PROFLIGHT MEDICAL RESPONSE, INC.
1,019,200 Shares of Common Stock
and
1,019,200 Redeemable Common Stock Purchase Warrants
UNDERWRITING AGREEMENT
June ___, 1998
First Liberty Investment Group, Inc.
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Dear Sirs:
Proflight Medical Response, Inc., a Colorado corporation (the
"Company"), hereby confirms its agreement with you (the "Representative"),
acting as Representative for the various Underwriters listed on Schedule A
hereto as follows:
1. Description of the Securities
The Company proposes to issue and sell to the Underwriters an aggregate
of 1,019,200 shares of common stock, $.001 par value per share (the "Common
Stock"), and 1,019,200 redeemable common stock purchase warrants of the Company
(the "Warrants," and collectively with the Common Stock, the "Securities"). Each
Warrant shall entitle the holder to purchase one share of Common Stock for
$8.00, subject to adjustment. The Company proposes to grant to the
Representative an option (the "Representative's Warrant") to purchase up to
101,920 additional shares of Common Stock and up to an additional 101,920
Warrants which may be exercised for an additional 101,920 shares of Common
Stock. The Company also proposes to grant to the Representative an option (the
"Overallotment Option"), exercisable during the 45-day period after the Closing
Date hereof, to purchase, at the initial public offering price less underwriting
discounts, up to an additional 152,880 shares of Common Stock and 152,880
Warrants (collectively, with the Common Stock underlying such Warrants, the
"Overallotment Securities"), on the same terms as the Common Stock and Warrants
are offered to the public, solely to cover overallotments. The Representative's
Securities and Overallotment Securities shall collectively be referred to as the
"Additional Securities". The offering of Securities and Additional Securities
contemplated hereby may sometimes be referred to as the "Offering."
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Pursuant to the Amended Agreement and Plan of Reorganization, dated
April 8, 1997, as amended in January, March, and May of 1998, between the
Company, Air Response, Inc. ("Air Response") and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇. (the "Air
Response Agreement"), the Company agreed to purchase, and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.,
sole shareholder of Air Response, agreed to sell, all of the outstanding capital
stock of Air Response in exchange for 496,154 shares of Common Stock of the
Company which will be issued two years from the date hereof. Pursuant to the
Amended Stock Purchase and Sale Agreement, dated April 8, 1997, as amended in
January, March and May of 1998 between the Company, Air Response South, Inc.
("ARS") and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇., the sole shareholder of ARS (the "ARS
Agreement"), the Company agreed to purchase, and ▇▇. ▇▇▇▇▇▇ agreed to sell to
the Company, all of the outstanding capital stock of ARS for $800,000. The
purchase of the Common Stock of the Company by the Underwriters pursuant to this
Agreement is expressly contingent upon the prior execution and delivery of each
of the Air Response Agreement and ARS Agreement and the consummation of the
transactions contemplated thereunder.
(a) The Warrants
The Warrants are exercisable during the three-year period
commencing two (2) years after the effective date of the Registration Statement,
as defined in Paragraph 2(a) (the "Effective Date"), except that the Warrants
may be exercisable after one (1) year after the Effective Date with the express
prior written consent of the Representative, and expire five (5) years after the
Effective Date, subject to prior redemption, as described below. The shares of
Common Stock issuable upon the exercise of the Warrants are hereinafter referred
to as the "Warrant Shares."
The Warrants will be redeemable at a price of $.10 per
Warrant, commencing two (2) years after the Effective Date (or one (1) year
after the Effective Date with the prior written consent of the Representative)
and prior to expiration, upon at least 30 days prior written notice provided
that the closing bid prices of the Common Stock (or closing sales price if
listed on an exchange or on a reporting system that provides last sales prices)
for 20 consecutive trading days ending immediately prior to the date on which
notice of redemption is given shall exceed $12.75 per share (subject to
adjustment), subject to the right of the holder to exercise his or its purchase
rights thereunder until redemption.
(b) Representative's Warrant
The Company will sell to the Representative, for $10, the
Representative's Warrant to purchase one share of Common Stock and one Warrant
for each ten shares of Common Stock and ten Warrants sold, respectively, in this
Offering excluding the Additional Securities
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(a maximum of 101,920 shares of Common Stock and 101,920 Warrants) at a price of
$10.75 per share of Common Stock and $.12 per Warrant (the "Representative's
Warrants," and collectively with the Securities underlying the Representative's
Warrants, the "Representative's Securities"). The Warrants underlying the
Representative's Warrants shall be exercisable at a price of $13.25 per Warrant.
The Representative's Securities shall be non-exercisable and non-transferable
(other than to (i) officers of the Representative, and (ii) members of the
selling group and their officers or partners) for a period of 12 months
following the Effective Date. The Representative's Securities shall be
registered for sale to the public and shall be included in the Registration
Statement filed in connection with the Offering.
(c) The Overallotment Option
The Company also proposes to grant to the Representative an
option (the "Overallotment Option"), exercisable during the 45-day period after
the Closing Date hereof, to purchase, at the initial public offering price less
underwriting discounts, up to an additional 152,880 shares of Common Stock and
152,880 Warrants (collectively, with the Common Stock underlying such Warrants,
the "Overallotment Securities"), on the same terms as the Common Stock and
Warrants are offered to the public, solely to cover overallotments. The
Overallotment Securities shall be registered for sale to the public and included
in the Registration Statement filed in connection with the Offering.
2. Representations and Warranties of the Company, Air
Response and ARS
Each of the Company, Air Response and ARS makes the following
representations and warranties to the Representative, as the case may be, that:
(a) The Company has filed with the Securities and Exchange
Commission (the "Commission"), a registration statement on Form SB-2 (File No.
333-27197), including any related preliminary prospectus ("Preliminary
Prospectus"), for the registration of the Securities under the Securities Act of
1933 (the "Act"). The Company will file further amendments to said registration
statement in the form to be delivered to you and will not, before the
registration statement becomes effective, file any other amendment thereto to
which you shall have objected in writing after having been furnished with a copy
thereof. Except as the context may otherwise require, such registration
statement, as amended, on file with the Commission at the time the registration
statement becomes effective (including the prospectus, financial statements,
exhibits and all other documents filed as a part thereof or incorporated
therein), is hereinafter called the "Registration Statement", and
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the prospectus, in the form filed with the Commission pursuant to Rule 424(b) of
the General Rules and Regulations of the Commission under the Act (the
"Regulations") or, if no such filing is made, the definitive prospectus used in
the Offering, is hereinafter called the "Prospectus". The Company has delivered
to you copies of each Preliminary Prospectus as filed with the Commission and
has consented to the use of such copies for purposes permitted by the Act.
(b) The Commission has not issued any orders preventing or
suspending the use of any Preliminary Prospectus, and each Preliminary
Prospectus has conformed in all material respects with the requirements of the
Act and has not included any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or necessary to make the
statements therein, not misleading, subject to the provisions set forth below
and except as such untrue statement or omission has been cured in the a
subsequent preliminary prospectus or in the final prospectus.
(c) When the Registration Statement becomes effective under
the Act and at all times subsequent thereto including the Closing Date
(hereinafter defined) and the Option Closing Date (hereinafter defined) and for
such longer periods as in the opinion of counsel for the Underwriter, a
Prospectus is required to be delivered in connection with the sale of the
Securities by the Underwriters, the Registration Statement and Prospectus, and
any amendment thereof or supplement thereto, will contain all material
statements which are required to be stated therein in accordance with the Act
and the Regulations, and will in all material respects conform to the
requirements of the Act and the Regulations, and neither the Registration
Statement nor the Prospectus, nor any amendment or supplement thereto, will
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
not misleading; provided, however, that this representation and warranty does
not apply to statements or omissions made in reliance upon and in conformity
with express written information furnished to the Company by you, for use in
connection with the preparation of the Registration Statement or Prospectus, or
in any amendment thereof or supplement thereto. It is understood that the
statements set forth under the heading "Underwriting" in the Prospectus with
respect to (i) the amounts of the selling concession and reallowance; (ii) the
identity of counsel to the Representative under the heading "Legal Matters;"
(iii) the information concerning the NASD affiliation of the Representative;
and (iv) the Risk Factor entitled "Lack of Underwriting History" constitute
for purposes of this Paragraph the only information furnished in writing by
or on behalf of the Representative for inclusion in the Registration
Statement and Prospectus, as the case may be.
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(d) The Company and each of Air Response and ARS are, and at
each of the Closing Date and the Option Closing Date will be, corporations duly
organized, validly existing and in good standing under the laws of the
jurisdiction of their incorporation. The Company and each of Air Response and
ARS are duly qualified or licensed and in good standing as foreign corporations
in each jurisdiction in which their ownership or leasing of any properties or
the character of their operations requires such qualification or licensing,
except those jurisdictions in which the failure to so qualify would not have a
material adverse effect. The Company and each of Air Response and ARS have all
requisite corporate powers and authority, and, except as set forth in the
Registration Statement, the Company and each of Air Response and ARS and their
respective employees have all material and necessary authorizations, approvals,
orders, licenses, certificates and permits of and from all governmental
regulatory officials and bodies to own or lease their properties and conduct
their businesses as described in the Prospectus, and the Company and each of Air
Response and ARS are doing business and have been doing business during the
period described in the Registration Statement in compliance with all such
material authorizations, approvals, orders, licenses, certificates and permits
and all material federal, state and local laws, rules and regulations concerning
the businesses in which the Company or Air Response and ARS are engaged. The
disclosures in the Registration Statement concerning the effects of federal,
state and local regulation on the businesses of the Company, Air Response and
ARS as currently conducted and as contemplated are correct in all material
respects and do not omit to state a material fact. Each of the Company, Air
Response and ARS has all corporate power and authority to enter into this
Agreement and carry out the provisions and conditions hereof, and all consents,
authorizations, approvals and orders required in connection therewith have been
obtained or will have been obtained prior to the Closing Date.
(e) This Agreement has been duly and validly authorized and
executed by each of the Company, Air Response and ARS. The Securities (including
the Common Stock and the Warrants), the Warrant Shares, the Representative's
Warrants to be issued and sold by the Company pursuant to this Agreement, the
Underwriter's Securities issuable upon exercise of the Representative's Warrants
and payment therefor, the Representative's Securities, the Overallotment Option
and the Overallotment Securities, have been duly authorized (and, in the case of
the Common Stock and the Warrant Shares, have been duly reserved for issuance)
and, when issued and paid for in accordance with this Agreement (and, in the
case of the Warrant Shares, upon exercise of the Warrants and payment to the
Company of the exercise price therefor), the Common Stock and Warrant Shares
will be validly issued, fully paid and non-assessable; the Common Stock,
Warrants, Warrant Shares, Representative's Warrants,
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Representative's Securities, the Overallotment Option and the Overallotment
Securities are not and will not be subject to the preemptive rights of any
stockholder of the Company, and all the capital stock of each of Air Response
and ARS is not and will not be subject to the preemptive rights of any
stockholder of Air Response or ARS, respectively, as the case may be, and all of
such securities conform and at all times up to and including their issuance will
conform in all material respects to all statements with regard thereto contained
in the Registration Statement and Prospectus; and all corporate action required
to be taken for the authorization, issuance and sale of the Common Stock,
Warrants, Warrant Shares, Representative's Warrants, Representative's
Securities, the Overallotment Option and the Overallotment Securities has been
taken, and this Agreement constitutes a valid and binding obligation of the
Company, enforceable in accordance with its terms, to issue and sell, upon
exercise in accordance with the terms thereof, the number and kind of
securities called for thereby.
(f) The consummation of the transactions contemplated by this
Agreement, the Air Response Agreement and the ARS Agreement and the fulfillment
of the terms hereof and thereof, will not result in a breach or violation of any
of the terms or provisions of, or constitute a default under, the Articles of
Incorporation, as amended, or Bylaws of the Company or any of Air Response or
ARS or of any evidence of material indebtedness, lease, contract or other
agreement or instrument to which the Company or any of Air Response or ARS is a
party or by which the Company or any of Air Response or ARS or any of their
material properties is bound, or under any applicable law, rule, regulation,
judgment, order or decree of any government, professional advisory body,
administrative agency or court, domestic or foreign, having jurisdiction over
the Company or any of Air Response or ARS, or their respective properties which
are material to the Company or its business, or result in the creation or
imposition of any lien, charge or encumbrance upon any of the properties or
assets of the Company or any of Air Response or ARS; and no consent, approval,
authorization or order of any court or governmental or other regulatory agency
or body is required for the consummation by the Company or any of Air Response
or ARS of the transactions on their part herein contemplated, except such as may
be required under the Act or under state securities or blue sky laws, except
where a breach, violation or failure to obtain such consent would not have a
material adverse effect upon the business or operation of the Company or Air
Response or ARS.
(g) Subsequent to the date hereof, and prior to the Closing
Date and the Option Closing Date, the Company will not issue or acquire any
equity securities other than securities of Air Response and ARS, pursuant to the
terms of the Air Response
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Agreement and the ARS Agreement, and as described in the Registration Statement,
and that neither Air Response nor ARS has issued or acquired any equity or debt
securities, and except that the Company may make short-term investments as
contemplated in the "Use of Proceeds" section of the Prospectus. Except as
described in the Registration Statement, the Company does not have, and at the
Closing Date will not have, outstanding any options to purchase or rights or
warrants to subscribe for, or any securities or obligations convertible into, or
any contracts or commitments to issue or sell shares of its Preferred Stock,
Common Stock or any such options, warrants, convertible securities or
obligations.
(h) The financial statements and notes thereto included in the
Registration Statement and the Prospectus fairly present the financial position
and the results of operations of each of the Company, Air Response and ARS at
the respective dates and for the respective periods to which they apply; and
such financial statements have been prepared in conformity with generally
accepted accounting principles, consistently applied throughout the periods
involved.
(i) Except as set forth in the Registration Statement, the
Company and each of Air Response and ARS are not, and at the Closing Date and at
the Option Closing Date will not be, in violation or breach of, or default in,
the due performance and observance of any term, covenant or condition of any
indenture, mortgage, deed of trust, note, loan or credit agreement, or any other
agreement or instrument evidencing an obligation for borrowed money, or any
other agreement or instrument to which the Company or any of Air Response and
ARS are a party or by which the Company or any of Air Response and ARS may be
bound or to which any of the property or assets of the Company or any of Air
Response and ARS are subject, which violations, breaches, default or defaults,
singularly or in the aggregate, would have a material adverse effect on the
Company or any of Air Response and ARS. The Company and each of Air Response and
ARS have not and will not have taken any action in material violation of the
provisions of the Articles of Incorporation, as amended, or the Bylaws of the
Company or Air Response and ARS or any statute or any order, rule or regulation
of any court or regulatory authority or governmental body having jurisdiction
over or application to the Company or Air Response and ARS, their businesses or
properties.
(j) (i) The financial statements and schedules of the Company
included as part of the Registration Statement or the Prospectus present fairly
and financial condition of the Company as of the dates thereof, and the results
of operations of the Company for the periods covered thereby, all in conformity
with generally accepted accounting principles applied on a consistent basis
throughout the entire periods involved; (ii) the financial
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statements and schedules of each of Air Response and ARS included as part of the
Registration Statement or the Prospectus present fairly the financial condition
of Air Response and ARS, respectively, as of the dates thereof, and the results
of operations of Air Response and ARS, respectively, for the periods covered
thereby, all in conformity with generally accepted accounting principles applied
on a consistent basis throughout the entire periods involved; (iii) ▇▇▇▇▇
▇▇▇▇▇▇▇▇, LLP (the "Company's Accountants"), who have reported on such financial
statements and schedules of the Company, are independent accountants with
respect to the Company, Air Response and ARS as required by the Act and the
Rules and Regulations; (iv) Staff Ciampino & Company, P.C., who have reported on
such financial statements and schedules for each of Air Response and ARS, are
independent accountants with respect to Air Response and ARS, as required by the
Act and the Rules and Regulations, and (v) no other financial statements or
schedules of the Company, Air Response or ARS are required to be included in the
Registration Statement or the Prospectus.
(k) Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus and prior to the
Closing Date or the Option Closing Date, except as set forth in or contemplated
by the Registration Statement and the Prospectus, (i) each of the Company, Air
Response or ARS has and will have conducted its business in substantially the
same manner as on December 31, 1997; (ii) neither the Company nor Air Response
or ARS has incurred or will have incurred any material liability or obligation,
direct or contingent, or has entered into or will have entered into any material
transaction; (iii) neither the Company nor Air Response or ARS has or will have
paid or declared any dividend or other distribution on its capital stock, and
(iv) there has not been and will not have been any change in (A) the
capitalization of the Company, Air Response or ARS, (B) the business,
properties, prospects, financial condition or results of operations of the
Company, Air Response or ARS, or (C) the value of the assets of the Company, Air
Response or ARS, arising for any reason whatsoever.
(l) Except as set forth in or contemplated by the Registration
Statement and the Prospectus, neither the Company nor Air Response or ARS has,
or at the Closing Date or the Option Closing Date will have, any material
contingent obligation.
(m) The Company and each of Air Response and ARS have, and at
the Closing Date and at the Option Closing Date will have, good and marketable
title to all properties and assets described in the Prospectus as owned by them,
free and clear of all liens, charges, encumbrances, claims, security interests,
restrictions and defects of any material nature whatsoever, except such as are
described or referred to in the Prospectus and liens for taxes not
8
yet due and payable. All of the material leases and subleases under which the
Company or any of Air Response and ARS are the lessor or sublessor of properties
or assets or under which the Company or any of Air Response and ARS hold
properties or assets as lessee as described in the Prospectus are, and will on
the Closing Date and the Option Closing Date be, in full force and effect, and
except as described in the Prospectus, the Company and Air Response and ARS are
not and will not be in default in respect to any of the terms or provisions of
any of such leases or subleases, and no claim has been asserted by anyone
adverse to rights of the Company or any of Air Response and ARS as lessor,
sublessor, lessee or sublessee under any of the leases or subleases mentioned
above, or affecting or questioning the right of the Company or any of Air
Response and ARS to continue possession of the leased or subleased premises or
assets under any such lease or sublease except as described or referred to in
the Prospectus, and the Company and each of Air Response and ARS owns or leases
all such properties as are necessary to its operations as now conducted and,
except as otherwise stated in the Prospectus, as proposed to be conducted set
forth in the Prospectus.
(n) The authorized, issued and outstanding capital stock of
the Company as of March 31, 1998 and as of the date of the Prospectus is as set
forth in the Prospectus under "Capitalization"; the shares of issued and
outstanding capital stock of the Company set forth thereunder have been duly
authorized, validly issued and are fully paid and non-assessable; except as set
forth in the Prospectus, no options, warrants or other rights to purchase,
agreements or other obligations to issue, or agreements or other rights to
convert any obligation into, any shares of capital stock of the Company, Air
Response or ARS have been granted or entered into by the Company, Air Response
or ARS, as the case may be, with respect to any of their securities; and the
Common Stock, the Warrants, the Representative's Warrant, the Representative's
Securities, the Overallotment Option and the Overallotment Securities, and all
such options and warrants conform in all material respects, to all statements
relating thereto contained in the Registration Statement and Prospectus.
(o) Except as described in the Prospectus, neither the
Company, nor Air Response or ARS owns or controls any capital stock or
securities of, or have any proprietary interest in, or otherwise participate in
any other corporation, partnership, joint venture, firm, association or business
organization, except that, at the Closing Date and Option Closing Date, the
Company, pursuant to the execution, delivery and consummation of each of the Air
Response Agreement and ARS Agreement prior to the Offering, will own all the
issued and outstanding capital stock of Air Response and ARS; provided, however,
that this provision shall not be applicable to the investment, if any, of the
net proceeds from the sale of the
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Securities sold by the Company in certificates of deposits, savings deposits,
short-term obligations of the United States Government, money market instruments
or other short-term investments.
(p) To the knowledge of the Company, Air Response and ARS,
respectively, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP and Staff Ciampino & Company, P.C., who have
given their reports on certain financial statements filed and to be filed with
the Commission as a part of the Registration Statement, which are incorporated
in the Prospectus, are with respect to the Company, in the former case, and with
respect to Air Response and ARS in the latter case, independent public
accountants as required by the Act and the Rules and Regulations.
(q) Subsequent to the respective dates as of which information
is given in the Registration Statement and Prospectus, and except as may
otherwise be indicated or contemplated herein or therein, neither the Company,
Air Response nor ARS have (i) issued any securities or incurred any material
liability or obligation, direct or contingent, for borrowed money; or (ii)
entered into any material transaction other than in the ordinary course of
business; or (iii) declared or paid any dividend or made any other distribution
on or in respect to its capital stock.
(r) There is no litigation or governmental proceeding pending,
or to the knowledge of the Company, Air Response or ARS, respectively, as the
case may be, threatened against, or involving the properties or business of the
Company, Air Response or ARS which might materially adversely affect the value,
assets or the operation of the properties or the business of the Company, Air
Response or ARS, except as referred to in the Prospectus. Further, except as
referred to in the Prospectus, there are no pending actions, suits or
proceedings related to environmental matters or related to discrimination on the
basis of age, sex, religion or race, nor is the Company, Air Response or ARS
charged with or, to its knowledge, under investigation with respect to any
violation of any statutes or regulations of any regulatory authority having
jurisdiction over its business or operations, and no labor disturbances by the
employees of the Company, Air Response or ARS exist or, to the knowledge of the
Company, Air Response or ARS, have been threatened.
(s) Each of the Company, Air Response and ARS has, and at the
Closing Date and at the Option Closing Date will have, filed all necessary
federal, state and foreign income and franchise tax returns or has requested
extensions thereof (except in any case where the failure to so file would not
have a material adverse effect on the Company, Air Response or ARS, as the case
may be), and has paid all taxes which it believes in good faith were
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required to be paid by it except for any such tax that currently is being
contested in good faith or as described in the Prospectus.
(t) The Company, Air Response and ARS are each in compliance
with the requirements of Section 13(b)(2) of the Securities Exchange Act of
1934, as amended, and all rules and regulations promulgated thereunder (the
"Exchange Act") and, except as disclosed in the Prospectus, to the Company's
knowledge, neither the Company, Air Response nor ARS, nor any of their
respective employees, officers, directors or agents, has made, directly or
indirectly, any payment of funds of such entity or received or retained funds in
violation of any law, rule or regulation, which payment, receipt on retention is
of a character which is required to be disclosed in the Prospectus.
(u) Each of the Company, Air Response and ARS has not at any
time (i) made any contribution to any candidate for political office, or failed
to disclose fully any such contribution, in violation of law, or (ii) made any
payment to any state, federal, foreign governmental or professional regulatory
agency, officer or official or other person charged with similar public,
quasi-public or professional regulatory duties, other than payments or
contributions required or allowed by applicable law.
(v) Except as set forth in the Registration Statement, to the
knowledge of the Company, Air Response and ARS, neither any of the Company, Air
Response and ARS, nor any of officer, director, employee or agent of the
Company, Air Response and ARS, has made any payment or transfer of any funds or
assets of any such entity or conferred any personal benefit by use of such
entity's assets or received any funds, assets or personal benefit in violation
of any law, rule or regulation, which is required to be stated in the
Registration Statement or necessary to make the statements therein not
misleading.
(w) On the Closing Date, all transfer or other taxes, if any
(other than income tax) which are required to be paid, and are due and payable,
in connection with the sale and transfer of the capital stock of each of Air
Response and ARS by ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇. to the Company, and of the Securities
by the Company to the Underwriter will have been fully paid or provided for by
the Company as the case may be, and all laws imposing such taxes will have been
fully complied with in all material respects.
(x) There are no contracts or other documents of the Company,
Air Response or ARS which are of a character required to be described in the
Registration Statement or Prospectus or filed as exhibits to the Registration
Statement which have not been so described or filed.
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(y) The Company will apply the net proceeds from the sale of
the Securities sold by it for the purposes and in the manner set forth in the
Registration Statement and Prospectus under the heading "Use of Proceeds."
(z) The Company, Air Response and ARS each maintain a system
of internal accounting controls sufficient to provide reasonable assurance that
(1) transactions are executed in accordance with management's general or
specified authorizations; (2) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets; (3) access to
assets is permitted only in accordance with management's general or specific
authorizations; and (4) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(aa) Except as set forth in the Prospectus, no holder of any
securities of the Company, Air Response or ARS has the right to require
registration of any securities because of the filing or effectiveness of the
Registration Statement.
(bb) Neither the Company nor Air Response or ARS have taken
and at the Closing Date will not have taken, directly or indirectly, any action
designed to cause or result in, or which has constituted or which might
reasonably be expected to constitute, the stabilization or manipulation of the
price of the Common Stock or the Warrants to facilitate the sale or resale of
such securities.
(cc) To the best of the Company's, or Air Response's or ARS'
knowledge, there are no claims for services in the nature of a finder's
origination fee with respect to the sale of the Securities hereunder or the sale
of the capital stock of Air Response or ARS.
(dd) No right of first refusal exists with respect to any sale
of securities by the Company, Air Response or ARS, except that right of first
refusal granted by the Company to the Representative to underwrite or place any
public private offering of any debt or equity securities of the Company
(excluding sales to employees of the Company) or any of its subsidiaries
(including Air Response and ARS) or affiliates for three years following the
Closing Date, and as to which the Representative shall have twenty (20) days
after its receipt of written notice thereof to accept or decline such offering.
If the Representative declines to participate in such offering and if thereafter
the terms of such offering are modified, the Representative shall have up to
ten (10) days thereafter to accept or decline the modified terms. In addition,
for the two years
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following the Effective Date, the Representative has the right, to purchase or
sell for its account any securities sold by officers, directors or holders of at
least five percent (5%) of any outstanding securities of any class of securities
of the Company (collectively, "Insiders"), any securities sold by Insiders
pursuant to Rule 144 or any successor provision thereto.
(ee) No statement, representation, warranty or covenant made
by the Company, Air Response or ARS in this Agreement or made in any certificate
or document required by this Agreement to be delivered to the Representative
was, when made, or as of the Closing Date or as of the Option Closing Date, will
be materially inaccurate, untrue or incorrect.
(ff) The Company and each of Air Response and ARS have
generally enjoyed satisfactory employer/employee relationships with their
respective employees and are in compliance with all federal, state and local
laws and regulations respecting the employment of their respective employees and
employment practices, terms and conditions of employment and wages and hours
relating thereto. To the knowledge of the Company, there are no pending or
threatened investigations involving the Company or any of Air Response and ARS
by the U.S. Department of Labor or any other federal, state or local agency
responsible for the enforcement of such laws and regulations. To the knowledge
of each of the Company, Air Response and ARS, there are no unfair labor practice
charges or complaints against the Company or any Subsidiary pending before the
National Labor Relations Board or any strikes, picketing, boycotts, disputes,
slowdowns or stoppage pending or threatened against or involving the Company or
any Subsidiary, or any predecessor entity, and none has occurred. No collective
bargaining agreements or modifications thereof are currently in effect or being
negotiated by the Company or any Subsidiary and their respective employees. No
grievance or arbitration proceeding is pending under any expired or existing
collective bargaining agreements of the Company and any Subsidiary.
(gg) Neither the Company, Air Response nor ARS have maintained
or contributed to any deferred compensation, profit sharing, savings,
retirement, pension or other benefit plan or arrangements with or for the
benefit of any person resulting from a relationship with the Company, except as
may be disclosed in the Prospectus.
(hh) Each of the Company, Air Response and ARS is in
compliance with all federal and state laws, rules and regulations relating to
consumer protection, occupational safety and health and to the storage, handling
or transportation of hazardous or toxic materials and each of the Company, Air
Response and ARS has received all permits, licenses or other approvals required
of the
13
Company, Air Response and ARS under applicable federal and state occupational
safety and health and environmental laws and regulations to conduct its business
and each of the Company, Air Response and ARS is in compliance with all terms
and conditions of any such permit, license or approval, except any such
violation of law or regulation, failure to receive required permits, licenses or
other approvals which would not, singly or in the aggregate, result in a
material adverse change in the condition (financial or otherwise), business, net
worth or results of operations of the Company, Air Response and ARS, except as
the case may be, as may be described in or contemplated by the Prospectus.
(ii) All promissory notes, in an aggregate principal amount of
$500,000, issued by the Company pursuant to bridge private placements in either
October 1996 or January 1997, have been cancelled and the holders thereof have
released and discharged the Company from its obligations thereunder and
liabilities therewith.
(jj) The Company has received, and promptly presented to the
Representative and counsel for the Representative, copies of all duly executed
and delivered "lock-up" letters from each of the officers, directors and
shareholders of the Company (after giving effect to the Acquisitions) regarding
any Common Stock of the Company or securities convertible into or exchangeable
for such Common Stock, that each of the foregoing is thereby restricted from
selling, hypothecating, pledging or otherwise disposing of any shares of Common
Stock or securities convertible into or exchangeable for Common Stock, for two
years from the Effective Date (or one year with the prior written consent of the
Underwriter).
(kk) The Company has received, and promptly presented to the
Representative and counsel for the Representative, "10b-5" letters from each of
the officers, directors and holders of at least five percent of the outstanding
shares of any class of equity stock of the Company (both before and after giving
effect to the Acquisitions), whereby such individuals stated that the
information contained in the Registration Statement and the Prospectus was
accurate, and affirmed that he or she has not, in the five years preceding the
Effective Date (or as disclosed in the Registration Statement and Prospectus),
been the subject of any court order, judgment or decree restricting in any way
such person's involvement in the securities or commodities industries, convicted
in or named in a criminal proceeding, the subject of any bankruptcy petition, or
found by a court of competent jurisdiction of violating any securities or
federal commodities law.
14
3. Covenants of the Company, Air Response and ARS
The Company, Air Response and ARS each covenant and agree, as the case
may be, that:
(a) The Company will cause its Common Stock and Warrants to be
registered pursuant to Section 12 of the Exchange Act, not later than the
Effective Date.
(b) The Company will file with NASDAQ, as long as the
Securities are quoted on the NASDAQ National Market System or SmallCap Market,
all documents required thereby to maintain listing or quotation thereupon, and
will take any and all actions required to comply with and maintain all
continuing requirements for listing thereupon.
(c) It will notify the Representative immediately of any actual
or threatened or impending investigations (formal or informal) or any delisting
of other proceedings brought by NASDAQ, the NASD, SEC or any other governmental
or regulatory agency or body.
(d) It will deliver to the Representative, without charge, two
conformed copies of each Registration Statement and of each amendment or
supplement thereto, including all financial statements and exhibits.
(e) The Company has delivered to the Representative, and each of
the Selected Dealers, if any, (as hereinafter defined) without charge, as many
copies as have been requested of each Preliminary Prospectus heretofore filed
with the Commission in accordance with and pursuant to the Commission's Rule 430
under the Act and will deliver to the Representative and to others whose names
and addresses are furnished by the Representative or a Selected Dealer, without
charge, on the Effective Date of the Registration Statement, and thereafter from
time to time during such reasonable period as you may request if, in the opinion
of counsel for the Representative, the Prospectus is required by law to be
delivered in connection with sales by the Representative or a dealer, as many
copies of the Prospectus (and, in the event of any amendment of or supplement
to the Prospectus, of such amended or supplemented Prospectus) as the
Representative may reasonably request for the purposes contemplated by the Act.
The Company will take all necessary actions to furnish to whomever directed by
the Representative, when and as requested by the Representative, all necessary
documents, exhibits, information, applications, instruments and papers as may
be reasonably required or, in the written opinion of counsel to the
Representative desirable, in order to permit or facilitate the sale of the
Securities.
15
(f) The Company has authorized the Representative to use, and
make available for use by prospective dealers, the Preliminary Prospectus, and
authorizes the Representative and all dealers (the "Selected Dealers") selected
by the Representative in connection with the distribution of the Securities to
be purchased by the Representative and all dealers to whom any of such
Securities may be sold by the Representative or by any Selected Dealer, to use
the Prospectus, as from time to time amended or supplemented, in connection with
the sale of the Securities in accordance with the applicable provisions of the
Act, the applicable Regulations and applicable state law, until completion of
the distribution of the Securities and for such longer period as you may request
if the Prospectus is required under the Act, the applicable Regulations or
applicable state law to be delivered in connection with sales of the Securities
by the Representative or the Selected Dealers.
(g) The Company will use its best efforts to cause the
Registration Statement to become effective and will notify the Representative
immediately, and confirm the notice in writing: (i) when the Registration
Statement or any post-effective amendment thereto becomes effective; (ii) of the
issuance by the Commission of any stop order or of the initiation, or to the
best of the Company's knowledge, the threatening, of any proceedings for that
purpose; (iii) of the suspension of the qualification of the Securities and the
Representative's Warrants, or underlying securities, for offering or sale in any
jurisdiction or of the initiating, or to the best of the Company's knowledge the
threatening, of any proceeding for that purpose; and (iv) of the receipt of any
comments from the Commission. If the Commission shall enter a stop order at any
time, the Company will make every reasonable effort to obtain the lifting of
such order at the earliest possible moment.
(h) During the time when a prospectus is required to be
delivered under the Act, the Company will comply with all requirements imposed
upon it by the Act and the Exchange Act, as now and hereafter amended and by the
Regulations, as from time to time in force, as necessary to permit the
continuance of sales of or dealings in the Securities in accordance with the
provisions hereof and the Prospectus. If at any time when a prospectus relating
to the Securities is required to be delivered under the Act, any event shall
have occurred as a result of which, in the opinion of counsel for the Company or
counsel for the Representative, the Prospectus as then amended or supplemented
includes an untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the statements therein,
not misleading, or if it is necessary at any time to amend the Prospectus to
comply with the Act, the Company will notify you promptly and prepare and file
with the Commission an appropriate
16
amendment or supplement in accordance with Section 10 of the Act and will
furnish to you copies thereof.
(i) The Company will endeavor in good faith, in cooperation
with you, at or prior to the time the Registration Statement becomes effective,
to qualify the Securities for offering and sale under the securities laws or
blue sky laws of such jurisdictions as you may reasonably designate. In each
jurisdiction where such qualification shall be effected, the Company will,
unless you agree that such action is not at the time necessary or advisable,
file and make such statements or reports at such times as are or may reasonably
be required by the laws of such jurisdiction.
(j) The Company will make generally available to its
securityholders, as soon as practicable, but in no event later than the first
day of the fifteenth full calendar month following the Effective Date of the
Registration Statement, an earnings statement of the Company, which will be in
reasonable detail but which need not be audited, covering a period of at least
twelve months beginning after the Effective Date of the Registration Statement,
which earnings statements shall satisfy the requirements of Section 11(a) of the
Act and the Regulations as then in effect. The Company may discharge this
obligation in accordance with Rule 158 of the Regulations.
(k) During the period of five years commencing on the
Effective Date of the Registration Statement, the Company will make available to
its stockholders an annual report (including financial statements audited by its
independent public accountants), in reasonable detail, and, at its expense,
furnish the Representative (i) within 90 days after the end of each fiscal year
of the Company, a consolidated balance sheet of the Company and a separate
balance sheet of each subsidiary of the Company the accounts of which are not
included in such consolidated balance sheet as of the end of such fiscal year,
and consolidated statements of operations, stockholders' equity and cash flows
of the Company and separate statements of operations, stockholders' equity and
cash flows of any subsidiaries of the Company the accounts of which are not
included in such consolidated statements, for the fiscal year then ended all in
reasonable detail and all certified by independent accountants (within the
meaning of the Act and the Regulations), (ii) within 45 days after the end of
each of the first three fiscal quarters of each fiscal year, similar balance
sheets as of the end of such fiscal quarter and similar statements of
operations, stockholders' equity and cash flows for the fiscal quarter then
ended, all in reasonable detail, and subject to year end adjustment, all
certified by the Company's principal financial officer or the Company's
principal accounting officer as having been prepared in accordance with
generally accepted accounting
17
principles applied on a consistent basis, (iii) as soon as available, each
report furnished to or filed with the Commission or any securities exchange and
each report and financial statement furnished to the Company's shareholders
generally and (iv) as soon as available, such other material as the Underwriter
may from time to time reasonably request regarding the financial condition and
operations of the Company.
(l) For a period of eighteen months from the Closing Date, the
Company, at its expense, shall cause its regularly engaged independent certified
public accountants to review (but not audit), the Company's financial statements
for each of the first three quarters prior to the announcement of quarterly
financial information, the filing of the Company's 10-Q quarterly report and the
mailing of quarterly financial information to stockholders.
(m) Prior to the filing of the Registration Statement, the
Company shall have provided to the Representative the results of any title,
lien, uniform commercial code or other search as the Representative or its
counsel may request.
(n) The Company will have executed and delivered all
agreements pertaining to and caused to be consummated, its acquisition of all
the outstanding capital stock of each of Air Response, Inc. and Air Response
South, Inc. (collectively, the "Acquisitions"), and will further cause all
conditions to the Acquisitions to remain fulfilled and otherwise of full force
and effect at all times during the term of this Agreement. The Company further
understands that the continuing effectiveness of the Acquisitions and its
performance of all obligations under all agreements effectuating the
Acquisitions are conditions precedent to any obligations of the Underwriter
hereunder, and that any failure by the Company to perform, maintain or fulfill
any obligations thereunder or hereunder, shall immediately release the
Underwriter from all its obligations and duties hereunder.
(o) Prior to the Closing Date or the Option Closing Date,
neither the Company nor any of Air Response or ARS will issue, directly or
indirectly, without your prior written consent and that of counsel for the
Representative, any press release or other public announcement or hold any press
conference with respect to the Company or its activities with respect to this
Offering.
(p) The Company will deliver to you prior to filing, any
amendment or supplement to the Registration Statement or Prospectus proposed to
be filed after the Effective Date of the Registration Statement and will not
file any such amendment or supplement to which you shall reasonably object after
being furnished such copy.
18
(q) During the period of 120 days commencing on the date
hereof, the Company will not at any time take, directly or indirectly, any
action designed to, or which will constitute or which might reasonably be
expected to cause or result in stabilization or manipulation of the price of the
Securities to facilitate the sale or resale of any of the Securities.
(r) The Company will apply the net proceeds from the Offering
received by it in the manner set forth under "Use of Proceeds" in the
Prospectus.
(s) Counsel for the Company, the Company's accountants, and
the officers and directors of the Company will, respectively, furnish the
opinions, the letters and the certificates referred to in subsections of
Paragraph 9 hereof, and, in the event that the Company shall file any amendment
to the Registration Statement relating to the offering of the Securities or any
amendment or supplement to the Prospectus relating to the offering of the
Securities subsequent to the Effective Date of the Registration Statement, such
counsel, such accountants, such officers and directors, respectively, will, at
the time of such filing or at such subsequent time as you shall specify, so long
as securities being registered by such amendment or supplement are being
underwritten by the Underwriters, furnish to you such opinions, letters and
certificates, each dated the date of its delivery, of the same nature as the
opinions, the letters and the certificates referred to in said Paragraph 9, as
you may reasonably request, or, if any such opinion or letter or certificate
cannot be furnished by reason of the fact that such counsel or such accountants
or any such officer or director believes that the same would be inaccurate, such
counsel or such accountants or such officer or director will furnish an accurate
opinion or letter or certificate with respect to the same subject matter.
(t) The Company will comply with all of the provisions of any
undertakings contained in the Registration Statement in all material respects.
(u) The Company will reserve and keep available for issuance
that maximum number of its authorized but unissued shares of Common Stock which
are issuable upon exercise of the Warrants
19
and issuable upon exercise of the Representative's Warrants (including the
underlying securities) outstanding from time to time.
(v) During a period of three years commencing on the Effective
Date, the Company will furnish to you and any Selected Dealers, who may so
request copies of such financial statements and other periodic and special
reports as the Company may from time to time distribute generally to the holders
of any class of its capital stock, and will furnish to the Representative and
such Selected Dealers who may request a copy of each annual or other report
which the Company is required to file with the Commission.
(w) Following the Effective Date and from time to time
thereafter, so long as the Warrants are outstanding, the Company will timely
prepare and file at its sole cost and expense one or more post-effective
amendments to the Registration Statement or a new registration statement as
required by law as will permit Warrant holders to be furnished with a current
prospectus in the event Warrants are exercised, and to use its best efforts and
due diligence to have same be declared effective. The Company will deliver a
draft of each such post-effective amendment or new registration statement to the
Representative at least ten days prior to the filing of such post-effective
amendment or registration statement.
(x) Following the Effective Date and from time to time
thereafter so long as any of the Warrants remain outstanding, the Company will
timely deliver and supply to its Warrant Agent sufficient copies of the
Company's current Prospectus, as will enable such Warrant Agent to deliver a
copy of such Prospectus to any Warrant or other holder where such Prospectus
delivery is by law required to be made.
(y) So long as any of the Warrants remain outstanding, the
Company shall continue to employ the services of a firm of independent certified
public accountants reasonably acceptable to the Representative in connection
with the preparation of the financial statements to be included in any
registration statement to be filed by the Company hereunder, or any amendment
or supplement thereto (it being understood that ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP is acceptable
to the Representative). During the same period, the Company shall employ the
services of a law firm(s) suitably experienced in corporate and securities
laws in connection with all legal work of the Company, including the preparation
of a registration statement to be filed by the Company hereunder, or any
amendment or supplement thereto.
(z) So long as any of the Warrants remain outstanding, the
Company shall continue to appoint a Warrant Agent for the Warrants, who shall be
reasonably acceptable to the Representative.
20
(aa) The Company agrees that it will, upon the Closing Date,
for a period of no less than three (3) years, engage a designee of the
Representative as an advisor (the "Advisor") to its Board of Directors where
such Advisor shall attend meetings of the Board, receive all notices and other
correspondence and communications sent by the Company to members of its Board of
Directors and shall be entitled to receive compensation therefor equal to the
entitlement of all non-employee directors. Such Advisor shall also be entitled
to receive reimbursement for all reasonable costs incurred in attending such
meetings including, but not limited to, food, lodging, and transportation. The
Company further agrees that during said three (3) year period, it shall schedule
no less than four (4) formal and "in person" meetings of its Board of Directors
in each such year and fifteen (15) days advance notice of such meetings shall be
given to the Advisor. Further, during such three (3) year period, the Company
shall give notice to the Underwriter with respect to any proposed acquisitions,
mergers, reorganizations or other similar transactions. The Representative shall
have the right during such three-year periods in its sole discretion, to
designate one person for election as a Director of the Company and the Company
will utilize its best efforts to obtain the election of such person who shall be
entitled to receive the same compensation, expense reimbursements and other
benefits set forth above.
The Company agrees to indemnify and hold the Representative and
such Advisor or Director harmless against any and all claims, actions, damages,
costs and expenses, and judgments arising solely out of the attendance and
participation of your designee at any such meeting described herein. In the
event the Company maintains a liability insurance policy affording coverage for
the acts of its of officers and directors, it agrees, if possible, to include
the Underwriter's designee as an insured under such policy.
(bb) Upon the Closing Date, the Company shall have entered
into a two year agreement with the Representative in form reasonably
satisfactory to the Underwriter (the "Consulting Agreement"), pursuant to which
the Representative will be retained as a management and financial consultant and
will be paid an aggregate fee of $120,000, exclusive of any non-accountable
out-of-pocket expenses, all of which shall be paid upon the Closing Date.
(cc) The Company will apply for listing in Standard and Poor's
Corporation Reports or ▇▇▇▇▇'▇ OTC Guide and shall use its best efforts to have
the Company included in such publications, as soon as is practicable following
the Closing Date and for at least five years from the Closing Date.
(dd) For a period of twenty-four (24) months from the
Effective Date, no officer, director or holder of any securities of
21
the Company prior to the Offering will, directly or indirectly, offer, sell
(including any short sale), grant any option for the sale of, acquire any option
to dispose of, or otherwise dispose of any shares of Common Stock into public
markets, including shares of Common Stock issuable upon exercise of options,
warrants or any convertible securities of the Company, without the prior written
consent of the Representative, other than as set forth in the Registration
Statement. In order to enforce this covenant, the Company shall impose
stop-transfer instructions with respect to the securities owned by every
stockholder prior to the Offering until the end of such period (subject to any
exceptions to such limitation on transferability set forth in the Registration
Statement). Notwithstanding the foregoing, the Company's current stockholders
shall be permitted to make transfers for estate planning purposes or in private
sales, so long as the transferee agrees in writing to be bound by the foregoing
provisions. If necessary to comply with any applicable Blue-sky Law, the shares
held by such stockholders will be escrowed with counsel for the Company or
otherwise as required. In addition, prior to the end of such twenty-four (24)
month period, the Company will not permit its counsel to issue any opinions to
remove any legends or any of its securities.
(ee) Except for the issuance of shares of capital stock by the
Company in connection with the exercise of warrants or options outstanding as of
the Closing Date and Option Closing Date and as disclosed in the Registration
Statement, the Company shall not, for a period of twenty-four (24) months
following the Closing Date, directly or indirectly, offer, sell, issue, agree to
issue or transfer any of its debt, equity or other securities of any kind,
including any security exchangeable or exercisable for, or convertible into,
shares of its capital stock or register any of such securities (under any form
of registration statement, including Form S-8), without the prior written
consent of the Underwriter. Options granted pursuant to plans as described in or
permitted under the Registration Statement must be exercisable at the fair
market value on the date of grant.
(ff) For so long as any of the Warrants remain outstanding,
the Company shall maintain "key person" life insurance payable to the Company on
the life of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, its Chief Executive Officer, in the amount of
$1,000,000, unless his employment with the Company is earlier terminated. In
such event, the Company will obtain a comparable policy on the life of his
successor for the balance of such period.
(gg) Each of the Company, Air Response and ARS will use their
best efforts to obtain, as soon after the Closing Date as is reasonably
possible, liability insurance covering their officers and directors.
22
(hh) Each of the Company, Air Response and ARS agree that any
conflict of interest arising between a member of any such company's Board of
Directors and such company in connection with such Director's dealing with, or
obligations to, such company, shall be resolved by a vote of the majority of the
independent members of the Board of Directors of such company.
(ii) The Company agrees that it will employ the services of a
financial public relations firm reasonably acceptable to the Representative for
a period of at least twelve months following the Effective Date.
(jj) For a period of two (2) years from the Effective Date, at
the request of the Representative, the Company shall provide promptly, at its
expense, copies of the Company's monthly transfer sheets furnished to it by its
transfer agent and copies of the securities positions provided to it by the
Depository Trust Company.
(kk) The Company shall take all actions necessary or required
to effectuate and preserve the registration rights granted to the Underwriter
pursuant to the Underwriter's Warrant.
4. Sale, Purchase and Delivery of Securities: Closing Date
(a) The Company agrees to sell to the Representative, and the
Underwriters, and each of the Representative and the Underwriters on the
basis of the warranties, representations and agreements of the Company
herein, and subject to the terms and conditions herein, agrees to
purchase the Securities as the amounts specified on Schedule A attached hereto
from the Company at a price of $6.50 per share of Common Stock and $.10 per
Warrant, less an underwriting discount of ten percent (10%) of the offering
price for each security. The Representative may allow a concession not
exceeding $.__ per share of Common Stock and $.___ per Warrant to Selected
Dealers who are members of the National Association of Securities Dealers, Inc
("NASD"), and to certain foreign dealers.
(b) Delivery of the Securities and payment therefor shall be
made at 10:00 A.M., New York time on the Closing Date, as hereinafter defined,
at the offices of the Underwriter or such other location as may be agreed upon
by you and the Company. Delivery of certificates for the Common Stock and
Warrants (in definitive form and registered in such names and in such
denominations as you shall request by written notice to the Company delivered at
least two business days' prior to the Closing Date), shall be made to you
against payment of the purchase price therefor by certified or bank check or
wire transfer payable in New York Clearing House funds to the order of the
Company. The Company will make such certificates available for inspection at
least two
23
business days prior to the Closing Date at such place as you shall
designate.
(c) Unless otherwise agreed, the "Closing Date" shall be
_____________, 1998, or such other date not later than the sixth business day
following the effective date of the Registration Statement as you shall
determine and advise the Company.
(d) The cost of original issue tax stamps, if any, in
connection with the issuance and delivery of the Securities by the Company to
the Underwriters shall be borne by the Company. The Company will pay and hold
the Underwriters, and any subsequent holder of the Securities, harmless from any
and all liabilities with respect to or resulting from any failure or delay in
paying federal and state stamp taxes, if any, which may be payable or determined
to be payable in connection with the original issuance or sale to the
Underwriters of the Securities or any portions thereof.
5. Sale, Purchase and Delivery of the Overallotment Securities:
Option Closing Date
(a) The Company agrees to sell to the Representative, and upon
the basis of the representations, warranties and agreements of the Company
herein contained, subject to the satisfaction of all the terms and conditions of
this Agreement, the Representative shall have the option (the "Overallotment
Option") to purchase the Overallotment Securities from the Company, at the same
price per Security as set forth in Paragraph 4(a) above. Overallotment
Securities may be purchased solely for the purpose of covering overallotments
made in connection with the distribution and sale of the Securities.
(b) The Overallotment Option to purchase all or part of the
Overallotment Securities covered thereby is exercisable by you at any time and
from time to time before the expiration of a period of 45 calendar days from the
date of the Effective Date of the Registration Statement (the "Option Period")
by written notice to the Company setting forth the number of Overallotment
Securities for which the Option is being exercised, the name or names in which
the certificates for such Overallotment Securities are to be registered and the
denominations of such certificates. Upon each exercise of the Overallotment
Option, the Company shall sell to the Representative the aggregate number of
Overallotment Securities specified in the notice exercising such Overallotment
Option.
(c) Delivery of the Overallotment Securities with respect to
which the Overallotment Option shall have been exercised and payment therefor
shall be made at 10:00 A.M., New York time on the Option Closing Date, as
hereinafter defined, at the offices of
24
the Representative or at such other locations as may be agreed upon by you and
the Company. Delivery of certificates for Overallotment Securities shall be made
to you against payment of the purchase price therefor by certified or bank check
or wire transfer in New York Clearing House Funds to the order of the Company.
The Company will make certificates for Overallotment Securities to be purchased
at the Option Closing Date available for inspection at least two business days
prior to such Option Closing Date at such place as you shall designate.
(d) The "Option Closing Date" shall be the date not later than
five business days after the end of the Option Period as you shall determine and
advise the Company by at least three full business days' notice, unless some
other time is agreed upon between you and the Company.
(e) The obligations of the Representative to purchase and pay
for Overallotment Securities at such Option Closing Date shall be subject to
compliance as of such date with all the conditions specified in Paragraph 2
herein and the delivery to you of opinions, certificates and letters, each dated
such Option Closing Date, substantially similar in scope to those specified in
Paragraph 9 herein.
(f) The cost of original issue tax stamps, if any, in
connection with the issuance and delivery of the Overallotment Securities by the
Company to the Representative shall be borne by the Company. The Company will
pay and hold the Representative, and any subsequent holder of Overallotment
Securities, harmless from any and all liabilities with respect to or resulting
from any failure or delay in paying federal and state stamp taxes, if any, which
may be payable or determined to be payable in connection with the original
issuance or sale to the Representative of the Overallotment Securities or any
portion thereof.
6. Warrant Solicitation Fee
The Company agrees to pay the Representative a fee of five percent (5%)
of the aggregate exercise price of the Warrants if: (i) the market price of the
Common Stock is greater than the exercise price of the Warrants on the date of
exercise; (ii) the exercise of the Warrants are solicited by a member of the
NASD and the customer states in writing that the transaction was solicited and
designates in writing the broker-dealer to receive compensation for the
exercise; (iii) the Warrants are not held in a discretionary account; (iv) the
disclosure of compensation arrangements was made both at the time of the
Offering and at the time of the exercise of the Warrant; and (v) the
solicitation of the Warrant is not in violation of Regulation M promulgated
under the Exchange Act. The Company agrees not to solicit the exercise of
25
any Warrants other than through the Representative and will not authorize any
other dealer to engage in such solicitation without the prior written consent of
the Representative which will not be unreasonably withheld. The Warrant
solicitation fee will not be paid in a non-solicited transaction. No Warrant
solicitation by the Representative will occur prior to one year from the
Effective Date.
7. Representations and Warranties of the Representative
The Representative represents and warrants to the Company that:
(a) The Representative is a member in good standing of the
National Association of Securities Dealers, Inc., and has complied with all NASD
requirements concerning net capital and compensation to be received in
connection with the Offering.
(b) To the Representative's knowledge, there are no claims for
services in the nature of a finder's origination fee with respect to the sale of
the Securities hereunder to which the Company, Air Response or ARS is, or may
become, obligated to pay.
(c) Neither the Representative nor its registered representatives
have provided purchasers of the Securities with any information concerning the
Company, Air Response or ARS other than the Preliminary Prospectus and the
Prospectus.
8. Payment of Expenses
(a) The Company will pay and bear all costs, fees, taxes and
expenses incident to and in connection with: (i) the issuance, offer, sale and
delivery of the Securities, including all expenses and fees incident to the
preparation, printing, filing and mailing (including the payment of postage with
respect to such mailing) of the Registration Statement (including all exhibits
thereto), each Preliminary Prospectus, the Prospectus, and amendments and
post-effective amendments thereof and supplements thereto, and this Agreement
and related documents, Preliminary and Final Blue Sky Memoranda, including the
cost of preparing and copying all copies thereof in quantities deemed necessary
by the Underwriters; (ii) the costs of preparing transaction closing binders and
lucite cube mementos in such quantity as the Underwriter specifies, and the
preparing and printing all "Tombstone" and other appropriate advertisements in
The Wall Street Journal, The New York Times and other publications selected by
the Representative; (iii) the printing, engraving, issuance and delivery of the
Common Stock, Warrants, Warrant Shares, Additional Securities, Underwriter's
Warrants and the securities underlying the Representative's Warrants, including
any transfer or other taxes payable thereon in connection with the original
issuance thereof; (iv) the qualification of the Common Stock and Warrants
under the state or foreign securities or "Blue
26
Sky" laws selected by the Representative and the Company, and all legal fees of
counsel for the Representative in connection therewith (in the amount of
$40,000) plus all disbursements and filing fees incurred by such counsel for
such states; (v) a fee of $20,000 to be paid to counsel to the Representative
for the preparation of a secondary trading memorandum; (vi) fees and
disbursements of counsel and accountants for the Company, including those
incurred in connection with the actions specified in the foregoing clause (i);
(vii) other expenses and disbursements reasonably incurred on behalf of the
Company; (viii) the filing fees payable to the Commission and the National
Association of Securities Dealers, Inc. ("NASD"); and (ix) any application
for listing of the Common Stock and Warrants on a securities exchange or
on NASDAQ.
(b) In addition to the expenses to be paid and borne by the
Company referred to in Paragraph 8(a) above, the Company shall reimburse you at
closing for expenses incurred by you in connection with the Offering (for which
you need not make any accounting), in the amount of 3% of the price to the
public of the Securities and Additional Securities sold in the Offering. This 3%
non-accountable expense allowance shall cover the fees of your legal counsel,
but shall not include any expenses for which the Company is responsible under
Paragraph 8(a) above, including the reasonable fees and disbursements of your
legal counsel with respect to Blue Sky matters.
(c) In the event that the Company does not or cannot, for any
reason whatsoever other than a default by the Representative, proceed with the
Offering, or if any of the representations, warranties or covenants contained in
this Agreement are not materially correct or cannot be complied with by the
Company, or business prospects or obligations of the Company are adversely
affected and the Company does not commence or continue with the Offering at any
time or terminates the proposed transaction prior to the Closing Date, the
Company shall reimburse the Representative on an accountable basis for all
out-of-pocket expenses actually incurred in connection with the Underwriting,
this Agreement and all of the transactions hereby contemplated (including,
without limitation, your legal fees and expenses).
9. Conditions of Representative's Obligations
The obligations of the Representative to consummate the transactions
contemplated by this Agreement shall be subject to the continuing accuracy of
the representations and warranties of the Company contained herein as of the
date hereof and as of the Closing Date, the accuracy of the statements of the
Company and its officers and directors made pursuant to the provisions hereof,
and to the performance by the Company of its covenants and agreements
27
hereunder and under any and all covenants and agreements contemplated herein and
under each certificate, opinion and document contemplated hereunder and to the
following additional conditions:
(a) The Registration Statement shall have become effective not
later than 5:00 p.m., New York time, on the date following the date of this
Agreement, or such later date and time as shall be consented to in writing by
you and, on or prior to the Closing Date, no stop order suspending the
effectiveness of the Registration Statement or the qualification or registration
of the Securities under the securities laws of any jurisdiction shall have been
issued and no proceedings for that purpose shall have been instituted or shall
be pending or to your knowledge or the knowledge of the Company, shall be
contemplated by the Commission or any such authorities of any jurisdiction and
any request on the part of the Commission or any such authorities for additional
information shall have been complied with to the reasonable satisfaction of the
Commission or such authorities and counsel to the Underwriter and after the date
hereof no amendment or supplement shall have been filed to the Registration
Statement or Prospectus without your prior consent.
(b) The Registration Statement or the Prospectus or any
amendment thereof or supplement thereto shall not contain an untrue statement of
a fact which is material, or omit to state a fact which is material and is
required to be stated therein or is necessary to make the statements therein,
not misleading.
(c) Between the time of the execution and delivery of this
Agreement and the Closing Date, there shall be no litigation instituted against
the Company, Air Response or ARS or any of their officers or directors and
between such dates there shall be no proceeding instituted or, to the Company's
knowledge, threatened against the Company, Air Response or ARS or any of their
officers or directors before or by any federal, state or county commission,
regulatory body, administrative agency or other governmental body, domestic or
foreign, in which litigation or proceeding an unfavorable ruling, decision or
finding would have a material adverse effect on the Company or its business,
business prospects or properties, or have a material adverse effect on the
financial condition or results of operation of the Company.
(d) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, (i) there shall have
been no litigation instituted against the Company, Air Response or ARS or any
officer or director of the Company, Air Response or ARS, and since such dates
there shall have been no proceeding instituted or threatened against the
Company, Air Response or ARS or any officer or director of the Company, Air
28
Response or ARS, before or by any federal, state or local court, commission,
regulatory body, administrative agency or other governmental agency or body,
domestic or foreign, in which litigation or proceeding an unfavorable ruling,
decision or finding could materially affect the business, properties, prospects,
financial condition or results of operations of the Company, Air Response or
ARS, and (ii) no executive officer of the Company listed as such in the
Prospectus shall have died, become physically or mentally disabled, resigned or
been removed or discharged.
(e) Each of the representations and warranties of the Company
contained herein and each certificate and document contemplated under this
Agreement to be delivered to you shall be true and correct at the Closing Date
as if made at the Closing Date, and all covenants and agreements contained
herein and in each such certificate and document to be performed on the part of
the Company, and all conditions contained herein and in each such certificate
and document to be fulfilled or complied with by the Company at or prior to the
Closing Date shall be fulfilled or complied with.
(f) At the Closing Date, you shall have received the opinion
of ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, counsel to the Company, dated as of such Closing Date,
addressed to the Representative and in form and substance satisfactory to
counsel to the Representative, to the effect that:
(i) The Company and each of Air Response and ARS are
corporations duly organized, validly existing and in good standing under the
laws of the jurisdiction of their incorporation with full corporate power and
authority, and all licenses, permits, certifications, registrations, approvals,
consents and franchises to own or lease and operate their properties and to
conduct their businesses as described in the Registration Statement. The Company
and each of Air Response and ARS are duly qualified to do business as foreign
corporations and are in good standing in all jurisdictions wherein such
qualification is necessary and failure so to qualify could have a material
adverse effect on the financial condition, results of operations, business or
properties of the Company and each of Air Response and ARS;
(ii) The Company has full corporate power and authority to
execute, deliver and perform the Underwriting Agreement, the Consulting
Agreement, the Air Response Agreement, the ARS Agreement, the Warrant Agreement
and the Representative's Warrants and to consummate the transactions
contemplated thereby. The execution, delivery and performance of the
Underwriting Agreement, the Consulting Agreement, the Air Response Agreement,
the ARS Agreement, the Warrant Agreement and the Representative's Warrants by
the Company, the consummation by the Company of the
29
transactions therein contemplated and the compliance by the Company with the
terms of the Underwriting Agreement, the Consulting Agreement, the Air Response
Agreement, the ARS Agreement, the Warrant Agreement and the Representative's
Warrants have been duly authorized by all necessary corporate action, and each
of the Underwriting Agreement, the Consulting Agreement, the Air Response
Agreement, the ARS Agreement, the Warrant Agreement and the Representative's
Warrants have been duly executed and delivered by the Company. Each of the
Underwriting Agreement, the Consulting Agreement, the Air Response Agreement,
the ARS Agreement, the Warrant Agreement and the Representative's Warrants is a
valid and binding obligation of the Company, enforceable in accordance with
their respective terms, subject, as to enforcement of remedies, to applicable
bankruptcy, insolvency, reorganization, moratorium and other laws affecting the
rights of creditors generally and the discretion of courts in granting equitable
remedies and except that enforceability of the indemnification provisions and
the contribution provisions set forth in the Underwriting Agreement may be
limited by the federal securities laws or public policy underlying such laws;
(iii) The execution, delivery and performance of the
Underwriting Agreement, the Consulting Agreement, the Air Response Agreement,
the ARS Agreement, the Warrant Agreement and the Representative's Warrants by
the Company, the consummation by the Company of the transactions therein
contemplated and the compliance by the Company with the terms of the
Underwriting Agreement, the Consulting Agreement, the Air Response Agreement,
the ARS Agreement, the Warrant Agreement and the Representative's Warrants do
not, and will not, with or without the giving of notice or the lapse of time, or
both, (A) result in a violation of the Articles of Incorporation, as the same
may be amended, or Bylaws of the Company or any of Air Response and ARS, (B) to
the best of our knowledge, result in a breach of, or conflict with, any terms or
provisions of or constitute a default under, or result in the modification or
termination of, or result in the creation or imposition of any lien, security
interest, charge or encumbrance upon any of the properties or assets of the
Company or any of Air Response and ARS pursuant to, any indenture, mortgage,
note, contract, commitment or other material agreement or instrument to which
the Company or any of Air Response and ARS are a party or by which the Company
or any of Air Response and ARS or any of their properties or assets are or may
be bound or affected, except where any of the foregoing would not result in a
material adverse effect upon the Company's or Air Response's and ARS' business
or operations; (C) to the best of our knowledge, violate any existing applicable
law, rule or regulation or judgment, order or decree known to us of any
governmental agency or court, domestic or foreign, having jurisdiction over the
Company or any of Air Response and ARS or any of their respective properties or
30
businesses; or (D) to the best of our knowledge, have any effect on any permit,
certification, registration, approval, consent, license or franchise necessary
for the Company or any of Air Response and ARS to own or lease and operate their
properties and to conduct their business or the ability of the Company or any of
Air Response and ARS to make use thereof;
(iv) Each of Air Response and ARS has full corporate power
and authority to execute, deliver and perform the Air Response Agreement and the
ARS Agreement and to consummate the transactions contemplated thereby. The
execution, delivery and performance of the Air Response Agreement and the ARS
Agreement by Air Response and ARS, and the consummation of the transactions
contemplated therein and the compliance by Air Response and ARS with the terms
of the Air Response Agreement and ARS Agreement, respectively, have been duly
authorized by all necessary corporate action. The Air Response Agreement and ARS
Agreement are valid and binding obligations of Air Response and ARS,
respectively, enforceable in accordance with their respective terms, subject, as
to enforcement of remedies, to applicable bankruptcy, insolvency, reorganization
moratorium, and other laws affecting the rights of creditors generally and the
discretion of courts in granting equitable remedies and except that
enforceability of the indemnification provisions and the contribution provisions
set forth in the Underwriting Agreement may be limited by the federal securities
laws or public policy underlying such laws. Each of the Air Response Agreement
and ARS Agreement have been duly executed, delivered and performed by each of
the parties thereto, and the transactions contemplated thereby have been
consummated. The Company is now the sole owner of all the capital stock of each
of Air Response and ARS, and there is no outstanding capital stock of either Air
Response or ARS owned by any party other than the Company.
(v) To the best of our knowledge, no authorization,
approval, consent, order, registration, license or permit of any court or
governmental agency or body (other than under the Act, the Regulations and
applicable state securities or Blue Sky laws) is required for the valid
authorization, issuance, sale and delivery of the Securities, the Additional
Securities, the Common Stock, the Warrants, the Warrant Shares, or the
Representative's Warrants, and the consummation by the Company of the
transactions contemplated by the Underwriting Agreement, the Consulting
Agreement, the Warrant Agreement or the Representative's Warrants;
(vi) The Registration Statement was declared effective
under the Act on ___________, 1998; to the best our knowledge, no stop order
suspending the effectiveness of the Registration Statement has been issued, and
no proceedings for that
31
purpose have been instituted or are pending, threatened or contemplated under
the Act or applicable state securities laws;
(vii) The Registration Statement and the Prospectus, as of
the Effective Date (except for the financial statements and other financial data
included therein or omitted therefrom, as to which we express no opinion),
comply as to form in all material respects with the requirements of the Act and
Regulations and the conditions for use of a registration statement on Form SB-2
have been satisfied by the Company;
(viii) The description in the Registration Statement and
the Prospectus of statutes, regulations, contracts and other documents have been
reviewed by us, and, based upon such review, are accurate in all material
respects and present fairly the information required to be disclosed, and to the
best of our knowledge, there are no material statutes or regulations, or, to the
best of our knowledge, material contracts or documents, of a character required
to be described in the Registration Statement or the Prospectus or to be filed
as exhibits to the Registration Statement, which are not so described or filed
as required.
To the best of our knowledge, none of the material
provisions of the contracts or instruments described above violates any existing
applicable law, rule or regulation or judgment, order or decree known to us of
any United States governmental agency or court having jurisdiction over the
Company or any of its assets or businesses;
(ix) The outstanding Common Stock and Warrants of the
Company, and all the issued and outstanding shares of the capital stock of each
of Air Response and ARS, have been duly authorized and validly issued. The
outstanding Common Stock of the Company is fully paid and nonassessable. None of
the outstanding Common Stock of any of the Company, Air Response and ARS has
been issued in violation of the preemptive rights of any stockholder of the
Company, Air Response or ARS, as the case may be. All of the issued and
outstanding shares of the capital stock of each of Air Response and ARS, after
giving effect to the consummation of the transactions contemplated by the Air
Response Agreement and the ARS Agreement, will be owned by the Company free and
clear of any mortgage, pledge, lien, charge or encumbrance, except as set forth
in the Registration Statement and the Prospectus. None of the holders of the
outstanding Common Stock of the Company is subject to personal liability solely
by reason of being such a holder. The authorized Common Stock conforms to the
description thereof contained in the Registration Statement and Prospectus. To
the best of our knowledge, except as set forth in the Prospectus, no holders of
any of the Company's securities or of the securities of Air
32
Response and ARS has any rights, "demand," "piggyback" or otherwise, to have
such securities registered under the Act;
(x) The issuance and sale of the Securities, the
Additional Securities, the Common Stock, the Warrants, the Warrant Shares and
the Representative's Warrants have been duly authorized and when issued and paid
for in accordance with the Underwriting Agreement or the respective Warrants
will be validly issued, fully paid and nonassessable, and the holders thereof
will not be subject to personal liability solely by reason of being such
holders. Neither the Securities, the Additional Securities, nor the Common Stock
are subject to preemptive rights of any stockholder of the Company. The
certificates representing the Securities are in proper legal form;
(xi) The issuance and sale of the Warrant Shares and the
Representative's Warrants have been duly authorized and, when paid for, issued
and delivered pursuant to the terms of the Warrant Agreement or the
Representative's Warrants, as the case may be, the Warrants and the
Representative's Warrants will constitute the valid and binding obligations of
the Company, enforceable in accordance with their terms, to issue and sell the
Warrants, the Warrant Shares and/or Representative's Warrants. All corporate
action required to be taken for the authorization, issuance and sale of the
securities has been duly, validly and sufficiently taken. The Common Stock
and the Warrants have been duly authorized by the Company to be offered in
the form of the Securities. The Warrants, the Warrant Shares and the
Representative's Warrants conform to the descriptions thereof contained
in the Registration Statement and Prospectus;
(xii) The Representative has acquired good title to the
Securities, free and clear of all liens, encumbrances, equities, security
interests and claims, provided that the Representative is a bona fide purchaser
as defined in 'SS'8-302 of the Uniform Commercial Code;
(xiii) Assuming that the Representative exercises the
overallotment option to purchase the Additional Securities and make payments
therefor in accordance with the terms of the Underwriting Agreement, upon
delivery of the Additional Securities to the Representative thereunder, the
Representative will acquire good title to the Additional Securities, free and
clear of any liens, encumbrances, equities, security interests and claims,
provided that the Representative is a bona fide purchaser as defined in
'SS'8-302 of the Uniform Commercial Code;
(xiv) To the best of our knowledge, after due inquiry,
there are no claims, actions, suits, proceedings, arbitrations, investigations
or inquiries before any governmental
33
agency, court or tribunal, foreign or domestic, or before any private
arbitration tribunal, pending or threatened against the Company or any of Air
Response and ARS or involving their properties or businesses, other than as
described in the Prospectus, such description being accurate, and other than
litigation incident to the kind of business conducted by the Company or any of
Air Response and ARS which, individually and in the aggregate, is not material,
and, except as otherwise disclosed in the Prospectus and the Registration
Statement, the Company and Air Response and ARS have complied with all federal
and state laws, statutes and regulations concerning its business;
(xv) All sales of the Company's securities, and the
Company's purchase of all the capital stock of each of Air Response and ARS,
have been made in compliance with or under an exemption from the registration
requirements of the Act, and no purchaser of such securities in any such sale
has a right of action against the Company for failure to comply with the
registration or filing requirements of any state;
(xvi) The Company has no subsidiaries other than Air
Response and ARS;
(xvii) We have participated in reviews and discussions in
connection with the preparation of the Registration Statement and the
Prospectus. Although we are not passing upon and do not assume responsibility
for the accuracy, completeness or fairness of the statements contained in the
Registration Statement, no facts came to our attention which lead us to believe
that (A) the Registration Statement (except as to the financial statements and
other financial data contained therein, as to which we express no opinion), on
the Effective Date, contained any untrue statement of 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, or that (B) the
Prospectus (except as to the financial statements and other financial data
contained therein, as to which we express no opinion) contains any untrue
statement or a material fact or omits to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading;
(xviii) The Company has, or will have before the Effective
Date, gained approval for listing of the Common Stock and Warrants on the NASDAQ
SmallCap Market and will maintain and fulfill all requirements for continued
listing thereupon;
(xix) The Company shall have obtained, and provided copies
to the Representative and counsel to the Representative of, cancelled promissory
notes in the aggregate principal amount of
34
$500,000 from all investors in the Company's bridge private placements in
October 1996 and January 1997, and shall have otherwise be released and
discharged by all such investors from all duties and obligations thereunder and
liabilities therefor; and
(xx) The Company shall have obtained, and provided copies
to the Representative and counsel to the Representative of, duly executed and
delivered "lock-up" letters from each of the Company's officers, directors and
shareholders whereby each such person agrees not to sell, issue, pledge,
hypothecate or otherwise transfer, any of such person's shares of Common Stock
for a period of twenty-four months from the Closing Date.
(g) On or prior to the Closing Date, counsel for the
Underwriter shall have been furnished such documents, certificates and opinions
as they may reasonably require for the purpose of enabling them to review the
matters referred to in subparagraph (e) of this Paragraph 9, or in order to
evidence the accuracy, completeness or satisfaction of any of the
representations, warranties or conditions herein contained.
(h) Prior to the Closing Date:
(i) There shall have been no material adverse change in
the condition or prospects or the business activities, financial or otherwise,
of the Company, Air Response or ARS, from the latest dates as of which such
condition is set forth in the Registration Statement and Prospectus;
(ii) There shall have been no transaction, outside the
ordinary course of business, entered into by the Company, Air Response or ARS,
from the latest date as of which the financial condition of the Company, Air
Response or ARS, is set forth in the Registration Statement and Prospectus which
is material to the Company, Air Response or ARS, except for the transactions
contemplated by the Air Response Agreement and ARS Agreement, which is either
(x) required to be disclosed in the Prospectus or Registration Statement and is
not so disclosed, or (y) likely to have a material adverse effect on the
business or financial condition of any of the Company, Air Response and ARS;
(iii) None of the Company, Air Response and ARS shall be
in default under any material provision of any instrument relating to any
outstanding indebtedness, except as described in the Prospectus;
(iv) No material amount of the assets of any of the
Company, Air Response or ARS shall have been pledged, mortgaged or otherwise
encumbered, except as set forth in the Registration Statement and Prospectus;
35
(v) No action, investigation suit or proceeding, at law or
in equity, shall have been pending or to the best of their knowledge threatened
against the Company, Air Response or ARS or affecting any of their respective
properties or businesses before or by any court or federal or state commission,
board or other administrative agency wherein an unfavorable decision, ruling or
finding would materially and adversely affect the business, operations,
prospects or financial condition or income of the Company, Air Response and ARS
taken as a whole, except as set forth in the Registration Statement and
Prospectus;
(vi) No stop order shall have been issued under the Act
and no proceedings therefor shall have been initiated or, to the best of the
knowledge of the Company, Air Response and ARS, threatened by the Commission;
and
(vii) Each of the representations and warranties of any of
the Company, Air Response or ARS contained in this Agreement and in each
certificate and document contemplated under this Agreement to be delivered to
you was, when originally made and is at the time such certificate is dated, true
and correct.
(i) Concurrently with the execution and delivery of this
Agreement and at the Closing Date, you shall have received a certificate of each
of the Company, Air Response and ARS signed by the Chief Executive Officer of
each of the Company, Air Response and ARS and the principal financial officer of
each of the Company, Air Response and ARS, dated as of the Closing Date, to the
effect that the conditions set forth in subparagraph (h) above have been
satisfied and that, as of the Closing Date, the representations and warranties
of the Company, Air Response and ARS set forth in Paragraph 2 herein and the
statements in the Registration Statement and Prospectus were and are true and
correct in all material respects. Any certificate signed by any officer of any
of the Company, Air Response and ARS and delivered to you or for counsel for the
Underwriter shall be deemed a representation and warranty by the Company to the
Underwriter as to the statements made therein.
(j) At the time this Agreement is executed, and at the Closing
Date, you shall have received a "cold comfort" letter, addressed to the
Underwriter and in form and substance satisfactory in all respects to you and
counsel for the Representative, from each of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, auditors for
the Company, and Staff Ciampino & Company, P.C., auditors for Air Response and
ARS, dated as of the date of this Agreement and as of the Closing Date.
(k) All proceedings taken in connection with the
authorization, issuance or sale of the Common Stock, Warrants, Warrant Shares,
the Representative's Warrants, the Representative's
36
Securities, the Overallotment Option and the Overallotment Securities as herein
contemplated shall be satisfactory in form and substance to you and to counsel
to the Representative, and the Representative shall have received from such
counsel an opinion, dated as the Closing Date with respect to such of these
proceedings as you may reasonably require.
(l) Each of the Company, Air Response and ARS shall have
furnished to you such certificates, additional to those specifically mentioned
herein, as you may have reasonably requested in a timely manner as to the
accuracy and completeness, at the Closing Date, of any statement in the
Registration Statement or the Prospectus, as to the accuracy, at the Closing
Date, of the representations and warranties of the Company, Air Response or ARS,
as the case may be, herein and in each certificate and document contemplated
under this Agreement to be delivered to you, as to the performance by the
Company of its obligations hereunder and under each such certificate and
document or as to the fulfillment of the conditions concurrent and precedent to
your obligations hereunder.
(m) On or before the Closing Date, the Company shall cause to
be provided, and the Underwriter shall have received, from each officer,
director and shareholder of the Company, "lock-up" agreements from each such
person restricting any sales, transfers, pledges or other hypothecations of such
person's shares of any class of equity security of the Company for a period of
twenty-four months from the Closing Date.
(n) The obligation of the Representative to purchase any
Securities hereunder is subject to the accuracy of the representations and
warranties of the Company contained herein on and as of the Option Closing Date
and to the satisfaction on and as of the Option Closing Date of the conditions
set forth herein.
(o) On the Closing Date there shall have been duly tendered to
you for your account the appropriate number of shares of Common Stock and
Warrants constituting the Securities.
(p) No action shall have been taken by the Commission or the
NASD the effect of which would make it improper, at any time prior to the
Closing Date, for members of the NASD to execute transactions (as principal or
agent) in the Securities and no proceedings for the taking of such action shall
have been instituted or shall be pending, or, to the knowledge of the
Underwriter, the Company, Air Response or ARS, shall be contemplated by the
Commission or the NASD. Each of the Company, Air Response or ARS and the
Underwriter represent that at the date hereof each has no knowledge that any
such action is in fact contemplated against any of them by the Commission or the
NASD.
37
(q) Prior to the Effective Date, the Company will make all
filings required, including registration under the Exchange Act, to obtain, and
shall have obtained and shall use its best efforts to maintain, the listing of
the Common Stock and Warrants on the Nasdaq SmallCap Market.
(r) If any of the conditions herein provided for in this
Paragraph shall not have been fulfilled, or the Acquisitions shall not have
occurred or either the Air Response Agreement or ARS Agreement shall not have
been duly executed, delivered and performed by all parties thereto, or all
promissory notes from the investors in either the October 1996 or January 1997
bridge private placements have not been cancelled and all obligations of the
Company thereunder been discharged, or all "lock-up" letters restricting sales,
pledges, transfers or hypothecations of any kind by officers, directors or
shareholders of the Company for twenty-four months after the Closing Date have
not been received, as of the date indicated, this Agreement and all obligations
of the Representative under this Agreement may be canceled at, or at any time
prior to, each Closing Date by the Representative notifying the Company of such
cancellation in writing or by telegram at or prior to the applicable Closing
Date. Any such cancellation shall be without liability of the Representative to
the Company, Air Response or ARS.
10. Indemnification and Contribution
(a) Subject to the conditions set forth below, each of the
Company, Air Response and ARS, jointly and severally, agrees to indemnify and
hold harmless the Representative and each of the Underwriters and each person,
if any, who controls such Representative or Underwriter ("controlling person")
within the meaning of either Section 15 of the Act or Section 20 of the Exchange
Act, and any of its agents including its attorneys, against any and all losses,
liabilities, claims, damages, actions and expenses or liability, joint or
several, whatsoever (including but not limited to any and all expense whatsoever
reasonably incurred in investigating, preparing or defending against any
litigation, commenced or threatened, or any claim whatsoever, including those
regarding legal fees), joint or several, to which it or such controlling persons
may become subject under the Act, the Exchange Act or under any other statute or
at common law or otherwise or under the laws of foreign countries, arising out
of or based upon any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement or any Preliminary Prospectus or
the Prospectus (as from time to time amended and supplemented); in any
post-effective amendment or amendments or any new registration statement and
prospectus in which is included the Warrant Shares of the Company issued or
issuable upon exercise of the Warrants, or Representative's Warrants Shares
upon exercise of the Representative's Warrants; or in any
38
application or other document or written communication (in this Paragraph 10
collectively called "application") executed by the Company or based upon written
information furnished by the Company filed in any jurisdiction in order to
qualify the Common Stock, Warrants, Warrant Shares, Additional Securities,
Representative's Warrants and Representative's Warrant Shares (including the
Shares issuable upon exercise of the Warrants underlying the Representative's
Warrants) under the securities laws thereof or filed with the Commission or any
securities exchange; or the omission or alleged omission therefrom of a material
fact required to be stated therein or necessary to make the statements therein
not misleading (in the case of the Prospectus, in the light of the circumstances
under which they were made), unless such statement or omission was made in
reliance upon or in conformity with written information furnished to the Company
with respect to the Representative by or on behalf of the Representative
expressly for use in any Preliminary Prospectus, the Registration Statement or
Prospectus, or any amendment or supplement thereof, or in application, as the
case may be. Notwithstanding the foregoing, the Company shall have no liability
under this Paragraph 10(a) if any such untrue statement or omission made in a
Preliminary Prospectus, is cured in the Prospectus and the Underwriter failed to
deliver to the person or persons alleging the liability upon which
indemnification is being sought, at or prior to the written confirmation of such
sale, a copy of the Prospectus. This indemnity will be in addition to any
liability which the Company may otherwise have.
(b) The Representative agrees to indemnify and hold harmless the
Company and each of the officers and directors of the Company who have signed
the Registration Statement and each other person, if any, who controls the
Company within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, to the same extent as the foregoing indemnity from the Company to
the Underwriter in Paragraph 10(a), but only with respect to any untrue
statement or alleged untrue statement of any material fact contained in or any
omission or alleged omission to state a material fact required to be stated in
the Registration Statement or Prospectus or any amendment or supplement thereof
or necessary to make the statements therein not misleading or in any application
made solely in reliance upon, and in conformity with, written information
furnished to the Company by you specifically expressly for use in the
preparation of the Registration Statement or Prospectus directly relating to the
transactions effected by Representative and the Underwriters in connection with
this Offering. This indemnity agreement will be in addition to any liability
which the Underwriter may otherwise have. Notwithstanding the foregoing, the
Representative shall have no liability under this Paragraph 10(b) if any such
untrue statement or omission made in a Preliminary Prospectus is cured in the
Prospectus, and the Prospectus is
39
delivered to the person or persons alleging the liability upon which
indemnification is being sought.
(c) If any action is brought against any indemnified party
(the "Indemnitee") in respect of which indemnity may be sought against another
party pursuant to the foregoing (the "Indemnitor"), the Indemnitor shall assume
the defense of the action, including the employment and fees of counsel
(reasonably satisfactory to the Indemnitee) and payment of expenses. Any
Indemnitee 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
Indemnitee unless the employment of such counsel shall have been authorized in
writing by the Indemnitor in connection with the defense of such action. If the
Indemnitor shall have employed counsel to have charge of the defense or shall
previously have assumed the defense of any such action or claim, the Indemnitor
shall not thereafter be liable to any Indemnitee in investigating, preparing or
defending any such action or claim. Each Indemnitee shall promptly notify the
Indemnitor of the commencement of any litigation or proceedings against the
Indemnitee in connection with the issue and sale of the Common Stock, Warrants,
Warrant Shares, Additional Securities, Representative's Securities or in
connection with the Registration Statement or Prospectus.
(d) In order to provide for just and equitable contribution
under the Act in any case in which: (i) the Representative makes a claim for
indemnification pursuant to Paragraph 10 hereof, but it is judicially determined
(by the entry of a final judgment or decree by a court of competent jurisdiction
and the time to appeal has expired or the last right of appeal has been denied)
that such indemnification may not be enforced in such case notwithstanding the
fact that this Paragraph 10 provides for indemnification of such case; or (ii)
contribution under the Act may be required on the part of the Representative in
circumstances for which indemnification is provided under this Paragraph 10,
then, and in each such case, the Company and the Representative shall contribute
to the aggregate losses, claims, damages or liabilities to which they may be
subject (after any contribution from others) in such proportion so that the
Underwriter is responsible for the portion represented by dividing the total
compensation received by the Underwriter herein by the total purchase price of
all Securities sold in the public offering and the Company is responsible for
the remaining portion; provided, that in any such case, no person guilty of a
fraudulent misrepresentation (within the meaning of Section 11 (f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
40
The foregoing contribution agreement shall in no way affect
the contribution liabilities of any persons having liability under Section 11 of
the Act other than the Company and the Representative. As used in this Paragraph
10, the term "Representative" includes any officer, director, or other person
who controls the Representative within the meaning of Section 15 of the Act, and
the word "Company" includes any officer, director or person who controls the
Company within the meaning of Section 15 of the Act. If the full amount of the
contribution specified in this paragraph is not permitted by law, then the
Underwriter and each person who controls the Representative shall be entitled to
contribution from the Company to the full extent permitted by law. No
contribution shall be requested with regard to the settlement of any matter from
any party who did not consent to the settlement.
(e) Within fifteen (15) days after receipt by any party to
this Agreement (or its representative) of notice of the commencement of any
action, suit or proceeding, such party will, if a claim for contribution in
respect thereof is made against another party (the "contributing party"), notify
the contributing party of the commencement thereof, but the omission so to
notify the contributing party will not relieve it from any liability it may have
to any other party other than for contribution hereunder.
In case any such action, suit or proceeding is brought against
any party, and such party notifies a contributing party or his or its
representative of the commencement thereof within the aforesaid fifteen (15)
days, the contributing party will be entitled to participate therein with the
notifying party and any other contributing party similarly notified. Any such
contributing party shall not be liable to any party seeking contribution on
account of any settlement of any claim, action or proceeding effected by such
party seeking contribution without the written consent of such contributing
party. The indemnification provisions contained in this Paragraph 10 are in
addition to any other rights or remedies which either party hereto may have with
respect to the other or hereunder.
11. Representations, Warranties, Agreements to Survive Delivery
The respective indemnity and contribution agreements by the Representative
and each of the Company, Air Response and ARS contained in Paragraph 10 hereof,
and the covenants, representations and warranties of each of the Company, Air
Response and ARS and the Representative set forth in this Agreement, shall
remain operative and in full force and effect regardless of (i) any
investigation made by the Representative or on its behalf or by or on behalf
of any person who controls the Representative, or by the Company, Air Response
or ARS or any controlling person of the Company, Air
41
Response or ARS or any director or any officer of the Company, Air Response or
ARS, (ii) acceptance of any of the Securities and payment therefor, or (iii) any
termination of this Agreement, and shall survive the delivery of the Securities
and any successor of the Representative or the Company, Air Response or ARS, or
of any person who controls you or the Company, Air Response or ARS or any other
indemnified party, as the case may be, shall be entitled to the benefit of such
respective indemnity and contribution agreements. The respective indemnity and
contribution agreements by the Representative and the Company, Air Response or
ARS contained in this Paragraph 11 shall be in addition to any liability which
the Underwriter and the Company, Air Response or ARS may otherwise have.
12. Effective Date of This Agreement and Termination Thereof
(a) This Agreement shall become effective at 10:00 A.M., New
York time, on the first full business day following the day on which you and the
Company receive notification that the Registration Statement became effective.
(b) This Agreement may be terminated by the Representative by
notifying the Company at any time on or before the Closing Date, if any domestic
or international event or act or occurrence has in your sole opinion, materially
disrupted, or in your sole opinion will in the immediate future materially
disrupt, securities markets; or if trading on the New York Stock Exchange, the
American Stock Exchange, or in the over-the-counter market shall have been
suspended, or minimum or maximum prices for trading shall have been fixed, or
maximum ranges for prices for securities shall have been required on the
over-the-counter market by the NASD or NASDAQ or by order of the Commission or
any other governmental authority having jurisdiction; or if a moratorium in
foreign exchange trading by major international banks or persons has been
declared; or if the Company shall have sustained a loss material or substantial
to the Company taken as a whole by fire, flood, accident, hurricane, earthquake,
theft, sabotage or other calamity or malicious act which, whether or not such
loss shall have been insured, will, in your sole opinion, make it inadvisable to
proceed with the delivery of the Securities; or if there shall have been a
material adverse change in the conditions of the securities market in general,
as in your reasonable judgment would make it inadvisable to proceed with the
offering, sale and delivery of the Securities; or if there shall have been a
material adverse change in the financial or securities markets, particularly in
the over-the-counter market, in the United States having occurred since the date
of this Agreement; or your clearing agent has refused to grant you credit in
connection with the purchase of the Common Stock and Warrants; or the NASDAQ
Stock Market, Inc. has refused to release the Common Stock and Warrants for
trading on the Nasdaq SmallCap market.
42
(c) If you elect to prevent this Agreement from becoming
effective or to terminate this Agreement as provided in this Paragraph 12, the
Company shall be notified promptly by you by telephone or facsimile, confirmed
by letter.
(d) If this Agreement shall not become effective or if this
Agreement shall not be carried out within the time specified herein by reason of
any failure on the part of any of the Company, Air Response or ARS to perform
any undertaking, or to materially satisfy any condition of this Agreement by it
to be performed or satisfied, the sole liability of the Company to the
Representative, in addition to the obligations assumed by the Company pursuant
to Paragraph 8 herein, will be to reimburse the Representative for the
following: (i) Blue Sky counsel fees and expenses to the extent set forth in
Paragraph 8; (ii) Blue Sky filing fees; and (iii) such reasonable out-of-pocket
expenses of the Representative (including the fees and disbursements of their
counsel), to the extent set forth in Paragraph 8(c), in connection with this
Agreement and the proposed offering of the Securities.
Notwithstanding any contrary provision contained in this
Agreement, any election hereunder or any termination of this Agreement, and
whether or not this Agreement is otherwise carried out, the provisions of
Paragraph 8 and 10 hereof shall not be in any way affected by such election or
termination or failure to carry out the terms of this Agreement or any part
hereof.
13. Notices
All communications hereunder, except as herein otherwise specifically
provided, shall be in writing and, if sent to the Representative, shall be
mailed by registered or certified mail, postage prepaid, return receipt
registered, or delivered personally with receipt acknowledged or by a
nationally-recognized next-day courier service with delivery confirmed to the
Representative at First Liberty Investment Group, Inc., ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Vice
President, with a copy thereof to ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq., Gusrae ▇▇▇▇▇▇
& ▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, if sent to
the Company, shall be mailed or delivered as set forth above to the Company
at ▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇, President, with a copy thereof to ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, ▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.,
and if sent to Air Response or ARS, mailed or delivered to such party
at Orlando Executive Airport, ▇▇▇-▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ 72, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇, with a copy to: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇., Esq., ▇▇▇▇▇▇ Crossing I,
Suite 225, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇.
43
14. Parties
This Agreement shall inure solely to the benefit of and shall be
binding upon, the Representative and the Underwriters as to which it shall
act hereunder as Representative, the Company, Air Response or ARS and the
controlling persons, directors and officers referred to in Paragraph 10 hereof,
and their respective successors, legal representatives and assigns, and no other
person shall have or be construed to have any legal or equitable right, remedy
or claim under or in respect of or by virtue of this Agreement or any provision
herein contained.
15. Construction
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of New York and shall supersede any
agreement or understanding, oral or in writing, express or implied, between the
Company, Air Response or ARS and you relating to the sale of any of the
Securities.
16. Jurisdiction and Venue
This Agreement shall be governed by and construed in accordance with the laws of
the State of New York with respect to contracts made and to be fully performed
therein, without regard to the conflicts of laws principles thereof. The parties
hereto hereby agree that any suit or proceeding arising under this Agreement, or
in connection with the consummation of the transactions contemplated hereby,
shall be brought solely in a federal or state court located in the City, County
and State of New York, or in any court of competent jurisdiction selected by the
Holder. By its execution hereof, each of the Company, Air Response and ARS
hereby consent and irrevocably submit to the in personam jurisdiction of the
federal and state courts located in the City, County and State of New York (or
any such other court of competent jurisdiction selected by the Underwriter) and
agrees that any process in any suit or proceeding commenced in such courts under
this Agreement may be served upon it personally or by certified or registered
mail, return receipt requested, or by Federal Express or other courier service,
with the same force and effect as if personally served upon it in New York City
(or in the city or county in which such other court is located). The parties
hereto each waive any claim that any such jurisdiction is not a convenient forum
for any such suit or proceeding and any defense of lack of in personam
jurisdiction with respect thereto.
17. Counterparts
This Agreement may be executed in counterparts.
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If the foregoing correctly sets forth the understanding between the
Representative and each of the Company, Air Response and ARS, please so indicate
in the space provided below for that purpose, whereupon this letter shall
constitute a binding agreement between us.
Very truly yours,
PROFLIGHT MEDICAL RESPONSE, INC.
By: _______________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, President
AIR RESPONSE, INC.
By: _______________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇., President
AIR RESPONSE SOUTH, INC.
By: _______________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇., President
Accepted as of the date first above written:
FIRST LIBERTY INVESTMENT GROUP, INC., as Representative
By:__________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Vice President
45
Schedule A
LIST OF UNDERWRITERS
Name and Address Amount of Securities to be Purchased