<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 30, 1997
REGISTRATION NO. 333-16571
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 5
TO
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>
MICHAEL DIGIOVANNA, ESQ. VICTOR DIGIOIA, ESQ.
PARKER DURYEE ROSOFF & HAFT GOLDSTEIN & DIGIOIA, LLP
529 FIFTH AVENUE 369 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017 NEW YORK, NEW YORK 10017
(212) 599-0500 (212) 599-3322
</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]
------------------------
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.
================================================================================
<PAGE> 2
SUBJECT TO COMPLETION, DATED MAY 30, 1997
PROSPECTUS
<TABLE>
<S> <C>
LOGO CONSERVER CORPORATION OF AMERICA
2,200,000 SHARES OF COMMON STOCK
</TABLE>
------------------------
This Prospectus relates to the offering (the "Offering") of 2,200,000
shares (the "Shares") of common stock, $0.001 par value per share (the "Common
Stock"), of Conserver Corporation of America, a Delaware corporation (the
"Company"). The Shares are sometimes hereinafter referred to as the
"Securities."
Prior to this Offering, there has been no public market for the Common
Stock, 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. For
information regarding the factors considered in determining the initial public
offering prices of the Shares, see "Risk Factors" and "Underwriting." The
Company's Common Stock has been accepted for inclusion on the Nasdaq SmallCap
Market and will trade immediately after the Offering under the symbol "RIPE".
------------------------
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>
=========================================================================================================
</TABLE>
<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO PUBLIC DISCOUNT(1) COMPANY(2)
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
Per Share....................... $5.00 $.425 $4.575
- ---------------------------------------------------------------------------------------------------------
Total(3)........................ $11,000,000 $935,000 $10,065,000
=========================================================================================================
</TABLE>
(1) Does not reflect additional compensation payable to Janssen/Meyers
Associates, L.P., as Underwriter (the "Underwriter"), in the form of (i)
Warrants to purchase 220,000 Shares of Common Stock exercisable over a
period of four years, commencing one year from the date hereof at a per
Share exercise price equal to 165% of the initial public offering price (the
"Underwriter's Warrants"); (ii) a non-accountable expense allowance of 3% of
the gross proceeds hereof, and (iii) a three year Financial Consulting
Agreement at an overall fee of $100,000 payable at the closing of the
Offering. In addition, see "Underwriting" for information concerning
indemnification and contribution arrangements with the Underwriters and
other compensation payable to the Underwriter.
(2) Before deducting estimated expenses of $705,000 payable by the Company,
excluding the non-accountable expense allowance payable to the Underwriter.
(3) The Company has granted to the Underwriter an option exercisable within 45
days after the date of this Prospectus to purchase up to an aggregate of
330,000 additional shares of Common Stock 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 $12,650,000, $1,075,250 and $11,574,750, respectively. See
"Underwriting."
------------------------
The Securities are being offered by the Underwriter, subject to prior sale,
when, as and if delivered to and accepted by the Underwriter, and subject to
approval of certain legal matters by their counsel and subject to certain other
conditions. The Underwriter 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 the Registrant at 17 State Street, New York, NY 10004 on or about
, 1997.
JANSSEN/MEYERS ASSOCIATES, L.P.
The date of this Prospectus is May 30, 1997.
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
[CURRENTLY PREPARING ARTWORK FOR INSIDE FRONT COVER]
<TABLE>
<S> <C>
Pictured above are cherries & flowers Pictured above are cherries & flowers
after 10 days of storage without Conserver 21TM after 10 days of storage with Conserver 21TM
</TABLE>
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.
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE SECURITIES,
INCLUDING PURCHASES OF THE SECURITIES TO STABILIZE ITS MARKET PRICE, PURCHASES
OF THE SECURITIES TO COVER SOME OR ALL OF A SHORT POSITION IN THE SECURITIES
MAINTAINED BY THE UNDERWRITER AND THE IMPOSITION OF PENALTY BIDS. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
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, and (ii) assumes the Underwriter's
Warrants to purchase 220,000 shares of Common Stock issued to the Underwriter in
connection with this Offering (the "Underwriter'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 150,000 shares of Common Stock, is not converted, (ii) outstanding options
to acquire 1,720,000 shares of Common Stock, as well as up to 495,000 shares of
Common Stock issuable upon exercise of future stock option grants under the
Company's 1996 Stock Option Plan, are not exercised, (iii) outstanding warrants
to purchase 325,000 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 550,000 shares of Common Stock are not
exercised. All references to shares of the Company's Common Stock reflect a
1-for-2.269793 reverse stock split approved by the Board of Directors in April
1997 to counteract the 2.2128874-for-1 stock split adopted by the Board of
Directors in November 1996 and the 1.066144-for-1 split adopted in December
1996. The reverse split was adopted by the Board of Directors based on
negotiations with the Underwriter, regarding a diminution of the Company's
authorized capital.
This Prospectus contains forward-looking statements which involve risks and
uncertainties. The Company has not engaged in any revenue producing activities
to date and anticipates commencing commercial operations no later than two
months following consummation of this Offering. As a result, 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 the heading "Risk Factors" and elsewhere in this Prospectus.
THE COMPANY
Conserver Corporation of America (the "Company") has licensed the exclusive
right to distribute, market, sell and otherwise commercially exploit Conserver
21(TM), a product composed of a non-toxic mixture of sepiolite and mineral
salts, in the United States and Canada through March 2022, subject to extension.
The Company also holds an option and a right of first refusal to exercise such
rights throughout the world. Tests have been performed on Conserver 21(TM) over
the past 35 months variously by the Company, the manufacturer of Conserver
21(TM), its predecessor in interest and companies with which it contracted. In
addition, various non-affiliated laboratories, commissioned by certain of the
aforementioned entities from time to time in various parts of the world,
utilizing independently derived protocols, have demonstrated that the use of
Conserver 21(TM) can extend the post-harvest life of fruits, vegetables and
flowers.
Conserver 21(TM) works like a sponge by cleansing from the atmosphere of a
storage or transport container ethylene and other gases emitted by fruits,
vegetables and flowers, thereby retarding their spoilage, lengthening their
post-harvest life and minimizing their shrinkage during ripening. These gases,
if allowed to remain in the atmosphere of the container, would be reabsorbed by
the perishable cargo during its maturation process, resulting in its accelerated
decay. Conserver 21(TM) also releases carbon dioxide and water vapor, thereby
assisting fruits, vegetables and flowers to maintain their freshness. Conserver
21(TM), a non-invasive product, is manufactured in the form of cylindrical
granules and placed in sealed filters or packets which are then positioned
within a storage or transport space.
The Company believes that Conserver 21(TM) can be used in conjunction with
a comprehensive quality assurance maintenance program to provide more
commercially saleable fruits, vegetables and flowers more reliably and cost
effectively than is achieved by current industry practices. It is currently
common for some growers of fresh fruits and vegetables to pick and ship their
products prior to their being fully ripened in an effort to reduce spoilage and
to minimize the extent of the natural decay that occurs in the transportation of
perishables. This often results in delivery of fruits and vegetables that are
unevenly ripened, have less mass and a compromised taste. Growers and
distributors have resorted to using expensive storage and transportation
3
<PAGE> 5
methods in an effort to reduce the incidence of such commercially unsatisfactory
products. The Company believes that Conserver 21(TM) which, for illustrative
purposes, has the capacity, as demonstrated by independent testing, to extend
the post-harvest life of certain varieties of tomatoes, strawberries, sweet
peppers and lilies by as much as 7, 10, 9 and 5 days, respectively, offers an
improved alternative to such methods. The Company intends to develop a quality
assurance maintenance program utilizing Conserver 21(TM) that will provide
fruit, vegetable and/or flower inspection and supervision services from point of
harvesting or packing to point of retail sale (the "Conserver 21(TM) Program").
The Company intends to market the Conserver 21(TM) Program to growers,
distributors, supermarket chains and other retailers who can benefit from the
availability of more saleable perishables.
The Company believes that the Conserver 21(TM) Program can offer the
following benefits:
- Increase the shelf-life of fruits, vegetables and flowers.
- Increase the sugar content, enrich the color and enhance the weight and
taste of fruits and vegetables which will be able to be harvested nearer
their height of ripeness.
- Reduce the shrinkage and spoilage of fruits and vegetables during storage
resulting in a greater product yield available for sale by supermarkets
and other retailers.
- Reduce the time and expense involved in handling and sorting produce in
storage and transport.
- Extend the selling season for many fruits and vegetables.
- Reduce the costs of transporting highly perishable fruits, vegetables and
flowers as slower and less expensive means can be utilized due to the
longer post-harvest life of the perishables.
The Company has the right to commercially exploit Conserver 21(TM)
throughout the world and, as its business develops, intends to explore the
commercial opportunities presented by Conserver 21(TM)in the international trade
of fresh fruits and vegetables.
The Company's distribution and marketing rights are derived from a
distribution agreement (the "Distribution Agreement") with Agrotech 2000 S.L., a
Spanish company ("Agrotech") that manufactures and packages Conserver 21(TM)
near Madrid, Spain and whose principal stockholder is Alfonso de Sande Moreno,
the developer of Conserver 21(TM). Agrotech holds the patent rights to Conserver
21(TM) and has represented and warranted that the rights to exclusively market,
sell, distribute and commercially exploit Conserver 21(TM), granted to the
Company by the Distribution Agreement, do not violate the rights of any third
parties and are granted to the Company pursuant to Agrotech's full right and
authority to so provide.
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.
4
<PAGE> 6
THE OFFERING
Securities Offered by the
Company....................... 2,200,000 Shares.
Common Stock Outstanding
Before the Offering........... 4,210,404 shares
Common Stock to be Outstanding
After the Offering.......... 6,385,404 shares(1)
Use of Proceeds............... The net proceeds of this Offering will be used
for direct and collaborative marketing and
distribution, Conserver 21(TM) inventory
purchases, research and development, 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."
Proposed Symbol for Nasdaq(2)
Common Stock................ "RIPE"
- ---------------
(1) Assumes the Company's re-acquisition of an aggregate of 25,000 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 Nasdaq quotation 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 continue to
meet the maintenance criteria for quotation on Nasdaq. See Risk
Factors -- No Assurance of Nasdaq Quotation.
5
<PAGE> 7
SUMMARY FINANCIAL INFORMATION
The following summary financial data have been derived from the 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, for the six months ended February 28, 1997 and the period from March 6,
1996 (date of incorporation) to February 28, 1997 and the balance sheet at
August 31, 1996 and February 28, 1997 are derived from, and are qualified by
reference to, the 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 MARCH 6, 1996
(DATE OF SIX MONTHS (DATE OF
INCORPORATION) TO ENDED INCORPORATION) TO
AUGUST 31, 1996 FEBRUARY 28, 1997 FEBRUARY 28, 1997
----------------- ----------------- -----------------
<S> <C> <C> <C>
Revenues............................... $ -- $ -- $ --
Compensation charges in connection with
issuance of options and
warrants(2).......................... 907,201 223,000 1,130,201
General and administrative expenses.... 458,611 849,888 1,308,499
----------- ----------- -----------
Operating (loss)....................... (1,365,812) (1,072,888) (2,438,700)
Interest expense, net of interest
income............................... 21,259 185,833 207,092
----------- ----------- -----------
Net (loss)............................. $(1,387,071) $(1,258,721) $(2,645,792)
=========== =========== ===========
Net (loss) per share of Common Stock... $ (.32) $ (.26)
----------- -----------
Weighted average number of shares of
Common Stock outstanding............. 4,390,767 4,844,733
=========== ===========
Pro-forma net (loss) per share of
Common Stock(5)...................... $ (.88)
-----------
</TABLE>
BALANCE SHEET DATA:
<TABLE>
<CAPTION>
FEBRUARY 28, 1997
---------------------------
AUGUST 31, AS
1996 ACTUAL ADJUSTED(3)
----------- ----------- -----------
<S> <C> <C> <C>
Working capital........................... $ 2,239,902 $ 1,015,585 $ 9,324,562
Total assets.............................. 2,443,436 2,156,075 10,076,075
Total current liabilities................. 199,156 833,749 743,749
Deficit accumulated during development
stage................................... (1,387,071) (2,645,792) (6,250,792)(4)
Stockholders' equity...................... 1,244,280 322,326 9,332,326
</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 and January 1997. See "Management's Discussion and Analysis of
Financial Condition and Plan of Operation" and Note E and J of Notes to
Financial Statements.
(3) Gives effect to the sale by the Company of the Securities offered hereby the
initial public offering price of $5.00 per Share and the initial application
of the estimated net proceeds therefrom. See "Use of Proceeds."
(4) Includes non-cash compensation charges incurred after February 28, 1997 of
approximately $3,585,000 consisting of: (i) $1,020,000 in connection with
the issuance of 500,000 options by the Company in April 1997 at an exercise
price of $2.00 per share; (ii) $525,000 in connection with the issuance of
725,000 options by the Company in April 1997 at an exercise price of $5.00
per share; and (iii) $2,040,000 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 550,000 shares of Common Stock at an
exercise price of $2.00 per share. See Note D of Notes to Financial
Statements.
(5) Pro-forma net (loss) per share of Common Stock is based on the weighted
average number of shares and net (loss), both as adjusted for the
transactions described in (4) above. Incremental shares included in
outstanding shares have been based upon the treasury stock method.
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, untested sources of supply and the
uncertainty of market acceptance of its business. Its activities since inception
have been primarily limited to negotiating distribution arrangements 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 February 28, 1997
was $2,645,792 which includes non-cash compensation charges of $1,130,201
recorded in connection with the value attributed to options and warrants issued
by the Company in March 1996 and August 1996 and January 1997 and $130,000 of
non-cash compensation charges for services contributed to the Company by Charles
H. Stein, its President and Chief Executive Officer. In addition, the Company
expects to record non-cash compensation charges of approximately $1,545,000
related to options issued in April 1997 and $2,040,000 upon the consummation of
this Offering as a consequence of the contemporaneous issuance of warrants upon
the consummation of this Offering, to a holder of convertible debentures and an
affiliate thereof, to purchase 550,000 shares of common stock of the Company at
an exercise price of $2.00 per share. No operating revenues are anticipated
until such time, if ever, as the Company can demonstrate the commercial
viability of its Conserver 21(TM) 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" and Notes D, E and J of Notes to
Financial Statements.
SOLE SOURCE OF SUPPLY; LOSS OF EXCLUSIVITY. The Company is wholly
dependant upon the Distribution Agreement for its rights to deliver Conserver
21(TM). If the Distribution Agreement were to terminate for any reason, the
Company would not be able to distribute Conserver 21(TM) products. Additionally,
the Company will be dependent upon Agrotech for its supply of Conserver 21(TM)
as Agrotech is the sole manufacturer of Conserver 21(TM). Agrotech currently
operates a manufacturing facility near Madrid which the Company has been advised
has a sufficient capacity to handle the business anticipated from the Conserver
21(TM) Program. Agrotech is looking to relocate to a larger facility in the near
future. Agrotech possesses all of the patent rights to Conserver 21(TM) but has
never produced or supplied the quantities of Conserver 21(TM) product that the
Company anticipates it will need to satisfy its market in the United States and
Canada. There can be no assurance that the current methods of production and
supply will be sufficient for the needs of the Conserver 21(TM) Program or will
not require substantial changes to meet such anticipated demand. Any sustained
impairment of the Company's ability to acquire Conserver 21(TM) for any reason,
including, without limitation, the cancellation of the Distribution Agreement,
or a cessation of production by Agrotech may significantly delay or seriously
impair the Company's ability to commercialize its Conserver 21(TM) Program. The
Company has been advised that Agrotech has sufficient capital for its operations
but requires additional funding to expand its current operational capacity. The
Company is obligated under the Distribution Agreement to make loans to Agrotech.
In May 1997 Agrotech, pursuant to the Distribution Agreement, borrowed $500,000
from the Company. Under the terms of the Distribution Agreement, if the Company
fails to purchase a minimum of $2,000,000 of Conserver 21(TM) products between
April 1997 and April 1998, or fails to meet the minimum annual purchase goal
established for any subsequent year, Agrotech may sell Conserver 21(TM) to other
customers in the United States and Canada. Such loss of exclusivity to sell
Conserver 21(TM) products will negatively impact the Company's business. See
"Business -- Sources of Supply; Manufacturing Distribution Agreement" and also
"Certain Transactions."
7
<PAGE> 9
REGULATORY REQUIREMENTS. The Company's intended utilization of Conserver
21(TM) to adsorb gases in storage or transport containers filled with fruits,
vegetables and flowers will result in the natural production of small amounts of
carbon dioxide, which have the effect of retarding the growth of microorganisms
and fungi also present in such containers. Such retardation effect, however, may
result in the technical classification of Conserver 21(TM) as a "pesticide"
under the rules and regulations of the United States Environmental Protection
Agency ("EPA") and thus subject Conserver 21(TM) to the provisions of the
Federal Insecticide Fungicide and Rodenticide Act ("FIFRA"). The Company and its
special counsel, based on a review of the relevant statutes and regulations,
have taken the position that Conserver 21(TM) is not a pesticide. The Company
has requested a confirmation from the EPA that Conserver 21(TM) is not a
pesticide, which request has not as yet been acted upon. There can be no
assurance that the EPA will not determine Conserver 21(TM) to be a pesticide.
Pesticides are required to be registered with the EPA and their use is subject
to compliance with EPA labeling and packaging requirements. If the EPA
determines that Conserver 21(TM) is a pesticide, the Company will promptly
proceed with EPA registration as both FIFRA and applicable customs regulations
prohibit the importation of unregistered pesticides under penalty of possible
civil and criminal sanctions. FIFRA registration may require the performance of
formal tolerance studies of Conserver 21(TM)'s interaction with fruits and
vegetables, which the Company estimates may cost it between $75,000 to $150,000,
and would take at least six months to complete, thereby extensively delaying the
Company's planned commercialization of the Conserver 21(TM) Program. There can
be no assurance that the registration procedure will not entail longer delays
and greater costs and expenses. Based on its review of applicable regulations,
the Company believes that Conserver 21(TM) is not subject to United States
Department of Transportation hazardous materials requirements which regulate the
transport of certain hazardous substances. The Company's proposed use of
Conserver 21(TM) does not currently subject it to any other material federal,
state or local regulatory approvals. There can be no assurance, however, that
future regulatory approvals will not be required, leading to unanticipated
expenses and delays inherent to the regulatory process. The Company has not
undertaken any investigation as to the applicable requirements that may be
imposed by regulatory agencies in Canada. There can be no guaranty that such
legal restrictions in Canada will not result in a delay in the Company's ability
to commercially develop the Conserver 21(TM) Program in Canada. See "Business --
Regulatory Requirements."
POSSIBLE CLAIMS REGARDING THE DISTRIBUTION RIGHTS. The Company had
formerly contracted for the exclusive rights to distribute Conserver 21(TM) in
the United States and Canada with Groupe Conserver, the group of affiliated
entities which, collectively, held the exclusive worldwide rights to distribute
and market Conserver 21(TM) from Conserver XXI, S.A., Agrotech's predecessor in
interest ("Conserver XXI"). Due to the instigation of insolvency proceedings
involving Conserver Investments S.A., the controlling entity of the Groupe
Conserver affiliates ("Conserver Investments"), and other alleged breaches,
including Groupe Conserver's loss of its rights from Conserver XXI, the Company
has terminated its former distribution agreement with Groupe Conserver and has
taken steps to preserve its right to assert claims in the Conserver Investments
insolvency proceedings. There can be no assurance that the Company's claims will
be successful or that Groupe Conserver or anyone acting on its behalf will not
attempt to enjoin the Company from exercising its rights derived from Agrotech
or otherwise make claims against the Company and that such efforts will not
successfully prevent the commercialization of the Conserver 21(TM) Program
temporarily. The Company does not believe that there is any basis for such
claims. See "Business -- Prior Agreements".
UNCERTAIN IMPLEMENTATION OF MARKETING STRATEGY. The Company will initially
market its Conserver 21(TM) Program to selected supermarkets and other
retailers, distributors and growers 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(TM) Program. Accordingly, there can be no
certainty that the Company's marketing strategy can be successfully implemented.
See "Business."
NO PRODUCT MARKET; LACK OF ORDERS AND/OR COMMITMENTS. The Company
currently has no orders and there can be no assurance that potential customers
will be willing to incur the costs of the Conserver 21(TM) Program, that the
Conserver 21(TM) Program will be contracted for by any supermarkets or other
retailers,
8
<PAGE> 10
distributors or growers or, even if accepted by any such entities, that it will
prove profitable or attractive to 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. See "Business."
RESTRICTED SCOPE OF BUSINESS. The proposed Conserver 21(TM) Program
currently is the Company's sole line of business and will account for
substantially all of the Company's revenues, if any, for the foreseeable future.
The success of the Company's business will depend on its ability to demonstrate
the commercial viability and effectiveness of the Conserver 21(TM) Program and
its success in competing against other products or technologies aimed at the
same market in the United States and Canada. Conserver 21(TM) has not been
commercially used outside of Spain and there can be no assurance that the
Company can establish a market for the Conserver 21(TM) Program in the United
States and Canada. If the Company's Conserver 21(TM) Program cannot be
successfully commercialized, or if Conserver 21(TM) cannot be marketed on a
stand-alone basis, it is likely there would be a material adverse effect on the
Company's business, financial condition and results of operations. See
"Business -- Conserver 21(TM)."
UNPROVEN ON LARGE-SCALE COMMERCIAL BASIS. The Company has never utilized
Conserver 21(TM) under the conditions and in the volumes that will be required
to make the Conserver 21(TM) Program profitable and cannot predict all of the
difficulties that may arise in connection therewith. Most of the tests utilizing
Conserver 21(TM) conducted to date have been performed on limited quantities of
fruits and vegetables under controlled non-commercial conditions, 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. Although the Company
has completed some initial testing, the Company has not completed all of its own
comprehensive independent tests and to date, has relied primarily on the tests
performed or commissioned by Agrotech, its predecessor in interest and entities
with which it had contracted. Thus, it is possible that Conserver 21(TM) 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(TM) 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(TM) 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 24 months following the completion of this Offering. The
continued expansion and operation of the Company's business beyond such 24 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. The Company does not
own the patent to Conserver 21(TM) but has been granted the exclusive right to
license and market the product. Certain patent applications covering the
inventions and know-how upon which Conserver 21(TM) is based, and which are held
by Agrotech, have been registered in Spain and The Netherlands which filing, by
compliance with international treaties, are deemed to reserve a priority right
for Agrotech to file applications in the United States and Canada if filed
before February 1998. Nevertheless, there can be no assurance that such patents
will be issued or if issued that such patents will not be infringed upon, or
that trade secrets relating to Conserver 21(TM) will not otherwise become known
to, or independently developed by, competitors. While the Company has obtained
representations and warranties from Agrotech with respect to Agrotech's
ownership of the technology, there can be no assurance that infringement claims
will not be asserted against the Company.
9
<PAGE> 11
If the Company's marketing of the Conserver 21(TM) is found to infringe a
patent, a court may grant an injunction to prevent making, selling or using the
product in the United States or Canada. Irrespective of the validity or success
of such claims, the Company could incur significant costs with respect to the
defense thereof. Litigation may be necessary to enforce patented technology
licensed by the Company, protect trade secrets or know-how, and to defend the
Company against claimed infringement of the right of others. There can be no
assurance that the Company will be successful in such undertakings or that the
Company will have sufficient funds for such undertakings.
DEPENDENCE ON KEY PERSONNEL; LACK OF KEY MAN INSURANCE. 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 this Offering including a
non-competition clause providing that Mr. Stein will not compete with the
Company for a period of 36 months following the termination of his employment.
Due to Mr. Stein's age and a certain pre-existing medical condition, neither of
which the Company believes will affect his ability to serve the Company, the
Company has determined the costs of purchasing a "key man" life insurance policy
on Mr. Stein to be prohibitively expensive. As a result, the Company does not
anticipate obtaining such insurance for Mr. Stein. The success of the Company
will also depend upon its 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(TM) 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(TM) Program will gain commercial
acceptance or establish 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 -- Competing Processes."
LIMITED EXPERTISE IN MARKETING POST-HARVEST LIFE EXTENSION PRODUCTS. The
Company's initial marketing activities will be performed by its executive
officers and advisors. To varying degrees, such persons have had prior
experience in the food industry and marketing food products and services.
However, none have had any experience with Conserver 21(TM) or in marketing the
Conserver 21(TM) Program. In order to market and sell the Conserver 21(TM)
Program, as well as any future products and services, the Company will need to
maintain a sales force with technical expertise in the food preservation and
food 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 "Management" and "Business -- Marketing Research."
BROAD DISCRETION IN APPLICATION OF OFFERING PROCEEDS. Approximately
$2,920,000, or 32.3%, of the net proceeds from the sale of Shares in this
Offering will be applied to working capital and other unspecified general
corporate purposes. 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. Accordingly, management of the Company will have broad discretion
over the use of proceeds. See "Business -- Source of Supply -- Manufacturing"
and "Use of Proceeds."
CONCENTRATION OF OWNERSHIP. Upon completion of this Offering, the current
stockholders of the Company will beneficially own approximately 66% of the
outstanding Shares of Common Stock. The Company's executive officers, directors
and their affiliates will beneficially own approximately 36.3% 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
10
<PAGE> 12
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
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
Shares in this Offering will experience immediate and substantial dilution in
the net tangible book value of the shares of Common Stock purchased by them in
this Offering. The immediate dilution to purchasers of the Shares offered hereby
is $3.54, or approximately 71%, per share of Common Stock. Additional dilution
to future net tangible book value per share may occur upon the exercise of the
Underwriter'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 SHARES. Prior to this Offering, there has been no public market
for the Shares. Although the Company has received conditional approval for the
quotation of the Shares on Nasdaq under the symbol "RIPE", there can be no
assurance that they will be quoted on such exchange or under such symbol or that
an active public market for the Shares will be developed or be sustained after
this Offering. The initial public offering price of the Shares offered hereby
have been arbitrarily determined by negotiations between the Company and the
Underwriter 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 Underwriter 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 Shares
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 Shares. See "Underwriting."
POTENTIAL ADVERSE IMPACT ON MARKET PRICE OF SHARES; SHARES ELIGIBLE FOR
FUTURE SALE; ADDITIONAL REGISTERED SECURITIES. Sales of substantial amounts of
the Company's Shares in the public market after this Offering, or the perception
that such sales may occur, could materially adversely affect the market prices
of the Shares and may impair the Company's ability to raise additional capital
by the sale of its equity securities. Of the 6,385,404 Shares of Common Stock
(assuming the SES Reacquisition) to be outstanding upon completion of this
Offering, the 2,200,000 Shares offered hereby (2,530,000 Shares 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 4,185,404 Shares of Common Stock and all
the options and 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. All officers and directors of the Company
have agreed unconditionally 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, including any options and warrants,
totalling approxi-
11
<PAGE> 13
mately 3,075,466 Shares fully diluted for a period of twenty seven (27) months
following the effective date of the Registration Statement. Certain holders of
warrants to purchase 550,000 shares of Common Stock have agreed unconditionally
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 securities
for a period of twenty four (24) months following the effective date of the
Registration Statement. A group of Shareholders who have also received Options
to purchase Common Stock at $2 per Share prior to the Offering have agreed
unconditionally 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
their holdings' totalling approximately 1,053,934 Shares fully diluted, for a
period of eighteen (18) months from the effective date of the Registration
Statement. Other holders of approximately 2,038,500 shares of the Company's
Common Stock including certain holders of options, warrants or other securities
convertible, exercisable or exchangeable for shares of Common Stock have agreed
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 Underwriter, except in connection with private transactions (not involving a
public offering) in which the transferee(s) agrees in writing to be similarly
bound. The holders of Convertible Debentures issued by the Company between
September and November of 1996 have agreed 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 securities (approximately 212,500 shares of
Common Stock when diluted) 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 Underwriter. The Underwriter has represented to Nasdaq
that it will not release the Convertible Debenture holders from such restriction
prior to the lapse of the twelve (12) month period. 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 Shares 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 Shares. See "Description of Securities" and; "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 UNDERWRITER'S WARRANTS. At the consummation of
the Offering, the Company will sell to the Underwriter and/or its designees, for
nominal consideration, warrants to purchase up to 220,000 shares of Common Stock
(the "Underwriter's Warrants"). The Underwriter'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 $8.25 per share. At the discretion of the
Company's Board of Directors, the Underwriter may exercise its rights under the
Underwriter's Warrants by surrendering rights to acquire shares of Common Stock
of the Company pursuant to the Underwriter's Warrant having a fair market value
on the date of the exercise equal to the cash exercise price. For the term of
the Underwriter's Warrants, the holders thereof will have, at nominal cost, the
opportunity to profit from a rise in the market price of the Shares of Common
Stock of the Company without assuming the risk of ownership, with a resulting
dilution in the interest of other security holders. As long as the Underwriter's
Warrants remain unexercised, the Company's ability to obtain additional capital
might be adversely affected. Moreover, the Underwriter may be expected to
exercise the Underwriter'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 Underwriter's
Warrants. See "Underwriting."
12
<PAGE> 14
NO ASSURANCE OF CONTINUED NASDAQ QUOTATION. The Board of Governors of the
National Association of Securities Dealers, Inc. has established certain
standards for the initial quotation and continued quotation of a security on
Nasdaq. The standards for initial quotation require, among other things, that an
issuer have total assets of $4,000,000 and capital and surplus of at least
$2,000,000; that the minimum bid price for the listed securities be $3.00 per
share; that the minimum market value of the public float (the shares held by
non-insiders) be at least $2,000,000, and that there be at least two market
makers for the issuer's securities. While the Company has been approved for
listing on Nasdaq, the Company's securities may be delisted for a variety of
reasons. Nasdaq may delist the Common Stock of the Company if it finds it is in
the public interest or if the Company fails to meet maintenance standards. The
maintenance standards require, among other things, that an issuer have total
assets of at least $2,000,000 and capital and surplus of at least $1,000,000;
that the minimum bid price for the listed securities be $2.00 per share; that
the minimum market value of the "public float" be at least $1,000,000 and that
there be at least two market-makers for the issuer's securities. A deficiency in
either the market value of the public float or the bid price maintenance
standard will be deemed to exist if the issuer fails the individual stated
requirement for ten consecutive trading days. If an issuer falls below the bid
price maintenance standard, it may remain on Nasdaq if the market value of the
public float is at least $1,000,000 and the issuer has $2,000,000 in equity. The
Securities and Exchange Commission has approved new maintenance requirements
which were proposed by Nasdaq. These rules would require the Company to have
either $2,000,000 net tangible assets or market capitalization of $35,000,000 or
$500,000 net revenue in two of its last fiscal years. In addition the Company
would have to have a public float of at least 500,000 shares. There can be no
assurance that the Company will continue to satisfy the requirements for
maintaining a Nasdaq quotation. In addition, recent proposals which would impose
more strict compliance standards if enacted would make it more difficult to
maintain Nasdaq quotation for the Company's Common Stock. If the Company's
Common Stock were to be excluded from Nasdaq, it would adversely affect the
prices of such securities and the ability of holders to sell them, and the
Company would be required to comply with the initial listing requirements to be
relisted on Nasdaq.
If the Company is unable to satisfy Nasdaq's maintenance requirements and
the price per share were to drop below $5.00, then unless the Company satisfied
certain net asset tests, the Company's securities would become subject to
certain penny stock rules promulgated by the Securities and Exchange Commission
(the "Commission"). The penny stock rules require a broker-dealer, prior to a
transaction in a penny stock not otherwise exempt from the rules, to deliver a
standardized risk disclosure document prepared by the Commission that provides
information about penny stocks and the nature and level of risks in the penny
stock market. The broker-dealer also must provide the customer with current bid
and offer quotations for the penny stock, the compensation of the broker-dealer
and its salesperson in the transaction and monthly account statements showing
the market value of each penny stock held in the customer's account. In
addition, the penny stock rules require that prior to a transaction in a penny
stock not otherwise exempt from such rules, the broker-dealer must make a
special written determination that the penny stock is a suitable investment for
the purchaser and receive the purchaser's written agreement to the transaction.
These disclosure requirements may have the effect of reducing the level of
trading activity in the secondary market for a stock that becomes subject to the
penny stock rules. If the Company's Common Stock becomes subject to the penny
stock rules, investors in the Offering may find it more difficult to sell their
Securities.
UNDERWRITER'S POTENTIAL INFLUENCE ON THE MARKET. A significant number of
the Shares offered hereby may be sold to customers of the Underwriter. Such
customers may engage in transactions for the sale or purchase of such Securities
through or with the Underwriter. Although it has no obligation to do so, the
Underwriter intends to make a market in the Shares and may otherwise effect
transactions in such Shares. If it participates in such market, the Underwriter
may influence the market, if one develops, for the Shares. Such market-making
activity may be discontinued at any time. Moreover, if the Underwriter sells the
securities issuable upon exercise of the Underwriter's Warrants, it may be
required under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), to temporarily suspend its market-making activities. The prices and
liquidity of the Shares may be significantly affected by the degree, if any, of
the Underwriter's participation in such market. See "Underwriting."
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<PAGE> 15
LIMITED EXPERIENCE OF UNDERWRITER. The Underwriter has never acted as lead
underwriter in connection with a public offering and has acted as co-manager in
two prior firm commitment public offerings. No assurance can be given that
Janssen/Meyers Associates' limited public offering experience will not affect
the subsequent development of a trading market. Investors should consider this
lack of public offering experience in making an investment decision.
CLASSIFIED BOARD OF DIRECTORS. The Company's stockholders and Board of
Directors recently approved an amendment to the Company's Certificate of
Incorporation which divides the Board of Directors into three classes. One-third
of the Board members are to subject to re-election each year commencing with the
1998 Annual Meeting. These provisions will make it more difficult for a third
party to obtain a majority of the Board, and may have the effect of hindering,
delaying, or preventing a change in control of the Company. This may have an
adverse effect upon the trading price of the Common Stock after the Offering is
completed.
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<PAGE> 16
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Shares in this
Offering are estimated to be approximately $9,030,000 ($10,490,250 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).............................. $1,000,000 11.1%
Inventory purchases of Conserver 21(TM)(2)................. 1,500,000 16.6
Development of new applications and products(3)............ 500,000 5.5
Loans to be used as purchase credits(4).................... 1,000,000 11.1
Repayment of indebtedness(5)............................... 1,760,000 19.5
Employee payroll/Hiring new employees...................... 350,000 3.9
Working capital and general corporate purposes(6).......... 2,920,000 32.3
---------- -----
Total............................................ $9,030,000 100.0%
========== =====
</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(TM) to
be used for market tests as well as providing customer services. See
"Business."
(3) To be used in connection with research and development relating to
additional uses of Conserver 21(TM), as well as investigating other products
that may be complementary to the Company's use of Conserver 21(TM). See
"Business -- Marketing Research."
(4) Required loans pursuant to the Distribution Agreement with such amounts to
be repayable through inventory purchase offsets and royalty payment offsets
over a three to four year period. See "Business -- Distribution Agreement."
(5) Includes the repayment of $500,000 plus accrued interest at 10%, to a
director of the Company who advanced such amount to Agrotech to fulfill a
Company obligation to make loans pursuant to the Distribution Agreement. See
"Business -- Distribution Agreement" and "Certain Transactions." The balance
represents the (i) repayment of $1,000,000 and accrued interest at a rate of
12% per annum through April 30, 1997 to a non-affiliate. (the Company used
the loan for working capital purposes); and (ii) $150,000 for the possible
repayment of loans to Convertible Debenture Holders. See Note [J] to the
Financial Statements. See "Management's Discussion and Analysis of Financial
Condition and Plan of Operation -- Liquidity and Capital Resources."
(6) Includes the costs of implementing Conserver 21(TM) program protocols,
purchasing or leasing capital equipment, establishing a laboratory facility,
leasing new office space and warehouse space, and other facilities intended
for the Company's operations. Although the Company has not commented any
negotiations in this regard, it anticipates the costs of such new facility,
office and warehouse spaces to be approximately $150,000 per year.
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 over the next 24 months. 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
15
<PAGE> 17
discretion of the Board of Directors of the Company. See "Risk Factors -- Broad
Discretion in Application of Offering Proceeds."
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 24 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.
16
<PAGE> 18
CAPITALIZATION
The following table sets forth (i) the actual capitalization of the Company
at February 28, 1997 and (ii) February 28, 1997 capitalization of the Company as
adjusted to reflect the sale of the 2,200,000 Shares 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>
FEBRUARY 28, 1997
-----------------------------
ACTUAL AS ADJUSTED
------------ ------------
<S> <C> <C>
Total long-term debt, excluding current portion......... $ 1,000,000 $ --
Preferred Stock, $.01 par value; 5,000 shares
authorized; none issued and outstanding............... -- --
Common Stock, $.001 par value, 30,000,000 shares
authorized; 4,210,404 shares issued and outstanding at
February 28, 1997; 6,385,404 shares issued and
outstanding at February 28, 1997 as adjusted(1)....... 4,211 6,385
Additional paid-in capital.............................. 2,963,907 15,576,733
Deficit accumulated during the development stage........ (2,645,792) (6,250,792)(2)
-------- --------
Total stockholders' equity......................... 322,326 9,332,326
-------- --------
Total capitalization.......................... $ 1,322,326 $ 9,332,326
======== ========
</TABLE>
- ---------------
(1) Number of shares issued and outstanding at February 28, 1997 as adjusted
assumes the consummation of the SES Reacquisition.
(2) Includes non-cash compensation charges incurred after February 28, 1997 of
approximately $3,585,000 consisting of: (i) $1,020,000 in connection with
the issuance of 500,000 options by the Company in April 1997 at an exercise
price of $2.00 per share; (ii) $525,000 in connection with the issuance of
725,000 options by the Company in April 1997 at an exercise price of $5.00
per share; and (iii) $2,040,000 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 550,000 shares of Common Stock at an
exercise price of $2.00 per share. See Note D of Notes to Financial
Statements.
17
<PAGE> 19
DILUTION
At February 28, 1997 the Company had a net tangible book value of $23,349,
or approximately $.01 per share of outstanding Common Stock. 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 2,200,000 Shares at the assumed initial public offering price of $5.00 per
Share (after deducting offering discounts and commissions and estimated offering
expenses payable by the Company), the net tangible book value of the Company at
February 28, 1997 as adjusted would have been approximately $9,332,326, or
approximately $1.46 per share. This represents an immediate increase in net
tangible book value of $1.45 per share to existing stockholders and an immediate
dilution of $3.54 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...... $5.00
Net tangible book value per share as of February 28, 1997............ .01
Increase per share attributable to this Offering..................... 1.45
----
As adjusted net tangible book value per share after this Offering.... 1.46
-----
Dilution per share to new investors(1)............................... $3.54
=====
</TABLE>
The following table summarizes 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 February 28, 1997
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 (2)......... 4,185,404 66% $ 3,175,514 22% $ .76
New investors..................... 2,200,000 34% $11,000,000 78% $5.00
---------- ---- ----------- ----
Total................... 6,385,404 100% $14,175,514 100%
========== ==== =========== ====
</TABLE>
- ---------------
(1) After giving effect to the receipt of the net proceeds from the exercise of
(i) the outstanding warrants to purchase 325,000 shares of Common Stock;
(ii) the outstanding options to purchase 1,720,000 shares of Common Stock;
(iii) the 550,000 warrants to be issued to a convertible debt holder and its
affiliate and (iv) the conversion of $750,000 of outstanding indebtedness of
the Company into 150,000 shares of Common Stock, the net tangible book value
of the Company at February 28, 1997 as adjusted would have been
approximately 19,354,826, or approximately $2.11 per share. This represents
an immediate dilution of $2.89 per share, or 58%, to purchasers of Common
Stock in this Offering. These figures do not include 495,000 shares of
Common Stock available for issuance in connection with the Company's 1996
Stock Option Plan. Options issued from the plan will be exercisable at the
then current fair market price of the Company's Common Stock.
(2) Includes the SES Reacquisition.
18
<PAGE> 20
SELECTED FINANCIAL DATA
The following summary financial data have been derived from the 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, for the six months ended February 28, 1997 and the period from March 6,
1996 (date of incorporation) to February 28, 1997 and the balance sheet at
August 31, 1996 and February 28, 1997 are derived from, and are qualified by
reference to, the 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 MARCH 6, 1996
(DATE OF SIX MONTHS (DATE OF
INCORPORATION) TO ENDED INCORPORATION) TO
AUGUST 31, 1996 FEBRUARY 28, 1997 FEBRUARY 28, 1997
----------------- ----------------- -----------------
<S> <C> <C> <C>
Revenues............................... $ -- $ -- $ --
Compensation charges in connection with
issuance of options and
warrants(2).......................... 907,201 223,000 1,130,201
General and administrative expenses.... 458,611 849,888 1,308,499
----------- ----------- -----------
Operating (loss)....................... (1,365,812) (1,072,888) (2,438,700)
Interest expense, net of interest
income............................... 21,259 185,833 207,092
----------- ----------- -----------
Net (loss)............................. $(1,387,071) $(1,258,721) $(2,645,792)
=========== =========== ===========
Net (loss) per share of Common Stock... $ (.32) $ (.26)
----------- -----------
Weighted average number of shares of
Common Stock outstanding............. 4,390,767 4,844,733
=========== ===========
Pro-forma net (loss) per share of
Common Stock......................... $ (.88)
-----------
</TABLE>
BALANCE SHEET DATA:
<TABLE>
<CAPTION>
FEBRUARY 28, 1997
--------------------------
AUGUST 31, AS
1996 ACTUAL ADJUSTED(3)
----------- ----------- -----------
<S> <C> <C> <C>
Working capital.............................. $ 2,239,902 $ 1,015,585 $ 9,324,562
Total assets................................. 2,443,436 2,156,075 10,076,075
Total current liabilities.................... 199,156 833,749 743,749
Deficit accumulated during development
stage...................................... (1,387,071) (2,645,792) (6,250,792)(4)
Stockholders' equity......................... 1,244,280 322,326 9,332,326
</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 and January 1997. See "Management's Discussion and Analysis of
Financial Condition and Plan of Operation" and Note E and J of Notes to
Financial Statements.
(3) Gives effect to the sale by the Company of the Shares offered hereby at the
initial public offering price of $5.00 per Share and the initial application
of the estimated net proceeds therefrom. See "Use of Proceeds."
(4) Includes non-cash compensation charges incurred after February 28, 1997 of
approximately $3,585,000 consisting of: (i) $1,020,000 in connection with
the issuance of 500,000 options by the Company in April 1997 at an exercise
price of $2.00 per share; (ii) $525,000 in connection with the issuance of
725,000 options by the Company in April 1997 at an exercise price of $5.00
per share; and (iii) $2,040,000 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 550,000 shares of Common Stock at an
exercise price of $2.00 per share. See Note D of Notes to Financial
Statements.
(5) Pro-forma net (loss) per share of common stock is based on the weighted
average number of shares and net (loss), both as adjusted for the
transactions described in (4) above. Incremental shares included in
outstanding shares have been based upon the treasury stock method.
19
<PAGE> 21
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 distribution arrangements, privately raising both debt and equity
funding, product testing and recruiting management personnel. The Company has
received the exclusive license to import, promote, distribute, market, sell and
otherwise commercially exploit Conserver 21(TM) in the United States and Canada,
and holds the exclusive option and right of first refusal to exercise such
rights throughout the world.
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 fruits, vegetables and flowers meet certain quality standards
and to oversee the proper use of Conserver 21(TM) in the packing and
transportation of such 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 February 28, 1997, 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
$2,645,792. Included in the net loss were (i) non-cash compensation charges of
$1,130,201 recorded in connection with the value attributed to options and
warrants issued by the Company in March and August 1996 and January 1997; (ii)
non-cash compensation charges of $130,000 for services to the Company
contributed by Charles H. Stein, its President and Chief Executive Officer;
(iii) a charge of approximately $126,000 related to amortization of debt
discount created by the value attributed to shares of Common Stock issued to
holders of convertible debentures and (iv) accrued interest expense of $120,000
on convertible notes. Through February 28, 1997, the Company has spent
approximately $1,139,000 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 1996 through
November 1996, the Company raised $3,172,000 through the private placement of
Common Stock at a purchase price of $5.00 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 approximately 2,000,000 shares of Common Stock upon conversion.
Instead, SES and its affiliate will receive warrants upon the consummation of
the Offering to purchase 550,000 shares of Common Stock at an exercise price of
$2.00 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
20
<PAGE> 22
approximately $2,040,000 in connection with the value attributed to the issuance
of such warrants. The Company will also re-acquire 25,000 shares of Common Stock
from the SES affiliate upon the consummation of the Offering. In addition, the
Company expects to record non-cash compensation charges of approximately
$1,545,000 related to options issued in April 1997.
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 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 $5.00 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 1,366,667 shares of
Common Stock from Conserver Investments, S.A., an unaffiliated company, for an
aggregate purchase price of $1,800,000.
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 February 28, 1997 was $2,645,792. No operating revenues
are anticipated until such time, if ever, as the Company can demonstrate the
commercial viability of its Conserver 21(TM) Program. The Company currently has
no orders and there can be no assurance that potential customers will be willing
to incur the costs of the Conserver 21(TM) Program. In addition, the use of
Conserver 21(TM) in a post-harvest quality maintenance assurance program such as
the Conserver 21(TM) Program has not yet been demonstrated on a commercial basis
outside of Spain. There can be no assurance regarding whether or when the
Company will successfully implement its business plan or operate profitably. See
"Risk Factors."
The Company currently estimates that the net proceeds from this Offering
will be sufficient to meet the Company's liquidity and working capital
requirements, including additional expenditures for inventory purchase
(including the repayment of $500,000 plus interest accrued at 10% to James
Stanton, a director of the Company, for a loan made on behalf of the Company to
Agrotech pursuant to the Distribution Agreement for the prepayment of these
purchases), leasing new office space, warehouse space, and establishing a
laboratory facility, for a period of at least 24 months following the
consummation of this Offering. The continued expansion and operation of the
Company's business beyond such 24 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.
21
<PAGE> 23
BUSINESS
THE COMPANY
Conserver Corporation of America (the "Company") has licensed the exclusive
right to distribute, market, sell and otherwise commercially exploit Conserver
21(TM), a product composed of a non-toxic mixture of sepiolite and mineral
salts, in the United States and Canada through March 2022, subject to extension.
In addition, the Company holds an option and a right of first refusal to
exercise such rights throughout the world. Tests have been performed on
Conserver 21(TM) over the past 35 months variously by the Company, the
manufacturer of Conserver 21(TM), its predecessor in interest and companies with
which it contracted. In addition, various non-affiliated laboratories,
commissioned by certain of the aforementioned entities from time to time in
various parts of the world, utilizing independently derived protocols, have
demonstrated that the use of Conserver 21(TM) can extend the post-harvest life
of fruits, vegetables and flowers.
Conserver 21(TM) works like a sponge by cleansing ethylene and other gases
emitted by fruits, vegetables and flowers from the atmosphere of a storage or
transport container thereby retarding their spoilage, lengthening their
post-harvest life and minimizing their shrinkage during ripening. These gases,
if allowed to remain in the atmosphere of the container, would be reabsorbed by
the perishable cargo during its maturation process, resulting in its accelerated
decay. Conserver 21(TM) also releases carbon dioxide and water vapor, thereby
assisting fruits, vegetables and flowers to maintain their freshness. Conserver
21(TM), a non-invasive product, is manufactured in the form of cylindrical
granules and placed in sealed filters or packets which are then positioned
within a storage or transport space.
The Company believes that Conserver 21(TM) can be used in conjunction with
a comprehensive quality assurance maintenance program to provide more
commercially saleable fruits, vegetables and flowers more reliably and cost
effectively than is achieved by current industry practices. It is currently
common for some growers of fresh fruits and vegetables to pick and ship their
products prior to their being fully ripened in an effort to reduce spoilage and
to minimize the extent of the natural decay that occurs in the transportation of
perishables. This often results in delivery of fruits and vegetables that are
unevenly ripened, have less mass and a compromised taste. Growers and
distributors have resorted to using expensive storage and transportation methods
in an effort to reduce the incidence of such commercially unsatisfactory
products. The Company believes that Conserver 21(TM) which, for illustrative
purposes, has the capacity, as demonstrated by independent testing, to extend
the post-harvest life of certain varieties of tomatoes, strawberries, sweet
peppers and lilies by as much as 7, 10, 9 and 5 days, respectively, offers an
improved alternative to such methods. The Company intends to develop a quality
assurance maintenance program utilizing Conserver 21(TM) that will provide
fruit, vegetable and/or flower inspection and supervision services from point of
harvest or packing to point of retail sale (the "Conserver 21(TM) Program"). The
Company intends to market the Conserver 21(TM) Program to growers, distributors,
supermarket chains and other retailers who can benefit from the availability of
more saleable perishables.
The Company believes that the Conserver 21(TM) Program can offer the
following benefits:
- Increase the shelf-life of fruits, vegetables and flowers.
- Increase the sugar content, enrich the color and enhance the weight and
taste of fruits and vegetables which will be able to be harvested nearer
their height of ripeness.
- Reduce the shrinkage and spoilage of fruits and vegetables during storage
resulting in a greater product yield available for sale by supermarkets
and other retailers.
- Reduce the time and expense involved in handling and sorting produce in
storage and transport.
- Extend the selling season for many fruits and vegetables.
- Reduce the costs of transporting highly perishable fruits, vegetables and
flowers as slower and less expensive means can be utilized due to the
longer post-harvest life of the perishables.
22
<PAGE> 24
The Company also, over time, intends to utilize its rights to distribute
the product throughout the world and explore the efficacy of Conserver 21(TM) in
aiding food distribution to areas suffering with agriculturally inhospitable
climates as well as its use in opening new markets for fresh fruits and
vegetables which were previously deemed too perishable to access distant
countries.
The Company's distribution and marketing rights are derived from the
Distribution Agreement with Agrotech 2000, S.L. ("Agrotech") a Spanish company
that manufactures and packages Conserver 21(TM) near Madrid and whose principal
stockholder is Alfonso de Sande Moreno, the developer of Conserver 21(TM). Sr.
Moreno has assigned or caused the assignment of all rights, title and interest
in and to the patents and other intellectual property underlying Conserver
21(TM) to Agrotech.
MARKET OVERVIEW
The Company has targeted the fruit, vegetable and flower markets for the
initial introduction of its Conserver 21(TM) 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 $42.0 and $38.9 in U.S.
retail sales in 1995 and 1994, respectively. The flower market generated $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
supply of fresh-cut salads and fruits and the trend among growers to employ
company branding of fresh produce.
The Company believes that today's consumers will purchase branded produce
because of the expectation of uniform quality associated with established
brands. For example, names like Dole(TM) and Chiquita(TM) have become synonymous
with premium quality pineapples and bananas. The Company believes it can
generate consumer loyalty and establish the kind of brand name market success
that has been achieved with processed foods, but has been comparatively
undeveloped to date in the fresh produce market. The Company believes that its
Conserver 21(TM) 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(TM) Program will be
attractive to flower growers and retailers. Approximately 48%, or $6.7 billion,
of the flowers sold in the United States are from foreign countries. Using the
Conserver 21(TM) Program would lessen the time pressure of delivery and enable
the flowers to be transported by cargo ship or other economical means, thereby
reducing the transportation cost.
Depending upon the success of the Conserver 21(TM) Program in the United
States and Canada, the Company expects to be able to explore the commercial
opportunities of using the Conserver 21(TM) Program in other countries and
accessing previously untapped markets for fruits and vegetables.
COMPETING PROCESSES
There are several methods used today to extend the post-harvest life of
fruits, vegetables and flowers. The most commonly used are ethylene "adsorbers,"
modified atmosphere packaging, controlled atmosphere systems and gamma
irradiation.
Ethylene Adsorbers reduce the amount of ethylene in the atmosphere
surrounding produce, by adsorbing the ethylene being released by the produce.
These products can only adsorb or "scrub" ethylene until they reach their point
of saturation. Without 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 would provide a service and benefit to
shippers, retailers and consumers. The Company believes that these products are
of significantly reduced efficacy and value in a humid environment, which
greatly limits their usefulness on a practical basis.
Modified atmosphere packaging involves 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
23
<PAGE> 25
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. Another
drawback is that each variety of produce has to be stored separately because of
its differing requirements for preservation.
Controlled atmosphere systems maintain a pre-defined mixture of poisonous
gases in the atmosphere surrounding fruits 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 quickly and unpredictably after release from this artificial
environment. As a result, the Company believes that the controlled atmosphere
process represents only a 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.
Gamma irradiation in carefully controlled dosages can be effective in
controlling decay and insect infestations on such produce as papayas, mangos,
bananas, pineapples and grapefruits. 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. 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.
CONSERVER 21(TM)
The Company believes that use of its Conserver 21(TM) 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(TM), which is composed of sepiolite and mineral
salts, works like a sponge. When placed in a storage or transport area with
fresh fruit, vegetables and flowers, it adsorbs gases, most notably ethylene,
detrimental to the preservation of food and also stimulates the creation of
carbon dioxide and water vapors. This combination of ethylene removal, which
helps delay the food maturation process, and the increase in carbon dioxide and
water vapors, which enhances the produce's natural ability to remain vital,
produces a uniquely beneficial environment for post-harvest life extension.
Unlike other methods of extending post-harvest life, Conserver 21(TM) is not
applied directly to the fruits, vegetables or flowers or into the environment.
Conserver 21(TM) is manufactured in the form of cylindrical granules and is
currently available in two packaged forms: filters and packets. The filters are
designed to be 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
effective coverage for the volume equivalent 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 placed in
boxes or crates containing the produce being stored or shipped. The granules
within the packet are activated by the gases emitted by the ripening fruits,
vegetables and/or flowers.
Conserver 21(TM) 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(TM) 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 over the last 35 months 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(TM) can scrub over 70% more ethylene than competitive products
in simulated trials and can also retard the spoilage of perishable produce and
flowers, lengthen their post-harvest life and reduce shrinkage in the transport
process.
24
<PAGE> 26
CONSERVER 21(TM) PROGRAM
The Company's Conserver 21(TM) Program is intended to ensure that fruits,
vegetables and flowers purchased from growers meet quality standards of
freshness which are then maintained through the packing and transportation
process until delivery and sale to the consumer.
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 primarily to 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.
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(TM) Installation. After inspection, the Company's technical
representatives will install, or oversee the installation of, Conserver 21(TM)
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. Depending upon the
customer's requirements, shipped items may be re-inspected at the point of
retail warehouse delivery by a technical representative during unloading and
delivery to ensure that quality standards have been maintained during the
storage and shipping process.
Potential Benefits.
- Higher Level of Consumer Satisfaction. Retail distributors using the
Conserver 21(TM) 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 riper. Generally, harvesting nearer to
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 riper produce can be harvested, stored with reduced spoilage and
delivered for retail sale "out of season."
- Reduced Shipping Costs. In some instances, retail distributors' cost of
products may decrease significantly due to the Conserver 21(TM) Program,
which can slow the decay of highly perishable items, thereby allowing
shipment by less expensive means of transport than otherwise used.
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.
- Increased Weight. The Conserver 21(TM) Program should generally result
in a higher weight yield of fruits, vegetables and flowers upon delivery
because of reduced spoilage. Since the retail distributor often pays the
grower by weight at the time of transport, this would generate increased
profitability for growers. In addition, the production of water vapor
attributable to the use of Conserver 21(TM) reduces the amount of
shrinkage in the cargo during shipment. Consequently, if there is less
spoilage and shrinkage through the use of Conserver 21(TM), the weight
and marketability of fruits and vegetables delivered for retail sale is
higher, thereby generating additional profits for the retail distributor
as well.
- Reduced Handling Costs. The Conserver 21(TM) Program, by reducing the
detrimental effects of ethylene, could cut the time and expense needed to
maintain shipments of produce in storage. Currently, distributors and
handlers must inspect shipments by hand to remove individual fruits and
vegetables whose advanced stage of decay could accelerate the maturation
of the remaining fruits and
25
<PAGE> 27
vegetables. With Conserver 21(TM), the deterioration of ripened fruits
and vegetables would be reduced, lessening the need for hand-inspections
and eliminating the cost for those extra inspections as well as the costs
incurred by the delay in the shipment of fruits, vegetables and flowers
to market.
BUSINESS STRATEGY
Market Opportunities. Based on tests performed and commissioned by the
Company, Agrotech and its predecessor in interest, and other companies with
which it contracted, the following examples highlight some of the market
opportunities for the Company's Conserver 21(TM) Program.
- Strawberries
Growers and distributors in California ship more than 600
million pounds of strawberries annually, most requiring
transport over several days. The post-harvest life of
strawberries can be extended for up to 10 additional days
utilizing Conserver 21(TM), resulting in greater volume and
higher quality berries for distributors to sell.
- Oranges Conserver 21(TM) can extend the post-harvest life of certain
types of oranges from 21 days to as much as 60 days allowing
growers to harvest 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 results in compromised taste
and added expense. The Company believes that Conserver 21(TM)
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 ripened and allowing them to be sold for a premium price,
at their maximum weight and at their height of natural
ripeness.
- Flowers Approximately 48% of the flowers sold in the United States are
imported via air freight. The Company believes that its
Conserver 21(TM) Program can slow down the post-harvest decay
and increase the post-harvest life of certain varieties of
carnations and lilies to as long as 7 and 5 days, respectively,
enabling these flowers to be shipped by less expensive means of
transport. In addition, Conserver 21(TM) has tested to be a
factor in reducing the yellowing of "Pinto Salmon" Geranium
transplants over a six day period. Because of Conserver
21(TM)'s efficacy, certain flowers should be able to be
commercially harvested and stored longer to meet peak demand
for the major holidays for flower sales -- Valentine's Day,
Mother's Day and Easter.
Initial Market Entry. In order to demonstrate projected savings to
prospective customers, the Company's management and advisors will work with its
prospective customers in analyzing their: (i) specific sources of supply of
fruits and vegetables; (ii) distribution and storage policies; and (iii)
warehouse and delivery procedures.
After completing its analysis, the Company will request a prospective
customer to agree to a demonstration by the Company of the potential cost
savings and other benefits which may be derived by the prospective customer from
its use of the Conserver 21(TM) Program. The Company will implement such
demonstration utilizing operational procedures designed specifically for the
customer, including but not limited to, pre-shipment inspections, installation
and recovery of Conserver 21(TM) packets and filters and coordination with
transporters and warehouses. The Company will also provide the prospective
customer with an analysis of the results of the demonstration and the potential
economic benefits of its use of the Conserver 21(TM) Program, all at no cost to
the prospective customer. Although the Company believes that the anticipated
results of these demonstrations will result in firm orders for use of the
Conserver 21(TM) Program, there can be no assurance that the Company's attempts
at initial market development will be successful.
Price. The Company expects to charge customers a fee based on the weight
of each shipment of fruits, vegetables or flowers it transports or stores using
the Conserver 21(TM) Program. The Company intends that its fee will represent
merely a percentage of the financial benefit derived by its customers through
the sale of greater quantities of higher quality fruits, vegetables and flowers
with reduced shipping and handling costs
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<PAGE> 28
derived from their use of the Conserver 21(TM) Program and as a result, will
represent no increased cost to the Company's customers.
Branded Service. The Company intends to establish a Conserver 21(TM)
"Freshness Seal" or other identifying trademark which will identify products
utilizing the Conserver 21(TM) Program.
Future Opportunities. In April 1997, the Company entered into an agreement
with Louden Plastics, Inc. to (i) explore the possibilities of developing
plastic material handling products which are compatible or usable with Conserver
21(TM) in the transport of fruits, vegetables, and flowers; and (ii) introduce
the Company to prospective customers who are interested in purchasing Conserver
21(TM) as part of, for incorporation into, or for use in conjunction with such
plastic material handling products. Such opportunities, if developed, could
provide the Company with additional revenues from the sale of Conserver 21(TM)
in connection the use of these plastic handling materials. As permitted by the
development of the Company's business in the future, the Company may explore the
commercial feasibility of purchasing seasonal fruits and vegetables, and storing
them utilizing Conserver 21(TM) so that the stored fruits and vegetables can be
sold at "out of season" premium prices. In addition the Company, as business
allows, will explore the commercial applications of Conserver 21(TM) in other
countries.
MARKETING RESEARCH
The Company has engaged Mr. Elie Toledano as an advisor to assist the
Company with the development of its protocols, marketing strategies and
research, as well as identifying the products with which Conserver 21(TM) can be
effectively utilized. Mr. Toledano had been actively involved for almost two
years in organizing and supervising the testing of Conserver 21(TM).
The Company will continue to perform studies to demonstrate the advantages
of Conserver 21(TM) over ethylene adsorbers and other methods of produce life
extension. The Company also expects to explore additional uses of Conserver
21(TM) in the United States, Canada and in other countries around the world as
well. Such potential uses include Conserver 21(TM)'s use in pre-packaged produce
items such as salads, as well as its potential to extend the lives of exotic
fruits and vegetables indigenous to certain geographical locales, as well as
other foodstuffs such as meat, poultry and fish, in addition to other diverse
applications such as absorbing cigarette and cigar smoke. The Company will work
closely with the research and development teams of Agrotech on any related
modifications to Conserver 21(TM).
AGROTECH
Introduction
Agrotech is the Spanish company which manufactures and packages Conserver
21(TM) in all its forms in its facility near Madrid, Spain. Alfonso de Sande
Moreno, the inventor of the Conserver 21(TM) technology, is Agrotech's majority
shareholder. Sr. Moreno has assigned all of the patents to Conserver 21(TM) in
his name to Agrotech, and is causing the transfer to Agrotech of other patents
and trademark rights from Agrotech's predecessor in interest Conserver XXI,
S.A., a Spanish company ("Conserver XXI") the majority shareholders of which are
the sole shareholders of Agrotech.
Prior Agreements
In May 1995, Conserver XXI had licensed the exclusive rights to distribute
and market Conserver 21(TM) worldwide to Groupe Conserver, an affiliated group
of companies based in Brussels (which were not affiliated with Conserver XXI).
In March, 1996 the Company entered into a distribution agreement with certain of
the Groupe Conserver entities for the exclusive marketing and distribution
rights to Conserver 21(TM) in the United States and Canada. That agreement was
amended in October 1996. Upon learning of a dispute between Conserver XXI and
Groupe Conserver, which threatened the Company's supply of Conserver 21(TM), the
Company entered into an agreement with Conserver Purchasing Corporation
("Purchasing"), an unaffiliated Delaware corporation, whereby the Company,
through Purchasing, would have been able to acquire substantially identical
marketing and distribution rights from Conserver XXI in the event Groupe
Conserver could not deliver the product. By agreement between the Company and
Purchasing dated October 9, 1996,
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<PAGE> 29
and subsequently amended on December 31, 1996, the Company agreed to lend
Purchasing up to $350,000 for the purpose of enabling Purchasing to acquire an
inventory of Conserver 21(TM), of which $328,550 had been advanced to Purchasing
through March 31, 1997. These loans, which are payable on demand, bear interest
at a rate of 8% per annum and are collateralized by a lien on Purchasing's
inventory of Conserver 21(TM). The Company expects that it will take the
inventory from Purchasing in repayment of the loan. Due to the establishment of
insolvency proceedings in Brussels regarding Conserver Investments, S.A., the
controlling entity of the Groupe Conserver affiliates, and other perceived
breaches, including Groupe Conserver's loss of its rights from Conserver XXI,
the Company terminated its distribution agreement with Groupe Conserver in March
of 1997. The Company subsequently entered into the Distribution Agreement with
Agrotech directly.
Distribution Agreement
In March 1997 the Company entered into the Distribution Agreement
establishing it as the exclusive licensee of the right to import, promote,
distribute, market and otherwise commercially exploit Conserver 21(TM) products
in the United States and Canada through March 2022, subject to extension. The
Company also holds the option and a right of first refusal to exercise such
exclusive rights throughout the world. The Company's rights also extend to any
variations on Conserver 21(TM) that may be developed and includes one, which is
currently available in Spain, for use with poultry, fish and meat. The Company
currently has not developed plans to use this variation of Conserver 21(TM) in
the United States or Canada but may do so in the future, in compliance with
applicable regulatory restrictions.
Under the terms of the Distribution Agreement, the Company must purchase a
minimum of $2,000,000 of Conserver 21(TM) products by April 1998 and must
continue to meet agreed upon minimum annual purchase goals to retain the
exclusivity of its rights. The Company is to pay Agrotech a stated per-unit
price for each sachet and filter of Conserver 21(TM), and is also required to
pay Agrotech a 4% royalty on net revenues derived from the Company's sales of
Conserver 21(TM). Royalties are payable 45 days after the end of each calendar
quarter. Net revenues are defined as the gross proceeds actually received by the
Company from the commercial exploitation of Conserver 21(TM) reduced by the cost
of packing, freight, insurance and federal, state and local taxes. Agrotech has
the right to borrow up to $1,000,000 from the Company as of May 1, 1997 and up
to an additional $500,000 commencing ninety (90) days after the offering with
such rights to borrow such amounts being exercisable throughout the term of the
Distribution Agreement. Loans shall be made at the one year interest rate for
Spanish Pesetas published in the Financial Times on the nearest business day
following each anniversary of the Effective Date. $1,000,000 of such loans shall
be repayable over a three year period as an offset against Conserver 21(TM)
purchases by the Company in excess of $2,000,000 annually and $500,000 of such
loans shall be payable out of royalties which may be due Agrotech from such
sales over a 3 to 4 year period. To date, $500,000 has been borrowed by
Agrotech, which amount has been funded by James Stanton, a Director of the
Company, on behalf of the Company. The Company shall repay Mr. Stanton in full
plus interest accrued at a rate of 10% per annum out of the proceeds of the
Offering. Charles Stein has agreed to personally guarantee a portion of the
Company's repayment obligation to Mr. Stanton.
Agrotech has the right, in its discretion, to substitute variations of
Conserver 21(TM) to fulfill the Company's orders but has covenanted that any
such product substitutions shall, at a minimum, meet currently approved
Conserver 21(TM) standards and shall be saleable in the same or compatible
formats as is needed by the Company for the Conserver 21(TM) Program. Agrotech
has also agreed to alter the existing Conserver 21(TM) formats at the Company's
request if, in the Company's discretion at any time such modification should be
necessary.
Pursuant to the terms of the Distribution Agreement, Agrotech has
represented and warranted that the Company has the exclusive right in the United
States and Canada to use the trademark "Conserver 21(TM)" for use in connection
with the marketing of Conserver 21(TM) Products.
The Distribution Agreement is automatically renewable beyond the Initial
Term for subsequent annual periods; provided, however, that the Distribution
Agreement can be terminated by either party by written notice ninety days prior
to the end of the Initial Term or prior to the end of each succeeding annual
term.
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<PAGE> 30
The Distribution Agreement (i) will be terminated automatically in case of
the insolvency or bankruptcy of one of the parties; or (ii) may be terminated by
either party for the substantial breach of any material provision by the other
party if the breaching party has not cured such breach within 30 days of written
notice thereof.
SOURCES OF SUPPLY; MANUFACTURING
Conserver 21(TM) is currently exclusively manufactured and packaged by
Agrotech in its own facilities located near Madrid, Spain. The Company believes
that its Conserver 21(TM) supply requirements, will fall within Agrotech's
current manufacturing capacity. See "Use of Proceeds."
The Distribution Agreement requires the Company to make loans to Agrotech
for the enhancement of its manufacturing capacity, as may be needed from time to
time to keep pace with demand. The Company does not have the right to build its
own facility. See "Risk Factors -- Sole Source of Supply; and "Business --".
REGULATORY REQUIREMENTS
The Company's intended utilization of Conserver 21(TM) to adsorb gases in
storage or transport containers filled with fruits, vegetables and flowers will
result in the natural production of carbon dioxide, which will have the effect
of retarding the growth of microorganisms and fungi also present in such
containers. Such retardation effect, however, may result in the technical
classification of Conserver 21(TM) as a "pesticide" under the rules and
regulations of the United States Environmental Protection Agency ("EPA") and
thus subject Conserver 21(TM) to the provisions of the Federal Insecticide
Fungicide and Rodenticide Act ("FIFRA"). The Company and its special counsel,
based on a review of the relevant statutes and regulations, have taken the
position that Conserver 21(TM) is not a pesticide. The Company has requested a
confirmation from the EPA that Conserver 21(TM) is not a pesticide, which
request has not as yet been acted upon. There can be no assurance that the EPA
will not determine Conserver 21(TM) to be a pesticide. Pesticides are required
to be registered with the EPA and their use is subject to compliance with EPA
labeling and packaging requirements. If the EPA determines that Conserver 21(TM)
is a pesticide, the Company will promptly proceed with EPA registration as both
FIFRA and applicable customs regulations prohibit the importation of
unregistered pesticides under penalty of possible civil and criminal sanctions.
FIFRA registration may require the performance of formal tolerance studies of
Conserver 21(TM)'s interaction with fruits and vegetables, which the Company
estimates may cost it between $75,000 and $150,000, and would take at least six
months to complete, thereby extensively delaying the Company's planned
commercialization of the Conserver 21(TM) Program. There can be no assurance
that the registration procedure will not entail longer delays and greater costs
and expenses. Based on its review of applicable regulations, the Company
believes that Conserver 21(TM) is not subject to United States Department of
Transportation hazardous materials requirements which regulate the transport of
certain hazardous substances.
The Company's proposed use of Conserver 21(TM) does not currently subject
it to any other material federal, state, or local regulatory approvals. The
Company has not, however, undertaken any investigation as to the applicable
requirements that may be imposed by regulatory agencies in Canada. There can be
no guaranty that such legal restrictions will not cause a delay in the Company's
ability to commercially develop the Conserver 21(TM)Program in Canada.
INSURANCE
The Company currently maintains comprehensive general liability and
property insurance with coverage of $1,000,000 per occurrence and umbrella
insurance of $4,000,000 per occurrence. There can be no assurance that such
coverage will be adequate to protect the Company from all potential losses.
EMPLOYEES
As of March 31, 1997, the Company had eight employees, including its five
executive officers.
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<PAGE> 31
FACILITIES
The Company maintains its headquarters in an executive office suite in
Coral Gables, Florida, on a month-to-month basis at a rental of approximately
$6,000 per month. The Company occupies approximately 1,000 square feet of office
space, has the right to use common areas and conference rooms and receives
office services. The Company also maintains an office in New York City at a cost
of approximately $3,845 per month. After the Offering, the Company expects to
move its Florida offices to a larger facility in the south Florida area although
the Company has not entered into any negotiations for such facilities. The
Company also intends to retain its office space in New York after the Offering.
LEGAL PROCEEDINGS
The Company is not presently a party to any material legal proceedings.
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<PAGE> 32
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..................... 65 Chairman, President and Chief
Executive Officer
James V. Stanton..................... 65 Vice Chairman and Director
Douglas C. Rice...................... 53 Executive Vice President -- Chief
Operating Officer
Miles R. Greenberg................... 40 Senior Vice President -- Finance,
Treasurer and Chief Financial
Officer
Jeffrey H. Berg...................... 53 Vice President -- Research and
Development
Gerald M. Breslauer.................. 60 Vice President -- Administration and
Secretary
Michael Stanton...................... 23 Vice President -- Special Projects
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
wholesaler and retailer of resale products. From 1985 to 1987, he was President
and Chief Executive Officer of Night Hawk Resources, Ltd. (Vancouver Stock
Exchange) which was engaged in oil and gas exploration in Texas and Alaska.
Prior thereto and from 1987, Mr. Stein was a private investor. Early in his
career, Mr. Stein pioneered the concept of packaging fresh orange juice in
"milk-type" cartons, which concept was sold to Kraft Foods, Inc. From December
1968 to October 1983, Mr. Stein was Chairman and Chief Executive Officer of
Hardwicke Companies Inc. (Nasdaq), 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. Prior to 1968, he was 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 (NYSE), the parent company of Sara Lee.
JAMES V. STANTON has been Vice Chairman and a director of the Company since
its inception. From 1981 to 1988 he served as Executive Vice President of the
Delaware North Company, one of the largest privately held food companies in the
United States. 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 was appointed Vice President -- Corporate Development of
the Company in May 1996 and appointed Executive Vice President and Chief
Operating Officer in April 1997. Prior to joining the Company and from 1986, Mr.
Rice was an independent food technologies consultant, during which time 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.
MILES R. GREENBERG was appointed Vice President and Chief Financial Officer
of the Company in September 1996 and appointed Senior Vice President on January
18, 1997. From 1994 until joining the Company, Mr. Greenberg served as Vice
President and Chief Financial Officer of F3 Software Corporation
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<PAGE> 33
("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 diversified financial services company. Mr. Greenberg is a
Certified Public Accountant formerly with KPMG Peat Marwick.
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 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. Mr. Breslauer is licensed
to practice law in the State of New York.
MICHAEL STANTON was appointed Vice President-Special Projects in April
1997. Mr. Stanton is the son of James Stanton, Vice Chairman and Director of the
Company and is a graduate of the College of the Holy Cross in 1996. Mr. Stanton
shall serve the Company in identifying and developing new business opportunities
and special project applications for Conserver 21(TM.)
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 project finance. Mr. Bryce was employed by
Hyatt International Corporation from 1969 until 1988, initially as a Vice
President, ultimately becoming Vice Chairman in 1981.
JAY M. HAFT has served as a director of the Company since October 1996. A
practicing attorney for over 25 years, Mr. Haft also serves as Chairman of Noise
Cancellation Technologies, Inc., Extech, Inc., Jenna Lane, Inc. as well as
director of five other public companies whose respective securities are traded
on The Nasdaq 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. 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. He is a member of the Florida State
Commission for Government Accountability to the People.
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.
JEFFREY H. BERG, PH.D. was appointed Vice President of Research and
Development in January 1997. He will assume such office upon the effectiveness
of the Offering. Dr. Berg, who has agreed to devote approximately 50% of his
working time to Company affairs, will also seek new business opportunities for
the Company that are compatible with its current or future business. Since 1987
Dr. Berg has worked in the financial community as an analyst covering the health
care industry, including as a part-time employee of M. H. Meyerson & Co., Inc.,
a financial services firm, since September 1995. From 1981 to 1987 Dr. Berg
worked at PA Technology, an international consulting agency where he counseled
clients in the food industry and the health care industry. From 1974 to 1981 he
led product development laboratories at Johnson & Johnson's Patient Care
Division, and subsequently for the Consumer Products Division of Ortho
Pharmaceutical Corporation. Dr. Berg received a Ph.D in organic chemistry from
New York University in 1969 and subsequently spent four years at General Foods
in research.
The Company has agreed that, for a period of five years from the effective
date of the Registration Statement, the Underwriter may designate one person to
be elected to the Board of Directors of the Company or, in the alternative, the
Underwriter 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. Such designee may be an officer or
director of the Underwriter. If the Underwriter's designee is elected to the
Board
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<PAGE> 34
of Directors such designee shall sit on the Company's Audit Committee. The
Company has agreed to reimburse the designee of the Underwriter for his
reasonable out-of-pocket expenses incurred in connection with their attendance
at meetings of the Company's Board of Directors and the Underwriter's designee
shall receive the same compensation as the Company's other non-employee
directors for service as a director. The Underwriter has not designated an
individual to serve in such capacity. See "Underwriting."
BOARD COMPOSITION
The Company currently has authorized five directors. In April, 1997, the
Board approved subject to stockholder approval, an amendment to the Company's
Amended Certificate of Incorporation to provide for a classified Board of
Directors effective upon closing of this Offering. In accordance with the terms
of such amendments, the Company's Board of Directors will be divided into three
classes. Class A, will consist of two stockholders (Messrs. Haft and Scharf)
whose term shall expire at the Company's annual stockholder meeting of 1998.
Class B, will consist of two directors (Messrs. Stanton and Bryce) whose term
shall expire at the Company's annual stockholder's meeting of 1999. Class C
shall consist of one director, Charles Stein whose term shall expire at the
Company's annual stockholder meeting of 2000. At each annual meeting of
stockholders beginning with the 1998 annual meeting, the successors to directors
whose terms will then expire will be elected to serve from the time of election
and qualification until the third annual meeting following election and until
their successors have been duly elected and qualified. Any additional
directorships resulting from an increase in the number of directors will be
distributed among the three classes so that, as nearly as possible, such class
will consist of an equal number of directors. All stockholders of the Company's
Common Stock shall be able to vote in elections for the directors of each Class.
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. If a designee
of the Underwriter is elected to the Company's Board of Directors, such designee
will also serve as an outsider director on the Audit Committee. The Compensation
Committee (which, upon completion of this Offering, will consist of Messrs.
Stein, Stanton and Scharf) has responsibility for establishing and reviewing
employee compensation. The Stock Option Committee (which, upon completion of
this Offering, will consist of Messrs. Stein, Bryce and Haft) 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 November 30, 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 $125,000 upon the consummation of this Offering
together with such additional increases as the Company's Board of Directors,
in its sole discretion, from time to time determines are appropriate. The
Company recorded non-cash compensation charges of $130,000 for services
contributed by Mr. Stein from inception through February 28, 1997.
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<PAGE> 35
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 $125,000 together with such additional
increases as the Company's Board of Directors, in its sole discretion, from time
to time determines are appropriate. 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 as well
as for 36 months 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 1,300,000 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) 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, 805,000 options have been granted under the Plan.
ADVISORS
Mr. Walter Ford, on an as needed basis, will assist the Company's
management in developing potential clients. Mr. Ford has 46 years of experience
in the produce industry, including: (i) 25 years with Kroger Supermarkets with
whom he served in a variety of capacities including senior produce buyer for a
138 store district and Assistant Division Merchandiser in charge of field
merchandising; (ii) 4 years as Senior Produce Buyer for Schnuck Markets Inc.;
and (iii) most recently serving as Vice President-Produce of Bi-Lo Supermarkets
in Greenville, South Carolina. Ahold, a major global supermarket retailer, has
acquired seven U.S. regional supermarket chains, including Bi-Lo, Edwards, Tops
Markets, Giant Foods, Stop 'n Shop, Finast, and Pic-n-Pay, and has combined
their purchasing and marketing functions. Mr. Ford for many years directed all
these combined produce functions.
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<PAGE> 36
Mr. Elie Toledano has been engaged by the Company as an advisor to assist
the Company with the development of its testing protocols, marketing strategies
and research, as well as identifying the products with which Conserver 21(TM)
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(TM) in
laboratories around the world.
KEY EMPLOYEES
Dr. Guiwen Cheng, Ph.D had been engaged by the Company as an advisor to
assist the Company with research on, and testing and evaluation of, Conserver
21(TM) and was formally retained as Manager of Research and Development in April
1997. Dr. Cheng had been a research associate in the University of Florida
Horticultural Sciences Department since 1994 and, before that, held a similar
position with the University of California Davis, Department of Pomology. Dr.
Cheng has advanced degrees from two post-harvest technology academic centers
including an M.S. in Horticulture from the University of California, Davis and a
Ph.D. in Horticulture from Oregon State University. Dr. Cheng has published over
20 papers on various aspects of post-harvest horticultural technology.
COMPENSATION OF DIRECTORS
Following the consummation of this Offering, directors who are not employed
by the Company will be paid fees of $1,000 for each meeting a director attended
in person and reimbursement of any attendant personal expenses incurred in
connection therewith. In addition, all directors will be reimbursed for expenses
incurred on behalf of the Company. Directors of the Company are eligible for
grants of options under the Company's Stock Option Plan.
INDEMNIFICATION OF DIRECTORS AND OFFICERS AND RELATED MATTERS
The Company's Certificate of Incorporation limits, to the maximum extent
permitted by the Delaware General Corporation Law ("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 of 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.
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<PAGE> 37
CERTAIN TRANSACTIONS
Following the Company's incorporation in March 1996, the Company issued an
aggregate of 4,880,167 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 634,400 shares of Common Stock to 49 persons at a price of $5.00
per share, including two persons who had previously acquired shares of Common
Stock at $.001 per share and 30,000 shares to two adult children of James V.
Stanton, a director of the Company. Subsequently in April 1997, options to
purchase 500,000 shares of Common Stock were granted to these 49 persons on a
pro rata basis at an exercise price of $2.00 per share.
In March 1996, options to purchase 75,000 shares of Common Stock at an
exercise price of $.50 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 150,000 shares of Common Stock at a purchase price of
$5.00 per share were granted to each of Messrs. Haft and Stanton. In April 1997,
options to purchase 150,000 shares of Common Stock at a purchase price of $5.00
per share were granted to each of Messrs. Haft and Stanton and options to
purchase a total of 70,000 shares of Common Stock at an exercise price of $5.00
per share were granted to Michael Stanton, Vice President of the Company and
James Stanton's son. In September 1996 and April 1997, options to purchase a
total of 90,000 shares of Common Stock at an exercise price of $5.00 per share
were granted to Miles R. Greenberg, Senior Vice President and Chief Financial
Officer.
In October and November 1996, the Company repurchased, for an aggregate
repurchase price of $1,800,000, 1,366,667 of the 1,666,667 shares of Common
Stock originally acquired by Conserver Investments, SA (an affiliate of Groupe
Conserver) ("CI") in March 1996 in connection with the Groupe Conserver
Distribution Agreement. The remaining 300,000 shares of Common Stock were
transferred in November to two persons designated by the Company, each of whom
are non-affiliates of both the Company and Groupe Conserver or any of their
directors, officers or employees.
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, and Mr. Allet subsequently resigned as
a director of the Company.
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.
Since October, 1996, the Company has paid rent of $3,845 per month plus
utilities to Charles H. Stein for the use of his Manhattan suite as office space
for the Company. See "-- Facilities".
In April 1997, James Stanton advanced $500,000 to Agrotech on behalf of the
Company in fulfillment of a Company obligation under the Distribution Agreement.
The Company shall repay Mr. Stanton in full plus interest accrued at 10% per
annum out of the proceeds of the Offering. Charles Stein has agreed to
personally guarantee a portion of the Company's repayment obligation to Mr.
Stanton.
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<PAGE> 38
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Common Stock as of April 15, 1997 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 BENEFICIALLY
NUMBER OF OWNED
SHARES ---------------------------
NAME AND ADDRESS OF BENEFICIALLY BEFORE AFTER
BENEFICIAL OWNER(1) OWNED OFFERING(9) OFFERING(9)
- ------------------------------------------------------- ------------ ----------- -----------
<S> <C> <C> <C>
Charles H. Stein....................................... 1,000,000(2) 23.8% 15.7%
James V. Stanton....................................... 403,644(3) 8.9% 6.0%
Douglas C. Rice........................................ 25,000(4) * *
Miles R. Greenberg..................................... -- -- --
Jeffrey H. Berg........................................ -- -- --
Gerald M. Breslauer.................................... 50,000 1.2% *
Michael J. Stanton..................................... 26,822(5) * *
Brian J. Bryce......................................... 500,000(6) 11.9% 7.8%
Jay M. Haft............................................ 350,000(7) 7.8% 5.2%
201 S. Biscayne Boulevard, Suite 3000
Miami, FL 33133
Michael Jay Scharf..................................... 200,000(8) 4.8% 3.1%
704 Spinnakers Reach
Ponte Vedra, FL 32082
Jasmine Trustees Ltd................................... 500,000(6) 11.9% 7.8%
P.O. Box 675
St. Helier, Jersey Channel Islands
Dori Kallan, Daniel Kallan and 300,000 7.1% 4.7%
Joshua Kallan as joint tenants.......................
19999 Back Nine Drive
Boca Raton, FL 33498
The SES Family Investment and 550,000(9) -- 7.9%
Trading Partnership, L.P.............................
2859 Queens Courtyard Drive
Las Vegas, Nevada 89109
All executive officers and directors as a group (10 2,555,466 52.5% 36.3%
persons)
(2)(3)(4)(5)(6)(7) and (8)...........................
</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 20,000 shares held jointly by Mr. Stanton and his spouse and
323,644 shares of Common Stock underlying warrants and options exercisable
within 60 days of the date of the Prospectus. Does not include 30,000
shares owned by Mr. Stanton's adult children.
(4) Represents currently exercisable options to purchase 25,000 shares of the
Company's Common Stock at an exercise price of $.50 per share exercisable
after March 7, 1997.
(5) Includes 11,822 shares of Common Stock underlying options exercisable at $5
per share within 60 days of the date of this Prospectus.
(6) 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.
(7) Includes 300,000 shares of Common Stock underlying warrants and options
exercisable within 60 days of the date of this Prospectus.
(8) Includes 200,000 shares held by the Scharf Family 1989 Trust for the
benefit of Mr. Scharf and his family.
(9) Represents shares issuable upon the exercise of warrants to be issued to
this entity upon consummation of this Offering and the concurrent repayment
by the Company of $1,000,000 in principal amount of indebtedness to this
entity. Does not include 25,000 shares presently owned by such entity which
are to be surrendered to the Company contemporaneously with such repayment
of indebtedness and issuance of warrants. See Note D of Notes to Financial
Statements.
(10) Assumes consummation of the SES Reacquisition upon the consummation of the
Offering.
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<PAGE> 39
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. 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.
COMMON STOCK
As of February 28, 1997, there were 4,210,404 shares of Common Stock
outstanding. There will be 6,385,404 shares of Common Stock outstanding after
giving effect to the sale of the Shares 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 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
150,000, 150,000 and 25,000 shares of Common Stock to Jay M. Haft, James V.
Stanton and Gregory Pilkington, respectively, at an exercise price of $5.00 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 $5.00 per share.
The holders of the debentures have agreed 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 Securities for a period of twelve (12) months
following the effective date of the Registration Statement without the prior
written consent of the Underwriter and the Company. The Underwriter has
represented to Nasdaq that it will not release the Convertible Debenture holders
from such restriction prior to the lapse of the twelve (12) month period. 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, 550,000
warrants at an exercise price of $2.00 to SES and one of its affiliates. The
Company anticipates that it will record a non-cash compensation charge of
approximately $2,040,000 in connection with the value attributed to such
issuance. SES and its affiliate have also agreed unconditionally 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 securities
for a period of twenty-four (24) months following the effective date of the
Registration Statement. See "Management's Discussion and Analysis of Financial
Condition and Plan of Operation -- Liquidity and Capital Resources" and "Shares
Eligible for Future Sale."
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
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<PAGE> 40
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, and has agreed with the Underwriter to
refrain from so doing for twelve (12) months following the Offering, 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 125,000 shares of
Common Stock at an exercise price of $.50 and options to purchase 1,095,000
shares of Common Stock at an exercise price of $5.00 per share have been granted
to 9 persons. Of these options, 295,000 vest pro-rata over three years
commencing one year from the date of grant, 500,000 options granted in January
and April 1997 vest fully six months from the date of issuance, and 425,000 were
fully vested upon issuance in April 1997. The Company has recorded non-cash
compensation charges of $528,000 in connection with the issuance of the 125,000
options exercisable at $.50 per share and $670,000 for 925,000 of the options
exercisable at $5.00 per share. Of the total options granted, 805,000 were
granted under the Company's 1996 Stock Option Plan. See "Management --Stock
Option Plan" and Note J[5] and [6] of Notes to Financial Statements. In
addition, in April 1997, options to purchase 500,000 shares were granted to the
49 persons who purchased shares of Common Stock of the Company at $5.00 per
share during the period from April 1996 through November 1996. The Company will
record compensation charges of $1,020,000 in connection with the issuance of
such shares which are fully vested and exercisable at $2.00 per share.
SECTION 203 OF THE DGCL
The Company has elected to be bound by the provisions of Section 203 of the
DGCL which 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 AGENT
The transfer agent for the Common Stock is American Stock Transfer & Trust
Company, New York, New York.
ANNUAL AND OTHER REPORTS
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.
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<PAGE> 41
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this Offering, there has been no market for the Shares. No
predictions can be made with respect to the effect, if any, that public sales of
shares of the Common Stock or the availability of Shares for sale will have on
the market price of the Common Stock after this Offering. Sales of substantial
amounts of the Common Stock 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 or the ability of the Company to raise capital through sales of
its equity securities.
Upon completion of this Offering, the Company will have 6,385,404 shares of
Common Stock outstanding (after giving effect to the SES Reacquisition). Of
these shares, the 2,200,000 Shares sold in this Offering will be freely
tradeable without restriction or further registration under the Securities Act.
The remaining 4,185,404 shares and the $5.00 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 one year,
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 (63,854 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 two 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.
All officers and directors of the Company have agreed unconditionally 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 twenty seven (27) months following the effective
date of the Registration Statement. Certain holders of warrants have agreed
unconditionally 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
Securities for a period of twenty four (24) months following the effective date
of the Registration Statement. A group of Shareholders who have also received
Options to purchase common stock at $2 per share prior to the Offering have
agreed 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 their
securities for a period of eighteen (18) months following the effective date of
the Registration Statement. Other stockholders of the Company and certain
holders of options, warrants or other Securities convertible, exercisable or
exchangeable for shares of Common Stock have agreed 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 Underwriter,
except in connection with private transactions (not involving a public offering)
in which the transferee(s) agrees in writing to be similarly bound. The holders
of Convertible Debentures issued by the Company between September and November
of 1996 have agreed 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 Securities 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 Underwriter. Nasdaq has required that the Convertible Debenture holders
and the $2.00 per share Option Holders not be released from such restrictions
prior to the lapse of the respective twelve (12) month and eighteen (18) month
periods.
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<PAGE> 42
UNDERWRITING
Janssen/Meyers Associates, LP, as Underwriter, has 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 Underwriter on a firm commitment basis, the Shares at the initial offering
price.
The Underwriter is committed to purchase all the Shares of Common Stock
offered hereby, if any of such securities are purchased. The Underwriting
Agreement provides that the obligations of the Underwriter is subject to
conditions precedent specified therein.
The Company has been advised by the Underwriter that the Underwriter
proposes initially to offer the Securities to the public at the initial public
offering price set forth on the cover page of this Prospectus and to certain
dealers at such prices less concessions not in excess of $.2125 per Share. Such
dealers may reallow a concession not in excess of $.10625 per Share to certain
other dealers. After the commencement of the Offering, the public offering
prices, concession and reallowance may be changed by the Underwriter.
The Underwriter 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 Underwriter against certain
liabilities, including liabilities under the Securities Act, or to contribute to
payments that the Underwriter may be required to make. The Company has also
agreed to pay to the Underwriter a non-accountable expense allowance equal to 3%
of the gross proceeds derived from the sale of the Securities underwritten of
which $50,000 has been paid to date.
The Company has granted to the Underwriter an over-allotment option,
exercisable during the forty-five (45) day period from the date of this
Prospectus, to purchase up to an additional 330,000 shares of Common Stock at
the initial public offering price per Share, 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
Underwriter, for nominal consideration, warrants to purchase from the Company up
to 220,000 shares of Common Stock. The Underwriter's Warrants are initially
exercisable at a price of $8.25 per share of Common Stock 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
Underwriter. The Underwriter's Warrants provide for adjustment in the number of
shares of Common Stock issuable upon the exercise thereof and in the exercise
price of the Underwriter's Warrants as a result of certain events, including
subdivisions and combinations of the Common Stock. The Underwriter's Warrants
grant to the holders thereof certain rights of registration for the securities
issuable upon exercise thereof. The Underwriter may exercise its rights under
the Underwriter's Warrants by surrendering rights to acquire shares of Common
Stock of the Company having a fair market value on the date of the exercise,
equal to the cash exercise price of the Underwriter's Warrant.
In connection with this Offering the Company also has entered into an
agreement whereby it (i) agrees to employ the Underwriter as its Investment
Banker and Financial Consultant for three years for an aggregate fee of $100,000
payable at closing; and (ii) for a period of five years, agrees to pay the
Underwriter the fee equal to five percent of the amount up to $5 million and
2 1/2% of the excess, if any, over $5 million of the consideration in any
transaction consummated by the Company with a party introduced to the Company by
the Representative.
All officers and directors of the Company have unconditionally agreed 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 twenty seven (27) months following the effective
date of the Registration Statement. Certain holders of warrants have agreed
unconditionally 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
41
<PAGE> 43
interest in such Securities for a period of twenty four (24) months following
the effective date of the Registration Statement. A group of Shareholders who
have also received Options to purchase common stock at $2 per share prior to the
Offering have agreed 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 their securities for a period of eighteen (18) months following the
effective date of the Registration Statement. Other stockholders of the Company
and certain holders of options, warrants or other Securities convertible,
exercisable or exchangeable for shares of Common Stock have agreed 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. Certain holders of Convertible Debentures have agreed 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. Nasdaq has required that the Convertible Debenture holders
and the $2 per share Option Holders not be released from such restrictions until
the lapse of the respective twelve (12) month and eighteen (18) month periods.
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
Underwriter, 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 twelve (12) months following the effective date of the
Registration Statement.
The Company has also agreed that, for a period of five (5) years from the
effective date of the Registration Statement, the Underwriter may designate one
person to be elected to the Board of Directors of the Company or, in the
alternative, the Underwriter 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. Such designee may be
an officer or director of the Underwriter. The Company has agreed to reimburse
designees of the Underwriter for their reasonable out-of-pocket expenses
incurred in connection with their attendance of meetings of the Company's Board
of Directors to the same extent it reimburses its other directors for such costs
and shall pay such designee the same salary as it pays to other non-employee
directors. The Underwriter's designate, if elected to the Board of Directors,
shall sit on the Audit Committee 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
Shares have been determined by negotiation between the Company and the
Underwriter 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.
In connection with this Offering, certain Underwriters and selling group
members and their respective affiliates may engage in transactions that
stabilize, maintain or otherwise affect the market price of the Shares. Such
transactions may include stabilization transactions effected in accordance with
Rule 104 of Regulation M, pursuant to which such persons may bid for or purchase
Common Stock for the purpose of stabilizing their respective market prices. The
Underwriter also may create a short position for the account of the Underwriter
by selling more Shares in connection with the Offering than they are committed
to purchase from the Company and in such case may purchase Shares in the open
market following completion of the Offering to cover all or a portion of such
short position. The Underwriter may also cover all or a portion of such short
position by exercising the Underwriter's Over-allotment Options referred to
above. In addition, the Underwriter, may impose "penalty bids" under contractual
arrangements with the Underwriter whereby it may reclaim from an Underwriter (or
dealer participating in the Offering) for the account of other Underwriter,
42
<PAGE> 44
the selling concession with respect to Shares that are distributed in the
Offering but subsequently purchased for the account of the Underwriter in the
open market. Any of the transactions described in this paragraph may result in
the maintenance of the price of the Shares at a level above that which might
otherwise prevail in the open market. None of the transactions described in this
paragraph is required, and, if they are undertaken, they may be discontinued at
any time.
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. Goldstein & DiGioia LLP, New York, New York, has acted as counsel to
the Underwriter 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 Shares 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 Shares 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."
43
<PAGE> 45
[This page intentionally left blank]
<PAGE> 46
CONSERVER CORPORATION OF AMERICA
(A DEVELOPMENT STAGE COMPANY)
-INDEX -
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
REPORT OF INDEPENDENT AUDITORS..................................................... F-2
BALANCE SHEETS AS AT AUGUST 31, 1996 AND FEBRUARY 28, 1997 (UNAUDITED)............. F-3
STATEMENTS OF OPERATIONS FOR THE PERIOD FROM MARCH 6, 1996 (DATE OF INCORPORATION)
THROUGH AUGUST 31, 1996, FOR THE SIX MONTHS ENDED FEBRUARY 28, 1997 (UNAUDITED),
AND FOR THE PERIOD FROM MARCH 6, 1996 (DATE OF INCORPORATION) THROUGH FEBRUARY
28, 1997 (UNAUDITED)............................................................. F-4
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE PERIOD FROM MARCH 6, 1996
(DATE OF INCORPORATION) THROUGH AUGUST 31, 1996 AND FOR THE SIX MONTHS ENDED
FEBRUARY 28, 1997 (UNAUDITED).................................................... F-5
STATEMENTS OF CASH FLOWS FOR THE PERIOD FROM MARCH 6, 1996 (DATE OF INCORPORATION)
THROUGH AUGUST 31, 1996, FOR THE SIX MONTHS ENDED FEBRUARY 28, 1997 (UNAUDITED),
AND FOR THE PERIOD FROM MARCH 6, 1996 (DATE OF INCORPORATION) THROUGH FEBRUARY
28, 1997 (UNAUDITED)............................................................. F-6
NOTES TO FINANCIAL STATEMENTS...................................................... F-7
</TABLE>
F-1
<PAGE> 47
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 its cash flows
for the period from March 6, 1996 (date of incorporation) through August 31,
1996 in conformity with generally accepted accounting principles.
Richard A. Eisner & Company LLP
New York, New York
September 27, 1996
With respect to Notes A[1]-[5], E, H[2] and J
November 19, 1996
With respect to Note A[6]
April 9, 1997
F-2
<PAGE> 48
CONSERVER CORPORATION OF AMERICA
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
<TABLE>
<CAPTION>
AUGUST 31, FEBRUARY 28,
1996 1997
------------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash.................................... $2,403,588 $1,492,134
Advances to officers and employees...... 17,968 68,479
Note receivable (Note A[3])............. 258,300
Other current assets.................... 17,502 30,421
------------- -------------
Total current assets................. 2,439,058 1,849,334
Fixed assets, net (Notes B[2] and C)...... 4,378 7,764
Costs of public offering.................. 298,977
------------- -------------
TOTAL................................ $2,443,436 $2,156,075
============= =============
LIABILITIES
Current liabilities:
Return of subscription funds (Note
H[2])................................ $90,000
Due to officers and employees........... 3,839 $397
Notes payable -- current (net of
$186,247 discount) (Note J[1])....... 563,753
Accrued expenses........................ 75,317 149,599
Accrued interest........................ 30,000 120,000
------------- -------------
Total current liabilities............ 199,156 833,749
Notes payable (Note D).................... 1,000,000 1,000,000
------------- -------------
Total liabilities.................... 1,199,156 1,833,749
------------- -------------
Commitments and other matters (Note H)
STOCKHOLDERS' EQUITY
(Notes A, D, E and J)
Preferred stock, par value $.01, 5,000,000
shares authorized, none issued and
outstanding
Common stock, par value $.001, 30,000,000
shares authorized, 5,211,567 shares and
4,210,404 shares issued and outstanding
at August 31, 1996 and February 28, 1997
(unaudited), respectively............... 5,212 4,211
Subscriptions receivable.................. (2,741)
Additional paid-in capital................ 2,628,880 2,963,907
(Deficit) accumulated during the
development stage....................... (1,387,071) (2,645,792)
------------- -------------
Total stockholders' equity........... 1,244,280 322,326
------------- -------------
TOTAL................................ $2,443,436 $2,156,075
============= =============
</TABLE>
The accompanying notes to financial statements are an integral part hereof.
F-3
<PAGE> 49
CONSERVER CORPORATION OF AMERICA
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE
PERIOD FROM ENDED PERIOD FROM
MARCH 6, 1996 FEBRUARY 28, MARCH 6, 1996
(DATE OF 1997 (DATE OF
INCORPORATION) INCORPORATION)
THROUGH ------------- THROUGH
AUGUST 31, FEBRUARY 28,
1996 (UNAUDITED) 1997
------------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Compensation charges in connection with
issuance of options (Note E[2])......... $ 450,000 $ 223,000 $ 673,000
Compensation charges in connection with
issuance of warrants (Note E[1])........ 457,201 457,201
General and administrative expenses....... 458,611 849,888 1,308,499
------------- ------------- -------------
Operating (loss).......................... (1,365,812) (1,072,888) (2,438,700)
Interest expense, net of $8,741 and
$30,729 interest income in August and
February, respectively.................. 21,259 185,833 207,092
------------- ------------- -------------
NET (LOSS)................................ $ (1,387,071) $ (1,258,721) $ (2,645,792)
------------- ------------- -------------
Net (loss) per share of common stock...... $ (.32) $ (.26)
============= =============
Weighted average number of common shares
outstanding............................. 4,390,767 4,844,733
============= =============
</TABLE>
The accompanying notes to financial statements are an integral part hereof.
F-4
<PAGE> 50
CONSERVER CORPORATION OF AMERICA
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(NOTE E)
<TABLE>
<CAPTION>
DEFICIT
COMMON STOCK ACCUMULATED
PAR VALUE $.001 ADDITIONAL DURING THE
------------------------- SUBSCRIPTIONS PAID-IN DEVELOPMENT
SHARES AMOUNT RECEIVABLE CAPITAL STAGE TOTAL
--------- ------- ------------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Issuance of common
stock for cash of
$2,140 and
subscriptions in
March 1996........ 4,880,167 $4,881 $ (2,741) $ 2,140
Issuance of common
stock for cash
from April through
August 1996 ($5.00
per share)........ 331,400 331 $1,656,679 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
Compensation charge
in connection with
officer's
salary............ 65,000 65,000
Net (loss) for the
period from March
6, 1996 (date of
incorporation)
through August 31,
1996.............. $(1,387,071) (1,387,071)
--------- ------ ------------ --------- ---------- ----------
Balance -- August
31, 1996.......... 5,211,567 5,212 (2,741) 2,628,880 (1,387,071) 1,244,280
Repurchase and
cancellation of
shares originally
issued (Note
J[2])............. (1,366,667) (1,367) 1,367 (1,800,000) (1,800,000)
Shares issued and
treated as debt
discount.......... 62,504 63 312,437 312,500
Sale of common
stock ($5.00 per
share) from
September 1, 1996
to November 7,
1996.............. 303,000 303 1,514,697 1,515,000
Legal services
provided by
stockholder
without charge.... 32,600 32,600
Collection of
subscriptions
receivable........ 1,374 1,374
Legal services in
connection with
sale of common
stock............. (12,707) (12,707)
Compensation
charges in
connection with
issuance of
options to
consultants....... 223,000 223,000
Compensation charge
in connection with
officer's
salary............ 65,000 65,000
Net (loss) for the
period from
September 1, 1996
through February
28, 1997.......... (1,258,721) (1,258,721)
--------- ------ ------------ --------- ---------- ----------
BALANCE -- FEBRUARY
28, 1997
(UNAUDITED)....... 4,210,404 $4,211 $ 0 $2,963,907 $(2,645,792) $ 322,326
========= ====== ============ ========= ========== ==========
</TABLE>
The accompanying notes to financial statements are an integral part hereof.
F-5
<PAGE> 51
CONSERVER CORPORATION OF AMERICA
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE FOR THE
PERIOD FROM PERIOD FROM
MARCH 6, 1996 MARCH 6, 1996
(DATE OF (DATE OF
INCORPORATION) SIX MONTHS INCORPORATION)
THROUGH ENDED THROUGH
AUGUST 31, FEBRUARY 28, FEBRUARY 28,
1996 1997 1997
<S> <C> <C> <C>
-------------- ------------ --------------
(UNAUDITED) (UNAUDITED)
Cash flows from operating activities:
Net (loss)...................................... $ (1,387,071) $ (1,258,721) $ (2,645,792)
Adjustments to reconcile net (loss) to net cash
(used in) operating activities:
Depreciation and amortization................ 487 126,860 127,347
Compensation expense relating to officer's
salary..................................... 65,000 65,000 130,000
Compensation expense relating to stock
options and warrants....................... 907,201 223,000 1,130,201
Legal services provided by shareholder
without charge............................. 32,600 32,600
Changes in operating assets and liabilities:
(Increase) in advances to officers and
employees............................... (14,129) (50,511) (64,640)
(Increase) in other assets................. (17,502) (12,919) (30,421)
Increase in accrued expenses and other
liabilities............................. 105,317 160,840 266,157
-------------- ------------ --------------
Net cash (used in) operating
activities............................ (340,697) (713,851) (1,054,548)
-------------- ------------ --------------
Cash flows from investing activities:
Acquisition of fixed assets..................... (4,865) (3,993) (8,858)
Funds used for note receivable.................. (258,300) (258,300)
-------------- ------------ --------------
Net cash (used in) investing
activities............................ (4,865) (262,293) (267,158)
-------------- ------------ --------------
Cash flows from financing activities:
Subscriptions receivable........................ 1,374 1,374
Repurchase of shares of common stock............ (1,800,000) (1,800,000)
Cost of public offering......................... (298,977) (298,977)
Legal services provided in connection with sale
of common stock.............................. (12,707) (12,707)
Proceeds from notes payable..................... 1,000,000 750,000 1,750,000
Return of subscription funds.................... 90,000 (90,000) -- 0 --
Proceeds from sale of common stock.............. 1,659,150 1,515,000 3,174,150
-------------- ------------ --------------
Net cash provided by financing
activities............................ 2,749,150 64,690 2,813,840
-------------- ------------ --------------
NET INCREASE (DECREASE) IN CASH................... 2,403,588 (911,454) 1,492,134
Cash -- beginning of period....................... 2,403,588
-------------- ------------ --------------
CASH -- END OF PERIOD............................. $ 2,403,588 $ 1,492,134 $ 1,492,134
============== ============ ==============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest........ $ -- 0 -- $ -- 0 -- $ -- 0 --
============== ============ ==============
</TABLE>
The accompanying notes to financial statements are an integral part hereof.
F-6
<PAGE> 52
CONSERVER CORPORATION OF AMERICA
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED WITH RESPECT TO FEBRUARY 28, 1997 AND THE
PERIODS ENDED FEBRUARY 28, 1997)
(NOTE A) -- THE COMPANY:
[1] 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.
[2] In connection with the organization of the Company, 1,666,667 shares of
common stock were subscribed to by Conserver Investments, S.A., which together
with certain of its affiliates are referred to hereafter as the "Groupe
Conserver".
Subsequent to August 31, 1996, the Company in a series of negotiated
transactions repurchased 1,366,667 of such shares for an aggregate sum of
$1,800,000.
[3] In March, 1996 the Company entered into a distribution agreement with
certain of the Groupe Conserver entities for the exclusive marketing and
distribution rights to Conserver 21(TM) products in the United States and
Canada. Conserver 21(TM) products are designed to preserve foodstuffs and
flowers. Groupe Conserver had obtained such rights from Conserver XXI (see Note
A[4] below) in May 1995. The agreement was amended in October 1996. Upon
learning of a dispute between Conserver XXI and Groupe Conserver, which
threatened the Company's supply of Conserver 21(TM), the Company entered into an
agreement with Conserver Purchasing Corporation ("Purchasing"), an unaffiliated
Delaware corporation, whereby the Company, through Purchasing, would have been
able to acquire substantially identical marketing and distribution rights from
Conserver XXI in the event Groupe Conserver could not deliver the product. By
agreement between the Company and Purchasing dated October 9, 1996, and
subsequently amended on December 31, 1996, the Company agreed to lend Purchasing
up to $350,000 for the purpose of enabling Purchasing to acquire an inventory of
Conserver 21(TM), of which $328,550 had been advanced to Purchasing through
March 31, 1997. These loans, which are payable on demand, bear interest at a
rate of 8% per annum and are collateralized by a lien on Purchasing's inventory
of Conserver 21(TM). Due to the establishment of insolvency proceedings in
Brussels regarding Conserver Investments, S.A., the controlling entity of the
Groupe Conserver affiliates, and Groupe Conserver's loss of its rights from
Conserver XXI, the Company terminated its distribution agreement with Groupe
Conserver in March of 1997.
[4] In March 1997 the Company entered into the Distribution Agreement with
Agrotech 2000, S.L., ("Agrotech"), a company whose sole shareholder controlled
Conserver XXI, establishing the Company as the exclusive licensee of the right
to import, promote, distribute, market and otherwise commercially exploit
Conserver 21(TM) products in the United States and Canada through March 2022,
subject to extension. The Company also holds the option and a right of first
refusal to exercise such exclusive rights throughout the world. Pursuant to the
terms of the Distribution Agreement, if the Company fails to purchase a minimum
of $2,000,000 of Conserver 21(TM) products between April 1997 and April 1998, or
fails to meet the minimum annual purchase goals, when established, Agrotech may
sell Conserver 21(TM) to other customers in the United States and Canada. Such
loss of exclusivity to sell Conserver 21(TM) products may negatively impact the
Company's business.
Pursuant to the Distribution Agreement, Agrotech has the right to borrow up
to $1,000,000 from the Company as of May 1, 1997 and up to an additional
$500,000 commencing ninety days after the proposed initial public offering. In
connection with such rights, a director of the Company advanced $500,000 to
F-7
<PAGE> 53
CONSERVER CORPORATION OF AMERICA
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED WITH RESPECT TO FEBRUARY 28, 1997 AND THE
PERIODS ENDED FEBRUARY 28, 1997)
(NOTE A) -- THE COMPANY: (CONTINUED)
Agrotech on behalf of the Company. The Company intends to repay the advance and
interest thereon at 10% out of the proceeds of the initial public offering. The
President of the Company has agreed to personally guarantee a portion of such
advance.
[5] 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.
[6] In November 1996, the Board of Directors approved a 2.128874 for 1
stock split. In December 1996, the Board approved a 1.066194 for 1 stock split.
Subsequently in April 1997, the Board of Directors approved a reverse stock
split to cancel the effect of the aforementioned two stock splits. All of the
above splits have been retroactively reflected in the 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 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 $5.00 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.
F-8
<PAGE> 54
CONSERVER CORPORATION OF AMERICA
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED WITH RESPECT TO FEBRUARY 28, 1997 AND THE
PERIODS ENDED FEBRUARY 28, 1997)
(NOTE B) -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
[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.
[7] Interim financial information:
The financial information presented as of February 28, 1997 and for the six
months ended February 28, 1997 and for the period from March 6, 1996 (date of
incorporation) through February 28, 1997 is unaudited, but in the opinion of
management contains all adjustments (consisting of only normal recurring
adjustments) necessary for a fair presentation of such financial information.
Results of operations for interim periods are not necessarily indicative of
those to be achieved for full fiscal years.
(NOTE C) -- FIXED ASSETS:
Fixed assets are summarized as follows:
<TABLE>
<CAPTION>
AUGUST 31, FEBRUARY 28,
1996 1997
---------- ------------
<S> <C> <C>
(UNAUDITED)
Office equipment................................... $ 4,865 $ 8,858
Less accumulated depreciation...................... (487) (1,094)
------ ------
Balance.......................................... $ 4,378 $ 7,764
====== ======
</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 $6 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 to May 1996. The new
agreement provides for repayment of the note and accrued interest from proceeds
received upon the completion of an effective public offering. In addition, the
Company will issue warrants for the purchase of 550,000 shares of common stock
at $2.00 per share. The warrants are expected to be valued at approximately
$2,040,000 and charged to expense concurrent with the completion of the public
offering. Should the warrants be issued, 25,000 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.
F-9
<PAGE> 55
CONSERVER CORPORATION OF AMERICA
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED WITH RESPECT TO FEBRUARY 28, 1997 AND THE
PERIODS ENDED FEBRUARY 28, 1997)
(NOTE E) -- STOCKHOLDERS' EQUITY:
[1] Warrants:
In August 1996, the Company issued three-year warrants to purchase 325,000
shares of the Company's common stock at $5.00 per share. The warrants have been
valued at $457,201 in the accompanying financial statements.
[2] Options granted:
In March 1996, the Company granted options to consultants for the purchase
of 100,000 shares of common stock at $.50 per share. The options vest 1/3 on
each anniversary date of their issue. The Company has recorded compensation
expense of $450,000 from March 6, 1996 (date of incorporation) through August
31, 1996 in connection with the issuance of these options.
In August 1996, the Company granted options to an employee to purchase
35,000 shares of common stock at $5.00 per share. From September 1996 through
January 1997, the Company granted options to employees and consultants to
purchase 55,000 shares of common stock and 200,000 shares of common stock,
respectively, exercisable at $5.00 per share. The Company has recorded
compensation expenses of $145,000 for the six months ended February 28, 1997 in
connection with the options issued to consultants.
In January 1997, options to purchase 25,000 shares of common stock
originally issued at an exercise price of $5.00 were cancelled and reissued at
an exercise price of $.50. In connection with the cancellation and reissuance of
such options, a compensation charge of approximately $78,000 was recorded by the
Company for the six months ended February 28, 1997.
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>
<CAPTION>
AUGUST 31, FEBRUARY 28,
1996 1997
---------- ------------
<S> <C> <C>
(UNAUDITED)
Risk free interest rate................................. 6% 7%
Expected life........................................... 3 years 4 years
Expected volatility..................................... .3 .3
Dividend yield.......................................... .00 .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 $1,395,993 and $.32,
respectively, for the period ended August 31, 1996 and $1,278,403 and $.26,
respectively, for the six months ended February 28, 1997.
[3] Stock option plan:
In November 1996 and as later amended in December 1996 and April 1997, the
Company adopted a stock option plan. Under the plan, which authorizes the
granting of incentive stock options or nonincentive stock options, the maximum
number of shares of common stock for which options may be granted is 1,300,000
shares. As of the date hereof, 805,000 options have been granted under this
stock option plan.
(NOTE F) -- RELATED PARTY TRANSACTIONS:
The Company incurred approximately $75,000 and $104,000 in legal fees to a
related party from March 6, 1996 (date of incorporation) through August 31, 1996
and the six months ended February 28, 1997 (unaudited), respectively. In
addition, the Company received free legal services amounting to $32,600 which
F-10
<PAGE> 56
CONSERVER CORPORATION OF AMERICA
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED WITH RESPECT TO FEBRUARY 28, 1997 AND THE
PERIODS ENDED FEBRUARY 28, 1997)
(NOTE E) -- STOCKHOLDERS' EQUITY: (CONTINUED)
is included in the above legal fees for the six months ended February 28, 1997
(unaudited) from a related party, which was recorded as additional paid-in
capital.
(NOTE G) -- PROPOSED PUBLIC OFFERING:
The Company has signed a letter of intent with an underwriter with respect
to a proposed public offering for 2,200,000 shares of common stock at $5.00 per
share of the Company's securities. There is no assurance that such offering will
be consummated. In connection 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 Chief Executive 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 three-year noncompete
clause upon termination.
[2] Return of subscription funds:
Based on the Company's review of investors' subscription documents prior to
the acceptance and issuance of shares to such investors, 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 all $90,000 of such subscription amounts.
[3] Royalties:
The Distribution Agreement with Agrotech (Note A) requires the Company to
purchase a minimum of $2,000,000 of Conserver 21(TM) products between March 1997
and March 1998 and pay royalties of 4% of net revenues generated from the
commercial use of the product. If the Company fails to meet the required
minimum, the Company could lose exclusivity to sell Conserver 21(TM) products.
(NOTE I) -- INCOME TAXES:
The Company, for tax purposes, does not have any operations or net
operating loss, as its expenses are considered pre-operating, and accordingly
will be capitalized and amortized when operations commence.
(NOTE J) -- SUBSEQUENT EVENTS:
Subsequent to August 31, 1996, the Company entered into the following
transactions:
[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 $5.00 per share.
F-11
<PAGE> 57
CONSERVER CORPORATION OF AMERICA
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED WITH RESPECT TO FEBRUARY 28, 1997 AND THE
PERIODS ENDED FEBRUARY 28, 1997)
(NOTE J) -- SUBSEQUENT EVENTS: (CONTINUED)
In connection with the sale of the debentures, the Company issued 62,504
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 1,366,667 shares of its common stock for
$1,800,000 (Note A).
[3] The Company sold 303,000 shares of common stock for $1,515,000.
[4] Refunds due to subscribers were paid (Note H[2]).
[5] In April 1997, the Company issued four year options to purchase 805,000
shares of its common stock at $5.00 per share, of which 300,000 vest fully in
six months, 80,000 vest ratably over a three year period and 425,000 are fully
vested upon issuance. The Company will record compensation expense of
approximately $525,000 in connection with the issuance of the above options.
[6] Also in April 1997, the Company granted options to purchase 500,000
shares of its common stock at $2.00 per share to persons who purchased the
Company's common stock through private placements for $5.00 per share during the
period from April 1996 through November 1996. The Company will record
compensation expense of approximately $1,020,000 in connection with the issuance
of such options which are fully vested upon issuance.
[7] As described in Notes D, J[5], and J[6], aggregate compensation charges
of $3,585,000 relating to options issued to non-employees of the Company
subsequent to February 28, 1997 and warrants issued upon consummation of the
offering, is expected to be charged to operations.
F-12
<PAGE> 58
======================================================
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 THE
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....................... 15
Dividend Policy....................... 16
Capitalization........................ 17
Dilution.............................. 18
Selected Financial Data............... 19
Management's Discussion and Analysis
of Financial Condition and Plan of
Operation........................... 20
Business.............................. 22
Management............................ 31
Certain Transactions.................. 36
Principal Stockholders................ 37
Description of Securities............. 38
Shares Eligible for Future Sale....... 40
Underwriting.......................... 41
Legal Matters......................... 43
Experts............................... 43
Additional Information................ 43
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
2,200,000 SHARES OF
COMMON STOCK
--------------------
PROSPECTUS
--------------------
JANSSEN/MEYERS
ASSOCIATES L.P.
MAY 30, 1997
======================================================
<PAGE> 59
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 Janssen/Meyers Associates L.P. (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 non-accountable expense allowance.......................... 330,000
Payments to prior underwriter............................................ 50,000
Nasdaq listing fee....................................................... 10,000
Blue sky legal fees...................................................... 63,000
Printing and engraving expenses.......................................... 125,000
Legal fees............................................................... 280,000
Accounting fees.......................................................... 90,000
Transfer Agent fees...................................................... 3,500
Miscellaneous expenses................................................... 53,583.61
----------
$1,035,000
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under Section 145 of the Delaware General Corporation Law (the "DGCL"),
Conserver Corporation of America (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 to 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 the 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 DGCL 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 DGCL, as amended from time to
time, any and all persons whom it shall have power to indemnify under such
section.
II-1
<PAGE> 60
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 upon its
incorporation 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 Trustees 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 M. 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.
II-2
<PAGE> 61
From March through November 1996, the Company issued its Common Stock
through private offerings 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;
(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;
II-3
<PAGE> 62
(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;
(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 and December 1996, the Company effected a 2.128874-for-one
stock split and a 1.066194-for-one stock split, respectively, with respect to
the foregoing shares. In April 1997 the Company undertook a one for 2.269793
share consolidation with respect to the foregoing shares in order to eliminate
the effect of the aforementioned two stock splits.
Each purchaser named herein is an "accredited investor", as such term is
defined in Rule 501, promulgated under the Securities Act and purchased
Registrant's Common Stock or Convertible Debentures, as applicable, for
investment and not with a view to their public distribution. The certificates
evidencing the securities so purchased each bear an appropriate restrictive
legend to such effect. Exemption from registration under the Securities Act is
claimed for the sales of the aforementioned securities in reliance upon the
exemption afforded by Section 4(2) of the Securities Act for transactions not
involving a public offering. 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 Janssen/Meyers Associates,
L.P. representative of the several underwriters named therein (the "Underwriter")
3.1* Certificate of Incorporation of Registrant and amendments thereto
3.1.2** Amendment to Registrants Certificate of Incorporation
3.2* By-laws of Registrant
4.2* Form of certificate evidencing shares of Common Stock
</TABLE>
II-4
<PAGE> 63
<TABLE>
<S> <C>
4.3* Form of Underwriter's Warrant Agreement between Registrant and the Underwriter
(including form of Underwriter's 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
5.1* Opinion of Parker Duryee Rosoff & Haft A Professional Corporation
10.1* 1996 Stock Option Plan
10.1.2* Amended & Restated 1996 Stock Option Plan
10.2* Distribution Agreement dated March 1997 between Registrant and Agrotech 2000, S.L.
10.3* Form of Employment Agreement between Charles H. Stein and the Registrant
10.4* Form of $5.00 Warrant Agreement dated August 1996
10.5* Loan Agreement dated October 9, 1996 between Registrant and Conserver Purchasing
Corporation ("CPC"), as amended by Letter Agreement dated December 31, 1996 between
Registrant and CPC
10.6** Form of Selected Dealer Agreement
10.7** Form of Financial Consulting Agreement between the Underwriter and the Registrant
10.8** Letter from the Registrant to James Stanton regarding $500,000 loan to Agrotech
10.9** Letter from Charles Stein to James Stanton regarding Stein's guaranty of the
Registrant's obligation to repay Mr. Stanton's loan
11.1* Statement as to Computation of Per Share Earnings
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>
- ---------------
* Previously filed.
** Filed herewith.
(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.
II-5
<PAGE> 64
(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.
(5) To provide to the Underwriter at the closing specified in the
Underwriting Agreement, certificates in such denominations and registered
in such names as required by the Underwriter to permit prompt delivery to
each purchaser.
(6) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(7) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of Registrant pursuant to Item 14 of this Part II to the
Registration Statement, or otherwise, Registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Securities Act, and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by Registrant of expenses
incurred or paid by a director, officer or controlling person of Registrant
in the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification
by it is against the public policy as expressed in the Securities Act and
will be governed by the final adjudication of such issue.
II-6
<PAGE> 65
SIGNATURES
Pursuant to the requirements of the Securities Act, Registrant has duly
caused this Amendment to the Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of New York, State of
New York, on the 30th day of May, 1997.
CONSERVER CORPORATION OF AMERICA
By: /s/ CHARLES H. STEIN
------------------------------------
Charles H. Stein
President
Pursuant to the requirements of the Securities Act, this Amendment to the
Registration Statement was signed by the following persons in the capacities and
on the dates stated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------- --------------------------------------- ---------------
<C> <S> <C>
* Chairman of the Board, May 30, 1997
- ------------------------------------- President and Chief Executive Officer
Charles H. Stein (Principal Executive Officer)
* Director May 30, 1997
- -------------------------------------
Brian J. Bryce
* Director May 30, 1997
- -------------------------------------
Jay M. Haft
* Director May 30, 1997
- -------------------------------------
Michael Jay Scharf
* Director May 30, 1997
- -------------------------------------
James V. Stanton
* Senior Vice President -- Finance, May 30, 1997
- ------------------------------------- Treasurer and Chief Financial Officer
Miles R. Greenberg (Principal Accounting Officer)
</TABLE>
- ---------------
* Charles H. Stein, pursuant to Powers of Attorney (executed by each of the
officers and directors listed above and filed with the Securities and Exchange
Commission), by signing his name hereto does hereby sign and execute this
Amendment to the Registration Statement on behalf of the persons referenced
above.
/s/ CHARLES H. STEIN
--------------------------------------
Charles H. Stein
May 30, 1997
II-7
<PAGE> 66
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION PAGE
- --------- ----------------------------------------------------------------------- ------------
<C> <S> <C>
1.1** Form of Underwriting Agreement between Registrant and Janssen/Meyers
Associates L.P., (the "Underwriter")...................................
3.1* Certificate of Incorporation and amendments thereto of Registrant......
3.1.2** Amendment to Registrant's Certificate of Incorporation.................
3.2* By-laws of Registrant..................................................
4.2* Form of certificate evidencing shares of Common Stock..................
4.3** Form of Underwriter's Warrant Agreement between Registrant and the
Underwriter (including form of Underwriter's 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..................
5.1* Opinion of Parker Duryee Rosoff & Haft A Professional Corporation......
10.1* 1996 Stock Option Plan.................................................
10.1.2* Amended & Restated 1996 Stock Option Plan..............................
10.2* Distribution Agreement dated October 9, 1996 between Registrant and
Agrotech 2000, S.L. ...................................................
10.3* Form of Employment Agreement between Charles H. Stein and the
Registrant.............................................................
10.4* Form of $5.00 Warrant Agreement dated August 1996......................
10.5* Loan Agreement dated October 9, 1996 between Registrant and Conserver
Purchasing Corporation ("CPC"), as amended by Letter Agreement dated
December 31, 1996 between Registrant and CPC...........................
10.6** Form of Selected Dealer Agreement......................................
10.7** Form of Financial Consulting Agreement between Registrant and
Underwriter............................................................
10.8** Letter from the Registrant to James Stanton regarding $500,000 loan to
Agrotech
10.9** Letter from Charles Stein to James Stanton regarding Stein's guaranty
of the Registrant's obligation to repay Mr. Stanton's loan.............
11.1* Statement as to Computation of Per Share Earnings......................
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>
- ---------------
* Previously filed.
** Filed herewith.
<PAGE> 1
EXHIBIT 1.1
2,200,000 Shares of Common Stock
of
CONSERVER CORPORATION OF AMERICA
UNDERWRITING AGREEMENT
New York, New York
1997
Janssen/Meyers Associates, L.P.
17 State Street
New York, New York 10004
Ladies and Gentlemen:
Conserver Corporation of America, a Delaware corporation (the
"Company"), confirms its agreement with Janssen/Meyers Associates, L.P. ("JMA"),
with respect to the sale by the Company and the purchase by the Underwriter, of
2,200,000 shares of the Company's common stock, par value $.001 per share
("Common Stock") and with respect to the grant by the Company to the
Underwriter, acting of the option described in Section 2(b) hereof to purchase
all or any part of 330,000 additional shares for the purpose of covering
over-allotments, if any. The aforesaid 2,200,000 shares of Common Stock (the
"Firm Securities") and together with all or any part of the 330,000 additional
shares of Common Stock subject to the overallotment option described in Section
2(b) hereof (the "Overallotment Securities") are hereinafter collectively
referred to as the "Securities". The Company also proposes to issue and sell to
the Underwriter, an option (the "Underwriter's Purchase Option") pursuant to the
Underwriter's Purchase Option Agreement (the "Underwriter's Purchase Option
Agreement") for the purchase of an aggregate of 220,000 additional shares of
Common Stock (the "Underwriter's Option Shares"). The Securities, the
Underwriter's Purchase Option Agreement and Underwriter's Option Shares are more
fully described in the Registration Statement (as defined in Subsection 1(a)
hereof) and the Prospectus (as defined in Subsection 1(a)
<PAGE> 2
hereof) referred to below. Unless the context otherwise requires, all references
to the "Company" shall include all presently existing subsidiaries and any
entities acquired by the Company on or prior to the Closing Date (defined in
Subsection 2(c) hereof). All representations, warranties and opinions of counsel
required hereunder shall cover any such subsidiaries and acquired entities taken
as a whole.
1. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, each of the Underwriter as of the
date hereof, and as of the Closing Date and any Overallotment Closing Date (as
defined in Subsection 2(c) hereof), if any, as follows:
(a) The Company has filed with the Securities and Exchange
Commission (the "Commission") a registration statement, and an amendment or
amendments thereto, on Form S-1 (No. 333- 16571) including any related
preliminary prospectus (each a "Preliminary Prospectus"), for the registration
of the Securities under the Securities Act of 1933, as amended (the "Act"),
which registration statement and any amendment or amendments have been prepared
by the Company in conformity with the requirements of the Act and the rules and
regulations of the Commission under the Act. Following execution of this
Agreement, the Company will promptly file (i) if the Registration Statement has
been declared effective by the Commission, (A) a Term Sheet (as defined in the
Rules and Regulations (as hereinafter defined)) pursuant to Rule 434 under the
Act or (B) a Prospectus under Rules 430A and/or 424(b) under the Act, in either
case in form satisfactory to the Underwriter or (ii) in the event the
registration statement has not been declared effective, a further amendment to
said registration statement in the form heretofore delivered to the Underwriter
and will not, before the registration statement becomes effective, file any
other amendment thereto unless the Underwriter shall have consented thereto
after having been furnished with a copy thereof. Except as the context may
otherwise require, such registration statement, as amended, on file with the
Commission at the time the registration statement becomes effective (including
the prospectus, financial statements, schedules, exhibits and all other
documents filed as a part thereof and all information deemed to be a part
thereof as of such time pursuant to paragraph (b) of Rule 430A of the Rules and
Regulations)(as hereinafter defined), 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 Rules and 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.
3
<PAGE> 3
(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 thereof and no proceedings
for a stop order have been instituted or are pending or, to the best knowledge
of the Company, threatened. Each of the Preliminary Prospectus, the Registration
Statement and the Prospectus at the time of filing thereof conformed in all
material respects with the requirements of the Act and the Rules and
Regulations, and neither the Preliminary Prospectus, the Registration Statement
nor the Prospectus at the time of filing thereof, except for representations
made therein regarding the exclusive distributor status of Groupe Conserver made
in reliance on information received by the Company from Groupe Conserver and
Conserver XXI, contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein and necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, except that this representation and warranty does not apply to
statements made or statements omitted in reliance upon and in conformity with
written information furnished to the Company with respect to the Underwriter by
or on behalf of the Underwriter expressly for use in such Preliminary
Prospectus, Registration Statement or Prospectus.
(c) When the Registration Statement becomes effective and at all
times subsequent thereto up to the Closing Date and each Overallotment Closing
Date (as hereinafter defined) and during such longer period as the Prospectus
may be required to be delivered in connection with sales by the Underwriter or a
dealer, the Registration Statement and the Prospectus will contain all material
statements which are required to be stated therein in compliance with the Act
and the Rules and Regulations, and will in all material respects conform to the
requirements of the Act and the Rules and Regulations; neither the Registration
Statement, nor any amendment thereto, at the time the Registration Statement or
such amendment is declared effective under the Act, 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, not misleading, and
the Prospectus at the time the Registration Statement becomes effective, at the
Closing Date and at any Overallotment Closing Date, will not contain an untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading; provided, however, that this representation and
warranty does not apply to statements made or statements omitted in reliance
upon and in conformity with information supplied to the Company in writing by or
on behalf of the Underwriter expressly for use in the Registration Statement or
Prospectus or any amendment thereof or supplement thereto.
(d) The Company has been duly organized and is now, and at the
Closing Date and any Overallotment Closing Date will be,
4
<PAGE> 4
validly existing as a corporation in good standing under the laws of the State
of Delaware. The Company does not own, directly or indirectly, an interest in
any corporation, partnership, trust, joint venture or other business entity;
provided, that the foregoing shall not be applicable to the investment of the
net proceeds from the sale of the Securities in short-term, low-risk investments
as set forth under "Use of Proceeds" in the Prospectus except to the extent that
any failure of the Company to comply with the foregoing does not have a material
adverse effect on the Company. The Company is duly qualified to do business and
in good standing as a foreign corporation in each jurisdiction in which its
ownership or leasing of its properties or the character of its operations
require such qualification to do business, except where the failure to so
qualify would not have a material adverse effect on the Company. 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 having jurisdiction over
environmental or similar matters), to own or lease its properties and conduct
its business as described in the Prospectus except where the failure to comply
would not have a material adverse effect upon the Company; 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 except where the failure to comply
would not have a material adverse effect upon the Company; 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, business affairs,
position, prospects, value, operation, properties, business or results of
operation of the Company. The disclosures, if any, 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
necessary to make the statements contained therein not misleading in light of
the circumstances in which they were made.
(e) The Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus under the caption "Capitalization"
and will have the adjusted capitalization set forth therein on the Closing Date,
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 the
5
<PAGE> 5
Company to issue any capital stock, rights, warrants, options or other
securities, except for this Agreement and as otherwise described in the
Prospectus. The Securities, the Underwriter's Purchase Option and the
Underwriter's Option Shares 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; 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 to subscribe for or purchase securities. The Securities, the
Underwriter's Purchase Option and the Underwriter's Option Shares to be issued
and sold by the Company hereunder, and upon payment therefor, are not and will
not be subject to any preemptive or other similar rights of any stockholder to
subscribe for or purchase securities, have been duly authorized and, when
issued, paid for and delivered in accordance with the terms hereof and thereof,
will be validly issued, fully paid and non-assessable and will conform to the
descriptions 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, issuance and sale of the Securities,
the Underwriter's Purchase Option and the Underwriter's Option Shares has been
duly and validly taken; and the certificates, if any, representing the
Securities and the Underwriter's Option Shares will be in due and proper form.
Upon the issuance and delivery pursuant to the terms hereof of the Securities to
be sold to the Underwriter by the Company hereunder, the Underwriter will
acquire good and marketable title to such Securities free and clear of any lien,
charge, claim, encumbrance, pledge, security interest, defect or other
restriction or equity of any kind whatsoever.
(f) The financial statements of the Company, together with the
related notes and schedules thereto, included in the Registration Statement, the
Preliminary Prospectus and the Prospectus fairly present the financial position
and the results of operations of the Company at the respective dates and for the
respective periods to which they apply; and such financial statements have been
prepared in conformity with generally accepted accounting principles and the
Rules and Regulations, consistently applied throughout the periods involved.
There has been no material adverse change or development involving a prospective
change in the condition, financial or otherwise, or in the earnings, business
affairs, position, prospects, value,
6
<PAGE> 6
operation, properties, business, or results of operation of the Company, whether
or not arising in the ordinary course of business, since the dates of the
financial statements included in the Registration Statement and the Prospectus
and the outstanding debt, the property, both tangible and intangible, and the
business of the Company, conform in all material respects to the descriptions
thereof contained in the Registration Statement and in the Prospectus.
(g) Richard A. Eisner & Company, LLP, whose report is filed with the
Commission as a part of the Registration Statement, is an independent certified
public accountant as required by the Act and the Rules and Regulations.
(h) 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 taxes payable under Chapters 21 through 24 of the Internal Revenue Code of
1986 (the "Code"), (ii) has furnished all tax and information returns it is
required to furnish pursuant to the Code, and has established adequate reserves
for such taxes which are not due and payable, and (iii) does not have knowledge
of any tax deficiency or claims outstanding, proposed or assessed against it.
(i) The Company maintains insurance, which is in full force and
effect, of the types and in the amounts which it reasonably believes to be
adequate for its business, including, but not limited to, personal injury and
product liability insurance covering all personal and real property owned or
leased by the Company against fire, theft, damage and all risks customarily
issued against.
(j) Except as disclosed in the Prospectus, there is no action, suit,
proceeding, inquiry, investigation, litigation or governmental proceeding
(including, without limitation, those having jurisdiction over environmental or
similar matters), domestic or foreign, pending or to the knowledge of the
Company threatened against (or circumstances that may give rise to the same), or
involving the properties or business of the Company which: (i) questions the
validity of the capital stock of the Company or this Agreement or of any action
taken or to be taken by the Company pursuant to or in connection with this
Agreement; (ii) is required to be disclosed in the Registration Statement which
is not so disclosed (and such proceedings as are summarized in the Registration
Statement are accurately summarized in all respects); or (iii) might materially
affect the condition, financial or otherwise, or the earnings, business affairs,
position, prospects, value, operation, properties, business or results of
operations of the Company.
(k) The Company has full legal right, power and authority to enter
into this Agreement, the
7
<PAGE> 7
Underwriter's Purchase Option Agreement, the Consulting Agreement (as described
in Section 4(x) hereof) and to consummate the transactions provided for in such
agreements; and this Agreement, the Underwriter's Purchase Option Agreement and
the Consulting Agreement have each been duly authorized, executed and delivered
by the Company. Each of this Agreement, the Underwriter's Purchase Option
Agreement and the Consulting Agreement, constitutes a legally valid and binding
agreement of the Company, subject to due authorization, execution and delivery
by the Underwriter, 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). Neither the
Company's execution or delivery of this Agreement, the Underwriter's Purchase
Option Agreement, or the Consulting Agreement, its performance hereunder and
thereunder, its consummation of the transactions contemplated herein and
therein, nor 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 material breach or
violation of any of the terms or provisions of, or constitutes or will
constitute a material default under, or result in the creation or imposition of
any material 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 material
license, contract, indenture, mortgage, deed of trust, voting trust agreement,
stockholders agreement, note, loan or credit agreement or any other agreement or
instrument to which the Company is a party or by which the Company is bound or
to which any of its properties or assets (tangible or intangible) is or may be
subject; or (iii) any statute, judgment, decree, order, rule or regulation
applicable to the Company of any arbitrator, court, regulatory body or
administrative agency or other governmental agency or body (including, without
limitation, those having jurisdiction over environmental or similar matters),
domestic or foreign, having jurisdiction over the Company or any of its
activities or properties.
(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 performance by the Company of this Agreement and
the transactions contemplated hereby, except such as have been or may be
obtained under the Act or may be required
8
<PAGE> 8
under state securities or Blue Sky laws in connection with (i) the Underwriter's
purchase and distribution of the Firm Securities and Overallotment Securities to
be sold by the Company hereunder; or (ii) the issuance and delivery of the
Underwriter's Purchase Option or the Underwriter's Option Shares.
(m) All executed agreements or copies of executed agreements
(whether electronically scanned or otherwise) filed as exhibits to the
Registration Statement to which the Company is a party or by which the Company
may be bound or to which any of its assets, properties or businesses may be
subject have been duly and validly authorized, executed and delivered by the
Company, and constitute legally valid and binding agreements of the Company,
enforceable against it in accordance with their respective terms, except to the
extent there is no material adverse effect upon the Company. The descriptions
contained in the Registration Statement of contracts and other documents are
accurate in all material respects and fairly present the information required to
be shown with respect thereto by the Rules and Regulations and there are no
material contracts or other documents which are required by the Act or the Rules
and Regulations 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 materially or substantially
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 in any material amount; (ii) entered into any
transaction other than in the ordinary course of business; (iii) declared or
paid any dividend or made any other distribution on or in respect of its capital
stock; or (iv) made any changes in capital stock, material changes in debt (long
or short term) or liabilities other than in the ordinary course of business; or
(v) made any material changes 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
material term, covenant or condition of any license, contract, indenture,
mortgage, installment sales agreement, lease, deed of trust, voting trust
agreement, stockholders agreement, note, loan or credit agreement, or any other
agreement or instrument evidencing an obligation for borrowed money, or any
other agreement or instrument to which the Company is a party or by which any of
the Company may be bound or to which any of its property or assets (tangible or
intangible)
9
<PAGE> 9
of the Company is subject or affected except where such default does not, and
will not, have a material adverse effect upon the Company.
(p) The Company has generally enjoyed a satisfactory
employer-employee relationship with its employees and is in compliance in all
material respects with all federal, state, local, and foreign laws and
regulations respecting employment and employment practices, terms and conditions
of employment and wages and hours.
(q) Since its inception, the Company has not incurred any liability
arising under or as a result of the application of the provisions of the Act.
(r) Except as disclosed in the Prospectus, the Company does not
presently maintain, sponsor or contribute to, and never has maintained,
sponsored or contributed 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"). Except as disclosed in the Prospectus, 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.
(s) The Company is not in violation in any material respect of any
domestic or foreign laws, ordinances or governmental rules or regulations to
which it is subject.
(t) Except for rights of SES Family Investment and Trading
Partnership LP and Gary Agranoff no holders of any securities of the Company or
of any options, warrants or other convertible or exchangeable securities of the
Company exercisable for or convertible or exchangeable for securities of the
Company have the right to include any securities issued by the Company in the
Registration Statement or any registration statement to be filed by the Company
or to require the Company to file a registration statement under the Act.
(u) Neither the Company, nor, to the Company's best knowledge after
due inquiry, any of its employees, directors, stockholders or affiliates (within
the meaning of the Rules and Regulations) has taken, directly or indirectly, any
action designed to or which has constituted or which might reasonably be
expected to cause or result in, under the Exchange Act, or otherwise,
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Securities or otherwise.
10
<PAGE> 10
(v) Except as described in the Prospectus, none of the patents,
patent applications, trademarks, service marks, trade names and copyrights, or
licenses and rights to the foregoing presently owned or held by the Company is
in dispute or are in any conflict with the right of any other person or entity
within the Company's current area of operations nor has the Company received
notice of any of the foregoing. The Company to its knowledge: (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 of any person, corporation or other entity under or with respect to any of
the foregoing; and (ii) except as set forth in the Prospectus, is not obligated
or under any liability whatsoever to make any payments by way of royalties, fees
or otherwise to any owner or licensee of, or other claimant to, any patent,
trademark, service mark trade name, copyright, know-how, technology or other
intangible asset, with respect to the use thereof or in connection with the
conduct of its business or otherwise.
(w) Except as disclosed in the Prospectus, the Company has an
unrestricted license to market and distribute the Conserver 21 product, free and
clear of and without violating any right, lien, or claim of others, including
without limitation, Conserver XXI and/or Groupe Conserver.
(x) Subject to the ownership rights of Agrotech 2000 S.L. in and to
the Conserver 21 product and related patents and technology, the Company has
taken reasonable security measures to protect the secrecy, confidentiality and
value of all the material trade secrets, trademarks, know-how (including
unpatented and/or unpatentable proprietary and confidential information)
technical data and information ("Intellectual Property") material to its
operations.
11
<PAGE> 11
(y) The Company has good and marketable title to, or valid and
enforceable leasehold estates in, all items of real and personal property 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 liens for taxes or assessments not yet due and
payable.
(aa) On or before the effective date of the Registration Statement,
the Company shall cause to be duly executed legally binding and enforceable
agreements pursuant to which (i) each of the Company's officers and directors,
has agreed not to, directly or indirectly, offer to sell, sell, grant any option
for the sale of, assign, transfer, pledge, hypothecate or otherwise encumber any
of their shares of Common Stock or other securities (either pursuant to Rule 144
of the Rules and Regulations or otherwise) or dispose of any beneficial interest
therein for a period of not less than 27 months, (ii) SES Family Investment and
Trading Partnership L.P. and Gary Agronoff have agreed not to, directly or
indirectly, offer to sell, sell, grant any option for the sale of, assign,
transfer, pledge, hypothecate or otherwise encumber any of their shares of
Common Stock or other securities (either pursuant to Rule 144 of the Rules and
Regulations or otherwise) or dispose of any beneficial interest therein for a
period of not less than 24 months, (iii) each of the persons receiving options
to purchase additional shares at $2.00 per share as described in the Prospectus,
has agreed not to, directly or indirectly, offer to sell, sell, grant any option
for the sale of, assign, transfer, pledge, hypothecate or otherwise encumber any
of their shares of Common Stock or their securities (either pursuant to Rule 144
of the Rules and Regulations or otherwise) or dispose of any beneficial interest
therein for a period of not less than 18 months without the prior written
consent of the Underwriter and (iv) all other persons have agreed not to,
directly or indirectly, offer to sell, sell, grant any option for the sale of,
assign, transfer, pledge, hypothecate or otherwise encumber any of their shares
of Common Stock or other securities (either pursuant to Rule 144 of the Rules
and Regulations or otherwise) or dispose of any beneficial interest therein for
a period of not less than 12 months. The Company will cause the Transfer Agent,
as defined below, to mark an appropriate legend on the face of stock
certificates representing all of such shares of Common Stock.
(bb) The Company has not incurred any liability and there are no
arrangements or understandings for services in the nature of a finder's or
origination fee with respect to the sale of the Securities or any other
arrangements, agreements, understandings, payments or issuances with respect to
the Company or any of its officers, directors, employees or affiliates that may
adversely affect the Underwriter's
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compensation, as determined by the National Association of Securities Dealers,
Inc. ("NASD").
(cc) The Firm Securities have been approved for quotation on the
Nasdaq SmallCap Market of the Nasdaq Stock Market, Inc. subject to official
notice of issuance.
(dd) 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
materially adverse effect on the assets, business or operations of the Company;
and (c) if not continued in the future, might adversely affect the assets,
business, 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.
(ee) Except as set forth in the Prospectus, no officer, director or
stockholder of the Company, or any "affiliate" or "associate" (as these terms
are defined in Rule 405 promulgated under the Rules and Regulations) of any such
person or entity or the Company, has or has had, either directly or indirectly,
(i) a material 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, except with respect to the beneficial ownership
of not more than 1% of the outstanding shares of capital stock of any
publicly-held entity; or (ii) a beneficial interest in any material 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 principal stockholder of the
Company, or any affiliate or associate of any such person or entity.
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<PAGE> 13
(ff) Any certificate signed by any officer of the Company and
delivered to the Underwriter or to the Underwriter's counsel shall be deemed a
representation and warranty by the Company to the Underwriter as to the matters
covered thereby.
(gg) The Company has entered into an employment agreement with
Charles Stein as described in the Prospectus. The Underwriter acknowledges that
the Company will not be obtaining any key-man life insurance policy with respect
to Mr. Stein.
(hh) No securities of the Company have been sold by the Company
since its inception, except as disclosed in Part II of the Registration
Statement.
(ii) The minute books of the Company have been made available to
Underwriter's counsel and contain a complete summary of all meetings and actions
of the Board of Directors and Stockholders of the Company since March, 1995.
(jj) Except as disclosed in writing to the Underwriter in a
certificate dated May 12, 1997, no officer, or director or to the Company's
knowledge stockholder of the Company has any affiliation or association with any
member of the NASD.
2. Purchase, Sale and Delivery of the Securities and
Agreement to Issue Underwriter's Purchase Option.
(a) On the basis of the representations, warranties, covenants and
agreements herein contained, but subject to the terms and conditions herein set
forth, the Company agrees to sell to the Underwriter, and the Underwriter agrees
to purchase from the Company, at the price per Security set forth below, the
Firm Securities.
(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
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<PAGE> 14
hereby grants an option to the Underwriter to purchase up to an additional
330,000 shares of Common Stock. The option granted hereby will expire 45 days
after the date of this Agreement, and may be exercised in whole or in part from
time to time only for the purpose of covering over-allotments which may be made
in connection with the offering and distribution of the Firm Securities upon
notice by the Underwriter to the Company setting forth the number of
Overallotment Securities as to which the Underwriter is then exercising the
option and the time and date of payment and delivery for such Overallotment
Securities. Any such time and date of delivery shall be determined by the
Underwriter, but shall not be later than seven full business days after the
exercise of said option, nor in any event prior to the Closing Date, as defined
in paragraph (c) below, unless otherwise agreed to between the Underwriter and
the Company. Nothing herein contained shall obligate the Underwriter to make any
over-allotments. No Overallotment Securities shall be delivered unless the Firm
Securities shall be simultaneously delivered or shall theretofore have been
delivered as herein provided.
(c) Payment of the purchase price for, and delivery of certificates
for, the Firm Securities shall be made at the offices of the Underwriter at 17
State Street, 17th Floor, New York, New York 10004 or at such other place as
shall be designated by the Underwriter. Such delivery and payment shall be made
at 10:00 a.m. (New York City time) on June __, 1997 or at such other time and
date as shall be designated by the Underwriter but not less than three (3) nor
more than five (5) business days after the effective date of the Registration
Statement (such time and date of payment and delivery being hereafter called
"Closing Date"). In addition, in the event that any or all of the Overallotment
Securities are purchased by the Underwriter, payment of the purchase price for,
and delivery of certificates for such Overallotment Securities shall be made at
the above-mentioned office or at such other place and at such time (such time
and date of payment and delivery being hereinafter called "Overallotment Closing
Date") as shall be agreed upon by the Underwriter and the Company on each
Overallotment Closing Date as specified in the notice from the Underwriter to
the Company. Delivery of the certificates for the Firm Securities and the
Overallotment Securities, if any, shall
15
<PAGE> 15
be made to the Underwriter against payment by the Underwriter of the
purchase price for the Firm Securities and the Overallotment Securities, if any,
to the order of the Company as the case may be by certified check in New York
Clearing House funds, certificates for the Firm Securities and the Overallotment
Securities, if any, shall be in definitive, fully registered form, shall bear no
restrictive legends and shall be in such denominations and registered in such
names as the Underwriter may request in writing at least two (2) business days
prior to Closing Date or the relevant Overallotment Closing Date, as the case
may be. The certificates for the Firm Securities and the Overallotment
Securities, if any, shall be made available to the Underwriter at the
above-mentioned office or such other place as the Underwriter may designate for
inspection, checking and packaging no later than 9:30 a.m. on the last business
day prior to Closing Date or the relevant Overallotment Closing Date, as the
case may be.
The purchase price of the Securities to be paid by each of the
Underwriter, severally and not jointly, to the Company for the Securities
purchased under Clauses (a) and (b) above will be $4.50 per Share (which price
is net of the Underwriter's discount and commissions). The Company shall not be
obligated to sell any Securities hereunder unless all Firm Securities to be sold
by the Company are purchased hereunder. The Company agrees to issue and sell the
Securities to the Underwriter in accordance herewith.
(d) On the Closing Date, the Company shall issue and sell to the
Underwriter, the Underwriter's Purchase Option at a purchase price of $220.00
which Underwriter's Purchase Option shall entitle the holders thereof to
purchase an aggregate of 220,000 shares of Common Stock. The Underwriter's
Purchase Option shall be exercisable for a period of four (4) years commencing
one (1) year from the effective date of the Registration Statement at an initial
exercise price equal to one hundred sixty-five percent (165%) of the initial
public offering price of the Firm securities. The Underwriter's Purchase Option
Agreement and form of Purchase Option Certificate shall be substantially in the
form filed as an Exhibit to the Registration Statement. Payment for the
Underwriter's Purchase Option shall be made on the Closing Date. The Company has
reserved and shall continue to reserve a sufficient number of Shares for
issuance upon exercise of the Underwriter's Purchase Option.
3. Public Offering of the Securities. As soon after the Registration
Statement becomes effective and as the Underwriter deems advisable, but in no
event more than five
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<PAGE> 16
(5) business days after such effective date, the Underwriter shall make a public
offering of the Securities (other than to residents of or in any jurisdiction in
which qualification of the Securities is required and has not become effective)
at the price and upon the other terms set forth in the Prospectus and otherwise
in compliance with the Rules and Regulations. The Underwriter may allow such
concessions and discounts upon sales to other dealers as set forth in the
Prospectus. The Underwriter may from time to time increase or decrease the
public offering price after distribution of the Securities has been completed to
such extent as the Underwriter, in its sole discretion, deems advisable.
4. Covenants of the Company. The Company covenants and agrees with the
Underwriter as follows:
(a) The Company shall use its best efforts to cause the Registration
Statement and any amendments thereto to become effective as promptly as
practicable and will not at any time, whether before or after the effective date
of the Registration Statement, file any amendment to the Registration Statement
or supplement to the Prospectus or file any document under the Exchange Act
within 25 days after the Closing Date except for Form 8-A/A1: (i) before
termination of the offering of the Securities by the Underwriter which the
Underwriter shall not previously have been advised and furnished with a copy; or
(ii) to which the Underwriter shall have objected; or (iii) which is not in
compliance with the Act, the Exchange Act or the Rules and Regulations.
(b) As soon as the Company is advised or obtains knowledge thereof,
the Company will advise the Underwriter and confirm by 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 or proceeding for that purpose; (iii) of the issuance by any state
securities commission of any proceedings for the suspension of the qualification
of the Securities for offering or sale in any jurisdiction or of the initiation,
or the threatening, of any proceeding for that purpose; (iv) of the receipt of
any comments from the Commission; and (v) of any request by the Commission for
any amendment to the Registration Statement or any amendment or supplement to
the Prospectus or for additional information. If
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<PAGE> 17
the Commission or any state securities commission or regulatory authority shall
enter a stop order or suspend such qualification at any time, the Company will
make every reasonable effort to obtain promptly the lifting of such order.
(c) The Company shall file the Prospectus (in form and substance
satisfactory to the Underwriter) or transmit the Prospectus by a means
reasonably calculated to result in filing with the Commission pursuant to Rule
424(b)(1) (or, if applicable and if consented to by the Underwriter pursuant to
Rule 424(b)(4)) not later than the Commission's close of business on the earlier
of (i) the second business day following the execution and delivery of this
Agreement and (ii) the fifth business day after the effective date of the
Registration Statement.
(d) The Company will give the Underwriter notice of its intention to
file or prepare any amendment to the Registration Statement (including any
post-effective amendment) or any amendment or supplement to the Prospectus
(including any revised prospectus which the Company proposes for use by the
Underwriter in connection with the offering of the Securities which differs from
the corresponding prospectus on file at the Commission at the time the
Registration Statement becomes effective, whether or not such revised prospectus
is required to be filed pursuant to Rule 424(b) of the Rules and Regulations),
will furnish the Underwriter with copies of any such amendment or supplement a
reasonable amount of time prior to such proposed filing or use, as the case may
be, and will not file any such prospectus to which the Underwriter or Goldstein
& DiGioia, LLP ("Underwriter's counsel"), shall reasonably object.
(e) The Company shall cooperate in good faith with the Underwriter,
and Underwriter's counsel, at or prior to the time the Registration Statement
becomes effective, in endeavoring to qualify the Securities for offering and
sale under the securities laws of such jurisdictions as the Underwriter may
reasonably designate, and shall cooperate with the Underwriter and Underwriter's
counsel in the making of such applications, and filing such documents and shall
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 consent to service of process in any such jurisdiction. In each
jurisdiction where such qualification shall be effected, the Company will,
unless the Underwriter agree that such action is not at the time necessary or
advisable, use all reasonable efforts to file and make such statements or
reports at such times as are or may reasonably be required by the laws of such
jurisdiction to continue such qualification.
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<PAGE> 18
(f) During the time when the 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 the Prospectus
relating to the Securities is required to be delivered under the Act, any event
shall have occurred as a result of which, in the opinion of counsel for the
Company or Underwriter's counsel, the Prospectus, as then amended or
supplemented, includes an untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, or if it is necessary at any time to amend the Prospectus
to comply with the Act, the Company will notify the Underwriter promptly and
prepare and file with the Commission an appropriate amendment or supplement in
accordance with Section 10 of the Act, each such amendment or supplement to be
reasonably satisfactory to Underwriter's counsel, and the Company will furnish
to the Underwriter a reasonable number of copies of such amendment or
supplement.
(g) As soon as practicable, but in any event not later than 45 days
after the end of the 12-month period commencing on the day after the end of the
fiscal quarter of the Company during which the effective date of the
Registration Statement occurs (90 days in the event that the end of such fiscal
quarter is the end of the Company's fiscal year), the Company shall make
generally available to its security holders, in the manner specified in Rule
158(b) of the Rules and Regulations, and to the Underwriter , an earnings
statement which will be in such form and detail required by, and will otherwise
comply with, the provisions of Section 11(a) of the Act and Rule 158(a) of the
Rules and Regulations, which statement need not be audited unless required by
the Act, covering a period of at least 12 consecutive months after the effective
date of the Registration Statement.
(h) During a period of five (5) years after the date hereof and
provided that the Company is required to file reports with the Commission under
Section 12 of the Exchange Act, the Company will furnish to its stockholders, as
soon as practicable, annual reports (including financial statements audited by
independent public accountants), and will deliver to the Underwriter:
(i) as soon as they are available, copies of all reports
(financial or other) mailed to stockholders;
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<PAGE> 19
(ii) 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;
(iii) every press release and every material news item or
article of interest to the financial community in respect of the Company and any
future subsidiaries or their affairs which was released or prepared by the
Company;
(iv) any additional information of a public nature concerning
the Company and any future subsidiaries or their respective businesses which the
Underwriter may reasonably request;
(v) a copy of any Schedule 13D, 13G, 14D-1, 13E-3 or 13E-4
received or filed by the Company from time to time.
During such five-year period, if the Company has active subsidiaries,
the foregoing financial statements will be on a consolidated basis to the extent
that the accounts of the Company and its subsidiaries are consolidated, and will
be accompanied by similar financial statements for any significant subsidiary
which is not so consolidated.
(i) For as long as the Company is required to file reports with the
Commission under Section 12 of the Exchange Act, the Company will maintain a
Transfer Agent, as well as a Registrar (which may be the same entity as the
Transfer Agent) for its Common Stock.
(j) The Company will furnish to the Underwriter or pursuant to the
Underwriter's direction, without charge, at such place as the Underwriter may
designate, copies of each Preliminary Prospectus, the Registration Statement and
any pre-effective or post-effective amendments thereto (two of which copies will
be signed and will include all financial statements and exhibits), the
Prospectus, and all amendments and supplements thereto, including any prospectus
prepared after the effective date of the Registration Statement, in each case as
soon as available and in such quantities as the Underwriter may reasonably
request.
(k) Neither the Company, nor its officers or directors, nor
affiliates of any of them (within the meaning of the Rules and Regulations) will
take, directly or indirectly, any action designed to, or which might in the
future reasonably be expected to cause or result in, stabilization or
manipulation of the price
20
<PAGE> 20
of any securities of the Company except as may be permitted under the Exchange
Act.
(l) The Company shall apply the net proceeds from the sale of the
Securities in the manner, and subject to the provisions, set forth under the
caption "Use of Proceeds" in the Prospectus. No portion of the net proceeds will
be used directly or indirectly to acquire any securities issued by the Company.
(m) The Company shall timely file all such reports, forms or other
documents as may be required 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.
(n) The Company shall furnish to the Underwriter as early as
practicable prior to each of the date hereof, the Closing Date and each
Overallotment Closing Date, if any, but no later than two (2) full business days
prior thereto, a copy of the latest available unaudited consolidated interim
financial statements of the Company (which in no event shall be as of a date
more than forty-five (45) days prior to the date of the Registration Statement)
which have been read by the Company's independent public accountants, as stated
in their letters to be furnished pursuant to Section 6(k) hereof.
(o) For a period of five (5) years from the Closing Date, the
Company shall furnish to the Underwriter at the Company's sole expense, (i)
daily consolidated transfer sheets relating to the Securities upon the
Underwriter's request; (ii) a list of holders of Securities upon the
Underwriter's request; (iii) a list of, if any, the securities positions of
participants in the Depository Trust Company upon the Underwriter's request.
(p) Until a date which is five (5) years from the Closing Date shall
use its best efforts to cause one (1) individual selected by the Underwriter to
be elected to the Board of Directors of the Company (the "Board"), if requested
by the Underwriter and provided such individual is reasonably acceptable to and
approved by the Company. The Underwriter's nominee, if elected, shall receive
the same compensation as the other non-employee members of the Board.
Alternatively, the Underwriter shall be entitled to appoint an individual who
shall be permitted to attend all meetings of the Board and to receive all
notices and other correspondence and communications sent by the Company to
members of the Board, and copies of all minutes thereof. The Company shall
reimburse the Underwriter's designee for his or her out-of-pocket expenses
reasonably incurred and authorized in advance by the Company in
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connection with his or her attendance of the Board meetings. To the extent
permitted by law, the Company agrees to indemnify and hold the designee (as a
director or observer) and the Underwriter harmless against any and all claims,
actions, awards and judgements arising out of his or her service as a director
or an observer and the Company shall maintain a liability insurance policy in an
amount of not less than $1,000,000 affording coverage for the action of its
officer and directors, to include such designee and the Underwriter as an
insured under such policy. The Underwriter's nominee shall, if a member of the
Board, be a member of the Audit Committee of the Board. The Underwriter's
nominee or designee, as the case may be, shall agree not to disclose any
non-public information and shall, if requested by the Company, execute and
deliver a non- disclosure agreement upon terms reasonably acceptable to the
Company. The Company reserves the right not to provide information and to
exclude such Underwriter's attendee from any meeting or portion thereof if
attendance at such meeting by such attendee would compromise or adversely affect
the attorney-client privilege between the Company and its counsel, or would, in
the good faith judgment of the Board, result in conflict of interest situation.
The Company shall use its reasonable efforts to promptly bring to the attention
of such attendee any agenda item that, in the good faith judgment of the Board,
would result in any trade secret, privileged matter or conflict of interest
arising during such meeting and the Board may exclude such attendee (or
alternatively, the attendee shall be entitled to exclude himself or herself)
from any deliberation or discussion of the Board concerning such trade secret
(if the observer has not executed a confidentiality agreement), privileged
matter or dissemination of such information. If such observer in his or her good
faith believes that an item to be discussed shall result in a conflict, then
such observer shall promptly bring such conflict to the attention of the
Chairman of the Board. In no event shall any provision of this paragraph waive
any obligation of confidentiality to the Company owed by any such attendee or
the Underwriter.
(q) For a period equal to the lesser of (i) five (5) years from the
date hereof, or (ii) the sale to the public of the Underwriter's Option Shares,
the Company will not take any action or actions that may prevent or disqualify
the Company's use of Form S-1 or, if applicable, Form S-3 (or other appropriate
form) for the registration under the Act of the Underwriter's Option Shares.
(r) For a period of five (5) years from the date hereof, use its
best efforts at its cost and expense to maintain the listing of the Securities
on the Nasdaq SmallCap or National Market System.
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<PAGE> 22
(s) As soon as practicable, but in no event more than 5
business days after the effective date of the Registration Statement, file a
Form 8-A/A1 with the Commission providing for the registration under the
Exchange Act of the Securities.
(t) Following the Effective Date of the Registration Statement
and for a period of two (2) years thereafter, the Company shall, at its sole
cost and expense, prepare and file such blue sky trading applications with such
jurisdictions as the Underwriter may reasonably request after consultation with
the Company, and on the Underwriter's request, furnish the Underwriter with a
secondary trading survey prepared by securities counsel to the Company.
(u) The Company shall not amend or alter the terms of any
written or oral employment agreement between the Company and any executive
officer in a manner more favorable to such employee without the prior consent of
the Underwriter, which consent shall not be unreasonably withheld by the
Underwriter. For a period of three (3) years from the date hereof prior to the
Company entering into any oral or written employment agreement with any person
who will, upon commencement of such persons duties be deemed an executive
officer, the Company shall consult with the Underwriters and the entire Board of
Directors as to the proposed terms of such employment.
(v) Until the completion of the distribution of the
Securities, the Company shall not without the prior written consent of the
Underwriter, which consent shall not be unreasonably withheld, 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.
(w) The Company will use its best efforts to maintain its
registration under the Exchange Act in effect for a period of five (5) years
from the Closing Date.
(x) On the Closing Date, the Company and the Underwriter shall
enter into a financial consulting agreement, in the form filed as an Exhibit to
the Registration Statement, pursuant to which the Underwriter will provide
financial consulting services to the Company for a three year period for an
aggregate fee of $2,777.77 per month ($100,000 in the aggregate), payable in
full
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at the Closing and the term of which shall commencing on the Closing Date (the
"Financial Consulting Agreement"). Among other provisions, the Consulting
Agreement shall contain terms which provide that the Company shall pay the
Underwriter a fee equal to five (5%) percent of the amount up to $5,000,000 and
two and one half (2 1/2 percent) of the excess, if any, over $5,000,000 of the
consideration involved in any transaction (regardless of the form of
transaction, whether by merger, acquisition or sale of assets or otherwise)
consummated by the Company with a party introduced by the Underwriter to the
Company.
(y) For a period of 12 months commencing on the Closing Date,
except with the written consent of the Underwriter, will not issue or sell,
directly or indirectly, any shares of its capital stock, or sell or grant
options, or warrants or rights to purchase any shares of its capital stock,
except pursuant to (i) this Agreement, (ii) the Underwriter's Purchase Option ,
(iii) the exercise of warrants and options of the Company heretofore issued and
described in the Prospectus, and (iv) the grant of options and the issuance of
shares issued upon exercise of options issued or to be issued under the
Company's stock option plan as described in the Prospectus (Stock Option Plan).
Except as discussed in the Prospectus, prior to the Closing Date, the Company
will not issue any options or warrants without the prior written consent of the
Underwriter. The Company shall not, for a period of 12 months from the Closing
Date offer or sell any securities pursuant to Regulation S or similar regulation
without the Underwriter's prior written consent.
(z) Except for the Company's present obligations to SEC Family
Investment and Trading L.P. and Gary Agranoff the
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<PAGE> 24
Company will not file any registration statement relating to the offer or sale
of any of the Company's securities, including any registration statement on Form
S-8, during the 24 months following the Closing Date without the Underwriter's
prior written consent.
(aa) Subsequent to the dates as of which information is given
in the Registration Statement and Prospectus and prior to the Closing Dates,
except as disclosed in or contemplated by the Registration Statement and
Prospectus, (i) the Company will not have incurred any liabilities or
obligations, direct or contingent, or entered into any material transactions
other than in the ordinary course of business; (ii) there shall not have been
any change in the capital stock, funded debt (other than regular repayments of
principal and interest on existing indebtedness) or other securities of the
Company, any material adverse change in the condition (financial or other),
business, operations, income, net worth or properties, including any material
loss or damage to the properties of the Company (whether or not such loss is
insured against), which could materially adversely affect the condition
(financial or other), business, operations, income, net worth or properties of
the Company; and (iii) the Company shall not pay or declare any dividend or
other distribution on its Common Stock or its other securities or redeem or
repurchase any of its Common Stock or other securities.
(bb) Except as disclosed in or contemplated by the
Registration Statement and Prospectus, the Company, for a period of 24 months
following the Closing Date, shall not redeem any of its securities, and shall
not pay any dividends or make any other cash distribution in respect of its
securities in excess of the amount of the Company's current or retained earnings
derived after the Closing Date without obtaining the Underwriter's prior written
consent, which consent shall not be unreasonably withheld. The Underwriter hall
either approve or disapprove such contemplated redemption of securities or
dividend payment or distribution within ten (10) business days from the date the
Underwriter receives written notice of the Company's proposal with respect
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<PAGE> 25
thereto; a failure of the Underwriter to respond within the ten (10) business
day period shall be deemed approval of the transaction.
(cc) The Company maintains and will continue to maintain a
system of internal accounting controls sufficient to provide reasonable
assurance that: (i) transactions are executed in accordance with management's
general or specific authorization; (ii) transactions are recorded as necessary
in order to permit preparation of financial statements in accordance 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 authorization; and (iv) the recorded accountability for
assets is compared with existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
5. Payment of Expenses.
(a) The Company hereby agrees to pay on each of Closing Date
and the Overallotment Closing Date (to the extent not paid at the Closing Date)
all its expenses and fees (other than fees of Underwriter's Counsel, except as
provided in (iv) below) incident to the performance of the obligations of the
Company under this Agreement, including, without limitation: (i) the fees and
expenses of accountants and counsel for the Company; (ii) all costs and expenses
incurred in connection with the preparation, duplication, mailing, printing and
filing of the Registration Statement and the Prospectus and any amendments and
supplements thereto and the printing, mailing and delivery of this Agreement,
the Selected Dealer Agreements, Agreement Between Underwriter , and related
documents, including the cost of all copies thereof and of the Preliminary
Prospectuses and of the Prospectus and any amendments thereof or supplements
thereto supplied to the Underwriter in quantities as hereinabove stated; (iii)
the printing, engraving, issuance and delivery of the Securities and
Underwriter's Option Shares including any transfer or other taxes payable
thereon; (iv) disbursements and fees of Underwriter's counsel in connection with
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, which Underwriter's counsel fees (exclusive of
filing fees and disbursements) shall equal $15,000 and of which $10,000 has
previously been paid; (v) advertising costs and expenses, including but not
limited to costs and expenses in connection with one information meeting held in
New York, New York, one tombstone advertisement, at least 5 bound volumes of the
Offering documents for the
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Underwriter and its counsel and prospectus memorabilia; (vi) fees and expenses
of the transfer agent; (vii) the fees payable to the NASD; and (viii) the fees
and expenses incurred in connection with the listing of the Securities on the
Nasdaq SmallCap Market. All fees and expenses payable to the Underwriter
hereunder shall be payable at the Closing Date or Overallotment Closing Date, as
applicable; provided, however, the company shall pay such fees and costs in
advance of the Closing Date if requested by the Underwriter. The Underwriter
shall be responsible for all of its own costs of counsel.
(b) If this Agreement is terminated by the Underwriter in
accordance with the provisions of Section 6, Section 10(a) or Section 11, the
Company shall reimburse and indemnify the Underwriter for up to $100,000
out-of-pocket actual expenses reasonably incurred in connection with the
transactions contemplated hereby including the fees and disbursements of counsel
for the Underwriter of which the Underwriter acknowledges $50,000 has been paid
prior to the date 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 Underwriter a non-accountable expense allowance equal to three percent (3%)
of the gross proceeds received by the Company from the sale of the Firm
Securities, $50,000 of which has been paid to date to the Underwriter . The
Company will pay the remainder of the non-accountable expense allowance on the
Closing Date by certified or bank cashier's check or, at the election of the
Underwriter , by deduction from the proceeds of the offering contemplated
herein. In the event the Underwriter elect to exercise the over-allotment option
described in Section 2(b) hereof, the Company further agrees to pay to the
Underwriter on the Overallotment Closing Date (by certified or bank cashier's
check or, at the Underwriter's election, by deduction from the proceeds of the
offering) a non-accountable expense allowance equal to three percent (3%) of the
gross proceeds received by the Company from the sale of the Overallotment
Securities.
6. Conditions of the Underwriter's Obligations. The obligations
of the Underwriter hereunder shall be subject to the continuing accuracy of the
representations and warranties of the Company herein as of the Closing Date and
each Overallotment Closing Date, if any, as if they had been made on and as of
the Closing Date or each Overallotment Closing Date, as the case may be; the
accuracy on and as of the Closing Date or Overallotment Closing Date, if any, of
the statements of officers of the Company made pursuant to the provisions
hereof; and the performance by the Company on and as
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of the Closing Date and each Overallotment Closing Date, if any, of each of its
covenants and obligations hereunder and to the following further conditions:
(a) The Registration Statement shall have become effective not
later than 5:30 P.M., New York time, on the date of this Agreement or such later
date and time as shall be consented to in writing by the Underwriter, and, at
Closing Date and each Overallotment 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 to the knowledge of the Company by the Commission and
any request on the part of the Commission for additional information shall have
been complied with to the reasonable satisfaction of Underwriter's counsel. If
the Company has elected to rely upon Rule 430A of the Rules and Regulations, the
price of the Securities and any price-related information previously omitted
from the effective Registration Statement pursuant to such Rule 430A shall have
been transmitted to the Commission for filing pursuant to Rule 424(b) of the
Rules and Regulations within the prescribed time period, and prior to Closing
Date the Company shall have provided evidence satisfactory to the Underwriter of
such timely filing, or a post-effective amendment providing such information
shall have been promptly filed and declared effective in accordance with the
requirements of Rule 430A of the Rules and Regulations.
(b) The Underwriter shall not have advised the Company that
the Registration Statement, or any amendment thereto, contains an untrue
statement of fact which, in the Underwriter's opinion, and the opinion of its
counsel is material or omits to state a fact which, in the Underwriter's
opinion, is material and is required to be stated therein or is necessary to
make the statements therein not misleading, or that the Prospectus, or any
supplement thereto, contains an untrue statement of fact which, in the
Underwriter's reasonable opinion, or the opinion of its counsel is material, or
omits to state a fact which, in the Underwriter's reasonable 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) At the Closing Date and the Overallotment Closing Date,
the Underwriter shall have received the favorable opinion of Parker Duryee
Rosoff & Haft, counsel to the Company, dated the Closing Date, or Overallotment
Closing Date, as the case may be, addressed to the Underwriter and in form and
substance satisfactory to Underwriter's counsel, to the effect that:
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(i)(A) The Company has been duly organized and is
validly existing as a corporation in good standing under the laws of the State
of Delaware with full corporate power and authority to own or lease its
properties and to carry on its business as set forth in the Registration
Statement and Prospectus; (B) to Counsel's knowledge the Company is duly
qualified as a foreign corporation in all jurisdictions in which by reason of
maintaining an office in such jurisdiction or by owning or leasing real property
in such jurisdiction it is required to be so qualified except where the failure
to be so qualified would have no material adverse effect upon the business,
properties, results of operations, conditions (financial or otherwise) affairs
or properties of the Company (a "Material Adverse Effect"); and (C) to the best
of counsel's knowledge, the Company has not received any notice of proceedings
relating to the revocation or modification of any such license or qualification
which revocation or modification would have a Material Adverse Effect upon the
Company.
(ii) The Registration Statement, each Preliminary
Prospectus that has been circulated and the Prospectus and any post-effective
amendments or supplements thereto (other than the financial statements,
schedules and other financial and statistical data included therein, as to which
no opinion need be rendered) comply as to form in all material respects with the
requirements of the Act and Regulations and the conditions for use of a
registration statement on Form S-1 have been satisfied by the Company.
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(iii) To the best of such counsel's knowledge, except
as described in the Prospectus, the Company does not own an interest of a
character required to be disclosed in the Registration Statement in any
corporation, partnership, joint venture, trust or other business entity;
(iv) To the best of such counsel's knowledge, the
Company has a duly authorized, issued and outstanding capitalization as set
forth in the Prospectus as of the date indicated therein, under the caption
"Capitalization". The Securities, Underwriter's Purchase Option and the
Underwriter's Option Shares conform or upon issuance will 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 all shares of
capital stock are fully paid and non-assessable; the holders thereof are not,
except by reason of their own conduct or acts, subject to personal liability by
reason of being such holders, and to the Counsel's knowledge none of such
securities were issued in violation of the preemptive rights of any holder of
any security of the Company. The Securities to be sold by the Company hereunder,
the Underwriter's Purchase Option to be sold by the Company under the
Underwriter's Purchase Option Agreement and Underwriter's Option Shares 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 or upon issuance will conform to the description thereof contained in
the Prospectus; are not, subject to the Counsel's knowledge to any preemptive or
other similar rights of any stockholder of the Company; that, to such counsel's
knowledge, the holders of the Securities and Underwriter's Option Shares shall
not be personally liable for the payment of the Company's debts solely by reason
of being such holders except as they may be liable by reason of their own
conduct or acts; and that the certificates representing the Securities,
Underwriter's Purchase Option and Underwriter's Option Shares are in due and
proper legal form. Upon delivery of the Securities to the Underwriter against
payment therefor as provided for in this Agreement, the Underwriter (assuming
they are bona fide purchasers within the meaning of the Uniform Commercial Code)
will acquire good title to the Securities, free and clear of all liens,
encumbrances, equities, security interests and claims.
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(v) The Registration Statement has been declared
effective under the Act, and, if applicable, filing of all pricing information
has been timely made in the appropriate form under Rule 430A, and, to the best
of such counsel's knowledge, no stop order suspending the effectiveness of the
Registration Statement has been issued and to the best of such counsel's
knowledge, no proceedings for that purpose have been instituted or are pending
or threatened or contemplated under the Act;
(vi) To the best of such counsel's knowledge, (A)
there are no material contracts or other documents required to be described in
the Registration Statement and the Prospectus and filed as exhibits to the
Registration Statement other than those described in the Registration Statement
and the Prospectus and filed as exhibits thereto, and (B) the descriptions in
the Registration Statement and the Prospectus and any supplement or amendment
thereto regarding such material contracts or other documents to which the
Company is a party or by which it is bound, are accurate in all material
respects and fairly represent the information required to be shown by Form S-1
and the Rules and Regulations;
(vii) This Agreement, the Underwriter's Purchase
Option Agreement and the Financial Consulting Agreement have each been duly and
validly authorized, executed and delivered by the Company, and assuming that
each is a valid and binding agreement of the Underwriter , as the case may be,
constitutes a legally valid and binding agreement of the Company, enforceable as
against the Company in accordance with their respective 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 or pursuant to public policy).
(viii) Neither the execution or delivery by the
Company of this Agreement, the Underwriter's Purchase Option Agreement or the
Financial Consulting Agreement, nor its performance hereunder or thereunder, nor
its consummation of the transactions contemplated herein or therein, nor the
conduct of its business as described in the Registration Statement, the
Prospectus, and any amendments or supplements thereto, nor the issuance of the
Securities pursuant to this Agreement, conflicts with or will conflict with or
results or will result in any material breach or violation of any of the terms
or provisions of, or constitutes or will constitute a material default under, or
result in the creation imposition of any material lien, charge, claim,
encumbrance, pledge, security interest, defect or other restriction or equity of
any kind
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whatsoever upon, any property or assets (tangible or intangible) of the Company
except to the extent such event will not have a Material Adverse Effect pursuant
to the terms of, (A) the Certificate of Incorporation or By-Laws of the Company,
(B) to the best knowledge of such counsel, any material indenture, mortgage,
deed of trust, voting trust agreement, stockholders agreement, note, loan or
credit agreement or any other agreement or instrument that is material to the
Company to which the Company is a party or by which it is bound or to which its
properties or assets (tangible or intangible) are subject, or any indebtedness,
or (C) to the best knowledge of such counsel, and except to the extent it would
not have a material adverse effect on the Company, any statute, judgment,
decree, order, rule or regulation applicable to the Company or any arbitrator,
court, regulatory body or administrative agency or other governmental agency or
body, having jurisdiction over the Company or any of its respective activities
or properties.
(ix) No consent, approval, authorization or order,
and no filing with, any court, regulatory body, government agency or other body
(other than such as may be required under state securities laws or the NASD, as
to which no opinion need be rendered) is required in connection with the
issuance by the Company of the Securities pursuant to the Prospectus and the
Registration Statement, the performance of this Agreement, the Underwriter's
Purchase Option Agreement and the Financial Consulting Agreement by the Company,
and the taking of any action by the Company contemplated hereby or thereby,
which has not been obtained;
(x) Except as described in the Prospectus, to the
best knowledge of such counsel, the Company is not in breach of, or in default
under, any material term or provision of any indenture, mortgage, installment
sale agreement, deed of trust, lease, voting trust agreement, stockholders'
agreement, note, loan or credit agreement or any other agreement or instrument
evidencing an obligation for borrowed money, or any other agreement or
instrument to which the Company is a party or by which the Company may be bound
or to which any of the property or assets (tangible or intangible) of the
Company is subject or affected; and the Company is not in violation of any
material term or provision of its Certificate of Incorporation or By-Laws or in
violation of any material franchise, license, permit, judgment, decree, order,
statute, rule or regulation material to the Company business;
(xi) The statements in the Prospectus under the
captions "THE COMPANY," "BUSINESS," "MANAGEMENT," "PRINCIPAL STOCKHOLDERS,"
"CERTAIN TRANSACTIONS," "DESCRIPTION OF SECURITIES STOCK," and "SHARES ELIGIBLE
FOR FUTURE SALE" have been reviewed by such counsel, and insofar as they refer
to
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statements of law, descriptions of statutes, licenses, rules or regulations or
legal conclusions, are correct in all material respects;
(xii) To the best of such counsel's knowledge, except
as described in the Prospectus, or with respect to SES Family Investment and
Trading Partnership LP and Gary Agranoff, no person, corporation, trust,
partnership, association or other entity holding securities of the Company has
the contractual 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;
(xiii) the Securities are eligible for listing on the
Nasdaq SmallCap Market.
In addition, such counsel shall state that in connection with the
preparation of the Registration Statement and the Prospectus such counsel has
participated in conferences with officers and other representatives of the
Company, Underwriters of the independent public accountants for the Company and
Underwriters of the Underwriter at which the contents of the Registration
Statement, the Prospectus and related matters were discussed and, although such
counsel is not passing upon, has not verified, and does not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Registration Statement and Prospectus and made no independent
check or verification thereof, on the basis of the foregoing, other than in
regard to representations as to the status of Groupe Conserver as exclusive
distributor of Conserver 21, no facts other than regarding the representations
regarding the exclusive distributor status of Groupe Conserver 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 Prospectus 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 in light of the circumstances under which they were made, 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 Registration Statement or Prospectus or with respect to
statements or omissions made therein in reliance upon information furnished in
writing to the Company on behalf of the Underwriter expressly for use in the
Registration Statement or the Prospectus). In rendering such opinion, such
counsel may state that no portion of the opinion relates, or is given with
regard to any issues or elements of any state or federal Intellectual Property
Law, Patent Law, Trademark Law, Environmental Law, the laws and regulations
regulating the sale, distribution and preparation of food, drugs and pesticides,
or the laws regulating international trade for the United States,
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<PAGE> 33
any of them, or any agencies deriving authority from either or both, and all
other foreign jurisdictions and their respective agencies.
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, the
corporate laws of Delaware and New York and jurisdictions in which they are
admitted, to the extent such counsel deems proper and to the extent specified in
such opinion, if at all, upon an opinion or opinions (in form and substance
reasonably satisfactory to Underwriter's counsel) of other counsel reasonably
acceptable to Underwriter's counsel, familiar with the applicable laws of such
other jurisdictions, and (B) as to matters of fact, to the extent they deem
proper, on certificates and written statements of responsible officers of the
Company and certificates or other written statements of officers of departments
of various jurisdictions having custody of documents respecting the corporate
existence or good standing of the Company; provided, that copies of any such
statements or certificates shall be delivered to Underwriter's counsel if
requested. The opinion of such counsel for the Company shall state that the
opinion of any such other counsel is in form satisfactory to such counsel and,
in their opinion, the Underwriter and they are justified in relying thereon.
(d) At each Overallotment Closing Date, if any, the
Underwriter shall have received the favorable opinion of counsel to the Company,
each dated the Overallotment Closing Date, addressed to the Underwriter and in
form and substance satisfactory to Underwriter's counsel confirming as of the
Overallotment Closing Date the statements made by such firm, in their opinion,
delivered on the Closing Date.
(e) On or prior to each of the Closing Date and the
Overallotment Closing Date, Underwriter's Counsel shall have been furnished such
documents, certificates and other legal opinions (including, without limitation,
legal opinions related to patent, trademark or Food and Drug matters) as they
may reasonably require and request 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 herein contained.
(f) Prior to the Closing Date and each Overallotment Closing
Date, if any: (i) there shall have been no material adverse change nor
development involving a prospective change in the condition, financial or
otherwise, prospects or the business activities of the Company, whether or not
in the ordinary course
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of business, from the latest dates as of which such condition is set forth in
the Registration Statement and Prospectus; (ii) there shall have been no
transaction, not in the ordinary course of business, entered into by the
Company, from the latest date as of which the financial condition of the Company
is set forth in the Registration Statement and Prospectus which is materially
adverse to the Company; (iii) the Company shall not be in material default under
any provision of any instrument relating to any outstanding indebtedness for
money borrowed, except as described in the Prospectus; (iv) no material amount
of the assets of the Company shall have been pledged or mortgaged, except as set
forth in the Registration Statement and Prospectus; (v) no action, suit or
proceeding, at law or in equity, shall have been pending or to its knowledge
threatened against the Company, or affecting any of 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
materially adversely affect the business, operations, prospects or financial
condition or income of the Company, except as set forth in the Registration
Statement and Prospectus; and (vi) no stop order shall have been issued under
the Act and no proceedings therefor shall have been initiated, threatened or
contemplated by the Commission.
(g) At the Closing Date and each Overallotment Closing Date,
if any, the Underwriter shall have received a certificate of the Company signed
by the principal executive officer and by the chief financial or chief
accounting officer of the Company, dated the Closing Date or Overallotment
Closing Date, as the case may be, to the effect that:
(i) The representations and warranties of the
Company in this Agreement are, in all material respects, true and correct, as if
made on and as of the Closing Date or the Overallotment 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 Overallotment Closing Date, as
the case may be;
(ii) No stop order suspending the effectiveness of
the Registration Statement has been issued, and no proceedings for that purpose
have been instituted or are pending or, to the best of each of such person's
knowledge, are contemplated or to their knowledge 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
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<PAGE> 35
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 nor 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 except to the extent any such material fact may be corrected in the
Final Prospectus; and
(iv) Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus and except
as otherwise contemplated therein: (A) the Company has not incurred up to and
including the Closing Date or the Overallotment 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 material transactions not in the ordinary course of
business; (D) there has not been any change in the capital stock or any increase
in 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 material loss or damage to its
property or assets, whether or not insured; (F) there is no litigation which is
pending or threatened against the Company which is required to be set forth in
an amended or supplemented Prospectus which has not been set forth;
(v) Neither the Company nor any of its officers or
affiliates shall have taken, and the Company, its officers and affiliates will
not take, directly or indirectly, any action designed to, or which might
reasonably be expected to, cause or result in the stabilization or manipulation
of the price of the Company's securities to facilitate the sale or resale of the
Shares.
References to the Registration Statement and the Prospectus in this
subsection (h) are to such documents as amended and supplemented at the date of
such certificate.
(h) By the Effective Date, the Underwriter shall have received
clearance from NASD as to the amount of compensation allowable or payable to the
Underwriter , as described in the Registration Statement.
(i) At the time this Agreement is executed, the Underwriter
hall have received a letter, dated such date, addressed to the Underwriter in
form and substance satisfactory in all respects (including the non-material
nature of the changes or decreases, if any, referred
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to in clause (iii) below) to the Underwriter, from Richard A. Eisner & Company
LLP:
(i) confirming that they are independent public
accountants with respect to the Company within the meaning of the Act and the
applicable Rules and Regulations;
(ii) stating that it is their opinion that the
combined financial statements and supporting schedules of the Company included
in the Registration Statement comply as to form in all material respects with
the applicable accounting requirements of the Act and the Rules and Regulations
thereunder and that the Underwriter may rely upon the opinion of Arthur Andersen
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 combined
financial statements of the Company (with an indication of the date of the
latest available unaudited interim combined financial statements), a reading of
the latest available minutes of the stockholders and board of directors and the
various committees of the boards of directors of the Company, consultations with
officers and other employees of the Company responsible for financial and
accounting matters and other specified procedures and inquiries, nothing has
come to their attention that would lead them to believe that (A) the unaudited
combined 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 combined 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 financial statements 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 February
28, 1997 to a specified date not more than five (5) days prior to the effective
date of the Registration Statement, there was any decrease in net revenues, net
earnings or increase in net earnings per common share of the Company, in each
case as compared with the corresponding period beginning November 30, 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;
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(iv) setting forth, at a date not later than five (5)
days prior to the effective date of the Registration Statement, the amount of
liabilities of the Company (including a breakdown of commercial paper and notes
payable to banks);
(v) stating that they have compared specific dollar
amounts, numbers of Securities, percentages of revenues and earnings, statements
and other financial information pertaining to the Company set forth in the
Prospectus in each case to the extent that such amounts, numbers, percentages,
statements and information may be derived from the general accounting records,
including work sheets, of the Company and excluding any questions requiring an
interpretation by legal counsel, with the results obtained from the application
of specified readings, inquiries and other appropriate procedures (which
procedures do not constitute an examination in accordance with generally
accepted auditing standards) set forth in the letter and found them to be in
agreement; and
(vi) stating that they have not during the
immediately preceding five (5) year period brought to the attention of the
Company's management any "weakness", as defined in Statement of Auditing
Standard No. 60 "Communication of Internal Control Structure Related Matters
Noted in an Audit, " in the Company's internal controls;
(vii) stating that they have in addition carried out
certain specified procedures, not constituting an audit, with respect to certain
pro forma financial information which is included in the Registration Statement
and the Prospectus and that nothing has come to their attention as a result of
such procedures that caused them to believe such unaudited pro forma financial
information does not comply in form in all material respects with the applicable
accounting requirements of Rule ll-02 of Regulation S-X or that the pro forma
adjustments have not been properly applied to the historical amounts in the
compilation of that information; and
(viii) statements as to such other matters incident
to the transaction contemplated hereby as the Underwriter may reasonably
request.
At the Closing Date and each Overallotment Closing Date, the
Underwriter shall have received from Richard A. Eisner & Company LLP, a letter,
dated as of the Closing Date, or Overallotment Closing Date, as the case may be,
to the effect that they reaffirm that statements made in the letter furnished
pursuant to Subsection (i) of this Section, except that the specified date
referred to shall be a date not more than five days prior to Closing Date 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
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in clause (iii) of subsection (i) of this Section with respect to certain
amounts, percentages and financial information as specified by the Underwriter
and deemed to be a part of the Registration Statement pursuant to Rule 430A(b)
and have found such amounts, percentages and financial information to be in
agreement with the records specified in such clause (iii).
(k) On each of Closing Date and Overallotment Closing Date, if
any, there shall have been duly tendered to the Underwriter for their accounts
the appropriate number of Securities against payment therefore.
(l) No order suspending the sale of the Securities in any
jurisdiction designated by the Underwriter pursuant to subsection (e) of Section
4 hereof shall have been issued on either the Closing Date or the Overallotment
Closing Date, if any, and no proceedings for that purpose shall have been
instituted or to its knowledge or that of the Company shall be contemplated.
If any condition to the Underwriter's obligations hereunder to be
fulfilled prior to or at the Closing Date or the relevant Overallotment Closing
Date, as the case may be, is not so fulfilled, the Underwriter may terminate
this Agreement or, if the Underwriter o elects, it may waive any such conditions
which have not been fulfilled or extend the time for their fulfillment.
7. Indemnification.
(a) The Company agrees to indemnify and hold harmless the
Underwriter, and each person, if any, who controls the Underwriter ("controlling
person") within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, against any and all losses, claims, damages, expenses or
liabilities, joint or several (and actions in respect thereof), whatsoever
(including but not limited to any and all expenses whatsoever reasonably
incurred in investigating, preparing or defending against any litigation,
commenced or threatened, or any claim whatsoever), as such are incurred, to
which such Underwriter or such controlling person may become subject under the
Act, the Exchange Act or any other statute or at common law 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 (except that the indemnification contained in this
paragraph with respect to any preliminary prospectus shall not inure to the
benefit of the Underwriter or to the benefit of any person controlling the
Underwriter on account of any loss, claim, damage, liability or expense arising
from the sale
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<PAGE> 39
of the Firm Securities by the Underwriter to any person if a copy of the
Prospectus, as amended or supplemented, shall not have been delivered or sent to
such person within the time required by the Act, and the untrue statement or
alleged untrue statement or omission or alleged omission of a material fact
contained in such Preliminary Prospectus was corrected in the Prospectus, as
amended and supplemented, and such correction would have eliminated the loss,
claim, damage, liability or expense), the Registration Statement or the
Prospectus (as from time to time amended and supplemented); (ii) in any
post-effective amendment or amendments or any new registration statement and
prospectus in which is included Securities of the Company issued or issuable
upon exercise of the Underwriter's Purchase Option; 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, the Nasdaq Stock Market, Inc. or any other
securities exchange; or the omission or alleged omission therefrom of a material
fact required to be stated therein or necessary to make the statements therein
not misleading (in the case of the Prospectus, in the light of the circumstances
under which they were made), unless in any case above such statement or omission
was made in reliance upon and in conformity with written information furnished
to the Company with respect to any Underwriter by or on behalf of such
Underwriter expressly for use in any Preliminary Prospectus, the Registration
Statement or Prospectus, or any amendment thereof or supplement thereto, in any
post-effective amendment, new registration statement or prospectus or in any
application, as the case may be.
The indemnity agreement in this subsection (a) shall be in addition to
any liability which the Company may have at common law or otherwise.
(b) The Underwriter agrees, 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 Section 15 of the Act or Section 20(a) of the Exchange Act
to the same extent as the foregoing indemnity from the Company to the
Underwriter (i) with respect to statements or omissions, or alleged statements
or omissions if any, made in any Preliminary Prospectus, the Registration
Statement or Prospectus or any amendment thereof or supplement thereto in any
post-effective amendment, new registration statement or prospectus, or in any
application made in reliance upon, and in strict conformity with, written
information furnished to the Company
40
<PAGE> 40
with respect to the Underwriter by the Underwriter expressly for use in such
Preliminary Prospectus, the Registration Statement or Prospectus or any
amendment thereof or supplement thereto or in any post-effective amendment, new
registration statement or prospectus, or in any such application, directly
related to the transactions effected by the Underwriter in connection with this
Offering; provided that such written information or omissions only pertain to
disclosures in the Preliminary Prospectus, the Registration Statement or
Prospectus or any amendment thereof or supplement thereto, in any post-effective
amendment, new registration statement or prospectus or in any such application,
and (ii) for any claim, loss, damages or liability for violation or alleged
violations of any federal or state securities laws in the offer or sale of the
Securities; provided, further, that the liability of the Underwriter to the
Company shall be limited to the product of the Underwriter's discount or
commission for the Shares multiplied by the number of Shares sold by the
Underwriter hereunder. The Company acknowledges that the statements with respect
to the public offering of the Firm Securities set forth under the heading
"Underwriting" and the stabilization legend and the last paragraph of the cover
page in the Prospectus have been furnished by the Underwriter expressly for use
therein and any information furnished by or on behalf of the Underwriter filed
in any jurisdiction in order to qualify the Securities under state securities
laws or filed with the Commission, the NASD or any securities exchange
constitute the only information furnished in writing by or on behalf of the
Underwriter for inclusion in the Prospectus and the Underwriter hereby confirm
that such statements and information are true and correct and shall be on each
Closing Date and Overallotment Closing Date.
(c) Promptly after receipt by an indemnified party under this
Section 7 of notice of the commencement of any action, suit or proceeding, such
indemnified party shall, if a claim in respect thereof is to be made against one
or more indemnifying parties under this Section 7, notify each party against
whom indemnification is to be sought in writing of the commencement thereof (but
the failure so to notify an indemnifying party shall not relieve it from any
liability which it may have under this Section 7 except to the extent that it
has been prejudiced in any material respect by such failure or from any
liability which it may have otherwise). In case any such action is brought
against any indemnified party, and it notifies an indemnifying party or parties
of the commencement thereof, the indemnifying party or parties will be entitled
to participate therein, and to the extent it may elect by written notice
delivered to the indemnified party promptly after receiving the aforesaid notice
from such indemnified party, the indemnifying party may assume the defense
thereof with counsel reasonably satisfactory to such
41
<PAGE> 41
indemnified party. Notwithstanding the foregoing the indemnified party or
parties shall have the right to employ its or their own counsel in any such case
but the fees and expenses of such counsel shall be at the expense of such
indemnified party or parties unless (i) the employment of such counsel shall
have been authorized in writing by the indemnifying parties in connection with
the defense of such action at the expense of the indemnifying party, (ii) the
indemnifying parties shall not have employed counsel reasonably satisfactory to
such indemnified party to have charge of the defense of such action within a
reasonable time after notice of commencement of the action, or (iii) such
indemnifying party or parties shall have reasonably concluded that there may be
defenses available to it or them that are different from or additional to those
available to one or all of the indemnifying parties (in which case the
indemnifying parties shall not have the right to direct the defense of such
action on behalf of the indemnified party or parties), in any of which events
such fees and expenses of one additional counsel shall be borne by the
indemnifying parties. In no event shall the indemnifying parties be liable for
fees and expenses of more than one counsel (in addition to any local counsel)
separate from their own counsel for all indemnified parties in connection with
any one action or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances.
Anything in this Section 7 to the contrary notwithstanding, an indemnifying
party shall not be liable for any settlement of any claim or action effected
without its written consent; provided however, that such consent was not
unreasonably withheld.
(d) In order to provide for just and equitable contribution in
any case in which (i) an indemnified party makes 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 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
42
<PAGE> 42
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 Underwriter are the
indemnified party the relative benefits received by the Company on the one hand,
and the Underwriter , on the other, shall be deemed to be in the same proportion
as the total net proceeds from the offering of the Securities (before deducting
expenses) bear to the total underwriting discounts and commissions received by
the Underwriter hereunder, in each case as set forth in the table on the cover
page of the Prospectus. Relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company or by the Underwriter and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission. The amount paid or payable by an
indemnified party as a result of the losses, claims, damages, expenses or
liabilities (or actions in respect thereof) referred to above in this
subdivision (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
subsection (d), no Underwriter shall be required to contribute any amount in
excess of the amount by which the total price at which the 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. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. For purposes
of this Section 7, each person, if any, who controls the Company within the
meaning of the Act, each officer of the Company who has signed the Registration
Statement, and each director of the Company shall have the same rights to
contribution as the Company, subject in each case to this subparagraph (d). Any
party entitled to contribution will, promptly after receipt of notice of
commencement of any action, suit or proceeding against such party in respect to
which a claim for contribution may be made against another party or parties
under this subparagraph (d), notify such party or parties from whom contribution
may be sought, but the omission so to notify such party or parties shall not
relieve the party or parties from whom contribution may be sought from any
obligation it or they may have hereunder or otherwise than under this
subparagraph (d), or to the extent that such party or parties were not adversely
affected by such omission. The contribution agreement set forth above shall be
in
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<PAGE> 43
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 Overallotment 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 the
Underwriter , the Company, or any controlling person, and shall survive
termination of this Agreement or the issuance and delivery of the Securities to
the Underwriter .
9. Effective Date. This Agreement shall become effective at
9:30 a.m., New York City time, on the next full business day following the date
hereof, or at such earlier time after the Registration Statement becomes
effective as the Underwriter , in its discretion, shall release the Securities
for the sale to the public, provided, however that the provisions of Sections 5,
7 and 10 of this Agreement shall at all times be effective. For purposes of this
Section 9, the Securities to be purchased hereunder shall be deemed to have been
so released upon the earlier of dispatch by the Underwriter of telegrams to
securities dealers releasing such Securities for offering or the release by the
Underwriter for publication of the first newspaper advertisement which is
subsequently published relating to the Securities.
10. Termination.
(a) The Underwriter shall have the right to
terminate this Agreement: (i) if any calamitous domestic or international event
or act or occurrence has materially disrupted, or in the Underwriter's
commercially reasonable opinion will in the immediate future materially disrupt
general securities markets in the United States; or (ii) if trading on the New
York Stock Exchange, the American Stock Exchange, or in the over-the-counter
market shall have been suspended or minimum or maximum prices for trading shall
have been fixed, or maximum ranges for prices for securities shall have been
required on the over-the-counter market by the NASD or by order of the
Commission or any other government authority having jurisdiction; or (iii) if
the United States shall have become involved in a war or major hostilities; or
(iv) if a banking moratorium has been declared by a New York
44
<PAGE> 44
State or federal authority; or (v) if a moratorium in foreign exchange trading
has been declared; or if the Company shall have sustained a material loss,
whether or not insured, by reason of fire, flood, accident or other calamity; or
(vi) if there shall have been such material adverse change in the conditions or
prospects of the Company, involving a change not contemplated by the
Registration Statement, or (vii) if there shall have been such material adverse
change in general economic, political or financial conditions as in the
Underwriter's reasonable judgment would make it inadvisable or impracticable to
proceed with the offering, sale or delivery of the Securities.
(b) Notwithstanding any contrary provision
contained in this Agreement, any election hereunder or any termination of this
Agreement (including, without limitation, pursuant to Sections 9 and 10 hereof),
and whether or not this Agreement is otherwise carried out, the provisions of
Section 5 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.
45
<PAGE> 45
11. Default by the Company. If the Company shall fail at the
Closing Date or any Overallotment 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 Overallotment Closing
Date, the Underwriter s may at the Underwriter's option, by notice from the
Underwriter to the Company, terminate the Underwriter's obligations to purchase
Securities from the Company on such date) without any liability on the part of
any non-defaulting party other than pursuant to Section 5 and Section 7 hereof.
No action taken pursuant to this Section shall relieve the Company from
liability, if any, in respect of such default.
12. Venue; Submission to Jurisdiction. The Company (a) agrees
that any legal suit, action or proceeding arising out of or relating to this
Agreement shall be instituted exclusively in New York State Supreme Court,
County of New York, or in the United States District Court for the Southern
District of New York, (b) waives any objection which the Company may have now or
hereafter to the venue of any such suit, action or proceeding, and (c)
irrevocably consents to the jurisdiction of the New York State Supreme Court,
County of New York and the United States District Court for the Southern
District of New York in any such suit, action or procedure. Each of the Company
and the Underwriter further agrees to accept and acknowledge service of any and
all process which may be served in any suit, action or proceeding in the New
York State Supreme Court for the Southern District of New York, and agrees that
service of process upon the Company mailed by certified mail to the Company's
address shall be deemed in every respect effective service of process upon the
company in any such suit, action or proceeding. In the event of litigation
between the parties arising hereunder, the prevailing party shall be entitled to
costs and reasonable attorney's fees.
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 Underwriter shall be directed to
Janssen/Meyers Associates, L.P., 17 State Street, 15th Floor, New York, New York
10004, Attention Bruce Meyers, with a copy to Goldstein & DiGioia, LLP, 369
Lexington Avenue, New York, New York 10017,
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<PAGE> 46
Attention: Victor J. DiGioia, Esq. Notices to the Company shall be directed to
the Company at 2655 LeJeune Road, Suite 535, Coral Gobles, Florida, 33134, with
a copy to Parker Duryee Rosoff & Haft, 529 Fifth Avenue, New York, New York
10011, Attention: Michael DiGiovanna, 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 Underwriters and assigns, and their respective
heirs and legal Underwriters 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. Applicable Law/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. Waiver. The waiver by either party of the breach of any
provision of this Agreement by the other party shall not operate or be construed
as a waiver of any subsequent breach.
18. Assignment. Except as otherwise provided within this
Agreement, neither party hereto may transfer or assign this Agreement without
prior written consent of the other party.
19. Titles and Captions. All article, section and paragraph
titles or captions contained in this Agreement are for convenience only and
shall not be deemed part of the context nor affect the interpretation of this
Agreement.
20. Pronouns and Plurals. All pronouns and any variations
thereof shall be deemed to refer to the masculine, feminine, neuter, singular or
plural as the identity of the Person or Persons may require.
21. Entire Agreement. This Agreement contains the entire
understanding between and among the parties and supersedes any prior
understandings and agreements among them respecting the subject matter of this
Agreement.
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<PAGE> 47
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:___________________________
Name: Charles H. Stein
Title: President
Confirmed and accepted as of the date first above written.
JANSSEN/MEYER ASSOCIATES, L.P.
By:_____________________________
Name: Peter Janssen
Title: President
48
<PAGE> 1
EXHIBIT 3.1.2
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, at a meeting held
on April 23, 1997, adopted resolutions proposing and declaring advisable the
following amendments to the Amended 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 Incorporation, relating to the
capitalization of the Corporation, be amended to add the following
provision to said article:
"On the date of the filing of this Certificate of Amendment to the
Certificate of Incorporation, all issued and outstanding shares of
Common Stock of this Corporation held by each holder of record on
such filing date shall be automatically combined in a reverse stock
split at the rate of 1-for-2.269793, without any further action on
the part of the holders thereof or this Corporation. No fractional
shares of Common Stock shall be issued. All fractional shares for
one-half share or more shall be increased to the next higher whole
number of shares and all fractional shares of less than one-half
share shall be decreased to the next lower whole number of shares."
II. Paragraph SEVENTH of the Certificate of Incorporation, relating to the
classification of the Board of Directors, be added in the following form:
"The Board of Directors of the Corporation shall be divided into
three classes, to be known as Class A, containing two directors,
Class B, containing two directors and Class C, containing one
director.
<PAGE> 2
The term of office of the Class A directors shall expire at the
annual meeting of the stockholders in 1998; the term of office of
the Class B directors shall expire at the annual stockholders'
meeting in 1999; and the term of office of the Class C director
shall expire at the annual stockholders' meeting in 2000. Upon
expiration of the terms of office of the directors as classified
above, their successors shall be elected for the term of 3 years
each.
At each annual meeting of the stockholders beginning with the 1998
annual meeting, the successors to the directors whose terms will
then expire will be elected to serve from the time of election and
qualification until the third annual meeting following election and
until their successors have been duly elected and qualified. Any
additional directorships resulting from the increase in the number
of directors will be distributed among the three classes so that, as
nearly as possible, each class will consist of an equal number of
directors."
SECOND: That pursuant to resolutions of the Board of Directors of the
Corporation, written consent by a majority of the stockholders of the
Corporation has been given in accordance with Section 228(d) of the General
Corporation Law of the State of Delaware, consenting to the filing of this
amendment and written notice to the non-consenting stockholders has been given
as provided in accordance with Section 228(d) of the General Corporation Law of
the State of Delaware.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
signed by Charles H. Stein, its President and Chief Executive Officer, on this
23rd day of April, 1997.
CONSERVER CORPORATION OF AMERICA, INC.
By: /s/ Charles H. Stein
__________________________________________________
Charles H. Stein, President and Chief Executive
Officer
<PAGE> 1
EXHIBIT 4.3
- --------------------------------------------------------------------------------
CONSERVER CORPORATION OF AMERICA
AND
JANSSEN/MEYERS ASSOCIATES LP
------------------
UNDERWRITER'S WARRANT AGREEMENT FOR SHARES
DATED AS OF , 1997
- --------------------------------------------------------------------------------
<PAGE> 2
UNDERWRITER'S WARRANT AGREEMENT dated as of __________, 1997 between
CONSERVER CORPORATION OF AMERICA, a Delaware corporation with its principal
address at 2655 LeJeune Road Suite 535, Coral Gables Florida 33134 (the
"Company") and JANSSEN/MEYERS ASSOCIATES LP, as Underwriter, a New York limited
partnership (hereinafter referred to variously as the "Holder" or the
"Underwriter").
W I T N E S S E T H :
WHEREAS, the Underwriter has agreed pursuant to the underwriting
agreement (the "Underwriting Agreement") dated as of the date hereof between the
Underwriter and the Company, to underwrite the Company's proposed public
offering (the "Public Offering") of 2,200,000 shares of Common Stock at a public
offering price of $5.00 per share (the "Shares"); and
WHEREAS, the Company proposes to issue to the Underwriter warrants
("Underwriter's Warrants") to purchase up to an aggregate of 220,000 fully paid
non-assessable shares (the "Shares") of the Company's common stock, $.001 par
value (the "Common Stock") at an exercise price of $8.25 per share (165% of the
public offering price of the Shares); and
WHEREAS, the Underwriter's Warrants to be issued pursuant to this
Agreement will be issued on the Closing Date (as such term is defined in the
3
<PAGE> 3
Underwriting Agreement) by the Company to the Underwriter in consideration for,
and as part of the compensation in connection with the Public Offering;
NOW, THEREFORE, in consideration of the premises, the payment by the
Underwriter to the Company of an aggregate of Two Hundred and Twenty Dollars
($220.00), the agreements herein set forth and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
l. Grant. The Holder is hereby granted the right to purchase, at any
time from June, 1998 [one year after effective date] until 5:30 P.M., New York
time, on June, 2002 four years after effective date], up to an aggregate of
220,000 Shares at an initial exercise price (subject to adjustment as provided
in Section 8 hereof) of $8.25 per Share (the "Exercise Price"), subject to the
terms and conditions of this Agreement. Except as set forth herein, the Shares
issuable upon exercise of the Underwriter's Warrants are in all respects
identical to the shares of Common Stock being purchased by the Underwriter for
resale to the public pursuant to the terms and provisions of the Underwriting
Agreement.
2. Underwriter's Warrant Certificates. The Underwriter's warrant
certificates (the "Underwriter's 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.
4
<PAGE> 4
3. Exercise of Underwriter's Warrants.
Section 3.1 Exercise. The Underwriter's Warrants initially are
exercisable at an aggregate initial exercise price (subject to adjustment as
provided in Section 8 hereof) per share, as set forth in Section 6 hereof
payable by certified or official bank check in New York Clearing House funds,
subject to adjustment as provided in Section 8 hereof. Upon surrender at the
Company's principal offices (currently located at 2655 LeJeune Road, Suite 535,
Coral Gables, Florida 33134), of an Underwriter's Warrant Certificate with the
annexed Form of Election to Purchase duly executed, together with payment of the
Purchase Price (as hereinafter defined) for the Shares purchased, the registered
holder of an Underwriter's Warrant Certificate ("Holder" or "Holders") shall be
entitled to receive a certificate or certificates for the Shares so purchased.
The purchase rights represented by each Underwriter's Warrant Certificate are
exercisable at the option of the Holder thereof, in whole or in part (but not as
to fractional shares of Common Stock underlying the Underwriter's Warrants). In
the case of the purchase of less than all the Shares purchasable under any
Underwriter's Warrant Certificate, the Company shall cancel the Underwriter's
Warrant Certificate upon the surrender thereof and shall execute and deliver a
new Underwriter's Warrant Certificate of like tenor for the balance of the
Shares purchasable thereunder.
Section 3.2 Cashless Exercise. At any time during the Warrant Exercise
Term, the Holder may, at its option, exchange the Warrants represented by such
5
<PAGE> 5
Holder's Warrant certificate, in whole or in part (a "Warrant Exchange), into
the number of fully paid and non-assessable Shares determined in accordance with
this Section 3.2, by surrendering such Warrant certificate at the principal
office of the Company or at the office of its transfer agent, accompanied by a
notice stating such Holder's intent to effect such exchange, the number of
Shares to be exchanged and the date on which the Holder requests that such
Warrant Exchange occur (the "Notice of Exchange"). The Warrant Exchange shall
take place on the date specified in the Notice of Exchange, or, if later, the
date the Notice of Exchange is received by the Company (the "Exchange Date").
Certificates for the Shares issuable upon such Warrant Exchange and, if
applicable, a new Warrant of like tenor evidencing the balance of the Shares
remaining subject to the Holder's Warrant certificate, shall be issued as of the
Exchange Date and delivered to the Holder within three (3) days following the
Exchange Date. In connection with any Warrant Exchange, the Holder's Warrant
certificate shall represent the right to subscribe for and acquire (i) the
number of Shares (rounded to the next highest integer) equal to (A) the number
of Shares specified by the Holder in its Notice of Exchange (the "Total Share
Number") less (B) the number of Shares equal to the quotient obtained by
dividing (i) the product of the Total Share Number and the existing Exercise
Price (as hereinafter defined) per Share by (ii) the Market Price (as defined in
Section 3.3 hereof) of a share of Common Stock.
Section 3.3 Market Price. For the purpose of this Agreement, the phrase "Market
Price" at any date shall be deemed to be the (i) last reported sale
6
<PAGE> 6
price on the last trading day or, in case no such reported sale takes place on
such day, the average last reported sale price for the last three (3) trading
days, in either case as officially reported by the principal securities exchange
on which the Common Stock is listed or admitted to trading, or, (ii) if the
Common Stock is not listed or admitted to trading on any national securities
exchange but is listed or quoted upon the Nasdaq National Market or SmallCap
Market (referred to hereinafter as "NASDAQ"), the closing bid price on the last
trading day, or, in case no such reported bid takes place on such day, the
average closing bid price for the last three (3) trading days, as furnished by
NASDAQ or similar organization if NASDAQ is no longer reporting such
information, or (iii) if the Common Stock is not listed upon a principal
exchange or quoted on NASDAQ, but quotes for the Common Stock are available in
the OTC Bulletin Board or "pink sheets" the closing bid price on the last
trading day, or, in case no such bid takes place on such day, the average
closing bid price for the last three (3) trading days as furnished on the OTC
Bulletin Board or (iv) in the event the Common Stock is not traded upon a
principal exchange and not listed on NASDAQ and quotes are not available on the
OTC Bulletin Board, as determined in good faith by resolution of the Board of
Directors of the Company, based on the best information available to it.
4. Issuance of Certificates. Upon the exercise of the Underwriter's
Warrants, the issuance of certificates for the Shares or other securities,
properties or rights underlying such Underwriter's Warrants, shall be made
forthwith (and in any event within five (5) business days thereafter) without
charge to the Holder thereof
7
<PAGE> 7
including, without limitation, any tax which may be payable in respect of the
issuance thereof, and such certificates shall (subject to the provisions of
Sections 5 and 7 hereof) be issued in the name of, or in such names as may be
directed by, the Holder thereof; provided, however, that the Company shall not
be required to pay any tax which may be payable in respect of any transfer
involved in the issuance and delivery of any such certificates in a name other
than that of the Underwriter and the Company shall not be required to issue or
deliver such certificates unless or until the person or persons requesting the
issuance thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid.
The Underwriter's Warrant Certificates and the certificates
representing the Shares issuable upon exercise of the Underwriter's Warrants
shall be executed on behalf of the Company by the manual or facsimile signature
of the then Chairman or Vice Chairman of the Board of Directors or President or
Vice President of the Company under its corporate seal reproduced thereon,
attested to by the manual or facsimile signature of the then present Secretary
or Assistant Secretary of the Company. The Underwriter's Warrant Certificates
shall be dated the date of the execution by the Company upon initial issuance,
division, exchange, substitution or transfer. The certificates representing the
Shares issuable upon exercise of the Underwriter's Warrant shall be identical in
form to those issued in connection with the Public Offering.
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5. Restriction On Transfer of Underwriter's Warrants. The Holder of an
Underwriter's Warrant Certificate, by its acceptance thereof, covenants and
agrees that the Underwriter's Warrants are not being acquired with a view to the
distribution thereof; and that the Underwriter's Warrants may not be sold,
transferred, assigned, hypothecated or otherwise disposed of, in whole or in
part, for a period of one (1) year from the date hereof, except to officers of
the Underwriter or members of the Selling Group (as defined in the Underwriting
Agreement).
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 Underwriter's
Warrant shall be $8.25 per Share. The exercise price shall be adjusted from time
to time in accordance with the provisions of Section 8 hereof.
Section 6.2 Exercise Price. The term "Exercise Price" herein shall mean
the initial exercise prices or the adjusted exercise price, depending upon the
context of the Underwriter's Warrants.
7. Registration Rights.
Section 7.1 Registration Under the Securities Act of 1933. The
Underwriter's Warrants and the Shares issuable upon exercise of the
Underwriter's Warrants, have been registered (the "Registration Statement")
under the Securities Act of 1933, as amended (the "Act").
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Section 7.2 Piggyback Registration. If, at any time commencing after
__________, 1998 (one (1) year from the Effective Date), through and including
________, 2002 (five (5) years from the Effective Date), the Company proposes to
register any of its securities under the Act (other than in connection with a
merger or pursuant to Form S-8 or similar form) it will give written notice by
registered or certified mail, at least thirty (30) days prior to the filing of
each such registration statement, to the Underwriter and to all other Holders of
the Underwriter's Warrants and Shares underlying the Underwriter's Warrants, of
its intention to do so. If any of the Underwriter or other Holders of the
Underwriter's Warrants and/or the Shares underlying the Underwriter's Warrants,
notify the Company within twenty (20) days after receipt of any such notice of
its or their desire to include any such securities in such proposed registration
statement, the Company shall afford each of the Underwriter and such Holders of
the Underwriter's Warrants and/or Shares underlying the Underwriter's Warrants,
the opportunity to have any of such securities registered under such
registration statement; provided, however, that in the event the underwriters
advise the Company that in their opinion the number of securities requested to
be included in such registration pursuant to this Agreement and pursuant to any
other rights granted by the Company to holders of its securities exceeds the
number of securities that can be sold in the offering without adversely
affecting the offering price of the Company's securities, the Company may first
include in such registration all securities the Company proposes to sell
(without including the
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holders of other rights granted by the Company), and each Holder shall accept a
pro rata reduction in the number of shares to be included in such registration
statement.
Notwithstanding the provisions of this Section 7.2, the Company shall
have the right at any time after it shall have given written notice pursuant to
this Section 7.2 (irrespective of whether a written request for inclusion of any
such securities shall have been made) to elect not to file any such proposed
registration statement, or to withdraw the same after the filing but prior to
the effective date thereof.
Section 7.3 Demand Registration.
(a) At any time commencing after June, 1998 (one (1) year from the
Effective Date) through and including June, 2002 (five (5) years from the
Effective Date), the Holders of the Underwriter's Warrants and Shares underlying
the Underwriter's Warrants, representing a "Majority" of the shares of Common
Stock issuable upon the exercise of the Underwriter's Warrants (assuming the
exercise of all of the Underwriter's Warrants) shall have the right (which right
is in addition to the registration rights under Section 7.2 hereof), exercisable
by written notice to the Company, to have the Company prepare and file with the
Commission, at on one occasion, a registration statement and such other
documents, including a prospectus, as may be necessary in the opinion of both
counsel for the Company and counsel for the Underwriter and Holders, in order to
comply with the provisions of the Act, so as to permit a public offering and
sale of their respective Underwriter's Warrants and Shares for at least nine (9)
consecutive
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months by such Holders and any other Holders of the Underwriter's Warrants and
the Shares who shall notify the Company within ten (10) days after receiving
notice from the Company of such request. Such registration and all costs
incident thereof shall be at the expense of the Company, as provided in Section
7.4(b).
(b) The Company covenants and agrees to give written notice of any
registration request under this Section 7.3 by any Holder or Holders to all
other registered Holders of the Underwriter's Warrants and Shares 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 within the time period specified
in Section 7.4(a) hereof, through and including ___________, 2002 (five (5)
years from the Effective Date), any Holder of the Underwriter's Warrants and/or
Shares, representing a "Majority" (as hereinafter defined) of the shares of
Common Stock issuable upon the exercise of the Underwriter's Warrants (assuming
the exercise of all of the Underwriter's Warrants) 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 shares, provided, however, that the provisions of Section 7.4(b)
hereof shall not apply to any such registration request and registration and all
costs incident thereto shall be at the expense of the Holder or Holders making
such request.
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(d) The Company and the Holders agree that the Holders of Underwriters
Warrants and Shares (the "Securities") will suffer damages if the Company fails
to fulfill its obligations under this Section 7.3 and that ascertaining the
extent of such damages with precision would not be feasible. Accordingly, the
Company agrees to pay liquidated damages in the form of interest with respect to
the Securities held by each Holder ("Liquidated Damages"), if:
(i) any Registration Statement required to be filed pursuant
to this Section 7.3 is not filed with the SEC on or prior to the date specified
in Section 7.4(a) for such filing in this Agreement;
(ii) any such Registration Statement has not been declared
effective by the SEC on or prior to the earliest possible time but in no event
later than 90 days after such filing (the "Effectiveness Target Date"); or
(iii) any Registration Statement required to be filed pursuant
to this Section 7.3 is filed and declared effective but shall thereafter cease
to be effective or fail to be usable for its intended purpose without being
succeeded immediately by a post effective amendment to such Registration
Statement that cures such failures and that is itself immediately declared
effective;
(each such event in clauses (i) through (iii) above being referred to herein as
a "Registration Default"). The additional interest comprising Liquidated Damages
shall be an amount equal to (A) with respect to the first 90-day period
immediately following the occurrence of a Registration Default, 10% of the
number of Securities held by such Holder (pro-rated weekly), plus (B) an
additional 10% of the
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<PAGE> 13
number of Securities held by such Holder with respect to each 30-day period
after the first 90 day period, until all Registration Defaults have been cured,
up to 100% of the number of Securities held by such Holder. The Company shall
notify the Holders within one Business Day after each and every date on which a
Registration Default occurs. All accrued and unpaid Liquidated Damages shall be
paid immediately by the Company on the expiration of each 90-day and 30-day
period by mailing certificates for such securities to Holders of record of the
Securities at such address as is set forth on the stock record books of the
Company. Each obligation to pay Liquidated Damages shall be deemed to accrue
beginning on the day of the applicable Registration Default (other than as set
forth above). Following the cure of all Registration Defaults, the accrual of
Liquidated Damages will cease until the next Registration Default, if any.
Section 7.4 Covenants of the Company With Respect to Registration. In
connection with any registration under Section 7.2 or 7.3 hereof, the Company
covenants and agrees as follows:
(a) The Company shall use its best efforts to file a registration
statement within sixty (60) days of receipt of any demand therefor in accordance
with Section 7.3(a), shall use its best efforts to have any registration
statement declared effective by the Effectiveness Target Date, and shall furnish
each Holder desiring to sell the Shares underlying the Underwriter's Warrants
such number of prospectuses as shall reasonably be requested. Notwithstanding
the foregoing sentence, the Company shall be entitled
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to postpone the filing of any registration statement otherwise required to be
prepared and filed by it pursuant to this Section 7.4(a) if the Company (i) is
publicly committed to a self-tender or exchange offer and the filing of a
registration statement would cause a violation of Regulation M under the
Securities Exchange Act of 1934 as amended (the "Exchange Act") or (ii) or if
the Company is involved in negotiating or consummating an acquisition or merger
which would make such registration impracticable in which case the filing of the
registration statement may be delayed for a period of up to 90 days. In the
event of such postponement, the Company shall be required to file the
registration statement pursuant to this Section 7.4(a) upon the earlier of (i)
the consummation or termination, as applicable, of the event requiring such
postponement or (ii) 90 days after the receipt of the initial demand for such
registration. Additionally, notwithstanding anything to the contrary contained
herein, during any period that a registration statement filed pursuant to
Section 7.3 hereof is effective, the Company shall have the right to prohibit
the sale of any shares thereunder upon notice to the Holder(s) (A) if in the
opinion of counsel for the Company, the Company would thereby be required to
disclose information not otherwise then required by law to be publicly disclosed
where it is significant to the operations or well being of the Company that such
information remain undisclosed, provided that the Company shall use its best
efforts to minimize the period of time in which it shall prohibit the sale of
any of such shares pursuant to this clause (A), (B) for periods of up to 30 days
if the Company reasonably believes that such sale might reasonably be expected
to have
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<PAGE> 15
an adverse effect on any significant proposal or plan of the Company to engage
in an acquisition of assets or any merger, consolidation, tender offer,
financing, corporate reorganization or similar transaction; (C) during the
period starting with the date 10 days prior to the Company's estimate of the
date of filing of, and ending on a date 90 days after the effective date of, a
Company initiated registration in which the Holders are entitled to and may in
fact participate in accordance with Section 7.2 hereof, but in no event longer
than 180 days; or (D) upon the happening of any event, as a result of which the
prospectus under the registration statement 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 not misleading in light of the
circumstances then existing (in which case, the Company shall within a
reasonable period provide the Holder with revised or supplemental prospectuses
and the Holders shall promptly take action to cease making any offers of such
shares until receipt and distribution of such revised or supplemental
prospectuses.
(b) The Company shall pay all costs (excluding fees and expenses of
Holder(s) counsel and any underwriting or selling commissions), fees and
expenses in connection with all registration statements filed pursuant to
Sections 7.2 and 7.3(a) hereof including, without limitation, the Company's
legal and accounting fees, printing expenses, and blue sky fees and expenses.
The Holder(s) will pay all costs, fees and expenses in connection with any
registration statement filed pursuant to Section 7.3(c).
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<PAGE> 16
(c) The Company will take all necessary action which may be required in
qualifying or registering the Underwriter's Warrants and Shares underlying the
Underwriter's Warrants included in a registration statement for offering and
sale under the securities or blue sky laws of such states as reasonably are
requested by the Holder(s), provided that the Company shall not be obligated to
execute or file any general consent to service of process or to qualify as a
foreign corporation to do business under the laws of any such jurisdiction.
(d) The Company shall indemnify the Holder(s) of the Underwriter's
Warrants and Shares 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 Exchange Act, against all loss, claim, damage,
expense or liability (including all expenses reasonably incurred in
investigating, preparing or defending against any claim whatsoever) to which any
of them may become subject under the Act, the Exchange Act or otherwise, arising
from such registration statement but only to the same extent and with the same
effect as the provisions pursuant to which the Company has agreed to indemnify
the Underwriter contained in Section 7 of the Underwriting Agreement.
(e) The Holder(s) of the Underwriter's Warrants and Shares underlying
the Underwriter's Warrants to be sold pursuant to a registration statement, and
their successors and assigns, shall severally, and not jointly, indemnify the
Company, its officers and directors and each person, if any, who controls the
Company within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act,
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<PAGE> 17
against all loss, claim, damage or expense or liability (including all expenses
reasonably incurred in investigating, preparing or defending against any claim
whatsoever) to which they may become subject under the Act, the Exchange Act or
otherwise, arising from information furnished by or on behalf of such Holders,
or their successors or assigns, for specific inclusion in such registration
statement to the same extent and with the same effect as the provisions
contained in Section 7 of the Underwriting Agreement pursuant to which the
Underwriter has agreed to indemnify the Company.
(f) Nothing contained in this Agreement shall be construed as requiring
the Holder(s) to exercise their Underwriter's Warrants prior to the initial
filing of any registration statement or the effectiveness thereof.
(g) The Company shall not permit the inclusion of any securities other
than the Shares underlying the Underwriter's Warrants to be included in any
registration statement filed pursuant to Section 7.3 hereof, or permit any other
registration statement (other than in connection with a merger or on Form S-8)
to become effective within 120 days of a registration statement filed pursuant
to Section 7.3 hereof, without the prior written consent of the Holders of the
Underwriter's Warrants or Shares underlying the Underwriter's Warrants
representing a majority of the shares of Common Stock issuable upon the exercise
of such Underwriter's Warrants.
(h) If the Shares underlying the Shares underlying the Underwriter's
warrants are to be sold in an underwritten public offering, the Company shall
use its best
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efforts to furnish to each Holder participating in the offering and to each such
underwriter, a signed counterpart, addressed to such underwriter, of (i) an
opinion of counsel to the Company dated the date of the closing under the
underwriting agreement, and (ii) a "cold comfort" letter dated the date of the
closing under the underwriting agreement signed by the independent public
accountants who have issued a report on the Company's financial statements
included in such registration statement, in each case covering substantially the
same matters with respect to such registration statement (and the prospectus
included therein) and, in the case of such accountants' letter, with respect to
events subsequent to the date of such financial statements, as are customarily
covered in opinions of issuer's counsel and in accountants' letters delivered to
underwriters in underwritten public offerings of securities.
(i) The Company shall as soon as practicable after the effective date
of the registration statement, and in any event within 15 months thereafter,
have made "generally available to its security holders" (within the meaning of
Rule 158 under the Act) an earnings statement (which need not be audited)
complying with Section 11(a) of the Act and covering a period of at least 12
consecutive months beginning after the effective date of the registration
statement.
(j) The Company shall deliver promptly to each Holder participating in
the offering requesting the correspondence and memoranda described below, and
the managing underwriters, copies of all correspondence between the Commission
and the Company, its counsel or auditors and all memoranda relating to
discussions
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with the Commission or its staff with respect to the registration statement and
permit each Holder and underwriter to do such investigation, upon reasonable
advance notice, with respect to information contained in or omitted from the
registration statement as it deems reasonably necessary to comply with
applicable securities laws or rules of the National Association of Securities
Dealers, Inc. ("NASD"). Such investigation shall include access to books,
records and properties and opportunities to discuss the business of the Company
with its officers and independent auditors, all to such reasonable extent and at
such reasonable times and as often as any such Holder shall reasonably request.
(k) The Company shall enter into an underwriting agreement with the
managing underwriter(s) selected for such underwriting, if any, by Holders
holding a Majority of the Underwriter's Warrants and Shares underlying the
Underwriter's Warrants requested to be included in such underwriting. Such
underwriting agreement shall be satisfactory in form and substance to the
Company, each Holder and such managing underwriters, and shall contain such
representations, warranties and covenants by the Company and such other terms as
are customarily contained in agreements of that type used by the managing
underwriter(s).
The Holders shall be parties to any underwriting agreement relating to
an underwritten sale of their Underwriter's Warrants and the Shares underlying
the Underwriter's Warrants and may, at their option, require that any or all the
representations, warranties and covenants of the Company to or for the benefit
of such 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, their intended methods of distribution, and except for matters
related to disclosures with respect to such Holders, contained or required to be
contained, in such registration statement under the Act and the rules and
regulations thereunder.
(1) For purposes of this Agreement, the term "Majority" in reference to
the Holders of Underwriter's Warrants and Shares, shall mean in excess of fifty
percent (50%) of the then outstanding Shares, assuming the full exercise of all
Underwriter's Warrants that (i) are not held by the Company, an affiliate,
officer, creditor, employee or agent thereof or any of their respective
affiliates, members of their families, persons acting as nominees or in
conjunction therewith or (ii) have not been resold to the public pursuant to
Rule 144 under the Act or a registration statement filed with the Commission
under the Act.
8. Adjustments to Exercise Price and Number of Securities.
Section 8.1 Subdivision and Combination. In case the Company shall at
any time subdivide or combine the outstanding shares of Common Stock, the
Exercise Price of the Underwriter's Warrants shall forthwith be proportionately
decreased in the case of subdivision or increased in the case of combination.
Section 8.2 Adjustment in Number of Securities. Upon each adjustment of
the Exercise Price of the Underwriter's Warrants, pursuant to the provisions of
this Section 8, the number of shares issuable upon the exercise of the
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Underwriter's Warrants, shall be adjusted to the nearest full amount by
multiplying a number equal to the exercise price in effect immediately prior to
such adjustment by the number of shares of Common Stock issuable upon exercise
of the Underwriter's Warrants immediately prior to such adjustment and dividing
the product so obtained by the adjusted Exercise Prices.
Section 8.3 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 Articles of Incorporation of the Company as amended as of
the date hereof, or (ii) any other class of stock resulting from successive
changes or reclassifications of such Common Stock, consisting solely of changes
in par value, or from par value to no par value, or from no par value to par
value. In the event that the Company shall after the date hereof issue common
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 Underwriter's Warrant, either shares of Common Stock or a
like number of such securities with greater or superior voting rights.
Section 8.4 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 Holder shall have
the
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right thereafter (until the expiration of such warrant) to receive, upon
exercise of such warrant, the kind and amount of shares of stock and other
securities and property receivable upon such consolidation or merger, by a
holder of the number of shares of Common Stock of the Company for which such
warrant might have been exercised immediately prior to such consolidation,
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 8.5 No Adjustment of Exercises Price in Certain Cases. No
adjustment of the Exercise Price of the Underwriter's Warrants shall be made:
(a) Upon the issuance or sale of the Underwriter's Warrants or
Shares issuable upon the exercise of the Underwriter's Warrants or the
exercise of options and warrants outstanding on the date hereof and
described in the prospectus relating to the Public Offering; or
(b) If the amount of such adjustment shall be less than two
cents ($.02) per share of Common Stock, provided, however, that in such
case any adjustment that would otherwise be required then to be made
shall be carried forward and shall be made at the time of and together
with the next subsequent adjustment which, together with any adjustment
so carried forward, shall amount to at least two cents ($.02) per share
of Common Stock.
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9. Exchange and Replacement of Underwriter's Warrant Certificates. Each
Underwriter's 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 Underwriter's Warrant Certificate of like tenor and date
representing in the aggregate the right to purchase the same number of Shares as
provided in the original Underwriter's Warrants in such denominations as shall
be designated by the Holder thereof at the time of such surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of any Underwriter's Warrant
Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to it, and reimbursement to the Company of all
reasonable expenses incidental thereto, and upon surrender and cancellation of
the Underwriter's Warrants, if mutilated, the Company will make and deliver a
new Underwriter's Warrant Certificate of like tenor, in lieu thereof.
10. Elimination of Fractional Interests. The Company shall not be
required to issue certificates representing fractions of shares of Common Stock
upon the exercise of the Underwriter's Warrants, nor shall it be required to
issue scrip or pay cash in lieu of fractional interests, it being the intent of
the parties that all fractional interests shall be eliminated by rounding any
fraction up to the nearest whole number of shares of Common Stock or other
securities, properties or rights.
11. Reservation and Listing of Securities. The Company shall at all
times reserve and keep available out of its authorized shares of Common Stock,
solely for
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<PAGE> 24
the purpose of issuance upon the exercise of the Underwriter's 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 Underwriter's Warrants and payment of the Exercise
Price therefor, all shares of Common Stock and other securities issuable upon
such exercise shall be duly and validly issued, fully paid, non-assessable and
not subject to the preemptive rights of any stockholder. As long as the
Underwriter's Warrants shall be outstanding, the Company shall use its best
efforts to cause all shares of Common Stock issuable upon the exercise of the
Underwriter's Warrants to be listed (subject to official notice of issuance) on
all securities exchanges on which the Common Stock issued to the public in
connection herewith may then be listed and/or quoted on NASDAQ.
12. Notices to Underwriter's Warrant Holders. Nothing contained in this
Agreement shall be construed as conferring upon the Holders the right to vote or
to consent or to receive notice as a stockholder in respect of any meetings of
stockholders for the election of directors or any other matter, or as having any
rights whatsoever as a stockholder of the Company. If, however, at any time
prior to the expiration of the Underwriter's Warrants and their exercise, any of
the following events shall occur:
(a) the Company shall take a record of the holders of its
shares of Common Stock for the purpose of entitling them to receive a
dividend or distribution payable otherwise than in cash, or a cash
dividend or distribution
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<PAGE> 25
payable otherwise than out of current or retained earnings, 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
(c) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation or merger) or a sale of
all or substantially all of its property assets and business as an
entirety shall be proposed;
then, in any one or more of such events the Company shall give written notice to
the Holders of such event at least fifteen (15) days prior to the date fixed as
a record date or the date of closing the transfer books for the determination of
the stockholders entitled to such dividend, distribution, convertible or
exchangeable securities or subscription rights, or entitled to vote on such
proposed dissolution, liquidation, winding up or sale. Such notice shall specify
such record date or the date of closing the transfer books, as the case may be.
Failure to give such notice or any defect therein shall not affect the validity
of any action taken in connection with the declaration or payment of any such
dividend, or the issuance of any convertible or exchangeable securities, or
subscription rights, options or warrants, or any proposed dissolution,
liquidation, winding up or sale.
13. Notices.
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<PAGE> 26
All notices requests, consents and other communications hereunder shall
be in writing and shall be deemed to have been duly made when delivered, or
mailed by registered or certified mail, return receipt requested:
(a) If to the registered Holder of the Underwriter's Warrants,
to the address of such Holder as shown on the books of the Company; or
(b) If to the Company, to the address set forth in Section 3
hereof or to such other address as the Company may designate by notice
to the Holders.
14. Supplements and Amendments. The Company and the Underwriter may
from time to time supplement or amend this Agreement without the approval of any
holders of Underwriter's Warrant Certificates (other than the Underwriter) in
order to cure any ambiguity, to correct or supplement any provision contained
herein which may be defective or inconsistent with any provisions herein or to
make any other provisions in regard to matters or questions arising hereunder
which the Company and the Underwriter may deem necessary or desirable and which
the Company and the Underwriter deem shall not adversely affect the interests of
the Holders of Underwriter's Warrant Certificates.
15. Successors. All the covenants and provisions of this Agreement
shall be binding upon and inure to the benefit of the Company, the Holders and
their respective successors and assigns hereunder.
16. Termination. This Agreement shall terminate at the close of
business on June, 2002. Notwithstanding the foregoing, the indemnification
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provisions of Section 7 shall survive such termination until the close of
business on April 16, 2004.
17. Governing Law: Submission to Jurisdiction. This Agreement and each
Underwriter's Warrant Certificate issued hereunder shall be deemed to be a
contract made under the laws of the State of New York and for all purposes shall
be construed in accordance with the laws of such State without giving effect to
the rules of said State governing the conflicts of laws.
The Company, the Underwriter and the Holders hereby agree that any
action, proceeding or claim against it arising out of, or relating in any way
to, this Agreement shall be brought and enforced in the courts of the State of
New York or of the United States of America for the Southern District of New
York, and irrevocably submits to such jurisdiction, which jurisdiction shall be
exclusive. The Company, the Underwriter and the Holders hereby irrevocably waive
any objection to such exclusive jurisdiction or inconvenient forum. Any such
process or summons to be served upon any of the Company, the Underwriter and the
Holders (at the option of the party bringing such action, proceeding or claim)
may be 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 13 hereof. Such mailing shall be deemed personal service and
shall be legal and binding upon the party so served in any action, proceeding or
claim. The Company, the Underwriter and the Holders agree that the prevailing
party(ies) in any such action or proceeding shall be entitled to recover from
the other party(ies) all of its/their
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reasonable legal costs and expenses relating to such action or proceeding and/or
incurred in connection with the preparation therefor.
18. Entire Agreement: Modification. This Agreement (including the
Underwriting Agreement to the extent portions thereof are referred to herein)
contains the entire understanding between the parties hereto with respect to the
subject matter hereof and, except as provided in Section 14 hereof, may not be
modified or amended except by a writing duly signed by the party against whom
enforcement of the modification or amendment is sought.
19. Severability. If any provision of this Agreement shall be held to
be invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provision of this Agreement.
20. Captions. The caption headings of the Sections of this Agreement
are for convenience of reference only and are not intended, nor should they be
construed as, a part of this Agreement and shall be given no substantive effect.
21. Benefits or this Agreement. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company and the
Underwriter and any other registered Holder(s) of the Underwriter's Warrant
Certificates or Shares underlying the Underwriter's Warrants any legal or
equitable right, remedy or claim under this Agreement; and this Agreement shall
be for the sole and exclusive benefit of the Company and the Underwriter and any
other Holder(s) of the Underwriter's Warrant Certificates or Shares.
29
<PAGE> 29
22. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and such counterparts shall together constitute but one and the
same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
[SEAL] CONSERVER CORPORATION OF AMERICA
By
-----------------------------------
Name:
Title:
Attest:
- -------------------------------
Secretary
JANSSEN/MEYERS ASSOCIATES LP
By
-----------------------------------
Name:
Title:
30
<PAGE> 30
EXHIBIT A
[FORM OF UNDERWRITER'S WARRANT CERTIFICATE]
THE UNDERWRITER'S WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER
SECURITIES ISSUABLE UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF
1933, (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR
RULE UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN
OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL
FOR THE ISSUER, THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE UNDERWRITER'S WARRANTS REPRESENTED BY THIS
CERTIFICATE IS RESTRICTED IN ACCORDANCE WITH THE UNDERWRITER'S WARRANT AGREEMENT
REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:30 P.M., NEW YORK TIME, _____________, 2002
No. UW-1 220,000 Underwriter's Warrants
Underwriter's Warrant Certificate
This Underwriter's Warrant Certificate certifies that
______________________, or registered assigns, is the registered holder of
220,000 Underwriter's Warrants to purchase initially, at any time from
________________, 1998 [one year from the effective date of the offering] until
5:30 p.m. New York time on _____________, 2002 [five years from the effective
date of the offering] ("Expiration Date"), up to 220,000 fully-paid and
non-assessable shares of Common Stock, par value $.001 per share (the
"Warrants") of CONSERVER CORPORATION OF AMERICA., a Delaware corporation (the
"Company"), at an initial exercise price, subject to adjustment in certain
events (the "Exercise Price"), of $8.25 per Share upon surrender of this
Underwriter's 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 warrant agreement dated as of _____________-, 1997 between the Company and
JANSSEN/MEYERS ASSOCIATES LP (the "Underwriter's Warrant Agreement").
<PAGE> 31
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
otherwise in accordance with the terms of the Underwriter's Warrant Agreement.
In accordance with Section 3.2 of the Underwriter's Warrant Agreement, payment
of the exercise price may also be made by the delivery of Shares of Common Stock
of the Company.
No Underwriter's Warrant may be exercised after 5:30 p.m., New York
time, on the Expiration Date, at which time all Underwriter's Warrants evidenced
hereby, unless exercised prior thereto, shall thereafter be void.
The Underwriter's Warrants evidenced by this Underwriter's Warrant
Certificate are part of a duly authorized issue of warrants pursuant to the
Underwriter's Warrant Agreement, which Underwriter's 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 Underwriter's Warrants.
The Underwriter's Warrant Agreement provides that upon the occurrence
of certain events the exercise price and/or number of the Company's securities
issuable thereupon may, subject to certain conditions, be adjusted. In such
event, the Company will, at the request of the holder, issue a new Underwriter's
Warrant Certificate evidencing the adjustment in the exercise price and the
number and/or type of securities issuable upon the exercise of the Underwriter's
Warrants; provided, however, that the failure of the Company to issue such new
Underwriter's Warrant Certificates shall not in any way change, alter or
otherwise impair, the rights of the holder as set forth in the Underwriter's
Warrant Agreement.
Upon due presentment for registration of transfer of this Underwriter's
Warrant Certificate at an office or agency of the Company, a new Underwriter's
Warrant Certificate or Underwriter's Warrant Certificates of like tenor and
evidencing in the aggregate a like number of Underwriter's Warrants shall be
issued to the transferee(s) in exchange for this Underwriter's Warrant
Certificate, subject to the limitations provided herein and in the Underwriter's
Warrant Agreement, without any charge except for any tax or other governmental
charge imposed in connection with such transfer.
Upon the exercise of less than all of the Underwriter's Warrants
evidenced by this Certificate, the Company shall forthwith issue to the holder
hereof a new Underwriter's Warrant Certificate representing such number of
unexercised Underwriter's Warrants.
2
<PAGE> 32
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Underwriter's 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 Underwriter's Warrant Certificate which are
defined in the Underwriter's Warrant Agreement shall have the meanings assigned
to them in the Underwriter's Warrant Agreement.
IN WITNESS WHEREOF, the Company has caused this Underwriter's Warrant
Certificate to be duly executed under its corporate seal.
Dated as of ______________-, 1997
[SEAL] CONSERVER CORPORATION OF AMERICA
By
-----------------------------------
Name:
Title:
Attest:
- -------------------
Secretary
3
<PAGE> 1
EXHIBIT 10.6
2,200,000 SHARES OF
COMMON STOCK, $.001 PAR VALUE
CONSERVER CORPORATION OF AMERICA
SELECTED DEALER AGREEMENT
May , 1997
- -----------------------
- -----------------------
- -----------------------
Ladies/Gentlemen:
We have agreed as the underwriter (the "Underwriter") named in the
enclosed prospectus (the "Prospectus"), subject to the terms and conditions of
an Underwriting Agreement dated May , 1997 (the "Underwriting Agreement"), to
purchase from CONSERVER CORPORATION OF AMERICA (the "Company") 2,200,000 shares
(the "Firm Shares") of Common Stock, par value $.001 (the "Common Stock"). We
may also purchase as many as 330,000 additional shares of Common Stock (the
"Option Shares") from the Company pursuant to Section 2 (b) of the Underwriting
Agreement. The Firm Shares to be sold by the Company and the Option Shares are
sometimes collectively referred to herein as the "Shares" and are more
particularly described in the Prospectus, additional copies of which will be
supplied in reasonable quantities upon request.
We are offering a portion of the Shares for sale to selected dealers
(the "Selected Dealers"), among whom we are pleased to include you, at the
public offering price of $5.00 per share, less a concession in the amount set
forth in the Prospectus under "Underwriting" ($.2125 per share). This offering
is made subject to delivery of the Shares and their acceptance by the
Underwriter, to the approval of all legal matters by our counsel, and to the
terms and conditions herein set forth, and may be made on the basis of the
reservation of the Shares or an allotment against subscription.
<PAGE> 2
We will advise you by telegram of the method and terms of the offering.
Acceptances should be sent to Janssen/Meyers Associates, L.P., 17 State Street,
New York, New York 10004, Attention: Syndicate Department. Subscription books
may be closed by us at any time without notice, and we reserve the right to
reject any subscription in whole or in part, but notification of allotments
against and rejections of subscriptions will be made as promptly as practicable.
Any of the Shares purchased by you hereunder are to be promptly offered
by you to the public at the public offering price, except as herein otherwise
provided and except that a reallowance from any such public offering price not
in excess of the amount set forth in the Prospectus under "Underwriting"
($.10625 per share) may be allowed to dealers who are members in good standing
of the National Association of Securities Dealers, Inc. (the "NASD"), or foreign
dealers or institutions not eligible for membership in said association who
agree to abide by the conditions with respect to foreign dealers and
institutions set forth in your confirmation below. We may buy Shares from, or
sell Shares to, any Selected Dealer, and any Selected Dealer may buy Shares
from, or sell Shares to, any other Selected Dealer at the public offering price
less all or any part of the concession set forth in the Prospectus. After the
Shares are released for sale to the public, we are authorized to vary the
offering price of the Shares and other selling terms.
If, prior to the termination of this Agreement, we purchase or contract
to purchase any Shares which were purchased by you from us or any Selected
Dealer at a concession from the public offering price (or any Shares which we
believe have been substituted therefor): you agree that we may (i) require you
to pay us on demand an amount equal to the concession on such Shares; (ii) sell
for your account the Shares so purchased and debit or credit your account with
the loss or profit resulting from such sale; or (iii) require you to purchase
such Shares at a price equal to the total cost of such purchase including
commissions and transfer taxes on redelivery.
Shares accepted or allotted hereunder shall be paid for in full at the
public offering price, or, if we shall so advise you, at such price less the
concession to dealers, at the office of Janssen-Meyers Associates, L.P., 17
State Street, New York, New York 10004, prior to 8:30 a.m., New York City time,
on such day after the public offering date as we may advise, by certified or
official bank check payable in New York Clearing House funds to the order of
Janssen-Meyers Associates, L.P., against delivery of certificates. If Shares are
purchased and paid for by you hereunder at the public offering price, the
concession will be paid to you after the termination of this Agreement.
3
<PAGE> 3
We have been advised by the Company that a registration statement (File
No. 333-16571) for the Shares, filed under the Securities Act of 1933, as
amended (the "Act"), has become effective. You agree that in selling the Shares
purchased pursuant hereto (which agreement shall also be for the benefit of the
Company) you will comply with the applicable requirements of the Act and of the
Securities Exchange Act of 1934, as amended, and the terms and conditions set
forth in the Prospectus. No person is authorized by the Company or any of the
Underwriters to give or rely on any information or to make any representations
not contained in the Prospectus in connection with the sale of Shares. You are
not authorized to act as agent for the Company or the Underwriter in offering
the Shares to the public or otherwise. Nothing contained herein shall constitute
that the Selected Dealers are partners with the Underwriter or with one another.
The Underwriter shall not be under any liability (except for our own
want of good faith) for or in respect of the validity or value of, or title to,
any Shares; the form or completeness of, or the statements contained in, or the
validity of, the registration statement, any preliminary prospectus, the
Prospectus, or any amendment or supplement thereto or any other letters or
instruments executed by or on behalf of the Company or others; the form or
validity of the agreement for the purchase of the Shares or this Agreement; the
delivery of the Shares; the performance by the Company or others of any
agreement on its or their part; or any matter in connection with any of the
foregoing; provided, however, that nothing in this paragraph shall be deemed to
relieve the Underwriter from any liability imposed by the Act.
You, by your confirmation below, represent that (i) you are a member in
good standing of the NASD or are a foreign bank or dealer not eligible for
membership in the NASD which agrees to make offers or sales of Shares within the
United States, its territories or its possessions, or to persons who are
citizens thereof or residents therein; (ii) neither you nor any of your
directors, officers, partners or "persons associated with" you (as defined in
the ByLaws of the NASD) nor, to your knowledge, any "related person" (as defined
by the NASD in its Interpretation of Article III, Section I of its Rules of Fair
Practice, as amended) or any other broker-dealer, have participated or intend to
participate in any transaction or dealing as to which documents or information
are required to be filed with the NASD pursuant to such Interpretation, and as
to which such documents or information have not been so filed as required.
You agree not to, at any time prior to the termination of this
Agreement, bid for, purchase, sell or attempt to induce others to purchase or
sell, directly or indirectly, any Common Stock other than (a) as provided for in
this Agreement or the Underwriting Agreement relating to the Shares, or (b)
purchases or sales as broker on unsolicited orders for the account of others. In
making
4
<PAGE> 4
the sales of Shares, if you are a member of the NASD, you will comply with all
applicable rules of the NASD, including, without limitation, the NASD's
Interpretation of Article II, Section I of its Rules of Fair Practice with
respect to Free-Riding and Withholding and Section 24 of Article III of the
NASD's Rules of Fair Practice, or if you are a foreign bank or dealer, you agree
to comply with such Interpretation of Sections 8, 24 and 36 of such Article as
though you were such a member and Section 25 of such Article as it applies to a
nonmember broker or dealer in a foreign country.
Upon application to us, we will inform you as to the advice we have
received from counsel concerning the jurisdictions in which the Shares have been
qualified for sale or are exempt under the respective securities or blue sky
laws of such jurisdictions, but we have not assumed and will not assume any
obligation or responsibility as to the right of any Selected Dealer to sell the
Shares in any jurisdiction.
As Underwriter, we shall have full authority to take such action as we
may deem advisable in respect of all matters pertaining to the offering or
arising thereunder. Neither we, acting as the Underwriter, shall be under any
obligation to you except for obligations expressly assumed by us in this
Agreement.
You agree, upon our request, at any time or times prior to the
termination of this Agreement, to report to us the number of Shares purchased by
you pursuant to the provisions hereof which then remain unsold.
Selected Dealers will be governed by the conditions herein set forth
until this Agreement is terminated. This Agreement will terminate at the close
of business on the 30th business day after the initial public offering of the
Shares, but, in our discretion, may be extended by us for a further period or
periods not exceeding 30 business days in the aggregate and in our discretion,
whether or not extended, may be terminated at any earlier time. Notwithstanding
the termination of this Agreement, you shall remain liable for your
proportionate amount of any claim, demand or liability which may be asserted
against you alone, or against you together with other dealers purchasing Shares
upon the terms hereof, or against us, based upon the claim that the Selected
Dealers, or any of them, constitute an association, an unincorporated business
or other entity.
This Agreement shall be construed in accordance with the laws of the
State of New York without giving effect to conflict of laws principles.
5
<PAGE> 5
In the event that you agree to purchase Shares in accordance with the
terms hereof, and with the aforementioned telegram, kindly confirm such
agreement by completing and signing the form provided for that purpose on the
enclosed duplicate hereof and returning it to us promptly.
All communications from you should be addressed to Janssen- Meyers
Associates, L.P., 17 State Street, New York, New York 10004 Attention: Syndicate
Department. Any notice from us to you shall be deemed to have been duly given if
mailed or telegraphed to you at this address to which this letter is mailed.
Very truly yours,
JANSSEN-MEYERS ASSOCIATES, L.P.
As Underwriter
By: /s/
-----------------------------------
Name:
Title:
6
<PAGE> 6
JANSSEN-MEYERS ASSOCIATES, L.P.
17 State Street
New York, New York 10004
Attention: Syndicate Department
Ladies/Gentlemen:
We hereby confirm our agreement to purchase __________ Shares (as such
term is defined in the Selected Dealer Agreement) of Common Stock of Conserver
Corporation of America, subject to the terms and conditions of the foregoing
Agreement and your telegram to us referred to therein. We hereby acknowledge
receipt of the definitive Prospectus relating to the Shares, and we confirm that
in purchasing Shares we have relied upon no statements whatsoever, written or
oral, other than the statements in such Prospectus. We have made a record of our
distribution of preliminary prospectuses and, when furnished with copies of any
revised preliminary prospectus, we have, upon your request, promptly forwarded
copies thereof to each person to whom we had theretofore distributed preliminary
prospectuses. We confirm that we have complied and will comply with all of the
requirements of Rule 15c2-8 under the Securities Exchange Act of 1934.
We hereby represent that we are a member in good standing of the
National Association of Securities Dealers, Inc. (the "NASD") or, if we are not
such a member, we are a foreign dealer or institution not eligible for
membership in said Association which agrees to make no sales within the United
States, its territories or its possessions or to persons who are citizens
thereof or residents therein. If we are such a member, we agree to comply with
all applicable rules of the NASD, including, without limitation, the provisions
of Section 24 of Article III of the Rules of Fair Practice of the NASD, or, if
we are such a foreign dealer or institution, we agree to comply with all
applicable rules of the NASD, including, without limitation, the NASD's
Interpretation with Respect to Free-Riding and Withholding and Sections 8, 24
and 36 of such Article as if we were such a member, and Section 25 of such
Article as it applies to a non-member broker or dealer in a foreign country.
----------------------------------
Corporate or Firm Name of
Selected Dealer
----------------------------------
(Signature of Authorized
Official or Partner)
7
<PAGE> 7
Dated: , 1997
8
<PAGE> 1
EXHIBIT 10.7
JANSSEN/MEYERS ASSOCIATES, L.P.
17 STATE STREET
NEW YORK, NY 10004
, 1997
Conserver Corporation of America
2655 LeJeune Road, Suite 535
Coral Gables, FL 33134
Attention: Charles Stern, President
Gentlemen:
This letter, when executed by the parties hereto, will
constitute an agreement between Conserver Corporation of America (the "Company")
and Janssen/Meyers Associates, L.P. ("JMA") pursuant to which the Company agrees
to retain JMA and JMA agrees to be retained by the Company under the terms and
conditions set forth below.
1. The Company hereby retains JMA to perform consulting
services related to corporate finance and other financial services matters, and
JMA hereby accepts such retention. In this regard, subject to the terms set
forth below, JMA shall furnish to the Company advice and recommendations with
respect to such aspects of the business and affairs of the Company as the
Company shall, from time to time, reasonably request upon reasonable notice. In
addition, JMA shall hold itself ready to assist the Company in evaluating and
negotiating particular contracts or transactions, if requested to do so by the
Company, upon reasonable notice.
2. As compensation for the services described in paragraph 1
above, the Company shall pay to JMA a fee of $100,000, for the full term of 36
months, payable in 36 equal monthly installments. In addition to the
compensation payable in this Section 2, the Company will reimburse JMA for any
and all reasonable expenses incurred by JMA in the performance of its duties
under paragraphs 3 or 4 hereunder, and JMA shall account for such expenses to
the Company. Such reimbursement shall accumulate and be paid monthly. No
expenses in excess of $1,000 shall be incurred or reimbursed without the prior
consent of the Company. Nothing contained herein shall prohibit JMA from
receiving any additional compensation under paragraphs 3 and 4 herein or
otherwise.
<PAGE> 2
3. In addition, JMA shall hold itself ready to assist the
Company in evaluating and negotiating particular contracts or transactions, if
requested to do so by the Company, upon reasonable notice, and will undertake
such evaluations and negotiations upon prior written agreement as to additional
compensation to be paid by the Company to JMA with respect to such evaluations
and negotiations.
4. The Company and JMA further acknowledge and agree that JMA
may act as a finder or financial consultant in various business transactions in
which the Company may be involved, such as mergers, acquisitions or joint
ventures. The Company hereby agrees that if in the event JMA shall first
introduce to the Company another party or entity, and that as a result of such
introduction, a transaction is consummated, the Company shall pay to JMA a fee
equal to five percent (5%) of the amount up to $5 million and two and one half
percent (2-1/2%) of the excess, of the consideration received by the Company
from parties introduced to the Company by JMA in non-financing related
transactions (including mergers, acquisitions, joint ventures and other business
transactions) consummated by the Company with a party introduced to the Company
by JMA. Such fee shall be paid in cash at the closing of the transaction to
which it relates or at such time as the consideration is received or paid by the
Company, and shall be payable whether or not the transaction involves stock, or
a combination of stock and cash, or is made on the installment sale basis.
5. All obligations of JMA contained herein shall be subject to
JMA's reasonable availability for such performance, in view of the nature of the
requested service and the amount of notice received. JMA shall devote such time
and effort to the performance of its duties hereunder as JMA shall determine is
reasonably necessary for such performance. JMA may look to such others for such
factual information, investment recommendations, economic advice and/or
research, upon which to base its advice to the Company hereunder, as it shall
deem appropriate. The Company shall furnish to JMA all information relevant to
the performance by JMA of its obligations under this Agreement, or particular
projects as to which JMA is acting as advisor, which will permit JMA to know all
facts material to the advice to be rendered, and all material or information
reasonably requested by JMA. In the event that the Company fails or refuses to
furnish any such material or information reasonably requested by JMA, and thus
prevents or impedes JMA's performance hereunder, any inability of JMA to perform
shall not be a breach of its obligations hereunder.
6. Nothing contained in this Agreement shall limit or
restrict the right of JMA or of any partner, employee, agent or
representative of JMA, to be a partner, director, officer,
employee, agent or representative of, or to engage in, any other
2
<PAGE> 3
business, whether of a similar nature or not, nor to limit or restrict the right
of JMA to render services of any kind to any other corporation, firm, individual
or association.
7. JMA will hold in confidence any confidential information
which the Company provides to JMA pursuant to this Agreement unless the Company
gives JMA permission in writing to disclose such confidential information to a
specific third party. In addition, all confidential information which the
Company provided to JMA in connection with its initial public offering shall be
considered confidential information for purposes of this Agreement.
Notwithstanding the foregoing, JMA shall not be required to maintain
confidentiality with respect to information (i) which is or becomes part of the
public domain through no fault of JMA; (ii) of which it had independent
knowledge prior to disclosure; (iii) which comes into the possession of JMA in
the normal and routine course of its own business from and through independent
non-confidential sources; or (iv) which is required to be disclosed by JMA by
governmental requirements. If JMA is requested or required (by oral questions,
interrogatories, requests for information or document subpoenas, civil
investigative demands, or similar process) to disclose any confidential
information supplied to it by the Company, or the existence of other
negotiations in the course of its dealings with the Company or its
representatives, JMA shall, unless prohibited by law, promptly notify the
Company of such request(s) so that the Company may seek an appropriate
protective order.
8. Each of the Company and JMA agrees to indemnify and hold
harmless each other, and their respective partners, employees, agents,
representatives and controlling persons (and the officers, directors, employees,
agents, representatives and controlling persons of each of them) from and
against any and all losses, claims, damages, liabilities, costs and expenses
(and all actions, suits, proceedings or claims in respect thereof) and any legal
or other expenses in giving testimony or furnishing documents in response to a
subpoena or otherwise (including, without limitation, the cost of investigating,
preparing or defending any such action, suit, proceeding or claim, whether or
not in connection with any action, suit, proceeding or claim in which JMA or the
Company is a party), as and when incurred, directly or indirectly, caused by,
relating to, based upon or arising out of JMA's service pursuant to this
Agreement. The Company further agrees that JMA shall incur no liability to the
Company or any other party on account of this Agreement or any acts or omissions
arising out of or related to the actions of JMA relating to this Agreement or
the performance or failure to perform any services under this Agreement except
for JMA's intentional or willful misconduct. This paragraph shall survive the
termination of this Agreement. Notwithstanding the foregoing, no party otherwise
entitled to indemnification shall be entitled thereto to the extent such party
has been determined to have acted in a manner which has been deemed gross
negligence or
4
<PAGE> 4
wilful misconduct regarding the matter for which indemnification is
sought herein.
9. This Agreement may not be transferred, assigned or
delegated by any of the parties hereto without the prior written consent of the
other party hereto.
10. The failure or neglect of the parties hereto to insist, in
any one or more instances, upon the strict performance of any of the terms or
conditions of this Agreement, or their waiver of strict performance of any of
the terms or conditions of this Agreement, shall not be construed as a waiver or
relinquishment in the future of such term or condition, but the same shall
continue in full force and effect.
11. This Agreement is for a term of thirty-six (36) months and
may not be terminated by the Company. This Agreement may be terminated by JMA at
any time upon 30 days' notice; provided JMA shall repay any portion of their fee
which was not earned on the effective date of such termination. Paragraphs 4, 7
and 8 shall survive the expiration or termination of this Agreement under all
circumstances.
12. Any notices hereunder shall be sent to the Company and to
JMA at their respective addresses set forth above. Any notice shall be given by
registered or certified mail, postage prepaid, and shall be deemed to have been
given when deposited in the United States mail. Either party may designate any
other address to which notice shall be given, by giving written notice to the
other of such change of address in the manner herein provided.
13. This Agreement has been made in the State of New York and
shall be construed and governed in accordance with the laws thereof without
giving effect to principles governing conflicts of law.
14. This Agreement contains the entire agreement between the
parties, may not be altered or modified, except in writing and signed by the
party to be charged thereby, and supersedes any and all previous agreements
between the parties relating to the subject matter hereof.
15. This Agreement shall be binding upon the parties hereto,
the indemnified parties referred to in Section 7, and their respective heirs,
administrators, successors and permitted assigns.
5
<PAGE> 5
If you are in agreement with the foregoing, please execute two
copies of this letter in the space provided below and return them to the
undersigned.
Very truly yours,
JANSSEN-MEYERS ASSOCIATES, L.P.
By:_____________________________
ACCEPTED AND AGREED TO AS OF
THE DATE FIRST ABOVE WRITTEN
CONSERVER CORPORATION OF AMERICA
By:___________________________
Charles Stern
President
6
<PAGE> 1
EXHIBIT 10.8
[CONSERVER CORPORATION OF AMERICA LOGO]
April 28, 1997
Mr. James V. Stanton
1310 19th St. NW
Suite LL
Washington, D.C. 20036
Dear James,
This letter will confirm that you and Charles Stein have made arrangements to
send $500,000 to Agrotech 2000 SL in satisfaction of the obligation of Conserver
Corporation of America to send these funds under its agreement with Agrotech.
The $500,000 is to be repaid to you out of the proceeds of the Company's public
offering with interest at the rate of 10% per annum.
Sincerely,
/s/ Gerald Breslauer
Gerald Breslauer
Vice President
<PAGE> 1
EXHIBIT 10.9
[CONSERVER CORPORATION OF AMERICA LOGO]
April 28, 1997
Mr. James V. Stanton
1310 19th St. NW
Suite LL
Washington, D.C. 20036
Dear James,
In advance of a more formal document, this letter is to affirm that I am
personally responsible for $250,000 of the $500,000 loan made by you on behalf
of Conserver Corporation of America to Agrotech 2000SL.
It is intended for the entire $500,000 to be repaid to you from the proceeds of
the Company's public offering anticipated to be effective about the second week
in May 1997.
On behalf of your fellow Directors, I want to thank you for dealing with this
most important condition in our agreement with Agrotech.
Sincerely,
/s/ Charles H. Stein
Charles H. Stein
Chairman of the Board
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the use in Amendment No. 5 to Registration
Statement on Form S-1 of Conserver Corporation of America (File #333-16571) of
our report dated September 27, 1996 (November 19, 1996 with respect to Notes
A,[1]-A[5], E, H[2] and J,and April 9, 1997 with respect to Note A[6]),
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
May 29, 1997
