AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 31, 1997
REGISTRATION STATEMENT NO. 333-15967
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 2 TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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ADVANCED ELECTRONIC SUPPORT PRODUCTS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C> <C>
FLORIDA 3577 59-2327-381
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
<TABLE>
<S> <C>
SLAV STEIN, PRESIDENT
ADVANCED ELECTRONIC SUPPORT PRODUCTS, INC.
1810 N.E. 144TH STREET 1810 N.E. 144TH STREET
NORTH MIAMI, FLORIDA 33181 NORTH MIAMI, FLORIDA 33181
(305) 944-7710 (305) 944-7710
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) INCLUDING AREA CODE, OF AGENT FOR SERVICE)
</TABLE>
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COPIES OF ALL COMMUNICATIONS TO:
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<S> <C> <C>
PHILIP B. SCHWARTZ, ESQ. LESLIE J. CROLAND, ESQ. ROBERT ALTENBACH, ESQ.
AKERMAN, SENTERFITT & EIDSON, P.A. LUCIO, MANDLER, CROLAND, BRONSTEIN, JOHNSON & MONTGOMERY
ONE S.E. 3RD AVENUE GARBETT, STIPHANY & MARTINEZ, P.A. 3060 PEACHTREE ROAD, N.W.
28TH FLOOR 701 BRICKELL AVENUE, SUITE 2000 SUITE 400
MIAMI, FLORIDA 33131-1704 MIAMI, FLORIDA 33131 ATLANTA, GEORGIA
(305) 374-5600 (305) 579-0012 (404) 262-1000
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APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities
Act of 1933, check the following box: [x]
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CALCULATION OF REGISTRATION FEE
============================================================================================================================
PROPOSED
AMOUNT MAXIMUM PROPOSED
TITLE OF EACH CLASS TO BE OFFERING PRICE AGGREGATE AMOUNT OF
OF SECURITIES TO BE REGISTERED REGISTERED PER SHARE(1) OFFERING PRICE(1) REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.001(2) 862,500 $6.50 $5,606,250 $ 1,698.86
- ---------------------------------------------------------------------------------------------------------------------------
Common Stock Purchase Warrants(3) 862,500 $.125 $ 107,812.50 $ 32.67
- ---------------------------------------------------------------------------------------------------------------------------
Common Stock, $.001(4) 862,500 $7.475 $6,447,187.5 $ 1,953.69
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Common Stock, $.001(5) 75,000 $8.45 $ 633,750 $ 192.05
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Underwriters' Common Stock
Purchase Warrants(5) 75,000 $.1625 $12,187.50 (6)
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Common Stock, $.001(7) 75,000 $7.475 $ 560,625 $ 169.87
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Total $ 4,047.14
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Total paid with prior filings $ 4,047.14
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Total paid with this filing $ 0
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(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457.
(2) Includes shares of Common Stock issuable in connection with the exercise
of the Underwriters' over-allotment option.
(3) Includes Common Stock Purchase Warrants issuable in connection with the
exercise of the Underwriters' over-allotment warrants.
(4) Issuable upon exercise of the Common Stock Purchase Warrants.
(5) Issuable upon the exercise of the Underwriters' Warrants, together with
such indeterminate number of shares of Common Stock as may be issuable by
reason of the antidilution provisions contained therein.
(6) No fee due pursuant to Rule 457(g).
(7) Issuable upon the exercise of the Warrants underlying the Underwriters'
Warrants, together with such indeterminate number of shares of Common Stock
as may be issuable by reason of the antidilution provisions contained
therein.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 24. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Pursuant to the provisions of Section 607.0850(1) of the Florida Business
Corporation Act, the Company has the power to indemnify any person who is or
was a party to any proceeding (other than an action by, or in the right of,
the Company), because such person is or was a director, officer, employee, or
agent of the Company (or is or was serving at the request of the Company
under specified capacities) against liability incurred in connection with
such proceeding provided such person acted in good faith and in a manner such
person reasonably believed to be in, or not opposed to, the best interest of
the Company (and with respect to any criminal action or proceeding, such
person had no reasonable cause to believe such person's conduct was
unlawful).
With respect to a proceeding by or in the right of the Company to procure
a judgment in its favor, Section 607.0850(2) of the Florida Business
Corporation Act provides that the Company shall have the power to indemnify
any person who is or was a director, officer, employee, or agent of the
Company (or is or was serving at the request of the Company under specified
capacities) against expenses and amounts paid in settlement not exceeding, in
the judgment of the Board of Directors, the estimated expense of litigating
the proceeding to conclusion, actually and reasonably incurred in connection
with the defense or settlement of such proceeding provided such person acted
in good faith and in a manner such person reasonably believed to be in, or
not opposed to, the best interest of the Company, except that no
indemnification shall be made in a case in which such person shall have been
adjudged to be liable to the Company unless and only to the extent that the
court in which the proceeding was brought, shall determine upon application
that, despite the adjudication of liability but in view of all circumstances
of the case, such person is fairly and reasonably entitled to indemnity for
such expenses.
Indemnification as described above shall only be granted in a specific
case upon a determination that indemnification is proper under the
circumstances using the applicable standard of conduct which is made by (a) a
majority of a quorum of directors who were not parties to such proceeding,
(b) if such a quorum is not attainable or by majority vote of a committee
designated by the Board of Directors consisting of two or more directors not
parties to the proceeding, (c) by independent legal counsel selected by the
Board of Directors described in the foregoing parts (a) and (b), or if a
quorum cannot be obtained, then selected by a majority vote of the full Board
of Directors, or (d) by the shareholders by a majority vote of a quorum
consisting of shareholders who are not parties to such proceeding.
Section 607.0850(12) of the Florida Business Corporation Act permits the
Company to purchase and maintain insurance on behalf of any director,
officer, employee or agent of the Company (or is or was serving at the
request of the Company in specified capacities) against any liability
asserted against such person or incurred by such person in any such capacity
whether or not the Company has the power to indemnify such person against
such liability.
ARTICLES OF INCORPORATION
The Articles of Incorporation of the Company (the "Articles") provide for
the indemnification of directors and officers of the Company to the fullest
extent permitted by Section 607.0850 of the Florida Business Corporation Act.
The Articles of Incorporation further provide that the indemnification
provided for therein shall not be exclusive of any rights to which those
indemnified may be entitled under any bylaw, agreement, vote of shareholders
or disinterested directors, or otherwise.
The Articles also contain a provision that eliminates the personal
liability of the Company's directors to the Company for monetary damages
unless the director has breached his or her fiduciary duty and such breach
constitutes or includes certain violations of criminal law, a transaction
from which the director derived an improper personal benefit, certain
unlawful distributions or certain other
II-1
<PAGE>
reckless, wanton or wilful acts or misconduct. This provision does not alter
a director's liability under the federal securities laws. In addition, this
provision does not affect the availability of equitable remedies, such as an
injunction or rescission, for breach of fiduciary duty.
SECURITIES AND EXCHANGE COMMISSION POLICY
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers or persons controlling the Company, the
Company has been informed that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is therefore unenforceable.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses* in connection with the issuance of the securities
being registered are as follows:
SEC Registration Fee ............................... $ 3,869.12
NASD Filing Fee .................................... 972.00
NASDAQ Listing Fee ................................. 6,675.00
3% Non-Accountable Expenses ........................ 101,250.00
Printing Expenses .................................. 35,000.00
Accounting Fees and Expenses ....................... 80,000.00
Legal Fees and Expenses ............................ 125,000.00
Blue Sky Fees and Expenses ......................... 60,000.00
Transfer Agent and Registrar Fees and Expenses .... 20,000.00
Miscellaneous ...................................... 10,000.00
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Total ............................................ $442,766.12
===========
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* All amounts, except the SEC registration fee and the NASD filing fee, are
estimated.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
The Company did not sell any shares of Common Stock during the past three
years.
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<PAGE>
ITEM 27. EXHIBITS.
(A) EXHIBITS.
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<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
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<S> <C>
1 Form of Underwriting Agreement between the Company and the Underwriters*
3.1 Amended and Restated Articles of Incorporation of the Company***
3.2 Bylaws of the Company***
3.3 Articles of Amendment to Amended and Restated Articles of Incorporation***
3.4 Amended and Restated Bylaws of the Company***
4.1 Form of Common Stock Certificate***
4.2 Form of Warrant Agreement*
4.3 Form of Purchase Option Agreement*
4.4 Form of Underwriter's Warrant*
4.5 Form of Underwriter's Option Certificate
5 Opinion of Akerman, Senterfitt & Eidson, P.A.***
10.1 Loan Agreement between the Company and SunTrust Bank Miami, N.A., dated July 26, 1996***
10.2 Lease Agreement between the Company and RSB Holdings, Inc., dated July 15, 1996***
10.3 Promissory Note between the Company and U.S. Advantage, dated July 15, 1995***
10.4 Form of 1996 Stock Option Plan***
10.5 Form of Employment Agreement between the Company and Slav Stein***
10.6 Form of Employment Agreement between the Company and Roman Briskin***
10.7 Form of Convertible Subordinated Promissory Note from the Company to Messrs. Stein and Briskin***
10.8 Form of Stock Option Agreement between the Company and Messrs. Stein and Briskin*
10.9 Form of Mahoney Consulting Agreement***
10.10 Form of Financial Advisory Agreement*
10.11 Form of Contingent Stock Option Agreement between the Company and Messrs. Stein and Briskin*
21 List of Subsidiaries***
23.1 Consent of Akerman, Senterfitt & Eidson, P.A. (included in Exhibit 5)***
23.2 Consent of BDO Seidman, LLP***
23.3 Consent of KPMG Bohlins AB***
27 Financial Data Schedule (for the Securities and Exchange Commission purposes only)***
e
</TABLE>
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* Filed herewith.
** Identical to exhibit 10.5.
*** Previously filed.
ITEM 28. UNDERTAKINGS.
(a) The undersigned small business issuer hereby undertakes to provide to
the underwriters at the closing specified in the underwriting agreement,
certificates in such denominations and registered in such names as required
by the underwriters to permit prompt delivery to each purchaser.
(b) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of
II-3
<PAGE>
expenses incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent, submit
to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
(c) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under Securities Act, the
information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of Prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of Prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(d) The undersigned small business issuer hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or together, represent
a fundamental change in the information in the registration statement; and
notwitstanding the forgoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed
that which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in the volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Miami, State of
Florida, on the 31st day of January, 1997.
ADVANCED ELECTRONIC SUPPORT PRODUCTS, INC.
By: /s/ SLAV STEIN
------------------------------------
Slav Stein, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacity and on the dates indicated:
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<CAPTION>
SIGNATURE TITLE DATE
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<S> <C> <C>
/s/ SLAV STEIN President and Director January 31, 1997
Slav Stein (and for execution purposes in the
capacity as Chief Executive Officer)
/s/ ROMAN BRISKIN Vice President and Director January 31, 1997
Roman Briskin (and for execution purposes in the
capacity as Chief Financial Officer)
/s/ TERRENCE R. DAIDONE Director January 31, 1997
Terrence R. Daidone
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
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<S> <C>
1 Form of Underwriting Agreement between the Company and the Underwriters
4.2 Form of Warrant Agreement
4.3 Form of Purchase Option Agreement
4.4 Form of Underwriter's Warrant
4.5 Form of Underwriter's Option Certificate
10.8 Form of Stock Option agreement between the Company and Messrs. Stein and Briskin
10.10 Form of Financial Advisory Agreement
10.11 Form of Contingent Stock Option Agreement between the Company and Messrs. Stein and Briskin
</TABLE>
ADVANCED ELECTRONIC SUPPORT PRODUCTS, INC.
750,000 Shares of Common Stock
750,000 Redeemable Common Stock Purchase Warrants
UNDERWRITING AGREEMENT
As of _______________, 199_
CORPORATE SECURITIES GROUP, INC.
980 North Federal Highway, Suite 210
Boca Raton, Florida 33432
ARGENT SECURITIES, INC.
3340 Peachtree Road, Suite 450
Atlanta, Georgia 30326
Gentlemen:
Advanced Electronic Support Products, Inc., a Florida corporation (the
"Company") confirms its agreement with Corporate Securities Group, Inc., a
Florida corporation, and Argent Securities, Inc., a Georgia corporation
(collectively, the "Representatives") as representatives and members of the
group of several underwriters, if any, named in Schedule I attached hereto (the
"Underwriters" or "you", and if there is no Schedule I attached, all references
in this Agreement to the "Underwriters" or "you" shall be deemed to refer only
to the Representatives) as follows:
1. THE SHARES AND THE WARRANTS. Subject to the terms and conditions set
forth herein, the Company proposes to sell to you on a "firm commitment" basis,
an aggregate of 750,000 shares ("Shares") of the Company's authorized but
unissued common stock, par value $.001 per share (the "Common Stock") and
750,000 Redeemable Common Stock Purchase Warrants, (the "Warrants"), each
Warrant entitling the holder thereof to purchase one share of Common Stock at an
exercise price of per share pursuant to a warrant agreement (the "Warrant
Agreement") between the Company and Continental Stock Transfer & Trust ("Warrant
Agent"). The Company also proposes to grant to you an option to purchase up to
an additional 112,500 shares of Common Stock and 112,500 Warrants for the sole
purpose of covering over-allotments, if any (the "Option Securities"). The
Shares and the Warrants are sometimes collectively referred to herein as the
"Firm Securities". The Firm Securities and the Option Securities are more fully
described in the Registration Statement and the Prospectus referred to herein
and are hereinafter sometimes collectively referred to as the "Securities."
2. REGISTRATION STATEMENT AND PROSPECTUS. A registration
statement on Form SB-2 (File No. 333-15967) together with exhibits and including
a preliminary form of prospectus for the registration of the Securities, has
been prepared by the Company in conformity with the requirements of the
Securities Act of 1933, as amended, and all applicable instructions, rules and
regulations (collectively, the "Securities Act") of the Securities and Exchange
Commission
<PAGE>
(the "Commission"), and has been filed with the Commission. There have been
delivered to you, copies of each Preliminary Prospectus and the Final
Prospectus. Such registration statement, including the Prospectus, Part II, any
documents incorporated by reference therein and all financial schedules and
exhibits thereto, as amended at the time when it shall become effective, is
herein referred to as the "Registration Statement," and the prospectus included
as part of the Registration Statement on file with the Commission when it shall
become effective or, if the procedure in Rule 430A of the Rules and Regulations
(as defined below) is followed, the prospectus that discloses all the
information that was omitted from the prospectus on the effective date of the
Registration Statement pursuant to such rule, and in either case, together with
any changes contained in any prospectus filed with the Commission by the Company
with your consent after the effective date of the Registration Statement, is
herein referred to as the "Final Prospectus." If the procedure in Rule 430A is
followed, the prospectus included as part of the Registration Statement on the
date when the Registration Statement became effective is referred to herein as
the "Effective Prospectus." Any prospectus included in the Registration
Statement of the Company and in any amendments thereto prior to the effective
date of the Registration Statement is referred to herein as a "Pre-Effective
Prospectus." For purposes of this Agreement, "Rules and Regulations" mean the
rules and regulations adopted by the Commission under either the Securities Act
or the Securities Exchange Act of 1934 (the "Exchange Act"), as applicable.
3. AGREEMENTS TO SELL AND PURCHASE.
(a) FIRM SECURITIES. The Company agrees to sell to you, and
upon the basis of the representations, warranties and agreements of the Company
herein contained and subject to the terms and conditions hereof, you shall
purchase from the Company, the Shares at a purchase price of $_____ per Share
and the Warrants at a purchase price of $____ per Warrant. This purchase price
of the Shares and the Warrants represents the public offering price of such
securities, less a discount, equaling ten percent (10%), that the Company has
agreed to allow the Underwriter. All or any portion of such discount may be
reallowed by you for sales through licensed securities dealers who are members
of the National Association of Securities Dealers, Inc. (the "NASD").
(b) OPTION SECURITIES. The Company also grants you an option
to purchase, upon your written notice to the Company, the Option Securities for
the sole purpose of covering over-allotments, if any, at the purchase price and
on the same terms as set forth in the preceding paragraph. The Option Securities
may be purchased, in whole or in part, at any time for a period of forty-five
(45) days following the effective date of the Registration Statement. The notice
from you to the Company shall specify the number of Option Securities to be
purchased and the date and time of payment and delivery thereof (the "Option
Closing Date"). You, as the Underwriters, in your sole discretion, shall
determine the number of Option Securities, if any, to be purchased as provided
herein. Such over-allotment option shall not be exercised more than on one
occasion.
2
<PAGE>
(c) UNDERWRITERS' PURCHASE OPTION. On the Closing Date (as
defined herein), the Company shall further issue and sell to you or, at your
direction, to your bona fide officers and directors, an option (the
"Underwriters' Purchase Option") pursuant to the Purchase Option Agreement for
the purchase of an aggregate of 75,000 shares of Common Stock (the
'Underwriters' Shares") and 75,000 Common Stock Purchase Warrants (the
"Underwriters' Warrants") for an aggregate purchase price of $75.00. The
Underwriters' Purchase Option shall be exercisable at any time during the four
year period commencing one-year after the effective date of the Registration
Statement (the "Term"), at a price of equal to 130% of the respective public
offering price of the Shares and the Warrants. For a period of one (1) year
after the effective date of the Registration Statement, the Underwriters'
Purchase Option (and the Purchase Option Securities, as hereinafter defined) may
not be sold, assigned, transferred, pledged or hypothecated except to officers
of the Underwriters or members of the selling group. Such transfers will only be
made if they do not violate the registration provisions of the Securities Act.
The Underwriters' Purchase Option and the Purchase Option Securities shall be
transferable after one year from the effective date of the Registration
Statement pursuant to available exemptions from registration (if not otherwise
covered by an effective registration statement) under the Securities Act,
provided, however, that the Underwriters' Purchase Option may not be transferred
to a direct competitor of the Company without the Company's prior written
consent. Except as otherwise set forth in the Purchase Option Agreement, you may
designate that the Underwriters' Purchase Option be issued in varying amounts
directly to your officers and not the Underwriters, and to other underwriters,
if any, and their designees. Such designation will be made by you only if you
determine that such issuances would not violate the interpretation of the Board
of Governors of the NASD relating to the review of corporate financing
arrangements. The Underwriters' Shares, the Underwriters' Warrants and the
shares of Common Stock underlying the Underwriters' Warrant (collectively
sometimes referred to herein as the "Purchase Option Securities") shall be
entitled to piggyback and demand registration rights acceptable to you and your
counsel and as set forth in the Purchase Option Agreement.
4. DELIVERY AND PAYMENT. Delivery of and payment for the Firm
Securities shall be made at 10:00 A.M., Miami Time, on ____________, 199 (such
time and date are referred to herein as the "Closing Date") at the offices of
Corporate Securities Group, Inc., 980 North Federal Highway, Suite 210, Boca
Raton, Florida 33432. The Closing Date and the time and the place of delivery of
and payment for the Firm Securities may be varied by agreement between you and
the Company.
If you elect to purchase and take delivery of any Option
Securities, delivery of and payment for such Option Securities shall be made at
said office or at such place as may be agreed upon in writing by you and the
Company, on the Option Closing Date, which may be the same as the Closing Date
but shall in no event be earlier than the Closing Date or earlier than one or
later than ten business days after the giving of the written notice referenced
in Section 3 hereof from you to the Company of the determination to purchase a
number, specified in said notice, of Option Securities. Such notice may be given
by you to the Company at any time within forty-five (45) days after the date of
the Final Prospectus. The Option Closing Date
3
<PAGE>
may be varied by agreement between you and the Company. On the Option Closing
Date, if any, there shall be delivered to you supplemental opinions and
certificates, dated such Option Closing Date, to the same effect as those
required to be delivered on the Closing Date pursuant to Section 8 hereof. The
Closing Date and the Option Closing Date are hereinafter collectively referred
to as the "Closing Date."
Delivery of certificates for the shares of Common Stock which
comprise the Shares and the certificates for the Warrants (in definitive form
and registered in such names and in such denominations as you shall request
prior to the Closing Date) shall be made to you against payment of the purchase
price therefor by certified or official bank check or checks payable to the
order of the Company in the amount of $_____. For the purpose of expediting the
checking and packaging of certificates for the Shares and the Warrants, the
Company and agrees to make such certificates available for inspection at least
24 hours prior to the Closing Date. Time shall be of the essence and delivery at
the time and place specified in this Agreement is a further condition to the
obligations of the Underwriter.
5. COVENANTS AND AGREEMENTS OF THE COMPANY. The Company further
covenants and agrees with you as follows:
(a) FILING OF REGISTRATION STATEMENT. The Company shall use
its best efforts to cause the Registration Statement to become effective or, if
the procedure in Rule 430A of the Rules and Regulations is followed, comply with
the provisions of and make all requisite filings with the Commission pursuant to
such Rules and Regulations. The Company will give you advance notice of its
intention to file or make any amendment or post-effective amendment to the
Registration Statement or any amendment or supplement to the Prospectus and will
submit all such amendments or supplements to you and to your counsel as soon as
possible, but not later than five (5) business days before the Company proposes
to file such amendments or supplements with the Commission. The Company will not
file any such amendment or supplement to which you shall reasonably object in
writing within a reasonable time after being furnished copies thereof. The
Company will not allow the Registration Statement to be declared effective by
the Commission without your approval.
(b) NOTICE TO UNDERWRITERS. The Company will advise you
promptly and confirm that advice in writing (i) when any post-effective
amendment to the Registration Statement shall have become effective, (ii) of the
mailing or the delivery to the Commission for filing of any amendment or
post-effective amendment to the Registration Statement or any amendment or
supplement to the Prospectus, (iii) of any request by the Commission for
amendment or supplement to the Registration Statement or the Prospectus, or for
additional information, immediately supplying you with copies of all comment
letters and all other correspondence with the Commission, (iv) of the issuance
by the Commission of any stop order suspending effectiveness of the Registration
Statement or of the suspension of the qualification of the Securities for
offering or sale in any jurisdiction, or of the initiation or threat of any
proceeding for any such purpose, (v) of the issuance by any state securities
commission or other regulatory authority of any order suspending the
qualification or the exemption from qualification
4
<PAGE>
of the Securities under state securities or Blue Sky laws or the initiation or
threat of any proceedings for that purpose and (vi) of the happening of any
event during the period mentioned in Section 5(d) hereof that makes any
statement made in the Registration Statement or the Prospectus untrue in any
material respect or which requires the making of any changes in the Registration
Statement or the Prospectus in order to make the statements therein not
misleading in any material respect. The Company will use its best efforts to
prevent the issuance of any stop order or suspension order and to obtain the
withdrawal of any such stop order or suspension order at the earliest possible
moment.
(c) NASDAQ LISTING. On the effective date of the Registration
Statement, the Common Stock and the Warrants shall be listed for quotation on
the NASDAQ SmallCap Market, and the Company shall use its best efforts to
maintain such listing for not less than five (5) years, provided, however, that
the Company may withdraw the listing of its securities on the NASDAQ if the
Company lists Common Stock and the Warrants on the NASDAQ National Market System
or on the New York or American Stock Exchange. In addition to the foregoing, the
Company shall, pursuant to Schedule D of the NASD By-Laws, prepare and file with
NASD any required notification along with applicable fees to list the Securities
on the NASDAQ system. The Company shall, as required, prepare and file as
promptly as practicable a Report by Issuer of Securities Quoted on NASDAQ
Interdealer Quotation System on Form 10-C (or any successor form) with respect
to the shares of Common Stock and the Warrants.
(d) POST-EFFECTIVE AMENDMENT. Within the time during which a
Final Prospectus relating to the Securities is required to be delivered under
the Securities Act, the Company shall comply with all requirements imposed upon
it by the Securities Act and by the Rules and Regulations, as from time to time
in force, so far as is necessary to permit the continuance of sales of or
dealings in the Securities as contemplated by the provisions hereof and the
Final Prospectus. If at any time when a prospectus relating to the Securities is
required to be delivered under the Securities Act, any event occurs as a result
of which, in the judgment of the Company and its counsel, the Prospectus as then
amended or supplemented would include any untrue statement of a material fact,
or omit to state a material fact necessary to make the statements therein, in
light of the circumstances under which made, not misleading in any material
respect, or if it is necessary at any time to amend or supplement the Prospectus
to comply with the Securities Act or any other applicable law, the Company will
promptly notify you, and the Company shall promptly prepare and file with the
Commission an amendment or supplement to the Registration Statement which will
correct such statement or omission, or an amendment or supplement which will
effect such compliance, and deliver to you in connection therewith such
prospectus or prospectuses in such quantity as may be necessary to permit
compliance with the requirements of the Securities Act.
(e) BLUE SKY QUALIFICATION. Prior to any public offering of
the Securities by you, the Company will endeavor in good faith, using your
counsel, and in cooperation with you and your counsel in taking such action as
may be necessary to register or qualify the Securities for offer and sale under
the applicable securities or Blue Sky laws of any states or jurisdictions of the
United States as you may reasonably designate and will maintain such
qualifications in
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effect for so long as may be required for the distribution of the Securities.
The foregoing shall be subject to the reasonable consent of the Company as to
any state or jurisdiction that seeks to impose an escrow requirement with
respect to insiders' shares or some other restrictive condition upon the Company
that exceeds the insiders lock-up provision of Section 5(h) (other than because
no escrow is required herein) or a comparable condition contained herein. Copies
of all applications and related documents for the registration or qualification
of securities (except for the Registration Statement and Prospectus) filed with
the various states shall be sent to the Company's counsel not later than the
next business day following their transmission to the various states, and copies
of all comments and orders received from the various states shall be made
available to the Company's counsel. As information is received from various
states and immediately prior to the effective date of the Registration
Statement, counsel for the Underwriters shall advise counsel for the Company in
writing of all states where the offering has been registered or qualified for
sale or has been canceled, withdrawn or denied, the date(s) of such event(s),
and the number of Securities (and amount of other securities, if any) registered
or qualified for sale in each state. The Company shall be responsible for the
cost of state registration filing fees and legal fees and expenses of
Underwriters' counsel in connection with such filings, which filing fees shall
be paid to Underwriters' counsel in advance of such filings. The Underwriters'
counsel's legal fees with respect to blue sky filing shall be $1,000 for each
state in which application for registration or qualification is made, up to an
aggregate of $35,000 for all states combined. All outstanding fees and expenses
of the Underwriters' counsel shall be paid by the Company on or prior to the
Closing Date.
The Company shall, as soon as practicable after the Closing
Date, apply for listing in Standard and Poor's Stock Guide and use its best
efforts to effect and maintain such listing for at least five (5) years. The
Company further agrees, no later than the Closing Date, to engage, the services
of an investor relations firm reasonably acceptable to the Representatives and
to maintain such services from the date of engagement for two (2) years
following the Closing Date. Further, the Company shall engage for a period of
two years at least three firms (one of which shall be Argent Securities, Inc.
and one of which shall be Standard & Poor's Stock Reports Professional Edition)
which are reasonably acceptable to the Representatives to provide industry
research and advice to the Company.
(f) INFORMATION TO THE UNDERWRITERS. The Company will deliver
to you, for a period of at least five (5) years from the Closing Date: (i) as
soon as practicable, but in any event within ninety-five (95) days after the
close of each fiscal year of the Company, or as soon thereafter as practicable,
a financial report of the Company and its subsidiaries, if any, on a
consolidated basis, and a similar financial report of all unconsolidated
subsidiaries, if any, all such reports to include a balance sheet as of the end
of the preceding fiscal year, a statement of operations, a statement of changes
in financial condition and a statement of stockholders' equity covering such
fiscal year, and all to be in reasonable detail and certified by independent
public accountants who may, however, be the regularly employed independent
public accountants of the Company; (ii) within one hundred and five (105) days
after the end of each quarterly fiscal period of the Company, other than the
last quarterly fiscal period in any fiscal year, or as soon thereafter as
practicable, copies of the consolidated statement of operations, the statement
of
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stockholders' equity and statement of changes in financial condition for that
period, and the balance sheet as of the end of that period of the Company and
its subsidiaries, if any, the statement of operations, the statement of
stockholders' equity and statement of changes in financial condition and the
balance sheet of each unconsolidated subsidiary, if any, of the Company for that
period, all subject to year-end adjustment, certified by the principal financial
or accounting officer of the Company; (iii) copies of all other statements,
documents, or other information which the Company shall mail or otherwise make
available to any class of its security holders, to the financial press or to the
public, or shall file with the Commission, including, but not limited to
periodic reports required to be filed under Sections 13 and 15 of the Exchange
Act, in particular Forms 10-K, 10-Q and 8-K (which shall be provided within the
same period such reports are required to be filed with the Commission); (iv) a
copy of each "weekly position sheet" generated by the Depository Trust
Corporation pursuant to a subscription for such service that the Company shall
maintain at its expense; and (v) upon request in writing, such other information
as may reasonably be requested with reference to the property, business,
stockholders and affairs of the Company and its subsidiaries, if any.
(g) SECTION 11(A) EARNINGS STATEMENT. The Company will, as
promptly as possible after the close of each fiscal year of the Company, prepare
and distribute reports to its stockholders which will include audited statements
of its operations and changes of financial position during such period and its
balance sheet as of the end of such period. The Company will make generally
available to its stockholders and will deliver to you, as soon as practicable,
but in no event later than the first day of the 15th full calendar month
following the effective date of the Registration Statement, an earnings
statement (which need not be audited but which will satisfy the provisions of
Section 11(a) of the Securities Act) covering a period of at least twelve (12)
months beginning after the effective date of the Registration Statement.
(h) LOCK-UP AGREEMENTS. The Company will cause each of its
officers, directors, holders of the Company's Common Stock, any other persons
deemed to be "affiliates" as defined in Rule 144 under the Securities Act and
Tim Mahoney immediately prior to the effective date of the Registration
Statement, to agree in writing (the "Lock-Up Agreement") that: (i) such person
shall not sell, including a short sale or sale against the box, or otherwise
dispose of any shares of the Common Stock owned directly, indirectly, or
beneficially (as defined by the Exchange Act and the Rules and Regulations
promulgated thereunder) by him, her or it for a period of twenty-four (24)
months from the effective date of the Registration Statement ("Lock-Up Period")
without the Underwriters' prior written consent; and (ii) such person will
permit all certificates evidencing his, her or its shares of Common Stock and/or
Warrants to be affixed with an appropriate restrictive legend, and will cause
the transfer agent for the Company to note such restrictions on the transfer
books and records of the Company. Additionally, for a period of forty-eight (48)
months following the effective date of the Registration Statement, the Company's
officers, directors, shareholders and affiliates will agree to sell any shares
of Common Stock it so desires to sell through the Representatives if the price
and terms of execution offered by the Representatives are at least as favorable
as may be obtained from other brokerage firms. On or before the effective date,
the Company shall have furnished to the Representatives the Lock-Up Agreements,
which shall be in a form reasonably acceptable to the
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Representatives and which shall be duly executed, and shall be valid and binding
obligations of such persons enforceable against such persons in accordance with
their respective terms.
(i) ISSUANCE OF ADDITIONAL SECURITIES. For a period of
twenty-four (24) months (or such earlier date if the Underwriters' Purchase
Option has been exercised in full) commencing on the Closing Date, except with
the written consent of the Underwriters, which consent shall not be unreasonably
withheld, the Company will not issue or sell, directly or indirectly, any shares
of its capital stock, or sell or grant options, or warrants or rights to
purchase any shares of its capital stock, except pursuant to (i) this Agreement,
(ii) the Underwriters' Purchase Option and the Underwriters' Warrants, (iii)
warrants and options of the Company heretofore issued and described in the
Prospectus, and (iv) the grant of options and the issuance of shares issued upon
exercise of options issued or to be issued under the Company's stock option plan
which is described in the Prospectus; except that, during such period, the
Company may issue securities in connection with an acquisition, merger or
similar transaction, provided that such securities are not publicly registered
or issued pursuant to Regulation S of the Act, and the acquirer of the
securities is not granted registration rights with respect thereto which are
effective prior to 24 months after the Closing Date and until the Underwriters'
Purchase Option is exercised, and the Representatives grant their consent.
Notwithstanding anything to the contrary set forth in the prior sentence, the
Company may not issue any class or series of Preferred Stock for a period of 24
months from the Closing Date without the unanimous vote or consent of all
members of the Board of Directors of the Company. Prior to the Closing Date, the
Company will not issue any options or warrants without the prior written consent
of the Underwriters.
(j) PRESS RELEASES. For a period commencing on the date hereof
and ending two years after the date of the Prospectus, neither the Company nor
any of its officers or directors will issue news releases or permit other such
publicity about the Company regarding the financial condition or any significant
event of the Company without the approval of the Company's legal counsel named
in the Prospectus under the heading "Legal Opinions," or such other counsel as
may be approved by you. During such period, the Company will deliver to you
copies of such news releases or other publicity about the Company promptly after
distribution thereof.
(k) UNDERWRITERS' COPIES. The Company will promptly deliver to
you, without charge: (i) two complete copies (one of which is manually signed)
of the Registration Statement, as originally filed, and of each amendment
thereto, and of each post-effective amendment thereto filed at any time when a
prospectus relating to the Securities is required to be delivered under the
Securities Act, in each such case manually executed by the proper officers and a
majority of the directors of the Company (or, in case of amendments, by their
duly constituted attorneys-in-fact) and including signed copies of each consent
of experts named in the Registration Statement and all financial statements,
schedules and exhibits filed therewith (including those incorporated by
reference to the extent not previously furnished to you), and (ii) such number
of conformed copies of the Registration Statement, as originally filed, and of
each amendment and post-effective amendment thereto (in each such case excluding
exhibits), as you may
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reasonably require. The Company will promptly deliver, without charge, to you or
such others whose names and addresses are designated by you as soon as possible
after the effective date of the Registration Statement, and thereafter from time
to time during the period when delivery of a prospectus relating to the
Securities is required by the Securities Act, as many printed copies as you may
reasonably request of the Final Prospectus and of any amended or supplemented
prospectus. The Company will promptly deliver, without charge, as soon as
practicable following the public offering or sale of the Securities, and
thereafter from time to time for such period as delivery of a prospectus or any
amendment or supplement thereto may be required, to you or any dealers to whom
Securities may be issued, as many copies as you reasonably request of the
Prospectus and any amendment or supplement thereto.
(l) NASD MATTERS. The Company shall supply your counsel with
the following as appropriate to satisfy the NASD filing requirements: (i) such
copies of any amendment or supplement to the Registration Statement and the
preliminary prospectus or Final Prospectus; and (ii) the statutory filing fee in
the form of a certified or cashier's check. The Company shall further supply to
your counsel, no later than one (1) week before the effective date of the
Registration Statement, a written representation as to (i) the existence or
nonexistence of any NASD affiliation or association of any officer, director, or
five percent (5%) or greater shareholder of the Company, and, if a shareholder
of the Company is a corporation, the existence or nonexistence of any direct or
indirect NASD affiliation or association of any officer, director, or five
percent (5%) or greater shareholder of such corporation, (ii) whether or not any
unregistered securities of the Company have been acquired by any NASD affiliated
persons during the twelve (12) month period prior to filing the Registration
Statement, and (iii) whether or not key-man life insurance has been or will be
provided for any officer or director of the Company by any NASD affiliate.
(m) EXPENSES. Whether or not the transactions contemplated by
this Agreement are consummated or this Agreement becomes effective or is
terminated, the Company shall bear all costs and expenses incident to the
issuance, offer, sale, and delivery of the Securities, including, but not
limited to, stock transfer taxes, all expenses and fees incident to the filing
of the Registration Statement and the registration statements with the
Commission pursuant to the Securities Act and the Exchange Act, the costs,
filing fees and reasonable counsel fees related to qualification under state
securities laws, fees and disbursements of counsel and accountants for the
Company, NASD filing fees, NASDAQ system fees, costs of preparing and printing
the Registration Statement and as many copies of the preliminary prospectus and
Prospectus as you may reasonably deem necessary, including all amendments and
supplements to the Registration Statement, and the printing, delivery, and
shipping of this Agreement and other underwriting documents, including
underwriters' questionnaires, underwriters' powers of attorney, Blue Sky
memoranda, and selected dealers' agreements, the cost of printing certificates
representing the Shares and the Warrants, the costs and charges of the Transfer
Agent and Warrant Agent, and all other costs and expenses incident to the
performance of its obligations hereunder which are not otherwise provided for in
this Agreement. The Company shall also bear all costs of holding informational
meetings and "road shows" to acquaint securities dealers with the affairs of the
Company. The Company, at its sole expense, shall make a representative of its
management
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available at the offices of the Underwriters, at mutually convenient times,
prior to the effective date of the Registration Statement and shall likewise
make representatives available at the Company for due diligence or other
informational meetings. The Company will also pay the reasonable out-of-pocket
travel expenses of the Underwriters and their counsel or the professionals
designated by the Underwriters to visit the Company's facilities (as well as
those of any significant supplier to, or customer of, the Company) for purposes
of discharging their due diligence responsibilities. The Prospectus (preliminary
and definitive) shall be printed by a financial printer selected by the Company
and approved by the Underwriters. The Company agrees to supply the Underwriters
(within ten weeks of the Closing Date) at the Company's sole cost and expense up
to ten (10) bound volumes of all the documents, papers and exhibits,
correspondence and records forming the materials included in the public
offering, and up to fourteen (14) Lucite cubes containing a miniature definitive
Prospectus. In addition, the Company agrees to pay for all pre- and post-closing
advertisements relating to the public offering.
In addition to the foregoing, the Company shall reimburse you
for your expenses on the basis of a nonaccountable expense allowance in the
amount of 3% of the gross offering proceeds; all of your costs in excess of the
nonaccountable expense allowance shall be paid by you. Expenses to which the
allowance shall be applied include fees of your counsel, but shall not include
the following: fees of the Company's counsel; Commission or state filing fees;
reasonable Blue Sky counsel fees and expenses; NASD filing fees; NASDAQ listing
fees; printing; tombstone advertisements; and any and all other expenses
customarily paid by the issuer in a public offering. The Company represents that
such payment will be made in full. The Company further agrees to pay to the
Underwriters any costs or expenses, including attorneys' fees, incurred or
resulting from any demands or causes of actions brought by the Underwriters or
by third parties against the Underwriters for the Company's failure to comply
with any provisions of this Underwriting Agreement.
Notwithstanding any other provisions of this Agreement, if (i)
(a) there is a material adverse change in the business or financial condition of
the Company, (b) there exists any material misrepresentation of the Company
contained herein or otherwise, (c) you discover in the course of your due
diligence examination of the Company facts which you determine, in your sole
discretion, could materially adversely affect the sale of the Securities, or (d)
market conditions, in your sole judgment, do not justify an offering on the
terms set forth in the Registration Statement, and in any such event you elect
to terminate the underwriting or (ii) there is any judicial, administrative or
other regulatory or governmental judgment, decree, order, injunction or similar
action or proceeding enjoining, suspending, prohibiting, limiting or otherwise
restricting you from engaging in underwriting activities or sales of securities,
and in any such event you elect to terminate the underwriting, the Company,
agrees that in addition to paying the Company's own expense, you will be
entitled to be reimbursed by us, on an accountable basis, for all of its
accountable out-of-pocket costs incurred in connection with the offering of
securities contemplated by the Registration Statement. Furthermore, if the
Company should fail to pay the agreed upon amounts set forth above to you, your
successors or assigns,
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the Company, shall, furthermore, be liable to you for reasonable attorney's fees
and costs incurred in the collection of said amounts.
(n) TRANSFER SHEETS. The Company shall furnish to you a list
of the names and addresses of all stockholders subsequent to the Closing Date
and shall cause the Transfer Agent to furnish to you a copy of all transfer
sheets for a period of three years from the later of the Closing Date or the
Option Closing Date.
(o) UNDERTAKINGS AND USE OF PROCEEDS. The Company will comply
with all of the undertakings contained in the Registration Statement and shall
apply the net proceeds of the sale of the Securities substantially in accordance
with the description set forth in the Prospectus.
(p) FINANCIAL ADVISORY AGREEMENT. On the Closing Date, the
Company shall execute a Financial Advisory Agreement with the Representatives
for financial consulting services, which may include (i) advising the Company in
connection with possible acquisitions (ii) facilitating shareholder
communications and relations, and (iii) advising and assisting the Company with
long-term financial planning, corporate reorganization, expansion and capital
structure and other financial matters. Such agreement shall have a term of two
years and provide for compensation of $2,000 per month which amount shall be
prepaid in full on the Closing Date. The Financial Advisory Agreement shall
further provide that if the Representatives, directly or indirectly, introduces
the Company, during the term of such agreement, to any person or entity that
during the term thereof or within 18 months following the term thereof, provides
any investment capital, loan or any other equity or debt financing to the
Company or any affiliate thereof, or becomes a party to a merger, acquisition,
joint venture, private placement or other similar transaction with the Company
or any affiliate thereof, then the Company shall pay to the Representatives a
cash finder's fee. Each cash finder's fee payable to the Representatives under
this Agreement shall be calculated as a percentage of the Transaction Value (as
defined herein and therein) in accordance with the following scale:
6% on the first $5,000,000 of the Transaction Value;
5% on the amount from $5,000,001 to $6,000,000; 4% on
the amount from $6,000,001 to $7,000,000; 3% on the
amount from $7,000,001 to $8,000,000; 2% on the
amount from $8,000,001 to $9,000,000; 1% on the
amount in excess of $9,000,000.
"Transaction Value" shall mean the aggregate value of all
cash, securities and other property (i) paid to the Company, its affiliates or
their shareholders in connection with any transaction referred to above
involving any investment in or acquisition of the Company or any affiliates (or
the assets of either), (ii) paid by the Company or any affiliate in any such
transaction involving an investment in or acquisition of another party or its
equity holdings by the Company or any affiliate, or (iii) paid or contributed by
the Company or any affiliate and by the other party or parties in the event of
any such transaction involving a merger,
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consolidation, joint venture or similar joint enterprise or undertaking. The
value of any such securities (whether debt or equity) or other property shall be
the fair market value thereof as determined by mutual agreement of the Company
and the Representatives or by an independent appraiser jointly selected by the
Company and the Representatives.
(q) EXCHANGE ACT REGISTRATION. The Company shall prepare and
file a registration statement with the Commission pursuant to Section 12(g) of
the Exchange Act. Such registration statement under the Exchange Act shall be
declared effective contemporaneously with the effectiveness of the Registration
Statement. The Company shall comply with the Securities Act, the Exchange Act
and the Rules and Regulations promulgated thereunder, the applicable rules and
regulations of the NASD and applicable states securities laws so as to permit
the continuance of sales of and dealings in the Securities in compliance with
applicable provisions of such laws, rules, and regulations, including the filing
with the Commission and the NASD of all reports required to be so filed by each,
and the Company will deliver to the holders of the shares all reports required
to be provided to such holders pursuant to such laws, rules, or regulations. The
Company will use its best efforts to maintain its registration under the
Exchange Act in effect for a period of five (5) years from the Closing Date.
(r) REDEMPTION AND DIVIDENDS. For a period of two years from
the Closing Date, the Company shall not, either directly or through a
subsidiary, (i) redeem or purchase any of its securities outstanding as of the
Closing Date, other than redemptions of the Warrants as permitted by the Warrant
Agreement, or that may be required in connection with possible termination of
employment with the Company under the terms of employment agreements in effect
on the Closing Date, or redemptions as otherwise provided for herein, or (ii)
pay any dividends, or make any other cash distribution in respect of its
securities, in excess of the amount of the Company's current or retained
earnings derived after the Closing Date, without the prior written consent of
the Representatives, which consent may be withheld for any reason. The
Representatives shall either approve or disapprove, in writing of such
contemplated stock redemption or dividend or distribution within five (5)
business days after the date the Representatives receive written notice of the
proposed action. Failure by the Representatives to provide a response to within
such five (5) day period shall be deemed to be an approval of the redemption or
dividend.
(s) DESIGNATION OF A DIRECTOR AND ATTENDANCE AT BOARD
MEETINGS. The Representatives shall have the right, for the five (5) year period
following the Closing Date, to designate two nominees (the "Nominees") for
election to the Company's Board of Directors. The officers, directors, and
principal shareholders of the Company shall agree in writing at or prior to the
Closing Date to vote all shares of voting capital stock owned by them (or over
which they have the power to direct the vote) during such five-year period in
favor of the election of the Nominees. In the alternative and at its option, the
Representatives shall have the right, during such five-year period, to have a
representative (the "Attendee") attend all meetings of the Board of Directors of
the Company, which meetings shall be held at least quarterly. The aforementioned
provision notwithstanding, the Company shall not be obligated to designate
Nominees after the Underwriters' Purchase Option and the Underwriters' Warrants
have been
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exercised in full. The number of board members may be increased from time to
time up to five (5) members. Any nominee for directorship (including re-election
to another term) shall be approved by the Representatives prior to his or her
election, which approval shall not be unreasonably withheld. The Company shall
reimburse the Underwriters' Nominees or Attendee for his or her out-of-pocket
expenses reasonably incurred and authorized in advance by the Company in
connection with his or her attendance of the Board meetings and a fee of $1,000
per month. The Nominees or Attendee shall also be entitled to participate in any
Stock Option Plans of the Company for non-employees. To the extent permitted by
law, the Company agrees to indemnify and hold the Nominees and the
Representatives harmless against any and all claims, actions, awards and
judgments arising out of his or her service as a director and in the event the
Company maintains a liability insurance policy affording coverage for the action
of its officer and directors, to include such Nominees and the Representatives
as an insured under such policy.
(t) AMENDMENTS TO EMPLOYMENT AND LOCK-UP AGREEMENTS. The
Company shall not amend or alter any term of any written employment agreement
nor Lock-Up Agreement between the Company and any executive officer (or
director), during the term thereof, in a manner more favorable to such employee,
without the express written consent of the Representatives until such time as
the Underwriters' Purchase Option and Underwriters' Warrants have been exercised
in full.
(u) WARRANT SOLICITATION. Commencing one (1) year from the
date hereof, upon the exercise of any Warrant, the exercise of which was
solicited by the Underwriters in accordance with the applicable rules and
regulations of the NASD prevailing at the time of such solicitation, the Company
shall pay to the soliciting Underwriter a fee of 5% of the aggregate exercise
price of such Warrant (the "Warrant Solicitation Fee") within five (5) business
days of such exercise, so long as the Underwriters provided bona fide services
in exchange for the Warrant Solicitation Fee and the Underwriters have been
specifically designated in writing by the holders of the Warrants as the broker.
The Company further agrees that it will not solicit the exercise of any Warrant
other than through the Underwriters, unless either: (i) the Underwriters cannot
legally solicit the exercise of the Warrants at the time of such solicitation;
(ii) the Representatives declines, in writing, to solicit the exercise of the
Warrants within five (5) business days of such a written request by the Company;
or (iii) the Representatives consents to the solicitation of the exercise of the
Warrants by the Company or another entity.
(v) INTERNAL ACCOUNTING CONTROLS. The Company will continue to
maintain a system of internal accounting controls sufficient to provide
reasonable assurance that: (i) transactions are executed in accordance with
management's general or specific authorization; (ii) transactions are recorded
as necessary in order to permit preparation of financial statements in
accordance with generally accepted accounting principles and to maintain
accountability for assets; (ii) access to assets is permitted only in accordance
with management's general or specific authorization; (iv) the recorded
accountability for assets is compared with existing assets at reasonable
intervals and appropriate action is taken with respect to any differences, and
(v)
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all quarterly reports filed on Form 10-Q shall be reviewed by the Company's
accountant in accordance with SAS71.
(w) CORPORATE GOVERNANCE. The Company, for a period of
twenty-four (24) months following the Effective Date (or such earlier date if
the Representative has exercised in full the Underwriters' Purchase Option and
the Underwriters' Warrants) shall implement the following procedures:
(i) Sixty days prior to fiscal year end, the
President will present to the Board of Directors a business plan to be adopted
by the Board of Directors at fiscal year end. The business plan will include the
following:
(a) monthly projections - including balance
sheet, profit/loss statement with underlying assumptions; and
(b) upon board approval, this document
becomes the annual budget.
(ii) No later than the 20th day of each month,
the Company will provide the Board with comparative financial statements for
the previous month showing actual balance sheet, profit/loss and cash flow vs.
budget with written explanation for deviation in excess of $50,000 or 10% of
line item presented.
(iii) Monthly Board meetings (which may be by
telephone) by the 25th of each month to include discussion of the Monthly Report
and approval of any changes to the business plan based on change of
circumstances.
(iv) Implementation of a compensation committee,
which will be headed by an outside director, to make recommendations to the
Board for compensation for all outside consultants, officers and outside
directors.
(v) Implementation of an audit committee which
will be headed by an outside directors.
6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to you that:
(a) ACCURACY OF REGISTRATION STATEMENT AND PROSPECTUS. To its
knowledge, the Commission has not issued any order preventing or suspending the
use of any preliminary prospectus or Prospectus, no proceedings for that purpose
have been instituted and each preliminary prospectus filed as part of the
Registration Statement as originally filed or as part of any amendment thereto
or filed pursuant to Rule 424 under the Securities Act in all material respects,
at the time of the filing thereof, complied with the Securities Act and did not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; when the Registration Statement becomes
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effective, and when the Prospectus is filed with the Commission, and at
all times subsequent thereto up to and including the Closing Date and the Option
Closing Date, or for such longer period as the Prospectus is required under the
Securities Act to be delivered in connection with sales by you or a dealer
selected by you, the Registration Statement and the Prospectus and any
amendments or supplements thereto will comply with the Securities Act; when the
Registration Statement becomes effective, the Registration Statement will
contain all statements required to be stated therein in accordance with the
Securities Act and will not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein not misleading; and when the Prospectus is filed with the
Commission, it will contain all statements required to be stated therein in
accordance with the Securities Act and will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; PROVIDED, HOWEVER, that the Company makes
no representations or warranties as to information contained in or omitted from
any preliminary prospectus or the Registration Statement or the Prospectus or
any such amendment or supplement in reliance upon and in conformity with written
information (or oral information to the extent such information relates to the
private ongoing investigation of you by the Commission) furnished to the Company
with respect to you by or on behalf of you expressly for use with reference to
you (or any person who may be deemed to be affiliated with you or an associated
person of yours) in connection with the preparation thereof.
(b) FINANCIAL STATEMENTS. The financial statements and the
related schedules and notes included in the Registration Statement and in the
Prospectus present fairly the financial position, results of operations and
changes in financial position of the Company and its subsidiaries, at the dates
and for the periods specified therein. The accountants who have audited the
financial statements filed with the Commission as a part of the Registration
Statement and the Prospectus are independent accountants with respect to the
Company as required by the Securities Act. The pro forma financial statements
included in the Registration Statement and the Prospectus present fairly the
financial position and results of operation of the Company at the dates and for
the periods specified therein.
(c) NO ADVERSE CHANGE. Except as reflected in the Registration
Statement and in the Prospectus or any amendment or supplement thereto, since
the respective dates as of which information is given in the Registration
Statement and in the Prospectus or any amendment or supplement thereto and prior
to the Closing Date, or Option Closing Date, as the case may be, the Company has
conducted its business in substantially the same manner as of November 8, 1996,
and neither the Company nor any of its subsidiaries have incurred, or will have
incurred, any liabilities or obligations, direct or contingent (other than in
the normal course of business except as disclosed in the Registration
Statement), and there has not been any change in the capital stock, short-term
debt (other than in the normal course of business) or long-term debt of the
Company or its subsidiaries or any adverse change, or any development involving
a change in the condition (financial or otherwise), net worth, results of
operations, the affairs or business prospects of the Company or its
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subsidiaries, which might be adverse to the Company or its subsidiaries and no
event has occurred concerning the Company or its subsidiaries and which might
result in an adverse change or effect in or on the general affairs, management,
financial position, stockholders' equity or results of operations of the Company
or its subsidiaries except as disclosed in the Registration Statement.
(d) AUTHORITY. This Agreement, the Warrant Agreement and the
Underwriters' Purchase Option have been duly authorized and validly executed and
delivered by the Company, and are legal, valid and binding agreements of the
Company enforceable against the Company, in accordance with their respective
terms.
(e) INCORPORATION AND STANDING. Each of the Company and its
subsidiaries, is a corporation duly organized and validly existing in good
standing under the laws of the jurisdiction of its incorporation and is duly
registered or qualified to do business and is in good standing as a foreign
corporation in each jurisdiction that requires such qualification and in which
the failure to qualify could have a material adverse effect on the Company and
its subsidiaries, taken as a whole. Each of the Company and its subsidiaries has
full power and authority (corporate, governmental, regulatory and other) to own
and lease its properties and to conduct its business as described in the
Registration Statement and in the Prospectus and has corporate power and
authority (corporate, governmental, regulatory and other) to enter into this
Agreement and to issue the Underwriters' Purchase Option and the Purchase Option
Securities. The Company has no subsidiaries other than its subsidiaries
disclosed in the Registration Statement and in the Prospectus. A complete and
correct copy of the Articles of Incorporation of the Company and the Articles of
Incorporation or Memorandum of Association of each subsidiary, as the case may
be, each as certified by the Secretary of the State of Florida or such other
jurisdiction of incorporation, and the bylaws of the Company, and the bylaws, of
each subsidiary, as currently in effect, and as certified by the Secretary of
the Company and each subsidiary, respectively, has been delivered to you, and no
changes therein will be made subsequent to the date hereof and prior to the
Closing Date or the Optional Closing Date.
(f) NO DEFAULTS. Neither the Company nor any of its
subsidiaries is in material violation of its corporate charter or bylaws,
respectively, and, except as disclosed in the Registration Statement and the
Prospectus, in material default in any respect in the performance of any
material obligation, agreement, covenant or condition contained in any bond,
debenture, note or any other evidence of indebtedness or in any indenture,
mortgage, deed of trust or other agreement or instrument of any of them or by
which any of their respective property is bound, and there exists, and through
the Closing Date and the Optional Closing Date, if any, there shall exist no
condition which, with the passage of time or otherwise, would constitute a
default under any such agreement or instrument or result in the imposition of
any penalty or acceleration of any indebtedness. No other party (to the
knowledge of the Company after investigation) under any agreement or instrument
referred to in the immediately preceding sentence to which the Company or its
subsidiaries is a party or by which their respective property is bound is in
default in any material respect thereunder. The execution and delivery of this
Agreement, the Warrant
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Agreement and the Purchase Option Agreement, the issue and sale of the
Securities, the Underwriters' Purchase Option and the Purchase Option Securities
and the compliance by the Company with all of the provisions of this Agreement,
the Warrant Agreement and the Purchase Option Agreement, will not conflict with
or result in a material breach or violation of any of the terms and provisions
of, or constitute a material default (or an event which with notice or lapse of
time, or both, would constitute a default) under, or result in the creation or
imposition of any material lien, charge or encumbrance upon any of the property
or assets of the Company or any of its subsidiaries pursuant to the terms of,
any material indenture, mortgage, deed of trust, loan agreement, lease or other
agreement or instrument to which the Company or any of its subsidiaries is a
party or by which the Company or any of its subsidiaries is bound or to which
any of the property or assets of the Company or any of its subsidiaries are
subject (and no consent under any thereof which has not been obtained is
required for any such action), nor will such action result in a material
violation of the provisions of the certificate of incorporation or bylaws of the
Company or any of its subsidiaries, or any statute or any order, rule or
regulation of any court or governmental agency or body having jurisdiction over
the Company or any of its subsidiaries or any of their respective property; and
no consent, approval, authorization, order, registration or qualification of or
with any court or any regulatory authority or other governmental body is
required for the issue and sale of the Securities, the Underwriters' Purchase
Option and Purchase Option Securities or in connection with the consummation of
the other transactions contemplated by this Agreement, the Warrant Agreement and
the Purchase Option Agreement, except such consents, approvals, authorizations,
registrations or qualifications as may be required under applicable Federal and
state securities or Blue Sky laws in connection with the purchase and
distribution of the Securities by you and the purchase of the Underwriters'
Purchase Option and Purchase Option Securities.
(g) CAPITAL STOCK. The authorized, issued and outstanding
capital stock of the Company and its subsidiaries conforms to the descriptions
thereof in the Registration Statement and in the Prospectus. The issued and
outstanding capital stock has been duly and validly authorized and issued, is
fully paid and nonassessable and is free of preemptive or, with the exception of
the Warrants, redemption rights. There are no outstanding options, warrants, or
other rights calling for the issuance of, and no commitment, plan or arrangement
to issue or to register, any share of capital stock of the Company or any
security convertible into or exchangeable for capital stock of the Company other
than as disclosed in the Registration Statement and the Prospectus. No holder of
any securities of the Company has the right to require registration of shares of
the Common Stock or other securities of the Company by reason of the filing of
the Registration Statement or otherwise, except as set forth in the Registration
Statement. The Company covenants and agrees that it will not amend any of its
stock option plans to increase the number of shares of Common Stock granted
under any of such option plans for a period two (2) years from the effective
date of the Registration Statement without the prior written consent of the
Representatives.
(h) LEGALITY OF SECURITIES. The Securities have been duly
authorized by the Company and conform to the descriptions thereof in the
Registration Statement and in the Prospectus. The Securities when sold and paid
for in accordance with the terms of this Agreement, will be duly and validly
issued, fully paid and nonassessable and free of preemptive and, with the
exception of the Warrants, redemption rights.
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(i) UNDERWRITERS' PURCHASE OPTION. The Underwriters' Purchase
Option and the Purchase Option Securities conform to the description thereof in
the Registration Statement and in the Prospectus and, when sold to and paid for
by you, will be duly authorized, will be validly issued and will be the valid
and binding obligation of the Company. The Underwriters' Purchase Option and
Purchase Option Securities have been duly and validly authorized and reserved
for issuance upon exercise of the Underwriters' Purchase Option and the
Underwriters' Warrant and, when issued upon such exercise in accordance with
terms at the price therein provided, will be validly issued, fully paid and
nonassessable and free of preemptive and redemption rights.
(j) PROPERTY. The Company and each of its subsidiaries has
good and marketable title to all properties and assets described in the Final
Prospectus as being owned by it (including securities) that are material to
their respective businesses free and clear of all material liens, charges,
encumbrances or restrictions of every kind and nature, except such as are
disclosed in the Registration Statement and in the Prospectus and except for
taxes not yet due, materialmen's, workmen's and other similar liens incurred in
the ordinary course of business which, individually or in the aggregate, do not
have a materially adverse effect on the value or use of such properties or
assets in the hands of the Company or any of its subsidiaries taken as a whole
and any other liens which, individually or in the aggregate, are not material to
the Company and its subsidiaries taken as a whole. The Company and each of its
subsidiaries owns or leases all such properties, real, personal and mixed,
tangible and intangible, as are necessary to carry on its operations as
heretofore conducted and, except as otherwise stated in the Registration
Statement and in the Prospectus, as proposed to be conducted, as set forth in
the Registration Statement and in the Prospectus.
(k) LITIGATION. Except as set forth in the Registration
Statement and in the Prospectus, there is not now pending or, to the knowledge
of the Company, threatened (i) any action, suit or proceeding to which the
Company or any of its subsidiaries or any of their respective officers or
directors is or will be a party or of which the business or property of the
Company or any of its subsidiaries is or will be the subject before or by any
court or governmental agency or body which might materially adversely affect the
condition (financial or other), business or prospects of the Company or any of
its subsidiaries, or might materially adversely affect the properties or assets
of the Company or any of its subsidiaries taken as a whole, (ii) any actions,
suits or proceedings related to environmental matters or related to
discrimination on the basis of age, sex, religion, race or national origin
except as disclosed in the Registration Statement and the Prospectus, (iii) any
existing or threatened labor disturbance by the employees of the Company or any
of its subsidiaries which might be expected to materially adversely affect the
conduct of the business, property, operations, financial condition or earnings
of the Company or any of its subsidiaries, or (iv) any material contingent
liability.
(l) TAX RETURN. Except as set forth in the Registration
Statement and in the Prospectus, the Company and each of its subsidiaries,
has filed, or has obtained currently effective extensions for, all necessary
federal, state, municipal and foreign income and franchise tax returns and has
paid all taxes shown as due thereon (or has obtained currently effective
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extensions); and, except as set forth in the Registration Statement and in the
Prospectus, neither the Company nor any of its subsidiaries has knowledge of any
tax deficiency which has been or might be asserted against the Company or any of
its subsidiaries which would materially adversely affect the business or
operations of the Company and any of its subsidiaries taken as a whole.
(m) PRIOR SALES. No securities of the Company have been sold
by the Company or by, or on behalf of, or for the benefit of the Company within
three years prior to the date hereof, except as set forth in the Registration
Statement or Prospectus.
(n) AUTHORIZATIONS. Except as disclosed in the Registration
Statement and the Prospectus, the Company and each of its subsidiaries have such
franchises, licenses, permits, approvals and other governmental authorizations
required for the present conduct of its business, such franchises, licenses,
permits, approvals and other governmental authorizations are in full force and
effect and the Company and its subsidiaries are in material compliance therewith
and the Company and its subsidiaries have not received notice of conflict with
the asserted rights of others in respect thereof. Except as set forth in the
Registration Statement and in the Prospectus, (i) the expiration of any material
contract, agreement, franchise, license, permit, approval or other governmental
authorization would not materially adversely affect the operation of the Company
or its subsidiaries, and (ii) none of the activities, businesses or properties
of the Company or its subsidiaries is in material violation of, or could cause
the Company or its subsidiaries to violate, any law, rule, regulation, or order
of the United States, any state, county or other jurisdiction, or of any agency
thereof.
(o) EXHIBITS. There are no material contracts, agreements or
other documents required to be described in the Registration Statement or in the
Prospectus or to be filed as exhibits to the Registration Statement by the
Securities Act which have not been described or filed as required, and neither
the Company nor its subsidiaries is in material violation of, and no material
default exists in the performance, observance or fulfillment of, any material
obligation, agreement, covenant or condition contained in any of such contracts,
agreements or documents except as disclosed in the Registration Statement and
the Prospectus.
(p) FINDER OR BROKER. The Company has not retained or dealt
with any broker or finder with respect to the transactions contemplated hereby,
and the Company knows of no outstanding claims for services in the nature of a
finder's fee or origination fee with respect to the sale of the Securities. The
Company will indemnify and hold harmless the Underwriters with respect to any
claim for a finder's fee by any party claiming to be owed such fee based on
contacts, conversations or arrangements with the Company. Furthermore, as set
forth in the Registration Statement and in the Prospectus, the Company has no
management or financial consulting agreement with anyone. Except as set forth in
the Registration Statement and in the Prospectus or otherwise disclosed to you
in writing prior to the date hereof, no promoter, officer, director or five
percent or greater stockholder of the Company is, directly or indirectly,
associated with an NASD member broker/dealer.
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(q) INTERNAL ACCOUNTING CONTROLS. The books, records and
accounts of the Company and its subsidiaries, if any, accurately and fairly
reflect, in reasonable detail, the transactions and dispositions of the assets
of the Company and its subsidiaries, as the case may be. The system of internal
accounting controls maintained by the Company and its subsidiaries is sufficient
to provide reasonable assurances that (i) transactions are executed in
accordance with management's general or specific authorization, (ii)
transactions are recorded as necessary (a) to permit preparation of financial
statements in conformity with generally accepted accounting principles and (b)
to maintain accountability for assets, (iii) access to assets is permitted only
in accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
difference.
(r) PATENTS. The Company and each of its subsidiaries have
such proprietary know-how, and such patents and governmental or other
authorizations as currently are required for their respective businesses and the
Company and each of its subsidiaries are, except as set forth in the
Registration Statement, in all respects in compliance with such patents and
governmental or other authorizations. Except as set forth in the Prospectus, the
services performed or products sold by the Company or its subsidiaries do not
violate or infringe any patent or governmental or other authorizations held or
owned by any third party. Neither the Company nor its subsidiaries has received
from or on behalf of any third party, any notice of violation or infringement of
or conflict with the rights of such third party with respect to any such patents
or governmental or other authorizations owned or used by the Company or its
subsidiaries.
(s) 1940 ACT MATTERS. Neither the Company nor any of its
subsidiaries will be operated so as to become an "investment company" or a
person "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
(t) STABILIZATION. Neither the Company, its subsidiaries, nor
any of their respective officers, directors or affiliates (as defined under the
Securities Act) have taken, directly or indirectly, any action to cause or
result in, or which has constituted, or might reasonably be expected to
constitute, the stabilization or manipulation of the price of the Common Stock
to facilitate the sale or the resale thereof, within the meaning of the
Securities Act or the Exchange Act.
(u) REASON FOR SALE. The sale of the Securities by the Company
pursuant to this Agreement is not prompted by any information concerning the
Company which is not set forth in the Registration Statement.
(v) EMPLOYMENT AGREEMENTS. The employment agreements between
the Company and its officers described in the Registration Statement are valid,
binding and enforceable obligations upon the respective parties thereto in
accordance with their respective terms, subject to the effect of bankruptcy or
similar proceedings and the effect and application of general principles of
equity.
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(w) LIQUIDATION. The Company's articles of incorporation
provide that (A) any liquidation of the Company, or (B) any business combination
in which the Company is not the surviving corporation or any sale of all or
substantially all of its assets (which combination or sale occurs during the
five-year period immediately following the Closing Date): (i) must be approved
by a vote of the holders of a majority of the outstanding shares of the capital
stock entitled to vote; and (ii) all "affiliates," as such term is defined in
Rule 144 promulgated under the Securities Act, of the Company on the Closing
Date shall agree to vote, during the two-year period immediately following the
closing date of the Public Offering, all shares of voting capital stock of the
Company owned by them (or over which they have the power to direct the vote) in
the same proportion as the votes cast by non-affiliates voting shares of the
same class or series, with respect to the above-referenced matters on which a
vote of stockholders is taken.
(x) ADDITIONAL REPRESENTATIONS. (i) no director, officer, or
key employee of the Company has been convicted of any felony, experienced a
personal bankruptcy, or been an officer, director, or key employee of any
company that during their tenure with such company experienced any bankruptcy
other than as disclosed to the Representatives in writing and disclosed in the
Registration Statement as required, or had any trustee, receiver, or conservator
appointed with respect to its business or assets; (ii) prior to the Closing
Date, the Company has not repaid (or agree to repay), other than in the ordinary
course of business or as disclosed in the Registration Statement, any
indebtedness to any of its shareholders (or incur any indebtedness with any
other lender, any part of the proceeds of which is to be used to repay
indebtedness to any of its shareholders) unless the terms thereof have been
approved in advance by the Underwriters, nor has the Company make any other
extraordinary distributions or payments to its shareholders (other than
distributions to Messrs. Stein and Briskin in the amount of the income tax
withholding payments for the Company's income payable by them due to the
Company's status as an S corporation as set forth in the Registration
Statement); and (iii) no more than an aggregate of $200,000 may be paid from the
proceeds of the offering to Messrs. Stein and Briskin in satisfaction of the
Principal Stockholder's Notes described in the Registration Statement, provided,
however, that if the Underwriters exercise, in full, the over-allotment option,
the Company may prepay an additional $100,000 in the aggregate, toward such
notes.
7. INDEMNIFICATION.
(a) BY COMPANY. The Company agrees to indemnify and hold
harmless you and each person, if any, who controls you within the meaning of
Section 15 of the Securities Act or Section 20(a) of the Exchange Act, from and
against any and all losses, liabilities, claims, damages and expenses (including
but not limited to reasonable attorneys' fees and any and all reasonable
expenses incurred in investigating, preparing or defending against any claim
whatsoever, and any and all amounts paid in settlement of any claim or
litigation), joint or several, to which you or they or any of them may become
subject under the Securities Act, the Exchange Act or otherwise, insofar as such
losses, liabilities, claims, damages or expenses (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of a material fact contained in the Registration Statement, as originally filed
or any
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amendment thereof, or any related preliminary prospectus or the Prospectus, or
in any supplement thereto or amendment thereof, or in any blue sky application
or other document executed by the Company specifically for that purpose or based
upon written information furnished by the Company filed in any state or other
jurisdiction in order to qualify any or all of the Securities under the
securities laws thereof (any such application, document or information being
hereinafter called a "Blue Sky Application") or arise out of or are based upon
any omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading in any
material respect, or arise out of or are based upon any failure of the Company
to comply with any provision of this Underwriting Agreement resulting in a claim
or loss to the Underwriters. Notwithstanding the preceding sentence, the Company
will not be liable in any such case to the extent, but only to the extent that,
any such loss, liability, claim, damage or expense arises out of or is based
upon any such untrue statement or alleged untrue statement or omission or
alleged omission made therein in reliance upon and in conformity with written
information furnished to the Company by or on behalf of you expressly for use
therein. This indemnity agreement will be in addition to any liability which the
Company may otherwise have, including under this Agreement. The Company agrees
to pay any reasonable legal or other expenses for which it is liable under this
subsection from time to time (but not more frequently than monthly) within 30
days after its receipt of a bill therefor; and further provided, however, that
the foregoing provisions are subject to the condition that, insofar as they
relate to any untrue statement, alleged untrue statement, omission or alleged
omission made in any Preliminary Prospectus but eliminated or remedied in the
Prospectus, such indemnity provision shall not inure to you or any person who
controls you within the meaning of Section 15 of the Securities Act or Section
20(a) of the Exchange Act if a copy of the Prospectus was not sent or given to
such person with or prior to the written confirmation of sale of such Securities
to such person. This indemnity agreement will be in addition to any liability
which the Company may otherwise have.
(b) BY UNDERWRITERS. You agree to indemnify and hold harmless
the Company, each of the officers of the Company who shall have signed the
Registration Statement and each other person, if any, who controls the Company
within the meaning of Section 15 of the Securities Act or Section 20(a) of the
Exchange Act, from and against any and all losses, liabilities, claims, damages
and reasonable expenses whatsoever (including but not limited to attorneys' fees
and any and all reasonable expenses whatsoever incurred in investigating,
preparing or defending against any litigation, commenced or threatened, or any
claim whatsoever, and any and all amounts paid in settlement of any claim or
litigation), joint or several, to which they or any of them may become subject
under the Securities Act, the Exchange Act or otherwise, insofar as such losses,
liabilities, claims, damages or expenses (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement, as originally filed or
any amendment thereof, or any related preliminary prospectus or the Prospectus,
or in any amendment thereof or supplement thereto, or in any Blue Sky
Application, or arise out of or are based upon the omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, in each case to the extent, but only
to the extent, that any such loss, liability, claim, damage or expense arises
out of or
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is based upon any such untrue statement or alleged untrue statement or omission
or alleged omission made therein in reliance upon and in conformity with written
information furnished to the Company by you expressly for use therein; PROVIDED,
HOWEVER, that in no case shall you be liable or responsible for any amount in
excess of the underwriting discounts and commissions received by you, as set
forth on the cover page of the Prospectus. You agree to pay any legal or other
expenses for which you are liable under this subsection (b) from time to time
(but not more frequently than monthly) within 30 days after receipt of a bill
therefor. This indemnity agreement will be in addition to any liability which
you may otherwise have.
(c) PROCEDURES IN CASE OF INDEMNIFICATION. Promptly after
receipt by an indemnified party under subsection (a) or (b) above of notice of
the commencement of any action or proceeding (including any governmental
investigation), such indemnified party shall, if a claim in respect thereof is
to be made against the indemnifying party under such subsection, notify each
party against whom indemnification is to be sought in writing of the
commencement thereof (but the failure so to notify an indemnifying party shall
not relieve it from any liability which it may have under this Section 7 except
to the extent that it has been prejudiced in any material respect by such
failure or from any liability which it may have otherwise). In case any such
action is brought against any indemnified party, and it notifies an indemnifying
party of the commencement thereof, the indemnifying party shall assume the
defense thereof, including the employment of counsel reasonably satisfactory to
the indemnified party and the payment of all expenses. Notwithstanding the
foregoing, the indemnified party or parties shall have the right to employ its
or their own counsel in any such case, but the fees and expenses of such counsel
shall be at the expense of such indemnified party or parties unless (i) the
employment of such counsel shall have been authorized in writing by one of the
indemnifying parties in connection with the defense of such action, (ii) the
indemnifying parties shall not have employed counsel reasonably satisfactory to
the indemnified party to have charge of the defense of such action within a
reasonable time after notice of commencement of the action, or (iii) such
indemnified party or parties shall have reasonably concluded and have been so
advised in a written opinion from counsel that there may be defenses available
to it or them which are different from or additional to those available to one
or all of the indemnifying parties (in which case the indemnifying parties shall
not have the right to direct the defense of such action on behalf of the
indemnified party or parties), in any of which events such fees and expenses
shall be borne by the indemnifying parties. Anything in this subsection to the
contrary notwithstanding, an indemnifying party shall not be liable for any
settlement of any claim or action effected without its written consent;
PROVIDED, HOWEVER, that such consent was not unreasonably withheld.
(d) CONTRIBUTION. In order to provide for contribution in
circumstances in which the indemnification provided for in Section 7(a) and (b)
hereof is for any reason held to be unavailable from the Company, or you, or is
insufficient to hold harmless a party indemnified thereunder, in lieu of
indemnifying such indemnified party, the Company, and you shall contribute to
the aggregate losses, claims, damages, liabilities and reasonable expenses of
the nature contemplated by such indemnification provisions (including any
investigation, legal and other reasonable expenses incurred in connection with,
and any amount paid in settlement of, any action, suit or proceeding or any
claims asserted, but after deducting in the case of losses,
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claims, damages, liabilities and reasonable expenses suffered by the Company or
you any contribution received by the Company or you from persons who may also be
liable for contribution, including persons who control the Company or you within
the meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange
Act, officers of the Company who signed the Registration Statement and directors
of the Company) to which the Company or you may be subject, in such proportions
as is appropriate to reflect the relative benefits received by the Company and
by you from the offering of the Securities or, if such allocation is not
permitted by applicable law or indemnification is not available as a result of
the indemnifying party not having received notice as provided in Section 7(d)
hereof in such proportion as is appropriate to reflect not only the relative
benefits referred to above but also the relative fault of the Company and you in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative benefits received by the Company and by
you shall be deemed to be in the same proportion as (a) the total proceeds from
the offering (before deducting expenses) received by the Company bear to (b) the
total underwriting discounts and commissions received by you in each case as set
forth in the table on the cover page of the Prospectus. The relative fault of
the Company and of you shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or by you or any agent expressly authorized by you to
supply such information and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and you agree that it would not be just and equitable if
contribution pursuant to this Section 7(d) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to above. Notwithstanding the provisions
of this Section 7(d), (i) in no case shall you be liable or responsible for any
amount in excess of the underwriting discount applicable to the Securities
purchased hereunder and (ii) no person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 7(e), each person, if any, who
controls an underwriter within the meaning of Section 15 of the Securities Act
or Section 20(a) of the Exchange Act shall have the same rights to contribution
as you, and each person, if any, who controls the Company within the meaning of
Section 15 of the Securities Act or Section 20(a) of the Exchange Act, each
officer of the Company who shall have signed the Registration Statement and each
director of the Company shall have the same rights to contribution as the
Company, subject in each case to clauses (i) and (ii) of this Section 7(e). Any
party entitled to contribution will, promptly after receipt of notice of
commencement of any action, suit or proceeding against such party in respect of
which a claim for contribution may be made against another party or parties
under this Section 7(e), notify such party or parties from whom contribution may
be sought, but the omission to so notify such party or parties shall not relieve
the party or parties from whom contribution may be sought from any obligation it
or they may have under Section 7(e) or otherwise. No party shall be liable for
contribution with respect to any action or claim settled without its consent;
PROVIDED, HOWEVER, that such consent was not unreasonably withheld. The
indemnity and contribution agreements contained in this Agreement shall remain
operative and in full force and effect regardless of (A) any investigation
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made by or on behalf of you or any person controlling you or by or on behalf of
the Company, (B) acceptance of any of the Securities and payment therefore or
(C) any termination of this Agreement. A successor to the Company, its directors
or officers or any person controlling the Company or to the Underwriter, shall
be entitled to the benefits of the indemnity, contribution, and reimbursement
agreements contained in this Section 7.
8. CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS. Your obligation to
purchase and pay for the Firm Securities on the Closing Date shall be subject to
the accuracy of and compliance with the representations and the warranties of
the Company herein contained and in each certificate and document contemplated
to be delivered to you hereunder as of the date hereof and the Closing Date, to
the performance by the Company of its obligations herein contained and to the
following additional terms and conditions:
(a) EFFECTIVE REGISTRATION STATEMENT. The Registration
Statement shall have become effective not later than 5:00 P.M., Miami time, on
the date of this Agreement, or at such later time or on such later date as you
may agree to in writing and any and all filings required by Rule 424 and Rule
430A of the Rules and Regulations shall have been made. At or prior to the
Closing, no stop order suspending the effectiveness of the Registration
Statement or the qualification or registration of the Securities under the Blue
Sky laws of any jurisdiction (whether or not a jurisdiction which you shall have
specified) shall have been issued and no proceeding for that purpose shall have
been initiated or shall be threatened by the Commission or the authorities of
any such jurisdiction. Any request for additional information on the part of the
Commission or any such authorities shall have been complied with to the
satisfaction of the Commission or such authorities and counsel for you. The
NASD, upon review of the terms of the public offering of the Securities, shall
not have objected to such offering, such terms, or your participation in the
same. After the date hereof no amendment or supplement shall have been filed to
the Registration Statement or the Prospectus without your prior written consent.
(b) ACCURACY OF REGISTRATION STATEMENT. No person shall have
discovered and advised the Company prior to the Closing Date that the
Registration Statement or Prospectus or any amendment or supplement thereto
contains an untrue statement of material fact which, in your opinion, is
material, or that the Registration Statement or any amendment or supplement
thereto omits to state a fact which, in your opinion after consultation with
legal counsel, is material and is required to be stated therein or is necessary
to make the statements therein not misleading or that the Prospectus or any
amendment or supplement thereto omits to state a fact which, in the opinion of
such counsel, is material and is required to be stated therein or is necessary
in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
(c) LITIGATION. Between the time of the execution and delivery
of this Agreement and the Closing, there shall be no material litigation
instituted against the Company, any of its subsidiaries or any of their
respective officers or directors, and between such dates there shall be no
proceeding instituted or threatened against the Company, any of its subsidiaries
or any of their respective officers or directors before or by any Federal,
state, county or local
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commission, regulatory body, administrative agency or other governmental body,
domestic or foreign, in which litigation or proceeding an unfavorable ruling,
decision or finding could materially adversely affect the Company, any of its
subsidiaries or their respective businesses, business prospects, properties,
financial conditions or results of operations.
(d) REVIEW BY UNDERWRITERS' COUNSEL. The authorization and
issuance of the Securities, the sale and delivery thereof, the Registration
Statement, the Prospectus and all other documents and corporate proceedings
incident thereto shall be satisfactory in all material respects to you and your
counsel, and your counsel shall be furnished on the Closing Date with such
documents and opinions as they may reasonably require for the purpose of
enabling them to pass upon the matters referred to in this Section 8(d).
(e) OPINION OF LEGAL COUNSEL. You shall have received an
opinion dated the effective date of the Registration Statement, and an updated
version of such opinion dated the Closing Date, satisfactory in form and
substance to you and your counsel, from Akerman, Senterfitt & Eidson, P.A.,
counsel for the Company, to the effect that:
(i) Each of the Company and its subsidiaries is a
corporation duly organized, validly existing, in good standing under
the laws of the jurisdiction of its respective incorporation and is
registered or qualified in good standing to do business as a foreign
corporation in each jurisdiction wherein the Company and its
subsidiaries own or lease any properties or conduct any business and in
which the failure to so qualify, could, in the aggregate, have a
material adverse effect on the business, properties or results of
operations of the Company and its subsidiaries taken as a whole. To
such counsel's knowledge after investigation, each of the Company and
its subsidiaries has corporate power and authority to own and lease its
properties and to conduct its business as described in the Registration
Statement and the Prospectus. The Company has no subsidiaries to the
knowledge of such counsel after investigation other than those
disclosed in the Registration Statement and the Prospectus.
(ii) The Registration Statement has become effective
under the Securities Act, and, (a) no stop order suspending the
effectiveness of the Registration Statement has been issued and no
proceedings for that purpose have been instituted or are, to the
knowledge of counsel after inquiry, threatened, pending or contemplated
under the Securities Act, except as may be disclosed in the Prospectus;
the Registration Statement and the Prospectus and each amendment or
supplement thereto (except for the financial statements, schedules and
other financial and statistical data included therein, as to which such
counsel need express no opinion) comply as to form in all material
respects with the requirements of the Securities Act; and (b) such
counsel has participated in the preparation of the Registration
Statement and the Prospectus and such counsel has no reason to believe
that either the Registration Statement, or any such amendment thereto,
at the time such Registration Statement or amendment became effective,
contained any untrue statement of a material fact or omitted to state
any material fact required to be stated therein or necessary to make
the statements therein not misleading,
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<PAGE>
or that the Prospectus, as of its date, or any supplement thereto as of
its date, contained any untrue statement of a material fact or omitted
to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading.
(iii) The Company has all requisite corporate power and
authority to enter into this Agreement and this Agreement has been
authorized, executed, and delivered by the Company and is a legal,
valid and binding agreement of the Company enforceable against the
Company in accordance with its terms, except (a) that this Agreement
may be subject to bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to creditors'
rights, (b) that the remedy of specific performance and injunctive and
other forms of equitable relief may be subject to equitable defenses
and to the discretion of the court before which any proceeding therefor
may be brought, and (c) as rights to indemnity and contribution
hereunder may be limited by federal or state securities laws or the
public policy underlying such laws.
(iv) The authorized, issued and outstanding capital
stock of the Company and all other outstanding securities of the
Company and its subsidiaries conform to the descriptions thereof in the
Registration Statement and in the Prospectus under the section entitled
"Description of Securities." The issued and outstanding capital stock,
prior to the issuance of the Securities sold by the Company hereunder,
has been authorized and validly issued, is fully paid and nonassessable
and is free of preemptive rights except as described in the Prospectus.
To the knowledge of such counsel after investigation, there are no
outstanding options, warrants, or other rights calling for the issuance
of, and no commitment, plan or arrangement to issue or register, any
share of capital stock of the Company or any security convertible into
or exchangeable for capital stock of the Company other than as
disclosed in the Registration Statement and the Prospectus.
(v) The Securities to be issued and sold to the
Underwriters by the Company have been authorized by the Company and
will conform in all material respects to the description thereof in the
Registration Statement and in the Prospectus. The Firm Securities, when
sold and fully paid for in accordance with the terms of this Agreement,
will be validly issued, fully paid and nonassessable and free of
preemptive rights. Such opinion delivered at the Closing Date shall
state that each of the Firm Securities is validly issued, fully paid
and non-assessable and not subject to preemptive rights.
(vi) The Purchase Option Agreement conforms to the
description thereof in the Registration Statement and in the Prospectus
and has been authorized, and when issued will be validly issued and
will be a valid and binding obligation of the Company. The
Underwriters' Purchase Option and the Purchase Option Securities have
been validly authorized and reserved for issuance upon exercise of the
Underwriters' Purchase Option and the Underwriters' Warrants and, when
issued upon such exercise
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<PAGE>
in accordance with the terms of the Purchase Option Agreement at the
price therein provided, will be validly issued, fully paid and
non-assessable and not subject to preemptive rights.
(vii) The certificates used to evidence the Securities,
the Underwriters' Purchase Option and the Purchase Option Securities
are each in due and proper form as required by the laws of the State of
Florida.
(viii) Neither the Company nor any of its subsidiaries
is in material violation of its corporate charter or bylaws,
respectively, or, to the knowledge of counsel after investigation, any
franchise, license, permit, judgment, decree, order, statute,
regulation, rule or ordinance of any court or administrative agency,
arbitration panel or authority applicable to the Company or any of its
subsidiaries except as described in the Prospectus, where the
consequences of any such violation would be material to the Company or
any of its subsidiaries. To the knowledge of such counsel after
investigation, except as described in the Prospectus neither the
Company nor any of its subsidiaries is in default in any material
respect in the performance of any material obligation, agreement,
lease, covenant or condition contained in any bond, debenture, note or
any other evidence of indebtedness or in any indenture, mortgage, deed
of trust or other material agreement or instrument (collectively, the
"Material Agreements") of which counsel after investigation, is aware
to which the Company or any of its subsidiaries, or by which the
Company's or any of its subsidiaries' properties are bound where the
consequences of any such default would be material and adverse to the
Company or any of its subsidiaries. To such counsel's knowledge after
investigation, there exists no condition which, with the passage of
time or otherwise, would constitute a material default under any
Material Agreement or instrument or result in the imposition of any
material penalty or acceleration of any material indebtedness.
(ix) The execution and delivery of this Agreement, the
Purchase Option Agreement, the Warrant Agreement, and the Financial
Advisory Agreement, the issuance and sale of the Securities, the
Underwriters' Purchase Option, and the Purchase Option Securities and
the compliance by the Company with all of the provisions of this
Agreement, the Purchase Option Agreement, the Warrant Agreement, and
the Financial Advisory Agreement, will not conflict with or result in a
breach or violation of any of the terms and provisions of, or
constitute a default (or an event which with notice or lapse of time,
or both, would constitute a default) under, or result in the creation
or imposition of any lien, charge or encumbrance upon any of the
property or assets of the Company or its subsidiaries pursuant to the
terms of any Material Agreement of the Company or any of its
subsidiaries or by which any of the Company's or its subsidiaries'
properties is bound, known to such counsel after investigation. To such
counsel's knowledge after investigation, there exists no condition
which, with the passage of time or otherwise, would constitute a
default under any such agreement or instrument or result in the
imposition of any penalty or acceleration of any such indebtedness,
where the consequences of any such default would be material and
adverse to the Company or any
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of its subsidiaries, nor will such action result in a violation of the
provisions of the corporate charter or bylaws of the Company or any of
its subsidiaries, or any statute or any order, rule or regulation of
any court or governmental agency or body having jurisdiction over the
Company or any of its subsidiaries or any of its or their properties,
where the consequences of any such violation would be material and
adverse to the Company and its subsidiaries. No consent, approval,
authorization, order, registration or qualification of or with any
court or any regulatory authority or other governmental body is
required for the issue and sale of the Securities, the Underwriters'
Purchase Option or the Purchase Option Securities or the consummation
of the other transactions contemplated by this Agreement, the Purchase
Option Agreement and the Warrant Agreement except the registration of
the Securities and, the Purchase Option Securities under the Securities
Act, and such consents, approvals, authorizations, registrations or
qualifications as may be required under state securities or Blue Sky
laws in connection with the purchase and distribution of the Securities
by you and the purchase of the Underwriters' Purchase Option by you.
(x) To the knowledge of such counsel after
investigation, the Company and each of its subsidiaries has such
licenses, registrations, permits, approvals, qualifications and
certificates of authority from the appropriate regulatory authorities
as are necessary to transact its business as described in the
Registration Statement and in the Prospectus in the jurisdictions in
which the Company and each of its subsidiaries transacts its business
or owns or leases property, and in which the failure to have such
licenses, registrations, permits, approvals, qualifications and
certificates could have a material adverse effect on the business,
properties or results of operation of the Company and its subsidiaries
taken as a whole.
(xi) To the knowledge of such counsel after
investigation, except as disclosed in the Registration Statement and in
the Prospectus, there is no pending or threatened material action, suit
or proceeding before or by any court or governmental agency or body or
arbitration panel, to which the Company or any of its subsidiaries or
any of their respective officers or directors is a party, or which any
property of the Company or any of its subsidiaries is subject, which
might result in a material adverse change in the business, financial
condition or results of operations or materially affect the properties
or assets of the Company or any of its subsidiaries taken as a whole.
(xii) Such counsel has reviewed all contracts referred
to in the Registration Statement and the Prospectus and such contracts
conform in all material respects to their descriptions therein. To the
knowledge of such counsel after investigation, no contracts or
documents of a character required to be described in the Registration
Statement or the Prospectus or to be filed as an exhibit to the
Registration Statement have not been so described or filed. Such
counsel does not know of any statutes or regulations or pending or
threatened legal or governmental proceedings required to be described
in the Prospectus which are not described as required.
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(xiii) To the knowledge of such counsel after
investigation, there are no holders of securities of the Company having
rights to the registration of shares of Common Stock or other
securities because of the filing of the Registration Statement by the
Company, except as disclosed in the Registration Statement and the
Prospectus.
(xiv) The sale of securities by the Company and/or its
subsidiaries described in Item 26, Part II of the Registration
Statement did not require registration under the Securities Act or any
state securities laws.
In giving such opinion, such counsel may rely as to
matters of fact upon statements and certifications of officers of the Company or
public officials as to matters of fact of which the maker of such certificate
has knowledge, and as to matters of law of jurisdictions other than Florida,
such counsel may rely on opinions of local counsel acceptable to you, copies of
which opinions shall be attached to the said opinion, provided, however, that
such counsel may not rely on an opinion if he has actual knowledge that such
opinion is not correct or knows that the facts or law on which the opinion of
local counsel is based are not correct.
(f) PRESIDENT'S CERTIFICATE. The Company shall have
furnished to you on the Closing Date a certificate of its President, or other
principal executive officer of the Company dated as of the Closing Date, to the
effect that:
(i) No stop order suspending the effectiveness of the
Registration Statement has been issued, and no proceedings for such
purpose have been commenced or are, to the knowledge of each signer of
such certificate, threatened or contemplated by the Commission; no stop
order suspending the qualification or registration of any of the
Securities under the Blue Sky laws of any jurisdiction (whether or not
a jurisdiction you shall have specified) has been issued, and no
material proceedings for such purpose have been commenced or are, to
the knowledge of each signer of such certificate after reasonable
inquiry, threatened or contemplated by any jurisdiction; and the
conditions, separately set forth in such certificate, contained in
Section 8 hereof have been complied with in all material respects.
(ii) The respective signers and each other member of
the Company's Board of Directors have each read the Registration
Statement and Prospectus and any amendments and supplements thereto,
and the Registration Statement and the Prospectus and any amendments
and supplements thereto and all statements contained therein are true
and correct in all material respects, and neither the Registration
Statement nor Prospectus nor any amendment or supplement thereto
includes any untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading and, since the effective date of the
Registration Statement, they are not aware of any event required to be
set forth in an amendment to the Registration Statement or a supplement
to the Prospectus which has not been so set forth.
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(iii) Except as reflected in the Registration Statement
and Prospectus or any amendment or supplement thereto, since the
respective dates as of which information is given in the Registration
Statement and Prospectus or any amendment or supplement thereto and
prior to the date of such certificate, (a) there has not been any
material adverse change, financial or otherwise, in the affairs or
condition of the Company and of its subsidiaries taken as a whole, and
(b) the Company has not incurred any material liabilities or
obligations, direct or contingent, or entered into any material
transactions, otherwise than in the ordinary course of business.
(iv) There are no legal proceedings pending or, to the
knowledge of the Company after reasonable inquiry, threatened against
the Company or any of its subsidiaries, of a character affecting the
validity of this Agreement or required to be disclosed in the
Prospectus which are not disclosed therein; there are no material
transactions or contracts which are required to be summarized therein
which are not so summarized; and there are no material contracts or
documents required to be filed as exhibits to the Registration
Statement which are not so filed.
(v) Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus,
no dividends or distribution whatever have been declared and/or paid on
or with respect to any securities of the Company.
(vi) Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus,
the Company has not sustained any material loss or damage to its
property, whether or not insured.
(vii) At and as of the Closing Date, the
representations and warranties contained in Section 6 of this Agreement
are true and correct in all material respects; the Company has complied
with all the agreements and has satisfied all the conditions on its
part to be performed or satisfied at or prior to the Closing Date, and
the matters set forth in Section 8 of this Agreement are true and
correct as therein set forth.
(g) CHIEF FINANCIAL OFFICER'S CERTIFICATE. The Company shall
have furnished to you on the Closing Date a certificate of its Chief
Financial Officer, or other principal executive financial officer or
accounting officer of the Company, dated as of the Closing Date, to the
effect that:
(i) To the knowledge of such officer after reasonable
inquiry no stop order suspending the effectiveness of the Registration
Statement has been issued, and no proceedings for such purpose have
been commenced or are, to the knowledge of each signer of such
certificate, threatened or contemplated by the Commission; no stop
order suspending the qualification or registration of any of the
Securities under the Blue Sky laws of any jurisdiction (whether or not
a jurisdiction you shall have specified) has been issued, and no
proceedings for such purpose have been commenced or are, to the knowl-
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edge of each signer of such certificate, threatened or contemplated by
any jurisdiction; and the conditions, separately set forth in such
certificate, contained in subsection 8 hereof have been complied with.
(ii) The Prospectus and any amendments and supplements
thereto and all statements contained therein are true and correct, and
to his knowledge, after reasonable inquiry, neither the Registration
Statement nor Prospectus nor any amendment or supplement thereto
includes any untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading and, since the effective date of the
Registration Statement, he is not aware of any event required to be set
forth in an amendment to the Registration Statement or a supplement to
the Prospectus which has not been so set forth.
(iii) Except as reflected in the Registration Statement
and Prospectus or any amendment or supplement thereto, since the
respective dates as of which information is given in the Registration
Statement and Prospectus or any amendment or supplement thereto and
prior to the date of such certificate, (a) there has not been any
material adverse change, financial or otherwise, in the affairs or
condition of the Company or any of its subsidiaries taken as a whole,
and (b) the Company has not incurred any material liabilities or
obligations, direct or contingent, or entered into any material
transactions, otherwise than in the ordinary course of business.
(iv) There are no material legal proceedings pending or
to his knowledge after reasonable inquiry, threatened against the
Company or any of its subsidiaries, of a character affecting the
validity of this Agreement or required to be disclosed in the
Prospectus which are not disclosed therein; there are no transactions
or contracts which are required to be summarized therein which are not
so summarized; and there are no material contracts or documents
required to be filed as exhibits to the Registration Statement which
are not so filed.
(v) Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus,
no dividends or distribution whatever have been declared and/or paid on
or with respect to any securities of the Company.
(vi) Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus,
the Company has not sustained any material loss or damage to its
property, whether or not insured.
(vii) At and as of the Closing Date, to his knowledge
after reasonable inquiry, the representations and warranties contained
in Section 6 of this Agreement are true and correct; the Company has
complied with all the agreements and has satisfied all the conditions
on its part to be performed or satisfied at or prior to the Closing
Date, and
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the matters set forth in Section 8 of this Agreement are true and
correct as therein set forth.
(h) ACCOUNTANT'S LETTER. You shall have received from the
independent certified public accountants that audited the financial statements
of the Company included in the Registration Statement, at least two letters each
addressed to you, substantially in the form heretofore approved by you, one
dated the effective date of the Registration Statement and the second, the
Closing Date.
(i) UNDERWRITERS' PURCHASE OPTION. The Company shall have
executed the Purchase Option Agreement and shall have delivered such properly
executed Underwriters' Option Certificates to you simultaneously with the
closing of the sale of the Firm Securities.
(j) LOCK-UP AGREEMENTS. You shall have received the
executed "lock-up" letters described in Section 5(h) of this Agreement.
(k) EMPLOYMENT AGREEMENTS. Prior to the effective date of the
Registration Statement, the Company will enter into and deliver to the
Underwriters employment agreements with Slav Stein and Roman Briskin, which
employment agreements will be subject to the Underwriters' approval.
(l) NASDAQ LISTING. The Common Stock and Warrants must
be qualified for listing on the Nasdaq SmallCap Market on the effective date of
the Registration Statement.
(m) BLUE SKY QUALIFICATION. The Securities shall be
qualified in such states as determined under Section 5(e) above and each
qualification shall be in effect and not subject to an stop order or other
proceeding on the Closing Date.
All such opinions, certificates, letters and documents delivered
pursuant to this Agreement will be in compliance with the provisions of this
Section 8 only if they are reasonably satisfactory to you and your counsel. The
Company shall furnish to you such conformed copies of such opinions,
certificates, letters and documents in such quantities as you shall reasonably
request.
If any of the conditions hereunder to be satisfied at or prior to the
Closing Date are not so satisfied, or subsequently waived, you may terminate
this Agreement without liability on your part or on the part of the Company,
except for the expenses to be paid or reimbursed by the Company pursuant to
Section 5(l) of this Agreement and except for any liability under Section 8 of
this Agreement.
Your obligation to purchase and pay for all or any portion of the
Option Securities on the Option Closing Date upon the exercise of the option
contained in Section 3 hereof shall be subject to the accuracy of and compliance
with the representations and the warranties of the Company herein contained as
of the date hereof and the Closing Date and Option Closing Date,
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<PAGE>
to the performance by the Company of its obligations hereunder and to the
following additional conditions:
(A) You shall have purchased the Firm Securities
from the Company (which purchase may occur simultaneously with the purchase of
the Option Securities from the Company).
(B) The condition set forth in paragraphs (a),
(b) and (c) of this Section 8 shall be satisfied as of the Option Closing Date.
(C) There shall have been tendered for delivery
in accordance with the terms and provisions of this Agreement the Option
Securities being purchased on the Option Closing Date from the Company.
(D) You shall have received an opinion of
counsel for the Company, dated the Option Closing Date, confirming their opinion
delivered pursuant to Section 8(e) hereof as of the Option Closing Date. In each
instance in which the opinion referred to in Section 8(e) refers to the
Firm Securities, the opinion delivered pursuant hereto shall also refer to the
Option Securities.
(E) You shall have received from the independent
certified public accountants that audited the financial statements of the
Company included in the Registration Statement, a letter addressed to you,
substantially in the form heretofore approved by you, dated the Option
Closing Date.
(F) You shall have received a certificate,
dated the Option Closing Date, of the Company, confirming the matters stated in
the certificate delivered pursuant to Section 8(f) hereof as of the Option
Closing Date and stating further that the Company has performed or a waiver has
been given for all or a part of the agreements herein contained to be performed
on its part at or prior to such Option Closing Date.
(G) You shall have received a certificate,
dated the Option Closing Date, of the Company, confirming the matters stated in
the certificate delivered pursuant to Section 8(g) hereof as of the Option
Closing Date and stating further that the Company has performed or a waiver has
been given for all or a part of the agreements herein contained to be performed
on its part at or prior to such option Closing Date.
9. EFFECTIVE DATE OF AGREEMENT; TERMINATION.
(a) This Agreement shall become effective when you and the
Company shall have received notification of the effectiveness of the
Registration Statement.
(b) This Agreement may be terminated at any time prior to
the Closing Date by you by written notice to the Company if in your judgment it
is impracticable to offer for sale
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or to enforce contracts made by you for the resale of the Securities agreed to
be purchased hereunder by reason of (i) the Company or its subsidiaries having
sustained a loss by reason of fire, flood, accident or other calamity, which, in
your opinion, substantially affects the value of the properties of the Company
or its subsidiaries or which materially interferes with the operation of the
business of the Company or any of its subsidiaries regardless of whether such
loss shall have been insured, (ii) the existing financial, political or economic
conditions in the United States or elsewhere having undergone such material
change as in your opinion would make it inadvisable to proceed with the
offering, sale and delivery of the Securities on the terms contemplated by the
Prospectus, (iii) a banking moratorium shall have been declared by either
federal or New York authorities, (iv) a war involving the United States or other
national calamity shall have occurred, (v) any material adverse change in the
condition or obligations of the Company and any of its subsidiaries taken as a
whole or in the earnings, operations, management or business prospects of the
Company and any of its subsidiaries taken as a whole, (vi) any action, suit or
proceeding shall be threatened or pending, at law or in equity, against the
Company and any of its subsidiaries taken as a whole, by any Federal, state or
other commission, board or agency, which is not disclosed in the Prospectus and
in which an unfavorable result or decision could materially adversely affect the
business, prospects, property, financial condition or income or earnings of the
Company and any of its subsidiaries taken as a whole, (vii) an action, suit or
proceeding that is threatened or pending, which has been previously disclosed in
the Prospectus, shall have worsened in any way such that an unfavorable result
or decision could materially adversely affect the business, prospects, property,
financial condition or income or earnings of the Company and/or any of its
subsidiaries, or (viii) during the course of your due diligence investigation of
the Company, facts arise which vary materially in an adverse manner from
representations which have been previously made concerning the Company's
business and financial condition. In addition, this Agreement may be terminated
by you by prompt written notice to the Company (i) at any time before it becomes
effective or (ii) in the event that the Company shall have failed to comply with
any of the provisions of this Agreement to be performed by it at or prior to any
Closing Date which have not been waived by you, or if any of the
representations, warranties, covenants, agreements or conditions of, or
applicable to, the Company herein contained shall not have been complied with or
satisfied within the time specified unless waived by you.
(c) At any time after the Closing Date, if you should (i)
cease to be a broker-dealer registered with the Commission, (ii) be suspended
from such registration for any period of time in excess of 30 days, (iii) cease
to be a member of the NASD or other self-regulatory organization or (iv) become
subject to a proceeding, action or notification under Section 6 of the
Securities Investor Protection Act of 1970, the obligations of the Company under
this Agreement shall cease without any liability on the part of the Company.
10. SURVIVAL OF INDEMNITIES, REPRESENTATIONS, WARRANTIES AND COVENANTS.
The respective indemnities of the Company and the Underwriters and the
respective representations, warranties and covenants of the Company and the
Underwriters set forth in this Agreement will remain in full force and effect,
regardless of any investigations made by or on behalf of the Company or the
Underwriters or any of their respective officers, directors, partners or any
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controlling person, and will survive delivery of and payment for the Securities
or termination of this Agreement pursuant to Section 10 hereof as the case may
be.
11. MISCELLANEOUS.
(a) This Agreement shall inure to the benefit of the Company
and the Underwriters, the officers and directors of such parties, each
controlling person referred to in Section 8 hereof and their respective
successors. Nothing in this Agreement is intended or shall be construed to give
to any other person, firm or corporation any legal or equitable right, remedy or
claim under or in respect of this Agreement or any provision herein contained.
The term "successor" as used in this Agreement shall not include any purchaser
of any Securities from the Underwriter.
(b) This Agreement constitutes the entire agreement among the
parties concerning the subject matter hereof and supersedes all prior agreements
and understandings.
(c) All notices and other communications hereunder (unless
otherwise expressly provided for herein) shall be in writing and shall be deemed
given when delivered in person on the business (before 5:00 P.M.) sent by
facsimile transmission, or on the date indicated on the return receipt if sent
registered or certified mail return receipt requested) to the party to receive
the same at the following addresses (or at such other address for a party as
shall be specified by like notice):
If to the Company: Advanced Electronic Support Products, Inc.
1810 Northeast 144th Street
North Miami, Florida 33181
Attn: Messrs. Slav Stein and Roman Briskin
Facsimile: (305) 652-8489
With a Copy to: Akerman, Senterfit & Eidson, P.A.
SunTrust International Center, 28th Floor
One Southeast Third Avenue
Miami, Florida 33131-1704
Attn: Philip Schwartz, Esq.
Facsimile: (305) 374-5095
If to the Underwriters: Corporate Securities Group, Inc.
980 North Federal Highway
Suite 310
Boca Raton, Florida 33432
Attn: Mr. Marshall T. Leeds, President
Facsimile: (407) 338-2827
36
<PAGE>
Argent Securities, Inc.
3340 Peachtree Road
Suite 450
Atlanta, Georgia 30326
Attn: Phil Reames, President
Facsimile: (404) 816-4085
With a Copy to: Lucio, Mandler, Croland, Bronstein, Garbett,
Stiphany & Martinez, P.A.
Barnett Bank Tower
701 Brickell Avenue, 20th Floor
Miami, Florida 33131
Attn: Leslie J. Croland, Esq.
Facsimile: (305) 579-0012
Johnson & Montgomery
One Buckhead Plaza
3060 Peachtree Road, N.W.
Suite 400
Atlanta, Georgia 30305
Attn: Robert Altenbach, Esq.
Facsimile: (770) 977-7673
(d) This Agreement was executed and delivered in, and its
validity, interpretation and construction shall be governed by the internal laws
of, the State of Florida applicable to agreements made and to be performed
wholly within such State. This Agreement may be executed in any number of
counterparts. Each counterpart, when executed and delivered, shall be an
original contract, but all counterparts, when taken together, shall constitute
one and the same Agreement.
(e) The Company hereby acknowledges that the breach of
material terms contained in this Agreement (whether or not specifically
designated as such) would cause irreparable damage and substantial prejudice to
your rights. Accordingly, the Company agrees that in the event of any such
breach or threatened breach, you shall have, in addition to its and your legal
remedies, the right to injunctive or other equitable relief, as permitted by
law, to prevent the Company's violation of their obligations hereunder.
(f) Titles and headings to sections herein are inserted for
the convenience of reference only and are not intended to be a part of or to
affect the meaning or interpretation of this Agreement.
(g) Any consent or approval of the Underwriters required
hereunder to any action of the Company shall not be unreasonably withheld, and
notwithstanding any other provisions hereof, such consent or approval shall not
be required if the Company obtains an opinion from counsel acceptable to the
Underwriters that the requirement of such consent or approval constitutes an
abrogation of the Board of Directors' duties under the corporate law of such
jurisdiction.
37
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If the foregoing is in accordance with your understanding of
our agreement, please sign and return to us a counterpart hereof, whereupon this
instrument along with all counterparts will become a binding agreement between
you and us in accordance with its terms.
Very truly yours,
Advanced Electronics Support Products, Inc.
By:________________________________________
________________________________________
Accepted and agreed to as of
the date first above written:
ARGENT SECURITIES, INC. CORPORATE SECURITIES GROUP, INC.
By: __________________ By:____________________________
38
EXHIBIT 4.2
WARRANT AGREEMENT
WARRANT AGREEMENT dated as of ____________, 1997 between Advanced
Electronic Support Products, Inc., a Florida corporation, having its principal
place of business at 1810 N.E. 144th Street, North Miami, FL 33181, (the
"Company") and Continental Stock Transfer & Trust Company, a New York
corporation, having its principal place of business at 2 Broadway, New York, New
York 10004 (the "Warrant Agent").
W I T N E S S E T H :
WHEREAS, the Company proposes to issue and sell to the public in an
initial public offering (the "IPO") 750,000 shares of the Company's Common
Stock, par value $.01 per share ("Shares"), and one Redeemable Common Stock
Purchase Warrant (the "Public Warrants") (plus an additional 75,000 Shares and
75,000 Common Stock Purchase Warrants to cover overallotments);
WHEREAS, the Company also proposes to issue and sell to Argent
Securities, Inc. (the "Underwriter") in the IPO an option to purchase 75,000
shares of Common Stock and 75,000 Common Stock Purchase Warrants (the
"Underwriter Warrants" and together with the Public Warrants sometimes
hereinafter referred to as the "Warrants");
WHEREAS, the Warrants shall be evidenced by certificates substantially
in the form of Exhibit A annexed hereto (the "Warrant Certificate"), each
Warrant entitling the holder thereof to purchase one share of Common Stock;
WHEREAS, the Warrants will have an exercise price of $6.90 per share of
Common Stock, subject to certain adjustments (the "Warrant Price"), will be
exercisable commencing on the first anniversary of the effective date of the IPO
("First Exercise Date") until a date which is the fifth anniversary of the
effective date of the IPO ("Last Exercise Date"), unless extended by the
Company, and, except for the Underwriter's Warrants, will be exercisable during
any period of time fixed for that Warrant's redemption in a Redemption Notice
(hereinafter defined in Section 2.03), which period of time will terminate
on a stated Redemption Date (hereinafter defined in Section 2.03);
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing to so act in connection with the
issuance, registration, transfer, exchange and replacement of the Warrant
Certificates and exercise of the Warrants; and
WHEREAS, the Company and the Warrant Agent desire to set forth in this
Agreement the terms and conditions upon which the Warrant Certificates shall be
issued, transferred, exchanged and placed and the Warrants exercised, and to
provide for the rights of the holders of the Warrants;
<PAGE>
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and the respective undertakings herein below set forth, the
Company and the Warrant Agent agree as follows:
ARTICLE I
ISSUANCE AND EXECUTION OF WARRANTS
SECTION 1.01 The Company hereby appoints the Warrant Agent to act on
behalf of the Company in accordance with the terms and conditions herein set
forth, and the Warrant Agent hereby accepts such appointment and agrees to
perform the same in accordance with such provisions.
SECTION 1.02 The Warrant Certificates for the Warrants shall be issued
in registered form only. The text of the Warrant Certificate, including the form
of assignment and subscription printed on the reverse side thereof, shall be
substantially in the form of Exhibit A annexed hereto, which text is hereby
incorporated in this Agreement by reference as though fully set forth herein and
to whose terms and conditions the Company and the Warrant Agent hereby agree.
Each Warrant Certificate shall evidence the right, subject to the provisions of
this Agreement and of such Warrant Certificate, to purchase the number of
validly issued, fully paid and non-assessable shares of Common Stock, as that
term is defined in Section 1.05 of this Agreement, stated therein, free of
preemptive rights, subject to adjustment as provided in Article III of this
Agreement.
SECTION 1.03 Upon the written order of the Company, signed by the
President or any Vice President, and the Secretary, Treasurer, Assistant
Secretary or Assistant Treasurer of the Company, the Warrant Agent shall issue
and register Warrants in the names and denominations specified in that order,
and will countersign and deliver Warrant Certificates evidencing the same in
accordance with that order. Each Warrant Certificate shall be dated the date of
its countersignature. Each Warrant Certificate shall be executed on behalf of
the Company by the manual or facsimile signature of the President of the
Company, under its corporate seal, affixed or facsimile, attested by the manual
or facsimile signature of the Secretary of the Company and shall be
countersigned manually by the Warrant Agent. The Warrant Certificates shall not
be valid for any purpose unless so countersigned. In case any officer whose
facsimile signature has been placed upon any Warrant Certificate shall have
ceased to be such before such Warrant Certificate is issued, it may be issued
with the same effect as if such officer had not ceased to be such on the date of
issuance.
SECTION 1.04 Except as otherwise expressly stated herein, all terms
used in the Warrant Certificate have the meanings provided in this Agreement.
SECTION 1.05 As used herein, the term " Common Stock" shall mean the
aggregate number of shares that the Company, by its Certificate of
Incorporation, as from time to time amended, is authorized to issue, which are
not limited by its Certificate of Incorporation to a fixed sum or percentage of
the book value in respect of the rights of the holders thereof to participate in
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dividends or in distribution of assets upon the voluntary or involuntary
liquidation, dissolution, or winding up the Company.
SECTION 1.06 The Warrant Agent understands and agrees that the Public
Warrants are being issued together with shares of Common Stock as constituting
Units in the IPO and that the Shares and the Public Warrants shall be detachable
and may be traded separately immediately upon the closing of the IPO.
ARTICLE II
WARRANT PRICE, DURATION AND EXERCISE OF WARRANTS, CALL OF
WARRANTS AND TRADING OF WARRANTS
SECTION 2.01
(a) Each Warrant shall entitle the person in whose name at the
time the Warrant shall be registered upon the books to be maintained by the
Warrant Agent for that purpose (the "Warrant Holder"), subject to the provisions
of the Warrant Certificates and of this Agreement, to purchase from the Company
any time on or after the First Exercise Date but at or before the Last Exercise
Date, up to the number of shares of Common Stock stated therein, as adjusted, at
the Warrant Price in effect at such date, payable in full at the time of
purchase in the manner provided in Section 2.02 of this Agreement.
(b) Each Warrant shall be exercisable in accordance with the
terms herein and in the Warrant Certificate which, among other things, contains
certain terms as to the Warrant Price.
SECTION 2.02
(a) The Warrant Holder may exercise a Warrant, in whole or in
part, by surrender of the Warrant Certificate, with the form of subscription
thereon duly executed by the Warrant Agent at its corporate office, together
with the Warrant Price for each share of Common Stock to be purchased in lawful
money of the United States, or by certified check, bank draft, or postal or
express money order payable in United States Dollars to the order of the
Company.
(b) Upon receipt of a Warrant Certificate with the form of
election to purchase thereon duly executed and accompanied by payment of the
aggregate Warrant Price for the shares of Common Stock for which the Warrant is
then being exercised, the Warrant Agent shall requisition from the transfer
agent certificates for the total number of the shares of Common Stock for which
the Warrant is being exercised in such names and denominations as are required
for delivery to the Warrant Holder, and the Warrant Agent shall thereupon
deliver such certificates to or in accordance with the instructions of the
Warrant Holder. The Company covenants and agrees that it has duly authorized and
directed its transfer agent (and will authorize and direct all its future
transfer agents) to comply with all such requests of the Warrant Agent.
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<PAGE>
(c) In case any Warrant Holder shall exercise his Warrant with
respect to less than all of the shares of Common Stock that may be purchased
under the Warrant, a new Warrant Certificate for the balance shall be
countersigned and delivered to or upon the order of the Warrant Holder.
(d) The Company covenants and agrees that it will pay when due
and payable any and all taxes which may be payable in respect to the issuance of
Warrants, or the issuance of any shares of Common Stock upon the exercise of
Warrants. However, neither the Company nor the Warrant Agent shall be required
to issue or deliver any Warrant Certificate or shares of Common Stock in a name
other than that of the Warrant Holder at the time of surrender if any tax is
payable in respect of such transfer until the person requesting the same has
paid to the Company the amount of such tax or has established to the Company's
satisfaction that such tax has been paid or shall not be due and payable. In the
event that any transfer tax is due and payable, the Warrant Agent shall be under
no obligation to issue or deliver any Warrant Certificate or shares of Common
Stock in a name other than that of the Warrant Holder until the Company has
notified the Warrant Agent that the transfer tax, if any, has been paid, or in
the alternative, that no transfer tax is due and payable by reason of an
exemption.
(e) The Warrant Agent shall account promptly to the Company
with respect to Warrants exercised and concurrently account to the Company for
all moneys received by the Warrant Agent for the purchase of shares of Common
Stock upon the exercise of Warrants.
(f) The Warrant Agent covenants and agrees that upon the
exercise of any of the Warrants, the Warrant Agent shall provide written notice
to the Company and to the Underwriter at its office at 3340 Peachtree Street,
N.E., Suite 450, Atlanta, Georgia 30326, the expense of which notice shall be
borne by the Company. Each notice shall contain the name of the exercising
Warrant Holder, the number of shares of Common Stock that the Warrant Holder has
elected to purchase, the purchase price paid on a per share basis and the
cumulative number of Warrants exercised by all of the Warrant Holders as of the
date of the transaction which is the subject of the aforesaid notice. Such
notice shall be made on the date of the exercise of the Warrant. Nothing
contained herein shall be construed so as to prevent the Warrant Agent from
providing the information required in this Section 2.02 (f) in a consolidated or
tabular form, provided that all other provisions of this Section are complied
with.
(g) The Warrant Agent covenants and agrees that it shall
provide a list of each and every holder of the Warrants to the Company and the
Underwriter at such time or from time to time as shall be required by the
Company or the Underwriter, but in no event shall such a list be provided less
frequently than once per annum at a date as shall be determined by the Company.
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<PAGE>
SECTION 2.03
(a) Commencing on the first anniversary of the effective date
of the IPO, the Company may, subject to the conditions set forth herein, redeem
all, but not less than all, the Warrants then outstanding at a redemption price
of $.05 per Warrant upon not less than thirty (30) days prior written notice
(the "Redemption Notice") to the holders thereof provided that the average
closing price of the Common Stock for the 20 consecutive trading days ending
three (3) days prior to the date of the Redemption Notice is at least $10.50,
subject to adjustment for stock dividends, stock splits and other anti-dilution
provisions as provided for under Article III herein. For purposes of this
Section 2.03, "closing price" at any date shall be deemed to be: (i) the last
sale price regular way as reported on the principal national securities exchange
on which the Common Stock is listed or admitted to trading, or (ii) if the
Common Stock is not listed or admitted to trading on any national securities
exchange, the average of the closing bid and asked prices regular way for the
Common Stock as reported by the Nasdaq National Market or Nasdaq Small Cap
Market of the Nasdaq Stock Market, Inc. ("NASDAQ") or (iii) if the Common Stock
is not listed or admitted for trading on any national securities exchange, and
is not reported by NASDAQ, the average of the closing bid and asked prices in
the over-the-counter market as furnished by the National Quotation Bureau, Inc.
or if no such quotation is available, the fair market value of the Common Stock
as determined in good faith by the Board of Directors of the Company. The
Redemption Notice shall be deemed effective upon mailing and the time of mailing
is the "Effective Date of the Notice". The Redemption Notice shall state a
redemption date not less than thirty (30) days from the Effective Date of the
Notice (the "Redemption Date") . No Redemption Notice shall be mailed unless all
funds necessary to pay for redemption of all Warrants then outstanding shall
have first been set aside by the Company in trust with the Warrant Agent for the
benefit of all Warrant Holders so as to be and continue to be available
therefor. The redemption price to be paid to the Warrant Holders will be $.05
for each share of the Common Stock of the Company to which the Warrant Holder
would then be entitled upon exercise of the Warrant being redeemed, as adjusted
from time to time as provided herein (the "Redemption Price"). In the event the
number of shares of Common Stock issuable upon exercise of the Warrant being
redeemed are adjusted pursuant to Article III hereof, then upon each such
adjustment the Redemption Price will be adjusted by multiplying the Redemption
Price in effect immediately prior to such adjustment by a fraction, the
numerator of which is the number of shares of Common Stock issuable upon
exercise of the Warrant being redeemed immediately prior to such adjustment and
the denominator of which is the number of shares of Common Stock issuable upon
exercise of such Warrant being redeemed immediately after such adjustment. The
Warrants may only be redeemed if the Company has in effect a current
Registration Statement or post-effective amendment covering the shares
underlying the Warrants. The Warrant Holders may exercise their Warrants between
the Effective Date of the Notice and the Redemption Date, such exercise being
effective if done in accordance with Section 2.02 (a), and if the Warrant
Certificate, with form of election to purchase duly executed and the Warrant
Price, as applicable for such Warrant subject to redemption for each share of
Common Stock to be purchased is actually received by the Warrant Agent at its
office located at 40 Wall Street, New York, New York 10005, no later than 5:00
P.M. New York time on the Redemption Date.
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<PAGE>
(b) If any Warrant Holder does not wish to exercise any
Warrant being redeemed, the Warrant Holder should mail such Warrant to the
Warrant Agent at its office located at 2 Broadway, 19th Floor, New York, New
York 10004, after receiving the Redemption Notice required by this Section. If
such Redemption Notice shall have been so mailed, and if on or before the
Effective Date of the Notice all funds necessary to pay for redemption of all
Warrants then outstanding shall have been set aside by the Company in trust with
the Warrant Agent for the benefit of all Warrant Holders so as to be and
continue to be available therefor, then, on and after said Redemption Date,
notwithstanding that any Warrant subject to redemption shall not have been
surrendered for redemption, the obligation evidenced by all Warrants not
surrendered for redemption or effectively exercised shall be deemed no longer
outstanding, and all rights with respect thereto shall forthwith cease and
terminate, except only the right of the holder of each Warrant subject to
redemption to receive the Redemption Price for each share of Common Stock to
which he would be entitled if he exercised the Warrant upon receiving the
Redemption Notice of the Warrant subject to redemption held by the Holder
hereof.
(c) Notwithstanding anything contained in this Article II, the
Underwriter's Warrants shall not be eligible for redemption by the Company.
ARTICLE III
ADJUSTMENT OF SHARES OF COMMON STOCK
PURCHASABLE AND OF WARRANT PRICE
SECTION 3.01 In case the Company shall at any time after the date of
this Agreement (i) declare a dividend on the outstanding Common Stock in shares
of its capital stock, (ii) subdivide the outstanding Common Stock, (iii) combine
the outstanding Common Stock into a smaller number of shares, or (iv) issue any
shares of its capital stock by reclassification of the Common Stock (including
any such reclassification in connection with a consolidation or merger in which
the Company is the continuing corporation), then, in each case, the Warrant
Price, and the number and kind of shares of Common Stock receivable upon
exercise, in effect at the time of the record date for such dividend or of the
effective date of such subdivision, combination, or reclassification shall be
proportionately adjusted so that the holder of any Warrant exercised after such
time shall be entitled to receive the aggregate number and kind of shares which
if such Warrant had been exercised immediately prior to such time, he would have
owned upon such exercise and been entitled to receive by virtue of such
dividend, subdivision, combination, or reclassification. Such adjustment shall
be made successively whenever any event listed above shall occur.
SECTION 3.02 In case the Company after the date hereof shall issue
rights, options, or warrants to all holders of Common Stock entitling them to
subscribe for or purchase Common Stock (or securities convertible into or
exchangeable for Common Stock) at a price per share (or having a conversion
price per share, if a security convertible into or exchangeable for Common
Stock) less than the "current market price" (as defined in Section 3.04 hereof)
per share of Common Stock on the record date established for the issuance of
such rights, options or warrants, then, in such
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<PAGE>
case, the Warrant Price shall be adjusted by multiplying the Warrant Price in
effect on the record date of such issuance by a fraction, of which the numerator
shall be the number of shares of Common Stock outstanding on the record date for
such issuance plus the number of shares of Common Stock which the aggregate
offering price of the total number of shares of Common Stock so to be issued (or
the aggregate initial conversion price of the convertible securities to be
issued or sold) would purchase at such "current market price" and of which the
denominator shall be the number of shares of Common Stock outstanding on the
record date for such issuance plus the number of additional shares of Common
Stock to be issued (or into which the convertible or exchangeable securities to
be issued or sold are initially convertible or exchangeable). Such adjustment
shall become effective at the close of business on such record date; provided,
however, that, to the extent the shares of Common Stock (or securities
convertible to or exchangeable for shares of Common Stock) are not delivered,
the Warrant Price shall be readjusted after the expiration of such rights,
options, or warrants (but only with respect to Warrants exercised after such
expiration), to the Warrant Price which would then be in effect had the
adjustments made upon the issuance of such rights or warrants been made upon the
basis of delivery of only the number of shares of Common Stock or securities
convertible into or exchangeable for shares of Common Stock actually issued. In
case any subscription price may be paid in a consideration part or all of which
shall be in a form other than cash, the value of such consideration shall be as
determined in good faith by the board of directors of the Company, whose
determination shall be conclusive absent manifest error. Shares of Common Stock
owned by or held for the account of the Company or any majority-owned subsidiary
shall not be deemed outstanding for the purpose of any such computation.
Notwithstanding the foregoing, no adjustment in the Warrant
Price or the number of shares of Common Stock issuable upon exercise of the
Warrants shall be made upon (i) the issuance of options (or upon exercise
thereof) by the Company pursuant to its Stock Option Plans, (ii) the issuance of
the Underwriter's Warrants, or (iii) any other options and warrants outstanding
as of the date hereof.
SECTION 3.03 In case the Company shall distribute to all holders
of Common Stock (including any such distribution made to the stockholders of the
Company in connection with a consolidation or merger in which the Company is the
continuing corporation) evidences of its indebtedness or assets (other than cash
dividends distributions and dividends payable in shares of Common Stock),
subscription rights, options, or warrants or convertible or exchangeable
securities containing the right to subscribe for or purchase shares of Common
Stock (excluding those referred to in Section 3.02 hereof), then, in each case,
the Warrant price shall be adjusted by multiplying the Warrant Price in effect
immediately prior to the record date for the determination of stockholders
entitled to receive such distribution by a fraction of which the numerator shall
be the "current market price" per share of Common Stock on such record date,
less the fair market value (as determined in good faith by the board of
directors of the Company, whose determination shall be conclusive absent
manifest error) of the portion of the evidences of indebtedness or assets so to
be distributed, or of such subscription rights, options, or warrants,
convertible or exchangeable securities containing the right to subscribe for or
purchase shares of Common Stock, applicable to the share, and of which the
denominator shall be such "current market price" per share of Common Stock. Such
adjustment
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<PAGE>
shall be made whenever any such distribution is made, and shall become effective
on the date of such distribution retroactive to the record date for the
determination of stockholders entitled to receive such distribution.
SECTION 3.04 For the purpose of any computation under sections 3.02 and
3.03 hereof, the "current market price" per share of Common Stock on any date
shall be deemed to be the average of the daily closing prices for the 20
consecutive trading days ending three (3) days prior to such date. The closing
price for each day shall be the last reported sales price regular way or, in
case no such reported sale takes place on such day, the closing bid price
regular way, in either case on the principal national securities exchange on
which the Common Stock is listed or admitted to trading or, if the Common Stock
is not listed or admitted to trading on any national securities exchange, the
highest reported bid price as furnished by NASDAQ. If on any such date the
Common Stock is not quoted on NASDAQ or any such organization, the closing price
shall be deemed to be the average of the closing bid and asked prices in the
over-the-counter market as reported by the National Quotation Bureau or if no
such quotation is available, the fair value of the Common Stock on such date, as
determined in good faith by the board of directors of the Company, whose
determination shall be conclusive absent manifest error.
SECTION 3.05 No adjustment in the Warrant Price shall be required if
such adjustment is less than $.05; provided, however, that any adjustments which
by reason of this Section 3.05 are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
under this Article III shall be made to the nearest cent or to the nearest
one-thousandth of a share, as the case may be.
SECTION 3.06 In any case in which this Article III shall require that an
adjustment in the Warrant Price be made effective as of a record date for a
specified event, the Company may elect to defer, until the occurrence of such
event, issuing to the holder of any Warrant exercised after such record date,
the shares, if any, issuable upon such exercise over and above the shares, if
any, issuable upon such exercise on the basis of the Warrant Price in effect
prior to such adjustment; provided, however, that the Company shall deliver to
such holder a due bill or other appropriate instrument evidencing such holder's
right to receive such additional shares upon the occurrence of the event
requiring such adjustment.
SECTION 3.07 Upon each adjustment of the Warrant Price as a result of
the calculations made in Section 3.01, 3.02, or 3.03 hereof, each Warrant
outstanding prior to the making of the adjustment in the Warrant Price shall
thereafter evidence the right to purchase, at the adjusted Warrant Price, that
number of shares (calculated to the nearest thousandth) obtained by dividing (A)
the product obtained by multiplying the number of shares purchasable upon
exercise of a Warrant prior to adjustment of the number of shares by the Warrant
Price in effect prior to adjustment of the Warrant Price by (B) the Warrant
Price in effect after such adjustment of the Warrant Price.
SECTION 3.08 In case of any capital reorganization of the Company, or of
any reclassification of the Common Stock (other than a reclassification of the
Common Stock referred
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<PAGE>
to in Section 3.01 hereof), or in the case of the consolidation of the Company
with or the merger of the Company into any other corporation or of the sale,
transfer, or lease of the properties and assets of the Company as, or
substantially as, an entirety to any other corporation or other entity, each
Warrant shall after such capital reorganization, reclassification of Common
Stock, consolidation, merger, sale, transfer, or lease, be exercisable, on the
same terms and conditions specified in this Agreement, for the number of shares
of stock or other securities, assets, or cash to which a holder of the number of
shares purchasable (at the time of such capital reorganization, reclassification
of Common Stock, consolidation, merger, sale, transfer, or lease) upon exercise
of such Warrant would have been entitled upon such capital reorganization,
reclassification of Common Stock, consolidation, merger, sale, transfer, or
lease; and in any such case, if necessary, the provisions set forth in this
Article III with respect to the rights and interests thereafter of the holders
of the Warrants shall be appropriately adjusted so as to be applicable, as
nearly as may reasonably be, to any shares of stock, other securities, assets,
or cash thereafter deliverable on the exercise of the Warrants. The subdivision
or combination of shares of Common Stock at any time outstanding into a greater
or lesser number of shares shall not be deemed to be a reclassification of the
Common Stock for the purposes of this subsection. The Company shall not effect
any such consolidation, merger, transfer, or lease, unless prior to or
simultaneously with the consummation thereof, the successor corporation (if
other than the Company) resulting from such consolidation or merger or the
Corporation purchasing, receiving, or leasing such assets or other appropriate
corporation or entity shall expressly assume, by written instrument in form
satisfactory to the Underwriter, the obligation to deliver to the holder of each
Warrant such shares of stock, securities, or assets as, in accordance with the
foregoing provisions, such holders may be entitled to purchase and to perform
the other obligations of the Company under this Agreement.
SECTION 3.09 The Company may make such reductions in the Warrant Price,
in addition to those required by this Article III, as it shall, in it sole
discretion, determine to be advisable.
ARTICLE IV
OTHER PROVISIONS RELATING TO RIGHTS OF
WARRANT HOLDERS
SECTION 4.01 No Warrant Holder, as such, shall be entitled to vote or
receive dividends or be deemed the holder of shares of Common Stock for any
purposes, nor shall anything contained in any Warrant Certificate be construed
to confer upon any Warrant Holder, as such, any of the rights of a shareholder
of the Company or any right to vote, give or withhold consent to any action by
the Company, whether upon any recapitalization, issue of stock, reclassification
of stock, consolidation, merger, conveyance or otherwise, receive dividends or
subscription rights, or otherwise, until in connection with the exercise of any
Warrant, such Warrant shall have been surrendered and the purchase price or the
shares of Common Stock for which such Warrant is being exercised shall have been
received by the Warrant Agent; provided, however, that any such surrender and
payment on any date when the stock transfer books of the Company shall be closed
shall constitute the person or persons in whose name or names the certificate or
certificates for those
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<PAGE>
shares of Common Stock are to be issued as the record holder or holders thereof
for all purposes at the opening of business on the next succeeding day on which
such stock transfer books are open and the Warrant surrendered shall not be
deemed to have been exercised, in whole or in part, as the case maybe, until
such next succeeding day on which stock transfer books are open.
SECTION 4.02 The Company covenants and agrees that it shall
contemporaneously provide to all Warrant Holders of record any publication,
mailing or notice of an event which it shall provide to all of its shareholders
of record and which event shall result in the adjustment to the Warrant Price as
provided in Article III hereof. For purposes of this Section 4.02, the Warrant
Holders of record shall be those Warrant Holders who are of record on a date
even with the date chosen by the Company for the purpose of determining the
shareholders of record who shall be entitled to receive such publication,
mailing or notice.
SECTION 4.03 If any Warrant Certificate is lost, stolen, mutilated or
destroyed, the Company and the Warrant Agent may, on such terms as to indemnity
or otherwise as they may in their discretion reasonably impose, which shall, in
the case of a mutilated Warrant Certificate, include the surrender thereof,
issue a new Warrant Certificate of like denomination and tenor as, and in
substitution for, the Warrant Certificate so lost, stolen mutilated or
destroyed.
SECTION 4.04
(a) The Company covenants and agrees that at all times it
shall reserve and keep available for the exercise of outstanding Warrants such
number of authorized shares of Common Stock and the aggregate number and kind of
any other securities which the Warrants are exercisable for, pursuant to the
provisions of Article III hereof, as are sufficient to permit the exercise in
full of such Warrants and that it will make available to the Warrant Agent from
time to time a number of duly executed certificates representing shares of
Common Stock and other securities, sufficient therefor.
(b) The Company shall use its best efforts to secure the
listing, upon official notice of issuance, of the shares of Common Stock
issuable upon exercise of Warrants upon any securities exchange upon which the
Common Stock becomes listed.
(c) The Company covenants that all shares of Common Stock
issued on exercise of Warrants shall be validly issued, fully paid,
non-assessable and free of preemptive rights.
(d) The Company has filed a Registration Statement on Form
SB-2 (Registration No. 333-15967) for the registration of, among other things,
the sale of the Warrants and the shares of Common Stock issuable upon exercise
thereof under the Securities Act of 1933, as amended (the "Act"). The Company
shall use its best efforts to secure the effectiveness of the Registration
Statement under the Act, and to register or qualify such Warrants and shares of
Common Stock under the laws of any states in which the sale of the Warrants and
shares of Common Stock was registered or qualified at the time of the IPO and
shall use its reasonable good faith efforts to register
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<PAGE>
and qualify such Warrants and shares of Common Stock in such additional states
and jurisdictions as may be appropriate. The Company further agrees to use its
best efforts to maintain the effectiveness of such Registration Statement and
such state qualifications, as aforesaid, by the filing of any and all amendments
to the Registration Statement and such state qualifications as may be required
from time to time under the Act or the laws of the various states until the
expiration or termination of all the Warrants in accordance herewith.
(e) The Company will furnish to the Warrant Agent, upon
request, an opinion of counsel satisfactory to the Warrant Agent to the effect
that (i) a Registration Statement under the Act is then in effect with respect
to the Warrants and shares of Common Stock issuable upon the exercise of the
Warrants and that the prospectus included therein complies as to form in all
material respects, (except as to financial statements, including schedules, and
other accounting and financial data, as to which such counsel need express no
opinion), with the requirements of the Act and the rules and regulations of the
Commission thereunder; or a Registration Statement under the Act with respect to
said shares of Common Stock is not required. In the event that said opinion
states that such a Registration Statement is in effect, the Company will from
time to time furnish the Warrant Agent with current prospectuses meeting the
requirements of the Act and such rules and regulations in sufficient quantity to
permit the Warrant Agent to deliver a prospectus ("Prospectus") to each Warrant
Holder upon exercise thereof. The Company further agrees to pay all fees, costs
and expenses in connection with the preparation and delivery to the Warrant
Agent of the foregoing opinions and Prospectuses and the above mentioned
registrations and other actions, and to immediately notify the Warrant Agent in
the event that (i) the Commission shall have issued or threatened to issue any
order preventing or suspending the use of any Prospectus; (ii) at any time any
Prospectus shall 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; or (iii) for any reason it shall be necessary
to amend or supplement any Prospectus in order to comply with the Act.
SECTION 4.05 If the number of shares purchasable upon the exercise of
each Warrant is adjusted pursuant to Section 3.07 hereof, the Company shall not
be required to issue fractions of shares upon exercise of the Warrants or to
distribute share certificates which evidence fractional shares. In lieu of
fractional shares, the Company, in its sole discretion, may pay to the
registered holders of Warrant Certificates at the time such Warrants are
exercised as herein provided an amount in cash equal to the same fraction of the
current market value of a share. For purposes of this Section 4.05, the current
market value of a share issuable upon the exercise of a Warrant shall be the
closing price of a share of Common Stock, as determined pursuant to the second
and third sentences of Section 3.04, for the trading day immediately prior to
the date of such exercise.
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<PAGE>
ARTICLE V
TREATMENT OF WARRANT HOLDERS
SECTION 5.01 Prior to due presentment for registration of transfer of
any Warrant, the Company and the Warrant Agent may deem and treat the Warrant
Holder as the absolute owner of such warrant, notwithstanding any notation of
ownership or other writing thereon, for the purpose of any exercise thereof and
for all other purposes, and neither the Company nor the Warrant Agent shall be
affected by any notice to the contrary.
ARTICLE VI
CONCERNING THE WARRANT AGENT
AND OTHER MATTERS
SECTION 6.01 The Company will from time to time promptly pay, subject
to the provisions of Section 2.02 (d) of this Agreement, all taxes and charges
that may be imposed upon the Company or the Warrant Agent in respect of the
issuance or delivery of shares of Common Stock upon the exercise of Warrants.
SECTION 6.02
(a) The Warrant Agent may resign and be discharged from its
duties under this Agreement upon sixty (60) days notice in writing, mailed to
the Company by registered or certified mail, and to each Warrant Holder. The
Company may remove the Warrant Agent or any successor warrant agent upon sixty
(60) days notice in writing, mailed to the Warrant Agent or successor Warrant
Agent, as the case may be, by registered or certified mail, and to each Warrant
Holder; provided, however, the Company shall appoint a new Warrant Agent as
hereinafter provided and such removal shall not become effective until a
successor Warrant Agent has been appointed and has accepted such appointment. If
the Warrant Agent shall resign or shall otherwise become capable of acting, the
Company shall appoint a successor to the Warrant Agent. If the Company shall
fail to make such appointment within a period of sixty (60) days after it has
been notified in writing of such resignation or incapability by the Warrant
Agent by a Warrant Holder, who shall, with such notice, submit his Warrant
Certificate for inspection by the Company, then any Warrant Holder may apply to
any court of competent jurisdiction or the appointment of a successor to the
Warrant Agent. Any successor Warrant Agent, whether appointed by the Company or
by such a court shall be a registered transfer agent, bank or trust company,
subject to the terms and conditions of this Section 6.02, in good standing and
incorporated under the laws of any State of the United States, having its
principal office in the United States of America. After appointment, the
successor Warrant Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Warrant Agent without
further act or deed. The former Warrant Agent shall deliver and transfer to the
successor Warrant Agent any property at the time held by it hereunder and
execute and deliver any further assurance, conveyance, act or deed necessary for
the purpose. Failure to give any notice
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<PAGE>
provided for in this Section, however, or any defect therein, shall not affect
the legality or validity of the resignation or removal of the Warrant Agent or
the appointment of the successor Warrant Agent, as the case may be.
(b) Any corporation into which the Warrant Agent may be
merged or with which it may be consolidated, or any corporation resulting from
any merger or consolidation to which the Warrant Agent shall be a party, or any
corporation succeeding to the corporate trust business of the Warrant Agent,
shall be the successor to the Warrant Agent hereunder without the execution or
filing of any paper or any further act on the part of any of the parties hereto.
In case at the time such successor to the Warrant Agent shall succeed to the
agency created by this Agreement, any of the Warrant Certificates shall have
been countersigned but not delivered, any such successor to the Warrant Agent
may adopt the countersignature of the original Warrant Agent and deliver such
Warrant Certificates so countersigned, and in case at that time any of the
Warrant Certificates shall not have been countersigned, any successor to the
Warrant Agent may countersign such Warrant Certificate in its own name or in the
name of the successor Warrant Agent; and in all such cases such Warrant
Certificates shall have the full force provided in the Warrant Certificates and
this Agreement.
In case at any time the name of the Warrant Agent shall be
changed and at such time any of the Warrant Certificates shall have been
countersigned but not delivered, the Warrant Agent may adopt the
countersignature under this prior name and deliver Warrant Certificates so
countersigned; and in case at that time any of the Warrant Certificates shall
not have been countersigned, the Warrant Agent may countersign such Warrant
Certificates either in its prior name or in its changed name; and in all such
cases such Warrant Certificates shall have the full force provided in the
Warrant Certificates and in this Agreement.
SECTION 6.03 The Company agrees to pay the Warrant Agent a reasonable
fee for all services rendered by it hereunder. The Company also agrees to
indemnify the Warrant Agent for, and to hold it harmless against, any loss,
liability or expense, incurred without gross negligence, willful misconduct or
bad faith on the part of the Warrant Agent, arising out of or in connection with
the acceptance and administration of this Agreement, including the costs and
expenses of defending against any claim of liability in the premises.
SECTION 6.04 The Company covenants and agrees that it shall, at the
Company's expense, provide to the Warrant Agent copies of its current
prospectus, if any, in such quantity as to enable the Warrant Agent to deliver
one copy of such current prospectus to such Warrant Holder who shall exercise
his rights under a Warrant. Notwithstanding anything else contained in this
Section 6.04, the Company shall not be obligated to provide copies of its
current prospectus for the purpose of allowing the Warrant Agent to deliver such
copies to any Warrant Holder who delivers all of his redeemable warrants for
redemption pursuant to Section 2.03 or who shall notice the Company of his
intent to permit redemption of all of his Warrants pursuant to Section 2.03
herein or to any person who shall hold any Warrant subject to the terms of this
Agreement after the earlier of the Redemption Date or the Last Exercise Date of
the Warrants.
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<PAGE>
SECTION 6.05 The Warrant Agent undertakes the duties and obligations
imposed by this Agreement upon the following terms and conditions, by all of
which the Company and the holders of Warrant certificates, by their acceptance
thereof, shall be bound:
(a) Whenever in the performance of its duties under this
Agreement the Warrant Agent shall deem it necessary or desirable that any fact
or matter be proved or established by the Company prior to taking or suffering
any action hereunder, that fact or matter, unless other evidence in respect
thereof be herein specifically prescribed, may be deemed to be conclusively
proved and established by a certificate signed by the President or the Secretary
of the Company and delivered to the Warrant Agent. That certificate shall be
full authorization to the Warrant Agent for any action taken or suffered in good
faith by it under the provisions of this Agreement in reliance upon that
certificate.
(b) The Warrant Agent shall be liable hereunder only for its
own gross negligence, willful misconduct or bad faith.
(c) The Warrant Agent shall not be liable for or by reason of
any of the statements of fact or recitals contained in this Agreement or in the
Warrant Certificates, except its countersignature thereof, or be required to
verify the same, but all such statements and recitals are and shall be deemed to
have been made by the Company only.
(d) The Warrant Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery hereof,
except the due execution hereof by the Warrant Agent, or in respect of the
validity or execution of any Warrant Certificate, except its countersignature
thereof; nor shall it be responsible for any Warrant Certificate; nor shall it
be responsible for the adjustment of the Warrant Price or the making of any
change in the number of shares of Common Stock required under the provisions of
Article III of this Agreement or responsible for the manner, method or amount of
any such change or the ascertaining of the existence of facts that would require
any such adjustment or change except with respect to the exercise of Warrant
Certificates after actual notice of any adjustment of the Warrant Price; nor
shall it by any act under this Agreement be deemed to make any representation or
warranty as to the authorization or reservation of any shares of Common Stock to
be issued pursuant to this Agreement or any Warrant Certificate or as to whether
any share of Common Stock will when issued be validly issued, fully paid,
non-assessable and free of preemptive rights.
(e) The Warrant Agent and any shareholder, director, officer
or employee of the Warrant Agent may buy, sell or deal in any of the Warrant
Certificates or other securities of the Company to retain a pecuniary interest
in any transaction in which the Company may be interested or contract with or
lend money to or otherwise act as fully and freely as though it was not the
Warrant Agent or subject to this Agreement. Nothing herein shall preclude the
Warrant Agent from acting in any other capacity for the Company or for any other
legal entity.
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<PAGE>
(f) The Warrant Agent is hereby authorized and directed to
accept instructions with respect to the performance of its duties hereunder from
any officer or assistant officer of the Company, and to apply to any such
officer or assistant officer for advice or instructions in connection with its
duties, and shall not be liable for any action taken or suffered to be taken by
it in good faith in accordance with instructions of any such officer or
assistant officer.
(g) The Warrant Agent may consult with its counsel or other
counsel satisfactory to it, including counsel for the Company, and the opinion
of such counsel shall be full and complete authorization and protection in
respect of any action taken, offered, or omitted by it hereunder in good faith
and in accordance with the opinion of such counsel.
(h) The Warrant Agent shall incur no liability to the Company
or to any holder of any Warrant for any action taken by it in reliance upon any
Warrant Certificate or certificate for Common Stock, instrument of assignment or
transfer, power of attorney, endorsement, affidavit, letter, notice, direction,
consent, certificate, statement, or other paper or document believed by it to be
genuine and to be signed, executed, and where necessary, certified or
acknowledged, by the proper person or persons.
SECTION 6.06 The Warrant Agent may, without the consent or concurrence
of the Warrant Holders, by supplemental agreement or otherwise, concur with the
Company in making any changes or corrections in this Agreement that (i) it shall
have been advised by counsel, who may be counsel for the Company, are required
to cure any ambiguity or to correct any defective or inconsistent provision or
clerical omission or mistake or manifest error herein contained, or (ii) as
provided in Section 3.09, the Company deems necessary of advisable and which
shall not be inconsistent with the provisions of the Warrant Certificates,
provided such changes or corrections do not adversely affect the privileges or
immunities of the Warrant Holders.
SECTION 6.07 All the covenants and provisions of this Agreement by or
for the benefit of the Company or the Warrant Agent shall bind and inure to the
benefit of their respective successors and assigns hereunder.
SECTION 6.08 Forthwith upon the appointment after the date thereof of
any transfer agent for the Common Stock, or of any subsequent transfer agent for
the Common Stock, the Company will file with the Warrant Agent a statement
setting forth the name and address of such transfer agent.
SECTION 6.09 Notice or demand pursuant to this Agreement to be given or
made by the Warrant Agent or by any Warrant Holder to or on the Company shall be
sufficiently given or made and effective on the third business day after posting
thereof, unless otherwise provided in this Agreement, if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing by
the Company with the Warrant Agent) as follows:
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<PAGE>
Advanced Electronic Support Products, Inc.
1810 N.E. 144th Street
North Miami, FL 33181
Attn: Mr. Slav Stein
notice or demand pursuant to this Agreement to be given or made by the Company
or any Warrant Holder to or on the Warrant Agent shall be sufficiently given or
made and effective on the third business day after posting thereof, unless
otherwise provided in this Agreement, if sent by first-class mail, postage
prepaid, addressed (until another address is filed in writing by the Warrant
Agent with the Company) as follows:
Continental Stock Transfer & Trust Company
2 Broadway, 19th Floor
New York, New York 10004
Attn: Compliance Department
notice or demand pursuant to this Agreement to be given or made by the Company
or the Warrant Agent to or on the Underwriter shall be sufficiently given or
made and effective on the third business day after posting thereof, unless
otherwise provided in this Agreement, if sent by first-class mail, postage
prepaid, addressed (until another address is filed in writing by the Underwriter
with the Company) as follows:
Argent Securities, Inc.
3340 Peachtree Street, Suite 450
Atlanta, Georgia 30326
Attn: L. Phillips Reames
notice or demand pursuant to this Agreement to be given or made by the Company
or the Warrant Agent to or on any Warrant Holder shall be sufficiently given or
made and effective on the third business day after posting thereof, unless
otherwise provided in this Agreement, if sent by first-class mail, postage
prepaid, addressed to such Warrant Holder at his last known address as it shall
appear in the records of the Company, if such notice shall be given by the
Company, or, if such notice shall be given by the Warrant Agent, as it shall
appear on the register maintained by the Warrant Agent.
A copy of any Notice or demand given or made pursuant to this
Agreement on the Warrant Agent, Company or Underwriter shall be promptly
forwarded by the recipient thereof to each of the Company, Warrant Agent or
Underwriter who shall not have received or made such demand or Notice.
SECTION 6.10 The validity, interpretation and performance of this
Agreement and the Warrants shall be governed by the law of the State of Florida.
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<PAGE>
SECTION 6.11 Nothing in this Agreement shall be construed to give to
any person or corporation other than the parties hereto and the Warrant Holders
any right, remedy or claim under promise or agreement hereof. All covenants,
conditions, stipulations, promises and agreements contained in this Agreement
shall be for the sole and exclusive benefit of the Company and the Warrant Agent
and their successors and of the Warrant Holders, and their heirs,
representatives, successors, assigns and transferees.
SECTION 6.12 A copy of this Agreement shall be available for inspection
by any Warrant Holder during the regular business hours and at the corporate
office of the Warrant Agent in New York, New York, at which time the Warrant
Agent may require any Warrant Holder to submit his Warrant Certificate for
inspection by it.
SECTION 6.13 This Agreement shall terminate on the Last Exercise Date,
or such earlier date upon which all Warrants have been exercised or redeemed,
except that the Warrant Agent shall account to the Company pursuant to Section
2.02 (e) of this Agreement for all cash held by it. The provisions of Section
6.03 and 6.04 of this Agreement shall survive such termination.
SECTION 6.14 The Article headings in this Agreement are for convenience
only and are not part of this Agreement and shall not affect the interpretation
thereof.
SECTION 6.15 This Agreement may be executed in any number counterparts,
each of which is so executed shall be deemed to be an original, and all such
counterparts shall together constitute but one and the same agreement.
ATTEST: ADVANCED ELECTRONIC SUPPORT
PRODUCTS, INC.
___________________________
By:___________________________________
Slav Stein, President
ATTEST: CONTINENTAL STOCK TRANSFER &
TRUST COMPANY
___________________________
By: ______________________________
Name: ___________________________
Title: ___________________________
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EXHIBIT 4.3
THE OPTIONS REPRESENTED BY THIS CERTIFICATE AND THE SECURITIES ISSUABLE UPON
EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, PURSUANT TO A REGISTRATION STATEMENT FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION (REGISTRATION NO. 333-________). HOWEVER, NEITHER THE
OPTIONS NOR SUCH SECURITIES CAN BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) A
POST-EFFECTIVE AMENDMENT TO SUCH REGISTRATION STATEMENT, (ii) A SEPARATE
REGISTRATION STATEMENT UNDER SUCH ACT, OR (iii) AN EXEMPTION FROM REGISTRATION
UNDER SUCH ACT.
THE TRANSFER OF THIS OPTION IS
RESTRICTED AS DESCRIBED HEREIN.
ADVANCED ELECTRONIC SUPPORT PRODUCTS, INC.
PURCHASE OPTION AGREEMENT
75,000 Shares of Common Stock
and 75,000 Common Stock Purchase Warrants
THIS CERTIFIES that, for receipt in hand of $75.00 and other value
received, Corporate Securities Group, Inc., 980 North Federal Highway, Suite
310, Boca Raton, Florida 33432, and Argent Securities, Inc., 3340 Peachtree
Road, N.E., Suite 450, Atlanta, Georgia 30326 (hereinafter collectively referred
to as the "Holder" or "Underwriter") is entitled to subscribe for and purchase
from ADVANCED ELECTRONIC SUPPORT PRODUCTS, INC., a Florida corporation (the
"Company"), upon the terms and conditions set forth herein, at any time or from
time to time after February __, 1997 and before 5:00 P.M. on January __, 2001,
New York time (the "Exercise Period"), 75,000 shares of the Company's Common
Stock, par value $.01 per share (the "Shares") at a price of $_____ per share,
and 75,000 Common Stock Purchase Warrants ("Underwriter's Warrants") at a price
of $_______ per Underwriter's Warrant. This Option may not be sold, transferred,
assigned or hypothecated, until January __, 1998 except that it may be
transferred in whole or in part, to (i) either party who is a "Holder" or one or
more officers or partners of the Holder (or the officers or partners of any such
person); (ii) a successor to the Holder, or the officers or partners of such
successor; (iii) a purchaser of substantially all of the assets of the Holder;
or (iv) by operation of law. The term "Holder" as used herein shall include any
transferee to whom this Option has been transferred in accordance with the
above. As used herein the term "this Option" shall mean and include this Option
and any option or options hereafter issued as a consequence of the exercise or
transfer of this Option in whole or part.
Each Underwriter's Warrant shall entitle the holder thereof to purchase
one share of Common Stock (the shares of Common Stock issuable upon exercise of
the Underwriter's Warrants being
<PAGE>
referred to as the "Warrant Shares") at $_____ per share. Each Underwriter's
Warrant shall be identical in all respects to the Warrants (the "Public
Warrants"), issued pursuant to the Warrant Agreement, dated ___________, 1997
(the "Warrant Agreement"), between the Company and Continental Stock Transfer
and Trust Co., as Warrant Agent; provided, however, the Underwriter's Warrants
shall not be subject to redemption by the Company under any circumstances.
1. TERM OF EXERCISE.
(a) This Option may be exercised during the Exercise Period as
to the whole or any lesser number of Shares and Underwriter's Warrants, by the
surrender of this Option (with the election at the end hereof duly executed) to
the Company at its offices at 1810 N.E. 144th Street, North Miami, Florida 33181
or such other place as is designated in writing by the Company, together with a
certified or bank cashier's check payable to the order of the Company in an
amount equal to the aggregate Exercise Price (per share and per warrant)
multiplied by the number of Shares and Underwriter's Warrants for which this
Option is being exercised.
(b) For purposes of this Option, the term "Current Market
Price" at any date shall be deemed to be: (i) the average of the daily closing
prices of the Common Stock or the Public Warrants, as the case may be, for the
20 consecutive trading days immediately preceding such date in reported sales
price, or (ii) in case no such reported sale takes place on such date, the last
sales price regular way in either case as reported on the principal national
securities exchange on which the Common Stock or the Public Warrants, as the
case may be, is listed or admitted to trading, or (iii) if the Common Stock or
the Public Warrants, as the case may be, is not listed or admitted to trading on
any national securities exchange, the average of the closing bid and asked
prices regular way for the Common Stock or the Public Warrants, as the case may
be, on the Nasdaq National Market System or Nasdaq SmallCap Market of the Nasdaq
Stock Market, Inc. (together referred to as "Nasdaq") or (iv) if the Common
Stock or the Public Warrants, as the case may be, is not listed or admitted for
trading on any national securities exchange and is not reported on NASDAQ or any
similar organization, the average of the closing bid and asked prices in the
over-the-counter market as furnished by the National Quotation Bureau, Inc. or
if no such quotation is available, the fair market value as determined by the
Board of Directors in good faith.
2. DELIVERY OF CERTIFICATES TO REGISTERED HOLDER. Upon each exercise of
this Option, the Holder shall be deemed to be the holder of record of the Shares
and Underwriter's Warrants issuable upon such exercise notwithstanding that the
transfer books of the Company shall then be closed or certificates representing
such Shares or Underwriter's Warrants shall not then have been actually
delivered to the Holder. As soon as practicable after each such exercise of this
Option, the Company shall issue and deliver to the Holder a certificate or
certificates for the Shares and a certificate or certificates for the
Underwriter's Warrants registered in the name of the Holder or its designee. If
this option should be exercised in part only, the Company shall, upon surrender
of this Option for cancellation, execute and deliver a new Option evidencing the
right of the Holder to purchase the balance of the Units (or portions thereof)
subject to purchase hereunder.
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<PAGE>
3. OPTION REGISTER. Any Warrants issued upon the transfer or exercise
in part of this Option shall be numbered and shall be registered in an Option
Register as they are issued. The Company shall be entitled to treat the
registered holder of any Option on the Option Register as the owner in fact
thereof for all purposes and shall not be bound to recognize any equitable or
other claim to or interest in such Option on the part of any other person, and
shall not be liable for any registration or transfer of Options which are
registered or to be registered in the name of a fiduciary or the nominee of a
fiduciary unless made with the actual knowledge that a fiduciary or nominee is
committing a breach of trust in requesting such registration or participation
therein amounts to bad faith. The Options shall be transferable only on the
books of the Company upon delivery thereof duly endorsed by the Holder or by its
duly authorized attorney or representative, or accompanied by proper evidence of
succession, assignment or authority to transfer in all cases of transfer by an
attorney, executor, administrator, guardian, or other legal representative, duly
authenticated evidence his or its authority shall be produced. Upon any
registration of transfer, the Company shall deliver a new option or options to
the holder thereof, for another Option, or other options of different
denominations, of like tenor and representing in the aggregate the right to
purchase a like number of Shares (or portions thereof) and Underwriter's
Warrants upon surrender to the Company or its duly authorized agent.
Notwithstanding the foregoing, the Company shall have no obligation to cause
this Option to be transferred on its books to any person if, in the opinion of
counsel to the Company, such transfer does not comply with the provisions of the
Securities Act of 1933, as amended (the "Act"), and the rules and regulations
thereunder.
4. RESERVATION OF COMMON STOCK. The Company shall at all times reserve
and keep available out of its authorized and unissued Common Stock, solely for
the purpose of providing for the exercise of this Option and the Underwriter's
Warrants, such number of shares of Common Stock as shall, from time to time, be
sufficient therefor. The Company covenants that all shares of Common Stock
issuable upon exercise of this Option and the Underwriter's Warrants when paid
for in accordance with the respective terms thereof, shall be validly issued,
fully paid and nonassessable by the Company.
5. ANTI-DILUTION; ADJUSTMENTS TO EXERCISE PRICE.
(a) Upon the occurrence of any event (an "Event") as a result
of which an adjustment is made to the exercise price (the "Public Exercise
Price") of any of the Public Warrants, the number of Shares issuable thereafter
upon exercise of this Option shall be adjusted to equal the number of Shares
issuable prior to such Event multiplied by a fraction, the numerator of which
shall be the Public Exercise Price in effect prior to such Event and the
denominator of which shall be the Public Exercise Price subsequent to such
Event.
(b) Notwithstanding any other provision of this Option, any
adjustment of the exercise price, and/or the number of Warrant Shares
purchasable upon the exercise of the Underwriter's Warrants shall be determined
solely by the antidilution and other adjustment provisions contained in the
Warrant Agreement (which provisions are incorporated herein by reference) as if
such Underwriter's Warrants were and had been outstanding on and from February ,
1997.
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<PAGE>
(c) Whenever there shall be an adjustment as provided in this
paragraph 5, the Company shall promptly cause written notice thereof to be sent
by registered mail, postage prepaid, to the Holder, at its principal office,
which notice shall be accompanied by an officer's certificate setting forth the
number of Shares issuable as part of each Share and the exercise price and the
number of Warrant Shares purchasable upon the exercise of the Underwriter's
Warrants after such adjustment and setting forth a brief statement of the facts
requiring such adjustment and the computation thereof, which officer's
certificate shall be conclusive evidence of the correctness of any such
adjustment absent manifest error.
(d) All calculations under this paragraph 5 shall be made to
the nearest cent or to the nearest one-thousandth of a share, as the case may
be.
(e) The Company shall not be required to issue fractions of
shares of Common Stock or other capital stock of the Company upon the exercise
of Options. If any fraction of a share would be issuable on the exercise of any
Option (or specified portions thereof), the Company, in its sole discretion,
shall purchase such fraction for an amount in cash equal to the same fraction of
the Current Market Price of such share of Common Stock on the date of exercise
of the Option.
6. REORGANIZATION/RECLASSIFICATION.
(a) In case of any consolidation with or merger of the Company
with or into another corporation (other than a merger or consolidation in which
the Company is the surviving or continuing corporation), or in case of any sale,
lease or conveyance to another corporation of the property of the Company as an
entirety or substantially as an entirety, such successor, leasing or purchasing
corporation, as the case may be, shall (i) execute with the holder an agreement
providing that the holder shall have the right thereafter to receive upon
exercise of this Option solely the kind and amount of shares of stock and other
securities, property, cash or any combination thereof receivable upon such
consolidation, merger, sale, lease or conveyance by a holder of the number of
shares of Common Stock and the Underwriter's Warrants for which this Option
might have been exercised immediately prior to such consolidation, merger, sale,
lease or conveyance, and (ii) make effective provision in order to effect such
agreement. Such agreement shall provide for adjustment which shall be as nearly
equivalent as practicable to the adjustments in paragraph 5.
(b) In case of any reclassification or change of the shares of
Common Stock issuable upon exercise of this Option (other than a change in par
value or from par value to no par value, or as a result of a subdivision or
combination, but including any change in the shares into two or more classes or
series of shares), or in case of any consolidation or merger of another
corporation into the Company in which the Company is the continuing corporation
and in which there is a reclassification or change (including a change to the
right to receive cash or other property) of the shares of Common Stock (other
than a change in par value, or from par value to no par value, or as a result of
a subdivision or combination, but including any change in the shares into two or
more classes or series of shares), the Holder shall have the right thereafter to
receive upon exercise of this Option solely the kind and amount of shares of
stock and other securities, property, cash or any
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<PAGE>
combination thereof receivable upon such reclassification, change, consolidation
or merger by a holder of the number of shares of Common Stock and the
Underwriter's Warrants for which this Option might have been exercised
immediately prior to such reclassification, change, consolidation or merger.
Thereafter, appropriate provision shall be made for adjustments which shall be
as nearly equivalent as practicable to the adjustments in paragraph 5 above.
(c) The above provisions of this paragraph 6 shall similarly
apply to successive reclassifications and changes of shares of Common Stock and
to successive consolidations, mergers, sales, leases or conveyances similar to
those described in paragraphs 6(a) and (b).
7. NOTICE OF DIVIDENDS/DISTRIBUTIONS. If , in case at any time
the Company shall propose:
(a) to pay any dividend or make any distribution on shares of
Common Stock in shares of Common Stock or make any other distribution (other
than regularly scheduled cash dividends which are not in a greater amount per
share than the most recent such cash dividend) to all holders of Common Stock;
or
(b) to issue any rights, warrants or other securities to all
holders of Common Stock or Public Warrants entitling them to purchase any
additional shares of Common Stock or any other rights, warrants or other
securities; or
(c) to effect any reclassification or change or outstanding
shares of Common Stock, or any consolidation, merger, sale, lease or conveyance
of property, described in paragraph 6; or
(d) to effect any liquidation, dissolution, or winding-up of
the Company; or
(e) to take any other action which would cause an adjustment
to the exercise price of the Public Warrants; then, and in any one or more of
such cases, the Company shall give written notice thereof, by registered mail,
postage prepaid, to the Holder at the Holder's address as it shall appear in the
Option Register, mailed at least 15 days prior to: (i) the date as of which the
holders of record of shares of Common Stock to be entitled to receive any such
dividend, distribution, rights, warrants or other securities are to be
determined; (ii) the date on which any such reclassification, change of
outstanding shares of Common Stock, consolidation, merger, sale, lease,
conveyance of property, liquidation, dissolution, or winding-up is expected to
become effective, and the date as of which it is expected that holders of record
of shares of Common Stock or Public Warrants, as the case may be, shall be
entitled to exchange their shares or warrants for securities or other property,
if any, deliverable upon such reclassification, change of outstanding shares,
consolidation, merger, sale, lease, conveyance of property, liquidation,
dissolution, or winding-up; or (iii) the date of such action which would require
an adjustment to the Public Exercise Price.
8. PAYMENT OF TAXES. The issuance of any Shares or Underwriter's
Warrants or other securities upon the exercise of this Option, and the delivery
of certificates or other instruments
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<PAGE>
representing such shares of Common Stock, Warrants or other securities, shall be
made without charge to the Holder for any tax or other charge in respect of such
issuance. The Company shall not, however, be required to pay any tax which may
be payable in respect of any transfer involved in the issue and delivery of any
certificate in a name other than that of the Holder and the Company shall not be
required to issue or deliver any such certificate unless and until person or
persons requesting the issue thereof shall have paid the Company the amount of
such tax or shall have established to the satisfaction of the Company that such
tax has been paid or is not due and payable.
9. REGISTRATION RIGHTS. (a) If, at any time after February __, 1998,
and before January __, 2001, the Company shall file a registration statement
(other than on Form S-8, or any successor form) with the Securities and Exchange
Commission (the "Commission") while Shares or Underwriter's Warrants are
available for purchase upon exercise of this Option or while any Shares,
Underwriter's Warrants or Warrant Shares (which have not been so registered) are
outstanding, the Company shall give the Holder and all the then registered
holders of such Shares, Underwriter's Warrants or Warrant Shares at least 30
days prior written notice of the filing of such registration statement. If
requested by the Holder or by any such holder in writing within 10 days after
receipt of any such notice, the Company shall, at the Company's sole expense
(other than the fees and disbursements of counsel for the Holder or such holder
and the underwriting discounts and commissions, if any, payable in respect of
the Warrants, Shares, Underwriter's Warrants and Warrant Shares sold by the
Holder or any such holder), use its best efforts to register or qualify the
Shares, Underwriter's Warrants and Warrant Shares (collectively, the
"Underwriter's Securities") of the Holder or any such holders who shall have
made such request concurrently with the registration covering such other
securities, all to the extent requisite to permit the public offering and sale
of the Underwriter's Securities through the facilities of all appropriate
securities exchanges and the over-the-counter market, and will use its best
efforts through its officers, directors, auditors and counsel to cause such
registration statement to become effective as promptly as practicable.
Notwithstanding the foregoing, if the managing underwriter of any such offering
shall advise the Company in writing that, in its opinion, the distribution of
all or a portion of the Underwriter's Securities requested to be included in the
registration concurrently with the securities being registered by the Company
would materially adversely affect the distribution of such securities by the
Company for its own account, the Underwriter's Securities shall not be included
in such registration statement or such registration statement shall include only
so many of the Underwriter's Securities as will not have such an effect,
provided that if any securities of the Company are included in such registration
statement for the account of any person other than the Company and the Holder or
any such holder, the securities included in such registration statement for such
other person shall have been reduced pro rata to the reduction of the
Underwriter's Securities which were requested to be included in such
registration.
(b) If at any time after February __, 1998 and before January
__, 2002, and in any event no later than five years after the effective date of
offering, the Company shall receive a written request from holders of
Underwriter's Securities who, in the aggregate, own (or upon exercise of all
Warrants and Underwriter's Warrants, will own) a majority of the total number of
shares of Common Stock issued or issuable upon exercise of the Warrants and the
Underwriter's Warrants, the Company shall, as promptly as practicable, prepare
and file with the Commission a registration statement
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<PAGE>
sufficient to permit the public offering and sale of the Underwriter's
Securities through the facilities of all appropriate securities exchanges and
the over-the-counter market, and will use its best efforts through its officers,
directors, auditors and counsel to cause such registration statement to become
effective as promptly as practicable; PROVIDED HOWEVER, that the Company shall
only be obligated to file one such registration statement for which all expenses
incurred in connection with such registration (other than the fees and
disbursements of counsel for the Holder or such holders and underwriting
discounts and commissions, if any, payable in respect of the Underwriter's
Securities sold by the Holder or any such holder) shall be borne by the Company
and one additional such registration statement for which all such expenses shall
be paid by the Holder and such holders.
(c) In the event of a registration pursuant to the provisions
of this paragraph 5, the Company shall use its best efforts to cause the
Underwriter's Securities so registered to be registered or qualified for sale
under the securities or blue sky laws of such jurisdictions as the Holder or
such holders may reasonably request; PROVIDED, HOWEVER, that the Company shall
not be required to (i) qualify to do business in any state by reason of this
paragraph 9(c) in which it is not otherwise required to qualify to do business,
(ii) or register or qualify in any state which will impose material burdens on
the Company or its principals.
(d) The Company shall keep effective any registration or
qualification contemplated by this paragraph 9 and shall from time to time amend
or supplement each applicable registration statement, preliminary prospectus,
final prospectus, application, document and communication for such period of
time as shall be required to permit the Holder or such holders to complete the
offer and sale of the Underwriter's Securities covered thereby. The Company
shall in no event be required to keep any such registration or qualification
effect for a period in excess of nine months from the date on which the Holder
and such holders are first free to sell such Underwriter's Securities; PROVIDED,
HOWEVER, that if the Company is required to keep any such registration or
qualification in effect with respect to securities other than the Underwriter's
Securities beyond such period, the Company shall keep such registration or
qualification in effect as it relates to the Underwriter's Securities for so
long as such registration or qualification remains or is required to remain in
effect in respect of such other securities.
(e) In the event of a registration pursuant to the provisions
of this paragraph 9, the Company shall furnish to each of the five largest
holders of any Underwriter's Securities included therein such amendment and
supplement thereto (in each case, including all exhibits), such reasonable
number of copies of each prospectus contained in such registration statement and
each supplement or amendment thereto (including each preliminary prospectus),
all of which shall conform to the requirements of the Act and the rules and
regulations thereunder, and such other documents, as the Holder or such holders
may reasonably request in order to facilitate the disposition of the
Underwriter's Securities included in such registration.
(f) In the event of a registration pursuant to the provisions
this paragraph 9, the Company shall furnish to each holder of any Underwriter's
Securities so registered with an opinion of its counsel (reasonably acceptable
to the Holder) to the effect that (i) the registration statement
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<PAGE>
has become effective under the Act and no order suspending the effectiveness of
the registration statement, preventing or suspending the use of the registration
statement, any preliminary prospectus, any final prospectus, or any amendment or
supplement thereto has been issued, nor has the Securities and Exchange
Commission (the "Commission") or any state securities authority instituted or
threatened to institute any proceedings with respect to such an order, (ii) the
registration statement and each prospectus forming a part thereof (including
each preliminary prospectus), and any amendment or supplement thereto,
materially complies as to form with the Act and the rules and regulations
thereunder (except as to financial statements, including schedules, and other
accounting and financial data, as to which counsel need express no opinion, and
(iii) such counsel has no knowledge or reason to know of any material
misstatement or omission in such registration statement or any prospectus, as
amended or supplemented.
(g) The Company agrees that until all the Underwriter's
Securities have been sold under a registration statement or pursuant to Rule 144
under the Act, it shall keep current in filing all reports, statements and other
materials required to be filed with the Commission to permit holders of the
Underwriter's Securities to sell such securities under Rule 144.
10. INDEMNIFICATION.
(a) Subject to the conditions set forth below, the Company
agrees to indemnify and hold harmless the Holder, any holder of any of the
Underwriter's Securities, their officers, directors, partners, employees, agents
and counsel, and each person, if any, who controls any such person within the
meaning of Section 15 of the Act or Section 20(a) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), from and against any and all loss,
liability, charge, claim, damage and expense whatsoever (which shall include,
for all purposes of this paragraph 10, but not be limited to, reasonable
attorneys' fees and any and all expense whatsoever reasonably incurred, and any
and all amounts paid in settlement of any claim or litigation), as and when
incurred, arising out of, based upon, or in connection with (i) any untrue
statement or alleged untrue statement of a material fact contained (A) in any
registration statement, preliminary prospectus or final prospectus (as from time
to time amended and supplemented), or any amendment or supplement thereto, or
(B) in any application or other document or communication (in this paragraph 10
collectively called an "application") executed by or on behalf of the Company
filed in any jurisdiction in order to register or qualify any of the
"Underwriter's Securities" under the securities or blue sky laws thereof or
filed with the Commission or any securities exchange; or any omission or alleged
omission to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, unless such statement or omission
was made in reliance upon and in conformity with written information furnished
to the Company with respect to the Holder or any holder of any of the
Underwriter's Securities by or on behalf of such Holder or Holders, or such
other Holder, exclusively for inclusion in any such preliminary prospectus, or
final prospectus, or any amendment or supplement thereto, or in any application,
as the case may be, or (ii) any breach of any representation, warranty, covenant
or agreement of the Company to indemnify, which shall be in addition to any
liability the Company may otherwise have, including liabilities arising under
this Option.
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<PAGE>
If any action is brought against the Holder or any holder of
any of the Underwriter's Securities or any of its officers, directors, partners,
employees, agents or counsel, or any controlling persons of such person (an
"indemnified party") in respect of which indemnity may be sought against the
Company pursuant to the foregoing paragraph, such indemnified party or parties
shall promptly notify the Company in writing of the institution of such action
(but the failure so to notify shall not relieve the Company from any liability
it may have other than pursuant to this paragraph 10(a) except to the extent
that it has been registered in any material request by such failure) and the
Company shall promptly assume the defense of such action, including the
employment of counsel (reasonably satisfactory to such indemnified party or
parties) and payment of expenses. Such indemnified party or parties shall have
the right to employ its or their own counsel in any such case, but the fees and
expenses of such counsel shall be at the expense of such indemnified party or
parties unless the employment of such counsel shall have been authorized in
writing by the Company in connection with the defense of such action or the
Company shall not have promptly employed counsel reasonably satisfactory to such
indemnified party or parties to have charge of the defense of such action or
such indemnified party or parties shall have reasonably concluded that there may
be one or more legal defenses available to it or them or to other indemnified
parties which are different from or addition to those available to the Company,
if any of which events the reasonable fees and expenses of such counsel shall be
borne by the Company and the Company shall not have the right to direct the
defense of such action on behalf of the indemnified party or parties. Anything
in this paragraph 10 (a) to the contrary notwithstanding, the Company shall not
be liable for any settlement of any such claim or action effected without its
written consent.
(b) The Holder and any other holder of Underwriter's
Securities agree to indemnify and hold harmless the Company, each director of
the Company, each officer of the Company who shall have signed any registration
statement covering Underwriter's Securities held by the Holder and such other
holder 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 Holder and such
other holder in paragraph 10(a), but only with respect to statements or
omissions, if any, made in any registration statement, preliminary prospectus,
or final prospectus (as from time to time amended and supplemented), or any
amendment or supplement thereto, or in any application, in reliance upon and in
conformity with written information furnished to the Company with respect to the
Holder or such other holder by or on behalf of the Holder or such other holder
expressly for inclusion in any such registration statement, preliminary
prospectus, or final prospectus, or any amendment or supplement thereto, or in
any application, as the case may be. If any action shall be brought against the
Company or any other person so indemnified based on any such registration
statement, preliminary prospectus, or final prospectus, or any amendment or
supplement thereto, or in any application, and in respect of which indemnity may
be sought against the Holder pursuant to this paragraph 10(b), the Holder and
such other holder shall have the rights and duties given to the Company, and the
Company and each other person so indemnified shall have the rights and duties
given to the indemnified parties, by the provisions of paragraph 10(a).
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<PAGE>
(c) To provide for just and equitable contribution, if (i) an
indemnified party makes a claim for indemnification pursuant to paragraph 10(a)
or 10(b) (subject to the limitations thereof) but is found in a final judicial
determination, not subject to further appeal, that such indemnification may not
be enforced in such case, or (ii) any indemnified or indemnifying party seeks
contribution under the Act, the Exchange Act or otherwise, then the Company
(including for this purpose any contribution made by or on behalf of any
director of the Company, any officer of the Company who signed any such
registration statement and any controlling person of the Company), as one
entity, and the Holder and any holder of any of the Underwriter's Securities
included in such registration in the aggregate (including for this purpose any
contribution by or on behalf of an indemnified party), as a second entity, shall
contribute to the losses, liabilities, claims, damages and expenses whatsoever
to which any of them may be subject, on the basis of relevant equitable
considerations such as the relative fault of the Company and the Holder or any
such holder in connection with the facts which resulted in such losses,
liabilities, claims, damages and expenses. The relative fault, in the case of an
untrue statement, alleged untrue statement, omission or alleged omission, shall
be determined by, among other things, whether such statement, alleged statement,
omission or alleged omission relates to information supplied by the Company, by
the Holder or by any holder of Underwriter's Securities included in such
registration, and the parties relative intent, knowledge, access to information
and opportunity to correct or prevent such statement, alleged statement,
omission or alleged omission. The Company and the Holder agree that it would be
unjust and inequitable if the respective obligations of the Company and the
Holder or any such other holder of the Underwriter's Securities for contribution
were determined by pro rata or per capita allocation of the aggregate losses,
liabilities, claims, damages and expenses (even if the Holder and the other
indemnified parties were treated as one entity for such purpose) or by any other
method of allocation that does not reflect the equitable considerations referred
to in this paragraph 10(c). 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 is not guilty of such fraudulent
misrepresentation. For purposes of this paragraph 10(c), each person, if any,
who controls the Holder or any holder of any of the Underwriter's Securities
within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act
and each officer, director, partner, employee, agent and counsel of each such
person, shall have the same rights to contribution as such person and each
person, if any, who controls the Company within the meaning of Section 15 of the
Act or Section 20(a) of the Exchange Act and each officer, director, partner,
employee, agent and counsel of each such person, shall have the same rights to
contribution as such person and each person, if any, who controls the Company
within the meaning of Section 15 of the Act or Section 20(a) of the Exchange
Act, each officer of the Company who shall have signed any such registration
statement, and each director of the Company shall have the same rights to
contribution as the Company, subject in each case to the provisions of this
paragraph 10(c). Anything in this paragraph 10(c) to the contrary
notwithstanding, no party shall be liable for contribution with respect to the
settlement of any claim or action effected without its written consent. This
paragraph 10(c) is intended to supersede any right to contribution under the
Act, the Exchange Act or otherwise.
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<PAGE>
11. LEGEND. The securities issued upon exercise of this Option
shall be subject to a stop transfer order and the certificate or certificates
evidencing any such securities shall bear the following legend:
"THE SHARES [OR OTHER SECURITIES] REPRESENTED BY THIS
CERTIFICATE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, PURSUANT TO A REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION. HOWEVER, SUCH
SHARES [OR OTHER SECURITIES] CANNOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO (i) A POST-EFFECTIVE AMENDMENT TO SUCH
REGISTRATION STATEMENT, (ii) A SEPARATE REGISTRATION STATEMENT
UNDER SUCH ACT, OR (iii) AN EXEMPTION FROM REGISTRATION UNDER
SUCH ACT."
12. LOST CERTIFICATES. Upon receipt of evidence satisfactory to the
Company of the loss, theft, destruction or mutilation of any Option (and upon
surrender of any Option if mutilated), and upon reimbursement of the Company's
reasonable incidental expenses, the Company shall execute and deliver to the
Holder thereof a new Option of like date, tenor and denomination.
13. NO RIGHTS AS SHAREHOLDER. The Holder of any Option shall not
have, solely on account of such status, any rights of a shareholder of the
Company, either at law or in equity, or to any notice of meetings of
stockholders or of any other proceedings of the Company, except as provided in
this Option.
14. NOTICES. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have been
duly made when delivered, or mailed by registered or certified mail, return
receipt requested:
(a) If to the registered holder of this Option, to the
address of such holder as shown on the books of the Company; or
(b) If to the Company, to the address set forth in
Paragraph l(a) of this Option;
or
(c) if to the Holder, to the address set forth on the
first page of this Option.
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<PAGE>
15. GOVERNING LAW. This Option shall be construed in accordance
with the laws of the State of Florida, without giving effect to conflict of
laws.
Dated: February __, 1997
ADVANCED ELECTRONIC SUPPORT
PRODUCTS, INC.
By:_______________________________________
Name: Slav Stein
Title: President
[Seal]
Secretary
EXHIBIT 4.4
THESE SECURITIES MAY NOT BE PUBLICLY OFFERED OR SOLD UNLESS AT THE TIME OF SUCH
OFFER OR SALE, THE PERSON MAKING SUCH OFFER OR SALE DELIVERS A PROSPECTUS
MEETING THE REQUIREMENTS OF SECTION 10 OF THE SECURITIES ACT OF 1933, AS
AMENDED, FORMING A PART OF A REGISTRATION STATEMENT, OR POST-EFFECTIVE AMENDMENT
THERETO, WHICH IS EFFECTIVE UNDER SAID ACT, OR UNLESS IN THE OPINION OF COUNSEL
TO THE CORPORATION, SUCH OFFER AND SALE IS EXEMPT FROM THE APPLICABLE PROVISIONS
OF SECTION 5 OF SAID ACT.
UNDERWRITER'S WARRANT
For the purchase of shares of common stock,
par value $______ per share
of
ADVANCED ELECTRONIC SUPPORT PRODUCTS, INC.
Incorporated Under the Laws of the
State of Florida
Void After 5 P.M. New York, time
on _____________, ________
No. ______________ Warrant to Purchase __________ Shares
THIS IS TO CERTIFY, that, for value received, _______________________, a
_______, corporation (the "Underwriter"), or its registered assigns, is
entitled, subject to the terms and conditions hereinafter set forth on or after
_______________, 1998, and at any time prior to 5 P.M., New York, time on
___________, ______, but not thereafter, to purchase the number of shares of
common stock, par value $_________ per share ("Common Stock") of ADVANCED
ELECTRONIC SUPPORT PRODUCTS, INC., a Florida corporation (the "Corporation"),
from the Corporation upon payment to the Corporation of $_____ per share of
Common Stock (the "Purchase Price"), if and to the extent this Warrant is
exercised, in whole or in part, during the period this Warrant remains in force,
subject in all cases to adjustment as provided in Article II hereof, and to
receive certificates representing the Common Stock so purchased, upon
presentation and surrender to the Corporation of this Warrant, with the form of
subscription attached hereto duly executed, and accompanied by payment of the
Purchase Price of each share of Common Stock purchased as provided herein. This
Warrant (the "Warrant") may not be transferred prior to ________________,
19____.
ARTICLE I
TERMS OF THE WARRANT
SECTION 1.01 Subject to the provisions of Sections 1.05 and 3.01 hereof,
this Warrant may be exercised at any time and from time to time after 9:00 A.M.,
New York, New York, time, on
<PAGE>
__________________, 199__ (the "Exercise Commencement Date"), but no later than
5:00 P.M., New York time on ______________, -___ (the "Expiration Time"). If
_______________, ____, is a day on which banking institutions are authorized by
law to close, then the date on which this Warrant shall expire shall be the next
succeeding day which shall not be such a day. If this Warrant is not exercised
on or before the Expiration Time it shall become void, and all rights hereunder
shall thereupon cease.
SECTION 1.02
(1) The holder of this Warrant (the "Holder") may exercise this Warrant,
in whole or in part, upon surrender of this Warrant with the form of
subscription attached hereto duly executed, to the Corporation at its corporate
office located at 1810 N.E. 144th Street, North Miami, Florida 33181, together
with the full Purchase Price for each share of Common Stock to be purchased in
lawful money of the United States, or by check, bank draft or postal or express
money order payable in United States dollars to the order of the Corporation,
and upon compliance with and subject to the conditions set forth herein.
(2) Upon receipt of this Warrant with the form of subscription duly
executed and accompanied by payment of the aggregate Purchase Price for the
shares for which this Warrant is then being exercised, together with all taxes
applicable upon such exercise, the Corporation shall cause to be issued
certificates for the total number of whole shares of Common Stock for which this
Warrant is being exercised in such denominations as are required for delivery to
the Holder, and the Corporation shall thereupon deliver such certificates to the
Holder or its nominee.
(3) In case the Holder shall exercise this Warrant with respect to less
than all of the shares of Common Stock that may be purchased under this Warrant,
the Corporation shall execute a new Warrant for the balance of the shares of
Common Stock that may be purchased upon exercise of this Warrant and deliver
such new Warrant to the Holder.
(4) The Corporation covenants and agrees that it will pay when due and
payable any and all taxes that may be payable in respect of the issue of this
Warrant, or the issue of any shares of Common Stock upon the exercise of this
Warrant. The Corporation shall not, however, be required to pay any tax that may
be payable in respect of any transfer involved in the issuance or delivery of
this Warrant or of the shares of Common Stock in a name other than that of the
Holder at the time of surrender, and until the payment of such tax the
Corporation shall not be required to issue such shares of Common Stock.
SECTION 1.03 This Warrant may be split-up, combined or exchanged for
another warrant or warrants of like tenor to purchase a like aggregate number of
shares. If the Holder desires to split-up, combine, or exchange this Warrant, he
shall make such request in writing delivered to the Corporation at its corporate
office and shall surrender this Warrant and any other Warrants to be so
split-up, combined or exchanged at such office. Upon any such surrender for a
split-up, combination or exchange, the Corporation shall execute and deliver to
the person entitled thereto a Warrant or
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<PAGE>
Warrants, as the case may be, as so requested. The Corporation shall not be
required to effect any split-up, combination or exchange that will result in the
issuance of a Warrant entitling the Holder to purchase upon exercise a fraction
of a share of Common Stock. The Corporation may require the holder to pay a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any split-up, combination or exchange of Warrants.
SECTION 1.04 Prior to due presentment for registration or transfer of
this Warrant, the Corporation may deem and treat the Holder, as registered on
the books of the Corporation maintained for that purpose, as the absolute owner
of this Warrant (notwithstanding any endorsement or notation of ownership or
other writing hereon) for the purpose of any exercise hereof and for all other
purposes and the Corporation shall not be affected by any notice to the
contrary.
SECTION 1.05 Prior to _______, 199__, this Warrant may not be sold,
hypothecated, exercised, assigned, or transferred, except to any member of the
National Association of Securities Dealers, Inc. participating in the offering
contemplated in Section 3.01 hereof and to individuals who are the bona fide
officers or partners of the Underwriter or such members, or any successor to
their respective businesses or pursuant to the laws of descent and distribution,
and thereafter and until its expiration shall be assignable and transferable in
accordance with and subject to the provisions of the Securities Act of 1933, as
amended (the "Act"), if this Warrant is exercised immediately upon assignment or
transfer. If this Warrant is not exercised immediately upon assignment or
transfer, this Warrant shall lapse.
SECTION 1.06 Any assignment permitted hereunder shall be made by
surrender of this Warrant to the Corporation at its principal office with the
form of assignment attached hereto duly executed and funds sufficient to pay any
transfer tax. In such event, the Corporation shall, without charge, execute and
deliver a new Warrant in the name of the assignee named in such instrument of
assignment and this Warrant shall promptly be canceled. This Warrant may be
divided or combined with other Warrants that carry the same rights upon
presentation thereof at the corporate office of the Corporation together with a
written notice signed by the Holder, specifying the names and denominations in
which such new Warrants are to be issued.
SECTION 1.07 Nothing contained in this Warrant shall be construed as
conferring upon the Holder the right to vote or to consent or to receive notice
as a stockholder in respect of any meetings of stockholders for the election of
directors or any other matter, or as having any rights whatsoever as a
stockholder of the Corporation. If, however, at any time prior to the expiration
of this Warrant and prior to its exercise, any of the following shall occur:
(a) the Corporation shall declare any dividend payable in stock
to the holders of its Common Stock or make any other distribution in property
other than cash to the holders of its Common Stock; or
(b) the Corporation shall offer to the holders of its Common
Stock rights to subscribe for or purchase any shares of any class of stock or
any other purchase any shares of any
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<PAGE>
class of stock or any other rights or options or securities exchangeable for or
convertible into shares of any class of stock; or
(c) the Corporation shall effect any reclassification of its
Common Stock (other than a reclassification involving merely the subdivision or
combination of outstanding shares of Common Stock) or any capital
reorganization, or any consolidation or merger (other than a merger in which no
distribution of securities or other property is made to holders of Common
Stock), or any sale, transfer or other disposition of its property, assets and
business substantially as an entirety, or the liquidation, dissolution or
winding up of the Corporation; or
(d) the Corporation shall issue any shares of Common Stock in
exchange for shares of preferred stock or indebtedness of the Corporation, other
than upon conversion of such shares of preferred stock or indebtedness; then, in
each such case, the Corporation shall cause notice of such proposed action to be
mailed to the Holder. Such notice shall specify (i) the date on which the books
of the Corporation shall close, or a record be taken, for determining holders of
Common Stock entitled to receive such stock dividend or other distribution or
such rights or options, or the date on which such reclassification,
reorganization, consolidation, merger, sale, transfer, other disposition,
liquidation, dissolution, winding up or exchange shall take place or commence,
as the case may be, (ii) the date as of which it is expected that holders of
record of Common Stock shall be entitled to receive securities or other property
deliverable upon such action, if any such date has been fixed (on such date in
the event of a voluntary or involuntary liquidation, dissolution or winding up
of the Corporation, the right to exercise this Warrant shall terminate), and
(iii) such facts as shall indicate the effect of such action (to the extent such
effect may be known at the date of such notice) on the Purchase Price and the
kind and amount of the Commons Stock and other securities and property
deliverable upon exercise of this Warrant. Such notice shall be mailed in the
case of any action covered by Subsection 1.07(a) and 1.07(b) above, at least ten
(10) days prior to the record date of determining holders of the Common Stock
for purposes of receiving such payment or offer, and in the case of any action
covered by Subsection 1.07(c) or 1.07(d) above, at least ten (10) days prior to
the earlier of the date upon which such action is to take place or any record
date to determine holders of Common Stock entitled to receive such securities or
other property.
Without limiting the obligation of the Corporation to provide
notice to the Holder of actions hereunder, it is agreed that failure of the
Corporation to give notice shall not invalidate such action of the Corporation.
SECTION 1.08 If this Warrant is lost, stolen, mutilated or destroyed,
the Corporation shall, on such reasonable terms as to indemnity or otherwise as
it may impose (which shall, in the case of a mutilated Warrant, include the
surrender thereof), issue a new Warrant of like denomination and tenor as, and
in substitution for, this Warrant, which shall thereupon become void. Any such
new Warrant shall constitute an independent contractual obligation of the
Corporation, whether or not the Warrant so lost, stolen, destroyed or mutilated
shall at any time be enforceable by anyone.
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<PAGE>
SECTION 1.09
(1) The Corporation covenants and agrees that at all times it shall
reserve and keep available for the exercise of this Warrant such number of
authorized shares of Common Stock as are sufficient to permit the exercise in
full of this Warrant.
(2) Prior to this issuance of any shares of Common Stock upon exercise
of this Warrant, the Corporation shall secure the registration of such shares
and listing upon any securities exchange upon which the shares of the
Corporation's Common Stock may at the time be listed for trading, if any.
(3) The Corporation covenants that all shares of Common Stock when
issued upon the exercise of this Warrant will be validly issued, fully paid,
nonassessable and free of preemptive rights.
ARTICLE II
ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF SHARES OF COMMON
STOCK PURCHASABLE UPON EXERCISE
SECTION 2.01 Subject to the provisions of this Article II, the Purchase
Price in effect from time to time shall be subject to adjustment as follows:
(1) In the case the Corporation shall (i) declare a dividend or make a
distribution on the outstanding shares of its Common Stock in shares of its
Common Stock, (ii) subdivide the outstanding shares of its Common Stock into a
greater number of shares, (iii) combine the outstanding shares of its Common
Stock into a smaller number of shares, (iv) issue any shares of its Common Stock
shares, (iv) issue any shares of its Common Stock by reclassification of the
Common Stock, then in each case the Purchase Price in effect immediately after
the record date for such dividend or distribution or the effective date of such
subdivision, combination or reclassification shall be adjusted so that it shall
equal the price determined by multiplying the Purchase Price in effect
immediately prior thereto by a fraction, of which the numerator shall be the
number of shares of Common Stock outstanding immediately before such dividend,
distribution, subdivision, combination or reclassification, and of which the
denominator shall be the number of shares of Common Stock outstanding
immediately after such dividend, distribution, subdivision, combination or
reclassification. Any shares of Common Stock of the Corporation issuable in
payment of a dividend shall be deemed to have been issued immediately prior to
the record date for such dividend.
(2) All calculations under this Section 2.01 shall be made to the
nearest whole cent.
SECTION 2.02 No adjustment in the Purchase Price in accordance with the
provisions of Subsection 2.01(1) hereof need be made if such adjustment would
amount to a change of less than 1% in such Purchase Price; provided that the
amount by which any adjustment is not made by reason of the provisions of this
Section 2.02 shall be carried forward and taken into account at the time of any
subsequent adjustment in the Purchase Price.
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<PAGE>
SECTION 2.03 Upon each adjustment of the Purchase Price pursuant to
Subsection 2.01(1) each Warrant shall thereupon evidence the right to purchase
shares of Common Stock (calculated to the nearest whole share) obtained by
multiplying the number of shares of Common Stock purchasable immediately prior
to such adjustment and dividing the product so obtained by the Purchase Price in
effect immediately after such adjustment.
SECTION 2.04 In case of any capital reorganization, other than in the
cases referred to in Section 2.01 hereof, or the consolidation or merger of the
Corporation with or into another corporation (other than a merger or
consolidation in which the Corporation is the merger or consolidation in which
the Corporation is the continuing corporation and which does not result in any
reclassification of the outstanding shares of Common Stock or the conversion of
the outstanding shares of Common Stock into shares of other stock or other
securities or property), or the sale of the property of the Corporation as an
entirety or substantially as an entirety, or the conversion, however effected,
of the Corporation into another form of entity (collectively such actions being
hereinafter referred to as "Reorganizations"), there shall thereafter be
deliverable upon exercise of any Warrant (as to the shares of Common Stock
subject thereto and in lieu of the number of shares of Common Stock theretofore
deliverable) the number of shares of stock or other securities or property to
which a holder of the number of shares of Common Stock that would otherwise have
been deliverable upon the exercise of such Warrant would have been entitled upon
such Reorganization if such Warrant had been exercised in full immediately prior
to such Reorganization. In case of any Reorganization, appropriate adjustment,
as determined in good faith by the Board of Directors of the Corporation, shall
be made in the application of the provisions herein set forth with respect to
the rights and interests of Warrant holders so that the provisions set forth
herein shall thereafter be applicable, as nearly as possible, in relation to any
shares or other property thereafter deliverable upon exercise of Warrants. The
Corporation shall not effect any such Reorganization, unless upon or prior to
the consummation thereof the successor entity, or if the Corporation shall be
the surviving entity in any such Reorganization and is not the issuer of the
shares of stock or other securities or property to be delivered to holders of
shares of the Common Stock outstanding at the effective time thereof, then such
issuer shall assume by written instrument the obligation to deliver to the
Holder such shares of stock, securities, cash or other property as the Holder
shall be entitled to purchase in accordance with the foregoing provisions. In
the event of a sale or conveyance or other transfer of all or substantially all
of the assets of the Corporation as a part of a plan for liquidation of the
Corporation, all rights to exercise any Warrant shall terminate on the date such
sale or conveyance or other transfer is to be consummated.
SECTION 2.05 The Corporation may select a firm of independent certified
public accountants acceptable to the Holder hereof, which selection may be
changed from time to time, to verify the computations made in accordance with
this Article II. The certificate, report or other written statement of any such
firm shall be conclusive evidence of the correctness of any computation made
under this Article II.
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<PAGE>
SECTION 2.06 Irrespective of any adjustments pursuant to this Article
II, Warrants theretofore or thereafter issued need not be amended or replaced,
but certificates thereafter issued shall bear an appropriate legend or other
notice of any adjustments.
SECTION 2.07 The Corporation shall not be required upon the exercise of
any Warrant to issue fractional shares of Common Stock that may result from
adjustments in accordance with this Article II to the Purchase Price or number
of shares of Common Stock purchasable under each Warrant. If more than one
Warrant is exercised at one time by the same Holder, the number of full shares
of Common Stock that shall be deliverable shall be computed based on the number
of shares of Common Stock deliverable in exchange for the aggregate number of
Warrants exercised. With respect to any final fraction of a share called for
upon the exercise of any Warrant or Warrants, the Corporation shall pay a cash
adjustment in respect of such final fraction in an amount equal to the same
fraction of the market value of a share of Common Stock on the business day next
preceding the date of such exercise. The Holder, by his acceptance of the
Warrant, shall expressly waive any right to receive any fractional share of
Common Stock upon exercise of the Warrants. For the purposes of this Section
2.07, the market price per share of Common Stock at any date shall mean the last
reported sale price regular way or, in case no such reported sale takes place on
such date, the average of the last reported bid and asked prices regular way, in
either case on the principal national securities exchange on which the Common
Stock is admitted to trading or listed if that is the principal market for the
Common Stock or if not listed or admitted to trading on any national securities
exchange or if such national security exchange is not the principal market for
the Common Stock, the closing bid price (or closing sales price, if reported) as
reported by the National Association of Securities Dealers, Inc. Automated
Quotation System or its successor, if any. If the price of the Common Stock is
not so reported, then such market price shall mean the last known price paid per
share by a purchaser of such stock in an arms' length transaction. All
calculations under this Section 2.07 shall be made to the nearest 1/100th of a
share.
SECTION 2.08 In no event shall the Purchase Price be adjusted below the
par value per share of the Common Stock.
ARTICLE III
REGISTRATION UNDER THE SECURITIES ACT OF 1933
SECTION 3.01 The shares of Common Stock issuable upon exercise of this
Warrant have been registered under the Act on Form SB-2, SEC File No. 333-______
(the "Registration Statement") as part of the Underwriters' Purchase Option
Agreement.
Upon exercise, in part or in whole, of this Warrant, the certificates
representing the shares of Common Stock shall bear the following legend:
"The shares represented by this certificate have been registered under the
Securities Act of 1933, as amended, solely for sale to the holder of a
warrant to purchase, which holder may be deemed to be an underwriter of
such shares within the provisions and
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for purposes only of the Securities Act of 1933, as amended. The issuer of
these shares will agree to a transfer hereof only if (1) an amended or
supplemented prospectus setting forth the terms of the offer has been filed
as part of a post-effective amendment to the Registration Statement under
which these shares are registered or as part of a new registration
statement, if then required, and such post-effective amendment or new
registration statement has become effective under the Securities Act of
1933, as amended, or (2) counsel to the issuer is satisfied that no such
post-effective amendment or new registration statement is required."
The Corporation agrees that it shall be satisfied that no post-effective
amendment or new registration statement is required for the public sale of the
shares of Common Stock if it shall be presented with a letter from the Staff of
the Securities and Exchange Commission (the "Commission") stating in effect
that, based upon stated facts that the Corporation shall have no reason to
believe are not true in any material respect, the Staff of the Commission will
not recommend any action to the Commission if such shares are offered and sold
without delivery of a prospectus, and that, therefore, no post-effective
amendment to the Registration Statement under which the sale of such shares is
registered or new registration statement is required to be filed.
SECTION 3.02 The Corporation understands and agrees that if at any time
during the period referred to above it should file a registration statement or
offering statement pursuant to the Act for a public offering of securities, the
Corporation, at its own expense, will offer to the Holder the opportunity to
register or qualify the offering and sale of the Shares underlying the Warrants.
This paragraph is not applicable to a registration statement filed with the
Commission on Form S-4 or S-8, or any successor forms, and shall apply only if
at least 25% of the underlying shares of Common Stock of this Warrant are so
presented for sale.
SECTION 3.03 In connection with any registration under Section
3.02 hereof, the Corporation covenants and agrees as follows:
(a) The Corporation shall use its best efforts to have any
post-effective amendment or new registration statement declared effective at the
earliest possible time, and shall furnish such number of prospectuses as shall
reasonably be requested by the Holder selling shares.
(b) The Corporation shall pay all costs, fees, and expenses in
connection with all post-effective amendments or new registration statements
under Section 3.02 hereof including, without limitation, the Corporation's legal
and accounting fees, printing expenses, blue sky fees and expenses, except that
the Corporation shall not pay any of the following costs, fees or expenses: (i)
underwriting discounts and commissions allocable to the Shares, (ii) state
transfer taxes, (iii) brokerage commissions and (iv) fees and expenses of
counsel and accountants for the holders of the Warrants, and/or shares of Common
Stock.
(c) The Corporation will take all necessary action to qualify or
register the securities included in a post-effective amendment or new
registration statement for offering and sale
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<PAGE>
under the securities or blue sky laws of such states as are requested by the
holders of such securities, provided that the Corporation shall not be obligated
to execute or file any general consent to service of process or to qualify as a
foreign corporation to do business under the law of any such jurisdiction.
(d) The Holder shall be entitled to pay the Purchase Price for
the shares out of the proceeds of any sale of the securities purchasable upon
their exercise, provided such exercise and sale occur simultaneously.
SECTION 3.04
(1) The Corporation shall indemnify and hold harmless each person
registering the sale of securities pursuant to this Article III (the "Seller")
and each underwriter, within the meaning of the Act, who may purchase from or
sell for any Seller any of the Shares from and against any and all losses,
claims, damages and liabilities caused by any untrue statement or alleged untrue
statement of a material fact contained in any post-effective amendment or new
registration statement or any supplemented prospectus under the Act included
therein required to be filed or furnished by reason of Section 3.02, or caused
by any omission or alleged omission to state therein or necessary to make the
statements therein not misleading, except insofar as such losses, claims,
damages or liabilities are caused by any such untrue statement or alleged untrue
statement or omission or alleged omission based upon information furnished or
required to be furnished in writing to the Corporation by such Seller or
underwriter expressly for use therein, which indemnification shall include each
person, if any, who controls any such Seller or underwriter within the meaning
of the Act; provided, however, that the indemnity agreement by the Corporation
set forth in this Section 3.04 with respect to any prospectus that shall be
subsequently amended or supplemented prior to the written confirmation of the
sale of any securities shall not inure to the benefit of any Seller or
underwriter from whom the person asserting such securities that are the subject
thereof (or to the benefit of any person controlling such Seller or
underwriter), if such Seller or underwriter failed to send or give a copy of the
prospectus as amended or supplemented to such person at or prior to written
confirmation of the sale of such securities to such person and if such amended
or supplemented prospectus did not contain any untrue statement or alleged
untrue statement or omission or alleged omission giving rise to such cause,
claim, damage or liability.
(2) Each Seller that avails itself of the procedures under Article III
shall indemnify, and secure the agreement of any underwriter which the Seller
employs to indemnify, the Corporation, its directors, each officer signing the
related post-effective amendment or registration statement and each person, if
any, who controls the Corporation within the meaning of the Act from and against
any and all losses, claims, damages and liabilities caused by any untrue
statement or alleged untrue statement of a material fact contained in any
post-effective amendment or registration statement or any prospectus required to
be filed or furnished by reason of Section 3.02, or caused by any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, insofar as such
losses, claims, damages or liabilities are caused by any untrue statement or
alleged untrue statement or omission or alleged omission based upon
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<PAGE>
information furnished in writing to the Corporation by any such Seller or
underwriter expressly for use therein.
SECTION 3.05 The agreements in this Article III shall continue in effect
regardless of the exercise and surrender of this Warrant.
ARTICLE IV
OTHER MATTERS
SECTION 4.01 The Corporation will from time to time promptly pay,
subject to the provisions of paragraph (4) of Section 1.02 hereof, all taxes and
charges that may be imposed upon the Corporation in respect of the issuance or
delivery of this Warrant or the shares of Common Stock purchasable upon the
exercise of this Warrant.
SECTION 4.02 All the covenants and provisions of this Warrant by or for
the benefit of the Corporation shall bind and inure to the benefit of its
successors and assigns hereunder.
SECTION 4.03 Notices or demands pursuant to this Warrant to be given or
made by the Holder to or on the Corporation shall be sufficiently given or made
if sent by certified or registered mail, return receipt requested, postage
prepaid, and addressed, until another address is designated in writing by the
Corporation, as follows:
Advanced Electronic Support Products, Inc.
1810 N.E. 144th Street
North Miami, FL 33181
Attention: President
Notices to the Holder provided for in this Warrant shall be deemed given
or made by the Corporation if sent by certified or registered mail, return
receipt requested, postage prepaid, and addressed to the Holder at his last
known address as it shall appear on the books of the Corporation.
SECTION 4.04 THE VALIDITY, INTERPRETATION AND PERFORMANCE OF
THIS WARRANT SHALL BE GOVERNED BY THE SUBSTANTIVE LAWS OF THE STATE OF
FLORIDA.
SECTION 4.05 Nothing in this Warrant expressed and nothing that may be
implied from any of the provisions hereof is intended, or shall be construed, to
confer upon, or give to, any person or corporation other than the Corporation
and the Holder any right, remedy or claim under promise or agreement hereof, and
all covenants, conditions, stipulations, promises and agreements contained in
this Warrant shall be for the sole and exclusive benefit of the Corporation and
its successors and of the Holder, its successors and, if permitted, its
assignees.
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<PAGE>
SECTION 4.06 The headings herein are for convenience only and are not
part of this Warrant and shall not affect the interpretation thereof.
IN WITNESS WHEREOF, this, Warrant has been duly executed by the
Corporation under its corporate seal as of the ____ day of __________, 1997.
ADVANCED ELECTRONIC SUPPORT
PRODUCTS, INC.
By:_____________________________
Name:___________________________
Title:__________________________
[CORPORATE SEAL]
Attest:
- -----------------------------
Secretary
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<PAGE>
ADVANCED ELECTRONIC SUPPORT PRODUCTS, INC.
SUBSCRIPTION FORM
(To be executed by the registered holder to exercise the right to
purchase shares of Common Stock evidenced by the foregoing
Warrant.)
Advanced Electronic Support Products, Inc.
1810 N.E. 144th Street
North Miami, FL 33181
The undersigned hereby irrevocably subscribes for the purchase of _____
share(s) of your Common Stock pursuant to and in accordance with the terms and
conditions of this Warrant, and herewith makes payment, covering the purchase of
such shares. Certificates for the shares of Common Stock should be delivered to
the undersigned at the address stated below. If such number of shares of Common
Stock shall not be all of the shares purchasable hereunder, please deliver a new
Warrant of like tenor for the balance of the remaining shares purchasable
hereunder to the undersigned at the address stated below.
The undersigned agrees that: (1) the undersigned will not offer, sell,
transfer or otherwise dispose of any such shares of Common Stock being purchased
hereunder unless either (a) a registration statement, or post-effective
amendment thereto, covering the sale of such shares of Common Stock has been
filed with the Securities and Exchange Commission pursuant to the Securities Act
of 1933, as amended (the "Act"), and such sale, transfer or other disposition is
accompanied by a prospectus meeting the requirements of Section 10 of the Act
forming a part of such registration statement, or post-effective amendment
thereto, which is in effect under the Act covering the sale of the shares of
Common Stock to be sold, transferred or otherwise disposed of, or (b) counsel
acceptable to Advanced Electronic Support Products, Inc. and satisfactory to the
undersigned has rendered an opinion acceptable to the Company in writing and
addressed to the Company that such proposed offer, sale, transfer or other
disposition of the shares of Common Stock is exempt from the provisions of
Section 5 of the Act in view of the circumstances of such proposed offer, sale,
transfer or other disposition; (2) the Company may notify the transfer agent for
its Common Stock that the certificates for the Common Stock acquired by the
undersigned pursuant hereto are not to be transferred unless the transfer agent
receives advance from the Company that one or both of the conditions referred to
in (1)(a) and (1)(b) above have been satisfied; and (3) the Company may affix
the legend set forth in Section 3.01 of this Warrant to the certificates for
shares of Common Stock hereby subscribed for, if such legend is applicable.
Dated:_________________ Signed:________________________
Signature guaranteed: Address _______________________
_______________________
_______________________
<PAGE>
ADVANCED ELECTRONIC SUPPORT PRODUCTS, INC.
ASSIGNMENT FORM
(To be executed by the registered holder to effect assignment of the
foregoing Warrant)
FOR VALUE RECEIVED _________________________________ hereby sells, assigns and
transfers unto _________________________________ the right to purchase ______
shares of Common Stock, par value $ _____ per share of the Corporation
purchasable pursuant to the within Warrant, on the terms and conditions set
forth therein, and does hereby irrevocably constitute and appoint
_____________________________________ and/or its transfer agent Attorney, to
transfer on the books of the Corporation Warrants representing such rights, with
full power of substitution.
Dated:__________________
Signed:____________________
Signature guaranteed:
________________________________
EXHIBIT 4.5
THE UNDERWRITER'S OPTION REPRESENTED BY THIS CERTIFICATE AND THE OTHER
SECURITIES ISSUABLE UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF
1933, (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR
RULE UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER, THAT AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE UNDERWRITER'S OPTIONS REPRESENTED BY THIS
CERTIFICATE IS RESTRICTED IN ACCORDANCE WITH THE UNDERWRITER'S PURCHASE OPTION
AGREEMENT REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:30 P.M., NEW YORK TIME, FEBRUARY __, 2002
No. U.0.1 Underwriter's Options
UNDERWRITER'S OPTION CERTIFICATE
This Underwriter's Option Certificate certifies that _______________
______________________ or registered assigns, is the registered holder of
________ Underwriter's Options to purchase initially, at any time from February
__, 1998 until 5:30 p.m. New York time on January __, 2002 ("Expiration Date"),
up to ________ Shares of Common Stock at a price of $_____ per share and
________ Stock Purchase Warrants at a price of $________ per Warrant of Advanced
Electronic Support Products, Inc., a Florida corporation (the "Company"), at an
aggregate initial exercise price, subject to adjustment in certain events (the
"Exercise Price"), of $_______ upon surrender of this Underwriter's Option
Certificate and payment of the Exercise Price at an office or agency of the
Company, but subject to the conditions set forth herein and in the Purchase
Option Agreement dated as of ___________, 199__ between the Company and Argent
Securities, Inc. (the "Underwriter's Purchase Option Agreement"). Payment of the
Exercise Price shall be made by certified or official bank check in New York
Clearing House funds payable to the order of the Company.
No Underwriter's Option may be exercised after 5:30 p.m., New York
time, on the Expiration Date, at which time all Underwriter's Options evidenced
hereby, unless exercised prior thereto, shall thereafter be void.
The Underwriter's Options evidenced by this Underwriter's Option
Certificate are part of a duly authorized issue of warrants pursuant to the
Underwriter's Purchase Option Agreement, which Underwriter's Purchase Option
Agreement is hereby incorporated by reference in and made a part of this
instrument and is hereby referred to for a description of the rights, limitation
of rights, obligations, duties and immunities thereunder of the Company and the
holders (the words "holders" or "holder" meaning the registered holders or
registered holder) of the Underwriter's Options.
<PAGE>
The Underwriter's Purchase Option Agreement provides that upon the
occurrence of certain events the exercise prices and/or number of the Company's
securities issuable thereupon may, subject to certain conditions, be adjusted.
In such event, the Company will, at the request of the holder, issue a new
Underwriter's Option Certificate evidencing the adjustment in the exercise price
and the number and/or type of securities issuable upon the exercise of the
Underwriter's Options; provided, however, that the failure of the Company to
issue such new Underwriter's Option Certificates shall not in any way change,
alter or otherwise impair, the rights of the holder as set forth in the
Underwriters Purchase Option Agreement.
Upon due presentment for registration of transfer of this Underwriter's
Option Certificate at an office or agency of the Company, a new Underwriter's
Option Certificate or Underwriter's Option Certificates of like tenor and
evidencing in the aggregate a like number of Underwriter's Options shall be
issued to the transferees in exchange for this Underwriter's Option Certificate,
subject to the limitations provided herein and in the Underwriter's Purchase
Option Agreement, without any charge except for any tax or other governmental
charge imposed in connection with such transfer.
Upon the exercise of less than all of the Underwriter's Options
evidenced by this Certificate, the Company shall forthwith issue to the holder
hereof a new Underwriter's Option Certificate representing such numbered
unexercised Underwriter's Options.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Underwriter's Option Certificate (notwithstanding any
notation of ownership or other writing hereon made by anyone), for the purpose
of any exercise hereof, and of any distribution to the holder(s) hereof, and for
all other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Underwriter's Option Certificate which are
defined in the Underwriter's Warrant Agreement shall have the meanings assigned
to them in the Underwriter's Purchase Option Agreement.
IN WITNESS WHEREOF, the Company has caused this Underwriter's Option
Certificate to be duly executed under its corporate seal.
Dated as of _________________, 1997
ADVANCED ELECTRONIC SUPPORT
PRODUCTS, INC.
[SEAL] By:______________________________
Name: _________________
Attest: Title: _________________
_______________________________
Secretary
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<PAGE>
[FORM OF ELECTION TO PURCHASE]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Underwriter's Option Certificate, to purchase _________
Shares and Warrants and herewith tenders in payment for such securities a
certified or official bank check payable in New York Clearing House Funds to the
order of Advanced Electronic Support Products, Inc. in the amount of
$___________, all in accordance with the terms hereof. The undersigned requests
that a certificate for such securities be registered in the name of
__________________________________________ whose address is ____________________
________________________________________________________________________________
and that such Certificate be delivered to ______________________________________
whose address is ______________________________________________________________.
Dated:__________________
_________________________________
Signature
(Signature must conform in
all respects to name of
holder as specified on the
face of the Underwriter's
Option Certificate.)
__________________________________
Insert Social Security or
Other Identifying Number of Holder)
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<PAGE>
THE UNDERWRITER'S OPTION REPRESENTED BY THIS CERTIFICATE AND THE OTHER
SECURITIES ISSUABLE UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF
1933, (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR
RULE UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER, THAT AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE UNDERWRITER'S OPTIONS REPRESENTED BY THIS
CERTIFICATE IS RESTRICTED IN ACCORDANCE WITH THE UNDERWRITER'S PURCHASE OPTION
AGREEMENT REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:30 P.M., NEW YORK TIME, FEBRUARY __, 2002
No. U.0.1 Underwriter's Options
UNDERWRITER'S OPTION CERTIFICATE
This Underwriter's Option Certificate certifies that Corporate
Securities Group, Inc. or registered assigns, is the registered holder of
________ Underwriter's Options to purchase initially, at any time from February
__, 1998 until 5:30 p.m. New York time on January __, 2002 ("Expiration Date"),
up to ________ Shares of Common Stock at a price of $_____ per share and
________ Stock Purchase Warrants at a price of $________ per Warrant of Advanced
Electronic Support Products, Inc., a Florida corporation (the "Company"), at an
aggregate initial exercise price, subject to adjustment in certain events (the
"Exercise Price"), of $_______ upon surrender of this Underwriter's Option
Certificate and payment of the Exercise Price at an office or agency of the
Company, but subject to the conditions set forth herein and in the Purchase
Option Agreement dated as of ___________, 199__ between the Company and Argent
Securities, Inc. (the "Underwriter's Purchase Option Agreement"). Payment of the
Exercise Price shall be made by certified or official bank check in New York
Clearing House funds payable to the order of the Company.
No Underwriter's Option may be exercised after 5:30 p.m., New York
time, on the Expiration Date, at which time all Underwriter's Options evidenced
hereby, unless exercised prior thereto, shall thereafter be void.
The Underwriter's Options evidenced by this Underwriter's Option
Certificate are part of a duly authorized issue of warrants pursuant to the
Underwriter's Purchase Option Agreement, which Underwriter's Purchase Option
Agreement is hereby incorporated by reference in and made a part of this
instrument and is hereby referred to for a description of the rights, limitation
of rights, obligations, duties and immunities thereunder of the Company and the
holders (the words "holders" or "holder" meaning the registered holders or
registered holder) of the Underwriter's Options.
<PAGE>
The Underwriter's Purchase Option Agreement provides that upon the
occurrence of certain events the exercise prices and/or number of the Company's
securities issuable thereupon may, subject to certain conditions, be adjusted.
In such event, the Company will, at the request of the holder, issue a new
Underwriter's Option Certificate evidencing the adjustment in the exercise price
and the number and/or type of securities issuable upon the exercise of the
Underwriter's Options; provided, however, that the failure of the Company to
issue such new Underwriter's Option Certificates shall not in any way change,
alter or otherwise impair, the rights of the holder as set forth in the
Underwriters Purchase Option Agreement.
Upon due presentment for registration of transfer of this Underwriter's
Option Certificate at an office or agency of the Company, a new Underwriter's
Option Certificate or Underwriter's Option Certificates of like tenor and
evidencing in the aggregate a like number of Underwriter's Options shall be
issued to the transferees in exchange for this Underwriter's Option Certificate,
subject to the limitations provided herein and in the Underwriter's Purchase
Option Agreement, without any charge except for any tax or other governmental
charge imposed in connection with such transfer.
Upon the exercise of less than all of the Underwriter's Options
evidenced by this Certificate, the Company shall forthwith issue to the holder
hereof a new Underwriter's Option Certificate representing such numbered
unexercised Underwriter's Options.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Underwriter's Option Certificate (notwithstanding any
notation of ownership or other writing hereon made by anyone), for the purpose
of any exercise hereof, and of any distribution to the holder(s) hereof, and for
all other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Underwriter's Option Certificate which are
defined in the Underwriter's Warrant Agreement shall have the meanings assigned
to them in the Underwriter's Purchase Option Agreement.
IN WITNESS WHEREOF, the Company has caused this Underwriter's Option
Certificate to be duly executed under its corporate seal.
Dated as of _________________, 1997
ADVANCED ELECTRONIC SUPPORT
PRODUCTS, INC.
[SEAL] By:______________________________
Name: _________________
Attest: Title: _________________
_______________________________
Secretary
-2-
<PAGE>
[FORM OF ELECTION TO PURCHASE]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Underwriter's Option Certificate, to purchase _________
Shares and Warrants and herewith tenders in payment for such securities a
certified or official bank check payable in New York Clearing House Funds to the
order of Advanced Electronic Support Products, Inc. in the amount of
$___________, all in accordance with the terms hereof. The undersigned requests
that a certificate for such securities be registered in the name of
__________________________________________ whose address is ____________________
________________________________________________________________________________
and that such Certificate be delivered to ______________________________________
whose address is ______________________________________________________________.
Dated:__________________
_________________________________
Signature
(Signature must conform in
all respects to name of
holder as specified on the
face of the Underwriter's
Option Certificate.)
__________________________________
Insert Social Security or
Other Identifying Number of Holder)
-3-
EXHIBIT 10.8
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement"), is made and effective as
of the 31st day of December, 1996, by and between Advanced Electronic Support
Products, Inc., a Florida corporation with its principal place of business at
1810 N.E. 144th Street, North Miami, Florida 33181 (the "Company"), and
_________________________________________________,_____________________________
________________________ (the "Optionee").
W I T N E S S E T H:
WHEREAS, the Optionee is willing to assist the Company in the further
development of its business;
WHEREAS, the Company is desirous of increasing the incentive of the
Optionee to exert Optionee's utmost efforts to improve the business and increase
the assets of the Company; and
WHEREAS, the Company is desirous of granting the Optionee certain
options (the "Options"), to purchase shares of Common Stock of the Company from
the Company upon the terms
and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration, receipt and adequacy of which is hereby
acknowledged, the parties hereto hereby agree as follows:
1. GRANT OF OPTION.
Subject to the terms and conditions of this Agreement, the Company
hereby grants to the Optionee, the option to purchase, at any time prior to 5:00
p.m. on January 1, 2007 (ten (10) years from the date hereof), an aggregate
100,000 shares of Common Stock of the Company (the "Option Shares"). The Options
shall expire pursuant to their terms on January 1, 2007 (ten (10) years from the
date hereof), unless sooner exercised by the Optionee as provided hereunder.
2. EXERCISE PRICE.
The Options shall be exercisable at $___ per share, which is the initial
public offering price of the Common Stock (the "Exercise Price"). The Optionee
shall pay all transfer taxes, if any, upon the exercise of the Options and all
other fees and expenses, if any, necessarily incurred by the Company in
connection therewith. The Exercise Price of the Options shall be subject to
adjustment in the event of changes in the capitalization of the Company, as set
forth in SECTION 5 hereto.
<PAGE>
3. EXERCISABILITY OF OPTIONS.
(a) TIME AND AMOUNT OF EXERCISE. The Options may be exercised in whole
or in part at any time commencing as of the date hereof, but in no case may an
Option (i) be exercised as to less than one hundred (100) shares of Common Stock
at any one time, or the remaining shares of Common Stock covered by the Option
if less than one hundred (100), and (ii) be exercised more than ten years from
the date of its grant.
(b) MANNER OF EXERCISE. An Option granted hereunder shall be exercised
by the delivery by the holder thereof to the Company at its principal office (to
the attention of the Secretary of the Company) of written notice of the number
of full shares of Common Stock with respect to which the Option is being
exercised, accompanied by payment in full of the price for such shares of Common
Stock, (i) in cash or by certified or bank check payable to the order of the
Company,(ii) by delivery of shares of Common Stock already owned by the Optionee
and having a fair market value equal to the Exercise Price, or (iii) by a
combination of cash and Common Stock. The consideration for the Option may also
be paid in full by a broker-dealer to whom the optionee has submitted an
exercise notice consisting of a fully endorsed Option, or through any other
medium of payment as the Company, in its sole and absolute discretion, may
authorize in writing.
(c) TRANSFER OF OPTIONS. All Options granted hereunder shall not be
transferable and any Option granted hereunder may be exercised during the
lifetime of the holder thereof only by the holder. No Option granted hereunder
shall be subject to execution, attachment or other
process.
4. THE OPTIONEE'S INVESTMENT REPRESENTATIONS.
The Optionee hereby agrees, acknowledges, represents and warrants to the
Company the following:
(a) The Optionee is acquiring the Options hereunder for investment
purposes only and without the intent toward the further sale and/or distribution
thereof. In addition, the Optionee hereby agrees, acknowledges, represents and
warrants, that in the event of the exercise of any of the Options hereunder,
said Option Shares shall be acquired for investment purposes only and without
the intent toward the further sale and/or distribution thereof.
(b) Unless the Option Shares are registered in compliance with the
registration requirements of the Securities Act of 1933, as amended, and with
other applicable securities laws, the certificates evidencing the Option Shares
will bear a restrictive legend with respect to the sale or transfer thereof. Any
subsequent sale, transfer, assignment or disposition of the Option Shares, if
then otherwise permitted in accordance with any contractual commitment or
obligation entered into by the Optionee, must be made in compliance with the
registration requirements of the Securities Act of 1933, as amended, and with
other applicable securities laws or pursuant to an opinion of counsel,
reasonably satisfactory to the Company, that such registration is not required.
2
<PAGE>
(c) The Optionee is familiar with the business and financial condition
of the Company, and the Optionee has been afforded the opportunity to ask all
relevant questions of the Company's management with respect to the business and
financial condition of the Company. The Optionee further agrees to re-assert any
of said representations and warranties and to make any other representations and
warranties, as reasonably requested by the Company, as of the date of exercise
of any of said Options.
(d) The Optionee hereby further acknowledges, agrees, represents and
warrants that the issuance of the Option Shares upon the exercise of the Options
is conditioned, in part, upon the compliance with applicable securities laws.
The Optionee agrees to deliver to the Company any reasonable documentation
requested with respect thereto and further acknowledges and agrees that any said
exercise of the Options and the issuance of the Option Shares may only be
effectuated provided said exercise is in compliance with applicable laws and
regulations. In addition, the Optionee further acknowledges that the Company is
relying upon the representations and warranties of the Optionee hereunder with
respect to compliance by the Company with applicable securities laws and
regulations.
5. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION.
(a) In the event of a merger, reorganization, consolidation,
recapitalization, stock dividend, stock split, or other change in corporate
structure affecting the shares of Common Stock of the Company, such adjustment
shall be made in the number of Option Shares, and the Exercise Price shall be
correspondingly adjusted to equitably reflect such change.
(b) Any adjustment in the number of Option Shares shall apply
proportionately to only the unexercised portion of the Options granted
hereunder. If fractions of an Option Share would result from any such
adjustment, the adjustment shall be revised to the next lower whole number of
Option Shares.
6. NO RIGHTS AS THE OPTIONEE.
The Optionee shall have no rights as a shareholder of the Company with
respect to the Option Shares issuable upon the exercise of Options granted
hereunder that have not been exercised and for which payment in full of the
applicable Exercise Price has not been made as provided herein. The delivery of
notice hereunder above of the Optionee's desire to exercise Options shall not
create any rights in the Optionee as a shareholder of the Company. The Optionee
shall have rights as a shareholder of the Company with respect to any Option
Shares only upon the tendering in full of the applicable Exercise Price to the
Company as provided herein.
7. PIGGY-BACK REGISTRATION.
(a) Within twelve (12) years from the date of this Agreement, whenever
the Company proposes to file a Registration Statement (as defined below), it
will, prior to such filing, give written
3
<PAGE>
notice to the Optionee of its intention to do so and, upon the written request
of the Optionee given within 5 days after the Company provides such notice
(which request shall state the intended method of disposition of the Registrable
Shares (defined below)), the Company shall use its best efforts to cause all
such shares of Common Stock underlying the Options (the "Registrable Shares")
which the Company has been requested by the Optionee to register to be
registered under the Securities Act of 1933, as amended, to the extent necessary
to permit their sale or other disposition in accordance with the intended
methods of distribution specified in the request of the Optionee; PROVIDED,
HOWEVER, that the Company shall have the right postpone or withdraw any
registration effected pursuant to this SECTION 7 without any obligation to the
Optionee whatsoever.
(b) In connection with any registration under this SECTION 7 involving
an underwritten offering, the Company shall not be required to include any
Registrable Shares in such registration unless the holder thereof accepts the
terms of the underwriting as agreed upon between the Company and the
underwriters selected by the Company. If, in the opinion of the managing
underwriter, it is appropriate because of marketing factors to limit the number
of Registrable Shares to be included in the offering, then the Company shall be
required to include in the registration only that number of Registrable Shares,
if any, which the managing underwriter believes should be included therein, and
shall be entitled to include before such Registrable Shares up to the number of
shares of Common Stock to be issued by the Company in the offering; PROVIDED,
HOWEVER, that no persons or entities other than the Company and the Optionee
shall be permitted to include securities in the offering. If the number of
Registrable Shares to be included in the offering in accordance with the
foregoing is less than the total number of shares which the holder of
Registrable Shares has requested to be included, then the holder of Registrable
Shares who has requested registration and other holders of securities entitled
to be included in such registration shall participate in the registration pro
rata based upon their total ownership of shares of Common Stock subject to the
managing underwriter's discretion.
(c) For the purposes of this SECTION 7 the term "Registration Statement"
means a registration statement filed by the Company with the Securities and
Exchange Commission for a public offering and sale of Common Stock (other than a
Registration Statement on Form S-4, or its successors, or any other form for a
similar limited purpose, or any registration statement covering only securities
proposed to be issued in exchange for securities or assets of another
corporation).
8. FURTHER CONDITIONS OF EXERCISE.
(a) DELIVERY OF SHARES BY COMPANY. The Company shall not be obligated to
deliver any shares of Common Stock until they have been listed on each
securities exchange on which the shares of Common Stock may then be listed or
until there has been qualification under or compliance with such state or
federal laws, rules or regulations as the Company may deem applicable. The
Company shall use reasonable efforts to obtain such listing, qualification and
compliance.
(b) WITHHOLDINGS. The Company may make such provisions and take such
steps as it may deem necessary or appropriate for the withholding of any taxes
that the Company is required
4
<PAGE>
by any law or regulation of any governmental authority, whether federal, state
or local, domestic or foreign, to withhold in connection with the exercise of
any Option, including, but not limited to, (i) the withholding of delivery of
shares of Common Stock upon exercise of Options until the holder reimburses the
Company for the amount the Company is required to withhold with respect to such
taxes, (ii) the canceling of any number of shares of Common Stock issuable upon
exercise of such Options in an amount sufficient to reimburse the Company for
the amount it is required to so withhold, or (iii) withholding the amount due
from any such person's wages or compensation due such person.
9. MISCELLANEOUS.
(a) INDULGENCES, ETC. Neither the failure nor any delay on the part of
either party to exercise any right, remedy, power or privilege under this
Agreement shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, remedy, power or privilege preclude any other or further
exercise of the same or of any other right, remedy, power or privilege, nor
shall any waiver of any right, remedy, power or privilege with respect to any
occurrence be construed as a waiver of such right, remedy, power or privilege
with respect to any other occurrence. No waiver shall be effective unless it is
in writing and is signed by the party asserted to have granted such waiver.
(b) CONTROLLING LAW. This Agreement and all questions relating to its
validity, interpretation, performance and enforcement (including, without
limitation, provisions concerning limitations of actions), shall be governed by
and construed in accordance with the laws of the State of Florida, without
application to the principles of conflict of laws.
(c) NOTICES. All notices, requests, demands and other communications
required or permitted under this Agreement shall be in writing and shall be
deemed to have been duly given, made and received only when personally
delivered, one day following the day when deposited with an overnight courier
service for overnight priority service, such as Federal Express, for delivery to
the intended addressee or three days following the day when deposited in the
United States mails, first class postage prepaid, certified or registered mail,
and addressed as set forth in the first paragraph of this Agreement. Any person
may alter the address to which communications or copies are to be sent by giving
notice of such change of address in conformity with the provisions of this
Section for the giving of notice.
(d) BINDING NATURE OF AGREEMENT; NO ASSIGNMENT. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, personal representatives, successors and assigns, except that no party
may assign or transfer its rights under this Agreement without the prior written
consent of the other parties hereto.
(e) PROVISIONS SEPARABLE. The provisions of this Agreement are
independent of and separable from each other, and no provision shall be affected
or rendered invalid or unenforceable
5
<PAGE>
by virtue of the fact that for any reason any other or others of them may be
invalid or unenforceable in whole or in part.
(f) SECTION HEADINGS. The section headings in this Agreement are for
convenience only; they form no part of this Agreement and shall not affect its
interpretation.
(g) NUMBER OF DAYS. In computing the number of days for purposes of this
Agreement, all days shall be counted, including Saturdays, Sundays and holidays;
PROVIDED, HOWEVER that if the final day of any time period falls on a Saturday,
Sunday or holiday on which federal banks are or may elect to be closed, then the
final day shall be deemed to be the next day which is not a Saturday, Sunday or
such holiday.
(h) NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any person other than the parties and their respective
successors and permitted assigns.
(i) ENTIRE AGREEMENT; AMENDMENTS. This Agreement (including the
documents and exhibits referred to herein) constitutes the entire agreement
among the parties and supersedes any prior understandings, agreements, or
representations by or among the parties, written or oral, that may have related
in any way to the subject matter hereof. This Agreement may not be amended,
supplemented or modified in whole or in part except by an instrument in writing
signed by the party or parties against whom enforcement of any such amendment,
supplement or modification is sought.
(j) CONSTRUCTION. The language used in this Agreement will be deemed to
be the language chosen by the parties to express their mutual intent, and
thereof strict construction shall be applied against any party. Any reference to
any federal, state, local or foreign statute or law shall be deemed also to
refer to the rules and regulations promulgated thereunder, unless the context
requires otherwise. The parties intend that each representation, warranty, and
covenant contained herein shall have independent significance. If any party has
breached any representation, warranty, or covenant contained herein in any
respect, the fact that there exists another representation, warranty or covenant
relating to the same subject matter (regardless of the relative levels of
specificity) which the party has not breached shall not detract from or mitigate
the fact that the party is in breach of the first representation, warranty or
covenant. This Agreement shall be neither construed against nor in favor of any
of the parties hereto, but rather in accordance with the fair meaning of its
content.
(k) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original and all of which together
will constitute one and the same instrument.
6
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
ADVANCED ELECTRONIC SUPPORT
PRODUCTS, INC.
By: ______________________________________
Name: _______________________________
Title:_______________________________
OPTIONEE:
__________________________________________
Print Name: ______________________________
7
FINANCIAL ADVISORY AGREEMENT
THIS AGREEMENT (the "Agreement") is made effective February ___, 1997,
between Corporate Securities Group, Inc. and Argent Securities, Inc., (each a
"Consultant" and collectively referred to as the "Consultants") and Advanced
Electronics Support Products, Inc., (hereinafter "Company").
RECITALS
A. Company desires to be assured of the association and services of
Consultants in order to avail itself of Consultants' experience, skills and
abilities, and background and knowledge, to facilitate long range planning, and
to execute the Company's business and investment banking needs in an orderly and
efficient manner, and is therefore willing to engage Consultants upon the terms
and conditions herein contained.
B. Consultants agree to be engaged and retained by Company and
upon said terms and conditions.
NOW THEREFORE, in consideration of the recitals, promises and
conditions in this Agreement, the Consultants and Company agree as follows:
1. CONSULTING SERVICES. Company hereby retains Consultants to become
the investment banking consultants to the Company and to render such advice,
consultation and information to the Board of Directors or the officers of the
Company regarding general financial matters, including, but not limited to,
long-term financial planning, expansions, changes in capital structure,
shareholder relations, the raising of capital from public and private sources,
and investment banking transactions and services, as shall be requested in
writing by the President of the Company from time to time. Consultants agree,
upon request, to make itself available to render such services as Consultants
deem necessary.
2. TERM. Except as otherwise provided in Section 3(b) of this
Agreement, the term of this Agreement shall be for a period of two (2) years
commencing , 199 .
3. COMPENSATION OF CONSULTANTS.
a. ADVISORY FEE. In exchange for the services provided
hereunder, the Company hereby agrees to pay Consultants an advisory fee equal to
$2,000 per month during the term of this Agreement. The Company shall pay
$48,000 (representing prepayment in full of the fees for the two-year term of
this Agreement) to Consultants on the closing date of the Company's public
offering of 750,000 shares of the Company's common stock, par value $.001 per
share ("Common Stock"), and 750,000 warrants to purchase Common Stock,
underwritten by, among others, Consultants.
<PAGE>
b. FINDER'S FEES. In addition to the compensation and expenses
paid or payable to Consultants pursuant to Sections 3(a) and 4 hereof, the
Company agrees that, if a Consultant, directly or indirectly, introduces the
Company, during the term of this Agreement, to any person or entity that during
the term hereof or within 18 months following the term hereof, provides any
investment capital, loan or any other equity or debt financing to the Company or
any affiliate thereof, or becomes a party to a merger, acquisition, joint
venture, private placement or other similar transaction with the Company or any
affiliate thereof, then the Company shall pay to such Consultant a cash finder's
fee. Each cash finder's fee payable to a Consultant under this Agreement shall
be calculated as a percentage of the Transaction Value (as defined herein) in
accordance with the following scale:
6% on the first $5,000,000; 5% on the amount from
$5,000,001 to $6,000,000; 4% on the amount from
$6,000,001 to $7,000,000; 3% on the amount from
$7,000,001 to $8,000,000; 2% on the amount from
$8,000,001 to $9,000,000; and 1% on the amount above
$9,000,000
"Transaction Value" shall mean the aggregate value of all
cash, securities and other property (i) paid to the Company, its affiliates or
their shareholders in connection with any transaction referred to above
involving any investment in or acquisition of the Company or any affiliates (or
the assets of either), (ii) paid by the Company or any affiliate in any such
transaction involving an investment in or acquisition of another party or its
equity holdings by the Company or any affiliate, or (iii) paid or contributed by
the Company or any affiliate and by the other party or parties in the event of
any such transaction involving a merger, consolidation, joint venture or similar
joint enterprise or undertaking. The value of any such securities (whether debt
or equity) or other property shall be the fair market value thereof as
determined by mutual agreement of the Company and the Consultants or by an
independent appraiser jointly selected by the Company and the Consultants.
4. EXPENSES. Company agrees to pay all reasonable business expenses
authorized in advance by Company in writing and incurred by Consultants in
furtherance of the business of Company, including travel, food, lodging and
entertainment expenses, upon presentation by Consultants of receipts in form
reasonably satisfactory to Company.
5. RELATIONSHIP OF PARTIES. This Agreement shall not constitute an
employer-employee relationship. It is the intention of each party that each
Consultant shall be an independent contractor and not an employee of the
Company. Consultants shall not have the authority to act as the agent of Company
except when such authority as specifically delegated to Consultant by the
Company. Subject to the express provisions herein, the manner and means utilized
by Consultants in the performance of Consultants' services hereunder shall be
under the sole control of the Consultants.
2
<PAGE>
6. LIABILITY OF CONSULTANTS. The Company acknowledges that all opinions
and advice, whether oral or written, given by Consultants to the Company in
connection with this Agreement are intended solely for the benefit and use of
the Company in considering the transaction to which they relate, and the Company
agrees that no person or entity other than the Company shall be entitled to make
use of or rely upon the advice of Consultants to be given hereunder, and no such
opinion or advice shall be used by the Company for any other purpose or
reproduced, disseminated, quoted or referred to by the Company in communications
with third parties at any time, in any manner or for any purpose, nor may the
Company make any public reference to Consultants or use Consultants' name in any
annual report or any other report or release of the Company without Consultants'
prior written consent, except that the Company may, without Consultants' further
consent, disclose this Agreement (but not information provided to the Company by
Consultants) in the Company's filings with the Securities and Exchange
Commission, if such disclosure is required by law.
7. NOTICES. Any notice, request, demand or other communication required
or permitted hereunder shall be deemed to be properly given when personally
served in writing or when deposited in the United States mail, postage prepaid,
addressed to the other party at the address appearing at the end of this
Agreement. Either party may change its address by written notice made in
accordance with this Section.
8. BENEFIT OF AGREEMENT. This Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective legal
representatives, administrators, executors, successors, subsidiaries and
affiliates.
9. GOVERNING LAW. This Agreement is made and shall be governed and
construed in accordance with the laws of the State of Florida.
10. ASSIGNMENT. Any attempt by either party to assign any rights,
duties or obligations which arise under this Agreement without the prior written
consent of the other party shall be void, and shall constitute a breach of the
terms of this Agreement.
11. ENTIRE AGREEMENT, MODIFICATIONS. This Agreement constitutes the
entire agreement between the Company and the Consultants. No promises,
guarantees, inducements or agreements, oral or written, expressed or implied,
have been made other than as contained in this Agreement. This Agreement can
only be modified or changed in writing signed by the party or parties to be
charged.
12. TERMINATION. This Agreement shall automatically terminate after the
initial two (2) year term. If terminated by Company, such action shall not alter
Company's obligation to pay Consultants the agreed upon full compensation
described in this Agreement.
13. LITIGATION EXPENSES. If any action is brought by either party to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable
3
<PAGE>
attorneys' fees, costs and disbursements in addition to any other
relief to which it may be entitled.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date indicated at the beginning of this Agreement.
Corporate Securities Group, Inc.
980 North Federal Highway, Suite 210
Boca Raton, Florida 33432
Dated: By:_______________________________________
Title:____________________________________
Argent Securities, Inc.
3340 Peachtree Road, Suite 450
Atlanta, Georgia 30326
Dated: By:_______________________________________
Title:____________________________________
Advanced Electronic Support Products, Inc.
1810 Northeast 144th Street
North Miami, Florida 33181
Dated: By:_______________________________________
Title:____________________________________
4
EXHIBIT 10.11
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement"), is made and effective as
of this _____ day of __________, 1997, by and between Advanced Electronic
Support Products, Inc., a Florida corporation with its principal place of
business at 1810 N.E. 144th Street, North Miami, Florida 33181 (the "Company"),
and __________________________________________________, ______________________
______________________________________________ (the "Optionee").
W I T N E S S E T H:
WHEREAS, the Optionee is willing to assist the Company in the further
development of its business;
WHEREAS, the Company is desirous of increasing the incentive of the
Optionee to exert Optionee's utmost efforts to improve the business and increase
the assets of the Company; and
WHEREAS, the Company is desirous of granting the Optionee certain
contingent options (the "Contingent Options"), to purchase shares of Common
Stock of the Company from the Company upon the terms and conditions set forth
herein.
NOW, THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration, receipt and adequacy of which is hereby
acknowledged, the parties hereto hereby agree as follows:
1. GRANT OF CONTINGENT OPTIONS.
Subject to the terms and conditions of this Agreement, the Company
hereby grants to the Optionee, the option to purchase, subject to certain
contingencies and vesting schedules, prior to 5:00 p.m. on ___________, 2007
(ten (10) years from the date hereof), an aggregate 125,000 shares of Common
Stock of the Company (the "Option Shares"). The Contingent Options shall expire
pursuant to their terms on ___________, 2007 (ten (10) years from the date
hereof), unless sooner exercised by the Optionee as provided hereunder.
2. EXERCISE PRICE.
The exercise price ("Exercise Price") of the Contingent Options shall be
the initial public offering price of the Company's Common Stock. The Optionee
shall pay all transfer taxes, if any, upon the exercise of the Contingent
Options and all other fees and expenses, if any, necessarily incurred by the
Company in connection therewith. The Exercise Price of the Contingent Options
shall be subject to adjustment in the event of changes in the capitalization of
the Company, as set forth in SECTION 5 hereto.
<PAGE>
3. EXERCISABILITY OF OPTIONS.
(a) VESTING OF CONTINGENT OPTIONS. The Contingent Options shall vest and
become exercisable seven (7) years from the date hereof but may vest earlier
contingent upon the Company satisfying certain Performance Thresholds (as that
term is defined below). The earlier vesting and exercise of the Contingent
Options is contingent upon the Company achieving specified earnings per share
levels, specified stock price levels or net income levels (the "Performance
Thresholds"), for the corresponding fiscal year-end. Commencing with fiscal
year-ended December 31, 1997, and at each of the four fiscal year ends
thereafter, 25,000 of such options shall become exercisable if the Company
achieves the following Performance Thresholds: (i) achieves earnings per share
of $.50, $.60, $.72, $.86 and $1.04 for the fiscal years ended December 31,
1997, 1998, 1999, 2000 and 2001 (collectively, the "Fiscal Years"), respectively
(or cumulative earnings per share of $.50, $1.10, $1.82, $2.68 and $3.72,
respectively), (ii) obtains an average closing bid price of the Company's Common
Stock on any 20 consecutive trading days during each Fiscal Year of $7.20,
$8.64, $10.37, $12.44 and $14.93, respectively, or (iii) the Company has net
income, during each Fiscal Year of $1.0 million, $1.2 million, $1.440 million,
$1.728 million and $2.074 million, respectively (or cumulative net income of
$1.0 million, $2.2 million, $3.64 million, $5.368 million and $7.442 million,
respectively). The following chart illustrates the foregoing Performance
Thresholds:
<TABLE>
- ------------------------------------------------------------------------------------------------
EPS NET
FYE OPTIONS CURRENT EPS STOCK NET INCOME
1/31 VESTED YEAR CUM PRICE INCOME CUMULATIVE
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1997 50,000 $.50 $.50 $ 7.20 $1,000,000 $1,000,000
- ------------------------------------------------------------------------------------------------
1998 50,000 .60 1.10 8.64 1,200,000 2,200,000
- ------------------------------------------------------------------------------------------------
1999 50,000 .72 1.82 10.37 1,440,000 3,640,000
- ------------------------------------------------------------------------------------------------
2000 50,000 .86 2.68 12.44 1,728,000 5,368,000
- ------------------------------------------------------------------------------------------------
2001 50,000 1.04 3.72 14.93 2,074,000 7,442,000
- ------------------------------------------------------------------------------------------------
</TABLE>
For any Fiscal Year after January 31, 1997 in which the Company attains the
foregoing Performance Thresholds, any Contingent Options eligible for vesting in
prior years which were not vested and exercisable because the Performance
Thresholds for such Fiscal Years were not achieved, shall vest and become
immediately exercisable. In addition, for any Fiscal Year in which the Company
attains the Performance Thresholds applicable to a subsequent Fiscal Year, all
Contingent Options eligible for vesting in such subsequent Fiscal Year shall
vest and become exercisable. Notwithstanding the foregoing, regardless of the
Company's performance under the Performance Thresholds, all of the Contingent
Options shall vest and become fully exercisable seven (7) years from the date
hereof to the extent not already vested in accordance with the foregoing. If any
of the Common Stock purchase warrants offered by the Company in connection with
the initial public offering of its Common Stock (the "Warrants") are exercised,
the Contingent Options shall vest and become exercisable pro rata (based on the
number of Warrants exercised) to the extent not already vested in accordance
with the foregoing. By way of illustration only, if 100,000 of the 750,000
Warrants
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<PAGE>
(13.33%) were exercised, then the corresponding pro rata amount of Contingent
Options (16,662.25 of the total 125,000 Options, or 13.33%) shall vest and
become exercisable. Net income amounts and earnings per share calculations shall
be those reflected on the Company's audited financial statements.
(b) TIME AND AMOUNT OF EXERCISE. The Contingent Options may be exercised
in whole or in part subject to the vesting schedule set forth in SECTION 3(A)
above, but in no case may a Contingent Option (i) be exercised as to less than
one hundred (100) shares of Common Stock at any one time, or the remaining
shares of Common Stock covered by the Contingent Option if less than one hundred
(100), and (ii) be exercised more than ten years from the date of its grant.
(c) MANNER OF EXERCISE. A Contingent Option granted hereunder shall be
exercised by the delivery by the holder thereof to the Company at its principal
office (to the attention of the Secretary of the Company) of written notice of
the number of full shares of Common Stock with respect to which the Contingent
Option is being exercised, accompanied by payment in full of the price for such
shares of Common Stock (i), in cash or by certified or bank check payable to the
order of the Company, (ii) by delivery of shares of Common Stock already owned
by the Optionee and having a fair market value equal to the Exercise Price, or
(iii) by a combination of cash and Common Stock The consideration for the
Contingent Option may also be paid in full by a broker-dealer to whom the
Optionee has submitted an exercise notice consisting of a fully endorsed
Contingent Option, or through any other medium of payment as the Company, in its
sole and absolute discretion, may authorize in writing.
(d) TRANSFER OF OPTIONS. All Contingent Options granted hereunder shall
not be transferable and any Contingent Option granted hereunder may be exercised
during the lifetime of the holder thereof only by the holder. No Contingent
Option granted hereunder shall be subject to execution, attachment or other
process.
4. THE OPTIONEE'S INVESTMENT REPRESENTATIONS.
The Optionee hereby agrees, acknowledges, represents and warrants to the
Company the following:
(a) The Optionee is acquiring the Contingent Options hereunder for
investment purposes only and without the intent toward the further sale and/or
distribution thereof. In addition, the Optionee hereby agrees, acknowledges,
represents and warrants, that in the event of the exercise of any of the
Contingent Options hereunder, said Option Shares shall be acquired for
investment purposes only and without the intent toward the further sale and/or
distribution thereof.
(b) Unless the Option Shares are registered in compliance with the
registration requirements of the Security Act of 1933, as amended, with other
applicable securities laws, the certificates evidencing the Option Shares will
bear a restrictive legend with respect to the sale or transfer thereof. Any
subsequent sale, transfer, assignment or disposition of the Option Shares, if
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<PAGE>
then otherwise permitted in accordance with any contractual commitment or
obligation entered into by the Optionee, must be made in compliance with the
registration requirements of the Securities Act of 1933, as amended, and with
other applicable securities laws or pursuant to an opinion of counsel,
reasonably satisfactory to the Company, that such registration is not required.
(c) The Optionee is familiar with the business and financial condition
of the Company, and the Optionee has been afforded the opportunity to ask all
relevant questions of the Company's management with respect to the business and
financial condition of the Company. The Optionee further agrees to re-assert any
of said representations and warranties and to make any other representations and
warranties, as reasonably requested by the Company, as of the date of exercise
of any of said Contingent Options.
(d) The Optionee hereby further acknowledges, agrees, represents and
warrants that the issuance of the Option Shares upon the exercise of the
Contingent Options is conditioned, in part, upon the compliance with applicable
securities laws. The Optionee agrees to deliver to the Company any reasonable
documentation requested with respect thereto and further acknowledges and agrees
that any said exercise of the Contingent Options and the issuance of the Option
Shares may only be effectuated provided said exercise is in compliance with
applicable laws and regulations. In addition, the Optionee further acknowledges
that the Company is relying upon the representations and warranties of the
Optionee hereunder with respect to compliance by the Company with applicable
securities laws and regulations.
5. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION.
(a) In the event of a merger, reorganization, consolidation,
recapitalization, stock dividend, stock split, or other change in corporate
structure affecting the shares of Common Stock of the Company, such adjustment
shall be made in the number of Option Shares, and the Exercise Price shall be
correspondingly adjusted to equitably reflect such change.
(b) Any adjustment in the number of Option Shares shall apply
proportionately to only the unexercised portion of the Contingent Options
granted hereunder. If fractions of an Option Share would result from any such
adjustment, the adjustment shall be revised to the next lower whole number of
Option Shares.
6. NO RIGHTS AS THE OPTIONEE.
The Optionee shall have no rights as a shareholder of the Company with
respect to the Option Shares issuable upon the exercise of Contingent Options
granted hereunder that have not been exercised and for which payment in full of
the applicable Exercise Price has not been made as provided herein. The delivery
of notice hereunder above of the Optionee's desire to exercise Contingent
Options shall not create any rights in the Optionee as a shareholder of the
Company. The Optionee shall have rights as a shareholder of the Company with
respect to any Option Shares only upon the tendering in full of the applicable
Exercise Price to the Company as provided herein.
4
<PAGE>
7. PIGGY-BACK REGISTRATION.
(a) Within six (6) years from the date of this Agreement, whenever the
Company proposes to file a Registration Statement (as defined below), it will,
prior to such filing, give written notice to the Optionee of its intention to do
so and, upon the written request of the Optionee given within 5 days after the
Company provides such notice (which request shall state the intended method of
disposition of the Registrable Shares (defined below)), the Company shall use
its best efforts to cause all such shares of Common Stock underlying the
Contingent Options (the "Registrable Shares") which the Company has been
requested by the Optionee to register to be registered under the Securities Act
of 1933, as amended, to the extent necessary to permit their sale or other
disposition in accordance with the intended methods of distribution specified in
the request of the Optionee; PROVIDED, HOWEVER, that the Company shall have the
right postpone or withdraw any registration effected pursuant to this SECTION 7
without any obligation to the Optionee whatsoever.
(b) In connection with any registration under this SECTION 7 involving
an underwritten offering, the Company shall not be required to include any
Registrable Shares in such registration unless the holder thereof accepts the
terms of the underwriting as agreed upon between the Company and the
underwriters selected by the Company. If, in the opinion of the managing
underwriter, it is appropriate because of marketing factors to limit the number
of Registrable Shares to be included in the offering, then the Company shall be
required to include in the registration only that number of Registrable Shares,
if any, which the managing underwriter believes should be included therein, and
shall be entitled to include before such Registrable Shares up to the number of
shares of Common Stock to be issued by the Company in the offering; PROVIDED,
HOWEVER, that no persons or entities other than the Company and the Optionee
shall be permitted to include securities in the offering. If the number of
Registrable Shares to be included in the offering in accordance with the
foregoing is less than the total number of shares which the holder of
Registrable Shares has requested to be included, then the holder of Registrable
Shares who has requested registration and other holders of securities entitled
to be included in such registration shall participate in the registration pro
rata based upon their total ownership of shares of Common Stock subject to the
managing underwriter's discretion.
(c) For the purposes of this SECTION 7 the term "Registration Statement"
means a registration statement filed by the Company with the Securities and
Exchange Commission for a public offering and sale of Common Stock (other than a
Registration Statement on Form S-4, or its successors, or any other form for a
similar limited purpose, or any registration statement covering only securities
proposed to be issued in exchange for securities or assets of another
corporation).
8. FURTHER CONDITIONS OF EXERCISE.
(a) DELIVERY OF SHARES BY COMPANY. The Company shall not be obligated to
deliver any shares of Common Stock until they have been listed on each
securities exchange on which the shares of Common Stock may then be listed or
until there has been qualification under or compliance with
5
<PAGE>
such state or federal laws, rules or regulations as the Company may deem
applicable. The Company shall use reasonable efforts to obtain such listing,
qualification and compliance.
(b) WITHHOLDINGS. The Company may make such provisions and take such
steps as it may deem necessary or appropriate for the withholding of any taxes
that the Company is required by any law or regulation of any governmental
authority, whether federal, state or local, domestic or foreign, to withhold in
connection with the exercise of any Contingent Option, including, but not
limited to, (i) the withholding of delivery of shares of Common Stock upon
exercise of Contingent Options until the holder reimburses the Company for the
amount the Company is required to withhold with respect to such taxes, (ii) the
canceling of any number of shares of Common Stock issuable upon exercise of such
Contingent Options in an amount sufficient to reimburse the Company for the
amount it is required to so withhold, or (iii) withholding the amount due from
any such person's wages or compensation due such person.
9. MISCELLANEOUS.
(a) INDULGENCES, ETC. Neither the failure nor any delay on the part of
either party to exercise any right, remedy, power or privilege under this
Agreement shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, remedy, power or privilege preclude any other or further
exercise of the same or of any other right, remedy, power or privilege, nor
shall any waiver of any right, remedy, power or privilege with respect to any
occurrence be construed as a waiver of such right, remedy, power or privilege
with respect to any other occurrence. No waiver shall be effective unless it is
in writing and is signed by the party asserted to have granted such waiver.
(b) CONTROLLING LAW. This Agreement and all questions relating to its
validity, interpretation, performance and enforcement (including, without
limitation, provisions concerning limitations of actions), shall be governed by
and construed in accordance with the laws of the State of Florida, without
application to the principles of conflict of laws.
(c) NOTICES. All notices, requests, demands and other communications
required or permitted under this Agreement shall be in writing and shall be
deemed to have been duly given, made and received only when personally
delivered, one day following the day when deposited with an overnight courier
service for overnight priority service, such as Federal Express, for delivery to
the intended addressee or three days following the day when deposited in the
United States mails, first class postage prepaid, certified or registered mail,
and addressed as set forth in the first paragraph of this Agreement. Any person
may alter the address to which communications or copies are to be sent by giving
notice of such change of address in conformity with the provisions of this
Section for the giving of notice.
(d) BINDING NATURE OF AGREEMENT; NO ASSIGNMENT. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, personal representatives,
6
<PAGE>
successors and assigns, except that no party may assign or transfer its rights
under this Agreement without the prior written consent of the other parties
hereto.
(e) PROVISIONS SEPARABLE. The provisions of this Agreement are
independent of and separable from each other, and no provision shall be affected
or rendered invalid or unenforceable by virtue of the fact that for any reason
any other or others of them may be invalid or unenforceable in whole or in part.
(f) SECTION HEADINGS. The section headings in this Agreement are for
convenience only; they form no part of this Agreement and shall not affect its
interpretation.
(g) NUMBER OF DAYS. In computing the number of days for purposes of this
Agreement, all days shall be counted, including Saturdays, Sundays and holidays;
PROVIDED, HOWEVER that if the final day of any time period falls on a Saturday,
Sunday or holiday on which federal banks are or may elect to be closed, then the
final day shall be deemed to be the next day which is not a Saturday, Sunday or
such holiday.
(h) NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any person other than the parties and their respective
successors and permitted assigns.
(i) ENTIRE AGREEMENT; AMENDMENTS. This Agreement (including the
documents and exhibits referred to herein) constitutes the entire agreement
among the parties and supersedes any prior understandings, agreements, or
representations by or among the parties, written or oral, that may have related
in any way to the subject matter hereof. This Agreement may not be amended,
supplemented or modified in whole or in part except by an instrument in writing
signed by the party or parties against whom enforcement of any such amendment,
supplement or modification is sought.
(j) CONSTRUCTION. The language used in this Agreement will be deemed to
be the language chosen by the parties to express their mutual intent, and
thereof strict construction shall be applied against any party. Any reference to
any federal, state, local or foreign statute or law shall be deemed also to
refer to the rules and regulations promulgated thereunder, unless the context
requires otherwise. The parties intend that each representation, warranty, and
covenant contained herein shall have independent significance. If any party has
breached any representation, warranty, or covenant contained herein in any
respect, the fact that there exists another representation, warranty or covenant
relating to the same subject matter (regardless of the relative levels of
specificity) which the party has not breached shall not detract from or mitigate
the fact that the party is in breach of the first representation, warranty or
covenant. This Agreement shall be neither construed against nor in favor of any
of the parties hereto, but rather in accordance with the fair meaning of its
content.
(k) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original and all of which together
will constitute one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
ADVANCED ELECTRONIC SUPPORT
PRODUCTS, INC.
By: ______________________________________
Name: ________________________________
Title:________________________________
OPTIONEE:
Print Name: ______________________________
8
