ADVANCED ELECTRONIC SUPPORT PRODUCTS, INC.
750,000 Shares of Common Stock
750,000 Redeemable Common Stock Purchase Warrants
UNDERWRITING AGREEMENT
As of _______________, 199_
CORPORATE SECURITIES GROUP, INC.
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ARGENT SECURITIES, INC.
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Gentlemen:
Advanced Electronic Support Products, Inc., a Florida corporation (the
"Company") confirms its agreement with Corporate Securities Group, Inc., a
Florida corporation, and Argent Securities, Inc., a Georgia corporation
(collectively, the "Representatives") as representatives and members of the
group of several underwriters, if any, named in Schedule I attached hereto (the
"Underwriters" or "you", and if there is no Schedule I attached, all references
in this Agreement to the "Underwriters" or "you" shall be deemed to refer only
to the Representatives) as follows:
1. THE SHARES AND THE WARRANTS. Subject to the terms and conditions set
forth herein, the Company proposes to sell to you on a "firm commitment" basis,
an aggregate of 750,000 shares ("Shares") of the Company's authorized but
unissued common stock, par value $.001 per share (the "Common Stock") and
750,000 Redeemable Common Stock Purchase Warrants, (the "Warrants"), each
Warrant entitling the holder thereof to purchase one share of Common Stock at an
exercise price of per share pursuant to a warrant agreement (the "Warrant
Agreement") between the Company and Continental Stock Transfer & Trust ("Warrant
Agent"). The Company also proposes to grant to you an option to purchase up to
an additional 112,500 shares of Common Stock and 112,500 Warrants for the sole
purpose of covering over-allotments, if any (the "Option Securities"). The
Shares and the Warrants are sometimes collectively referred to herein as the
"Firm Securities". The Firm Securities and the Option Securities are more fully
described in the Registration Statement and the Prospectus referred to herein
and are hereinafter sometimes collectively referred to as the "Securities."
2. REGISTRATION STATEMENT AND PROSPECTUS. A registration
statement on Form SB-2 (File No. 333-15967) together with exhibits and including
a preliminary form of prospectus for the registration of the Securities, has
been prepared by the Company in conformity with the requirements of the
Securities Act of 1933, as amended, and all applicable instructions, rules and
regulations (collectively, the "Securities Act") of the Securities and Exchange
Commission
(the "Commission"), and has been filed with the Commission. There have been
delivered to you, copies of each Preliminary Prospectus and the Final
Prospectus. Such registration statement, including the Prospectus, Part II, any
documents incorporated by reference therein and all financial schedules and
exhibits thereto, as amended at the time when it shall become effective, is
herein referred to as the "Registration Statement," and the prospectus included
as part of the Registration Statement on file with the Commission when it shall
become effective or, if the procedure in Rule 430A of the Rules and Regulations
(as defined below) is followed, the prospectus that discloses all the
information that was omitted from the prospectus on the effective date of the
Registration Statement pursuant to such rule, and in either case, together with
any changes contained in any prospectus filed with the Commission by the Company
with your consent after the effective date of the Registration Statement, is
herein referred to as the "Final Prospectus." If the procedure in Rule 430A is
followed, the prospectus included as part of the Registration Statement on the
date when the Registration Statement became effective is referred to herein as
the "Effective Prospectus." Any prospectus included in the Registration
Statement of the Company and in any amendments thereto prior to the effective
date of the Registration Statement is referred to herein as a "Pre-Effective
Prospectus." For purposes of this Agreement, "Rules and Regulations" mean the
rules and regulations adopted by the Commission under either the Securities Act
or the Securities Exchange Act of 1934 (the "Exchange Act"), as applicable.
3. AGREEMENTS TO SELL AND PURCHASE.
(a) FIRM SECURITIES. The Company agrees to sell to you, and
upon the basis of the representations, warranties and agreements of the Company
herein contained and subject to the terms and conditions hereof, you shall
purchase from the Company, the Shares at a purchase price of $_____ per Share
and the Warrants at a purchase price of $____ per Warrant. This purchase price
of the Shares and the Warrants represents the public offering price of such
securities, less a discount, equaling ten percent (10%), that the Company has
agreed to allow the Underwriter. All or any portion of such discount may be
reallowed by you for sales through licensed securities dealers who are members
of the National Association of Securities Dealers, Inc. (the "NASD").
(b) OPTION SECURITIES. The Company also grants you an option
to purchase, upon your written notice to the Company, the Option Securities for
the sole purpose of covering over-allotments, if any, at the purchase price and
on the same terms as set forth in the preceding paragraph. The Option Securities
may be purchased, in whole or in part, at any time for a period of forty-five
(45) days following the effective date of the Registration Statement. The notice
from you to the Company shall specify the number of Option Securities to be
purchased and the date and time of payment and delivery thereof (the "Option
Closing Date"). You, as the Underwriters, in your sole discretion, shall
determine the number of Option Securities, if any, to be purchased as provided
herein. Such over-allotment option shall not be exercised more than on one
occasion.
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(c) UNDERWRITERS' PURCHASE OPTION. On the Closing Date (as
defined herein), the Company shall further issue and sell to you or, at your
direction, to your bona fide officers and directors, an option (the
"Underwriters' Purchase Option") pursuant to the Purchase Option Agreement for
the purchase of an aggregate of 75,000 shares of Common Stock (the
'Underwriters' Shares") and 75,000 Common Stock Purchase Warrants (the
"Underwriters' Warrants") for an aggregate purchase price of $75.00. The
Underwriters' Purchase Option shall be exercisable at any time during the four
year period commencing one-year after the effective date of the Registration
Statement (the "Term"), at a price of equal to 130% of the respective public
offering price of the Shares and the Warrants. For a period of one (1) year
after the effective date of the Registration Statement, the Underwriters'
Purchase Option (and the Purchase Option Securities, as hereinafter defined) may
not be sold, assigned, transferred, pledged or hypothecated except to officers
of the Underwriters or members of the selling group. Such transfers will only be
made if they do not violate the registration provisions of the Securities Act.
The Underwriters' Purchase Option and the Purchase Option Securities shall be
transferable after one year from the effective date of the Registration
Statement pursuant to available exemptions from registration (if not otherwise
covered by an effective registration statement) under the Securities Act,
provided, however, that the Underwriters' Purchase Option may not be transferred
to a direct competitor of the Company without the Company's prior written
consent. Except as otherwise set forth in the Purchase Option Agreement, you may
designate that the Underwriters' Purchase Option be issued in varying amounts
directly to your officers and not the Underwriters, and to other underwriters,
if any, and their designees. Such designation will be made by you only if you
determine that such issuances would not violate the interpretation of the Board
of Governors of the NASD relating to the review of corporate financing
arrangements. The Underwriters' Shares, the Underwriters' Warrants and the
shares of Common Stock underlying the Underwriters' Warrant (collectively
sometimes referred to herein as the "Purchase Option Securities") shall be
entitled to piggyback and demand registration rights acceptable to you and your
counsel and as set forth in the Purchase Option Agreement.
4. DELIVERY AND PAYMENT. Delivery of and payment for the Firm
Securities shall be made at 10:00 A.M., Miami Time, on ____________, 199 (such
time and date are referred to herein as the "Closing Date") at the offices of
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▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇. The Closing Date and the time and the place of delivery of
and payment for the Firm Securities may be varied by agreement between you and
the Company.
If you elect to purchase and take delivery of any Option
Securities, delivery of and payment for such Option Securities shall be made at
said office or at such place as may be agreed upon in writing by you and the
Company, on the Option Closing Date, which may be the same as the Closing Date
but shall in no event be earlier than the Closing Date or earlier than one or
later than ten business days after the giving of the written notice referenced
in Section 3 hereof from you to the Company of the determination to purchase a
number, specified in said notice, of Option Securities. Such notice may be given
by you to the Company at any time within forty-five (45) days after the date of
the Final Prospectus. The Option Closing Date
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may be varied by agreement between you and the Company. On the Option Closing
Date, if any, there shall be delivered to you supplemental opinions and
certificates, dated such Option Closing Date, to the same effect as those
required to be delivered on the Closing Date pursuant to Section 8 hereof. The
Closing Date and the Option Closing Date are hereinafter collectively referred
to as the "Closing Date."
Delivery of certificates for the shares of Common Stock which
comprise the Shares and the certificates for the Warrants (in definitive form
and registered in such names and in such denominations as you shall request
prior to the Closing Date) shall be made to you against payment of the purchase
price therefor by certified or official bank check or checks payable to the
order of the Company in the amount of $_____. For the purpose of expediting the
checking and packaging of certificates for the Shares and the Warrants, the
Company and agrees to make such certificates available for inspection at least
24 hours prior to the Closing Date. Time shall be of the essence and delivery at
the time and place specified in this Agreement is a further condition to the
obligations of the Underwriter.
5. COVENANTS AND AGREEMENTS OF THE COMPANY. The Company further
covenants and agrees with you as follows:
(a) FILING OF REGISTRATION STATEMENT. The Company shall use
its best efforts to cause the Registration Statement to become effective or, if
the procedure in Rule 430A of the Rules and Regulations is followed, comply with
the provisions of and make all requisite filings with the Commission pursuant to
such Rules and Regulations. The Company will give you advance notice of its
intention to file or make any amendment or post-effective amendment to the
Registration Statement or any amendment or supplement to the Prospectus and will
submit all such amendments or supplements to you and to your counsel as soon as
possible, but not later than five (5) business days before the Company proposes
to file such amendments or supplements with the Commission. The Company will not
file any such amendment or supplement to which you shall reasonably object in
writing within a reasonable time after being furnished copies thereof. The
Company will not allow the Registration Statement to be declared effective by
the Commission without your approval.
(b) NOTICE TO UNDERWRITERS. The Company will advise you
promptly and confirm that advice in writing (i) when any post-effective
amendment to the Registration Statement shall have become effective, (ii) of the
mailing or the delivery to the Commission for filing of any amendment or
post-effective amendment to the Registration Statement or any amendment or
supplement to the Prospectus, (iii) of any request by the Commission for
amendment or supplement to the Registration Statement or the Prospectus, or for
additional information, immediately supplying you with copies of all comment
letters and all other correspondence with the Commission, (iv) of the issuance
by the Commission of any stop order suspending effectiveness of the Registration
Statement or of the suspension of the qualification of the Securities for
offering or sale in any jurisdiction, or of the initiation or threat of any
proceeding for any such purpose, (v) of the issuance by any state securities
commission or other regulatory authority of any order suspending the
qualification or the exemption from qualification
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of the Securities under state securities or Blue Sky laws or the initiation or
threat of any proceedings for that purpose and (vi) of the happening of any
event during the period mentioned in Section 5(d) hereof that makes any
statement made in the Registration Statement or the Prospectus untrue in any
material respect or which requires the making of any changes in the Registration
Statement or the Prospectus in order to make the statements therein not
misleading in any material respect. The Company will use its best efforts to
prevent the issuance of any stop order or suspension order and to obtain the
withdrawal of any such stop order or suspension order at the earliest possible
moment.
(c) NASDAQ LISTING. On the effective date of the Registration
Statement, the Common Stock and the Warrants shall be listed for quotation on
the NASDAQ SmallCap Market, and the Company shall use its best efforts to
maintain such listing for not less than five (5) years, provided, however, that
the Company may withdraw the listing of its securities on the NASDAQ if the
Company lists Common Stock and the Warrants on the NASDAQ National Market System
or on the New York or American Stock Exchange. In addition to the foregoing, the
Company shall, pursuant to Schedule D of the NASD By-Laws, prepare and file with
NASD any required notification along with applicable fees to list the Securities
on the NASDAQ system. The Company shall, as required, prepare and file as
promptly as practicable a Report by Issuer of Securities Quoted on NASDAQ
Interdealer Quotation System on Form 10-C (or any successor form) with respect
to the shares of Common Stock and the Warrants.
(d) POST-EFFECTIVE AMENDMENT. Within the time during which a
Final Prospectus relating to the Securities is required to be delivered under
the Securities Act, the Company shall comply with all requirements imposed upon
it by the Securities Act and by the Rules and Regulations, as from time to time
in force, so far as is necessary to permit the continuance of sales of or
dealings in the Securities as contemplated by the provisions hereof and the
Final Prospectus. If at any time when a prospectus relating to the Securities is
required to be delivered under the Securities Act, any event occurs as a result
of which, in the judgment of the Company and its counsel, the Prospectus as then
amended or supplemented would include any untrue statement of a material fact,
or omit to state a material fact necessary to make the statements therein, in
light of the circumstances under which made, not misleading in any material
respect, or if it is necessary at any time to amend or supplement the Prospectus
to comply with the Securities Act or any other applicable law, the Company will
promptly notify you, and the Company shall promptly prepare and file with the
Commission an amendment or supplement to the Registration Statement which will
correct such statement or omission, or an amendment or supplement which will
effect such compliance, and deliver to you in connection therewith such
prospectus or prospectuses in such quantity as may be necessary to permit
compliance with the requirements of the Securities Act.
(e) BLUE SKY QUALIFICATION. Prior to any public offering of
the Securities by you, the Company will endeavor in good faith, using your
counsel, and in cooperation with you and your counsel in taking such action as
may be necessary to register or qualify the Securities for offer and sale under
the applicable securities or Blue Sky laws of any states or jurisdictions of the
United States as you may reasonably designate and will maintain such
qualifications in
5
effect for so long as may be required for the distribution of the Securities.
The foregoing shall be subject to the reasonable consent of the Company as to
any state or jurisdiction that seeks to impose an escrow requirement with
respect to insiders' shares or some other restrictive condition upon the Company
that exceeds the insiders lock-up provision of Section 5(h) (other than because
no escrow is required herein) or a comparable condition contained herein. Copies
of all applications and related documents for the registration or qualification
of securities (except for the Registration Statement and Prospectus) filed with
the various states shall be sent to the Company's counsel not later than the
next business day following their transmission to the various states, and copies
of all comments and orders received from the various states shall be made
available to the Company's counsel. As information is received from various
states and immediately prior to the effective date of the Registration
Statement, counsel for the Underwriters shall advise counsel for the Company in
writing of all states where the offering has been registered or qualified for
sale or has been canceled, withdrawn or denied, the date(s) of such event(s),
and the number of Securities (and amount of other securities, if any) registered
or qualified for sale in each state. The Company shall be responsible for the
cost of state registration filing fees and legal fees and expenses of
Underwriters' counsel in connection with such filings, which filing fees shall
be paid to Underwriters' counsel in advance of such filings. The Underwriters'
counsel's legal fees with respect to blue sky filing shall be $1,000 for each
state in which application for registration or qualification is made, up to an
aggregate of $35,000 for all states combined. All outstanding fees and expenses
of the Underwriters' counsel shall be paid by the Company on or prior to the
Closing Date.
The Company shall, as soon as practicable after the Closing
Date, apply for listing in Standard and Poor's Stock Guide and use its best
efforts to effect and maintain such listing for at least five (5) years. The
Company further agrees, no later than the Closing Date, to engage, the services
of an investor relations firm reasonably acceptable to the Representatives and
to maintain such services from the date of engagement for two (2) years
following the Closing Date. Further, the Company shall engage for a period of
two years at least three firms (one of which shall be Argent Securities, Inc.
and one of which shall be Standard & Poor's Stock Reports Professional Edition)
which are reasonably acceptable to the Representatives to provide industry
research and advice to the Company.
(f) INFORMATION TO THE UNDERWRITERS. The Company will deliver
to you, for a period of at least five (5) years from the Closing Date: (i) as
soon as practicable, but in any event within ninety-five (95) days after the
close of each fiscal year of the Company, or as soon thereafter as practicable,
a financial report of the Company and its subsidiaries, if any, on a
consolidated basis, and a similar financial report of all unconsolidated
subsidiaries, if any, all such reports to include a balance sheet as of the end
of the preceding fiscal year, a statement of operations, a statement of changes
in financial condition and a statement of stockholders' equity covering such
fiscal year, and all to be in reasonable detail and certified by independent
public accountants who may, however, be the regularly employed independent
public accountants of the Company; (ii) within one hundred and five (105) days
after the end of each quarterly fiscal period of the Company, other than the
last quarterly fiscal period in any fiscal year, or as soon thereafter as
practicable, copies of the consolidated statement of operations, the statement
of
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stockholders' equity and statement of changes in financial condition for that
period, and the balance sheet as of the end of that period of the Company and
its subsidiaries, if any, the statement of operations, the statement of
stockholders' equity and statement of changes in financial condition and the
balance sheet of each unconsolidated subsidiary, if any, of the Company for that
period, all subject to year-end adjustment, certified by the principal financial
or accounting officer of the Company; (iii) copies of all other statements,
documents, or other information which the Company shall mail or otherwise make
available to any class of its security holders, to the financial press or to the
public, or shall file with the Commission, including, but not limited to
periodic reports required to be filed under Sections 13 and 15 of the Exchange
Act, in particular Forms 10-K, 10-Q and 8-K (which shall be provided within the
same period such reports are required to be filed with the Commission); (iv) a
copy of each "weekly position sheet" generated by the Depository Trust
Corporation pursuant to a subscription for such service that the Company shall
maintain at its expense; and (v) upon request in writing, such other information
as may reasonably be requested with reference to the property, business,
stockholders and affairs of the Company and its subsidiaries, if any.
(g) SECTION 11(A) EARNINGS STATEMENT. The Company will, as
promptly as possible after the close of each fiscal year of the Company, prepare
and distribute reports to its stockholders which will include audited statements
of its operations and changes of financial position during such period and its
balance sheet as of the end of such period. The Company will make generally
available to its stockholders and will deliver to you, as soon as practicable,
but in no event later than the first day of the 15th full calendar month
following the effective date of the Registration Statement, an earnings
statement (which need not be audited but which will satisfy the provisions of
Section 11(a) of the Securities Act) covering a period of at least twelve (12)
months beginning after the effective date of the Registration Statement.
(h) LOCK-UP AGREEMENTS. The Company will cause each of its
officers, directors, holders of the Company's Common Stock, any other persons
deemed to be "affiliates" as defined in Rule 144 under the Securities Act and
▇▇▇ ▇▇▇▇▇▇▇ immediately prior to the effective date of the Registration
Statement, to agree in writing (the "Lock-Up Agreement") that: (i) such person
shall not sell, including a short sale or sale against the box, or otherwise
dispose of any shares of the Common Stock owned directly, indirectly, or
beneficially (as defined by the Exchange Act and the Rules and Regulations
promulgated thereunder) by him, her or it for a period of twenty-four (24)
months from the effective date of the Registration Statement ("Lock-Up Period")
without the Underwriters' prior written consent; and (ii) such person will
permit all certificates evidencing his, her or its shares of Common Stock and/or
Warrants to be affixed with an appropriate restrictive legend, and will cause
the transfer agent for the Company to note such restrictions on the transfer
books and records of the Company. Additionally, for a period of forty-eight (48)
months following the effective date of the Registration Statement, the Company's
officers, directors, shareholders and affiliates will agree to sell any shares
of Common Stock it so desires to sell through the Representatives if the price
and terms of execution offered by the Representatives are at least as favorable
as may be obtained from other brokerage firms. On or before the effective date,
the Company shall have furnished to the Representatives the Lock-Up Agreements,
which shall be in a form reasonably acceptable to the
7
Representatives and which shall be duly executed, and shall be valid and binding
obligations of such persons enforceable against such persons in accordance with
their respective terms.
(i) ISSUANCE OF ADDITIONAL SECURITIES. For a period of
twenty-four (24) months (or such earlier date if the Underwriters' Purchase
Option has been exercised in full) commencing on the Closing Date, except with
the written consent of the Underwriters, which consent shall not be unreasonably
withheld, the Company will not issue or sell, directly or indirectly, any shares
of its capital stock, or sell or grant options, or warrants or rights to
purchase any shares of its capital stock, except pursuant to (i) this Agreement,
(ii) the Underwriters' Purchase Option and the Underwriters' Warrants, (iii)
warrants and options of the Company heretofore issued and described in the
Prospectus, and (iv) the grant of options and the issuance of shares issued upon
exercise of options issued or to be issued under the Company's stock option plan
which is described in the Prospectus; except that, during such period, the
Company may issue securities in connection with an acquisition, merger or
similar transaction, provided that such securities are not publicly registered
or issued pursuant to Regulation S of the Act, and the acquirer of the
securities is not granted registration rights with respect thereto which are
effective prior to 24 months after the Closing Date and until the Underwriters'
Purchase Option is exercised, and the Representatives grant their consent.
Notwithstanding anything to the contrary set forth in the prior sentence, the
Company may not issue any class or series of Preferred Stock for a period of 24
months from the Closing Date without the unanimous vote or consent of all
members of the Board of Directors of the Company. Prior to the Closing Date, the
Company will not issue any options or warrants without the prior written consent
of the Underwriters.
(j) PRESS RELEASES. For a period commencing on the date hereof
and ending two years after the date of the Prospectus, neither the Company nor
any of its officers or directors will issue news releases or permit other such
publicity about the Company regarding the financial condition or any significant
event of the Company without the approval of the Company's legal counsel named
in the Prospectus under the heading "Legal Opinions," or such other counsel as
may be approved by you. During such period, the Company will deliver to you
copies of such news releases or other publicity about the Company promptly after
distribution thereof.
(k) UNDERWRITERS' COPIES. The Company will promptly deliver to
you, without charge: (i) two complete copies (one of which is manually signed)
of the Registration Statement, as originally filed, and of each amendment
thereto, and of each post-effective amendment thereto filed at any time when a
prospectus relating to the Securities is required to be delivered under the
Securities Act, in each such case manually executed by the proper officers and a
majority of the directors of the Company (or, in case of amendments, by their
duly constituted attorneys-in-fact) and including signed copies of each consent
of experts named in the Registration Statement and all financial statements,
schedules and exhibits filed therewith (including those incorporated by
reference to the extent not previously furnished to you), and (ii) such number
of conformed copies of the Registration Statement, as originally filed, and of
each amendment and post-effective amendment thereto (in each such case excluding
exhibits), as you may
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reasonably require. The Company will promptly deliver, without charge, to you or
such others whose names and addresses are designated by you as soon as possible
after the effective date of the Registration Statement, and thereafter from time
to time during the period when delivery of a prospectus relating to the
Securities is required by the Securities Act, as many printed copies as you may
reasonably request of the Final Prospectus and of any amended or supplemented
prospectus. The Company will promptly deliver, without charge, as soon as
practicable following the public offering or sale of the Securities, and
thereafter from time to time for such period as delivery of a prospectus or any
amendment or supplement thereto may be required, to you or any dealers to whom
Securities may be issued, as many copies as you reasonably request of the
Prospectus and any amendment or supplement thereto.
(l) NASD MATTERS. The Company shall supply your counsel with
the following as appropriate to satisfy the NASD filing requirements: (i) such
copies of any amendment or supplement to the Registration Statement and the
preliminary prospectus or Final Prospectus; and (ii) the statutory filing fee in
the form of a certified or cashier's check. The Company shall further supply to
your counsel, no later than one (1) week before the effective date of the
Registration Statement, a written representation as to (i) the existence or
nonexistence of any NASD affiliation or association of any officer, director, or
five percent (5%) or greater shareholder of the Company, and, if a shareholder
of the Company is a corporation, the existence or nonexistence of any direct or
indirect NASD affiliation or association of any officer, director, or five
percent (5%) or greater shareholder of such corporation, (ii) whether or not any
unregistered securities of the Company have been acquired by any NASD affiliated
persons during the twelve (12) month period prior to filing the Registration
Statement, and (iii) whether or not key-man life insurance has been or will be
provided for any officer or director of the Company by any NASD affiliate.
(m) EXPENSES. Whether or not the transactions contemplated by
this Agreement are consummated or this Agreement becomes effective or is
terminated, the Company shall bear all costs and expenses incident to the
issuance, offer, sale, and delivery of the Securities, including, but not
limited to, stock transfer taxes, all expenses and fees incident to the filing
of the Registration Statement and the registration statements with the
Commission pursuant to the Securities Act and the Exchange Act, the costs,
filing fees and reasonable counsel fees related to qualification under state
securities laws, fees and disbursements of counsel and accountants for the
Company, NASD filing fees, NASDAQ system fees, costs of preparing and printing
the Registration Statement and as many copies of the preliminary prospectus and
Prospectus as you may reasonably deem necessary, including all amendments and
supplements to the Registration Statement, and the printing, delivery, and
shipping of this Agreement and other underwriting documents, including
underwriters' questionnaires, underwriters' powers of attorney, Blue Sky
memoranda, and selected dealers' agreements, the cost of printing certificates
representing the Shares and the Warrants, the costs and charges of the Transfer
Agent and Warrant Agent, and all other costs and expenses incident to the
performance of its obligations hereunder which are not otherwise provided for in
this Agreement. The Company shall also bear all costs of holding informational
meetings and "road shows" to acquaint securities dealers with the affairs of the
Company. The Company, at its sole expense, shall make a representative of its
management
9
available at the offices of the Underwriters, at mutually convenient times,
prior to the effective date of the Registration Statement and shall likewise
make representatives available at the Company for due diligence or other
informational meetings. The Company will also pay the reasonable out-of-pocket
travel expenses of the Underwriters and their counsel or the professionals
designated by the Underwriters to visit the Company's facilities (as well as
those of any significant supplier to, or customer of, the Company) for purposes
of discharging their due diligence responsibilities. The Prospectus (preliminary
and definitive) shall be printed by a financial printer selected by the Company
and approved by the Underwriters. The Company agrees to supply the Underwriters
(within ten weeks of the Closing Date) at the Company's sole cost and expense up
to ten (10) bound volumes of all the documents, papers and exhibits,
correspondence and records forming the materials included in the public
offering, and up to fourteen (14) Lucite cubes containing a miniature definitive
Prospectus. In addition, the Company agrees to pay for all pre- and post-closing
advertisements relating to the public offering.
In addition to the foregoing, the Company shall reimburse you
for your expenses on the basis of a nonaccountable expense allowance in the
amount of 3% of the gross offering proceeds; all of your costs in excess of the
nonaccountable expense allowance shall be paid by you. Expenses to which the
allowance shall be applied include fees of your counsel, but shall not include
the following: fees of the Company's counsel; Commission or state filing fees;
reasonable Blue Sky counsel fees and expenses; NASD filing fees; NASDAQ listing
fees; printing; tombstone advertisements; and any and all other expenses
customarily paid by the issuer in a public offering. The Company represents that
such payment will be made in full. The Company further agrees to pay to the
Underwriters any costs or expenses, including attorneys' fees, incurred or
resulting from any demands or causes of actions brought by the Underwriters or
by third parties against the Underwriters for the Company's failure to comply
with any provisions of this Underwriting Agreement.
Notwithstanding any other provisions of this Agreement, if (i)
(a) there is a material adverse change in the business or financial condition of
the Company, (b) there exists any material misrepresentation of the Company
contained herein or otherwise, (c) you discover in the course of your due
diligence examination of the Company facts which you determine, in your sole
discretion, could materially adversely affect the sale of the Securities, or (d)
market conditions, in your sole judgment, do not justify an offering on the
terms set forth in the Registration Statement, and in any such event you elect
to terminate the underwriting or (ii) there is any judicial, administrative or
other regulatory or governmental judgment, decree, order, injunction or similar
action or proceeding enjoining, suspending, prohibiting, limiting or otherwise
restricting you from engaging in underwriting activities or sales of securities,
and in any such event you elect to terminate the underwriting, the Company,
agrees that in addition to paying the Company's own expense, you will be
entitled to be reimbursed by us, on an accountable basis, for all of its
accountable out-of-pocket costs incurred in connection with the offering of
securities contemplated by the Registration Statement. Furthermore, if the
Company should fail to pay the agreed upon amounts set forth above to you, your
successors or assigns,
10
the Company, shall, furthermore, be liable to you for reasonable attorney's fees
and costs incurred in the collection of said amounts.
(n) TRANSFER SHEETS. The Company shall furnish to you a list
of the names and addresses of all stockholders subsequent to the Closing Date
and shall cause the Transfer Agent to furnish to you a copy of all transfer
sheets for a period of three years from the later of the Closing Date or the
Option Closing Date.
(o) UNDERTAKINGS AND USE OF PROCEEDS. The Company will comply
with all of the undertakings contained in the Registration Statement and shall
apply the net proceeds of the sale of the Securities substantially in accordance
with the description set forth in the Prospectus.
(p) FINANCIAL ADVISORY AGREEMENT. On the Closing Date, the
Company shall execute a Financial Advisory Agreement with the Representatives
for financial consulting services, which may include (i) advising the Company in
connection with possible acquisitions (ii) facilitating shareholder
communications and relations, and (iii) advising and assisting the Company with
long-term financial planning, corporate reorganization, expansion and capital
structure and other financial matters. Such agreement shall have a term of two
years and provide for compensation of $2,000 per month which amount shall be
prepaid in full on the Closing Date. The Financial Advisory Agreement shall
further provide that if the Representatives, directly or indirectly, introduces
the Company, during the term of such agreement, to any person or entity that
during the term thereof or within 18 months following the term thereof, provides
any investment capital, loan or any other equity or debt financing to the
Company or any affiliate thereof, or becomes a party to a merger, acquisition,
joint venture, private placement or other similar transaction with the Company
or any affiliate thereof, then the Company shall pay to the Representatives a
cash finder's fee. Each cash finder's fee payable to the Representatives under
this Agreement shall be calculated as a percentage of the Transaction Value (as
defined herein and therein) in accordance with the following scale:
6% on the first $5,000,000 of the Transaction Value;
5% on the amount from $5,000,001 to $6,000,000; 4% on
the amount from $6,000,001 to $7,000,000; 3% on the
amount from $7,000,001 to $8,000,000; 2% on the
amount from $8,000,001 to $9,000,000; 1% on the
amount in excess of $9,000,000.
"Transaction Value" shall mean the aggregate value of all
cash, securities and other property (i) paid to the Company, its affiliates or
their shareholders in connection with any transaction referred to above
involving any investment in or acquisition of the Company or any affiliates (or
the assets of either), (ii) paid by the Company or any affiliate in any such
transaction involving an investment in or acquisition of another party or its
equity holdings by the Company or any affiliate, or (iii) paid or contributed by
the Company or any affiliate and by the other party or parties in the event of
any such transaction involving a merger,
11
consolidation, joint venture or similar joint enterprise or undertaking. The
value of any such securities (whether debt or equity) or other property shall be
the fair market value thereof as determined by mutual agreement of the Company
and the Representatives or by an independent appraiser jointly selected by the
Company and the Representatives.
(q) EXCHANGE ACT REGISTRATION. The Company shall prepare and
file a registration statement with the Commission pursuant to Section 12(g) of
the Exchange Act. Such registration statement under the Exchange Act shall be
declared effective contemporaneously with the effectiveness of the Registration
Statement. The Company shall comply with the Securities Act, the Exchange Act
and the Rules and Regulations promulgated thereunder, the applicable rules and
regulations of the NASD and applicable states securities laws so as to permit
the continuance of sales of and dealings in the Securities in compliance with
applicable provisions of such laws, rules, and regulations, including the filing
with the Commission and the NASD of all reports required to be so filed by each,
and the Company will deliver to the holders of the shares all reports required
to be provided to such holders pursuant to such laws, rules, or regulations. The
Company will use its best efforts to maintain its registration under the
Exchange Act in effect for a period of five (5) years from the Closing Date.
(r) REDEMPTION AND DIVIDENDS. For a period of two years from
the Closing Date, the Company shall not, either directly or through a
subsidiary, (i) redeem or purchase any of its securities outstanding as of the
Closing Date, other than redemptions of the Warrants as permitted by the Warrant
Agreement, or that may be required in connection with possible termination of
employment with the Company under the terms of employment agreements in effect
on the Closing Date, or redemptions as otherwise provided for herein, or (ii)
pay any dividends, or make any other cash distribution in respect of its
securities, in excess of the amount of the Company's current or retained
earnings derived after the Closing Date, without the prior written consent of
the Representatives, which consent may be withheld for any reason. The
Representatives shall either approve or disapprove, in writing of such
contemplated stock redemption or dividend or distribution within five (5)
business days after the date the Representatives receive written notice of the
proposed action. Failure by the Representatives to provide a response to within
such five (5) day period shall be deemed to be an approval of the redemption or
dividend.
(s) DESIGNATION OF A DIRECTOR AND ATTENDANCE AT BOARD
MEETINGS. The Representatives shall have the right, for the five (5) year period
following the Closing Date, to designate two nominees (the "Nominees") for
election to the Company's Board of Directors. The officers, directors, and
principal shareholders of the Company shall agree in writing at or prior to the
Closing Date to vote all shares of voting capital stock owned by them (or over
which they have the power to direct the vote) during such five-year period in
favor of the election of the Nominees. In the alternative and at its option, the
Representatives shall have the right, during such five-year period, to have a
representative (the "Attendee") attend all meetings of the Board of Directors of
the Company, which meetings shall be held at least quarterly. The aforementioned
provision notwithstanding, the Company shall not be obligated to designate
Nominees after the Underwriters' Purchase Option and the Underwriters' Warrants
have been
12
exercised in full. The number of board members may be increased from time to
time up to five (5) members. Any nominee for directorship (including re-election
to another term) shall be approved by the Representatives prior to his or her
election, which approval shall not be unreasonably withheld. The Company shall
reimburse the Underwriters' Nominees or Attendee for his or her out-of-pocket
expenses reasonably incurred and authorized in advance by the Company in
connection with his or her attendance of the Board meetings and a fee of $1,000
per month. The Nominees or Attendee shall also be entitled to participate in any
Stock Option Plans of the Company for non-employees. To the extent permitted by
law, the Company agrees to indemnify and hold the Nominees and the
Representatives harmless against any and all claims, actions, awards and
judgments arising out of his or her service as a director and in the event the
Company maintains a liability insurance policy affording coverage for the action
of its officer and directors, to include such Nominees and the Representatives
as an insured under such policy.
(t) AMENDMENTS TO EMPLOYMENT AND LOCK-UP AGREEMENTS. The
Company shall not amend or alter any term of any written employment agreement
nor Lock-Up Agreement between the Company and any executive officer (or
director), during the term thereof, in a manner more favorable to such employee,
without the express written consent of the Representatives until such time as
the Underwriters' Purchase Option and Underwriters' Warrants have been exercised
in full.
(u) WARRANT SOLICITATION. Commencing one (1) year from the
date hereof, upon the exercise of any Warrant, the exercise of which was
solicited by the Underwriters in accordance with the applicable rules and
regulations of the NASD prevailing at the time of such solicitation, the Company
shall pay to the soliciting Underwriter a fee of 5% of the aggregate exercise
price of such Warrant (the "Warrant Solicitation Fee") within five (5) business
days of such exercise, so long as the Underwriters provided bona fide services
in exchange for the Warrant Solicitation Fee and the Underwriters have been
specifically designated in writing by the holders of the Warrants as the broker.
The Company further agrees that it will not solicit the exercise of any Warrant
other than through the Underwriters, unless either: (i) the Underwriters cannot
legally solicit the exercise of the Warrants at the time of such solicitation;
(ii) the Representatives declines, in writing, to solicit the exercise of the
Warrants within five (5) business days of such a written request by the Company;
or (iii) the Representatives consents to the solicitation of the exercise of the
Warrants by the Company or another entity.
(v) INTERNAL ACCOUNTING CONTROLS. The Company will continue to
maintain a system of internal accounting controls sufficient to provide
reasonable assurance that: (i) transactions are executed in accordance with
management's general or specific authorization; (ii) transactions are recorded
as necessary in order to permit preparation of financial statements in
accordance with generally accepted accounting principles and to maintain
accountability for assets; (ii) access to assets is permitted only in accordance
with management's general or specific authorization; (iv) the recorded
accountability for assets is compared with existing assets at reasonable
intervals and appropriate action is taken with respect to any differences, and
(v)
13
all quarterly reports filed on Form 10-Q shall be reviewed by the Company's
accountant in accordance with SAS71.
(w) CORPORATE GOVERNANCE. The Company, for a period of
twenty-four (24) months following the Effective Date (or such earlier date if
the Representative has exercised in full the Underwriters' Purchase Option and
the Underwriters' Warrants) shall implement the following procedures:
(i) Sixty days prior to fiscal year end, the
President will present to the Board of Directors a business plan to be adopted
by the Board of Directors at fiscal year end. The business plan will include the
following:
(a) monthly projections - including balance
sheet, profit/loss statement with underlying assumptions; and
(b) upon board approval, this document
becomes the annual budget.
(ii) No later than the 20th day of each month,
the Company will provide the Board with comparative financial statements for
the previous month showing actual balance sheet, profit/loss and cash flow vs.
budget with written explanation for deviation in excess of $50,000 or 10% of
line item presented.
(iii) Monthly Board meetings (which may be by
telephone) by the 25th of each month to include discussion of the Monthly Report
and approval of any changes to the business plan based on change of
circumstances.
(iv) Implementation of a compensation committee,
which will be headed by an outside director, to make recommendations to the
Board for compensation for all outside consultants, officers and outside
directors.
(v) Implementation of an audit committee which
will be headed by an outside directors.
6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to you that:
(a) ACCURACY OF REGISTRATION STATEMENT AND PROSPECTUS. To its
knowledge, the Commission has not issued any order preventing or suspending the
use of any preliminary prospectus or Prospectus, no proceedings for that purpose
have been instituted and each preliminary prospectus filed as part of the
Registration Statement as originally filed or as part of any amendment thereto
or filed pursuant to Rule 424 under the Securities Act in all material respects,
at the time of the filing thereof, complied with the Securities Act and did not
contain any untrue statement of a material fact or omit to state any 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; when the Registration Statement becomes
14
effective, and when the Prospectus is filed with the Commission, and at
all times subsequent thereto up to and including the Closing Date and the Option
Closing Date, or for such longer period as the Prospectus is required under the
Securities Act to be delivered in connection with sales by you or a dealer
selected by you, the Registration Statement and the Prospectus and any
amendments or supplements thereto will comply with the Securities Act; when the
Registration Statement becomes effective, the Registration Statement will
contain all statements required to be stated therein in accordance with the
Securities Act and will not contain an 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 not misleading; and when the Prospectus is filed with the
Commission, it will contain all statements required to be stated therein in
accordance with the Securities Act and will not contain an 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; PROVIDED, HOWEVER, that the Company makes
no representations or warranties as to information contained in or omitted from
any preliminary prospectus or the Registration Statement or the Prospectus or
any such amendment or supplement in reliance upon and in conformity with written
information (or oral information to the extent such information relates to the
private ongoing investigation of you by the Commission) furnished to the Company
with respect to you by or on behalf of you expressly for use with reference to
you (or any person who may be deemed to be affiliated with you or an associated
person of yours) in connection with the preparation thereof.
(b) FINANCIAL STATEMENTS. The financial statements and the
related schedules and notes included in the Registration Statement and in the
Prospectus present fairly the financial position, results of operations and
changes in financial position of the Company and its subsidiaries, at the dates
and for the periods specified therein. The accountants who have audited the
financial statements filed with the Commission as a part of the Registration
Statement and the Prospectus are independent accountants with respect to the
Company as required by the Securities Act. The pro forma financial statements
included in the Registration Statement and the Prospectus present fairly the
financial position and results of operation of the Company at the dates and for
the periods specified therein.
(c) NO ADVERSE CHANGE. Except as reflected in the Registration
Statement and in the Prospectus or any amendment or supplement thereto, since
the respective dates as of which information is given in the Registration
Statement and in the Prospectus or any amendment or supplement thereto and prior
to the Closing Date, or Option Closing Date, as the case may be, the Company has
conducted its business in substantially the same manner as of November 8, 1996,
and neither the Company nor any of its subsidiaries have incurred, or will have
incurred, any liabilities or obligations, direct or contingent (other than in
the normal course of business except as disclosed in the Registration
Statement), and there has not been any change in the capital stock, short-term
debt (other than in the normal course of business) or long-term debt of the
Company or its subsidiaries or any adverse change, or any development involving
a change in the condition (financial or otherwise), net worth, results of
operations, the affairs or business prospects of the Company or its
15
subsidiaries, which might be adverse to the Company or its subsidiaries and no
event has occurred concerning the Company or its subsidiaries and which might
result in an adverse change or effect in or on the general affairs, management,
financial position, stockholders' equity or results of operations of the Company
or its subsidiaries except as disclosed in the Registration Statement.
(d) AUTHORITY. This Agreement, the Warrant Agreement and the
Underwriters' Purchase Option have been duly authorized and validly executed and
delivered by the Company, and are legal, valid and binding agreements of the
Company enforceable against the Company, in accordance with their respective
terms.
(e) INCORPORATION AND STANDING. Each of the Company and its
subsidiaries, is a corporation duly organized and validly existing in good
standing under the laws of the jurisdiction of its incorporation and is duly
registered or qualified to do business and is in good standing as a foreign
corporation in each jurisdiction that requires such qualification and in which
the failure to qualify could have a material adverse effect on the Company and
its subsidiaries, taken as a whole. Each of the Company and its subsidiaries has
full power and authority (corporate, governmental, regulatory and other) to own
and lease its properties and to conduct its business as described in the
Registration Statement and in the Prospectus and has corporate power and
authority (corporate, governmental, regulatory and other) to enter into this
Agreement and to issue the Underwriters' Purchase Option and the Purchase Option
Securities. The Company has no subsidiaries other than its subsidiaries
disclosed in the Registration Statement and in the Prospectus. A complete and
correct copy of the Articles of Incorporation of the Company and the Articles of
Incorporation or Memorandum of Association of each subsidiary, as the case may
be, each as certified by the Secretary of the State of Florida or such other
jurisdiction of incorporation, and the bylaws of the Company, and the bylaws, of
each subsidiary, as currently in effect, and as certified by the Secretary of
the Company and each subsidiary, respectively, has been delivered to you, and no
changes therein will be made subsequent to the date hereof and prior to the
Closing Date or the Optional Closing Date.
(f) NO DEFAULTS. Neither the Company nor any of its
subsidiaries is in material violation of its corporate charter or bylaws,
respectively, and, except as disclosed in the Registration Statement and the
Prospectus, in material default in any respect in the performance of any
material obligation, agreement, covenant or condition contained in any bond,
debenture, note or any other evidence of indebtedness or in any indenture,
mortgage, deed of trust or other agreement or instrument of any of them or by
which any of their respective property is bound, and there exists, and through
the Closing Date and the Optional Closing Date, if any, there shall exist no
condition which, with the passage of time or otherwise, would constitute a
default under any such agreement or instrument or result in the imposition of
any penalty or acceleration of any indebtedness. No other party (to the
knowledge of the Company after investigation) under any agreement or instrument
referred to in the immediately preceding sentence to which the Company or its
subsidiaries is a party or by which their respective property is bound is in
default in any material respect thereunder. The execution and delivery of this
Agreement, the Warrant
16
Agreement and the Purchase Option Agreement, the issue and sale of the
Securities, the Underwriters' Purchase Option and the Purchase Option Securities
and the compliance by the Company with all of the provisions of this Agreement,
the Warrant Agreement and the Purchase Option Agreement, will not conflict with
or result in a material breach or violation of any of the terms and provisions
of, or constitute a material default (or an event which with notice or lapse of
time, or both, would constitute a default) under, or result in the creation or
imposition of any material lien, charge or encumbrance upon any of the property
or assets of the Company or any of its subsidiaries pursuant to the terms of,
any material indenture, mortgage, deed of trust, loan agreement, lease or other
agreement or instrument to which the Company or any of its subsidiaries is a
party or by which the Company or any of its subsidiaries is bound or to which
any of the property or assets of the Company or any of its subsidiaries are
subject (and no consent under any thereof which has not been obtained is
required for any such action), nor will such action result in a material
violation of the provisions of the certificate of incorporation or bylaws of the
Company or any of its subsidiaries, or any statute or any order, rule or
regulation of any court or governmental agency or body having jurisdiction over
the Company or any of its subsidiaries or any of their respective property; and
no consent, approval, authorization, order, registration or qualification of or
with any court or any regulatory authority or other governmental body is
required for the issue and sale of the Securities, the Underwriters' Purchase
Option and Purchase Option Securities or in connection with the consummation of
the other transactions contemplated by this Agreement, the Warrant Agreement and
the Purchase Option Agreement, except such consents, approvals, authorizations,
registrations or qualifications as may be required under applicable Federal and
state securities or Blue Sky laws in connection with the purchase and
distribution of the Securities by you and the purchase of the Underwriters'
Purchase Option and Purchase Option Securities.
(g) CAPITAL STOCK. The authorized, issued and outstanding
capital stock of the Company and its subsidiaries conforms to the descriptions
thereof in the Registration Statement and in the Prospectus. The issued and
outstanding capital stock has been duly and validly authorized and issued, is
fully paid and nonassessable and is free of preemptive or, with the exception of
the Warrants, redemption rights. There are no outstanding options, warrants, or
other rights calling for the issuance of, and no commitment, plan or arrangement
to issue or to register, any share of capital stock of the Company or any
security convertible into or exchangeable for capital stock of the Company other
than as disclosed in the Registration Statement and the Prospectus. No holder of
any securities of the Company has the right to require registration of shares of
the Common Stock or other securities of the Company by reason of the filing of
the Registration Statement or otherwise, except as set forth in the Registration
Statement. The Company covenants and agrees that it will not amend any of its
stock option plans to increase the number of shares of Common Stock granted
under any of such option plans for a period two (2) years from the effective
date of the Registration Statement without the prior written consent of the
Representatives.
(h) LEGALITY OF SECURITIES. The Securities have been duly
authorized by the Company and conform to the descriptions thereof in the
Registration Statement and in the Prospectus. The Securities when sold and paid
for in accordance with the terms of this Agreement, will be duly and validly
issued, fully paid and nonassessable and free of preemptive and, with the
exception of the Warrants, redemption rights.
17
(i) UNDERWRITERS' PURCHASE OPTION. The Underwriters' Purchase
Option and the Purchase Option Securities conform to the description thereof in
the Registration Statement and in the Prospectus and, when sold to and paid for
by you, will be duly authorized, will be validly issued and will be the valid
and binding obligation of the Company. The Underwriters' Purchase Option and
Purchase Option Securities have been duly and validly authorized and reserved
for issuance upon exercise of the Underwriters' Purchase Option and the
Underwriters' Warrant and, when issued upon such exercise in accordance with
terms at the price therein provided, will be validly issued, fully paid and
nonassessable and free of preemptive and redemption rights.
(j) PROPERTY. The Company and each of its subsidiaries has
good and marketable title to all properties and assets described in the Final
Prospectus as being owned by it (including securities) that are material to
their respective businesses free and clear of all material liens, charges,
encumbrances or restrictions of every kind and nature, except such as are
disclosed in the Registration Statement and in the Prospectus and except for
taxes not yet due, materialmen's, workmen's and other similar liens incurred in
the ordinary course of business which, individually or in the aggregate, do not
have a materially adverse effect on the value or use of such properties or
assets in the hands of the Company or any of its subsidiaries taken as a whole
and any other liens which, individually or in the aggregate, are not material to
the Company and its subsidiaries taken as a whole. The Company and each of its
subsidiaries owns or leases all such properties, real, personal and mixed,
tangible and intangible, as are necessary to carry on its operations as
heretofore conducted and, except as otherwise stated in the Registration
Statement and in the Prospectus, as proposed to be conducted, as set forth in
the Registration Statement and in the Prospectus.
(k) LITIGATION. Except as set forth in the Registration
Statement and in the Prospectus, there is not now pending or, to the knowledge
of the Company, threatened (i) any action, suit or proceeding to which the
Company or any of its subsidiaries or any of their respective officers or
directors is or will be a party or of which the business or property of the
Company or any of its subsidiaries is or will be the subject before or by any
court or governmental agency or body which might materially adversely affect the
condition (financial or other), business or prospects of the Company or any of
its subsidiaries, or might materially adversely affect the properties or assets
of the Company or any of its subsidiaries taken as a whole, (ii) any actions,
suits or proceedings related to environmental matters or related to
discrimination on the basis of age, sex, religion, race or national origin
except as disclosed in the Registration Statement and the Prospectus, (iii) any
existing or threatened labor disturbance by the employees of the Company or any
of its subsidiaries which might be expected to materially adversely affect the
conduct of the business, property, operations, financial condition or earnings
of the Company or any of its subsidiaries, or (iv) any material contingent
liability.
(l) TAX RETURN. Except as set forth in the Registration
Statement and in the Prospectus, the Company and each of its subsidiaries,
has filed, or has obtained currently effective extensions for, all necessary
federal, state, municipal and foreign income and franchise tax returns and has
paid all taxes shown as due thereon (or has obtained currently effective
18
extensions); and, except as set forth in the Registration Statement and in the
Prospectus, neither the Company nor any of its subsidiaries has knowledge of any
tax deficiency which has been or might be asserted against the Company or any of
its subsidiaries which would materially adversely affect the business or
operations of the Company and any of its subsidiaries taken as a whole.
(m) PRIOR SALES. No securities of the Company have been sold
by the Company or by, or on behalf of, or for the benefit of the Company within
three years prior to the date hereof, except as set forth in the Registration
Statement or Prospectus.
(n) AUTHORIZATIONS. Except as disclosed in the Registration
Statement and the Prospectus, the Company and each of its subsidiaries have such
franchises, licenses, permits, approvals and other governmental authorizations
required for the present conduct of its business, such franchises, licenses,
permits, approvals and other governmental authorizations are in full force and
effect and the Company and its subsidiaries are in material compliance therewith
and the Company and its subsidiaries have not received notice of conflict with
the asserted rights of others in respect thereof. Except as set forth in the
Registration Statement and in the Prospectus, (i) the expiration of any material
contract, agreement, franchise, license, permit, approval or other governmental
authorization would not materially adversely affect the operation of the Company
or its subsidiaries, and (ii) none of the activities, businesses or properties
of the Company or its subsidiaries is in material violation of, or could cause
the Company or its subsidiaries to violate, any law, rule, regulation, or order
of the United States, any state, county or other jurisdiction, or of any agency
thereof.
(o) EXHIBITS. There are no material contracts, agreements or
other documents required to be described in the Registration Statement or in the
Prospectus or to be filed as exhibits to the Registration Statement by the
Securities Act which have not been described or filed as required, and neither
the Company nor its subsidiaries is in material violation of, and no material
default exists in the performance, observance or fulfillment of, any material
obligation, agreement, covenant or condition contained in any of such contracts,
agreements or documents except as disclosed in the Registration Statement and
the Prospectus.
(p) FINDER OR BROKER. The Company has not retained or dealt
with any broker or finder with respect to the transactions contemplated hereby,
and the Company knows of no outstanding claims for services in the nature of a
finder's fee or origination fee with respect to the sale of the Securities. The
Company will indemnify and hold harmless the Underwriters with respect to any
claim for a finder's fee by any party claiming to be owed such fee based on
contacts, conversations or arrangements with the Company. Furthermore, as set
forth in the Registration Statement and in the Prospectus, the Company has no
management or financial consulting agreement with anyone. Except as set forth in
the Registration Statement and in the Prospectus or otherwise disclosed to you
in writing prior to the date hereof, no promoter, officer, director or five
percent or greater stockholder of the Company is, directly or indirectly,
associated with an NASD member broker/dealer.
19
(q) INTERNAL ACCOUNTING CONTROLS. The books, records and
accounts of the Company and its subsidiaries, if any, accurately and fairly
reflect, in reasonable detail, the transactions and dispositions of the assets
of the Company and its subsidiaries, as the case may be. The system of internal
accounting controls maintained by the Company and its subsidiaries is 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 (a) to permit preparation of financial
statements in conformity with generally accepted accounting principles and (b)
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
difference.
(r) PATENTS. The Company and each of its subsidiaries have
such proprietary know-how, and such patents and governmental or other
authorizations as currently are required for their respective businesses and the
Company and each of its subsidiaries are, except as set forth in the
Registration Statement, in all respects in compliance with such patents and
governmental or other authorizations. Except as set forth in the Prospectus, the
services performed or products sold by the Company or its subsidiaries do not
violate or infringe any patent or governmental or other authorizations held or
owned by any third party. Neither the Company nor its subsidiaries has received
from or on behalf of any third party, any notice of violation or infringement of
or conflict with the rights of such third party with respect to any such patents
or governmental or other authorizations owned or used by the Company or its
subsidiaries.
(s) 1940 ACT MATTERS. Neither the Company nor any of its
subsidiaries will be operated so as to become an "investment company" or a
person "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
(t) STABILIZATION. Neither the Company, its subsidiaries, nor
any of their respective officers, directors or affiliates (as defined under the
Securities Act) have taken, directly or indirectly, any action to cause or
result in, or which has constituted, or might reasonably be expected to
constitute, the stabilization or manipulation of the price of the Common Stock
to facilitate the sale or the resale thereof, within the meaning of the
Securities Act or the Exchange Act.
(u) REASON FOR SALE. The sale of the Securities by the Company
pursuant to this Agreement is not prompted by any information concerning the
Company which is not set forth in the Registration Statement.
(v) EMPLOYMENT AGREEMENTS. The employment agreements between
the Company and its officers described in the Registration Statement are valid,
binding and enforceable obligations upon the respective parties thereto in
accordance with their respective terms, subject to the effect of bankruptcy or
similar proceedings and the effect and application of general principles of
equity.
20
(w) LIQUIDATION. The Company's articles of incorporation
provide that (A) any liquidation of the Company, or (B) any business combination
in which the Company is not the surviving corporation or any sale of all or
substantially all of its assets (which combination or sale occurs during the
five-year period immediately following the Closing Date): (i) must be approved
by a vote of the holders of a majority of the outstanding shares of the capital
stock entitled to vote; and (ii) all "affiliates," as such term is defined in
Rule 144 promulgated under the Securities Act, of the Company on the Closing
Date shall agree to vote, during the two-year period immediately following the
closing date of the Public Offering, all shares of voting capital stock of the
Company owned by them (or over which they have the power to direct the vote) in
the same proportion as the votes cast by non-affiliates voting shares of the
same class or series, with respect to the above-referenced matters on which a
vote of stockholders is taken.
(x) ADDITIONAL REPRESENTATIONS. (i) no director, officer, or
key employee of the Company has been convicted of any felony, experienced a
personal bankruptcy, or been an officer, director, or key employee of any
company that during their tenure with such company experienced any bankruptcy
other than as disclosed to the Representatives in writing and disclosed in the
Registration Statement as required, or had any trustee, receiver, or conservator
appointed with respect to its business or assets; (ii) prior to the Closing
Date, the Company has not repaid (or agree to repay), other than in the ordinary
course of business or as disclosed in the Registration Statement, any
indebtedness to any of its shareholders (or incur any indebtedness with any
other lender, any part of the proceeds of which is to be used to repay
indebtedness to any of its shareholders) unless the terms thereof have been
approved in advance by the Underwriters, nor has the Company make any other
extraordinary distributions or payments to its shareholders (other than
distributions to Messrs. ▇▇▇▇▇ and ▇▇▇▇▇▇▇ in the amount of the income tax
withholding payments for the Company's income payable by them due to the
Company's status as an S corporation as set forth in the Registration
Statement); and (iii) no more than an aggregate of $200,000 may be paid from the
proceeds of the offering to Messrs. ▇▇▇▇▇ and ▇▇▇▇▇▇▇ in satisfaction of the
Principal Stockholder's Notes described in the Registration Statement, provided,
however, that if the Underwriters exercise, in full, the over-allotment option,
the Company may prepay an additional $100,000 in the aggregate, toward such
notes.
7. INDEMNIFICATION.
(a) BY COMPANY. The Company agrees to indemnify and hold
harmless you and each person, if any, who controls you within the meaning of
Section 15 of the Securities Act or Section 20(a) of the Exchange Act, from and
against any and all losses, liabilities, claims, damages and expenses (including
but not limited to reasonable attorneys' fees and any and all reasonable
expenses incurred in investigating, preparing or defending against any claim
whatsoever, and any and all amounts paid in settlement of any claim or
litigation), joint or several, to which you or they or any of them may become
subject under the Securities Act, the Exchange Act or otherwise, insofar as such
losses, liabilities, claims, damages or expenses (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of a material fact contained in the Registration Statement, as originally filed
or any
21
amendment thereof, or any related preliminary prospectus or the Prospectus, or
in any supplement thereto or amendment thereof, or in any blue sky application
or other document executed by the Company specifically for that purpose or based
upon written information furnished by the Company filed in any state or other
jurisdiction in order to qualify any or all of the Securities under the
securities laws thereof (any such application, document or information being
hereinafter called a "Blue Sky Application") or arise out of or are based upon
any 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 any
material respect, or arise out of or are based upon any failure of the Company
to comply with any provision of this Underwriting Agreement resulting in a claim
or loss to the Underwriters. Notwithstanding the preceding sentence, the Company
will not be liable in any such case to the extent, but only to the extent that,
any such loss, liability, claim, damage or expense arises out of or is based
upon any such untrue statement or alleged untrue statement or omission or
alleged omission made therein in reliance upon and in conformity with written
information furnished to the Company by or on behalf of you expressly for use
therein. This indemnity agreement will be in addition to any liability which the
Company may otherwise have, including under this Agreement. The Company agrees
to pay any reasonable legal or other expenses for which it is liable under this
subsection from time to time (but not more frequently than monthly) within 30
days after its receipt of a ▇▇▇▇ therefor; and further provided, however, that
the foregoing provisions are subject to the condition that, insofar as they
relate to any untrue statement, alleged untrue statement, omission or alleged
omission made in any Preliminary Prospectus but eliminated or remedied in the
Prospectus, such indemnity provision shall not inure to you or any person who
controls you within the meaning of Section 15 of the Securities Act or Section
20(a) of the Exchange Act if a copy of the Prospectus was not sent or given to
such person with or prior to the written confirmation of sale of such Securities
to such person. This indemnity agreement will be in addition to any liability
which the Company may otherwise have.
(b) BY UNDERWRITERS. You agree to indemnify and hold harmless
the Company, each of the officers of the Company who shall have signed the
Registration Statement and each other person, if any, who controls the Company
within the meaning of Section 15 of the Securities Act or Section 20(a) of the
Exchange Act, from and against any and all losses, liabilities, claims, damages
and reasonable expenses whatsoever (including but not limited to attorneys' fees
and any and all reasonable expenses whatsoever incurred in investigating,
preparing or defending against any litigation, commenced or threatened, or any
claim whatsoever, and any and all amounts paid in settlement of any claim or
litigation), joint or several, to which they or any of them may become subject
under the Securities Act, the Exchange Act or otherwise, insofar as such losses,
liabilities, claims, damages or expenses (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement, as originally filed or
any amendment thereof, or any related preliminary prospectus or the Prospectus,
or in any amendment thereof or supplement thereto, or in any Blue Sky
Application, 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 any such loss, liability, claim, damage or expense arises
out of or
22
is based upon any such untrue statement or alleged untrue statement or omission
or alleged omission made therein in reliance upon and in conformity with written
information furnished to the Company by you expressly for use therein; PROVIDED,
HOWEVER, that in no case shall you be liable or responsible for any amount in
excess of the underwriting discounts and commissions received by you, as set
forth on the cover page of the Prospectus. You agree to pay any legal or other
expenses for which you are liable under this subsection (b) from time to time
(but not more frequently than monthly) within 30 days after receipt of a ▇▇▇▇
therefor. This indemnity agreement will be in addition to any liability which
you may otherwise have.
(c) PROCEDURES IN CASE OF INDEMNIFICATION. Promptly after
receipt by an indemnified party under subsection (a) or (b) above of notice of
the commencement of any action or proceeding (including any governmental
investigation), such indemnified party shall, if a claim in respect thereof is
to be made against the indemnifying party under such subsection, notify each
party against whom indemnification is to be sought in writing of the
commencement thereof (but the failure so to notify an indemnifying party shall
not relieve it from any liability which it may have under this Section 7 except
to the extent that it has been prejudiced in any material respect by such
failure or from any liability which it may have otherwise). In case any such
action is brought against any indemnified party, and it notifies an indemnifying
party of the commencement thereof, the indemnifying party shall assume the
defense thereof, including the employment of counsel reasonably satisfactory to
the indemnified party and the payment of all expenses. Notwithstanding the
foregoing, the indemnified party or parties shall have the right to employ its
or their own counsel in any such case, but the fees and expenses of such counsel
shall be at the expense of such indemnified party or parties unless (i) the
employment of such counsel shall have been authorized in writing by one of the
indemnifying parties in connection with the defense of such action, (ii) the
indemnifying parties shall not have employed counsel reasonably satisfactory to
the indemnified party to have charge of the defense of such action within a
reasonable time after notice of commencement of the action, or (iii) such
indemnified party or parties shall have reasonably concluded and have been so
advised in a written opinion from counsel that there may be defenses available
to it or them which are different from or additional to those available to one
or all of the indemnifying parties (in which case the indemnifying parties shall
not have the right to direct the defense of such action on behalf of the
indemnified party or parties), in any of which events such fees and expenses
shall be borne by the indemnifying parties. Anything in this subsection to the
contrary notwithstanding, an indemnifying party shall not be liable for any
settlement of any claim or action effected without its written consent;
PROVIDED, HOWEVER, that such consent was not unreasonably withheld.
(d) CONTRIBUTION. In order to provide for contribution in
circumstances in which the indemnification provided for in Section 7(a) and (b)
hereof is for any reason held to be unavailable from the Company, or you, or is
insufficient to hold harmless a party indemnified thereunder, in lieu of
indemnifying such indemnified party, the Company, and you shall contribute to
the aggregate losses, claims, damages, liabilities and reasonable expenses of
the nature contemplated by such indemnification provisions (including any
investigation, legal and other reasonable expenses incurred in connection with,
and any amount paid in settlement of, any action, suit or proceeding or any
claims asserted, but after deducting in the case of losses,
23
claims, damages, liabilities and reasonable expenses suffered by the Company or
you any contribution received by the Company or you from persons who may also be
liable for contribution, including persons who control the Company or you within
the meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange
Act, officers of the Company who signed the Registration Statement and directors
of the Company) to which the Company or you may be subject, in such proportions
as is appropriate to reflect the relative benefits received by the Company and
by you from the offering of the Securities or, if such allocation is not
permitted by applicable law or indemnification is not available as a result of
the indemnifying party not having received notice as provided in Section 7(d)
hereof in such proportion as is appropriate to reflect not only the relative
benefits referred to above but also the relative fault of the Company and you in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative benefits received by the Company and by
you shall be deemed to be in the same proportion as (a) the total proceeds from
the offering (before deducting expenses) received by the Company bear to (b) the
total underwriting discounts and commissions received by you in each case as set
forth in the table on the cover page of the Prospectus. The relative fault of
the Company and of you shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or by you or any agent expressly authorized by you to
supply such information and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and you agree that it would not be just and equitable if
contribution pursuant to this Section 7(d) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to above. Notwithstanding the provisions
of this Section 7(d), (i) in no case shall you be liable or responsible for any
amount in excess of the underwriting discount applicable to the Securities
purchased hereunder and (ii) no person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 7(e), each person, if any, who
controls an underwriter within the meaning of Section 15 of the Securities Act
or Section 20(a) of the Exchange Act shall have the same rights to contribution
as you, and each person, if any, who controls the Company within the meaning of
Section 15 of the Securities Act or Section 20(a) of the Exchange Act, each
officer of the Company who shall have signed the Registration Statement and each
director of the Company shall have the same rights to contribution as the
Company, subject in each case to clauses (i) and (ii) of this Section 7(e). Any
party entitled to contribution will, promptly after receipt of notice of
commencement of any action, suit or proceeding against such party in respect of
which a claim for contribution may be made against another party or parties
under this Section 7(e), notify such party or parties from whom contribution may
be sought, but the omission to so notify such party or parties shall not relieve
the party or parties from whom contribution may be sought from any obligation it
or they may have under Section 7(e) or otherwise. No party shall be liable for
contribution with respect to any action or claim settled without its consent;
PROVIDED, HOWEVER, that such consent was not unreasonably withheld. The
indemnity and contribution agreements contained in this Agreement shall remain
operative and in full force and effect regardless of (A) any investigation
24
made by or on behalf of you or any person controlling you or by or on behalf of
the Company, (B) acceptance of any of the Securities and payment therefore or
(C) any termination of this Agreement. A successor to the Company, its directors
or officers or any person controlling the Company or to the Underwriter, shall
be entitled to the benefits of the indemnity, contribution, and reimbursement
agreements contained in this Section 7.
8. CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS. Your obligation to
purchase and pay for the Firm Securities on the Closing Date shall be subject to
the accuracy of and compliance with the representations and the warranties of
the Company herein contained and in each certificate and document contemplated
to be delivered to you hereunder as of the date hereof and the Closing Date, to
the performance by the Company of its obligations herein contained and to the
following additional terms and conditions:
(a) EFFECTIVE REGISTRATION STATEMENT. The Registration
Statement shall have become effective not later than 5:00 P.M., Miami time, on
the date of this Agreement, or at such later time or on such later date as you
may agree to in writing and any and all filings required by Rule 424 and Rule
430A of the Rules and Regulations shall have been made. At or prior to the
Closing, no stop order suspending the effectiveness of the Registration
Statement or the qualification or registration of the Securities under the Blue
Sky laws of any jurisdiction (whether or not a jurisdiction which you shall have
specified) shall have been issued and no proceeding for that purpose shall have
been initiated or shall be threatened by the Commission or the authorities of
any such jurisdiction. Any request for additional information on the part of the
Commission or any such authorities shall have been complied with to the
satisfaction of the Commission or such authorities and counsel for you. The
NASD, upon review of the terms of the public offering of the Securities, shall
not have objected to such offering, such terms, or your participation in the
same. After the date hereof no amendment or supplement shall have been filed to
the Registration Statement or the Prospectus without your prior written consent.
(b) ACCURACY OF REGISTRATION STATEMENT. No person shall have
discovered and advised the Company prior to the Closing Date that the
Registration Statement or Prospectus or any amendment or supplement thereto
contains an untrue statement of material fact which, in your opinion, is
material, or that the Registration Statement or any amendment or supplement
thereto omits to state a fact which, in your opinion after consultation with
legal counsel, is material and is required to be stated therein or is necessary
to make the statements therein not misleading or that the Prospectus or any
amendment or supplement thereto omits to state a fact which, in the opinion of
such counsel, is material and is required to be stated therein or is necessary
in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
(c) LITIGATION. Between the time of the execution and delivery
of this Agreement and the Closing, there shall be no material litigation
instituted against the Company, any of its subsidiaries or any of their
respective officers or directors, and between such dates there shall be no
proceeding instituted or threatened against the Company, any of its subsidiaries
or any of their respective officers or directors before or by any Federal,
state, county or local
25
commission, regulatory body, administrative agency or other governmental body,
domestic or foreign, in which litigation or proceeding an unfavorable ruling,
decision or finding could materially adversely affect the Company, any of its
subsidiaries or their respective businesses, business prospects, properties,
financial conditions or results of operations.
(d) REVIEW BY UNDERWRITERS' COUNSEL. The authorization and
issuance of the Securities, the sale and delivery thereof, the Registration
Statement, the Prospectus and all other documents and corporate proceedings
incident thereto shall be satisfactory in all material respects to you and your
counsel, and your counsel shall be furnished on the Closing Date with such
documents and opinions as they may reasonably require for the purpose of
enabling them to pass upon the matters referred to in this Section 8(d).
(e) OPINION OF LEGAL COUNSEL. You shall have received an
opinion dated the effective date of the Registration Statement, and an updated
version of such opinion dated the Closing Date, satisfactory in form and
substance to you and your counsel, from Akerman, Senterfitt & ▇▇▇▇▇▇, P.A.,
counsel for the Company, to the effect that:
(i) Each of the Company and its subsidiaries is a
corporation duly organized, validly existing, in good standing under
the laws of the jurisdiction of its respective incorporation and is
registered or qualified in good standing to do business as a foreign
corporation in each jurisdiction wherein the Company and its
subsidiaries own or lease any properties or conduct any business and in
which the failure to so qualify, could, in the aggregate, have a
material adverse effect on the business, properties or results of
operations of the Company and its subsidiaries taken as a whole. To
such counsel's knowledge after investigation, each of the Company and
its subsidiaries has corporate power and authority to own and lease its
properties and to conduct its business as described in the Registration
Statement and the Prospectus. The Company has no subsidiaries to the
knowledge of such counsel after investigation other than those
disclosed in the Registration Statement and the Prospectus.
(ii) The Registration Statement has become effective
under the Securities Act, and, (a) no stop order suspending the
effectiveness of the Registration Statement has been issued and no
proceedings for that purpose have been instituted or are, to the
knowledge of counsel after inquiry, threatened, pending or contemplated
under the Securities Act, except as may be disclosed in the Prospectus;
the Registration Statement and the Prospectus and each amendment or
supplement thereto (except for the financial statements, schedules and
other financial and statistical data included therein, as to which such
counsel need express no opinion) comply as to form in all material
respects with the requirements of the Securities Act; and (b) such
counsel has participated in the preparation of the Registration
Statement and the Prospectus and such counsel has no reason to believe
that either the Registration Statement, or any such amendment thereto,
at the time such Registration Statement or amendment became effective,
contained any untrue statement of a material fact or omitted to state
any material fact required to be stated therein or necessary to make
the statements therein not misleading,
26
or that the Prospectus, as of its date, or any supplement thereto as of
its date, contained any untrue statement of a material fact or omitted
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.
(iii) The Company has all requisite corporate power and
authority to enter into this Agreement and this Agreement has been
authorized, executed, and delivered by the Company and is a legal,
valid and binding agreement of the Company enforceable against the
Company in accordance with its terms, except (a) that this Agreement
may be subject to bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to creditors'
rights, (b) that the remedy of specific performance and injunctive and
other forms of equitable relief may be subject to equitable defenses
and to the discretion of the court before which any proceeding therefor
may be brought, and (c) as rights to indemnity and contribution
hereunder may be limited by federal or state securities laws or the
public policy underlying such laws.
(iv) The authorized, issued and outstanding capital
stock of the Company and all other outstanding securities of the
Company and its subsidiaries conform to the descriptions thereof in the
Registration Statement and in the Prospectus under the section entitled
"Description of Securities." The issued and outstanding capital stock,
prior to the issuance of the Securities sold by the Company hereunder,
has been authorized and validly issued, is fully paid and nonassessable
and is free of preemptive rights except as described in the Prospectus.
To the knowledge of such counsel after investigation, there are no
outstanding options, warrants, or other rights calling for the issuance
of, and no commitment, plan or arrangement to issue or register, any
share of capital stock of the Company or any security convertible into
or exchangeable for capital stock of the Company other than as
disclosed in the Registration Statement and the Prospectus.
(v) The Securities to be issued and sold to the
Underwriters by the Company have been authorized by the Company and
will conform in all material respects to the description thereof in the
Registration Statement and in the Prospectus. The Firm Securities, when
sold and fully paid for in accordance with the terms of this Agreement,
will be validly issued, fully paid and nonassessable and free of
preemptive rights. Such opinion delivered at the Closing Date shall
state that each of the Firm Securities is validly issued, fully paid
and non-assessable and not subject to preemptive rights.
(vi) The Purchase Option Agreement conforms to the
description thereof in the Registration Statement and in the Prospectus
and has been authorized, and when issued will be validly issued and
will be a valid and binding obligation of the Company. The
Underwriters' Purchase Option and the Purchase Option Securities have
been validly authorized and reserved for issuance upon exercise of the
Underwriters' Purchase Option and the Underwriters' Warrants and, when
issued upon such exercise
27
in accordance with the terms of the Purchase Option Agreement at the
price therein provided, will be validly issued, fully paid and
non-assessable and not subject to preemptive rights.
(vii) The certificates used to evidence the Securities,
the Underwriters' Purchase Option and the Purchase Option Securities
are each in due and proper form as required by the laws of the State of
Florida.
(viii) Neither the Company nor any of its subsidiaries
is in material violation of its corporate charter or bylaws,
respectively, or, to the knowledge of counsel after investigation, any
franchise, license, permit, judgment, decree, order, statute,
regulation, rule or ordinance of any court or administrative agency,
arbitration panel or authority applicable to the Company or any of its
subsidiaries except as described in the Prospectus, where the
consequences of any such violation would be material to the Company or
any of its subsidiaries. To the knowledge of such counsel after
investigation, except as described in the Prospectus neither the
Company nor any of its subsidiaries is in default in any material
respect in the performance of any material obligation, agreement,
lease, covenant or condition contained in any bond, debenture, note or
any other evidence of indebtedness or in any indenture, mortgage, deed
of trust or other material agreement or instrument (collectively, the
"Material Agreements") of which counsel after investigation, is aware
to which the Company or any of its subsidiaries, or by which the
Company's or any of its subsidiaries' properties are bound where the
consequences of any such default would be material and adverse to the
Company or any of its subsidiaries. To such counsel's knowledge after
investigation, there exists no condition which, with the passage of
time or otherwise, would constitute a material default under any
Material Agreement or instrument or result in the imposition of any
material penalty or acceleration of any material indebtedness.
(ix) The execution and delivery of this Agreement, the
Purchase Option Agreement, the Warrant Agreement, and the Financial
Advisory Agreement, the issuance and sale of the Securities, the
Underwriters' Purchase Option, and the Purchase Option Securities and
the compliance by the Company with all of the provisions of this
Agreement, the Purchase Option Agreement, the Warrant Agreement, and
the Financial Advisory Agreement, will not conflict with or result in a
breach or violation of any of the terms and provisions of, or
constitute a default (or an event which with notice or lapse of time,
or both, would constitute a default) under, or result in the creation
or imposition of any lien, charge or encumbrance upon any of the
property or assets of the Company or its subsidiaries pursuant to the
terms of any Material Agreement of the Company or any of its
subsidiaries or by which any of the Company's or its subsidiaries'
properties is bound, known to such counsel after investigation. To such
counsel's knowledge after investigation, there exists no condition
which, with the passage of time or otherwise, would constitute a
default under any such agreement or instrument or result in the
imposition of any penalty or acceleration of any such indebtedness,
where the consequences of any such default would be material and
adverse to the Company or any
28
of its subsidiaries, nor will such action result in a violation of the
provisions of the corporate charter or bylaws of the Company or any of
its subsidiaries, or any statute or any order, rule or regulation of
any court or governmental agency or body having jurisdiction over the
Company or any of its subsidiaries or any of its or their properties,
where the consequences of any such violation would be material and
adverse to the Company and its subsidiaries. No consent, approval,
authorization, order, registration or qualification of or with any
court or any regulatory authority or other governmental body is
required for the issue and sale of the Securities, the Underwriters'
Purchase Option or the Purchase Option Securities or the consummation
of the other transactions contemplated by this Agreement, the Purchase
Option Agreement and the Warrant Agreement except the registration of
the Securities and, the Purchase Option Securities under the Securities
Act, and such consents, approvals, authorizations, registrations or
qualifications as may be required under state securities or Blue Sky
laws in connection with the purchase and distribution of the Securities
by you and the purchase of the Underwriters' Purchase Option by you.
(x) To the knowledge of such counsel after
investigation, the Company and each of its subsidiaries has such
licenses, registrations, permits, approvals, qualifications and
certificates of authority from the appropriate regulatory authorities
as are necessary to transact its business as described in the
Registration Statement and in the Prospectus in the jurisdictions in
which the Company and each of its subsidiaries transacts its business
or owns or leases property, and in which the failure to have such
licenses, registrations, permits, approvals, qualifications and
certificates could have a material adverse effect on the business,
properties or results of operation of the Company and its subsidiaries
taken as a whole.
(xi) To the knowledge of such counsel after
investigation, except as disclosed in the Registration Statement and in
the Prospectus, there is no pending or threatened material action, suit
or proceeding before or by any court or governmental agency or body or
arbitration panel, to which the Company or any of its subsidiaries or
any of their respective officers or directors is a party, or which any
property of the Company or any of its subsidiaries is subject, which
might result in a material adverse change in the business, financial
condition or results of operations or materially affect the properties
or assets of the Company or any of its subsidiaries taken as a whole.
(xii) Such counsel has reviewed all contracts referred
to in the Registration Statement and the Prospectus and such contracts
conform in all material respects to their descriptions therein. To the
knowledge of such counsel after investigation, no contracts or
documents of a character required to be described in the Registration
Statement or the Prospectus or to be filed as an exhibit to the
Registration Statement have not been so described or filed. Such
counsel does not know of any statutes or regulations or pending or
threatened legal or governmental proceedings required to be described
in the Prospectus which are not described as required.
29
(xiii) To the knowledge of such counsel after
investigation, there are no holders of securities of the Company having
rights to the registration of shares of Common Stock or other
securities because of the filing of the Registration Statement by the
Company, except as disclosed in the Registration Statement and the
Prospectus.
(xiv) The sale of securities by the Company and/or its
subsidiaries described in Item 26, Part II of the Registration
Statement did not require registration under the Securities Act or any
state securities laws.
In giving such opinion, such counsel may rely as to
matters of fact upon statements and certifications of officers of the Company or
public officials as to matters of fact of which the maker of such certificate
has knowledge, and as to matters of law of jurisdictions other than Florida,
such counsel may rely on opinions of local counsel acceptable to you, copies of
which opinions shall be attached to the said opinion, provided, however, that
such counsel may not rely on an opinion if he has actual knowledge that such
opinion is not correct or knows that the facts or law on which the opinion of
local counsel is based are not correct.
(f) PRESIDENT'S CERTIFICATE. The Company shall have
furnished to you on the Closing Date a certificate of its President, or other
principal executive officer of the Company dated as of the Closing Date, to the
effect that:
(i) No stop order suspending the effectiveness of the
Registration Statement has been issued, and no proceedings for such
purpose have been commenced or are, to the knowledge of each signer of
such certificate, threatened or contemplated by the Commission; no stop
order suspending the qualification or registration of any of the
Securities under the Blue Sky laws of any jurisdiction (whether or not
a jurisdiction you shall have specified) has been issued, and no
material proceedings for such purpose have been commenced or are, to
the knowledge of each signer of such certificate after reasonable
inquiry, threatened or contemplated by any jurisdiction; and the
conditions, separately set forth in such certificate, contained in
Section 8 hereof have been complied with in all material respects.
(ii) The respective signers and each other member of
the Company's Board of Directors have each read the Registration
Statement and Prospectus and any amendments and supplements thereto,
and the Registration Statement and the Prospectus and any amendments
and supplements thereto and all statements contained therein are true
and correct in all material respects, and neither the Registration
Statement nor Prospectus nor any amendment or supplement thereto
includes any untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading and, since the effective date of the
Registration Statement, they are not aware of any event required to be
set forth in an amendment to the Registration Statement or a supplement
to the Prospectus which has not been so set forth.
30
(iii) Except as reflected in the Registration Statement
and Prospectus or any amendment or supplement thereto, since the
respective dates as of which information is given in the Registration
Statement and Prospectus or any amendment or supplement thereto and
prior to the date of such certificate, (a) there has not been any
material adverse change, financial or otherwise, in the affairs or
condition of the Company and of its subsidiaries taken as a whole, and
(b) the Company has not incurred any material liabilities or
obligations, direct or contingent, or entered into any material
transactions, otherwise than in the ordinary course of business.
(iv) There are no legal proceedings pending or, to the
knowledge of the Company after reasonable inquiry, threatened against
the Company or any of its subsidiaries, of a character affecting the
validity of this Agreement or required to be disclosed in the
Prospectus which are not disclosed therein; there are no material
transactions or contracts which are required to be summarized therein
which are not so summarized; and there are no material contracts or
documents required to be filed as exhibits to the Registration
Statement which are not so filed.
(v) Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus,
no dividends or distribution whatever have been declared and/or paid on
or with respect to any securities of the Company.
(vi) Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus,
the Company has not sustained any material loss or damage to its
property, whether or not insured.
(vii) At and as of the Closing Date, the
representations and warranties contained in Section 6 of this Agreement
are true and correct in all material respects; the Company has complied
with all the agreements and has satisfied all the conditions on its
part to be performed or satisfied at or prior to the Closing Date, and
the matters set forth in Section 8 of this Agreement are true and
correct as therein set forth.
(g) CHIEF FINANCIAL OFFICER'S CERTIFICATE. The Company shall
have furnished to you on the Closing Date a certificate of its Chief
Financial Officer, or other principal executive financial officer or
accounting officer of the Company, dated as of the Closing Date, to the
effect that:
(i) To the knowledge of such officer after reasonable
inquiry no stop order suspending the effectiveness of the Registration
Statement has been issued, and no proceedings for such purpose have
been commenced or are, to the knowledge of each signer of such
certificate, threatened or contemplated by the Commission; no stop
order suspending the qualification or registration of any of the
Securities under the Blue Sky laws of any jurisdiction (whether or not
a jurisdiction you shall have specified) has been issued, and no
proceedings for such purpose have been commenced or are, to the knowl-
31
edge of each signer of such certificate, threatened or contemplated by
any jurisdiction; and the conditions, separately set forth in such
certificate, contained in subsection 8 hereof have been complied with.
(ii) The Prospectus and any amendments and supplements
thereto and all statements contained therein are true and correct, and
to his knowledge, after reasonable inquiry, neither the Registration
Statement nor Prospectus nor any amendment or supplement thereto
includes any untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading and, since the effective date of the
Registration Statement, he is not aware of any event required to be set
forth in an amendment to the Registration Statement or a supplement to
the Prospectus which has not been so set forth.
(iii) Except as reflected in the Registration Statement
and Prospectus or any amendment or supplement thereto, since the
respective dates as of which information is given in the Registration
Statement and Prospectus or any amendment or supplement thereto and
prior to the date of such certificate, (a) there has not been any
material adverse change, financial or otherwise, in the affairs or
condition of the Company or any of its subsidiaries taken as a whole,
and (b) the Company has not incurred any material liabilities or
obligations, direct or contingent, or entered into any material
transactions, otherwise than in the ordinary course of business.
(iv) There are no material legal proceedings pending or
to his knowledge after reasonable inquiry, threatened against the
Company or any of its subsidiaries, of a character affecting the
validity of this Agreement or required to be disclosed in the
Prospectus which are not disclosed therein; there are no transactions
or contracts which are required to be summarized therein which are not
so summarized; and there are no material contracts or documents
required to be filed as exhibits to the Registration Statement which
are not so filed.
(v) Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus,
no dividends or distribution whatever have been declared and/or paid on
or with respect to any securities of the Company.
(vi) Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus,
the Company has not sustained any material loss or damage to its
property, whether or not insured.
(vii) At and as of the Closing Date, to his knowledge
after reasonable inquiry, the representations and warranties contained
in Section 6 of this Agreement are true and correct; the Company has
complied with all the agreements and has satisfied all the conditions
on its part to be performed or satisfied at or prior to the Closing
Date, and
32
the matters set forth in Section 8 of this Agreement are true and
correct as therein set forth.
(h) ACCOUNTANT'S LETTER. You shall have received from the
independent certified public accountants that audited the financial statements
of the Company included in the Registration Statement, at least two letters each
addressed to you, substantially in the form heretofore approved by you, one
dated the effective date of the Registration Statement and the second, the
Closing Date.
(i) UNDERWRITERS' PURCHASE OPTION. The Company shall have
executed the Purchase Option Agreement and shall have delivered such properly
executed Underwriters' Option Certificates to you simultaneously with the
closing of the sale of the Firm Securities.
(j) LOCK-UP AGREEMENTS. You shall have received the
executed "lock-up" letters described in Section 5(h) of this Agreement.
(k) EMPLOYMENT AGREEMENTS. Prior to the effective date of the
Registration Statement, the Company will enter into and deliver to the
Underwriters employment agreements with ▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇, which
employment agreements will be subject to the Underwriters' approval.
(l) NASDAQ LISTING. The Common Stock and Warrants must
be qualified for listing on the Nasdaq SmallCap Market on the effective date of
the Registration Statement.
(m) BLUE SKY QUALIFICATION. The Securities shall be
qualified in such states as determined under Section 5(e) above and each
qualification shall be in effect and not subject to an stop order or other
proceeding on the Closing Date.
All such opinions, certificates, letters and documents delivered
pursuant to this Agreement will be in compliance with the provisions of this
Section 8 only if they are reasonably satisfactory to you and your counsel. The
Company shall furnish to you such conformed copies of such opinions,
certificates, letters and documents in such quantities as you shall reasonably
request.
If any of the conditions hereunder to be satisfied at or prior to the
Closing Date are not so satisfied, or subsequently waived, you may terminate
this Agreement without liability on your part or on the part of the Company,
except for the expenses to be paid or reimbursed by the Company pursuant to
Section 5(l) of this Agreement and except for any liability under Section 8 of
this Agreement.
Your obligation to purchase and pay for all or any portion of the
Option Securities on the Option Closing Date upon the exercise of the option
contained in Section 3 hereof shall be subject to the accuracy of and compliance
with the representations and the warranties of the Company herein contained as
of the date hereof and the Closing Date and Option Closing Date,
33
to the performance by the Company of its obligations hereunder and to the
following additional conditions:
(A) You shall have purchased the Firm Securities
from the Company (which purchase may occur simultaneously with the purchase of
the Option Securities from the Company).
(B) The condition set forth in paragraphs (a),
(b) and (c) of this Section 8 shall be satisfied as of the Option Closing Date.
(C) There shall have been tendered for delivery
in accordance with the terms and provisions of this Agreement the Option
Securities being purchased on the Option Closing Date from the Company.
(D) You shall have received an opinion of
counsel for the Company, dated the Option Closing Date, confirming their opinion
delivered pursuant to Section 8(e) hereof as of the Option Closing Date. In each
instance in which the opinion referred to in Section 8(e) refers to the
Firm Securities, the opinion delivered pursuant hereto shall also refer to the
Option Securities.
(E) You shall have received from the independent
certified public accountants that audited the financial statements of the
Company included in the Registration Statement, a letter addressed to you,
substantially in the form heretofore approved by you, dated the Option
Closing Date.
(F) You shall have received a certificate,
dated the Option Closing Date, of the Company, confirming the matters stated in
the certificate delivered pursuant to Section 8(f) hereof as of the Option
Closing Date and stating further that the Company has performed or a waiver has
been given for all or a part of the agreements herein contained to be performed
on its part at or prior to such Option Closing Date.
(G) You shall have received a certificate,
dated the Option Closing Date, of the Company, confirming the matters stated in
the certificate delivered pursuant to Section 8(g) hereof as of the Option
Closing Date and stating further that the Company has performed or a waiver has
been given for all or a part of the agreements herein contained to be performed
on its part at or prior to such option Closing Date.
9. EFFECTIVE DATE OF AGREEMENT; TERMINATION.
(a) This Agreement shall become effective when you and the
Company shall have received notification of the effectiveness of the
Registration Statement.
(b) This Agreement may be terminated at any time prior to
the Closing Date by you by written notice to the Company if in your judgment it
is impracticable to offer for sale
34
or to enforce contracts made by you for the resale of the Securities agreed to
be purchased hereunder by reason of (i) the Company or its subsidiaries having
sustained a loss by reason of fire, flood, accident or other calamity, which, in
your opinion, substantially affects the value of the properties of the Company
or its subsidiaries or which materially interferes with the operation of the
business of the Company or any of its subsidiaries regardless of whether such
loss shall have been insured, (ii) the existing financial, political or economic
conditions in the United States or elsewhere having undergone such material
change as in your opinion would make it inadvisable to proceed with the
offering, sale and delivery of the Securities on the terms contemplated by the
Prospectus, (iii) a banking moratorium shall have been declared by either
federal or New York authorities, (iv) a war involving the United States or other
national calamity shall have occurred, (v) any material adverse change in the
condition or obligations of the Company and any of its subsidiaries taken as a
whole or in the earnings, operations, management or business prospects of the
Company and any of its subsidiaries taken as a whole, (vi) any action, suit or
proceeding shall be threatened or pending, at law or in equity, against the
Company and any of its subsidiaries taken as a whole, by any Federal, state or
other commission, board or agency, which is not disclosed in the Prospectus and
in which an unfavorable result or decision could materially adversely affect the
business, prospects, property, financial condition or income or earnings of the
Company and any of its subsidiaries taken as a whole, (vii) an action, suit or
proceeding that is threatened or pending, which has been previously disclosed in
the Prospectus, shall have worsened in any way such that an unfavorable result
or decision could materially adversely affect the business, prospects, property,
financial condition or income or earnings of the Company and/or any of its
subsidiaries, or (viii) during the course of your due diligence investigation of
the Company, facts arise which vary materially in an adverse manner from
representations which have been previously made concerning the Company's
business and financial condition. In addition, this Agreement may be terminated
by you by prompt written notice to the Company (i) at any time before it becomes
effective or (ii) in the event that the Company shall have failed to comply with
any of the provisions of this Agreement to be performed by it at or prior to any
Closing Date which have not been waived by you, or if any of the
representations, warranties, covenants, agreements or conditions of, or
applicable to, the Company herein contained shall not have been complied with or
satisfied within the time specified unless waived by you.
(c) At any time after the Closing Date, if you should (i)
cease to be a broker-dealer registered with the Commission, (ii) be suspended
from such registration for any period of time in excess of 30 days, (iii) cease
to be a member of the NASD or other self-regulatory organization or (iv) become
subject to a proceeding, action or notification under Section 6 of the
Securities Investor Protection Act of 1970, the obligations of the Company under
this Agreement shall cease without any liability on the part of the Company.
10. SURVIVAL OF INDEMNITIES, REPRESENTATIONS, WARRANTIES AND COVENANTS.
The respective indemnities of the Company and the Underwriters and the
respective representations, warranties and covenants of the Company and the
Underwriters set forth in this Agreement will remain in full force and effect,
regardless of any investigations made by or on behalf of the Company or the
Underwriters or any of their respective officers, directors, partners or any
35
controlling person, and will survive delivery of and payment for the Securities
or termination of this Agreement pursuant to Section 10 hereof as the case may
be.
11. MISCELLANEOUS.
(a) This Agreement shall inure to the benefit of the Company
and the Underwriters, the officers and directors of such parties, each
controlling person referred to in Section 8 hereof and their respective
successors. Nothing in this Agreement is intended or shall be construed to give
to any other person, firm or corporation any legal or equitable right, remedy or
claim under or in respect of this Agreement or any provision herein contained.
The term "successor" as used in this Agreement shall not include any purchaser
of any Securities from the Underwriter.
(b) This Agreement constitutes the entire agreement among the
parties concerning the subject matter hereof and supersedes all prior agreements
and understandings.
(c) All notices and other communications hereunder (unless
otherwise expressly provided for herein) shall be in writing and shall be deemed
given when delivered in person on the business (before 5:00 P.M.) sent by
facsimile transmission, or on the date indicated on the return receipt if sent
registered or certified mail return receipt requested) to the party to receive
the same at the following addresses (or at such other address for a party as
shall be specified by like notice):
If to the Company: Advanced Electronic Support Products, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Messrs. ▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a Copy to: Akerman, Senterfit & ▇▇▇▇▇▇, P.A.
SunTrust International Center, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Underwriters: Corporate Securities Group, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
36
Argent Securities, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇, President
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a Copy to: ▇▇▇▇▇, Mandler, Croland, Bronstein, Garbett,
Stiphany & ▇▇▇▇▇▇▇▇, P.A.
▇▇▇▇▇▇▇ Bank Tower
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇
One Buckhead Plaza
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇.▇.
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(d) This Agreement was executed and delivered in, and its
validity, interpretation and construction shall be governed by the internal laws
of, the State of Florida applicable to agreements made and to be performed
wholly within such State. This Agreement may be executed in any number of
counterparts. Each counterpart, when executed and delivered, shall be an
original contract, but all counterparts, when taken together, shall constitute
one and the same Agreement.
(e) The Company hereby acknowledges that the breach of
material terms contained in this Agreement (whether or not specifically
designated as such) would cause irreparable damage and substantial prejudice to
your rights. Accordingly, the Company agrees that in the event of any such
breach or threatened breach, you shall have, in addition to its and your legal
remedies, the right to injunctive or other equitable relief, as permitted by
law, to prevent the Company's violation of their obligations hereunder.
(f) Titles and headings to sections herein are inserted for
the convenience of reference only and are not intended to be a part of or to
affect the meaning or interpretation of this Agreement.
(g) Any consent or approval of the Underwriters required
hereunder to any action of the Company shall not be unreasonably withheld, and
notwithstanding any other provisions hereof, such consent or approval shall not
be required if the Company obtains an opinion from counsel acceptable to the
Underwriters that the requirement of such consent or approval constitutes an
abrogation of the Board of Directors' duties under the corporate law of such
jurisdiction.
37
If the foregoing is in accordance with your understanding of
our agreement, please sign and return to us a counterpart hereof, whereupon this
instrument along with all counterparts will become a binding agreement between
you and us in accordance with its terms.
Very truly yours,
Advanced Electronics Support Products, Inc.
By:________________________________________
________________________________________
Accepted and agreed to as of
the date first above written:
ARGENT SECURITIES, INC. CORPORATE SECURITIES GROUP, INC.
By: __________________ By:____________________________
38