory indemnification, and
upon surrender and cancellation of this Warrant, if mutilated, the Company shall
execute and deliver a new Warrant of like tenor and date. Any such new Warrant
executed and delivered shall constitute an additional contractual obligation on
the part of the Company, whether or not this Warrant so lost, stolen, destroyed
or mutilated shall be at any time enforceable by anyone.
The Holder agrees with the Company that this Warrant is issued, and all
the rights hereunder shall be held, subject to all of the conditions,
limitations and provisions set forth herein.
1. EXERCISE OF WARRANT.
1.1 MANNER OF EXERCISE. This Warrant may be exercised in whole
at any time, or in part from time to time, during the period commencing on the
Base Date and expiring on the Expiration Date or, if any such day is a day on
which banking institutions in the City of New York are authorized by law to
close, then on the next succeeding day that shall not be such a day, by
presentation and surrender of this Warrant to the Company at its principal
office, or at the office of its stock transfer agent, if any, with the Warrant
Exercise Form attached hereto duly executed and accompanied by payment (either
in cash or by certified or official bank check, payable to the order of the
Company) of the Exercise Price for the number of shares specified in such Form
and instruments of transfer, if appropriate, duly executed by the Holder or its
duly authorized attorney.
1.2 ALTERNATIVE MANNER OF EXERCISE. In lieu of exercising this
Warrant in the manner set forth in Section 1.1, this Warrant may be exercised in
whole at any time, or in part from time to time, during the period commencing on
the Base Date and expiring on the Expiration Date or, if any such day is a day
on which banking institutions in the City of New York are authorized by law to
close, then on the next succeeding day that shall not be such a day, by
presentation and surrender of this Warrant to the
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***Date of effectiveness of registration statement for Company's
initial public offering.
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Company at its principal office, or at the office of its stock transfer agent,
if any, with the Warrant Exercise Form attached hereto duly executed and
accompanied by payment (either in cash or by certified or official bank check,
payable to the order of the Company) of $.001 for each share issuable upon
exercise of this Warrant, the number of such shares (collectively, the
"Alternative Option Shares") to be determined as hereinafter set forth, and
instruments of transfer, if appropriate, duly executed by the Holder or its duly
authorized attorney. Alternative Option Shares shall be determined according to
the following formula:
Z = A x (MP - EP)
--------------
MP
For the purpose of this Section 1.2, the following definitions
shall apply:
(a) "Z" shall mean the number of Alternative Option
Shares;
(b) "A" shall mean that number of shares of Common
Stock issuable upon exercise of this Warrant of the part
thereof being exercised had such Warrant or part been
exercised pursuant to Section 1.1;
(c) "MP" shall mean the average of the closing prices
per share of the Common Stock on the securities exchange or
automated quotation system on which the Common Stock is
primarily traded for the ten trading days ending on the
trading day prior to the date this Warrant is presented and
surrendered to the Company; and
(d) "EP" shall mean the Exercise Price (as herein-
above defined).
1.3 PARTIAL EXERCISE; TAXES. If this Warrant should be
exercised in part only, the Company shall, upon surrender of this Warrant for
cancellation, execute and deliver a new Warrant evidencing the rights of the
Holder thereof to purchase the balance of the shares purchasable hereunder. Upon
receipt by the Company of this Warrant, together with the Exercise Price, at its
office, or by the stock transfer agent of the Company at its office, in proper
form for exercise, the Holder shall be deemed to be the holder of record of the
shares of Common Stock issuable upon such exercise, notwithstanding that the
stock transfer books of the Company shall then be closed or that certificates
representing such shares of Common Stock shall not then be actually delivered to
the Holder. The Company shall pay any and all documentary stamp or similar issue
taxes payable in respect of the issue or delivery of shares of Common Stock on
exercise of this Warrant.
2. RESERVATION OF SHARES; ETC. The Company will at all times
reserve for issuance and delivery upon exercise of this Warrant all
shares of Common Stock or other shares of capital stock of the
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Company (and other securities and property) from time to time receivable upon
exercise of this Warrant. All such shares (and other securities and property)
shall be duly authorized and, when issued upon such exercise, shall be validly
issued, fully paid and nonassessable and free of all preemptive rights.
3. ABSENCE OF REGISTRATION UNDER SECURITIES ACT OF 1933.
3.1 ABSENCE OF REGISTRATION UNDER SECURITIES ACT OF 1933. The
shares of Common Stock issuable upon exercise of this Warrant are not presently,
and upon their issuance will not be, registered under the Securities Act of
1933, as amended (the "Act"). Such shares of Common Stock, however, will be
subject to certain registration rights as more fully set forth in Schedule 3.1
attached hereto (the "Registration Rights Schedule"). This Warrant is not and
will not be registered under the Act.
3.2 RESTRICTIONS UPON TRANSFERABILITY. The Warrant Stock
and the Warrant may be sold or otherwise disposed only in accordance with the
provisions of Sections 4 and 5 of the Registration Rights Schedule.
4. FRACTIONAL SHARES. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant, but the
Company shall issue one additional share of its Common Stock in lieu of each
fraction of a share otherwise called for upon any exercise of this Warrant.
5. EXCHANGE, TRANSFERS, ASSIGNMENT OF WARRANT. This Warrant is not
registered under the Act nor under any applicable state securities law or
regulation. This Warrant cannot be exchanged, transferred or assigned, except in
accordance with the provisions of Section 3.2 hereof. Upon such event and upon
surrender of this Warrant to the Company or at the office of its stock transfer
agent, if any, with the Assignment Form annexed hereto duly executed and funds
sufficient to pay any transfer tax, the Company shall, without charge, execute
and deliver a new Warrant in the name of the assignee named in such instrument
of assignment and this Warrant shall promptly be cancelled. Subject to the
foregoing, this Warrant may be divided or combined with other Warrants which
carry the same rights upon presentation hereof at the office of the Company or
at the office of its stock transfer agent, if any, together with a written
notice specifying the names and denominations in which new Warrants are to be
issued and signed by the Holder hereof. The term "Warrant" as used herein
includes any Warrants into which this Warrant may be divided or exchanged.
6. RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof, be
entitled to any rights of a stockholder of the Company, either at law or in
equity, and the rights of the Holder are limited to those expressed in this
Warrant.
7. REDEMPTION. This Warrant is not redeemable by the Company.
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8. ANTI-DILUTION PROVISIONS.
8.1 STOCK DIVIDENDS, SUBDIVISIONS AND COMBINATIONS.
(a) Triggering Events. If at any time or from time to
time after the Base Date the Company shall: (i) declare a dividend or otherwise
make a distribution to the holders of its Common Stock in the form of additional
shares of Common Stock, (ii) subdivide its outstanding shares of Common Stock
into a larger number of shares of Common Stock, or (iii) combine its outstanding
shares of Common Stock into a small number of shares of Common Stock, then the
adjustments set forth in paragraphs (b) and (c) shall be made to the number of
shares of Common Stock for which this Warrant is exercisable and to the Exercise
Price, respectively.
(b) Adjustment to Number of Shares of Common Stock
for which Warrant is Exercisable. The number of shares of Common Stock for which
this Warrant is exercisable shall be adjusted to equal: (i) the number of share
of Common Stock for which this Warrant is exercisable immediately before the
occurrence of any such event, (ii) multiplied by a fraction, (A) the numerator
of which is the total number of shares of Common Stock outstanding immediately
after the occurrence of such event, and (B) the denominator of which is the
total number of shares of Common Stock outstanding immediately before the
occurrence of such event.
(c) Adjustment to Exercise Price. The Exercise Price
shall be adjusted to equal (i) the Exercise Price immediately prior to the
occurrence of any such event, (ii) multiplied by a fraction, (A) the numerator
of which is the number of shares of Common Stock for which this Warrant is
exercisable immediately before such event, and (B) the denominator of which is
the number of shares of Common Stock for which this Warrant is exercisable
immediately after the adjustment.
8.2 ADJUSTMENT FOR DIVIDENDS IN OTHER SECURITIES, PROPERTY,
ETC.; RECLASSIFICATION, ETC. In case at any time or from time to time after the
Base Date the holders of Common Stock (or any other securities at the time
receivable upon the exercise of this Warrant) shall have received, or on or
after the record date fixed for the determination of eligible stockholders,
shall have become entitled to receive without payment therefor: (a) other or
additional securities or property (other than cash) by way of dividend, (b) any
cash paid or payable except out of earned surplus of the Company at the Base
Date as increased (decreased) by subsequent credits (charges) thereto (other
than credits in respect of any capital or paid-in surplus or surplus created as
a result of a revaluation of property) or (c) other or additional (or less)
securities or property (including cash) by way of stock-split, spin-off,
split-up, reclassification, combination of shares or similar corporate
rearrangement, then, and in each such case, the Holder of this Warrant, upon the
exercise thereof as provided in Section 1, shall be entitled to receive the
amount of securities
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<PAGE> 13
and property (including cash in the cases referred to in clauses (b) and (c)
above) which such Holder would hold on the date of such exercise if on the
record date for any such distribution it had been the holder of record of the
number of shares of Common Stock (as constituted on such record date) subscribed
for upon such exercise as provided in Section 1; all subject to further
adjustment as provided in this Section 8; in each case, the terms of this
Warrant shall be applicable to the securities or property then receivable upon
exercise of the Warrant.
8.3 ADJUSTMENT FOR REORGANIZATION, CONSOLIDATION, MERGER, ETC.
In case of any reorganization of the Company (or any other corporation, the
securities of which are at the time receivable on the exercise of this Warrant)
after the Base Date or in case after such date the Company (or any such other
corporation) shall consolidate with or merge into another corporation or convey
all or substantially all of its assets to another corporation, then, and in each
such case, the Holder of this Warrant upon the exercise thereof as provided in
Section 1 at any time after the consummation of such reorganization,
consolidation, merger or conveyance, shall be entitled to receive, in lieu of
the securities and property receivable upon the exercise of this Warrant prior
to such consummation, the securities or property to which such Holder would have
been entitled upon such consummation if such Holder had exercised this Warrant
immediately prior thereto, all subject to further adjustment as provided in this
Section 8; in each such case, the terms of this Warrant shall be applicable to
the securities or property receivable upon the exercise of this Warrant after
such consummation. The Company shall, as a condition precedent to any such
reorganization, reclassification, merger, consolidation or disposition of
assets, cause the successor or acquiring corporation (if other than the Company)
to expressly assume the due and punctual observance and performance of each and
every event covenant and condition of this Warrant to be performed and observed
by the Company and all the obligations and liabilities hereunder. The foregoing
provisions of this Section shall similarly apply to successive reorganizations,
reclassifications, mergers, consolidations, or disposition of assets.
8.4 ADJUSTMENT FOR ISSUE OR SALE OF COMMON STOCK AT LESS THAN
CURRENT MARKET PRICE. With the exception of (a) issuances of shares of Common
Stock pursuant to this Warrant, (b) the exercise of any options, warrants or
other rights to acquire Common Stock outstanding on the Base Date, (c) the
issuance subsequent to the Base Date of any options or other rights to acquire
shares of Common Stock under any of the Company's employee benefit plans in
effect on the Base Date (collectively the "Company Plans") and (d) the exercise
subsequent to the Base Date of options or other rights to acquire Common Stock
under the Company Plans (provided that the aggregate number of shares of Common
Stock excluded pursuant to (b), (c) and (d) combined shall not exceed 5% of the
Common Stock outstanding on the Base Date, subject to adjustment for subsequent
stock splits and stock dividends), in case at any time or from time to time
after the Base Date the Company shall issue shares of
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<PAGE> 14
Common Stock without consideration or for a consideration per share less than
the Current Market Value (as hereinafter defined), then, and in each such case,
the Holder of this Warrant upon the exercise hereof as provided in Section 1
shall be entitled to receive, in lieu of the shares of Common Stock theretofore
receivable upon such exercise, a number of shares of Common Stock determined by
(a) dividing to the nearest one-thousandth (.001) the then current Exercise
Price by the Exercise Price to be computed as provided below in this Section
8.4, and (b) multiplying to the nearest whole share (one-half share being
considered a whole share) the resulting quotient by the number of shares of
Common Stock (as constituted on the Base Date) subscribed for upon such
exercise, as provided in Section 1. Such Exercise Price shall be computed (to
the nearest one-thousandth ($.001)) by dividing
(i) the sum of (x) the result obtained by multiplying the
number of shares of Common Stock outstanding immediately prior
to such issue or sale by the Current Market Price, plus (y)
the number of shares of Common Stock that could have been
acquired at the Current Market Price immediately prior to the
issue or sale using the consideration, if any, received by the
Company upon such issue or sale, by
(ii) the number of shares of Common Stock outstanding
immediately after such issue or sale.
For the purposes of this Section 8.4, the following subsections 8.4.1 to 8.4.10
shall be applicable:
8.4.1 DIVIDENDS, ETC. , IN COMMON STOCK OR
CONVERTIBLE SECURITIES. In case at any time after the Base Date the Company
shall declare any dividend or order any other distribution upon any stock of the
Company of any class, payable in Common Stock or in any stock or other
securities directly or indirectly convertible into or exchangeable for Common
Stock (any such stock or other securities being hereinafter called "Convertible
Securities"), such declaration or distribution shall be deemed to be an issue
and sale (as of the record date), without consideration, of such Common Stock or
such Convertible Securities, as the case may be.
8.4.2 ISSUANCE OR SALE OF CONVERTIBLE SECURITIES.
In case at any time after the Base Date the Company shall issue or sell any
Convertible Securities, there shall be determined the price per share for which
Common Stock is issuable upon the conversion or exchange thereof, such
determination to be made by dividing (a) the total amount received or receivable
by the Company as consideration for the issue or sale of such Convertible
Securities (subject to adjustment as provided in subsection 8.4.6 in case of an
issue or sale for cash), plus the minimum aggregate amount of additional
consideration, if any, payable to the Company
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upon the conversion or exchange thereof, by (b) the maximum number of shares of
Common Stock issuable upon the conversion or exchange of all such Convertible
Securities.
If the price per share so determined shall be less
than the Current Market Price, then such issue or sale shall be deemed to be an
issue or sale for cash (as of the date of issue or sale of such Convertible
Securities) of such maximum number of shares of Common Stock at the price per
share so determined; provided that if such Convertible Securities shall by their
terms provide for a change or changes (upwards or downwards), with the passage
of time or otherwise, in the amount of additional consideration, if any, payable
to the Company, or in the rate of exchange, upon the conversion or exchange
thereof, the Exercise Price shall, forthwith upon any such change becoming
effective, be readjusted (but to no greater extent than originally adjusted, in
the case of an increase in the additional consideration) to reflect the same;
and provided further that upon the expiration of such rights of conversion or
exchange of such Convertible Securities, if any thereof shall not have been
exercised, the Exercise Price shall forthwith be readjusted (but to no greater
extent than originally adjusted, in the case of an increase in the additional
consideration) and thereafter be the price which it would have been had an
adjustment been made on the basis that (i) the only shares of Common Stock so
issued or sold were those issued or sold upon conversion or exchange of such
Convertible Securities, and (ii) they were issued or sold for the consideration
actually received by the Company upon such conversion or exchange, plus the
consideration, if any, actually received by the Company for the issue or sale of
all of such Convertible Securities which shall have been converted or exchanged.
8.4.3 GRANT OF RIGHTS OR OPTIONS FOR COMMON STOCK.
In case at any time after the Base Date the Company shall grant any rights or
options to subscribe for, purchase or otherwise acquire Common Stock, there
shall be determined the price per share for which Common Stock is issuable upon
the exercise of such rights or options, such determination to be made by
dividing (a) the total amount, if any, received or receivable by the Company as
consideration for the granting of such rights or options, plus the minimum
aggregate amount of additional consideration payable to the Company upon the
exercise of such rights or options, by (b) the maximum number of shares of
Common Stock issuable upon the exercise of such rights or options.
If the price per share so determined shall be less
than the Current Market Price, then the granting of such rights or options shall
be deemed to be an issue or sale for cash (as of the date of granting of such
rights or options) of such maximum number of shares of Common Stock at the price
per share so determined; provided that if such rights or options shall by their
terms provide for a change or changes (upwards or downwards), with the passage
of time or otherwise, in the amount of additional consideration payable to the
Company upon the exercise thereof, the
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Exercise Price shall forthwith upon any such change becoming effective, be
readjusted (but to no greater extent than originally adjusted, in the case of an
increase in the additional consideration) to reflect the same; and provided
further that upon the expiration of such rights or options, if any thereof shall
not have been exercised, the Exercise Price shall forthwith be readjusted (but
to no greater extent than originally adjusted, in the case of an increase in the
additional consideration), and thereafter be the price which it would have been
had an adjustment been made on the basis that (i) the only shares of Common
Stock so issued or sold were those issued or sold upon the exercise of such
rights or options, and (ii) they were issued or sold for the consideration
actually received by the Company upon such exercise, plus the consideration, if
any, actually received by the Company for the granting of all such rights or
options, whether or not exercised.
8.4.4 GRANT OF RIGHTS OR OPTIONS FOR CONVERTIBLE
SECURITIES. In case at any time after the Base Date the Company shall grant any
rights or options to subscribe for, purchase or otherwise acquire Convertible
Securities, such Convertible Securities shall be deemed, for the purposes of
subsection 8.4.2, to have been issued and sold for the total amount received or
receivable by the Company as consideration for the granting of such rights or
options plus the minimum aggregate amount of additional consideration, if any,
payable to the Company upon the exercise of such rights or options; provided
that if such rights or options shall by their terms provide for a change or
changes (upwards or downwards), with the passage of time or otherwise, in the
amount of additional consideration payable to the Company upon the exercise
thereof, the Exercise Price shall, forthwith upon any such change becoming
effective, be readjusted (but to no greater extent than originally adjusted, in
the case of an increase in the additional consideration) to reflect the same;
and provided further that upon the expiration of such rights or options if any
thereof shall not have been exercised, the Exercise Price shall forthwith be
readjusted (but to no greater extent than originally adjusted, in the case of an
increase in the additional consideration), and thereafter be the price which it
would have been had an adjustment been made upon the basis that (i) the only
Convertible Securities so issued or sold were those issued or sold upon the
exercise of such rights or options, and (ii) they were issued or sold for the
consideration actually received by the Company upon such exercise, plus the
consideration, if any, actually received by the Company for the granting of all
such rights or options, whether or not exercised.
8.4.5 DILUTION IN CASE OF OTHER SECURITIES. In
case at any time after the Base Date any securities other than Common Stock
shall at the time be receivable upon the exercise of any Warrant, and in case
any such additional securities shall be issued or sold by the Company or shall
become subject to issue upon the conversion or exchange of any securities of the
Company or to subscription, purchase or other acquisition pursuant to any rights
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or options granted by the Company for a consideration such as to dilute the
purchase rights evidenced by the Warrant, then, and in each such case, the
Exercise Price shall forthwith be adjusted, substantially in the manner provided
for above in this Section 8.4 so as to protect the holder of such Warrant
against the effect of such dilution.
8.4.6 EXPENSES, ETC., NOT DEDUCTED. In case at
any time after the Base Date any shares of Common Stock, Convertible Securities
or other securities, or any rights or options to subscribe for, purchase or
otherwise acquire any thereof, shall be issued or sold for cash, the
consideration received therefor shall be deemed to be the amount received
therefor, before deducting all commissions, costs and expenses incurred in
connection with such issuance or sale determined as of the date not later than
45 days after the date of the close of the offering with respect to such
issuance or sale.
8.4.7 DETERMINATION OF CONSIDERATION. In case at
any time after the Base Date any shares of Common Stock, Convertible Securities
or other securities, or any rights or options to subscribe for, purchase or
otherwise acquire any thereof, shall be issued or sold for a consideration other
than cash (or a consideration which includes cash if such cash constitutes a
part of the assets of a corporation or business substantially all of the assets
of which are being received as such consideration), then, for the purposes of
this Section 8.4, the Board of Directors of the Company shall in good faith
determine the fair value of such consideration, and such Common Stock,
Convertible Securities, other securities, rights or options shall be deemed to
have been issued or sold for an amount of cash equal to the value so determined
in good faith. In case any Common Stock, Convertible Securities or other
securities or any rights or options to subscribe for, purchase or otherwise
acquire any thereof shall be issued or sold together with other securities or
other assets for a consideration which covers both, the Board of Directors of
the Company shall in good faith determine what part of such consideration so
received shall be allocated to the issue or sale of such Common Stock,
Convertible Securities or other securities or such rights or options. Whenever
the Board of Directors of the Company shall be required to make a determination
in good faith of the fair value of any consideration, such determination shall,
if requested by the Holder, be supported by an opinion of an investment banking
firm of recognized national standing selected by the Company and reasonably
acceptable to such Holder.
8.4.8 RECORD DATE DEEMED ISSUE DATE. In case the
Company shall take a record of the holders of shares of its stock of any class
for the purpose of entitling them (a) to receive a dividend or a distribution
payable in Common Stock, Convertible Securities or other securities, or (b) to
subscribe for, purchase or otherwise acquire Common Stock, Convertible
Securities or other securities, then such record date shall be deemed to be the
date of
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the issue or sale of the Common Stock, Convertible Securities or other
securities issued or sold or deemed to have been issued or sold upon the
declaration of such dividend or the making of such other distribution, or the
date of the granting of such rights of subscription, purchase or other
acquisition, as the case may be.
8.4.9 SHARES CONSIDERED OUTSTANDING. The number of
shares of Common Stock outstanding at any given time shall include shares deemed
issued for purposes of adjustment pursuant to this Section 8.4, but shall
exclude shares in the treasury of the Company.
8.4.10 DURATION OF EXERCISE PRICE. Following each
computation or readjustment of the Exercise Price, as provided in this Section
8.4, the newly computed or adjusted Exercise Price shall remain in effect until
a further computation or readjustment thereof is required by this Section 8.4.
8.4.11 CURRENT MARKET PRICE. As used herein, the
"Current Market Price" on any date shall mean the average of the closing prices
per share of the Common Stock on the securities exchange or automated quotation
system on which the Common Stock is primarily traded for the ten trading days
ending on the trading day prior to such date or, where applicable, the closing
price per share on the trading day or days actually used for valuing shares of
Common Stock for the purposes of issuance or deemed issuance of such shares of
Common Stock (as applicable) in the transaction giving rise to possible
adjustment of the Exercise Price pursuant to this Section 8.
8.5 NO IMPAIRMENT. The Company will not, by amendment of its
Certificate of Incorporation or through reorganization, consolidation, merger,
dissolution, issue or sale of securities, sale of assets or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
of the Warrant, but will at all times in good faith assist in the carrying out
of all such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the Holder of this Warrant against
dilution or other impairment. Without limiting the generality of the foregoing,
while any Warrant is outstanding, the Company (a) will not permit the par value,
if any, of the shares of stock receivable upon the exercise of this Warrant to
be above the amount payable therefor upon such exercise, (b) will take all such
action as may be necessary or appropriate in order that the Company may validly
and legally issue or sell fully-paid and nonassessable stock upon the exercise
of all Warrants at the time outstanding, (c) will not issue or sell any stock of
any class which is preferred as to dividends or as to the distribution of assets
upon voluntary or involuntary dissolution, liquidation or winding-up, unless the
rights of the holders thereof shall be limited to a fixed sum or percentage of
par value in respect to participation in dividends and in any such distribution
of assets and (d) will take no action to amend its Certificate of Incorporation
which would change to the detriment of the holders of Common Stock the dividend
or voting rights of the Company's Common
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Stock (as constituted on the Base Date).
8.6 CERTIFICATE AS TO ADJUSTMENTS. In each case of an
adjustment in the Exercise Price or the number of shares of Common Stock (or
other securities or property) receivable on the exercise of the Warrant, the
Company at its expense will promptly compute such adjustment in accordance with
the terms of the Warrant and prepare a certificate to be executed by the chief
financial officer of the Company setting forth such adjustment and showing in
detail the facts upon which such adjustment is based, including a statement of
(a) the consideration received or to be received by the Company for any
additional shares of Common Stock issued or sold or deemed to have been issued
or sold, (b) the number of shares of Common Stock outstanding or deemed to be
outstanding, and (c) the new Exercise Price. The Company will forthwith mail a
copy of each such certificate to each holder of the Warrant. Upon the request of
the Holder, the Company shall obtain, at its own expense, a certificate signed
by a firm of independent certified public accountants of recognized national
standing selected by the Company (which may be the accounting firm regularly
retained by the Company), setting forth, in reasonable detail, all events
requiring any adjustment to the Exercise Price and number of shares of Common
Stock receivable upon exercise of the Warrant, since the date of the last such
certificate delivered by any such accounting firm and the method by which each
such adjustment was calculated.
8.7 NOTICES OF RECORD DATE, ETC.
In case:
(a) the Company shall take a record of the holders
of its Common Stock (or other securities at the time receivable upon the
exercise of the Warrant) for the purpose of entitling them to receive any
dividend (other than a regular cash dividend payable out of retained earnings)
or other distribution, or any right to subscribe for, purchase or otherwise
acquire any shares of stock of any class or any other securities, or to receive
any other right; or
(b) of any capital reorganization of the Company,
any reclassification of the capital stock of the Company, any consolidation or
merger of the Company with or into another corporation (other than a merger
solely for purposes of change of domicile) or any conveyance of all or
substantially all of the assets of the Company to another corporation;
(c) of any voluntary or involuntary dissolution,
liquidation or winding-up of the Company; or
(d) any other event requiring an adjustment pursuant
to this Section 8, then, and in each such case, the Company shall mail or cause
to be mailed to each holder of the Warrant at the time outstanding a notice
specifying, as the case may be, (i) the date on which a record is to be taken
for the purpose of such
12
<PAGE> 20
dividend, distribution or right, and stating the amount and character of such
dividend, distribution or right, or (ii) the date on which such reorganization,
reclassification, consolidation, merger, conveyance, dissolution, liquidation or
winding-up is to take place, and the time, if any, is to be fixed, as to which
the holders of record of Common Stock (or such other securities at the time
receivable upon the exercise of the Warrant) shall be entitled to exchange their
shares of Common Stock (or such other securities) for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
merger, conveyance, dissolution, liquidation or winding-up. Such notice shall be
mailed at least twenty (20) days prior to the date therein specified and the
Warrant may be exercised prior to said date during the term of the Warrant no
later than five days prior to said date.
9. LEGEND. Upon exercise of any of the Warrants and the issuance of any
of the shares thereunder, all certificates representing shares shall bear on the
face thereof substantially the following legends, insofar as is consistent with
Delaware law:
"The shares of common stock represented by this certificate
have not been registered under the Securities Act of 1933, as
amended, and may not be sold, offered for sale, assigned,
transferred or otherwise disposed of, unless registered
pursuant to the provisions of that Act or an opinion of
counsel to the Corporation is obtained stating that such
disposition is in compliance with an available exemption from
such registration. "
10. APPLICABLE LAW. The Warrant is issued under and shall
for all purposes be governed by and construed in accordance with
the laws of the State of Delaware.
11. NOTICE. Notices and other communications to be given to the Holder
of the Warrant evidenced by this certificate shall be deemed to have been
sufficiently given, if delivered or mailed, addressed in the name and at the
address of such owner appearing on the records of the Company, and if mailed,
sent registered or certified mail, postage prepaid. Notices or other
communications to the Company shall be deemed to have been sufficiently given if
delivered by hand or mailed, by registered or certified mail, postage prepaid,
to the Company at 44 East 67th Street, Suite 3B, New York, New York 10021, Attn:
President, or at such other address as the Company shall have designated by
written notice to such registered owner as herein provided. Notice by mail shall
be deemed given when deposited in the United States mail as herein provided.
13
<PAGE> 21
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed on
its behalf, in its corporate name, by its duly authorized officer, all as of the
day and year first above written.
CONSERVER CORPORATION OF AMERICA
By:_______________________________________
Name:
Title:
14
<PAGE> 22
WARRANT EXERCISE FORM
The undersigned hereby irrevocably elects to exercise the within
Warrant to the extent of purchasing ________ shares of Common Stock of CONSERVER
CORPORATION OF AMERICA and hereby makes payment in accordance with the Warrant.
_______________________________________
Name of Registered Holder
_______________________________________
Signature
_______________________________________
Signature, if held jointly
_______________________________________
Date
INSTRUCTIONS FOR ISSUANCE OF STOCK
(if other than to the registered Holder of the within Warrant)
Name___________________________________________________________________________
(Please typewrite or print in block letters)
Address________________________________________________________________________
________________________________________________________________________
Social Security or Taxpayer Identification Number_____________________________
ASSIGNMENT FORM
(See Section 5 for terms of Assignment)
The Holder hereby assigns and transfers unto
Name__________________________________________________________________________
(Please typewrite or print in block letters)
Address________________________________________________________________________
________________________________________________________________________
the right to purchase shares of Common Stock of CONSERVER CORPORATION OF AMERICA
represented by this Warrant to the extent of __________shares as to which such
right is exercisable and does hereby irrevocably constitute and appoint ________
Attorney, to transfer the same on the books of CONSERVER CORPORATION OF AMERICA
with full power of substitution in the premises.
Dated:______________________, 19
_____________________________________
Name of Registered Holder
_____________________________________
Signature
_____________________________________
Signature, if held jointly
<PAGE> 23
SCHEDULE 3.1
REGISTRATION RIGHTS, PROCEDURES
AND
RESTRICTIONS UPON TRANSFER
1. RESTRICTION ON TRANSFER. The Restricted Securities (as hereinafter
defined), and any shares of capital stock received in respect thereof, whether
by reason of a stock split or share reclassification thereof, a stock dividend
thereon or otherwise, shall not be transferable except upon the conditions
specified in this Schedule, which conditions are intended to insure compliance
with the provisions of the Securities Act in respect of the transfer thereof.
2. DEFINITIONS. As used in this Schedule, the following terms shall
have the following respective meanings:
"Closing Date" shall mean the Closing Date as such term is
defined in the Amendatory Agreement to which this Schedule is attached (the
"Amendatory Agreement").
"Commission" shall mean the Securities and Exchange
Commission, or any other Federal agency at the time administering the Securities
Act.
"Corporation" shall mean Conserver Corporation of America, a
Delaware corporation, and its successors and assigns.
"Person" shall mean and include an individual, a corporation,
a partnership, a trust, an unincorporated organization and a government or any
department, agency or political subdivision thereof.
"Purchaser" shall mean any of The SES Family Investment
and Trading Partnership, L.P. or Gerald N. Agranoff, or such
Purchaser's permitted successors or assigns.
"Restricted Securities" shall mean (i) the Warrants, and (ii)
the shares of Common Stock of the Corporation issuable upon exercise of the
Warrants.
"Restricted Shares" shall mean the shares of Common Stock of
the Corporation constituting Restricted Securities.
"Securities Act" shall mean the Securities Act of 1933,
as amended, or any similar Federal statute, and the rules and
<PAGE> 24
regulations of the Commission thereunder, all as the same shall be in effect at
the time.
"Transfer" shall include any disposition of Restricted
Securities or of any interest therein which would constitute a sale thereof
within the meaning of the Securities Act.
"Warrants" shall mean those common stock purchase warrants,
initially pertaining to the purchase of up to 550,000* shares of Common Stock of
the Corporation issued pursuant to the Amendatory Agreement to which this
Schedule is appended, and any common stock purchase warrants issued in
replacement or substitution therefor.
3. RESTRICTIVE LEGENDS. Each certificate for the Restricted Securities
and any shares of capital stock received in respect thereof, whether by reason
of a stock split or share reclassification thereof, a stock dividend thereon or
otherwise, and each certificate for any such securities issued to subsequent
transferees of any such certificate shall (unless otherwise permitted by the
provisions of Sections 4 or 11 hereof) be stamped or otherwise imprinted with a
legend in substantially the form set forth in Section 9 of each Warrant to which
this Schedule refers.
4. NOTICE OF TRANSFER. The holder of any Restricted Securities, by
acceptance thereof agrees, prior to any transfer of any Restricted Securities,
to give written notice to the Corporation of such holder's intention to effect
such transfer and to comply in all other respects with the provisions of this
Section 4, and Section 3.2 of each Warrant to which this Schedule refers. Each
such notice shall describe the manner and circumstances of the proposed transfer
and shall be accompanied by (a) the written opinion, addressed to the
Corporation, of counsel for the holder of Restricted Securities, as to whether
in the opinion of such counsel (which opinion shall be reasonably satisfactory
to counsel for the Corporation) such proposed transfer involves a transaction
requiring registration of such Restricted Securities under the Securities Act,
and (b) in the case of Restricted Shares, if in the opinion of such counsel such
registration is required, a written request addressed to the Corporation by the
holder of Restricted Securities, describing in detail the proposed method of
disposition and requesting the Corporation to effect the registration of such
Restricted Shares pursuant to the terms and provisions of Section 5 hereof;
provided, however, that no such opinion shall be required in connection with a
transaction complying with the requirements of Rule 144 (as amended from time to
time) promulgated under the Securities Act (or successor Rule thereto). If in
the opinion of such counsel (if such opinion is required hereunder) and counsel
- --------
*Subject to adjustment in accordance with the Amendatory Agreement to which this
Schedule is annexed.
2
<PAGE> 25
for the Corporation, the proposed transfer of Restricted Securities may be
effected without registration under the Securities Act, the holder of Restricted
Securities shall thereupon be entitled to transfer Restricted Securities in
accordance with the terms of the notice delivered by it to the Corporation. Each
certificate or other instrument evidencing the securities issued upon the
transfer of any Restricted Securities (and each certificate or other instrument
evidencing any untransferred balance of such securities) shall bear the legend
described in Section 3 hereof unless (a) in the opinion of such counsel and
counsel for the Corporation registration of future transfer is not required by
the applicable provisions of the Securities Act or (b) the Corporation shall
have waived the requirement of such legends; provided, however, that such legend
shall not be required on any certificate or other instrument evidencing the
securities issued upon such transfer in the event such transfer shall be made in
compliance with the requirements of Rule 144 (as amended from time to time)
promulgated under the Securities Act (or successor Rule thereto). The holder of
Restricted Securities shall not transfer such Restricted Securities until such
opinion of counsel has been given to the Corporation (unless waived by the
Corporation or unless such opinion is not required in accordance with the
provisions of this Section 4) or until registration of the Restricted Shares
involved in the above-mentioned request has become effective under the
Securities Act.
5. REGISTRATION. (a) No later than twelve (12) months after the Closing
Date, the Corporation shall file a registration statement on Form S-3 (or other
then available form) under the Securities Act covering the Restricted Shares and
will thereafter exert its best efforts to promptly effect the registration of
the Restricted Shares under the Securities Act.
(b) If the Corporation at any time subsequent to one year from
the Effective Date proposes for any reason to register any of its securities
under the Securities Act (other than those issuable pursuant to present or
future employee benefit plans or pursuant to transactions of the nature
contemplated by Rule 145 (as amended from time to time), promulgated under the
Securities Act) when the registration statement contemplated by Section 5(a) has
not been filed with the Commission, it shall each such time promptly give
written notice to the Purchaser, if still a holder of outstanding Restricted
Securities, of its intention so to do, and, upon the written request, given
within 30 days after receipt of any such notice, of the holder of any such
Restricted Securities to register any Restricted Shares (which request shall
specify the Restricted Shares intended to be sold or disposed of by such holders
and shall state the intended method of disposition of such Restricted Shares by
the prospective seller), the Corporation shall use its best efforts to cause all
such Restricted Shares to be registered under the Securities Act promptly upon
receipt of the written request of such holders for such registration, all to the
3
<PAGE> 26
extent requisite to permit the sale or other disposition (in accordance with the
intended methods thereof, as aforesaid) by the prospective seller or sellers of
the Restricted Shares so registered.
(c) Anything contained herein to the contrary notwithstanding,
with respect to a registration requested pursuant to this Section 5, the
Corporation may include in such registration any authorized but unissued shares
of Common Stock for sale by the Corporation or any issued and outstanding shares
of Common Stock for sale by others, except in the case of a registration
pursuant to Section 5(a) where the consent of the holders of the Restricted
Shares participating in such registration shall be required.
(d) In the event that the proposed registration under Section
5(b) is, in whole or in part, an underwritten public offering of securities of
the Corporation, any request pursuant to Section 5(b) to register Restricted
Shares may specify that such shares are to be included in the underwriting (i)
on the same terms and conditions as the shares of Common Stock, if any,
otherwise being sold through underwriters under such registration or (ii) on
terms and conditions comparable to those generally applicable to offerings of
common stock in reasonably similar circumstances in the event that no shares of
Common Stock other than Restricted Shares are being sold through underwriters
under such registration; provided, however, that, as to any registration
pursuant to Section 5(b), (i) if the managing underwriter determines and advises
in writing that the inclusion of all Restricted Shares proposed to be included
in the underwritten public offering and other issued and outstanding shares of
Common Stock proposed to be included therein by persons other than holders of
Restricted Securities (the "Other Shares") would materially and adversely
interfere with the successful distribution of such securities, then the number
of Restricted Shares and Other Shares excluded from such registration shall be
allocated, when the registration statement has been filed pursuant to the
exercise of a demand registration right by the holders of Other Shares, first to
the holders of Other Shares and, in all other circumstances, pro rata among the
holders of Restricted Shares and Other Shares (based upon the number of shares
of Common Stock requested to be registered in such offering by the respective
holders of Restricted Shares and Other Shares to be registered in such
offering), and (ii) in each case those shares of Common Stock which are excluded
from the underwritten public offering pursuant to this Section 5(d) shall be
nevertheless included in such registration but withheld from the market by the
holders thereof for a period, not to exceed 90 days, which the managing
underwriter reasonably determines as necessary in order to effect the
underwritten public offering.
6. PREPARATION AND FILING. If and whenever the Corpora- tion is under
an obligation pursuant to the provisions of this Schedule to use its best
efforts to effect the registration of any
4
<PAGE> 27
Restricted Shares, the Corporation shall, as expeditiously as practicable:
(a) prepare and file with the Commission a registration
statement with respect to such securities and use its best efforts to
cause such registration statement to become and remain effective;
(b) prepare and file with the Commission such amendments and
supplements to such registration statements and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective until all Restricted Securities have been disposed
of and to comply with the provisions of the Securities Act with respect
to the sale or other disposition of all Restricted Shares covered by
such registration statement and will furnish to each selling
stockholder prior to the filing thereof a copy of any amendment or
supplement to such registration statement or prospectus and shall not
file any such amendment or supplement to which any such selling
stockholder shall have reasonably objected on the grounds that such
amendment or supplement does not comply in all material respects with
the requirements of the Securities Act or the rules and regulations
thereunder;
(c) furnish to each selling stockholder such number of copies
of such registration statement and of each such amendment or supplement
thereto (in each case including all exhibits) a summary prospectus or
other prospectus, including a preliminary prospectus, in conformity
with the requirements of the Securities Act, and such other documents
as such seller may reasonably request in order to facilitate the public
sale or other disposition of such Restricted Shares;
(d) use its best efforts to register or qualify the Restricted
Shares covered by such registration statement under the securities or
blue sky laws of the State of New York and of such other states or
jurisdictions as each such seller shall reasonably request but in no
event more than twelve states or jurisdictions in the aggregate
(provided, however, that the Corporation shall not be required to
consent to general service of process for all purposes in any
jurisdiction where it is not then qualified) and do any and all other
acts or things which may be necessary or advisable to enable such
seller to consummate the public sale or disposition in such
jurisdictions of such securities;
(e) notify each seller of Restricted Shares covered by such
registration statement, at any time when a prospectus relating thereto
covered by such registration statement is required to be delivered
under the Securities Act within the appropriate period mentioned in
clause (b) of this Section 6, of the happening of any event as a result
of which the
5
<PAGE> 28
Registration Statement, the prospectus or any document incorporated
therein by reference, includes an untrue statement of a material fact
or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading and at the
request of such seller, prepare and furnish to such seller a
post-effective amendment or supplement to the registration statement or
the related prospectus or any document incorporated therein by
reference or file any other required document so that, as thereafter
delivered to the purchasers of such shares, such prospectus shall not
include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading;
(f) furnish, at the request of any holder or holders
requesting registration of Restricted Shares pursuant to this Schedule,
on the date that such Restricted Shares are delivered to the
underwriters for sale in connection with a registration pursuant to
this Schedule, if such securities are being sold through underwriters,
or, if such securities are not being sold through underwriters, on the
date that the registration statement with respect to such securities
becomes effective, (i) an opinion, dated such date, of the counsel
representing the Corporation for the purposes of such registration, in
form and substance as is customarily given to underwriters, in an
underwritten public offering, addressed to the underwriters, if any,
and to the holder or holders making such request; and (ii) a letter
dated such date, from the independent certified public accountants of
the Corporation, in form and substance as is customarily given by
independent certified public accountants to underwriters in an
underwritten public offering, addressed to the underwriters, if any,
and to the holder or holders making such request;
(g) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make generally
available to its securities holders, as soon as reasonably practicable,
an earnings statement covering the period of at least twelve months,
but not more than eighteen months, beginning with the first month of
the first fiscal quarter after the effective date of such registration
statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act; and
(h) notify each selling stockholder and the managing
underwriter or underwriters, if any, promptly, and confirm
such advice in writing;
(A) when the registration statement, any pre-effective
amendment, the prospectus or any prospectus supplement or
post-effective amendment to the registration statement
6
<PAGE> 29
has been filed, and, with respect to the registration
statement or any post-effective amendment, when the same
has become effective;
(B) of the issuance by the Commission of any stop order
suspending the effectiveness of the registration statement or
the initiation of any proceedings for that purpose;
(C) of the receipt by the Corporation of any qualification of
the Restricted Shares for sale under the securities or "Blue
Sky" laws of any jurisdiction or the initiation or threatening
of any proceeding for such purpose; and
(D) of the existence of any fact which results in the
registration statement, the prospectus or any document
incorporated therein by reference containing an untrue
statement of material fact or omitting to state a material
fact required to be stated therein or necessary to make the
statements therein not misleading.
(i) make every reasonable effort to obtain the withdrawal of
any order suspending the effectiveness of the registration statement at
the earliest possible moment;
(j) use its best efforts to cause all Restricted Shares
covered by the registration statement to be listed on each securities
exchange on which the Corporation's Common Stock is listed, if any;
(k) provide and cause to be maintained a transfer agent for
all Restricted Shares covered by such registration statement from and
after a date not later than the effective date of such registration
statement.
7. UNDERWRITTEN OFFERINGS.
UNDERWRITING AGREEMENT. If requested by the underwriters for
any underwritten offering of Restricted Shares on behalf of a holder or holders
of Restricted Shares requested pursuant to this Schedule, the Corporation will
enter into an underwriting agreement with such underwriters for such offering,
such agreement to contain such representations and warranties by the Corporation
and such other terms and provisions as are customarily contained in underwriting
agreements with respect to secondary distributions, including, without
limitation, indemnities to the effect and to the extent provided in Section 10
hereof. The holders of Restricted Shares on whose behalf Restricted Shares are
to be distributed by such underwriters shall be parties to any such underwriting
agreement and the representations and warranties by, and the other agreements on
the part of, the Corporation to and for the benefit
7
<PAGE> 30
of such underwriters, shall also be made to and for the benefit of such holders
of Restricted Shares. Such holders of Restricted Shares shall not be required by
the Corporation to make any representations or warranties to or agreements with
the Corporation or the underwriters other than reasonable representations,
warranties or agreements regarding such holder, such holder's Restricted Shares
and such Holder's intended method or methods of disposition as are customarily
contemplated by underwriting agreements with respect to secondary distributions
and any other representation required by law.
8. PREPARATION; REASONABLE INVESTIGATION. In connection with the
preparation and filing of each registration statement registering Restricted
Shares under the Securities Act, the Corporation will give the holders of
Restricted Shares on whose behalf such Restricted Shares are to be so registered
and their underwriters, if any, and their respective counsel and accountants,
the opportunity to participate in the preparation of such registration
statement, each prospectus included therein or filed with the Commission, each
document incorporated by reference therein and each amendment thereof or
supplement thereto, and will give each of them such access to its books and
records and such opportunities to discuss the business of the Corporation with
its officers and the independent public accountants who have certified its
financial statements as shall be necessary, in the opinion of such holders and
such underwriters or their respective counsel, to conduct a reasonable
investigation within the meaning of the Securities Act.
9. EXPENSES. All expenses incurred by the Corporation in complying with
Sections 5 and 6 hereof, including, without limitation, all registration and
filing fees (without the limitations set forth in the following proviso), fees
and expenses of complying with securities and blue sky laws, printing expenses
and fees and disbursements of counsel (within the limitations set forth in the
following proviso and the independent certified public accountants of the
Corporation shall be paid by the Corporation; provided, however, that with
respect to the registration effected pursuant to Section 5(a), in the case of a
registration statement on Form S-3 (or successor form), the Corporation shall
pay only (x) the first $5,000, and, in the case of a registration statement on
Form S-1 (or successor form) the Corporation shall pay only the first $25,000,
of the registration and filing fees and fees and disbursements of counsel for
the Corporation and (y) one-half of any amount of filing and registration fees
in excess thereof. All underwriting discounts and selling commissions and stock
transfer taxes applicable to the Restricted Shares covered by registrations
effected pursuant to Section 5 hereof and one-half of all registration and
filing fees and fees and disbursements of counsel for the Corporation in excess
of the $5,000 or $25,000 amount (as the case may be) set forth in the preceding
proviso and all fees and disbursements of counsel for such seller or sellers, in
8
<PAGE> 31
proportion to the number of Restricted Shares sold by such seller or sellers,
shall be borne and paid by such seller or sellers. In connection with any
registration pursuant to Section 5(a), the seller or sellers (by unanimous vote
if there is more than one seller) may require the Corporation to retain as the
Corporation's counsel a law firm designated by the seller or sellers, and
acceptable to the Corporation, which acceptance shall not be unreasonably
withheld.
10. INDEMNIFICATION.
(a) In the event of any registration of any Restricted Shares
under the Securities Act pursuant to this Schedule or registration or
qualification of any Restricted Shares pursuant to Section 6(d) hereof, the
Corporation shall indemnify and hold harmless the seller of such shares, each
underwriter of such shares, if any, each broker or any other person acting on
behalf of such seller and each other person, if any, who controls any of the
foregoing persons, within the meaning of the Securities Act, against any losses,
claims, damages or liabilities, joint or several, to which any of the foregoing
persons may become subject under the Securities Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon an untrue statement or alleged untrue statement
of a material fact contained in any registration statement under which such
Restricted Shares were registered under the Securities Act, any preliminary
prospectus or final prospectus contained therein, any document incorporated by
reference therein or any amendment or supplement thereto, or any document
prepared and/or furnished by the Corporation incident to the registration or
qualification of any Restricted Shares pursuant to Section 6(d) hereof, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading or, with respect to any prospectus, necessary to make the
statements therein in light of the circumstances under which they were made, not
misleading, or any violation by the Corporation of the Securities Act or state
securities or blue sky laws applicable to the Corporation and relating to action
or inaction required of the Corporation in connection with such registration or
qualification under such state securities or blue sky laws; and shall reimburse
such seller, such underwriter, broker or other person acting on behalf of such
seller and each such controlling person for any legal or any other expenses
reasonably incurred by any of them in connection with investigating or defending
any such loss, claim, damage, liability or action; provided, however, that the
Corporation shall not be liable in any such case to the extent that such loss,
claim, damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in said
registration statement, said preliminary prospectus or said prospectus or said
amendment or supplement or any document incident to the registration or
9
<PAGE> 32
qualification of any Restricted Shares pursuant to Section 6(d) hereof in
reliance upon and in conformity with written information furnished to the
Corporation through an instrument duly executed by such seller or such
underwriter specifically for use in the preparation thereof.
(b) Before Restricted Shares held by any prospective seller
shall be included in any registration pursuant to this Schedule, such
prospective seller and any underwriter acting on its behalf shall have agreed to
indemnify and hold harmless (in the same manner and to the same extent as set
forth in the preceding paragraph (a) of this Section 10) the Corporation, each
director of the Corporation, each officer of the Corporation who shall sign such
registration statement and any person who controls the Corporation within the
meaning of the Securities Act, with respect to any untrue statement or omission
from such registration statement, any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereto, if such untrue
statement or omission was made in reliance upon and in conformity with written
information furnished to the Corporation through an instrument duly executed by
such seller or such underwriter specifically for use in the preparation of such
registration statement, preliminary prospectus, final prospectus or amendment or
supplement; provided, however, that the maximum amount of liability in respect
of such indemnification shall be limited, in the case of each prospective seller
of Restricted Shares, to an amount equal to the gross proceeds actually received
by such prospective seller from the sale of Restricted Shares effected pursuant
to such registration.
(c) Promptly after receipt by an indemnified party of notice
of the commencement of any actions involving a claim referred to in paragraph
(a) or (b) of this Section 10, such indemnified party will, if a claim in
respect thereof is made against an indemnifying party, give written notice to
the latter of the commencement of such action. In case any such action is
brought against an indemnified party, the indemnifying party will be entitled to
participate in and to assume the defense thereof, jointly with any other
indemnifying party similarly notified to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party shall not be responsible for any
legal or other expenses subsequently incurred by the indemnified party in
connection with the defense thereof; provided, however, that if any indemnified
party shall have reasonably concluded that there may be one or more legal
defenses available to such indemnified party which are differed from or
additional to those available to the indemnifying party, or that such claim or
litigation involves or could have an effect upon matters beyond the scope of the
indemnity agreement provided in this Section 10, the indemnifying party shall
reimburse such indemnified party for that
10
<PAGE> 33
portion of the fees and expenses of any counsel retained by the indemnified
party which are reasonably related to the matters covered by the indemnity
agreement provided in this Section 10.
(d) The failure to notify an indemnifying party promptly of
the commencement of any such action, if and only to the extent materially
prejudicial to the ability of the indemnifying party to defend such action,
shall relieve such indemnifying party of any liability to the indemnified party
under this Section 10, but the omission so to notify the indemnifying party will
not relieve the indemnifying party of any liability that it may have to any
indemnified party otherwise than under this Schedule.
The indemnifying party shall not make any settlement of any
claims indemnified against hereunder without the written consent of the
indemnified party or parties, which consent shall not be unreasonably withheld.
(e) If the indemnification provided for in Section 10 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative benefits received from the offering by the Corporation, the holders of
Restricted Shares and any underwriter; but if such allocation is not permitted
by applicable law or if the indemnified party failed to give the notice required
under paragraph (c) above, each indemnifying party shall contribute to such
amount paid or payable by such indemnified party in such proportions as are
appropriate to reflect not only such relative benefits but also relative fault
of the Corporation, the holders of Restricted Securities and any underwriter in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities (or actions in respect thereof), as well as any
other relevant equitable considerations. The parties agree that the 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
untrue statement of a material fact relates to information supplied by the
Corporation, the holders of Restricted Shares or underwriter and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission; that it would not be just and equitable if
contribution pursuant to such agreement were determined by pro rata allocation
or by any other method of allocation which does not take account of the
equitable consideration referred to above in this paragraph (e); that the amount
paid or payable by an indemnified party as a result of the losses, claims,
damages or liabilities (or actions in respect thereof), referred to above in
this paragraph (e) shall be deemed
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<PAGE> 34
to include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim;
that the holders of Restricted Shares shall not be required to contribute any
amount in excess of the dollar amount, if any, by which the proceeds to be
received by such holders from the sale of their respective Restricted Shares
exceeds the amount of damages such holders of Restricted Shares would have
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission, and no underwriter shall be required
to contribute any amount in excess of the amount by which the total price at
which the shares or securities underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission; and that no person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
11. REMOVAL OF LEGENDS, ETC. Notwithstanding the foregoing provisions
of this Schedule, the restrictions imposed by this Schedule upon the
transferability of any Restricted Securities shall cease and terminate when any
such Restricted Securities are sold or otherwise disposed of in accordance with
the intended method of disposition by the seller or sellers thereof set forth in
the registration statement or as otherwise contemplated by Section 4 hereof.
Whenever the restrictions imposed by this Schedule shall terminate, as herein
provided, the holder of any Restricted Securities as to which such restrictions
have terminated shall be entitled to receive from the Corporation, without
expense, a new certificate not bearing the restrictive legends referred to in
Section 3 hereof and not containing any other reference to the restrictions
imposed by this Schedule.
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<PAGE> 1
Exhibit 4.6
ANNEX A
THIS DEBENTURE AND ANY SHARES OF COMMON STOCK ISSUABLE UPON ITS CONVERSION HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE TRANSFERRED
UNTIL (l) A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 SHALL HAVE
BECOME EFFECTIVE WITH RESPECT THERETO, OR (2) RECEIPT BY THE COMPANY OF AN
OPINION OF COUNSEL TO THE COMPANY OR OTHER SUCH OTHER COUNSEL REASONABLY
ACCEPTABLE TO THE COMPANY, BOTH AS TO THE IDENTITY OF SUCH OTHER COUNSEL AND THE
FORM AND SUBSTANCE OF THE OPINION OF SUCH OTHER COUNSEL, TO THE EFFECT THAT
REGISTRATION UNDER THE SECURITIES ACT OF 1933 IS NOT REQUIRED IN CONNECTION
WITH SUCH PROPOSED TRANSFER.
CONSERVER CORPORATION OF AMERICA, INC.
10% Convertible Debenture Due , 1997
$ September , 1996
CONSERVER CORPORATION OF AMERICA, INC., a Delaware corporation
(the "Company"), for value received, hereby promises to pay to the order of
______________________, or registered assigns (the "Holder"), in such coin or
currency of the United States of America as at the time of payment shall be
legal tender for the payment of public and private debts, at the last address of
the Holder of this Note as recorded on the books of the Company or, if no such
address is noted, at the principal office of the Company, the principal sum of
Six Hundred Thousand ($600,000) Dollars, on September , 1997, plus interest on
the outstanding principal sum hereof from the date hereof, at the rate of 10%
per annum until payment of said unpaid principal sum shall be made in full.
This Note is one of the 10% Convertible Debentures issued by
the Company in the aggregate principal amount of up to $600,000 (the
"Debenture") offered pursuant to the Subscription Agreement executed in
connection herewith (the "Subscription Agreement").
1. Registry. Books for the registry of this Debenture shall be kept at the
principal office of the Company. No transfer of this Debenture shall be valid
unless made on the Company's
<PAGE> 2
books, by the registered Holder hereof in person or by an attorney duly
authorized in writing.
2. Conversion.
(a) The Holder of this Debenture and any registered assign
shall have the right, at its option, at any time and from time to time from and
after the date hereof and up to and including the close of business on September
, 1997 (the "Maturity Date"), to elect to convert, subject to the terms and
provisions of this Section 2, effective ten (10) days after receipt by the
Company of notice of such election given in accordance with Section 2(b), all,
and only all, of the unpaid principal hereof into fully paid and nonassessable
shares of Common Stock, $.01 par value, of the Company (the "Common Stock"), at
the price of $5.00 per share, or if an adjustment of such price has taken place
in accordance with the provisions of Section 2(d) hereof, at the price as last
adjusted (the "Conversion Price"), such that the number of shares obtained upon
conversion shall be determined by dividing the Conversion Price into the
principal amount of this Debenture being converted. The Conversion Price and the
number and character of shares of Common Stock are subject to adjustment as
hereinafter provided. In the event the Company's initial public offering of
shares of Common Stock and Warrants (the "Offering") is not closed on or before
the Maturity Date, the Holder may elect to extend the Maturity Date to September
, 1998 (the "Extended Maturity Date"), in which event the Holder may elect to
convert as set forth above until the Extended Maturity Date.
(b) In order to convert this Debenture, the Holder hereof
shall deliver this Debenture to the Company at its principal office, together
with written notice in the form annexed hereto that it elects to convert the
then unpaid principal balance of this Debenture, together in each instance with
then accrued but unpaid interest thereon, if any, into shares of Common Stock in
accordance with the provisions of this Section 2.
(c) If the holder has made an election to convert all of the
principal balance of this Debenture, and accrued but unpaid interest due
thereon, as provided in subparagraph (b) above, ten (10) days after receipt by
the Company of such notice or as promptly as practicable thereafter, the Company
shall deliver or cause to be delivered to the Holder a certificate representing
the number of fully paid and nonassessable shares of Common Stock into which
this Debenture is being converted, together with a cash adjustment in respect
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<PAGE> 3
of any fraction of a share to which he shall be entitled, if any. Such
conversion shall be deemed to have been made at the close of business on the
date this Debenture shall have been surrendered together with the written
election to convert, so that the person entitled to receive the shares of Common
Stock upon conversion of this Debenture shall be treated for all purposes as
having become the record holder or holders of such shares of Common Stock at
such time and such conversion shall be at the Conversion Price in effect at such
time. The issuance of certificates for shares of Common Stock upon the
conversion of this Debenture shall be made without charge to the Holder hereof
for any tax in respect of the issuance of such certificate; provided, however,
that the Company shall not be required to pay any taxes which may be payable or
incur any other expenses in respect of any transfer involved in the issuance of
any certificate for shares of Common Stock in a name other than that of the
Holder of this Debenture in respect of which shares of Common Stock are issued.
(d) The Conversion Price shall be subject to adjustment from
time to time as set forth in this subsection (d) and in Section 4 hereof:
(i) If at any time or times after the date hereof, the
total number of outstanding shares of Common Stock shall be increased or
decreased by a stock split, stock dividend, reverse split or similar pro rata
change in the capitalization of the Company, the Conversion Price shall be an
amount determined as follows:
(A) by multiplying (x) the Conversion Price immediately prior
to such event, by (y) the total number of outstanding shares of Common
Stock of the Company immediately prior to such event; and
(B) by dividing the product thereof by the total number of
outstanding shares of Common Stock of the Company immediately after
such event.
(ii) Anything herein to the contrary notwithstanding, no
adjustment in the Conversion Price shall be required unless such adjustment,
either by itself or with other adjustments not previously made, would require a
change of at least one percent; provided, however, that any adjustment which by
reason of this Section 2(d)(ii) is not required to be made shall be carried
forward and taken into account in any subsequent adjustment.
(iii) Anything herein to the contrary notwithstanding, no
adjustments pursuant to this Section 2(d) shall be made
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<PAGE> 4
(a) by reason of or in connection with the issuance of shares of Common Stock
upon conversion of the Debentures, or (b) if such adjustment would result in an
increase in the Conversion Price.
(e) If at any time or times after the date hereof, the Company
shall effect a reorganization, shall merge with or consolidate into another
corporation, or shall sell, transfer or otherwise dispose of all or
substantially all of its property, assets or business and, pursuant to the terms
of such reorganization, merger, consolidation or disposition of assets, shares
of stock or other securities, property or assets of the Company (or the
successor, transferee or affiliate of the Company) or cash are to be received by
or distributed to the holders of Common Stock, or if at any time or times after
the date hereof the Company shall make any distribution of its assets with
respect to its Common Stock, then the Holder of this Debenture shall have the
right, concurrently with the closing of such transaction, to convert this
Debenture and to receive, upon conversion of this Debenture, the number of
shares of stock or other securities, property or assets of the Company (or the
successor, transferee or affiliate of the Company), or cash receivable upon or
as a result of such reorganization, merger, consolidation, disposition of assets
or distribution by a holder of the number of shares of Common Stock into which
this Debenture was convertible immediately prior to such event. The provisions
of this Section 2(e) shall similarly apply to successive reorganizations,
mergers, consolidations, dispositions of assets or distributions.
(f) If at any time or times after the date hereof, a purchase,
tender or exchange offer is made to and accepted by the holders of more than 50%
of the outstanding shares of Common Stock of the Company, the Company shall not
effect any consolidation, merger or sale with the person having made such offer
or with any affiliate of such person, unless prior to the consummation thereof
the Holder of this Debenture shall have been given a reasonable opportunity then
to elect to convert this Debenture and to receive, upon conversion of this
Debenture, either the stock, securities, cash or assets then issuable with
respect to the Common Stock or the previous holders of the Common Stock in
accordance with such offer.
(g) No fractional shares of Common Stock or scrip representing
fractional shares of Common Stock shall be issued upon any conversion of this
Debenture, but, in lieu thereof, there shall be paid an amount in cash equal to
the same fraction of the Conversion Price of a whole share of Common Stock.
(h) The Company shall at all times reserve and keep available
out of its authorized but unissued shares of Common Stock, solely for the
purpose of effecting the conversion or exchange of this Debenture, the full
number of whole shares of Common Stock then
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<PAGE> 5
deliverable upon the conversion or exchange of the entire principal amount of
this Debenture at the time outstanding. The Company shall take at all times such
corporate action as shall be necessary in order that the Company may validly and
legally issue fully paid and nonassessable shares of Common Stock upon the
conversion of this Debenture in accordance with the provisions hereof.
3. Events of Default. This Debenture shall automatically become due and payable
in full if any one or more of the following events ("Events of Default") shall
occur and be continuing:
(a) If the Company shall (i) admit in writing its inability to
pay its debts generally as they become due, (ii) file a petition or
answer or consent seeking relief under the Federal Bankruptcy Code, as
now constituted or hereafter amended, or any other applicable Federal
or state bankruptcy or insolvency law or other similar law, (iii)
consent to the institution of proceedings under any law listed in (ii)
above, or to the filing of any such petition or to the appointment or
taking possession of a receiver, liquidator, assignee, trustee,
custodian (or other similar official) of the Company or of any
substantial part of its property, or (iv) make an assignment for the
benefit of its creditors; or
(b) If a decree or order shall be entered by a court for
relief in respect of the Company under the Federal Bankruptcy Code, as
now constituted or hereafter amended, or any other applicable Federal
or state bankruptcy or insolvency law or other similar law, or
appointing a receiver, liquidator, assignee, trustee (or similar
official) of the Company or of any substantial part of its property, or
ordering the winding-up or liquidation of their affairs and such decree
or order shall not be vacated or set aside or stayed within a period of
120 days from the date of entry thereof; or
(c) If the Company shall fail to make any payment of principal
or interest due under this Debenture within ten days of the date upon
which such payment was due.
The foregoing notwithstanding, the Holder, by written, may
waive any Event of Default and/or rescind and annul any such acceleration; but
no such waiver or rescission and annulment shall extend to or shall affect any
subsequent default, or shall impair any right consequent thereon.
The Company agrees that it will not declare or pay any
dividends on its Common Stock following the occurrence of an Event of Default so
long as the Event of Default shall be continuing.
5
<PAGE> 6
4. Adjustment for Issue or Sale of Common Stock at Less than Conversion Price.
With the exception of (a) issuances of shares of Common Stock upon conversion of
this Debenture or otherwise pursuant to the Subscription Agreement, (b) the
issuance of shares underlying any currently outstanding options, warrants or
other securities exchangeable for, and convertible into, Common Stock, (c) the
issuance subsequent to the date hereof of any options or other rights to acquire
shares of Common Stock under any of the Company's employee benefit plans
(collectively the "Company Plans"), (d) the exercise subsequent to the date
hereof of options or other rights to acquire Common Stock under the Company
Plans, (e) the issuance of shares pursuant to the Offering, and (f) the issuance
of any shares underlying other securities issued in the Offering which by their
terms are exchangeable, convertible or exercisable into shares of Common Stock,
in case at any time or from time to time the Company shall issue shares of
Common Stock without consideration or for a consideration per share less than
the Conversion Price (or, if a Pro Forma Adjusted Conversion Price shall be in
effect by reason of a previous adjustment under this Section 4, as provided
below in this Section 4, less than such Pro Forma Adjusted Payment Price) (as
hereinafter defined) in effect immediately prior to the issue or sale of such
shares, then, and in each such case, the Holder of this Debenture upon the
conversion hereof as provided in Section 2 shall be entitled to receive, in lieu
of the shares of Common Stock theretofore receivable upon such conversion, a
number of shares of Common Stock determined by (a) dividing to the nearest
one-thousandth (.001) the Payment Price by a Pro Forma Adjusted Conversion Price
to be computed as provided below in this Section 4, and (b) multiplying to the
nearest whole share (one-half share being considered a whole share) the
resulting quotient by the number of shares of Common Stock (as constituted on
the Conversion Date) issuable upon such conversion. Such Pro Forma Adjusted
Conversion Price shall be computed (to the nearest one-thousandth ($.001)) by
dividing
(i) the sum of (x) the result obtained by
multiplying the number of shares of Common
Stock outstanding immediately prior to such
issue or sale by the Conversion Price (or,
if a Pro Forma Adjusted Conversion Price
shall be in effect by reason of a previous
adjustment under this Section 4, by such
Pro Forma Adjusted Conversion Price), plus
(y) the consideration, if any, received by
the Company upon such issue or sale, by
(ii) the number of shares of Common Stock
outstanding immediately after such issue or
sale.
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<PAGE> 7
Notwithstanding the above, in no event shall the Pro Forma Adjusted Conversion
Price be adjusted pursuant to this computation to an amount in excess of
Conversion Price (or, if a Pro Forma Adjusted Conversion Price shall be in
effect by reason of a Previous Adjustment under this Section 4 in excess of such
Pro Forma Adjusted Conversion Price) immediately prior to such computation.
For the purposes of this Section 4, the following subsections 4(a) to 4(j) shall
be applicable:
(a) Dividends, Etc. in Common Stock or Convertible
Securities. In case the Company shall declare any dividend or order any other
distribution upon any stock of the Company of any class, payable in Common Stock
or in any stock or other securities directly or indirectly convertible into or
exchangeable for Common Stock (any such stock or other securities being
hereinafter called "Convertible Securities"), such declaration or distribution
shall be deemed to be an issue and sale (as of the record date), without
consideration, of such Common Stock or such Convertible Securities, as the case
may be.
(b) Issuance or Sale of Convertible Securities. In
case the Company shall issue or sell any Convertible Securities, there shall be
determined the price per share for which Common Stock is issuable upon the
conversion or exchange thereof, such determination to be made by dividing (a)
the total amount received or receivable by the Company as consideration for the
issue or sale of such Convertible Securities (subject to adjustment as provided
in subsection 4(f) in case of an issue or sale for cash), plus the minimum
aggregate amount of additional consideration, if any, payable to the Company
upon the conversion or exchange thereof, by (b) the maximum number of shares of
Common Stock issuable upon the conversion or exchange of all such Convertible
Securities.
If the price per share so determined shall be
less than the Conversion Price (or, if a Pro Forma Adjusted Conversion Price
shall be in effect, less than such Pro Forma Adjusted Conversion Price), then
such issue or sale shall be deemed to be an issue or sale for cash (as of the
date of issue or sale of such Convertible Securities) of such maximum number of
shares of Common Stock at the price per share so determined; provided that if
such Convertible Securities shall by their terms provide for a change or changes
(upwards or downwards), with the passage of time or otherwise, in the amount of
additional consideration, if any, payable to the Company, or in the rate of
exchange, upon the conversion or exchange thereof, the Pro Forma Adjusted
Conversion Price shall, forthwith upon any such change becoming effective, be
readjusted (but to no greater extent than originally adjusted, in the case of an
increase in the additional consideration) to reflect the same; and provided
further that upon the expiration of such rights of
7
<PAGE> 8
conversion or exchange of such Convertible Securities, if any thereof shall not
have been exercised, the Pro Forma Adjusted Conversion Price shall forthwith be
readjusted (but to no greater extent than originally adjusted, in the case of an
increase in the additional consideration) and thereafter be the price which it
would have been had an adjustment been made on the basis that (i) the only
shares of Common Stock so issued or sold were those issued or sold upon
conversion or exchange of such Convertible Securities, and (ii) they were issued
or sold for the consideration actually received by the Company upon such
conversion or exchange, plus the consideration, if any, actually received by the
Company for the issue or sale of all of such Convertible Securities which shall
have been converted or exchanged.
(c) Grant of Rights or Options for Common Stock. In
case at any time the Company shall grant any rights or options to subscribe for,
purchase or otherwise acquire Common Stock, there shall be determined the price
per share for which Common Stock is issuable upon the exercise of such rights or
options, such determination to be made by dividing (a) the total amount, if any,
received or receivable by the Company as consideration for the granting of such
rights or options, plus the minimum aggregate amount of additional consideration
payable to the Company upon the exercise of such rights or options, by (b) the
maximum number of shares of Common Stock issuable upon the exercise of such
rights or options.
If the price per share so determined shall be
less than the Conversion Price (or, if a Pro Forma Adjusted Conversion Price
shall be in effect, less than such Pro Forma Adjusted Conversion Price), then
the granting of such rights or options shall be deemed to be an issue or sale
for cash (as of the date of granting of such rights or options) of such maximum
number of shares of Common Stock at the price per share so determined; provided
that if such rights or options shall by their terms provide for a change or
changes (upwards or downwards), with the passage of time or otherwise, in the
amount of additional consideration payable to the Company upon the exercise
thereof, the Pro Forma Adjusted Conversion Price shall forthwith upon any such
change becoming effective, be readjusted (but to no greater extent than
originally adjusted, in the case of an increase in the additional consideration)
to reflect the same; and provided further that upon the expiration of such
rights or options, if any thereof shall not have been exercised, the Pro Forma
Adjusted Conversion Price shall forthwith be readjusted (but to no greater
extent than originally adjusted, in the case of an increase in the additional
consideration), and thereafter be the price which it would have been had an
adjustment been made on the basis that (i) the only shares of Common Stock so
issued or sold were those issued or sold upon the exercise of such rights or
options, and (ii) they
8
<PAGE> 9
were issued or sold for the consideration actually received by the Company upon
such exercise, plus the consideration, if any, actually received by the Company
for the granting of all such rights or options, whether or not exercised.
(d) Grant of Rights or Options for Convertible
Securities. In case the Company shall grant any rights or options to subscribe
for, purchase or otherwise acquire Convertible Securities, such Convertible
Securities shall be deemed, for the purposes of subsection 4(b), to have been
issued and sold for the total amount received or receivable by the Company as
consideration for the granting of such rights or options plus the minimum
aggregate amount of additional consideration, if any, payable to the Company
upon the exercise of such rights or options; provided that if such rights or
options shall by their terms provide for a change or changes (upwards or
downwards), with the passage of time or otherwise, in the amount of additional
consideration payable to the Company upon the exercise thereof, the Pro Forma
Adjusted Conversion Price shall, forthwith upon any such change becoming
effective, be readjusted (but to no greater extent than originally adjusted, in
the case of an increase in the additional consideration) to reflect the same;
and provided further that upon the expiration of such rights or options if any
thereof shall not have been exercised, the Pro Forma Adjusted Conversion Price
shall forthwith be readjusted (but to no greater extent than originally
adjusted, in the case of an increase in the additional consideration), and
thereafter be the price which it would have been had an adjustment been made
upon the basis that (i) the only Convertible Securities so issued or sold were
those issued or sold upon the exercise of such rights or options, and (ii) they
were issued or sold for the consideration actually received by the Company upon
such exercise, plus the consideration, if any, actually received by the Company
for the granting of all such rights or options, whether or not exercised.
(e) Dilution in Case of Other Securities. In case at
any time any securities other than Common Stock shall at the time be receivable
upon the payment of this Debenture, and in case any such additional securities
shall be issued or sold by the Company or shall become subject to issue upon the
conversion or exchange of any securities of the Company or to subscription,
purchase or other acquisition pursuant to any rights or options granted by the
Company for a consideration such as to dilute the payment rights evidenced by
this Debenture, then, and in each such case, the Pro Forma Adjusted Conversion
Price shall forthwith be adjusted, substantially in the manner provided for
above in this Section 4 so as to protect the holder of this Debenture against
the effect of such dilution.
(f) Expenses, Etc., Deducted. In case any shares of
Common Stock, Convertible Securities or other securities, or any
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<PAGE> 10
rights or options to subscribe for, purchase or otherwise acquire any thereof,
shall be issued or sold for cash, the consideration received therefor shall be
deemed to be the net amount received therefor, after deducting all costs and
expenses reasonably incurred in connection with such issuance or sale determined
as of the date not later than 45 days after the date of the close of the
offering with respect to such issuance or sale.
(g) Determination of Consideration. In case any
shares of Common Stock, Convertible Securities or other securities, or any
rights or options to subscribe for, purchase or otherwise acquire any thereof,
shall be issued or sold for a consideration other than cash (or a consideration
which includes cash if such cash constitutes a part of the assets of a
corporation or business substantially all of the assets of which are being
received as such consideration), then, for the purposes of this Section 4, the
Board of Directors of the Company shall in good faith determine the fair value
of such consideration, and such Common Stock, Convertible Securities, other
securities, rights or options shall be deemed to have been issued or sold for an
amount of cash equal to the value so determined in good faith. In case any
Common Stock, Convertible Securities or other securities or any rights or
options to subscribe for, purchase or otherwise acquire any thereof shall be
issued or sold together with other securities or other assets for a
consideration which covers both, the Board of Directors of the Company shall in
good faith determine what part of such consideration so received shall be
allocated to the issue or sale of such Common Stock, Convertible Securities or
other securities or such rights or options.
(h) Record Date Deemed Issue Date. In case the
Company shall take a record of the holders of shares of its stock of any class
for the purpose of entitling them (a) to receive a dividend or a distribution
payable in Common Stock, Convertible Securities or other securities, or (b) to
subscribe for, purchase or otherwise acquire Common Stock, Convertible
Securities or other securities, then such record date shall be deemed to be the
date of the issue or sale of the Common Stock, Convertible Securities or other
securities issued or sold or deemed to have been issued or sold upon the
declaration of such dividend or the making of such other distribution, or the
date of the granting of such rights of subscription, purchase or other
acquisition, as the case may be.
(i) Shares Considered Outstanding. The number of
shares of Common Stock outstanding at any given time shall include shares deemed
issued for purposes of adjustment pursuant to this Section 4, but shall exclude
shares in the treasury of the Company.
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<PAGE> 11
(j) Duration of Pro Forma Adjusted Conversion Price.
Following each computation or readjustment of a Pro Forma Adjusted Conversion
Price, as provided in this Section 4, the newly computed or adjusted Pro Forma
Adjusted Conversion Price shall remain in effect until a further computation or
readjustment thereof is required by this Section 4.
5. Subordination. This Debenture shall be subordinated to indebtedness for
borrowed money to banks or other financial institutions, now outstanding or
hereinafter incurred, and shall be pari passu with the Company's % Convertible
Debentures in the approximate amount of $_________ heretofore issued.
6. Miscellaneous.
(a) All notices, demands, requests and other communications
to be given or delivered under or by reason of the provisions of this Debenture
shall be in writing and shall be deemed to have been given personally or when
mailed by certified or registered mail, return receipt requested and postage
prepaid, and addressed, if to the Company, at Conserver Corporation of America,
Inc., 2655 Le Jeune Road, Suite 535, Coral Gables, Florida 33134, Attention:
Chief Executive Officer, with a copy to Parker Duryee Rosoff & Haft, 529 Fifth
Avenue, New York, New York 10017, Attention: Ira I. Roxland, Esq., or at such
other address as specified by the Company in writing to the Holders, or, if to
the Holder, at the address for such Holder on the books of registry maintained
in accordance with Section 1 hereof.
(b) This Debenture and its validity, construction and
performance shall be governed in all respects by the laws of the State of New
York, without giving effect to principles of conflict of laws.
(c) In any case where the date of interest on or maturity of
principal of this Debenture shall not be a business day, then the payment
thereof shall be made on the next succeeding business day, with the same force
and effect as if made on the date of maturity.
(d) This Debenture shall not be modified or amended except by
a writing signed by the Holder.
(e) If any provision of this Debenture shall be held to be
invalid, illegal or unenforceable, such invalidity, illegality or
unenforceability shall not affect any other provisions of this Debenture, and
this Debenture shall be construed as if any invalid, illegal or unenforceable
provisions had not been contained herein; provided however, that default in the
performance or observance by the Company of any provision of this Debenture
which has been held to be invalid, illegal or unenforceable shall,
notwithstanding such
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<PAGE> 12
invalidity, illegality or unenforceability, constitute an Event of Default
hereunder, if such default would have constituted an Event of Default without
regard to such invalidity, illegality or unenforceability.
(f) The headings of this Debenture are for convenience only
and shall not control or affect the meaning or construction of any provisions
hereof.
(g) If this Debenture is mutilated, lost, stolen or destroyed,
the Company shall issue a new Debenture of like form and maturity to the Holder
hereof upon presentment and surrender of the mutilated Debenture, in the case of
mutilation, and upon receipt of evidence of loss, theft or destruction and of
indemnity in all other cases, each in form satisfactory to the Company.
(h) This Debenture and any payment of principal or interest
due hereunder is transferable, negotiable and assignable at the option of the
Holder hereof only in compliance with the terms of this Debenture and the
provisions of the Subscription Agreement, including, without limitation, the
requirement of compliance with applicable state and Federal securities laws and
the delivery to the Company of an opinion of counsel satisfactory to the Company
of such compliance. This Debenture may be transferred by the Holder on the
Debenture register of the Company, upon surrender of this Debenture for
registration of transfer at the Company's office duly endorsed by, or
accompanied by a written instrument of transfer reasonably satisfactory to the
Company duly executed by, the Holder or his attorney duly authorized in writing,
and thereupon one or more new Debentures, for the same aggregate principal
amount then outstanding, will be issued to the designated transferee or
transferees. No service charge will be made for any such transfer, but the
Company may require payment of a sum sufficient to cover any tax or government
charge payable in connection therewith.
(i) If at any time or times after the date hereof:
(1) The Company shall pay any dividends upon its Common Stock,
whether payable in cash, stock or other property, or make any
distribution of its assets with respect to its Common Stock;
(2) The Company shall offer for subscription pro rata to the
holders of its Common Stock any additional shares of stock of any class
or other rights;
(3) The Company shall effect a reorganization, shall merge
with or consolidate into another corporation, or shall sell, transfer
or otherwise dispose of all or substantially all of its property,
assets or business; or
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<PAGE> 13
(4) There shall be voluntary or involuntary dissolution,
liquidation, or winding up of the Company;
then, in any one or more of such cases, the Company shall
give written notice to the Holder of the Debenture of the date on which (a) a
record shall be taken for such dividend, distribution, or subscription rights,
or (b) such reorganization, merger, consolidation, sale, transfer or other
disposition, liquidation, or winding up shall take place, as the case may be.
Such notice shall also specify the date as of which the holders of Common Stock
of record shall participate in such dividend, distribution, or subscription
rights, or shall be entitled to exchange their Common Stock for securities or
other property deliverable upon such reorganization, merger, consolidation,
sale, transfer or other disposition, liquidation or winding up, as the case may
be. Such notice shall be given at least 20 days prior to the action in question
and not less than 10 days prior to the record date or the date on which the
Company's transfer books are closed in respect thereto.
(j) The Company shall deliver to the Holder, not later than 90
days following the end of each fiscal year of the Company, a copy of its annual
financial statements.
(k) If any payment of principal or interest or any notice
hereunder is required to be made on any date which is a Saturday, Sunday or New
York State bank holiday, such payment or notice shall be made on the next
succeeding day on which banks in New York State are open for business.
(l) Prior to due presentment of registration for transfer of
this Debenture, the Company or any agent thereof may treat the person in whose
name this Debenture is registered as the absolute owner thereof for all
purposes, whether or not this Debenture is overdue.
IN WITNESS WHEREOF, the Company has caused this Debenture to be
duly executed, and its corporate seal to be hereunder affixed and attached.
CONSERVER CORPORATION OF AMERICA, INC.
By:_____________________________________
ATTEST:
By:
(Seal)
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<PAGE> 14
CONVERSION NOTICE
TO: CONSERVER CORPORATION OF AMERICA, INC.
The undersigned Holder of this Debenture hereby irrevocably exercises
the option to convert the amount of the principal balance of this Debenture
specified below into shares of Common Stock, $.01 par value, of Conserver
Corporation of America, Inc. in accordance with the terms of this Debenture, and
directs that the shares issuable and deliverable upon the conversion, together
with any replacement Debenture or check in payment for a fractional share, be
issued in the name of and delivered to the undersigned at the address set forth
below the undersigned's signature.
Date: ____________, ____
Principal amount to be Name, address and signature
converted $_________
---------------------------
Name
---------------------------
Address
---------------------------
---------------------------
Signature
<PAGE> 1
Exhibit 4.7
THIS DEBENTURE AND ANY SHARES OF COMMON STOCK ISSUABLE UPON ITS CONVERSION HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE TRANSFERRED
UNTIL (l) A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 SHALL HAVE
BECOME EFFECTIVE WITH RESPECT THERETO, OR (2) RECEIPT BY THE COMPANY OF AN
OPINION OF COUNSEL TO THE COMPANY OR OTHER SUCH OTHER COUNSEL REASONABLY
ACCEPTABLE TO THE COMPANY, BOTH AS TO THE IDENTITY OF SUCH OTHER COUNSEL AND THE
FORM AND SUBSTANCE OF THE OPINION OF SUCH OTHER COUNSEL, TO THE EFFECT THAT
REGISTRATION UNDER THE SECURITIES ACT OF 1933 IS NOT REQUIRED IN CONNECTION
WITH SUCH PROPOSED TRANSFER.
CONSERVER CORPORATION OF AMERICA, INC.
10% Convertible Debenture Due November , 1997
$ November , 1996
- ----------------
CONSERVER CORPORATION OF AMERICA, INC., a Delaware corporation
(the "Company"), for value received, hereby promises to pay to the order of
,or registered assigns (the "Holder"), in such coin or currency
of the United States of America as at the time of payment shall be legal
tender for the payment of public and private debts, at the last address of the
Holder of this Note as recorded on the books of the Company or, if no such
address is noted, at the principal office of the Company, the principal sum of
_______________________ ($___________) Dollars, on the earlier of (i) November
, 1997 or (ii) at Holder's election, within 30 days after the closing of the
Company's initial public offering of 4,000,000 shares of Common Stock and
4,000,000 warrants, as provided in the Company's Registration Statement on
Form S-1, plus interest on the outstanding principal sum hereof from the date
hereof, at the rate of 10% per annum until payment of said unpaid principal
sum shall be made in full.
This Note is the 10% Convertible Debenture issued by the
Company in the aggregate principal amount of $150,000 (the "Debenture") offered
pursuant to the Subscription Agreement executed in connection herewith (the
"Subscription Agreement").
<PAGE> 2
1. Registry. Books for the registry of this Debenture shall be kept at the
principal office of the Company. No transfer of this Debenture shall be valid
unless made on the Company's books, by the registered Holder hereof in person or
by an attorney duly authorized in writing.
2. Conversion.
(a) The Holder of this Debenture and any registered assign
shall have the right, at its option, at any time and from time to time from and
after the date hereof and up to and including the close of business on November
, 1997 (the "Maturity Date"), to elect to convert, subject to the terms and
provisions of this Section 2, effective ten (10) days after receipt by the
Company of notice of such election given in accordance with Section 2(b), all,
and only all, of the unpaid principal hereof into fully paid and nonassessable
shares of Common Stock, $.01 par value, of the Company (the "Common Stock"), at
the price of $5.00 per share, or if an adjustment of such price has taken place
in accordance with the provisions of Section 2(d) hereof, at the price as last
adjusted (the "Conversion Price"), such that the number of shares obtained upon
conversion shall be determined by dividing the Conversion Price into the
principal amount of this Debenture being converted. The Conversion Price and the
number and character of shares of Common Stock are subject to adjustment as
hereinafter provided. In the event the Company's initial public offering of
shares of Common Stock and Warrants (the "Offering") is not closed on or before
the Maturity Date, the Holder may elect to extend the Maturity Date to November
, 1998 (the "Extended Maturity Date"), in which event the Holder may elect to
convert as set forth above until the Extended Maturity Date.
(b) In order to convert this Debenture, the Holder hereof
shall deliver this Debenture to the Company at its principal office, together
with written notice in the form annexed hereto that it elects to convert the
then unpaid principal balance of this Debenture, together in each instance with
then accrued but unpaid interest thereon, if any, into shares of Common Stock in
accordance with the provisions of this Section 2.
(c) If the holder has made an election to convert all of the
principal balance of this Debenture, and accrued but unpaid interest due
thereon, as provided in subparagraph (b) above, ten (10) days after receipt by
the Company of such notice or as promptly as practicable thereafter, the Company
shall deliver or cause to be delivered to the Holder a
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<PAGE> 3
certificate representing the number of fully paid and nonassessable shares of
Common Stock into which this Debenture is being converted, together with a cash
adjustment in respect of any fraction of a share to which he shall be entitled,
if any. Such conversion shall be deemed to have been made at the close of
business on the date this Debenture shall have been surrendered together with
the written election to convert, so that the person entitled to receive the
shares of Common Stock upon conversion of this Debenture shall be treated for
all purposes as having become the record holder or holders of such shares of
Common Stock at such time and such conversion shall be at the Conversion Price
in effect at such time. The issuance of certificates for shares of Common Stock
upon the conversion of this Debenture shall be made without charge to the Holder
hereof for any tax in respect of the issuance of such certificate; provided,
however, that the Company shall not be required to pay any taxes which may be
payable or incur any other expenses in respect of any transfer involved in the
issuance of any certificate for shares of Common Stock in a name other than that
of the Holder of this Debenture in respect of which shares of Common Stock are
issued.
(d) The Conversion Price shall be subject to adjustment from
time to time as set forth in this subsection (d) and in Section 4 hereof:
(i) If at any time or times after the date hereof, the
total number of outstanding shares of Common Stock shall be increased or
decreased by a stock split, stock dividend, reverse split or similar pro rata
change in the capitalization of the Company, the Conversion Price shall be an
amount determined as follows:
(A) by multiplying (x) the Conversion Price immediately prior
to such event, by (y) the total number of outstanding shares of Common
Stock of the Company immediately prior to such event; and
(B) by dividing the product thereof by the total number of
outstanding shares of Common Stock of the Company immediately after
such event.
(ii) Anything herein to the contrary notwithstanding, no
adjustment in the Conversion Price shall be required unless such adjustment,
either by itself or with other adjustments not previously made, would require a
change of at least one percent; provided, however, that any adjustment which by
reason of this Section 2(d)(ii) is not required to be made shall be carried
forward and taken into account in any subsequent adjustment.
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<PAGE> 4
(iii) Anything herein to the contrary notwithstanding, no
adjustments pursuant to this Section 2(d) shall be made (a) by reason of or in
connection with the issuance of shares of Common Stock upon conversion of the
Debentures, or (b) if such adjustment would result in an increase in the
Conversion Price.
(e) If at any time or times after the date hereof, the Company
shall effect a reorganization, shall merge with or consolidate into another
corporation, or shall sell, transfer or otherwise dispose of all or
substantially all of its property, assets or business and, pursuant to the terms
of such reorganization, merger, consolidation or disposition of assets, shares
of stock or other securities, property or assets of the Company (or the
successor, transferee or affiliate of the Company) or cash are to be received by
or distributed to the holders of Common Stock, or if at any time or times after
the date hereof the Company shall make any distribution of its assets with
respect to its Common Stock, then the Holder of this Debenture shall have the
right, concurrently with the closing of such transaction, to convert this
Debenture and to receive, upon conversion of this Debenture, the number of
shares of stock or other securities, property or assets of the Company (or the
successor, transferee or affiliate of the Company), or cash receivable upon or
as a result of such reorganization, merger, consolidation, disposition of assets
or distribution by a holder of the number of shares of Common Stock into which
this Debenture was convertible immediately prior to such event. The provisions
of this Section 2(e) shall similarly apply to successive reorganizations,
mergers, consolidations, dispositions of assets or distributions.
(f) If at any time or times after the date hereof, a purchase,
tender or exchange offer is made to and accepted by the holders of more than 50%
of the outstanding shares of Common Stock of the Company, the Company shall not
effect any consolidation, merger or sale with the person having made such offer
or with any affiliate of such person, unless prior to the consummation thereof
the Holder of this Debenture shall have been given a reasonable opportunity then
to elect to convert this Debenture and to receive, upon conversion of this
Debenture, either the stock, securities, cash or assets then issuable with
respect to the Common Stock or the previous holders of the Common Stock in
accordance with such offer.
(g) No fractional shares of Common Stock or scrip representing
fractional shares of Common Stock shall be issued upon any conversion of this
Debenture, but, in lieu thereof, there shall be paid an amount in cash equal to
the same fraction of the Conversion Price of a whole share of Common Stock.
(h) The Company shall at all times reserve and keep available
out of its authorized but unissued shares of Common Stock,
4
<PAGE> 5
solely for the purpose of effecting the conversion or exchange of this
Debenture, the full number of whole shares of Common Stock then deliverable upon
the conversion or exchange of the entire principal amount of this Debenture at
the time outstanding. The Company shall take at all times such corporate action
as shall be necessary in order that the Company may validly and legally issue
fully paid and nonassessable shares of Common Stock upon the conversion of this
Debenture in accordance with the provisions hereof.
3. Events of Default. This Debenture shall automatically become due and payable
in full if any one or more of the following events ("Events of Default") shall
occur and be continuing:
(a) If the Company shall (i) admit in writing its inability to
pay its debts generally as they become due, (ii) file a petition or
answer or consent seeking relief under the Federal Bankruptcy Code, as
now constituted or hereafter amended, or any other applicable Federal
or state bankruptcy or insolvency law or other similar law, (iii)
consent to the institution of proceedings under any law listed in (ii)
above, or to the filing of any such petition or to the appointment or
taking possession of a receiver, liquidator, assignee, trustee,
custodian (or other similar official) of the Company or of any
substantial part of its property, or (iv) make an assignment for the
benefit of its creditors; or
(b) If a decree or order shall be entered by a court for
relief in respect of the Company under the Federal Bankruptcy Code, as
now constituted or hereafter amended, or any other applicable Federal
or state bankruptcy or insolvency law or other similar law, or
appointing a receiver, liquidator, assignee, trustee (or similar
official) of the Company or of any substantial part of its property, or
ordering the winding-up or liquidation of their affairs and such decree
or order shall not be vacated or set aside or stayed within a period of
120 days from the date of entry thereof; or
(c) If the Company shall fail to make any payment of principal
or interest due under this Debenture within ten days of the date upon
which such payment was due.
The foregoing notwithstanding, the Holder, by written, may
waive any Event of Default and/or rescind and annul any such acceleration; but
no such waiver or rescission and annulment shall extend to or shall affect any
subsequent default, or shall impair any right consequent thereon.
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<PAGE> 6
The Company agrees that it will not declare or pay any
dividends on its Common Stock following the occurrence of an Event of Default so
long as the Event of Default shall be continuing.
4. Adjustment for Issue or Sale of Common Stock at Less than Conversion Price.
With the exception of (a) issuances of shares of Common Stock upon conversion of
this Debenture or otherwise pursuant to the Subscription Agreement, (b) the
issuance of shares underlying any currently outstanding options, warrants or
other securities exchangeable for, and convertible into, Common Stock, (c) the
issuance subsequent to the date hereof of any options or other rights to acquire
shares of Common Stock under any of the Company's employee benefit plans
(collectively the "Company Plans"), (d) the exercise subsequent to the date
hereof of options or other rights to acquire Common Stock under the Company
Plans, (e) the issuance of shares pursuant to the Offering, and (f) the issuance
of any shares underlying other securities issued in the Offering which by their
terms are exchangeable, convertible or exercisable into shares of Common Stock,
in case at any time or from time to time the Company shall issue shares of
Common Stock without consideration or for a consideration per share less than
the Conversion Price (or, if a Pro Forma Adjusted Conversion Price shall be in
effect by reason of a previous adjustment under this Section 4, as provided
below in this Section 4, less than such Pro Forma Adjusted Payment Price) (as
hereinafter defined) in effect immediately prior to the issue or sale of such
shares, then, and in each such case, the Holder of this Debenture upon the
conversion hereof as provided in Section 2 shall be entitled to receive, in lieu
of the shares of Common Stock theretofore receivable upon such conversion, a
number of shares of Common Stock determined by (a) dividing to the nearest
one-thousandth (.001) the Payment Price by a Pro Forma Adjusted Conversion Price
to be computed as provided below in this Section 4, and (b) multiplying to the
nearest whole share (one-half share being considered a whole share) the
resulting quotient by the number of shares of Common Stock (as constituted on
the Conversion Date) issuable upon such conversion. Such Pro Forma Adjusted
Conversion Price shall be computed (to the nearest one-thousandth ($.001)) by
dividing
(i) the sum of (x) the result obtained by
multiplying the number of shares of Common
Stock outstanding immediately prior to such
issue or sale by the Conversion Price (or,
if a Pro Forma Adjusted Conversion Price
shall be in effect by reason of a previous
adjustment under this Section 4, by such
Pro Forma Adjusted Conversion Price), plus
(y) the consideration, if any, received by
the Company upon such issue or sale, by
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<PAGE> 7
(ii) the number of shares of Common Stock
outstanding immediately after such issue or
sale.
Notwithstanding the above, in no event shall the Pro Forma Adjusted Conversion
Price be adjusted pursuant to this computation to an amount in excess of
Conversion Price (or, if a Pro Forma Adjusted Conversion Price shall be in
effect by reason of a Previous Adjustment under this Section 4 in excess of such
Pro Forma Adjusted Conversion Price) immediately prior to such computation.
For the purposes of this Section 4, the following subsections 4(a) to 4(j) shall
be applicable:
(a) Dividends, Etc. in Common Stock or Convertible Securities. In case the
Company shall declare any dividend or order any other distribution upon any
stock of the Company of any class, payable in Common Stock or in any stock or
other securities directly or indirectly convertible into or exchangeable for
Common Stock (any such stock or other securities being hereinafter called
"Convertible Securities"), such declaration or distribution shall be deemed to
be an issue and sale (as of the record date), without consideration, of such
Common Stock or such Convertible Securities, as the case may be.
(b) Issuance or Sale of Convertible Securities. In
case the Company shall issue or sell any Convertible Securities, there shall be
determined the price per share for which Common Stock is issuable upon the
conversion or exchange thereof, such determination to be made by dividing (a)
the total amount received or receivable by the Company as consideration for the
issue or sale of such Convertible Securities (subject to adjustment as provided
in subsection 4(f) in case of an issue or sale for cash), plus the minimum
aggregate amount of additional consideration, if any, payable to the Company
upon the conversion or exchange thereof, by (b) the maximum number of shares of
Common Stock issuable upon the conversion or exchange of all such Convertible
Securities.
If the price per share so determined shall be
less than the Conversion Price (or, if a Pro Forma Adjusted Conversion Price
shall be in effect, less than such Pro Forma Adjusted Conversion Price), then
such issue or sale shall be deemed to be an issue or sale for cash (as of the
date of issue or sale of such Convertible Securities) of such maximum number of
shares of Common Stock at the price per share so determined; provided that if
such Convertible Securities shall by their terms provide for a change or changes
(upwards or downwards), with the passage of time or otherwise, in the amount of
additional consideration, if any, payable to the Company, or in the rate of
exchange, upon the conversion or
7
<PAGE> 8
exchange thereof, the Pro Forma Adjusted Conversion Price shall, forthwith upon
any such change becoming effective, be readjusted (but to no greater extent than
originally adjusted, in the case of an increase in the additional consideration)
to reflect the same; and provided further that upon the expiration of such
rights of conversion or exchange of such Convertible Securities, if any thereof
shall not have been exercised, the Pro Forma Adjusted Conversion Price shall
forthwith be readjusted (but to no greater extent than originally adjusted, in
the case of an increase in the additional consideration) and thereafter be the
price which it would have been had an adjustment been made on the basis that (i)
the only shares of Common Stock so issued or sold were those issued or sold upon
conversion or exchange of such Convertible Securities, and (ii) they were issued
or sold for the consideration actually received by the Company upon such
conversion or exchange, plus the consideration, if any, actually received by the
Company for the issue or sale of all of such Convertible Securities which shall
have been converted or exchanged.
(c) Grant of Rights or Options for Common Stock. In
case at any time the Company shall grant any rights or options to subscribe for,
purchase or otherwise acquire Common Stock, there shall be determined the price
per share for which Common Stock is issuable upon the exercise of such rights or
options, such determination to be made by dividing (a) the total amount, if any,
received or receivable by the Company as consideration for the granting of such
rights or options, plus the minimum aggregate amount of additional consideration
payable to the Company upon the exercise of such rights or options, by (b) the
maximum number of shares of Common Stock issuable upon the exercise of such
rights or options.
If the price per share so determined shall be
less than the Conversion Price (or, if a Pro Forma Adjusted Conversion Price
shall be in effect, less than such Pro Forma Adjusted Conversion Price), then
the granting of such rights or options shall be deemed to be an issue or sale
for cash (as of the date of granting of such rights or options) of such maximum
number of shares of Common Stock at the price per share so determined; provided
that if such rights or options shall by their terms provide for a change or
changes (upwards or downwards), with the passage of time or otherwise, in the
amount of additional consideration payable to the Company upon the exercise
thereof, the Pro Forma Adjusted Conversion Price shall forthwith upon any such
change becoming effective, be readjusted (but to no greater extent than
originally adjusted, in the case of an increase in the additional consideration)
to reflect the same; and provided further that upon the expiration of such
rights or options, if any thereof shall not have been exercised, the Pro Forma
Adjusted Conversion Price shall forthwith be readjusted (but to no greater
extent than originally adjusted, in the case of an increase
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<PAGE> 9
in the additional consideration), and thereafter be the price which it would
have been had an adjustment been made on the basis that (i) the only shares of
Common Stock so issued or sold were those issued or sold upon the exercise of
such rights or options, and (ii) they were issued or sold for the consideration
actually received by the Company upon such exercise, plus the consideration, if
any, actually received by the Company for the granting of all such rights or
options, whether or not exercised.
(d) Grant of Rights or Options for Convertible
Securities. In case the Company shall grant any rights or options to subscribe
for, purchase or otherwise acquire Convertible Securities, such Convertible
Securities shall be deemed, for the purposes of subsection 4(b), to have been
issued and sold for the total amount received or receivable by the Company as
consideration for the granting of such rights or options plus the minimum
aggregate amount of additional consideration, if any, payable to the Company
upon the exercise of such rights or options; provided that if such rights or
options shall by their terms provide for a change or changes (upwards or
downwards), with the passage of time or otherwise, in the amount of additional
consideration payable to the Company upon the exercise thereof, the Pro Forma
Adjusted Conversion Price shall, forthwith upon any such change becoming
effective, be readjusted (but to no greater extent than originally adjusted, in
the case of an increase in the additional consideration) to reflect the same;
and provided further that upon the expiration of such rights or options if any
thereof shall not have been exercised, the Pro Forma Adjusted Conversion Price
shall forthwith be readjusted (but to no greater extent than originally
adjusted, in the case of an increase in the additional consideration), and
thereafter be the price which it would have been had an adjustment been made
upon the basis that (i) the only Convertible Securities so issued or sold were
those issued or sold upon the exercise of such rights or options, and (ii) they
were issued or sold for the consideration actually received by the Company upon
such exercise, plus the consideration, if any, actually received by the Company
for the granting of all such rights or options, whether or not exercised.
(e) Dilution in Case of Other Securities. In case at
any time any securities other than Common Stock shall at the time be receivable
upon the payment of this Debenture, and in case any such additional securities
shall be issued or sold by the Company or shall become subject to issue upon the
conversion or exchange of any securities of the Company or to subscription,
purchase or other acquisition pursuant to any rights or options granted by the
Company for a consideration such as to dilute the payment rights evidenced by
this Debenture, then, and in each such case, the Pro Forma Adjusted Conversion
Price shall forthwith be adjusted, substantially in the
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<PAGE> 10
manner provided for above in this Section 4 so as to protect the holder of this
Debenture against the effect of such dilution.
(f) Expenses, Etc., Deducted. In case any shares of
Common Stock, Convertible Securities or other securities, or any rights or
options to subscribe for, purchase or otherwise acquire any thereof, shall be
issued or sold for cash, the consideration received therefor shall be deemed to
be the net amount received therefor, after deducting all costs and expenses
reasonably incurred in connection with such issuance or sale determined as of
the date not later than 45 days after the date of the close of the offering with
respect to such issuance or sale.
(g) Determination of Consideration. In case any
shares of Common Stock, Convertible Securities or other securities, or any
rights or options to subscribe for, purchase or otherwise acquire any thereof,
shall be issued or sold for a consideration other than cash (or a consideration
which includes cash if such cash constitutes a part of the assets of a
corporation or business substantially all of the assets of which are being
received as such consideration), then, for the purposes of this Section 4, the
Board of Directors of the Company shall in good faith determine the fair value
of such consideration, and such Common Stock, Convertible Securities, other
securities, rights or options shall be deemed to have been issued or sold for an
amount of cash equal to the value so determined in good faith. In case any
Common Stock, Convertible Securities or other securities or any rights or
options to subscribe for, purchase or otherwise acquire any thereof shall be
issued or sold together with other securities or other assets for a
consideration which covers both, the Board of Directors of the Company shall in
good faith determine what part of such consideration so received shall be
allocated to the issue or sale of such Common Stock, Convertible Securities or
other securities or such rights or options.
(h) Record Date Deemed Issue Date. In case the
Company shall take a record of the holders of shares of its stock of any class
for the purpose of entitling them (a) to receive a dividend or a distribution
payable in Common Stock, Convertible Securities or other securities, or (b) to
subscribe for, purchase or otherwise acquire Common Stock, Convertible
Securities or other securities, then such record date shall be deemed to be the
date of the issue or sale of the Common Stock, Convertible Securities or other
securities issued or sold or deemed to have been issued or sold upon the
declaration of such dividend or the making of such other distribution, or the
date of the granting of such rights of subscription, purchase or other
acquisition, as the case may be.
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<PAGE> 11
(i) Shares Considered Outstanding. The number of shares of
Common Stock outstanding at any given time shall include shares deemed issued
for purposes of adjustment pursuant to this Section 4, but shall exclude shares
in the treasury of the Company.
(j) Duration of Pro Forma Adjusted Conversion Price.
Following each computation or readjustment of a Pro Forma Adjusted Conversion
Price, as provided in this Section 4, the newly computed or adjusted Pro Forma
Adjusted Conversion Price shall remain in effect until a further computation or
readjustment thereof is required by this Section 4.
5. Subordination. This Debenture shall be subordinated to indebtedness for
borrowed money to banks or other financial institutions, now outstanding or
hereinafter incurred, and shall be pari passu with the Company's 10% Convertible
Debentures in the approximate amount of $600,000 heretofore issued.
6. Miscellaneous.
(a) All notices, demands, requests and other communications
to be given or delivered under or by reason of the provisions of this Debenture
shall be in writing and shall be deemed to have been given personally or when
mailed by certified or registered mail, return receipt requested and postage
prepaid, and addressed, if to the Company, at Conserver Corporation of America,
Inc., 2655 Le Jeune Road, Suite 535, Coral Gables, Florida 33134, Attention:
Chief Executive Officer, with a copy to Parker Duryee Rosoff & Haft, 529 Fifth
Avenue, New York, New York 10017, Attention: Ira I. Roxland, Esq., or at such
other address as specified by the Company in writing to the Holders, or, if to
the Holder, at the address for such Holder on the books of registry maintained
in accordance with Section 1 hereof.
(b) This Debenture and its validity, construction and
performance shall be governed in all respects by the laws of the State of New
York, without giving effect to principles of conflict of laws. (c) In any case
where the date of interest on or maturity of principal of this Debenture shall
not be a business day, then the payment thereof shall be made on the next
succeeding business day, with the same force and effect as if made on the date
of maturity.
(d) This Debenture shall not be modified or amended except by
a writing signed by the Holder.
(e) If any provision of this Debenture shall be held to be
invalid, illegal or unenforceable, such invalidity, illegality or
unenforceability shall not affect any other provisions of this
11
<PAGE> 12
Debenture, and this Debenture shall be construed as if any invalid, illegal or
unenforceable provisions had not been contained herein; provided however, that
default in the performance or observance by the Company of any provision of this
Debenture which has been held to be invalid, illegal or unenforceable shall,
notwithstanding such invalidity, illegality or unenforceability, constitute an
Event of Default hereunder, if such default would have constituted an Event of
Default without regard to such invalidity, illegality or unenforceability.
(f) The headings of this Debenture are for convenience only
and shall not control or affect the meaning or construction of any provisions
hereof.
(g) If this Debenture is mutilated, lost, stolen or destroyed,
the Company shall issue a new Debenture of like form and maturity to the Holder
hereof upon presentment and surrender of the mutilated Debenture, in the case of
mutilation, and upon receipt of evidence of loss, theft or destruction and of
indemnity in all other cases, each in form satisfactory to the Company.
(h) This Debenture and any payment of principal or interest
due hereunder is transferable, negotiable and assignable at the option of the
Holder hereof only in compliance with the terms of this Debenture and the
provisions of the Subscription Agreement, including, without limitation, the
requirement of compliance with applicable state and Federal securities laws and
the delivery to the Company of an opinion of counsel satisfactory to the Company
of such compliance. This Debenture may be transferred by the Holder on the
Debenture register of the Company, upon surrender of this Debenture for
registration of transfer at the Company's office duly endorsed by, or
accompanied by a written instrument of transfer reasonably satisfactory to the
Company duly executed by, the Holder or his attorney duly authorized in writing,
and thereupon one or more new Debentures, for the same aggregate principal
amount then outstanding, will be issued to the designated transferee or
transferees. No service charge will be made for any such transfer, but the
Company may require payment of a sum sufficient to cover any tax or government
charge payable in connection therewith.
(i) If at any time or times after the date hereof:
(1) The Company shall pay any dividends upon its Common Stock,
whether payable in cash, stock or other property, or make any
distribution of its assets with respect to its Common Stock;
(2) The Company shall offer for subscription pro rata to the
holders of its Common Stock any additional shares of stock of any class
or other rights;
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(3) The Company shall effect a reorganization, shall merge
with or consolidate into another corporation, or shall sell, transfer
or otherwise dispose of all or substantially all of its property,
assets or business; or
(4) There shall be voluntary or involuntary dissolution,
liquidation, or winding up of the Company;
then, in any one or more of such cases, the Company shall
give written notice to the Holder of the Debenture of the date on which (a) a
record shall be taken for such dividend, distribution, or subscription rights,
or (b) such reorganization, merger, consolidation, sale, transfer or other
disposition, liquidation, or winding up shall take place, as the case may be.
Such notice shall also specify the date as of which the holders of Common Stock
of record shall participate in such dividend, distribution, or subscription
rights, or shall be entitled to exchange their Common Stock for securities or
other property deliverable upon such reorganization, merger, consolidation,
sale, transfer or other disposition, liquidation or winding up, as the case may
be. Such notice shall be given at least 20 days prior to the action in question
and not less than 10 days prior to the record date or the date on which the
Company's transfer books are closed in respect thereto.
(j) The Company shall deliver to the Holder, not later than 90
days following the end of each fiscal year of the Company, a copy of its annual
financial statements.
(k) If any payment of principal or interest or any notice
hereunder is required to be made on any date which is a Saturday, Sunday or New
York State bank holiday, such payment or notice shall be made on the next
succeeding day on which banks in New York State are open for business.
(l) Prior to due presentment of registration for transfer of
this Debenture, the Company or any agent thereof may treat the person in whose
name this Debenture is registered as the absolute owner thereof for all
purposes, whether or not this Debenture is overdue.
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<PAGE> 14
IN WITNESS WHEREOF, the Company has caused this Debenture to be duly
executed, and its corporate seal to be hereunder affixed and attached.
CONSERVER CORPORATION OF AMERICA, INC.
By:_____________________________________
ATTEST:
By:
(Seal)
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CONVERSION NOTICE
TO: CONSERVER CORPORATION OF AMERICA, INC.
The undersigned Holder of this Debenture hereby irrevocably exercises
the option to convert the amount of the principal balance of this Debenture
specified below into shares of Common Stock, $.01 par value, of Conserver
Corporation of America, Inc. in accordance with the terms of this Debenture, and
directs that the shares issuable and deliverable upon the conversion, together
with any replacement Debenture or check in payment for a fractional share, be
issued in the name of and delivered to the undersigned at the address set forth
below the undersigned's signature.
Date: ____________, ____
Principal amount to be Name, address and signature
converted $_________
---------------------------
Name
---------------------------
Address
---------------------------
---------------------------
Signature
<PAGE> 1
Exhibit 10.1
CONSERVER CORPORATION OF AMERICA
1996 STOCK OPTION PLAN
1. PURPOSE. The purpose of the Conserver Corporation of America 1996
Stock Option Plan (the "Plan") is to encourage key employees of Conserver
Corporation of America (the "Company") and of any present or future parent or
subsidiary of the Company (collectively, "Related Corporations") and other
individuals who render services to the Company or a Related Corporation, by
providing opportunities to participate in the ownership of the Company and its
future growth through (a) the grant of options which qualify as "incentive stock
options" ("ISOs") under Section 422(b) of the Internal Revenue Code of 1986, as
amended (the "Code"); and (b) the grant of options which do not qualify as ISOs
("Non-Qualified Options"). Both ISOs and Non-Qualified Options are referred to
hereafter individually as an "Option" and collectively as "Options." As used
herein, the terms "parent" and "subsidiary" mean "parent corporation" and
"subsidiary corporation," respectively, as those terms are defined in Section
424 of the Code.
2. ADMINISTRATION OF THE PLAN.
(a) BOARD OR COMMITTEE ADMINISTRATION. The Plan shall be
administered by the Board of Directors of the Company (the "Board") or by a
committee appointed by the Board (the "Committee"); provided that the Plan shall
be administered: (i) to the extent required by applicable regulations under
Section 162(m) of the Code, by two or more "outside directors" (as defined in
applicable regulations thereunder) and (ii) to the extent required by Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended, or any
successor provision ("Rule 16b-3"), by a disinterested administrator or
administrators within the meaning of Rule 16b-3. All references in this Plan to
the "Committee" shall mean the Board if no Committee has been appointed. Subject
to ratification of the grant or authorization of each Option by the Board (if so
required by applicable state law), and subject to the terms of the Plan, the
Committee shall have the authority to (i) determine to whom (from among the
class of employees eligible under paragraph 3 to receive ISOs) ISOs shall be
granted, and to whom (from among the class of individuals and entities eligible
under paragraph 3 to receive Non-Qualified Options) Non-Qualified Options may be
granted; (ii) determine the time or times at which Options shall be granted;
(iii) determine the purchase price of shares subject to each Option, which
prices shall not be less than the minimum price specified in paragraph 6; (iv)
determine whether each Option granted shall be an ISO or a Non-Qualified Option;
(v)
<PAGE> 2
determine (subject to paragraph 7) the time or times when each Option shall
become exercisable and the duration of the exercise period; (vi) extend the
period during which outstanding Options may be exercised; (vii) determine
whether restrictions are to be imposed on shares subject to Options and the
nature of such restrictions, if any, and (viii) interpret the Plan and prescribe
and rescind rules and regulations relating to it. If the Committee determines to
issue a Non-Qualified Option, it shall take whatever actions it deems necessary,
under Section 422 of the Code and the regulations promulgated thereunder, to
ensure that such Option is not treated as an ISO. The interpretation and
construction by the Committee of any provisions of the Plan or of any Option
granted under it shall be final unless otherwise determined by the Board. The
Committee may from time to time adopt such rules and regulations for carrying
out the Plan as it may deem advisable. No member of the Board or the Committee
shall be liable for any action or determination made in good faith with respect
to the Plan or any Option granted under it.
(b) COMMITTEE ACTIONS. The Committee may select one of its
members as its chairman, and shall hold meetings at such time and places as it
may determine. A majority of the Committee shall constitute a quorum and acts of
a majority of the members of the Committee at a meeting at which a quorum is
present, or acts reduced to or approved in writing by all the members of the
Committee (if consistent with applicable state law), shall be the valid acts of
the Committee. From time to time the Board may increase the size of the
Committee and appoint additional members thereof, remove members (with or
without cause) and appoint new members in substitution therefor, fill vacancies
however caused, or remove all members of the Committee and thereafter directly
administer the Plan.
(c) GRANT OF OPTIONS TO BOARD MEMBERS. Subject to the
provisions of the first sentence of paragraph 2(a) above, if applicable, Options
may be granted to members of the Board. All grants of Options to members of the
Board shall in all other respects be made in accordance with the provisions of
this Plan applicable to other eligible persons. Consistent with the provisions
of the first sentence of Paragraph 2(a) above, members of the Board who either
(i) are eligible to receive grants of Options pursuant to the Plan or (ii) have
been granted Options may vote on any matters affecting the administration of the
Plan or the grant of any Options pursuant to the Plan, except that no such
member shall act upon the granting to himself or herself of Options, but any
such member may be counted in determining the existence of a quorum at any
meeting of the Board during which action is taken with respect to the granting
to such member of Options.
(d) EXCULPATION. No member of the Board shall be
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<PAGE> 3
personally liable for monetary damages for any action taken or any failure to
take any action in connection with the administration of the Plan or the
granting of Options under the Plan, provided that this subparagraph 3(c) shall
apply to (i) any breach of such member's duty of loyalty to the Company or its
stockholders, (ii) acts or omissions not in good faith or involving intentional
misconduct or a knowing violation of law, (iii) acts or omissions that would
result in liability under Section 174 of the General Corporation Law of the
State of Delaware, as amended, and (iv) any transaction from which the member
derived an improper personal benefit.
(e) INDEMNIFICATION. Service on the Committee shall constitute
service as a member of the Board. Each member of the Committee shall be entitled
without further act on his or her part to indemnity from the Company to the
fullest extent provided by applicable law and the Company's Certificate of
Incorporation and/or By-laws in connection with or arising out of any action,
suit or proceeding with respect to the administration of the Plan or the
granting of Options thereunder in which he or she may be involved by reason of
his or her being or having been a member of the Committee, whether or not he or
she continues to be a member of the Committee at the time of the action, suit or
proceeding.
3. ELIGIBLE EMPLOYEES AND OTHERS. ISOs may be granted only to employees
of the Company or any Related Corporation. Non-Qualified Options may be granted
to any employee, officer or director (whether or not also an employee) or
consultant of the Company or any Related Corporation. The Committee may take
into consideration a recipient's individual circumstances in determining whether
to grant an Option. The granting of any Option to any individual or entity shall
neither entitle that individual or entity to, nor disqualify such individual or
entity from, participation in any other grant of Options.
4. STOCK. The stock subject to Options shall be authorized but unissued
shares of Common Stock of the Company, par value $.001 per share (the "Common
Stock"), or shares of Common Stock reacquired by the Company in any manner. The
aggregate number of shares which may be issued pursuant to the Plan is 450,000,
subject to adjustment as provided in paragraph 13. If any Option granted under
the Plan shall expire or terminate for any reason without having been exercised
in full or shall cease for any reason to be exercisable in whole or in part, the
shares of Common Stock subject to such Option shall again be available for
grants of Options under the Plan.
5. GRANTING OF OPTIONS. Options may be granted under the
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<PAGE> 4
Plan at any time on or after November 6, 1996 and prior to November 6, 2006. The
date of grant of an Option under the Plan will be the date specified by the
Committee at the time it grants the Option; provided, however, that such date
shall not be prior to the date on which the Committee acts to approve the grant.
Options granted under the Plan are intended to qualify as performance based
compensation to the extent required under proposed Treasury Regulation Section
1.162-27.
6. MINIMUM OPTION PRICE; ISO LIMITATIONS.
(a) PRICE FOR NON-QUALIFIED OPTIONS. The exercise price per
share specified in the agreement relating to each Non-Qualified Option granted
under the Plan shall in no event be less than the minimum legal consideration
required therefor under the laws of any jurisdiction in which the Company or its
successors in interest may be organized. Non-Qualified Options granted under the
Plan, with an exercise price less than the fair market value per share of Common
Stock on the date of grant, are intended to qualify as performance-based
compensation under Section 162(m) of the Code and any applicable regulations
thereunder. Any such Non-Qualified Options granted under the Plan shall be
exercisable only upon the attainment of a preestablished, objective performance
goal established by the Committee.
(b) PRICE FOR ISOS. The exercise price per share specified in
the agreement relating to each ISO granted under the Plan shall not be less than
the fair market value per share of Common Stock on the date of such grant. In
the case of an ISO to be granted to an employee owning stock possessing more
than ten percent (10%) of the total combined voting power of all classes of
stock of the Company or any Related Corporation, the price per share specified
in the agreement relating to such ISO shall not be less than one hundred ten
percent (110%) of the fair market value per share of Common Stock on the date of
grant. For purposes of determining stock ownership under this paragraph, the
rules of Section 424(d) of the Code shall apply.
(c) $100,000 ANNUAL LIMITATION ON ISO VESTING. Each eligible
employee may be granted Options treated as ISOs only to the extent that, in the
aggregate under this Plan and all incentive stock option plans of the Company
and any Related Corporation, ISOs do not become exercisable for the first time
by such employee during any calendar year with respect to stock having a fair
market value (determined at the time the ISOs were granted) in excess of $1
00,000. The Company intends to designate any Options granted in excess of such
limitation as Non-Qualified Options.
(d) DETERMINATION OF FAIR MARKET VALUE. If, at the time an
Option is granted under the Plan, the Company's Common Stock is
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<PAGE> 5
publicly traded, "fair market value" shall be determined as of the date of grant
or, if the prices or quotes discussed in this sentence are unavailable for such
date, the last business day for which such prices or quotes are available prior
to the date of grant and shall mean (i) the average (on that date) of the high
and low prices of the Common Stock on the principal national securities exchange
on which the Common Stock is traded, if the Common Stock is then traded on a
national securities exchange; or (ii) the last reported sale price (on that
date) of the Common Stock on the Nasdaq National Market, if the Common Stock is
not then traded on a national securities exchange; or (iii) the closing bid
price (or average of bid prices) last quoted (on that date) by an established
quotation service for over-the-counter securities, if the Common Stock is not
reported on the Nasdaq National Market. If the Common Stock is not publicly
traded at the time an Option is granted under the Plan, "fair market value"
shall mean the fair value of the Common Stock as determined by the Committee
after taking into consideration all factors which it deems appropriate,
including, without limitation, recent sale and offer prices of the Common Stock
in private transactions negotiated at arm's length.
7. OPTION DURATION. Subject to earlier termination as provided in
paragraphs 9 and 10 or in the agreement relating to such Option, each Option
shall expire on the date specified by the Committee, but not more than (i) ten
years from the date of grant in the case of Options generally and (ii) five
years from the date of grant in the case of ISOs granted to an employee owning
stock possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or any Related Corporation, as determined
under paragraph 6(b). Subject to earlier termination as provided in paragraphs 9
and 10, the term of each ISO shall be the term set forth in the original
instrument granting such ISO, except with respect to any part of such ISO that
is converted into a Non-Qualified Option pursuant to paragraph 16.
8. EXERCISE OF OPTION. Subject to the provisions of paragraphs 9
through 12, each Option granted under the Plan shall be exercisable as follows:
(a) VESTING. The Option shall either be fully exercisable on the
date of grant or shall become exercisable thereafter in such installments as the
Committee may specify.
(b) FULL VESTING OF INSTALLMENTS. Once an installment becomes
exercisable, it shall remain exercisable until expiration or termination of the
Option, unless otherwise specified by the Committee.
(c) PARTIAL EXERCISE. Each Option or installment may be
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<PAGE> 6
exercised at any time or from time to time, in whole or in part, for up to the
total number of shares with respect to which it is then exercisable.
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<PAGE> 7
(d) ACCELERATION OF VESTING. The Committee shall have the right to
accelerate the date that any installment of any Option becomes exercisable;
provided that the Committee shall not, without the consent of an optionee,
accelerate the permitted exercise date of any installment of any Option granted
to any employee as an ISO (and not previously converted into a Non-Qualified
Option pursuant to paragraph 16) if such acceleration would violate the annual
vesting limitation contained in Section 422(d) of the Code, as described in
paragraph 6(c).
9. TERMINATION OF EMPLOYMENT. Unless otherwise specified in the
agreement relating to such ISO, if an ISO optionee ceases to be employed by the
Company and all Related Corporations other than by reason of death or disability
or as otherwise specified in paragraph 10, no further installments of his or her
ISOs shall become exercisable, and his or her ISOs shall terminate on the
earlier of (a) ninety (90) days after the date of termination of his or her
employment, or (b) their specified expiration dates, except to the extent that
such ISOs (or unexercised installments thereof) have been converted into
Non-Qualified Options pursuant to paragraph 16. For purposes of this paragraph
9, employment shall be considered as continuing uninterrupted during any bona
fide leave of absence (such as those attributable to illness, military
obligations or governmental service) provided that the period of such leave does
not exceed 90 days or, if longer, any period during which such optionee's right
to reemployment is guaranteed by statute. A bona fide leave of absence with the
written approval of the Committee shall not be considered an interruption of
employment under this paragraph 9, provided that such written approval
contractually obligates the Company or any Related Corporation to continue the
employment of the optionee after the approved period of absence. ISOs granted
under the Plan shall not be affected by any change of employment within or among
the Company and Related Corporations, so long as the optionee continues to be an
employee of the Company or any Related Corporation. Nothing in the Plan shall be
deemed to give any grantee of any Option the right to be retained in employment
or other service by the Company or any Related Corporation for any period of
time.
10. DEATH; DISABILITY; BREACH.
(a) DEATH. If an ISO optionee ceases to be employed by the Company
and all Related Corporations by reason of his or her death, any ISO owned by
such optionee may be exercised, to the extent otherwise exercisable on the date
of death, by the estate, personal representative or beneficiary who has acquired
the ISO by will or by the laws of descent and distribution, until the earlier of
(i) the specified expiration date of the ISO or (ii) one (1) year from the date
of the optionee's death.
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<PAGE> 8
(b) DISABILITY. If an ISO optionee ceases to be employed by the
Company and all Related Corporations by reason of his or her disability, such
optionee shall have the right to exercise any ISO held by him or her on the date
of termination of employment, for the number of shares for which he or she could
have exercised it on that date, until the earlier of (i) the specified
expiration date of the ISO or (ii) one (1) year from the date of the termination
of the optionee's employment. For the purposes of the Plan, the term
"disability" shall mean "permanent and total disability" as defined in Section
22(e)(3) of the Code or any successor statute.
(c) BREACH. If an ISO optionee ceases to be employed by the Company
and all Related Corporation by reason of a finding by the Committee, after full
consideration of the facts presented on behalf of both the Company and the
Optionee, that the ISO optionee has breached his or her employment or service
contract with the Company or any Related Corporation, or has been engaged in
disloyalty to the Company or any Related Corporation, then, in such event, in
addition to immediate termination of the Option, the ISO optionee shall
automatically forfeit all shares for which the Company has not yet delivered
share certificates upon refund by the Company of the exercise price of such
Option. Notwithstanding anything herein to the contrary, the Company may
withhold delivery of share certificates pending the resolution of any inquiry
that could lead to a finding resulting in a forfeiture.
11. ASSIGNABILITY. No Option shall be assignable or transferable by the
grantee except by will, by the laws of descent and distribution or, in the case
of Non-Qualified Options only, pursuant to a valid domestic relations order.
Except as set forth in the previous sentence, during the lifetime of a grantee
each Option shall be exercisable only by such grantee.
12. TERMS AND CONDITIONS OF OPTIONS. Options shall be evidenced by
instruments (which need not be identical) in such forms as the Committee may
from time to time approve. Such instruments shall conform to the terms and
conditions set forth in paragraphs 6 through 11 hereof and may contain such
other provisions as the Committee deems advisable which are not inconsistent
with the Plan, including restrictions applicable to shares of Common Stock
issuable upon exercise of Options. The Committee may specify that any
Non-Qualified Option shall be subject to the restrictions set forth herein with
respect to ISOs, or to such other termination and cancellation provisions as the
Committee may determine. The Committee may from time to time confer authority
and responsibility on one or more of its own members and/or one or more officers
of the Company to execute and deliver such instruments. The proper officers of
the Company are authorized and directed to take any and all action necessary or
advisable from
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time to time to carry out the terms of such instruments.
13. ADJUSTMENTS. Upon the occurrence of any of the following
events, an optionee's rights with respect to Options granted to such optionee
hereunder shall be adjusted as hereinafter provided, unless otherwise
specifically provided in the written agreement between the optionee and the
Company relating to such Option:
(a) STOCK DIVIDENDS AND STOCK SPLITS. If the shares of Common
Stock shall be subdivided or combined into a greater or smaller number of shares
or if the Company shall issue any shares of Common Stock as a stock dividend on
its outstanding Common Stock, the number of shares of Common Stock deliverable
upon the exercise of Options shall be appropriately increased or decreased
proportionately, and appropriate adjustments shall be made in the purchase price
per share to reflect such subdivision, combination or stock dividend.
(b) CONSOLIDATIONS OR MERGERS. If the Company is to be
consolidated with or acquired by another entity in a merger, sale of all or
substantially all of the Company's assets or otherwise (an "Acquisition"), the
Committee or the board of directors of any entity assuming the obligations of
the Company hereunder (the "Successor Board"), shall, as to outstanding Options,
either (i) make appropriate provision for the continuation of such Options by
substituting on an equitable basis for the shares then subject to such Options
either (A) the consideration payable with respect to the outstanding shares of
Common Stock in connection with the Acquisition, (B) shares of stock of the
surviving corporation or (C) such other securities as the Successor Board deems
appropriate, the fair market value of which shall approximate the fair market
value of the shares of Common Stock subject to such Options immediately
preceding the Acquisition; or (ii) upon written notice to the optionees, provide
that all Options must be exercised, to the extent then exercisable, within a
specified number of days of the date of such notice, at the end of which period
the Options shall terminate; or (iii) terminate all Options in exchange for a
cash payment equal to the excess of the fair market value of the shares subject
to such Options (to the extent then exercisable) over the exercise price
thereof.
(c) RECAPITALIZATION OR REORGANIZATION. In the event of a
recapitalization or reorganization of the Company (other than a transaction
described in subparagraph (c) above) pursuant to which securities of the Company
or of another corporation are issued with respect to the outstanding shares of
Common Stock, an optionee upon exercising an Option shall be entitled to receive
for the purchase price paid upon such exercise the securities he or she would
have received if he or she had exercised such Option prior to such
recapitalization or reorganization.
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<PAGE> 10
(d) MODIFICATION OF ISOS. Notwithstanding the foregoing, any
adjustments made pursuant to subparagraphs (a), (b) or (c) with respect to ISOs
shall be made only after the Committee, after consulting with counsel for the
Company, determines whether such adjustments would constitute a "modification"
of such ISOs (as that term is defined in Section 424 of the Code) or would cause
any adverse tax consequences for the holders of such ISOs. If the Committee
determines that such adjustments made with respect to ISOs would constitute a
modification of such ISOs or would cause adverse tax consequences to the
holders, it may refrain from making such adjustments.
(e) DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, each Option will terminate
immediately prior to the consummation of such proposed action or at such other
time and subject to such other conditions as shall be determined by the
Committee.
(f) ISSUANCES OF SECURITIES. Except as expressly provided
herein, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of shares subject to Options. No adjustments shall be made for dividends paid in
cash or in property other than securities of the Company.
(g) FRACTIONAL SHARES. No fractional shares shall be issued
under the Plan and the optionee shall receive from the Company cash in lieu of
such fractional shares.
(h) ADJUSTMENTS. Upon the happening of any of the events
described in subparagraphs (a), (b) or (c) above, the class and aggregate number
of shares set forth in paragraph 4 hereof that are subject to Options which
previously have been or subsequently may be granted under the Plan shall also be
appropriately adjusted to reflect the events described in such subparagraphs.
The Committee or the Successor Board shall determine the specific adjustments to
be made under this paragraph 13 and, subject to paragraph 2, its determination
shall be conclusive.
14. MEANS OF EXERCISING OPTIONS. An Option (or any part or
installment thereof) shall be exercised by giving written notice to the Company
at its principal office address, or to such transfer agent as the Company shall
designate. Such notice shall identify the Option being exercised and specify the
number of shares as to which such Option is being exercised, accompanied by full
payment of the purchase price therefor either (a) in United States dollars in
cash or by check, (b) at the discretion of the Committee, through delivery of
shares of Common Stock having a fair market
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value equal as of the date of the exercise to the cash exercise price of the
Option, (c) at the discretion of the Committee, by delivery of the grantee's
personal recourse note bearing interest payable not less than annually at no
less than 100% of the lowest applicable Federal rate, as defined in Section
1274(d) of the Code, (d) at the discretion of the Committee and consistent with
applicable law, through the delivery of an assignment to the Company of a
sufficient amount of the proceeds from the sale of the Common Stock acquired
upon exercise of the Option and an authorization to the broker or selling agent
to pay that amount to the Company, which sale shall be at the participant's
direction at the time of exercise, or (e) at the discretion of the Committee, by
any combination of (a), (b), (c) and (d) above. If the Committee exercises its
discretion to permit payment of the exercise price of an ISO by means of the
methods set forth in clauses (b), (c), (d) or (e) of the preceding sentence,
such discretion shall be exercised in writing at the time of the grant of the
ISO in question. The holder of an Option shall not have the rights of a
shareholder with respect to the shares covered by such Option until the date of
issuance of a stock certificate to such holder for such shares. Except as
expressly provided above in paragraph 13 with respect to changes in
capitalization and stock dividends, no adjustment shall be made for dividends or
similar rights for which the record date is before the date such stock
certificate is issued.
15. TERM AND AMENDMENT OF PLAN. This Plan was adopted by the Board on
November 19, 1996, subject, with respect to the validation of ISOs granted under
the Plan, to approval of the Plan by the stockholders of the Company at the next
Meeting of Stockholders or, in lieu thereof, by written consent. If the approval
of stockholders is not obtained on or prior to November 19, 1997, any grants of
ISOs under the Plan made prior to that date will be rescinded. The Plan shall
expire at the end of the day on November 19, 2006 (except as to Options
outstanding on that date). Subject to the provisions of paragraph 5 above,
Options may be granted under the Plan prior to the date of stockholder approval
of the Plan. The Board may terminate or amend the Plan in any respect at any
time, except that, without the approval of the stockholders obtained within 12
months before or after the Board adopts a resolution authorizing any of the
following actions: (a) the total number of shares that may be issued under the
Plan may not be increased (except by adjustment pursuant to paragraph 13); (b)
the benefits accruing to participants under the Plan may not be materially
increased; (c) the requirements as to eligibility for participation in the Plan
may not be materially modified; (d) the provisions of paragraph 3 regarding
eligibility for grants of ISOs may not be modified; (e) the provisions of
paragraph 6(b) regarding the exercise price at which shares may be offered
pursuant to ISOs may not be modified (except by adjustment pursuant to paragraph
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13); (f) the expiration date of the Plan may not be extended; and (g) the Board
may not take any action which would cause the Plan to fail to comply with Rule
16b-3. Except as otherwise provided in this paragraph 15, in no event may action
of the Board or stockholders alter or impair the rights of a grantee, without
such grantee's consent, under any Option previously granted to such grantee.
16. APPLICATION OF FUNDS. The proceeds received by the Company from the
sale of shares pursuant to Options granted under the Plan shall be used for
general corporate purposes.
17. NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION. By accepting an ISO
granted under the Plan, each optionee agrees to notify the Company in writing
immediately after such optionee makes a Disqualifying Disposition (as described
in Sections 421, 422 and 424 of the Code and regulations thereunder) of any
stock acquired pursuant to the exercise of ISOs granted under the Plan. A
Disqualifying Disposition is generally any disposition occurring on or before
the later of (a) the date two years following the date the ISO was granted or
(b) the date one year following the date the ISO was exercised.
18. WITHHOLDING OF ADDITIONAL INCOME TAXES. Upon the exercise of a
Non-Qualified Option for less than its fair market value, the making of a
Disqualifying Disposition (as defined in paragraph 17), the vesting or transfer
of restricted stock or securities acquired on the exercise of an Option
hereunder, or the making of a distribution or other payment with respect to such
stock or securities, the Company may withhold taxes in respect of amounts that
constitute compensation includible in gross income. The Committee in its
discretion may condition (i) the exercise of an Option, or (ii) the vesting or
transferability of restricted stock or securities acquired by exercising an
Option, on the grantee's making satisfactory arrangement for such withholding.
Such arrangement may include payment by the grantee in cash or by check of the
amount of the withholding taxes or, at the discretion of the Committee, by the
grantee's delivery of previously held shares of Common Stock or the withholding
from the shares of Common Stock otherwise deliverable upon exercise of a Option
shares having an aggregate fair market value equal to the amount of such
withholding taxes.
19. GOVERNMENTAL REGULATION. The Company's obligation to sell and
deliver shares of the Common Stock under this Plan is subject to the approval of
any governmental authority required in connection with the authorization,
issuance or sale of such shares.
12
<PAGE> 13
Government regulations may impose reporting or other obligations on the Company
with respect to the Plan. For example, the Company may be required to send tax
information statements to employees and former employees that exercise ISOs
under the Plan, and the Company may be required to file tax information returns
reporting the income received by grantees of Options in connection with the
Plan.
13
<PAGE> 14
20. GOVERNING LAW. The validity and construction of the Plan and the
instruments evidencing Options shall be governed by the laws of Delaware.
14
<PAGE> 1
DISTRIBUTION AGREEMENT
THE PARTIES HERETO:
1. CONSERVER INTERNATIONAL, B.V. a company organized and existing under
the laws of the Netherlands having its registered office at Hoekenrode
6-8, 1102 BR Amsterdam Zuid-Oost, the Netherlands, hereinafter referred
to as "B.V.";
AND
2. CONSERVER NORTH AMERICA, INC., a company organized and existing under
the laws of Delaware having a registered office at Corporation Trust
Center, 1209 Orange Street, Wilmington, Delaware hereinafter referred
to as "NORD" (hereinafter B.V. and NORD are referred to collectively as
"INTERNATIONAL");
AND
3. CONSERVER CORPORATION OF AMERICA, a corporation organized and existing
under the laws of Delaware having a place of business at 2655 Le Jeune
Road, Coral Gables, FL33134, hereinafter referred to as the
"DISTRIBUTOR";
WHEREAS:
A. By the terms of an agreement dated 1995, CONSERVER ENGINEERING LTD., a
company organized and existing under the laws of Ireland having its registered
office at 2 Clan William Terrace, Dublin, Ireland (hereinafter referred to as
"CONSERVER ENGINEERING") has been awarded from CONSERVER 21 S.A., a company
organized and existing under the laws of Spain an exclusive license for, i.a.,
the Territory described hereafter, to distribute the Products, (as hereinafter
defined) and has been granted the right to seek, in its own name, intellectual
property protection of the know how and inventions upon which the Products are
based.
B. Certain patent applications relating to the Products have been filed in Spain
in the name of CONSERVER ENGINEERING under number 9401478 and 9600692 and in The
Hague at the European Office for Patents in the name of Alfonso de Sande Moreno
on June 24, 1996 ("the Patent"). Copies of the said application documents are
annexed hereto as Annex 1-A and 1-B respectively. Alfonso de Sande Moreno
(President of Conserver 21 S.A.) and companies of the group to which
INTERNATIONAL belong, are both (direct or indirect) shareholders of both
CONSERVER 21 and CONSERVER ENGINEERING.
C. In addition to the intellectual property rights described above, CONSERVER
ENGINEERING with its own research team has
<PAGE> 2
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developed yet new know how, inventions, and industrial processes enabling it to
manufacture, the products on industrial basis; CONSERVER ENGINEERING has
initiated and is in the process of obtaining additional intellectual property
protection for such new know how, inventions and industrial processes.
On the basis of the rights and the related know how belonging to or
granted to CONSERVER ENGINEERING, CONSERVER ENGINEERING has entered into an
exclusive worldwide marketing and distribution license agreement with B.V. dated
[________] for the manufacture, sale and general commercial exploitation of the
Products;
D. B.V. has entered into an exclusive marketing and distribution license
agreement for the United States, Canada and Mexico with NORD dated [________]
for the manufacture, sale and general commercial exploitation of the Products.
E. The product group described in Annexes 2 and 3, as well as any new products
which INTERNATIONAL or CONSERVER ENGINEERING may later develop or acquire for
preservation of foodstuffs and flowers are herein referred to as "the Products."
F. INTERNATIONAL has also obtained from CONSERVER ENGINEERING on the basis of
the above mentioned license agreements, a non-exclusive trademark license
concerning the trademark "CONSERVER 21" as described in Annex 4 to this
Agreement (hereinafter the "Trademark") , which Trademark is in the process of
being registered in the United States Patent Office.
G. DISTRIBUTOR has advised INTERNATIONAL that it is willing to use, sell,
distribute and otherwise generally exploit commercially the Products (except for
the market of domestic use of the Products) in the Territory (as hereinafter
defined) as the exclusive and independent distributor of INTERNATIONAL and
INTERNATIONAL has expressed its desire to have DISTRIBUTOR act as its exclusive
distributor for the Products in the Territory on the terms described herein.
H. The parties have therefore decided to enter into an agreement setting forth
the terms and conditions under which DISTRIBUTOR shall market, use, promote,
distribute, sell and generally exploit commercially the Products (except for the
market of domestic use of the Products) in the United States of America and its
possessions, territories and dependencies, and Canada (herein, "the Territory"),
and set forth such terms and conditions in this Agreement.
NOW THEREFORE, THE PARTIES HERETO AGREE AS FOLLOWS:
<PAGE> 3
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1. SUBJECT MATTER
1.1 INTERNATIONAL hereby grants to DISTRIBUTOR the exclusive right to
import, promote, distribute, market, sell, use and generally exploit
commercially the Products (including the Trademark) in the Territory to
commercial users, excluding domestic consumers.
1.2 Subject to Paragraph 8.7, DISTRIBUTOR shall buy such Products as it may
need from INTERNATIONAL and use or resell them in the Territory in its
own name and for its own account and risk.
1.3 In complying with its obligations under the Agreement, DISTRIBUTOR may
distribute the Products through sub-distributors or agents.
DISTRIBUTOR shall notify INTERNATIONAL in writing of the name and
address of all proposed sub-distributors and shall not retain any sub-
distributors without the prior consent of INTERNATIONAL, which consent
shall not be unreasonably withheld. If disapproval of a proposed
sub-distributor is not given in writing by INTERNATIONAL within two
weeks of such written submission by DISTRIBUTOR, approval shall be
deemed to have been given.
2. PRODUCT RANGE - NON-COMPETITION
2.1 INTERNATIONAL reserves the right to substitute a new Product for any
Product and to modify the specifications, the manufacture or the design
of any Product if and when it deems it necessary or desirable, without
the consent of the DISTRIBUTOR and DISTRIBUTOR shall have no claim for
damages as a result of this action. Any decision by INTERNATIONAL as
described in the preceding sentence must be made for all distributors
and shall be made on no less than 60 days written notice. INTERNATIONAL
shall inform DISTRIBUTOR of any internal discussions of proposed
modifications or substitutions of the Products at the earliest possible
time so as to enable DISTRIBUTOR to control its inventory of Products
and to adjust its marketing as a result of such possible decisions.
INTERNATIONAL warrants that any possible modification or substitution
shall conform to the nature and intended use of the Products, and can
qualify as Products under this Agreement.
2.2 Subject to mandatory trade and commerce statutes, rules and regulations
as may be or become applicable INTERNATIONAL shall not permit any other
distributors to
<PAGE> 4
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import, promote, distribute sell, use or otherwise commercially exploit
the Products directly or indirectly or through agents or
sub-distributors in the Territory during the term of this Agreement
(except for the market of the domestic use of the Products), nor shall
it do so itself, in either case in a manner that would infringe upon
the rights granted to DISTRIBUTOR hereunder. To the extent permitted by
such statutes, rules and regulations, INTERNATIONAL shall use its best
efforts to prevent distribution of the Products in the Territory by
other persons.
2.3 DISTRIBUTOR shall not promote, distribute, market, sell, use or
otherwise commercially exploit the Products:
- through a branch or subsidiary, warehouse, distributor, agent or any
other active means outside the Territory, except after prior written
authorization of INTERNATIONAL (which authorization shall not be
unreasonably withheld to the extent the request relates to situations
that bear a close connection with the Territory and the request would
not infringe upon the rights of other distributors), provided, however,
that if Products are to be used in shipments to the Territory, such
authorization from INTERNATIONAL shall not be required insofar as the
preservation of the goods being so shipped is entirely organized by and
takes place under the responsibility of DISTRIBUTOR; nor
- for purposes other than for the preservation of foodstuffs and
flowers, except as provided in paragraph 6 hereof.
2.4 During the whole term of the Agreement, DISTRIBUTOR shall not in the
Territory, directly or indirectly manufacture, promote, sell or use for
trade purposes under whatever form, products which may compete with the
products, it being understood and agreed, however, that DISTRIBUTOR may
use (i) other products which do not compete with the Products but may
enhance or be used compatibly with the Products, and (ii) competing
products during such times as INTERNATIONAL fails to supply products to
DISTRIBUTOR, or construction of new or expansion of existing production
is taking place, or otherwise in accordance with Paragraph 8 of this
Agreement.
3. OBLIGATIONS OF DISTRIBUTOR
3.1 Subject to paragraph 8.7, DISTRIBUTOR shall purchase the Products for
commercial use in the Territory exclusively
<PAGE> 5
- 5 -
from INTERNATIONAL or companies designated by INTERNATIONAL.
3.2 DISTRIBUTOR shall inform its customers of the General Conditions of Use
of the Products made by INTERNATIONAL, as described in Annex 5 to this
Agreement. INTERNATIONAL may change these General Conditions on
reasonable notice from time to time.
3.3. DISTRIBUTOR shall promote the use, sale and/or distribution of the
Products in a loyal and diligent way, in accordance with the
manufacturer's General Conditions of Use, within the framework of the
marketing and business arrangements the Parties may from time to time
agree to, and shall abstain from making false or misleading statements
concerning INTERNATIONAL or its Products, provided that the repetition
or reproduction of statements made by INTERNATIONAL with respect to the
market in the Territory shall not be construed as false or misleading
for the purposes of this Agreement.
3.4 DISTRIBUTOR shall cooperate with INTERNATIONAL in obtaining the
authorizations or permits necessary for the use of the Products in the
Territory for all foodstuffs and for compliance with all rules and
regulations applicable to the Products for their marketing and their
use. INTERNATIONAL shall use its best efforts and shall be responsible
for obtaining all authorizations and permits for use of the Products in
connection with fish, meat and poultry, and all authorizations and
permits with respect the anti-microbial and anti-fungal benefits of the
Products for foodstuffs and cut flowers, at INTERNATIONAL'S cost.
3.5 Provided DISTRIBUTOR pays any additional expense generated thereby,
DISTRIBUTOR shall have the right to be named as an additional insured
under the products liability insurance policy maintained by
INTERNATIONAL, covering product liability risk related to the Products,
and, at the request of DISTRIBUTOR, INTERNATIONAL shall supply
DISTRIBUTOR with a copy of such policy. At DISTRIBUTOR's sole option,
DISTRIBUTOR shall obtain and maintain its own product liability
insurance relating to the Products and include INTERNATIONAL as an
additional insured during the whole term of this Agreement. Both such
insurance policies shall contain a provision pursuant to which the
insurers waive any recourse against INTERNATIONAL or DISTRIBUTOR, as
the case may be.
3.6 Periodically during the year DISTRIBUTOR shall consult
<PAGE> 6
- 6 -
with INTERNATIONAL with respect to its business plan for the coming year and
shall present a formal written business plan to INTERNATIONAL on June 30 for the
next calendar year; INTERNATIONAL shall likewise provide DISTRIBUTOR with its
business plan for the next year on August 31. The Parties acknowledge that their
respective initial business plans for the eighteen month period ended December
31, 1997 has been delivered to and has been approved by each other.
The parties shall regularly inform each other on the market conditions
and the state of competition in the Territory.
3.7 DISTRIBUTOR and INTERNATIONAL shall cooperate with one another in
connection with the general commercial exploitation of Products to
international customers. In that regard, whenever any party to this
agreement has an opportunity to make a presentation for the commercial
exploitation of the Products to a company which has significant
international business, such party shall immediately notify the other
party of such opportunity so that a united marketing strategy can be
agreed upon.
3.8 Within thirty (30) days following the end of each of the first three
calendar quarters, DISTRIBUTOR shall send INTERNATIONAL a detailed
summary of commercial activities with respect to the use of the
Products made by itself and by all its sub-distributors during the
quarter concerned.
Before February 15 of each year DISTRIBUTOR shall submit to
INTERNATIONAL a detailed summary of revenues received from the use and
commercial exploitation of the Products made by itself and by its
sub-distributors during the preceding calendar year.
DISTRIBUTOR shall provide INTERNATIONAL with the details of quantity of
Product used and of the revenue received therefrom, prices, dates of
delivery for certain specific accounts (to be agreed to by DISTRIBUTOR
and INTERNATIONAL).
INTERNATIONAL may audit the accounts of DISTRIBUTOR yearly at its cost
upon reasonable notice and at a mutually agreeable time and place.
These accounts as well as all related elements will be held at the
disposal of INTERNATIONAL or its representative authorized to effect
verifications.
3.9 At the present time it is not possible for the parties to
<PAGE> 7
- 7 -
negotiate more than rough estimates of minimum sales of the Products,
which estimate is reflected in Annex 6. After the initial start-up
period through December 31, 1997, the Parties shall negotiate in good
faith reasonable minimum sales for future years, which minimum sales
DISTRIBUTOR shall be responsible for.
4. SALES ORGANIZATION
4.1 DISTRIBUTOR shall be responsible for marketing and sales promotion in
the Territory in a commercially reasonable, proper and diligent manner.
Such marketing shall at all times be within the guidelines established
or approved by INTERNATIONAL, provided, however, that if DISTRIBUTOR;s
Business Plan, submitted in accordance with paragraph 3.6 of this
Agreement shall have been accepted, no further approvals or consents
shall be required from INTERNATIONAL insofar as the Business Plan
expressly refers to the marketing strategy DISTRIBUTOR intends to
pursue. The Parties agree that, other than as provided for hereunder,
all DISTRIBUTOR's initiatives relating to the marketing of the Product
or bearing on the Product's general image in the market, shall have to
be approved by INTERNATIONAL. INTERNATIONAL shall not unreasonably
withhold its approval. If the parties have been unable to agree on a
proper marketing strategy, and, to the extent that DISTRIBUTOR shall
have then pursued the marketing strategy recommended by INTERNATIONAL,
DISTRIBUTOR shall not be accountable if there is a failure to meet the
sales and royalty goals agreed to as provided for in paragraph 3.9.
4.2 DISTRIBUTOR shall have the right to have its initial staff trained in
English at B.V.'s facility in Western Europe at no cost to DISTRIBUTOR
other than the cost of travel and living expenses of its staff while
there.
4.3 DISTRIBUTOR shall have the right to have its commercial staff and the
commercial staff of its sub-distributors and agents participate in
training sessions organized by INTERNATIONAL which shall be conducted
in English. INTERNATIONAL shall maintain a staff of technicians able to
explain the processes and provide technical information and assistance
to be able to market the Products effectively. During the start-up
period through December 31, 1997, if requested by DISTRIBUTOR,
INTERNATIONAL shall make its own experts available to DISTRIBUTOR in
the Territory at no cost to DISTRIBUTOR other than the costs of travel
and living expenses which shall be borne by DISTRIBUTOR.
<PAGE> 8
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5. PUBLICITY - P.O.S. MATERIALS
5.1 DISTRIBUTOR shall be responsible at its own cost for the publicity and
promotion of the Products in the Territory.
5.2 DISTRIBUTOR recognizes that, as the commercial activities of
INTERNATIONAL are international, any advertising concerning the
Products can affect, even outside the Territory, the international fame
and prestige of INTERNATIONAL. DISTRIBUTOR shall therefore submit all
advertising for approval by INTERNATIONAL and such advertising shall be
deemed approved unless INTERNATIONAL shall object within 15 days of
such submission. INTERNATIONAL shall not unreasonably withhold
approval.
5.3 INTERNATIONAL shall provide DISTRIBUTOR, and DISTRIBUTOR shall provide
INTERNATIONAL, on a current basis and at no cost, with individual
copies of all promotional materials which it or any of its other
distributors or sub-distributors have created, including access to all
"camera ready" materials and other marketing materials which might
reduce the cost of producing advertising materials.
5.4 INTERNATIONAL shall keep DISTRIBUTOR informed of all positive and
negative publicity or developments concerning the Products and
competitive products so as to enable DISTRIBUTOR to take advantage of
or to be able to respond to inquiries concerning the Products.
INTERNATIONAL shall also disclose to DISTRIBUTOR all information it has
developed or acquired concerning the Products or any improvement or
modifications thereto which could be helpful in establishing the
commercial utility of the Products.
6. FIRST REFUSAL
6.1 DISTRIBUTOR is granted a right of first refusal of a license or
distributorship with respect to any proposed use of the Products for
uses other than the preservation of foodstuffs and flowers, not for use
by domestic consumers. Such right must be exercised within 45 days
after DISTRIBUTOR is provided with the proposed terms and conditions of
the agreement.
6.2 DISTRIBUTOR is granted a right of first refusal of a license or
distributorship with respect to any products acquired or developed by
INTERNATIONAL or CONSERVER ENGINEERING for use as a preserver of
foodstuffs and flowers other than for use by domestic customers. Such
right must be exercised within 45 days after DISTRIBUTOR
<PAGE> 9
- 9 -
is provided with the proposed terms and conditions of the agreement.
7. PRICES
7.1 DISTRIBUTOR shall buy the Products from NORD at the "distributor"
tariff of NORD (hereinafter the "Tariff") in force at the time the
order is placed by DISTRIBUTOR. DISTRIBUTOR shall benefit from all
discounts applicable to distributors mentioned in the Tariff. No
distributor shall be able to buy Products at a lower cost than
DISTRIBUTOR.
7.2 The Tariff in force at the day of signature of the present Agreement is
described in Annex 7 to this Agreement. The Tariff may be revised by
INTERNATIONAL on 30 days prior written notice, but only if a change in
the costs of the minerals used to manufacture the Products, the cost of
utilities or other increases in direct manufacturing costs (excluding
managerial salaries), or any other event with a direct impact on
production or regulatory compliance, justify such adjustment.
7.3 The Tariff is established FOB an East Coast United States location
("Point of Delivery") including all taxes, freight, insurance and
export or import duties, which shall be for the account of NORD. All
products shall be properly labelled by INTERNATIONAL and customs
clearance shall be the responsibility of NORD.
7.4 NORD retains title to the Products until full payment thereof by
DISTRIBUTOR, even in case of moratorium or bankruptcy of DISTRIBUTOR.
7.5 The term of payment of the Products shall be forty five (45) days
following the date of delivery of the Product to DISTRIBUTOR in the
Territory, by wire transfer to the bank account selected by NORD, as
notified from time to time.
7.6 Any unpaid and overdue amount under this Agreement shall bear interest
at the prime rate of Citibank as in effect from time to time, which
shall be added to the amount due NORD from the date the amount becomes
due until the date of payment.
8. ORDERS - DELIVERY
8.1 DISTRIBUTORS shall place its orders with NORD by fax, E- mail or by
mail at the address indicated by NORD. If an order is sent by fax, a
written confirmation of the order
<PAGE> 10
- 10 -
shall be mailed.
8.2 NORD shall do its utmost to deliver the orders of DISTRIBUTOR without
delay, within its production capacity limits and taking into account
the other Distribution Agreements concluded with third parties.
8.3 Unless otherwise agreed between the parties, the Products shall be
delivered at the Point of Delivery.
All taxes, duties and excises concerning the sales as of the Point of
Delivery shall exclusively be borne by Distributor other than export
duties or fees and export permits and formalities.
8.4 The Products shall be for the risk of DISTRIBUTOR from the time of
delivery of the Products to the Point of Delivery by NORD to the
carrier.
8.5 INTERNATIONAL shall not be liable for any deterioration or alternation
of the Products caused by the carrier, and in such event it is the
responsibility of the DISTRIBUTOR to take any action required against
the carrier, provided that if the Products shall have been insured
during shipment by INTERNATIONAL, INTERNATIONAL shall cooperate fully
with DISTRIBUTOR in pursuing claims against the insurer.
8.6 DISTRIBUTOR either itself or through its subdistributors, shall, at all
times, maintain sufficient inventory of the Products so as to cover the
reasonably expected needs of the Products during a period of two
months. At DISTRIBUTOR's option, this inventory may be maintained at
NORD's warehouse, charges to be invoiced on a passthrough basis. The
Parties acknowledge that DISTRIBUTOR currently maintains no such
inventory. DISTRIBUTOR hereby undertakes to build up such inventory in
accordance with the approved Business Plan over a period of six months.
8.7 In the event INTERNATIONAL is unable to provide adequate quantities of
the Products to DISTRIBUTOR in a reasonable time after the placing of
an order by DISTRIBUTOR (such reasonableness being determined as from
the placing of the order and with due recognition of the commercial
requirements of DISTRIBUTOR as set forth in the approved Business Plan
or any amendments thereof), INTERNATIONAL shall use its best efforts to
increase its production capacity.
In that event, should INTERNATIONAL fail to achieve such
<PAGE> 11
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increased capacity, or if such increase appears not to be sufficient to
enable INTERNATIONAL to deliver the Products within such reasonable
time, INTERNATIONAL shall cause a plant for the manufacture of Products
to be built in the Territory, Mexico or Canada, to serve as the
supplier of the Products which will primarily service the needs of the
market in the Territory and Canada.
Should it appear that (i) INTERNATIONAL fails to increase its
production capacity so as to satisfy the reasonable delivery demands of
DISTRIBUTOR, or (ii) INTERNATIONAL fails to diligently start or
implement the construction of a production facility in the Territory in
accordance with this subparagraph, (iii) all reasonable corrective
measures by INTERNATIONAL fail to achieve delivery of the Products
within such reasonable time, or (iv) INTERNATIONAL is manifestly unable
to deliver Products in accordance with the terms and conditions of this
Agreement, then DISTRIBUTOR shall have the authority to take over
management responsibility for the production, sourcing and/or
purchasing of the Products for the Territory, and, to the extent this
would appear to be necessary to achieve timely deliveries, to build a
production facility (for the supply of the needs of the market in the
Territory exclusively). To that effect, in such event, INTERNATIONAL
and CONSERVER ENGINEERING hereby agree to license or otherwise provide
all necessary intellectual property rights and know how to DISTRIBUTOR,
as may be reasonably necessary for DISTRIBUTOR to operate a production
facility, and INTERNATIONAL and CONSERVER ENGINEERING shall cooperate
fully with DISTRIBUTOR in such event.
9. SUB-DISTRIBUTOR
9.1 DISTRIBUTOR may grant the distribution rights for the Products in the
Territory to sub-distributors or agents, as provided for in paragraph
1.3 hereof.
9.2 All orders of Products of sub-distributors or agents shall be placed by
DISTRIBUTOR in its own name and DISTRIBUTOR shall be responsible for
payment of the price of the Products ordered.
9.3 In case of expiration or termination for whatever reason of the present
Agreement, sub-distributors and agents shall have no claim vis-a-vis
INTERNATIONAL.
<PAGE> 12
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10. ROYALTY
10.1 In consideration of INTERNATIONAL's entering into this Agreement,
DISTRIBUTOR shall pay a royalty to INTERNATIONAL of six (6%) percent of
Net Revenues of DISTRIBUTOR generated from the commercial use of the
Product for the first One Hundred Million ($100,000,000) Dollars of
such Net Revenues, and a royalty of seven (7%) percent on Net Revenues
generated from the commercial use of the Product in excess thereof.
10.2 DISTRIBUTOR shall pay the royalty to INTERNATIONAL quarterly,
forty-five days after the end of each calendar quarter. Royalties shall
be accompanied by copies of such records as INTERNATIONAL may
reasonably request in order to verify revenues received from the
commercial use of the Products.
10.3 During the term of this Agreement, DISTRIBUTOR shall provide
INTERNATIONAL with a quarterly report of revenues received from the
commercial use of the Products, in a form reasonably satisfactory to
INTERNATIONAL.
10.4 DISTRIBUTOR shall maintain accurate and complete business records with
respect to its commercial use and distribution of the Product.
DISTRIBUTOR shall make the originals of such records (not including
financial statements and records) available to INTERNATIONAL'S
employees or agents during regular business hours.
10.5 For the purposes of this agreement the term "Net Revenues" shall mean
the gross proceeds actually received by DISTRIBUTOR from the commercial
exploitation of Products reduced by the cost of packing, freight, and
insurance of the Product, and by federal, state and local taxes.
11. INTELLECTUAL AND COMMERCIAL PROPERTY RIGHTS
11.1 DISTRIBUTOR shall market the Products under the Trademark or under
another trademark agreed to by INTERNATIONAL, and it shall not use any
other trademark to sell the Product. In the event it is determined that
the Products should be marketed under another trademark, such trademark
shall be registered in the United Stares by CONSERVER ENGINEERING, at
its cost, provided, however, that DISTRIBUTOR shall be entitled to
register such mark if CONSERVER ENGINEERING shall fail to do so and
such failure shall continue after notice (in accordance with paragraph
19.4 of this Agreement) shall have been given by DISTRIBUTOR to
CONSERVER ENGINEERING.
<PAGE> 13
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11.2 INTERNATIONAL hereby grants to DISTRIBUTOR the non-exclusive right to
use the Trademark in the Territory for the use and sale of the Products
in conformity with this Agreement. INTERNATIONAL shall not use the
Trademark in the Territory for any other use without the consent of the
DISTRIBUTOR.
11.3 DISTRIBUTOR shall only during the term of the Agreement use the
Trademark only for the use, distribution and sale of the Products in
the Territory in conformity with the conditions of this Agreement. In
this respect Distributor shall not
- use or register the Trademark for other products than those which
from time to time are the subject matter of the present Agreement or
other needs than the marketing of such Products in the context of the
present Agreement;
- except as provided for below, use of the Trademark after termination
or expiration of the Agreement for whatever reason.
11.4 Under the present Agreement DISTRIBUTOR may use the word "CONSERVER" in
its name. DISTRIBUTOR shall in case of termination or expiration for
whatever reason of the present Agreement, immediately change such name
by removing the word "CONSERVER" or any other combination of words,
letters or signs referring to INTERNATIONAL or its Products as they may
from time to time be or have been used by INTERNATIONAL to identify
itself or its Products.
11.5 DISTRIBUTOR shall not file for the registration of the Trademark or of
trademarks or signs which could be confusingly similar to the Trademark
in any country.
11.6 DISTRIBUTOR may authorize sub-distributors or agents to use the
Trademark for the sale of the Products provided DISTRIBUTOR guarantees
compliance by sub-distributors or agents of the conditions of use of
the Trademark and the obligation under the present paragraph towards
INTERNATIONAL.
11.7 DISTRIBUTOR recognizes that CONSERVER ENGINEERING is the licensor of
the know how and of the intellectual property rights in connection with
the Products.
11.8 Other than as provided herein, INTERNATIONAL does not give any
guarantee other than (i) the guarantee that it has been awarded an
exclusive temporary right to distribute
<PAGE> 14
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the Products in the Territory, and (ii) that the Trademark exists and
has been licensed to INTERNATIONAL.
11.9 CONSERVER ENGINEERING and INTERNATIONAL further guarantee that they
shall use their best efforts to secure patent protection for the
inventions and know how upon which the Products are based wherever the
Products are sold or commercial used, including in the Territory.
11.10 DISTRIBUTOR shall inform INTERNATIONAL as soon as possible of any
unfair infringement or infringement actions or nullity actions against
the exclusive rights that do or may exist, or against the Trademark by
third parties concerning the Products, or any other action which could
affect the validity or the scope of protection of the intellectual
property rights of which it may become aware, in order for
INTERNATIONAL to remedy the situation (which it shall be the duty of
INTERNATIONAL to try to do), and, in particular, at INTERNATIONAL's
direction and expense, to take such actions as is required to protect
the rights and Trademark or to request DISTRIBUTOR, at INTERNATIONAL'S
expense, to take such actions on INTERNATIONAL's behalf; in the latter
case DISTRIBUTOR shall follow the instructions given by INTERNATIONAL,
provided, however, that if after such notice of infringement by
DISTRIBUTOR to INTERNATIONAL, INTERNATIONAL shall have failed to take
action to prevent such infringement, DISTRIBUTOR shall be authorized to
take such action as it deems appropriate to prevent such infringement.
11.11 In case the intellectual property rights or the Trademark protection
are not granted or are declared null and void, dependent or infringing
by a final court decision, DISTRIBUTOR may not claim any reimbursement
or damages or discount from INTERNATIONAL concerning the unpaid
invoices still due to INTERNATIONAL at the date of such court decision,
DISTRIBUTOR expressly waiving any and all rights of recovery against
INTERNATIONAL in this respect.
11.12 In case infringement actions are initiated against DISTRIBUTOR
concerning the sales of the Products, International shall give its
technical and legal advice to DISTRIBUTOR for its defense.
INTERNATIONAL and CONSERVER ENGINEERING shall indemnify and hold
DISTRIBUTOR harmless from and against any costs, expenses and damages
including any legal fees resulting directly or indirectly from any
claims or actions for patent or trademark infringement (whether
threatened or actually initiated) or as a result of any breach in whole
or in part of any representation or
<PAGE> 15
- 15 -
warranty, or from a judgement entered therein, which may be brought
against DISTRIBUTOR for such infringement as a result of its activities
hereunder. However, INTERNATIONAL is not obliged to join the
proceedings.
11.13 INTERNATIONAL and CONSERVER ENGINEERING represent and warrant that
jointly, they are the exclusive licensees of the right to distribute
the Products in the Territory and of the Trademark and all goodwill
associated therewith, free and clear of all liens, encumbrances,
security interests or rights of any other party whatsoever. There is no
litigation, claim or assessment pending or threatened contesting their
rights under the license indicated in the preamble of this Agreement.
To the best of their knowledge, INTERNATIONAL's use of the intellectual
property rights does not, and DISTRIBUTOR's use of the intellectual
property rights as contemplated herein will not, infringe upon any
other person's patents, trademarks or proprietary rights of any nature
whatsoever.
11.14 INTERNATIONAL and CONSERVER ENGINEERING represent and warrant jointly,
that, to the best of their knowledge, (i) the secret formula, processes
and the specifications are their exclusive rights as licensee and
licensor, respectively, do not infringe upon any other person's
ownership or proprietary rights, and that (ii) such secret formula and
processes, will yield Products that are good and merchantable and fit
for use with foodstuffs.
11.15 The execution of this Agreement by INTERNATIONAL has been duly
authorized by all necessary corporate action of INTERNATIONAL and
ENGINEERING and constitute the valid and binding obligation of
INTERNATIONAL and ENGINEERING. The execution of this Agreement by
INTERNATIONAL and the consummation of the transactions contemplated
hereby does not conflict with or result in default under or breach of
(1) INTERNATIONAL and ENGINEERING's Articles of Incorporation or
By-laws or other organization documents; (2) any agreement, indenture,
mortgage, contract or instrument to which INTERNATIONAL and ENGINEERING
are bound or by which any of their properties or assets are subject;
(3) any order, writ, injunction, decree or judgment of any court or
governmental agency applicable to INTERNATIONAL and ENGINEERING or to
which any of their assets are bound; or (4) any law or regulation
applicable to INTERNATIONAL and ENGINEERING or by which any of their
assets are bound.
<PAGE> 16
- 16 -
12. GUARANTEE
INTERNATIONAL warrants that all products which are to be shipped under this
Agreement shall qualify as Products and shall be of a quality as previously
demonstrated to DISTRIBUTOR.
Except as provided for herein, INTERNATIONAL does not guarantee that the
Products shall be free from defects, as sold by INTERNATIONAL to DISTRIBUTOR, or
concerning any damages or losses direct or indirect material or immaterial,
financial, commercial or otherwise, incurred by DISTRIBUTOR, its
sub-DISTRIBUTORS or agents or any third party.
INTERNATIONAL is not obliged to replace Products which arrive in a damaged
condition, other than Products which were defective when shipped, which shall be
replaced. As a compensation for any such damage, during the first year of the
Agreement commencing with the initial shipment of Products, INTERNATIONAL shall
ship to DISTRIBUTOR an additional 0.5% of the amount of Product ordered on each
order of Products ordered by DISTRIBUTOR.
After such initial year, the parties will negotiate an appropriate percentage
based upon the experience during the first year.
13. ASSIGNMENT OF AGREEMENT
DISTRIBUTOR may not in whole or part assign its rights under the present
Agreement to third parties without the prior written authorization of
INTERNATIONAL, except in the context of an agency or sub-distribution Agreement
as provided above, or to a controlled, controlling or common controlled entity.
14. TERM
14.1 The present Agreement shall remain in effect for an initial period as
follows (the "Initial Period"):
(i) at the time of the signing of this Agreement, the Initial Period
shall be equal to the duration provided for in the license granted
to CONSERVER ENGINEERING Ltd. and INTERNATIONAL, i.e. until May
12, 2005;
(ii) however, to the extent CONSERVER ENGINEERING Ltd. or INTERNATIONAL
succeed in obtaining a license for a longer duration, or succeed
in obtaining exclusive proprietary rights to the intellectual
property rights or on the Trademark and on all rights relating to
the know how and inventions upon which the Products are based, the
Initial Period
<PAGE> 17
- 17 -
shall be extended to a total duration of twenty (20) years as of
the date of this Agreement.
14.2 M. Denis Allet, who co-signs this Agreement to mark his approval to be
bound by the provisions of this section, agrees to use his best efforts
to secure, for CONSERVER ENGINEERING or INTERNATIONAL, (i) either
proprietary rights on the know how and inventions upon which the
Products are based, or (ii) an amendment to the existing license
granted to CONSERVER ENGINEERING Ltd. relating to the same, providing
for an exclusive license for the Territory for a period of 20 years
and, if possible, to have it renewable thereafter for additional terms
so as to satisfy section 14.3 hereof.
14.3 Subject to paragraph 14.4 this Agreement shall be automatically
renewable beyond the Initial Period for subsequent periods of three (3)
years.
14.4 The present Agreement can be terminated by either party without any
indemnity being due at the end of its term, by written notice one year
prior to the end of the initial twenty (20) year term and thereafter by
written notice six (6) months' prior to the end of each succeeding
three year term.
14.5 The Agreement can be terminated prematurely only pursuant to the
condition provided for in paragraph 15 hereunder.
15. PREMATURE TERMINATION
15.1 Each party may terminate the Agreement in case:
- of insolvency or bankruptcy of the other party, howsoever
manifested;
- substantial breach of any material provision of this Agreement by
the other party provided written notice has been given to the
other of the alleged breach and the other party has not cured or
commenced the cure of the breach within thirty (30) days after
delivery of such notice;
- the material breach by the other party is caused by force majeure
and the situation is prolonged beyond one hundred eighty (180)
days.
- failure of DISTRIBUTOR to reach seventy-five (75%) percent of the
minimum sales level of Products provided for in paragraph 3.9
hereof for two consecutive years,
<PAGE> 18
- 18 -
provided, however, that this paragraph shall not apply in respect
of the start-up period through December 31, 1997 nor if such
failure is caused by the inability of INTERNATIONAL to provide
DISTRIBUTOR with adequate quantities of Products on a timely
basis, and provided further that if DISTRIBUTOR believes this
marketing guidelines established by INTERNATIONAL are
inappropriate for marketing the Products in the Territory, it
shall advise INTERNATIONAL of its concerns with such strategy and
if the parties are unable to agree on the proper marketing
strategy DISTRIBUTOR shall not be accountable if there is a
failure to meet the sales goals agreed to as provided for in
paragraph 3.9.
15.2 INTERNATIONAL may terminate the present Agreement in case DISTRIBUTOR
does not pay the amounts due under the present agreement with twenty
(20) business days of receipt of notice to that effect.
15.3 In case of expiration or termination of the Agreement for whatever
reason, DISTRIBUTOR shall immediately stop selling the Products
purchased from International in the Territory, provided, however, that
DISTRIBUTOR shall have the right to sell its inventory over the 60 days
following such termination or expiration or, at INTERNATIONAL's option,
by INTERNATIONAL purchasing such inventory at DISTRIBUTORS's cost,
including all duties, shipping and other directly related costs.
15.4 Notwithstanding any other provision of this Agreement to the contrary,
if this Agreement is terminated as a consequence of the insolvency of
INTERNATIONAL, howsoever manifested, or if INTERNATIONAL's failure to
deliver sufficient Products on a timely basis has led to the
authorization of DISTRIBUTOR to manage the production, sourcing and/or
purchasing of the Products, or to produce directly the Products, all in
accordance with paragraph 8.7 of this Agreement, then DISTRIBUTOR shall
have a continuing right to produce, market, use and generally exploit
commercially the Products and use the Trademark in conjunction
therewith, such right to be coterminous with the license (and any
extension thereof) described in paragraph 14.1 of this Agreement.
16. CONFIDENTIALITY
16.1 All technical and commercial information provided to DISTRIBUTOR by
INTERNATIONAL or which comes to the knowledge of DISTRIBUTOR in the
context of the execution
<PAGE> 19
- 19 -
of the present Agreement, shall be considered confidential by
DISTRIBUTOR and shall not be disclosed to any other company, person or
organization except after prior written authorization by INTERNATIONAL,
provided, however, that if a court orders that DISTRIBUTOR disclose any
such confidential information, DISTRIBUTOR shall immediately notify
INTERNATIONAL of such order, and thereafter shall be excused from the
obligations of this paragraph to the extent and within the limits of
that court order.
16.2 However, DISTRIBUTOR may give this information to its employees, its
agents (including consultants and advisers) or its sub-distributors if
necessary for the marketing of the Products, provided these persons
shall comply with the obligations of the present paragraph.
16.3 DISTRIBUTOR shall adopt internal procedures to preserve the
confidential character of the information, including procedures of
transmission of information.
16.4 The above mentioned obligations shall remain in force after the
expiration or termination of the present Agreement for whatever reason,
but do not apply to information which has fallen in the public domain
or would fall in that domain in the course of the performance under the
present Agreement, as long as the disclosure was not caused by the
DISTRIBUTOR or its personnel, its sub-distributors or its agents.
17. INDEPENDENCE
Neither Party is an agent or employee of the other. The Parties have no
authority whatsoever to assume, create or incur any obligation or liability on
behalf of the other or to bind the other in any manner.
18. APPLICABLE LAW
18.1 Delaware law is applicable to this agreement.
18.2 Any dispute or controversy arising out of this agreement shall be
submitted for resolution by arbitration to the International Chamber of
Commerce in Paris, France.
19. MISCELLANEOUS
19.1 Neither party is responsible for any loss or damages by delays or
non-performance of obligations under this Agreement caused by force
majeure, provided each party notifies the other as soon as possible if
such events.
<PAGE> 20
- 20 -
Such event, however, does not exempt DISTRIBUTOR form its obligation to
pay INTERNATIONAL the amounts due.
19.2 The present Agreement (including the Annexes to the Agreement which
form an integral part of the Agreement) constitutes the whole Agreement
between the parties and supersedes all other prior oral or written
agreements between the parties.
19.3 Except if expressly provided to the contrary, this Agreement may not be
modified or amended except by a writing, signed by the parties'
authorized representatives.
19.4 All notifications or claims of whatever nature should be addressed by
one party to the other in writing and delivered personally or sent by
mail return receipt requested:
If to Conserver International,
M. Denis Allet
6, Rue Antoine Vaquerie
75016 Paris, France
With a copy to:
M. Patrick Van Leynseele
Stibbe Simont Monahan Duhot
47-51 Rue Henri Wafelaert
1060 Brussels, Belgium
If to Conserver Engineering,
2 Clan William Terrace
Dublin, Ireland
With a copy to:
M. Patrick Van Leynseele
Stibbe Simont Monahan Duhot
47-51 Rue Henri Wafelaert
1060 Brussels, Belgium
<PAGE> 21
- 21 -
If to Conserver North America, Inc.
Corporation Trust Center
1209 Orange Street
Wilmington, Delaware
If to Conserver Corporation of America,
Mr. Charles Stein
44 East 67th Street
New York, New York 10021
With a copy to:
Maxwell Stolzberg, Esq.
Mezan, Stolzberg & Schwartzman, P.C.
460 Park Avenue
New York, N.Y. 10022
And to:
Gregory Pilkington, Esq.
McFadden, Pilkington & Ward
City Tower, Level 4
40 Basinghall Street
London EC2V 5DE
or to such other address as may hereby be designated in writing to the
other parties. Notifications shall be deemed to be made on the third
day after the date of delivery to the postal services. When made by
personal delivery, they shall be effective when made.
19.5 The titles of the paragraphs of the present Agreement are for
information purposes only and are not a part of the present Agreement
and cannot be used for its interpretation.
19.6 Except if expressly provided to the contrary, the failure of a party to
insist upon strict performance under this Agreement, on any occasion,
shall not be considered a waiver or deprive that party of the right to
insist upon strict compliance to that term or any other term of this
Agreement, now or in future, while any waiver should be made in
writing.
19.7 If any provision of this Agreement is considered null and void by an
enforceable decision of any competent Court or administrative
authority, such invalidity shall not affect
<PAGE> 22
- 22 -
the validity of the remaining provisions. The parties shall substitute
for any invalid provision a mutually acceptable valid one which shall
as much as possible meet the commercial aims of the former invalid
provision.
IN WITNESS WHEREOF, the parties hereto have signed and executed the
present Agreement at the place and date mentioned hereunder.
CONSERVER CORPORATION OF CONSERVER INTERNATIONAL B.V.
AMERICA
BY: By:
----------------------------- ---------------------------
Date: 10/9/96 Date: 10/9/96
----------------------------- ---------------------------
Place: Place:
----------------------------- ---------------------------
Title: Chairman Title:
----------------------------- ---------------------------
Signature: /s/ Charles H. Stein Signature: /s/ B. Denis Allet
----------------------- ---------------------
Title: Executive Vice President Title:
Signature: /s/ Mark Kallan Signature:
----------------------- -----------------------
CONSERVER NORTH AMERICA, INC.
BY: By:
----------------------------- ---------------------------
Date: 10/9/96 Date:
----------------------------- ---------------------------
Place: Place:
----------------------------- ---------------------------
Title: B. Denis Allet Title:
----------------------------- ---------------------------
The undersigned does hereby agree
to be bound but hereto but only with
respect to Items. A., B., C., D., E.,
F., 6.1, 6.2, 8.7, 11.1, 11.8, 11.9,
11.10, 11.12, 11.13, 11.14, and 11.15;
CONSERVER ENGINEERING
BY: By:
----------------------------- ---------------------------
Date: 10/9/96 Date:
----------------------------- ---------------------------
Place: Place:
----------------------------- ---------------------------
Title: Title:
----------------------------- ---------------------------
The undersigned does hereby agreed to
be bound but only with respect to
item 14.2
/s/ B. Denis Allet
- -----------------------------
B. Denis Allet
<PAGE> 1
EXHIBIT 10.4
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, OFFERED FOR SALE, ASSIGNED, TRANSFERRED OR
OTHERWISE DISPOSED OF, UNLESS REGISTERED PURSUANT TO THE PROVISIONS OF THAT ACT
OR AN OPINION OF COUNSEL TO THE COMPANY IS OBTAINED STATING THAT SUCH
DISPOSITION IS IN COMPLIANCE WITH AN AVAILABLE EXEMPTION FROM SUCH REGISTRATION.
----------------------------
CONSERVER CORPORATION OF AMERICA
(Incorporated under the laws of the State of Delaware)
VOID AFTER 5:00 P.M., NEW YORK CITY TIME, ON _____________, 1999
DATED: ___________, 1996 WARRANT TO PURCHASE
_________ SHARES OF
COMMON STOCK
WARRANT FOR THE PURCHASE OF SHARES OF COMMON STOCK
FOR VALUE RECEIVED, CONSERVER CORPORATION OF AMERICA, a Delaware
corporation (the "Company"), hereby certifies that
______________________________ or assigns (the "Holder") is entitled, subject to
the provisions of this warrant (the "Warrant"), to purchase from the Company
during the period commencing on the day hereof and expiring at 5:00 p.m. New
York City local time, on_____________, 1999 (the "Expiration Date") up to
_____________ fully paid and nonassessable shares of Common Stock of the Company
at a price of $5.00 per share (such exercise price per share being hereinafter
referred to as the "Exercise Price" and, if and as adjusted as herein provided,
the "Pro Forma Adjusted Exercise Price").
The term "Common Stock" means the common shares of the Company as
constituted on ______________, 1996 (the "Base Date"), together with any other
equity securities that may be issued by the Company in addition thereto or in
substitution therefor. The number of shares of Common Stock to be received upon
the exercise of this Warrant may be adjusted from time to time as hereinafter
set forth. The shares of Common Stock deliverable upon such exercise, and as
adjusted from time to time, are hereinafter sometimes referred to as "Warrant
Stock".
Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of
<PAGE> 2
this Warrant, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Warrant, if mutilated, the Company shall execute and deliver a new Warrant of
like tenor and date. Any such new Warrant executed and delivered shall
constitute an additional contractual obligation on the part of the Company,
whether or not this Warrant so lost, stolen, destroyed or mutilated shall be at
any time enforceable by anyone.
The Holder agrees with the Company that this Warrant is issued, and all
the rights hereunder shall be held, subject to all of the conditions,
limitations and provisions set forth herein.
1. EXERCISE OF WARRANT.
1.1 PRIMARY MANNER OF EXERCISE. This Warrant may be exercised
in whole at any time, or in part from time to time, during the period commencing
on the Base Date and expiring on the Expiration Date or, if any such day is a
day on which banking institutions in the City of New York are authorized by law
to close, then on the next succeeding day that shall not be such a day, by
presentation and surrender of this Warrant to the Company at its principal
office, or at the office of its stock transfer agent, if any, with the Warrant
Exercise Form attached hereto duly executed and accompanied by payment (either
in cash or by certified or official bank check, payable to the order of the
Company) of the Exercise Price for the number of shares specified in such Form
and instruments of transfer, if appropriate, duly executed by the Holder or its
duly authorized attorney.
1.2 ALTERNATIVE MANNER OF EXERCISE. In lieu of exercising this
Warrant in the manner set forth in Section 1.1, this Warrant may be exercised in
whole at any time, or in part from time to time, during the period commencing on
the Base Date and expiring on the Expiration Date or, if any such day is a day
on which banking institutions in the City of New York are authorized by law to
close, then on the next succeeding day that shall not be such a day, by
presentation and surrender of this Warrant to the Company at its principal
office, or at the office of its stock transfer agent, if any, with the Warrant
Exercise Form attached hereto duly executed and accompanied by payment (either
in cash or by certified or official bank check, payable to the order of the
Company) of $.001 for each share issuable upon exercise of this Warrant, the
number of such shares (collectively, the "Alternative Option Shares") to be
determined as hereinafter set forth, and instruments of transfer, if
appropriate, duly executed by the Holder or its duly authorized attorney.
Alternative Option Shares shall be determined according to the following
formula:
Z = A x (MP - EP)
-------------
MP
2
<PAGE> 3
For the purpose of this Section 1.2, the following definitions
shall apply:
(a) "Z" shall mean the Alternative Option Shares;
(b) "A" shall mean that number of shares of Common
Stock issuable upon exercise of this Warrant had such Warrant
been exercised pursuant to Section 1.1;
(c) "MV" shall mean the market price of the Common
Stock on the date this Warrant is presented and
surrendered to the Company; and
(d) "EP" shall mean the Exercise Price (as herein-
above defined).
1.3 PARTIAL EXERCISE. If this Warrant should be exercised in
part only, the Company shall, upon surrender of this Warrant for cancellation,
execute and deliver a new Warrant evidencing the rights of the Holder thereof to
purchase the balance of the shares purchasable hereunder. Upon receipt by the
Company of this Warrant, together with the Exercise Price, at its office, or by
the stock transfer agent of the Company at its office, in proper form for
exercise, the Holder shall be deemed to be the holder of record of the shares of
Common Stock issuable upon such exercise, notwithstanding that the stock
transfer books of the Company shall then be closed or that certificates
representing such shares of Common Stock shall not then be actually delivered to
the Holder. The Company shall pay any and all documentary stamp or similar issue
taxes payable in respect of the issue or delivery of shares of Common Stock on
exercise of this Warrant.
2. RESERVATION OF SHARES. The Company will at all times reserve for
issuance and delivery upon exercise of this Warrant all shares of Common Stock
or other shares of capital stock of the Company (and other securities and
property) from time to time receivable upon exercise of this Warrant. All such
shares (and other securities and property) shall be duly authorized and, when
issued upon such exercise, shall be validly issued, fully paid and nonassessable
and free of all preemptive rights.
3. ABSENCE OF REGISTRATION UNDER SECURITIES ACT OF 1933.
3.1 ABSENCE OF REGISTRATION UNDER SECURITIES ACT OF 1933. The
shares of Common Stock issuable upon exercise of this Warrant are not presently,
and upon their issuance will not be, registered under the Securities Act of
1933, as amended (the "Act"). Such shares of Common Stock, however, will be
subject to certain registration rights as more fully set forth in Schedule 3.1
attached hereto (the "Registration Rights Schedule"). This Warrant is not and
will not be registered under the Act.
3
<PAGE> 4
3.2 RESTRICTIONS UPON TRANSFERABILITY. The Warrant Stock and
the Warrant may be sold or otherwise disposed only in accordance with the
provisions of Sections 4 and 5 of the Registration Rights Schedule.
4. FRACTIONAL SHARES. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant, but the
Company shall issue one additional share of its Common Stock in lieu of each
fraction of a share otherwise called for upon any exercise of this Warrant.
5. EXCHANGE, TRANSFERS, ASSIGNMENT OF WARRANT. This Warrant is not
registered under the Act nor under any applicable state securities law or
regulation. This Warrant cannot be exchanged, transferred or assigned, except in
accordance with the provisions of Section 3.2 hereof. Upon such event and upon
surrender of this Warrant to the Company or at the office of its stock transfer
agent, if any, with the Assignment Form annexed hereto duly executed and funds
sufficient to pay any transfer tax, the Company shall, without charge, execute
and deliver a new Warrant in the name of the assignee named in such instrument
of assignment and this Warrant shall promptly be cancelled.
6. RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof, be
entitled to any rights of a stockholder of the Company, either at law or in
equity, and the rights of the Holder are limited to those expressed in this
Warrant.
7. REDEMPTION. This Warrant is not redeemable by the Company.
8. ANTI-DILUTION PROVISIONS.
8.1 ADJUSTMENT FOR DIVIDENDS IN OTHER SECURITIES, PROPERTY,
ETC.; RECLASSIFICATION, ETC. In case at any time or from time to time after the
Base Date the holders of Common Stock (or any other securities at the time
receivable upon the exercise of this Warrant) shall have received, or on or
after the record date fixed for the determination of eligible stockholders,
shall have become entitled to receive without payment therefor: (a) other or
additional securities or property (other than cash) by way of dividend, (b) any
cash paid or payable except out of earned surplus of the Company at the Base
Date as increased (decreased) by subsequent credits (charges) thereto (other
than credits in respect of any capital or paid-in surplus or surplus created as
a result of a revaluation of property) or (c) other or additional (or less)
securities or property (including cash) by way of stock-split, spin-off,
split-up, reclassification, combination of shares or similar corporate
rearrangement, then, and in each such case, the Holder of this Warrant, upon the
exercise thereof as provided in Section 1, shall be entitled to receive the
amount of securities and property (including cash in the cases referred to in
clauses
4
<PAGE> 5
(b) and (c) above) which such Holder would hold on the date of such exercise if
on the Base Date it had been the holder of record of the number of shares of
Common Stock (as constituted on the Base Date) subscribed for upon such exercise
as provided in Section 1 and had thereafter, during the period from the Base
Date to and including the date of such exercise, retained such shares and/or all
other additional (or less) securities and property (including cash in the cases
referred to in clauses (b) and (c) above) receivable by it as aforesaid during
such period, giving effect to all adjustments called for during such period by
Section 8.2.
8.2 ADJUSTMENT FOR REORGANIZATION, CONSOLIDATION, MERGER, ETC.
In case of any reorganization of the Company (or any other corporation, the
securities of which are at the time receivable on the exercise of this Warrant)
after the Base Date or in case after such date the Company (or any such other
corporation) shall consolidate with or merge into another corporation or convey
all or substantially all of its assets to another corporation, then, and in each
such case, the Holder of this Warrant upon the exercise thereof as provided in
Section 1 at any time after the consummation of such reorganization,
consolidation, merger or conveyance, shall be entitled to receive, in lieu of
the securities and property receivable upon the exercise of this Warrant prior
to such consummation, the securities or property to which such Holder would have
been entitled upon such consummation if such Holder had exercised this Warrant
immediately prior thereto, all subject to further adjustment as provided in
Section 8.1; in each such case, the terms of this Warrant shall be applicable to
the securities or property receivable upon the exercise of this Warrant after
such consummation.
8.3 NO IMPAIRMENT. The Company will not, by amendment of its
Certificate of Incorporation or through reorganization, consolidation, merger,
dissolution, issue or sale of securities, sale of assets or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
of the Warrant, but will at all times in good faith assist in the carrying out
of all such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the Holder of this Warrant against
dilution or other impairment. Without limiting the generality of the foregoing,
while any Warrant is outstanding, the Company (a) will not permit the par value,
if any, of the shares of stock receivable upon the exercise of this Warrant to
be above the amount payable therefor upon such exercise, (b) will take all such
action as may be necessary or appropriate in order that the Company may validly
and legally issue or sell fully-paid and nonassessable stock upon the exercise
of all Warrants at the time outstanding, (c) will not issue or sell any stock of
any class which is preferred as to dividends or as to the distribution of assets
upon voluntary or involuntary dissolution, liquidation or winding-up, unless the
rights of the holders thereof shall be limited to a fixed sum or percentage of
par value in respect to participation in dividends and in any such distribution
5
<PAGE> 6
of assets and (d) will take no action to amend its Certificate of Incorporation
which would change to the detriment of the holders of Common Stock the dividend
or voting rights of the Company's Common Stock (as constituted on the Base
Date).
8.4 CERTIFICATE AS TO ADJUSTMENTS. In each case of an
adjustment in the number of shares of Common Stock (or other securities or
property) receivable on the exercise of the Warrant, the Company at its expense
will promptly compute such adjustment in accordance with the terms of the
Warrant and prepare a certificate setting forth such adjustment and showing in
detail the facts upon which such adjustment is based, including a statement of
(a) the consideration received or to be received by the Company for any
additional shares of Common Stock issued or sold or deemed to have been issued
or sold, (b) the number of shares of Common Stock outstanding or deemed to be
outstanding, and (c) the Pro Forma Adjusted Exercise Price. The Company will
forthwith mail a copy of each such certificate to each holder of the Warrant.
8.5 NOTICES OF RECORD DATE, ETC.
In case:
(a) the Company shall take a record of the holders
of its Common Stock (or other securities at the time receivable upon the
exercise of the Warrant) for the purpose of entitling them to receive any
dividend (other than a cash dividend) or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities, or to receive any other right; or
(b) of any capital reorganization of the Company
(other than a stock split or reverse stock split), any reclassification of the
capital stock of the Company, any consolidation or merger of the Company with or
into another corporation (other than a merger for purposes of change of
domicile) or any conveyance of all or substantially all of the assets of the
Company to another corporation; or
(c) of any voluntary or involuntary dissolution,
liquidation or winding-up of the Company, then, and in each such case, the
Company shall mail or cause to be mailed to each holder of the Warrant at the
time outstanding a notice specifying, as the case may be, (i) the date on which
a record is to be taken for the purpose of such dividend, distribution or right,
and stating the amount and character of such dividend, distribution or right, or
(ii) the date on which such reorganization, reclassification, consolidation,
merger, conveyance, dissolution, liquidation or winding-up is to take place, and
the time, if any, is to be fixed, as to which the holders of record of Common
Stock (or such other securities at the time receivable upon the exercise of the
Warrant) shall be entitled to exchange their shares of Common Stock (or such
other securities) for securities or other property deliverable upon
6
<PAGE> 7
such reorganization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding-up. Such notice shall be mailed at least
twenty (20) days prior to the date therein specified and the Warrant may be
exercised prior to said date during the term of the Warrant no later than five
days prior to said date.
9. LEGEND. Upon exercise of any of the Warrants and the issuance of any
of the shares thereunder, all certificates representing shares shall bear on the
face thereof substantially the following legends, insofar as is consistent with
Delaware law:
"The shares of common stock represented by this certificate
have not been registered under the Securities Act of 1933, as
amended, and may not be sold, offered for sale, assigned,
transferred or otherwise disposed of, unless registered
pursuant to the provisions of that Act or an opinion of
counsel to the Corporation is obtained stating that such
disposition is in compliance with an available exemption from
such registration. "
10. APPLICABLE LAW. The Warrant is issued under and shall for all
purposes be governed by and construed in accordance with the laws of the State
of Delaware.
11. NOTICE. Notices and other communications to be given to the Holder
of the Warrant evidenced by this certificate shall be deemed to have been
sufficiently given, if delivered or mailed, addressed in the name and at the
address of such owner appearing on the records of the Company, and if mailed,
sent registered or certified mail, postage prepaid. Notices or other
communications to the Company shall be deemed to have been sufficiently given if
delivered by hand or mailed, by registered or certified mail, postage prepaid,
to the Company at 2655 LeJeune Road, Coral Gables, Florida 33134, Attn:
President, or at such other address as the Company shall have designated by
written notice to such registered owner as herein provided. Notice by mail shall
be deemed given when deposited in the United States mail as herein provided.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed on
its behalf, in its corporate name, by its duly authorized officer, all as of the
day and year first above written.
CONSERVER CORPORATION OF AMERICA
By: __________________________________
Name: Charles H. Stein
Title: President
7
<PAGE> 8
WARRANT EXERCISE FORM
The undersigned hereby irrevocably elects to exercise the within
Warrant to the extent of purchasing ___________________ shares of Common Stock
of CONSERVER CORPORATION OF AMERICA and hereby makes payment at the rate of
$5.00 per share, or an aggregate of $ ______________, in payment therefor.
______________________________________
Name of Registered Holder
______________________________________
Signature
______________________________________
Signature, if held jointly
______________________________________
Date
<PAGE> 9
INSTRUCTIONS FOR ISSUANCE OF STOCK
(if other than to the registered Holder of the within Warrant)
Name__________________________________________________________________________
(Please typewrite or print in block letters)
Address_______________________________________________________________________
_______________________________________________________________________
Social Security or Taxpayer Identification Number ____________________________
ASSIGNMENT FORM
(See Section 5 for terms of Assignment)
The Holder hereby assigns and transfers unto
Name__________________________________________________________________________
(Please typewrite or print in block letters)
Address_______________________________________________________________________
_______________________________________________________________________
the right to purchase shares of Common Stock of CONSERVER CORPORATION OF AMERICA
represented by this Warrant to the extent of ________________________ shares as
to which such right is exercisable and does hereby irrevocably constitute and
appoint Attorney, to transfer the same on the books of CONSERVER CORPORATION OF
AMERICA with full power of substitution in the premises.
Dated: __________________________, 19____
__________________________________
Name of Registered Holder
__________________________________
Signature
__________________________________
Signature, if held jointly
<PAGE> 10
SCHEDULE 3.1
REGISTRATION RIGHTS, PROCEDURES
AND
RESTRICTIONS UPON TRANSFER
1. RESTRICTION ON TRANSFER. The Restricted Securities (as hereinafter
defined), and any shares of capital stock received in respect thereof, whether
by reason of a stock split or share reclassification thereof, a stock dividend
thereon or otherwise, shall not be transferable except upon the conditions
specified in this Schedule, which conditions are intended to insure compliance
with the provisions of the Securities Act in respect of the transfer thereof.
2. DEFINITIONS. As used in this Schedule, the following terms shall
have the following respective meanings:
"Commission" shall mean the Securities and Exchange
Commission, or any other Federal agency at the time administering the Securities
Act.
"Corporation" shall mean CONSERVER CORPORATION OF AMERICA, a
Delaware corporation, and its successors and assigns.
"Person" shall mean and include an individual, a corporation,
a partnership, a trust, an unincorporated organization and a government or any
department, agency or political subdivision thereof.
"Purchaser" shall mean the registered holder of the Warrants,
or such Purchaser's permitted successors or assigns.
"Restricted Securities" shall mean (i) the Warrants, and (ii)
the shares of Common Stock, $.001 par value, of the Corporation issuable upon
exercise of the Warrants.
"Restricted Shares" shall mean the shares of Common Stock of
the Corporation constituting Restricted Securities.
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar Federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
<PAGE> 11
"Transfer" shall include any disposition of Restricted
Securities or of any interest therein which would constitute a sale thereof
within the meaning of the Securities Act.
"Warrants" shall mean those common stock purchase warrants of
even date herewith, initially pertaining to the purchase of up to _____________
shares of Common Stock of the Corporation, and any common stock purchase
warrants issued in replacement or substitution therefor, to which this Schedule
is appended.
3. RESTRICTIVE LEGENDS. Each certificate for the Restricted Securities
and any shares of capital stock received in respect thereof, whether by reason
of a stock split or share reclassification thereof, a stock dividend thereon or
otherwise, and each certificate for any such securities issued to subsequent
transferees of any such certificate shall (unless otherwise permitted by the
provisions of Sections 4 or 11 hereof) be stamped or otherwise imprinted with a
legend in substantially the form set forth in Section 9 of the Warrant to which
this Schedule refers.
4. NOTICE OF TRANSFER. The holder of any Restricted Securities, by
acceptance thereof agrees, prior to any transfer of any Restricted Securities,
to give written notice to the Corporation of such holder's intention to effect
such transfer and to comply in all other respects with the provisions of this
Section 4, and Section 3.2 of the Warrant to which this Schedule refers. Each
such notice shall describe the manner and circumstances of the proposed transfer
and shall be accompanied by (a) the written opinion, addressed to the
Corporation, of counsel for the holder of Restricted Securities, as to whether
in the opinion of such counsel (which opinion shall be satisfactory to counsel
for the Corporation) such proposed transfer involves a transaction requiring
registration of such Restricted Securities under the Securities Act, and (b) in
the case of Restricted Shares, if in the opinion of such counsel such
registration is required, a written request addressed to the Corporation by the
holder of Restricted Securities, describing in detail the proposed method of
disposition and requesting the Corporation to effect the registration of such
Restricted Shares pursuant to the terms and provisions of Section 5 hereof;
provided, however, that no such opinion shall be required in connection with a
transaction complying with the requirements of Rule 144 (as amended from time to
time) promulgated under the Securities Act (or successor Rule thereto). If in
the opinion of such counsel (if such opinion is required hereunder) and counsel
for the Corporation, the proposed transfer of Restricted Securities may be
effected without registration under the Securities Act, the holder of Restricted
Securities shall thereupon be entitled to transfer Restricted Securities in
accordance with the terms of the notice delivered by it to the Corporation. Each
certificate or other instrument evidencing the securities issued upon the
transfer
2
<PAGE> 12
of any Restricted Securities (and each certificate or other instrument
evidencing any untransferred balance of such securities) shall bear the legend
described in Section 3 hereof unless (a) in the opinion of such counsel and
counsel for the Corporation registration of future transfer is not required by
the applicable provisions of the Securities Act or (b) the Corporation shall
have waived the requirement of such legends; provided, however, that such legend
shall not be required on any certificate or other instrument evidencing the
securities issued upon such transfer in the event such transfer shall be made in
compliance with the requirements of Rule 144 (as amended from time to time)
promulgated under the Securities Act (or successor Rule thereto). The holder of
Restricted Securities shall not transfer such Restricted Securities until such
opinion of counsel has been given to the Corporation (unless waived by the
Corporation or unless such opinion is not required in accordance with the
provisions of this Section 4) or until registration of the Restricted Shares
involved in the above-mentioned request has become effective under the
Securities Act.
5. REGISTRATION. (a) If the Corporation at any time and from time to
time during the period commencing on ____________, 1997 and ending on
_____________, 2002 proposes for any reason to register any of its securities
under the Securities Act (other than pursuant to a registration statement on
Forms S-8, S-4 or similar or successor forms), it shall each such time promptly
give written notice to the Purchaser, if still a holder of outstanding
Restricted Securities, and to each other holder of outstanding Restricted
Securities, of its intention so to do, and, upon the written request, given
within 30 days after receipt of any such notice, of the holder(s) of any such
Restricted Securities to register any Restricted Shares (which request shall
specify the Restricted Shares intended to be sold or disposed of by such
holder(s) and shall state the intended method of disposition of such Restricted
Shares by the prospective seller(s)), the Corporation shall use its best efforts
to cause all such Restricted Shares to be registered under the Securities Act
promptly upon receipt of the written request of such holders for such
registration, all to the extent requisite to permit the sale or other
disposition (in accordance with the intended methods thereof, as aforesaid) by
the prospective seller(s) of the Restricted Shares so registered.
(b) Anything contained herein to the contrary notwithstanding,
with respect to any registration pursuant to this Section 5, the Corporation may
include in such registration any authorized but unissued shares of Common Stock
or other of its securities for sale by the Corporation or any issued and
outstanding shares of Common Stock for sale by others.
3
<PAGE> 13
(c) In the event that any proposed registration under Section
5 is, in whole or in part, an underwritten public offering of securities of the
Corporation, any request pursuant to this Section 5 to register Restricted
Shares may specify that such shares are to be included in the underwriting (i)
on the same terms and conditions as the shares of Common Stock, if any,
otherwise being sold through underwriters under such registration or (ii) on
terms and conditions comparable to those generally applicable to offerings of
common stock in reasonably similar circumstances in the event that no shares of
Common Stock other than Restricted Shares are being sold through underwriters
under such registration; provided, however, that, as to any such registration,
(i) if the managing underwriter determines and advises in writing that the
inclusion of all Restricted Shares proposed to be included in the underwritten
public offering and other issued and outstanding shares of Common Stock proposed
to be included therein by persons other than holders of Restricted Securities
(the "Other Shares") would interfere with the successful marketing of such
securities, then the number of Restricted Shares and Other Shares excluded from
such registration shall be allocated, when the registration statement has been
filed pursuant to the exercise of a demand registration right by the holders of
Other Shares, first to the holders of Other Shares and, in all other
circumstances, pro rata among the holders of Restricted Shares and Other Shares
(based upon the number of shares of Common Stock requested to be registered in
such offering by the respective holders of Restricted Shares and Other Shares to
be registered in such offering), and (ii) in each case those shares of Common
Stock which are excluded from the underwritten public offering pursuant to this
Section 5 shall be nevertheless included in such registration but withheld from
the market by the holders thereof for a period, not to exceed 90 days, which the
managing underwriter reasonably determines as necessary in order to effect the
underwritten public offering.
6. PREPARATION AND FILING. If and whenever the Corporation is under an
obligation pursuant to the provisions of this Schedule to use its best efforts
to effect the registration of any Restricted Shares, the Corporation shall, as
expeditiously as practicable:
(a) prepare and file with the Commission a registration
statement with respect to such securities and use its best efforts to
cause such registration statement to become and remain effective;
(b) prepare and file with the Commission such amendments and
supplements to such registration statements and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for at least nine months and to comply with the
provisions of the Securities Act with respect to the sale or other
disposition of all
4
<PAGE> 14
Restricted Shares covered by such registration statement and will
furnish to each selling stockholder prior to the filing thereof a copy
of any amendment or supplement to such registration statement or
prospectus and shall not file any such amendment or supplement to which
any such selling stockholder shall have reasonably objected on the
grounds that such amendment or supplement does not comply in all
material respects with the requirements of the Securities Act or the
rules and regulations thereunder;
(c) furnish to each selling stockholder such number of copies
of such registration statement and of each such amendment or supplement
thereto (in each case including all exhibits) a summary prospectus or
other prospectus, including a preliminary prospectus, in conformity
with the requirements of the Securities Act, and such other documents
as such seller may reasonably request in order to facilitate the public
sale or other disposition of such Restricted Shares;
(d) use its best efforts to register or qualify the Restricted
Shares covered by such registration statement under the securities or
blue sky laws of such jurisdictions as each such seller shall
reasonably request but in no event more than three states in the
aggregate (provided, however, that the Corporation shall not be
required to consent to general service of process for all purposes in
any jurisdiction where it is not then qualified) and do any and all
other acts or things which may be necessary or advisable to enable such
seller to consummate the public sale or disposition in such
jurisdictions of such securities;
(e) notify each seller of Restricted Shares covered by such
registration statement, at any time when a prospectus relating thereto
covered by such registration statement is required to be delivered
under the Securities Act within the appropriate period mentioned in
clause (b) of this Section 6, of the happening of any event as a result
of which the Registration Statement, the prospectus or any document
incorporated therein by reference, includes an untrue statement of a
material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading and
at the request of such seller, prepare and furnish to such seller a
post-effective amendment or supplement to the registration statement or
the related prospectus or any document incorporated therein by
reference or file any other required document so that, as thereafter
delivered to the purchasers of such shares, such prospectus shall not
include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading;
5
<PAGE> 15
(f) furnish, at the request of any holder or holders
requesting registration of Restricted Shares pursuant to this Schedule,
on the date that such Restricted Shares are delivered to the
underwriters for sale in connection with a registration pursuant to
this Schedule, if such securities are being sold through underwriters,
or, if such securities are not being sold through underwriters, on the
date that the registration statement with respect to such securities
becomes effective, (i) an opinion, dated such date, of the counsel
representing the Corporation for the purposes of such registration, in
form and substance as is customarily given to underwriters, in an
underwritten public offering, addressed to the underwriters, if any,
and to the holder or holders making such request; and (ii) a letter
dated such date, from the independent certified public accountants of
the Corporation, in form and substance as is customarily given by
independent certified public accountants to underwriters in an
underwritten public offering, addressed to the underwriters, if any,
and to the holder or holders making such request;
(g) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make generally
available to its securities holders, as soon as reasonably practicable,
an earnings statement covering the period of at least twelve months,
but not more than eighteen months, beginning with the first month of
the first fiscal quarter after the effective date of such registration
statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act; and
(h) notify each selling stockholder and the managing
underwriter or underwriters, if any, promptly, and confirm
such advice in writing;
(A) when the registration statement, any pre-effective
amendment, the prospectus or any prospectus supplement or
post-effective amendment to the registration statement has
been filed, and, with respect to the registration statement or
any post-effective amendment, when the same has become
effective;
(B) of the issuance by the Commission of any stop order
suspending the effectiveness of the registration statement or
the initiation of any proceedings for that purpose;
(C) of the receipt by the Corporation of any qualification of
the Restricted Shares for sale under the securities or "blue
sky" laws of any jurisdiction or the initiation or threatening
of any proceeding for such purpose; and
6
<PAGE> 16
(D) of the existence of any fact which results in the
registration statement, the prospectus or any document
incorporated therein by reference containing an untrue
statement of material fact or omitting to state a material
fact required to be stated therein or necessary to make the
statements therein not misleading.
(i) make every reasonable effort to obtain the withdrawal of
any order suspending the effectiveness of the registration statement at
the earliest possible moment;
(j) use its best efforts to cause all Restricted Shares
covered by the registration statement to be listed on each securities
exchange on which the Corporation's Common Stock is listed, if any;
(k) provide and cause to be maintained a transfer agent for
all Restricted Shares covered by such registration statement from and
after a date not later than the effective date of such registration
statement.
7. UNDERWRITTEN OFFERINGS. [Intentionally Omitted].
8. PREPARATION; REASONABLE INVESTIGATION. In connection with the
preparation and filing of each registration statement registering Restricted
Shares under the Securities Act, the Corporation will give the holders of
Restricted Shares on whose behalf such Restricted Shares are to be so registered
and their underwriters, if any, and their respective counsel and accountants,
the opportunity to participate in the preparation of such registration
statement, each prospectus included therein or filed with the Commission, each
document incorporated by reference therein and each amendment thereof or
supplement thereto, and will give each of them such access to its books and
records and such opportunities to discuss the business of the Corporation with
its officers and the independent public accountants who have certified its
financial statements as shall be necessary, in the opinion of such holders and
such underwriters or their respective counsel, to conduct a reasonable
investigation within the meaning of the Securities Act.
9. EXPENSES. All expenses incurred by the Corporation in complying with
Sections 5 and 6 hereof, including, without limitation, all registration and
filing fees, fees and expenses of complying with securities and blue sky laws,
printing expenses and fees and disbursements of both counsel and the independent
certified public accountants of the Corporation shall be paid by the
Corporation; provided, however, that all underwriting discounts and selling
commissions and stock transfer taxes applicable to the Restricted Shares covered
by registrations effected pursuant to Section 5 hereof shall be borne by the
seller or sellers thereof,
7
<PAGE> 17
in proportion to the number of Restricted Shares sold by such seller or sellers
shall be borne by such holders.
10. INDEMNIFICATION.
(a) In the event of any registration of any Restricted Shares
under the Securities Act pursuant to this Schedule or registration or
qualification of any Restricted Shares pursuant to Section 6(d) hereof, the
Corporation shall indemnify and hold harmless the seller of such shares, each
underwriter of such shares, if any, each broker or any other person acting on
behalf of such seller and each other person, if any, who controls any of the
foregoing persons, within the meaning of the Securities Act, against any losses,
claims, damages or liabilities, joint or several, to which any of the foregoing
persons may become subject under the Securities Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon an untrue statement or alleged untrue statement
of a material fact contained in any registration statement under which such
Restricted Shares were registered under the Securities Act, any preliminary
prospectus or final prospectus contained therein, any document incorporated by
reference therein or any amendment or supplement thereto, or any document
prepared and/or furnished by the Corporation incident to the registration or
qualification of any Restricted Shares pursuant to Section 6(d) hereof, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading or, with respect to any prospectus, necessary to make the
statements therein in light of the circumstances under which they were made, not
misleading, or any violation by the Corporation of the Securities Act or state
securities or blue sky laws applicable to the Corporation and relating to action
or inaction required of the Corporation in connection with such registration or
qualification under such state securities or blue sky laws; and shall reimburse
such seller, such underwriter, broker or other person acting on behalf of such
seller and each such controlling person for any legal or any other expenses
reasonably incurred by any of them in connection with investigating or defending
any such loss, claim, damage, liability or action; provided, however, that the
Corporation shall not be liable in any such case to the extent that such loss,
claim, damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in said
registration statement, said preliminary prospectus or said prospectus or said
amendment or supplement or any document incident to the registration or
qualification of any Restricted Shares pursuant to Section 6(d) hereof in
reliance upon and in conformity with written information furnished to the
Corporation through an instrument duly executed by such seller or such
underwriter specifically for use in the preparation thereof.
8
<PAGE> 18
(b) Before Restricted Shares held by any prospective seller
shall be included in any registration pursuant to this Schedule, such
prospective seller and any underwriter acting on its behalf shall have agreed to
indemnify and hold harmless (in the same manner and to the same extent as set
forth in the preceding paragraph (a) of this Section 10) the Corporation, each
director of the Corporation, each officer of the Corporation who shall sign such
registration statement and any person who controls the Corporation within the
meaning of the Securities Act, with respect to any untrue statement or omission
from such registration statement, any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereto, if such untrue
statement or omission was made in reliance upon and in conformity with written
information furnished to the Corporation through an instrument duly executed by
such seller or such underwriter specifically for use in the preparation of such
registration statement, preliminary prospectus, final prospectus or amendment or
supplement; provided, however, that the maximum amount of liability in respect
of such indemnification shall be limited, in the case of each prospective seller
of Restricted Shares, to an amount equal to the gross proceeds actually received
by such prospective seller from the sale of Restricted Shares effected pursuant
to such registration.
(c) Promptly after receipt by an indemnified party of notice
of the commencement of any actions involving a claim referred to in paragraph
(a) or (b) of this Section 10, such indemnified party will, if a claim in
respect thereof is made against an indemnifying party, give written notice to
the latter of the commencement of such action. In case any such action is
brought against an indemnified party, the indemnifying party will be entitled to
participate in and to assume the defense thereof, jointly with any other
indemnifying party similarly notified to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party shall not be responsible for any
legal or other expenses subsequently incurred by the indemnified party in
connection with the defense thereof; provided, however, that if any indemnified
party shall have reasonably concluded that there may be one or more legal
defenses available to such indemnified party which are differed from or
additional to those available to the indemnifying party, or that such claim or
litigation involves or could have an effect upon matters beyond the scope of the
indemnity agreement provided in this Section 10, the indemnifying party shall
reimburse such indemnified party for that portion of the fees and expenses of
any counsel retained by the indemnified party which are reasonably related to
the matters covered by the indemnity agreement provided in this Section 10.
(d) The failure to notify an indemnifying party promptly
of the commencement of any such action, if materially prejudicial
9
<PAGE> 19
to the ability of the indemnifying party to defend such action, shall relieve
such indemnifying party of any liability to the indemnified party under this
Section 10, but the omission so to notify the indemnifying party will not
relieve the indemnifying party of any liability that it may have to any
indemnified party otherwise than under this Schedule.
The indemnifying party shall not make any settlement of any
claims indemnified against hereunder without the written consent of the
indemnified party or parties, which consent shall not be unreasonably withheld.
(e) If the indemnification provided for in Section 10 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative benefits received from the offering by the Corporation, the holders of
Restricted Shares and any underwriter; but if such allocation is not permitted
by applicable law or if the indemnified party failed to give the notice required
under paragraph (c) above, each indemnifying party shall contribute to such
amount paid or payable by such indemnified party in such proportions as are
appropriate to reflect not only such relative benefits but also relative fault
of the Corporation, the holders of Restricted Securities and any underwriter in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities (or actions in respect thereof), as well as any
other relevant equitable considerations. The parties agree that the 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
untrue statement of a material fact relates to information supplied by the
Corporation, the holders of Restricted Shares or underwriter and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission; that it would not be just and equitable if
contribution pursuant to such agreement were determined by pro rata allocation
or by any other method of allocation which does not take account of the
equitable consideration referred to above in this paragraph (e); that the amount
paid or payable by an indemnified party as a result of the losses, claims,
damages or liabilities (or actions in respect thereof), referred to above in
this paragraph (e) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim; that the holders of Restricted Shares
shall not be required to contribute any amount in excess of the dollar amount by
which the proceeds to be received by such holders from the sale of their
respective Restricted Shares exceeds the amount
10
<PAGE> 20
of damages such holders of Restricted Shares would have otherwise been required
to pay by reason of such untrue or alleged untrue statement or omission or
alleged omission, and no underwriter shall be required to contribute any amount
in excess of the amount by which the total price at which the shares or
securities underwritten by it and distributed to the public were offered to the
public exceeds the amount of any damages which such underwriter has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission; and that no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
11. REMOVAL OF LEGENDS, ETC. Notwithstanding the foregoing provisions
of this Schedule, the restrictions imposed by this Schedule upon the
transferability of any Restricted Securities shall cease and terminate when any
such Restricted Securities are sold or otherwise disposed of in accordance with
the intended method of disposition by the seller or sellers thereof set forth in
the registration statement or as otherwise contemplated by Section 4 hereof.
Whenever the restrictions imposed by this Schedule shall terminate, as herein
provided, the holder of any Restricted Securities as to which such restrictions
have terminated shall be entitled to receive from the Corporation, without
expense, a new certificate not bearing the restrictive legends referred to in
Section 3 hereof and not containing any other reference to the restrictions
imposed by this Schedule.
11
<PAGE> 1
Exhibit 21.1
NONE
<PAGE> 1
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the use in this Registration Statement of our
report dated September 27, 1996 (November 19, 1996 with respect to Notes A, E,
H(2) and J), relating to the financial statements of Conserver Corporation of
America, and to the reference to our firm under the caption "Experts" in the
Prospectus.
/s/ Richard A. Eisner & Company LLP
New York, New York
November 19, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-START> MAR-06-1996
<PERIOD-END> AUG-31-1996
<CASH> 2,403,588
<SECURITIES> 0
<RECEIVABLES> 28,780
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,441,799
<PP&E> 4,865
<DEPRECIATION> 487
<TOTAL-ASSETS> 2,446,177
<CURRENT-LIABILITIES> 199,156
<BONDS> 0
0
0
<COMMON> 11,095
<OTHER-SE> 2,557,997
<TOTAL-LIABILITY-AND-EQUITY> 2,446,177
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,300,812
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21,259
<INCOME-PRETAX> (1,322,071)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,322,071)
<EPS-PRIMARY> (.13)
<EPS-DILUTED> (.13)
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