<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 23, 1997
REGISTRATION NO. 333-16571
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 4
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 APRIL 23, 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 anticipates that the Shares will be included for quotation on Nasdaq 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 $.50 $4.50
- ---------------------------------------------------------------------------------------------------------
Total(3)........................ $11,000,000 $1,100,000 $9,900,000
=========================================================================================================
</TABLE>
(1) Does not reflect additional compensation payable to Janssen/Meyers
Associates, L.P., the representative of the several Underwriters (the
"Representative"), 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 120% of the
initial public offering price (the "Representative's Warrants"); (ii) a
non-accountable expense allowance of 3% of the gross proceeds hereof, (iii)
a three year Financial Consulting Agreement at a monthly fee of $5,000 per
month; and (iv) a preferential right of first refusal with respect to
certain future financings of the Company. In addition, see "Underwriting"
for information concerning indemnification and contribution arrangements
with the Underwriters and other compensation payable to the Representative.
(2) Before deducting estimated expenses of $595,000 payable by the Company,
excluding the non-accountable expense allowance payable to the
Representative.
(3) The Company has granted to the Underwriters an option exercisable within 45
days after the date of this Prospectus to purchase up to an aggregate of
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, $1,265,000 and $11,385,000, respectively. See
"Underwriting."
------------------------
The Securities are being offered by the Underwriters, subject to prior
sale, when, as and if delivered to and accepted by the Underwriters, and subject
to approval of certain legal matters by their counsel and subject to certain
other conditions. The Underwriters reserve the right to withdraw, cancel or
modify this Offering and to reject any order in whole or in part. It is expected
that delivery of the Securities offered hereby will be made against payment at
the offices of 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 , 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 UNDERWRITERS 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 Representative's
Warrants to purchase 220,000 shares of Common Stock issued to the Representative
in connection with this Offering (the "Representative's Warrants") are not
exercised. Such information also assumes (i) that $750,000 in principal amount
of outstanding indebtedness of the Company which, by its terms, can be converted
into 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.
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 "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 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
3
<PAGE> 5
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 that manufactures and packages Conserver 21(TM) near Madrid,
Spain ("Agrotech") and whose principal stockholder is Alfonso de Sande Moreno,
the developer of Conserver 21(TM). Agrotech 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 Symbols 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
=========== ===========
</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 $ 9,269,562
Total assets.............................. 2,443,436 2,156,075 10,021,075
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 9,277,326
</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 at
an assumed 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.
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 authorized manufacturer of Conserver 21(TM). Agrotech
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.
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 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."
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
7
<PAGE> 9
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. If FIFRA registration is
not required, the Company's use of Conserver 21(TM) may require it to comply
with the federal Toxic Substance and Control Act which could subject it to other
reporting and registration obligations. 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 IMPAIRMENT OF 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, 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
8
<PAGE> 10
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. A combination of
patents, trademarks and trade secrets protect the rights and know-how relating
to Conserver 21(TM). 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. 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 the technology, there can be no assurance that infringement claims
will not be asserted against the Company. If 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.
9
<PAGE> 11
DEPENDENCE ON KEY PERSONNEL. The Company's success is dependent upon the
Company's senior corporate management, particularly Charles H. Stein, its Chief
Executive Officer and President. The loss of Mr. Stein's services would have a
material adverse effect on the Company. The Company will enter into a three-year
employment agreement with Mr. Stein commencing on the consummation of 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. The Company also intends to apply for a "key man" life insurance
policy on the life of Mr. Stein in an amount of no less than $1,000,000 prior to
the consummation of this Offering. 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
$4,115,000, or 45.8%, 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 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
Securities 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 Securities offered
hereby is $3.55, or approximately 71%, per share of Common Stock. Additional
dilution to future net tangible
10
<PAGE> 12
book value per share may occur upon the exercise of the Representative's
Warrants, currently outstanding options and warrants, options to be issued under
the Company's 1996 Stock Option Plan and warrants to be issued to a holder of
convertible debentures and its affiliates. The current stockholders of the
Company, including the Company's executive officers and directors and persons or
entities affiliated with them, acquired their Shares of Common Stock for
consideration substantially less than the public offering price of the Shares of
Common Stock offered hereby. As a result, new investors in this Offering will
bear substantially all of the risks inherent in an investment in the Company.
See "Capitalization," "Dilution" and "Certain Transactions."
NO DIVIDENDS AND NONE ANTICIPATED. To date, no dividends have been
declared or paid on the Common Stock, and the Company does not anticipate
declaring or paying any dividends in the foreseeable future, but rather intends
to reinvest profits, if any, in its business. See "Dividend Policy."
LACK OF PUBLIC MARKET; DETERMINATION OF OFFERING PRICE; VOLATILITY OF
PRICES OF THE SHARES. Prior to this Offering, there has been no public market
for the Securities. 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
Representative and bear no relationship to the Company's current earnings, book
value, net worth or other established valuation criteria. The factors considered
in determining the initial public offering prices included an evaluation by
management and the Representative of the history of and prospects for the
industry in which the Company proposes to compete, an assessment of the
Company's management, the prospects of the Company, its capital structure and
certain other factors deemed relevant. Furthermore, the trading prices of the
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), and the 325,000 warrants exercisable at $5.00
per share (the "$5.00 Warrants") 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
after ninety (90) days 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 $5.00 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 approximately 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
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
11
<PAGE> 13
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 Representative, except in connection with private
transactions (not involving a public offering) in which the transferee(s) agrees
in writing to be similarly bound. The 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 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 Representative. The Representative 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
Securities prevailing from time to time. Nevertheless, the sale or availability
for sale of significant quantities of securities could materially adversely
affect the market prices of the Securities. See "Shares Eligible for Future
Sale."
POTENTIAL ADVERSE EFFECT OF FUTURE ISSUANCES OF AUTHORIZED PREFERRED
STOCK. The Company's Certificate of Incorporation authorizes the issuance of
preferred stock with such designations, rights and preferences as may be
determined from time to time by the Board of Directors. Accordingly, the Board
of Directors is empowered, without stockholder approval, to issue preferred
stock with such rates of dividends, redemption provisions, liquidation
preferences, voting rights, conversion privileges and other characteristics as
the Board of Directors may deem necessary. Such preferred stock, if issued,
could adversely affect the holders of the Common Stock. In addition, the
preferred stock could discourage, delay or prevent a takeover of the Company.
The Company has no present intention to issue any shares of preferred stock. See
"Description of Securities."
POTENTIAL ADVERSE EFFECT OF REPRESENTATIVE'S WARRANTS. At the consummation
of the Offering, the Company will sell to the Representative and/or its
designees, for nominal consideration, warrants to purchase up to 220,000 shares
of Common Stock (the "Representative's Warrants"). The Representative's Warrants
will be exercisable for a period of four years commencing one year after the
effective date of this Offering, at an exercise price of $6.00 per share. At the
discretion of the Company's Board of Directors, the Representative may exercise
its rights under the Representative's Warrants by surrendering rights to acquire
shares of Common Stock of the Company pursuant to the Representative's Warrant
having a fair market value on the date of the exercise equal to the cash
exercise price. For the term of the Representative's Warrants, the holders
thereof will have, at nominal cost, the opportunity to profit from a rise in the
market price of the Securities without assuming the risk of ownership, with a
resulting dilution in the interest of other security holders. As long as the
Representative's Warrants remain unexercised, the Company's ability to obtain
additional capital might be adversely affected. Moreover, the Representative may
be expected to exercise the Representative's Warrants at a time when the Company
would, in all likelihood, be able to obtain any needed capital through a new
offering of its securities on terms more favorable than those provided by the
Representative's Warrants. See "Underwriting."
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
12
<PAGE> 14
of reasons. Nasdaq may delist the securities 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 is considering new maintenance requirements 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 securities. If the Company's securities 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.
REPRESENTATIVE'S POTENTIAL INFLUENCE ON THE MARKET. A significant number
of the Securities offered hereby may be sold to customers of the Representative.
Such customers may engage in transactions for the sale or purchase of such
Securities through or with the Representative. Although it has no obligation to
do so, the Representative intends to make a market in the Securities and may
otherwise effect transactions in such Securities. If it participates in such
market, the Representative may influence the market, if one develops, for the
Securities. Such market-making activity may be discontinued at any time.
Moreover, if the Representative sells the securities issuable upon exercise of
the Representative's Warrants, 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 Securities may be
significantly affected by the degree, if any, of the Representative's
participation in such market. See "Underwriting."
LIMITED EXPERIENCE OF REPRESENTATIVE. The Representative 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.
13
<PAGE> 15
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Shares in this
Offering are estimated to be approximately $8,975,000 ($10,410,500 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).............................. $750,000 8.4%
Inventory purchases of Conserver 21(TM)(2)................. 1,000,000 11.1
Development of new applications and products(3)............ 500,000 5.6
Loans to be used as purchase credits(4).................... 1,500,000 16.7
Repayment of indebtedness(5)............................... 1,110,000 12.4
Working capital and general corporate purposes(6).......... 4,115,000 45.8
---------- -----
Total............................................ $8,975,000 100.0%
========== =====
</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 year period. See "Business -- Distribution Agreement."
(5) Includes the 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. See "Management's Discussion and Analysis
of Financial Condition and Plan of Operation -- Liquidity and Capital
Resources."
(6) Includes the costs of establishing a laboratory facility, leasing new office
space and warehouse space, and other facilities intended for the Company's
operations.
The foregoing represents the Company's best estimate of the allocation of
the net proceeds of the Offering, based upon the current status of its
operations and anticipated business plans. It is possible, however, that the
application of funds will differ considerably from the estimates set forth
herein due to changes in the economic climate and/or the Company's planned
business operations or unanticipated complications, delays and expenses. Any
reallocation of the net proceeds will be at the discretion of the Board of
Directors of the Company. See "Risk Factors -- Broad Discretion in Application
of Offering Proceeds."
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
14
<PAGE> 16
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.
15
<PAGE> 17
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 15,521,733
Deficit accumulated during the development stage........ (2,645,792) (6,250,792)(2)
-------- --------
Total stockholders' equity......................... 322,326 9,277,326
-------- --------
Total capitalization.......................... $ 1,322,326 $ 9,277,326
======== ========
</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.
16
<PAGE> 18
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 $9,277,326, or
approximately $1.45 per share. This represents an immediate increase in net
tangible book value of $1.44 per share to existing stockholders and an immediate
dilution of $3.55 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..................... 1.44
----
As adjusted net tangible book value per share after this Offering.... 1.45
-----
Dilution per share to new investors(1)............................... $3.55
=====
</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 19,299,826, 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.
17
<PAGE> 19
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
=========== ===========
</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 $ 9,269,562
Total assets.............................. 2,443,436 2,156,075 10,021,075
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 9,277,326
</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 at
an assumed 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.
18
<PAGE> 20
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
19
<PAGE> 21
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, 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.
20
<PAGE> 22
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.
21
<PAGE> 23
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 and Chiquita 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
22
<PAGE> 24
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.
23
<PAGE> 25
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
24
<PAGE> 26
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
25
<PAGE> 27
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. 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, 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
26
<PAGE> 28
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 $1,500,000 from the Company between May 1, 1997 and
ninety (90) days after the Offering. Such sums 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 royalties which may be due Agrotech. See
"Business."
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.
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 --".
27
<PAGE> 29
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. If FIFRA registration is not required, the Company's use of
Conserver 21(TM) may require it to comply with the federal Toxic Substance and
Control Act which could subject it to other reporting and registration
obligations. 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.
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.
28
<PAGE> 30
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..................... 64 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 business 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. He was previously President and
Chief Executive Officer of Kitchens of Sara Lee, the world's largest bakery, as
well as a director, member of the Executive Committee, and a Vice President of
Consolidated Foods Corporation (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
29
<PAGE> 31
("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., and Healthcare Acquisition Corp.,
each a public company whose respective securities are traded on the Nasdaq
SmallCap Market. He is a Managing General Partner of Venture Capital Associates,
Ltd. and of Gen Am "1" Venture Fund, a domestic and an international venture
capital fund, respectively. From 1989 until 1994, he was a partner at Parker
Duryee Rosoff & Haft, counsel to the Company, in New York, New York. He is
currently of counsel to such firm.
MICHAEL JAY SCHARF has been a director of the Company since September 1996.
Mr. Scharf has been Chairman, President and Chief Executive Officer of Niagara
Corporation (formerly International Metals Acquisition Corporation), a publicly
held specialty steel and metal company, since 1993. From 1989 until 1993, Mr.
Scharf was a private investor. From 1983 until 1989, he was Chairman and Chief
Executive Officer of Edgecomb Corporation, a leading independent metals
distribution company which was sold in 1989 to the Blackstone Group. Mr. Scharf
is also a director of Financial Services Acquisition Corp., a publicly held
company.
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 Representative may designate one person
to be elected to the Board of Directors of the Company or in the alternative,
the Representative may designate one person to attend all meetings of the
Company's Board of Directors and to receive all notices of meetings of the
Company's Board of Directors and all other correspondence and communications
sent by the Company to members of its Board of Directors. Such designee may be
an officer or director of the Representative. If the Representative's designee
is elected to the Board of Directors such designee shall sit on the Company's
Audit Committee. The Company has
30
<PAGE> 32
agreed to reimburse designees of the Representative for their reasonable
out-of-pocket expenses incurred in connection with their attendance at meetings
of the Company's Board of Directors. The Representative has not designated an
individual to serve in such capacity. See "Underwriting."
BOARD COMPOSITION
The Company currently has authorized five directors. In April, 1995, 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 Representative 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.
31
<PAGE> 33
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 BiLo, 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.
32
<PAGE> 34
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.
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.
33
<PAGE> 35
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.
34
<PAGE> 36
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 300
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.
35
<PAGE> 37
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 Representative and the Company. The Representative 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
36
<PAGE> 38
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 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 OWNER 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.
37
<PAGE> 39
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
Representative, except in connection with private transactions (not involving a
public offering) in which the transferee(s) agrees in writing to be similarly
bound. The 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 Representative. The Representative 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.
38
<PAGE> 40
UNDERWRITING
The Underwriters named below (the "Underwriters"), for whom Janssen/Meyers
Associates, LP. is acting as representative (in such capacity, the
"Representative"), have severally agreed, subject to the terms and conditions of
the Underwriting Agreement (the "Underwriting Agreement") to purchase from the
Company and the Company has agreed to sell to the Underwriters on a firm
commitment basis, the respective number of Shares set forth opposite their
names:
<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
-------------------------------------------------------------------------- ---------
<S> <C>
Janssen/Meyers Associates, LP............................................. 2,200,000
---------
Total........................................................... 2,200,000
=========
</TABLE>
The Underwriters are 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 several Underwriters are subject
to conditions precedent specified therein.
The Company has been advised by the Representative that the Underwriters
propose initially to offer the Securities to the public at the initial public
offering prices set forth on the cover page of this Prospectus and to certain
dealers at such prices less concessions not in excess of $ per Share.
Such dealers may reallow a concession not in excess of $ per Share to
certain other dealers. After the commencement of the Offering, the public
offering prices, concession and reallowance may be changed by the
Representative.
The Representative has informed the Company that it does not expect sales
to discretionary accounts by the Underwriters to exceed five percent (5%) of the
Securities offered hereby.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute to
payments that the Underwriters may be required to make. The Company has also
agreed to pay to the Representative a non-accountable expense allowance equal to
3% of the gross proceeds derived from the sale of the Securities underwritten of
which $50,000 has been paid to date.
The Company has granted to the Underwriters an over-allotment option,
exercisable during the forty-five (45) day period from the date of this
Prospectus, to purchase up to an additional 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
Representative, for nominal consideration, warrants to purchase from the Company
up to 220,000 shares of Common Stock. The Representative's Warrants are
initially exercisable at a price of $6.00 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 Representative. The Representative'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 Representative's Warrants as a result
of certain events, including subdivisions and combinations of the Common Stock.
The Representative's Warrants grant to the holders thereof certain rights of
registration for the securities issuable upon exercise thereof. The
Representative may exercise its rights under the Representative's Warrants by
surrendering rights to acquire shares of Common Stock of the Company pursuant to
the Representative's Warrant having a fair market value on the date of the
exercise, equal to the cash exercise price of the Representative's Warrant.
39
<PAGE> 41
In connection with this Offering the Company also has agreed to grant the
Representative an irrevocable preferential right for a period of three years
from the date of the Offering to purchase for its account or to sell for the
account of the Company, or any subsidiary of or successor to the Company, or any
of its officers, directors or affiliates any securities of the Company
(excluding offerings solely consisting of debt) which any of the aforementioned
people or entities may seek to sell. In addition, the Company has entered into
an agreement whereby it (i) agrees to employ the Representative as its
Investment Banker and Financial Consultant at a monthly fee of $5,000 per month
for three years; and (ii) for a period of five years, agrees to pay the
Representative 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 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. The Representative has contractually agreed with Nasdaq not to
consent to the release of the Convertible Debenture holders from such
restriction until the lapse of the twelve (12) month period. An appropriate
legend shall be marked on the face of certificates representing all such
Securities.
The Company has agreed not to, without the prior written consent of the
Representative, issue, sell, agree or offer to sell, grant an option for the
purchase or sale of, or otherwise transfer or dispose of any of its securities
for a period of 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 Representative may designate
one person to attend all meetings of the Company's Board of Directors and to
receive all notices of meetings of the Company's Board of Directors and all
other correspondence and communications sent by the Company to members of its
Board of Directors. Such designee may be an officer or director of the
Representative. The Company has agreed to reimburse designees of the
Representative for their reasonable out-of-pocket expenses incurred in
connection with their attendance of meetings of the Company's Board of
Directors. The Representative'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
Securities have been determined by negotiation between the Company and the
Representative and do not necessarily bear any relationship to the Company's
asset value, net worth, or other established criteria of value. The factors
considered in such negotiations, in addition to prevailing market conditions,
included the history of and prospects for the industry in which the Company
40
<PAGE> 42
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 Securities. 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
Underwriters also may create a short position for the account of the
Underwriters by selling more Securities 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 Underwriters may also cover all or a portion
of such short position by exercising the Underwriters' Over-allotment Options
referred to above. In addition, the Representative, on behalf of the
Underwriters, may impose "penalty bids" under contractual arrangements with the
Underwriters whereby it may reclaim from an Underwriter (or dealer participating
in the Offering) for the account of other Underwriters, the selling concession
with respect to Securities that are distributed in the Offering but subsequently
purchased for the account of the Underwriters in the open market. Any of the
transactions described in this paragraph may result in the maintenance of the
price of the Securities 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 Underwriters in connection with this Offering.
EXPERTS
The financial statements of the Company as at August 31, 1996 and for the
period from March 6, 1996 (date of incorporation) through August 31, 1996,
included in this Prospectus, have been audited by Richard A. Eisner & Company,
LLP, independent auditors, as set forth in their report thereon appearing
elsewhere herein. Such financial statements are included herein and in the
Registration Statement in reliance upon such report and upon the authority of
said firm as experts in auditing and accounting.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), Washington, D.C. 20549, a Registration Statement on Form S-1 in
accordance with the provisions of the Securities Act of 1933, as amended, with
respect to the Securities offered hereby. This Prospectus, filed as part of the
Registration Statement, does not contain all the information set forth in the
Registration Statement and the exhibits filed thereto. For further information
regarding the Company and the Securities offered hereby, reference is made to
such Registration Statement and to the exhibits filed therewith. Statements
herein contained concerning the provisions of any document are not necessarily
complete and, in each instance, reference is made to the copy of such document
filed as an exhibit to the Registration Statement. The Registration Statement
and the exhibits may be inspected without charge at the offices of the
Commission and, upon payment to the Commission of prescribed fees and rates,
copies of all or any part thereof may be obtained from the Commission's
principal office at the Public Reference Section, Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549 or at the Northeast Regional
Office, 7 World Trade Center, New York, New York 10048. The Registration
Statement may also be accessed on the World Wide Web through the Commission's
Internet address at "http://www.sec.gov."
41
<PAGE> 43
[This page intentionally left blank]
<PAGE> 44
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> 45
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> 46
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> 47
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> 48
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> 49
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> 50
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, leaving $21,450 available for this purpose. 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.
[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
F-7
<PAGE> 51
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)
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.
[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.
F-8
<PAGE> 52
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)
[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>
FEBRUARY 28,
1997
AUGUST 31, ------------
1996
---------- (UNAUDITED)
<S> <C> <C>
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. 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> 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 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>
FEBRUARY 28,
1997
AUGUST 31, ------------
1996
---------- (UNAUDITED)
<S> <C> <C>
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> 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 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> 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 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> 56
======================================================
NO UNDERWRITER, DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED
IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY
UNDERWRITER. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE
HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY ANY SECURITIES OFFERED HEREBY BY ANYONE IN ANY JURISDICTION
IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON
MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM
IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 7
Use of Proceeds....................... 14
Dividend Policy....................... 15
Capitalization........................ 16
Dilution.............................. 17
Selected Financial Data............... 18
Management's Discussion and Analysis
of Financial Condition and Plan of
Operation........................... 19
Business.............................. 21
Management............................ 29
Certain Transactions.................. 34
Principal Stockholders................ 35
Description of Securities............. 36
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.
, 1997
======================================================
<PAGE> 57
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
Nasdaq listing fee....................................................... 10,000
Blue sky legal fees...................................................... 50,000
Printing and engraving expenses.......................................... 125,000
Legal fees............................................................... 250,000
Accounting fees.......................................................... 75,000
Transfer and Warrant Agent fees.......................................... 3,500
Miscellaneous expenses................................................... 51,583.61
----------
$ 925,000
==========
</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> 58
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> 59
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> 60
(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
"Representative")
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> 61
<TABLE>
<S> <C>
4.3** Form of Representative's Warrant Agreement between Registrant and the
Representative (including form of Representative'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 Agreement among Underwriters
10.7** Form of Selected Dealer Agreement
10.8** Form of Financial Consulting Agreement between the Representative and the
Registrant
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.
*** Filed by Amendment.
(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> 62
(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 Representative at the closing specified in the
Underwriting Agreement, certificates in such denominations and registered
in such names as required by the Representative 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> 63
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 22nd day of April, 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, April 22, 1997
- ------------------------------------- President and Chief Executive Officer
Charles H. Stein (Principal Executive Officer)
* Director April 22, 1997
- -------------------------------------
Brian J. Bryce
* Director April 22, 1997
- -------------------------------------
Jay M. Haft
* Director April 22, 1997
- -------------------------------------
Michael Jay Scharf
* Director April 22, 1997
- -------------------------------------
James V. Stanton
* Senior Vice President -- Finance, April 22, 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
April 22, 1997
II-7
<PAGE> 64
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., as representative of the several underwriters named
therein (the "Representative").........................................
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 Representative's Warrant Agreement between Registrant and the
Representative (including form of Representative'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 Agreement among Underwriters...................................
10.7** Form of Selected Dealer Agreement......................................
10.8** Form of Financial Consulting Agreement between Registrant and
Representative.........................................................
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.
*** Filed by Amendment.
<PAGE> 1
EXHIBIT 1.1
2,200,000 Shares of Common Stock and
of
CONSERVER CORPORATION OF AMERICA
UNDERWRITING AGREEMENT
New York, New York
1997
Janssen/Meyers Associates, L.P.
as Representative of the several
Underwriters name in Schedule I
hereto
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"), and each of
the other underwriters named in Schedule I hereto (collectively, the
"Underwriters," which term shall also include any underwriter substituted as
hereinafter provided in Section 11), for whom JMA is acting as representative
(in such capacity JMA shall hereinafter be referred to as the "Representative"),
with respect to the sale by the Company and the purchase by the Underwriters, of
2,200,000 shares (the "Shares") of the Company's common stock, par value $.0001
per share ("Common Stock") and with respect to the grant by the Company to the
Underwriters, acting severally and not jointly, 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
(the "Firm Securities") and together with all or any part of the 330,000
additional Shares 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
Underwriters, an option (the "Underwriters' Purchase Option") pursuant to the
Underwriters' Purchase Option Agreement (the "Underwriters' Purchase Option
Agreement") for the purchase of an aggregate of 220,000 additional Shares (the
"Underwriters' Option Shares"). The Securities, the Underwriters' Purchase
Option Agreement and Underwriters' 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) 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
1
<PAGE> 2
2(c) hereof). All representations, warranties and opinions of counsel required
hereunder shall cover any such subsidiaries and acquired entities.
1. Representations and Warranties of the Company. The Company represents
and warrants to, and agrees with, each of the Underwriters as of the date
hereof, and as of the Closing Date 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 SB-2 (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 Underwriters 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 Underwriters
and will not, before the registration statement becomes effective, file any
other amendment thereto unless the Underwriters 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.
(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
2
<PAGE> 3
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 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 Underwriters by or on behalf of the Underwriters
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 Underwriters 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 Underwriters 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, 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
3
<PAGE> 4
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 applications, approvals, orders, licenses, certificates,
franchises and permits of and from all governmental or regulatory officials and
bodies (including, without limitation, those having jurisdiction over
environmental or similar matters), to own or lease its properties and conduct
its business as described in the Prospectus; the Company is and has been doing
business in compliance with all such authorizations, approvals, orders,
licenses, certificates, franchises and permits and all federal, state, local and
foreign laws, rules and regulations 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
and the Overallotment Closing Date, if any, based upon the assumptions set forth
therein, and the Company is not a party to or bound by any instrument, agreement
or other arrangement providing for the Company to issue any capital stock,
rights, warrants, options or other securities, except for this Agreement and as
otherwise described in the Prospectus. The Shares, the Underwriters' Purchase
Option and the Underwriters' 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
4
<PAGE> 5
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 Underwriters' Purchase Option and the Underwriters' 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 Underwriters' Purchase Option and the Underwriters'
Option Shares has been duly and validly taken; and the certificates, if any,
representing the Securities and the Underwriters' 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 Underwriters by the Company hereunder, the
Underwriters 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, 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.
5
<PAGE> 6
(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 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 Underwriters' Purchase Option Agreement, the Consulting
Agreement (as described in Section ___ hereof) and to consummate the
transactions provided for in such agreements; and this Agreement, the
Underwriters' Purchase Option Agreement and the Consulting Agreement have each
been duly authorized, executed and delivered by the Company. Each of this
Agreement, the Underwriters' 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
6
<PAGE> 7
Representative or the Underwriters, 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
Underwriters' 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
breach or violation of any of the terms or provisions of, or constitutes or will
constitute a default under, or result in the creation or imposition of any
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 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 issuance of the Securities pursuant to the
Prospectus and the Registration Statement, the performance of this Agreement and
the transactions contemplated hereby, except such as have been or may be
obtained under the Act or may be required under state securities or Blue Sky
laws in connection with (i) the Underwriters' 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 Underwriters' Purchase
Option or the Underwriters' 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
7
<PAGE> 8
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) 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.
8
<PAGE> 9
(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) 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.
(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: (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
9
<PAGE> 10
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) The Company owns and has the unrestricted right to use all
material trade secrets, trade-marks, trade names, know-how (including all other
unpatented and/or unpatentable proprietary or confidential information, systems
or procedures), inventions, designs, processes, works of authorship, computer
programs and technical data and information (collectively herein "Intellectual
Property") required for or incident to the development, manufacture, operation
and sale of all products and services sold or proposed to be sold by the
Company, free and clear of and without violating any right, lien, or claim of
others, including without limitation, former employers of its employees;
provided, however, that the possibility exists that other persons or entities,
completely independently of the Company, or employees or agents, could have
developed trade secrets or items of technical information similar or identical
to those of the Company.
(x) The Company has taken reasonable security measures to protect
the secrecy, confidentiality and value of all the Intellectual Property material
to its operations.
(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 Limited and George
Agronoff have agreed not to, directly or indirectly, offer to sell, sell, grant
any option for the sale of, assign,
10
<PAGE> 11
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
additional shares 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
Representative 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 Underwriters' compensation, as determined by the National
Association of Securities Dealers, Inc. ("NASD").
(cc) The Firm Securities have been approved for quotation on the
Nasdaq Electronic Bulletin Board 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)
11
<PAGE> 12
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) an interest in any person or entity which (A) furnishes or sells services or
products which are furnished or sold or are proposed to be furnished or sold by
the Company, or (B) purchases from or sells or furnishes to the Company any
goods or services, 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 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.
(ff) Any certificate signed by any officer of the Company and
delivered to the Underwriters or to the Underwriters' counsel shall be deemed a
representation and warranty by the Company to the Underwriters as to the matters
covered thereby.
(gg) The Company has entered into an employment agreement with
Charles Stein as described in the Prospectus. The Company has obtained a key-man
life insurance policy with an insurance company rated "A" or better in the
amount of not less than $2,000,000 on the life of Mr. Stein, which policy is
owned by the Company and names the Company as the sole beneficiary thereunder.
(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
Underwriters' Counsel and contain a complete summary of all meetings and actions
of the Board of Directors and Stockholders of the Company since __________,
199_.
12
<PAGE> 13
(jj) Except as disclosed in writing to the Underwriters, no officer,
or director or 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 Underwriters' 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 each Underwriter, and each Underwriter,
severally and not jointly, agrees to purchase from the Company at the price per
Security set forth below, that proportion of the number of Firm Securities set
forth in Schedule I opposite the name of the Underwriter which the number of
Firm Securities bears to the total number of Firm Securities, subject to such
adjustment as the Underwriters in their discretion shall make to eliminate any
sales or purchases of fractional Securities, plus any additional Defaulted
Securities which such Underwriters may become obligated to purchase pursuant to
the provisions of Section 11 hereof.
(b) In addition, on the basis of the representations, warranties,
covenants and agreements, herein contained, but subject to the terms and
conditions herein set forth, the Company hereby grants an option to the
Underwriters to purchase up to an additional 330,000 Shares. 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 Representative to the
Company setting forth the number of Overallotment Securities as to which the
Underwriters are 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 Representative, 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 Representative and the Company. In the event such option is
exercised, each of the Underwriters, acting severally and not jointly, shall
purchase such number of Overallotment Securities then being purchased which
shall have been allocated to such Underwriters by the Representative, and which
such shall have agreed to purchase, subject in each case to such adjustments as
the s in their discretion shall make to eliminate any sales or purchases of
fractional Securities. Nothing herein contained shall obligate the Underwriters
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.
13
<PAGE> 14
(c) Payment of the purchase price for, and delivery of certificates
for, the Firm Securities shall be made at the offices of the Representative,
Janssen/Meyers Associates, L.P., 17 State Street, ___th Floor, New York, New
York 10004 or at such other place as shall be designated by the Representative.
Such delivery and payment shall be made at 10:00 a.m. (New York City time) on
_____ __, 1997 or at such other time and date as shall be designated by the
Underwriters 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
Underwriters, 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 Representative and the Company on each Overallotment Closing Date as
specified in the notice from the Representative to the Company. Delivery of the
certificates for the Firm Securities and the Overallotment Securities, if any,
shall be made to the Underwriters against payment by the Underwriters 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 Underwriters 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 Underwriters at the
above-mentioned office or such other place as the Representative may designate
for inspection, checking and packaging no later than 9:30 a.m. on the last
business day prior to 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
Underwriters, 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 Underwriters' 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 Underwriters in accordance herewith.
(d) On the Closing Date, the Company shall issue and sell to the
Underwriters, the Underwriters' Purchase Option at a purchase price of $220.00
which Underwriters' Purchase Option
14
<PAGE> 15
shall entitle the holders thereof to purchase an aggregate of 220,000 Shares.
The Underwriters' 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 twenty percent
(120%) of the initial public offering price of the Shares. The Underwriters'
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 Underwriters' 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 Underwriters' Purchase Option .
3. Public Offering of the Securities. As soon after the Registration
Statement becomes effective and as the Underwriters deem advisable, but in no
event more than five (5) business days after such effective date, the
Underwriters 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 Underwriters may allow such concessions and discounts upon
sales to other dealers as set forth in the Prospectus. The Underwriters 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 Underwriters, in
their sole discretion, deems advisable.
4. Covenants of the Company. The Company covenants and agrees with the
Underwriters as follows:
(a) The Company shall use its best efforts to cause the Registration
Statement and any amendments thereto to become effective as promptly as
practicable and will not at any time, whether before or after the effective date
of the Registration Statement, file any amendment to the Registration Statement
or supplement to the Prospectus or file any document under the Exchange Act: (i)
before termination of the offering of the Securities by the Underwriters which
the Underwriters shall not previously have been advised and furnished with a
copy; or (ii) to which the Underwriters 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 Underwriters 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
15
<PAGE> 16
becomes effective; (ii) of the issuance by the Commission of any stop order or
of the initiation, or the threatening of any proceeding, suspending the
effectiveness of the Registration Statement or any order preventing or
suspending the use of the Preliminary Prospectus or the Prospectus, or any
amendment or supplement thereto, or the institution or proceeding for that
purpose; (iii) of the issuance by any state securities commission of any
proceedings for the suspension of the qualification of the Securities for
offering or sale in any jurisdiction or of the initiation, or the threatening,
of any proceeding for that purpose; (iv) of the receipt of any comments from the
Commission; and (v) of any request by the Commission for any amendment to the
Registration Statement or any amendment or supplement to the Prospectus or for
additional information. If the Commission or any state securities commission 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 Underwriters) 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 Underwriters 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 Underwriters notice of its intention
to file or prepare any amendment to the Registration Statement (including any
post-effective amendment) or any amendment or supplement to the Prospectus
(including any revised prospectus which the Company proposes for use by the
Underwriters in connection with the offering of the Securities which differs
from the corresponding prospectus on file at the Commission at the time the
Registration Statement becomes effective, whether or not such revised prospectus
is required to be filed pursuant to Rule 424(b) of the Rules and Regulations),
will furnish the Underwriters 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 Underwriters or Goldstein
& DiGioia, LLP ("Underwriters' Counsel"), shall reasonably object.
(e) The Company shall cooperate in good faith with the Underwriters,
and Underwriters' 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 Underwriters may
reasonably designate, and shall cooperate with the Underwriters and
16
<PAGE> 17
Underwriters' 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 Underwriters 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.
(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 Underwriters' Counsel, the Prospectus, as then amended or
supplemented, includes an untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary to make the
statements therein, in the 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 Underwriters 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 Underwriters' Counsel, and the Company will furnish
to the Underwriters 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 Underwriters, 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.
17
<PAGE> 18
(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 Representative:
(i) as soon as they are available, copies of all
reports (financial or other) mailed to stockholders;
(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
Representative 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 four-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 and Warrant Agent, which may be the same entity, and, if
necessary under the same jurisdiction of incorporation as the Company, as well
as a Registrar (which may be the same entity as the Transfer and Warrant Agent)
for its Common Stock.
(j) The Company will furnish to the Underwriters or pursuant to the
Underwriters' direction, without charge, at such place as the Underwriters 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
18
<PAGE> 19
available and in such quantities as the Underwriters 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 of any securities of the Company.
(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 Underwriters 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 Representative at the Company's sole expense, (i)
daily consolidated transfer sheets relating to the Securities upon the
Representative's request; (ii) a list of holders of Securities upon the
Representative's request; (iii) a list of, if any, the securities positions of
participants in the Depository Trust Company upon the Representative's request.
(p) Until a date which is five years from the Closing Date shall use
its best efforts to cause one (1) individual selected by the Representative to
be elected to the Board of Directors of the Company (the "Board"), if requested
by the Representative and provided such individual is reasonably acceptable to
and approved by the Company. Alternatively, the Representative 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
19
<PAGE> 20
sent by the Company to members of the Board, and copies of all minutes thereof.
The Company shall reimburse the Representative's designee for his or her
out-of-pocket expenses reasonably incurred and authorized in advance by the
Company in 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 Representative 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 $3,000,000 affording coverage for the
action of its officer and directors, to include such designee and the
Representative as an insured under such policy. The Representative's nominee
shall, if a member of the Board, be a member of the Audit Committee of the
Board.
(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 Underwriters' 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 Underwriters' 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.
(s) (i) 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
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 Representative may reasonably request after consultation
with the Company, and on the Representative's request, furnish the
Representative with a secondary trading survey prepared by securities counsel to
the Company.
(u) The Company shall not amend or alter any term of any written
employment agreement between the Company and any executive officer, or alter or
amend the amount of compensation payable to such employee during the term of
such written employment agreement, in a manner more favorable to such employee,
without the express written consent of the Representative.
20
<PAGE> 21
(v) Until the completion of the distribution of the Securities, the
Company shall not without the prior written consent of the Representative, 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 Representative shall
enter into a financial consulting agreement, in the form filed as an Exhibit to
the Registration Statement, pursuant to which the Representative will provide
financial consulting services to the Company for a three year period for a fee
of $5,000 per month, payable in equal monthly installments' 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 Underwriters 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
Underwriters to the Company.
(y) For a period of 12 months commencing on the Closing Date, except
with the written consent of the Representative, 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 Underwriters' 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
Representative. The Company shall not, for a period of two (2) years from the
Closing Date offer or sell any securities pursuant to Regulation S or similar
regulation.
(z) The Company hereby grants to the Representative preferential
right on the terms and subject to the conditions set forth in this paragraph,
for a period of three (3) years from the Effective Date of the Registration
Statement, to purchase for its
21
<PAGE> 22
account, or to sell for the account of the Company or future subsidiaries, any
securities of the Company or any of its affiliates or subsidiaries with respect
to which the Company or any of its Subsidiaries may seek a public or private
sale of such securities (except for any securities sold under Rule 144). The
Company, for a period of three (3) years form the Effective Date of the
Registration Statement, will consult, and will cause such future subsidiaries to
consult with the Representative with regard to any such offering or placement
and will offer, or cause any of its future subsidiaries to offer, to the
Representative the opportunity, on terms not more favorable to the Company or
such present or future affiliate or subsidiary than they can secure elsewhere,
to purchase or sell any such securities. If the Representative fails to accept
in writing such proposal made by the Company or any of its future subsidiaries
within twenty (20) business days after receipt of a written notice from the
Company containing such notice, then the Representative shall have no further
claim or right with respect to the proposal contained in such notice. If,
thereafter, such proposal is materially modified, the Company shall again
consult, and cause each future subsidiary to consult, with the Representative in
connection with such modification and shall in all respects have the same
obligations and adopt the same procedures with respect to such proposal as are
provided hereinabove with respect to the original proposal.
(aa) The 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 Representative's prior written consent.
(bb) 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.
22
<PAGE> 23
(cc) 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 Representative's prior written consent,
which consent shall not be unreasonably withheld. The Representative shall
either approve or disapprove such contemplated redemption of securities or
dividend payment or distribution within ten (10) business days from the date the
Representative receives written notice of the Company's proposal with respect
thereto; a failure of the Representative to respond within the ten (10) business
day period shall be deemed approval of the transaction.
(dd) 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 Underwriters' 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 Underwriters, 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 Underwriters in quantities as hereinabove stated; (iii) the printing,
engraving, issuance and delivery of the Securities and Underwriters' Option
Shares including any transfer or other taxes payable thereon; (iv) disbursements
and fees of Underwriters' Counsel in connection with the qualification of the
Securities under state or foreign securities or "Blue Sky" laws and
23
<PAGE> 24
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 Underwriters' Counsel fees (exclusive of filing fees and
disbursements) shall equal $_______ and of which $________ 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 Representative 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 Underwriters
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 Underwriters. The Underwriters
shall be responsible for all of its own costs of counsel.
(b) If this Agreement is terminated by the Underwriters in
accordance with the provisions of Section 6, Section 10(a) or Section 11, the
Company shall reimburse and indemnify the Representative 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 Underwriters of which the Representative 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
Underwriters 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 Representative. 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 Representative,
by deduction from the proceeds of the offering contemplated herein. In the event
the Underwriters elect to exercise the over-allotment option described in
Section 2(b) hereof, the Company further agrees to pay to the Underwriters on
the Overallotment Closing Date (by certified or bank cashier's check or, at the
Representative's election, by deduction from the proceeds of the offering) a
non-accountable expense allowance equal to three percent (3%) of the gross
proceeds received by the Company from the sale of the Overallotment Securities.
6. Conditions of the Underwriters' Obligations. The obligations of the
Underwriters hereunder shall be subject to the continuing accuracy of the
representations and warranties of the
24
<PAGE> 25
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 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 Underwriters, 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 Underwriters' 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 Underwriters
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 Underwriters shall not have advised the Company that the
Registration Statement, or any amendment thereto, contains an untrue statement
of fact which, in the Underwriters' opinion, and the opinion of its counsel is
material or omits to state a fact which, in the Underwriters' 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 Underwriters'
reasonable opinion, or the opinion of its counsel is material, or omits to state
a fact which, in the Underwriters' 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
Underwriters shall have received the favorable opinion of Parker Durgee Rosoff &
Haft, counsel to the Company, dated the
25
<PAGE> 26
Closing Date, or Overallotment Closing Date, as the case may be, addressed to
the Underwriters and in form and substance satisfactory to Underwriters'
Counsel, to the effect that:
(i) The Company: (A) has been duly organized and is validly
existing as a corporation in good standing under the laws of the State of
Delaware with full corporate power and authority to own and operate its
properties and to carry on its business as set forth in the Registration
Statement and Prospectus; (B) the Company is duly licensed or qualified as a
foreign corporation in all jurisdictions in which by reason of maintaining an
office in such jurisdiction or by owning or leasing real property in such
jurisdiction it is required to be so licensed or qualified except where failure
to be so qualified or licensed would have no material adverse effect upon the
Company; 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. Such counsel shall state that
such counsel has participated in conferences with officers and other
Underwriters 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 and does not assume any responsibility
for the accuracy, completeness or fairness of the statements contained in the
Registration Statement and Prospectus, and has not been obligated to complete
any independent investigation thereof, on the basis of the foregoing, no facts
have come to the attention of such counsel which lead them to believe that
either the Registration Statement or any amendment thereto at the time such
Registration Statement or amendment became effective or the 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 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
26
<PAGE> 27
therein in reliance upon information furnished in writing to the Company on
behalf of Underwriters expressly for use in the Registration Statement or the
Prospectus).
(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 Shares, Underwriters' Purchase Option and the Underwriters' 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 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 Underwriters' Purchase Option to be sold by the Company
under the Underwriters' Purchase Option Agreement and Underwriters' 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 any preemptive or other
similar rights of any stockholder of the Company; that, to such counsel's
knowledge, the holders of the Securities and Underwriters' 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 Shares,
Underwriters' Purchase Option and Underwriters' Option Shares are in due and
proper legal form. Upon delivery of the Shares to the Underwriters against
payment therefor as provided for in this Agreement, the Underwriters (assuming
they are bona fide purchasers within the meaning of the Uniform Commercial Code)
will acquire good title to the Shares, free and clear of all liens,
encumbrances, equities, security interests and claims.
(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
27
<PAGE> 28
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 Underwriters' 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 Underwriters, 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 Underwriters' 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 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
upon the Company 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
indenture, mortgage, deed of trust, voting trust agreement, stockholders
agreement, note, loan
28
<PAGE> 29
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, 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 Underwriters' 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 CAPITAL STOCK," and "SHARES ELIGIBLE FOR FUTURE
SALE" have been reviewed by such counsel, and insofar as they refer to
statements of law, descriptions of statutes, licenses, rules or regulations or
legal conclusions, are correct in all material respects;
(xii) To the best of such counsel's knowledge, except as
described in the Prospectus, 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
29
<PAGE> 30
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
Small Cap Market.
In addition, such counsel shall state that such counsel has participated
in conferences with officers and other representatives of the Company,
representatives of the independent public accountants for the Company and
representatives of the Underwriters at which the contents of the Registration
Statement, the Prospectus and related matters were discussed and, although such
counsel is not passing upon and does not assume any responsibility for the
accuracy, completeness or fairness of the statements contained in the
Registration Statement and Prospectus and made no independent check or
verification thereof, on the basis of the foregoing, no facts have come to the
attention of such counsel which lead them to believe that either the
Registration Statement or any amendment thereto at the time such Registration
Statement or amendment became effective or the 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 any Underwriter expressly for use in the
Registration Statement or the Prospectus).
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 Underwriters' Counsel) of other counsel reasonably
acceptable to Underwriters' 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 Underwriters' Counsel if
requested. The opinion of such counsel for the Company shall state that the
opinion of any such other counsel is in form
30
<PAGE> 31
satisfactory to such counsel and, in their opinion, the Underwriters and they
are justified in relying thereon.
(d) At each Overallotment Closing Date, if any, the Underwriters
shall have received the favorable opinion of counsel to the Company, each dated
the Overallotment Closing Date, addressed to the Underwriters and in form and
substance satisfactory to Underwriters' 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 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.
31
<PAGE> 32
(g) At the Closing Date and each Overallotment Closing Date, if any,
the Underwriters shall have received a certificate of the Company signed by the
principal executive officer and by the chief financial or chief accounting
officer of the Company, dated the Closing Date or 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 threatened under the Act;
(iii) The Registration Statement and the Prospectus and, if
any, each amendment and each supplement thereto, contain all statements and
information required to be included therein, and none of the Registration
Statement, the Prospectus nor any amendment or supplement thereto includes any
untrue statement of a material fact or omits to state any material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading and neither the
Preliminary Prospectus 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
32
<PAGE> 33
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 Closing Date, the Underwriters shall have received
clearance from NASD as to the amount of compensation allowable or payable to the
Underwriters, as described in the Registration Statement.
(i) At the time this Agreement is executed, the Representative shall
have received a letter, dated such date, addressed to the Underwriters in form
and substance satisfactory in all respects (including the non-material nature of
the changes or decreases, if any, referred to in clause (iii) below) to the
Representative, from Richard A. Eisner 4 Company LP:
(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 Underwriters 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
33
<PAGE> 34
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 ___________, 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 ___________, 1997 other than as set forth in or contemplated by
the Registration Statement, or, if there was any such decrease, setting forth
the amount of such decrease;
(iv) setting forth, at a date not later than five (5) days
prior to the 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
34
<PAGE> 35
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 Underwriters may reasonably request.
(j) At the Closing Date and each Overallotment Closing Date, the
Underwriters shall have received from Richard A. Eisner, 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 in clause
(iii) of subsection (i) of this Section with respect to certain amounts,
percentages and financial information as specified by the Underwriters 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 Underwriters 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 Underwriters 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 Underwriters' 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
35
<PAGE> 36
fulfilled, the Representative may terminate this Agreement or, if the
Representative so elects, it may waive any such conditions which have not been
fulfilled or extend the time for their fulfillment.
7. Indemnification.
(a) The Company agrees to indemnify and hold harmless each of the
Underwriters, including specifically each person who may be substituted for an
Underwriter as provided in Section 11 hereof) and each person, if any, who
controls any 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 Underwriters or to the benefit of any person controlling the
Underwriters on account of any loss, claim, damage, liability or expense arising
from the sale of the Firm Securities by the Underwriters 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 Underwriters' Unit 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, 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
36
<PAGE> 37
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) Each of the Underwriters agrees severally, but not jointly, to
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the Registration Statement, and each other person, if
any, who controls the Company within the meaning of the Act to the same extent
as the foregoing indemnity from the Company to the Underwriters but only with
respect to statements or omissions, if any, made in any Preliminary Prospectus,
the Registration Statement or Prospectus or any amendment thereof or supplement
thereto 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 with respect to
the Underwriters by such Underwriter expressly for use in such Preliminary
Prospectus, the Registration Statement or Prospectus or any amendment thereof or
supplement thereto or in any post-effective amendment, new registration
statement or prospectus, or in any such application, directly related to the
transactions effected by the Underwriters 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, provided,
further, that the liability of each Underwriter to the Company shall be limited
to the product of the Underwriters' discount or commission for the Shares
multiplied by the number of Shares sold by such Underwriters 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 Underwriters expressly for use therein and any
information furnished by or on behalf of the Underwriters 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 Underwriters for
inclusion in the Prospectus and the Underwriters hereby confirm that such
37
<PAGE> 38
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 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.
38
<PAGE> 39
(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 or omissions
that resulted in such losses, claims, damages, expenses or liabilities, as well
as any other relevant equitable considerations. In any case where the Company is
the contributing party and the Underwriters are the indemnified party the
relative benefits received by the Company on the one hand, and the Underwriters,
on the other, shall be deemed to be in the same proportion as the total net
proceeds from the offering of the Securities (before deducting expenses) bear to
the total underwriting discounts and commissions received by the Underwriters
hereunder, in each case as set forth in the table on the Cover Page of the
Prospectus. Relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or by the Underwriters and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
untrue statement or omission. The amount paid or payable by an indemnified party
as a result of the losses, claims, damages, expenses or liabilities (or actions
in respect thereof) referred to above in this subdivision (d) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this 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
39
<PAGE> 40
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 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
Underwriters, the Company, or any controlling person, and shall survive
termination of this Agreement or the issuance and delivery of the Securities to
the Underwriters.
9. Effective Date.
This Agreement shall become effective at _____ 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
Underwriters, in their 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 Underwriters of telegrams to
securities dealers releasing such Securities for offering or the release by the
Underwriters for publication of the first
40
<PAGE> 41
newspaper advertisement which is subsequently published relating to the
Securities.
10. Termination.
(a) The Underwriters 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 Underwriters' opinion will in the
immediate future materially disrupt general securities markets in the United
States; or (ii) if trading on the New York Stock Exchange, the American Stock
Exchange, or in the over-the-counter market shall have been suspended or minimum
or maximum prices for trading shall have been fixed, or maximum ranges for
prices for securities shall have been required on the over-the-counter market by
the NASD or by order of the Commission or any other government authority having
jurisdiction; or (iii) if the United States shall have become involved in a war
or major hostilities; or (iv) if a banking moratorium has been declared by a New
York State or federal authority; or (v) if a moratorium in foreign exchange
trading has been declared; or if the Company shall have sustained a material
loss, whether or not insured, by reason of fire, flood, accident or other
calamity; or (vii) 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 (viii) if there shall have been such material
adverse general market conditions as in the Representative's reasonable judgment
would make it inadvisable 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.
11. Substitution of the Underwriters. If one or more of the
Underwriters shall fail (otherwise than for a reason sufficient to justify the
termination of this Agreement under the provisions of Section 6, Section 10 or
Section 12 hereof) to purchase the Securities which it or they are obligated to
purchase on such date under this Agreement (the "Defaulted Securities), the
Underwriters shall have the right, within 24 hours thereafter, to make
arrangements for one or more of the non-defaulting Underwriters, or any other
Underwriters, to purchase all, but not less than all, of the Defaulted
Securities in such amounts as may be agreed upon and upon the terms herein set
forth; if, however, the Underwriters shall not have completed such arrangements
within such 24-hour period, then:
41
<PAGE> 42
(a) if the number of Defaulted Securities does not exceed 10%
of the total number of Firm Securities to be purchased on such date, the
non-defaulting Underwriters shall be obligated to purchase the full amount
thereof in the proportions that their respective underwriting obligations
hereunder bear to the underwriting obligations of all nondefaulting
Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the
total number of Firm Securities, this Agreement shall terminate without
liability on the part of any nondefaulting Underwriters.
No action taken pursuant to this Section shall relieve any
defaulting Underwriters from liability in respect of any default by such
Underwriters under this Agreement.
In the event of any such default which does not result in a
termination of this Agreement, the Underwriters shall have the right to postpone
the Closing Date for a period not exceeding seven days in order to effect any
required changes in the Registration Statement or Prospectus or in any other
documents or arrangements.
12. Default by the Company. If the Company shall fail at the
Closing Date or 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 Underwriters may at the Representative's option, by notice from the
Representative to the Company, terminate the Underwriters' 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.
13. Notices. All notices and communications hereunder, except as
herein otherwise specifically provided, shall be in writing and shall be deemed
to have been duly given if mailed or transmitted by any standard form of
telecommunication. Notices to the Underwriters shall be directed to the
Representative at Janssen/Meyers Associates, L.P., 17 State Street, 15th Floor,
New York, New York 1004, Attention Ken Levy, with a copy to Goldstein & DiGioia,
LLP, 369 Lexington Avenue, New York, New York 10017, 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
Durgee Rosoff & Haft, 529 Fifth Avenue, New York, New York 10011, Attention:
Michael DiGiovanna, Esq.
42
<PAGE> 43
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. 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.
43
<PAGE> 44
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,
CONSERVOR 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.
as Representative of the Several Underwriters
By:_____________________________
Name: Peter Janssen
Title: President
44
<PAGE> 45
SCHEDULE I
Underwriter Number of Securities
- ----------- --------------------
45
<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, a Representative of the several
Underwriters, 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 $6.00 per share (120% 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
2
<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 ________, 1998 [one year after effective date] until 5:30 P.M., New York
time, on ______, 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 $6.00 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.
3
<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 _______________________________), 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
Holder's Warrant certificate, in whole or in part (a "Warrant Exchange), into
the number of
4
<PAGE> 5
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
price on the last trading day or, in case no such reported sale takes place on
such day, the average
5
<PAGE> 6
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 including, without limitation, any tax which may be
payable in respect of the
6
<PAGE> 7
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.
5. Restriction On Transfer of Underwriter's Warrants. The Holder of a
Underwriter's Warrant Certificate, by its acceptance thereof, covenants and
agrees
7
<PAGE> 8
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 $6.00 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").
Section 7.2 Piggyback Registration. If, at any time commencing after
__________, 1998 (one (1) year from the Effective Date), through and including
________, 2003 (seven (7) years from the Effective Date), the Company proposes
to register any of
8
<PAGE> 9
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 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.
9
<PAGE> 10
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 _________, 1998 (one (1) year from the
Effective Date) through and including _______, 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 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
10
<PAGE> 11
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.
(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
11
<PAGE> 12
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 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
12
<PAGE> 13
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 forty-five (45) 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 at the earliest possible time, 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
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 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
13
<PAGE> 14
Securities Exchange Act of 1934 as amended (the "Exchange Act"). 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 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
14
<PAGE> 15
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).
(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.
15
<PAGE> 16
(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, 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
16
<PAGE> 17
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 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
17
<PAGE> 18
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
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
18
<PAGE> 19
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. 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.
19
<PAGE> 20
(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
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.
20
<PAGE> 21
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 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
21
<PAGE> 22
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.
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
22
<PAGE> 23
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 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
23
<PAGE> 24
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 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
24
<PAGE> 25
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.
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
25
<PAGE> 26
(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 _____________, 2002. Notwithstanding the foregoing, the indemnification
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
26
<PAGE> 27
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 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
27
<PAGE> 28
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.
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.
28
<PAGE> 29
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
[SEAL] CONSERVOR CORPORATION OF AMERICA
By __________________________________
Name:
Title:
Attest:
__________________________________
Secretary
JANSSEN/MEYERS ASSOCIATES LP
By __________________________________
Name:
Title:
29
<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 consummation of the offering] until
5:30 p.m. New York time on _____________, 2002 [five years from the consummation
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 CONSERVOR CORPORATION OF AMERICA., a Delaware corporation (the
"Company"), at an initial exercise price, subject to adjustment in certain
events (the "Exercise Price"), of $6.00 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"). Payment of
the Exercise Price shall be made by certified or official
<PAGE> 31
bank check in New York Clearing House funds payable to the order of the Company
or otherwise in accordance with the terms of the Undewriter's Warrant Agreement.
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.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Underwriter's Warrant Certificate (notwithstanding any
2
<PAGE> 32
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
CONSERVOR CORPORATION OF AMERICA
[SEAL] By _________________________________
Name:
Title:
Attest:
_________________________________
Secretary
3
<PAGE> 33
[FORM OF ELECTION TO PURCHASE]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Underwriter's Warrant Certificate, to purchase _____ shares
of Common Stock and herewith tenders in payment for such securities a certified
or official bank check payable in New York Clearing House Funds to the order of
_______________________________ in the amount of $________, all in accordance
with the terms hereof. The undersigned requests that a certificate for such
securities be registered in the name of _______________ whose address is
_____________________________ and that such Certificate be delivered to whose
address is _________________________________.
Dated:
Signature _____________________________
(Signature must conform in all respects to
name of holder as specified on the face of
the Underwriter's Warrant Certificate.)
_____________________________
Insert Social Security or Other
Identifying Number of Holder)
<PAGE> 1
Exhibit 10.1.2
AMENDED & RESTATED
CONSERVER CORPORATION OF AMERICA
1996 STOCK OPTION PLAN
1. PURPOSE. The purpose of the Amended and Restated Conserver
Corporation of America 1996 Stock Option Plan (the "Plan") is to encourage key
employees of Conserver Corporation of America (the "Company") and of any
present or future parent or subsidiary of the Company (collectively, "Related
Corporations") and other individuals who render services to the Company or a
Related Corporation, by providing opportunities to participate in the
ownership of the Company and its future growth through (a) the grant of
options which qualify as "incentive stock options" ("ISOs") under Section
422(b) of the Internal Revenue Code of 1986, as amended (the "Code"); and (b)
the grant of options which do not qualify as ISOs ("Non-Qualified Options").
Both ISOs and Non-Qualified Options are referred to hereafter individually as
an "Option" and collectively as "Options." As used herein, the terms "parent"
and "subsidiary" mean "parent corporation" and "subsidiary corporation,"
respectively, as those terms are defined in Section 424 of the Code.
2. ADMINISTRATION OF THE PLAN.
(a) BOARD OR COMMITTEE ADMINISTRATION. The Plan shall be
administered by the Board of Directors of the Company (the "Board") or by a
committee appointed by the Board (the "Committee"); provided that the Plan shall
be administered: (i) to the extent required by applicable regulations under
Section 162(m) of the Code, by two or more "outside directors" (as defined in
applicable regulations thereunder) and (ii) to the extent required by Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended, or any
successor provision ("Rule 16b-3"), by a disinterested administrator or
administrators within the meaning of Rule 16b-3. All references in this Plan to
the "Committee" shall mean the Board if no Committee has been appointed. Subject
to ratification of the grant or authorization of each Option by the Board (if so
required by applicable state law), and subject to the terms of the Plan, the
Committee shall have the authority to (i) determine to whom (from among the
class of employees eligible under paragraph 3 to receive ISOs) ISOs shall be
granted, and to whom (from among the class of individuals and entities eligible
under paragraph 3 to receive Non-Qualified Options) Non-Qualified Options may be
granted; (ii) determine the time or times at which Options shall be granted;
(iii) determine the purchase price of shares subject to each Option, which
prices shall not be less than the minimum price specified in paragraph 6; (iv)
determine whether each Option granted shall be an ISO or a Non-Qualified Option;
(v)
<PAGE> 2
determine (subject to paragraph 7) the time or times when each Option shall
become exercisable and the duration of the exercise period; (vi) extend the
period during which outstanding Options may be exercised; (vii) determine
whether restrictions are to be imposed on shares subject to Options and the
nature of such restrictions, if any, and (viii) interpret the Plan and prescribe
and rescind rules and regulations relating to it. If the Committee determines to
issue a Non-Qualified Option, it shall take whatever actions it deems necessary,
under Section 422 of the Code and the regulations promulgated thereunder, to
ensure that such Option is not treated as an ISO. The interpretation and
construction by the Committee of any provisions of the Plan or of any Option
granted under it shall be final unless otherwise determined by the Board. The
Committee may from time to time adopt such rules and regulations for carrying
out the Plan as it may deem advisable. No member of the Board or the Committee
shall be liable for any action or determination made in good faith with respect
to the Plan or any Option granted under it.
(b) COMMITTEE ACTIONS. The Committee may select one of its
members as its chairman, and shall hold meetings at such time and places as it
may determine. A majority of the Committee shall constitute a quorum and acts of
a majority of the members of the Committee at a meeting at which a quorum is
present, or acts reduced to or approved in writing by all the members of the
Committee (if consistent with applicable state law), shall be the valid acts of
the Committee. From time to time the Board may increase the size of the
Committee and appoint additional members thereof, remove members (with or
without cause) and appoint new members in substitution therefor, fill vacancies
however caused, or remove all members of the Committee and thereafter directly
administer the Plan.
(c) GRANT OF OPTIONS TO BOARD MEMBERS. Subject to the
provisions of the first sentence of paragraph 2(a) above, if applicable, Options
may be granted to members of the Board. All grants of Options to members of the
Board shall in all other respects be made in accordance with the provisions of
this Plan applicable to other eligible persons. Consistent with the provisions
of the first sentence of Paragraph 2(a) above, members of the Board who either
(i) are eligible to receive grants of Options pursuant to the Plan or (ii) have
been granted Options may vote on any matters affecting the administration of the
Plan or the grant of any Options pursuant to the Plan, except that no such
member shall act upon the granting to himself or herself of Options, but any
such member may be counted in determining the existence of a quorum at any
meeting of the Board during which action is taken with respect to the granting
to such member of Options.
(d) EXCULPATION. No member of the Board shall be
2
<PAGE> 3
personally liable for monetary damages for any action taken or any failure to
take any action in connection with the administration of the Plan or the
granting of Options under the Plan, provided that this subparagraph 3(c) shall
apply to (i) any breach of such member's duty of loyalty to the Company or its
stockholders, (ii) acts or omissions not in good faith or involving intentional
misconduct or a knowing violation of law, (iii) acts or omissions that would
result in liability under Section 174 of the General Corporation Law of the
State of Delaware, as amended, and (iv) any transaction from which the member
derived an improper personal benefit.
(e) INDEMNIFICATION. Service on the Committee shall constitute
service as a member of the Board. Each member of the Committee shall be entitled
without further act on his or her part to indemnity from the Company to the
fullest extent provided by applicable law and the Company's Certificate of
Incorporation and/or By-laws in connection with or arising out of any action,
suit or proceeding with respect to the administration of the Plan or the
granting of Options thereunder in which he or she may be involved by reason of
his or her being or having been a member of the Committee, whether or not he or
she continues to be a member of the Committee at the time of the action, suit or
proceeding.
3. ELIGIBLE EMPLOYEES AND OTHERS. ISOs may be granted only to employees
of the Company or any Related Corporation. Non-Qualified Options may be granted
to any employee, officer or director (whether or not also an employee) or
consultant of the Company or any Related Corporation. The Committee may take
into consideration a recipient's individual circumstances in determining whether
to grant an Option. The granting of any Option to any individual or entity shall
neither entitle that individual or entity to, nor disqualify such individual or
entity from, participation in any other grant of Options.
4. STOCK. The stock subject to Options shall be authorized but unissued
shares of Common Stock of the Company, par value $.001 per share (the "Common
Stock"), or shares of Common Stock reacquired by the Company in any manner. The
aggregate number of shares which may be issued pursuant to the Plan is
1,300,000 subject to adjustment as provided in paragraph 13. If any Option
granted under the Plan shall expire or terminate for any reason without having
been exercised in full or shall cease for any reason to be exercisable in
whole or in part, the shares of Common Stock subject to such Option shall
again be available for grants of Options under the Plan.
5. GRANTING OF OPTIONS. Options may be granted under the
3
<PAGE> 4
Plan at any time on or after November 6, 1996 and prior to November 6, 2006. The
date of grant of an Option under the Plan will be the date specified by the
Committee at the time it grants the Option; provided, however, that such date
shall not be prior to the date on which the Committee acts to approve the grant.
Options granted under the Plan are intended to qualify as performance based
compensation to the extent required under proposed Treasury Regulation Section
1.162-27.
6. MINIMUM OPTION PRICE; ISO LIMITATIONS.
(a) PRICE FOR NON-QUALIFIED OPTIONS. The exercise price per
share specified in the agreement relating to each Non-Qualified Option granted
under the Plan shall in no event be less than the minimum legal consideration
required therefor under the laws of any jurisdiction in which the Company or its
successors in interest may be organized. Non-Qualified Options granted under the
Plan, with an exercise price less than the fair market value per share of Common
Stock on the date of grant, are intended to qualify as performance-based
compensation under Section 162(m) of the Code and any applicable regulations
thereunder. Any such Non-Qualified Options granted under the Plan shall be
exercisable only upon the attainment of a preestablished, objective performance
goal established by the Committee.
(b) PRICE FOR ISOS. The exercise price per share specified in
the agreement relating to each ISO granted under the Plan shall not be less than
the fair market value per share of Common Stock on the date of such grant. In
the case of an ISO to be granted to an employee owning stock possessing more
than ten percent (10%) of the total combined voting power of all classes of
stock of the Company or any Related Corporation, the price per share specified
in the agreement relating to such ISO shall not be less than one hundred ten
percent (110%) of the fair market value per share of Common Stock on the date of
grant. For purposes of determining stock ownership under this paragraph, the
rules of Section 424(d) of the Code shall apply.
(c) $100,000 ANNUAL LIMITATION ON ISO VESTING. Each eligible
employee may be granted Options treated as ISOs only to the extent that, in the
aggregate under this Plan and all incentive stock option plans of the Company
and any Related Corporation, ISOs do not become exercisable for the first time
by such employee during any calendar year with respect to stock having a fair
market value (determined at the time the ISOs were granted) in excess of $1
00,000. The Company intends to designate any Options granted in excess of such
limitation as Non-Qualified Options.
(d) DETERMINATION OF FAIR MARKET VALUE. If, at the time an
Option is granted under the Plan, the Company's Common Stock is
4
<PAGE> 5
publicly traded, "fair market value" shall be determined as of the date of grant
or, if the prices or quotes discussed in this sentence are unavailable for such
date, the last business day for which such prices or quotes are available prior
to the date of grant and shall mean (i) the average (on that date) of the high
and low prices of the Common Stock on the principal national securities exchange
on which the Common Stock is traded, if the Common Stock is then traded on a
national securities exchange; or (ii) the last reported sale price (on that
date) of the Common Stock on the Nasdaq National Market, if the Common Stock is
not then traded on a national securities exchange; or (iii) the closing bid
price (or average of bid prices) last quoted (on that date) by an established
quotation service for over-the-counter securities, if the Common Stock is not
reported on the Nasdaq National Market. If the Common Stock is not publicly
traded at the time an Option is granted under the Plan, "fair market value"
shall mean the fair value of the Common Stock as determined by the Committee
after taking into consideration all factors which it deems appropriate,
including, without limitation, recent sale and offer prices of the Common Stock
in private transactions negotiated at arm's length.
7. OPTION DURATION. Subject to earlier termination as provided in
paragraphs 9 and 10 or in the agreement relating to such Option, each Option
shall expire on the date specified by the Committee, but not more than (i) ten
years from the date of grant in the case of Options generally and (ii) five
years from the date of grant in the case of ISOs granted to an employee owning
stock possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or any Related Corporation, as determined
under paragraph 6(b). Subject to earlier termination as provided in paragraphs 9
and 10, the term of each ISO shall be the term set forth in the original
instrument granting such ISO, except with respect to any part of such ISO that
is converted into a Non-Qualified Option pursuant to paragraph 16.
8. EXERCISE OF OPTION. Subject to the provisions of paragraphs 9
through 12, each Option granted under the Plan shall be exercisable as follows:
(a) VESTING. The Option shall either be fully exercisable on the
date of grant or shall become exercisable thereafter in such installments as the
Committee may specify.
(b) FULL VESTING OF INSTALLMENTS. Once an installment becomes
exercisable, it shall remain exercisable until expiration or termination of the
Option, unless otherwise specified by the Committee.
(c) PARTIAL EXERCISE. Each Option or installment may be
5
<PAGE> 6
exercised at any time or from time to time, in whole or in part, for up to the
total number of shares with respect to which it is then exercisable.
6
<PAGE> 7
(d) ACCELERATION OF VESTING. The Committee shall have the right to
accelerate the date that any installment of any Option becomes exercisable;
provided that the Committee shall not, without the consent of an optionee,
accelerate the permitted exercise date of any installment of any Option granted
to any employee as an ISO (and not previously converted into a Non-Qualified
Option pursuant to paragraph 16) if such acceleration would violate the annual
vesting limitation contained in Section 422(d) of the Code, as described in
paragraph 6(c).
9. TERMINATION OF EMPLOYMENT. Unless otherwise specified in the
agreement relating to such ISO, if an ISO optionee ceases to be employed by the
Company and all Related Corporations other than by reason of death or disability
or as otherwise specified in paragraph 10, no further installments of his or her
ISOs shall become exercisable, and his or her ISOs shall terminate on the
earlier of (a) ninety (90) days after the date of termination of his or her
employment, or (b) their specified expiration dates, except to the extent that
such ISOs (or unexercised installments thereof) have been converted into
Non-Qualified Options pursuant to paragraph 16. For purposes of this paragraph
9, employment shall be considered as continuing uninterrupted during any bona
fide leave of absence (such as those attributable to illness, military
obligations or governmental service) provided that the period of such leave does
not exceed 90 days or, if longer, any period during which such optionee's right
to reemployment is guaranteed by statute. A bona fide leave of absence with the
written approval of the Committee shall not be considered an interruption of
employment under this paragraph 9, provided that such written approval
contractually obligates the Company or any Related Corporation to continue the
employment of the optionee after the approved period of absence. ISOs granted
under the Plan shall not be affected by any change of employment within or among
the Company and Related Corporations, so long as the optionee continues to be an
employee of the Company or any Related Corporation. Nothing in the Plan shall be
deemed to give any grantee of any Option the right to be retained in employment
or other service by the Company or any Related Corporation for any period of
time.
10. DEATH; DISABILITY; BREACH.
(a) DEATH. If an ISO optionee ceases to be employed by the Company
and all Related Corporations by reason of his or her death, any ISO owned by
such optionee may be exercised, to the extent otherwise exercisable on the date
of death, by the estate, personal representative or beneficiary who has acquired
the ISO by will or by the laws of descent and distribution, until the earlier of
(i) the specified expiration date of the ISO or (ii) one (1) year from the date
of the optionee's death.
7
<PAGE> 8
(b) DISABILITY. If an ISO optionee ceases to be employed by the
Company and all Related Corporations by reason of his or her disability, such
optionee shall have the right to exercise any ISO held by him or her on the date
of termination of employment, for the number of shares for which he or she could
have exercised it on that date, until the earlier of (i) the specified
expiration date of the ISO or (ii) one (1) year from the date of the termination
of the optionee's employment. For the purposes of the Plan, the term
"disability" shall mean "permanent and total disability" as defined in Section
22(e)(3) of the Code or any successor statute.
(c) BREACH. If an ISO optionee ceases to be employed by the Company
and all Related Corporation by reason of a finding by the Committee, after full
consideration of the facts presented on behalf of both the Company and the
Optionee, that the ISO optionee has breached his or her employment or service
contract with the Company or any Related Corporation, or has been engaged in
disloyalty to the Company or any Related Corporation, then, in such event, in
addition to immediate termination of the Option, the ISO optionee shall
automatically forfeit all shares for which the Company has not yet delivered
share certificates upon refund by the Company of the exercise price of such
Option. Notwithstanding anything herein to the contrary, the Company may
withhold delivery of share certificates pending the resolution of any inquiry
that could lead to a finding resulting in a forfeiture.
11. ASSIGNABILITY. No Option shall be assignable or transferable by the
grantee except by will, by the laws of descent and distribution or, in the case
of Non-Qualified Options only, pursuant to a valid domestic relations order.
Except as set forth in the previous sentence, during the lifetime of a grantee
each Option shall be exercisable only by such grantee.
12. TERMS AND CONDITIONS OF OPTIONS. Options shall be evidenced by
instruments (which need not be identical) in such forms as the Committee may
from time to time approve. Such instruments shall conform to the terms and
conditions set forth in paragraphs 6 through 11 hereof and may contain such
other provisions as the Committee deems advisable which are not inconsistent
with the Plan, including restrictions applicable to shares of Common Stock
issuable upon exercise of Options. The Committee may specify that any
Non-Qualified Option shall be subject to the restrictions set forth herein with
respect to ISOs, or to such other termination and cancellation provisions as the
Committee may determine. The Committee may from time to time confer authority
and responsibility on one or more of its own members and/or one or more officers
of the Company to execute and deliver such instruments. The proper officers of
the Company are authorized and directed to take any and all action necessary or
advisable from
8
<PAGE> 9
time to time to carry out the terms of such instruments.
13. ADJUSTMENTS. Upon the occurrence of any of the following
events, an optionee's rights with respect to Options granted to such optionee
hereunder shall be adjusted as hereinafter provided, unless otherwise
specifically provided in the written agreement between the optionee and the
Company relating to such Option:
(a) STOCK DIVIDENDS AND STOCK SPLITS. If the shares of Common
Stock shall be subdivided or combined into a greater or smaller number of shares
or if the Company shall issue any shares of Common Stock as a stock dividend on
its outstanding Common Stock, the number of shares of Common Stock deliverable
upon the exercise of Options shall be appropriately increased or decreased
proportionately, and appropriate adjustments shall be made in the purchase price
per share to reflect such subdivision, combination or stock dividend.
(b) CONSOLIDATIONS OR MERGERS. If the Company is to be
consolidated with or acquired by another entity in a merger, sale of all or
substantially all of the Company's assets or otherwise (an "Acquisition"), the
Committee or the board of directors of any entity assuming the obligations of
the Company hereunder (the "Successor Board"), shall, as to outstanding Options,
either (i) make appropriate provision for the continuation of such Options by
substituting on an equitable basis for the shares then subject to such Options
either (A) the consideration payable with respect to the outstanding shares of
Common Stock in connection with the Acquisition, (B) shares of stock of the
surviving corporation or (C) such other securities as the Successor Board deems
appropriate, the fair market value of which shall approximate the fair market
value of the shares of Common Stock subject to such Options immediately
preceding the Acquisition; or (ii) upon written notice to the optionees, provide
that all Options must be exercised, to the extent then exercisable, within a
specified number of days of the date of such notice, at the end of which period
the Options shall terminate; or (iii) terminate all Options in exchange for a
cash payment equal to the excess of the fair market value of the shares subject
to such Options (to the extent then exercisable) over the exercise price
thereof.
(c) RECAPITALIZATION OR REORGANIZATION. In the event of a
recapitalization or reorganization of the Company (other than a transaction
described in subparagraph (c) above) pursuant to which securities of the Company
or of another corporation are issued with respect to the outstanding shares of
Common Stock, an optionee upon exercising an Option shall be entitled to receive
for the purchase price paid upon such exercise the securities he or she would
have received if he or she had exercised such Option prior to such
recapitalization or reorganization.
9
<PAGE> 10
(d) MODIFICATION OF ISOS. Notwithstanding the foregoing, any
adjustments made pursuant to subparagraphs (a), (b) or (c) with respect to ISOs
shall be made only after the Committee, after consulting with counsel for the
Company, determines whether such adjustments would constitute a "modification"
of such ISOs (as that term is defined in Section 424 of the Code) or would cause
any adverse tax consequences for the holders of such ISOs. If the Committee
determines that such adjustments made with respect to ISOs would constitute a
modification of such ISOs or would cause adverse tax consequences to the
holders, it may refrain from making such adjustments.
(e) DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, each Option will terminate
immediately prior to the consummation of such proposed action or at such other
time and subject to such other conditions as shall be determined by the
Committee.
(f) ISSUANCES OF SECURITIES. Except as expressly provided
herein, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of shares subject to Options. No adjustments shall be made for dividends paid in
cash or in property other than securities of the Company.
(g) FRACTIONAL SHARES. No fractional shares shall be issued
under the Plan and the optionee shall receive from the Company cash in lieu of
such fractional shares.
(h) ADJUSTMENTS. Upon the happening of any of the events
described in subparagraphs (a), (b) or (c) above, the class and aggregate number
of shares set forth in paragraph 4 hereof that are subject to Options which
previously have been or subsequently may be granted under the Plan shall also be
appropriately adjusted to reflect the events described in such subparagraphs.
The Committee or the Successor Board shall determine the specific adjustments to
be made under this paragraph 13 and, subject to paragraph 2, its determination
shall be conclusive.
14. MEANS OF EXERCISING OPTIONS. An Option (or any part or
installment thereof) shall be exercised by giving written notice to the Company
at its principal office address, or to such transfer agent as the Company shall
designate. Such notice shall identify the Option being exercised and specify the
number of shares as to which such Option is being exercised, accompanied by full
payment of the purchase price therefor either (a) in United States dollars in
cash or by check, (b) at the discretion of the Committee, through delivery of
shares of Common Stock having a fair market
10
<PAGE> 11
value equal as of the date of the exercise to the cash exercise price of the
Option, (c) at the discretion of the Committee, by delivery of the grantee's
personal recourse note bearing interest payable not less than annually at no
less than 100% of the lowest applicable Federal rate, as defined in Section
1274(d) of the Code, (d) at the discretion of the Committee and consistent with
applicable law, through the delivery of an assignment to the Company of a
sufficient amount of the proceeds from the sale of the Common Stock acquired
upon exercise of the Option and an authorization to the broker or selling agent
to pay that amount to the Company, which sale shall be at the participant's
direction at the time of exercise, or (e) at the discretion of the Committee, by
any combination of (a), (b), (c) and (d) above. If the Committee exercises its
discretion to permit payment of the exercise price of an ISO by means of the
methods set forth in clauses (b), (c), (d) or (e) of the preceding sentence,
such discretion shall be exercised in writing at the time of the grant of the
ISO in question. The holder of an Option shall not have the rights of a
shareholder with respect to the shares covered by such Option until the date of
issuance of a stock certificate to such holder for such shares. Except as
expressly provided above in paragraph 13 with respect to changes in
capitalization and stock dividends, no adjustment shall be made for dividends or
similar rights for which the record date is before the date such stock
certificate is issued.
15. TERM AND AMENDMENT OF PLAN. This Plan was adopted by the Board on
November 19, 1996, subject, with respect to the validation of ISOs granted under
the Plan, to approval of the Plan by the stockholders of the Company at the next
Meeting of Stockholders or, in lieu thereof, by written consent. If the approval
of stockholders is not obtained on or prior to November 19, 1997, any grants of
ISOs under the Plan made prior to that date will be rescinded. The Plan shall
expire at the end of the day on November 19, 2006 (except as to Options
outstanding on that date). Subject to the provisions of paragraph 5 above,
Options may be granted under the Plan prior to the date of stockholder approval
of the Plan. The Board may terminate or amend the Plan in any respect at any
time, except that, without the approval of the stockholders obtained within 12
months before or after the Board adopts a resolution authorizing any of the
following actions: (a) the total number of shares that may be issued under the
Plan may not be increased (except by adjustment pursuant to paragraph 13); (b)
the benefits accruing to participants under the Plan may not be materially
increased; (c) the requirements as to eligibility for participation in the Plan
may not be materially modified; (d) the provisions of paragraph 3 regarding
eligibility for grants of ISOs may not be modified; (e) the provisions of
paragraph 6(b) regarding the exercise price at which shares may be offered
pursuant to ISOs may not be modified (except by adjustment pursuant to paragraph
11
<PAGE> 12
13); (f) the expiration date of the Plan may not be extended; and (g) the Board
may not take any action which would cause the Plan to fail to comply with Rule
16b-3. Except as otherwise provided in this paragraph 15, in no event may action
of the Board or stockholders alter or impair the rights of a grantee, without
such grantee's consent, under any Option previously granted to such grantee.
16. APPLICATION OF FUNDS. The proceeds received by the Company from the
sale of shares pursuant to Options granted under the Plan shall be used for
general corporate purposes.
17. NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION. By accepting an ISO
granted under the Plan, each optionee agrees to notify the Company in writing
immediately after such optionee makes a Disqualifying Disposition (as described
in Sections 421, 422 and 424 of the Code and regulations thereunder) of any
stock acquired pursuant to the exercise of ISOs granted under the Plan. A
Disqualifying Disposition is generally any disposition occurring on or before
the later of (a) the date two years following the date the ISO was granted or
(b) the date one year following the date the ISO was exercised.
18. WITHHOLDING OF ADDITIONAL INCOME TAXES. Upon the exercise of a
Non-Qualified Option for less than its fair market value, the making of a
Disqualifying Disposition (as defined in paragraph 17), the vesting or transfer
of restricted stock or securities acquired on the exercise of an Option
hereunder, or the making of a distribution or other payment with respect to such
stock or securities, the Company may withhold taxes in respect of amounts that
constitute compensation includible in gross income. The Committee in its
discretion may condition (i) the exercise of an Option, or (ii) the vesting or
transferability of restricted stock or securities acquired by exercising an
Option, on the grantee's making satisfactory arrangement for such withholding.
Such arrangement may include payment by the grantee in cash or by check of the
amount of the withholding taxes or, at the discretion of the Committee, by the
grantee's delivery of previously held shares of Common Stock or the withholding
from the shares of Common Stock otherwise deliverable upon exercise of a Option
shares having an aggregate fair market value equal to the amount of such
withholding taxes.
19. GOVERNMENTAL REGULATION. The Company's obligation to sell and
deliver shares of the Common Stock under this Plan is subject to the approval of
any governmental authority required in connection with the authorization,
issuance or sale of such shares.
12
<PAGE> 13
Government regulations may impose reporting or other obligations on the Company
with respect to the Plan. For example, the Company may be required to send tax
information statements to employees and former employees that exercise ISOs
under the Plan, and the Company may be required to file tax information returns
reporting the income received by grantees of Options in connection with the
Plan.
13
<PAGE> 14
20. GOVERNING LAW. The validity and construction of the Plan and the
instruments evidencing Options shall be governed by the laws of Delaware.
14
<PAGE> 1
Exhibit 10.2
DISTRIBUTION AGREEMENT
----------------------
THIS AGREEMENT is made this day of March 1997; by and
between AGROTECH 2000 SL, a company organized with limited
liability under the laws of Spain whose registered office is
at C/Acanto 22, 13th Floor 1; 28045 Madrid ("Agrotech"), and
Conserver Corporation of America, a corporation organized
under the laws of the State of Delaware having a place of
business at 2655 LeJeune Road, Coral Gables, Florida 33134
("CCA").
WHEREAS, Agrotech has developed or acquired the rights to a
group of products known as Conserver 21 which extends the
post-harvest life of fruits, vegetables and flowers and
similarly extends the edible life of fish, meat and poultry;
WHEREAS, Agrotech wishes to market, sell and otherwise
commercially exploit Conserver 21 in the United States of
America and Canada (the "Territory") through a suitable
distributor based in the Territory;
WHEREAS CCA is capable of marketing, selling and otherwise
commercially exploiting Conserver 21 in the Territory; and
WHEREAS, Agrotech and CCA have agreed that Agrotech will grant
to CCA, and CCA will accept, the right to market, sell and
otherwise commercially exploit Conserver 21 products in the
<PAGE> 2
-2-
Territory, and Agrotech and CCA wish to put the terms of that agreement in
writing;
NOW, THEREFORE, in consideration of the mutual understandings and agreements
contained herein, the parties hereto hereby agree as follows:
1. GRANT OF RIGHTS
---------------
(a) Agrotech hereby grants to CCA the exclusive right to market, sell,
distribute and otherwise commercially exploit the Product (as
hereinafter defined) in the Territory, subject to the terms and
conditions of this Agreement, it being understood and agreed that such
right shall permit CCA to use the Product outside the Territory in
conjunction with the shipment of goods to the Territory under the
direction of CCA.
(b) Agrotech hereby further grants to CCA the option to market, sell,
distribute and otherwise commercially exploit the Product in each
nationally defined jurisdiction outside the Territory, which option
may be exercised at any time during the Initial Term or any extension
of this Agreement, provided that if CCA shall not have exercised an
option for any such jurisdiction and Agrotech shall receive an offer
<PAGE> 3
-3-
therefor from a third party, CCA shall have a right of first refusal
with respect to such jurisdiction, such right to be exercised within
sixty (60) days of receipt of notice from Agrotech in accordance with
paragraph 15 of this Agreement of such third party offer by CCA
proposing to Agrotech a commercially reasonable business plan for such
jurisdiction. Following the exercise of such option or right of first
refusal, Agrotech and CCA shall enter into a distribution agreement for
such territory substantially similar in form and substance to this
Agreement, provided that subsequent to this Agreement, loans (and the
terms thereof) from CCA to Agrotech during the Initial Term of this
Agreement and any extension hereto shall be negotiated in good faith by
the parties hereto when demand for the Product by CCA for use in the
Territory or in other jurisdictions in accordance with this paragraph
creates a necessity for the expansion of Agrotech's plant and
facilities, rather than necessarily being a provision of such future
distribution agreements.
(c) For the purposes of this Agreement, the "Product(s)" shall mean
Conserver 21 as it currently exists (regardless of the name, symbol or
logo, if any, with which it is branded) as well as any other products
which may be developed or otherwise obtained from time to
<PAGE> 4
-4-
time by Agrotech or Alfonso de Sande Moreno (who, for the
purposes of this provision, also executes this Agreement), it
being agreed by Agrotech that all of its employees and agents,
from time to time, shall likewise be bound by these provisions,
which have as their purpose the prolongation of the life of any
types of food or, more generally, the affecting of a defined
area by adsorption, conversion or other management technique,
including, for example only and without limitation, products
which would remove smoke from indoor environments.
(d) Agrotech shall have the right to supply such Products as it
deems appropriate for the purposes set forth in any orders from
CCA, provided, however, that the Products supplied shall conform
to the standards of effectiveness of Conserver 21 as it now
exists and any higher standards, whether in general efficacy or
in the specificity of intended use, of any Products later
developed or obtained, as set forth in sub-paragraph (c), and
further provided that such Products shall be packaged in the
existing filter or sachet forms, as directed by CCA, unless
otherwise agreed by the parties or in accordance with paragraph
4(e) of this Agreement.
(e) During the term of this Agreement and subject to any
<PAGE> 5
- 5 -
applicable laws or governmental regulations, Agrotech shall not
permit and shall take all reasonable actions (including
equitable and legal actions) to prevent any person or entity
other than CCA from importing, promoting, distributing, selling,
using or otherwise commercially exploiting the Product in the
Territory, either directly or indirectly (for example, through
agents or sub-distributors), provided that should Agrotech fail
to take such reasonable action within ninety (90) days of
becoming aware of such infringement, CCA shall hereby be deemed
to have been appointed Agrotech's agent to take such action, in
its own name or in the name of Agrotech as CCA deems
appropriate, and the reasonable cost of such action taken by CCA
may be set against sums owing to Agrotech by CCA under paragraph
9 of this Agreement.
(f) Agrotech shall cooperate fully with CCA in preventing any
trans-shipment of the Product into the Territory from outside
the Territory by a third party.
2. TERM
The Initial Term of this Agreement shall commence as of the date hereof (the
"Effective Date") and shall be terminable as
<PAGE> 6
- 6 -
of the anniversary of such date in the year 2022 by ninety (90) days prior
notice in accordance with paragraph 15 of this Agreement, each successive year
of the Initial Term and any extension thereto being referred to herein as the
"Contract Year". Absent such termination (or extension), this Agreement, shall
continue from year to year from such anniversary in 2022, unless terminated at
the end of any Contract Year following such date by such ninety (90) days prior
notice or otherwise terminated in accordance with this Agreement.
3. RIGHTS AND OBLIGATIONS OF CCA
(a) In consideration of the rights granted hereunder, CCA agrees
that Agrotech shall have the right (i) to borrow up to One
Million U.S. Dollars (US$1,000,000) from CCA, such right arising
as soon as is practicable following CCA's initial public
offering, it being anticipated by CCA that such initial public
offering shall occur by 15th April 1997, it being agreed that in
any event Agrotech shall have the right to borrow up to One
Hundred Thousand U.S. Dollars (US$100,000) by 22nd April 1997
and the balance of Nine Hundred Thousand U.S. Dollars
(US$900,000) by 1st May 1997, and (ii) to borrow up to Five
Hundred Thousand U.S. Dollars ($500,000), not sooner than ninety
(90) days following such initial public offering, such rights
continuing throughout the Initial Term of this Agreement and any
extension hereto, it being
<PAGE> 7
- 7 -
agreed that such sums shall be lent 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,
incrementally in accordance with business plans of Agrotech
presented to CCA.
(b) The loan described in clause (a) (i) shall be repayable within three
(3) years of the date of the loan by offset over such period against
sums owing to Agrotech by CCA under paragraph 9 of this Agreement,
it being agreed that (A) Agrotech shall not be obliged to accept
more than one-third of the offset in any one year, and (B) such
offset of one-third in any one year shall be in the form of a credit
for Product ordered in such year in excess of Two Million U.S.
Dollars (US$2,000,000) in value in accordance with the prices
established in accordance with paragraph 9 of this Agreement, it
being further agreed that CCA shall have the right to carry forward
such credit right indefinitely and to use such credit right in
territories other than the Territory which it acquires in accordance
with paragraph 1(b) of this Agreement, and the loan described in
clause (a) (ii) shall be repayable within four (4) years of the date
of the loan by offset over such period against royalties payable by
CCA under paragraph 9(e) at no more than one-fourth of the offset in
any one (1) year.
<PAGE> 8
-8-
(c) CCA shall aggressively market and promote the Product in a manner
calculated to attain and sustain the maximum revenue from the Product
in the Territory.
(d) CCA shall be solely responsible for the cost of its advertising,
marketing and promotion within the Territory.
(e) CCA shall not, without written consent of Agrotech, manufacture,
distribute, sell or otherwise commercially exploit any other products
which might reasonably be deemed to compete with the Product, or
otherwise engage in any activity which might reasonably be expected to
damage the name, reputation or commercial potential for the Product in
the Territory, it being understood, however, that CCA may use (i) other
products which do not compete with the Products but may (?) or be used
commercially (?) with the Product, and (ii) competing products after
ninety (90) days' notice to Agrotech
[END OF PAGE]
<PAGE> 9
-9-
in accordance with paragraph 15 of this Agreement if Agrotech is
unable to supply the Product on a timely basis in the quantities
required by CCA.
(f) It is understood and agreed that CCA may exercise the rights granted
hereunder through sub-distributors or agents.
(g) CCA shall cooperate with Agrotech in its efforts to obtain, pursuant
to paragraph 4(b) of this agreement, all necessary permits, approvals
or other governmental authorizations required in order to use the
Product in its intended manner with cut flowers, fruit, vegetables,
meat, fish, poultry and in such other intended uses as the Product may
from time to time have.
(h) CCA shall have the right, upon reasonable notice, to have its
commercial staff and the commercial staff of its sub-distributors or
agents participate in training sessions conducted in English organized
by Agrotech at Agrotech's premises. Agrotech shall maintain a staff of
technicians able to explain the correct use of the Product and provide
technical information and assistance to assist CCA to market the
Products effectively. During the start-up period through 31st December
1997, if
<PAGE> 10
- 10 -
requested by CCA, Agrotech shall make its own experts available to
CCA in the Territory for periods up to fifteen (15) days at no cost
to CCA other than the costs of travel and living (at the standards
which would normally be expected by executives of CCA) and other
reasonable out-of-pocket expenses, which shall be borne by CCA. The
costs and expenses of CCA's staff undergoing training sessions
provided by Agrotech shall be borne by CCA.
(i) Agrotech shall maintain product liability insurance having adequate
coverage (determined by reference to the Territory) for product
liability risk related to the Products, and, provided that CCA pays
any additional expenses arising thereby, CCA shall have the right to
be named as an additional insured under such insurance policy. At
the request of CCA, Agrotech shall supply CCA with a copy of such
policy. At CCA's sole option, CCA shall obtain and maintain its own
product liability insurance relating to the Products and, at
Agrotech's request and expense, include Agrotech as an additional
insured during the whole term of this Agreement; should CCA
determine to maintain such coverage, Agrotech shall cooperate with
CCA in providing such information as the
<PAGE> 11
- 11 -
insurer may reasonably require. Both such insurance policies
shall contain a provision pursuant to which the insurers waive
any recourse against Agrotech or CCA, as the case may be.
(j) CCA shall maintain accurate and complete business and financial
records with respect to its commercial use and distribution of
the Product and, upon reasonable notice, shall make such records
available to Agrotech's employees or agents during regular
business hours.
4. RIGHTS AND OBLIGATIONS OF AGROTECH
(a) Agrotech shall use its best efforts to ensure that all Product
delivered to CCA hereunder is of the highest standard of quality
and conforms in all respects to the representations regarding the
Product made by Agrotech to CCA from time to time.
(b) Upon the advice to Agrotech by CCA of any regulatory or other
governmental permits, approval or authorizations required for the
commercial use and exploitation of the Product in the Territory,
Agrotech shall proceed, at its sole expense, to take all
necessary steps to obtain such permits, approvals or
authorizations, provided, however, that
<PAGE> 12
- 12 -
(i) Agrotech, at its option, may appoint CCA as its agent to obtain
such permits, approvals or authorizations, nevertheless in Agrotech's
name and at its expense, and (ii) if Agrotech fails either to proceed
to take such action, directly or by appointing CCA as its agent within
a reasonable period of time, then CCA shall have the right to take all
reasonable actions to obtain such permits, approvals or
authorizations, either in Agrotech's name or CCA's name, as CCA deems
appropriate, and to offset the cost of such action against any sums
owing to Agrotech under paragraph 9 of this Agreement.
(c) Agrotech shall provide CCA, on a current basis and at no cost, with
individual copies of all promotional materials which it or any of its
other distributors or sub-distributors have created, including access
to all "camera ready" materials and other marketing materials which
might reduce the cost to CCA of producing advertising materials.
(d) Agrotech shall (i) keep CCA informed of all positive and negative
publicity or developments concerning the Products and competitive
products so as to enable CCA to take advantage of or to be able to
respond to enquiries concerning the Products, and
<PAGE> 13
-13-
(ii) disclose to CCA all information it has developed or
acquired concerning the Products or any improvement or
modifications thereto which could be helpful in establishing
the commercial utility of the Products.
(e) Agrotech agrees to alter its packaging, labelling or general
presentation of the Product in accordance with requests of CCA
based upon market requirements, it being understood and agreed
that CCA shall bear the additional cost of such special
requirement packaging over the standard packaging of the
Product from time to time.
(f) Agrotech agrees generally to cooperate fully with CCA in the
marketing of the Product as it exists now and the development
of the Product to fulfil demands identified by CCA, it being
understood that Agrotech shall be promptly reimbursed for any
out-of-pocket expenses incurred by it in connection with travel
undertaken at the request of CCA.
5. REPRESENTATIONS, WARRANTIES, COVENANTS AND INDEMNITIES OF AGROTECH
(a) Agrotech represents and warrants that (i) it has the full right
and authority to enter into this Agreement and grant the
rights granted hereunder,
<PAGE> 14
- 14 -
that the execution and delivery of this Agreement was duly authorized by
all necessary corporate action, and this Agreement represents the valid and
binding obligation of Agrotech; (ii) its grant of the right to use
intellectual property rights hereunder does not infringe any third person's
ownership of or proprietary interest in any such intellectual property;
and (iii) the Products intended for use with food products are and at all
times shall be fit for use with such food products. By signing this
Agreement, Alfonso de Sande Moreno hereby consents to the grant of rights
hereunder with respect to any Products for which he or she may hold the
relevant patent from time to time.
(b) Alfonso de Sande Moreno and Jose-Angel Gomez-Arrevalello Acevedo
represents, warrants and covenants that, as controlling shareholders of
Conserver XXI, S.A., a Spanish company now in voluntary liquidation, and as
the sole shareholders and directors of Agrotech, they shall ensure that
Agrotech has all rights, including, without limitation, intellectual
property rights, related to the Products which were at any time held by
Conserver XXI, S.A.
(c) Agrotech hereby agrees to indemnify CCA for any loss or damage suffered by
it, including legal expenses and lawyers' fees, arising from any breach of
the representations, warranties and covenants set forth in this
<PAGE> 15
- 15 -
paragraph 5.
6. MINIMUM ANNUAL PURCHASES
(a) It is hereby agreed that in the first Contract Year following the
Effective Date, CCA shall purchase Product having a cost,
pursuant to paragraph 9 of this Agreement, of not less than Two
Million U.S. Dollars (US$2,000,000), and in each subsequent
Contract Year the minimum purchase requirement shall be mutually
agreed in writing by Agrotech and CCA by reference to inflation
and business conditions in the Territory.
(b) In the event that CCA shall fail to purchase the minimum quantity
of Product as set forth in sub-paragraph (a) in any Contract
Year, then in the following year, upon the expiration of ninety
(90) days' notice to CCA in accordance with paragraph 15 of this
Agreement, Agrotech shall have the right (but not the obligation)
to sell Product to other customers in the Territory.
7. DELIVERY
(a) Agrotech shall use it best efforts to have all Product available
for shipment as soon as possible following receipt of an order
but in no event later than in accordance with the timetable set
forth in Schedule I
<PAGE> 16
-16-
attached hereto and made a part hereof.
(b) It is understood and agreed that all Product shall be delivered F.O.B.,
CCA's warehouse in the Territory, provided that CCA shall pay the shipping
costs due to Agrotech or its order when such costs become due.
8. ACCEPTANCE AND CLAIMS
(a) CCA shall be deemed to have accepted without reservation all Product
delivered by Agrotech unless claims for alleged defects, shortages, or any
other claims or alleged claims of any nature related to the Product are
made to Agrotech in accordance with sub-paragraph (b). Failure to report
any alleged claim in accordance with sub-paragraph (b) shall permanently
extinguish any and all rights arising from or accruing to CCA from such
alleged claim or any larger or related cause of action of which said
alleged claim is an integral part.
(b) All claims for alleged defects or shortages shall be made in writing and
delivered in accordance with paragraph 15 of this Agreement as soon as
discovered and in any event not later than fifteen (15) days, in the case
of shortages, and thirty (30) days in the case of defects, after delivery
of Products to CCA's destination in the Territory. If CCA shall claim that
any Product is defective, upon Agrotech's request CCA shall promptly supply
Agrotech with samples of
<PAGE> 17
-17-
the allegedly defective Product or such other evidence of deficiency as
Agrotech shall reasonably specify. Any such claim or alleged claim, of
whatever type, of CCA related the Product shall be made in writing and
delivered in accordance with paragraph 15 of this Agreement, as soon as
is practical after CCA becomes aware of the basis of the claim.
(c) If Agrotech and CCA agree that Product delivered to CCA not usable for
its intended purpose as a result of defective production, Agrotech reserves
the right to require CCA to return to Agrotech, at such location as
Agrotech may direct and at Agrotech's expense, all or part of such unusable
Product, or to destroy it or otherwise dispose of it at Agrotech's expense
and liability and pursuant to its instructions.
9. PRICES AND TERMS; ROYALTIES; PAYMENT
(a) In consideration of the rights granted by Agrotech to CCA hereunder, CCA
agrees to pay to Agrotech, in
[END OF PAGE]
<PAGE> 18
- 18 -
the manner hereinafter set forth; the invoice price to CCA
for the Product ordered by CCA from time to time.
(b) CCA shall pay for the Product ordered by wire transfer
to such account as shall be notified from time to time by
Agrotech, it being agreed that (i) each order shall be
accompanied by a simultaneous wire transfer of fifty
percent (50%) of the total price of each order. (ii) the
balance shall be payable within forty five (45) days of
shipment of the Product in the first Contract Year and
ninety (90) days after such shipment thereafter, and (iii)
any unpaid and overdue amount shall bear interest at
the prime rate of Citibank, N.A., as in effect from time
to time, which amounts shall be added to the amount due to
Agrotech from the date such amount becomes due until the
date of payment.
(c) Prices for the Product shall be agreed in writing before
the start of every alternate Contract Year, it being agreed
that the prices for the first two (2) Contract Years shall
be as set forth in Schedule II attached hereto and made a
part hereof and that any adjustments to such prices in
subsequent Contract Years shall be mutually agreed
reasonable, and negotiated in good faith.
(d) Any variation in the method of payment set forth in this
paragraph 9 or in the agreed price from time to time shall
be agreed in writing by the parties hereto.
<PAGE> 19
- 19 -
(e) In consideration of Agrotech's entering into this
Agreement, and as additional payment hereunder, CCA shall
pay a royalty to Agrotech of four (4%) percent of Net
Revenues (as defined below) of CCA generated from the
commercial use of the Product, such payment to be made
quarterly, forty-five (45) days after the end of each
calendar quarter, each such payment to be accompanied by
copies of such records as Agrotech may reasonably require
in order to verify revenues received from the commercial
use of the Products.
(f) For the purposes of this agreement the term "Net
Revenues" shall mean the gross proceeds actually received
by CCA from the commercial exploitation of Products reduced
by any cost to CCA of packing,
[END OF PAGE]
<PAGE> 20
-20-
freight, and insurance of the Product, and by federal, state
and local taxes.
10. INTELLECTUAL PROPERTY
(a) CCA hereby acknowledges, as between CCA and Agrotech,
Agrotech's exclusive ownership and other rights in the
"Conserver 21" trademark, trade name and other trade
designations in the Territory, as well as patents registered
and/or applied for in Spain and The Hague, as listed in
Schedule III attached hereto and made a part hereof, as well
as any other patents related to the Products from time to time
(the "Patents"), and further acknowledges that the rights
granted hereunder are a non-assignable privilege to use such
"Conserver 21" trade designations only in connection with the
distribution, marketing, advertising, display, sale and
commercial exploitation of the Product. This privilege shall
terminate upon termination of this Agreement.
(b) Agrotech hereby agrees that it shall apply to register the
Patents in each jurisdiction in the Territory as soon as is
practicable following the Effective Date and further agrees
that if it fails to take such action within a reasonable
period of
<PAGE> 21
- 21 -
time, CCA shall hereby be deemed to have been appointed Agrotech's agent to
take such action, in Agrotech's name, in which event Agrotech shall
cooperate fully with CCA in such action, and the reasonable cost of such
action taken by CCA may be set against sums owing to Agrotech by CCA under
paragraph 9 of this Agreement.
(c) CCA shall at all times recognize, respect and protect Agrotech's right of
total ownership of the "Conserver 21" trademark and any other trademarks
used in conjunction with the Product in the Territory, as well as the
Patents, and shall not intentionally derogate, diminish or weaken Agrotech's
sole property rights in said mark and the Patents.
(d) CCA shall promptly notify Agrotech of any and all infringements of
Agrotech's trademarks, patents and any other intellectual property rights
held or used in conjunction with the Product in the Territory that may come
to CCA's attention, and Agrotech shall take all reasonable action against
such infringement, with which action CCA shall cooperate, all expenses and
costs incident thereto being borne by Agrotech, provided that should
Agrotech fail to take such reasonable action, CCA shall hereby be
<PAGE> 22
-22-
deemed to have been appointed Agrotech's agent to take such action, in
its own name or in the name of Agrotech as CCA deems appropriate, and
the reasonable cost of such action taken by CCA may be set against sums
owing to Agotech by CCA under paragraph 9 of this Agreement.
(e) Agrotech shall defend and hold CCA harmless from any claim,
liability, suit, cost or expense arising out of any third-party claim of
infringement of its property right in the "Conserver 21" trademark or
the Patents.
11. TERMINATION FOR CAUSE
(a) Either party may terminate this Agreement if the other party commits
a material breach of this Agreement, by giving thirty (30) days written
notice to the other party of such breach and termination, unless the
defaulting party cures such breach within such period.
(b) This Agreement shall be automatically terminated, without further
notice, and each party shall thereupon be released from all obligations
hereunder, in the event of:
<PAGE> 23
-23-
(i) the insolvency of either party, however such insolvency may be
evidenced;
(ii) the complete or partial liquidation or suspension of the business
of either party;
(iii) the filing by or against either party of a voluntary or
involuntary petition pursuant to any present or future act of a
governmental organ having jurisdiction over the party, or any political
subdivision thereof, on the subject of bankruptcy;
(iv) the institution of any proceeding by or against either party for
any relief under any law relating to the relief of debtors, adjustments
of indebtedness, reorganizations, arrangements, compositions or
extensions;
(v) the making by either party of any assignment for the benefit of
creditors, or the application for the appointment or the appointment of
any receiver of the property of either party;
(vi) the filing or issuance of a notice of lien for the purpose of
attaching or sequestering a
<PAGE> 24
- 24 -
substantial part of the property or assets of either party
unless such lien is bonded or otherwise stayed;
(vii) the service of a warrant for distraint or notice of any
intended bulk sale or the commencement of any proceeding
supplementary to judgement; or
(viii) the dissolution of either party;
(c) Should the termination of this Agreement be occasioned by the
occurrence of any of the events enumerated in sub-paragraph (b) with
respect to Agrotech, then CCA shall have the right to purchase the
Product from any successor in interest to Agrotech on the same terms
and conditions set forth herein.
12. STATUS OF PARTIES
The relationship of CCA to Agrotech shall be that of an independent contractor
engaged in purchasing the Product from Agrotech for commercial exploitation. As
such, neither party nor any of their respective employees are either agents or
legal representatives of the other for any purpose, and neither shall have any
power or authority to represent, act
<PAGE> 25
-25-
for, bind or commit the other. Neither the making nor performance of this
Agreement shall be construed in any manner to establish a joint venture or
partnership.
13. ASSIGNMENT
The parties acknowledge that this Agreement is personal in nature and agree
that this Agreement shall not be assigned by either party, in whole or in part,
without the prior written consent of the other. Any purported assignment of
this Agreement or any interest therein without the written consent of the other
party shall be void. The foregoing notwithstanding, each party shall have, at
all times and in its sole and unfettered discretion, the right to sell, convey,
assign or otherwise transfer its interest in this Agreement to any entity which
it controls, is controlled by, or is under common control with.
14. SEVERABILITY
The illegality or unenforceability of any provision of this Agreement shall not
impair the legality or enforceability of any other provision. The laws, rules
and regulations of the jurisdictions in which CCA conducts its business are
hereby incorporated in this Agreement to the extent that such laws, rules and
regulations are required to be so incorporated and shall supersede any
conflicting provision of this Agreement.
<PAGE> 26
- 26 -
If required by applicable law, Agrotech and CCA may enter into an amendment of
this Agreement for the sole purpose of complying with such law.
15. NOTICE
Any notice permitted or required under this Agreement shall be deemed to be
effective upon receipt if such notice is in writing and is personally served or
mailed by registered or certified air mail, postage prepaid, return receipt
requested, or sent by international air courier, to the addresses of the
parties as herein stated or to such other addresses as shall have been charged
by either party to the other in writing in accordance with this provision, and
evidenced by post office or courier receipt, as the case may be, or, if sent
by telex or facsimile, upon receipt of appropriate confirmation.
16. MODIFICATION
This Agreement may be modified, amended or revised only by a written
instrument, duly executed by the parties hereto.
17. ENTIRE AGREEMENT
This Agreement, along with any schedules and duly executed addenda hereto, shall
be deemed to contain the entire and only agreement between the parties relating
to the subject matter
<PAGE> 27
- 27 -
hereof, and any representations, terms or conditions relating hereto and not
incorporated herein shall not be binding upon either party. This Agreement
wholly cancels, voids, and supersedes any agreement heretofore entered into
between the parties with respect to the subject matter hereof, except as
otherwise expressly provided herein.
18. COMPLIANCE WITH LAWS
In the conduct of its business in relation to this Agreement, CCA shall comply
with all applicable laws, regulations and orders and the like prevailing in the
Territory and shall hold Agrotech harmless from any claim, liability, cost or
expense arising out of a violation thereof.
19. GOVERNING LAW; ARBITRATION
(a) It is the express intent of the parties that this Agreement shall be
interpreted in accordance with and governed by the laws of the State
of Delaware.
(b) Any dispute arising hereunder shall be finally resolved by arbitration
by and under the rules of the International Chamber of Commerce, such
arbitration to be conducted in Madrid.
<PAGE> 28
- 28 -
20. WAIVER AND REMEDIES
No waiver by either of the parties hereto of any failure by the other party to
keep or perform any covenant or condition of this Agreement shall be deemed a
waiver of any preceding, succeeding or continuing breach of the same or any
other covenant or condition. Except as expressly provided to the contrary, the
remedies herein provided shall be deemed cumulative, and the exercise of one
shall not preclude the exercise of any other remedy nor shall the specifications
of remedies herein exclude any rights or remedies at law or in equity which may
be available.
21. HEADINGS
The title or headings of provisions herein are used for convenience only and
shall in no way be used to construe the meaning of the provisions hereof.
22. EXECUTION
This Agreement may be executed by duly authorized representatives of the
respective parties hereto in any number of counterparts, each of which shall be
deemed the original. This Agreement may be translated into any other language,
and such translation may be initialled, but only this Agreement in the English
language shall be deemed the original. If any
<PAGE> 29
SCHEDULE I
Delivery Time for the Product
Sachets: Six (6) weeks plus one (1) week for each two hundred
fifty thousand (250,000) sachets ordered.
Filters: One (1) week for each ten thousand (10,000) filters
ordered.
<PAGE> 30
-29-
conflict exists between the English language and the translation, the English
language version shall control.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement by their
duly authorized representatives as of the date and year first, above written.
CONSERVER CORPORATION OF AMERICA
By:
------------------------------
AGROTECH 2000 SL
By:
------------------------------
and
By:
------------------------------
----------------------------------
ALFONSO DE SANDE MORENO
----------------------------------
JOSE-ANGEL GOMEZ-AREVALILO ACEVIDO
<PAGE> 31
SCHEDULE II
Prices
Prices for the first two (2) Contract Years shall be Seventeen U.S. Dollars
(US$17.00) per filter and Nineteen U.S. Cents (US$0.19) per sachet that ex
works.
---------------------------------
<PAGE> 32
SCHEDULE III
Patents
1. Number 9401478 in Spain, filed under the name of
Conserver XXI, S.A.
2. Number 9600692 in Spain, filed under the name of Alfonso
de Sande Moreno.
3. Number PCT/EP96/02742 in The Hague, filed under the name
of Alfonso de Sande Moreno.
<PAGE> 1
EXHIBIT 10.6
2,200,000 SHARES OF COMMON STOCK
OF
CONSERVOR CORPORATION OF AMERICA
AGREEMENT AMONG UNDERWRITERS
May , 1997
JANSSEN-MEYERS ASSOCIATES, L.P.
As Representative of the
several Underwriters named
in Schedule I to Exhibit A
annexed hereto
17 State Street
New York, New York 10004
Dear Sirs:
We understand that Conservor Corporation of America, a Delaware
corporation (the "Company"), desires to enter into an agreement, substantially
in the form of Exhibit A attached hereto (the "Underwriting Agreement") with you
and the other prospective Underwriters named in Schedule I to the Underwriting
Agreement for the sale by the Company, of an aggregate of 2,200,000 shares of
Common Stock, par value $.001 per share (the "Shares") of the Company (the "Firm
Securities"). In addition, the Company, pursuant to the Underwriting Agreement,
will grant to the Underwriters an option to purchase up to an additional 330,000
Shares (the "Option Securities") for the purpose of covering over-allotments, if
any, in connection with the sale of the Firm Securities. The Firm Securities and
any Option Securities purchased pursuant to the Underwriting Agreement are
herein called the "Securities."
We understand that changes may be made in those who are to be Underwriters
and in the respective number of Securities to be purchased by them, but that the
number of Securities to be purchased by us as set forth in said Schedule I will
not be changed without our consent except as provided herein or in the
Underwriting Agreement. The parties on whose behalf you execute the Underwriting
Agreement are herein called the "Underwriters."
We desire to confirm the agreement among you, the undersigned and the
other Underwriters with respect to the purchase of the Securities by the
Underwriters, severally and not jointly, from the Company. The aggregate number
of Securities which any Underwriter will
<PAGE> 2
be obligated to purchase pursuant to the terms of the Underwriting Agreement is
herein called the "Underwriting Obligation" of that Underwriter.
1. Authority and Compensation of Representative. We hereby authorize you,
as our representative (the "Representative") and on our behalf, (a) to enter
into an agreement with the Company, in substantially the form attached hereto as
Exhibit A, but with such changes therein as in your judgment will not be
materially adverse to the Underwriters, providing for the purchase by us,
severally and not jointly, from the Company, at the purchase price per Security
determined as set forth in said Exhibit A, of the number of Firm Securities set
forth opposite our name in Schedule I to said Exhibit A, and our allotted share
of the Option Securities which you determine to be purchased, (b) to exercise
all the authority and discretion vested in the Underwriters and in you by the
provisions of the Underwriting Agreement, (c) to take all such action as you in
your discretion may deem necessary or advisable in order to carry out the
provisions of the Underwriting Agreement and of this Agreement, and the sale and
distribution of the Securities, and (d) to determine all matters relating to the
public advertisement of the Securities.
As our share of the compensation for your services hereunder, we will pay
to you, and we authorize you to charge to our account on the Closing Date and on
the Option Closing Date referred to in the Underwriting Agreement, $_____ per
Share and $____ per Warrant in respect of the aggregate number of Firm
Securities and Option Securities, respectively, which we shall agree to purchase
pursuant to the Underwriting Agreement.
2. Public Offering of Securities. The sale of the Securities to the public
is to be made, as herein provided, as soon after the registration statement
relating to the Securities becomes effective as in your judgment is advisable.
The purchase price to be paid by the Underwriters for the Securities and the
initial public offering price are to be determined by agreement between you and
the Company. The Securities shall be first offered to the public at the initial
public offering prices as so determined (the "Initial Public Offering Price").
You will advise us by telegraph or telephone when the Securities shall be
released for offering, when the registration statement relating to the
Securities shall become effective and the price at which the Securities is
initially to be offered. We agree not to sell any of the Securities until you
have released it for that purpose. We authorize you, after the initial public
offering, to change the public offering price, the concession and the
reallowance if, in your sole discretion, such action becomes desirable by reason
of changes in general market conditions or otherwise. As used herein, the terms
"Registration Statement," "Preliminary Prospectus" and "Prospectus" shall have
the meanings ascribed thereto in the Underwriting Agreement. The public offering
price sat the time in effect is herein called the "Offering Price." After notice
from you that the Securities is released for public sale, we will offer to the
public in conformity with the provisions hereof and with the terms of offering
set forth in the Prospectus such shares of your Securities as you advise us are
not reserved.
3. Offering to Dealers and Retail Sales. We authorize you to reserve for
offering and sale, and on our behalf to sell, to retail purchasers (such sales
being herein called "Retail Sales")
2
<PAGE> 3
and to dealers selected by you (such dealers, among whom any Underwriter may be
included, being herein called "Selected Dealers") all or any part of our
Securities as you, in your sole discretion, shall determine. Such sales, if any,
shall be made (a) in the case of Retail Sales, at the Offering Price, and (b) in
the case of sales to Selected Dealers, at the Offering Price less such
concession or concessions as you, in your sole discretion, shall determine.
Except for such sales as are designated by a purchaser to be for the account of
a particular Underwriter or Selected Dealer, any sales to Selected Dealers made
for our account shall be as nearly as practicable in the ratio that the
Securities reserved for our account for offering to Selected Dealers bears to
the aggregate of all Securities of all Underwriters so reserved.
You agree to notify us promptly on the date of the public offering as to
the number of shares, if any, of the Securities which we may retain for direct
sale by us. Prior to the termination of the provisions referred to in Section 13
hereof, you may reserve for offering and sale as hereinbefore provided any
Securities theretofore retained by us remaining unsold and we may, with your
consent, retain any Securities theretofore reserved by you remaining unsold.
We agree that, from time to time prior to the termination of the
provisions referred to in Section 13 hereof, we shall furnish to you such
information as you may request in order to determine the number of Securities
purchased by us under the Underwriting Agreement which then remain unsold, and
we shall upon your request sell to you for the account of any Underwriter as
many of such unsold Securities as you may designate at the Offering Price, less
all or any part of the concession to Selected Dealers as you, in your sole
discretion, shall determine. The provisions of Section 4 hereof shall not be
applicable in respect of any such sale.
We authorize you to determine the form and manner of any communications or
agreements with Selected Dealers. In the event that there shall be any
agreements with Selected Dealers, you are authorized to act as manager
thereunder and we agree, in such event, to be governed by the terms and
conditions of such agreements. The form of Selected Dealer Agreement attached
hereto as Exhibit B is satisfactory to us.
It is understood that any Selected Dealer to whom an offer may be made as
hereinbefore provided shall be actually engaged in the investment banking or
securities business and shall be either (i) a member in good standing of the
National Association of Securities Dealers, Inc. (the "NASD") or (ii) a dealer
with its principal place of business located outside the United States, its
territories and its possessions and not registered as a broker or dealer under
the Securities Exchange Act of 1934, as amended (the "1934 Act"), who agrees not
to make any sales within the United States, its territories or its possessions
or to persons who are nationals thereof or residents therein. Each Selected
Dealer shall agree to comply with the provisions of Section 24 of Article III of
the Rules of Fair Practice of the NASD, and each foreign Selected Dealer who is
not a member of the NASD also shall agree to comply with the NASD's
interpretation with respect to free-riding and withholding, to comply, as though
it were a member of the NASD, with the provisions of Sections 8 and 36 of
Article III of such Rules of Fair Practice, and to comply with Section 25 of
Article III thereof as that Section applies to a non-member foreign dealer. The
several Underwriters may allow, and the Selected Dealers, if any, may re-allow,
3
<PAGE> 4
such concession or concessions as you may determine from time to time on sales
of Securities to any qualified dealer, all subject to the Rules of Fair Practice
of the NASD.
You, and any of the several Underwriters with your prior consent, may make
purchases or sales of the Securities from or to any of the other Underwriters,
at the Offering Price less all or any part of the gross spread, and from or to
any of the Selected Dealers at the Offering Price less all or any part of the
concession to Selected Dealers.
Upon your request, we will advise you of the identity of any dealer to
whom we allow such a discount and any Underwriter or Selected Dealer from whom
we receive such a discount.
4. Repurchases in the Open Market. Any Securities sold by us (otherwise
than through you) which shall be contracted for or purchased in the open market
by you on behalf of any Underwriter or Underwriters shall be repurchased by us
on demand at a price equal to the cost of such purchase plus commissions and
taxes on redelivery. Any Securities delivered on such repurchase need not be the
identical shares originally sold by us. In lieu of delivery of such shares to
us, you may sell such shares in any manner for our account and charge us with
the amount of any loss or expense or credit us with the amount of any profit,
less any expense, resulting from such sale, or charge our account with an amount
not in excess of the concession to Selected Dealers.
5. Delivery and Payment. Upon your request, we shall deliver to you
payment for the Securities to be purchased by us under the Underwriting
Agreement in an amount equal to the Initial Public Offering Price for such
Securities less the concession to Selected Dealers. Such payment shall be made
in such form and at such time and place as may be specified in such request, and
we authorize you to make payment for such Securities against delivery thereof
for our account hereunder. If we are a member of or clear through a member of
The Depository Trust Company ("DTC"), you may, in your discretion, deliver our
Securities through the facilities of DTC.
You shall remit to us, as promptly as practicable, the amounts received by
you from Selected Dealers and retail purchasers as payment in respect of
Securities sold by you for our account pursuant to Section 3 hereof for which
payment has been received. Securities purchased by us under the Underwriting
Agreement and not reserved or sold by you for our account pursuant to Section 3
hereof shall be delivered to us as promptly as practicable after receipt by you.
Any Securities purchased by us and so reserved which remains unsold at any time
prior to the settlement of accounts hereunder may, in your discretion, and
shall, upon your request, be delivered to us, but, until termination of the
Selected Dealer Agreements pursuant to their terms, such delivery shall be for
carrying purposes only. In case any Securities reserved for sale in Retail Sales
or to Selected Dealers shall not be purchased and paid for in due course as
contemplated hereby, we agree (a) to accept delivery when tendered by you of any
Securities so reserved for our account and not so purchased and paid for, and
(b) in case we shall have received payment from you in respect of any such
Securities, to reimburse you on demand for the full amount which you shall have
paid us in respect of such Securities.
4
<PAGE> 5
In the event of our failure to tender payment for Securities as provided
in the Underwriting Agreement, you shall have the right under the provisions
thereof to arrange for other persons, who may include you and any other
Underwriter, to purchase such Securities which we had agreed to purchase but
without relieving us from liability for our default.
6. Authority to Borrow. We authorize you to advance your funds for our
account (charging current interest rates) and to arrange loans for our account
or the account of the Underwriters for the purpose of carrying out this
Agreement, and in connection therewith to execute and deliver any notes or other
instruments and to hold or pledge as security therefor all or any part of our
Securities purchased hereunder for our account. Any lender is hereby authorized
to accept your instructions in all matters relating to such loans. Any part of
our Securities so held by you may be delivered to us for carrying purposes and,
if so delivered, will be redelivered to you upon demand.
7. Allocation of Expenses and Liability. We authorize you to charge our
account with and we agree to pay (a) all transfer taxes on sales made by you for
our account, except as herein otherwise provided, and (b) our proportionate
share (based on our Underwriting Obligation) of all expenses incurred by you in
connection with the purchase, carrying, sale and distribution of the Securities
and all other expenses arising under the terms of the Underwriting Agreement or
this Agreement. Your determination of all such expenses and your allocation
thereof shall be final and conclusive. You may at any time make partial
distributions of credit balances or call for payment of debit balances. Funds
for our account at any time in your hands may be held in your general funds
without accountability for interest. As soon as practicable after the termina-
tion of this Agreement, the net credit or debit balance in our account, after
proper charge and credit for all interim payments and receipts, shall be paid to
or paid by us, provided that you may establish such reserves as you, in your
sole discretion, shall deem advisable to cover possible additional expenses
chargeable to the several Underwriters. Notwithstanding any settlement, we will
remain liable for any taxes on transfers for our account and for our
proportionate share (based on our Underwriting Obligation) of all expenses and
liabilities that may be incurred for the accounts of the Underwriters.
8. Liability for Future Claims. Neither any statement by you of any credit
or debit balance in our account nor any reservation from distribution to cover
possible additional expenses relating to the Securities shall constitute any
representation by you as to the existence or non-existence of possible
unforeseen expenses or liabilities of or charges against the several
Underwriters. Notwithstanding the distribution of any net credit balance to us
or the termination of this Agreement or both, we shall be and remain liable for,
and will pay on demand, (a) our proportionate share (based on our Underwriting
Obligation) of all expenses and liabilities which may be incurred by or for the
accounts of the Underwriters, or any of them, based on the claim that the
Underwriters constitute an association, unincorporated business, partnership or
any separate entity, and (b) any transfer taxes paid after such settlement on
account of any sale or transfer for our account.
5
<PAGE> 6
9. Stabilization and Over-Allotment. We authorize you on our behalf and
for our account, during the term of this Agreement, in your discretion, and
without obligating you to do so, to buy and sell Securities in the open market
or otherwise for either long or short account, on such terms and at such prices
as you may determine and, in arranging for sales, to over-allot and cover such
over-allotments, provided that at no time shall the net commitment of any
Underwriter under authority of this Section, either for long or short account,
exceed an amount equivalent to 15% of the maximum number of Securities to be
purchased by such Underwriter under the Underwriting Agreement. During or after
the term of this Agreement you may cover any short position incurred under the
preceding sentence by purchase of Option Securities from the Company pursuant to
the option contained in Section 2 of the Underwriting Agreement or otherwise.
All purchases, sales and over-allotments under authority of this Section shall
be for the accounts of each of the several Underwriters as nearly as practicable
in proportion to their respective Underwriting Obligations. We agree to take up
at cost on demand any Securities so purchased for our account and to deliver on
demand any Securities so sold or over-allotted for our account. We also
authorize you to deliver our Securities pursuant to this Section 9, against
sales made by you for our account pursuant to any provisions of this Agreement.
Notwithstanding the foregoing limitations, in the event of default by one or
more Underwriters in respect of their obligations under this paragraph, each
nondefaulting Underwriter shall assume its proportionate share of the
obligations of such defaulting Underwriter without relieving such defaulting
Underwriter of its liability hereunder.
In the event that you effect any stabilizing purchases pursuant to this
Section 9, you will notify each Underwriter promptly of the date and time when
the first stabilizing purchase is effected and the date and time when
stabilizing is terminated. Each Underwriter agrees that if it effects any
stabilizing purchases, it will, not later than three business days following the
day on which any such stabilizing purchase is effected, notify you of the price,
date and time at which such stabilizing purchase was effected and will promptly
notify you of the date and time when stabilizing was terminated by such
Underwriter. Each Underwriter authorizes you to file with the Securities and
Exchange Commission (the "Commission") all notices and reports which may be
required as a result of any transactions made pursuant to this Section 9.
We agree to advise you, from time to time upon your request during the
term of this Agreement, of the number of Securities retained by us or purchased
by us from other Underwriters and Selected Dealers remaining unsold, and will,
upon your request, release to you for the accounts of one or more of the several
Underwriters, such number of Securities as you may designate at such price, not
less than the net price to Selected Dealers nor more than the Initial Public
Offering Price, as you may determine.
If, pursuant to the provisions of the first paragraph of this Section 9
and prior to the termination of this Agreement (or such earlier date as you may
have determined on notice to the Underwriters) you purchase or contract to
purchase any Securities which were retained by or released to us for direct
sale, which shares were theretofore not effectively placed for investment by us,
we authorize you in your discretion either to charge our account with an amount
equal to the concession to Selected Dealers with respect thereto or to require
us to repurchase such
6
<PAGE> 7
shares at a price equal to the total cost of such purchase, including
commissions, if any, and transfer tax on the redelivery. Securities delivered on
such repurchase need not be the identical shares originally purchased by and
delivered to us.
Upon the termination of this Agreement, you are authorized in your
discretion, in lieu of delivering to the several Underwriters any Securities
then held for their respective accounts pursuant to this Section 9, to sell such
shares for the accounts of each of the Underwriters at such price or prices as
you may determine and debit or credit our account for the loss or profit
resulting from such sale.
10. Open Market Transactions. We agree that we will not make bids or
offers, or make or induce purchases or sales for our own account or the accounts
of customers, in the open market or otherwise, either before or after the
purchase of the Securities and for either long or short accounts, of any
Securities or any security of the same class or series, or any right to purchase
any such security except (i) as provided in this Agreement, the Underwriting
Agreement and the Selected Dealer Agreements or otherwise approved by you, (ii)
in brokerage transactions not involving solicitation of the customer's order and
(iii) in connection with option and option-related transactions that are
consistent with the "no-action" position set forth in Release No. 17609, as
amended in Release No. 19565, of the Commission under the 1934 Act. We further
agree that we will not lend, either before or after the purchase of the
Securities, to any customer, Underwriter, Selected Dealer or to any other
securities broker or dealer any Securities. Prior to the completion (as defined
in Regulation M under the 1934 Act) of our participation in the distribution, we
will otherwise comply with Regulation M.
11. Blue Sky. Prior to the initial offering by the Underwriters, you will
inform us as to the states and other jurisdictions under the respective
securities or blue sky laws of which it is believed that the Securities has been
qualified for sale or is exempt from such qualification, but you do not assume
any responsibility or obligation as to the accuracy of such information or as to
the right of any Underwriter or dealer to offer or sell the Securities in any
state or other jurisdiction. You agree to file or cause to be filed, on behalf
of the Underwriters, a Further State Notice in respect of the Securities
pursuant to Article 23-A of the General Business Law of the State of New York,
if necessary.
12. Default by Underwriters. Default by one or more Underwriters in
respect of their obligations under the Underwriting Agreement shall not release
us from any of our obligations or in any way affect the liability of any
defaulting Underwriter to the other Underwriters for damages resulting from such
default. In the event of such default by one or more Underwriters, you are
authorized to increase, pro rata with the other non-defaulting Underwriters, the
amount of Securities which we shall be obligated to purchase from the Company;
provided, however, that the aggregate amount of all such increases for all
non-defaulting Underwriters shall not exceed 10% of the Securities and, if the
aggregate amount of the Securities not taken up by such defaulting Underwriters
exceeds such 10%, you are further authorized, but shall not be obligated, to
arrange for the purchase by other persons, who may include you and other
non-defaulting Underwriters, of all or a portion of the Securities not taken up
by such Underwriters.
7
<PAGE> 8
In the event any such increases or arrangements are made, the respective amounts
of the Securities to be purchased by the non-defaulting Underwriters and by any
such other person or persons shall be taken as the basis for the Underwriters'
obligations under this Agreement, but this shall not in any way affect the
liability of any defaulting Underwriter to the other Underwriters for damages
resulting from such default.
In the event of default by one or more Underwriters in respect of their
obligations under this Agreement to take up and pay for any Securities purchased
by you for their respective accounts pursuant to Section 9 hereof, or to deliver
any such Securities sold or over-allotted by you for their respective accounts
pursuant to any provision of this Agreement, and to the extent that arrangements
shall not have been made by you for other persons to assume the obligations of
such defaulting Underwriter or Underwriters, each non-defaulting Underwriter
shall assume its proportionate share of the aforesaid obligations of each such
defaulting Underwriter without relieving any such defaulting Underwriter of its
liability therefor.
13. Termination. Section 2, the second paragraph and the first sentence of
the third paragraph of Section 3, Section 4, the first sentence of Section 9 and
Section 10 hereof will terminate at the close of business on the 30th calendar
day after the effective date of the Registration Statement, unless extended or
sooner terminated as hereinafter provided. You may extend such provisions, or
any of them, for a period not to exceed 30 additional calendar days by notice to
us to such effect. You may terminate any of such provisions at any time by
notice to us, and you may terminate all such provisions at any time by notice to
us to the effect that the offering provisions of this Agreement are terminated.
14. General Position of the Representative. In taking action under this
Agreement, you shall act only as agent of the several Underwriters. Your
authority shall include the taking of such action as you may deem advisable in
respect of all matters pertaining to any and all offers and sales of the
Securities, including the right to make any modifications which you consider
necessary or desirable in the arrangements with Selected Dealers or others. You
shall be under no liability for or in respect of the value of the Securities or
the validity or the form thereof, the Registration Statement, the Prospectus or
agreements or other instruments executed by the Company or others; or for or in
respect of the delivery of the Securities; or for the performance by the Company
or others of any agreement on its or their part; nor shall you as Representative
or otherwise be liable under any of the provisions hereof or for any matters
connected herewith, except for want of good faith, and except for any liability
arising under the Securities Act of 1933, as amended (the "1933 Act"); and only
obligations expressly assumed by you as Representative herein shall be implied
from this Agreement. In representing the Underwriters hereunder, you shall act
as the Representative of each of them respectively. Nothing herein contained
shall constitute the several Underwriters partners with you or with each other,
or render any Underwriter liable for the commitments of any other Underwriter,
except as otherwise provided in Section 12 hereof and in Section 11 of the
Underwriting Agreement. If the Underwriters shall be deemed to constitute a
partnership for Federal income tax purposes, it is the intent of each
Underwriter to be excluded from the application of Subchapter K, Chapter 1,
Subtitle A, of the Internal Revenue Code of 1986, as amended. Each Underwriter
elects to
8
<PAGE> 9
be so excluded and agrees not to take any position inconsistent with such
election. Each Underwriter authorizes you, in your discretion, to execute and
file on behalf of the Underwriters such evidence of election as may be required
by the Internal Revenue Service. The commitments and liabilities of each of the
several Underwriters are several in accordance with their respective
Underwriting Obligations and are not joint.
15. Acknowledgment of Receipt of Registration Statement etc. We hereby
confirm that we have examined the Registration Statement relating to the
Securities as heretofore filed by the Company with the Commission and each
amendment thereto, if any, filed through the date hereof, including any
documents filed under the 1934 Act through the date hereof and incorporated by
reference into the Prospectus, that we are willing to be named as an underwriter
therein and to accept the responsibilities of an underwriter thereunder, and
that we are willing to proceed as therein contemplated. We confirm that we have
authorized you to advise the Company on our behalf (a) as to the statements to
be included in any Preliminary Prospectus and in the Prospectus under the
heading "Underwriting" insofar as they relate to us, and (b) that there is no
other information about us required to be stated in the Registration Statement
or Prospectus. We understand that the aforementioned documents are subject to
further change and that we will be supplied with copies of any further
amendments or supplements to the Registration Statement, of any document filed
under the 1934 Act after the effective date of the Registration Statement and
before termination of the offering of the Securities by the Underwriters if such
document is deemed to be incorporated by reference into the Prospectus and of
any amended or supplemented Prospectus promptly, if and when received by you,
but the making of such changes, amendments and supplements shall not release us
or affect our obligations hereunder or under the Underwriting Agreement.
16. (a) Indemnity. We agree to indemnify and hold harmless each other
Underwriter and any person who controls any such Underwriter within the meaning
of Section 15 of the 1933 Act, to the extent that, and upon the terms on which,
we agree to indemnify and hold harmless the Company and other specified persons
as set forth in the Underwriting Agreement. Our indemnity agreement contained in
this Section 16 shall remain in full force and effect regardless of any
investigation made by or on behalf of such other Underwriter or controlling
person and shall survive the delivery of and payment for the Securities and the
termination of this Agreement and the similar agreements entered into with the
other Underwriters.
(b) Claims Against Underwriters. Each Underwriter (including you) will
pay, upon your request, as contribution, its proportionate share, based upon its
Underwriting Obligation, of any loss, claim, damage or liability, joint or
several, paid or incurred by any Underwriter (including you) to any person other
than an Underwriter, arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement, the Prospectus, any amendment or supplement thereto or any
Preliminary Prospectus or any other selling or advertising material approved by
you for use by the Underwriters in connection with the sale of the Securities,
or the omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading
(other than an untrue statement or alleged untrue statement or omission or
alleged omission made in
9
<PAGE> 10
conformity with written information furnished to the Company through you by or
on behalf of an Underwriter expressly for use therein) or relating to any
transaction contemplated by this Agreement; and will pay such proportionate
share of any legal or other expense reasonably incurred by you or with your
consent in connection with investigating or defending against any such loss,
claim, damage or liability, or any action in respect thereof. In determining the
amount of our obligation under this paragraph, appropriate adjustment may be
made by you to reflect any amounts received by any one or more Underwriters in
respect of such claim from the Company pursuant to Section 8 of the Underwriting
Agreement or otherwise. There shall be credited against any amount paid or
payable by us pursuant to this paragraph any loss, claim, damage, liability or
expense which is incurred by us as a result of any such claim asserted against
us, and if such loss, claim, damage, liability or expense is incurred by us
subsequent to any payment by us pursuant to this paragraph, appropriate
provision shall be made to effect such credit, by refund or otherwise. If any
such claim is asserted, you may take such action in connection therewith as you
deem necessary or desirable, including retention of counsel for the
Underwriters, and in your discretion separate counsel for any particular
Underwriter or group of Underwriters, and the fees and disbursements of any
counsel so retained by you shall be included in the amounts payable pursuant to
this paragraph. In determining amounts payable pursuant to this paragraph, any
loss, claim, damage, liability or expense incurred by any person who controls
any Underwriter within the meaning of Section 15 of the 1933 Act which has been
incurred by reason of such control relationship shall be deemed to have been
incurred by such Underwriter. Any Underwriter may elect to retain, at its own
expense, its own counsel. You may settle or consent to the settlement of any
such claim on advice of counsel retained by you. Whenever you receive notice of
the assertion of any claim to which the provisions of this paragraph would be
applicable, you will give prompt notice thereof to each Underwriter. If any
Underwriter or Underwriters defaults in its or their obligation to make any
payments under this paragraph, each non-defaulting Underwriter shall be
obligated to pay its proportionate share of all defaulted payments, based upon
the proportion such non-defaulting Underwriter's Underwriting Obligation bears
to the Underwriting Obligations of all non-defaulting Underwriters. Nothing
herein shall relieve a defaulting Underwriter from liability for its default.
17. Capital Requirements. We confirm that the incurrence by us of our
obligations under this Agreement and under the Underwriting Agreement will not
place us in violation of the net capital requirements of Rule 15c3-1 under the
1934 Act or of any applicable rules relating to capital requirements of any
securities exchange to which we are subject.
18. Undertaking to Mail Prospectuses. As contemplated by Rule 15c2-8 under
the 1934 Act, you agree to mail a copy of the Prospectus mentioned in the
Underwriting Agreement to any person making a written request therefor during
the period referred to in said Rule, the mailing to be made to the address given
in the request. We confirm that we have delivered all Preliminary Prospectuses
and revised Preliminary Prospectuses, if any, required to be delivered under the
provisions of Rule 15c2-8 and agree to deliver all Prospectuses required lo be
delivered thereunder. We acknowledge that the copies of the Preliminary
Prospectus furnished to us have been distributed to dealers who have been
notified of the foregoing requirements pertaining to the delivery of Preliminary
Prospectuses and Prospectuses. You have heretofore
10
<PAGE> 11
delivered to us such number of copies of Preliminary Prospectuses as have been
reasonably requested by us, receipt of which is hereby acknowledged, and will
deliver such number of copies of Prospectuses as will be reasonably requested by
us.
19. Miscellaneous. Any notice hereunder from you to us or from us to you
shall be deemed to have been duly given if sent by registered mail, telegram or
teletype, to us at our address as set forth in our Underwriters' Questionnaire
previously delivered to you, or to you at 17 State Street, New York, New York
10004, Attention: Syndicate Department.
We understand that you are a member in good standing of the NASD. We
hereby confirm that we are actually engaged in the investment banking or
securities business and are either (i) a member in good standing of the NASD or
(ii) a dealer with its principal place of business located outside the United
States, its territories and its possessions and not registered as a broker or
dealer under the 1934 Act who agrees not to make any sales within the United
States, its territories or its possessions or to persons who are nationals
thereof or residents therein (except that we may participate in sales to
Selected Dealers and others under Section 3 of this Agreement). We hereby agree
to comply with the provisions of Section 24 of Article III of the Rules of Fair
Practice of the NASD, and, if we are a foreign dealer and not a member of the
NASD, we also hereby agree to comply with the NASD's interpretation with respect
to free-riding and withholding and to comply, as though we were a member of the
NASD, with the provisions of Sections 8 and 36 of Article III of such Rules of
Fair Practice, and to comply with Section 25 of Article III thereof as that
Section applies to a non-member foreign dealer. In connection with sales and
offers to sell Securities made by us outside the United States, its territories
and possessions (i) we will either furnish to each person to whom any such sale
or offer is made a copy of the then current Preliminary Prospectus or the
Prospectus, as the case may be, or inform such person that such Preliminary
Prospectus or Prospectus will be available upon request, and (ii) we will
furnish to each person to whom any such sale or offer is made such prospectus,
advertisement or other offering document containing information relating to the
Securities or the Company as may be required under the law of the jurisdiction
in which such sale or offer is made. Any prospectus, advertisement or other
offering document furnished by us to any person in accordance with the preceding
sentence and any such additional offering material as we may furnish to any
person (x) shall comply in all respects with the law of the jurisdiction in
which it is so furnished, (y) shall be prepared and so furnished at our sole
risk and expense and (z) shall not contain information relating to the
Securities or the Company which is inconsistent in any respect with the
information contained in the then current Preliminary Prospectus or in the
Prospectus, as the case may be.
This instrument may be signed by or on behalf of the Underwriters in one
or more counterparts each of which shall constitute an original and all of which
together shall constitute one and the same agreement among all the Underwriters
and shall become effective at such time as all the Underwriters shall have
signed or have had signed on their behalf such counterparts and you shall have
confirmed all such counterparts. You may confirm such counterparts by facsimile
signature.
11
<PAGE> 12
This Agreement shall be governed by and construed in accordance with the
laws of the State of New York without giving effect to the choice of law or
conflicts of laws principles thereof.
Please confirm that the foregoing correctly states the understanding
between us by signing and returning to us a counterpart hereof.
Very truly yours,
__________________________________
As Attorney-in-Fact for each of the
several Underwriters named in Schedule
I to the Underwriting Agreement.
Confirmed as of the date
first above written:
JANSSEN-MEYERS ASSOCIATES, L.P.
As Representative of
the Several Underwriters
By __________________________________
Name:
Title:
12
<PAGE> 1
EXHIBIT 10.7
2,200,000 SHARES OF
COMMON STOCK, $.001 PAR VALUE
CONSERVER CORPORATION OF AMERICA
SELECTED DEALER AGREEMENT
May , 1997
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 , 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 $.001 (the "Common Stock"). We
may also purchase as many as 330,000 additional shares of Common Stock (the
"Option Shares") from the Company pursuant to Section 2 (b) of the Underwriting
Agreement. The Firm Shares to be sold by the Company and the Option Shares are
sometimes collectively referred to herein as the "Shares" and are more
particularly described in the Prospectus, additional copies of which will be
supplied in reasonable quantities upon request.
We are offering a portion of the Shares for sale to selected dealers (the
"Selected Dealers"), among whom we are pleased to include you, at the public
offering price, less a concession in the amount set forth in the Prospectus
under "Underwriting" ($____ 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" ($____
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
Berkeley Securities Corporation, 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.
2
<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
3
<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.
4
<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:
5
<PAGE> 6
JANSSEN-MEYERS ASSOCIATES, L.P.
17 State Street
New York, New York 10004
Attention: Syndicate Department
Gentlemen:
We hereby confirm our agreement to purchase Shares (as such term is
defined in the Selected Dealer Agreement) of Common Stock of Conservor
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)
Dated: , 1997
6
<PAGE> 1
EXHIBIT 10.8
FORM OF FINANCIAL CONSULTING AGREEMENT
BETWEEN REPRESENTATIVE AND THE COMPANY
March 31, 1997
Conserver Corporation of America
2655 LeJeune Road
Suite 535
Coral Cables, Florida 33134
Attention: Charles H. Stein
Chairman of the Board
Gentlemen:
Reference is made to our recent discussions relating to a proposed
public offering of securities of Conserver Corporation of America (the
"Company") through Janssen/Meyers Associates, L.P. (the "Underwriter"). Based
upon our discussions, financial material which you have submitted to us and
representations which you have made to us describing the Company and its
principals, and subject to (i) the satisfactory completion of our due diligence
review of the Company's business and future plans; (ii) the future business and
financial condition of the Company; (iii) economic and market conditions in
general, we hereby confirm our agreement in principle to act as underwriter for
the Company, on a firm commitment basis, in connection with a public offering of
the Company's securities (the "Offering") upon the following basic terms and
conditions:
1. The offering shall consist of the sale by the Company of
approximately $11,220,000 of the Company's securities. It is currently
anticipated that the Offering will consist of the sale by the Company of
approximately 2,200,000 shares (the "Shares") of the Company's Common Stock par
value $.001 per share (the "Common Stock") (plus 330,000 additional Shares to
cover over-allotments) at an anticipated offering price of approximately $5.00
per Share and 2,200,000 Redeemable Common Stock Purchase Warrants (the
"Warrants") (plus 330,000 additional Warrants to cover over-allotments) at an
anticipated offering price of approximately $0.10 per Warrant. Each Warrant will
entitle the holder to purchase, during an exercise period commencing on the date
of issuance and terminating five years after the effective date (the "Effective
Date") of the Registration Statement (as described below), one share of Common
Stock at an exercise price of $7.00 per share, subject to adjustment to prevent
dilution. The Warrants shall be redeemable at the option of the Company
commencing one year after issuance, for $.10 per Warrant, on thirty days prior
written
<PAGE> 2
notice, provided the closing bid price of the Company's Common Stock is at least
$12.00 for 20 consecutive trading days ending within ten days of the date of
the notice of redemption. The Shares and Warrants are hereinafter collectively
referred to as the "Securities."
2. The actual size of the Offering, the precise number of Shares and
Warrants to be offered, and the offering price per Share and Warrant shall be
negotiated between the Company and the Underwriter and will depend upon the
capitalization of the Company at the time of the Offering, market for the
Company's Common Stock, general economic conditions and changes in the
prospects or forecasts of the Company, as well as other factors. The Company
will have no more than 5,130,000 shares of Common Stock outstanding, on a fully
diluted basis, immediately prior to the effective date of the Registration
Statement (as described below), excluding shares underlying outstanding
derivative securities exercisable or convertible at a price no less than the
initial public offering price of the Common Stock and up to 1,300,000 shares of
Common Stock reserved for issuance under the Company's 1996 Stock Option plan
(the "Plan"). The Plan shall provide that no options will be exercisable or
shares issued, for consideration less than the closing bid price on the date of
issuance and in no event prior to or immediately following the Offering at an
exercise price less than $5.00 per share. In addition, no more than 605,000
options may be granted between the date hereof and the effective date.
3. The Company will grant to the Underwriter an option, exercisable
within 45 days after the Offering is commenced, to acquire up to an additional
15% of the number of Securities to be offered, solely for the purpose of
covering over allotments (the "Over Allotment Option") on the same terms as the
Securities are initially offered to the public.
4. The underwriting discount or spread shall be 10% of the public
offering price. The Underwriter shall also be entitled to a nonaccountable
expense allowance equal to 3% of the gross proceeds of the Offering (including
proceeds from the sale of Securities subject to the Over Allotment option
referred to in paragraph 3 hereof). The Company shall pay a $50,000 advance to
the Underwriter which shall be applied against the nonaccountable expense
allowance. Such sum shall be paid upon execution of this letter of Intent.
5. The Company shall, as soon as practicable, prepare and file with the
Securities and Exchange Commission (the "Commission") and the appropriate state
securities authorities, an amendment to the Registration Statement on Form S-1
or other appropriate form (the "Registration Statement") under the Securities
Act of 1933, as
2
<PAGE> 3
Securities to be sold in the Offering (including the Securities subject to the
Over allotment Option referred to in paragraph 3 hereof) with the Commission
and the filing of the offering materials with the NASD, all fees, expenses and
disbursements relating to the registration or qualification of such Securities
under the securities laws of such states and other jurisdictions as the
Underwriter may reasonably designate (including, without limitation, all filing
and registration fees and fees and disbursements of the Underwriter's counsel),
Underwriter's counsel fees in connection with obtaining clearance from the
NASD, the costs of all mailing and printing of the underwriting documents
(including the Underwriting Agreement, any Blue Sky Surveys and, if
appropriate, any Agreement Among Underwriters, Selected Dealers Agreement,
Underwriters' Questionnaire and Power of Attorney), Registration Statements and
all amendments, supplements and exhibits thereto and as many preliminary and
final prospectuses as the Underwriter may reasonably deem necessary, the costs
of one tombstone advertisement, all reasonable travel and lodging expenses
incurred by the Underwriter and its counsel, reasonable bound volumes and
prospectus memorabilia. Upon the Underwriter's request, the Company shall
provide funds to pay all such fees, expenses and disbursements in advance. The
Company agrees to use a financial printer located in New York City acceptable
to the Underwriter.
9. While the Commission is reviewing the Registration Statement, the
Underwriter may plan and arrange a marketing trip/reception for the Company's
management to meet with prospective investors. Such a trip may include visits
to a number of prospective institutional and retail investors. On such
trips/receptions, the Company will pay all reasonable expenses.
Conferences and discussions between the Company and the Underwriter
shall be held as required within the City of New York in the State of New York.
If meetings shall be held outside of these areas and should the Underwriter be
required to incur special travel expenses in connection with such meetings and
the proposed public offering, the Company agrees to pay such reasonable amount
of traveling and lodging out-of-pocket expenses as may be necessarily incurred
by the Underwriter or its counsel, payable when incurred and billed.
10. At such time as the Company and the Underwriter are mutually
satisfied that it is appropriate to commence the Offering, the final terms of
the Underwriting Agreement will be negotiated and the Company and the
Underwriter will request the Commission to declare the Registration Statement
effective.
11. Concurrent with the closing of the Offering, the Company shall sell
to the Underwriter (or its designated affiliates) Underwriter's Warrants (the
"Underwriter's Warrants") covering a
4
<PAGE> 4
amended (the "Act"), covering the Securities to be sold in the Offering
(including the Securities subject to the Over allotment Option referred to in
paragraph 3 hereof). The Registration Statement, and all amendments and
supplements thereto, will be in form satisfactory to the Underwriter and its
counsel and will contain audited financial statements and such other financial
statements and schedules as may be required by the Act and the rules and
regulations of the Commission thereunder. The Underwriter shall be given the
opportunity to make such review and investigation in connection with the
Registration Statement as it deems desirable.
The Company shall pay, as incurred, all expenses of such investigation
including all expenses associated with a trip by the Underwriter including
reasonable travel and lodging expenses of the Underwriter and its
representatives, not to exceed $25,000, to examine the Company's facilities and
the fees and expenses of an independent consultant to evaluate the Company's
products and prepare a due diligence report to the Underwriter.
6. The Registration Statement filing will include as an exhibit a proposed
form of Underwriting Agreement. The final Underwriting Agreement will be in form
satisfactory to the Company and the Underwriter and will include indemnification
provisions and other terms and conditions customarily found in underwriting
agreements. Without limiting the generality of the foregoing, the Underwriting
Agreement shall provide that for a period of (i) 27 months from the Effective
Date, with respect to any officer or director (ii) 24 months from the Effective
Date with respect to Gerald Agronoff and SES Limited (iii) 18 months with
respect to all persons to receive additional shares prior to the Offering and
(iii) 12 months with respect to the Company and all other shareholders of the
Company, no such person shall offer, issue, sell, contract to sell, grant any
option for the sale of or otherwise dispose of any securities of the Company
without the Underwriter's prior written consent, except for Securities issued
pursuant to the Over Allotment option referred to in paragraph 3 hereof. The
Underwriter's consent shall not be unreasonably withheld with respect to sales
of securities by the Company.
7. Concurrently with, or as soon as practicable after, the filing of the
Registration Statement with the Commission, the necessary state securities law
filings will be made with respect to the Securities to be sold in the Offering
(including the Securities and underlying securities subject to the Over
allotment Option referred to in paragraph 3 hereof). The Company and the
Underwriter will cooperate in obtaining the necessary approvals and
qualifications in such states as the Underwriter deems desirable.
8. The Company shall be responsible for and pay all expenses relating to
the Offering, including, without limitation, all filing fees and communication
expenses relating to the registration of the
3
<PAGE> 5
number of Securities equal to 10% of the number of Securities being sold in the
Offering (not including any Securities subject to the Over allotment option
referred to in paragraph 3 hereof). The price of the Underwriter's Warrants
shall be $.001 per Warrant. The Underwriter's Warrants will be nonexercisable
for one year after the date the offering commences and will expire five years
after such date. The Underwriter's Warrants will be exercisable at a price equal
to 120% of the public offering price. The Company agrees that it will, on one
occasion during the four-year period commencing one year from the Effective
Date, file a registration statement with the Commission upon the request of the
Underwriter at the Company's expense which registration statement shall include
the shares of the Company's Common Stock and Warrants underlying the
Underwriter's Warrants, and the shares of Common Stock underlying the Warrants
underlying the Underwriter's Warrants at the Company's expense (other than
underwriting discounts and commissions and fees of counsel to the holders of the
Underwriter's Warrants, Shares and Warrants so registered). The Underwriter
shall also have the right, during such four-year period, to require the Company
to prepare and file one additional registration statement at the Underwriter's
sole expense. The holders of the Underwriter's Warrants may demand registration
without exercising the Underwriter's Warrants and, in fact, are never required
to exercise same. In addition, the Company has also agreed, to provide to the
Underwriter "piggyback" registration rights covering the shares of the Company's
Common Stock underlying the Warrants. The Warrants will be nontransferable for a
period of one year (other than to a successor in merger or consolidation, to a
purchaser of substantially all of the Underwriters assets, to its partners in
the event of liquidation or dissolution or to its officers or employees or to a
member participating in the Offering and the officers or employees thereof), may
be exercised as to all or a lesser number of Shares and/or Warrants. The
Underwriter's Warrants will contain provisions covering cashless exercise and
adjustment in the number and price of such Warrants or Shares to prevent
dilution.
12. The Company shall, at its cost and expense, take all necessary and
appropriate action to cause the Securities to be included for trading on the
Nasdaq Stock Market immediately upon the effective date of the Registration
Statement, and remain listed for at least five years provided the Company
otherwise complies with the prevailing requirements for such listing.
13. The Company will use its best efforts to obtain key person life
insurance in the amount of $2,000,000 on the life of one or more of the
Company's principal executive officers designated by the Underwriter. Such
insurance shall be maintained in full force and effect for a period of three
years.
5
<PAGE> 6
14. The Company shall also use its best efforts (which shall include,
but shall not be limited to, the solicitation of proxies, if necessary) to
elect a designee of the Underwriter to the Company's Board of Directors. In the
alternative, the Underwriter shall be entitled to designate a senior advisor who
shall be invited to, and be entitled to attend, all meetings of the Board of
Directors. Such designee or senior advisor shall receive such compensation as
shall be appropriate for an outside director. The Company shall also use its
best efforts to obtain Directors and Officers' liability insurance in the face
amount of at least $1,000,000.
15. The Company and the Underwriter represent that no person has acted
as a finder in connection with the transactions contemplated herein and the
Underwriter and the Company agree to indemnify each other with respect to any
claim for a finder's fee in connection with the Offering. The Company shall
obtain the unconditional release of National Securities Corporation as soon as
practicable but no later than the filing of the amendment to the Registration
Statement.
16. Upon conclusion of the Offering, the Company will engage a
financial public relations firm designated by the Underwriter and reasonably
acceptable to the Company to provide corporate communications services.
The Company agrees and undertakes to consult with the Underwriter prior
to distribution to third parties of any financial information, news releases,
and/or other publicity regarding the Company, its business, or any terms of the
proposed offering.
Copies of all documents, which the Company or its public relations
advisors intend to distribute will be provided to the Underwriter for review
prior to such distribution which the Underwriter will hold in confidence until
the public release of such information.
17. The Company agrees to designate American Stock Transfer & Trust
Company as transfer agent for the Company. For a period of two (2) years from
the Effective Date of the Registration, the Company, at its expense, shall
provide the Underwriter with copies of the Company's daily transfer sheets.
18. The Company agrees that if the Securities are sold pursuant to the
Offering, the Underwriter shall have an irrevocable preferential right for a
period of three (3) years from the date the Offering is completed to purchase
for its account or to sell for the account of the Company, or any subsidiary of
or successor to the Company, or any of its officers, directors, or affiliates,
determines as of the Effective Date (the "Principal Stockholders") any
securities of the Company (excluding offerings solely consisting of debt) which
the Company or any of its Principal
6
<PAGE> 7
Stockholders may seek to sell, whether pursuant to registration under the Act
or otherwise. The Company and its Principal Stockholders will consult the
Underwriter with regard to any such offering and will offer the Underwriter the
opportunity to purchase or sell any such securities on terms not more favorable
to the Company or its Principal Stockholders than it or they can secure
elsewhere. If the Underwriter fails to accept such offer within twenty (20)
business days after the mailing of a notice containing such offer by registered
mail addressed to the Underwriter, then the Underwriter shall have no further
claim or right with respect to the financing proposal contained in such notice.
If, however, any of the material terms of such proposal are subsequently
modified, the preferential right referred to herein shall apply to such
modified proposal as if the original proposal had not been made. The
Underwriter's failure to exercise its preferential right with respect to any
particular proposal shall not affect its preferential rights relative to future
proposals.
19. At or prior to the closing of the Offering, the Company will enter
into an agreement with the Underwriter pursuant to which (i) the Company shall
agree to employ the Underwriter as its Investment Banker and Financial
Consultant at a monthly fee of $5,000.00 per month for a period of three years
(exclusive of any accountable out-of-pocket expenses) payable in monthly
installments commencing on the closing date of the Offering; (ii) for a period
of five years, the Underwriter will be paid a fee equal to five percent of the
amount up to $5 million and two and one half percent of the excess, if any,
over $5 million of the consideration involved in any transaction (including
mergers, acquisitions, joint ventures and other business transactions)
consummated by the Company with a party introduced to the Company by the
Underwriter.
20. No proceeds of the Offering will be used to pay outstanding loans
from officers, directors or shareholders or to pay any accrued salaries or
bonuses to any employees or former employees.
21. If, at any time prior to the signing of the Underwriting Agreement
or the closing, as the case may be, (i) the Company will not or cannot
expeditiously proceed with the Offering, including without limitation as a
result of the Company taking or not taking actions, or (ii) any of the
representations, warranties or covenants of the Company herein are not
materially correct or cannot be complied with, or (iii) in the Underwriter's
sole judgement, there occurs a material adverse change in the Company's
financial condition, business, prospects or obligations, and the Underwriter
shall not commence or continue the underwriting, or (iv) in the Underwriter's
sole judgment, market conditions are unsuitable for the Offering and the
Underwriter shall not commence or continue the underwriting, the Company shall
reimburse the Underwriter in full for its actual out-of-pocket expenses
(including, without limitation, its legal fees and disbursements)
7
<PAGE> 8
up to $100,000.
Except as provided in this paragraph, this letter is not intended to be
a binding legal document, as the agreement between the parties hereto on these
matters will be embodied in the Underwriting Agreement referred to above. Until
the Underwriting Agreement has been finally negotiated and signed, either the
Company or the Underwriter may at any time terminate further participation in
the proposed transactions. The party so terminating shall have no liability to
the other on account of any matters provided for herein, except that,
regardless of which party elects to terminate, the Company agrees to reimburse
the Underwriter for, or otherwise pay and bear, the expenses and fees to be
paid and borne by the Company as provided herein. Until the consummation of the
Offering and as long as the Underwriter is proceeding in good faith with
preparations for the Offering, the Company agrees not to negotiate or enter
into any agreement with or solicit any underwriter, potential underwriter, or
other person in connection with a public offering of the Company's securities.
We are delighted at the prospect of working with you and look forward
to a successful offering.
If you are in agreement with the foregoing, please execute and return
two copies of this letter to the undersigned.
Very truly yours,
Janssen/Meyers Associates, L.P.
By ___________________________________
Bruce Meyers
Vice-President
ACCEPTED AND AGREED TO AS OF
THE DATE FIRST ABOVE WRITTEN:
Conserver Corporation of America
By _____________________________
Charles H. Stein
Chairman of the Board
8
