<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 24, 2000
REGISTRATION NO. 333-85683
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 5 TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
GLOBAL BRANDS, INC.
(Name of small business issuer in its charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
2080
(Primary standard industrial classification code number)
13-3762562
(I.R.S. Employer Identification No.)
1031 ROUTE 9W
UPPER GRANDVIEW, NEW YORK 10960
(914) 358-1212
(Address and telephone number of principal executive offices and principal place
of business)
------------------------
DR. RALPH M. FERRANTE
Chairman and Chief Executive Officer
Global Brands, Inc.
1031 Route 9W
Upper Grandview, New York 10960
(914) 358-1212
(Name, address and telephone number of agent for service)
------------------------
Copy to:
HANK GRACIN, ESQ. STEVEN MORSE, ESQ.
Lehman & Eilen LLP Lester Morse P.C.
50 Charles Lindbergh Blvd. - Suite 505 111 Great Neck Road, Suite 420
Uniondale, New York 11553 Great Neck, New York 11021
Telephone: (516) 222-0888 Telephone: (516) 487-1446
Facsimile: (516) 222-0948 Facsimile: (516) 487-1452
------------------------
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable
after the registration statement becomes effective.
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 of
1933 check the following box. /X/
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 registration statement for the same
offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(d)
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 the delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. / /
------------------------
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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- --------------------------------------------------------------------------------------------------
PROPOSED
TITLE OF EACH CLASS OF PROPOSED MAXIMUM
SECURITIES TO MAXIMUM AGGREGATE AMOUNT OF
BE AMOUNT TO OFFERING PRICE OFFERING REGISTRATION
REGISTERED BE REGISTERED PER SHARE(1) PRICE(1) FEE(5)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $.01 per
share (2) 1,495,000 $ 6.25 $9,343,750 $ 2,597.56
- --------------------------------------------------------------------------------------------------
Underwriter's Common Stock
Warrants, each to purchase one
share of Common Stock (3) 130,000 .0008 104.00 (4)
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Common Stock, par value $.01 per
share, issuable upon exercise
of the Underwriter's Common
Stock Warrants 130,000 10.3125 1,340,625 372.69
- --------------------------------------------------------------------------------------------------
Total Registration Fee $ 2,970.25
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(a) promulgated under the Securities Act of 1933, as
amended.
(2) Assumes the Underwriter's over-allotment option to purchase up to 195,000
additional shares of Common Stock is exercised in full.
(3) Represents warrants to be issued by Global Brands to the Underwriter at the
time of delivery and acceptance of the securities to be sold by Global
Brands to the public hereunder.
(4) None, pursuant to Rule 457(g).
(5) Fees are calculated by multiplying the aggregate offering price by .000278.
(6) Previously paid $2,398.97. $571.28 has been paid with this filing.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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- --------------------------------------------------------------------------------
<PAGE>
THIS INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING OFFERS TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED MAY 24, 2000
PROSPECTUS
[LOGO]
GLOBAL BRANDS, INC.
1,300,000 SHARES OF COMMON STOCK
------------------------
We are offering 1,300,000 shares of our common stock. This is our initial
public offering and no public market currently exists for our shares.
We develop and sell premium beverage products utilizing our trademarks and
other national brand programs.
------------------------
We have applied for quotation of our common stock on the Nasdaq Smallcap
Market under the symbol "GLBR".
------------------------
AN INVESTMENT IN OUR SECURITIES INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 6.
THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE
NOT APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS PROSPECTUS
IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNTS COMPANY
-------------------- -------------------- --------------------
<S> <C> <C> <C>
Per Share.................. $ 6.25 $ .625 $ 5.625
Total...................... $8,125,000 $812,500 $7,312,500
</TABLE>
Three stockholders of Global Brands have granted the underwriters the right
to purchase up to an additional 195,000 shares of common stock to cover
over-allotments.
------------------------
SOMERSET FINANCIAL GROUP, INC. SEABOARD SECURITIES, INC.
------------------------
, 2000
<PAGE>
<PAGE>
[LOGO]
GLOBAL BRANDS
BUILDING BETTER BRANDS
"SWISS NATURAL", "REACH FOR THE PEAK", "ULTRA PEAK", SWISS NATURAL ICY BERRY",
SWISS NATURAL ICY CITRUS", SWISS NATURAL ICY MELONADE" and "SWISS NATURAL ICY
COFFEE" are registered trademarks of Global Brands.
<PAGE>
PROSPECTUS SUMMARY
Our business strategy is to develop and market premium consumer products
under brand names which are either our own registered trademarks or nationally
recognized third-party trademarks.
We are currently applying this branding strategy in the marketing and sale
of premium beverage products in the alternative beverage category, which are
also known as new age beverages. We have developed and sell premium new age
beverages and juices under our Swiss Natural registered trademark using our
Ultra PeakRegistered vitamin formula. We also have developed and sell premium
new age beverages and juices under various nationally recognized brand names. In
each case, we use third party distribution systems owned or designated by our
clients to avoid the capital costs which are required to build our own national
distribution system. In addition, all of our beverages are bottled in our
proprietary glass bottles.
We intend to expand our branding strategy for premium new age beverages by
identifying additional nationally recognized brand names and trademarks under
which beverage products can be marketed and sold. We may also apply our branding
strategy to other premium consumer product categories outside of the beverage
market and, to compliment our strategy, we may from time to time acquire or
strategically partner with other companies in our target branding channels.
THE OFFERING
<TABLE>
<S> <C>
Securities offered...................... 1,300,000 shares of common stock.
Common stock outstanding before the
offering................................ 2,591,708 shares.
Common stock to be outstanding after the
offering................................ 3,891,708 shares. This figure excludes an aggregate
of up to 2,006,267 shares of common stock issuable
upon:
* exercise and/or conversion of all outstanding
warrants and convertible securities and
* exercise of all underwriters' warrants to be
issued
in connection with this offering.
Proposed Nasdaq Smallcap Symbol......... Common stock -- GLBR
</TABLE>
Unless otherwise indicated, all information in this prospectus assumes that
the underwriters' overallotment option will not be exercised.
Unless otherwise indicated, all information in this prospectus, including
per share data and information relating to the number of shares issued and
outstanding, has been adjusted to reflect a
1.5 for 1 reverse split of our common and preferred stock effected on October 1,
1999.
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
which is contained in this prospectus. We are offering to sell shares of common
stock and seeking offers to buy shares of common stock only in jurisdictions
where offers and sales are permitted. The information contained in this
prospectus is accurate only as of the date of this prospectus, regardless of the
time of delivery of this prospectus or of any sale of the common stock.
FOR NEW JERSEY RESIDENTS
This offering may only be sold to residents of the State of New Jersey who
are accredited investors within the meaning of Rule 501 of Regulation D of the
Securities Act of 1933. Natural persons must either have a net worth or joint
net worth with that person's spouse, at the time of his purchase of at least
$1,000,000 or individual net income in the last two years of at least $200,000
($300,000 in the case of a joint income with that person's spouse) and a
reasonable expectation of reaching the same income level in the current year. In
the case of corporations and partnerships not formed for the specific purpose of
acquiring the securities offered, the entity must have in excess of $5,000,000
total assets or all the equity owners must be accredited investors.
Broker/dealers located in the State of New Jersey will be permitted to sell
Global Brands' shares to accredited investors and non-accredited investors
located outside of the State of New Jersey wherever such sales can be lawfully
sold.
3
<PAGE>
SUMMARY OF FINANCIAL DATA
FOR THE FISCAL YEARS ENDED
FEBRUARY 29, 2000 AND FEBRUARY 28, 1999
The following summary financial data should be read in conjunction with
Global Brands' financial statements and the notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations". The
statement of operations data for the years ended February 29, 2000 and February
28, 1999 are derived from the financial statements of Global Brands that have
been audited by Goldstein Golub Kessler LLP, independent certified public
accountants.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-------------------------------
FEBRUARY FEBRUARY
29, 28,
STATEMENT OF OPERATIONS DATA: 2000 1999
----------- -----------
<S> <C> <C>
Net sales....................................... $ 3,799,795 $ 3,005,872
Cost of sales................................... 2,493,499 2,001,701
----------- -----------
Gross profit.................................. 1,306,296 1,004,171
----------- -----------
Expenses:
General and administrative.................... 890,155 842,231
Selling and promotional....................... 449,746 502,652
Product development........................... 2,590 30,895
----------- -----------
Total expenses.................................. 1,342,491 1,375,778
----------- -----------
Loss Before Depreciation and Amortization, Other
Income and Interest Expense................... (36,195) (371,607)
----------- -----------
Depreciation and Amortization................... (40,189) (28,826)
Other income.................................... 93,389 11,079
Interest expense................................ (179,017) (50,062)
----------- -----------
Net Loss........................................ $ (162,012) $ (439,416)
----------- -----------
----------- -----------
Loss per common share -- Basic.................. $ (0.05) $ (0.12)
----------- -----------
Weighted average number of common shares
outstanding -- Basic (3)...................... 2,993,708(1) 3,797,708
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-------------------------------
FEBRUARY FEBRUARY
29, 28,
STATEMENT OF OPERATIONS DATA: 2000 1999
----------- -----------
<S> <C> <C>
Gross Sales..................................... $ 3,878,441 $ 3,061,586
Sales Returns and allowances.................... (78,646) (55,714)
----------- -----------
Net sales..................................... $ 3,799,795 $ 3,005,872
----------- -----------
----------- -----------
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
FEBRUARY 29, 2000
-------------------------------
AS
BALANCE SHEET DATA: ACTUAL ADJUSTED(2)
----------- -----------
<S> <C> <C>
Cash and cash equivalents....................... $ 115,143 $ 6,359,070
Working capital (deficiency).................... (1,212,921) 5,638,338
Total assets.................................... 1,553,149 7,411,442
Total liabilities............................... 2,236,776 1,629,444
Stockholders' (deficiency) equity............... (683,627) 5,781,998
</TABLE>
- ------------------
(1) Does not give effect to the conversion of any shares of the convertible
preferred stock which were issued on June 30, 1999 and may be converted into
1,206,000 shares of common stock. Also does not give effect to the
conversion of any convertible subordinated debentures.
(2) Gives effect to the sale of the 1,300,000 shares of common stock being
offered hereby and anticipated application of the estimated net proceeds
therefrom including the repayment of indebtedness and interest payable to a
stockholder.
(3) Gives effect to the reverse stock split effective October 1, 1999.
<TABLE>
<CAPTION>
FEBRUARY 29, FEBRUARY 28,
PERFORMANCE RATIOS 2000 1999
------ --------
Return on Equity................................. 0.24 0.84
<S> <C> <C>
Return on Assets................................. -0.10 -0.33
A/R turnover..................................... *12.19 *12.68
Inventory Turnover............................... **5.41 **7.10
Profit Margin on Sales........................... 34.38% 33.41%
</TABLE>
- ------------------
*Average Accounts Receivable computed by using month-end amounts.
**Average Inventory computed by using month-end amounts.
5
<PAGE>
RISK FACTORS
You should carefully consider the following risks before making an
investment decision. The trading price of our common stock could decline due to
any of these risks, and you could lose all or part of your investment. You also
should refer to the other information set forth in this prospectus, including
our financial statements and the related notes thereto.
GLOBAL BRANDS HAS INCURRED LOSSES FROM INCEPTION AND MAY NEVER GENERATE
SUBSTANTIAL PROFITS,
IF ANY AT ALL.
For each fiscal year since our inception in April 1993, Global Brands has
generated net losses. We may never generate substantial profits, if any at all.
Global Brands had an accumulated deficit of $2,736,437 as of February 29, 2000.
We can provide no assurances that our operations will be profitable in the
future.
WE MAY NEED ADDITIONAL CAPITAL AND MAY NOT BE ABLE TO OBTAIN IT.
We believe that the proceeds from this offering together with our current
cash balances and anticipated cash to be generated from operations will be
sufficient to meet our expected operating and capital requirements for at least
one year. However, we may need to raise additional funds in order to support
further expansion, meet competitive pressures, or respond to unanticipated
requirements. We cannot assure you that additional financing will be available
if needed on terms favorable to us.
WE HAVE LIMITED WORKING CAPITAL AND MAY ENCOUNTER FUTURE LIQUIDITY PROBLEMS.
We have historically had limited working capital. We had a working capital
deficiency of $1,212,921 at February 29, 2000. While we expect the proceeds of
this offering to provide us with sufficient working capital, there is no
assurance that future operations will not encounter capital resource and
liquidity problems.
THE LOSS OF SBARRO, INC. AS A CUSTOMER WOULD HAVE A MATERIAL ADVERSE EFFECT ON
OUR BUSINESS.
We currently sell our private label beverages only to Sbarro, Inc., a
nationwide chain of restaurants. The loss of Sbarro, Inc. as a customer would
have a material adverse effect on our business. We also depend significantly
upon the revenue derived from the sale of our beverages to Dunkin' Donuts
franchisees and several major independent distributors and retail outlets. Our
agreements with Sbarro and Dunkin' Donuts do not require them to purchase any
specified quantity of products from us. Although we consider our relationship
with each of these customers to be good, either of them could decide not to
purchase our beverages.
THE LOSS OF ANY OF OUR THIRD-PARTY SUPPLIERS OR SERVICE PROVIDERS COULD HAVE A
MATERIAL ADVERSE EFFECT ON OUR OPERATIONS AND FINANCIAL RESULTS.
We rely on third parties to produce our beverages, to produce our glass
bottles and to bottle our beverages. The loss of our third-party suppliers or
service providers could have a material adverse effect on our operations and
financial results.
THE LOSS OF OUR THIRD PARTY BEVERAGE DISTRIBUTORS COULD HAVE A MATERIAL ADVERSE
EFFECT ON OUR OPERATIONS AND FINANCIAL RESULTS.
We depend on customer-owned or customer-designated distributors and other
third-party distributors to distribute our Swiss Natural label beverages. The
loss of our third party beverage distributors could have a material adverse
effect on our operations and financial results. Most of our distributors are not
bound by written agreements with us and may discontinue their relationship with
us on short notice. The loss of one or more of our distributors could have a
significant negative effect on the sales of our Swiss Natural label beverages.
6
<PAGE>
IF WE ARE UNABLE TO COMPETE EFFECTIVELY WITH OUR COMPETITORS, MANY OF WHOM HAVE
BEEN IN EXISTENCE LONGER THAN US, HAVE A MORE ESTABLISHED MARKET PRESENCE AND
HAVE SUBSTANTIALLY GREATER RESOURCES THAN US, WE WILL NOT BE ABLE TO INCREASE
REVENUES OR GENERATE PROFITS.
Our ability to increase revenues and generate profitability is directly
related to our ability to compete effectively with our competitors. We face
intense competition from other beverage companies producing similar products,
including Snapple, Fruitopia, Ocean Spray, Arizona, Mistic and various other
lesser known brands. Increased competition could diminish our ability to be
profitable or result in loss of market share and damage the Swiss Natural brand.
Many of our competitors are larger, better established and have greater
financial, marketing and distribution resources than us. These greater resources
permit our competitors to implement extensive advertising and promotional
programs which we have not been, and will not be, able to match.
IF WE ARE NOT ABLE TO RETAIN OUR CHIEF EXECUTIVE OFFICER, IT WILL BE MORE
DIFFICULT FOR US TO MANAGE OUR OPERATIONS AND OUR OPERATING PERFORMANCE WOULD
SUFFER.
The success of our business is greatly dependent upon the active
involvement of our Chief Executive Officer, Dr. Ralph Ferrante, who is
responsible for the development of the formulas used to manufacture our
products. The loss of the services of Dr. Ferrante would materially and
adversely affect our business and prospects. We have secured $1,000,000 of key
man life insurance on Dr. Ferrante.
IF OUR COMPETITORS MISAPPROPRIATE OUR UNPATENTED PROPRIETARY KNOW-HOW, TRADE
DRESS AND TRADE SECRETS IT COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS.
If our competitors develop substantially equivalent proprietary information
or otherwise obtain access to our know-how it could materially and adversely
affect our business. We rely primarily on unpatented proprietary know-how in the
production of our beverages, as well as on confidentiality agreements with the
companies that produce our beverages and with our employees.
We regard the protection of our trademarks, trade dress and trade secrets
as critical to our future success. We have registered our trademarks in the
United States. We also rely on a combination of laws and contractual
restrictions, such as confidentiality agreements, to establish and protect our
proprietary rights, trade dress and trade secrets. However, laws and contractual
restrictions may not be sufficient to prevent misappropriation of our
proprietary rights, trade dress or trade secrets.
ANY DECREASE IN THE SUPPLY OF FRUIT JUICES OR INCREASE IN THE PRICES OF FRUIT
JUICES COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS AND RESULTS OF
OPERATIONS.
We depend upon an uninterrupted supply of fruit juices from the fruit of
apple trees and orange trees. Any decrease in the supply of these fruit juices
or increase in the prices of these fruit juices as a result of any adverse
weather conditions, pests or fungal disease could have a material adverse effect
on our business and results of operations. Apple and orange trees may become
damaged, diseased or destroyed as a result of any adverse weather conditions,
pests or fungal disease. Additionally, there are types of controllable fungal
diseases that can affect fruit production although not fatal to the trees
themselves. These types of fungal diseases are generally controllable with
fungicides. However, we can't be sure that such control measures will continue
to be effective.
STOCKHOLDERS MAY NOT BE ABLE TO RE-SELL THEIR STOCK OR MAY HAVE TO SELL AT
PRICES SUBSTANTIALLY LOWER THAN THE PRICE THEY PAID FOR IT.
Prior to this offering, you could not buy or sell our common stock
publicly. Although the initial public offering price was determined based on
several factors, the market price after the offering may vary from the initial
offering price. As a result, stockholders may not be able to re-sell their stock
or may have to sell at prices substantially lower than the price they paid for
it. In addition, the stock market is subject to price and volume fluctuations
affecting the market price for public companies generally, or within broad
industry groups, which fluctuations may be unrelated to the operating
7
<PAGE>
results or other circumstances of a particular company. Such fluctuations may
adversely affect the liquidity of the common stock, as well as the price that
holders may achieve upon any future sale.
BECAUSE IT MAY BE DIFFICULT TO EFFECT A CHANGE IN CONTROL OF GLOBAL BRANDS
WITHOUT CURRENT MANAGEMENT'S CONSENT, MANAGEMENT MAY BE ENTRENCHED EVEN THOUGH
STOCKHOLDERS MAY BELIEVE OTHER MANAGEMENT MAY BE BETTER AND A POTENTIAL SUITOR
WHO OTHERWISE MIGHT BE WILLING TO PAY A PREMIUM TO ACQUIRE GLOBAL BRANDS MAY
DECIDE NOT TO ATTEMPT AN ACQUISITION.
Upon consummation of this offering, Dr. Ralph M. Ferrante, the Chairman and
Chief Executive Officer of Global Brands, and Herbert Paul, the President and
Chief Financial Officer of Global Brands, together with trusts owned by their
respective family members, will hold approximately 38% and 10%, respectively, of
our outstanding voting stock, including our convertible preferred stock which
carries rights to vote with the common stock on a one-vote-per-share basis. Such
concentration of ownership may have the effect of delaying, deferring or
preventing a change in control of Global Brands and entrenching current
management even though stockholders may believe other management may be better.
In addition, the issuance of a poison-pill or another large block of preferred
stock with voting rights could have the effect of delaying, deferring or
preventing a change in control of Global Brands. Potential suitors who otherwise
might be willing to pay a premium to acquire Global Brands may decide not to try
to acquire us because it may be difficult to effect a change in control of
Global Brands without current management's consent. If Messrs. Ferrante and Paul
and their family members act together, they are likely to have the ability to
control the outcome on all matters requiring stockholder approval, including the
election and removal of directors and any merger, consolidation or sale of all
or substantially all of our assets, and the ability to control our management
and affairs.
FUTURE SALES OF COMMON STOCK MAY CAUSE THE MARKET PRICE OF THE COMMON STOCK TO
DROP.
Future sales of shares of common stock by Global Brands and/or its
stockholders could cause the market price of the common stock to drop. After
this offering, we will have outstanding 3,891,708 shares of common stock. We
have reserved an additional 2,006,267 shares of common stock for issuance
pursuant to outstanding convertible securities, preferred stock and warrants.
All of the shares of common stock to be sold in this offering will be freely
tradeable without restriction or further registration under the federal
securities laws. Assuming the underwriters' over-allotment option is exercised
in full, the remaining shares of outstanding common stock, representing
approximately 62% of the outstanding common stock upon completion of this
offering, will be "restricted securities" under the Securities Act subject to
restrictions on the timing, manner and volume of sales of such shares.
YOU WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION.
The initial public offering price is expected to be substantially higher
than the net tangible book value of each outstanding share of common stock.
Purchasers of common stock in this offering will suffer immediate and
substantial dilution. The dilution will be $4.78 per share, or 76%, in the net
tangible book value of the common stock from the expected initial public
offering price. If the outstanding options and warrants to purchase shares of
common stock are exercised, there would be further dilution.
REPRESENTATIVE'S INFLUENCE ON GLOBAL BRANDS
We have an underwriting agreement with Somerset Financial Group which
provides for Somerset to be retained as our financial consultant and to have the
right to designate a non-voting advisor to our board of directors for a period
of two years from the date of this prospectus. During such two-year period, the
underwriting agreement also provides Somerset with the right to introduce
possible acquisitions, mergers and consolidations to us for our evaluation. As a
result of the foregoing, Somerset may have an influence on the decision making
of our board of directors after the offering. Further, Somerset, through its
anticipated sales of securities to Somerset's own customers in this offering and
intended market making activities, may exert a dominating influence on the
market, if
8
<PAGE>
one develops, for our securities. Such market making activities may be
discontinued at any time. The price and liquidity of our securities may be
significantly affected by the degree, if any, of Somerset's participation in
such market.
INEXPERIENCE OF THE REPRESENTATIVE
This is the first public offering underwritten by Somerset Financial Group.
We can provide no assurance that Somerset's inexperience as managing underwriter
of public offerings will not adversely affect this offering, the subsequent
development of a trading market, if any, or the liquidity of our securities.
FORWARD LOOKING STATEMENTS
Some of the statements under "Prospectus Summary", "Risk Factors",
"Management's Discussion and Analysis of Financial Condition and Results of
Operations", "Business" and elsewhere in this prospectus constitute
forward-looking statements. These statements involve known and unknown risks,
uncertainties and other factors that may cause our actual results, levels of
activity, performance, or achievements to be materially different from any
future results, levels of activity, performance, or achievements expressed or
implied by such forward-looking statements. Such factors include, among other
things, those listed under "Risk Factors" and elsewhere in this prospectus.
In some cases, you can identify forward-looking statements by terminology
such as "may", "will", "should", "could", "expects", "plans", "anticipates",
"believes", "estimates", "predicts", "potential", or "continue" or the negative
of such terms or other comparable terminology.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance, or achievements. Moreover, neither we nor any other
person assumes responsibility for the accuracy and completeness of such
statements. We are under no duty to update any of the forward-looking statements
after the date of this prospectus.
USE OF PROCEEDS
The primary purposes of this offering are to obtain additional capital,
create a public market for the common stock, and facilitate future access to
public markets. The net proceeds to us from the sale of our common stock are
estimated to be approximately $6,465,625 after deducting underwriters'
compensation and other estimated offering expenses totaling $1,659,375. We
intend to use the net proceeds as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF
NET PROCEEDS NET PROCEEDS
------------ -------------
<S> <C> <C>
Purchase of additional inventory........................ $ 699,000 10.81%
Purchase of vending and refrigeration equipment......... 650,000 10.05%
Purchase of manufacturing and distribution equipment,
and/or other related strategic acquisitions........... 2,100,000 32.48%
Repayment and retirement of outstanding note and
interest to A. Donald McCulloch, Jr. and Carolyn B.
McCulloch, both of whom are stockholders of Global
Brands, and one of whom is a former director.......... 325,005 5.03%
Marketing and promotion................................. 520,000 8.04%
New product research and development.................... 200,000 3.09%
E-commerce and business-to-business distribution and
marketing............................................. 250,000 3.87%
New client selling and collateral materials............. 350,000 5.41%
General corporate purposes, including working capital... 1,371,620 21.22%
---------- -------
Total.............................................. $6,465,625 100.00%
---------- -------
---------- -------
</TABLE>
Management will have broad discretion in the use of proceeds allocated to
general corporate purposes. In this regard, we may use up to $757,500 of the
general purpose proceeds to retire those convertible debentures due February
2001 which are not converted into common stock and, as such, may place such
funds in a segregated account for the benefit of those convertible debenture
holders
9
<PAGE>
who execute 12-month lock-up agreements regarding the shares of common stock
issuable upon the conversion of these debentures.
Our indebtedness to A. Donald McCulloch, Jr. and Carolyn B. McCulloch as of
February 29, 2000 is evidenced by two promissory notes, one in the principal
amount of $152,500, which bears interest at the rate of 12% per annum, and
represents the outstanding principal amount of the original obligation, and the
other in the principal amount of $169,455, which represents accrued interest on
the original obligation, and is non-interest bearing. Both promissory notes to
the McCullochs mature upon the earlier to occur of:
* December 31, 2000;
* ten days after the receipt of funds by us of the proceeds of an initial
public offering of our common stock
* the sale of all or substantially all of our assets
Pending the above uses, we intend to invest the net proceeds from this
offering in short-term, interest-bearing, investment-grade securities.
DIVIDEND POLICY
We have not declared or paid any cash dividends on our common stock since
our inception and do not expect to pay any cash dividends on its common stock in
the foreseeable future. Holders of shares of our Series A Preferred Stock are
entitled to receive a quarterly dividend commencing on June 1, 2001 accruing
from March 1, 2001, of two ($0.02) cents per share prior to any other class of
stock receiving any dividends, and to participate in dividends declared and paid
on the common stock, on an "as-converted" basis. We currently intend to retain
future earnings, if any, after paying the dividend on the preferred stock, to
finance the expansion of our business.
CAPITALIZATION
The following table sets forth the capitalization of Global Brands as of
February 29, 2000: (1) on an actual basis, and (2) as adjusted to reflect the
receipt by Global Brands of the estimated net proceeds from the sale of our
1,300,000 shares of common stock offered hereby (after deducting the estimated
offering expenses and underwriter' compensation). The information described in
the following table assumes that none of the convertible subordinated debentures
of Global Brands have been converted. This table should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the financial statements and related notes thereto included
elsewhere in this prospectus.
<TABLE>
<CAPTION>
FEBRUARY 29, 2000
-----------------------------
AS ADJUSTED
TO REFLECT
NET PROCEEDS
ACTUAL OF OFFERING
----------- ------------
<S> <C> <C>
Convertible Subordinated Debentures..................... $ 757,500 $ 757,500
----------- ------------
Compensation Payable.................................... 101,092 101,092
----------- ------------
Preferred Stock, $.01 par value, 3,000,000 shares
authorized; Series A Convertible Preferred Stock,
1,206,000 shares issued and outstanding (actual and as
adjusted)............................................. 12,060 12,060
Common Stock, $.01 par value, 20,000,000 shares
authorized, 2,591,708 shares issued and outstanding
actual; 3,891,708 shares outstanding, as adjusted..... 25,917 38,917
Additional paid in capital.............................. 2,014,833 8,467,458
Accumulated Deficit..................................... (2,736,437) (2,736,437)
----------- ------------
Stockholders' equity (deficiency)....................... (683,627) 5,781,998
----------- ------------
Total capitalization.................................... $ 174,965 $ 6,640,590
----------- ------------
----------- ------------
</TABLE>
10
<PAGE>
DILUTION
The net tangible book value of Global Brands as of February 29, 2000 was a
negative $1,133,038, or a negative $.44 per share. "Net tangible book value per
share" is determined by dividing the number of outstanding shares of common
stock into the net tangible book value of Global Brands (total tangible assets
less total liabilities). Assuming the sale by Global Brands of the 1,300,000
shares of common stock offered hereby at a price of $6.25 for one share, the net
tangible book value of Global Brands as of February 29, 2000 would have been
approximately $5,718,221 or $1.47 per share. This represents an immediate
increase in net tangible book value of $6,851,259 to existing stockholders and
an immediate dilution of $4.78 per share, 76%, to new investors purchasing
shares at the initial public offering price of $6.25 per share. The following
table illustrates the per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................. $ 6.25
Net tangible negative book value per share as of February 29,
2000....................................................... $(.44)
Increase in net tangible book value per share attributable to
new investors.............................................. 1.91
-----
Net tangible book value per share after the offering............ 1.47
------
Dilution per share to new investors............................. $ 4.78
------
------
</TABLE>
The following table summarizes as of February 29, 2000 the number of shares
of capital stock, including Series A Preferred Stock purchased from Global
Brands and the average cash price per share paid by existing stockholders and by
investors purchasing shares of common stock in this offering at an initial
public offering price of $6.25 per share, before deducting the underwriters'
compensation and other estimated offering expenses:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
--------------------- -----------------------
NUMBER PERCENT AMOUNT PERCENT
--------- ------- ----------- -------
<S> <C> <C> <C> <C>
Existing stockholders............................. 3,797,708 74% $ 2,052,810 20%
New investors..................................... 1,300,000 26 8,125,000 80
--------- --- ----------- ---
Total............................................. 5,097,708 100% $10,177,810 100%
--------- --- ----------- ---
--------- --- ----------- ---
</TABLE>
The sale by Messrs. Ferrante, Paul and Brescio of 195,000 shares of common
stock upon exercise in full of the underwriters' over-allotment option will
reduce the percentage of common stock held by existing stockholders to 62% of
the total number of shares of common stock to be outstanding upon consummation
of this offering and will increase the percentage of common stock held by new
investors to 38% of the total number of shares of common stock to be outstanding
upon consummation of this offering. See "Principal Stockholders."
The foregoing discussion and table exclude:
* the 130,000 shares of common stock issuable upon exercise of the 130,000
underwriters' common stock purchase warrants to be issued in connection
with this offering;
* 500,000 additional shares of common stock reserved for issuance under
the 1999 Stock Option Plan;
* 165,267 shares of common stock issuable upon exercise of outstanding
warrants at an exercise price of approximately $2.24 per share; and
* 505,000 shares of common stock issuable upon conversion of the $757,500
aggregate principal amount of convertible debentures presently
outstanding.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of the financial condition and results of
operations of Global Brands also should be read in conjunction with the
financial statements and related notes thereto included elsewhere in this
prospectus.
11
<PAGE>
FISCAL YEAR 2000 ENDED FEBRUARY 29, 2000 COMPARED TO FISCAL YEAR 1999 ENDED
FEBRUARY 28, 1999.
Global Brands' net loss for the year ended February 29, 2000 was $(162,012)
as compared to ($439,416) for the year ended February 28, 1999 and loss before
depreciation and amortization, other income and interest expense was ($36,195)
for the year ended February 29, 2000 as compared to ($371,607) for the year
ended February 28, 1999. The decrease in net loss and loss before depreciation
and amortization, other income and interest expense was primarily due to an
increase in net sales and a decrease in expenses. Net sales for the year ended
February 29, 2000 increased approximately 26% from those of the year ended
February 28, 1999. The increase in sales is attributable to the addition of new
customers, the sale of new products such as orange and apple juice, and
increased sales of private label beverages in new territories. Cost of sales as
a percentage of sales and gross profit remained relatively constant for both
periods and was approximately 66% and 34%, respectively. Included in the cost of
sales are all raw materials to produce our 16 oz. and 12 oz. products. These
costs include flavoring, glass, trays, labels, partitions, bottling and packing
fee. Also included are freight charges to ship all raw materials to our
production facility. Expenses for the year ended February 29, 2000 decreased
approximately 2% as compared to the prior year primarily as a result of the fact
that there was a decrease in wages, selling and promotional expense and to a
lesser extent product development expenses. Other income increased as compared
with that of the prior year. Interest expense increased $128,955 as compared
with that of the prior year as a result of an increase in corporate debt.
LIQUIDITY AND CAPITAL RESOURCES.
At February 29, 2000, Global Brands had cash and cash equivalents of
$115,143 as compared to $530,729 at February 28, 1999. The decrease in cash and
cash equivalents during the twelve month period ended February 29, 2000 is due
to $404,416 of cash used in operating activities and, to a lesser extent,
$141,660 of cash used in investing activity partially offset by $130,490 of cash
provided by financing activities. Cash provided by financing activities during
the twelve month period ended February 29, 2000 consisted of proceeds from a
bank line of credit issued to Global Brands less amounts utilized to pay
deferred offering costs and payments made on notes to stockholders. Cash used in
investing activities during the twelve month period ended February 29, 2000
consisted of payments made to purchase property and equipment.
Based upon its current operating plan, Global Brands anticipates that the
net proceeds of this offering, together with cash generated from operations,
will be sufficient to satisfy its future liquidity requirements for at least the
next 12 months. However, the ability of Global Brands to meet future liquidity
needs is directly related to its sales volume and the costs associated with the
development and marketing of its products. It is anticipated that a portion of
the proceeds of this offering will be used to purchase refrigeration equipment
and vending equipment to be used by our customers to hold and display our
products. It is anticipated that this will be an ongoing expense which will
adversely affect Global Brands' cash flow. Furthermore, Global Brands may have
the on-going expense of making interest payments to any holder of its
convertible debentures who does not convert its debenture into shares of common
stock. Since Global Brands does not currently have any outside sources of
financing, except a line of credit, all of these expenses will have to be paid
for either out of the proceeds of this offering or cash generated from
operations.
BUSINESS
OUR BUSINESS STRATEGY
Our business strategy consists of the following elements:
* Expand core business. Our current core business can be increased within
the list of current clients, and with expanded utilization of the Swiss
Natural brand.
* New franchise business. We recognize that our ability to successfully
implement proven proprietary label programs with well-known established
franchise brands enhances our ability to expand to new clients.
12
<PAGE>
* Enter new brand categories. We recognize the growth opportunity in
acquiring the rights to use familiar corporate, trade and brand names and
logos from third parties to expand revenues.
* Enter new product categories. In addition to our current core business
and brand beverage programs we will continue to explore strategic new
product categories.
* Pursue strategic acquisitions and alliances. We intend to identify
opportunistic acquisitions of related businesses which will enhance our
ability to develop and grow our branding strategy. We may effect these
acquisitions with cash, stock or a combination of cash and stock.
* Exploit our operating efficiencies. We believe our current infrastructure
and low-overhead operating methods can accommodate significant growth
without a proportionate increase in our operating and administrative
expenses, thereby increasing our operating margins.
* Expand our management team. We intend to expand our current Board of
Directors with new key members and create an industry advisory board to
assist us with the growth and implementation of our strategic plan.
OUR COMPANY
We were incorporated under the laws of the State of Delaware in April 1993.
We changed our name from Swiss Natural Foods, Inc. to Swiss Natural Brands, Inc.
on October 1, 1999 and from Swiss Natural Brands, Inc. to Global Brands, Inc. on
April 12, 2000. Our principal office is located at 1031 Route 9W, Upper
Grandview, New York 10960, and our telephone number at that location is (914)
358-1212.
INDUSTRY OVERVIEW
Our business competes in the alternative beverage category of the beverage
industry, which are also known as new age beverages.
Alternative beverages consist of fruit juices, fruit drinks that are not
100% juice, sparkling and still water, ready-to-drink teas, sports drinks and
natural soda. From 1992 to 1999, the alternative beverage market has experienced
significant growth, with volumes tripling, from 480 million cases to 1.5 billion
cases, according to the Beverage Digest Fact Book. In 1999, the Beverage Digest
Fact Book indicated that the volume of the alternative beverage market grew to
approximately 1.5 billion cases. Nonetheless, alternative beverages currently
remain only a small portion of the entire beverage market, which, in the opinion
of management, provides significant opportunity for future growth.
In general, the segments of the alternative beverage category in which
Swiss Natural label beverages compete enjoyed strong growth in 1999. According
to information published in the Beverage Digest Fact Book 2000, the fruit juice
and fruit juice drink segment grew from 555 million cases sold in 1998 to 595
million cases sold in 1999, and the ready to-drink tea segment grew from 400
million cases sold in 1998 to 430 million cases sold in 1999.
The alternative age beverage category generally consists of products
classified as "premium", more specialized goods, and to a lesser extent,
"non-premium", lower-margin, generic or more mainstream products. Premium
beverage products typically command higher prices and higher margins for the
brand owner, the distributor and the retailer than other beverages because of
the following:
* Higher Quality Ingredients. Premium beverage ingredients are positioned
to be higher quality and usually do not include preservatives.
* Distribution. The primary distribution channels for premium beverages are
convenience stores and other small retail outlets. These locations
usually sell premium beverages in single refrigerated cold servings
instead of at room temperature in larger containers.
* Packaging and Marketing. Packaging is a key differentiation in the
single-serve market and critical to building a premium image. Marketing
premium beverages relies heavily on product innovation, unique
advertising and availability.
13
<PAGE>
OUR BUSINESS
We market and sell a variety of premium beverages, including fruit drinks,
ready-to-drink teas and 100% juice products under both our proprietary Swiss
Natural trademark and private label brands. A significant portion of our
business consists of sales of six flavored beverages, including one diet
beverage and two 100% juice products under a private label beverage program
developed by us for Sbarro Inc. Under the Swiss Natural brand, we market and
distribute vitamin-fortified flavored beverages and two 100% juice products,
including three diet beverages. One of our larger customers for our Swiss
Natural brand products are Dunkin' Donuts franchisees. Our sales to the Dunkin'
Donuts franchisees, as well as to Sbarro Inc., each represent at least 10% of
our total overall revenues.
Prior to March 1996, our revenues were derived solely from the sale of our
Swiss Natural labeled beverages. At present we sell our beverages under a
private label in almost all Sbarro franchise restaurants including many Sbarro
restaurants located outside the United States. Our line of beverages is the only
authorized bottled soft drink of its kind to be sold in the Sbarro restaurants.
In January 1998, we renewed our agreement with Sbarro granting us a right of
first refusal to be the exclusive supplier of Sbarro private label beverages for
a three year period of time. We have agreed, as long as we are supplying
beverages to Sbarro, to refrain from developing a private label program for any
other company which sells pizza as its primary source of revenue.
Sbarro is a major customer of ours and we depend significantly upon the
sale of our beverages to Sbarro. At the request of Sbarro, we began production
of two 100% juice products to be supplied to Sbarro under the private label
program. We have been advised that the two 100% juice products supplied by
Global Brands have replaced all other juices currently being sold by the Sbarro
franchise restaurants and are the only authorized 100% juice products sold by
such franchise restaurants.
In February 1998, we began to supply our juice and other beverage products
on a trial basis to approximately 22 Dunkin' Donut franchisees which are
supplied from the Mid-Atlantic Dunkin' Donut regional distribution center. On
March 29, 1999 we executed a three year agreement with this Dunkin' Donuts
regional distribution center which designates our Swiss Natural label beverages
as authorized beverages for the region, which includes approximately 900 Dunkin'
Donuts franchisees. We currently supply approximately 200 Dunkin' Donuts
franchisees with our Swiss Natural label beverages. In February 2000, Swiss
Natural labeled beverages were approved for distribution through the South East
regional distribution center of Dunkin' Donuts. Sales to the South East region
began in March 2000. In March 2000, Swiss Natural labeled beverages were
approved for distribution through the Mid-West regional distribution center of
Dunkin' Donuts. Sales to the Mid-West region began in April 2000. The Dunkin'
Donut franchisees, however, may purchase bottled beverage products from any
supplier that they choose. Our revenues have increased as a result of the sales
of our beverages to the Dunkin' Donut franchisees.
We are currently in contract negotiations with an additional fast food
franchise to be the sole and exclusive supplier of tea and fruit drinks to all
franchises for a proprietary labeled line of beverages.
We also utilize multiple independent distributors to sell Swiss Natural
labeled beverages. In March of 2000 we were approved for distribution by one of
the largest independent distributors servicing approximately 4,000 pizza stores
in the North East to distribute and sell the entire line of Swiss Natural
labeled beverages. Our independent distributors sell Swiss Natural label
beverages to food service accounts, convenience stores, delicatessens, pizza
restaurants, golf courses, hotels, schools, cafeterias, fitness clubs and a
variety of other outlets which sell beverages. In March 1997, we executed a
letter of understanding with Ritter/Sysco Food Services, Inc., a division of
Sysco, a national food service distributor for distribution of our beverages to
food service customers receiving our beverages within a 100 mile radius of
Columbus Circle, New York, New York.
During the fiscal year ended February 29, 2000, our Swiss Natural brand
sales totaled $1,184,249 compared to $628,194 for the prior fiscal year. This
represents an increase of approximately 89%. Sales of our Swiss Natural brands
carry a significantly higher gross profit percentage than our private label
products. Gross profit percentage on Swiss Natural brand sales range by accounts
from
14
<PAGE>
approximately 33% to 56%. Sales of private label beverages totaled $2,694,192
for the fiscal year ended February 29, 2000 compared to $2,433,392 for the prior
fiscal year. This represents an increase of approximately 11%. Gross profit
percentage on sales of private label beverages ranges from approximately 28% to
31%.
During the fiscal year ended February 28, 1999, the five largest
distributors of Swiss Natural label beverages purchased approximately 76% of the
case sales of our Swiss Natural label beverages (approximately 19% of the case
sales of all of our beverages including our private label beverages), each
purchasing in excess of approximately 9% of the case sales of Swiss Natural
label beverages, with none of the distributors accounting for more than
approximately 30% of our sales of Swiss Natural label beverages. During the
fiscal year ended February 29, 2000, the five largest distributors of Swiss
Natural label beverages purchased approximately 77% of the case sales of our
Swiss Natural label beverages (approximately 27% of the case sales of all of our
beverages including our private label beverages), each purchasing in excess of
approximately 3% of the case sales of Swiss Natural label beverages. No one
distributor accounted for more than approximately 44% of our sales of Swiss
Natural label beverages sold in such fiscal year.
OUR INTERNET STRATEGY
We have initiated the development of an e-commerce plan which we expect
will increase direct distribution to customers and retailers utilizing the
Internet and a company website. In connection with our Internet distribution
initiative, we are developing new packaging concepts for our products which we
believe will help to promote our retail and business-to-business sales over the
Internet, as well as increase the efficiency and lower the cost of our
distribution systems. We have purchased several web-site names, are interviewing
web-site developers and estimate that the site will be operational in 2000.
OUR PRODUCTS
We currently sell nine (9) naturally flavored beverages under the
trademarks Swiss Natural Icy Berry, Swiss Natural Diet Icy Berry, Swiss Natural
Icy Citrus, Swiss Natural Icy Melonade, Swiss Natural Lemon Icy Tea, Swiss
Natural Diet Icy Tea With Lemon, Swiss Natural Raspberry Icy Tea, Swiss Natural
Peach Icy Tea and Swiss Natural Diet Peach Icy Tea. In addition, we sell a 100%
orange juice product and a 100% apple juice product under the Swiss Natural
label. The Swiss Natural Diet Icy Berry, Diet Peach Icy Tea and Diet Icy Tea
With Lemon were introduced to attract customers who are calorie conscious. We
also sell six naturally flavored beverages, a 100% orange juice product and a
100% apple juice product under our private label program. All of our beverages
are made utilizing natural flavors and juices and none contain preservatives or
artificial colors. In addition, the beverages sold under the Swiss Natural label
are fortified with our "Ultrapeak(R) " vitamin formula, a specific combination
of vitamins. Our beverages have a shelf life of approximately nine (9) months
and typically are sold to consumers within sixty to ninety days of their
production.
RAW MATERIALS
We procure our bottles, water, juice products, apple and orange juice
concentrates, high fructose corn syrup, citric acid, our vitamin formulation and
other designated ingredients used in our proprietary beverages from various
suppliers which then supply our independent bottling company. Each of these
ingredients is readily available from several alternative suppliers.
We purchase our proprietary flavor bases from an independent flavor
supplier. We are the sole owner of the service formulae used in connection with
the production and manufacture of our beverages. If for any reason our flavor
supplier were to cease to supply the flavor bases used in our proprietary
service formula to us, we believe we would be able to secure an alternate source
of supply.
15
<PAGE>
PRODUCTION
All of our Swiss Natural label and private label beverages are currently
manufactured and bottled by an independent bottling company. We have recently
reached a multi-year production agreement with our current bottling facility. In
accordance with our arrangement with our current bottling facility, they are to
provide basic raw materials for our beverages such as water, while we provide a
flavor base, together with our Ultrapeak(R) vitamin formula. Our finished
product is then manufactured in accordance with our specifications in
distinctive glass bottles supplied by us utilizing our specified labels on such
bottles. We purchase our labels from an independent label manufacturer. We place
orders for finished goods with the bottler on a monthly basis based upon our
best estimates of our future needs prior to our receipt of orders from
distributors. We monitor the production of our beverages to assure adherence to
production procedures and quality standards. In addition, some of our suppliers
have entered into confidentiality agreements to protect our trade secrets. We
have not experienced any significant returns or incidents of product spoilage
which we believe is due to the nature of our customers and their ability to move
product quickly.
We have an arrangement with an independent storage company for the storage
of all of our finished goods inventory. Inasmuch as neither we nor a majority of
our customers own or operate any trucking companies, we utilize third-party
trucking services to deliver product to our customers.
All of our tea and fruit beverages, including both the Swiss Natural label
and the private label beverages, are currently sold in our proprietary 16 ounce
and 12 ounce, single serve, wide-mouth glass container, which has a distinctive
and unique shape designed to stimulate consumer interest and create brand
recognition. We use a private mold for the production of such glass containers
and we purchase these containers from an independent third party glass
manufacturer. The glass manufacturer does not have a written supply agreement
with us. We are researching and developing the use of other packaging
containers, such as plastic containers and aluminum cans, to expand the
distribution of our brand. We plan to use the new types of packaging in
additional distribution channels including electronic commerce.
TRADEMARKS AND COPYRIGHTS
We have obtained registered trademarks to protect the name "Swiss
Natural(R) " and the slogan "Reach For The Peak(R) " used in selling our
beverages. We have also obtained registered trademarks for the marks "Swiss
Natural Icy Berry(R) ", "Swiss Natural Icy Citrus(R) ", "Swiss Natural Icy
Melonade(R) ", "Swiss Natural Icy Coffee(R) " and for "Swiss Natural Icy Tea(R)
", and "Ultra Peak(R) ", the name of our vitamin formula. We use a private mold
for the production of our proprietary glass container. As to our beverage
formulations, we rely on the unpatented know-how of our Chief Executive Officer
and the confidentiality agreements with our flavor manufacturer, our bottling
company and our employees.
COMPETITION
Competition in the beverage industry is intense. We face competition from
other beverage companies providing similar products such as Snapple, Fruitopia,
Ocean Spray, Arizona and Mistic and various other lesser known brands. We also
face competition from other beverage companies providing other beverages. Many
of our competitors, including the dominant brands named above, are better
established and have greater financial resources than us. We believe that the
quality of our beverages, distribution strategy, private label business,
competitive prices and profit margins will enable us to compete with these
companies.
SALES AND MARKETING STRATEGY
Our marketing strategy is to create a consumer awareness of our brand in
our targeted markets as well as to increase our client base of private label
customers. The core marketing campaign theme of our Swiss Natural label
beverages has been and will be centered around our "Reach For The Peak(R) "
registered trademark. We also emphasize the fact that our products provide great
taste with
16
<PAGE>
enhanced nutritional benefits and utilize no artificial coloring or
preservatives. We also promote the fact that our products contain natural
ingredients.
To date, we have focused our marketing efforts mainly in the New York
metropolitan area. Following the consummation of this offering, we intend to
further market our Swiss Natural label beverages in other regions of the United
States such as the Northeast, the Southeast, the Mid-Atlantic and the West Coast
and to increase our sales to private label customers.
Our sales strategy has been to provide a superior product at an
advantageous profit margin for both the distributor and retailer. This strategy
enables us to secure a degree of market acceptance and distribution capability
generating repeat sales with minimal expense for advertising. In addition, we
have offered, from time to time, sales allowances and/or discounts to
distributors based upon their performance. Our sales strategy has not included
the use of consignment sales. In order to increase our sales volume, we intend
to expend additional capital for an expanded sales force and enhanced
promotional material.
GOVERNMENT REGULATION
The production and sale of our beverages are subject to the rules and
regulations of various federal, state and local food and health agencies,
including the U.S. Food and Drug Administration. The FDA also regulates the
labeling of containers including, without limitation, statements concerning
product ingredients.
We are also subject to various federal, state and local environmental laws
and regulations that limit the discharge, storage, handling and disposal of a
variety of substances and by laws and regulations relating to workplace safety
and worker health, principally the Occupational Safety and Health Administration
Act, as well as similar state laws and regulations. We believe that we comply in
all material respects with these laws or regulations, although we cannot assure
that future compliance with such laws or regulations will not have a material
adverse effect on our results of operations or financial condition. We did not
incur any significant costs in the fiscal year ended February 29, 2000 to comply
with environmental laws.
EMPLOYEES AND CONSULTANTS
Our chief executive officer and chief financial officer are also directors
and stockholders of our company. We presently employ three other people at our
executive offices on a full time basis, none of whom has a written employment
agreement with us. Two of the other employees are engaged in sales and marketing
and one employee is a certified public accountant who performs accounting
services. Our chief executive officer devotes his full business time to our
business, and our chief financial officer devotes a majority of his business
time to our business. Our chief financial officer, an attorney and certified
public accountant, is engaged in the practice of law. In addition, from time to
time we engage sales consultants to assist us in expanding the sales and
distribution of our products.
We do not currently have any contingent forms of compensation for our
officers and directors, including any pension, retirement, stock appreciation,
or other compensation plan other than our 1999 Stock Option Plan. However, we
anticipate that we will institute such other forms of compensation in the
future.
We have never had a work stoppage and our employees are not represented by
any collective bargaining unit. We consider our relations with our employees to
be good. Our future success will depend, in part, on our ability to continue to
attract, integrate, retain and motivate highly qualified sales and managerial
personnel for whom competition is intense.
SLOTTING FEES
For us to achieve placement of our products in certain supermarket chains
and individual supermarket stores, it may sometimes be necessary for us to
purchase shelf space by paying slotting fees. Typically, supermarket chains and
prominent local supermarkets impose these charges as a one
17
<PAGE>
time payment before the products are permitted in the store or chain. Slotting
fees are less frequently imposed by other types of retail outlets such as
individual convenience stores and delicatessens. The fees are negotiated on an
individual basis.
MARKETING AND PROMOTION
We intend to position Swiss Natural label beverages as a brand name
synonymous with products of superior quality and nutritional benefit with great
taste. To date, we have used a limited amount of point of sale promotion
material, and we previously utilized some radio advertisements.
We believe that increased marketing expenditures may be necessary in order
to increase sales volume. During the current fiscal year, marketing expense is
budgeted at approximately three percent (3%) of Swiss Natural label beverage net
sales. On an ongoing basis we anticipate our marketing budget to be
approximately six percent (6%) to eight percent (8%) percent of the Swiss
Natural label beverage net sales. In addition, we anticipate a continuation of
our discount policy to distributors, which may result in higher promotional
expenses.
LEGAL PROCEEDINGS
We are not a party to any legal proceedings. However, from time to time we
may be subject to legal proceedings and claims in the ordinary course of
business. Such claims, even if not meritorious, could result in the expenditure
by us of significant financial and managerial resources.
FACILITIES
Our executive and administrative office is located in approximately 1,250
square feet of office space located at 1031 Route 9W, Upper Grandview, New York.
Global Brands does not pay rent for the use of this office space. The office
space is owned by Dr. Ralph M. Ferrante, our Chairman and Chief Executive
Officer. We are currently seeking new office space to occupy as a primary site
of executive operations and it anticipates moving its corporate headquarters to
the State of New Jersey. We have no other office facilities.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Set forth below is certain information regarding our directors and
executive officers.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------------- --- --------------------------------------------
<S> <C> <C>
Dr. Ralph M. Ferrante.................... 45 Chief Executive Officer, Chairman of the
Board and Secretary
Herbert M. Paul.......................... 64 Chief Financial Officer, President,
Assistant Secretary and Director
James P. McCann.......................... 41 Director
Kenneth D. Greenblatt.................... 53 Director -- Nominee
Donald L. Antle.......................... 60 Director -- Nominee
</TABLE>
DR. RALPH M. FERRANTE has been our Chief Executive Officer, Chairman of the
Board of Directors and Secretary since 1993. From 1982 to 1992, he was the
Executive Vice President of Ferrante Enterprises, Inc., a real estate
development company which he co-founded. From 1981 to 1985, he was a practicing
chiropractor at the Rockland Health Center. Dr. Ferrante has a Doctor of
Chiropractic degree from New York Chiropractic College and a BBA degree from
Pace University.
HERBERT M. PAUL is a certified public accountant and an attorney and has
been our Chief Financial Officer, President, Assistant Secretary and a Director
since 1993. Since 1981, Mr. Paul has been the managing partner of Herbert Paul,
P.C., a law firm specializing in business and tax matters. Prior to 1981, he was
a senior partner at Touche Ross & Co., an international accounting firm which
was the predecessor to Deloitte & Touche. Mr. Paul has been a trustee and a
professor at New York University as well as a member of various professional
committees. Mr. Paul has an MBA degree
18
<PAGE>
from the New York University Graduate School of Business, an LLM degree from the
New York University Graduate School of Law, a JD degree from Harvard Law School
and a BBA degree from Baruch College. Mr. Paul is listed in Who's Who in Finance
& Industry, Who's Who in American Law and Who's Who in America.
JAMES P. MCCANN is a First Vice President at Prudential Securities. He had
been a First Vice President at Paine Webber since 1994, where he was directly
responsible for the management of in excess of $240 million of funds. Mr.
McCann's responsibilities include fixed income management and equity investments
for clients. Mr. McCann was employed by Paine Webber in 1981 when he graduated
from Manhattan College with a B.B.A. degree. Mr. McCann has been a director of
Global Brands since March 1, 1999.
KENNETH D. GREENBLATT was employed from 1968 to 1981 at Gilbert Frank
Corporation, a privately held textile company where he became President in 1976.
In 1981 Gilbert Frank Corporation was purchased by Guilford Mills Incorporated,
a public company where Mr. Greenblatt served as Chairman of the Gilbert Frank
division until 1987. In 1987 Mr. Greenblatt founded Waverly Converting Inc. a
textile company which was purchased by Missbrenner, Inc. where Mr. Greenblatt
served as President until 1997. From 1997 to the present, Mr. Greenblatt has
been Chairman of the Board of Kenneth John Productions, a Broadway production
company which has produced 17 shows winning 23 Tony awards since 1981. Mr.
Greenblatt has a BBA degree in Finance from the University of Miami. Mr.
Greenblatt is a member of the Presidents Council of the University of Miami, and
serves on the Board of Directors of the Helen Hayes Theater.
DONALD L. ANTLE has since 1987 been founder and President of Antle
Enterprises a private beverage industry consulting firm specializing in company
sales, mergers and acquisitions, corporate financing, industry expert witness,
and new product introductions. Mr. Antle began his beverage career in 1958 with
the Seven-Up Bottling Company in Colorado. In 1962 he joined the Dr Pepper
Company as a zone manager, in 1964 he became Division manager, and then in 1973
became Vice President of Franchise at the Dr. Pepper Company. In 1982 Mr. Antle
became President of Premier Beverages, which marketed the Welch's soft drink
brand. Mr. Antle has a BBA degree from the University of Colorado.
BOARD OF DIRECTORS
Directors are elected at the annual meeting of our stockholders to hold
office for a designated period not to exceed one year or until their successors
are elected and qualified. Officers serve at the discretion of the Board.
Directors may receive such compensation for their services as is fixed from time
to time by resolution of the Board.
DIRECTOR'S COMPENSATION
Directors currently receive no compensation for their service as such. We
anticipate granting no more than an aggregate of 20,000 options to purchase
shares of common stock at the initial public offering price to our outside
directors as compensation for their services as directors. We do reimburse
directors for their reasonable expenses incurred in attending meetings of the
Board of Directors.
COMPENSATION OF OFFICERS AND KEY EMPLOYEES
Each of our officers has agreed to forego payment for all services
performed by them on our behalf during the period from our inception until
February 28, 1995 pursuant to agreements between us and each of our officers.
However, such officers, as well as two of our employees, one of whom is no
longer with us, were owed money for services performed for us during the fiscal
year ended February 29, 1996 and a portion of the fiscal year ended February 28,
1997. In February, 1998, Dr. Ferrante, Mr. Paul and Mr. Brescio canceled all
indebtedness owed to them by us, including all indebtedness for compensation
owed to them by us, in exchange for shares of common stock. At that time, we
owed $601,737, $152,819 and $93,419 to Dr. Ferrante, Mr. Paul and Mr. Brescio,
respectively. Accordingly, in exchange for the cancellation of indebtedness, we
issued 353,653, 89,815 and 54,904
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<PAGE>
additional shares of our common stock to Dr. Ferrante, Mr. Paul and Mr. Brescio,
respectively. At present, the only indebtedness of ours remaining for accrued
and unpaid compensation is to a former employee and stockholder in the amount of
$101,092.
We have entered into an employment agreement with Dr. Ralph M. Ferrante
pursuant to which Dr. Ferrante has agreed to continue to serve as our Chief
Executive Officer until February 28, 2002. Dr. Ferrante's employment agreement
provides that for the year ended February 29, 2000 he will receive a base salary
of $168,000 per annum, a $13,000 payment for medical insurance, a $10,000
payment for life insurance and a $7,200 car allowance; and that for each of the
fiscal years ended February 28, 2001 and February 28, 2002 he will receive a ten
percent increase from the previous year's base salary, a $13,000 payment for
medical insurance, a $12,000 payment for life insurance and a car allowance of
$9,600.
Herbert Paul has agreed to continue to serve as our President and Chief
Financial Officer. We have also entered into a consulting agreement with Mr.
Paul until February 28, 2002. Mr. Paul's consulting agreement provides that for
the year ended February 29, 2000 he will receive consulting fees of $99,750 per
annum, a $4,750 allocation for medical insurance and a $4,750 allocation for
life insurance; and that for each of the fiscal years ended February 28, 2001
and February 28, 2002 he will receive a ten percent increase from the previous
year's consulting fees and a continuation of the allocations for medical and
life insurances.
SUMMARY OF COMPENSATION
The following Summary Compensation Table sets forth information concerning
compensation earned in the three fiscal years ended February 28, 1998, February
28, 1999 and February 29, 2000, by our Chief Executive Officer and President
(the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-----------------------------------------------
AWARDS
ANNUAL COMPENSATION ------------------------ PAYOUTS
----------------------------------------------- RESTRICTED SECURITIES ---------------------
NAME AND FISCAL YEAR OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER
PRINCIPAL ENDED SALARY BONUS COMPENSATION AWARD(S) OPTIONS/SARS PAYOUTS COMPENSATION
POSITION FEBRUARY 28(29) ($) ($) ($) ($) (#) ($) ($)
- --------------------- --------------- ------- ------- ------------ ---------- ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dr. Ralph Ferrante... 2000 168,000 -- 7,200 -- -- -- 23,000
Chairman of the 1999 160,000 -- 7,200 -- -- -- --
Board and Chief 1998 140,000 -- 7,200 -- -- -- --
Executive Officer
Herbert Paul......... 2000 -- -- 109,250 -- -- -- --
President and Chief 1999 -- -- 99,750 -- -- -- --
Financial Officer 1998 -- -- 87,083 -- -- -- --
</TABLE>
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
As permitted pursuant to the corporate law of the State of Delaware, our
state of incorporation, the Certificate of Incorporation requires that we
indemnify its directors and officers against certain liabilities and expenses
incurred in their service in such capacities to the fullest extent permitted by
applicable law. These provisions would provide indemnification for liabilities
arising under the federal securities laws to the extent that such
indemnification is found to be enforceable under, and to be in accordance with
applicable law. Additionally, we have entered into an indemnity agreement with
each director and officer which generally provides that they are indemnified
with respect to actions taken in good faith. Furthermore, the personal liability
of the directors is limited as provided in our Certificate of Incorporation.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to our directors, officers and controlling persons pursuant to
the foregoing provisions, or otherwise, we have 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.
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<PAGE>
GLOBAL BRANDS 1999 STOCK OPTION PLAN
The Global Brands 1999 Stock Option Plan was ratified and approved by our
Board of Directors on June 30, 1999. The 1999 Stock Option Plan is intended to
promote our long term financial interests and growth by providing employees,
officers, directors, and consultants with appropriate incentives and rewards to
enter into and continue in the employ of, or their relationship with, us and to
acquire a proprietary interest in our long-term success; and to reward the
performance of individual officers, other employees, consultants and directors
in fulfilling their responsibilities for long-range achievements.
GENERAL
The 1999 Stock Option Plan provides for the granting of awards to such
officers, other employees, consultants and directors of our company and its
affiliates as the Board of Directors may select from time to time. A total of
500,000 shares of common stock has been reserved for issuance under the 1999
Stock Option Plan.
If any shares subject to an award are forfeited, canceled, exchanged or
surrendered or if an award otherwise terminates or expires without a
distribution of shares to the holder of such award, the shares of common stock
with respect to such award will, to the extent of any such forfeiture,
cancellation, exchange, surrender, termination or expiration, again be available
for the awards under the 1999 Stock Option Plan.
In the event that the compensation committee determines that any dividend
or other distribution (whether in the form of cash, common stock, or other
property), recapitalization, stock split, reverse split, reorganization, merger,
consolidation, spin-off, combination, repurchase, or share exchange, or other
similar corporate transaction or event, affects the common stock such that an
adjustment is appropriate in order to prevent dilution or enlargement of the
rights of holders of awards under 1999 Stock Option Plan, then the compensation
committee will make such equitable changes or adjustments as it deems necessary
or appropriate to any or all of (i) the number and kind of shares of common
stock or other property (including cash) that may thereafter be issued in
connection with awards, (ii) the number and kind of shares of common stock or
other property (including cash) issued or issuable in respect of outstanding
awards and (iii) the exercise price, grant price, or purchase price relating to
any award; provided that, with respect to incentive stock options, such
adjustment shall be made in accordance with Section 424(h) of the Code.
ADMINISTRATION
The 1999 Stock Option Plan will be administered by the compensation
committee. The compensation committee has the authority in its sole discretion,
subject to and not inconsistent with the express provisions of the 1999 Stock
Option Plan, to administer the 1999 Stock Option Plan and to exercise all the
powers and authorities either specifically granted to it under, or necessary or
advisable in the administration of, the 1999 Stock Option Plan, including,
without limitation, the authority to grant awards; to determine the persons to
whom and the time or times at which awards shall be granted; to determine the
type and number of awards to be granted, the number of shares of common stock to
which an award may relate and the terms, conditions, restrictions and
performance goals relating to any award; to determine whether, to what extent,
and under what circumstances an award may be settled, canceled, forfeited,
exchanged, or surrendered; to make adjustments in the performance goals in
recognition of unusual or non-recurring events affecting Global Brands or the
financial statements of Global Brands (to the extent not inconsistent with
Section 162(m) of the Code, if applicable), or in response to changes in
applicable laws, regulations, or accounting principles; to construe and
interpret the 1999 Stock Option Plan and any award; to prescribe, amend and
rescind rules and regulations relating to the 1999 Stock Option Plan; to
determine the terms and provisions of agreements evidencing awards; and to make
all other determinations deemed necessary or advisable for the administration of
the 1999 Stock Option Plan.
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<PAGE>
AWARDS UNDER THE 1999 STOCK OPTION PLAN
No options have been granted under the 1999 Stock Option Plan. Unless
otherwise determined by the compensation committee, options granted pursuant to
the 1999 Stock Option Plan will become exercisable ratably over three years
commencing on the first anniversary of the date of grant, but in no event may an
option be exercised more than 10 years following the date of its grant. The
purchase price per share payable upon the exercise of an option will be
established by the compensation committee; provided, however, that incentive
stock options may not have an exercise price less than the fair market value of
a share of common stock on the date of the grant. The option exercise price is
payable by any one of the following methods or a combination thereof:
* in cash or by personal check, certified check, bank cashier's check or
wire transfer;
* in shares of common stock owned by the participant for at least six
months prior to the date of exercise and valued at their fair market
value on the effective date of such exercise; or
* by such other method as the compensation committee may from time to time
authorize.
The compensation committee also has the authority to specify, at the time
of grant or, with respect to options that are not intended to qualify as
incentive stock options ("non-qualified stock options"), at or after the time of
grant, that a participant shall be granted a new non-qualified stock option (a
"reload option") for a number of shares of common stock equal to the number of
shares of common stock surrendered by the participant upon exercise of all or a
part of an option in the manner described above, subject to the availability of
common stock under the 1999 Stock Option Plan at the time of such exercise;
provided, however, that no reload option shall be granted to a non-employee
director. Reload options shall be subject to such conditions as may be specified
by the compensation committee in its discretion, subject to the terms of the
1999 Stock Option Plan.
EMPLOYMENT ARRANGEMENTS
Ferrante Employment Agreement. We have entered into an employment agreement
with Dr. Ralph M. Ferrante pursuant to which Dr. Ferrante has agreed to continue
to serve as our Chief Executive Officer until February 28, 2002. Dr. Ferrante's
employment agreement provides that for the year ended February 29, 2000 he will
receive a base salary of $168,000 per annum, a $13,000 payment for medical
insurance, a $10,000 payment for life insurance and a $7,200 car allowance; and
that for each of the fiscal years ended February 28, 2001 and February 28, 2002
he will receive a ten percent increase from the previous year's base salary, a
$13,000 payment for medical insurance, a $12,000 payment for life insurance and
a car allowance of $9,600.
Paul Consulting Agreement. Herbert Paul has agreed to continue to serve as
our President and Chief Financial Officer. We have also entered into a
consulting agreement with Mr. Paul until February 28, 2002. Mr. Paul's
consulting agreement provides that for the year ended February 29, 2000 he will
receive consulting fees of $99,750 per annum, a $4,750 allocation for medical
insurance and a $4,750 allocation for life insurance; and that for each of the
fiscal years ended February 28, 2001 and February 28, 2002 he will receive a ten
percent increase from the previous year's consulting fees and a continuation of
the allocation for medical and life insurances.
CERTAIN TRANSACTIONS
We utilize approximately 1,250 square feet of office space for our
corporate headquarters in a facility owned by Dr. Ferrante, our Chairman of the
Board, Chief Executive Officer and principal stockholder. We do not pay rent for
the use of our corporate headquarters. We do not have any written agreement with
respect to such arrangement.
As of February 1, 1999, we owed an aggregate amount of $455,527 to A.
Donald and Carolyn B. McCulloch, Jr. for loans made by them to us in order to
fund our operations. Mr. McCulloch is a former director and stockholder of our
company. In February 1999, we paid the McCullochs $75,000 out of the proceeds
received by us from a private placement of convertible debentures. In addition,
two of our employees paid the McCullochs $95,000 in exchange for the transfer to
such employees of
22
<PAGE>
49,341 shares of our common stock owned by the McCullochs. The McCullochs also
forgave $95,000 due to them by us and released us from certain negative
covenants.
The aggregate indebtedness owed by us to the McCullochs as of February 29,
2000 is $325,005, inclusive of accrued interest. The indebtedness is evidenced
by two promissory notes, one in the principal amount of $152,500, which bears
interest at a rate of 12% per annum, and represents the outstanding principal
amount of the original obligation, plus accrued interest of $3,050 and the other
in the amount of $169,455 which represents accrued interest on the original
promissory note and is non-interest bearing. Both promissory notes to the
McCullochs mature on the earlier to occur of:
* December 31, 2000;
* ten days after our receipt of the proceeds of an initial public
offering; or
* the sale of all or substantially all of our assets.
We will use a portion of the proceeds of this offering to repay such amount
plus all accrued interest thereon.
OTHER TRANSACTIONS
Dr. Ferrante was previously owed an aggregate of $180,888 by us for
compensation due to him on account of services performed for us. As of February
28, 1998 Dr. Ferrante exchanged this indebtedness owed to him by us for 106,311
newly issued shares of common stock.
Dr. Ferrante was previously owed an aggregate of $420,849 by us for loans
made by him to fund our operations. As of February 28, 1998 Dr. Ferrante
exchanged this indebtedness owed to him by us for 247,342 newly issued shares of
common stock.
Mr. Paul was previously owed an aggregate of $102,599 by us for
compensation due to him on account of services performed for us. As of February
28, 1998 Mr. Paul exchanged this indebtedness owed to him by us for 60,299 newly
issued shares of common stock.
Mr. Paul was also previously owed an aggregate of $50,220 by us for loans
made by him to fund our operations. As of February 28, 1998 Mr. Paul exchanged
this indebtedness owed to him by us for 29,516 newly issued shares of common
stock.
Mr. Brescio was previously owed an aggregate of $93,419 by us for
compensation due to him on account of services performed for us as an employee.
As of February 28, 1998 Mr. Brescio exchanged this indebtedness owed to him by
us for 54,904 newly issued shares of common stock.
Effective June 30, 1999, Messrs. Ferrante, Paul and Brescio exchanged
1,206,000 shares of common stock of Global Brands owned by them for 1,206,000
shares of Series A Preferred Stock. See "Description of Capital Stock -Preferred
Stock" for a more detailed description of the terms of such preferred stock.
During the years ended February 28, 1999 and February 29, 2000, we paid
$80,000 and $30,000, respectively, in legal fees to Leslie Marlow, Esq.,
formerly an associate at Rosenman & Colin LLP and the daughter of Mr. Paul.
OUR POLICY
We believe that each of the foregoing transactions has been on terms no
less favorable to us than those that could have been obtained from unaffiliated
parties. It is our intent that, in the future, transactions with affiliated
parties will be approved by a majority of our disinterested directors or
otherwise as permitted by applicable law. Any such future transactions are
expected to be on terms no less favorable to us than could be obtained from
unaffiliated parties.
PRINCIPAL STOCKHOLDERS
The following table sets forth information known to Global Brands with
respect to beneficial ownership of our common stock as of the date of this
prospectus by
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<PAGE>
* each stockholder known by us to be the beneficial owner of more than 5%
of our common stock;
* each director of Global Brands;
* the Named Executive Officers; and
* all executive officers and directors as a group.
Except as otherwise indicated, we believe that the beneficial owners of
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. We assume that the underwriter's
over-allotment option will not be exercised. In event the underwriter's
over-allotment option is exercised, Messrs. Ferrante, Paul and Brescio will hold
740,123 shares, 144,418 shares and 100,195 shares, respectively, after the
offering, which in percentage terms is equal to 19.0%, 3.7% and 2.6%,
respectively, of the then outstanding shares. The table does not give effect to
111,667 shares of common stock purchasable by Mr. Rolls upon the exercise of
warrants or the 20,000 shares of common stock issuable upon the conversion of
the convertible debentures held by Mr. McCann. In addition, Mario V. Ferrante
has granted to Ralph M. Ferrante the right to vote his shares of common stock.
Ralph M. Ferrante disclaims beneficial ownership of these shares and the shares
of common stock owned by Mario V. Ferrante have not been included in Ralph M.
Ferrante's share ownership.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED PRIOR TO SHARES BENEFICIALLY
OFFERING OWNED AFTER OFFERING
NAME AND ADDRESS ---------------------- ----------------------
OF BENEFICIAL OWNER NUMBER PERCENT NUMBER PERCENT
- ------------------------------------------------ --------- ------- --------- -------
<S> <C> <C> <C> <C>
Ralph M. Ferrante............................... 878,573 33.9% 878,573 22.6%
c/o Global Brands, Inc.
1031 Route 9W
Upper Grandview, NY 10960
Herbert M. Paul................................. 179,518 6.9% 179,518 4.6%
c/o Global Brands, Inc.
1031 Route 9W
Upper Grandview, NY 10960
A. Donald & Carolyn B. McCulloch, Jr............ 345,825 13.3% 345,825 8.9%
c/o Global Brands, Inc.
1031 Route 9W
Upper Grandview, NY 10960
Ernest Rolls.................................... 223,334 8.6% 223,334 5.7%
c/o Global Brands, Inc.
1031 Route 9W
Upper Grandview, NY 10960
Ronald Brescio.................................. 121,645 4.7% 121,645 3.1%
c/o Global Brands, Inc.
1031 Route 9W
Upper Grandview, NY 10960
James P. McCann................................. 0 0% 0 0%
c/o Global Brands, Inc.
1031 Route 9W
Upper Grandview, NY 10960
Mario V. Ferrante............................... 184,411 7.1% 184,411 4.7%
c/o Global Brands, Inc.
1031 Route 9W
Upper Grandview, NY 10960
All directors and executive officers as a group
(3 persons)................................... 1,058,091 40.8% 1,058,091 27.2%
</TABLE>
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<PAGE>
The following table sets forth information known to us with respect to
beneficial ownership of our Series A Preferred Stock as of the date of this
prospectus by
* each stockholder known by us to be the beneficial owner of more than 5%
of our Series A Preferred Stock;
* each director of Global Brands;
* the Named Executive Officers; and
* all executive officers and directors as a group.
Except as otherwise indicated, Global Brands believes that the beneficial
owners of Series A Preferred 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>
SHARES BENEFICIALLY
OWNED PRIOR TO SHARES BENEFICIALLY
OFFERING OWNED AFTER OFFERING
NAME AND ADDRESS ---------------------- ----------------------
OF BENEFICIAL OWNER NUMBER PERCENT NUMBER PERCENT
- ------------------------------------------------ --------- ------- --------- -------
<S> <C> <C> <C> <C>
Ralph M. Ferrante............................... 849,867 70.5% 849,867 70.5%
c/o Global Brands, Inc.
1031 Route 9W
Upper Grandview, NY 10960
Herbert M. Paul................................. 238,463 19.8% 238,463 19.8%
c/o Global Brands, Inc.
1031 Route 9W
Upper Grandview, NY 10960
Ronald Brescio.................................. 117,670 9.7% 117,670 9.7%
c/o Global Brands, Inc.
1031 Route 9W
Upper Grandview, NY 10960
James P. McCann................................. 0 0% 0 0%
c/o Global Brands, Inc.
1031 Route 9W
Upper Grandview, NY 10960
All directors and executive officers as a group
(3 persons)................................... 1,088,330 90.3% 1,088,330 90.3%
</TABLE>
DESCRIPTION OF CAPITAL STOCK
GENERAL
The authorized common stock of Global Brands consists of 20,000,000 shares,
par value $.01 per share. The authorized preferred stock of Global Brands
consists of 3,000,000 shares, par value $.01 per share. The 2,591,708 currently
outstanding shares of Global Brands common stock are owned by approximately 70
holders of record. Upon consummation of this offering, 3,891,708 shares of
common stock will be issued and outstanding. An additional 130,000 shares of
common stock will be outstanding if the 130,000 underwriter's common stock
purchase warrants are exercised in full. An additional 1,206,000 shares of
common stock will be outstanding upon conversion of all outstanding shares of
the Series A Preferred Stock. The foregoing description of the capital stock
excludes shares of common stock issuable upon exercise of the outstanding
warrants and upon exercise of the $757,500 aggregate principal amount of the
convertible debentures.
On October 1, 1999, Global Brands effected a 1.5-for-1 reverse stock split
of its common and preferred stock. Unless otherwise indicated, all information
in this prospectus has been adjusted to reflect this split.
25
<PAGE>
COMMON STOCK
Voting Rights. Each holder of common stock outstanding is entitled to one
vote per share on all matters submitted to a vote of Global Brands'
stockholders, including the election of directors. Holders do not have
cumulative voting rights in connection with the election of directors or any
other matter.
Any action that may be taken at a meeting of the stockholders may be taken
by written consent in lieu of a meeting if Global Brands receives consents
signed by stockholders having the minimum number of votes that would be
necessary to approve the action at a meeting at which all shares entitled to
vote on the matter were present and voted. This could permit Dr. Ferrante and
Mr. Paul to take action regarding matters without providing other stockholders
the opportunity to voice dissenting views or raise other matters.
Liquidation. In the event of any dissolution, liquidation or winding up of
the affairs of Global Brands, whether voluntary or involuntary, holders of the
common stock are entitled to share ratably in all assets remaining after payment
of the debts and other liabilities of Global Brands.
Dividends, distributions and stock splits. Each share of common stock will
have an equal and ratable right to receive dividends when, if and as declared
from time to time by the board of directors out of funds legally available
therefor. Global Brands does not anticipate paying cash dividends in the
foreseeable future.
Other provisions. The holders of common stock are not entitled to
preemptive rights. There are no redemption or sinking fund provisions applicable
to the common stock. Several of our principal stockholders have rights of first
refusal with respect to the transfer and sale by other stockholders of shares of
Global Brands' common stock.
PREFERRED STOCK
Messrs. Ferrante, Paul and Brescio have exchanged 1,206,000 shares of
common stock owned by them for 1,206,000 shares of Series A Preferred Stock
("Series A Preferred"), a newly issued series of preferred stock. The Series A
Preferred is non-redeemable, assignable and carries rights to vote with the
common stock on a one-vote-per-share basis. The Series A Preferred is
convertible into common stock, at the option of the holder, at any time after
the earliest to occur of:
* the first fiscal year of Global Brands or any trailing twelve (12) month
period in which Global Brands' financial statements show earnings before
interest, taxes, charges resulting from stock, debenture or stock option
issuances and underwriter's consulting fees have equaled or exceeded
$750,000;
* the date on which the closing price of the common stock of Global Brands
as reported by the NASDAQ system or its successor, or any national
securities exchange on which such stock is listed (or if not so reported,
the average of the closing bid and asked prices as furnished by two
members of the NASD selected by Global Brands for that purpose) is equal
to or greater than ten dollars ($10.00) per share;
* the closing date of any acquisition of all or a portion of the equity
securities of Global Brands, the acquisition of all or a portion of
Global Brands' assets, the merger of Global Brands with or into another
entity regardless of whether Global Brands is the surviving entity, or
any additional equity financing by Global Brands;
* two (2) years after the closing date of this offering; or
* June 30, 2000 if the closing of this offering and the closing of the
sale of the over-allotment shares hereunder have not occurred prior to
such date.
The Series A Preferred shall pay a quarterly dividend of two cents ($0.02)
per share commencing June 1, 2001, accruing from March 1, 2001 prior to any
other class of stock receiving any dividends, and to participate in dividends
declared and paid on the common stock, on an "as-converted"basis. In addition,
the Series A Preferred will upon liquidation participate pari passu with the
common stock,
26
<PAGE>
on an "as-converted" basis. The holders of the Series A Preferred shares shall
be protected against dilution of their interest in the common stock into which
their shares are convertible upon the occurrence of certain events. If the
holders of the Series A Preferred do not receive their quarterly dividends on a
timely basis, the amount of such dividend shall accrue and shall be paid in full
prior to the payment of any dividends to the holders of common stock.
If and to the extent that the shares of common stock issuable upon
conversion of the Series A Preferred are not includable in a registration
statement on the form to be utilized by Global Brands, then, commencing one year
after the closing of this offering, at the request of the holders thereof,
delivered to Global Brands, Global Brands will prepare and file, at its own
expense, one (1) registration statement on such form as required, to enable such
holders to resell shares of common stock acquired upon the conversion of the
Series A Preferred.
UNDERWRITERS' WARRANTS
At the closing of this offering, Global Brands will sell to the
underwriters stock warrants to purchase 130,000 shares of common stock at an
aggregate purchase price of $100. The underwriters' stock warrants will be
exercisable to purchase one share of common stock at a price equal to $10.3125
per share at any time during the four-year period commencing one year from the
effective date of this prospectus. The underwriters' stock warrants expire on
.
OTHER WARRANTS AND OPTIONS
Global Brands has issued 165,267 warrants to purchase 165,267 shares of
common stock at a price of $2.24 per share. Of such warrants, 111,667 are issued
to one of the principal stockholders listed in the table set forth under
Principal Stockholders.
All of the warrants previously issued by Global Brands are exercisable at
any time prior to the earlier to occur of (a) June 14, 2002 or (b) the date
which is ten days after the date on which Global Brands mails to the holder of
the warrant a copy of a preliminary prospectus included in a registration
statement which has been filed with the Securities and Exchange Commission for
the registration of Global Brands' common stock under the Securities Act of
1933, as amended. The warrants are exercisable at a price of $2.24 per share,
subject to adjustment to prevent dilution in certain circumstances.
For the life of the warrant, the holders thereof are given the opportunity
to profit from a rise in the market price of Global Brands' common stock, which
exercise at the time of such rise may result in a dilution of the interests of
other stockholders. Global Brands may find it more difficult to raise additional
equity capital if it should be needed for the business of Global Brands while
the warrants are outstanding.
CONVERTIBLE DEBENTURES
In January, 1999 Global Brands sold $757,500 principal amount of
convertible debentures. The convertible debentures bear interest at a rate of
12% per annum, payable annually. The convertible debentures mature in February,
2001. The holder of any convertible debenture has the right, exercisable at any
time up to the maturity of the convertible debenture, at his option, to convert
such convertible debenture at the principal amount thereof (or any portion
thereof that is an integral multiple of $1,500) into shares of the common stock
at a price of $1.50 per share (except that, in the event such convertible
debenture shall be called for redemption, such right shall terminate on the
close of business on the fifth day immediately preceding the redemption date).
The debentures may be redeemed by Global Brands on at least 15 days notice at
the option of Global Brands, in whole at any time or in part from time to time,
at a price equal to 100% of the principal amount of the debentures being
redeemed together with interest accrued thereon and unpaid from the later of the
date of issue of such debentures or the last interest payment date to the
redemption date.
27
<PAGE>
INDEBTEDNESS
As of February 29, 2000, after the conversion into common stock of all the
indebtedness owed by us to Dr. Ferrante, Mr. Paul and Mr. Brescio, Global Brands
had outstanding debt, notes and interest payable to stockholders in the
aggregate amount of $325,005, all of such indebtedness is owed to A. Donald
McCulloch, Jr. and Carolyn B. McCulloch, for loans and accrued interest made by
such individuals to us in order to fund our operations. The two promissory notes
evidencing such indebtedness to the McCullochs mature on the earlier to occur of
(i) December 31, 2000, (ii) ten days after the receipt of funds by Global Brands
from an initial public offering, or (iii) the sale of all or substantially all
of the assets of Global Brands. We intend to use a portion of the proceeds of
this offering to repay such amount plus all accrued interest thereon. See "Use
of Proceeds".
ANTI-TAKEOVER EFFECTS OF LAW AND CERTIFICATE OF INCORPORATION
Following consummation of the offering, we will be subject to the business
combination provisions of Section 203 of Delaware corporation law. In general,
such provisions prohibit a publicly held Delaware corporation from engaging in
various business combination transactions with any interested stockholder (in
general, a stockholder owning 15% of a corporation's outstanding voting
securities) for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless:
* the transaction is approved by the corporation's board of directors prior
to the date the stockholder became an interested stockholder;
* upon consummation of the transaction which resulted in the stockholder's
becoming an interested stockholder, the stockholder owned at least 85% of
the shares of stock entitled to vote generally in the election of
directors of the corporation outstanding at the time the transaction
commenced, excluding, for purposes of determining the number of shares
outstanding, those shares owned by (a) persons who are directors and also
officers and (b) employee stock plans in which employee participants do
not have the right to determine confidentiality whether shares held
subject to the plan will be tendered in a tender or exchange offer; or
* on or after such date, the business combination is approved by the board
of directors and authorized by the affirmative vote of at least 66 2/3%
of such outstanding voting stock not owned by the interested stockholder.
TRANSFER AGENT AND REGISTRAR
Corporate Stock Transfer, Inc. has been appointed as transfer agent and
registrar for the common stock.
LISTING
We have applied for listing of the common stock on the Nasdaq SmallCap
Market under the symbol "GLBR".
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for the common
stock or the warrants. We cannot predict the effect, if any, that sales of
shares of the common stock to the public or the availability of shares for sale
to the public will have on the market price of the common stock prevailing from
time to time.
Upon consummation of this offering, Global Brands will have 3,891,708
shares of common stock outstanding. Of the shares outstanding after this
offering, the 1,300,000 shares of common stock sold in this offering and the
195,000 shares offered to the underwriters under the over-allotment option will
be freely tradeable without restriction under the Securities Act of 1933, except
that shares owned by an affiliate of Global Brands will be subject to the volume
limitations of Rule 144 under the Securities Act of 1933. As defined in Rule
144, an affiliate of an issuer is a person who, directly or indirectly,
28
<PAGE>
through one or more intermediaries, controls or is controlled by, or is under
common control with, such issuer.
The remaining 2,396,708 shares, assuming exercise of the overallotment, of
common stock will be restricted securities (as that phrase is defined in Rule
144) and may not be resold in the absence of registration under the Securities
Act or pursuant to an exemption from such registration, including the exemption
provided by Rule 144 under the Securities Act. Substantially all of the holders
of such shares of common stock have registration rights which entitle them under
certain circumstances to register their shares for resale in the event Global
Brands proposes to register additional shares of common stock in the future.
Subject to the foregoing and to the lock-up agreements described below,
under Rule 144 as currently in effect, a stockholder, including an affiliate,
who has beneficially owned his or her restricted shares for at least one year
from the date they were acquired from Global Brands or an affiliate of Global
Brands may sell, within any three-month period, a number of such shares that
does not exceed certain volume restrictions, provided that certain requirements
concerning availability of public information, manner of sale and notice of sale
are satisfied. In addition, under Rule 144(k), if a period of at least two years
has elapsed from the date any restricted shares were acquired from Global Brands
or an affiliate, a stockholder that is not an affiliate of Global Brands at the
time of sale and that has not been an affiliate for at least three months prior
to the sale is entitled to sell those shares without compliance with the
requirements of Rule 144 set forth above. An affiliate of Global Brands,
however, must comply with the volume restrictions and the other requirements
referred to above.
Except for the holders of 195,000 shares offered to the underwriter
pursuant to the over-allotment option and the holders of the 1,300,000 shares
offered to the public in this offering, the holders of substantially all other
outstanding shares of common stock are subject to the underwriters' lockup
restrictions. Pursuant to the lockup, the holders have agreed not to sell,
transfer, hypothecate or convey, without the written consent of the
underwriters, by registration or otherwise, their shares for a period of at
least one year from the effective date of this prospectus. In addition, the
holders have agreed not to sell, transfer, hypothecate or convey their shares
for any longer period as may be required by NASDAQ. Any such stockholder may
however transfer his or her stock in a transaction not involving a public
offering including a transfer to a member of his family or in the event of
death, by will or operation of law, provided that any such transferee shall
agree, as a condition to such transfer, to be bound by such restrictions. If the
195,000 over-allotment shares are not purchased from shareholders by the
underwriters, such shares will not be subject to the underwriters' lockup
restrictions.
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement, the form
of which has been filed as an exhibit to the registration statement of which
this prospectus forms a part, the underwriters named below, acting through
Somerset Financial Group, Inc. and Seaboard Securities, Inc. as representatives,
have severally agreed to purchase from Global Brands, and Global Brands has
agreed to sell, an aggregate of 1,300,000 shares of common stock. The
underwriters' obligations to pay for and accept delivery of the shares of common
stock are subject to certain conditions set forth in the underwriting agreement,
including, but not limited to, satisfactory completion of due diligence,
delivery of a comfort letter from Global Brands' auditors, receipt of an opinion
of Global Brands' counsel and other closing conditions. The underwriters are
committed to purchase all of the shares of common stock if any securities are
purchased. Under certain circumstances, the commitments of non-defaulting
underwriters may be increased.
<TABLE>
<CAPTION>
UNDERWRITERS AMOUNT
------------------------------------------------------------ ---------
<S> <C>
Somerset Financial Group, Inc...............................
Seaboard Securities, Inc....................................
---------
Total.................................................. 1,300,000
---------
---------
</TABLE>
29
<PAGE>
The underwriters propose to offer the shares of common stock to the public
at the public offering price set forth on the cover page of this prospectus and
to certain dealers, who are members of the NASD, at such price less an
underwriting discount of 10% of the public offering price, or $ per
share. The underwriting fee is equal to the difference between the initial
public offering price and the amount paid by the underwriters for the shares of
common stock in this offering. The underwriters may allow a concession of
$ per share to dealers that are members of the NASD. The underwriters
may permit dealers to reallow to other dealers securities and receive a
reallowance of $ per share. Until completion of this offering, the
public offering price, the underwriting discount, concession and reallowances
will not be changed.
Global Brands has agreed to pay the underwriters a non-accountable expense
allowance of 3% of the aggregate offering price of the securities sold in this
offering (including any shares purchased pursuant to the over-allotment option),
$15,000 of which has been paid.
Global Brands has agreed to indemnify the underwriters against liabilities
under the Securities Act of 1933 in connection with this offering.
Messrs. Ferrante, Paul and Brescio have granted to the underwriters an
option, exercisable during the 45-day period after the date of this prospectus,
to purchase up to 195,000 additional shares of the common stock owned by them at
the public offering price, less underwriting discounts and a pro rata portion of
the non-accountable expense allowance. Specifically, Mr. Ferrante has granted an
option to purchase 138,450 shares, Mr. Paul has granted an option to purchase
35,100 shares and Mr. Brescio has granted an option to purchase 21,450 shares to
the underwriter. The underwriters may exercise this option solely to cover
over-allotments, if any, made in the sale of the securities offered hereby.
Generally, to the extent that this option is exercised, each underwriter will
become obligated to purchase approximately the same percentage of such
additional securities as the percentage of securities it was originally
obligated to purchase as set forth above. If the underwriters exercise the
over-allotment option in full, the total gross public offering price will be
$ , the total underwriting discounts will be $ and the total
proceeds to Global Brands and the selling security holders will be $ and
$ , respectively.
Prior to this offering, there has been no public market for the common
stock. Accordingly, the public offering price for the securities was determined
by negotiation between Global Brands and the underwriters. Among the factors
considered in determining the public offering price were the services, the
experience of management, the economic conditions of Global Brands' industry in
general, the general condition of the equity securities market and the demand
for similar securities of companies considered comparable to Global Brands and
other relevant factors. There can be no assurance, however, that the prices at
which the common stock and warrants will sell in the public market after this
offering will not be lower than the price at which the shares of common stock
and warrants are sold by the underwriters.
The underwriting agreement also provides that Somerset Financial Group
shall have the right to designate a non-voting advisor to the Board of Directors
of Global Brands, which advisor shall be acceptable to Global Brands, for a
period of two years after the effective date of this prospectus. Said designee
shall attend meetings of the Board of Directors and shall be entitled to receive
reimbursement for all reasonable costs incurred in attending such meetings. As
of the date of this prospectus, no adviser has been designated.
Global Brands has agreed to sell to the underwriters or their designees,
for nominal consideration, the underwriter's common stock purchase warrants to
purchase an aggregate of 130,000 shares of common stock at a price of $10.3125
per share. The shares of common stock will be identical to the shares of common
stock offered to the public hereby in all respects. All of the underwriter's
warrants will be exercisable for a four-year period commencing one year after
the date of this prospectus. During the period beginning on the date of this
prospectus and ending five years thereafter, Global Brands has agreed to
maintain a current registration statement with respect to the underwriter's
warrants and the underlying common stock. The underwriter's warrants will
contain
30
<PAGE>
anti-dilution provisions providing for appropriate adjustment of the exercise
price and number of securities that may be purchased upon the occurrence of
certain specified events.
Upon the closing of this offering, Global Brands shall enter into a
financial consulting agreement with Somerset Financial Group pursuant to which
Somerset Financial Group shall receive a consulting fee in an amount equal to
two (2%) of the dollar amount of the securities sold in this offering (including
securities sold pursuant to the over-allotment option, to the extent exercised),
for consulting services which shall be rendered by Somerset Financial Group for
a period of two (2) years from the date of this prospectus. Such consulting
services shall include, but shall not be limited to, advising Global Brands in
connection with possible acquisition opportunities, advising Global Brands
regarding shareholder relations including the preparation of the annual report
and other releases, assisting in long-term financial planning, and other
financial assistance. Such consulting fee shall be paid in full in advance at
each closing of this offering.
The underwriting agreement also provides that if Global Brands shall, within two
(2) years from the effective date of this prospectus, enter into any agreement
or understanding with any person or entity exclusively introduced by Somerset
Financial Group involving any of the following transactions which were
originated exclusively by Somerset Financial Group:
* the sale of all or substantially all of the assets of Global Brands,
* the merger or consolidation of Global Brands (other than a merger or
consolidation effected for the purpose of changing Global Brands'
domicile) with another entity, or
* the acquisition by Global Brands of the assets or stock of another
business entity, which agreement or understanding is thereafter
consummated, whether or not during such two (2) year period.
Global Brands, upon such consummation, shall pay to Somerset Financial
Group an amount equal to the following percentages of the consideration paid by
Global Brands in connection with such transaction: 5% of the first $1,000,000,
or portion thereof, of such consideration; 4% of the second $1,000,000, or
portion thereof, of such consideration; and 3% of such consideration in excess
of the first $2,000,000 of such consideration. The fees payable to Somerset
Financial Group will be in the same form of consideration as that paid by or to
Global Brands, as the case may be, in any such transactions.
Until the distribution of securities in this offering is completed, the
rules of the SEC may limit the ability of the underwriters and certain selling
group members to bid for and purchase the securities. As an exception to these
rules, the underwriters are permitted to engage in certain transactions that
stabilize the price of the securities. Such transactions consist of bids or
purchases for the purpose of maintaining the price of the securities. If the
underwriters create a short position in the securities in connection with this
offering, i.e., if they sell more shares of common stock than are set forth on
the cover page of this prospectus, the underwriters may reduce the short
position by purchasing common stock in the open market. The underwriters may
also elect to reduce any short position by exercising all or part of the
over-allotment option described above. In addition, Somerset Financial Group may
impose a penalty bid on certain underwriters and selling group members. This
means that if Somerset Financial Group purchases shares of common stock in the
open market to reduce the underwriters' short position or to stabilize the price
of the common stock, it may reclaim the amount of the selling concession from
the underwriters and selling group members that sold those securities as part of
this offering. In general, purchases of a security for the purpose of
stabilization or to reduce a short position could cause the price of the
security to be higher than it might be in the absence of such purchases. The
imposition of a penalty bid might also have an effect on the price of a security
to the extent that it discouraged resales of that security. Neither Somerset
Financial Group nor any of the underwriters makes any representations or
predictions as to the direction or magnitude of any effect that the transactions
described above may have on the price of the securities. In addition, neither
Somerset Financial Group nor any of the underwriters makes any representations
that Somerset Financial Group or any such underwriter will engage in such
transactions or that such transactions, once commenced, will not be discontinued
without notice.
31
<PAGE>
LEGAL MATTERS
The validity of the issuance of the shares of common stock offered hereby
will be passed upon for Global Brands by Lehman & Eilen LLP, Uniondale, New
York. Lester Morse P.C., Great Neck, New York will pass upon legal matters for
the Underwriters. Hank Gracin, Esq., partner of Lehman & Eilen, owns 1,005
shares of the common stock.
EXPERTS
The financial statements of Global Brands as of February 29, 2000 and for
each of the two years in the period ended February 29, 2000 included in this
Prospectus and in this Registration Statement have been included herein in
reliance upon the report of Goldstein Golub Kessler LLP, independent certified
public accountants, given upon the authority of such firm as experts in
accounting and auditing.
ADDITIONAL INFORMATION
Global Brands has filed with the Securities and Exchange Commission a
Registration Statement on Form SB-2 under the Securities Act with respect to the
common stock and warrants offered hereby. This Prospectus does not contain all
of the information set forth in the Registration Statement and the exhibits
thereto. For further information with respect to Global Brands and the common
stock and warrants offered hereby, reference is made to the Registration
Statement and the exhibits thereto. Statements contained in this Prospectus
regarding the contents of any contract or any other document to which reference
is made are not necessarily complete, and, in each instance where a copy of such
contract or other document has been filed as an exhibit to the Registration
Statement, reference is made to the copy so filed, each such statement being
qualified in all respects by such reference. A copy of the Registration
Statement and the exhibits thereto may be inspected without charge at the
offices of the Commission at Judiciary Plaza, 450 Fifth Street, Washington, D.C.
20549, and copies of all or any part of the Registration Statement may be
obtained from the Public Reference Section of the Commission, Washington, D.C.
20549 upon the payment of the fees prescribed by the Commission. The Commission
maintains a Web site (http://www.sec.gov) that contains reports, proxy and
information statements and other information regarding registrants, such as
Global Brands, that file electronically with the Commission.
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
which is contained in this prospectus. We are offering to sell shares of common
stock and seeking offers to buy shares of common stock only in jurisdictions
where offers and sales are permitted. The information contained in this
prospectus is accurate only as of the date of this prospectus, regardless of the
time of delivery of this prospectus or of any sale of the common stock.
32
<PAGE>
GLOBAL BRANDS, INC.
(FORMERLY SWISS NATURAL BRANDS, INC.)
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
INDEPENDENT AUDITOR'S REPORT.................................................. F-2
FINANCIAL STATEMENTS:
Balance Sheet............................................................... F-3
Statement of Operations..................................................... F-4
Statement of Stockholders' Deficiency ...................................... F-5
Statement of Cash Flows .................................................... F-6
Notes to Financial Statements............................................... F-7 - F-11
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Stockholders of
Global Brands, Inc.
(Formerly Swiss Natural Brands, Inc.)
We have audited the accompanying balance sheet of Global Brands, Inc. (formerly
Swiss Natural Brands, Inc.), as of February 29, 2000, and the related statements
of operations, stockholders' deficiency, and cash flows for each of the two
years in the period ended February 29, 2000. 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 audits.
We conducted our audits 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 audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Global Brands, Inc. as of
February 29, 2000, and the results of its operations and its cash flows for each
of the two years in the period ended February 29, 2000 in conformity with
generally accepted accounting principles.
GOLDSTEIN GOLUB KESSLER LLP
New York, New York
April 7, 2000, except for the last sentence
of the first paragraph of Note 1,
as to which the date is April 12, 2000, and
Note 8 as to which the
date is May 22, 2000.
F-2
<PAGE>
GLOBAL BRANDS, INC.
(FORMERLY SWISS NATURAL BRANDS, INC.)
BALANCE SHEET
<TABLE>
<CAPTION>
FEBRUARY 29,
2000
------------
<S> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................................... $ 115,143
Accounts receivable, less allowance for doubtful accounts of $8,585......... 204,934
Inventory................................................................... 573,048
Other current assets........................................................ 29,638
------------
TOTAL CURRENT ASSETS................................................ 922,763
Property and Equipment, at cost, less accumulated depreciation and
amortization of $112,227.................................................... 180,975
Trademarks, less accumulated amortization of $37,511.......................... 1,000
Debt Placement Fees, less accumulated amortization of $74,191................. 62,777
Deferred Offering Costs....................................................... 385,634
Deferred Income Tax Asset, Net................................................ --
------------
TOTAL ASSETS........................................................ $ 1,553,149
------------
------------
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current Liabilities:
Bank loan payable........................................................... $ 250,000
Account payable and accrued expenses........................................ 803,179
Convertible subordinated debentures......................................... 757,500
Debt and interest payable--stockholder...................................... 325,005
------------
TOTAL CURRENT LIABILITIES........................................... 2,135,684
Compensation Payable.......................................................... 101,092
------------
TOTAL LIABILITIES................................................... 2,236,776
------------
Commitments
Stockholders' Deficiency:
Preferred stock -- Series A, $.01 par value; authorized 3,000,000 shares,
issued and outstanding 1,206,000 shares.................................. 12,060
Common stock -- $.01 par value; authorized 20,000,000 shares, issued and
outstanding 2,591,708 shares............................................. 25,917
Additional paid-in capital.................................................. 2,014,833
Accumulated deficit......................................................... (2,736,437)
------------
STOCKHOLDERS' DEFICIENCY............................................ (683,627)
------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY...................... $ 1,553,149
------------
------------
</TABLE>
See Notes to Financial Statements
F-3
<PAGE>
GLOBAL BRANDS, INC.
(FORMERLY SWISS NATURAL BRANDS, INC.)
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED
---------------------------
FEBRUARY FEBRUARY
28, 29,
<S> <C> <C>
1999 2000
----------- -----------
Net sales......................................................... $ 3,005,872 $ 3,799,795
Cost of sales..................................................... 2,001,701 2,493,499
----------- -----------
Gross profit...................................................... 1,004,171 1,306,296
----------- -----------
Expenses (Income):
General and administrative................................... 842,231 890,155
Selling and promotional...................................... 502,652 449,746
Product development.......................................... 30,895 2,590
Depreciation and amortization................................ 28,826 40,189
Interest expense............................................. 50,062 179,017
Other........................................................ (11,079) (93,389)
----------- -----------
Total Expenses............................................. 1,443,587 1,468,308
----------- -----------
Net Loss.......................................................... $ (439,416) $ (162,012)
----------- -----------
----------- -----------
Loss per common share -- basic.................................... $ (.12) $ (.05)
----------- -----------
----------- -----------
Weighted-average number of common shares outstanding -- basic..... 3,797,708 2,993,708
----------- -----------
----------- -----------
</TABLE>
See Notes to Financial Statements
F-4
<PAGE>
GLOBAL BRANDS, INC.
(FORMERLY SWISS NATURAL BRANDS, INC.)
STATEMENT OF STOCKHOLDERS' DEFICIENCY
YEARS ENDED FEBRUARY 28, 1999 AND FEBRUARY 29, 2000
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK ADDITIONAL
-------------------- --------------------- PAID-IN ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT TOTAL
--------- -------- ---------- -------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at February 28, 1998... -- -- 3,797,708 $ 37,977 $1,919,833 $(2,135,009) $ (177,199)
Forgiveness of debt and
interest payable --
stockholder.................. -- -- -- -- 95,000 -- 95,000
Net loss....................... -- -- -- -- -- (439,416) (439,416)
--------- -------- ---------- -------- ----------- ----------- -----------
Balance at February 28, 1999... -- -- 3,797,708 37,977 2,014,833 (2,574,425) (521,615)
Exchange of 1,206,000 common
shares for 1,206,000
preferred shares............. 1,206,000 $ 12,060 (1,206,000) (12,060) -- -- --
Net loss....................... -- -- -- -- -- (162,012) (162,012)
--------- -------- ---------- -------- ----------- ----------- -----------
Balance at February 29, 2000... 1,206,000 $ 12,060 2,591,708 $ 25,917 $2,014,833 $(2,736,437) $ (683,627)
--------- -------- ---------- -------- ----------- ----------- -----------
--------- -------- ---------- -------- ----------- ----------- -----------
</TABLE>
See Notes to Financial Statements
F-5
<PAGE>
GLOBAL BRANDS, INC.
(FORMERLY SWISS NATURAL BRANDS, INC.)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------
FEBRUARY FEBRUARY
28, 29,
1999 2000
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss............................................................ $ (439,416) $ (162,012)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization..................................... 28,826 40,189
Amortization of debt placement fees............................... 5,707 68,484
Accrued interest.................................................. 37,382 18,300
Legal settlement.................................................. -- (82,069)
Changes in operating assets and liabilities:
(Increase) decrease in account receivable...................... (179,880) 22,104
Increase in inventory.......................................... (118,819) (240,439)
Increase in other current assets............................... (9,512) (16,725)
Decrease in other assets....................................... 16,093 --
Increase (decrease) in accounts payable and accrued expenses... 319,465 (52,248)
----------- -----------
NET CASH USED IN OPERATING ACTIVITIES.......................... (340,154) (404,416)
----------- -----------
Cash used in investing activity -- purchases of property and
equipment......................................................... (38,737) (141,660)
----------- -----------
Cash flows from financing activities:
Proceeds from bank loan payable................................... -- 250,000
Proceeds from issuance of convertible subordinated debentures..... 757,500 --
Payment for debt placement fees................................... (136,968) --
Deferred offering costs........................................... -- (103,307)
Payments of notes payable -- stockholders......................... (75,000) (16,203)
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES...................... 545,532 130,490
----------- -----------
Net increase (decrease) in cash and cash equivalents................ 166,641 (415,586)
Cash and cash equivalents at beginning of year...................... 364,088 530,729
----------- -----------
Cash and cash equivalents at end of year............................ $ 530,729 $ 115,143
----------- -----------
----------- -----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Income taxes................................................... $ 1,150 $ 380
----------- -----------
----------- -----------
Interest to stockholders....................................... $ -0- $ 99,383
----------- -----------
----------- -----------
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING ACTIVITIES:
Forgiveness of debt and interest payable -- stockholder........... $ 95,000 $ -0-
----------- -----------
----------- -----------
Deferred offering costs........................................... $ -0- $ 282,327
----------- -----------
----------- -----------
</TABLE>
See Notes to Financial Statements
F-6
<PAGE>
GLOBAL BRANDS, INC.
(FORMERLY SWISS NATURAL BRANDS, INC.)
NOTES TO FINANCIAL STATEMENTS
1. PRINCIPAL BUSINESS ACTIVITY AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES:
Global Brands, Inc. (formerly Swiss Natural Brands, Inc.) (the "Company") was
incorporated on April 22, 1993 in the State of Delaware. The Company's principal
business activity involves the production and sale of refreshment drinks (the
"Product"). Effective April 12, 2000, the Company changed its name from Swiss
Natural Brands, Inc. to Global Brands, Inc.
The Company uses one independent outside bottler to handle all of its production
needs. The Company sells the Product directly to independent distributors who in
turn distribute the Product to the outside market, primarily in the New York,
New Jersey and Connecticut Tri-State Area. The Company also supplies the Product
under a private label program to a nationally franchised restaurant chain
comprised of approximately 750 restaurants. For the year ended February 28,
1999, 81% of the Company's sales were to one customer. For the year ended
February 29, 2000, 69% and 12% of the Company's sales were to two customers.
Inventory is stated at the lower of cost, determined by the first-in, first-out
method, or market.
Depreciation of property and equipment is being provided for by the
straight-line method over the estimated useful lives of the assets.
Trademarks are being amortized by the straight-line method over a period of 60
months.
Cash equivalents consist of a money market account.
The Company maintains its cash in bank deposit accounts which, at times, may
exceed federally insured limits. The Company has not experienced any losses in
such accounts. The Company believes it is not exposed to any significant credit
risk on cash.
Sales are recorded as the Product is shipped. The Company does not enter into
consigned merchandise agreements and returns and allowances are allowed on a
case-by-case basis. Those allowances are not material to the financial
statements and are included as an adjustment to sales.
Costs incurred for advertising are expensed as incurred and included in selling
and promotional expenses in the accompanying statement of operations.
Advertising expenses amounted to $11,792 and $3,885 for the years ended February
28, 1999 and February 29, 2000, respectively.
Deferred offering costs represent costs attributable to a proposed initial
public offering (the "IPO"). The Company intends to offset these costs against
the proceeds from this transaction. In the event that such offering is not
completed, these costs will be charged to operations.
The preparation of financial statements in conformity with generally accepted
accounting principles requires the use of estimates by management. Actual
results could differ from these estimates.
Basic loss per share is computed by dividing net loss by the weighted-average
number of common shares outstanding during the year. Shares to be issued upon
the conversion of the subordinated debentures, preferred stock and warrants are
not included in the computation of loss per share for the years ended February
28, 1999 and February 29, 2000, respectively, as their effect is antidilutive.
Management does not believe that any recently issued, but not yet effective,
accounting standards if currently adopted would have a material effect on the
accompanying financial statements.
On October 1, 1999 the Board of Directors authorized a 1.5-for-1 (67%) reverse
stock split of the Company's issued and outstanding common and preferred stocks.
All references to number of shares and per share amounts have been restated to
reflect the reverse stock split.
F-7
<PAGE>
GLOBAL BRANDS, INC.
(FORMERLY SWISS NATURAL BRANDS, INC.)
NOTES TO FINANCIAL STATEMENTS
For comparability certain February 28, 1999 amounts have been reclassified, when
appropriate, to conform to the financial statement presentation used at February
29, 2000.
2. INVENTORY:
Inventory consists of the following:
<TABLE>
<CAPTION>
FEBRUARY 29,
2000
------------
<S> <C>
Raw materials.................................................................. $125,845
Finished goods................................................................. 447,203
--------
$573,048
--------
--------
</TABLE>
Included in cost of sales in the accompanying financial statements for the year
ended February 29, 2000 is $78,677 relating to the write-off of inventory that
became unsaleable.
3. PROPERTY AND EQUIPMENT:
Property and equipment, at cost, consists of the following:
<TABLE>
<CAPTION>
FEBRUARY 29, ESTIMATED
2000 USEFUL LIFE
------------ ------------
<S> <C> <C>
Machinery and equipment......................................... $247,303 5 years
Office equipment................................................ 29,672 5 years
Leasehold improvements.......................................... 10,185 5 years
Furniture and fixtures.......................................... 6,042 5 years
-------- --------
293,202
Less accumulated depreciation and amortization.................. 112,227
--------
$180,975
--------
--------
</TABLE>
4. BANK LOAN PAYABLE:
On January 11, 2000, the Company entered into a demand promissory note with a
bank whereby the Company may borrow up to $300,000. The outstanding balance is
due June 30, 2000. Interest is payable monthly at the bank's prime rate plus
1/2% (9.25% at February 29, 2000). The bank loan payable is collateralized by
all of the Company's assets. As of February 29, 2000, the Company has borrowed
$250,000 against this demand promissory note.
5. PRIVATE PLACEMENTS:
On January 29, 1999, the Company issued convertible subordinated debentures (the
"Debentures"), in the amount of $757,500, that mature in February 2001. Interest
is payable on the principal amount at 12% per annum, payable in arrears, on the
last day of each calendar year. The Debentures may be redeemed, at the option of
the Company, in whole or part at anytime, at a price equal to the principal
amount plus any unpaid accrued interest. The holders of the Debentures may
convert the principal amount into common stock of the Company, at any time prior
to maturity or redemption, at a price of $1.50 per share. In connection with the
issuance of these Debentures, the Company incurred debt placement fees of
$136,968 which are being amortized on the straight-line basis over the term of
the Debentures. For the years ended February 28, 1999 and February 29, 2000,
$5,707 and $68,484,
F-8
<PAGE>
GLOBAL BRANDS, INC.
(FORMERLY SWISS NATURAL BRANDS, INC.)
NOTES TO FINANCIAL STATEMENTS
respectively, of amortization was recorded as interest expense in the
accompanying statement of operations. The payment of the Debentures is
subordinated to any bank, financial institution engaged in lending money,
insurance company or similar institution.
6. DEBT AND INTEREST PAYABLE--STOCKHOLDER:
As of February 10, 1999, the Company owed a stockholder $491,955 which was
evidenced by one promissory note (the "Promissory Note") and one demand note
(the "Demand Note"). The Company owed the stockholder the principal amount of
$300,000 plus accrued interest under the terms of the Promissory Note and the
principal amount of $22,500 plus accrued interest under the terms of the Demand
Note. Both notes provided that the principal amounts accrued interest at a rate
of 12% per annum. The Company used $75,000 from the January 1999 private
placement (see Note 5) to pay $22,500 and retire the entire principal amount
owed under the Demand Note as well as $52,500 to pay a portion of the
outstanding principal balance owed under the Promissory Note. In addition, the
stockholder forgave $95,000 of the outstanding principal balance owed under the
Promissory Note (which was credited to additional paid-in capital for the year
ended February 28, 1999). In order to evidence such payments, the debt
forgiveness, and the remaining principal on the Promissory Note and interest on
both notes, the Company replaced the Promissory Note with two substitute notes
(the "Substitute Promissory Notes") which together evidence the aggregate
outstanding principal balance on the Promissory Note and accrued and unpaid
interest on both notes. The first Substitute Note, in the amount of $152,500,
represents the unpaid principal from the Promissory Note and accrues interest at
12% per annum. The second Substitute Note, in the amount of $169,455, represents
the accrued and unpaid interest on the Promissory Note and the Demand Note, and
bears no interest. The Substitute Notes were due the earlier of February 10,
2000 or as defined in the note agreements. On February 10, 2000, the due date of
the substitute notes was extended to December 31, 2000 or as defined in the
extended note agreement.
7. COMPENSATION PAYABLE:
For the year ended February 28, 1997 and prior, a former employee/stockholder of
the Company has not been paid his entire salary. The Company has accrued
compensation payable, in the amount of $101,092. The Company has an informal
agreement whereby this individual has agreed not to demand repayment before one
year from the date of the financial statements.
8. PREFERRED STOCK:
In August 1999, effective as of June 30, 1999, several major stockholders
exchanged 1,206,000 shares of common stock for the same amount of Series A
Preferred Stock (the "Preferred Stock"). The Preferred Stock is nonredeemable,
assignable and carries rights to vote with the common stock on a one-vote-per-
share basis. The Preferred Stock will, upon liquidation, participate pari passu
with the common stock on an "as converted" basis. The holders of the Preferred
Stock were entitled to receive a quarterly cumulative dividend of $.02 per share
commencing on March 1, 2000, with the first dividend payment being June 1, 2000.
On May 22, 2000 the terms of the Preferred Stock were amended so that dividends
on the Preferred Stock commence on March 1, 2001, with the first dividend
payment being June 1, 2001. If the holders of the Preferred Stock do not receive
their quarterly dividends on a timely basis, the amount of such dividends shall
accrue and be paid in full prior to the payment of any common stock dividends.
The Preferred Stock is convertible into common stock at the option of the holder
at any time if the Company meets certain earnings levels and other criteria, as
defined in the agreement, or at the earlier of two years after the date of the
IPO or June 30, 2000 if the IPO, including the over-allotment, is not completed.
F-9
<PAGE>
GLOBAL BRANDS, INC.
(FORMERLY SWISS NATURAL BRANDS, INC.)
NOTES TO FINANCIAL STATEMENTS
9. COMMON STOCK:
The board of directors of the Company has increased the number of authorized
shares of common stock from 7,500,000 to 20,000,000 shares.
10. WARRANTS:
The Company has 165,267 warrants outstanding to purchase an equal amount of the
Company's common stock at an exercise price of $2.24 per share. These warrants
are exercisable at the earlier of June 14, 2002, subject to antidilution
provisions, or 10 days after the date on which the Company mails to the
warrantholders a copy of the preliminary prospectus included in a Registration
Statement filed with the Securities and Exchange Commission under the Securities
Act of 1933.
11. STOCK OPTION PLAN:
All employees, officers, directors and consultants of the Company are eligible
to participate in the Global Brands 1999 Stock Option Plan (the "Plan"). Under
the Plan a total of 500,000 shares of common stock were authorized for issuance
upon exercise of the options. No options have been granted under this Plan.
12. INTEREST EXPENSE:
Interest expense consists of the following:
<TABLE>
<CAPTION>
FEBRUARY 28, FEBRUARY 29,
1999 2000
------------ ------------
<S> <C> <C>
Debentures..................................................... $ 6,973 $ 90,900
Stockholder.................................................... 37,382 18,300
Amortization of debt placement fees............................ 5,707 68,484
Bank loan...................................................... -- 1,333
-------- --------
$ 50,062 $179,017
-------- --------
-------- --------
</TABLE>
13. INCOME TAXES:
At February 29, 2000, the Company had net operating loss carryforwards for both
financial reporting and income tax purposes of approximately $2,350,000, which
are available to offset future federal, state and local taxable income. These
net operating loss carryforwards expire in periods subsequent to fiscal 2008.
The carryforwards resulted in a deferred tax asset of approximately $595,000 at
February 29, 2000 for which the Company has provided a full valuation allowance
due to the uncertainty about future realization of this tax benefit. Utilization
of the net operating loss carryforwards may be limited based upon the ownership
changes relating to the IPO.
14. RELATED PARTY TRANSACTIONS:
Included in professional fees and costs associated with the private placements
are legal fees paid to a relative of the President and Chief Financial Officer.
For the years ended February 28, 1999 and February 29, 2000, these fees amounted
to approximately $80,000 and $30,000, respectively. Of the $80,000 paid during
the year ended February 28, 1999, $50,000 relates to the private placements and
is included in debt placement fees on the balance sheet.
In addition, approximately $95,000 and $99,750 was paid to a stockholder for
professional services rendered during the years ended February 28, 1999 and
February 29, 2000, respectively.
F-10
<PAGE>
GLOBAL BRANDS, INC.
(FORMERLY SWISS NATURAL BRANDS, INC.)
NOTES TO FINANCIAL STATEMENTS
The Company occupies office space that is owned by the principal stockholder.
There were no amounts paid as rent expense for the years ended February 28, 1999
and February 29, 2000.
15. COMMITMENTS:
As of March 1, 1999, the Company entered into an employment agreement with a key
employee and a consulting agreement with a stockholder, each for a three-year
period ending February 28, 2002. The employment agreement includes base
compensation of $168,000 per annum with additional benefits as defined in the
agreement. The consulting agreement includes compensation of $99,750 per annum
with additional benefits as defined in the agreement. Both agreements include a
10% increase in compensation during the second and third years.
On February 3, 2000, the Company as defendant and the plaintiff to a pending
lawsuit signed a Stipulation of Discontinuing Action which was filed with the
Clerk of Courts thereby settling the pending case. The Company has recorded
$82,069 as other income in the accompanying statement of operations for the year
ended February 29, 2000 to reflect the reversal of the accounts payable the
Company had recorded for the amount due this vendor.
16. INITIAL PUBLIC OFFERING:
The Company is in the process of filing a registration statement on Form SB-2
under the Securities Act of 1933. The registration statement contemplates an
offering of 1,300,000 shares of common stock at an offering price of $6.25.
F-11
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Until , 2000 (25 days after the date of this prospectus), all
dealers that buy, sell or trade in our common stock, whether or not
participating in this offering, may be required to deliver a prospectus. This
delivery requirement is in addition to the dealers' obligation to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
The Offering.......................... 3
Summary of Financial Data............. 4
Risk Factors.......................... 6
Forward Looking Statements............ 9
Use of Proceeds....................... 9
Dividend Policy....................... 10
Capitalization........................ 10
Dilution.............................. 11
Management's discussion and analysis
of financial condition and results
of operations....................... 11
Business.............................. 12
Management............................ 18
Global Brands 1999 Stock Option
Plan................................ 21
Certain Transactions.................. 22
Principal Stockholders................ 23
Description of Capital Stock.......... 25
Shares eligible for future sale....... 28
Underwriting.......................... 29
Legal Matters......................... 32
Experts............................... 32
Additional Information................ 32
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[LOGO]
GLOBAL BRANDS, INC.
1,300,000 SHARES OF
COMMON STOCK
------------------------
PROSPECTUS
------------------------
SOMERSET FINANCIAL GROUP, INC.
SEABOARD SECURITIES, INC.
, 2000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Amended and Restated certificate of incorporation and by-laws of the
Registrant provide that the Registrant shall indemnify any person to the full
extent permitted by the Delaware General Corporation Law (the "GCL"). Section
145 of the GCL, relating to indemnification, is hereby incorporated herein by
reference.
In accordance with Section 102(a)(7) of the GCL, the certificate of
incorporation of the Registrant eliminates the personal liability of directors
to the Registrant or its stockholders for monetary damage for breach of
fiduciary duty as a director with certain limited exceptions set forth in
Section 102(a)(7) of the GCL.
The Registrant has entered into indemnification agreements with each of its
officers and directors, the form of which is filed as Exhibit 10.19, to which
reference is hereby made.
Reference is made to Section 9 of the underwriting agreement (Exhibit 1.1)
which provides for indemnification by the underwriter of the Registrant, its
officers and directors.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses (other than
underwriting discounts, consulting fees and the underwriters 3% non-accountable
expense allowance) payable by the Registrant in connection with the issuance and
distribution of the securities being registered. Except for the SEC and NASD
filing fees, all expenses have been estimated and are subject to future
contingencies.
<TABLE>
<S> <C>
SEC registration..................................................... $ 2,970
NASD fee............................................................. 2,238
Nasdaq Listing Fees.................................................. 5,000
Legal fees and expenses.............................................. 125,000
Printing and engraving expenses...................................... 100,000
Accounting fees and expenses......................................... 150,000
Blue sky fees and expenses........................................... 50,000
Miscellaneous........................................................ 5,417
--------
Total................................................................ $440,625
--------
--------
</TABLE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
Since June 30, 1996, the Registrant has issued unregistered securities in
the transactions described below:
In February and April, 1997, the Registrant completed a private placement
offering pursuant to which it issued 437,599 and 141,996 shares respectively, of
common stock to investors. The offering raised an aggregate of approximately
$1,300,000 from such investors. The Registrant issued the common stock pursuant
to the provisions of Rule 506 promulgated under the Securities Act of 1933, as
amended and filed a Report on Form D in connection therewith. Winchester
Investment Securities, Inc. acted as the placement agent for such offering and
received a placement fee of 10% in connection with such offering. Winchester,
its designees and certain consultants also received 85,302 shares of common
stock in connection with such offering.
In February, 1998, Dr. Ferrante, Mr. Paul and Mr. Brescio canceled all
indebtedness owed to them by the Registrant, including all indebtedness for
compensation owed to them by the Registrant, in exchange for shares of common
stock. At that time, the Registrant owed $601,737, $152,819 and $93,419 to Dr.
Ferrante, Mr. Paul and Mr. Brescio, respectively. Accordingly, in exchange for
the
II-1
<PAGE>
cancellation of indebtedness, the Registrant issued 353,653, 89,815 and 54,904
additional shares of its common stock to Dr. Ferrante, Mr. Paul and Mr. Brescio,
respectively. The Registrant issued the shares in a cashless exchange pursuant
to the exemption afforded by Section 3(a)9 of the Securities Act, as amended.
In January, 1999 the Registrant issued $757,500 principal amount of
convertible debentures. The convertible debentures bear interest at a rate of
12% per annum, payable annually. The convertible debentures mature in February,
2001. The holder of any convertible debenture has the right, exercisable at any
time up to the maturity of the convertible debenture, at his option, to convert
such convertible debenture at the principal amount thereof (or any portion
thereof that is an integral multiple of $1,500) into shares of the common stock
at a price of $1.50 per share (except that, in the event such convertible
debenture shall be called for redemption, such right shall terminate on the
close of business on the fifth day immediately preceding the redemption date).
The Registrant issued the convertible debentures pursuant to the provisions of
Rule 506 promulgated under the Securities Act of 1933, as amended, and filed a
Report on Form D in connection therewith. Comprehensive Capital Corporation
acted as the placement agent for such offering and received placement fees of
$136,968 in connection with such offering.
As of June 30, 1999 the Registrant issued 1,206,000 shares of the Series A
Preferred Stock to Messrs. Ferrante, Paul and Brescio in exchange for the
delivery to the Registrant by such persons of 1,206,000 shares of common stock
held by them. The Registrant issued the Preferred Stock in a cashless exchange
pursuant to the exemption afforded by Section 3(a)9 of the Securities Act of
1933, as amended.
ITEM 27. EXHIBITS
<TABLE>
<C> <S>
*1.1 --Revised Form of Underwriting Agreement.
*1.2 --Revised Agreement Among Underwriters.
*1.3 --Revised Selected Dealer Agreement.
**3.1 --Amended and Restated Certificate of Incorporation of the Registrant
**3.2 --Amended and Restated By-Laws of the Registrant.
**3.3 --Certificate of Designations for Series A Preferred Stock.
**3.4 --Certificate of Amendment of Certificate of Incorporation of the Registrant.
**3.5 --Amendment to Certificate of Designations for Series A Preferred Stock.
*3.6 --Certificate of Amendment of Certificate of Incorporation of the Registrant.
*3.7 --Amendment to Certificate of Designations for Series A Preferred Stock.
*3.8 --Amendment to Certificate of Designations for Series A Preferred Stock.
**4.1 --Specimen Certificate for Registrant's Common Stock
*4.2 --Revised Form of Underwriter's Stock Warrant
**4.3 --Form of Convertible Subordinated Debenture
**5.1 --Opinion of Lehman & Eilen LLP
**10.1 --1999 Stock Option Plan of Registrant.
**10.2 --Employment Agreement dated as of March 1, 1999, as amended, between
Registrant and Ralph M. Ferrante
**10.3 --Consulting Agreement dated as of March 1, 1999, as amended, between
Registrant and Herbert M. Paul
**10.4 --Amended Agreement dated as of February 10, 1999 among the Registrant, A.
Donald McCulloch, Jr., Carolyn B. McCulloch, Ralph M. Ferrante and
Herbert M. Paul.
**10.5 --Promissory Note dated February 10, 1999 in the principal amount of $152,500
made by the Registrant in favor of A. Donald McCulloch, Jr. and Carolyn
B. McCulloch.
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S>
**10.6 --Promissory Note dated February 10, 1999 in the principal amount of $169,455
made by the Registrant in favor of A. Donald McCulloch, Jr. and Carolyn
B. McCulloch.
**10.7 --Glass Supply Agreement between the Registrant and Consumers Packaging Inc.,
as amended.
**10.8 --Agreement of Confidentiality dated January 11, 1995 between the Registrant
and Consumers Glass Company.
**10.9 --Agreement dated August 7, 1997 between the Registrant and Comax
Manufacturing Corporation.
**10.10 --Confidentiality Agreement dated November 6, 1998 between the Registrant and
Comax Manufacturing Corporation.
**10.11 --Agreement dated October 31, 1997 by and between the Registrant and Ritter/
Sysco Foods, Inc.
**10.12 --Hold Harmless Agreement and Guaranty/Warranty of Product dated February 7,
1997 between the Registrant and Sysco Corporation.
**10.13 --Agreement dated January 30, 1998 between the Registrant and Sbarro, Inc.
**10.14 --Beverage Supply Agreement dated March 29, 1999 between the Registrant and
Dunkin' Donuts MidAtlantic DCP, Inc.
**10.15 --Agency Agreement dated May 5, 1998 between the Registrant and Bentonville
Associates Ventures, LLC, as amended.
**10.16 --Vendor Agreement between the Registrant and Wal-Mart Stores.
*10.17 --Revised Form of Financial Consulting Agreement between the Registrant and
the Underwriter.
**10.18 --Form of Indemnification Agreement between the Registrant and each officer
and director of the Registrant.
**10.19 --Agreement dated September 22, 1999 between the Registrant and Cartaret
Packaging, Inc.
**10.20 --Agreement dated as of December 1, 1998 among the Registrant, A. Donald
McCulloch, Jr., Carolyn B. McCulloch, Ralph M. Ferrante and Herbert M.
Paul.
**10.21 --Amendment to Agreement dated as of December 1, 1998 among Registrant, A.
Donald McCulloch, Jr., Carolyn B. McCulloch, Ralph M. Ferrante and
Herbert M. Paul.
*23.1 --Consent of Goldstein Golub Kessler LLP
**23.2 --Consent of Lehman & Eilen LLP (contained in opinion of counsel set forth as
Exhibit 5).
**24.1 --Power of Attorney.
**27 --Financial Data Schedule.
</TABLE>
- ------------------
* Filed herewith.
** Previously filed.
ITEM 28. UNDERTAKINGS.
(1) The undersigned Registrant hereby undertakes that it will:
(a) File, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act,
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the registration statement.
II-3
<PAGE>
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) if, in the aggregate, the changes in volume and price represent
no more than a 20 percent change in the maximum aggregate offering price
set forth in the "Calculation of Registration Fee" table in the
effective registration statement; and
(iii) Include any additional or changed material information on the
plan of distribution.
(b) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial
bona fide offering.
(c) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of this offering.
(2) The undersigned Registrant hereby undertakes to provide to the
underwriter at the closing specified in the underwriting agreement certificates
in such denominations and registered in such names as required by the
underwriter to permit prompt delivery to each purchaser.
(3) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the 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 the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(4) The undersigned Registrant hereby undertakes that it will:
(a) For determining any liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4), or 497(h)
under the Securities Act as part of this registration statement as of the time
it was declared effective.
(b) For determining any liability under the Securities Act, treat each post
effective amendment that contains a form of prospectus as a new registration
statement for the securities offered in the registration statement, and the
offering of such securities at that time as the initial bona fide offering of
those securities.
II-4
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and has authorized this registration
statement or amendment thereto to be signed on its behalf by the undersigned,
whereunto duly authorized, in the City of Upper Grandview, State of New York on
the 23rd day of May, 2000.
GLOBAL BRANDS, INC.
By: /s/ Ralph M. Ferrante
___________________________________
Ralph M. Ferrante
Chairman of the Board and
Chief Executive Officer
In accordance with the requirements of the Securities Act of 1933, this
registration statement or amendment thereto has been signed by the following
persons in the capacities and on the dates stated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------------- ---------------------------- ----------------------
<C> <S> <C>
/s/ RALPH M. FERRANTE Chairman of the Board, Chief May 23, 2000
- ---------------------------------------- Executive Officer and
Ralph M. Ferrante Secretary
/s/ HERBERT PAUL President, Chief Financial May 23, 2000
- ---------------------------------------- Officer, (Principal
Herbert Paul Financial Officer
Principal Account Officer)
Assistant Secretary and
Director
/s/ JAMES P. MCCANN Director May 23, 2000
- ----------------------------------------
James P. McCann
</TABLE>
II-5
EXHIBIT 1.1
Global Brands, Inc.
1031 Route 9W
Grandview, New York 10960
UNDERWRITING AGREEMENT
Somerset Financial Group, Inc. June __, 2000
535 Connecticut Avenue
Suite 102
Norwalk, CT 06854
Gentlemen:
Global Brands, Inc., a Delaware corporation (the "Company"), proposes
to issue and sell to Somerset Financial Group, Inc. ("Somerset" or the
"Representative") and to each of the other underwriters named in Schedule I
hereto (the "Underwriters"), for each of whom you are acting as Representative
1,300,000 shares of Common Stock (the AShares@) at a public offering price of
$6.25 per share.
The 1,300,000 Shares are hereinafter sometimes referred to as the "Firm
Common Stock." Upon the request of the Representative, and as provided in
Section 3 hereof, the ASelling Security Holders@ named herein in Schedule II
will sell to the Underwriters up to a maximum of 195,000 shares of Common Stock
for the purpose of covering over-allotments. Such additional shares of Common
Stock are hereinafter sometimes referred to as the "Optional Common Stock." Both
the Firm Common Stock and the Optional Common Stock are sometimes collectively
referred to herein as the "Securities." All of the Securities which are the
subject of this Agreement are more fully described in the Prospectus of the
Company described below.
In the event that the Representative does not form an underwriting
group but decides to act as the sole Underwriter, then all references to
Somerset herein as Representative shall be deemed to be to it as such sole
Underwriter and Section 14 hereof shall be deemed deleted in its entirety.
The Company and the Selling Security Holders understand that the
Underwriters propose to make a public offering of the Securities as soon as the
Representative deems advisable after the Registration Statement hereinafter
referred to becomes effective. The Company and the Selling Security Holders
hereby each confirms its agreement with the Representative and the other
Underwriters as follows:
SECTION 1. Description of Securities. The Company's authorized and
outstanding capitalization when the public offering of the Securities
contemplated hereby is permitted to commence, under the Securities Act of 1933,
as amended (the "Act"), and at the Closing Date (hereinafter defined) will be as
set forth in the Prospectus (hereinafter defined).
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SECTION 2. Representations and Warranties of the Company and the
Selling Security Holders. The Company hereby represents and warrants to, and
agrees with, the Underwriters as follows:
(a) A Registration Statement on Form SB-2 and amendments
thereto (No. 333-85683) with respect to the Securities, including a form of
prospectus relating thereto, copies of which have been previously delivered to
you, has been prepared by the Company in conformity with the requirements of the
Act, and the rules and regulations (the "Rules and Regulations") of the
Commission thereunder, and has been filed with the Commission under the Act. The
Company, subject to the provisions of Section 6(a) hereof, may file one or more
amendments to such Registration Statement and Prospectus. The Underwriters will
receive copies of each such amendment.
The Effective Date of the Registration Statement represents the date
that the public offering of the Securities as contemplated by this Agreement is
therefore authorized to commence. The Registration Statement and Prospectus, as
finally amended and revised immediately prior to the Effective Date, are herein
called respectively the "Registration Statement" and the "Prospectus." If,
however, a prospectus is filed by the Company pursuant to Rule 424(b) of the
Rules and Regulations which differs from the Prospectus, the term "Prospectus"
shall also include the prospectus filed pursuant to Rule 424(b).
(b) The Registration Statement (and Prospectus), at the time
it becomes effective under the Act, (as thereafter amended or as supplemented if
the Company shall have filed with the Commission an amendment or supplement),
and, with respect to all such documents, on the Closing Date (hereinafter
defined), will in all material respects comply with the provisions of the Act
and the Rules and Regulations, and will not contain an untrue statement of a
material fact and will not omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading; provided, however,
that none of the representations and warranties contained in this subsection (b)
shall extend to the Underwriters in respect of any statements in or omissions
from the Registration Statement and/or the Prospectus, based upon information
furnished in writing to the Company by the Underwriters specifically for use in
connection with the preparation thereof.
(c) The Company has been duly incorporated and is now, and on
the Closing Date will be, validly existing as a corporation in good standing
under the laws of the State of Delaware, having all required corporate power and
authority to own its properties and conduct its business as described in the
Prospectus. The Company is now, and on the Closing Date will be, duly qualified
to do business as a foreign corporation in good standing in all of the
jurisdictions in which it conducts its business or the character or location of
its properties requires such qualifications except where the failure to so
qualify would not materially adversely affect the Company's business, properties
or financial condition. The Company has no subsidiaries, except as are set forth
in the Prospectus.
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(d) The financial statements of the Company included in the
Registration Statement and Prospectus present fairly the financial position and
results of operations and changes in financial condition of the Company at the
respective dates and for the respective periods to which they apply; and such
financial statements have been prepared in conformity with generally accepted
accounting principles, consistently applied throughout the periods involved, and
are in accordance with the books and records of the Company.
(e) The Company's auditors, Goldstein,Golub & Kessler LLP, who
have given their report on certain financial statements which are included as a
part of the Registration Statement and the Prospectus, are independent public
accountants as required under the Act and the Rules and Regulations.
(f) Subsequent to the respective dates as of which information
is given in the Prospectus and prior to the Closing Date and, except as set
forth in or contemplated in the Prospectus, (i) the Company has not incurred,
nor will it incur, any material liabilities or obligations, direct or
contingent, nor has it, nor will it have entered into any material transactions,
in each case not in the ordinary course of business; (ii) there has not been,
and will not have been, any material change in the Company's certificate of
incorporation or in its capital stock or funded debt; and (iii) there has not
been, and will not have been, any material adverse change in the business, net
worth or properties or condition (financial or otherwise) of the Company whether
or not arising from transactions in the ordinary course of business.
(g) Except as otherwise set forth in the Prospectus, the real
and personal properties of the Company as shown in the Prospectus and
Registration Statement to be owned by the Company are owned by the Company by
good and marketable title free and clear of all liens and encumbrances, except
those (i) specifically referred to in the Prospectus, which do not materially
adversely affect the use or value of such assets, (ii) for current taxes not now
due, or (iii) are held by the Company by valid leases, none of which is in
default. Except as disclosed in the Prospectus and Registration Statement, the
Company in all material respects has full right and licenses, permits and
governmental authorizations required to maintain and operate its business and
properties as the same are now operated and, to its best knowledge, none of the
activities or business of the Company is in material violation of, or causes the
Company to violate any laws, ordinances and regulations applicable thereto, the
violation of which would have a material adverse impact on the condition
(financial or otherwise), business, properties or net worth of the Company.
(h) The Company has no material contingent obligations, nor
are its properties or business subject to any material risks, which may be
reasonably anticipated, which are not disclosed in the Prospectus.
(i) Except as disclosed in the Prospectus and Registration
Statement, there are no material actions, suits or proceedings at law or in
equity of a material nature pending, or to the Company's knowledge, threatened
against the Company which are not adequately covered by insurance, which might
result in a material adverse change in the condition (financial or otherwise),
properties or net worth of the Company, and there are no proceedings pending or,
to the knowledge of the Company, threatened against the Company before or by any
federal or state commission, regulatory body, or administrative agency or other
governmental body, wherein an unfavorable ruling, decision or finding would
materially adversely affect the business, properties or net worth or financial
condition or income of the Company, which are not disclosed in the Prospectus.
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(j) All of the outstanding shares of Common Stock are duly
authorized and validly issued and outstanding, fully paid, non-assessable, and
do not have any and were not issued in violation of any preemptive rights. All
of the Common Stock as described in the Prospectus when paid for shall be duly
authorized and validly issued and outstanding, fully paid, non-assessable, and
will not have any and will not be issued in violation of any preemptive rights.
The Underwriters will receive good and marketable title to the Securities
purchased by them from the Company free and clear of all liens, encumbrances,
claims, security interests, restrictions, stockholders' agreements and voting
trusts whatsoever. Except as set forth in the Prospectus, there are no
outstanding shares of preferred stock and there are no outstanding options,
warrants, or other rights or commitments, providing for the issuance of any
shares of any class of capital stock of the Company, or any security convertible
into, or exchangeable for, any shares of any class of capital stock of the
Company. All of the Securities of the Company to which this Agreement relates
conform to the statements relating to them that are contained in the
Registration Statement and Prospectus.
(k) The certificate or certificates required to be furnished
to the Underwriters pursuant to the provisions of Section 11 hereof will be true
and correct.
(l) The execution and delivery by the Company of this
Agreement has been duly authorized by all necessary corporate action and it is a
valid and binding obligation of the Company, enforceable against it in
accordance with its terms except as the enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other laws pertaining to
creditors rights generally.
(m) Except as disclosed in the Prospectus, no default exists,
and no event has occurred which, with notice or lapse of time, or both, would
constitute a default in the due performance and observance of any material term,
covenant or condition by the Company or any other party, of any material
indenture, mortgage, deed of trust, note or any other material agreement or
instrument to which the Company is a party or by which it or its business or its
properties may be bound or affected, except as disclosed in the Prospectus. The
Company has full power and lawful authority to authorize, issue and sell the
Firm Common Stock to be sold by it hereunder on the terms and conditions set
forth herein and in the Registration Statement and in the Prospectus. No
consent, approval, authorization or other order of any regulatory authority is
required for such authorization, issue or sale, except as may be required under
the Act or state securities laws. The execution and delivery of this Agreement,
the consummation of the transactions herein contemplated, and compliance with
the terms hereof will not conflict with, or constitute a default under any
indenture, mortgage, deed of trust, note or any other agreement or instrument to
which the Company is now a party or by which it or its business or its
properties may be bound or materially affected; the certificate of incorporation
and any amendments thereto; the by-laws of the Company, as amended; or to the
best knowledge of the Company, any law, order, rule or regulation, writ,
injunction or decree of any government, governmental instrumentality, or court,
domestic or foreign, having jurisdiction over the Company or its business or
properties.
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(n) No officer or director of the Company has taken, and each
officer and director has agreed that he will not take, directly or indirectly,
any action designed to stabilize or manipulate the price of the Common Stock in
the open market following the Closing Date or any other type of action designed
to, or that may reasonably be expected to cause or result in such stabilization
or manipulation, or that may reasonably be expected to facilitate the initial
sale, or resale, of any of the Securities which are the subject of this
Agreement.
(o) The Warrants to purchase Common Stock to be issued at
closing to the Representative (the ARepresentative's Warrants@) will be, when
issued and paid for, duly and validly authorized and executed by the Company and
will constitute valid and binding obligations of the Company, legally
enforceable in accordance with their terms (except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws pertaining to creditors rights generally), and the Company will have
duly authorized, reserved and set aside the shares of its Common Stock issuable
upon exercise of the Representative's Warrants and such stock, when issued and
paid for upon exercise of the Representative's Warrants in accordance with the
provisions of the Representative Warrants will be duly authorized and validly
issued, fully-paid and non-assessable.
(p) All of the aforesaid representations, agreements, and
warranties shall survive delivery of, and payment for, the Firm Common Stock.
The Selling Securities Holder represents and warrants to, and
agrees with the several Underwriters, as follows:
(i) There is no litigation, arbitration, claim, governmental
or other proceeding (formal or informal), or investigation before any court or
beneficiary, public body or board pending, threatened, or disclosed in the
Prospectus (or any basis therefor known to the Selling Security Holders) with
respect to the Optional Common Stock and the Selling Security Holders. The
Selling Security Holders are not in violation of, or in default with respect to,
any law, rule, regulation, order, judgment, or decree; nor are the Selling
Security Holders required to take any action in order to avoid such violation or
default.
(ii) The Selling Security Holders have all requisite power and
authority to execute, deliver, and perform this Agreement. This Agreement has
been duly executed and delivered by or on behalf of the Selling Security
Holders, is the legal, valid and binding obligation of the Selling Security
Holders, and is enforceable as to the Selling Security Holders in accordance
with its terms. No consent, authorization, approval, order, license,
certificate, or permit of or from, or declaration or filing with, any federal,
state, local or other governmental authority or any court or other tribunal is
required by the Selling Security Holders for the execution, delivery or
performance of this Agreement (except filings under the Act which have been made
before the applicable Closing Date and such consents consisting only of consents
under "blue sky" or securities laws which have been obtained at or prior to the
date of this Agreement) by the Selling Security Holders. No consent of any party
to any contract, agreement, instrument, lease, license, indenture, mortgage,
deed of trust, note, arrangement or understanding to which the Selling Security
Holders are a party, or to which any of the Selling Security Holders' properties
or assets are subject, is required for the execution, delivery or performance of
this Agreement; and the execution, delivery and performance of this Agreement
will not violate, result in a breach of, conflict with, or (with or without the
giving of notice of the passage of time or both) entitle any party to terminate
or call a default under such contract, agreement, instrument, lease, license,
indenture, mortgage, deed of trust, note, arrangement or understanding, or
violate, result in a breach of, or conflict with, any law, rule, regulation,
order, judgment or decree binding on the Selling Security Holders.
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(iii) The Selling Security Holders have good and marketable
title to their Optional Common Stock to be sold by them pursuant to this
Agreement, free and clear or all liens, security interests, pledges,
restrictions, charges, encumbrances, stockholders' agreements and voting trusts.
(iv) Neither the Selling Security Holders nor any of the
Selling Security Holders' affiliates (as defined in the Regulations) have taken
or will take, directly or indirectly, prior to the termination of the
underwriting syndicate contemplated by this Agreement, any action designed to
stabilize or manipulate the price of the Securities of the Company, or which has
caused or resulted in, or which might in the future reasonably be expected to
cause or result in, stabilization or manipulation of the price of the securities
or to facilitate the sale or resale of any of the Optional Common Stock.
(v) All information furnished or to be furnished to the
Company by or on behalf of the Selling Security Holders for use in connection
with the preparation of the Registration Statement and the Prospectus is true in
all respects and does not and will not include 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.
(vi) Except as may be set forth in the Prospectus, the Selling
Security Holders have not incurred any liability for a fee, commission or other
compensation on account of the employment of a broker or finder in connection
with the transactions contemplated by this Agreement.
(vii) The Selling Security Holders have no knowledge that, and
do not believe that, any representation or warranty of the Company in Section 2
is incorrect.
(viii) The Selling Security Holders have not, directly or
indirectly: used any individual or corporate funds for unlawful contributions,
gifts, entertainment, or other unlawful expenses individual or relating to
political activity; made any unlawful payment to foreign or domestic government
officials or employees or to foreign or domestic political parties or campaigns
from individual or corporate funds; violated any provision of the Foreign
Corrupt Practices Act of 1977, as amended; or made any bribe, rebate, payoff,
influence payment, kickback, or other unlawful payment.
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(ix) Selling Security Holders Optional Common Stock that may
be sold pursuant to this Agreement are duly and validly authorized and issued,
fully paid and non-assessable, and have not been issued and are not owned or
held in violation of any preemptive right of stockholders, optionholders,
warrant holders or other persons.
(x) No transaction has occurred between the Selling Security
Holders and the Company or any third party that is required to be described in
the Registration Statement or the Prospectus.
SECTION 3. Issuance, Sale and Delivery of the Firm Common Stock, the
Optional Common Stock and the Representative's Warrants.
(a) Upon the basis of the representations, warranties,
covenants and agreements of the Company herein contained, but subject to the
terms and conditions herein set forth, the Company agrees to sell to the several
Underwriters, and the Underwriters, severally and not jointly, agree to purchase
from the Company, the number of the Firm Common Stock set forth opposite the
respective names of the Underwriters in Schedule I hereto, plus any additional
Firm Common Stock which such Underwriter may become obligated to purchase
pursuant to the provisions of Section 14 hereof.
The purchase price of the Firm Common Stock to be paid by
the several Underwriters shall be the initial public offering price less a ten
percent discount.
In addition, and upon the same basis, subject to the same
terms and conditions, the Selling Security Holders hereby grants to you as
Representative an option to purchase, but only for the purpose of covering
over-allotments, upon not less than two days' notice from you, the Optional
Common Stock or any portion thereof, at the same price per share of Common Stock
as that set forth in the preceding paragraph. All purchases of the Optional
Common Stock shall be made for the accounts of the several underwriters as
nearly as practicable in proportion to their respective underwriting
obligations. The Optional Common Stock may be exercised by the Representative at
any time, and from time to time, thereafter within a period of 45 calendar days
following the Effective Date. The time(s) and date(s) (if any) so designated for
delivery and payment for the Optional Common Stock shall be set forth in the
notice to the Company. Such dates are herein defined as the Additional Closing
Date(s).
(b) Payment for the Firm Common Stock shall be made by
certified or official bank checks in New York Clearing House funds, payable to
the order of the Company, at the offices of the Representative at 535
Connecticut Avenue, Suite 102, Norwalk, CT 06854, or its clearing agent, or at
such other place as shall be agreed upon by the Representative and the Company,
upon delivery of the Firm Common Stock to the Representative for the respective
accounts of the Underwriters. In making payment to the Company, the
Representative may first deduct all sums due to it for the balance of the
non-accountable expense allowance and under the Financial Consulting Agreement
(as hereinafter defined). Such delivery and payment shall be made at 9:30 A.M.,
New York City Time on a T+ 3 business days basis, which may be delayed by the
Representative at its option to a T+5 business days basis (unless postponed in
accordance with the provisions of Section 14 hereof) or at such other time as
shall be agreed upon by the Representative and the Company. The time and date of
such delivery and payment are hereby defined as the Closing Date. It is
understood that each Underwriter has authorized the Representative, for the
account of such Underwriter, to accept delivery of, receipt for, and make
payment of the purchase price for the Firm Common Stock which it has agreed to
purchase. Subsequently, each Underwriter shall make payment and accept delivery
of the Firm Securities from the Representative through the facilities of
Depository Trust Company (ADTC@); however, the Representative may, at its
option, require payment to be made outside of the facilities of DTC as provided
for in the Agreement Among Underwriters. In the event that the Closing is not
through the facilities of DTC, you individually, and not as Representative may
(but shall not be obligated to) make payment of the purchase price for the Firm
Common Stock to be purchased by any Underwriter whose check shall not have been
received by the Closing Date, for the account of such Underwriter, but any such
payment shall not relieve such Underwriter from its obligations hereunder.
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(c) Payment for the Optional Common Stock to the Selling
Security Holders shall be made at the offices of the Representative in Norwalk,
CT or its clearing agent or at such other place as shall be designated by the
Representative, in accordance with the notice delivered to the Selling Security
Holders pursuant to Section 3(a). Such closing date shall be no later than five
business days from the expiration of the forty-five day option period.
(d) Certificates for the Firm Common Stock and for the
Optional Common Stock shall be registered in such name or names and in such
authorized denominations as the Representative may request in writing at least
two business days prior to the Closing Date, and the Additional Closing Date(s)
(if any). The Company and the Selling Security Holders shall permit the
Representative to examine and package said certificates for delivery at least
one full business day prior to the Closing Date and prior to the Additional
Closing Date(s). The Company shall not be obligated to sell or deliver any of
the Firm Common Stock except upon tender of payment by the Underwriters for all
of the Firm Common Stock agreed to be purchased by them hereunder. The
Representative, however, shall have the sole discretion to determine the number
of Optional Common Stock, if any, to be purchased.
(e) At the time of making payment for the Firm Common Stock,
the Company also hereby agrees to sell to the Representative and its permitted
designees, Representative's Warrants to purchase 130,000 shares of Common Stock
at any time during a four year period commencing one year after the Effective
Date at an aggregate purchase price of $100. The Representative's Warrants will
be exercisable at a price of $10.3125 per share. From the Effective Date and
until one (1) year thereafter, such Representative Warrants may not be sold,
transferred, assigned or hypothecated except to the Representative and selling
group members and their officers or partners.
SECTION 4. Public Offering. The several Underwriters agree, subject to
the terms and provisions of this Agreement, to offer the Common Stock to the
public as soon as practicable after the Effective Date, at the initial offering
price of $6.25 and upon the terms described in the Prospectus. The
Representative may, from time to time, decrease the public offering price, after
the initial public offering, to such extent as the Representative may determine,
however, such decreases will not affect the price payable to the Company
hereunder.
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SECTION 5. Registration Statement and Prospectus. The Company will
furnish the Representative, without charge, two signed copies of the
Registration Statement and of each amendment thereto, including all exhibits
thereto and such amount of conformed copies of the Registration Statement and
Amendments as may be reasonably requested by the Representative for distribution
to each of the Underwriters and Selected Dealers.
The Company will furnish, at its expense, as many printed
copies of a Preliminary Prospectus and of the Prospectus as the Representative
may request for the purposes contemplated by this Agreement. If, while the
Prospectus is required to be delivered under the Act or the Rules and
Regulations, any event known to the Company relating to or affecting the Company
shall occur which should be set forth in a supplement to or an amendment of the
Prospectus in order to comply with the Act (or other applicable law) or with the
Rules and Regulations, the Company will forthwith prepare, furnish and deliver
to the Representative and to each of the other Underwriters and to others whose
names and addresses are designated by the Representative, in each case at the
Company's expense, a reasonable number of copies of such supplement or
supplements to or amendment or amendments of, the Prospectus.
The Company authorizes the Underwriters and the selected
dealers, if any, in connection with the distribution of the Securities and all
dealers to whom any of the Securities may be sold by the Underwriters, or by any
Selected Dealer, to use the Prospectus, as from time to time amended or
supplemented, in connection with the offering and sale of the Securities and in
accordance with the applicable provisions of the Act and the applicable Rules
and Regulations and applicable State Securities Laws.
SECTION 6. Covenants of the Company. The Company covenants and agrees
with each Underwriter that:
(a) After the date hereof, the Company will not at any time,
whether before or after the Effective Date, file any amendment to the
Registration Statement or the Prospectus, or any supplement to the Prospectus,
of which the Representative shall not previously have been advised and furnished
with a copy, or to which the Representative or the Underwriters' counsel, shall
have reasonably objected in writing on the ground that it is not in compliance
with the Act or the Rules and Regulations.
(b) The Company will use its best efforts to cause the
Registration Statement to become effective as promptly as reasonably practicable
and will advise the Representative, (i) when the Registration Statement shall
have become effective and when any amendment thereto shall have become
effective, and when any amendment of or supplement to the Prospectus shall be
filed with the Commission, (ii) when the Commission shall make request or
suggestion for any amendment to the Registration Statement or the Prospectus or
for additional information and the nature and substance thereof, and (iii) of
the issuance by the Commission of an order suspending the effectiveness of the
Registration Statement or of the initiation of any proceedings for that purpose,
and will use every reasonable effort to prevent the issuance of such an order,
or if such an order shall be issued, to obtain the withdrawal thereof at the
earliest possible moment.
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(c) The Company will prepare and file with the Commission,
promptly upon the request of the Representative, such amendments, or supplements
to the Registration Statement or Prospectus, in form and substance satisfactory
to counsel to the Company, as in the reasonable opinion of Lester Morse P.C., as
counsel to the Underwriters, may be necessary or advisable in connection with
the offering or distribution of the Securities, and will use its best efforts to
cause the same to become effective as promptly as possible.
(d) The Company will, at its expense, when and as requested by
the Representative, supply all necessary documents, exhibits and information,
and execute all such applications, instruments and papers as may be required or
desirable, in the opinion of the Underwriters' counsel; to qualify the
Securities or such part thereof as the Representative may determine, for sale
under the so-called "Blue Sky" Laws of such states as the Representative shall
designate, and to continue such qualification in effect so long as required for
the purposes of the distribution of the Securities, provided, however, that the
Company shall not be required to qualify as a foreign corporation or to file a
consent to service of process in any state in any action other than one arising
out of the offering or sale of the Securities.
(e) The Company will, at its own expense, file and provide,
and continue to file and provide, such reports, financial statements and other
information as may be required by the Commission, or the proper public bodies of
the states in which the Securities may be qualified for sale, for so long as
required by applicable law, rule or regulation and will provide the
Representative with copies of all such registrations, filings and reports on a
timely basis.
(f) During the period of five years from the Effective Date,
the Company will deliver to the Underwriter a copy of each annual report of the
Company, and will deliver to the Underwriter (i) within 50 days after the end of
each of the Company's first three quarter-yearly fiscal periods, a balance sheet
of the Company as at the end of such quarter-yearly period, together with a
statement of its income and a statement of changes in its cash flow for such
period (Form 10-QSB), all in reasonable detail, signed by its principal
financial or accounting officer, (ii) within 105 days after the end of each
fiscal year, a balance sheet of the Company as at the end of such fiscal year,
together with a statement of its income and statement of changes in cash flow
for such fiscal year (Form 10-KSB), such balance sheet and statement of cash
flow for such fiscal year to be in complete detail and to be accompanied by a
certificate or report of independent public accountants, (who may be the regular
accountants for the Company), (iii) as soon as available a copy of every other
report (financial or other) mailed to the shareholders, and (iv) as soon as
available a copy of every report and financial statement furnished to or filed
with the Commission or with any securities exchange pursuant to requirements by
or agreement with such exchange or the Commission pursuant to the Securities
Exchange Act of 1934, as amended, or any regulations of the Commission
thereunder. If the Company has one or more active subsidiaries, the financial
statements required by (i) and (ii) above shall be furnished on a consolidated
basis in respect of the Company and its subsidiaries if required under generally
accepted accounting principles. The financial statements referred to in (ii)
shall also be furnished to all of the shareholders of the Company as soon as
practicable after the 105 days referred to therein.
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(g) The Company represents that with respect to the
Securities, it will prepare and file a Registration Statement with the
Commission pursuant to Section 12(g) of the Securities Exchange Act of 1934, as
amended, prior to the Effective Date with a request that such Registration
Statement will become effective on the first day following the Effective Date.
The Company understands that, to register, it must prepare and file with the
Commission a General Form of Registration of Securities (Form 8-A or Form 10).
In addition, the Company agrees to qualify its Common Stock for listing on the
NASDAQ System as a Small-Cap Issue on the Effective Date and will take all
necessary and appropriate action so that its Common Stock continues to be listed
for trading in the NASDAQ System for at least five years from the Effective Date
provided the Company otherwise complies with the prevailing maintenance
requirements of NASDAQ System. In addition, at such time as the Company
qualifies for listing its Common Stock on the National Market System of NASDAQ,
the Company will take all steps necessary to have its Common Stock listed on the
National Market System of NASDAQ in lieu of listing as Small-Cap Issues. The
Company shall comply with all periodic reporting and proxy solicitation
requirements imposed by the Commission pursuant to the 1934 Act, and shall
promptly furnish you with copies of all material filed with the Commission
pursuant to the 1934 Act or otherwise furnished to shareholders of the Company.
(h) The Company will make generally available to its security
holders, as soon as practicable, but in no event later than 15 months after the
Effective Date, an earnings statement of the Company (which need not be audited)
in reasonable detail, covering a period of at least twelve months beginning
after the Effective Date, which earnings statement shall satisfy the provisions
of Section 11(a) of the Act.
(i) The Company shall, on the Effective Date, apply for
listing in Standard and Poor's Corporation Records (requesting coverage in the
Daily News Supplement) and Standard & Poor's Monthly Stock Guide and shall use
its best efforts to have the Company listed in such reports for a period of not
less than five (5) years from the Closing Date.
(j) The Company shall employ the services of Goldstein, Golub
& Kessler LLP or such other auditing firm acceptable to the Representative in
connection with the preparation of the financial statements required to be
included in the Registration Statement and shall continue to appoint such
auditors or such other auditors as are reasonably acceptable to the
Representative for a period of three (3) years following the Effective Date of
the Registration Statement. The Company shall appoint Corporate Stock Transfer,
Inc. as transfer agent for the Securities.
(k) Within ninety (90) days subsequent to the Effective Date,
the Company will furnish "Key Man" Life Insurance in the amount of $1,000,000 on
the life of Dr. Ralph M. Ferrante with the Company as the beneficiary thereof
and the Company shall pay the annual premium therefor for a period of not less
than five years from the Effective Date on the Effective Date. The Company shall
employ Dr. Ralph Ferrante pursuant to an employment agreement on terms described
in the Prospectus and filed with the Commission as an exhibit to the
Registration Statement.
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(l) The Company will for a period of five years at its
expense, shall cause its regularly engaged independent certified public
accountants to examine (but not audit) the Company's financial statements for
each of the first three (3) fiscal quarters prior to the announcement of
quarterly financial information, the filing of the Company's Form 10-QSB
quarterly report and the mailing of quarterly financial information to security
holders.
(m) Except for the Stock Option Plan described in the
Prospectus, for a period of two years after the date of this Prospectus, the
Company shall not file a Registration Statement on Form S-8 or any other
appropriate form to register shares underlying a stock option plan without the
prior written consent of the Representative.
(n) The Company, at its expense, shall retain the services of
Blue Sky Data Corp. or another company or legal counsel acceptable to the
Representative to provide the Underwriters with an after market blue sky survey
in those states which the Securities are eligible for sale. The Company shall
also pay the annual cost of providing updates to the Underwriters for a period
of five years or until the Company's Securities are listed on the New York Stock
Exchange, American Stock Exchange or NASDAQ National Market.
(o) As soon as practicable after the Closing Date, the Company
will deliver to the Representative and its counsel a total of three bound
volumes of copies of all documents relating to the public offering which is the
subject of this Agreement.
(p) The Company will at its cost for a period of three years
after the Effective Date, distribute an annual report to all stockholders
setting forth the results of operations and the financial position of the
Company. The Company will, at its cost, for a period of one year after the
Effective Date furnish the Representative at the Company's sole cost with a
duplicate copy of the daily transfer sheets prepared by the Transfer Agent and
copy of the weekly sheets prepared by Depository Trust Company and a duplicate
copy of a list of stockholders.
(q) After the Effective Date, the Company shall retain the
services of a financial public relations firm(s) reasonably satisfactory to the
Representative, and unrelated to or unassociated with the Representative. Such
firm shall be engaged no later than 30 days after the Closing of the public
offering and for a period of three years thereafter.
(r) The Company agrees that no Common or Preferred Stock with
super voting rights will be issued for a period of one year after the Effective
Date without the Representative's prior written consent.
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SECTION 7. Expenses of the Company.
(a) The Company shall be responsible for and shall bear all of
its expenses directly and necessarily incurred in connection with the proposed
financing, including: (i) the preparation, printing and filing of the
Registration Statement and amendments thereto, including NASD and SEC filing
fees, preliminary and final Prospectus and the printing of the Underwriting
Agreement, the Agreement Among the Underwriters and the Selected Dealers'
Agreement, a Blue Sky Memorandum and material to be circulated to the
Underwriters by us; (ii) the issuance and delivery of certificates representing
the Securities, including original issue and transfer taxes, if any; (iii) the
qualifications of the Company's Securities (covered by the "firm commitment"
offering) under State Securities or Blue Sky Laws, including counsel fees of
Lester Morse P.C. relating thereto in the sum of Thirty-Five Thousand ($35,000)
Dollars plus disbursements relating to, but not limited to, long-distance
telephone calls, photocopying, messengers, excess postage, overnight mail and
courier services; (iv) the fees and disbursements of counsel for the Company and
the accountants for the Company; (v) costs of qualifying the Securities for
listing on NASDAQ and (vi) post closing tombstone advertisements not to exceed
$12,000. Upon the commencement of the necessary state Blue Sky filings by our
counsel, the Company shall supply him at his request, all necessary state filing
fees. In addition, the Company shall pay Lester Morse P.C. $12,500 on or before
the filing of the initial Registration Statement as an advance toward the blue
sky fees, which $12,500 has been paid.
(b) In addition, the Company shall bear each of the following
costs: (i) investigative reports (such as Bishop's Reports) of the Company's
executive officers, directors and principal stockholders, as well as travel and
other reasonable due diligence expenses not to exceed $10,000 in the aggregate,
including without limitation, informational meetings and presentations in
connection with the offering; and (ii) otherwise unreimbursed postage, including
mailing of preliminary and final prospectuses incurred by or on behalf of the
Representative and the Underwriters in preparation for, or in connection with
the offering and sale and distribution of the Securities on an accountable
basis.
SECTION 8. Payment of Underwriters' Expenses.
On the Closing Date, the Company will pay to you an expense
allowance equal to three (3%) percent of the total gross proceeds derived from
the sale of the Firm Common Stock, $15,000 of which has been paid in advance to
the Representative, for the fees and disbursements of counsel to the
Underwriters and for costs of otherwise unreimbursed advertising, traveling,
postage, telephone and telegraph expenses and other miscellaneous expenses
incurred by or on behalf of the Representative and the Underwriters in
preparation for, or in connection with the offering and sale and distribution of
the Securities; and you shall not be obligated to account to the Company for
such disbursements and expenses. Further, in the event that this Agreement is
terminated pursuant to Section 12 hereof, the Company will be obligated to
reimburse the Representative on an accountable basis for its reasonable
out-of-pocket expenses incurred in connection hereunder, less any amounts
previously advanced. On the Closing Date or Additional Closing Date (if any)
that the Representative completes the purchase of all or any portion of the
Optional Common Stock, the Selling Security Holders shall have deducted from the
proceeds payable to them by the Representative, an amount equal to a 10%
discount and a 3% non-accountable expense allowance.
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SECTION 9. Indemnification.
(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act against any
and all losses, claims, damages and liabilities, joint or several (including any
reasonable investigation, legal and other expenses incurred in connection with,
and any amount paid in settlement of, any action, suit or proceeding or any
claim asserted), to which they, or any of them, may become subject under the
Act, the Exchange Act or other Federal or state law or regulation, at common law
or otherwise, insofar as such losses, claims, damages or liabilities arise out
of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus, the Registration
Statement or the statement of a material fact contained in any preliminary
prospectus, the Registration Statement or the Prospectus or any amendment
thereof or supplement thereto, or arise out of or are based upon any omission or
alleged omission to state therein such fact required to be stated therein or
necessary to make such statements therein not misleading. The Selling Security
Holders agree to indemnify each Underwriter and each person, if any, who
controls any Underwriter within the meaning of Section 15 of the Act or Section
20 of the Exchange Act, against any and all losses, claims, damages and
liabilities, joint or several (including any reasonable investigation, legal and
other expenses incurred in connection with, and any amount paid in settlement
of, any action, suit or proceeding or any claim asserted), to which they, or any
of them, may become subject under the Act, the Exchange Act or other Federal or
state law or regulation, at common law or otherwise, insofar as such losses,
claims, damages or liabilities, joint or several (including any reasonable
investigation, legal and other expenses incurred in connection with, and any
amount paid in settlement of, any action, suit or proceeding or any claim
asserted), to which they, or any of them, may become subject under the Act, the
Exchange Act or other Federal or state law or regulation, at common law or
otherwise, insofar as such losses, claims, damages or liabilities arise out of
or are based upon any untrue statement or alleged untrue statement of a material
fact with respect to the Selling Security Holders contained in any preliminary
prospectus, the Registration Statement or the Prospectus or any amendment
thereof or supplement thereto (which amendments or supplements are furnished to
the Selling Security Holders), or which arise out of or are based upon any
omission or alleged omission to state therein such fact required to be stated
therein or necessary to make such statements therein not misleading, but only
with reference to information relating to the Selling Security Holders furnished
in writing to the Company by or on behalf of the Selling Security Holders
expressly for use in connection with the preparation of the Registration
Statement and Prospectus or any amendment thereof or supplement thereto (which
amendments or supplements are furnished to the Selling Security Holders), or
which arise out of or are based upon any omission or alleged omission to state
therein such fact required to be stated therein or necessary to make such
statements therein not misleading.
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(b) Such indemnity shall not inure to the benefit of any
Underwriter (or any person controlling such Underwriter) on account of any
losses, claims, damages or liabilities arising from the sale of the Securities
to any person by such Underwriter if such untrue statement or alleged untrue
statement or omission was made in such preliminary prospectus, the Registration
Statement or the Prospectus, or such amendment or supplement, in reliance upon
and in conformity with information furnished in writing to the Company by the
Representatives on behalf of any Underwriter specifically for use therein. The
obligations of the Selling Security Holders, pursuant to this Section 9(a) shall
be limited to an amount not exceeding the product of the Per Security Price to
Public of the Securities as set forth on the cover page of the Prospectus and
the number of Securities being sold by each of them. In no event shall the
indemnification agreement contained in this Section 9(a) inure to the benefit of
any Underwriter on account of any losses, claims, damages, liabilities or
actions arising from the sale of the Securities upon the public offering to any
person by such Underwriter if such losses, claims, damages, liabilities or
actions arise out of, or are based upon, a statement or omission or alleged
omission in a preliminary prospectus and if, in respect to such statement,
omission or alleged omission, the Prospectus differs in a material respect from
such preliminary prospectus and a copy of the Prospectus has not been sent or
given to such person at or prior to the confirmation of such sale to such
person. This indemnity agreement will be in addition to any liability which the
Company and the Selling Security Holders may otherwise have.
(c) Each Underwriter agrees, severally and not jointly, to
indemnify and hold harmless the Company, each person, if any, who controls the
Company within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act, each director of the Company, and each officer of the Company who
signs the Registration Statement and the Selling Security Holders, to the same
extent as the foregoing indemnity from the Company and the Selling Security
Holders to each Underwriter, but only insofar as such losses, claims, damages or
liabilities arise out of or are based upon any untrue statement or omission or
alleged untrue statement or omission which was made in any Preliminary
Prospectus, any Rule 430A Prospectus, the Registration Statement or the
Prospectus, or any amendment thereof or supplement thereto, which were made in
reliance upon and in conformity with information furnished in writing to the
Company by the Representatives on behalf of any Underwriter for specific use
therein; provided, however, that the obligation of each Underwriter to indemnify
the Company (including any controlling person, director or officer thereof) and
the Selling Security Holders shall be limited to the net proceeds received by
the Company and the Selling Security Holders, respectively, from such
Underwriter. For all purposes of this Agreement, the amounts of the selling
concession and reallowance set forth in the Prospectus constitute the only
information furnished in writing by or on behalf of any Underwriter expressly
for inclusion in any Preliminary Prospectus, any Rule 430A Prospectus, the
Registration Statement or the Prospectus or any amendment or supplement thereto.
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<PAGE>
(d) Any party that proposes to assert the right to be
indemnified under this Section will, promptly after receipt of notice of
commencement of any action, suit or proceeding against such party in respect of
which a claim is to be made against an indemnifying party or parties under this
Section, notify each such indemnifying party of the commencement of such action,
suit or proceeding, enclosing a copy of all papers served. No indemnification
provided for in Section 9(a) 9(b), or 9(c) shall be available to any party who
shall fail to give notice as provided in this Section 9(d) if the party to whom
notice was not given was unaware of the proceeding to which such notice would
have related and was prejudiced by the failure to give such notice but the
omission so to notify such indemnifying party of any such action, suit or
proceeding shall not relieve it from any liability that it may have to any
indemnified party for contribution or otherwise than under this Section. In case
any such action, suit or proceeding shall be brought against any indemnified
party and it shall notify the indemnifying party of the commencement thereof,
the indemnifying party shall be entitled to participate in, and, to the extent
that it shall wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel reasonably satisfactory to
such indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof and the
approval by the indemnified party of such counsel, the indemnifying party shall
not be liable to such indemnified party for any legal or other expenses, except
as provided below and except for the reasonable costs of investigation
subsequently incurred by such indemnified party in connection with the defense
thereof. The indemnified party shall have the right to employ its counsel in any
such action, but the fees and expenses of such counsel shall be at the expense
of such indemnified party unless (i) the employment of counsel by such
indemnified party has been authorized in writing by the indemnifying parties,
(ii) the indemnified party shall have reasonably concluded that there may be a
conflict of interest between the indemnifying parties and the indemnified party
in the conduct of the defense of such action (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 (iii) the indemnifying parties shall not have
employed counsel to assume the defense of such action within a reasonable time
after notice of the commencement thereof, in each of which cases the reasonable
fees and expenses of counsel shall be at the expense of the indemnifying
parties. An indemnifying party shall not be liable for any settlement of any
action, suit, proceeding or claim effected without its written consent.
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(e) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in Sections 9(a) and (b)
is due in accordance with its terms but for any reason is held to be unavailable
from the Company, the Selling Security Holders or the Underwriters, the Company,
the Selling Security Holders and the Underwriters shall contribute to the
aggregate losses, claims, damages and liabilities (including any investigation,
legal and other expenses reasonably incurred in connection with, and any amount
paid in settlement of, any action, suit or proceeding or any claims asserted,
but after deducting any contribution received by the Company from persons other
than the Underwriters, such as the Selling Security Holders, persons who control
the company within the meaning of the Act, officers of the Company who signed
the Registration Statement and directors of the Company, who may also be liable
for contribution) to which the Company and the Selling Security Holders and one
or more of the Underwriters may be subject in such proportion as is appropriate
to reflect the relative benefits received by the Company and the Selling
Security Holders on the one hand and the Underwriters on the other from the
offering of the Securities or, if such allocation is not permitted by applicable
law or indemnification is not available as a result of the indemnifying party
not having received notice as provided herein in such proportion as is
appropriate to reflect not only the relative benefits referred to above but also
the relative fault of the Company and the Selling Security Holders on the one
hand and the Underwriters on the other in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant omissions which resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
omissions which resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The relative
benefits received by the Company, the Selling Security Holders and the
Underwriters shall be deemed to be in the same proportion as (x) the total
proceeds from the Offering (net of underwriting discounts but before deducting
expenses) received by the Company or the Selling Security Holders from the sale
of the Securities, as set forth in the table on the cover page of the Prospectus
(but not taking into account the use of the proceeds of such sale of Securities
by the Company), bear to (y) the underwriting discount received by the
Underwriters, as set forth in the table on the cover page of the Prospectus. The
relative fault of the Company, the Selling Security Holders and the Underwriters
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact related to information supplied by
the Company, the Selling Security Holders or the Underwriters and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company, the Selling Security Holders
and the Underwriters agree that it would not be just and equitable if
contribution pursuant to this Section 9 were determined by pro rata allocation
(even if the Underwriters were treated as one entity for such purpose) or by any
other method of allocation which does not take account of the equitable
consideration referred to above. Notwithstanding the provisions of this Section
9, (i) in no case shall any Underwriter (except as may be provided in the
Agreement Among Underwriters) be liable or responsible for any amount in excess
of the underwriting discount applicable to the Securities purchased by such
Underwriter hereunder, (ii) in no case shall the Selling Security Holders be
liable or responsible for any amount in excess of the product of the Per
Security Price to Public of the Securities as set forth on the cover page of the
Prospectus and the number of Securities being sold by each of them subject to
the limitation expressed in Section 9(a), and (iii) the Company shall be liable
and responsible for any amount in excess of the underwriting discount and the
amount referred to in clause (ii) provided, however (i) that 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 9, each person, if
any, who controls an Underwriter within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act shall have the same rights to contribution as
such Underwriter, 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, each
officer of the Company who shall have 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 clauses (i), (ii) and (iii) in the immediately
preceding sentence of this Section 9. Any party entitled to contribution will,
promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect of which a claim for contribution may
be made against another party or parties under this Section, notify such party
or parties from whom contribution may be sought, but the omission so to notify
such party or parties from whom contribution may be sought shall not relieve the
party or parties from whom contribution may be sought from any other obligation
it or they may have hereunder or otherwise than under this Section. No party
shall be liable for contribution with respect to any action, suit, proceeding or
claim settled without its written consent. The Underwriters' obligations to
contribute pursuant to this Section 9 are several in proportion to their
respective underwriting commitments and not joint.
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SECTION 10. Effectiveness of Agreement. This Agreement shall become
effective (i) at 9:30 A.M., New York Time, on the first full business day after
the Effective Date, or (ii) at the time of the initial public offering by the
Underwriters of the Securities whichever shall first occur. The time of the
initial public offering by the Underwriters of the Securities for the purposes
of this Section 10, shall mean the time, after the Registration Statement
becomes effective, of the release by the Representative for publication of the
first newspaper advertisement which is subsequently published relating to the
Securities, or the time, after the Registration Statement becomes effective,
when the Securities are first released by the Representative for offering by the
Underwriters or dealers by letter or telegram, whichever shall first occur. The
Representative agrees to notify the Company immediately after it shall have
taken any action, by release or otherwise, whereby this Agreement shall have
become effective. This Agreement shall, nevertheless, become effective at such
time earlier than the time specified above, after the Effective Date, as the
Representative may determine by notice to the Company.
SECTION 11. Conditions of the Underwriters' Obligations. The
obligations of the several Underwriters to purchase and pay for the Securities
which the Underwriters have agreed to purchase hereunder are subject to: the
accuracy, as of the date hereof and as of the Closing Dates of all of the
representations and warranties of the Company and the Selling Security Holders
contained in this Agreement; the Company's and the Selling Security Holders'
compliance with, or performance of, all of its covenants, undertakings and
agreements contained in this Agreement that are required to be complied with or
performed on or prior to each of the Closing Dates and to the following
additional conditions:
(a) On or prior to the Closing Date, no order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceeding for that purpose shall have been instituted or be pending or, to the
knowledge of the Company, shall be threatened by the Commission; any request for
additional information on the part of the Commission (to be included in the
Registration Statement or the Prospectus or otherwise) shall have been complied
with to the satisfaction of the Commission; and neither the Registration
Statement nor any amendment thereto shall have been filed to which counsel to
the Underwriters shall have reasonably objected, in writing.
(b) The Representative shall not have disclosed in writing to
the Company that the Registration Statement or Prospectus or any amendment or
supplement thereto contains an untrue statement of a fact which, in the opinion
of counsel to the Underwriters, is material, or omits to state a fact which, in
the opinion of such counsel, is material and is required to be stated therein,
or is necessary to make the statements therein not misleading.
(c) Between the date hereof and the Closing Date, the Company
shall not have sustained any loss on account of fire, explosion, flood,
accident, calamity or other such cause, of such character as materially
adversely affects its business or property, whether or not such loss is covered
by insurance.
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(d) Between the date hereof and the Closing Date, there shall
be no litigation instituted or threatened against the Company (or the Selling
Security Holders with respect to the Optional Common Stock), and there shall be
no proceeding instituted or threatened against the Company (or the Selling
Security Holders with respect to the Optional Common Stock) before or by any
federal or state commission, regulatory body or administrative agency or other
governmental body, domestic or foreign, wherein an unfavorable ruling, decision
or finding would materially adversely affect the business, licenses, permits,
operations or financial condition or income of the Company or the right of the
Selling Security Holders to deliver unencumbered title to the Underwriters for
the Optional Common Stock.
(e) Except as contemplated herein or as set forth in the
Registration Statement and Prospectus, during the period subsequent to the
Effective Date and prior to the Closing Date, (A) the Company shall have
conducted its business in the usual and ordinary manner as the same was being
conducted on the date of the filing of the initial Registration Statement and
(B) except in the ordinary course of its business, the Company shall not have
incurred any material liabilities or obligations (direct or contingent), or
disposed of any of its assets, or entered into any material transaction, and (C)
the Company shall not have suffered or experienced any material adverse change
in its business, affairs or in its condition, financial or otherwise. On the
Closing Date, the capital stock and surplus accounts of the Company shall be
substantially as great as at its last financial report without considering the
proceeds from the sale of the Securities except to the extent that any decrease
is disclosed in or contemplated by the Prospectus.
(f) The authorization of the Securities, the Registration
Statement, the Prospectus and all corporate proceedings and other legal matters
incident thereto and to this Agreement, shall be reasonably satisfactory in all
respects to counsel to the Underwriters.
(g) The Company shall have furnished to the Representative the
opinions, dated the Closing Date, and Additional Closing Date(s), addressed to
you, of its counsel that:
(i) The Company has been duly incorporated and is a validly
existing corporation in good standing under the laws of the State of Delaware
with full corporate power and authority to own and operate its properties and to
carry on its business as set forth in the Registration Statement and Prospectus;
it has authorized and outstanding capital as set forth in the Registration
Statement and Prospectus; and the Company is duly licensed or qualified as a
foreign corporation in all jurisdictions in which by reason of maintaining an
office in such jurisdiction or by owning or leasing real property in such
jurisdiction it is required to be so licensed or qualified except where failure
to be so qualified or licensed would have no material adverse effect.
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(ii) All of the outstanding Shares of Common Stock are duly
and validly issued and outstanding, fully paid, and non-assessable, and do not
have any, and were not issued in violation of any, preemptive rights. The
Company will have duly authorized, reserved and set aside shares of Common Stock
issuable upon exercise of the outstanding options or warrants and when issued in
accordance with such terms contained in the Prospectus, will be duly and validly
authorized and issued, fully paid and non-assessable.
(iii) All of the Securities of the Company to which this
Agreement relates conform to the statements relating to them that are contained
in the Registration Statement and Prospectus (excluding financial statements).
(iv) The Underwriters against payment therefor, will receive
good and marketable title to the Securities purchased by them from the Company
and the Selling Security Holders in accordance with the terms and provisions of
this Agreement.
(v) To the best of the knowledge of such counsel, except as
set forth in the Prospectus, there are no outstanding options, warrants, or
other rights, providing for the issuance of, and, no commitments, plans or
arrangements to issue, any shares of any class of capital stock of the Company,
or any security convertible into, or exchangeable for, any shares of any class
of capital stock of the Company.
(vi) To the best of such counsel's knowledge, no consents,
approvals, authorizations or orders of agencies, officers or other regulatory
authorities are necessary for the valid authorization, issuance or sale of the
Securities hereunder, except such as may be required under the Act or state
securities or blue sky laws.
(vii) The Registration Statement has become effective under
the Act and, to the best of the knowledge of such counsel, no order suspending
the effectiveness of the Registration Statement has been issued and no
proceedings for that purpose have been instituted or are pending or contemplated
under the Act, and the Registration Statement and Prospectus, and each amendment
thereof and supplement thereto, comply as to form in all material respects with
the requirements of the Act and the Rules and Regulations (except that no
opinion need be expressed as to financial statements and financial data
contained in the Registration Statement or Prospectus), and in the course of the
preparation of the Registration Statement, nothing has come to the attention of
said counsel to cause them to believe that either the Registration Statement or
the Prospectus or any such amendment or supplement contains any untrue statement
of a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading; and such
counsel is familiar with all contracts referred to in the Registration Statement
or in the Prospectus and such contracts are sufficiently summarized or disclosed
therein, or filed as exhibits thereto, as required, and such counsel does not
know of any other contracts required to be summarized or disclosed or filed; and
such counsel does not know of any legal or governmental proceedings pending or
threatened to which the Company is a party, or in which property of the Company
is the subject, of a character required to be disclosed in the Registration
Statement or the Prospectus which are not disclosed and properly described
therein.
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(viii) The Representative's Warrants to be issued to the
Representative or its permitted designees hereunder will be, when issued against
payment therefor duly and validly authorized and executed by the Company and
will constitute valid and binding obligations of the Company, legally
enforceable in accordance with their terms (except as such enforcement may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights generally), and
the Company will have duly authorized, reserved and set aside the shares of its
Common Stock issuable upon exercise of the Representative's Warrants and such
stock, when issued and paid for upon exercise of the Representative's Warrants
in accordance with the provisions thereof, will be duly and validly authorized
and issued, fully-paid and non-assessable.
(ix) The Company holds by valid lease, its properties as shown
in the Prospectus, and is in all material respects complying with all laws,
ordinances and regulations applicable thereto.
(x) This Agreement has been duly authorized and executed by
the Company and the Selling Security Holders and is a valid and binding
agreement of the Company and the Selling Security Holders enforceable in
accordance with its terms subject to bankruptcy, insolvency, reorganization,
moratorium and other laws affecting creditors rights generally and except that
no opinion need be given with regard to the enforceability of Section 9 hereof
or the availability of equitable relief.
(xi) To the best knowledge of such counsel: (a) no default
exists, and no event has occurred which, with notice or lapse of time, or both,
would constitute a default in the due performance and observance of any material
term, covenant or condition by the Company or the Selling Security Holders, of
any indenture, mortgage, deed of trust, note or any other agreement or
instrument to which the Company or the Selling Security Holders are a party or
by which it or its business or its properties may be bound or affected, except
where such default would not have a material adverse effect on the business of
the Company and except as disclosed in the Prospectus; (b) the Selling Security
Holders have full power and legal authority to sell the Optional Common Stock to
the Underwriters free and clear of all liens and encumbrances; (c) the Company
has full power and lawful authority to authorize, issue and sell the Firm Common
Stock on the terms and conditions set forth herein and in the Registration
Statement and in the Prospectus; (d) no consent, approval, authorization or
other order of any regulatory authority is required for such authorization,
issue or sale, except as may be required under the Act or state securities laws,
clearance with the NASD and such other consent, approval, authorization or order
as has been obtained and is in full force and effect; and (e) the execution and
delivery of this Agreement, the consummation of the transactions herein
contemplated, and compliance with the terms hereof will not conflict with, or
constitute a default under, any material indenture, mortgage, deed of trust,
note or any other agreement or instrument to which the Company and the Selling
Security Holders are now a party or by which it or its business or its
properties may be bound or affected, the Certificate of Incorporation and any
amendments thereto, the by-laws of the Company, or any order, rule or
regulation, writ, injunction or decree of any government, governmental
instrumentality, or court, domestic or foreign, having jurisdiction over the
Company or the Selling Security Holders or its business or properties.
21
<PAGE>
(xii) Except as disclosed in the Registration Statement and
Prospectus, to the best knowledge of such counsel, there are no material
actions, suits or proceedings at law or in equity of a material nature pending,
or to such counsel's knowledge, threatened against the Company or the Selling
Security Holders which are not adequately covered by insurance and there are no
proceedings pending or, to the knowledge of such counsel, threatened against the
Company or the Selling Security Holder before or by any federal or state
Commission, regulatory body, or administrative agency or other governmental
body, wherein an unfavorable ruling, decision or finding would materially and
adversely affect the business, operation or condition (financial or otherwise)
of the Company or the ability of Selling Security Holders to deliver
unencumbered title of the Optional Common Stock to the Underwriters, which are
not disclosed in the Prospectus.
Such opinion shall also cover such other matters incident to
the transactions contemplated by this Agreement as the Representative shall
reasonably request. In rendering such opinion, such counsel may rely upon
certificates of any officer of the Company or public officials as to matters of
fact.
(h) The Company shall have furnished to the Representative
certificates of the President or Chairman of the Board and the Secretary of the
Company, dated as of the Closing Date, and Additional Closing Date(s), to the
effect that:
(i) Each of the representations and warranties of the Company
contained in Section 2 hereof are true and correct in all material respects at
and as of such Closing Date, and the Company has performed or complied with all
of its agreements, covenants and undertakings contained in this Agreement and
has performed or satisfied all the conditions contained in this Agreement on its
part to be performed or satisfied at the Closing Date;
(ii) The Registration Statement has become effective and no
order suspending the effectiveness of the Registration Statement has been
issued, and, to the best of the knowledge of the respective signers, no
proceeding for that purpose has been initiated or is threatened by the
Commission;
(iii) The respective signers have each carefully examined the
Registration Statement and the Prospectus and any amendments and supplements
thereto, and to the best of their knowledge the Registration Statement and the
Prospectus and any amendments and supplements thereto and all statements
contained therein are true and correct in all material respects, and neither the
Registration Statement nor the Prospectus nor any amendment or supplement
thereto includes any untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading and, since the effective date of the Registration
Statement, there has occurred no event required to be set forth in an amended or
supplemented Prospectus which has not been so set forth except changes which the
Registration Statement and Prospectus indicate might occur.
22
<PAGE>
(iv) Except as set forth or contemplated in the Registration
Statement and Prospectus, since the respective dates as of which, or periods for
which, information is given in the Registration Statement and Prospectus and
prior to the date of such certificate (A) there has not been any material
adverse change, financial or otherwise, in the business, business prospects,
earnings, general affairs or condition (financial or otherwise), of the Company
(in each case whether or not arising in the ordinary course of business), and
(B) the Company has not incurred any liabilities, direct or contingent, or
entered into any transactions, otherwise than in the ordinary course of business
other than as referred to in the Registration Statement or Prospectus and except
changes which the Registration Statement and Prospectus indicate might occur.
(i) The Company and the Selling Security Holders shall have
furnished to the Representative on the Closing Date, such other certificates,
additional to those specifically mentioned herein, as the Representative may
have reasonably requested, as to: the accuracy and completeness of any statement
in the Registration Statement or the Prospectus, or in any amendment or
supplement thereto; the representations and warranties of the Company and the
Selling Security Holders herein; the performance by the Company and the Selling
Security Holders of its obligations hereunder; or the fulfillment of the
conditions concurrent and precedent to the obligations of the Underwriters
hereunder, which are required to be performed or fulfilled on or prior to the
Closing Date.
(j) At the time this Agreement is executed, and on the Closing
Date you shall have received a letter from Goldstein, Golub & Kessler, addressed
to the Representative, as Representative of the Underwriters, and dated,
respectively, as of the date of this Agreement and as of the Closing Date and
Additional Closing Date as the case may be (based upon information not more than
five business days prior to such Effective Date, Closing Date and Additional
Closing Date as the case may be), in form and substance reasonably satisfactory
to the Representative, to the effect that:
(i) They are independent public accountants with respect to
the Company within the meaning of the Act and the applicable published Rules and
Regulations of the Commission;
(ii) In their opinion, the financial statements and related
schedules of the Company included in the Registration Statement and Prospectus
and covered by their reports comply as to form in all material respects with the
applicable accounting requirements of the Act and the published Rules and
Regulations of the Commission issued thereunder;
(iii) On the basis of limited procedures, not constituting an
audit, including a review of the latest interim unaudited financial statements
of the Company on the basis specified by the American Institute of Certified
Public Accountants for a review of interim financial information, a reading of
the minutes of meetings of the boards of directors, and stockholders of the
Company, inquiries of officials of the Company responsible for financial and
accounting matters and such other inquiries and procedures as may be specified
in such letter, nothing came to their attention which caused them to believe:
23
<PAGE>
(A) that at the date of the latest balance sheet read by them
and at a subsequent specified date not more than five business days prior to the
date of such letter, there was any change in the capital stock or increase in
long-term debt of the Company as compared with amounts shown in the most recent
balance sheet included in the Prospectus, except for changes which the
Prospectus discloses have occurred or may occur or which are described in such
letter;
(B) that at the date of the latest balance sheet read by them
and at a subsequent specified date not more than five business days prior to the
date of such letter, there were any decreases, as compared with amounts shown in
the most recent balance sheet included in the Prospectus, in total assets, net
current assets or stockholder's equity of the Company except for decreases which
the Prospectus discloses have occurred or may occur or which are described in
such letter; or
(C) that for the period from the date of the most recent
financial statements in the Registration Statement to a subsequent specified
date not more than five business days prior to the date of such letter, there
were any decreases, as compared with the corresponding period of the preceding
year, in gross profit or the total or per share amounts of net income of the
Company except for decreases which the Prospectus discloses have occurred or may
occur or which are described in such letter.
(iv) In addition to the audit referred to in their report
included in the Registration Statement and the Prospectus and the limited
procedures referred to in clause (iii) above, they have carried out certain
specified procedures, not constituting an audit, with respect to certain
amounts, percentages and financial information which are derived from the
general accounting records of the Company which appear in the Prospectus under
the captions "Summary of Financial Data," "Capitalization", "Management",
"Management's Discussion and Analysis of Financial Condition and Results of
Operations", "Certain Transactions", Summary of Financial Data", "Dilution" and
"Risk Factors," as well as such other financial information as may be specified
by the Representative, and that they have compared such amounts, percentages and
financial information with the accounting records of the Company and have found
them to be in agreement.
(k) Selling Security Holders shall furnish to the
Representative on the Closing Date and the Additional Closing Date(s), if any,
insofar as it applies to the Selling Security Holders, such other certificates,
additional to those specifically mentioned herein, as the Representative may
have reasonably requested, as to: the accuracy and completeness of any statement
in the Registration Statement or the Prospectus, or in any amendment or
supplement thereto; the representations and warranties of the Selling Security
Holders herein; the performance by the Selling Security Holders of its
obligations hereunder; or the fulfillment of the conditions concurrent and
precedent to the obligations of the Underwriters hereunder, which are required
to be performed or fulfilled on or prior to the Closing Date.
24
<PAGE>
All the opinions, letters, certificates and evidence mentioned
above or elsewhere in this Agreement shall be deemed to be in compliance with
the provisions hereof only if they are in form and substance reasonably
satisfactory to counsel to the Representative, whose approval shall not be
unreasonably withheld, conditioned or delayed.
If any of the conditions specified in this section shall not
have been fulfilled when and as required by this Agreement to be fulfilled, this
Agreement and all obligations of the Underwriters hereunder may be terminated
and canceled by the Representative by notifying the Company and the Selling
Security Holders of such termination and cancellation in writing or by telegram
at any time prior to, or on, the Closing Date and any such termination and
cancellation shall be without liability of any party hereto to any other party,
except with respect to the provisions of Sections 7 and 8 hereof. The
Representative may, of course, waive, in writing, any conditions which have not
been fulfilled or extend the time for their fulfillment.
SECTION 12. Termination.
(a) This Agreement may be terminated by the Representative by
written or telegraphic notice to the Company and the Selling Security Holders at
any time before it becomes effective pursuant to Section 10.
(b) This Agreement may be terminated by the Representative by
written or telegraphic notice to the Company and the Selling Security Holders,
at any time after it becomes effective, in the event that the Company, after
notice from the Representative and an opportunity to cure, shall have failed or
been unable to comply in material respects with any of the material terms,
conditions or provisions of this Agreement on the part of the Company to be
performed, complied with or fulfilled within the respective times herein
provided for, including without limitation Section 6(g) hereof, unless
compliance therewith or performance or satisfaction thereof shall have been
expressly waived by the Representative in writing. This Agreement may also be
terminated if there is any action, suit or proceeding, threatened or pending, at
law or equity against the Company, or by any federal, state or other commission,
board or agency wherein any unfavorable result or decision could materially
adversely affect the business, property, or financial condition of the Company
which was not disclosed in the Prospectus.
25
<PAGE>
(c) This Agreement may be terminated by the Representative by
written or telegraphic notice to the Company at any time after it becomes
effective, if the offering of, or the sale of, or the payment for, or the
delivery of, the Securities is rendered impracticable because (i) additional
material governmental restriction, not in force and effect on the date hereof,
shall have been imposed upon trading in securities generally or minimum or
maximum prices shall have been generally established on the New York Stock
Exchange or trading in securities generally on such exchange shall have been
suspended or a general banking moratorium shall have been established by Federal
or New York State authorities or (ii) a war or other national calamity shall
have occurred involving the United States or (iii) the condition of the market
for securities in general shall have materially and adversely changed, or (iv)
the Company or its business or business prospects is materially adversely
affected so that it would be impractical to proceed with, or consummate, this
Agreement or the public offering of the Securities.
(d) Any termination of this Agreement pursuant to this Section
12 shall be without liability of any character (including, but not limited to,
loss of anticipated profits or consequential damages) on the part of any party
hereto, except that the Company shall remain obligated to pay the costs and
expenses provided to be paid by it specified in Sections 6, 7 and 8, to the
extent therein provided. In the event that this offering is terminated by the
Company, the Representative shall be entitled to receive reimbursement of its
out of pocket expenses on an accountable basis after giving credit to the
Company for any advances received toward the Representative's non-accountable
expense allowance. The Representative shall account to the Company for any
advance and shall reimburse the Company for any portion of the advance not
expended for actual out-of-pocket expenses.
SECTION 13. Finder. The Company and the Underwriters mutually represent
that they know of no person who rendered any service in connection with the
introduction of the Company to the Underwriters and that they know of no claim
by anyone for a "finder's fee" or similar type of fee, in connection with the
public offering which is the subject of this Agreement. Each party hereby
indemnifies the other against any such claims by any person known to it, and not
known to the other party hereto, who shall claim to have rendered services in
connection with the introduction of the Company to the Underwriters and/or to
have such a claim.
26
<PAGE>
SECTION 14. Substitution of Underwriters.
(a) If one or more Underwriters default in its or their
obligations to purchase and pay for Securities hereunder and if the aggregate
amount of such Securities which all Underwriters so defaulting have agreed to
purchase does not exceed 10% of the aggregate number of Securities constituting
the Securities, the non-defaulting Underwriters shall have the right and shall
be obligated severally to purchase and pay for (in addition to the Securities
set forth opposite their names in Schedule I) the full amount of the Securities
agreed to be purchased by all such defaulting Underwriters and not so purchased,
in proportion to their respective commitments hereunder. In such event the
Representative, for the accounts of the several non-defaulting Underwriters, may
take up and pay for all or any part of such additional Securities to be
purchased by each such Underwriter under this subsection (a), and may postpone
the Closing Date to a time not exceeding seven full business days; or
(b) If one or more Underwriters (other than the
Representative) default in its or their obligations to purchase and pay for the
Securities hereunder and if the aggregate amount of such Securities which all
Underwriters so defaulting shall have agreed to purchase shall exceed 10% of the
aggregate number of Securities or if one or more Underwriters for any reason
permitted hereunder cancel its or their obligations to purchase and pay for
Securities hereunder, the non-canceling and non-defaulting Underwriters
(hereinafter called the "Remaining Underwriters") shall have the right, but
shall not be obligated to purchase such Securities in such proportion as may be
agreed among them, at the Closing Date. If the Remaining Underwriters do not
purchase and pay for such Securities at such Closing Date, the Closing Date
shall be postponed for 24 hours and the remaining Underwriters shall have the
right to purchase such Securities, or to substitute another person or persons to
purchase the same or both, at such postponed Closing Date. If purchasers shall
not have been found for such Securities by such postponed Closing Date, the
Closing Date shall be postponed for a further 24 hours and the Company shall
have the right to substitute another person or persons, satisfactory to you to
purchase such Securities at such second postponed Closing Date. If the Company
shall not have found such purchasers for such Securities by such second
postponed Closing Date, then this Agreement shall automatically terminate and
neither the Company, the Selling Security Holders nor the remaining Underwriters
(including the Representative) shall be under any obligation under this
Agreement (except that the Company shall remain liable to the extent provided in
Paragraph 7 hereof). As used in this Agreement, the term "Underwriter" includes
any person substituted for an Underwriter under this Section 14. Nothing in this
subparagraph (b) will relieve a defaulting Underwriter from its liability, if
any, to the other Underwriters for damages occasioned by its default hereunder
(and such damages shall be deemed to include, without limitation, all expenses
reasonably incurred by each Underwriter in connection with the proposed purchase
and sale of the Securities) or obligate any Underwriter to purchase or find
purchasers for any Securities in excess of those agreed to be purchased by such
Underwriter under the terms of Sections 3 and 14 hereof.
27
<PAGE>
Notwithstanding anything contained herein to the contrary, no
provisions of this Section 14 or any other section of this Underwriting
Agreement are intended to permit an Underwriter to terminate its obligation to
purchase the Firm Securities (as such term is defined in this Underwriting
Agreement) from the Company based upon: (i) the occurrence of non-material
events affecting the Company or the securities market or (ii) the inability to
market the securities.
SECTION 15. Registration of the Representative's Warrants and/or the
Underlying Securities. The Registration Statement filed with the Commission
shall register the Representative's Warrants and underlying securities. The
Company agrees to maintain a current Registration Statement with respect to the
Representative's Warrants and the underlying securities at the sole cost of the
Company until five years after the Effective Date. The Company may satisfy this
requirement by one or more post-effective amendments to the Registration
Statement or through the filing of a new Registration Statement.
SECTION 16. Other Agreements.
(a) Consulting Agreement. On the Effective Date, the Company will enter
into an agreement retaining the Representative as a financial consultant
pursuant to which the Representative shall receive a consulting fee in an amount
equal to two(2%) of the gross proceeds of this offering (including the
Over-Allotment Option) for services for two (2) years from the Effective Date,
payable in full in advance on the Closing Date, which shall include, but not be
limited to, advising the Company in connection with possible acquisition
opportunities, advising the Company regarding shareholder relations including
the preparation of the annual report and other releases, assisting in long-term
financial planning, advice in connection with corporate re-organizations and
expansion and capital structure, and other financial assistance.
(b) Finder's Fee: The Company agrees that if it shall within two (2)
years from the Effective Date, enter into any agreement of understanding with
any person or entity introduced by the Representative involving the following
originated by Representative (i) the sale of all or substantially all of the
assets and properties of the Company, (ii) the merger or consolidation of the
Company (other than a merger or consolidation effected for the purpose of
changing the Company's domicile) or (iii) the acquisition by the Company of the
assets or stock of another business entity, which agreement or understanding
thereafter consummated, whether or not during such two (2) year period, the
Company, upon such consummation, shall pay to the Representative an amount equal
to the following percentages of the consideration paid by the Company in
connection with such transaction:
5% of the first $1,000,000 or portion thereof, of such
consideration; 4% of the second $1,000,000 or portion thereof,
of such consideration; and 3% of such consideration in excess
of the first $2,000,000 of such consideration.
28
<PAGE>
The fees payable to the Representative will be in the same
form of consideration as that paid by or to the Company, as the case may be, in
any such transactions.
(c) Designation of Non-voting Advisor to the Board: The Company agrees
that unless waived by us, that the Representative shall have the right to
designate a non-voting advisor to the Board acceptable to the Company who
resides in the New York metropolitan area for a period of two years after the
Effective Date. Said designee shall attend meetings of the Board and shall be
entitled to receive reimbursement for all approved reasonable costs incurred in
attending such meetings, including but not limited to, food, lodging and
transportation. In the event the Company maintains a liability insurance policy
affording coverage for the act of its officers and/or directors, it will agree,
to the extent permitted under such policy, to include each of the Representative
and its designee as an insured under such policy.
SECTION 17. Lock-Up Agreement
Except for the 195,000 shares subject to the Optional Common Stock
which are held by Selling Security Holders or unless waived by the
Representative, the pre-offering holders of the outstanding shares of Common
Stock and Preferred Stock and warrants/options/notes exercisable or convertible
into Capital Stock have agreed not to sell or otherwise transfer their Common
Stock or Preferred Stock for a period of one year from the Effective Date of
this Offering without the prior written consent of the Underwriters. The
aforementioned lock-up agreements executed by the security holders shall also
cover any securities issued by the Company during the first year after the
Effective Date. The Company covenants and represents that after the Effective
Date, it will not grant securities to officers, directors and consultants to the
Company unless they execute a one-year lock-up agreement from the Effective Date
or the lock-up agreement is waived by the Representative.
SECTION 18. Notice. Except as otherwise expressly provided in
this Agreement, (A) whenever notice is required by the provisions hereof to be
given to the Company, such notice shall be given in writing, by certified mail,
return receipt requested, addressed to the Company at the address set forth
herein on the first page, copy to Lehman & Eilen LLP, Suite 505, 50 Charles
Lindberg Boulevard, Uniondale, NY 11553; (B) whenever notice is required by the
provisions hereof to be given to the Underwriters, such notice shall be in
writing addressed to the Representative at Somerset Financial Group, Inc.; and
(C) whenever notice is required by the provisions hereof to be given to the
Selling Security Holders, such notice shall be given in writing, by certified
mail, return receipt requested, addressed to the Selling Security Holders at the
addresses set forth in Schedule II. forth herein on the first page copy to
Steven Morse, Esq., Lester Morse P.C., Suite 420, 111 Great Neck Road, Great
Neck, NY 11021. Any party may change the address for notices to be sent by
giving written notice to the other persons.
29
<PAGE>
SECTION 19. Representations and Agreements to Survive
Delivery. Except as the context otherwise requires, all representations,
warranties, covenants, and agreements contained in this Agreement shall be
deemed to be representations, warranties, covenants, and agreements as at the
date hereof and as at the Closing Date and the Additional Closing Date(s), and
all representations, warranties, covenants, and agreements of the Selling
Security Holders, the several Underwriters and the Company, shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of any of the Underwriters or any of their controlling persons, and
shall survive any termination of this Agreement (whensoever made) and/or
delivery of the Firm Shares and the Optional Shares to the several Underwriters.
SECTION 20. Miscellaneous. This Agreement is made solely for the
benefit of the Selling Security Holders, the Underwriters and the Company and
their respective successors and assigns, and no other person shall acquire or
have any right under or by virtue of this Agreement. The term "successor" or the
term "successors and assigns" as used in this Agreement shall not include any
purchaser, as such, of any of the Shares.
This Agreement shall not be assignable by any party without the other
party's prior written consent. This Agreement shall be binding upon, and shall
inure to the benefit of, our respective successors and permitted assigns. The
foregoing represents the sole and entire agreement between us with respect to
the subject matter hereof and supersedes any prior agreements between us with
respect thereto. This Agreement may not be modified, amended or waived except by
a written instrument signed by the party to be charged. The validity,
interpretation and construction of this Agreement, and of each part hereof,
shall be governed by the internal laws of the State of New York, without giving
effect to the conflict of laws provisions thereof.
This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original, but all of which together shall be deemed to
be one and the same instrument.
If a party signs this Agreement and transmits an electronic facsimile
of the signature page to the other party, the party who receives the
transmission may rely upon the electronic facsimile as a signed original of this
Agreement.
30
<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us a counterpart hereof, whereupon this
instrument along with all counterparts will become a binding agreement between
the Selling Security Holders, the Company and the Underwriters in accordance
with its terms.
Very truly yours,
GLOBAL BRANDS, INC.
By:______________________________
Herbert Paul, President
SELLING SECURITY HOLDERS:
_________________________________
Ronald Brescia
_________________________________
Dr. Ralph Ferrante
_________________________________
Herbert Paul
CONFIRMED AND ACCEPTED, as of the date first above written:
SOMERSET FINANCIAL GROUP, INC.
By________________________________________
William Schloth, Chief Financial Officer
For itself and as the Representative of
the other Underwriters named in
Schedule I hereto.
31
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE I
================================================================================
Underwriter Firm Securities to
be Purchased
- --------------------------------------------------------------------------------
Number of Common
Shares
- --------------------------------------------------------------------------------
<S> <C>
Somerset Financial Group, Inc.
Seaboard Securities, Inc.
---------
Total 1,300,000
</TABLE>
32
<PAGE>
SCHEDULE II
<TABLE>
<CAPTION>
================================================================================
Name and Address of Amount of Optional
Selling Security Holders Common Stock
- --------------------------------------------------------------------------------
<S> <C>
Ralph Ferrante 138,450
Ronald Brescia 21,450
Herbert Paul 35,100
-------
Total 195,000
</TABLE>
33
<PAGE>
EXHIBIT 1.2
GLOBAL BRANDS, INC.
1,300,000 SHARES OF COMMON STOCK
AGREEMENT AMONG UNDERWRITERS
__________, 2000
To each of the Underwriters named in Schedule I
to the attached Underwriting Agreement
Dear Sirs:
1. UNDERWRITING AGREEMENT. Global Brands, Inc. (the "Company"),
proposes to enter into an underwriting agreement in the form of the Underwriting
Agreement attached hereto as Exhibit "A" (the "Underwriting Agreement") with the
underwriters named in Schedule I to the Underwriting Agreement (the
"Underwriters"), acting severally and not jointly, with respect to the purchase
from the Company of 1,300,000 Shares of Common Stock. Such Shares are
hereinafter sometimes referred to as the "Firm Common Stock." Upon our request,
and as provided in Section 3 of the Underwriting Agreement, the Selling Security
Holders named in Schedule II of the Underwriting Agreement will sell to the
Underwriters up to a maximum of 195,000 Shares of Common Stock., Such additional
Securities are hereinafter sometimes referred to as the "Optional Common Stock."
Both the Firm Common Stock and the Optional Common Stock are sometimes
collectively referred to herein as the "Securities." All of the Securities which
are the subject of this Agreement are more fully described in the Prospectus of
the Company described below. Under the terms of the Underwriting Agreement, each
of the Underwriters will agree, in accordance with the terms thereof to purchase
the aggregate number of Common Stock set forth opposite its name in said
Schedule I, subject to adjustment pursuant to Section 12 hereof and Section 14
of the Underwriting Agreement.
2. REGISTRATION STATEMENT AND PROSPECTUS. The Securities are described
in a registration statement and related prospectus which have been filed with
the Securities and Exchange Commission (the "Commission") under the Securities
Act of 1933, as amended (the "Act"). An amendment to such registration statement
has been or will be filed in which you have been or will be named as one of the
Underwriters of the Securities. Copies of the registration statement as filed
and as amended have been delivered to you, and you hereby authorize us to
approve on your behalf any further amendments or supplements which may be
necessary or appropriate. The registration statement, as amended at the time it
becomes effective, is called the "Registration Statement" and the final
prospectus relating to the Securities as filed by the Company with the
Commission pursuant to Rule 424(b) under the Act is referred to as the
"Prospectus."
1
<PAGE>
3. AUTHORITY OF REPRESENTATIVE. You authorize us as your Representative
to execute the Underwriting Agreement with the Company in the form attached with
such insertions, deletions or other changes as we may approve (but not as to the
number of, and price of, the Securities to be purchased by you except as
provided herein and therein) and to take such action as in our discretion we may
deem advisable in respect of all matters pertaining to the Underwriting
Agreement, this Agreement, the transactions for the accounts of the several
Underwriters contemplated thereby and hereby, and the purchase, carrying, sale
and distribution of the Securities.
4. PUBLIC OFFERING. In connection with the public offering of the
Securities, you authorize us, in our discretion:
(a) To determine the time and manner of the initial public
offering (after the Registration Statement become effective), the initial public
offering price, and the concessions and reallowances to dealers, to change the
public offering price and such concessions and reallowances after the initial
public offering, to furnish the Company with the information to be included in
the Registration Statement and the Prospectus (and any amendment or supplement
thereto) with respect to the terms of the public offering, and to determine all
matters relating to the public advertisement of the Securities and any
communications with dealers or others;
(b) To reserve all or any part of your Securities for sale to
retail purchasers (including institutions) and to dealers selected by us
("Selected Dealers") among which may be included any Underwriter (including
ourselves) and each of which shall be a member of the National Association of
Securities Dealers, Inc., and each of which shall agree that in making sales to
purchasers in the United States it will conform to the Rules of Fair Practice of
said Association (or, in the case of a foreign dealer not eligible for
membership in such Association, which shall agree not to reoffer, resell or
deliver Securities in the United States, its territories or its possessions, or
to persons whom it has reason to believe are citizens thereof or residents
therein), such reservations for sales to retail purchasers to be as nearly as
practicable in proportion to the respective underwriting obligations of the
Underwriters and such reservations for sales to Selected Dealers to be in such
proportion as we determine, and from time to time to add to the reserved
Securities such Securities retained by you remaining unsold and to release to
you any of your Securities reserved but not sold;
(c) To sell reserved Securities as nearly as practicable in
proportion to the respective reservations to retail purchasers at the public
offering price, and to Selected Dealers at the public offering price less the
Selected Dealer's concession pursuant to the Selected Dealers Agreement in
substantially the form attached; and
(d) To buy Securities for your account from Selected Dealers
at the public offering price less such amount not in excess of the Selected
Dealer's concession as we may determine.
2
<PAGE>
After advice from us that the Securities are released for public
offering, you will offer to the public in conformity with the terms of offering
set forth in the Prospectus, or any amendment or supplement, such of your
Securities as we advise you are not reserved.
You recognize the importance of a broad distribution of the Securities
among bona fide investors and you agree to use your best efforts to obtain such
broad distribution and to that end, to the extent you deem practicable, to give
priority to small orders. In offering the Securities to Selected Dealers we will
take such action as we deem appropriate to effect a broad distribution.
5. REPURCHASE OF SECURITIES NOT EFFECTIVELY PLACED FOR INVESTMENT. You
are requested to place for investment those of your Securities which are not
reserved as aforesaid. Any Securities sold by you (otherwise than through us)
which may be delivered to us against a purchase contract made by us for the
account of any Underwriter prior to termination of the provisions referred to in
Section 11 of this Agreement, shall be purchased by you upon demand from us at
the cost of such purchase plus brokerage commissions and transfer taxes on
redelivery. Securities delivered on such repurchase need not be identical to
those purchased by you. In lieu of demand repurchase by you we may in our
discretion (i) sell for your account the Securities so purchased by us, at such
price and upon such terms as we may determine, and debit or credit your account
with the loss and expense or net profit resulting from such sale, or (ii) charge
your account with an amount not in excess of the Selected Dealer's concession
with respect to such Securities plus brokerage commissions and transfer taxes
paid in connection with such purchase.
6. PAYMENT AND DELIVERY. We shall give you at least 24 hours prior
notice of the Closing Date. You agree to deliver payment and receive securities
through the facilities of the Depository Trust Company ("DTC") or, at our
option, to deliver to us at or before 9:00 a.m. New York City Time, on such
Closing Date at the office of Somerset Financial Group, Inc., 535 Connecticut
Avenue, Suite 102, Norwalk, CT 06854 (or such other office as we may direct), a
certified check or bank cashier's check payable in New York Clearing House funds
to the order of Somerset Financial Group, Inc., as Representative, for the full
purchase price of the Securities which you shall have agreed to purchase from
the Company less the concession to selected dealers. The proceeds to the Company
shall be delivered by us in the amount required in payment of the full purchase
price to the Company against delivery of the Securities to us for your account.
We are authorized to accept that delivery and to give a receipt therefor. You
authorize us, as your custodian, to take delivery of your Securities, registered
as we may direct in order to facilitate deliveries. You also authorize us to
hold for your account such of your Securities as we have reserved for sale to
retail purchasers and to Selected Dealers, and to deliver your reserved
Securities against such sales. We will deliver your unreserved Securities to you
promptly and, after we receive payment for reserved Securities sold by us for
your account, we will remit to you, as promptly as practicable, an amount equal
to the price paid by you for such Securities. As soon as practicable after
termination of Sections 4, 5 and 9 and the first and penultimate sentences of
Section 8 of this Agreement (pursuant to Section 11 hereof) we will deliver to
you any of your Securities reserved but not sold. All Securities delivered to
you pursuant to this Section will be evidenced by certificates in such
denominations as you shall direct by written notice received by us not later
than the second full business day preceding the Closing Date.
3
<PAGE>
7. AUTHORITY TO BORROW. In connection with the purchase or carrying of
any Securities purchased hereunder for your account, you authorize us, in our
discretion, to advance funds for your account, charging current interest rates,
or to arrange loans for your account, and in connection therewith to execute and
deliver any notes or other instruments and hold or pledge as security any of
your Securities. Any lender may rely on our instructions in all matters relating
to any such loan. Any of your Securities held by us for your account may be
delivered to you for carrying purposes only, and subject to our further
direction.
8. STABILIZATION AND OVER-ALLOTMENT. To facilitate the distribution of
the Securities, you authorize us during the term of this Agreement, or for such
longer period as may be necessary in our discretion, to make purchases and sales
of the Securities for your account in the open market or otherwise, for long or
short account, on such terms as we deem advisable and, in arranging sales, to
over-allot. You also authorize us to cover any short position incurred pursuant
to this Section on such terms as we deem advisable. Included in the authority
granted to us by you is the authority to exercise the over-allotment option for
you to purchase the Optional Securities granted by Section 3 of the Underwriting
Agreement. All such purchases and sales shall be made for the accounts of the
several Underwriters as nearly as practicable in proportion to their respective
underwriting obligations. Your net commitment under this Section shall not, at
the end of any business day, exceed 15% of your maximum underwriting obligation.
You will on our demand take up at cost or deliver against payment any Securities
purchased or sold for your account and, if any such other Underwriter defaults
in its corresponding obligation, you will assume your proportionate share of
such obligation without relieving the defaulting Underwriter from liability. You
will be obligated in respect to purchases and sales made for your account
hereunder whether or not the proposed purchase of the Securities is consummated.
Upon request you will advise us of Securities retained by you and unsold and
will sell to us for the account of one or more of the Underwriters such of your
unsold Securities as we may designate, at the public offering price thereof less
such amount as we may determine, but not in excess of the Selected Dealer's
concession with respect thereto. Until the termination of this Agreement
pursuant to Section 11 hereof, or prior notification by us, we shall have the
sole right to effect stabilizing transactions in the Securities. You agree that
until such time you will not make any purchases or sales of any of such
securities except as provided in Section 9 hereof. You also agree to timely
provide us with the information required by Rule 17a-2(d) under the Securities
Exchange Act of 1934, as amended (the "1934 Act").
9. OPEN MARKET TRANSACTIONS. You agree not to bid for, purchase,
attempt to induce others to purchase, or sell, directly or indirectly, any
Securities, except as brokers pursuant to unsolicited orders and as otherwise
provided in this Agreement or in the Underwriting Agreement. You further agree
not to offer the Securities for sale until notified by us, as the Representative
of the Underwriters, that they are released for that purpose.
4
<PAGE>
10. EXPENSES AND SETTLEMENT. We may charge your account with Selected
Dealer's concessions and all transfer taxes on sales made by us for your account
and with your proportionate share (based upon your underwriting obligation) of
all other expenses incurred by us under the terms of this Agreement or the
Underwriting Agreement, in excess of those reimbursed by the Company pursuant to
Section 8 of the Underwriting Agreement, or in connection with the purchase,
carrying, sale or distribution of the Securities. Our determination of the
amount and allocation of expenses shall be conclusive. As soon as practicable
after termination of the provisions referred to in Section 11, the accounts
hereunder will be settled, but we may reserve from distribution such amount as
we deem advisable to cover possible additional expenses. We may at any time make
partial distribution of credit balances or call for payment of debit balances.
Any of your funds in our hands may be held with our general funds without
accountability for interest. Notwithstanding any settlement, you will pay (i)
your proportionate share (based upon your underwriting obligation) of any
liability which may be incurred by the Underwriters, or any of them, based on
the claim that the Underwriters constitute an association, partnership,
unincorporated business or other separate entity, and of any expenses incurred
by us, or by any other Underwriter with our approval, in contesting any such
liability, and (ii) any transfer taxes which may be assessed and paid after such
settlement on account of any sale or transfer for your account.
11. TERMINATION AND SETTLEMENT. This Agreement will terminate (a) at
the close of business on the 30th day after the date of the Underwriting
Agreement; or (b) on such earlier or later date, not more than 30 days after the
date specified in (a), as we may determine; or (c) on the date of termination of
the Underwriting Agreement, if the same shall be terminated as provided by its
terms.
Upon termination of this Agreement, all authorizations, rights and
obligations hereunder will cease, except (a) the mutual obligation to settle
accounts hereunder, (b) your obligation to pay any claims referred to in the
last paragraph of this Section, (c) the obligations with respect to indemnity
set forth in Section 15 hereof (all obligations of which will continue until
fully discharged), and (d) your obligation with respect to purchases which may
be made by us from time to time thereafter to cover any short position with
respect to the offering, all of which will continue until fully discharged, and
except our authority with respect to matters to be determined by us, or by us
and the Company, pursuant to the terms of the Underwriting Agreement, which will
survive the termination of this Agreement.
The accounts arising pursuant to this Agreement will be settled and
paid as soon as practicable after termination. The determination by us of the
amounts to be paid to or by you will be final and conclusive.
5
<PAGE>
Notwithstanding any settlement upon the termination of this Agreement,
you will pay your proportionate share of any amount asserted against and
discharged by the Underwriters, or any of them, based upon the claim that the
Underwriters constitute an association, unincorporated business or other
separate entity, or based upon or arising out of a claim that this Agreement or
the Underwriting Agreement is invalid or illegal for any reason, including any
expense incurred in defending against such claim, and will pay any transfer
taxes which may be assessed thereafter on account of any sale or transfer of
Securities for our account.
12. DEFAULT BY UNDERWRITERS. Default by one or more Underwriters
hereunder or under the Underwriting Agreement shall not release the other
Underwriters from their obligations or affect the liability of any defaulting
Underwriter to the other Underwriters for damages resulting from such default.
In case of default under the Underwriting Agreement by one or more Underwriters,
we may arrange for the purchase by others, including non-defaulting
Underwriters, of Securities not taken up by such defaulting Underwriter and you
will, at our request, increase pro rata with the other non-defaulting
Underwriters the aggregate principal amount of Securities which you are to
purchase, or both, by an amount not exceeding one-ninth of your original
underwriting obligations. In the event any such arrangements are made, the
respective Securities to be purchased by non-defaulting Underwriters and by such
others shall be taken as the basis for the underwriting obligations under this
Agreement.
In the event of default by one or more Underwriters in respect of their
obligations under this Agreement, each non-defaulting Underwriter shall assume
its proportionate share of the obligations under this Agreement of each such
defaulting Underwriter (other than, to the extent stated in the first paragraph
of this Section, the purchase obligation of such defaulting Underwriter).
13. POSITION OF REPRESENTATIVE. We shall be under no liability to you
for any act or omission except for obligations expressly assumed by us in this
Agreement, but no obligation on our part shall be implied or inferred. Nothing
shall constitute the Underwriters, or any of them, an association, partnership,
unincorporated business or other separate entity and the rights and liability of
ourselves and each of the Underwriters are several and not joint.
14. COMPENSATION TO REPRESENTATIVE. As compensation for our services as
Representative, you agree to pay us $___ per share of Common Stock out of the
aggregate underwriting discount attributable to Securities which you agree to
purchase from the Company and/or the Selling Security Holders pursuant to the
Underwriting Agreement. We are authorized to charge your account with such an
amount.
15. INDEMNIFICATION. You will indemnify and hold harmless each other
Underwriter and each person, if any, who controls such Underwriter within the
meaning of Section 15 of the Act to the extent and upon the terms by which each
Underwriter agrees to indemnify the Company in the Underwriting Agreement. Such
indemnity agreement shall survive the termination of any of the provisions of
this Agreement.
6
<PAGE>
In the event that at any time any claim shall be asserted against us as
or as a result of our having acted as Representative, or otherwise involving the
Underwriters generally, relating to the Registration Statement or any
preliminary prospectus or the Prospectus, as from time to time amended or
supplemented, the public offering of the Securities or any of the transactions
contemplated by this Agreement, you authorize us to make such investigation, to
retain such counsel and to take such other action as we shall deem necessary or
desirable under the circumstances, including settlement of any claim or claims
if such course of action shall be recommended by counsel retained by us. You
agree to pay to us, on request, your proportionate share (based upon your
underwriting obligation) of all expenses incurred by us (including, but not
limited to, the disbursements and fees of counsel so retained) in investigating
and defending against such claim or claims, and your proportionate share (based
upon your underwriting obligation) of any liability incurred by us in respect of
such claim or claims, whether such liability shall be the result of a judgment
against us or as a result of any such settlement.
16. BLUE SKY MATTERS. We shall not have any responsibility with respect
to the right of any Underwriter or other person to sell Securities in any
jurisdiction, notwithstanding any information we may furnish in that connection.
You hereby authorize us to take such action as may be necessary or advisable to
qualify the Securities for offering and sale in any jurisdiction. We have caused
to be filed Further State Notices respecting the Securities to be offered to the
public in New York in the form required by, and pursuant to, the provisions of
Article 23A of the General Business Law of the State of New York.
17. TITLE TO SECURITIES. The Securities purchased for the respective
accounts of the several Underwriters shall remain the property of those
Underwriters until sold; and no title to such securities shall in any event pass
to us, as Representative, by virtue of any of the provisions of this Agreement.
18. CAPITAL REQUIREMENTS. Unless the provisions of clause (b) of the
second sentence of the last paragraph of this Agreement are applicable to you,
you confirm that your commitment hereunder will not result in any violation of
Section 8(b) or 15(c) of the 1934 Act or in any violation of any of the rules
and regulations promulgated under the 1934 Act, including, without limitation,
Rule 15c3-1, or any provision of any applicable rules of any securities exchange
to which you are subject or of any restriction imposed upon you by such
exchange.
19. NOTICES AND GOVERNING LAWS. Any notice from you to us shall be
mailed or transmitted by any standard form of written telecommunication to us at
535 Connecticut Avenue, Suite 102, Norwalk, CT 06854. Any notice from us to you
shall be mailed or transmitted by any standard from of written telecommunication
to you at your address as set forth in your Underwriter's Questionnaire. This
Agreement shall be governed by and construed in accordance with the laws of the
State of New York.
7
<PAGE>
We represent that we are a member in good standing of the National
Association of Securities Dealers, Inc. You represent that you are (a) a member
in good standing of such Association or (b) a foreign dealer which is not
eligible for membership in such Association, in which event you will make sales
of any Securities only outside the United States and its territories and
possessions to persons who are not citizens or residents of the United States or
its territories or possessions, and that in making any such sales, you will
comply with such Association's Interpretation with respect to Free-Riding and
Withholding. You further represent that: (i) you will notify each of your
customers with respect to whose account you have investment discretion and to
whose account you intend to sell any Securities that you propose to sell
Securities to such account as a principal and you will obtain the customer's
written consent to such sale; and (ii) you will comply with the requirements of
Rule 15c2-8 under the 1934 Act and have distributed or are distributing copies
of a Preliminary Prospectus to all persons to whom you then expected to mail
confirmations of sale, not less than 48 hours prior to the time it is expected
to mail such confirmations.
Very truly yours,
SOMERSET FINANCIAL GROUP, INC.
By:________________________________
As Representative of the several
Underwriters
Confirmed and accepted as of
the date first above written.
- -------------------------------
Attorney-in-fact for the several
Underwriters named in Schedule I
to the Underwriting Agreement
8
<PAGE>
EXHIBIT 1.3
Somerset Financial Group, Inc.
535 Connecticut Avenue
Suite 102
Norwalk, Connecticut 06854
GLOBAL BRANDS, INC.
1,300,000 SHARES OF COMMON STOCK
SELECTED DEALER AGREEMENT
Dear Sirs: _________, 2000
We, as the Underwriter named in the Prospectus dated ___________ , 2000
have agreed, subject to the terms and conditions of the Underwriting Agreement
dated this date (the "Underwriting Agreement") to purchase from Global Brands,
Inc. (the "Company"), at the prices set forth on the cover of such Prospectus,
the above referred to 1,300,000 Shares of Common Stock and, at our option, from
the Selling Security Holders named in Schedule II of the Underwriting Agreement,
up to an additional 195,000 shares of Common Stock to cover over-allotments
(collectively being called the "Securities"). The Securities and certain of the
terms on which they are being purchased and offered are more fully described in
the enclosed Prospectus. Additional copies of the Prospectus will be supplied to
you in reasonable quantities upon request.
We, as the Underwriter, are offering to certain dealers ("Selected
Dealers"), among whom we are pleased to include you, part of the Securities, at
the public offering price less a concession of $.___ per Share of Common Stock.
The offering to Selected Dealers is made subject to the issuance and delivery of
the Securities to us and their acceptance by us, to the approval of legal
matters by our counsel, and to the terms and conditions hereof, and may be made
by us on the basis of the reservation of Securities or an allotment against
subscription, or otherwise in our discretion.
The initial public offering prices of the Securities are as set forth
in the Prospectus. With our consent, Selected Dealers may allow a re-allowance
of not in excess of $ -0- per Share of Common Stock in selling the Shares of
Common Stock to other dealers meeting the requirements of the specifications set
forth in the affirmation of dealers contained in the attached Acceptance and
Order. Upon our request, you will notify us of the identity of any dealer to
whom you allow such a reallowance and any Selected Dealer from whom you receive
such a re-allowance.
1
<PAGE>
All orders will be strictly subject to confirmation and we reserve the
right in our uncontrolled discretion to reject any order in whole or in part, to
accept or reject orders in the order of their receipt or otherwise, and to
allot. You are not authorized to give any information or make any representation
other than as set forth in the Prospectus in connection with the sale of any of
the Securities. No dealer is authorized to act as agent for the Underwriter, or
for the Company, when offering any of the Securities. Nothing contained herein
shall constitute the Selected Dealers partners with us or with one another.
Upon release by us, you may offer the Securities at the public offering
price, subject to the terms and conditions hereof. We may, and the Selected
Dealers may, with our consent, purchase Securities from and sell Securities to
each other at the public offering price less a concession not in excess of the
concession to Selected Dealers.
Payment for Securities purchased by you is to be made at our office (or
at such other place as instructed) at the public offering price, on such date as
we may advise, on one day's notice to you, by certified or official bank check
in New York Clearing House funds payable to our order. Delivery to you of
certificates for the Securities will be made as soon as is practicable
thereafter. Unless specifically authorized by us, payment by you may not be
deferred until delivery of certificates to you. The concession payable to you
will be paid as soon as practicable after the closing.
This Agreement shall terminate at the close of business on the 30th day
after the effective date of the Registration Statement. We may terminate this
Agreement at any time prior thereto by notice to you. Notwithstanding the
termination of this Agreement, you shall remain liable for your proportionate
share of any transfer tax or any liability which may be asserted or assessed
against us or Selected Dealers based upon the claim that the Underwriter and the
Selected Dealers, or any of them, constitute a partnership, association,
unincorporated business or other entity, including in each case your
proportionate share of expenses incurred in defending against any such claim or
liability.
In the event that, prior to the termination of this Agreement we
purchase in the open market or otherwise any Securities delivered to you, you
agree to repay to us for the account of the Underwriter the amount of the above
concession to Selected Dealers plus brokerage commissions and any transfer taxes
paid in connection with such purchase; which amounts can be withheld from the
concession otherwise payable to you hereunder. Certificates for Securities
delivered on any such purchase need not be the identical certificates originally
issued to you.
At any time prior to the termination of this Agreement, you will, upon
our request, report to us the number of Securities purchased by you under this
Agreement which then remain unsold and will, upon our request, sell to us for
the account of the Underwriter the number of such unsold Securities that we may
designate, at the public offering price less an amount to be determined by us
not in excess of the concession allowed you.
2
<PAGE>
We shall have full authority to take such action as we may deem
advisable in respect of all matters pertaining to the offering, including,
without limitation, stabilization and over-allotment. We shall be under no
liability to you except for our lack of good faith and for obligations assumed
by us in this Agreement, except that you do not waive any rights that you may
have under the Securities Act of 1933 (the "1933 Act") or the rules and
regulations thereunder.
Upon application to us, we will inform you of the states and other
jurisdictions of the United States in which it is believed that the Securities
are qualified for sale under, or are exempt from the requirements of, their
respective securities laws, but we assume no responsibility with respect to your
right to sell Securities in any jurisdiction. We have filed a Further State
Notice with respect to the Securities with the Department of State of the State
of New York.
You confirm that you are familiar with Rule 15c2-8 under the Securities
Exchange Act of 1934 (the "1934 Act"), relating to the distribution of
preliminary and final prospectuses, and confirm that you have complied and will
comply therewith (whether or not the Company is subject to the reporting
requirements of Section 13 or 15(d) of the 1934 Act). We will make available to
you, to the extent made available to us by the Company such number of copies of
the Prospectus as you may reasonably request for purposes contemplated by the
1933 Act, the 1934 Act, and the rules and regulations thereunder.
Your attention is directed to Regulation M under the 1934 Act, which
contains certain prohibitions against trading by a person interested in a
distribution until such person has completed its participation in the
distribution. You confirm that you will at all times comply with the provisions
of such Regulation M in connection with this offering.
Any notice from us shall be deemed to have been duly given if
telephoned, and subsequently mailed or transmitted by any standard form of
written tele-communication to you at the address to which this Agreement is
mailed, or if so mailed or transmitted in the first instance.
Please advise us promptly by telephone or any standard form of written
tele-communication of the principal amount of Securities ordered by you and
confirm your agreement hereto by signing the Acceptance and Order on the
enclosed duplicate hereof and returning promptly such signed duplicate copy to
Somerset Financial Group, Inc., 535 Connecticut Avenue, Suite 102, Norwalk, CT
06854.
Upon receipt thereof, this instrument and such signed duplicate copy
will evidence the agreement between us.
Very truly yours,
SOMERSET FINANCIAL GROUP, INC.
By:________________________________________
William Schloth, Chief Financial Officer
3
<PAGE>
ACCEPTANCE AND ORDER
Somerset Financial Group, Inc.
535 Connecticut Avenue
Suite 102
Norwalk, CT 06854
Dear Sirs:
We hereby enter our order for ______ Shares of Common Stock of Global
Brands, Inc. under the terms and conditions of the foregoing Agreement.
We agree to all the terms and conditions stated in the foregoing
Agreement. We acknowledge receipt of the Prospectus relating to the above
Securities and we further state that in entering this order we have relied upon
said Prospectus and no other statements whatsoever, written or oral. We affirm
that we are 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, or possessions
and not registered under the Securities Exchange Act of 1934 and not eligible
for membership in the NASD, who hereby agrees to make no sales within the United
States, its territories or its possessions or to persons who are nationals
thereof or residents therein, and in making any sales, to comply with the NASD's
interpretation with respect to free-riding and withholding, as well as all other
pertinent interpretations of the NASD that may be applicable to us. We also
affirm and agree that we will promptly re-offer any Securities purchased by us
in conformity with the terms of the offering and in conformity with Rules 2730,
2740, 2420 and 2750 of the NASD Conduct Rules and all applicable Rules and
Regulations promulgated under the Securities Exchange Act of 1934.
Date: ___________, 2000
____________________________________
(Name of Selected Dealer)
By:____________________________________
(Authorized Signature)
Address:_______________________________
_______________________________________
4
EXHIBIT 3.6
CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION
OF
SWISS NATURAL BRANDS, INC.
SWISS NATURAL BRANDS, INC. (hereinafter called the "corporation"), a
corporation organized and existing under and by virtue of the General
Corporation Law of the State of Delaware, does hereby certify:
1. The name of the corporation is SWISS NATURAL BRANDS, INC.
2. The certificate of incorporation of the corporation is hereby
amended by striking out Article FIRST thereof and by substituting in lieu of
said Article the following new Article FIRST:
The name of the Corporation is GLOBAL BRANDS, INC.
3. The amendment of the certificate of incorporation herein certified
has been duly adopted in accordance with the provisions of Section 228 and 242
of the General Corporation Law of the State of Delaware. Prompt written notice
of the adoption of the amendment herein certified has been given to those
stockholders who have not been consented in writing thereto, as provided in
Section 228 of the General Corporation Law of the State of Delaware.
Executed on this 11th day of April, 2000.
SWISS NATURAL BRANDS, INC.
By: /s/ Herbert Paul
----------------------------
Herbert Paul
President
<PAGE>
EXHIBIT 3.7
AMENDMENT TO CERTIFICATE OF DESIGNATIONS, RIGHTS AND PREFERENCES OF A
SERIES OF PREFERRED STOCK (AS AMENDED BY THE AMENDMENT THERETO EFFECTIVE OCTOBER
1, 1999, THE "CERTIFICATE OF DESIGNATIONS") BY RESOLUTION OF THE BOARD OF
DIRECTORS PROVIDING FOR AN ISSUE OF 1,206,000 SHARES OF A SERIES OF PREFERRED
STOCK, $.01 PAR VALUE, DESIGNATED AS THE "SERIES A CONVERTIBLE PREFERRED
STOCK").
We, Ralph M. Ferrante, Chairman of the Board and Secretary, and Herbert
M. Paul, President and Assistant Secretary, of Swiss Natural Brands, Inc.,
(formerly Swiss Natural Foods, Inc., hereinafter called the "Corporation"),
pursuant to the provisions of Section 151 and 242 of the General Corporation Law
of the State of Delaware, do hereby make this Amendment to the Certificate of
Designations under the corporate seal of the Corporation and do hereby state and
certify that pursuant to the authority expressly vested in the Board of
Directors of the Corporation by the Certificate of Incorporation, the Board of
Directors, with the consent of all holders of outstanding shares of the Series A
Convertible Preferred Stock, duly adopt the following resolutions:
RESOLVED, that certain of the preferences and rights, qualifications,
limitations and restrictions of the Series A Convertible Preferred Stock be
amended as follows:
Section 7 of the Certificate of Designations is hereby amended to read
as follows:
"7. Conversion Rights. (a) The Series A Preferred Shares shall be
convertible upon the earliest to occur of (i) June 30, 2000 if the closing of
the Corporation's initial public offering of securities and the closing of the
sale of the over-allotment shares thereunder have not occurred prior to such
date; (ii) two (2) years after the closing date of the Corporation's initial
public offering of securities; (iii) the first fiscal year of the Corporation or
any trailing 12 (twelve) month period in which the Corporation's financial
statement shows earnings before interest, taxes, charges resulting from stock,
debenture, or stock option issuances and underwriters' consulting fees have
equaled or exceeded $750,000; (iv) the closing date of any acquisition of all or
a portion of the equity securities of the Corporation, the acquisition of all or
a portion of its assets, the merger of the Corporation with or into another
entity not related to the Corporation or any of its officers or directors,
regardless of whether the Corporation is the surviving entity, or any additional
equity financing by the Corporation; or (v) the date on which the closing price
of the Common Stock as reported by the NASDAQ system or its successor, or any
national securities exchange on which such Common Stock is listed (or if not so
reported, the average of the closing bid and asked prices as furnished by two
members of the NASD selected by the Corporation for that purpose) is equal to or
greater than ten dollars ($10.00) per share.
RESOLVED, that all preferences, rights, qualifications, limitations and
restrictions of the Series A Convertible Preferred Stock, other than those set
forth in the preceding paragraph, shall remain in full force and effect, as set
forth in the Certificate of Designations.
IN WITNESS WHEREOF, said Swiss Natural Brands, Inc. has caused this
Amendment to the Certificate of Designations to be signed by Ralph M. Ferrante,
its Chairman of the Board and attested to by Herbert M. Paul, its Assistant
Secretary as of the 6th day of April 2000.
SWISS NATURAL BRANDS, INC.
By: /s/ Ralph M. Ferrante
-----------------------
Ralph M. Ferrante
Chairman of the Board
Corporate Seal Attest:
By: /s/ Herbert Paul
-----------------------
Herbert M. Paul
Assistant Secretary
<PAGE>
EXHIBIT 3.8
AMENDMENT OF CERTIFICATE OF DESIGNATIONS, RIGHTS AND PREFERENCES OF A
SERIES OF PREFERRED STOCK (AS AMENDED BY THE AMENDMENTS THERETO
EFFECTIVE OCTOBER 1, 1999 AND APRIL 11, 2000, THE "CERTIFICATE OF
DESIGNATIONS" BY RESOLUTION OF THE BOARD OF DIRECTORS PROVIDING FOR AN
ISSUE OF 1,206,000 SHARES OF SERIES OF PREFERRED STOCK, $.01 PAR VALUE,
DESIGNATED AS THE "SERIES A CONVERTIBLE PREFERRED STOCK".
We, Ralph M. Ferrante, Chairman of the Board and Secretary,
and Herbert Paul, President and Assistant Secretary, of Global Brands, Inc.
(formerly, Swiss Natural Brands, Inc., hereinafter called the "Corporation"),
pursuant to the provision of Sections 151 and 242 of the General Corporation Law
of the State of Delaware, do hereby make this Amendment to the Certificate of
Designations under the corporate seal of the Corporation and do hereby state and
certify that pursuant to the authority expressly vested in the Board of
Directors of the Corporation by the Certificate of Incorporation, the Board of
Directors, with the consent of all holders of outstanding shares of the Series A
Convertible Preferred Stock, duly adopt the following resolution:
RESOLVED, that certain of the preferences and rights,
qualifications, limitations and restrictions of the Series A Convertible
Preferred Stock be amended as follows:
Dividends. Section 4 of the Certificate of Designations shall
be amended to read as follows:
"4. Dividends. The holders of outstanding Series A Convertible
Preferred Stock, in preference to the holders of shares of the Common Stock and
any other capital stock of the Corporation ranking junior to the Series A
Convertible Preferred Stock as to the payment of dividends, shall be entitled to
receive out of funds legally available for the purpose, cumulative cash
dividends at the annual rate of $.08 per share in equal quarterly payments on
the first day of March, June, September, and December of each year (each, a
"Quarterly Dividend Payment Date"), with payments commencing on June 1, 2001.
Dividends payable pursuant to this Section 4 shall begin to
accrue and be cumulative from March 1, 2001. Accrued but unpaid dividends shall
not bear interest and shall be paid in full prior to the payment of any
dividends to the holders of Common Stock. Dividends paid on the shares of Series
A Convertible Preferred Stock in an amount less than the total amount of such
dividends at the time accrued and payable on such shares shall be allocated pro
rata on a share-by-share basis among all such shares at the time outstanding.
The Board of Directors may fix a record date for the determination of holders of
shares of Series A Convertible Preferred Stock entitled to receive payment of
dividends, which record date shall be not less than ten days and not more than
sixty days prior to the date fixed for the payment thereof. Thereafter, the
Series A Convertible Preferred Stock will participate in any dividends declared
on the Common Stock, on an as converted basis."
RESOLVED, that all preferences, rights, qualifications,
limitations and restrictions of the Series A Convertible Preferred Stock, other
than those set forth above, shall remain in full force and effect, as set forth
in the Certificate of Designations.
IN WITNESS WHEREOF, said GLOBAL BRANDS, INC. has caused this
Amendment to the Certificate of Designations to be signed by Ralph M. Ferrante,
its Chairman of the Board and attested to by Herbert M. Paul, its Assistant
Secretary as of the 18th day of May, 2000.
GLOBAL BRANDS, INC.
By: /s/ Ralph M. Ferrante By: /s/ Herbert M. Paul
- ------------------------- -----------------------
Ralph M. Ferrante Herbert M. Paul
Chairman of the Board Assistant Secretary
EXHIBIT 4.2
No sale, offer to sell or transfer of the securities represented by this
certificate or any interest therein shall be made unless a registration
statement under the Securities Act of 1933, as amended, with respect to such
transaction is then in effect, or the issuer has received an opinion of counsel
satisfactory to it that such transfer does not require registration under that
Act.
This Warrant will be void after 5:00 p.m. New York time on , 2005 (i.e.
five years from the effective date of the Registration Statement).
REPRESENTATIVE'S WARRANT
WARRANT NO. 1
To Subscribe for and Purchase Shares of
GLOBAL BRANDS, INC.
(Transferability Restricted as Provided in Paragraph 8 Below)
THIS CERTIFIES THAT, for value received, ___________ or registered
assigns, is entitled to subscribe for and purchase from GLOBAL BRANDS, INC.,
incorporated under the laws of the State of Delaware (the "Company") up to
_________fully paid and non-assessable shares of Common Stock (the "Shares") of
the Company, as hereinafter defined, at the "Purchase Price" and during the
period hereinafter set forth, subject, however, to the provisions and upon the
terms and conditions hereinafter set forth. This Warrant is one of an issue of
the Company's Common Stock Purchase Warrants (herein called the "Warrants"),
identical in all respects except as to the names of the holders thereof and the
number of Shares purchasable thereunder, representing on the original issue
thereof rights to purchase up to 130,000 Shares.
1. As used herein:
(a) "Common Stock" or "Common Shares" shall initially refer to
the Company's Common Stock, $.01 par value, per share as more fully set forth in
Section 5 hereof.
(b) "Purchase Price" shall be $10.3125 per share (165% of the
public offering price per share) which is subject to adjustment pursuant to
Section 4 hereof.
(c) "Underwriter" or "Representative" shall refer to Somerset
Financial Group, Inc.
(d) "Underwriting Agreement" shall refer to the Underwriting
Agreement dated as of ___________, 2000 between the Company and the Underwriter.
<PAGE>
(e) "Warrants" or "Representative's Warrants" shall refer to
Warrants to purchase an aggregate of up to 130,000 Shares issued to the
Underwriter or its designees by the Company pursuant to the Underwriting
Agreement, as such may be adjusted from time to time pursuant to the terms of
Section 4 and including any Warrants represented by any certificate issued from
time to time in connection with the transfer, partial exercise, exchange of any
Warrants or in connection with a lost, stolen, mutilated or destroyed Warrant
certificate, if any, or to reflect an adjusted number of Shares.
(f) "Underlying Securities" shall refer to and include the
Common Shares issuable or issued upon exercise of the Representative's Warrants.
(g) "Holders" shall mean the registered holder of such
Representative's Warrants or any issued Underlying Securities.
(h) "Effective Date" shall refer to the effective date of the
Form SB-2 Registration Statement File No. 333-85683 with the Securities and
Exchange Commission.
(i) "Transfer Agent" shall mean Corporate Stock Transfer, Inc.
2. The purchase rights represented by this Warrant may be exercised by
the holder hereof, in whole or in part at any time, and from time to time,
during the period commencing on the Effective Date until , 2005 (the "Expiration
Date"), by the presentation of this Warrant, with the purchase form attached
duly executed, at the Company's office (or such office or agency of the Company
as it may designate in writing to the Holder hereof by notice pursuant to
Section 14 hereof), and upon payment by the Holder to the Company in cash, or by
certified check or bank draft of the Purchase Price for such Shares of Common
Stock. The Company agrees that the Holder hereof shall be deemed the record
owner of such Underlying Securities as of the close of business on the date on
which this Warrant together with payment of the exercise price shall have been
presented to the Company. Certificates for the Underlying Securities so
purchased shall be delivered to the Holder hereof by the Transfer Agent within a
reasonable time, not exceeding five (5) days, after the rights represented by
this Warrant shall have been so exercised. If this Warrant shall be exercised in
part only, the Company shall, upon surrender of this Warrant for cancellation,
deliver a new Representative's Warrant evidencing the rights of the Holder
hereof to purchase the balance of the Shares which such Holder is entitled to
purchase hereunder. Exercise in full of the rights represented by this Warrant
shall not extinguish the rights granted under Section 9 hereof.
3. Subject to the provisions of Section 8 hereof, (i) this Warrant is
exchangeable at the option of the Holder at the aforesaid office of the Company
for other Representative's Warrants of different denominations entitling the
Holder thereof to purchase in the aggregate the same number of Shares of Common
Stock as are purchasable hereunder; and (ii) this Warrant may be divided or
combined with other Representative's Warrants which carry the same rights, in
either case, upon presentation hereof at the aforesaid office of the Company
together with a written notice, signed by the Holder hereof, specifying the
names and denominations in which new Representative's Warrants are to be issued,
and the payment of any transfer tax due in connection therewith.
2
<PAGE>
4. Subject and pursuant to the provisions of this Section 4, the
Purchase Price and number of Common Shares subject to this Warrant shall be
subject to adjustment from time to time as set forth hereinafter.
(A) If the Company shall, at any time, subdivide its
outstanding Common Shares by recapitalization, reclassification, split up
thereof, or other such issuance without additional consideration, the
appropriate Purchase Price immediately prior to such subdivision shall be
proportionately decreased, and if the Company shall at any time combine the
outstanding Common Shares by recapitalization, reclassification or combination
thereof, the Purchase Price immediately prior to such combination shall be
proportionately increased. Any such adjustment to the Purchase Price or the
corresponding adjustment to the Purchase Price shall become effective at the
close of business on the record date for such subdivision or combination. No
adjustment to the Purchase Price and the number of shares issuable upon exercise
of this Warrant shall be required if such adjustment provides the holders of
this Warrant with disproportionate rights, privileges and economic benefits
which are not provided to the public shareholders.
(B) In the event that prior to the Representative's Warrant's
expiration date the Company adopts a resolution to merge, consolidate, or sell
percentages in all of its assets, each Warrant holder upon the exercise of his
Representative's Warrant will be entitled to receive the same treatment as a
holder of any other share of Common Stock. In the event the Company adopts a
resolution for the liquidation, dissolution, or winding up of the Company's
business, the Company will give written notice of such adoption of a resolution
to the registered holders of the Representative's Warrants. Thereupon all
liquidation and dissolution rights under this Warrant will terminate at the end
of thirty (30) days from the date of the notice to the extent not exercised
within those thirty (30) days.
(C) If any capital reorganization or reclassification of the
capital stock of the Company or consolidation or merger of the Company with
another corporation, shall be effected in such a way that holders of Common
Stock shall be entitled to receive stock, securities, cash or assets with
respect to or in exchange for Common Stock, then, as a condition of such
reorganization, reclassification, consolidation, merger or sale, the Company or
such successor or purchasing corporation, as the case may be, shall be obligated
to provide for and notify each registered holder of the Representative's Warrant
that such holder shall have the right thereafter and until the expiration date
to exercise such Warrant for the kind and amount of stock, securities, cash or
assets receivable upon such reorganization, reclassification, consolidation,
merger or sale by a holder of the number of shares of Common Stock for the
purchase of which such Warrant might have been exercised immediately prior to
such reorganization, reclassification, consolidation, merger or sale, subject to
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 4.
(D) In case at any time the Company shall declare a dividend
or make any other distribution upon any stock of the Company payable in Common
Stock, then such Common Stock issuable in payment of such dividend or
distribution shall be deemed to have been issued or sold without consideration.
3
<PAGE>
(E) Upon any adjustment of the appropriate respective Purchase
Price as hereinabove provided, the number of Common Shares issuable upon
exercise of each class of Warrant shall be changed to the number of shares
determined by dividing (i) the aggregate Purchase Price payable for the purchase
of all shares issuable upon exercise of that class of Warrant immediately prior
to such adjustment by (ii) the appropriate Purchase Price per share in effect
immediately after such adjustment.
(F) No adjustment in the Purchase Price shall be required
under Section 4 hereof unless such adjustment would require an increase or
decrease in such price of at least 1% provided, however, that any adjustments
which by reason of the foregoing are not required at the time to be made shall
be carried forward and taken into account and included in determining the amount
of any subsequent adjustment, and provided further, however, that in case the
Company shall at any time subdivide or combine the outstanding Common Shares as
a dividend, said amount of 1% per share shall forthwith be proportionately
increased in the case of a combination or decreased in the case of a subdivision
or stock dividend so as to appropriately reflect the same.
(G) On the effective date of any new Purchase Price the number
of shares as to which this Warrant may be exercised shall be increased or
decreased so that the total sum payable to the Company on the exercise of this
Warrant shall remain constant.
(H) The form of Representative's Warrant need not be changed
because of any change pursuant to this Article, and Representative's Warrants
issued after such change may state the Purchase Price and the same number of
shares as is stated in the Representative's Warrants initially issued pursuant
to this Warrant. However, the Company may at any time in its sole discretion
(which shall be conclusive) make any change in the form of Representative's
Warrant that the Company may deem appropriate and that does not affect the
substance thereof, and any Representative's Warrant thereafter issued or
countersigned, whether in exchange or substitution for an outstanding Warrant or
otherwise, may be in the form as so changed.
5. For the purposes of this Warrant, the terms "Common Shares" or
"Common Stock" shall mean (i) the class of stock designated as the Common Stock,
$.01 par value, of the Company on the date set forth on the first page hereof or
(ii) any other class of stock resulting from successive changes or
re-classifications of such Common Stock consisting solely of changes in par
value, or from no par value to par value, or from par value to no par value. If
at any time, as a result of an adjustment made pursuant to Section 4, the
securities or other property obtainable upon exercise of this Warrant shall
include shares or other securities of the Company other than Common Shares or
securities of another corporation or other property, thereafter, the number of
such other shares or other securities or property so obtainable shall be subject
to adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Common Shares contained in
Section 4 and all other provisions of this Warrant with respect to Common Shares
shall apply on like terms to any such other shares or other securities or
property. Subject to the foregoing, and unless the context requires otherwise,
all references herein to Common Shares shall, in the event of an adjustment
pursuant to Section 4, be deemed to refer also to any other securities or
property then obtainable as a result of such adjustments.
4
<PAGE>
6. The Company covenants and agrees that:
(a) During the period within which the rights represented by
the Representative's Warrant may be exercised, the Company shall, at all times,
reserve and keep available out of its authorized capital stock, solely for the
purposes of issuance upon exercise of this Warrant, such number of its Common
Shares as shall be issuable upon the exercise of this Warrant and at its expense
will obtain the listing thereof on all national securities exchanges on which
the Common Shares are then listed; and if at any time the number of authorized
Common Shares shall not be sufficient to effect the exercise of this Warrant,
the Company will take such corporate action as may be necessary to increase its
authorized but unissued Common Shares to such number of shares as shall be
sufficient for such purpose; the Company shall have analogous obligations with
respect to any other securities or property issuable upon exercise of this
Warrant.
(b) All Common Shares which may be issued upon exercise of the
rights represented by this Warrant will, upon issuance be validly issued, fully
paid, nonassessable and free from all taxes, liens and charges with respect to
the issuance thereof.
(c) All original issue taxes payable in respect of the
issuance of Common Shares upon the exercise of the rights represented by this
Warrant shall be borne by the Company but in no event shall the Company be
responsible or liable for income taxes or transfer taxes upon the transfer of
any Representative's Warrants.
7. Until exercised, this Warrant shall not entitle the Holder hereof to
any voting rights or other rights as a shareholder of the Company, except that
the Holder of this Warrant shall be deemed to be a shareholder of this Company
for the purpose of bringing suit on the ground that the issuance of shares of
stock of the Company is improper under the New York Corporation Law.
8. This Warrant and the Underlying Securities shall not be sold,
transferred, assigned or hypothecated for a period of twelve (12) months from
the Effective Date, except to officers or partners of the Representative, and/or
the other underwriters and/or selected dealers who participated in such
offering, or the officers or partners of such underwriters and/or selected
dealers. In no event shall this Warrant and the Underlying Securities be sold,
transferred, assigned or hypothecated except in conformity with the applicable
provisions of the Securities Act of 1933, as then in force (the "Act"), or any
similar Federal statute then in force, and all applicable "Blue Sky" laws.
9. The Holder of this Warrant, by acceptance hereof, agrees that, prior
to the disposition of this Warrant or of any Underlying Securities theretofore
purchased upon the exercise hereof, under circumstances that might require
registration of such securities under the Act, or any similar federal statute
then in force, such Holder will give written notice to the Company expressing
such Holder's intention of effecting such disposition, and describing briefly
such Holder's intention as to the disposition to be made of this Warrant and/or
the Underlying Securities theretofore issued upon exercise hereof. Promptly upon
receiving such notice, the Company shall present copies thereof to its counsel
and the provisions of the following subdivisions shall apply:
5
<PAGE>
(a) If, in the opinion of such counsel, the proposed
disposition does not require registration under the Act, or any similar federal
statute then in force, of this Warrant and/or the securities issuable or issued
upon the exercise of this Warrant, the Company shall, as promptly as
practicable, notify the Holder hereof of such opinion, whereupon such holder
shall be entitled to dispose of this Warrant and/or such Underlying Securities
theretofore issued upon the exercise hereof, all in accordance with the terms of
the notice delivered by such Holder to the Company.
(b) If, in the opinion of such counsel, such proposed
disposition requires such registration under the Act, or similar federal statute
then in effect, of this Warrant and/or the Underlying Securities issuable or
issued upon the exercise of this Warrant, the Company shall promptly give
written notice of such opinion to the Holder hereof and to the then holders of
the securities theretofore issued upon the exercise of this Warrant at the
respective addresses thereof shown on the books of the Company. The registration
rights contained in Section 15 of the Underwriting Agreement are incorporated by
reference as if set forth in their entirety herein.
10. The Company agrees to indemnify and hold harmless the holder of
this Warrant, or of securities issuable or issued upon the exercise hereof, from
and against any claims and liabilities caused by any untrue statement of a
material fact, or omission to state a material fact required to be stated, in
any such registration statement or prospectus except insofar as such claims or
liabilities are caused by any such untrue statement or omission based on
information furnished in writing to the Company by such holder, or by any other
such holder affiliated with the holder who seeks indemnification, as to which
the holder hereof, by acceptance hereof, agrees to indemnify and hold harmless
the Company.
11. If this Warrant, or any of the securities issuable pursuant hereto,
require qualification or registration with, or approval of, any governmental
official or authority (other than registration under the Act, or any similar
federal statute at the time in force), before such securities may be issued on
the exercise hereof, the Company, at its expense, will take all requisite action
in connection with such qualification, and will use its best efforts to cause
such securities and/or this Warrant to be duly registered or approved, as may be
required.
12. This Warrant is exchangeable, upon its surrender by the registered
holder at such office or agency of the Company as may be designated by the
Company, for new Representative's Warrants of like tenor, representing, in the
aggregate, the right to subscribe for and purchase the number of Common Shares
that may be subscribed for and purchased hereunder, each of such new
Representative's Warrants to represent the right to subscribe for and purchase
such number of Common Shares as shall be designated by the registered holder at
the time of such surrender. Upon receipt of evidence satisfactory to the Company
of the loss, theft, destruction or mutilation of this Warrant, and, in the case
of any such loss, theft or destruction, upon delivery of a bond of indemnity
satisfactory to the Company, or in the case of such mutilation, upon surrender
or cancellation of this Warrant, the Company will issue to the registered holder
a new Representative's Warrant of like tenor, in lieu of this Warrant,
representing the right to subscribe for and purchase the number of Common Shares
that may be subscribed for and purchased hereunder. Nothing herein is intended
to authorize the transfer of this Warrant except as permitted under Paragraph 8.
6
<PAGE>
13. Every holder hereof, by accepting the same, agrees with any
subsequent holder hereof and with the Company that this Warrant and all rights
hereunder are issued and shall be held subject to all of the terms, conditions,
limitations and provisions set forth in this Warrant, and further agrees that
the Company and its transfer agent may deem and treat the registered holder of
this Warrant as the absolute owner hereof for all purposes and shall not be
affected by any notice to the contrary.
14. All notices required hereunder shall be given by first-class mail,
postage prepaid; if given by the holder hereof, addressed to the Company at 1031
Route 9W, Grandview, New York 10960 or such other address as the Company may
designate in writing to the holder hereof; and if given by the Company,
addressed to the holder at the address of the holder shown on the books of the
Company. The validity, construction and enforcement of this Warrant shall be
governed by the laws of the State of New York and jurisdiction is hereby vested
in the Courts of said State in the event of the institution of any legal action
under this Warrant.
IN WITNESS WHEREOF, GLOBAL BRANDS, INC. has caused this Warrant to be
signed by its duly authorized officers under its corporate seal, to be dated as
of , 2000.
GLOBAL BRANDS, INC.
(Corporate Seal)
By:________________________
Herbert Paul, President
Attest:
__________________________________________
Ralph M. Ferrante, Chief Executive Officer
7
<PAGE>
PURCHASE FORM
To Be Executed
Upon Exercise of Warrant
The undersigned hereby exercises the right to purchase Common Shares evidenced
by the within Warrant, according to the terms and conditions thereof, and
herewith makes payment of the purchase price in full. The undersigned requests
that certificates for such shares shall be issued in the name set forth below.
Dated: , 200
___________________________________
Signature
___________________________________
Print Name of Signatory
___________________________________
Name to whom certificates are to
be issued if different from above
Address: __________________________
___________________________________
Social Security No. or other
identifying number ________________
___________________________________
If said number of shares shall not be all the shares purchasable under
the within Warrant, the undersigned requests that a new Warrant for the
unexercised portion shall be registered in the name of :
___________________________________
(Please Print)
Address: __________________________
___________________________________
Social Security No. or other
identifying number ________________
___________________________________
Signature
8
<PAGE>
FORM OF ASSIGNMENT
FOR VALUE RECEIVED , hereby
sells assigns and transfers to , Soc. Sec. No.
[ ] the within Warrant, together with all rights, title and interest therein,
and does hereby irrevocably constitute and appoint attorney to transfer such
Warrant on the register of the within named Company, with full power of
substitution.
___________________________________
Signature
Dated: , 200
Signature Guaranteed:
___________________________________
9
EXHIBIT 10.17
GLOBAL BRANDS, INC.
1031 ROUTE 9W
GRANDVIEW, NEW YORK 10960
Somerset Financial Group, Inc. ___________, 2000
535 Connecticut Avenue
Suite 102
Norwalk, CT 06854
Gentlemen:
In connection with an initial public offering ("IPO") of Global Brands,
Inc. (the "Company"), which offering is being underwritten by Somerset Financial
Group, Inc. ("Somerset") the following sets forth our understanding with respect
to Somerset providing financial advisory services for the Company.
1. For a period of two (2) years commencing on the date hereof,
Somerset will render financial consulting services to the Company as such
services shall be required but in no event shall such services require more than
two business days per month. Your services shall include the following:
(a) to advise and assist in matters pertaining to the financial
requirements of our corporation and to assist, as and when required, in
formulating plans and methods of financing;
(b) to prepare and present financial reports required by us and to
analyze proposals relating to obtaining funds for our business, mergers and/or
acquisitions;
(c) to assist in our general relationship with the financial
community including brokers, stockholders, financial analysts, investment
bankers, and institutions; and
(d) to assist in obtaining financial management, and technical and
advisory services, and financial and corporate public relations, as may be
requested or advisable.
2. All services required to be performed hereunder shall be requested
by the Company in writing and upon not less than seven business days notice,
unless such notice is waived by you. Such notice shall be to the address
specified above or to such other place as you shall designate to us in writing.
3. For Somerset's services to be performed hereunder, and for
Somerset's continued availability to perform such services, the Company will pay
Somerset a fee in an amount equal to two (2%) percent of the gross proceeds of
this offering (including the Over-Allotment Option) for services for two (2)
years from the date hereof which sum is payable in full in advance at each
closing date of the IPO. Further, we will reimburse Somerset for such reasonable
out-of-pocket expenses as may be incurred by Somerset on the Company's behalf,
but only to the extent authorized by the Company.
<PAGE>
4. This Agreement has been duly approved by the Company's Board of
Directors.
5. Somerset shall have no authority to bind the Company to any contract
or commitment, inasmuch as Somerset's services hereunder are advisory in nature.
6. Somerset will maintain in confidence all proprietary, non-published
information obtained by you with respect to the Company during the course of the
performance of your services hereunder and Somerset shall not use any of the
same for your own benefit or disclose any of the same to any third party,
without the Company's prior written consent, both during and after the term of
this Agreement.
7. This Agreement shall not be assignable by either party without the
other party's prior written consent.
8. This Agreement shall be binding upon, and shall inure to the benefit
of the Company's and Somerset's respective successors and permitted assigns.
9. The foregoing represents the sole and entire agreement between us
with respect to the subject matter hereof and supersedes any prior agreements
between us with respect thereto. This Agreement may not be modified, amended or
waived except by a written instrument signed by the party to be charged. This
Agreement shall be governed by and construed in accordance with the internal
laws of the State of New York, without regard to the principles of conflicts of
laws of such State.
Please signify your agreement to the foregoing by signing and returning
to us the enclosed copy of this Agreement which will thereupon constitute an
agreement between us.
Very truly yours,
GLOBAL BRANDS, INC.
BY__________________________
Herbert Paul, President
Agreed and Consented to:
SOMERSET FINANCIAL GROUP, INC.
BY________________________________________
William Schloth, Chief Financial Officer
EXHIBIT 23.1
INDEPENDENT AUDITOR'S CONSENT
To the Stockholders of
Global Brands, Inc.
(formerly Swiss Natural Brands, Inc.)
We hereby consent to the use in the Prospectus constituting part of the
Registration Statement on Form SB-2 of our report dated April 7, 2000, except
for the last sentence of the first paragraph of Note 1, as to which the date is
April 12, 2000, and Note 8, as to which the date is May 22, 2000 on the
financial statements of Global Brands, Inc. (formerly Swiss Natural Brands,
Inc.), which appear in such Prospectus. We also consent to the reference to our
Firm under the captions "Experts" and "Summary of Financial Data" in such
Prospectus.
GOLDSTEIN GOLUB KESSLER LLP
New York, New York
May 23, 2000
