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EXHIBIT 1.1
Form of Warrant Exercise and Placement Agent Agreement
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WARRANT EXERCISE AND
PLACEMENT AGENT AGREEMENT
December __, 2000
Tucker Anthony Incorporated
100 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Gentlemen:
Galaxy Nutritional Foods, Inc. (f/k/a Galaxy Foods Company), a
Delaware corporation (the "Company"), has issued to FINOVA Mezzanine Capital
Inc. ("FINOVA") certain of its Common Stock Warrants (the "Warrants")
exercisable for up to 815,000 shares of common stock, $.01 par value (the
"Shares"). FINOVA has agreed to exercise the Warrants and offer and sell the
Shares under the terms and conditions set forth in this letter agreement (the
"Agreement"). The Company and FINOVA desire Tucker Anthony Incorporated to act
as exclusive placement agent ("Placement Agent") in connection with the offer
and sale of the Shares (the "Offering").
1. Exercise of Warrants.
A. FINOVA and the Company hereby agree that during the
Offering Period (as defined in Section 2.B. below) FINOVA will exercise from
time to time Warrants for such number of Shares as are sold by you or
Soliciting Dealers (as defined in Section 2.C. below), and shall deliver
promptly upon a sale of any Shares such notices, documents, instruments or
other items reasonably requested by you and the Company in connection with the
exercise of such Warrants. Subject to the terms of this Agreement, during the
Offering Period FINOVA agrees that all Shares will be available for sale, that
Warrants will be exercised when requested by you and that no Shares will be
withheld or withdrawn from the operation of this Agreement. In the event that
there are no sales of Shares under this Agreement, FINOVA shall have no
liability to any party for any fees or costs subject to the indemnification
provisions of Section 8 and the limited liability of FINOVA in the event that
it refuses to exercise the Warrants pursuant to Section 11(b).
B. FINOVA shall be entitled to receive all of the net
proceeds from the sale of Shares hereunder (after retention by you of related
Selling Commissions and payment to the Company of the exercise price of the
related Warrants). In consideration of FINOVA's exercise of the Warrants and
sale of the Shares as described herein, the Company guarantees that FINOVA will
receive average net proceeds from the sale of Shares hereunder (after retention
by you of related Selling Commissions and payment to the Company of the
exercise price of the related Warrants) of no less than $1.00 per Share (the
"Guaranteed Minimum"). In the event that FINOVA does not receive average net
proceeds from the sale of Shares hereunder (after retention by you of related
Selling Commissions and payment to the Company of the exercise price of the
related Warrants) of at least the Guaranteed Minimum, the Company shall pay to
FINOVA the difference between the average net proceeds actually received by
FINOVA and the Guaranteed Minimum. Notwithstanding any provision in this
Agreement to the contrary, the parties hereto agree that the exercise price of
the Warrants and the Selling Commissions shall be deducted from the sales
proceeds of the Shares. FINOVA has agreed to defer the payment to it of such
amounts as provided in Section 4.B. hereinbelow.
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C. Notwithstanding any provision in this Agreement to
the contrary, the parties hereto agree that the gross sales price of any Share
sold hereunder will not be less than $3.25 (the "Minimum Price") without the
express written consent of the Company.
2. Description of Offering and Appointment of the Placement
Agent.
A. You are hereby appointed as FINOVA's exclusive
placement agent during the Offering Period for the purpose of finding
purchasers for the Shares, on a best efforts basis for up to 815,000 Shares,
through a public offering pursuant to a Registration Statement on Form S-3 (the
"Registration Statement"), and the prospectus contained therein (the
"Prospectus"), filed with the Securities and Exchange Commission (the "SEC") by
the Company on behalf of FINOVA under the Securities Act of 1933, as amended
(the "Act"). Subject to the terms and conditions contained herein, you accept
such appointment and agree to use your best efforts to find prospective
purchasers for the Shares. FINOVA and the Company expressly acknowledge and
agree that your obligations hereunder are on a best efforts basis only and that
the execution of this Agreement does not constitute a commitment by you or any
other person or entity to purchase Shares and does not ensure the successful
placement of all or any of the Shares.
B. The "Offering Period" shall mean that period during
which Shares may be offered for sale, commencing on the day the Registration
Statement is filed with the SEC, and continuing until the close of business on
March 31, 2001 (the "Termination Date") (subject to the right upon the mutual
agreement of the Company, FINOVA and you to extend the Offering Period to a
date not later than June 30, 2001; provided, however, that the Offering Period
shall in all events terminate upon the sale of all of the Shares).
C. You may, in your sole discretion, request other
registered broker-dealers who are members of the National Association of
Securities Dealers, Inc. ("NASD"), to assist in the efforts to place the
Shares. All such additional broker-dealers are referred to herein as
"Soliciting Dealers." The allocation of Shares among you and the Soliciting
Dealers shall be made by you. Before you retain any Soliciting Dealer, you will
cause the Soliciting Dealer to execute a Soliciting Dealer Agreement in form
and substance which you, the Company and FINOVA shall agree.
D. Subject to the performance by FINOVA and the Company
of their respective obligations to be performed under this Agreement, you
hereby accept such agency and agree on the terms and conditions herein set
forth to use your best efforts during the Offering Period to find purchasers
for the Shares. Upon termination of the Offering, your agency and this
Agreement shall terminate without obligation on your part or on the part of
FINOVA or the Company to you, except as set forth in this Agreement. We
acknowledge that your actions hereunder at all times will be as an agent and
not as a principal and that you have no obligation or commitment to purchase
any Shares under any circumstances.
E. The offering of the Shares shall be at the offering
price and upon the terms and conditions set forth in the Prospectus, subject to
the terms and conditions herein set forth. Subject to the terms hereof, offers
and, after the effective date of the Registration Statement, sales of the
Shares will occur continuously during the Offering Period.
3. Representations, Warranties, and Covenants of FINOVA, the
Company and Placement Agent.
A. The Company represents, warrants, and covenants to
you and FINOVA as follows:
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(a) The Company meets the requirements for use
of Form S-3 under the Securities Act of 1933, as amended (the "1933 Act"), and
the rules and regulations (the "1933 Act Regulations") of the Securities and
Exchange Commission (the "Commission") thereunder, and has filed a registration
statement on such Form (Registration No. 333-50796) which has become effective,
for the registration of the Shares under the 1933 Act and the 1933 Act
Regulations. The Commission has not issued any order preventing or suspending
the use of the Prospectus or the Preliminary Prospectus (as defined below). The
term "Preliminary Prospectus" as used herein means a preliminary prospectus
relating to the Shares and FINOVA Shares as contemplated by Rule 430 or Rule
430A ("Rule 430A") of the 1933 Act Regulations included at any time as part of
the registration statement. Copies of such registration statement and
amendments and of each related Preliminary Prospectus have been delivered to
the Placement Agent and to FINOVA. If such registration statement has not
become effective, a further amendment to such registration statement, including
a form of final prospectus, necessary to permit such registration statement to
become effective will be filed promptly by the Company with the Commission. If
such registration statement has become effective, a final prospectus relating
to the Shares containing information permitted to be omitted at the time
effectiveness by Rule 430A will be filed by the Company with the Commission in
accordance with Rule 424(b) of the 1933 Act Regulations promptly after
execution and delivery of this Agreement. The term "Registration Statement"
means the registration statement as amended at the time it becomes or became
effective (the "Effective Date"), including all material incorporated by
reference therein and any information deemed to be included by Rule 430A and
any additional registration statement filed pursuant to Rule 462(b) of the
Rules and Regulations ("Rule 462(b)") with respect to the Shares ("Rule 462(b)
Registration Statement"). The term "Prospectus" means the prospectus relating
to the Shares as first filed with the Commission pursuant to Rule 424(b) of the
Rules and Regulations or, if no such filing is required, the form of final
prospectus relating to the Shares included in the Registration Statement at the
Effective Date. Any reference herein to the Registration Statement, the
Prospectus or any Preliminary Prospectus shall be deemed to refer to and
include the documents incorporated by reference therein pursuant to Item 12 of
Form S-3 which were filed under the Securities Exchange Act of 1934, as amended
(the "1934 Act"), on or before the date of this Agreement, or the issue date of
the Prospectus or any Preliminary Prospectus, as the case may be; and any
reference herein to the terms "amend," "amendment" or "supplement" with respect
to the Registration Statement, the Prospectus or any Preliminary Prospectus
shall be deemed to refer to and include the filing of any document under the
1934 Act after the date of this Agreement, or the issue date of the Prospectus
or any Preliminary Prospectus, as the case may be, and deemed to be
incorporated therein by reference.
(b) On the date that any Preliminary Prospectus
was filed with the Commission, the date the Prospectus is first filed with the
Commission pursuant to Rule 424(b) (if required), at all times subsequent to
and including the initial Closing Date and when any post-effective amendment to
the Registration Statement becomes effective or any amendment or supplement to
the Prospectus is filed with the Commission, the Registration Statement, each
Preliminary Prospectus and the Prospectus (as amended or as supplemented if the
Company shall have filed with the Commission any amendment or supplement
thereto), including the financial statements included in the Prospectus, did or
will comply with all applicable provisions of the 1933 Act and the 1933 Act
Regulations and the 1934 Act and the rules and regulations promulgated
thereunder (the "1934 Act Regulations") and did or will contain all statements
required to be stated therein in accordance with the 1933 Act and the 1933 Act
Regulations and the 1934 Act and the 1934 Act Regulations. On the Effective
Date and when any post-effective amendment to the Registration Statement
becomes effective, no part of the Registration Statement or any such amendment
did or will contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein not misleading. At the Effective Date, at the date the
Prospectus or any amendment or supplement to the Prospectus is filed with the
Commission and at each Closing Date the Prospectus did not or will not contain
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not
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misleading. The Company has not distributed any offering material in connection
with the offering or sale of the Shares, other than the Registration Statement,
the Preliminary Prospectus and the Prospectus.
(c) BDO Seidman, LLP, who have certified the
financial statements and supporting schedules included in the Registration
Statement, are independent public accountants as required by the 1933 Act and
the 1933 Act Regulations and the 1934 Act and the 1934 Act Regulations.
(d) The financial statements included or
incorporated by reference in the Registration Statement and the Prospectus
present fairly the consolidated financial position of the Company as of the
dates indicated and its consolidated results of operations for the periods
specified; except as otherwise stated in the Registration Statement, said
financial statements have been prepared in conformity with generally accepted
accounting principles applied on a consistent basis; and the supporting
schedules included in the Registration Statement present fairly the information
required to be stated therein. The financial information and statistical data
set forth in the Prospectus are prepared on an accounting basis consistent with
such financial statements.
(e) Since the respective dates as of which
information is given in the Registration Statement and the Prospectus, except
as otherwise stated therein, (i) there has been no material adverse change or
any development involving a prospective material adverse change in or affecting
the condition, financial or otherwise, or in the earnings, business affairs, or
business prospects of the Company, whether or not arising in the ordinary
course of business, (ii) there have been no transactions entered into by the
Company, other than those in the ordinary course of business, which are
material with respect to the Company, and (iii) there has been no dividend or
distribution of any kind declared, paid or made by the Company on any class of
its capital stock. The Company has no material contingent obligations which are
not disclosed in the Registration Statement or the financial statements
incorporated by reference therein.
(f) The Company has been duly incorporated and
is validly existing as a corporation in good standing under the laws of its
jurisdiction of incorporation, with corporate power and authority to own, lease
and operate its properties and to conduct its business as described in the
Prospectus and to enter into and perform its obligations under this Agreement;
the Company is duly qualified as a foreign corporation to transact business and
is in good standing in each jurisdiction in which such qualification is
required, whether by reason of the ownership or leasing of property or the
conduct of business, except where the failure to so qualify would not, singly
or in the aggregate, have a material adverse effect on the condition, financial
or otherwise, or the earnings, business affairs or results of operations of the
Company, taken as a whole (a "Material Adverse Effect"). Other than short-term
freely transferable investments in publicly traded companies aggregating less
than 5% of such companies or otherwise required to be disclosed under Item 601
of Regulation S-K, the Company does not own, directly or indirectly, any shares
of capital stock or any other equity securities of any corporation or have any
equity interest in any firm, partnership, joint venture, association or other
entity.
(g) The shares of issued and outstanding
capital stock of the Company have been duly authorized and validly issued and
are fully paid and nonassessable and have not been issued in violation of or
are not otherwise subject to any preemptive or other similar rights; the Shares
have been duly authorized for issuance and sale pursuant to this Agreement and,
when issued and delivered by FINOVA pursuant to this Agreement against payment
of the consideration set forth herein, will be validly issued and fully paid
and nonassessable; the certificates evidencing the Shares are in due and proper
form under Delaware law; the authorized capital stock of the Company, including
the Shares, conforms to all statements relating thereto contained in the
Prospectus; and the issuance of the Shares is not subject to preemptive or
other similar rights. There are no outstanding subscriptions, options, warrants
(other than the Warrants) convertible or exchangeable securities or other
rights granted to or by the Company to purchase shares of capital stock or
other securities of the Company and there are no commitments, plans or
arrangements to issue any shares of capital stock or any security convertible
or exchangeable for capital stock in the
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Company, in each case other than pursuant to the Company's employee benefit,
stock option and stock purchase plans in effect as of the date hereof or as
otherwise described in the Prospectus.
(h) The Company: (i) is in material compliance
with any and all applicable foreign, United States, state and local
environmental laws, rules, regulations, treaties, statutes and codes
promulgated by any and all governmental authorities relating to the protection
of human health and safety, the environment or toxic substances or wastes,
pollutants or contaminates ("Environmental Laws"); (ii) has received all
permits, licenses or other approvals required of it under applicable
Environmental Laws to conduct its business as currently conducted; and (iii) is
in compliance with all terms and conditions of any such permit, license or
approval, except where such noncompliance with Environmental Laws, failure to
receive required permits, licenses or other approvals would not, individually
or in the aggregate, have a Material Adverse Effect. No action, proceeding,
revocation proceeding, writ, injunction or claim is pending or, to the
Company's knowledge, threatened against the Company relating to the
Environmental Laws.
(i) The Company is not in violation of its
charter or bylaws or similar governing instruments or in default in the
performance or observance of any material obligation, agreement, covenant or
condition contained in any contract, indenture, mortgage, loan agreement, deed,
trust, note, lease, sublease, voting agreement, voting trust, or other
instrument or agreement to which the Company is a party or by which the Company
may be bound, or to which any of the property or assets of the Company are
subject; and the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated herein and compliance by the
Company with its obligations hereunder have been duly authorized by all
necessary corporate action and will not conflict with or constitute a breach
of, or default under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company pursuant to
any contract, indenture, mortgage, loan agreement, deed, trust, note, lease,
sublease, voting agreement, voting trust or other instrument or agreement to
which the Company is a party or by which they may be bound, or to which any of
the property or assets of the Company are subject, nor will such action result
in any violation of the provisions of the charter or bylaws of the Company or
any applicable statute, law, rule, regulation, ordinance, decision, directive
or order.
(j) No labor dispute with the employees of the
Company exists or, to the knowledge of the Company, is imminent; and the
Company is not aware of any existing or imminent labor disturbance by the
employees of any of its principal suppliers, manufacturers or contractors which
might, singly or in the aggregate, be expected to have a Material Adverse
Effect.
(k) There is no action, suit or proceeding
before or by any court or governmental agency or body, domestic or foreign, now
pending, or, to the knowledge of the Company, threatened, against or affecting
the Company, which is required to be disclosed in the Registration Statement
(other than as disclosed therein), or which, singly or in the aggregate, could
result in any Material Adverse Effect, or which, singly or in the aggregate,
could materially and adversely affect the properties or assets thereof or which
could materially and adversely affect the consummation of this Agreement; all
pending legal or governmental proceedings to which the Company is a party or of
which any of its properties or assets is the subject which are not described in
the Registration Statement, including ordinary routine litigation incidental to
the business, are, considered in the aggregate, not material; and there are no
contracts or documents of the Company which are required to be filed as
exhibits to the Registration Statement by the 1933 Act or by the 1933 Act
Regulations which have not been so filed.
(l) No relationship, direct or indirect, exists
between or among the Company on the one hand and the directors, officers,
shareholders, customers or suppliers of the Company on the other hand, that is
required by the 1933 Act or 1934 Act or the 1933 Act Regulations or 1934 Act
Regulations to be described in the Registration Statement and the Prospectus or
documents incorporated by reference therein that is not described as so
required.
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(m) The Company owns or is licensed to use all
patents, patent applications, inventions, trademarks, trade names, applications
for registration of trademarks, service marks, service mark applications,
copyrights, know-how, manufacturing processes, formulae, trade secrets,
licenses and rights in any thereof and any other intangible property and assets
(herein called the "Proprietary Rights") which are material to the business of
the Company as now conducted, in each case as described in the Prospectus. The
description of the Proprietary Rights is correct in all material respects and
fairly and correctly describes the Company's rights with respect thereto. The
Company has no knowledge of, and the Company has not given or received any
notice of, any pending conflicts with or infringement of the rights of others
with respect to any Proprietary Rights or with respect to any license of
Proprietary Rights. No action, suit, arbitration, or legal, administrative or
other proceeding, or investigation is pending, or, to the knowledge of the
Company, threatened, which involves any Proprietary Rights. The Company is not
subject to any judgment, order, writ, injunction or decree of any court or any
Federal, state, local, foreign or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, or any
arbitrator, or has entered into or is a party to any contract which restricts
or impairs the use of any such Proprietary Rights in a manner which would have
a material adverse effect on the use of any of the Proprietary Rights. To the
knowledge of the Company, no Proprietary Rights used by the Company, and no
services or products sold by the Company, conflict with or infringe upon any
proprietary rights available to any third party. The Company has not received
written notice of any pending conflict with or infringement upon such third
party proprietary rights. The Company has not entered into a consent,
indemnification, forbearance to sue or settlement agreement with respect to
Proprietary Rights other than in the ordinary course of business. No claims
have been asserted by any person with respect to the validity of the ownership
or right to use the Proprietary Rights of the Company and, to the knowledge of
the Company, there is no reasonable basis for any such claim to be successful.
The Company has complied, in all material respects, with its contractual
obligations relating to the protection of the Proprietary Rights used pursuant
to licenses. To the knowledge of the Company, no person is infringing on or
violating the Proprietary Rights owned or used by the Company.
(n) No registration, authorization, approval,
qualification or consent of any court or governmental authority or agency is
necessary in connection with the offering, issuance or sale of the Shares
hereunder, except such as may be required under the 1933 Act or the 1933 Act
Regulations or state securities or Blue Sky laws (or such as may be required by
the National Association of Securities Dealers, Inc. ("NASD") or the American
Stock Exchange).
(o) Except as otherwise disclosed in the
Prospectus, the Company now holds and at each Closing Date will hold, all
licenses, certificates, approvals and permits from all state, United States,
foreign and other regulatory authorities, including but not limited to the
United States Food and Drug Administration (the "FDA") and any foreign
regulatory authorities performing functions similar to those performed by the
FDA, that are material to the conduct of the business of the Company (as such
business is currently conducted), except for such licenses, certificates,
approvals and permits the failure of which to hold would not have a Material
Adverse Effect, all of which are valid and in full force and effect (and there
is no proceeding pending or, to the knowledge of the Company, threatened which
may cause any such license, certificate, approval or permit to be withdrawn,
canceled, suspended or not renewed). The Company is not in violation of any
law, order, rule, regulation, writ, injunction or decree of any court or
governmental agency or body, including, but not limited to, the FDA, and the
Company has not received any notice of proceedings relating to the revocation
or modification of any such permit or any circumstance which would lead it to
believe that such proceedings are reasonably likely which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding, would
have a Material Adverse Effect. All of the descriptions in the Registration
Statement and Prospectus of the legal
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and governmental proceedings by or before the FDA or any foreign, state or
local governmental body exercising comparable authority are true, complete and
accurate in all material respects.
(p) The Company has all corporate power and
authority to enter into this Agreement, and to perform its obligations
hereunder, and all consents, authorizations, approvals and orders required in
connection herewith have been obtained, except such as may be required under
state securities or Blue Sky laws or the by-laws and rules of the NASD and, if
the Registration Statement is not effective under the 1933 Act as of the time
of execution hereof, such as may be required (and shall be obtained as provided
in this Agreement) under the 1933 Act. This Agreement has been duly executed
and delivered by the Company and constitutes a valid and binding obligation of
the Company, enforceable against the Company in accordance with its terms,
except as limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws now or hereafter in effect relating to or affecting
creditors' rights generally or by general principles of equity relating to the
availability of remedies and except as rights to indemnity and contribution
hereunder may be limited by federal or state securities laws or the public
policy underlying such laws.
(q) There are no persons with registration or
other similar rights to have any securities registered pursuant to the
Registration Statement or otherwise registered by the Company under the 1933
Act, other than those which have been waived.
(r) No order preventing or suspending the use
of any preliminary prospectus has been issued and no proceedings for that
purpose are pending, threatened, or, to the knowledge of the Company,
contemplated by the Commission; and to the knowledge of the Company, no order
suspending the offering of the Shares in any jurisdiction has been issued and,
to the knowledge of the Company, no proceedings for that purpose have been
instituted or threatened or are contemplated.
(s) The Company has good and marketable title
to its properties, subject to security interests granted to the Company's
lenders. The properties of the Company are, in the aggregate, in good repair
(reasonable wear and tear excepted), and suitable for their respective uses.
Any real property held under lease by the Company are held by it under valid,
subsisting and enforceable leases with such exceptions as are not material and
do not interfere with the conduct of the business of the Company.
(t) The Company maintains a system of internal
accounting controls sufficient to provide reasonable assurances that (i)
transactions are executed in accordance with management's general or specific
authorization, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets, (iii) access
to assets is permitted only in accordance with management's general or specific
authorization, and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken
with respect to any differences.
(u) The Company has conducted and is conducting
its business in compliance with all applicable Federal, state, local and
foreign statutes, laws, rules, regulations, ordinances, codes, decisions,
decrees, directives and orders, except where the failure to do so would not,
singly or in the aggregate, have a Material Adverse Effect.
(v) To the Company's knowledge, neither the
Company nor any employee or agent of the Company has made any payment of funds
of the Company or received or
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retained any funds in violation of any law, rule or regulation, which payment,
receipt or retention of funds is of a character required to be disclosed in the
Prospectus.
(w) The Company is not an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
(x) All offers and sales of capital stock of
the Company prior to the date hereof were at all relevant times duly registered
or exempt from the registration requirements of the 1933 Act and were duly
registered or subject to an available exemption from the registration
requirements of the applicable state securities or Blue Sky laws.
(xi) The Company does not conduct business with
Cuba within the meaning of Section 517.075, Florida Statutes.
(y) The Common Stock is registered pursuant to
Section 12(b) of the 1934 Act. The Shares have been duly authorized for listing
on the American Stock Exchange ("AMEX"). The Company has taken no action
designed to, or likely to have the effect of, terminating the registration of
the Common Stock under the 1934 Act or delisting the Common Stock from the
AMEX, nor has the Company received any notification that the Commission or the
AMEX is contemplating terminating such registration or listing.
(z) Neither the Company, nor, to its knowledge,
any of its officers, directors or affiliates has taken, and at each Closing
Date, neither the Company nor, to its knowledge, any of its officers, directors
or affiliates will have taken, directly or indirectly, any action which has
constituted, or might reasonably be expected to constitute, the stabilization
or manipulation of the price of sale or resale of the Common Stock.
(aa) The Company maintains insurance of the
types and in amounts adequate for its business and consistent with insurance
coverage maintained by similar companies in similar businesses, including but
not limited to, insurance covering product liability and real and personal
property owned or leased against theft, damage, destruction, acts of vandalism
and all other risks customarily insured against, all of which insurance is in
full force and effect.
(bb) The Company has filed all material U.S. and
foreign tax returns required to be filed, which returns are true and correct in
all material respects, and the Company is not in default in the payment of any
taxes, including penalties and interest, assessments, fees and other charges,
shown thereon due or otherwise assessed, other than those being contested in
good faith and for which adequate reserves have been provided or those
currently payable without interest which were payable pursuant to said returns
or any assessments with respect thereto.
(cc) Except as described in the Prospectus, to
the Company's knowledge, there are no rule making or similar proceedings before
the FDA or comparable Federal, state, local or foreign government bodies which
involve or affect the Company, which, if the subject of an action unfavorable
to the Company could involve a prospective Material Adverse Effect.
(dd) The Company has not received any
communication (whether written or oral) relating to the termination or
threatened termination or modification or threatened modification of any
material consulting, licensing, marketing, research and development,
cooperative or any similar agreement.
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(ee) Each employee of the Company has entered
into a non-competition, non-disclosure and confidentiality agreement with the
Company, and, to the Company's knowledge, each such employee is not in
violation of such agreement. To the knowledge of the Company, if any full-time
employee identified in the Prospectus has entered into any non-competition,
non-disclosure, confidentiality or other similar agreement with any party other
than the Company, such employee is neither in violation thereof nor is expected
to be in violation thereof as a result of the business conducted or expected to
be conducted by the Company as described in the Prospectus or such person's
performance of his obligations to the Company.
(ff) The Company has delivered to the Placement
Agent an agreement in the form of Attachment A hereto to the effect that the
Company will not, without the prior written consent of the Placement Agent,
which consent shall not be unreasonably withheld, offer, sell, or otherwise
dispose (or announce any offer, sale, grant of any option to purchase or other
disposition) of any shares of capital stock of the Company or securities
convertible into, or exchangeable or exercisable for, shares of capital stock
of the Company for a period of 120 days after the last Closing Date other than
(i) securities issued pursuant to contractual obligations of the Company in
effect as of the date of this Agreement and disclosed to and approved by the
Placement Agent prior to the Effective Date; (ii) securities issued on a pro
rata basis to all holders of outstanding equity securities of the Company; and
(iii) equity securities issued pursuant to employee benefit, purchase or
similar plans in effect as of the date hereof.
(gg) The executive officers and the directors of
the Company have delivered to the Placement Agent an agreement in the form of
Attachment B hereto to the effect that none of such executive officers and
directors will, without the prior written consent of the Placement Agent, which
consent shall not be unreasonably withheld, offer, sell, or otherwise dispose
(or announce any offer, sale, grant of any option to purchase or other
disposition) of any shares of capital stock of the Company or securities
convertible into, or exchangeable or exercisable for, shares of capital stock
of the Company for a period of 120 days after the last Closing Date other than
(i) dispositions of securities pursuant to contractual obligations of the
Company in effect as of the date of this Agreement and disclosed to and
approved by the Placement Agent prior to the Effective Date, (ii) dispositions
of securities to a third party making a cash tender or exchange offer in
compliance with Regulations 14D and 14E under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), following the filing with the Securities
and Exchange Commission by the Company, in compliance with the Exchange Act, a
Recommendation Statement on Schedule 14D-9 pursuant to which the Company
affirmatively recommends to the Company stockholders the acceptance of such
cash tender or exchange offer, and (iii) transfers of securities by gift, will
or intestacy, including to a trust in which the executive officer or director
owns all of the beneficial interest therein provided.
B. FINOVA represents, warrants, and covenants to you
and the Company as follows:
(a) FINOVA is, and at each Closing Date will
be, duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with corporate power and authority to own,
lease and operate its properties and to conduct its business.
(b) FINOVA has all corporate power and
authority to enter into this Agreement and to carry out all the terms and
provisions hereof to be carried out by it. All authorizations and consents
necessary for the execution and delivery by FINOVA of this Agreement have been
given. This Agreement has been duly authorized, executed and delivered by or on
behalf of FINOVA and constitutes the valid and binding agreement of FINOVA and
is enforceable against FINOVA in accordance with its terms, except as limited
by applicable
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<PAGE> 11
bankruptcy, insolvency, reorganization, moratorium or other laws now or
hereafter in effect relating to or affecting creditors' rights generally or by
general principles of equity relating to the availability of remedies and
except as rights to indemnity or contribution may be limited by federal or
state securities laws and the public policy underlying such laws.
(c) FINOVA now has (i) good and marketable
title to the Warrants, free and clear of encumbrances and (ii) full legal right
and power, and all authorization and approvals required by law, to exercise the
Warrants. At the time of delivery of the Shares hereunder, FINOVA will have (i)
good and marketable title to Shares to be sold by FINOVA hereunder, free and
clear of all encumbrances, and (ii) full legal right and power, and all
authorizations and approvals required by law, to sell, transfer and deliver the
Shares and to make the representations, warranties and agreements made by
FINOVA herein.
(d) The execution, delivery or performance of
this Agreement and the consummation of the transactions contemplated herein by
FINOVA do not conflict or will not conflict with or do not result or will not
result in any breach or violation of any of the terms or provisions of, or
constitute a default under, or result in the creation or imposition of any
encumbrance upon, any property or assets of FINOVA pursuant to (i) the terms of
its organizational documents; (ii) the terms of any material contract or other
agreement to which FINOVA is a party or by which it is bound or to which any of
its properties is subject, which conflict, breach, violation or default would
adversely affect FINOVA's ability to perform its obligations hereunder; (iii)
any statute, rule or regulation of any governmental body having jurisdiction
over FINOVA or any of its activities or properties; or (iv) the terms of any
judgment, decree or order of any arbitration or governmental body having such
jurisdiction.
(e) No consent, approval, authorization or
order of, or any filing or declaration with any governmental body is required
for the consummation by FINOVA of the transactions on its part contemplated
herein, except such as have been obtained under the state securities or Blue
Sky laws and under the NASD rules.
(f) The sale of Shares proposed to be sold by
FINOVA is not prompted by FINOVA's knowledge of any material adverse
information concerning the Company or its subsidiaries which is not set forth
or described in the Prospectus.
(g) On the date of the Prospectus, the
information with respect to FINOVA included therein did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein not
misleading.
(h) On the Effective Date and when any
post-effective amendment to the Registration Statement becomes effective, or
any amendment or supplement to the Prospectus is filed with the Commission, no
information regarding FINOVA included in the Registration Statement or any such
post-effective amendment, or any amendment or supplement to the Prospectus, did
or will contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein not misleading. At the Effective Date, the date the
Prospectus or any amendment or supplement to the Prospectus is filed with the
Commission and at each Closing Date, the information regarding FINOVA included
in the Prospectus did not or will not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
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<PAGE> 12
(i) FINOVA has delivered to the Placement Agent
an agreement in the form of Attachment B hereto to the effect that it will not,
without the prior written consent of the Placement Agent, offer, sell, or
otherwise dispose (or announce any offer, sale, grant of any option to purchase
or other disposition) of any shares of capital stock of the Company or
securities convertible into, or exchangeable or exercisable for, shares of
capital stock of the Company for a period of 120 days after the last Closing
Date.
C. Placement Agent represents, warrants and covenants
to the Company and FINOVA as follows:
(a) Placement Agent has the necessary power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby.
(b) Placement Agent is a corporation, duly
organized, validly existing, and in good standing under the laws of the State
of Delaware. Placement Agent has the requisite corporate power and authority to
execute this Agreement and to perform its duties hereunder, and the execution
and delivery by it of this Agreement and the consummation of the transactions
herein contemplated will not result in any violation of, or be in conflict
with, or constitute a default under, any material agreement or instrument to
which Placement Agent is a party or by which Placement Agent or its properties
are bound, or any judgment, decree, order, or, to its knowledge, any statute,
rule or regulation applicable to Placement Agent.
(c) Placement Agent is a member of the NASD and
a broker-dealer registered as such under the Securities Exchange Act of 1934,
as amended (the "1934 Act"), and under the securities laws of the states in
which the Shares are to be offered or sold.
(d) This Agreement has been duly authorized
and, when executed and delivered by Placement Agent and the other parties
hereto, will be Placement Agent's legal, valid and binding agreement,
enforceable in accordance with its terms, except to the extent that the
enforceability hereof may be limited by (i) bankruptcy, fraudulent conveyance,
insolvency, reorganization, moratorium, or similar laws from time to time in
effect and affecting the rights of creditors generally, (ii) limitations upon
the power of a court to grant specific performance or any other remedy with
respect to the enforcement of this Agreement, (iii) judicial discretion, or
(iv) the extent that the indemnification provisions of this Agreement are or
may be held to be violative of public policy (under either state or federal
law) in the context of the offer, offer for sale, or sale of securities.
(e) Neither Placement Agent nor any of its
agents or employees has made, or caused to be made, any payment of fees,
commissions or other payments of funds, directly or indirectly, to or through
any "broker" or "dealer" (as such terms are defined in the 1934 Act), in
connection with the offering or sale of the Shares other than brokers or
dealers who are registered with the SEC pursuant to the 1934 Act and with the
NASD or who are exempt from such registration.
(f) Any information relating to Placement Agent
furnished in writing to the Company and/or its counsel expressly for inclusion
in the Registration Statement or Prospectus does not, and will not, on the
consummation of any sale of Shares contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
4. Placement, Payment of Exercise Price and Fees.
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<PAGE> 13
A. Upon obtaining offers or commitments from
prospective purchasers for the purchase of Shares at or above the Minimum Price
per Share, you will notify the Company and FINOVA of the name, address and
taxpayer I.D. or social security number of each prospective purchaser and the
number of Shares to be purchased. Prior to the closing of the sale of any
number of Shares (at which time you will collect the sales proceeds for the
Shares to be sold) (a "Closing Date"), FINOVA will exercise Warrants for an
equivalent number of Shares and will promptly deliver to the Company such
notices, documents, instruments or other items reasonably requested by the
Company in connection with such exercise of Warrants, including a direction to
the Company and the Company's stock transfer agent to issue the Shares
underlying the exercised Warrants according to the direction of the purchaser
of such Shares. Upon exercise of Warrants, the Company will use its best
efforts to cause the Company's transfer agent to issue the underlying Shares
promptly.
B. Within five days after each Closing Date, and after
deducting the Selling Commission (as defined in Section 4.C. below) applicable
to such sale, you shall distribute to the Company the net proceeds of the sale
of Shares, which shall include the amounts attributable to the exercise price
of the related Warrants. FINOVA has agreed to defer the payment to it of the
net proceeds that would otherwise have been payable to FINOVA upon the sale of
Shares (after retention by you of related Selling Commissions and payment to
the Company of the exercise price of the related Warrants), including any
amounts that may have been payable by the Company to FINOVA as part of the
Guaranteed Minimum (the "FINOVA Proceeds"). Such deferred payment shall be
deemed to be an additional advance of the FINOVA Proceeds by FINOVA to the
Company under the Company's existing credit facility with FINOVA, and shall be
subject to the terms and conditions applicable thereto, provided that the
principal amount of the advance shall be payable in full one year after the
date the advance is made. The Company and FINOVA shall execute such documents
as may be necessary to amend the FINOVA credit facility to reflect the advance
and the terms and repayment thereof.
C. For acting as exclusive placement agent in
connection with the Offering, you shall be entitled to receive from the gross
sales proceeds of the sale of Shares as provided hereunder a commission equal
to seven percent (7%) (the "Selling Commission") of the aggregate gross
proceeds received from the sale of Shares. A portion of the Selling Commission
(up to seven percent (7%)) may be reallowed to Soliciting Dealers.
D. In addition to the Selling Commission, you will
receive a warrant from the Company in the form attached hereto as Attachment C
exercisable for one share of the Company's common stock for each ten Shares
sold hereunder (the "Placement Agent Warrants"). The exercise price of the
Placement Agent Warrants shall be 120% of the average gross sales price of all
Shares sold hereunder.
E. The Company shall pay all fees, charges, expenses
and disbursements in connection with (a) the preparation, printing, filing,
distribution and mailing of the Registration Statement and Prospectus and any
supplement and amendment thereto and all other documents relating to the
Offering and the purchase, sale and issuance of the Shares, including, without
limitation, a blue sky memorandum, if any, (b) the issuance, sale, and transfer
of the Shares, including any transfer or other taxes payable thereon (other
than Selling Commissions and other amounts payable by FINOVA to Placement Agent
hereunder), (c) the registration or qualification of the Shares for offer and
sale under the securities laws of certain states designated as provided below
(including all filing and registration fees). Each party hereto shall be
responsible for the payment of their respective attorneys' fees and costs,
except that the Company agrees to reimburse the Placement Agent for its
attorneys' fees and costs up to a maximum of $25,000.
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<PAGE> 14
F. It is understood and agreed by the parties hereto
that payment of all commissions contemplated hereby shall be made to the
Placement Agent, and the Placement Agent in turn will pay any Soliciting Dealer
retained by the Placement Agent on such terms to which the Placement Agent and
the Soliciting Dealer may agree. The Placement Agent will indemnify and hold
harmless the Company and FINOVA from any claim or action by, or liability to,
any Soliciting Dealer retained by the Placement Agent arising from or related
to the non-payment of commissions or other sums due to any such Soliciting
Dealer.
5. Covenants of the Company, FINOVA and Placement Agent.
A. The Company and FINOVA (as to (b), (d), (m), (n) and
(o) only) covenant and agree to:
(a) Deliver to you at you offices in Milwaukee,
Wisconsin (Attention: Joseph Hickey), such number of copies of the Prospectus,
including any amendment or supplement thereto, and exhibits, as you may
reasonably request for the purposes contemplated by the Act or this Agreement.
(b) Comply with all requirements imposed upon
it by the Act, as now and hereafter amended, by the regulations promulgated
thereunder from time to time in force, and by all state securities laws and
regulations of those states in which an exemption has been obtained or
qualification of the Shares has been effected, to permit the continuance of
offers and sales of the Shares in accordance with the provisions hereof and of
the Prospectus.
(c) During the Offering Period, the Company
will amend or supplement the Registration Statement and Prospectus as necessary
to comply with the requirements of the Act.
(d) Notify you immediately of the occurrence of
any event of which the Company or FINOVA becomes aware if such event would
cause the Registration Statement or Prospectus (or any documents or
incorporated therein by reference) to include an untrue statement of a material
fact or, in view of the circumstances under which such statement of fact was
made, omit to state any material fact necessary to make the statements therein
not misleading, in which event the Company will promptly effect the preparation
of an amended or supplemented Registration Statement in form and substance
reasonably acceptable to the Placement Agent and its counsel which will correct
such statement or omission. All sales of Shares shall cease during the period
beginning on the date such notice is given and ending on the date on which an
amended or supplemented Registration Statement is filed.
(e) Prior to, or soon as practicable after, the
commencement of the Offering Period, to qualify the Shares (or to obtain an
exemption from any registration requirement) for offering and sale under the
securities laws relating to the offering or sale of the Shares in such
jurisdictions as the Company and you agree; in each jurisdiction where such
qualification or exemption shall be effected, the Company will, unless you
agree that such action is not at the time necessary or advisable, file and make
such statements or reports at such times as are or may reasonably be required
by the laws of such jurisdiction.
(f) File its periodic filings under the 1934
Act with the SEC in a timely manner.
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<PAGE> 15
(g) Notify you immediately and confirm the
notice in writing of the issuance by the SEC or by any state securities
administration of any stop order suspending the offering or sale of the Shares
or enjoining the sale of the Shares or of the initiation of any proceedings for
that purpose. The Company will make every reasonable effort (i) to prevent the
issuance of any such stop order, and (ii) if any such stop order shall at any
time be issued, to obtain the lifting thereof at the earliest possible moment.
All sales of Shares shall cease during the period beginning on the date such
notice is given and ending on the date on which the stop order is lifted.
(h) The Company will not, either prior to the
Effective Date or thereafter during such period as the Prospectus would be
required by law to be delivered in connection with sales of the Shares by an
underwriter or dealer, file any amendment or supplement to the Registration
Statement or the Prospectus, unless a copy thereof shall first have been
submitted to the Placement Agent and FINOVA within a reasonable period of time
prior to the filing thereof and the Placement Agent and FINOVA (as to
disclosure relating specifically to FINOVA) shall not have objected thereto in
good faith.
(i) The Company will use its best efforts to
cause the Registration Statement to become effective, and will notify the
Placement Agent and FINOVA promptly, and will confirm such advice in writing,
(1) when the Registration Statement has become effective and when any
post-effective amendment thereto becomes effective, (2) of any request by the
securities or other governmental authority (including, without limitation, the
Commission) of any jurisdiction for amendments or supplements to the
Registration Statement or the Prospectus or for additional information, (3) of
the issuance by any securities or other governmental authority (including,
without limitation, the Commission) of any jurisdiction of any stop order
suspending the effectiveness of the Registration Statement or the initiation of
any proceedings for that purpose or the threat thereof, (4) of the happening of
any event during the period mentioned in Section 5.A.(h) that in the judgment
of the Company makes any statement made in the Registration Statement or the
Prospectus untrue or that requires the making of any changes in the
Registration Statement or the Prospectus in order to make the statements
therein, in light of the circumstances in which they are made, not misleading
and (5) of receipt by the Company or any representative or attorney of the
Company of any other communication from the securities or other governmental
authority (including, without limitation, the Commission) of any jurisdiction
relating to any of the Registration Statement, any Preliminary Prospectus or
the Prospectus. If at any time any securities or other governmental authority
(including, without limitation, the Commission) of any jurisdiction shall issue
any order suspending the effectiveness of the Registration Statement, the
Company will make every reasonable effort to obtain the withdrawal of such
order at the earliest possible moment. If the Company has omitted any
information from the Registration Statement, pursuant to Rule 430A, it will use
its best efforts to comply with the provisions of and make all requisite
filings with the Commission pursuant to said Rule 430A and to notify the
Placement Agent promptly of all such filings. If the Company elects to rely on
Rule 462(b), the Company shall both file a Rule 462(b) Registration Statement
with the Commission in compliance with Rule 462(b) and pay the applicable
filing fees in accordance with Rule 111 of the Rules and Regulations by the
earlier of (A) 10:00 p.m., New York time, on the date of this Agreement and (B)
the time confirmations are sent or given, as specified by Rule 462(b)(2).
(j) If, at any time when a Prospectus relating
to the Shares is required to be delivered under the 1933 Act, any event occurs
as a result of which the Prospectus, as then amended or supplemented, would, in
the judgment of counsel to the Company or counsel to the Placement Agent,
include any untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or the Registration
Statement, as then amended or supplemented,
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<PAGE> 16
would, in the judgment of counsel to the Company or counsel to the Placement
Agent, include any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein not misleading, or if
for any other reason it is necessary, in the judgment of counsel to the Company
or counsel to the Placement Agent, at any time to amend or supplement the
Prospectus or the Registration Statement to comply with the 1933 Act or the
1933 Act Regulations, the Company will promptly notify the Placement Agent and,
subject to Section 5.A.(h) hereof, will promptly prepare and file with the
Commission, at the Company's expense, an amendment to the Registration
Statement or an amendment or supplement to the Prospectus that corrects such
statement or omission or effects such compliance and will deliver to the
Placement Agent, without charge, such number of copies thereof as the Placement
Agent may reasonably request. The Company consents to the use of the Prospectus
or any amendment or supplement thereto by the Placement Agent in accordance
with applicable law.
(k) The Company will furnish to the Placement
Agent and its counsel, without charge, (i) an aggregate of three signed copies
of the registration statement described in Section 3.A.(a) hereof and each
pre-effective amendment thereto, including financial statements and schedules,
and all exhibits thereto, and any registration statement filed pursuant to Rule
462(b) and (ii) so long as a prospectus relating to the Shares is required to
be delivered under the 1933 Act, as many copies of each Preliminary Prospectus
or the Prospectus or any amendment or supplement thereto as the Placement Agent
may reasonably request.
(l) The Company will comply with all the
undertakings contained the Registration Statement.
(m) Neither the Company nor FINOVA will, at any
time, directly or indirectly, take any action intended, or which might
reasonably be expected, to cause or result in, or which will constitute,
stabilization of the price of the Common Stock to facilitate the sale or resale
of any of the Shares.
(n) During the Offering Period, neither the
Company nor FINOVA, nor any of their subsidiaries shall, directly or
indirectly, through any officer, director, employee, agent or otherwise
(including, without limitation, through any placement agent (other than the
Placement Agent), broker, investment banker, attorney or accountant retained by
the Company, FINOVA, or any of their subsidiaries or affiliates), solicit,
initiate or encourage the submission of any proposal or offer (an "Investment
Proposal") from any person or entity (including any of such person's or
entity's officers, directors, employees, agents and other representatives)
relating to any issuance of the Company's equity securities (including debt
securities with any equity feature) or relating to any other transaction having
a similar effect or result on the Company's capitalization, or participate in
any discussions or negotiations regarding, or furnish to any other person or
entity any information with respect to, or otherwise cooperate in any way with,
or assist or participate in, facilitate or encourage any effort or attempt by
any other person or entity to do or seek to do any of the foregoing, unless the
Company or FINOVA, as applicable, notifies the Placement Agent in writing at
least ten (10) business days' prior to engaging in any such activities. The
Company and FINOVA shall immediately cease and cause to be terminated any and
all contacts, discussions and negotiations with third parties regarding any
Investment Proposal that has been made as of the date hereof.
(o) FINOVA hereby waives the application of
Section 8(c)(iv) of the Stock Purchase Warrant dated September 30, 1999,
whereby the Company granted the Warrants to FINOVA, to the Placement Agent
Warrants.
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<PAGE> 17
You may waive in writing the performance by the
Company and FINOVA of any one or more of the foregoing covenants or extend the
time for their performance.
B. Placement Agent covenants and agrees with the
Company and FINOVA that Placement Agent will:
(a) In connection with the offer and sale of
the Shares, comply with all requirements imposed upon you by the Act, as now
and hereafter amended, by the regulations promulgated thereunder or other
federal regulations applicable to the Offering, the sale of Shares or your
activities, as from time to time in force, by all applicable state securities
laws and regulations and by this Agreement.
(b) Provide the Company with such information
relating to the offer and sale of the Shares by you as the Company may from
time to time reasonably request or as may be requested to enable the Company to
prepare such other reports of sale as may be required to be filed under
applicable state securities laws.
(c) Not take any action or permit any action to
occur that would result in any of the representations and warranties of
Placement Agent contained herein being untrue in any material respect as of a
time immediately after such action is taken or permitted.
(d) Offer the Shares in accordance with the
applicable provisions of the Act and not take, or omit to take, any action in
connection with offers and sales of Shares that would cause the offering not to
be made in compliance with the Act or other applicable law or regulation; and
you will not offer the Shares for sale in any jurisdiction unless and until you
have been advised that the Shares are either registered in accordance with, or
exempt from, the securities and other laws applicable thereto.
(f) Make no representations concerning the
Offering, except as set forth in the Prospectus, as supplemented or amended
from time to time.
6. Conditions of the Obligations of the Placement Agent. The
obligations of the Placement Agent hereunder are subject to the following
conditions:
(a) Notification that the Registration Statement has
become effective shall be received by the Placement Agent not later than 5:30
p.m., Milwaukee time, on the date of this Agreement or at such later date and
time as shall be consented to by the Placement Agent and all filings required
by Rule 424 of the Rules and Regulations and Rule 430A shall have been made.
(b) (i) No stop order suspending the effectiveness
of the Registration Statement shall have been issued, and no proceedings for
that purpose shall be pending or threatened by any securities or other
governmental authority (including, without limitation, the Commission), (ii) no
order suspending the effectiveness of the Registration Statement or the
qualification or registration of the Shares under the securities or Blue Sky
laws of any jurisdiction shall be in effect and no proceeding for such purpose
shall be pending before or threatened or contemplated by any securities or
other governmental authority (including, without limitation, the Commission),
(iii) any request for additional information on the part of the staff of any
securities or other governmental authority (including, without limitation, the
Commission) shall have been complied with to the satisfaction of the staff of
the Commission or such authorities and (iv) after the date hereof no amendment
or supplement to the Registration Statement or the Prospectus shall have been
filed unless a copy thereof was first submitted to the Placement Agent and the
Placement Agent did not object thereto in good faith, and the Placement Agent
shall have received certificates,
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<PAGE> 18
dated the Closing Date and signed by the President and Chief Executive Officer
or the Chairman of the Board of Directors of the Company, and the Chief
Financial Officer of the Company (who may, as to proceedings threatened, rely
upon the best of their information and belief), to the effect of clauses (i),
(ii) and (iii).
(c) Since the respective dates as of which information
is given in the Registration Statement and the Prospectus, (i) there shall not
have been a material adverse change in the general affairs, business,
properties, management, condition (financial or otherwise) or results of
operations of the Company, taken as a whole, whether or not arising from
transactions in the ordinary course of business, in each case other than as set
forth in or contemplated by the Registration Statement and the Prospectus and
(ii) the Company shall not have sustained any material loss or interference
with its business or properties from fire, explosion, flood or other casualty,
whether or not covered by insurance, or from any labor dispute or any court or
legislative or other governmental action, order or decree, which is not set
forth in the Registration Statement and the Prospectus, if in the judgment of
the Placement Agent any such development makes it impracticable or inadvisable
to consummate the sale and delivery of the Shares at the public offering price.
(d) Since the respective dates as of which information
is given in the Registration Statement and the Prospectus, there shall have
been no litigation or other proceeding instituted against the Company or any of
its officers or directors in their capacities as such, before or by any
Federal, state or local court, commission, regulatory body, administrative
agency or other governmental body, domestic or foreign, in which litigation or
proceeding an unfavorable ruling decision or finding would have a Material
Adverse Effect.
(e) Each of the representations and warranties of the
Company contained herein shall be true and correct in all material respects at
each Closing Date, as if made on such date, and all covenants and agreements
herein contained to be performed on the part of the Company and all conditions
herein contained to be fulfilled or complied with by the Company at or prior to
each Closing Date shall have been duly performed, fulfilled or complied with.
(f) At the time of the execution of this Agreement, the
Placement Agent shall have received from BDO Seidman, LLP a letter dated such
date, in form and substance satisfactory to the Placement Agent, to the effect
that (i) they are independent public accountants with respect to the Company
within the meaning of the 1933 Act and the 1933 Act Regulations, (ii) it is
their opinion that the financial statements and supporting schedules included
in the Registration Statement and covered by their opinions therein comply as
to form in all material respects with the applicable accounting requirements of
the 1933 Act and the 1933 Act Regulations, and (iii) based upon limited
procedures set forth in detail in such letter, nothing has come to their
attention which causes them to believe that (A) the unaudited financial
statements and supporting schedules of the Company included in the Registration
Statement do not comply as to form in all material respects with the applicable
accounting requirements of the 1933 Act and the 1933 Act Regulations and the
1934 Act and the 1934 Act Regulations or are not presented in conformity with
generally accepted accounting principles applied on a basis substantially
consistent with that of the audited financial statements included in the
Registration Statement, or (B) at a specified date not more than five days
prior to the date of this Agreement, there has been any change in the capital
stock of the Company or any increase in the consolidated long-term debt of the
Company or any decrease in consolidated net current assets or net assets as
compared with the amounts shown in the September 30, 2000 balance sheet
included in the Registration Statement or, during the period from September 30,
2000 to a specified date not more than five days prior to the date of this
Agreement, there were any decreases, as compared with the corresponding period
in the preceding year, in consolidated revenues, net income or net income per
share of the Company, except in all
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<PAGE> 19
instances for changes, increases or decreases which the Registration Statement
and the Prospectus disclose have occurred or may occur.
(g) The Placement Agent shall have received from BDO
Seidman, LLP a letter, dated as of each Closing Date, to the effect that they
reaffirm the statements made in the letter furnished pursuant to subsection (f)
of this Section, except that the specified date referred to shall be a date not
more than five days prior to such Closing Date.
(h) At each Closing Date, there shall be furnished to
the Placement Agent a certificate, dated the date of its delivery, signed by
each of the Chief Executive Officer and the Chief Financial Officer of the
Company, in form and substance satisfactory to the Placement Agent, to the
effect that:
(i) Each signer of such certificate has
carefully examined the Registration Statement and the Prospectus and (A) as of
the date of such certificate, (x) the Registration Statement does not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein not misleading and (y) the Prospectus does not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading and (B)
since the Effective Date no event has occurred as a result of which it is
necessary to amend or supplement the Prospectus in order to make the statements
therein not untrue or misleading in any material respect.
(ii) Each of the representations and warranties
of the Company contained in this Agreement were, when originally made, and are,
at the time such certificate is delivered, true and correct in all material
respects.
(iii) Each of the covenants required herein to be
performed by the Company on or prior to the date of such certificate has been
duly, timely and fully performed and each condition herein required to be
complied with by the Company on or prior to the delivery of such certificate
has been duly, timely and fully complied with.
(iv) No stop order suspending the effectiveness
of the Registration Statement or of any part thereof has been issued and no
proceedings for that purpose have been instituted or, to their knowledge, are
contemplated by the Commission.
(v) Subsequent to the date of the most recent
financial statements in the Prospectus, there has been no material adverse
change in the financial position or results of operations of the Company,
except as set forth in or contemplated by the Prospectus.
(j) The Shares shall have been authorized for quotation
on the AMEX.
(k) Counsel for the Placement Agent shall have been
furnished with such documents and opinions as they may require in order to
evidence the accuracy of any of the representations or warranties or the
fulfillment of any of the conditions herein contained; and all proceedings
taken by the Company in connection with the issuance and sale of the Shares as
herein contemplated shall be satisfactory in form and substance to the
Placement Agent and counsel for the Placement Agent. Any certificate or
document signed by any officer of the Company and delivered to you or to your
counsel shall be deemed a representation and warranty by the Company to each of
you as to the statements made therein and such statements are true and correct
except
39
<PAGE> 20
where the inaccuracy of such statements alone or in the aggregate would not
have a Material Adverse Effect.
(l) FINOVA shall have furnished to the Placement Agent
such certificates, in addition to those specifically mentioned herein, as the
Placement Agent may have reasonably requested as to the accuracy and
completeness at each Closing Date of any statement in the Registration
Statement or the Prospectus regarding FINOVA, as to the accuracy at each
Closing Date of the representations and warranties of FINOVA, as to the
performance by FINOVA of its obligations hereunder, and as to the fulfillment
of the conditions concurrent and precedent to the obligations hereunder of the
Placement Agent.
(m) The Placement Agent shall have received an opinion,
dated as of each Closing Date, of Baker and Hostetler LLP, counsel for the
Company, in form and substance reasonably satisfactory to counsel for the
Placement Agent.
7. [Reserved]
8. Indemnification.
(a) The Company shall indemnify and hold harmless the
Placement Agent and FINOVA, the directors, officers, employees and agents of
the Placement Agent and FINOVA and each person, if any, who controls the
Placement Agent or FINOVA within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act from and against any and all losses, claims,
liabilities, expenses and damages, joint or several (including any and all
investigative, reasonable legal and other expenses reasonably incurred in
connection with, and any amount paid in settlement of, any action, suit or
proceeding or any claim asserted), to which any of them may become subject
under the 1933 Act or other Federal or state statutory law or regulation, at
common law or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof as contemplated below) arise out of
or are based on a breach of the terms and conditions of this Agreement by the
Company, or arise out of or are based upon the inaccuracy of any representation
made by the Company herein or any untrue or alleged untrue statement of any
material fact contained in the Registration Statement, the Prospectus, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading; provided,
however, the Company's obligations to the Placement Agent in this section shall
not apply to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in the
Registration Statement, the Prospectus, or any amendment or supplement thereto,
in reliance upon and in conformity with written information furnished to the
Company by or on behalf of the Placement Agent expressly for use therein; and
provided further, that the Company's obligations to FINOVA in this section
shall not apply to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was made
in the Registration Statement, the Prospectus or any amendment or supplement
thereto, in reliance upon and in conformity with written information furnished
to the Company by or on behalf of FINOVA expressly for use therein. This
indemnity agreement will be in addition to any liability which the Company may
otherwise have to the Placement Agent and FINOVA. The Company will not, without
the prior written consent of the Placement Agent or FINOVA, settle or
compromise or consent to the entry of any judgment in any pending or threatened
claim, action, suit or proceeding in respect of which indemnification has been
sought hereunder (whether or not such Placement Agent or FINOVA or any person
who controls such Placement Agent or FINOVA within the meaning of Section 15 of
the 1933 Act or Section 20 of the 1934 Act is a party to each claim, action,
suit or proceeding), unless such settlement, compromise or consent includes an
unconditional release of the Placement Agent and FINOVA and each such
controlling person from all liability arising out of such claim, action, suit
or proceeding.
40
<PAGE> 21
(b) FINOVA shall indemnify and hold harmless the
Placement Agent and the Company, the directors, officers, employees and agents
of the Placement Agent and the Company and each person, if any, who controls
the Placement Agent or the Company within the meaning of Section 15 of the 1933
Act or Section 20 of the 1934 Act from and against any and all losses, claims,
liabilities, expenses and damages, joint or several (including any and all
investigative, reasonable legal and other expenses reasonably incurred in
connection with, and any amount paid in settlement of, any action, suit or
proceeding or any claim asserted), to which any of them may become subject
under the 1933 Act or other Federal or state statutory law or regulation, at
common law or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof as contemplated below) arise out of
or are based on a breach of the terms and conditions of this Agreement by
FINOVA, or arise out of or are based upon the inaccuracy of any representation
made by FINOVA herein or any untrue or alleged untrue statement of any material
fact contained in the Registration Statement, the Prospectus, or any amendment
or supplement thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in the Registration
Statement, the Prospectus, or any amendment or supplement thereto, in reliance
upon and in conformity with written information furnished to the Company by or
on behalf of FINOVA expressly for use therein. This indemnity agreement will be
in addition to any liability which FINOVA may otherwise have to the Company and
the Placement Agent. FINOVA will not, without the prior written consent of the
Placement Agent or the Company, settle or compromise or consent to the entry of
any judgment in any pending or threatened claim, action, suit or proceeding in
respect of which indemnification has been sought hereunder (whether or not such
Placement Agent or the Company or any person who controls such Placement Agent
or the Company within the meaning of Section 15 of the 1933 Act or Section 20
of the 1934 Act is a party to each claim, action, suit or proceeding), unless
such settlement, compromise or consent includes an unconditional release of the
Placement Agent and the Company and each such controlling person from all
liability arising out of such claim, action, suit or proceeding. The liability
of FINOVA under this section shall be limited to an amount equal to the FINOVA
Proceeds. The Company and FINOVA may agree, as among themselves and without
limiting the rights of the Placement Agent under this Agreement, as to the
respective amounts of such liability for which they each shall be responsible.
(c) The Placement Agent shall indemnify and hold
harmless the Company and FINOVA, the directors, officers, employees and agents
of the Company and FINOVA and each person, if any, who controls the Company and
FINOVA within the meaning of Section 15 of the 1933 Act or Section 20 of the
1934 Act from and against any and all losses, claims, liabilities, expenses and
damages, joint or several (including any and all investigative, reasonable
legal and other expenses reasonably incurred in connection with, and any amount
paid in settlement of, any action, suit or proceeding or any claim asserted),
to which any of them may become subject under the 1933 Act or other Federal or
state statutory law or regulation, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or expenses (or actions in respect thereof
as contemplated below) arise out of or are based on a breach of the terms and
conditions of this Agreement by the Placement Agent, or arise out of or are
based upon the inaccuracy of any representation made by the Placement Agent
herein or any untrue or alleged untrue statement of any material fact contained
in the
41
<PAGE> 22
Registration Statement, the Prospectus, or any amendment or supplement thereto,
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was made in the Registration Statement, the Prospectus, or any
amendment or supplement thereto, in reliance upon and in conformity with
written information furnished to the Company by or on behalf of the Placement
Agent expressly for use therein. This indemnity agreement will be in addition
to any liability which the Placement Agent may otherwise have to the Company
and FINOVA. The Placement Agent will not, without the prior written consent of
the Company or FINOVA, settle or compromise or consent to the entry of any
judgment in any pending or threatened claim, action, suit or proceeding in
respect of which indemnification has been sought hereunder (whether or not the
Company or FINOVA or any person who controls the Company or FINOVA within the
meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act is a party
to each claim, action, suit or proceeding), unless such settlement, compromise
or consent includes an unconditional release of the Company and FINOVA and each
such controlling person from all liability arising out of such claim, action,
suit or proceeding. The liability of the Placement Agent under this section
shall be limited to an amount equal to the aggregate Selling Commissions and
any expense reimbursements and other amounts paid to the Placement Agent or any
Soliciting Dealer hereunder or in connection with this offering.
(d) Any party that proposes to assert the right to be
indemnified under this Section 8 will, promptly after receipt of notice of
commencement of any action against such party in respect of which a claim is to
be made against an indemnifying party or parties under this Section 8, notify
each such indemnifying party of the commencement of such action, enclosing a
copy of all papers served, but the omission so to notify such indemnifying
party will not relieve it from any liability that it may have to any
indemnified party under the foregoing provisions of this Section 8 unless, and
only to the extent that, such omission results in the forfeiture of substantive
rights or defenses by, or otherwise prejudices, the indemnifying party. If any
such action is brought against any indemnified party and it notifies the
indemnifying party of its commencement, the indemnifying party will be entitled
to participate in and, to the extent that it elects by delivering written
notice to the indemnified party promptly after receiving notice of the
commencement of the action from the indemnified party, jointly with any other
indemnifying party similarly notified, to assume the defense of the action,
with counsel satisfactory to the indemnified party, and after notice from the
indemnifying party to the indemnified party of its election to assume the
defense, the indemnifying party will not be liable to the indemnified party for
any legal or other expenses except as provided below and except for the
reasonable costs of investigation incurred by the indemnified party in
connection with the defense. The indemnified party will have the right to
employ its own counsel in any such action, but the fees, expenses and other
charges of such counsel will be at the expense of such indemnified party unless
(1) the employment of counsel by the indemnified party has been authorized in
writing by the indemnifying party, (2) the indemnified party has reasonably
concluded that a conflict exists (based on a written opinion of counsel to the
indemnified party) between the indemnified party and the indemnifying party
that would prevent the counsel selected by the indemnifying party from
representing the indemnified party (in which case the indemnifying party will
not have the right to direct the defense of such action on behalf of the
indemnified party) or (3) the indemnifying party has not in fact employed
counsel to assume the defense of such action within a reasonable time after
receiving notice of the commencement of the action, in each of which cases the
reasonable fees, disbursements and other charges of counsel will be paid by the
indemnifying party or parties. It is understood that the indemnifying party or
parties shall not, in connection with any proceeding or related proceedings in
the same jurisdiction, be liable for the reasonable fees, disbursements and
other charges of more than one separate firm admitted to practice in such
jurisdiction at any one time for all such indemnified party or parties. All
such fees, disbursements and other charges will be reimbursed by the
indemnifying party promptly as they are incurred and demand delivered therefor.
No indemnifying party will, without the prior written consent of the
indemnified parties, settle or compromise or consent to the entry of any
judgment in any pending or threatened claim, action, suit or proceeding in
respect of which indemnification has been sought hereunder (whether or not the
indemnified parties are parties to such claim, action, suit or proceeding),
unless such settlement, compromise or consent includes an unconditional release
of each indemnified party from all liability arising out of such claim, action,
suit or
42
<PAGE> 23
proceeding. An indemnifying party will not be liable for any settlement of any
action or claim effected without its written consent (which consent will not be
unreasonably withheld).
(e) In order to provide for just and equitable
contribution in circumstances in which the indemnification provided for in the
foregoing paragraphs of this Section 8 is applicable in accordance with its
terms but for any reason is held to be unavailable from the Company, FINOVA or
the Placement Agent, the Company, FINOVA and the Placement Agent will
contribute to the total losses, claims, liabilities, expenses and damages
(including any investigative, legal and other expenses reasonably incurred in
connection with, and any amount paid in settlement of, any action, suit or
proceeding or any claim asserted, but after deducting any contribution received
by the Company from persons other than the Placement Agent such as persons who
control the Company within the meaning of the 1933 Act or the 1934 Act,
officers of the Company who signed the Registration Statement and directors of
the Company, who also may be liable for contribution) to which the Company,
FINOVA and the Placement Agent may be subject in proportion to the relative
benefits received by the Company, FINOVA and the Placement Agent and the
relative fault of the Company, FINOVA and the Placement Agent, with respect to
the statements or omissions which resulted in such loss, claim, liability,
expense or damage, or action in respect thereof, as well as any other relevant
equitable considerations with respect to such offering. The relative benefits
received by the Company shall be deemed to be in the same proportion as the
amounts received by the Company pursuant to Section 4 above (less the amount of
the FINOVA Proceeds) bear to total gross proceeds from the offering. The
relative benefits received by FINOVA shall be deemed to be in the same
proportion as the amount of the FINOVA Proceeds bears to total gross proceeds
from the offering. The relative benefits received by the Placement Agent shall
be deemed to be in the same proportion as the amounts received by the Placement
Agent pursuant to Section 4 above bears to total gross proceeds from the
offering. The relative fault shall be determined by reference to whether the
untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact relates to information supplied by the
Company, FINOVA or the Placement Agent, the intent of the parties and their
relative knowledge, access to information and opportunity to correct or prevent
such statement or omission. The Company, FINOVA and the Placement Agent agree
that it would not be just and equitable if contributions pursuant to this
Section 8(e) were to be determined by pro rata allocation or by any other
method of allocation which does not take into account the equitable
considerations referred to herein. The amount paid or payable by an indemnified
party as a result of the loss, claim, liability, expense or damage, or action
in respect thereof, referred to above in this Section 8(e) shall be deemed to
include, for purpose of this Section 8(e), any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Section 8(e), the Placement Agent shall not be required to contribute any
amount in excess of the aggregate Selling Commissions and any expense
reimbursements and other amounts paid to the Placement Agent or any Soliciting
Dealer under this Agreement or in connection with this offering, and no person
found guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the 1933 Act) will be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. For purposes of this Section
8(e), any person who controls a party to this Agreement within the meaning of
the 1933 Act or the 1934 Act will have the same rights to contribution as that
party, and each officer of the Company who signed the Registration Statement
will have the same rights to contribution as the Company, subject in each case
to the provisions hereof. Any party entitled to contribution, promptly after
receipt of notice of commencement of any action against such party in respect
of which a claim for contribution may be made under this Section 8(e), will
notify any such party or parties from whom contribution may be sought, but the
omission so to notify will not relieve the party or parties from whom
contribution may be sought from any other obligation it or they may have under
this Section 8(e). No party will be liable for contribution with respect to any
43
<PAGE> 24
action or claim settled without its written consent (which consent will not be
unreasonably withheld)
9. Compliance. All actions, direct or indirect, by you, the
Company and FINOVA and their respective agents, employees and Affiliates in
connection with the offering and sale of the Shares shall conform to the
requirements of the 1933 Act, the regulations promulgated thereunder, and all
other applicable laws and regulations and to all procedures for the offering
and sale of the Shares established by you.
10. Representations and Agreements to Survive Sale and Payment.
Except as the context otherwise requires, all representations, warranties and
agreements contained in this Agreement shall be deemed to be representations,
warranties, and agreements at the consummation of the sale of any Shares, and
such representations, warranties and agreements of Placement Agent, the
Company, and FINOVA, including the indemnity agreements contained in Section 8
hereof and the covenants and agreements contained in Sections 3, 4 and 5
hereof, shall remain operative and in full force and effect, regardless of any
investigation (or any statement as to the results thereof) made by or on behalf
of the Placement Agent or any controlling person of the Placement Agent, or the
Company or FINOVA or any officer or director or controlling person of the
Company or FINOVA, and shall survive the sale of, and payment for, the Shares.
11. Termination of this Agreement.
(a) The obligations of the Placement Agent under this
Agreement (other than those obligations that expressly survive expiration or
termination of this Agreement) may be terminated at any time prior to a Closing
Date, by notice to the Company from the Placement Agent, without liability on
the part of the Placement Agent to the Company or FINOVA if, prior to delivery
and payment for the Shares (i) trading in the Common Stock of the Company shall
have been suspended by the Commission or by the AMEX, (ii) trading in
securities generally on the New York Stock Exchange or the AMEX shall have been
suspended or limited or minimum or maximum prices shall have been generally
established on any of such exchanges, or additional material governmental
restrictions, not in force on the date of this Agreement, shall have been
imposed upon trading in securities generally by any of such exchanges or by
order of the Commission or any court or other governmental authority, (iii) a
general banking moratorium shall have been declared by Federal or New York
State authorities or (iv) in the reasonable judgment of the Placement Agent,
any material adverse change in the financial or securities markets in the
United States or any outbreak or material escalation of hostilities or
declaration by the United States of a national emergency or war or other
calamity or crisis shall have occurred, the effect of any of which is such as
to make it, in the sole judgment of the Placement Agent, impracticable or
inadvisable to market the Shares on the terms and in the manner contemplated by
the Prospectus.
(b) If this Agreement shall be terminated pursuant to
this Section 11 hereof, neither the Company nor FINOVA shall then be under any
liability to the Placement Agent except as provided in Sections 8 and 10
hereof, and in this Section 11(b). In the event that any Shares are not
delivered by or on behalf of FINOVA as provided herein, as a result of FINOVA's
failure or refusal to exercise the related Warrants in accordance with the
terms thereof or hereof, FINOVA will reimburse the Placement Agent for all
out-of-pocket expenses, including fees and disbursements of counsel, reasonably
incurred by the Placement Agent in making preparations for the placement of the
Shares not so delivered, but the Company and FINOVA shall then be under no
further liability to the Placement Agent in respect of the Shares not so
delivered except as provided
44
<PAGE> 25
in Sections 8 and 10 hereof. In the event that any Shares are not delivered by
or on behalf of FINOVA as provided herein, as a result of the Company's failure
or refusal to complete the Share issuance other than as a result of FINOVA's
failure or refusal to exercise the related Warrants in accordance with the
terms thereof or hereof, the Company will reimburse the Placement Agent for all
out-of-pocket expenses, including fees and disbursements of counsel, reasonably
incurred by the Placement Agent in making preparations for the placement of the
Shares not so delivered, but the Company and FINOVA shall then be under no
further liability to the Placement Agent in respect of the Shares not so
delivered except as provided in Sections 8 and 10 hereof.
12. Severability. If any portion of this Agreement shall be held
invalid or inoperative, then, so far as is reasonable and possible (A) the
remainder of this Agreement shall be considered valid and operative and (B)
effect shall be given to the intent manifested by the portion held invalid or
inoperative.
13. Modification or Amendment. This Agreement may not be modified
or amended except by written agreement executed by the parties hereto.
14. Number and Gender of Words. Whenever the context so requires,
the masculine shall include the feminine and neuter, and the singular shall
include the plural, and conversely.
15. Other Instruments. The parties hereto covenant and agree that
they will execute such other and further instruments and documents as are or
may become necessary or convenient to effectuate and carry out this Agreement.
16. Captions. The captions used in this Agreement are for
convenience only and shall not be construed in interpreting this Agreement.
17. Parties. This Agreement shall be binding upon the parties
hereto and inure solely to the benefit of the parties hereto and, to the extent
provided in Sections 8 and 10 hereof, the affiliates, officers, directors,
employees and agents of the Company, FINOVA and the Placement Agent, and their
respective successors, legal representatives, heirs, and assigns, and no other
person shall have or be construed to have any legal or equitable right, remedy
or claim under or in respect of or by virtue of this Agreement or any provision
herein contained.
18. Survival. Any termination of the Offering without
consummation thereof shall be without obligation on the part of any party
except that the indemnification provided in Section 8 hereof shall survive any
termination or the expiration of the Offering Period, and shall survive the
sale of the Shares; and except that the Placement Agent shall be entitled to
retain any and all fees and other payments to the extent paid prior to the date
of termination.
19. No Other Beneficiaries. This Agreement is intended for the
sole and exclusive benefit of the parties hereto and their respective
successors and controlling persons, and no other person, firm or corporation
shall have any third-party beneficiary or other rights hereunder.
20. Governing Law. This Agreement shall be governed by and
construed in accordance with the law of the State of Florida. The parties
hereby agree: (i) in any legal proceeding brought in connection with this
Agreement or the transactions contemplated hereby, to irrevocably submit to the
nonexclusive in personam, jurisdiction of (A) any state or federal court of
competent jurisdiction sitting in the State of Florida, County of Orange; or
(B) in the event that any party is a defendant in any legal proceeding in which
it seeks to join the other as a third party defendant, then, any state or
federal court in which such proceeding has properly been brought, and consents
45
<PAGE> 26
to suit therein; and (ii) to waive any objection they may now or hereafter have
to the venue of such proceeding in any such court or that such proceeding was
brought in an inconvenient court.
21. Notices. All notices, requests, demands and other
communications which are required or may be given under this Agreement shall be
in writing and shall be deemed to have been duly given when delivered
personally or by express or overnight courier or delivery, receipt
acknowledged, or three days after being sent by registered or certified mail,
return receipt requested, postage prepaid. All notices shall be made to the
parties at the addresses designated above, or at such other or different
addresses which a party may subsequently provide with notice thereof, and to
their respective legal counsel, as follows:
A. If to the Placement Agent, to:
Tucker Anthony Incorporated
100 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Attention: Joseph Hickey
with a copy to:
Godfrey & Kahn, S.C.
780 North Water Street
Milwaukee, Wisconsin 53202
Attention: Christopher B. Noyes, Esq.
or to such other person or address as the Placement Agent shall furnish the
other parties in writing.
B. If to the Company, to:
Galaxy Nutritional Foods, Inc.
2901 Titan Row
Orlando, Florida 32809
Attention: Keith A. Ewing
with a copy to:
Baker & Hostetler LLP
200 South Orange Avenue, Suite 2300
Post Office Box 112
Orlando, Florida 32802
Attention: Kenneth C. Wright, Esquire
or to such other person or address as the Company shall furnish the other
parties in writing.
C. If to FINOVA, to:
FINOVA Mezzanine Capital Inc.
500 Church Street, Suite 200
Nashville, Tennessee 37219
Attention: Philip J. Clark, Esquire
with a copy to:
Harwell, Howard, Hyne, Gabbert & Manner, P.C.
1800 First American Center
Nashville, Tennessee 37235
Attention: David C. Cox, Esquire
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<PAGE> 27
or to such other person or address as FINOVA shall furnish the other parties in
writing.
22. Counterparts. This Agreement may be signed in counterparts
with the same effect as if both parties had signed one and the same instrument.
23. Attorneys' Fees. In the event that any litigation, including
any appeals, is instituted in connection with the breach, enforcement or
interpretation of this Agreement, including, without limitation, any action
seeking declaratory relief, equitable relief, injunctive relief, or any action
at law for damages, the prevailing party shall be entitled to recover all
reasonable attorneys' fees, paralegals' fees and court costs incurred in
connection therewith. It is acknowledged and agreed that a breach of any of the
representations, warranties or covenants contained herein shall constitute a
breach of this Agreement.
24. WAIVER OF JURY TRIAL. THE PLACEMENT AGENT, THE COMPANY AND
FINOVA EACH HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT ANY
MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON, OR ARISING
OUT OF, UNDER OR IN CONJUNCTION WITH THIS AGREEMENT, AND ANY OTHER AGREEMENT
CONTEMPLATED TO BE EXECUTED IN CONJUNCTION HEREWITH OR THEREWITH, OR ANY COURSE
OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR
ACTIONS OF ANY PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PLACEMENT
AGENT TO ENTER INTO THIS AGREEMENT.
25. Mediation. The parties hereto agree that before commencing
any lawsuit regarding any dispute arising under or related to this Agreement,
reasonable attempts shall be made to resolve such dispute through mediation. In
the event of such a dispute, any party may notify the other two parties, in
writing, of its intention to initiate mediation with respect thereto. Promptly
thereafter, the Placement Agent, the Company and FINOVA shall mutually agree on
a mediator to mediate the dispute and shall determine the schedule for such
mediation. If the parties are unable to agree upon a mediator within ten
business days following the delivery of the intent to mediate, or if any party
in its sole discretion elects, for any reason whatsoever, to discontinue to the
mediation during its pendency, all attempts to mediate the dispute may be
abandoned and the parties may file their claims and actions in the appropriate
judicial forum. The Placement Agent, the Company and FINOVA shall each make a
representative with full power to enter into a settlement available for
mediation between the hours of 9:00 a.m. and 5:00 p.m. on the date or dates
agreed upon by the parties for the mediation. All parties shall bear an equal
portion of the mediator's fee and the costs associated with the mediation (but
not the costs of any individual party, which costs shall be borne by the
respective party).
26. Entire Agreement. This Agreement and the letter agreement by
and between the Placement Agent and the Company dated August 7, 2000 contain
the entire understanding between the parties hereto and supersede any prior
understanding or written or oral agreements between them respecting the subject
matter hereof and thereof.
If the foregoing correctly sets forth the understanding between you
and the remaining parties hereto, please so indicate in the space provided
below for that purpose, where upon this letter shall constitute a binding
agreement among us.
47
<PAGE> 28
Very truly yours,
GALAXY NUTRITIONAL FOODS, INC.
By:
----------------------------------
Keith A. Ewing,
Chief Financial Officer
FINOVA MEZZANINE CAPITAL INC.
By:
----------------------------------
Name:
-------------------------------
Title:
-------------------------------
AGREED TO AND ACCEPTED:
TUCKER ANTHONY INCORPORATED
By:
----------------------------------
Name:
-------------------------------
Title:
-------------------------------
48
<PAGE> 29
ATTACHMENT A
December __, 2000
Tucker Anthony Capital Markets
100 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Ladies and Gentlemen:
Galaxy Nutritional Foods, Inc. (the "Company") intends to enter into a warrant
exercise and placement agent agreement (the "Agreement") with Tucker Anthony
Capital Markets (the "Placement Agent") and FINOVA Mezzanine Capital, Inc.,
providing for the public offering by the Placement Agent of common stock (the
"Common Stock") of the Company (the "Public Offering").
In consideration of the Placement Agent's agreement to make the Public Offering
and for other good and valuable consideration, receipt and sufficiency of which
are hereby acknowledged, the Company agrees that, without the prior written
consent of the Placement Agent, which consent shall not be unreasonably
withheld, the Company will not, directly or indirectly offer, sell, pledge,
contract to sell (including any short sale), grant any option to purchase or
otherwise dispose of any shares of Common Stock or securities convertible into,
or exchangeable or exercisable for, shares of Common Stock (together with the
Common Stock, "Securities"), except to the extent such Securities are included
in and sold pursuant to the registration statement related to the Public
Offering and the Agreement, or enter into any Hedging Transaction (as defined
below) relating to any Securities (each of the foregoing referred to as a
"Disposition") or announce any Disposition for a period commencing on the date
hereof and ending on the date that is 120 days after the last closing date of a
sale of Common Stock pursuant to the Agreement (the "Lock-up Period"). "Hedging
Transaction" means any short sale (whether or not against the box) or any
purchase, sale or grant of any right (including, without limitation, any put or
call option) with respect to any security (other than a broad-based market
basket or index) that includes, relates to or derives any significant part of
its value from the Common Stock.
This Lock-Up Agreement shall not apply to (i) Securities issued pursuant to
contractual obligations of the Company, in effect as of the date hereof which
are disclosed to and approved by the Placement Agent prior to the effective
date of the registration statement related to the Public Offering, including,
without limitation, Securities to be issued upon the exercise of options and
warrants outstanding as of the date hereof, (ii) Securities issued on a pro
rata basis to all holders of the outstanding equity securities of the Company
and (iii) Securities issued pursuant to employee benefit or purchase plans in
effect as of the date hereof. With respect to subsection (i) above, the
Placement Agent is deemed to have knowledge of and to have approved all
contractual obligations of the Company to issue Securities, including
outstanding options and warrants, to the extent disclosed in the registration
statement or prospectus for the Public Offering, or in any document
incorporated by reference therein.
The Company understands that the Placement Agent will proceed with the Public
Offering in reliance on this Lock-up Agreement.
Very truly yours,
GALAXY NUTRITIONAL FOODS, INC.
By:
---------------------------
Keith A. Ewing,
Chief Financial Officer
49
<PAGE> 30
ATTACHMENT B
December __, 2000
Galaxy Nutritional Foods, Inc.
2441 Viscount Row
Orlando, Florida 32809
Tucker Anthony Capital Markets
100 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Ladies and Gentlemen:
The undersigned understands that Tucker Anthony Capital Markets (the "Placement
Agent"), proposes to enter into a warrant exercise and placement agent
agreement (the "Agreement") with Galaxy Nutritional Foods, Inc. (the "Company")
and FINOVA Mezzanine Capital, Inc., providing for the public offering by the
Placement Agent of common stock (the "Common Stock") of the Company (the
"Public Offering").
In consideration of the Placement Agent's agreement to make the Public Offering
and for other good and valuable consideration, receipt and sufficiency of which
are hereby acknowledged, the undersigned agrees that, without the prior written
consent of the Placement Agent, which consent shall not be unreasonably
withheld, the undersigned will not, directly or indirectly offer, sell, pledge,
contract to sell (including any short sale), grant any option to purchase or
otherwise dispose of any shares of Common Stock or securities convertible into,
or exchangeable or exercisable for, shares of Common Stock (together with the
Common Stock, "Securities") (including, without limitation, Securities of the
Company which may be deemed to be beneficially owned by the undersigned
immediately prior to the effective date of the registration statement related
to the Public Offering in accordance with the rules and regulations of the
Securities and Exchange Commission (the "SEC"), and Securities which may be
issued upon exercise of a stock option or warrant), except to the extent such
Securities are included in and sold pursuant to the registration statement
related to the Public Offering and the Agreement, or enter into any Hedging
Transaction
50
<PAGE> 31
(as defined below) relating to any Securities (each of the
foregoing referred to as a "Disposition") or announce any Disposition for a
period commencing on the date hereof and ending on the date that is 120 days
after the last closing date of a sale of Common Stock pursuant to the Agreement
(the "Lock-up Period"). The foregoing restriction is expressly intended to
preclude the undersigned from engaging in any Hedging Transaction or other
transaction which is designed to or reasonably expected to lead to or result in
a Disposition during the Lock-up Period even if the securities would be
disposed of by someone other than the undersigned. "Hedging Transaction" means
any short sale (whether or not against the box) or any purchase, sale or grant
of any right (including, without limitation, any put or call option) with
respect to any security (other than a broad-based market basket or index) that
includes, relates to or derives any significant part of its value from the
Common Stock.
This letter agreement (the "Lock-Up Agreement") shall not apply to Dispositions
of (i) Securities issued pursuant to contractual obligations of the undersigned
in effect as of December __, 2000 which are disclosed to and approved by the
Placement Agent prior to the effective date of the registration statement
related to the Public Offering, (ii) Dispositions of Securities to a third
party making a cash tender or exchange offer in compliance with Regulations 14D
and 14E under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), following the filing with the Securities Exchange Commission by the
Company, in compliance with the Exchange Act, a Recommendation Statement on
Schedule 14D-9 pursuant to which the Company affirmatively recommends to the
Company stockholders the acceptance of such cash tender or exchange offer or
(iii) transfers of any or all of the Securities by gift, will or intestacy,
including to a trust in which the undersigned owns all of the beneficial
interest therein provided; provided, however, that in any such case it shall be
a condition to the transfer that the transferee execute an agreement stating
that the transferee is receiving and holding the Securities subject to the
provisions of this Lock-up Agreement, and there shall be no further transfer of
such Securities except in accordance with this Lock-up Agreement.
Without limiting the restrictions herein, any Disposition by the undersigned
shall remain at all times subject to applicable securities laws, including,
without limitation, the resale restrictions imposed by Rule 144 promulgated
under the Securities Act of 1933, as amended.
The undersigned agrees that the Company may (i) with respect to any Securities
for which the undersigned is the holder of record, cause the transfer agent for
the Company to note stop transfer instructions with respect to such Securities
on the transfer books and records of the Company, and (ii) with respect to any
Securities for which the undersigned is the beneficial holder but not the
holder of record, cause the holder of record of such Securities to cause the
transfer agent for the Company to note stop transfer instructions with respect
to such Securities on the transfer books and records of the Company.
The undersigned hereby agrees that, to the extent that the terms of this
Lock-up Agreement conflict with or are in any way inconsistent with any
agreement providing registration rights to which the undersigned and the
Company may be a party, this Lock-up Agreement supersedes such registration
rights agreement.
The undersigned understands that the Company and the Placement Agent will
proceed with the Public Offering in reliance on this Lock-up Agreement.
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<PAGE> 32
The undersigned hereby represents and warrants that the undersigned has full
power and authority to enter into this Lock-up Agreement. All authority herein
conferred or agreed to be conferred shall survive the death or incapacity of
the undersigned and any obligations of the undersigned shall be binding upon
the heirs, personal representatives, successors and assigns of the undersigned.
Very truly yours,
Print Name:
-----------------------------
----------------------------------------
Social Security or Taxpayer I.D. Number:
52
<PAGE> 33
ATTACHMENT C
THIS WARRANT AND THE OTHER SECURITIES ISSUABLE UPON EXERCISE THEREOF HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND
MAY NOT BE OFFERED OR SOLD EXCEPT (i) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT, (ii) TO THE EXTENT APPLICABLE, PURSUANT TO RULE 144
UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT RELATING TO THE DISPOSITION
OF SECURITIES) OR (iii) UPON THE DELIVERY BY THE HOLDER TO THE COMPANY OF AN
OPINION OF COUNSEL, REASONABLY SATISFACTORY TO COUNSEL FOR THE COMPANY, STATING
THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
Right to Purchase a maximum of
______ Shares of Common Stock of Galaxy
Nutritional Foods, Inc.
Date: ____________, 2001
GALAXY NUTRITIONAL FOODS, INC.
COMMON STOCK PURCHASE WARRANT
GALAXY NUTRITIONAL FOODS, INC., a Delaware corporation (the
"Company"), hereby certifies that, for value received, Tucker Anthony
Incorporated, or its successors and assigns, is entitled, subject to the terms
set forth below, to purchase from the Company a maximum of _______ fully paid
and nonassessable shares of Common Stock, $.01 par value, of the Company, at
the exercise price of $_____ per share, subject to adjustment as provided
herein (hereinafter referred to as the "Purchase Price").
This Warrant may be exercised as provided herein upon surrender of
this Warrant and payment of the Purchase Price at an office or agency of the
Company. Payment of the Purchase Price may be made in cash, by certified or
official bank check in New York Clearing House funds payable to the order of
the Company, in Common Stock or any combination thereof. If the holder elects
to pay all or part of the Purchase Price in Common Stock, the holder may make
such payment either by delivering to the Company a number of shares already
owned by the holder equal in value to the Purchase Price multiplied by the
number of shares of Common Stock designated by the holder in the subscription
at the end hereof or by requesting the Company to withhold from the number of
shares of Common Stock deliverable to the holder upon exercise a number of
shares equal in value to the Purchase Price multiplied by the number of shares
of Common Stock designated by the holder in the subscription at the end hereof.
All such shares so delivered or withheld shall be valued at their market price
on the business day immediately preceding the day on which such shares are
withheld or delivered.
No Warrant may be exercised after the Expiration Time (as defined
below), at which time all Warrants evidenced hereby, unless exercised prior
thereto, shall thereafter be void and of no further force and effect.
As used herein the following, unless the context otherwise required,
have the following respective meanings:
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<PAGE> 34
(a) The term "Change of Control" shall mean (i) any "person" (as
such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), other than a group including the holder,
becoming the beneficial owner (as defined in Rule 13d-3 of the Exchange Act),
directly or indirectly, of 35% or more of the then outstanding shares of Common
Stock or voting securities representing 35% or more of the combined voting
power of the Company's then outstanding voting securities entitled to vote
generally in the election of directors, (ii) any merger or consolidation of the
Company with any other corporation other than a merger or consolidation which
would result in the voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity) at least 50% of
the combined voting power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger or consolidation,
(iii) any liquidation or dissolution of the Company or the sale or other
disposition of all or substantially all of the assets of the Company, (iv)
individuals who, as of the date hereof, constitute the board of directors of
the Company cease for any reason to constitute at least of a majority of such
board.
(b) The term "Company" shall include Galaxy Nutritional Foods,
Inc., and any entity that shall succeed to or assume the obligations of the
Company hereunder.
(c) The term "Common Stock" includes (i) the Company's Common
Stock, $.01 par value per share; (ii) any other capital stock of any class or
classes (however designated) of the Company, authorized on or after such date,
the holders of which shall have the right, without limitation as to amount,
either to all or to a share of the balance of current dividends and liquidating
dividends after the payment of dividends and distributions on any shares
entitled to preference, and the holders of which shall ordinarily, in the
absence of contingencies, be entitled to vote for the election of directors of
the Company; and (iii) any other securities into which or for which any of the
securities described in (i) or (ii) may be converted or exchanged pursuant to a
plan of recapitalization, reorganization, merger, sale of assets or otherwise.
(d) The term "Other Securities" refers to any stock (other than
Common Stock) and other securities of the Company or any other person
(corporate or otherwise) which the holders of the Warrants at any time shall be
entitled to receive, or shall have received, on the exercise of the Warrants,
in lieu of or in addition to Common Stock, or which at any time shall be
issuable or shall have been issued in exchange for or in replacement of Common
Stock or Other Securities pursuant to Section 4 of this Warrant or otherwise.
1. Exercise of Warrant
1.1 Vesting of Warrant. This Warrant shall be fully
vested on the date hereof and be exercisable in full two years after
the date of issuance. Following such two-year period, this Warrant may
be exercised in full or in part according to the terms and conditions
in paragraphs 1.2 and 1.3 below. Notwithstanding the foregoing, this
Warrant shall be exercisable in full prior to the expiration of the
two-year period set forth above upon a Change of Control.
1.2 Full Exercise. Once vested, this Warrant may be
exercised in full by the holder hereof by surrender of this Warrant,
with the form of subscription at the end hereof duly executed by such
holder, to the Company at its principal office, accompanied by
payment, in cash, by certified or official bank check payable to the
order of the Company or Common Stock, in the amount equal to (a) the
Purchase Price then in effect, multiplied by (b) the number of shares
of Common Stock for which this Warrant is then exercisable.
54
<PAGE> 35
1.3 Partial Exercise. This Warrant may be exercised in
part (but not as to fractional shares) by surrender of this Warrant in
the manner and at the place provided in Section 1.2 except that the
amount payable by the holder on such partial exercise shall be equal
to (a) the Purchase Price then in effect, multiplied by (b) the number
of shares of Common Stock designated by the holder in the subscription
at the end hereof. On any such partial exercise the Company at its
expense will issue and deliver to or upon the order of the holder
hereof a new Warrant or Warrants of like tenor, in the name of the
holder hereof or as such holder (upon payment by such holder of any
applicable transfer taxes) may request, calling in the aggregate on
the face or faces thereof for the number of shares of Common Stock for
which such Warrant or Warrants may still be exercised.
1.4 Company Acknowledgment. The Company will, at the
time of the exercise of the Warrant, upon the request of the holder
hereof, acknowledge in writing its continuing obligation to afford to
such holder any rights to which such holder shall continue to be
entitled after such exercise in accordance with the provisions of this
Warrant. If the holder shall fail to make any such request, such
failure shall not affect the continuing obligation of the Company to
afford to such holder any such rights.
2. Delivery of Stock Certificates on Exercise. As soon as
practicable after the exercise of this Warrant in full or in part, the
Company at its expense (including the payment by it of any applicable
issue taxes) will cause to be issued in the name of and delivered to
the holder hereof, or as such holder may direct (provided, however,
that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and
delivery of any such certificates in a name other than that of the
holder and the Company shall not be required to issue or deliver such
certificates unless or until the person or persons requesting the
issuance thereof shall have paid to the Company the amount of such tax
or shall have established to the satisfaction of the Company that such
tax has been paid), duly authorized, validly issued, fully paid and
nonassessable shares of Common Stock (or Other Securities) to which
such holder shall be entitled on such exercise, together with any
other stock or other securities and property (including cash, where
applicable) to which such holder is entitled upon such exercise
pursuant to Section 1 and otherwise. The Company shall not be required
to issue certificates representing fractions of shares of Common Stock
and shall not be required to issue scrip or pay cash in lieu of
fractional interests, it being the intent of the parties that all
fractional interests shall be eliminated by rounding any fraction up
to the nearest whole number of shares of Common Stock.
3. Adjustment for Dividends in Other Stock, Property or
Reclassification. In case at any time or from time to time, the
holders of Common Stock (or Other Securities) shall have received, or
(on or after the record date fixed for the determination of
shareholders eligible to receive) shall have become entitled to
receive, without payment therefor,
(a) other or additional stock or other securities or
property (other than cash) by way of dividend, or
(b) any cash (excluding cash dividends payable solely
out of earnings or earned surplus of the Company), or
(c) other or additional stock or other securities or
property (including cash) by way of spin-off, split-up, reclassification,
recapitalization, combination of shares of similar corporate rearrangement,
other than additional shares of Common Stock (or Other Securities) issued as a
stock dividend or in a stock-split (adjustment in respect of which are provided
for in Section 4 hereof), then and in each such case the holder of this
Warrant, on the exercise hereof as
55
<PAGE> 36
provided in Section 1 hereof, shall be entitled to receive the amount of stock
and other securities and property (including cash in the cases referred to in
subdivisions (b) and (c) of this Section 3) which such holder would have
received if the holder had been the holder of record of the number of shares of
Common Stock called for on the face of this Warrant during the period from the
date hereof to and including the date such stock and other securities and
property (including cash in the cases referred to in subdivision (b) and (c) of
this Section 3) would have been receivable by such holder as aforesaid during
such period, giving effect to all adjustments called for during such period by
Section 4 hereof.
The Company shall notify the holder of each such adjustment, setting
forth in reasonable detail the event requiring the adjustment and the
method by which such adjustment was calculated.
4. Extraordinary Events. In the event that the Company shall (a)
issue additional shares of Common Stock as a dividend or other distribution on
outstanding Common Stock, (b) subdivide its outstanding shares of Common Stock
into a larger number of shares of Common Stock, or (c) combine its outstanding
shares of Common Stock into a smaller number of shares of Common Stock, then,
in each such event, the Purchase Price shall, simultaneously with the happening
of such event, be adjusted by multiplying the then Purchase Price by a
fraction, the numerator of which shall be the number of shares of Common Stock
outstanding immediately prior to such event and the denominator of which shall
be the number of shares of Common Stock outstanding immediately after such
event, and the product so obtained shall thereafter be the Purchase Price then
in effect. The Purchase Price, as so adjusted, shall be readjusted in the same
manner upon the happening of any successive event or events described herein in
this Section 4. The holder of this Warrant shall thereafter, on the exercise
hereof as provided in Section 1 hereof, be entitled to receive that number of
shares of Common Stock determined by multiplying the number of shares of Common
Stock which would otherwise (but for the provisions of this Section 4) be
issuable on such exercise by a fraction of which (i) the numerator of the
Purchase Price which would otherwise (but for the provisions of this Section 4)
be in effect, and (ii) the denominator is the Purchase Price in effect on the
date of such exercise.
The Company shall notify the holder of each such adjustment, setting
forth in reasonable detail the event requiring the adjustment and the method by
which such adjustment was calculated.
5. Notices of Record Date, etc. In the event of:
(a) any taking by the Company of a record of the holders
of any class of securities for the purpose of determining the holders thereof
who are entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class
or any other securities or property, or to receive any other right, or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company or any
transfer of all or substantially all the assets of the Company to or
consolidation or merger of the Company with or into any other person, or
(c) any voluntary or involuntary dissolution,
liquidation or winding-up of the Company, then and in each such event the
Company will mail or cause to be mailed to each holder of a Warrant a notice
specifying (i) the date on which any such record is to be taken for the purpose
of such dividend, distribution or right, and stating the amount and character
of such dividend, distribution or right, (ii) the date of which any such
reorganization, reclassification, recapitalization, transfer, consolidation,
merger, dissolution, liquidation or winding-up is to take
56
<PAGE> 37
place, and the time, if any is to be fixed, as of which the holders of record
of the Common Stock (or Other Securities) shall be entitled to exchange their
shares of Common Stock (or Other Securities) for securities or other property
deliverable on such reorganization, reclassification, recapitalization,
transfer, consolidation, merger, dissolution, liquidation or winding-up, and
(iii) the amount and character of any stock or other securities, or rights or
options with respect thereto, proposed to be issued or granted, the date of
such proposed issue or grant is to be offered or made. Such notice shall be
mailed at least 20 days prior to the date specified in such notice on which any
such action is to be taken.
6. Reservation of Stock Issuable on Exercise of Warrant. The
Company will at all times reserve and keep available, solely for issuance and
delivery on the exercise of the Warrants, all shares of Common Stock (or Other
Securities) from time to time issuable on the exercise of the Warrants.
7. Exchange of Warrant. On surrender for exchange of any
Warrant, properly endorsed, to the Company, the Company at its expense will
issue and deliver to or on the order of the holder thereof a new Warrant and
Warrants of like tenor, in the name of such holder or as such holder (on
payment by such holder of any applicable transfer taxes) may direct, calling in
the aggregate on the face or faces thereof for the number of shares of Common
Stock called for on the face or faces of the Warrant or Warrants so
surrendered.
8. Replacement of Warrant. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of such Warrant, the Company at its
expense will execute and deliver, in lieu thereof, a new Warrant of like tenor.
9. Warrant Agent. The Company may, by written notice to each
holder of a Warrant, appoint an agent for the purpose of issuing Common Stock
(or Other Securities) on the exercise of this Warrant pursuant to Section 1
hereof, exchanging Warrants pursuant to Section 7 hereof, and replacing
Warrants pursuant to Section 8 hereof, or any of the foregoing, and thereafter
any such issuance, exchange or replacement, as the case may be, shall be made
at such office by such agent.
10. Remedies. The Company stipulates that the remedies at law of
the holder of this Warrant in the event of any default or threatened default by
the Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate, and that such terms may be
specifically enforced by a decree for the specific performance of any agreement
contained herein or by an injunction against a violation of any of the terms
hereof or otherwise.
11. Negotiability. This Warrant is issued upon and subject to the
following terms:
(a) No holder of this Warrant shall, as such, be
entitled to vote or to receive dividends or to be deemed the holder of Common
Stock that may at any time be issuable upon exercise of the Warrant for any
purpose whatsoever, nor shall anything contained herein be construed to confer
upon such holder, as such, any of the rights of a stockholder of the Company or
any right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action (whether upon any recapitalization, issue or reclassification
of stock, change of par value or change of stock to no par value,
consolidation, merger or conveyance or otherwise), or to receive notice of
meetings, or to receive dividends or subscription rights, until such holder
shall have exercised the Warrant and
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<PAGE> 38
been issued shares of the Common Stock in accordance with the provisions
hereof, except in all cases as otherwise provided in Sections 3 and 4.
(b) Neither this Warrant nor any shares of Common Stock
purchased pursuant to this Warrant are registered under the Securities Act of
1933, as amended (the "Act"), or applicable state securities laws. Therefore,
the Company may require, as a condition of allowing the transfer or exchange of
this Warrant or, until a registration statement for such shares has been filed
with and declared effective by the Securities and Exchange Commission and
applicable state securities commissions, that the holder or transferee of this
Warrant or such shares, as the case may be, furnish to the Company an opinion
of counsel reasonably acceptable to the Company and its counsel to the effect
that such transfer or exchange may be made without registration under the Act
and applicable state securities laws.
(c) Until this Warrant is transferred on the books of
the Company, the Company may treat the registered holder hereof as the absolute
owner hereof for all purposes, notwithstanding any notice to the contrary.
(d) Neither this Warrant nor any portion hereof, nor any
rights hereunder, may be assigned, sold, transferred, hypothecated or conveyed
until such time as this Warrant is exercisable as provided herein; provided,
that, the initial holder may assign this Warrant or any portion hereof, or
rights hereunder, to officers of the initial holder prior to such time, subject
to the terms, conditions and restrictions set forth herein.
12. Registration Rights. In the event that the Company, at any
time commencing after this Warrant has vested and is exercisable and expiring
at the Expiration Time, determines to proceed with the actual preparation and
filing of a Registration Statement under the Act in connection with the
proposed offer and sale of any of its securities by it or any of its security
holders (other than a registration statement on Form S-4, S-8 or other limited
purpose form) (the "Registration Statement"), the Company will give written
notice of such filing to the holder. Upon the written request from the holder
within 20 days after receipt of any such notice from the Company, the Company
will, except as otherwise provided herein, cause such number of shares of
Common Stock issuable to holder upon the exercise of this Warrant which are
requested by holder, and which are not otherwise included in any other
registration statement (the "Registrable Securities"), to be included in the
Registration Statement filed under this paragraph at the Company's cost and
expense (excluding underwriting discounts, commissions and filing fees
attributable to the holder's Common Stock included therein). The Company shall
not have any obligations to holder with respect to a date by which any such
Registration Statement filed under this paragraph shall be filed with or
declared effective by the SEC or the period of time during which any such
Registration Statement shall remain effective. Notwithstanding the foregoing,
if any managing underwriter of any offering for which the Registration
Statement under this paragraph is to be filed determines and advises in writing
that the inclusion of any shares of holder proposed to be included in such
offering, together with any other issued and outstanding securities proposed to
be included therein by holders of securities other than holder, would interfere
with the successful marketing of such securities, then the Registration
Statement prepared in connection with such offering will include (i) first, the
securities which the Company proposes to sell, then (ii) second, the number of
securities held by other parties requested to be included in such Registration
Statement, including Registrable Securities, that, in the opinion of the
managing underwriter, can be sold without having the material adverse affect
referred to above, such amount to be allocated pro rata among all such other
parties, including holder, on the basis of the respective number of shares of
securities as to which registration has been requested by such holders of
shares. The holder shall be entitled to indemnification from the Company for
losses, claims, damages, liabilities
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<PAGE> 39
and expenses to which the holder may become subject under the Act insofar as
such losses, claims, damages, liabilities or expenses (or actions in respect
thereof as contemplated below) arise out of or are based upon any untrue or
alleged untrue statement of any material fact contained in any such
registration statement, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading; provided, however,
the Company's obligations to the holder under this paragraph shall not apply to
the extent that such untrue statement or alleged untrue statement or omission
or alleged omission was made in such registration statement in reliance upon
and in conformity with written information furnished to the Company by or on
behalf of the holder expressly for use in the registration statement. The
Company agrees to provide the registration rights set forth in this paragraph
12 to the holder in such a manner as to permit the holder to dispose of its
Registrable Securities in a commercially reasonable manner; provided, however,
that the foregoing shall not require the Company to maintain the effectiveness
of any registration statement filed hereunder for any specific amount of time.
13. Notices, etc. All notices and other communications from the
Company to the holder of this Warrant shall be mailed by first class registered
or certified mail, postage prepaid, at such address as may have been furnished
to the Company in writing by such holder or, until any such holder furnishes to
the Company an address, then to, and at the address of, the last holder of this
Warrant who has so furnished an address to the Company.
14. Governing Law. This Warrant shall be governed by, and
construed in accordance with, the laws of the State of Florida.
15. Miscellaneous. This Warrant and any term hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of such change, waiver, discharge
or termination is sought. the headings in this Warrant are for purposes of
reference only, and shall not limit or otherwise affect any of the terms
hereof. This Warrant is being executed as an instrument under seal. The
invalidity or unenforceability of any provision hereof shall in no way affect
the validity or enforceability of any other provision.
16. Expiration. All rights to exercise this Warrant shall expire
at 5:00 P.M., Orlando, Florida time, on ___________ 2005 (the "Expiration
Time"). Whether or not surrendered to the Company by the holder, this Warrant
shall be deemed canceled upon the expiration hereof.
Attest: GALAXY NUTRITIONAL FOODS, INC.
By:
---------------------------- ---------------------------------------
Cynthia L. Hunter, Secretary Keith A. Ewing,
Chief Financial Officer
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<PAGE> 40
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
TO:
------------------------------
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise this Warrant for, and to purchase thereunder _______________
shares of Common Stock of Galaxy Nutritional Foods, Inc., in consideration for
the payment of $______________ and/or __________ shares of Common Stock (at a
per share price of $____), and requests that the certificates for such shares
be issued in the name of, and delivered to the following:
---------------------------
---------------------------
---------------------------
---------------------------
Dated: -----------------------------------------
(Signature must conform to name of holder
as specified on the face of the warrant)
-----------------------------------------
-----------------------------------------
-----------------------------------------
(Address)
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<PAGE> 41
FORM OF ASSIGNMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and
transfers unto __________ __________ the right represented by the within
Warrant to purchase __________ shares of Common Stock of Galaxy Nutritional
Foods, Inc. to which the within Warrant relates, and appoints __________
__________ __________ Attorney to transfer such right on the books of Galaxy
Nutritional Foods, Inc. with full power of substitution in the premises.
Dated: -----------------------------------------
(Signature must conform to name of holder
as specified on the face of the Warrant)
Signed in the presence of:
-----------------------------------------
-------------------------- -----------------------------------------
-------------------------- -----------------------------------------
Print Name: (Address)
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