As filed with the Securities and Exchange Commission on December 30, 1999
Registration No. 333-81829
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 5 TO
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
BIO-AQUA SYSTEMS, INC.
(Name of Small Business Issuer in its Charter)
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<S> <C> <C>
FLORIDA ____ 65-0926223
(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Numbers) Identification No.)
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1900 Glades Road, Suite 351
Boca Raton, Florida 33431 1900 Glades Road, Suite 351
(561) 416-8930 Boca Raton, Florida 33431
(Address and Telephone Number of (Address of Principal Place of Business or
Principal Executive Offices) Intended Principal Place of Business)
David Mayer
BIO-AQUA SYSTEMS, INC.
1900 Glades Road, Suite 351
Boca Raton, Florida 33431
(561) 416-8930
(Name, address and telephone number of agent for service)
Copies to:
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Charles B. Pearlman, Esq. Nancy J. Van Sant, Esq.
Brian A. Pearlman, Esq. Sacher, Zelman, Paul, Beiley & Van Sant, P.A.
Atlas, Pearlman, Trop & Borkson, P.A. 1401 Brickell Avenue, Suite 700
200 East Las Olas Boulevard, Suite 1900 Miami, Florida 33131
Fort Lauderdale, Florida 33301 Telephone (305) 371-8797
Telephone (954) 763-1200 Facsimile (305) 374-2605
Facsimile (954) 766-7800
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Approximate date of commencement 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 under Rule 415 under the Securities Act of 1933, as
amended, check the following box: [X]
If this form is filed to register additional securities for an offering under
Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration number of the earlier effective registration
statement for the same offering: [ ]
If this form is a post-effective amendment filed under Rule 462(c) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. [ ]
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If this form is a post-effective amendment filed under 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 delivery of the prospectus is expected to be made under Rule 434, please
check the following box: [ X ]
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CALCULATION OF REGISTRATION FEE
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============================================ ================ =================== ==================== ===============
Title of Each Class of Amount Proposed Maximum Proposed Maximum Amount of
Securities to be Registered to be Offering Price Aggregate Offering Registration
Registered per Security Price(1) Fee
- -------------------------------------------- ---------------- ------------------- -------------------- ---------------
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Class A Common Stock 1,380,000(2) $5.625 $7,762,500 $2,157.98
- -------------------------------------------- ---------------- ------------------- -------------------- ---------------
Warrants 1,380,000(3) $.125 $172,500 $47.96
- -------------------------------------------- ---------------- ------------------- -------------------- ---------------
Class A Common Stock issuable
upon exercise of the Warrants 1,380,000(4) $7.30 $10,074,000 $2,800.57
- -------------------------------------------- ---------------- ------------------- -------------------- ---------------
Representative's Warrants 120,000(5) $0.001 $120 $.02
- -------------------------------------------- ---------------- ------------------- -------------------- ---------------
Class A Common Stock 120,000(6) $9.28 $1,113,600 $309.58
- -------------------------------------------- ---------------- ------------------- -------------------- ---------------
Warrants issuable upon the exercise of the
Representative's Warrants 120,000(7) $.206 $24,720 $6.87
- -------------------------------------------- ---------------- ------------------- -------------------- ---------------
Class A Common Stock issuable upon the
exercise of the Representative's Warrants 120,000(8) $12.045 $1,445,400 $401.82
- -------------------------------------------- ---------------- ------------------- -------------------- ---------------
TOTAL $20,592,840 $5,724.81(9)
============================================ ================ =================== ==================== ===============
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(1) Estimated solely for purposes of calculating the amount of the registration
fee under Rule 457 under the Securities Act of 1933, as amended.
(2) Includes 180,000 shares of class A voting common stock issuable under the
underwriter's over-allotment option.
(3) Includes 180,000 redeemable common stock purchase warrants issuable under
the over-allotment option.
(4) Represents shares of class A common stock issuable upon exercise of the
warrants registered together with such additional indeterminate number of
shares as may be issued upon exercise of such warrants by reason of the
anti-dilution provisions contained therein.
(5) Includes 120,000 representative's purchase warrants.
(6) Represents shares of class A common stock issuable upon exercise of the
representative's warrants together with such additional indeterminate
number of shares of class A common stock as may be issued upon exercise of
such representative's warrants by reason of the anti-dilution provisions
contained therein.
(7) Represents warrants issuable upon exercise of the representative's
warrants, together with such additional indeterminate number of warrants as
may be issued by reason of the anti-dilution provisions contained in the
registration statement.
(8) Represents shares of class A common stock issuable upon exercise of the
warrants included within the representative's warrants together with such
additional indeterminate number of shares of class A common stock as may be
issued upon exercise of such warrants by reason of the anti-dilution
provisions contained in the registration statement.
(9) Fee has been paid.
The registrant will amend 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, as amended, or until the registration statement shall
become effective on such date as the Securities and Exchange Commission, acting
under Section 8(a), may determine.
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Item 27. Exhibits.
Exhibit No. Description of Exhibit
- ----------- ----------------------
1.1 Form of Underwriting Agreement(2)
1.2 Form of Agreement Among Underwriters(1)
1.3 Form of Selected Dealers Agreement(1)
1.4 Lock-Up Agreement (1)
2.1 Stock Exchange Agreement between Flagship Import Export LLC
and Bio-Aqua for the exchange of class B common stock of
Bio-Aqua for shares of Tepual S.A.(1)
2.3 Stock Purchase Agreement between Atik, S.A. and Bio-Aqua for
the purchase of class B common stock (1)
2.4 Stock Purchase Agreement between Bio-Aqua and Atik, S.A. for
the purchase of shares of Tepual S.A.(1)
2.5 Stock Purchase Agreement between Profeed, Inc. and Bio-Aqua
for the acquisition of Profeed, Inc. and the rights to the
Tepual(TM) and Inual(TM) brands and trademarks(1)
3.1 Bio-Aqua's Articles of Incorporation(1)
3.1(a) Articles of Amendment to the Articles of Incorporation of
Bio-Aqua(1)
3.2 Bio-Aqua's Bylaws(1)
4.1 Form of warrant agreement together with the form of warrant
certificate(1)
4.2 Form of representative's warrant agreement together with the
form of representative's purchase warrant certificate(1)
4.3 Form of class A common stock certificate (1)
5.1 Opinion of Atlas, Pearlman, Trop & Borkson, P.A.(1)
10.1 Stock Option Plan(1)
10.2 Association Agreement between Tepual S.A. and Centro de
Estudios Cientificos de Santiago and Implementation Agreement
(1)
10.3 Agreement between Tepual S.A., Centro de Estudios Cientificos
de Santiago and R-Biopharm (1)
10.4 Agreement Between Inual S.A. and R-Biopharm (1)
10.5 Distribution Agreement between Inual S.A. and R-Biopharm (1)
10.6 License Agreement between Tepual S.A. and Biosur S.A.C. (1)
10.7 Marketing Agreement between Tepual S.A. and Biosur S.A. (1)
10.8 Commercial Agreement between Tepual S.A. and Kelor Trading
Ltd. (1)
10.9 Form of Bridge Loan Documents(1)
10.10 Employment Agreement between Tepual S.A. and Max Rutman(1)
10.11 Employment Agreement between Tepual S.A. and Guillermo
Quiroz(1)
10.12 Consulting Agreement between Bio-Aqua and David Mayer(1)
10.13 Recognition of Bank Note with Hemisphere National Bank(1)
10.14 Recognition of Bank Note with Corpbanca(1)
10.15 Recognition of Bank Note with Banco Sud Americano(1)
10.16 Recognition of Bank Note with Banco Santander(1)
10.17 Recognition of Bank Note with Banco do Brasil(1)
10.18 Lease Agreement between Bio-Aqua and Andean Financial
Corporation(1)
10.19 Lease Agreement between Tepual and Kaman Construcciones
Limitada(1)
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10.20 Lease Agreement between Tepual and Don Lindor Ltda.(1)
10.21 Lease Agreement between Tepual and Centrovet Ltda.(1)
10.22 Lease Agreement between Tepual and Turteltaub(1)
21 Subsidiaries of Registrant(1)
23.1 Consent of Atlas, Pearlman, Trop & Borkson, P.A. (to be
included in its opinion filed as Exhibit 5.1)(1)
23.2 Consent of Spear, Safer, Harmon & Co. P.C.(1)
27 Financial Data Schedule(1)
99.3 U.S. Patent Application for PSP Red Tide Detection Kit(1)
99.4 U.S. Patent Application for Red Tide Cleansing System(1)
99.5 Consent of Guillermo Quiroz(1)
99.6 Consent of Nestor Lagos(1)
99.7 Consent of Sergio Vivanco(1)
99.8 Consent of Robert Shuey (2)
- --------------------
(1) Previously filed
(2) Filed herein
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, as
amended, the registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements of filing on Form SB-2 and authorizes this
amendment to be signed on its behalf by the undersigned, in the City of Ft.
Lauderdale, State of Florida, on this 30th day of December, 1999.
Bio-Aqua Systems, Inc.
By: /s/ Max Rutman
----------------------------------------
President and Chief Executive Officer
In accordance with the requirements of the Securities Act of 1933, this
amendment to the registration statement was signed by the following persons in
the capacities and on the dates stated.
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Signatures Title Date
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/s/ Max Rutman President and Chief December 30, 1999
-------------------- Executive Officer and
Max Rutman Director (Principal
Executive Officer)
/s/ Guillermo Quiroz Chief Financial Officer December 30, 1999
------------------- (Principal Financial and
Guillermo Quiroz Accounting Officer)
/s/ David Mayer Director December 30, 1999
-------------------
David Mayer
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UNDERWRITING AGREEMENT
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TABLE OF CONTENTS
-----------------
Page
----
Underwriting Agreement..................................................... 1
SECTION 1.................................................................. 1
Description of Securities.................................................. 1
SECTION 2.................................................................. 1
Representations and Warranties of the Company.............................. 1
2.01. Registration Statement and Prospectus...................... 2
2.02. Accuracy of Registration Statement and Prospectus.......... 2
2.03. Financial Statements....................................... 3
2.04. Independent Public Accountant.............................. 3
2.05. No Material Adverse Change................................. 3
2.06. No Defaults................................................ 3
2.07. Incorporation and Standing................................. 4
2.08. Legality of Outstanding Stock.............................. 4
2.09. Legality of Stock, Warrants and Representative's Warrants.. 4
2.10. Prior Sales................................................ 4
2.11. Litigation................................................. 4
2.12. Warrants and Representative's Warrants..................... 5
2.13. Finder..................................................... 5
2.14. Exhibits................................................... 5
2.15. Tax Returns................................................ 6
2.16. Property................................................... 6
2.17. Patents & Trademarks....................................... 6
2.18. Authority.................................................. 6
2.19. Environmental Laws......................................... 6
2.20. ERISA...................................................... 7
2.21. No NASD Affiliation........................................ 7
2.22. Foreign Corrupt Practices Act.............................. 7
SECTION 3.................................................................. 7
Purchase and Sale of the Stock............................................. 7
3.01. Purchase of Stock and Over-Allotment Option................. 7
3.01.01. Default by an Underwriter................................ 8
3.01.02. Liability of Defaulting Underwriter...................... 8
3.01.03. Right of Remaining Underwriters.......................... 8
3.02. Public Offering Price....................................... 8
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3.02.01. Payment For Stock........................................ 9
3.02.02. Closing.................................................. 9
3.02.03. Inspection of Certificates............................... 9
3.03. Sale of Warrants............................................ 9
3.04. Representative's Expense Allowance.......................... 10
3.05. Representations of the Parties.............................. 10
3.06. Post-Closing Information.................................... 10
3.07. Re-Offers By Selected Dealers............................... 10
SECTION 4.................................................................. 10
Registration Statement and Prospectus...................................... 10
4.01. Delivery of Registration Statements................................. 10
4.02. Delivery of Preliminary Prospectus.......................... 11
4.03. Delivery of Prospectus...................................... 11
4.04. Further Amendments and Supplements.......................... 11
4.05. Use of Prospectus........................................... 12
SECTION 5.................................................................. 12
Covenants of the Company................................................... 12
5.01. Objection of Representative to Amendments or Supplements.... 12
5.02. Company's Best-Efforts to Cause Registration
Statement to Become Effective............................ 12
5.03. Preparation and Filing of Amendments and Supplements........ 13
5.04. Blue-Sky Qualification...................................... 13
5.05. Financial Statements........................................ 13
5.06. Reports and Financial Statements to the
Representative and Co-Manager............................ 13
5.07. Expenses Paid by the Company................................ 14
5.08. Reports to Shareholders..................................... 14
5.09. Section 11(a) Financials.................................... 14
5.10. Post-Effective Availability of Prospectus................... 15
5.11. Application of Proceeds..................................... 15
5.12. Undertakings of Certain Shareholders........................ 15
5.13. Delivery of Documents....................................... 15
5.14. Cooperation With Representative's Due Diligence............. 15
5.15. No Sale Period.............................................. 15
5.16. Appointment of Transfer Agent............................... 16
5.17. Compliance With Conditions Precedent........................ 16
5.18. Section 462(b) Registration Statement....................... 16
5.19. Registration Under the Exchange Act......................... 16
5.20. Designation of Member of Company's Board of Directors....... 16
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5.21. Key Man Insurance........................................... 16
5.22. Application to Moody's or Standard & Poors.................. 17
5.23. AMEX Listing................................................ 17
5.24. Exclusivity................................................. 17
5.25 Consulting................................................... 17
SECTION 6.................................................................. 17
Indemnification............................................................ 17
6.01. Indemnification By Company.................................. 17
6.02. Indemnification By Underwriters............................. 18
SECTION 7.................................................................. 18
Effectiveness of Agreement................................................. 18
SECTION 8.................................................................. 19
Conditions of the Underwriters' Obligations................................ 19
8.01. Effectiveness of Registration Statement..................... 19
8.02. Accuracy of Registration Statement.......................... 20
8.03. Casualty and Other Calamity................................. 20
8.04. Litigation and Other Proceedings............................ 20
8.05. Lack of Material Change and Other Conditions................ 20
8.06. AMEX Listing Approval....................................... 21
8.07. Accountant's Comfort Letter and Update...................... 21
8.08. Review By and Opinion of Underwriter's Counsel.............. 21
8.09. Opinion of Counsel.......................................... 21
8.10.01. Accountant's Letter...................................... 23
8.10.02. Conformed Copies of Accountant's Letter.................. 24
8.11. Officer's Certificate....................................... 24
8.12. Tender of Delivery of Stock................................. 25
8.13. Blue-Sky Qualification...................................... 25
8.14. Approval of Representative's Counsel........................ 25
8.15. Officers' Certificate As a Company Representative........... 25
SECTION 9.................................................................. 26
Termination................................................................ 26
9.01. Termination Because of Non-Compliance....................... 26
9.02. Market Out Termination...................................... 26
9.03. Company's Right to Terminate................................ 26
9.04. Effect of Termination Hereunder............................. 27
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SECTION 10................................................................. 27
Underwriter's Representations and Warranties............................... 27
10.01. Registration as Broker-Dealer and Member of NASD........... 27
10.02. No Pending Proceedings..................................... 27
SECTION 11................................................................. 27
Rights and Obligations..................................................... 27
11.01. Consultation With Representative........................... 27
11.02. Exercise of Warrants....................................... 27
SECTION 12................................................................. 28
Notice..................................................................... 28
12.01. Notice to the Company...................................... 28
12.02. Notice to the Underwriters................................. 29
SECTION 13................................................................. 29
Miscellaneous.............................................................. 29
13.01. Benefit.................................................... 29
13.02. Survival................................................... 29
13.03. Governing Law.............................................. 30
13.04. Underwriters' Information.................................. 30
13.05. Counterparts............................................... 30
ANNEX A.............................................. 1
CONSULTING AGREEMENT.............................................. 1
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Underwriting Agreement
Institutional Equity Corporation
5910 North Central Expressway, Suite 480
Dallas, TX 75206
Nutmeg Securities, Ltd.
495 Post Road East
Westport, CT 06880
Ladies and Gentlemen:
Bio-Aqua Systems, Inc. and its subsidiaries (the "Company'), a Florida
company, of 1900 Glades Road, Suite 351, Boca Raton, Florida, hereby confirms
its agreement with the representative of the Underwriters, Institutional Equity
Corporation f/k/a Redstone Securities, Inc. ("Representative"), Nutmeg
Securities Ltd. ("Co-Manager") and other members of the Underwriting Group
(hereinafter the "Underwriting Group" or "Underwriters") as follows:
SECTION 1
Description of Securities
The Company's authorized and outstanding capitalization when the
offering of the securities contemplated hereby is permitted to commence and at
the Closing Date (hereinafter defined), will be as set forth in the Registration
Statement and Prospectus included therein (hereinafter defined). The Company
proposes to issue and sell to the Underwriting Group an aggregate of 1,200,000
Class A Voting Stock par value $.0001 at $5.625 per share ("Stock") and
1,200,000 Redeemable Common Stock Purchase Warrants at $.125 per Warrant
("Warrants") and Redeemable Representative's Warrants entitling Representative
to 120,000 shares of Stock at $9.28 and 120,000 warrants at $.206 exercisable
for Stock at $12.045 ("Representative's Warrants"). The Underwriting Group shall
also have an over-allotment option for a period of 45 days subsequent to the
closing to purchase up to an additional 180,000 shares of Class A Common Stock
and 180,000 Warrants at the initial public offering price minus the
Underwriter's discount as provided in Section 3.01 hereof.
SECTION 2
Representations and Warranties of the Company
In order to induce the Underwriting Group to enter into this Agreement
the Company hereby represents and warrants to and agrees with the Underwriting
Group as follows:
1
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2.01. Registration Statement and Prospectus. A registration statement
on Form SB-2 (File No. 33-81829) (the "Registration Statement") with respect to
the Stock and Warrants, including the related Prospectus, copies of which have
heretofore been delivered by the Company to the Underwriter, has been prepared
by the Company in conformity with the requirements of the Securities Act of
1933, as amended (the "Act"), and the rules and regulations ("Rules and
Regulations") of the Securities and Exchange Commission (the "'Commission")
thereunder, and said Registration Statement has been filed with the Commission
under the Act; one or more amendments to said Registration Statement, copies of
which have heretofore been delivered to the Representative, has or have
heretofore been filed; and the Company may file on or prior to the effective
date additional amendments to said Registration Statement, including the final
Prospectus. Included in such Registration Statement of the Company's Common
Stock, are which shares are reserved against exercise of the Underwriter's
Warrants to be granted by the Company, as more particularly described
hereinafter.
As used in this Agreement: the term "Registration Statement" refers to
and means said Registration Statement on Form SB-2 and all amendments thereto,
including the Prospectus, all exhibits and financial statements, as it becomes
effective; the term "Prospectus" refers to and means the Prospectus included in
the Registration Statement when it becomes effective; and the term "Preliminary
Prospectus" refers to and means any prospectus included in said Registration
Statement before it becomes effective. The terms "Effective Date" and
"Effective" refer to the date the Commission declares the Registration Statement
filed with the Electronic Data Gathering, Analysis and Retrieval system
("EDGAR") effective pursuant to Section 8 of the Act.
2.02. Accuracy of Registration Statement and Prospectus. The
Commission has not issued any order preventing or suspending the use of any
Preliminary Prospectus with respect to the Stock and Warrants, and each
Preliminary Prospectus has conformed in all material respects with the
requirements of the Act and the applicable Rules and Regulations of the
Commission thereunder, and to the best of the Company's knowledge, has not
included at the time of filing any untrue statement of a material fact or
omitted to state a material fact necessary to make the statements therein not
misleading. When the Registration Statement becomes Effective and on the Closing
Date (as hereinafter defined), the Registration Statement and Prospectus, and
any further amendments or supplements thereto, will contain all statements which
are required to be stated therein in accordance with the Act and the Rules and
Regulations for the purposes of the proposed public offering of the Stock and
Warrants, and all statements of material fact contained in the Registration
Statement and Prospectus will be true and correct, and neither the Registration
Statement nor the Prospectus will include any untrue statement of a material
fact or omit to state any material fact required to be stated therein necessary
to make the statements therein not misleading; provided, however, the Company
does not make any representations or warranties as to information contained in
or omitted from the
2
<PAGE>
Registration Statement or the Prospectus in reliance upon written information
furnished by the Representative on behalf of the Underwriters specifically for
use therein.
2.03. Financial Statements. The financial statements of the Company
together with related schedules and notes as set forth in the Registration
Statement and Prospectus will present fairly the financial position of the
Company and the results of its operations and the changes in its financial
position at the respective dates and for the respective periods for which they
apply; such financial statements have been prepared in accordance with generally
accepted principles of accounting consistently applied throughout the periods
concerned except as otherwise stated therein or with respect to quarterly
periods, normal recurring adjustments.
2.04. Independent Public Accountant. Spear, Safer, Harmon & Co., P.A.
, which has certified, or shall certify, certain of the financial statements
filed, or to be filed, with the Commission as part of the Registration Statement
and Prospectus, are independent certified public accountants within the meaning
of the Act and the Rules and Regulations.
2.05.No Material Adverse Change. Except as may be reflected in or
contemplated by the Registration Statement or the Prospectus, subsequent to the
dates as of which information is given in the Registration Statement and
Prospectus, and prior to the Closing Date, (i) there shall not be any material
adverse change in the condition, financial or otherwise, of the Company or in
its business taken as a whole; (ii) there shall not have been any material
transaction entered into by the Company or its subsidiaries other than
transactions in the ordinary course of business; (iii) neither the Company nor
any of its subsidiaries shall have incurred any material obligations, contingent
or otherwise, which are not disclosed in the Prospectus; (iv) there shall not
have been, nor will there be, any change in the capital stock or long-term debt
(except current payments) of the Company; (v) the Company has not, and will not,
have paid or declared any dividends or other distributions on its common stock;
and (vi) there are no currency exchange control laws or withholding taxes of any
applicable country which govern the payment of dividends on the stock of the
Company or the stock of any of the subsidiaries of the Company except as set
forth in the Prospectus and Registration Statement.
2.06. No Defaults. Neither the Company nor any of its subsidiaries is
in any default which has not been waived in the performance of any material
obligation, agreement or condition contained in any debenture, note or other
evidence of indebtedness or any indenture or loan agreement of the Company. The
execution and delivery of this Agreement and the consummation of the
transactions herein contemplated, and compliance with the terms of this
Agreement will not conflict with or result in a breach of any of the terms,
conditions or provisions of, or constitute a default under, the articles of
incorporation, as amended, or bylaws of the Company, any note, indenture,
mortgage, deed of trust or other agreement or instrument to which the Company is
a party or by which it or any of its property is bound, or any existing law,
order, rule, regulation, writ, injunction,
3
<PAGE>
or decree of any government, governmental instrumentality, agency or body,
arbitration tribunal or court, domestic or foreign, having jurisdiction over the
Company or its property. The consent, approval, authorization, or order of any
court or governmental instrumentality, agency or body is not required for the
consummation of the transactions herein contemplated except such as may be
required under the Act or under the blue sky or securities laws of any state or
jurisdiction.
2.07. Incorporation and Standing. The Company is, and at the Closing
Date will be, duly incorporated and validly existing in good standing as a
corporation under the laws of the State of Florida and the Company and/or its
subsidiaries is duly is authorized to do business in all other states and
applicable foreign jurisdictions, including Chile, with authorized and
outstanding capital stock as set forth in the Registration Statement and the
Prospectus, and with full power and authority (corporate and other) to own its
property and conduct its business, present and proposed, as described in the
Registration Statement and Prospectus; the Company has full power and authority
to enter into this Agreement; and the Company is duly qualified and in good
standing as a foreign corporation in each jurisdiction in which it owns or
leases real property or transacts business requiring such qualification except
where failure to so qualify would not have a material adverse effect on the
Company. The Company has no subsidiaries other than as shown in Exhibit 21 to
the Registration Statement.
2.08. Legality of Outstanding Stock. The outstanding common stock of
the Company has been duly and validly authorized, issued and is fully paid and
non-assessable and will conform in all material respect to all statements with
regard thereto contained in the Registration Statement and Prospectus. No sales
of securities have been made by the Company in violation of the registration
provisions of the Securities Act of 1933.
2.09. Legality of Stock, Warrants and Representative's Warrants. The
Stock, Warrants, and Representative's Warrants have been duly and validly
authorized and, when issued and delivered against payment therefor as provided
in this Agreement, will be validly issued, fully paid and non-assessable. The
Stock, Warrants, and Representative's Warrants upon issuance will not be subject
to the preemptive rights of any shareholders of the Company. The Warrants and
Representative's Warrants when sold and delivered, will constitute valid and
binding obligations of the Company enforceable in accordance with the terms
thereof subject to bankruptcy, insolvency, auditors' rights generally and
equitable principles of law. A sufficient number of shares of Common Stock and
Warrants have been reserved for issuance upon exercise of the Warrants and
Representative's Warrants. The Stock, Warrants, and Representative's Warrants
will conform to all statements with regard thereto in the Registration Statement
and Prospectus.
4
<PAGE>
2.10. Prior Sales. No securities of the Company, of an affiliate or of
a predecessor of the Company have been sold within one year prior to the date
hereof, except as set out in the Registration Statement.
2.11. Litigation. Except as set forth in the Registration Statement
and Prospectus, there is, and at the Closing Date there will be, no action, suit
or proceeding before any court or governmental agency, authority or body pending
or to the knowledge of the Company threatened which might result in judgments
against the Company not adequately covered by insurance or which collectively
might result in any material adverse change in the condition (financial or
otherwise), the business or the prospects of the Company, or would materially
affect the properties or assets of the Company.
2.12. Warrants and Representative's Warrants. Upon delivery of and
payment for the Warrants and Representative's Warrants to be sold by and to the
Company as set forth in Section 3.03 of this Agreement, the Underwriter and the
Underwriter's designees will receive good and marketable title thereto, free and
clear of all liens, encumbrances, charges and claims whatsoever, except for any
encumbrances imposed under Securities laws or as contained in this Agreement;
and the Company will have on the Effective Date of the Registration Statement
and at the time of delivery of such Warrants or Representative's Warrants full
legal right and power and all authorization and approval required by law to
sell, transfer and deliver such Warrants or Representative's Warrants in the
manner provided hereunder subject to certain "lock up" provisions set forth in
the Registration Statement and Prospectus.
2.13. Finder. The Company knows of no outstanding claims for services
in the nature of a finder's fee or origination fee with respect to the sale of
the Stock and Warrants hereunder resulting from its acts for which the
Representative may be responsible.
2.14. Exhibits. There are no contracts or other documents which are
required to be filed as exhibits to the Registration Statement by the Act or by
the Rules and Regulations which have not been so filed and each contract to
which the Company or any of its subsidiaries is a party and to which reference
is made in the Prospectus has been duly and validly executed, is or will be at
the Effective Date, in full force and effect in all material respects in
accordance with their respective terms, including but not limited to the
Employment Agreement between the Company and Max Rutman, Exhibit No. 10.10, the
Employment Agreement between Guillermo Quiroz and the Company, Exhibit No.
10.11, and the various distribution and licensing agreements in Exhibits
10.2-10.8, and none of such contracts have been assigned by the Company; and the
Company knows of no present situation or condition or fact which would prevent
compliance with the terms of such contracts, as amended to date. Except for
amendments or modifications of such contracts in the ordinary course of
business, the Company has no intention of exercising any right which it may have
to cancel any of its obligations under any of such contracts,
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and has no knowledge that any other party to any of such contracts has any
intention not to render full performance under such contracts.
2.15. Tax Returns. The Company has filed all federal and state tax
returns which are required to be filed by it and has paid all taxes shown on
such returns and on all assessments received by it to the extent such taxes have
become due. The Company has filed all tax returns required by it in any foreign
jurisdictions. All taxes with respect to which the Company is obligated have
been paid or adequate accruals have been set up to cover any such unpaid taxes.
2.16. Property. Except as otherwise set forth in or contemplated by
the Registration Statement and Prospectus, the Company has good title, free and
clear of all liens, encumbrances and defects, except liens for current taxes not
due and payable, to all property and assets which are described in the
Registration Statement and the Prospectus as being owned by the Company, subject
only to such exceptions as are not material and do not adversely affect the
present or prospective business of the Company.
2.17. Patents & Trademarks. Except as disclosed in the Registration Statement
or Prospectus, the Company has sufficient licenses, permits and other
governmental authorizations currently necessary for the conduct of its business
or the ownership of its properties as described in the Prospectus and is in all
material respects complying therewith and owns or possesses adequate rights to
use all material patents, patent applications, trademarks, service marks,
trade-names, trademark registrations, service mark registrations, copyrights and
licenses necessary for the conduct of such business and had not received any
notice of conflict with the asserted rights of others in respect thereof. To the
best knowledge of the Company, none of the activities or business of the Company
are in violation of, or cause the Company to violate, any law, rule, regulation
or order of the United States, any state, county or locality, or of any agency
or body of the United States or of any state, county or locality, the violation
of which would have a material adverse effect.
2.18. Authority. The execution and delivery by the Company of this
Agreement has been duly authorized by all necessary corporate action and this
Agreement is the valid, binding and legally enforceable obligation of the
Company.
2.19. Environmental Laws. Neither the Company nor any of its
subsidiaries has violated any foreign, federal, state or local law relating to
the protection of human health and safety, the environmental or hazardous or
toxic substances or wastes, pollutants or contaminants ("Environmental Laws"),
or incurred costs or liabilities associated with these Environmental Laws,
except for such violations which singly or in the aggregate would not have a
material adverse effect on the business, prospects, financial condition or
results of the Company and its subsidiaries taken as a whole.
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2.20. ERISA. Neither the Company nor any of its subsidiaries has
violated any provisions or the Employee Retirement Income Security Act of 1974,
as amended, or the rules and regulations promulgated thereunder, in each case
that is applicable to the Company or such subsidiary, except for such violations
which singly or in the aggregate would not have a material adverse effect on the
business, financial condition or results of the Company and its subsidiaries
taken as a whole.
2.21. No NASD Affiliation. Except as previously disclosed in writing by
the Company to the Representative, no officer, director or 10% stockholder of
the company has any National Association of Securities Dealers, Inc. (the
"NASD") affiliation.
2.22. Foreign Corrupt Practices Act. The Company has not, directly or
indirectly, at any time (i) made any contributions to any candidate for
political office, or failed to disclose fully any such contribution in violation
of law or (ii) made any payment to any state, federal or foreign governmental
officer or official, or other person charged with similar public or quasi-public
duties, other than payments or contributions required or allowed by applicable
law. The Company's internal accounting controls and procedures are sufficient to
cause the Company to comply in all material respects with the Foreign Corrupt
Practices Act of 1977, as amended.
SECTION 3
Purchase and Sale of the Stock
3.01. Purchase of Stock and OverAllotment Option. The Company hereby
agrees to sell to members of the Underwriting Group named in Schedule I hereto
(for all of whom the Representative is acting), severally and not jointly, and
each member of the Underwriting Group, upon the basis of the representations and
warranties herein contained, but subject to the conditions hereinafter stated,
agrees to purchase from the Company, severally and not jointly, the number of
shares of Stock set forth opposite their respective names in Schedule I hereto
at a purchase price of $5.625 per share, less the underwriting discounts, and
the number of Warrants set forth opposite their respective names in Schedule I
hereto at a purchase price of $.125 per Warrant, less the underwriting
discounts. The Representative is also granted Representative's Warrants
entitling them to purchase 120,000 Warrants at a purchase price of $.001,
entitling the Representative to 120,000 shares of Stock at $9.28 per share of
Stock, and 120,000 warrants exercisable at a price of $.206 per Warrant. These
warrants are exercisable for Stock at $12.045 per share for five years following
the Effective Date subject to a twelve month lock-up. Pursuant to NASD Rule
2710(c)(7)(A) the Representative Warrants and warrants acquired by the
Representative and each Co-Manager will be restricted from sale, transfer,
assignment, or hypothecation for a period of one year from the Effective Date of
the Registration Statement except to officers or members of the Representative
or either Co-Manager and members of the selling group and/or their officers or
partners.
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The Company hereby grants to the Representative an over allotment
option (the "Over- allotment Option") for a period of forty-five days after the
Effective Date to purchase at the initial public offering price of $5.625 per
share up to 180,000 additional shares of Stock and 180,000 Warrants at $.125 per
Warrant, less the underwriting discounts, in order to cover over-allotments.
3.01.01. Default by an Underwriter. If any of the Underwriters shall
fail to purchase the entire number of shares of Stock and Warrants set opposite
its name in Schedule I hereto, and such failure to purchase shall constitute a
default by such Underwriter in the performance of its obligations under this
Agreement, the remaining Underwriters shall have the right and shall be
obligated to take up and pay for (in the respective proportions which the number
of shares of Stock and Warrants set opposite the names of the several remaining
Underwriters bears to the aggregate number of shares of Stock and Warrants set
opposite the names of all the remaining Underwriters) the entire amount of
shares of Stock and Warrants which the defaulting Underwriter agreed but failed
to purchase, provided, however, that the aggregate amount of all such increases
for all non-defaulting Underwriters shall not exceed 120,000 shares of Stock or
120,000 Warrants and provided, further, that in the event that such additional
shares of Stock or Warrants shall exceed the foregoing maximum, the remaining
Underwriters shall have the right, but shall not be obligated, to take up and
pay for (in such proportions as may be agreed upon among them) the entire amount
(but not less than all) of remaining shares of Stock or Warrants which all
defaulting Underwriters agreed but failed to purchase.
3.01.02. Liability of Defaulting Underwriter. Nothing contained in
this Section 3.01 shall relieve any defaulting Underwriter of its liability, if
any, to the Company or to the remaining Underwriters for damages occasioned by
its default hereunder.
3.01.03. Right of Remaining Underwriters. If any of the Underwriters
shall fail to purchase the entire number of shares of Stock and Warrants set
opposite its name and such failure to purchase shall not constitute a default by
such Underwriter in the performance of its obligations under this Agreement, the
remaining Underwriters shall have the right, but shall not be obligated, to take
up and pay for (in such proportions as in be agreed upon among them) the entire
amount (but not less than all) of the shares of Stock and Warrants which all
withdrawing Underwriters agreed but failed to purchase.
3.02. Public Offering Price. After the Commission notifies the Company
that the Registration Statement has become Effective, the Underwriters propose
to offer the Stock to the public at a public offering price of $5.625 per share,
and the Warrants at $.125 per Warrant, as set forth in the Prospectus. The
Underwriters may allow a discount of $.5625 upon sales of Stock and $.0125 upon
sales of Warrants to selected dealers as may be determined from time to time by
the Representative.
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3.02.01. Payment For Stock. Payment for the Stock and Warrants
(including the Over-allotment Option Stock and Warrants) which the Underwriters
agree to purchase shall be made to the Company or its order by wire transfer,
certified or official bank check or checks (in immediately available funds), in
the amount of the purchase price by or on behalf of the Representative at the
offices of the Representative in Dallas, Texas, upon delivery to the
Representative of certificates for shares and Warrants in definitive form in
such numbers and registered in such names as the Representative requests in
writing at least one full business day prior to such delivery.
3.02.02. Closing. The time and date of delivery and payment hereunder
is herein called the "Closing Date" and shall take place at the office of the
Representative at 5910 North Central Expressway, Suite 480, Dallas, Texas 75206,
or at such other place that shall be agreed upon by the Company and the
Underwriters, on the third business day following the effective date of this
Agreement(unless postponed in accordance with Section 9) or such other time not
later than ten business days after such date as shall be agreed upon by the
Representative and the Company. Should the Representative elect to exercise any
part of the Over-allotment Option pursuant to Section 3.01 herein above, the
time and date of delivery and payment for said over-allotment Stock and Warrants
shall be as mutually agreed, but not later than the 45th calendar day after the
Effective Date. Said date is hereinafter referred to, as the "Over-Allotment
Closing Date."
3.02.03. Inspection of Certificates. For the purpose of expediting the
checking and packaging of the certificates for Stocks and Warrants, the Company
agrees to make the certificates available for inspection by the Representative
at the office of the Representative, set forth above in Dallas, Texas at least
one full business day prior to the proposed delivery date.
3.03. Sale of Warrants. The Company will sell and deliver to the
Representative, at a purchase price of $0.125 per Warrant less the underwriting
discounts, 1,200,000 Warrants, dated on the Closing Date, substantially in the
form of Exhibit A, attached hereto and by this reference incorporated herein,
evidencing the right of the Representative to purchase 1,200,000 shares of Stock
at the price of $5.625 per share and upon the terms and conditions provided in
the Warrants. The Company shall not be obligated to sell and deliver the
Warrants, and the Underwriter will not be obligated to purchase and pay for the
Warrants, except upon payment for the shares pursuant to Subsection 3.02.01
hereof.
The Representative may purchase for nominal consideration, at the
closing of the sale of all the Stock and Warrants contemplated by this
Underwriting Agreement, Representative's Warrants entitling Representative to
120,000 shares of Stock and 120,000 Warrants, which shall not be exercisable or
transferable for a twelve month period following the Effective Date. The
Representative's Warrants shall be exercisable for a period of five years at
$9.28 per share of Stock and $.206 per Warrant exercisable for Stock at $12.045,
upon the terms and conditions provided in the Representative's
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Warrants. The Company shall not be obligated to sell and deliver the
Representative's Warrants, and the Representative will not be obligated to
purchase and pay for the Representative's Warrants, except upon payment for the
shares pursuant to Subsection 3.02.01 hereof.
3.04. Representative's Expense Allowance. It is understood that the
Company shall reimburse the Representative and the Co-Manager for their expenses
on a non-accountable basis in the total amount of 3% of the gross proceeds from
the offering of which $30,000.00 has been previously paid to Emerson Bennett &
Associates, including proceeds from the sale of the over-allotment shares, if
exercised. At the Closing and, if applicable, on the Over-Allotment Closing
Date, the Company shall pay to the Representative and the Co-Manager the unpaid
balance of such allowance to defray the expenses incurred by the Representative
and Co-Manager in connection with the offering. The Representative shall be
solely responsible for all expenses incurred by it in connection with the
offering including, but not limited to, the expenses of its own counsel except
as set forth in subsection 5.07 hereof.
3.05. Representations of the Parties. The parties hereto respectively
represent that as of the Closing Date the representations herein contained and
the statements contained in all the certificates theretofore or simultaneously
delivered by any party to another, pursuant to this Agreement, shall in all
material respects be true and correct.
3.06. PostClosing Information. The Representative covenants that
reasonably promptly after the Closing Date, it will supply the Company with all
information required from the Underwriters for the completion of any applicable
forms and such additional information as the Company may reasonably request to
be supplied to the securities commissions of such states in which the Stock and
Warrants have been qualified for sale.
3.07. ReOffers By Selected Dealers. On each sale by the Underwriters
of any of the Stock to selected dealers, the Representative shall require the
selected dealer purchasing any such Stock to agree to re-offer the same on the
terms and conditions of the offering set forth in the Registration Statement and
Prospectus.
SECTION 4
Registration Statement and Prospectus
4.01. Delivery of Registration Statements. The Company shall deliver to
the Representative without charge two signed copies of the Registration
Statement, including all financial statements and exhibits filed therewith and
any amendments or supplements thereto, and shall deliver without charge to the
Representative five conformed copies of the Registration Statement and any
amendment or supplement thereto, including such financial statements and
exhibits. The signed copies of the Registration Statement so furnished to the
Representative will include signed copies of any and all consents and
certificates of the independent public accountant certifying to the financial
statements included in the Registration Statement and Prospectus and signed
copies of any and all consents and
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certificates of any other persons whose profession gives authority to statements
made by them and who are named in the Registration Statement or Prospectus as
having prepared, certified, or reviewed any part thereof.
4.02. Delivery of Preliminary Prospectus. The Company will deliver to the
Representative, without charge, as many copies of each Preliminary Prospectus
filed with the Commission bearing in red ink the statement required by
Regulation S-B Item 501(6) and (7) as may be required by the Underwriters. The
Company consents to the use of such documents by the Underwriters and by dealers
prior to the Effective Date of the Registration Statement. The Company will
deliver at its expense such copies of the Preliminary Prospectus as the
Representative may deem necessary in order to recirculate the Preliminary
Prospectus and/or to permit compliance with the provisions of Rule 15c2-11. For
purposes of the paragraph, the term "Preliminary Prospectus" shall be deemed to
include after the Effective Date of the Registration Statement a Rule 430A
subject to completion prospectus and the Company will deliver to the
Representative, after the effective date at its expense such copies of the Rule
430A prospectus subject to completion as the Representative deems necessary in
connection with the offering.
4.03. Delivery of Prospectus. The Company will deliver, at its
expense, as many printed copies of the Prospectus as the Underwriter may require
for the purposes contemplated by this Agreement and shall deliver said printed
copies of the Prospectus to the Representative as soon as practicable on
effectiveness of this Agreement, but in no event more than one business day
after the effective date of this Agreement. The Company will deliver such
additional copies at its expense as may be necessary to permit dealers to comply
with the requirements of Rule 174. If the Representative determines to use a
Term Sheet together with a prospectus subject to completion in accordance with
Rule 434 to satisfy the delivery of prospectus requirement, the Company shall
furnish the Representative with such number of copies of the Term Sheet meeting
the requirements of Rule 434 and will file such number of copies with the
Commission as required by Rule 424(b) to permit the Representative to deliver
the final prospectus to purchasers in the offering in this manner.
4.04. Further Amendments and Supplements. If, during such period of
time as in the opinion of the Representative or its counsel a Prospectus
relating to this financing is required to be delivered under the Act, any event
occurs or any event known to the Company relating to or affecting the Company
shall occur as a result of which the Prospectus as then amended or supplemented
would include an untrue statement of a material fact, or omit to state any
material fact necessary to make the statements therein, in light of the
circumstances under which they were made not misleading, or if it is necessary
at any time after the Effective Date of the Registration Statement to amend or
supplement the Prospectus to comply with the Act, the Company will forthwith
notify the
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Representative thereof and prepare and file with the Commission such further
amendment to the Registration Statement or supplemental or amended Prospectus as
may be required and furnish and deliver to the Representative and to others
whose names and addresses are designated by the Representative, all at the cost
of the Company, the number of copies of the amended or supplemented Prospectus
designated by the Representative, which is so amended or supplemented to not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the Prospectus not misleading in the light of
the circumstances when it is delivered to a purchaser or prospective purchaser,
and which will comply in all respects with the Act.
4.05. Use of Prospectus. The Company authorizes the Underwriters in
connection with the distribution of the Stock and Warrants and all dealers to
whom any of the Stock and Warrants may be sold by the Underwriters to use the
Prospectus as from time to time amended or supplemented, in connection with the
offering and sale of the Stock and Warrants, and in accordance with the
applicable provisions of the Act and the applicable Rules and Regulations and
applicable state blue sky or securities laws.
SECTION 5
Covenants of the Company
The Company covenants and agrees with the Underwriters that:
5.01. Objection of Representative to Amendments or Supplements. After
the date hereof, the Company will not at any time, whether before or after the
Effective Date of the Registration Statement, file any amendment or supplement
to the Registration Statement or Prospectus, unless and until a copy of such
amendment or supplement has been previously furnished to the Representative
within a reasonable time period prior to the proposed filing thereof, or of
which the Representative or counsel for the Representative has reasonably
objected to, in writing, on the ground that such amendment or supplement is not
in compliance with the Act or the Rules and Regulations.
5.02. Company's BestEfforts to Cause Registration Statement to Become
Effective. The Company will use its best efforts to cause the Registration
Statement and any post-effective amendment subsequently filed, to become
effective as promptly as reasonably practicable and will promptly advise the
Representative, and will confirm such advice in writing (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 a 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 pursuant to Section 8
of the Act or of the initiation of any proceedings for that purpose; (iv) of the
happening of any event which in the judgment of
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the Company makes any material statement in the Registration Statement or
Prospectus untrue or which requires the making of any changes in the
Registration Statement or Prospectus in order to make the statements therein not
misleading; and (v) of the refusal to qualify or the suspension of the
qualification of the Stock and Warrants for offering or sale in any
jurisdiction, or of the institution of any proceedings for any of such purposes.
The Company will use every reasonable effort to prevent the issuance of any such
order or of any order preventing or suspending such use, to prevent any such
refusal to qualify or any such suspension, and to obtain as soon as possible a
lifting of any such order, the reversal of any such refusal and the termination
of any such suspension.
5.03. Preparation and Filing of Amendments and Supplements. The
Company will prepare and file promptly with the Commission, upon request of the
Representative, such amendments or supplements to the Registration Statement or
Prospectus, in form satisfactory to counsel to the Company, as in the opinion of
counsel to the Representative and of counsel to the Company, may be necessary in
connection with the offering or distribution of the Stock and Warrants and will
use its best efforts to cause the same to become effective as promptly as
possible.
5.04. BlueSky Qualification. The Company will, when and as requested
by the Representative or the Co-Manager, use reasonable efforts to qualify the
Stock and Warrants or such part thereof as the Representative or the Co-Manager
may determine for sale under the so-called blue sky laws of the State of
Florida, and of so many other states as the Representative may reasonably
request, and to continue such qualification in effect so long as required for
the purposes of the distribution of the Stock and Warrants.
5.05. Financial Statements. The Company at its own expense will
prepare and give and will continue to give such financial statements and other
information to and as may be required by the Commission, or the proper public
bodies of the states in which the Stock and Warrants may be qualified.
5.06. Reports and Financial Statements to the Representative and
Co-Manager. During the period of five years from the Closing Date, the Company
will deliver to the Representative and the Co-Manager, copies of each annual
report of the Company and (i) within 105 days after the close of each fiscal
year of the Company, a financial report of the Company and its subsidiaries, if
any, on a consolidated basis, and a similar financial report of all
unconsolidated subsidiaries, if any, all such reports to include a balance sheet
as of the end of the preceding fiscal year, an income statement, a statement of
changes in financial condition and an analysis of shareholders' equity covering
such fiscal year, and all to be in reasonable detail and certified by
independent public accountants for the Company; (ii) within 50 days after the
end of each quarterly fiscal period of the Company other than the last quarterly
fiscal period in any fiscal year, copies of the consolidated income statement
and statement of changes in financial condition for that period, and the balance
sheet as of the end of that period of the Company and its subsidiaries, if any,
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and the income statement, statement of changes in financial condition and the
balance sheet of each unconsolidated subsidiary, if any, of the Company for that
period, all subject to year-end adjustment, certified by the principal financial
or accounting officer of the Company; (iii) copies of all other statements,
documents, or other information which the Company shall mail or otherwise make
available to any class of its security holders, or shall file with the
Commission; and (iv) upon request in writing from the Underwriter, furnish to
the Underwriter such other information as may reasonably be requested and which
may be properly disclosed to the Representative with reference to the property,
business and affairs of the Company and its subsidiaries, if any.
5.07. Expenses Paid by the Company. The Company will pay, whether or
not the transactions contemplated hereunder are consummated or this Agreement is
prevented from becoming effective or is terminated, all costs and expenses
incident to the performance of its obligations under this Agreement including:
all expenses incident to the authorization of the Stock and Warrants and their
issue and delivery to the Representative; any original issue taxes in connection
therewith; all transfer taxes, if any, incident to the initial sale of the Stock
and Warrants to the public; the Blue Sky fees and expenses of the Representative
and the Co-Manager's counsel and accountants; the costs and expenses incident to
the preparation, printing and filing under the Act and with the National
Association of Securities Dealers, Inc. of the Registration Statement, any
Preliminary Prospectus and the Prospectus and any amendments or supplements
thereto; the cost of printing, reproducing and filing all exhibits to the
Registration Statement, the underwriting documents and the Selected Dealers
Agreement, the cost of printing and furnishing to the Representative copies of
the Registration Statement and copies of the Prospectus as herein provided; and,
the cost of qualifying the Stock and Warrants under the state securities or Blue
Sky laws as provided in Section 5.04 herein, including expenses and
disbursements of the Representative and the Co-Manager incurred in connection
with such qualification.
5.08. Reports to Shareholders. During the period of five years from
the Closing Date, the Company will, as promptly as possible, not to exceed 120
days, after each annual fiscal period render and distribute reports to its
shareholders which will include audited statements of its operations and changes
of financial position during such period and its balance sheet as of the end of
such period, as to which statements the Company's independent certified public
accountants shall have rendered an opinion.
5.09. Section 11(a) Financials. The Company will make generally
available to its security holders and will deliver to the Representative and the
Co-Manager, as soon as practicable, but in no event later than the first day of
the sixteenth full calendar month following the Effective Date of the
Registration Statement, an earnings statement (as to which no opinion need be
rendered but which will satisfy the provisions of Section 11(a) of the Act)
covering a period of at least 12 months beginning after the Effective Date of
the Registration Statement.
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5.10. PostEffective Availability of Prospectus. Within the time during
which the Prospectus is required to be delivered under the Act, the Company will
comply, at its own expense, with all requirements imposed upon it by the Act, as
now or hereafter amended, by the Rules and Regulations, as from time to time may
be in force, and by any order of the Commission, so far as necessary to permit
the continuance of sales or dealings in the Stock and Warrants.
5.11. Application of Proceeds. The Company will apply the net proceeds
from the sale of the Stock and Warrants substantially in the manner set forth in
the Registration Statement and Prospectus. No NASD member shall receive 10% or
more of the net proceeds.
5.12. Undertakings of Certain Shareholders. The Company will deliver
to the Representative, prior to or simultaneously with the execution of this
Agreement, the undertaking of each officer, director, and each employee of the
Company who owns 5% or more of shares of the Company (based on the number of
shares to be outstanding prior to the completion of the offering) that such
person shall not directly or indirectly offer or sell to the public any portion
of the shares of common stock owned prior to the effective date of this
Agreement or hereafter acquired by exercise of an option for a period of
twenty-four months or privately for a period of twelve months from the Effective
Date of the Registration Statement without the Representative's prior written
consent.
5.13. Delivery of Documents. At the Closing, the Company will deliver
to the Representative true and correct copies of the articles of incorporation
and certificate of incorporation of the Company and all amendments thereto, all
such copies to be certified by the Secretary of State of the State of Florida;
true and correct copies of the bylaws of the Company and of the minutes of all
meetings of the directors and shareholders of the Company held prior to the
Closing Date which in any way relate to the subject matter of this Agreement;
and true and correct copies of all material contracts to which the Company is a
part, other than contracts for the sale of products or services in the normal
course of business.
5.14. Cooperation With Representative's Due Diligence. At all times
prior to the Closing Date, the Company will cooperate with the Representative
and the Co-Manager in such investigation as the Representative may make, or
cause to be, made of all the properties, business and operations of the Company
in connection with the purchase and public offering of the Stock and Warrants,
and the Company will make available to the Representative in connection
therewith such information in its possession as the Representative and the
Co-Manager may reasonably request.
5.15. No Sale Period. No offering, sale or other disposition of any
common stock, equity or long-term debt will be made within one year after the
Effective Date of the
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Prospectus, directly or indirectly, by the Company, otherwise than hereunder or
with the Representative's consent.
5.16. Appointment of Transfer Agent. The Company has appointed
American Stock Transfer Trust Company as Transfer Agent for the Stock and
Warrants subject to the Closing. The Company will not change or terminate such
appointment for a period of three years from the Effective Date without first
obtaining the written consent of the Representative, which consent shall not be
unreasonably withheld.
5.17. Compliance With Conditions Precedent. The Company will use all
reasonable efforts to comply or cause to be complied with the conditions
precedent to the several obligations of the Underwriters in Section 8 hereof.
5.18. Section 462(b) Registration Statement. The Company shall, upon
the demand of the Representative, file a Registration statement pursuant to
Section 462(b) covering an additional 23% of the Securities offered.
5.19. Registration Under the Exchange Act. The Company shall, within
90 days after the Effective Date, register the class of equity securities which
constitutes the Stock and Warrants by filing with the Securities and Exchange
Commission a Registration Statement (and such copies thereof as the Commission
may require) with respect to such securities, containing such information and
documents as the Commission may specify comparable to that which is required in
an application to register a security pursuant to subsection (g) of Section 12
of the Act, as amended.
5.20. Designation of Member of Company's Board of Directors. The
Representative shall have the right to designate as a member of the Board of
Directors or at the Representative's option, an individual to attend the
meetings of the Board of Directors of the Company, for a period until the next
annual meeting at which time management of the Company shall cause said designee
to be nominated for election to the Board of Directors, and shall support the
election of said designee. The designee shall continue to be nominated and
supported by management of the Company until such time as the Warrants have been
called by the Company. The attending individual shall not be compensated for
attendance in excess of any fee paid to any other members of the Board of
Directors, provided however that in the event Robert A. Shuey, III, is
designated, he shall receive a fee of $12,000.00 per year, 10,000 options at the
Initial Public Offering price, and $100.00 per meeting.
5.21. Key Man Insurance. The Company as of the Effective Date, will use
its best efforts and in good faith attempt to obtain one million dollar
($1,000,000) key man life insurance policy, from a qualified insurance company,
on Max Rutman the Chief Executive Officer, President and Chairman of the Board
of the Company, for which the Company will
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be the beneficiary. The Company will use its best efforts to maintain such
insurance for 5 years from Effective Date.
5.22. Application to Moody's or Standard & Poors. The Company shall, within
120 days after the Effective Date, apply for listing in either Moody's
Over-the-Counter Manual or Standard & Poors and shall use its best efforts to
have the Company listed in such manual.
5.23. AMEX Listing. For a period of five years from the Effective Date
of the Registration Statement, the Company will use its best efforts at its cost
and expense to effect and maintain the quotation of the Stock and Warrants on
the American Stock Exchange and will file with the American Stock Exchange all
documents and notices required by the American Stock Exchange for companies that
have securities that are traded in the over the counter market and quotations
for which are reported by the American Stock Exchange.
5.24 Exclusivity The Company agrees that it will not negotiate with any
underwriter or other person relating to a possible offering of the Company's
securities through March 15, 2000. The Company represents and warrants that,
except as disclosed to the Representative, the Company's subsidiaries are wholly
owned by the Company, and that it has not granted any other person any right to
underwrite or register shares thereof or entered into any agreement to pay any
finder's or financial services fee that would be triggered by consummation of
this offering.
5.25. Consulting. The Company has agreed to engage the Representative
and the Co-Manager as consultants for a period of two (2) years from the closing
of the offering at a fee of $60,000 per annum payable to each of the
Representative and the Co-Managers commencing on the Effective Date and
continuing for a period of twenty-four consecutive months. The Representative
and the Co-Manager agree to provide (1) general financial consulting services
and advice pertaining to the Company's business affairs, (2) assistance in
developing, studying and evaluating financing and capital structure, (3) merger
and acquisition activity, (4) reports and studies, and (5) negotiations
pertaining to the above. The Company shall execute and deliver to the
Representative and the Co-Manager a Financial Consulting Agreement, in the form
attached as Annex A.
SECTION 6
Indemnification
6.01. Indemnification By Company. The Company agrees to indemnify and
hold harmless the Underwriters and each person who controls any underwriter
against any and all losses, claims, damages or liabilities, joint or several, to
which they or any of them may become subject under the Act or any other statute
or at common law and to reimburse persons indemnified as above for any legal or
other expenses (including the cost of any
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investigation and preparation) incurred by them in connection with any
litigation, whether or not resulting in any liability, but only insofar as such
losses, claims, damages, liabilities and litigation arise out of or are based
upon any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement or any amendment thereto or any
application or other document filed in order to qualify the Stock and Warrants
under the blue sky or securities laws of the states where filings were made, or
the omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, all
as of the date when the Registration Statement or such amendment, as the case
may be, becomes effective, or any untrue statement or alleged untrue statement
of a material fact contained in the Prospectus (as amended or supplemented if
the Company shall have filed with the Commission any amendments thereof or
supplements thereto), or the omission or alleged omission to state therein a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading; provided, however,
that the indemnity agreement contained in this subsection 6.01 shall not apply
to amounts paid in settlement of any such litigation if such settlements are
effected without the consent of the Company, nor shall it apply to the
Underwriter or any person controlling the Underwriters in respect of any such
losses, claims, damages, liabilities or actions arising out of or based upon any
such untrue statements or alleged untrue statement, or any such omission or
alleged omission, if such statement or omission was made in reliance upon
information peculiarly within the knowledge of the Underwriter and furnished in
writing to the Company by the Underwriter specifically for use in connection
with the preparation of the Registration Statement and Prospectus or any such
amendment or supplement thereto. This indemnity agreement is in addition to any
other liability which the Company may otherwise have to the Underwriters. The
Underwriters agree within ten days after the receipt by them of written notice
of the commencement of any action against them or against any person controlling
them as aforesaid, in respect of which indemnity may be sought from the Company
on account of the indemnity agreement contained in this subsection 6.01 to
notify the Company in writing of the commencement thereof. The failure of the
Underwriters so to notify the Company of any such action shall relieve the
Company from any liability which it may have to the Underwriters or any person
controlling them as aforesaid on account of the indemnity agreement contained in
this subsection 6.01, but shall not relieve the Company from any other liability
which it may have to the Underwriters or such controlling person. In case any
such action shall be brought against the Underwriters or any such controlling
person and the Underwriters shall notify the Company of the commencement
thereof, the Company shall be entitled to participate in (and, to the extent
that it shall wish, to direct) the defense thereof at its own expense, but such
defense shall be conducted by counsel of recognized standing and reasonably
satisfactory to the Representative or such controlling person or persons,
defendant or defendants in such litigation. The Company agrees to notify the
Representative and the Co-Manager promptly of commencement of any litigation or
proceedings against it or any of its officers or directors, of which it may be
advised, in connection with the issue and sale of any of its securities and to
furnish to the Representative, at its request, copies of all pleadings
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therein and permit the Representative to be an observer therein and apprise the
Representative of all developments therein, all at the Company's expense.
Provided, however, that in no event shall the indemnification agreement
contained in this Section 6.01 inure to the benefit of the Representative (or
any person controlling the Representative) on account of any losses, claims,
damages, liabilities or actions arising from the sale of the Stock and Warrants
upon the public offering to any person by such Representative if such losses,
claims, damages, liabilities or actions arise out of, or are based upon, an
untrue statement or omission or alleged untrue statement or omission in a
Preliminary Prospectus and if the Prospectus shall correct the untrue statement
or omission or the alleged untrue statement or omission which is the basis of
the loss, claim, damage, liability or action for which indemnification is sought
and a copy of the Prospectus had not been sent or given to such person at or
prior to the confirmation of such sale to him in any case where such delivery is
required by the Securities Act, unless such failure to deliver the Prospectus
was a result of non-compliance by the Company with Section 4.03 hereof.
6.02. Indemnification By Underwriters. The Underwriters severally
agree, to the extent of and only to the extent of their commitment pursuant to
Schedule I, in the same manner as set forth in subsection 6.01 above, to
indemnify and hold harmless the Company, the directors of the Company and each
person, if any, who controls the Company with respect to any statement in or
omission from the Registration Statement or any amendment thereto, or the
Prospectus (as amended or as supplemented, if amended or supplemented as
aforesaid) or any application or other document filed in any state or
jurisdiction in order to qualify the Stock and Warrants under the blue sky or
securities laws thereof, or any information furnished pursuant to Section 3.05
hereof, if such statement or omission was made in reliance upon information
peculiarly within its knowledge and furnished in writing to the Company by the
Representative on its behalf specifically for use in connection with the
preparation thereof or supplement thereto. The Underwriters shall not be liable
for amounts paid in settlement of any such litigation if such settlement was
effected without the consent of the Representative. In case of commencement of
any action in respect of which indemnity may be sought from the Underwriters on
account of the indemnity agreement contained in this subsection 6.02, each
person agreed to be indemnified by the Underwriters shall have the same
obligation to notify the Underwriters as the Underwriters have toward the
Company in subsection 6.01 above, subject to the same loss of indemnity in the
event such notice is not given, and the Underwriters shall have the same right
to participate in (and, to the extent that they shall wish, to direct) the
defense of such action at their own expense, but such defense shall be conducted
by counsel of recognized standing and satisfactory to the Company. The
Underwriters agree to notify the Company promptly of the commencement of any
litigation or proceeding against the Underwriters or against any such
controlling person, of which it may be advised, in connection with the issue and
sale of any of the securities of the Company, and furnish to the Company at its
request copies of all pleadings therein and apprize it of all
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the developments therein, all at the Company's expense, and permit the Company
to be an observer therein.
SECTION 7
Effectiveness of Agreement
This Agreement shall become effective upon release by the
Representative of the Stock and Warrants for offering after the Effective Date.
The time of the release by the Representative of the Stock and Warrants for
offering, for the purposes of this Section 7, shall mean the time of the release
by the Representative of the Stock and Warrants for public sale pursuant to the
Registration Statement. The Representative agrees to notify the Company
immediately after the Representative shall have released the Stock and Warrants,
that this Agreement has 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 8
Conditions of the Underwriters' Obligations
The Underwriters' obligations hereunder to purchase the Stock and
Warrants and to make payment to the Company hereunder on the Closing Date shall
be subject to the accuracy, as of the Closing Date, of the representations and
warranties on the part of the Company herein contained, to the performance by
the Company of all its agreements herein contained, to the fulfillment of or
compliance by the Company with all covenants and conditions hereof, and to the
following additional conditions:
8.01. Effectiveness of Registration Statement. The Registration
Statement shall have become effective on or prior to 12:00 Noon EST time, on the
Effective Date hereof, or such later date as the Underwriter may agree to. 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 initiated or threatened by the Commission or be pending; any
request for additional information on the part of the Commission (to be included
in the Registration Statement or Prospectus or otherwise) shall have been
complied with to the satisfaction of the Commission; and neither the
Registration Statement or the Prospectus nor any amendment thereto shall have
been filed to which counsel to the Representative shall have reasonably objected
in writing or have not given their consent.
8.02. Accuracy of Registration Statement. The Representative shall not
have disclosed in writing to the Company that the Registration Statement or the
Prospectus or any amendment thereof or supplement thereto contains an untrue
statement of a fact which, in the opinion of counsel to the Representative, is
material, or omits to state a fact
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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.
8.03. Casualty and Other Calamity. 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 any other cause, of such character as
materially adversely affects its business or property considered as an entire
entity, whether or not such loss is covered by insurance and the President of
the Company of the Company shall not have suffered any injury or disability of a
nature which would materially adversely affect his ability to properly function
as an officer and director of the Company.
8.04. Litigation and Other Proceedings. Between the date hereof and
the Closing Date, there shall be no litigation instituted or threatened against
the Company and there shall be no proceeding instituted or threatened against
the Company 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, franchises, licenses, patents, operations or financial condition or
income of the Company considered as an entity.
8.05. Lack of Material Change and Other Conditions. Except as
contemplated herein or as set forth in the Registration Statement and
Prospectus, during the period subsequent to the date of the last audited balance
sheet included in the Registration Statement and prior to the Closing Date, the
Company (A) shall have conducted its business in the usual and ordinary manner
as the same was being conducted on the date of the last audited balance sheet
included in the Registration Statement, (B) except in the ordinary course of its
business, the Company shall not have incurred any liabilities or obligations
(direct or contingent) or disposed of any of its assets, or entered into any
material transaction or suffered or experienced any substantially adverse change
in its condition, financial or otherwise.
8.06. AMEX Listing Approval. The American Stock Exchange shall have
approved the Company's listing application under the symbols "SEA" for the Stock
and "SEAW" for the Warrants.
8.07. Accountant's Comfort Letter and Update. At the Closing the
Representative shall have received from Spear, Safer, Harmon & Co. a letter
dated such date, in form and substance satisfactory to the representative
containing statements and information of the type ordinarily included in
accountants' "comfort letter" to underwriters with respect to the financial
statements and certain financial information contained in the Registration
Statement and Prospectus; and, at the Closing, the Representative shall also
have received from Spear, Safer Harmon & Co. a letter, dated at the Closing
Date, to the effect that they reaffirm the statements made in the letter
furnished pursuant to the previous clause, except that the specified date
referred to shall be a date not more than
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three days prior to the Closing Date. At the Closing Date, the capital stock and
surplus accounts of the Company shall be substantially the same as at the date
of the last audited balance sheet included in the Registration Statement,
without considering the proceeds from the sale of the Stock, other than as may
be set forth in the Prospectus.
8.08. Review By and Opinion of Underwriter's Counsel. The
authorization of the Stock, the Warrants, the Warrant Stock, the
Representative's Warrants, 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
Representative and the Co-Manager. The Representative and the Co-Manager shall
have received an opinion dated as of the Closing Date from its counsel,
substantially in the form of the opinion called for by Section 8.07(viii),
qualified in such manner as the Representative may deem acceptable.
8.09. Opinion of Counsel. The Company (which term shall include any
subsidiaries of the Company) shall have furnished to the Representative the
opinions, dated the Closing Date, addressed to the Representative, from Atlas,
Pearlman, Trop & Borkson, P.A. and Abud, Vivanco & Vergara, counsels to the
Company, to the effect that based upon a review by them of the Registration
Statement, Prospectus, the Company's certificate of incorporation, bylaws, and
relevant corporate proceedings, an examination of such statutes they deem
necessary and such other investigation by such counsel as they deem necessary to
express such opinion:
(i) Bio-Aqua Systems, Inc. has been duly incorporated and is a
validly existing corporation in good standing under the laws of Florida, 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.
(ii) The Company is duly qualified or registered as a foreign
corporation in any applicable state or foreign jurisdiction cognizant that the
Company's ownership of property and its conduct of business requires such
qualification or registration and that the failure to so qualify would have a
material adverse effect on its operations.
(iii) To its knowledge, Bio-Aqua Systems, Inc. has authorized an
outstanding capital stock as set forth in the Registration Statement and
Prospectus; the outstanding common stock of the Company, the Stock, and the
Warrants conform in all material respects to the statements concerning them in
the Registration Statement and Prospectus; the outstanding common stock of
Bio-Aqua Systems, Inc. has been duly and validly issued and is fully-paid and
nonassessable and to its knowledge contains no preemptive rights; the Stock has
been, and the shares of Warrant Stock issuable upon exercise of the Warrants
will be, duly and validly authorized and, upon issuance thereof and payment
therefor in accordance with this Agreement and the Warrants, will be duly
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and validly issued, fully paid and nonassessable, and to its knowledge will not
be subject to the preemptive rights of any shareholder of Bio-Aqua Systems, Inc.
(iv) The Warrants and Representative's Warrants have been duly
and validly authorized and issued and are valid and binding instruments
enforceable in accordance with their terms.
(v) To the Company's knowledge, a sufficient number of shares of
Stock and Warrants have been duly reserved for issuance upon exercise of the
Warrants and the Representative's Warrants.
(vi) No consents, approvals, authorizations or orders of
agencies, officers or other (United States) regulatory authorities are known to
such counsel which are necessary for the valid authorization, issue or sale of
the Stock and Warrants hereunder, except as required under the Act or blue sky
or state securities laws.
(vii) The issuance and sale of the Stock, the Warrants,
Representative's Warrants and the consummation of the transactions herein
contemplated and compliance with the terms of this Agreement will not conflict
with or result in a breach of any of the terms, conditions, or provisions of or
constitute a default under the certificate of incorporation, or bylaws of
Bio-Aqua Systems, Inc., or any note, indenture, mortgage, deed of trust, or
other agreement or instrument known to such counsel to which the Company is a
party or by which the Company or any of its property is bound or any existing
law (provided this paragraph shall not relate to federal or state securities
laws), order, rule, regulation, writ, injunction, or decree known to such
counsel of any government, governmental instrumentality, agency, body,
arbitration tribunal, or court domestic or foreign, having jurisdiction over the
Company or its property.
(viii) The Registration Statement has become effective under the
Act and, to the best of the knowledge of such counsel after such counsel has
conducted a reasonable investigation, no order suspending the effectiveness of
the Registration Statement has been issued and no proceedings for that purpose
have been instituted or are pending by the Commission under the Act; and the
Registration Statement and Prospectus, and each amendment and supplement
thereto, comply as to form in all material respects with the requirements of the
Act and the Rules and Regulations thereunder, and nothing has come to such
counsel's attention 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 in light of the
circumstances under which made (except that no opinion need be expressed as to
financial statements and the notes thereto contained in the Registration
Statement or Prospectus).
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(ix) Such counsel is familiar with all contracts referred to in
the Registration Statement or 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 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 the subject of such a
character required to be disclosed in the Registration Statement or the
Prospectus which are not disclosed and properly described therein.
(x) This Agreement has been duly authorized and executed by the
Company and is a valid and binding agreement of the Company.
As to routine factual matters such as the issuance of stock
certificates and receipt of payment therefor, the states and countries in which
the Company transacts business, the adoption of resolutions reflected by the
Company's minute book and the like, such counsel may rely on the certificate of
an appropriate officer of the Company. Such opinion shall also cover such other
matters incident to the transactions contemplated by this Agreement as the
Underwriter or their Counsel shall reasonably request.
8.10.01. Accountant's Letter. The Underwriter shall have received a
letter addressed to it and dated the date of this Agreement and the Closing
Date, respectively, from Spear, Safer, Harmon & Co. independent public
accountants for the Company, stating that (i) with respect to the Company they
are independent public accountants within the meaning of the Act and the
applicable published Rules and Regulations thereunder and the response to Item
509 of Regulation S-K as reflected by the Registration Statement is correct
insofar as it relates to them; (ii) in their opinion, the financial statements
examined by them of the Company at all dates and for all periods referred to in
their opinion and included in the Registration Statement and Prospectus, comply
in all material respects with the applicable accounting requirements of the Act
and the published Rules and Regulations thereunder with respect to registration
statements on Form SB-2; (iii) on the basis of certain indicated procedures (but
not an examination in accordance with generally accepted accounting principles),
including examinations of the instruments of the Company set forth under
"Capitalization" in the Prospectus, a reading of the latest available interim
unaudited financial statements of the Company, whether or not appearing in the
Prospectus, inquiries of the officers of the Company or other persons
responsible for its financial and accounting matters regarding the specific
items for which representations are requested below and a reading of the minute
books of the Company, nothing has come to their attention which would cause them
to believe that during the period from the last audited balance sheet included
in the Registration Statement to a specified date not more than five days prior
to the date of such letter (a) there has been any change in the capital stock or
other securities of the Company or any payment or declaration of any dividend or
other distribution in respect thereof or exchange therefor from that shown on
its audited balance sheets or in the debt of the Company from that shown or
contemplated under "Capitalization" in the Registration Statement or Prospectus
other than as set forth in or
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contemplated by the Registration Statement or Prospectus; (b) there have been
any material decreases in net current assets or net assets as compared with
amounts shown in the last audited balance sheet included in the Prospectus so as
to make said financial statements misleading; and (c) on the basis of the
indicated procedures and discussions referred to in clause (iii) above, nothing
has come to their attention which, in their judgment, would cause them to
believe or indicate that (1) the unaudited financial statements and schedules
set forth in the Registration Statement and Prospectus do not present fairly the
financial position and results of the Company, for the periods indicated, in
conformity with the generally accepted accounting principles applied on a
consistent basis with the audited financial statements, and (2) the dollar
amounts, percentages and other financial information set forth in the
Registration Statement and Prospectus under the captions "Prospectus Summary,"
"Risk Factors," "Dilution," "Capitalization," "Exchange Rates", "Remuneration,"
"Bridge Financing", "Business", "Principal Shareholders," and Certain
Relationships and Related Transactions are not in agreement with the Company's
general ledger, financial records or computations made by the Company therefrom.
8.10.02. Conformed Copies of Accountant's Letter. The Representative
shall be furnished without charge, in addition to the original signed copies,
such number of signed or photostatic or conformed copies of such letters as the
Representative shall reasonably request.
8.11. Officer's Certificate. The Company shall have furnished to the
Representative and to the Co-Manager its certificate by the Chief Executive
Officer and the Chief Financial Officer, dated as of the Closing Date, to the
effect that:
(i) The representations and warranties of the Company in this
Agreement are true and correct at and as of the Closing Date, and the Company
has complied in all material respects with all the agreements and has satisfied
all the conditions on its part to be performed or satisfied at or prior to 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 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 contain all statements
required to be stated therein, and all statements contained therein are true and
correct in all material respects, and neither the Registration Statement nor
Prospectus nor any amendment or supplement thereto includes any untrue statement
of a material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein in light of the
circumstances
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when made 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
a supplemented Prospectus which has not been so set forth.
(iv) Except as set forth in the Registration Statement and
Prospectus since the respective dates as of which the 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 affairs or condition of the Company, 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.
(v) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus, no dividends or distribution
whatever have been declared and/or paid on or with respect to the common stock
of the Company.
8.12. Tender of Delivery of Stock. All of the Stock and Warrants being
offered by the Company and the Warrants being purchased from the Company by the
Representative shall be tendered for delivery in accordance with the terms and
provisions of this Agreement.
8.13. Blue-Sky Qualification. The Stock shall be qualified in such
states as the Underwriters through their Representative may reasonably request
pursuant to Section 5.04, and each such qualification shall be in effect and not
subject to any stop order or other proceeding on the Closing Date.
8.14. Approval of Representative's Counsel. All 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 satisfactory to counsel to the Representative and to the
Co-Manager, whose approval shall not be unreasonably withheld. The suggested
form of such documents shall be provided to the counsel for the Representative
and to the Co-Manager, at least one business day before the Closing Date. The
Representative's and to the Co-Manager's counsel will provide a written
memorandum stating such closing documents which they deem necessary for their
review. Such memorandum shall be delivered at least three business days before
the Closing Date to counsel for the Company.
8.15. Officers' Certificate As a Company Representative. Any
certificate signed by an officer of the Company and delivered to the
Representative or to counsel for the Representative will be deemed a
representation and warranty by the Company to the Representative as to the
statements made therein.
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SECTION 9
Termination
9.01. Termination Because of NonCompliance. This Agreement may be
terminated by the Representative by notice to the Company in the event that
there has been, since the time of execution of this Agreement or since the
respective dates as of which the information is given in the Prospectus, any
material adverse change in the financial condition, or business affairs of the
Company and its subsidiaries considered as one enterprise, whether or not
arising in the ordinary course of business, or if, the Company shall have failed
or been unable to comply with any of the terms, conditions or provisions of this
Agreement on the part of the Company to be performed, complied with or fulfilled
(including but not limited to those specified in Sections 2, 3, 4, 5, and 8
hereof) within the respective times herein provided for, unless compliance
therewith or performance or satisfaction thereof shall have been expressly
waived by the Representative in writing.
9.02. Market Out Termination. This Agreement may be terminated by the
Representative by notice to the Company at any time if payment for and delivery
of the Stock and Warrants is rendered impracticable or inadvisable because (i)
trading in securities generally on the New York Stock Exchange, American Stock
Exchange, or NASDAQ (including NASDAQ SmallCap) shall have been suspended or
materially limited, (ii) a general moratorium on commercial banking activities
in New York or Florida shall have been declared by either federal or state
authorities, or (iii) there has occurred a material adverse change in the
financial markets in the United States or elsewhere including, but not limited
to: a war, new outbreak of hostilities or escalation thereof, or any other
national calamity shall have occurred, or any development involving a crisis or
change in political, financial, or economic conditions, the effect of which on
the financial markets of the United States or overseas is such as it would be
impracticable or inadvisable for the Representative to proceed or continue with
this Agreement or with the public offering. Notice of such termination may be
given to the Company by telegram, telecopy or telephone and shall subsequently
be confirmed by letter.
9.03. Company's Right to Terminate. In the event any action or
proceeding of the type referred to in subparagraph 9.02 above shall be
instituted or threatened against the Underwriters at any time prior to the
effective date hereunder, the Underwriters fail to comply with subparagraphs
10.01 and 10.02, or in the event there shall be filed by or against the Company
in any court pursuant to any federal, state, local or municipal statute, a
petition in bankruptcy or insolvency or for reorganization or for the
appointment of a receiver or trustee of its assets or if it makes an assignment
for the benefit of creditors, the Company shall have the right on three days'
written notice to the Representative to terminate this Agreement without any
liability to the Underwriters of any kind except for the payment of all expenses
as provided herein.
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9.04. Effect of Termination Hereunder. Any termination of this
Agreement pursuant to this Section 9 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 thereto; except that the Company shall remain
obligated to pay the costs and expenses provided to be paid by it specified in
Section 5.07 unless terminated under 9.03; and the Company and the
Representative shall be obligated to pay, respectively, all losses, claims,
damages or liabilities, joint or several, under Section 6.01 in the case of the
Company and Section 6.02 in the case of the Representative.
SECTION 10
Underwriter's Representations and Warranties
The Underwriters represent and warrant to and agree with the Company
that:
10.01. Registration as BrokerDealer and Member of NASD. Each
underwriter is registered as a broker-dealer with the Securities and Exchange
Commission and is registered as a broker-dealer in all states in which it
conducts business and is a member in good standing of the National Association
of Securities Dealers, Inc.
10.02. No Pending Proceedings. There is not now pending or threatened
against the Underwriters any action or proceeding of which it has been advised,
either in any court of competent jurisdiction, before the Securities and
Exchange Commission or any state securities commission concerning its activities
as a broker or dealer, nor have any of the Underwriters been named as a "cause"
in any such action or proceeding.
SECTION 11
Rights and Obligations
11.01. Consultation With Representative. See Section 5.24. Consulting.
In reference to the rights and obligations of the Representative provided in the
Consulting Agreement, the Company shall not be required to consult with the
Underwriter concerning any borrowings from banks and institutional lenders or
concerning financing under any equipment leasing or similar arrangements.
11.02. Exercise of Warrants. Upon the exercise of any Warrants after
the Effective Date, the Company will pay the Representative and the Co-Manager,
as principal and not in its representative capacity, a fee of four percent (4%)
of the difference between the initial offering price and the aggregate exercise
price of the Warrants if: (i) the market price of the Company's Stock is greater
than the exercise price of the Warrants on the date of exercise; (ii) the
exercise of the Warrants was solicited by a member of the NASD; (iii) the
Warrants are not held in a discretionary account; (iv) the disclosure of
compensation arrangements has been made in documents provided to customers, both
as part of the original offering and at the time of the exercise; (v) the
solicitation of the exercise of the Warrants was not in violation of Regulation
M promulgated under the Exchange Act; and (vi) the solicitation of the exercise
of
28
<PAGE>
the Warrants is in compliance with NASD Notice to Members 81-38. The warrant
solicitation fee is to be received only by brokers designated in writing by the
Company. The Company agrees not to solicit the exercise of any Warrants through
brokers or dealers other than through the Representative and the Co-Managers
provided that the Company shall not be required to pay the Representative or the
Co-Managers any solicitation fee as to any Warrants solicited solely by the
Company without any action on the part of the Representative and the Co-Managers
and provided the Company is permitted by applicable laws to so solicit the
exercise of the Warrants. The Company will not authorize any other dealer to
engage in such solicitation without the prior written consent of the
Representative and the Co-Managers. The exercise of the Warrants other than
through the Representative and the Co-Managers will be presumed to be
unsolicited unless the customer has indicated in writing that the transaction
was not unsolicited and has designated the broker/dealer which is to receive
compensation for the exercise. The warrant solicitation fee to be paid upon the
exercise of the warrants will not be paid before (12) twelve months after the
effective date of the offering.
SECTION 12
Notice
Except as otherwise expressly provided in this Agreement:
12.01. Notice to the Company. Whenever notice is required by the
provisions of this Underwriting Agreement to be given to the Company, such
notice shall be in writing addressed to the Company as follows:
BIO-AQUA SYSTEMS, INC.
1900 Glades Road, Suite 351
Boca Raton, FL 33431
Telephone: (561) 416-8930
Attention: David Mayer
With a copy to:
Charles B. Pearlman, Esq.
Brian Pearlman, Esq.
Atlas, Pearlman, Trop & Borkson, P.A.
200 East Las Olas Blvd., Suite 1900
Fort Lauderdale, FL 33301
Telephone: (954) 763-1200
Telefax: (954) 766-7800
29
<PAGE>
12.02. Notice to the Underwriters. Whenever notice is required by the
provisions of this Agreement to be given to the Underwriters, such notice shall
be given in writing addressed to the Representative at the address set out at
the beginning of this Agreement, with a copy to:
Institutional Equity Corporation
Attn: Robert A. Shuey, III
5910 North Central Expressway, Suite 480
Dallas, TX 75206
Nutmeg Securities
Attn: Dan Guilfoile
495 Post Road East
Westport, CT 06880
With a copy to:
Nancy Van Sant, Attorney
Paul A. Levine, Attorney
Sacher, Zelman, Paul, Beiley & Van Sant P.A.
1401 Brickell, Suite 700
Miami, FL 33133
Telephone: (305) 371-8797
Telefax: (305) 374-2605
SECTION 13
Miscellaneous
13.01. Benefit. This Agreement is made solely for the benefit of the
Underwriters, the Company, their respective officers and directors and any
controlling person, 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 purchasers, as such, of any of the Stock or Warrants.
13.02. Survival. The respective indemnities, agreements,
representations, warranties, covenants and other statements of the Company or
its officers as set forth in or made pursuant to this Agreement and the
indemnity agreements of the Company and the Underwriters contained in Section 6
hereof shall survive and remain in full force and effect, regardless of (i) any
investigation made by or on behalf of the Company or the Underwriters or any
such officer or director thereof or any controlling person of the Company or of
the Underwriters, (ii) delivery of or payment for the Stock, (iii) the Closing
Date, and (iv) any successor of the Company and the Underwriters or any
controlling
30
<PAGE>
person, officer or director thereof, as the case may be, shall be entitled to
the benefits hereof.
13.03. Governing Law. The validity, interpretation and construction of
this Agreement and of each part hereof will be governed by the laws of the State
of Florida.
13.04. Underwriters' Information. The statements with respect to the
public offering of the Stock on the cover page of the Prospectus and under the
caption "Underwriting"' in the Prospectus constitute the written information
furnished by or on behalf of the Underwriters referred to in subsection 2.02
hereof, in subsection 6.01 hereof and subsection 6.02 hereof.
13.05. Counterparts. This Agreement may be executed in any number of
counterparts, each of which may be deemed an original and all of which together
will constitute one and the same instrument.
Please confirm that the foregoing correctly sets forth our Agreement.
Very truly yours,
Bio-Aqua Systems, Inc.
By:
----------------------------
ATTEST:
--------------------------
Secretary
WE HEREBY CONFIRM AS OF THE DATE HEREOF THAT THE ABOVE
LETTER SETS FORTH THE AGREEMENT BETWEEN THE COMPANY AND US.
INSTITUTIONAL EQUITY CORPORATION
By:
----------------------------
NUTMEG SECURITIES, LTD.
By:
----------------------------
BIO-AQUA SYSTEMS, INC.
By:
----------------------------
1
<PAGE>
ANNEX A
INSTITUTIONAL EQUITY CORPORATION
5910 North Central Expressway, Suite 480
Dallas, TX 75206
NUTMEG SECURITIES, LTD.
495 Post Road East
Westport, CT 06880
CONSULTING AGREEMENT
--------------------
_____________, 1999
Bio-Aqua Systems, Inc.
1900 Glades Road, Suite 351
Boca Raton, Florida 33431
Attention: Mr. Max Rutman Chairman of the Board, President and Chief
Executive Officer
Dear Sirs:
This will confirm the arrangements, terms and conditions pursuant to
which Institutional Equity Corporation (the "Representative") and Nutmeg
Securities, Ltd.("Nutmeg")(collectively the "Consultants") have been retained to
serve as consultants and advisors to Bio-Aqua Systems, Inc., a Florida
corporation (the "Company"), for the term set forth in Section 3 below. The
undersigned hereby agree to the following terms and conditions:
1. Engagement. The Company hereby retains the Consultants to perform
consulting and advisory services, and the Consultants hereby accepts such
retention and agrees to do and perform consulting and advisory services, upon
the terms and conditions set forth herein.
2. Duties of the Consultant.
-------------------------
(a) Consulting Services. The Consultants will provide such general
financial consulting services and advice pertaining to the Company's business
affairs (as further set forth below), as and when the Company may from time to
time reasonably request upon reasonable notice. Without limiting the generality
of the foregoing, the Consultants will assist the Company in developing,
studying and evaluating financing and capital structure, mergers and
acquisitions activity and corporate financing proposals,
<PAGE>
prepare reports and studies thereon when advisable, and assist in negotiations
and discussions pertaining thereto.
(b) Financing. The Consultants will assist and represent the Company
in obtaining both short and long-term financing, when so requested by the
Company in the Company's sole discretion. The Consultants will be entitled to
additional compensation under such terms as may be agreed to by the parties in
connection therewith.
(c) Wall Street Liaison. The Consultants will, when appropriate,
arrange meetings between representatives of the Company and individuals and
financial institutions in the investment community, such as security analysts,
portfolio managers and market makers.
The services described in this Section 2 shall be rendered by the
Consultants in consultation with the Company at such time and place and in such
manner (whether by conference, telephone, letter or otherwise) as the
Consultants and the Company may reasonably determine.
3. Term. The term of this Agreement shall commence on the date hereof
and continue for a period of two years from the date hereof (the "Term").
4. Compensation. As compensation in full for the Consultant's services
hereunder during the Term, the Company shall pay to the Consultants $60,000 per
annum, payable to the Representative, commencing on the effective date.
5. Expenses. The Company shall pay and reimburse the Consultants for
all reasonable out-of-pocket expenses incurred by the Consultants and approved
in advance in writing by the Company in the performance of its services under
this Agreement.
6. Relationship. Nothing herein shall constitute either Consultant as
an employee or agent of the Company. Except as might hereinafter be expressly
agreed, the Consultants shall not have the authority to obligate or commit the
Company in any manner whatsoever. Nothing herein shall preclude the Company from
enjoying the services of any other investment banking firm during the term of
this Agreement or any entity providing similar services as the consultant.
7. Confidentiality. Except in the course of the performance of its
duties hereunder, and in such case, only upon express written consent of the
Company, the Consultants agree that they shall not disclose any trade secrets,
know-how, or other proprietary information not in the public domain learned as a
result of this Agreement unless and until such information becomes generally
known or is in the public domain.
8. Finder's or Broker's Fees. The Company acknowledges and agrees that,
with the written agreement and at the request of the Company, the Consultants
may act as a
2
<PAGE>
finder or financial consultant in various business transactions in which the
Company or any of its subsidiaries may be involved, such as mergers,
acquisitions, joint ventures or investments and that the Consultants may be
entitled to receive a finder's fee or brokerage commission or other rights,
profits or payments in connection with such transactions provided, however, that
the Company and the Consultants have entered into an agreement prior thereto
regarding the services to be performed by and the fee to be paid to the
Consultants.
9. Permitted Activities. Nothing contained in this Agreement shall
limit or restrict the right of the Consultants or of any officer, director,
shareholder, employee, agent or representative of the Consultants to be a
partner, owner, director, officer, employee, agent or representative of, or
engage in, any other business, whether of a similar nature or not, or limit or
restrict the right of the Consultants to render services of any kind to any
other corporation, firm, individual or other entity. Nothing contained in this
Agreement shall limit or restrict the right of the Company to retain the
services of other investment bankers or financial consultants.
10. Assignment and Termination. This Agreement shall not be assignable
by any party except to a successor to all or substantially all of the business
of either party without the prior written consent of the other party, which
consent may be arbitrarily withheld by the party whose consent is required.
11. Notices. All notices hereunder shall be in writing and shall be
validly given, made or served if in writing and delivered in person or when
received by facsimile transmission, or five days after being sent first class
certified or registered mail, postage prepaid or one day after being sent by
nationally recognized overnight courier to the party for whom intended at the
addresses as set forth above or at such other address as may be provided.
12. Governing Law; Submission to Jurisdiction. This agreement shall be
interpreted, construed, governed and enforced according to the laws of the State
of Florida without giving effect to the conflicts of law rules thereof. The
Company and the Consultants hereby agree that any action, proceeding or claim
against it arising out of, or relating in any way to, this Agreement shall be
brought and enforced in the courts of the State of Florida or of the United
States of America in Florida, and irrevocably submits to such jurisdiction,
which jurisdiction shall be exclusive. The Company and the Consultants hereby
irrevocably waive any objection to such exclusive jurisdiction or inconvenient
forum and also hereby irrevocably waive any right or claim to trial by jury in
connection with any such action, proceeding or claim.
13. Amendments. No amendment or modification of the terms or conditions
of this Agreement shall be valid unless in writing and signed by the parties
hereto.
3
<PAGE>
14. Indemnification. As a consultant for the Company, the Consultants
must at times rely upon the information supplied to the Consultants by the
Company's officers, directors, agents and employees as to accuracy and
completeness. Therefore, the Company agrees to indemnify, hold harmless and
defend the Consultants, its directors, officers, employees and agents from and
against any and all claims, actions, proceedings, losses, liabilities, costs and
expenses (including without limitation, reasonable attorneys' fees) incurred by
any of them in connection with or as a result of any inaccuracy, incompleteness
or omission of information given to the Consultants in writing by the Company's
officers, directors, agents or employees in connection with the rendering of
services by the Consultants requested by the Company hereunder.
15. Counterparts. This Agreement may be executed in one or more
counterparts which, taken together, shall constitute one and the same
instrument, and this Agreement shall become effective when one or more
counterparts have been signed by each of the parties. It shall not be necessary
in making proof of this Agreement or any counterpart hereof to account for more
than one such counterpart.
Very truly yours,
INSTITUTIONAL EQUITY CORPORATION
By:
-------------------------------
Name:
Title:
NUTMEG SECURITIES, LTD.
By:
-------------------------------
Name:
Title:
AGREED AND ACCEPTED:
BIO-AQUA SYSTEMS, INC.
By: /s/ Max Rutman
-------------------------------
Max Rutman
Chairman of the Board, President and
Chief Executive Officer
4
CONSENT TO BE INCLUDED IN THE PROSPECTUS
OF
BIO-AQUA SYSTEMS, INC.
The undersigned possible nominee for director of Bio-Aqua Systems, Inc.
(the "Company") hereby consents to the following:
Pursuant to Rule 438 of the Securities Act of 1933, the undersigned
consents to the inclusion of his name and references to him in the Registration
Statement on Form SB-2 filed by the Company, with regard to possibly becoming a
director of the Company after the effective date of the Company's initial public
offering.
Dated: December 22, 1999.
/s/ Robert A. Shuey, III
--------------------------
Robert A. Shuey, III
