<PAGE> 1
FORM 10-QSB. -QUARTERLY REPORT UNDER SECTION 13
OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
(LAST AMENDED BY 34-32231, EFF. 6/3/93)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C 20549
FORM 10-QSB
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1996
-------------
or
[ ] TRANSACTION REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to _______________
COMMISSION FILE NUMBER 0-24432
-------
THE AMERICAS GROWTH FUND, INC.
------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C>
Maryland 65-0504786
- -------------------------------------------------------------- -------------------------------------
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
701 Brickell Avenue, Suite 2000, Miami, Florida 33131
- -----------------------------------------------------------------------------------------------------
(Address of principal executive offices)
(305) 374-3575
- ------------------------------------------------------------------------------------------------------
(Issuers's Telephone Number)
- ------------------------------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last report)
</TABLE>
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchanged Act after the distribution of
securities under a plan confirmed by a court. Yes No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
State the number of shares outstanding of each of the issuer's common equity,
as of the latest practicable date: 1,265,100
Traditional Small Business Disclosure Format (Check one): Yes ; No X
--- ---
<PAGE> 2
INDEX
THE AMERICAS GROWTH FUND, INC.
<TABLE>
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Balance Sheet as of as of June 30, 1996. (Unaudited)
Statement of Operations for the six months ended June 30, 1996. (Unaudited)
Statement of Charges in Net Assets for the six months ended June 30, 1996. (Unaudited)
Statements of Cash Flows for the six months ended June 30, 1996. (Unaudited)
Notes to Financial Statements. (Unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations,
Liquidity and Capital Resources.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports of Form 8-K
Signature
</TABLE>
2
<PAGE> 3
THE AMERICAS GROWTH FUND, INC.
BALANCE SHEETS
JUNE 30, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
Assets: ------------ -----------
<S> <C> <C>
Investments at market or fair value:
Investments in U.S. Treasury Bills $ 4,461,700 $ 4,409,700
Investments in common stock warrants - 14,000
Investments in notes receivable 125,000 50,000
----------- -----------
Total investments (amortized cost of $4,555,700 4,586,700 4,473,700
and $4,450,200 in 1996 and 1995, respectively)
Cash and cash equivalents 436,600 675,700
Note receivable, less allowance for doubtful
collections (1995; $5,000) - 17,600
Interest receivable - 500
Prepaid expenses 15,400 2,200
Deferred tax asset 51,000 1,100
Furniture and equipment, net 15,900 11,000
Organizational costs, net 4,900 6,400
Deposits 1,100 1,100
----------- -----------
5,111,600 5,189,300
----------- -----------
Liabilities:
Accounts payable 14,800 3,200
Accrued directors fees 6,400 9,300
Deferred tax liability 2,900 5,500
----------- -----------
24,100 18,000
----------- -----------
$ 5,087,500 $ 5,171,300
=========== ===========
Net assets:
Preferred stock, $.01 par value, 2,000,000
shares authorized, no shares issued $ - $ -
Common stock, $.01 par value, 10,000,000 shares
authorized, 1,265,100 shares issued and outstanding 12,700 12,700
Capital in excess of par 5,141,300 5,141,300
Undistributed operating income (loss) and investment
gains (losses):
Accumulated operating (losses) income (74,500) 3,700
Realized gains on investments 44,000 -
Unrealized (depreciation) appreciation
of investments (36,000) 13,600
----------- -----------
Net assets applicable to outstanding common shares
(equivalent to $4.02 and $4.09 per share for 1996
and 1995, respectively, based on outstanding
common shares of 1,265,100) $ 5,087,500 $ 5,171,300
=========== ===========
</TABLE>
Read the accompanying notes.
<PAGE> 4
THE AMERICAS GROWTH FUND, INC.
STATEMENTS OF OPERATIONS
THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
--------------------------------- ---------------------------------
JUNE 30, 1996 JUNE 30, 1995 JUNE 30, 1996 JUNE 30, 1995
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Interest income $ 61,600 $ 75,400 $ 126,700 $ 142,800
-------------- -------------- -------------- --------------
Expenses:
Consulting fees, principally to affiliates 19,200 9,000 28,200 18,000
Salaries 23,700 22,500 47,300 45,000
Professional fees 52,800 5,000 100,400 30,500
Board of Directors fees 3,500 3,500 7,300 8,600
Other 24,100 40,700 53,400 47,400
-------------- -------------- -------------- --------------
123,300 80,700 236,600 149,500
-------------- -------------- -------------- --------------
Investment loss before income tax benefit (61,700) (5,300) (109,900) (6,700)
Less income tax benefit 24,600 1,000 35,700 1,400
-------------- -------------- -------------- --------------
Net investment loss (37,100) (4,300) (74,200) (5,300)
-------------- -------------- -------------- --------------
Realized gains (losses) from sales of investments 700 (400) (800) 3,800
Less income tax benefit (expense) applicable to
realized (depreciation) appreciation of investments (200) 300 100 (800)
-------------- -------------- -------------- --------------
500 (100) (700) 3,000
-------------- -------------- -------------- --------------
Unrealized appreciation (depreciation)
of investments (23,800) 16,400 (28,200) 23,500
Less income tax benefit (expense) applicable
to unrealized appreciation (depreciation)
of investments 9,500 (3,000) 10,600 (4,800)
-------------- -------------- -------------- --------------
(14,300) 13,400 (17,600) 18,700
-------------- -------------- -------------- --------------
Net (decrease) increase in net assets
resulting from operations $ (50,900) $ 9,000 $ (92,500) $ 16,400
============== ============== ============== ==============
Per-share amounts:
Net investment loss $ (0.03) $ - $ (0.06) $ -
Net realized gains (losses) on investments - - - -
Net unrealized appreciation (depreciation)
on investments (0.01) - (0.01) -
--------------- --------------- -------------- ---------------
$ (0.04) $ - $ (0.07) $ -
============== =============== ============== ===============
Weighted average number of shares used
in per-share computations 1,265,100 1,265,100 1,265,100 1,265,100
=============== =============== ============== ===============
</TABLE>
Read the accompanying notes.
<PAGE> 5
THE AMERICAS GROWTH FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(UNADITED)
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Net investment loss $ (74,200) $ (5,300)
Net realized (losses) gains from sales
of investments (700) 3,000
Net increase in unrealized (depreciation)
appreciation of investments (17,600) 18,700
----------- ------------
Net (decrease) increase in net assets
resulting from operations (92,500) 16,400
Net assets at beginning of period 5,180,000 5,154,900
----------- ------------
Net assets at end of period $ 5,087,500 $ 5,171,300
=========== ============
</TABLE>
Read the accompanying notes.
<PAGE> 6
THE AMERICAS GROWTH FUND, INC.
STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(UNADITED)
<TABLE>
<CAPTION>
1996 1995
Cash flows from operating activities: ------------- --------------
<S> <C> <C>
Sources of cash:
Interest $ 16,200 $ 16,600
------------- --------------
Uses of cash:
Payroll 47,300 45,000
Consulting fees, primarily to affiliate 28,200 18,000
Operating expenses 153,100 87,800
Income taxes 23,100 -
------------- --------------
251,700 150,800
------------- --------------
Cash (used in) operating activities (235,500) (134,200)
------------- --------------
Cash flows from investing activities:
Sources of cash:
Proceeds from sale of U.S. Treasury Bills 4,000,000 4,000,000
Proceeds from sale of common stock - 101,600
------------- --------------
4,000,000 4,101,600
------------- --------------
Uses of cash:
Purchase of furniture and equipment - 3,400
Purchase of U.S. Treasury Bills 3,929,700 4,345,600
Advances to notes receivable:
Related party - 22,600
Other - 50,000
------------- --------------
3,929,700 4,421,600
------------- --------------
Cash provided by (used in) investing
activities 70,300 (320,000)
-------------- --------------
(Decrease) in cash and cash equivalents (165,200) (454,200)
Cash and cash equivalents at beginning of period 601,800 1,129,900
-------------- --------------
Cash and cash equivalents at end of period $ 436,600 $ 675,700
============== ==============
</TABLE>
Read the accompanying notes.
<PAGE> 7
THE AMERICAS GROWTH FUND, INC.
STATEMENTS OF CASH FLOWS (CONTINUED)
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(UNADITED)
<TABLE>
<CAPTION>
1996 1995
------------- -------------
<S> <C> <C>
Reconciliation of net (decrease) increase in
net assets resulting from operations to cash
used in operating activities:
Net (decrease) increase in net assets
resulting from operations $ (92,500) 16,400
------------- -------------
Adjustments to reconcile net (decrease) increase
in net assets resulting from operations to
cash used in operating activities:
Accretion of discount on U.S. Treasury Bills (111,300) (125,700)
Allowance for doubtful collections, related party - 5,000
Realized loss (gain) from sale of investments 800 (3,800)
Amortization and depreciation 1,600 1,300
Unrealized depreciation (appreciation) of investments 28,200 (23,500)
Provision for deferred income taxes (benefit) (46,900) 4,200
Changes in assets and liabilities:
Interest receivable 800 (500)
Prepaid expenses (7,400) (1,400)
Accounts payable (200) (4,100)
Accrued payroll taxes - (8,900)
Accrued directors fees (900) 6,800
Income taxes payable (7,700) -
------------- -------------
Total adjustments (143,000) (150,600)
------------- -------------
Cash (used in) operating activities $ (235,500) $ (134,200)
============= =============
</TABLE>
Read the accompanying notes.
<PAGE> 8
THE AMERICAS GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996 AND 1995
(UNAUDITED)
1. ORGANIZATION AND NATURE OF OPERATIONS:
The Americas Growth Fund, Inc. (the "Company") was incorporated under the
laws of the State of Maryland on June 3, 1994. The Company is a
non-diversified, closed-end management investment company and has filed
with the Securities and Exchange Commission ("SEC") a notification of
election to be treated as a "business development company" as that term is
defined in the Investment Company Act of 1940, as amended.
The Company's primary investment objective is to achieve long-term capital
appreciation of its assets, rather than current income, by investing in
equity and debt securities of and providing managerial assistance to,
emerging and established companies that management believes offer
significant potential opportunities for growth (individually, "portfolio
company", collectively, "portfolio companies"). The Company invests
primarily in United States based portfolio companies
"strategically-linked" to the Caribbean and Latin America. The Company
considers companies to be strategically-linked to the Caribbean and Latin
America if they derive substantial revenue (at least 50%) from operations
or transactions in the Caribbean and Latin America or, if in the Company's
view, they are positioned to do so. The Company considers "Caribbean and
Latin American" countries to be Argentina, Aruba, the Bahamas, Barbados,
Belize, Bolivia, Brazil, Chile, Colombia, Costa Rica, Cuba, Dominican
Republic, Ecuador, El Salvador, Guatemala, Haiti, Honduras, Jamaica,
Mexico, Netherlands Antilles, Nicaragua, Panama, Paraguay, Peru, the
Commonwealth of Puerto Rico, Trinidad and Tobago, Uruguay and Venezuela.
The Company considers "emerging companies" to be those companies in the
early stages of development with little or no operating history, and
minimal revenue or profits, which the Company anticipates will increase
revenues and become profitable. The Company considers "established
companies" to be those with an existing revenue and profit base. To a
lesser extent, certain of the emerging and established companies in which
the Company invests may be in "turnaround" or other restructuring
situations.
2. SIGNIFICANT ACCOUNTING POLICIES:
SECURITIES VALUATION:
Investments in unrestricted securities that are traded in the
over-the-counter market are generally valued at the closing bid price on
the last day of the period. U.S. Treasury bills are valued at market
value. Restricted securities are valued at fair value as determined by
the Board of Directors. Because of the inherent uncertainty of such
valuations, the estimated values may differ significantly from the values
that would have been used had a ready market for the securities existed,
and the differences could be material.
USE OF ESTIMATES.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from those
estimates.
<PAGE> 9
THE AMERICAS GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996 AND 1995
(UNAUDITED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
CASH AND CASH EQUIVALENTS:
The Company considers all highly liquid investments purchased with
original maturities of three months or less to be cash equivalents.
FURNITURE AND EQUIPMENT:
Furniture and equipment are stated at cost less accumulated depreciation.
Depreciation is computed using the straight-line method over the estimated
useful lives of the related assets.
ORGANIZATIONAL COSTS:
Organizational costs are stated net of accumulated amortization of $2,600
and $1,100 at June 30, 1996 and 1995, respectively, and are being amortized
using the straight-line method over five years.
INCOME TAXES:
The Company is not entitled to the special treatment available to regulated
investment companies and is taxed as a regular corporation for federal and
state income tax purposes. The aggregate cost of securities at June 30,
1996 and 1995 for federal income tax purposes and financial reporting
purposes was the same. The aggregate gross and net unrealized
(depreciation) appreciation for the six months ended June 30, 1996 and 1995
is ($28,200) and $23,500, respectively.
PER SHARE AMOUNTS:
Per share amounts are computed by dividing the net investment income (loss)
and net realized and unrealized gains (losses) on investments by the
weighted average number of shares outstanding throughout the year.
RECLASSIFICATION:
Certain amounts in the prior year's financial statements have been
reclassified to conform to the current year's presentation.
3. CONCENTRATION OF CREDIT RISK:
Financial instruments that potentially subject the Company to
concentration of credit risk consist principally of cash and cash
equivalents. During the year the Company had deposits with financial
institutions which exceeded the $100,000 limit covered by the Federal
Deposit Insurance Corporation. Management regularly monitors their
balances and attempts to keep this potential risk to a minimum by
maintaining their accounts with financial institutions they believe are of
good quality.
<PAGE> 10
THE AMERICAS GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996 AND 1995
(UNAUDITED)
4. INVESTMENTS:
INVESTMENTS INCLUDE THE FOLLOWING AT JUNE 30, 1996 AND 1995:
<TABLE>
<CAPTION>
VALUE VALUE
PRINCIPAL TYPE OF ISSUE AND JUNE 30, JUNE 30,
AMOUNT NAME OF ISSUER 1996 1995
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Treasury bills (87.7%
and 85.3% of net assets at
June 30, 1996 and 1995,
respectively)
$ 485,580 U.S. Treasury bill,
$500,000 face value,
matures August 31, 1995 $ - $ 485,400
$ 1,973,305 U.S. Treasury bill,
$2,000,000 face value,
matures September 7, 1995 - 1,979,200
$ 471,030 U.S. Treasury bill,
$500,000 face value,
matures January 11, 1996 - 495,400
$ 1,415,780 U.S. Treasury bill,
$1,500,000 face value,
matures February 8, 1996 - 1,449,700
$ 487,890 U.S. Treasury bill,
$500,000 face value,
matures July 11, 1996 499,200 -
$ 1,465,940 U.S. Treasury bill,
$1,500,000 face value,
matures August 8, 1996 1,491,800 -
$ 1,975,800 U.S. Treasury bill,
$2,000,000 face value,
matures September 5, 1996 1,980,600 -
$ 476,030 U.S. Treasury bill,
$500,000 face value,
matures November 14, 1996 490,100 -
----------- -----------
Total U.S. Treasury bills $ 4,461,700 $ 4,409,700
=========== ===========
</TABLE>
<PAGE> 11
THE AMERICAS GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996 AND 1995
(UNAUDITED)
4. INVESTMENTS (CONTINUED):
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
SHARES SHARES VALUE VALUE
JUNE 30, JUNE 30, TYPE OF ISSUE AND JUNE 30, JUNE 30,
1996 1995 NAME OF ISSUER 1996 1995
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common stocks (0.0% and
0.0% of net assets at
June 30, 1996 and
1995, respectively:
Majority owned (restricted):
80 - Americas Growth
Partners, Inc. $ - $ -
============ =============
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
WARRANTS WARRANTS VALUE VALUE
JUNE 30, JUNE 30, TYPE OF ISSUE AND JUNE 30, JUNE 30,
1996 1995 NAME OF ISSUER 1996 1995
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common stocks warrants:
(0.0% and 0.3% of net
assets at June 30, 1996
and 1995, respectively)
Restricted:
1 1 Greg Manning
Auctions, Inc. $ - $ 14,000
============= =============
Golf Reservations
of America, Inc.
2 2 Class A $ - $ -
2 2 Class B $ - $ -
============= =============
</TABLE>
<PAGE> 12
THE AMERICAS GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996 AND 1995
(UNAUDITED)
4. INVESTMENTS (CONTINUED):
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT VALUE VALUE
OF NOTES TYPE OF ISSUE AND JUNE 30, JUNE 30,
JUNE 30, 1996 NAME OF ISSUER 1996 1995
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Notes (2.5% and 1.0% of
net assets at June 30,
1996 and 1995, respectively)
$ 50,000 Golf Reservations of
America, Inc. $ 25,000 $ 50,000
$ 100,000 Approved Financial
Corporation 100,000 -
------------ ------------
$ 125,000 $ 50,000
============ ============
</TABLE>
In November 1994, in a private placement, the Company purchased 50,000 shares
of restricted common stock and a warrant in Greg Manning Auctions, Inc.
("Manning"). The warrant entitled the holder to purchase 50,000 shares of
Manning restricted common stock at $2.25 per share through November 3, 1995.
Subsequently, the number of common shares obtainable upon exercise was
increased to 56,500 and the exercise price was decreased to $1.55. The Company
received certain registration rights with respect to the common stock and the
common stock underlying the warrant. The Company exercised the warrant and
purchased the common stock on November 1, 1995. On November 16, 1995 the
Company sold the stock for $141,200 which resulted in a realized gain of
approximately $53,500.
The Company agreed to loan up to $200,000 to Golf Reservations of America, Inc.
("Golf") pursuant to two 10% promissory notes in January and March, 1995. At
June 30, 1996 and 1995, the outstanding balance was $50,000 which is in
default. In connection with the notes, the Company received warrants to
purchase an aggregate 110,907 shares of Golf's common stock at an exercise
price of $1.88 per share. As of June 30, 1996 and 1995, the Board of Directors
has valued the note at $25,000 and $50,000, respectively, and the warrants at
$0.
<PAGE> 13
THE AMERICAS GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996 AND 1995
(UNAUDITED)
4. INVESTMENTS (CONTINUED):
On July 6, 1995, the Company entered into a joint venture agreement with
Approved Financial Corporation (Approved) to market commercial loans to
businesses that derive, or are in a position to derive, a substantial
portion of their revenue from the Caribbean and Latin America. The loans
are to be secured by qualified first or second mortgages. On August 1,
1995, the Company provided Approved with a $200,000 credit facility
bearing interest at prime. As of June 30, 1996, $100,000 has been advanced
to Approved under the credit facility. In consideration for providing the
credit facility and for its management consulting services, the Company
will receive a twenty-five percent (25%) interest in the joint venture's
revenue received from points on applicable loans and an option to purchase
twenty five percent (25%) of the joint venture for $200,000. As of June
30, 1996, the Company had not exercised this option. As of June 30, 1996,
the Board of Directors has valued the outstanding credit facility at
$100,000 and the option at $0. On July 24, 1996, the outstanding credit
facility was repaid in full and as of such date the joint venture and the
option were terminated.
5. CASH AND CASH EQUIVALENTS:
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF COST AND COST AND
SHARES SHARES VALUE VALUE
JUNE 30, JUNE 30, TYPE OF ISSUE AND JUNE 30, JUNE 30,
1996 1995 NAME OF ISSUER 1996 1995
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
425,700 571,300 Money market fund,
Cortland Trust, Inc. $ 425,700 $ 571,300
- 102,800 Money market fund,
Smith Barney - 102,800
- - Checking account
with bank 10,900 1,600
---------- -------------
Total cash and cash
equivalents (8.6 %
and 13.1% of net
assets at June 30,
1996 and 1995,
respectively) $ 436,600 $ 675,700
========== =============
</TABLE>
<PAGE> 14
THE AMERICAS GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996 AND 1995
(UNAUDITED)
6. FURNITURE AND EQUIPMENT:
Furniture and equipment consists of the following at June 30, 1996 and
1995:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Furniture and fixtures $ 1,500 $ 1,500
Computer equipment 16,400 10,200
--------- ---------
17,900 11,700
Less accumulated depreciation (2,000) (700)
--------- ---------
$ 15,900 $ 11,000
========= =========
</TABLE>
7. INCOME TAXES:
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. The
deferred tax liability is the result of unrealized appreciation
(depreciation) on investments and the use of accelerated depreciation
methods for income tax purposes.
The significant components of deferred tax assets and liabilities on the
balance sheet at June 30, 1996 and 1995 are:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Deferred tax assets:
Net operating loss and Section 179
carryover $ 42,000 $ 100
Unrealized depreciation of investments 9,000 -
Allowance for doubtful collections - 1,000
---------- ----------
51,000 1,100
---------- ----------
Deferred tax liability:
Depreciation 2,900 1,600
Unrealized appreciation of investments - 3,900
---------- ----------
2,900 5,500
---------- ----------
Net deferred tax asset (liability) $ 48,100 $ (4,400)
========== ==========
</TABLE>
<PAGE> 15
THE AMERICAS GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996 AND 1995
(UNAUDITED)
7. INCOME TAXES (CONTINUED):
Significant components of the provision for income taxes (benefits)
attributable to continuing operations in 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
--------- ----------
<S> <C> <C>
Current:
Federal $ - $ -
State - -
--------- ----------
- -
--------- ----------
Deferred:
Federal (benefit) (39,000) 3,300
State (benefit) (7,400) 900
--------- ----------
(46,400) 4,200
--------- ----------
Provision for income
taxes (benefit) $ (46,400) $ 4,200
========= ==========
</TABLE>
8. RELATED PARTY TRANSACTIONS:
The Company has entered into one year renewable consulting agreements with
an entity of which a director of the Company was Chairman and President.
The agreement terminates in July, 1996. The Company paid $18,000 during
each of the periods ended June 30, 1996 and 1995.
The Company leased its office space pursuant to a noncancelable operating
lease which expired in September, 1995. Commencing in October 1995, the
Company is provided with free office space by a law firm with which the
Chairman is "of counsel". Rent expense for the period ended June 30, 1995
was approximately $10,700. The Company paid the law firm legal fees of
approximately $29,300 in the six months ended June 30, 1996.
<PAGE> 16
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations, Liquidity and Capital Resources.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1996
As a result of operations, net assets decreased approximately $50,900 (or
approximately .01% of net assets) during the quarter ended June 30, 1996. For
the comparable period in 1995, net assets increased approximately $9,000 during
the quarter. The net decrease in net assets resulting from operations for the
quarter ended June 30, 1996 primarily resulted from a net investment loss of
$37,100 and an increase in unrealized depreciation of investments of $14,300.
The Company recognized investment income (which consisted entirely of
interest income) of approximately $61,600 for the quarter ended June 30, 1996
as compared to $75,400 for the quarter ended June 30, 1995. The lower
investment income resulted primarily from lower interest rates.
Expenses aggregated approximately $123,300 during the quarter ended June
30, 1996 which included salaries, accounting fees, consulting fees, legal fees
and administrative expenses. Expenses for the quarter ended June 30, 1995 were
approximately $80,700. The increased expenses for the quarter ended June 30,
1996 resulted primarily from higher legal fees associated with the negotiation
of the potential merger transaction with Advanced Electronic Support Services,
Inc. and the terminated merger negotiations with Tallard Technologies B.V.
SIX MONTHS ENDED JUNE 30, 1996
As a result of operations, net assets decreased approximately $92,500 (or
approximately .02% of net assets) during the six months ended June 30, 1996.
For the comparable period in 1995, net assets increased $16,400. The decrease
in net assets resulting from operations for the six months ended June 30, 1996
primarily resulted from a net investment loss of $74,200 and an increase in
unrealized depreciation of investments of $17,600.
The Company recognized investment income (which consisted entirely of
interest income) of approximately $126,700 for the six months ended June 30,
1996 as compared to 142,800 for the six months ended June 30, 1995. The lower
investment income resulted primarily from lower interest rates.
Expenses aggregated approximately $236,000 during the six months ended June
30, 1996 which included salaries, accounting fees, consulting fees, legal fees
and administrative expenses. Expenses for the six months ended June 30, 1995
were approximately $149,500. The increased expenses for the six months ended
June 30, 1996 resulted primarily from higher legal fees associated with the
negotiation of the potential merger transaction with Advanced Electronic
Support Services, Inc. and the terminated merger negotiations with Tallard
Technologies B.V.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1996, the Company had cash and cash equivalents of
approximately $436,600 and US Treasury Bills of approximately $4,461,700. The
increase in capital resources of approximately $4,989,500 was primarily due to
the closing of the Company's initial public offering on August 30, 1994 and the
exercise of the underwriter's overallotment option on September 21, 1994
providing net proceeds
3
<PAGE> 17
to the Company of approximately $4,785,000 and $717,800, respectively, before
deducting other offering costs of $349,300. The decrease in capital resources
for the six months ended June 30, 1996 was primarily due to a net investment
loss of $74,200. As of June 30, 1996, the Company had liabilities of
approximately $24,100.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
The Company is not a party to any material pending legal proceedings.
Item 2. Changes in Securities.
Not Applicable.
Item 3. Defaults upon Senior Securities.
Not Applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted to a vote of security holders during the quarter
covered by this report.
Item 5. Other Information.
PROPOSED MERGER SUBJECT TO STOCKHOLDER APPROVAL
On June 15, 1996, The Americas Growth Fund, Inc. entered into an Agreement
and Plan of Merger (the "Merger Agreement") with Advanced Electronic Support
Products, Inc. ("AESP"). The Merger Agreement provides for the merger
("Merger") of AESP with and into AGF Merger Corporation, a newly-formed,
wholly-owned subsidiary of the Company ("Newco"). As a result of the Merger,
the separate corporate existence of Newco will cease and AESP will continue as
the surviving corporation of the Merger. To effectuate the Merger, all of the
common stock, no par value, of AESP ("AESP Common Stock") will be converted
into 1,707,043 shares of the Company's common stock, par value $.001 per share
("Common Stock"). The Merger Agreement further provides that the Company will
acquire AESP Computerzubehor Gmbh ("AESP Germany") and Advanced Electronic
Support Products Computertillbehor I Sweden Aktiebolag ("AESP Sweden") in a
share exchange transaction, pursuant to which all of the issued and outstanding
capital stock of AESP Germany and AESP Sweden will be exchanged for the
issuance of 20,000 shares of Common Stock to the stockholders of AESP Germany
and 20,000 shares of Common Stock to the stockholders of AESP Sweden.
As a result of the Merger, AESP, AESP Germany and AESP Sweden
(collectively, the "AESP Entities") will become wholly-owned subsidiaries of
the Company, and the Company will become a holding company through which it
will operate the AESP Entities. Messrs. Stein and Briskin, the two current
holders of the capital stock of the AESP Entities, will own an aggregate of
1,747,043 shares of the Company's Common Stock after the Merger, which will
represent approximately 58 percent of the Company's outstanding Common Stock.
The Company has agreed to register with the Securities and Exchange Commission
("Commission") all of the shares of the Common Stock to be issued to Messrs.
Stein and Briskin in connection with the Merger within six months after the
completion of the Merger. Messrs. Stein and Briskin have agreed not to dispose
of any of the Common Stock for a one-year period following the completion of
the Merger.
4
<PAGE> 18
THE AESP ENTITIES
Advanced Electronics Support Products, Inc. ("AESP") is an international
manufacturer and distributor of computer connectivity and networking products.
AESP was incorporated in Florida in 1983 and its headquarters are located at
1810 N.E. 144th Street, North Miami, Florida, 33181 (800-446-2377). AESP also
has warehouse facilities in North Miami and California. Through AESP Germany
and AESP Sweden, both wholly owned by the two principals of AESP (Slav Stein
and Roman Briskin), AESP has sales offices and warehouses in Germany and
Sweden.
Until 1990, AESP offered the majority of its products for Apple Computer
connectivity solutions, at which point it had been designated as a "Third-Party
Developer" by Apple Computer. In 1991, AESP rapidly began to expand its
product base to include PC connectivity and general networking solutions. In
1992, AESP obtained the patent for Ethernet Auto By Pass Wallplate which has
been part of AESP's product line since that time. In 1995, AESP opened a
bonded warehouse in Germany to accommodate its growing product line and its
expanding base of European customers, including those in Eastern Europe.
AESP currently offers a full range of products to its customers, including
computer cables, connectors, installation products, data sharing devices, fiber
optic cables as well as a complete selection of networking products, such as
reworking interface cards, hubs, transceivers, and repeaters for different
networking topologies. Through suppliers, AESP manufactures products that AESP
designs as well as standard industry products. AESP's suppliers are located
primarily in the Far East in order to obtain competitive prices on AESP's labor
intensive products. AESP offers its products to customers in North America,
Latin America, Eastern and Western Europe.
CONSUMMATION OF THE MERGER
The Merger Agreement was signed by the parties on July 15, 1996. The
closing (the "Closing") of the Merger Agreement is subject to approval of the
Merger by the Company's stockholders at a Special Meeting of the Stockholders
("Special Meeting"), which is expected to be held during the third or fourth
quarter of 1996. The Closing will occur as soon as practicable following the
Special Meeting and the satisfaction of the certain conditions precedent to the
consummation of the Merger, as discussed below. The Merger will become
effective (the "Effective Time") upon the filing of Articles of Merger with the
Secretary of State of the State of Florida, which is scheduled to occur on the
same day as the Closing.
Conditions to the consummation of the Merger include: (i) the procurement
of all government authorizations; (ii) the accuracy of certain representations
and warranties contained in the Merger Agreement; (iii) the performance by the
Company of all covenants and agreements required by the Merger Agreement,
including, without limitation, the: (a) indemnification of the current members
of the Board of Directors of the Company, (b) entering into the Consulting
Agreement, Non-Competition Agreement and the Severance Agreement with Mr.
Sokolow (see infra), (c) entering into the employment agreements with Messrs.
Stein and Briskin (see infra), (d) change the composition of the Board (see
infra), (e) use of its best efforts to cause the Merger to qualify as tax free
reorganization for federal income tax income purposes, (f) registration of the
shares of Common Stock and Warrants issued pursuant to the Merger Agreement
within six months of the Closing and (g) the establishment of the 1996 Stock
Plan (see infra); (iv) the performance by AESP of all covenants and agreements
required by the Merger Agreement, including, without limitation, the: (a)
execution of the Convertible Note in favor of Messrs. Stein and Briskin, (see
infra) (b) use of its best efforts to cause the Merger to qualify as tax free
reorganization for federal income tax income purposes and (c) use of its best
efforts to prevent the occurrence of a change in control or other event of
default under its debt instruments as a result of the Merger.
The obligation of the Company to consummate the Merger is subject to the
additional condition that the Company shall have received an opinion,
acceptable to the Company's Board of Directors, from
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<PAGE> 19
ABV with respect to the fairness of the Merger from a financial point of view.
The obligation of AESP to consummate the Merger is subject to the additional
condition that AESP shall have reasonably determined that the Company will have
no further obligations under the 1940 Act after the Merger. In order for any
such determination to be reasonable, AESP must deliver a legal opinion from an
AV rated law firm to the effect that: (i) it is more likely than not that the
Company will have further obligations under the 1940 Act after the Merger; and
(ii) such obligations result from the Company's status and operations as a
business development company under the 1940 Act, or otherwise under the 1940
Act, and do not include those general obligations under the 1940 Act that are
applicable to all companies, wherever situated.
The Merger Agreement provides that, prior to the Effective Time, each of
the Company and AESP (and their respective subsidiaries) shall: (i) operate its
business only in the ordinary course of business, consistent with past
practice; and (ii) use its best efforts to preserve substantially intact its
business organization, to keep available the services of its current officers,
employees and consultants and to preserve its relationships with, among others,
customers and suppliers.
Prior to the Special Meeting to consider the Merger, the Company is
prohibited from soliciting or initiating the submission of any proposal or
offer relating to any transaction involving the capital stock or assets of the
Company, including any joint venture, lease, licensing agreement, dividend,
tender offer, merger, consolidation, acquisition or other business combination.
The Company may, however, participate in any discussions or negotiations with
respect to any unsolicited proposal (or take any of the actions referred to in
the foregoing paragraph) if: (i) counsel to the Company's Board of Directors
advises the Board that the failure to participate in such discussions or
negotiations could involve the members of the Board of Directors in a breach of
their fiduciary duties to the stockholders of the Company; or (ii) the Board
determines, after consulting with its financial advisors, that any such
proposal may be more favorable to the Company's stockholders from a financial
point of view than the Merger. In the event that the Company terminates the
Merger Agreement based upon its fiduciary duty to the Company's stockholders,
then the Company will be required to pay $250,000 to AESP within ten business
days of the third party merger or business combination.
The Merger Agreement may be terminated and the Merger may be abandoned at
any time on or before the Effective Time: (i) by the mutual consent of the
Company and AESP; (ii) by either party if there has been a breach by the other
party of any representation, warranty or covenant set forth in the Merger
Agreement; (iii) by either party if the Merger is not consummated before
December 31, 1996; (iv) by either party if the consummation of the Merger is
permanently enjoined by a governmental authority; (v) by the Company if the
Board of Directors exercises its fiduciary duties to the Company's stockholders
in connection with an unsolicited third party merger or business combination;
or (vi) by either party if the required vote of the Company's stockholders is
not obtained.
CERTAIN TRANSACTION IN CONNECTION WITH MERGER
AESP is presently a private corporation that has elected status as an "S"
corporation under the Internal Revenue code of 1986. As a result of this
election, Messrs. Stein and Briskin, who represent all of the stockholders of
AESP, have personally paid taxes on the undistributed profits of AESP. In
addition, Messrs. Stein and Briskin will personally pay taxes on undistributed
profits of AESP for the period from January 1, 1996 to the Effective Time. In
order to reimburse Messrs. Stein and Briskin for the payment of such taxes, the
Merger Agreement provides that, at or prior to the Effective Time, AESP will
execute a Seven Year Convertible Subordinated Promissory Note ("Convertible
Note") in the amount of $1,430,000 in favor of Messrs. Stein and Briskin for
the purpose of reimbursing Messrs. Stein and Briskin for federal income tax
owed by such persons with respect to AESP's 1996 pre-merger earnings. The
principal amount of the Convertible Note will be adjusted based upon the actual
earnings of AESP during the period from January 1, 1996 to the Effective Time.
Under this Convertible Note, which bears interest at a rate of one-percent over
the floating prime rate charged by Citibank, N.A., the holder has the right to
convert the
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<PAGE> 20
principal amount of the Convertible Note at any time prior to maturity, into
shares of AESP Common Stock (or, if after the Merger, shares of the Company's
Common Stock) based upon a conversion rate of $3.60 per share. In the event
that the holder exercises such conversion right, the shares of Common Stock
issued upon conversion will be afforded one-time demand registration rights and
certain piggyback registration rights.
In connection with the signing of the Merger Agreement, the Company will
loan $100,000 to AESP to pay certain fees incurred by AESP in connection with
negotiation and preparation of the Merger, provided that AESP's financial
statements, for the six month ended June 30, 1996, reflect after tax income
equal to or in excess of AESP's income for the comparable prior year period.
The Loan will bear interest at a rate equal to the floating prime rate charged
by Citibank, N.A., plus one percent and becomes due one year after the date of
making. Under the terms of the Merger Agreement, the repayment of the loan
will be forgiven by the Company in the event that the Company's stockholders do
not approve the Merger at the Special Meeting.
Each of the members of the Board of Directors will derive certain benefits
in connection with and upon the consummation of the Merger. In connection with
the Company's cancellation of its employment agreement ("Employment Agreement")
with Leonard J. Sokolow, the Company's Chairman of the Board, President and
Portfolio Manager, the Company has agreed to pay Mr. Sokolow $350,000 in cash
as compensation for the estimated loss of three year's salary under the
Employment Agreement and $620,000 as a performance award in recognition of Mr.
Sokolow's efforts on behalf of the Company and based upon the estimated
performance award under the Company's Profit Sharing Plan for the three year
period following and giving effect to the Merger. In addition, the Company
will, upon the consummation of the Merger, enter into the following agreements
with Mr. Sokolow: (i) a Non-Competition Agreement pursuant to which he will
receive $925,000, representing $185,000 per year for the five-year term of his
covenant not to compete; (ii) a Warrant Agreement, pursuant to which he will
have the right to purchase up to 90,000 shares of the Company's Common Stock
at exercise prices ranging from $3.60 to $5.00 per share; and (iii) a one-year
Consulting Agreement, pursuant to which he will receive a monthly fee of
$2,000 per month. The members of the Board of Directors of the Company, other
than Mr. Sokolow, will receive a Warrant Agreement with the Company, pursuant
to which each will be entitled to purchase up to 20,000 shares of the
Company's Common Stock (30,000 in the case of one director) at an exercise
price of $3.60 per share.
OPERATION AND MANAGEMENT OF THE COMPANY FOLLOWING MERGER
After the Merger, the Company will be a holding company through which the
Company will operate the AESP Entities as wholly-owned operating subsidiaries.
After the Merger, the primary purpose of the Company will be to derive earnings
from the operation of these subsidiaries as opposed to the Company's current
purpose of deriving earnings from investments in other companies.
After the Merger, all of the current members of the Company's Board of
Directors, other than Leonard J. Sokolow, will resign from the Board of
Directors. Mr. Sokolow will then vote to elect Messrs. Stein and Briskin as
directors of the Company. Thereafter, Messrs. Stein and Briskin will vote
their shares of the Company's Common Stock to ensure that Mr. Sokolow remains
on the Company's Board of Directors until the expiration of his Class III
directorship, which is scheduled to expire at the Company's 1998 annual meeting
of stockholders.
As a condition to the consummation of the Merger Agreement, Messrs. Stein
and Briskin will each enter into an employment agreement with the Company after
the Merger. The term of such employment agreements will (subject to earlier
termination for cause) be for an initial period of five years and will
thereafter continue for successive one year terms unless canceled by either
party. During the term of such employment agreements, Messrs. Stein and
Briskin will receive a salary of $125,000 per year, which salary will increase
annually by 10 percent of the prior year's salary plus the increase in the
consumer price index, which increase may not, in any event, exceed 20 percent
of the prior year's salary. In addition, Messrs. Stein and Briskin will be
entitled to receive an annual bonus equal to five percent of the Company's
pre-tax net income in each fiscal year, provided that the annual bonus may not
exceed 300 percent of the prior year's salary. The Company will provide each
of Messrs. Stein and Briskin with an automobile allowance
7
<PAGE> 21
of $500 per month and a term life insurance policy in the amount of $1,000,000.
For purposes of the employment agreement, a change in control is defined as an
event that: (i) would be required to be reported in response to Item 6(e) of
Schedule 14(a) of Regulation 14A under the Exchange Act; (ii) causes a person
other than Messrs. Stein and Briskin to beneficially own more that 20 percent
of the Company's outstanding securities; or (iii) causes members of the Board
of Directors following the Merger to cease to constitute a majority thereof
unless the election of each new director was approved by a vote of at least
two-thirds of the directors still in office who were directors as of the
effective date of the employment agreement. In the event that during the term
of such employment agreements there is a change of control of the Company which
has not been approved by the Company's Board of Directors, Messrs. Stein and
Briskin will have the option to terminate their employment with the Company
within three months of the change of control and receive a lump sum payment of
$1,000,000. In such event, all previously granted stock options would become
automatically vested. If the Board of Directors approves a change of control,
Messrs. Stein and Briskin may terminate their employment, but would only be
entitled to receive a payment equal to the prior year's annual salary and to
become automatically vested in a portion of their stock option equal to their
percentage completion of the term of their employment agreement. As part of
such employment agreements, each of Messrs. Stein and Briskin will agree not to
compete against the Company for a 12-month period following the termination of
his employment with the Company for any reason other than a change in control
without the approval of the Board of Directors.
For a three year period following the Merger, the Company will be
prohibited from entering into any agreement with any stockholder who
beneficially owns more than 20 percent of the Company's outstanding securities
(e.g., Messrs. Stein and Briskin) with respect to any transaction that would
constitute a "going private" or other transaction subject to Rule 13e-3 (a
"Rule 13e-3 Transaction") of the Securities Exchange Act of 1934 ("Exchange
Act") or any successor rule. As a general matter, a Rule 13e-3 Transaction
involves a transaction (such as a purchase, tender offer, or a reorganization)
by an issuer or an affiliate of an issuer that is designed or reasonably likely
to cause the delisting of the issuer's equity securities from NASDAQ or an
exchange or cause a reduction in the number of stockholders of record to fewer
than 300, thereby qualifying the securities for an exemption from Exchange Act
registration and periodic reporting obligations. The Merger Agreement provides
that the Company may engage in a Rule 13e-3 Transaction during the three year
period if: (i) a majority of disinterested stockholders approve such
transaction; (ii) the disinterested directors of the Board recommend such
transaction; and (iii) an opinion is obtained from a financial advisor that the
transaction is fair to the stockholders from a financial point of view.
The Merger Agreement provides that for a three year period following the
Merger Agreement, the Company shall cause the Common Stock to continue to be
registered under the Exchange Act and shall use its reasonable best efforts to
timely file all periodic reports and other documents required to be filed by
the Company thereunder.
After the Merger, the Company and its subsidiary, AESP, will use its
available working capital to satisfy corporate obligations and pursue business
opportunities. The Merger Agreement provides that AESP may use its working
capital to make payments under the Convertible Note and to pay the tax
obligations of Messrs. Briskin and Stein arising from their status as
stockholders of AESP prior to the Merger.
After the Merger has been consummated, the Company intends to enter into an
agreement with JW Charles Services, Inc. ("JW Charles") pursuant to which JW
Charles would provide investment banking services to the Company. It is
presently contemplated that in exchange for such services, the Company would
grant JW Charles a warrant to purchase $200,000 shares of Common Stock at an
exercise price of $3.60 per share.
WITHDRAWAL OF BUSINESS DEVELOPMENT COMPANY ELECTION UNDER THE 1940 ACT
The Company is presently a non-diversified, closed-end management
investment company electing to be treated as a business development company
under the 1940 Act. A business development company is, in effect, a closed-end
investment company that: (i) is operated for the purpose of making investments
8
<PAGE> 22
in small and developing businesses; (ii) makes available significant managerial
assistance to its portfolio companies; and (iii) notifies the Commission of its
election to be treated as a business development company under the 1940 Act.
As a result of being a business development company, the Company has been
exempt from being "registered" as an investment company under the 1940 Act,
although the Company is still subject to significant regulation under the 1940
Act.
Upon the consummation of the Merger, the Company is not expected to fall
within the definition of an "investment company" under the 1940 Act. As a
result, the exemptive benefit ordinarily enjoyed by a regulated business
development company will not be necessary or relevant to the Company. In
connection with its approval of the Merger, the Board of Directors has
therefore concluded that it would not be consistent with the 1940 Act or in the
best interest of the Company to unnecessarily subject the Company to the
limitations and regulatory burdens imposed under the 1940 Act upon business
development companies. As a condition to the Merger, and subject to
stockholder approval at the Special Meeting, the Company intends to file a
notice of withdrawal of its election as a business development company on Form
N- 54C with the Commission following approval of this proposal and immediately
after the Effective Time.
AMENDMENTS TO THE ARTICLES OF INCORPORATION
As a condition to the Merger, the Company's stockholders will be presented
at the Special Meeting with a proposal to adopt an amendment to the Company's
Articles of Incorporation to change the name of the Company after the Merger
from The Americas Growth Fund, Inc. to Advanced Electronic Support Products,
Inc. and to delete certain provisions and references therein to the 1940 Act.
ADOPTION OF THE 1996 STOCK OPTION PLAN
At the Special Meeting, stockholders of the Company will also be asked to
consider and approve the 1996 Plan which will provide for the grant by the
Company of options to purchase up to an aggregate of 400,000 of the Company's
Common Stock to the Company's employees, subject to the consummation of the
Merger.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit 2 - Agreement and Plan of Merger, dated as of July 15,
1996, among The Americas Growth Fund, Inc., AGF Merger Corporation, Advanced
Electronic Support Products, Inc., Slav Stein, Roman Briskin, and Leonard J.
Sokolow.
Exhibit 27 - Financial Data Schedule (for SEC purposes only)
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<PAGE> 23
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE AMERICAS GROWTH FUND, INC.
By: /s/ LEONARD J. SOKOLOW
------------------------------
Leonard J. Sokolow
Chairman of the Board, President and
Chief Financial Officer
(Principal Executive, Financial and
Accounting Officer)
Date: August 12, 1996
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<PAGE> 1
Exhibit 2
AGREEMENT AND PLAN OF MERGER
among
THE AMERICAS GROWTH FUND, INC.,
AGF MERGER CORPORATION,
ADVANCED ELECTRONIC SUPPORT PRODUCTS, INC.,
SLAV STEIN,
ROMAN BRISKIN,
and
LEONARD J. SOKOLOW
Dated as of July 15, 1996
<PAGE> 2
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
<TABLE>
<S> <C> <C>
1.1 "Affiliate" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 "Business Day" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 "Control" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 "Code" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.5 "Effective Time" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.6 "Encumbrance" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.7 "Environmental Laws" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.8 "Exchange Act" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.9 "Exchange Ratio" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.10 "Governmental Authority" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.11 "Governmental Order" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.12 "Intellectual Property" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.13 "Material Adverse Effect" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.14 "Opt-Out Time" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.15 "Person" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.16 "Receivables" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.17 "Securities Act" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.18 "Subsidiary" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.19 "Surviving Corporation" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
</TABLE>
ARTICLE II
THE MERGER
<TABLE>
<S> <C> <C>
2.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.2 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.3 Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.4 Effect of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.5 Articles of Incorporation; By-Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
</TABLE>
ARTICLE III
CONVERSION OF SECURITIES AND EXCHANGE OF CERTIFICATES
<TABLE>
<S> <C> <C>
3.1 Conversion of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.2 Exchange of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.3 Stock Transfer Books . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.4 Stock Options, Warrants and Other Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.5 Issuance of AGF Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.6 Acquisition of AESP Germany and AESP Sweden . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
</TABLE>
i
<PAGE> 3
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
<TABLE>
<S> <C> <C>
1.1 "Affiliate" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 "Business Day" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 "Control" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 "Code" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.5 "Effective Time" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.6 "Encumbrance" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.7 "Environmental Laws" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.8 "Exchange Act" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.9 "Exchange Ratio" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.10 "Governmental Authority" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.11 "Governmental Order" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.12 "Intellectual Property" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.13 "Material Adverse Effect" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.14 "Opt-Out Time" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.15 "Person" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.16 "Receivables" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.17 "Securities Act" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.18 "Subsidiary" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.19 "Surviving Corporation" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
</TABLE>
ARTICLE II
THE MERGER
<TABLE>
<S> <C> <C>
2.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.2 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.3 Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.4 Effect of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.5 Articles of Incorporation; By-Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
</TABLE>
ARTICLE III
CONVERSION OF SECURITIES AND EXCHANGE OF CERTIFICATES
<TABLE>
<S> <C> <C>
3.1 Conversion of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.2 Exchange of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.3 Stock Transfer Books . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.4 Stock Options, Warrants and Other Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.5 Issuance of AGF Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.6 Acquisition of AESP Germany and AESP Sweden . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
</TABLE>
i
<PAGE> 4
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF AESP
<TABLE>
<S> <C>
4.1 Organization and Qualification; Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.2 Articles of Incorporation and By-Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.3 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.4 Authority of each AESP Entity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.5 No Conflict; Required Filings and Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.6 Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.7 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.8 Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.9 Absence of Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.10 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.11 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.12 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.13 Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.14 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.15 Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.16 Environmental Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.17 Conduct of Business in the Ordinary Course . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.18 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.19 Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.20 Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.21 Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.22 Suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.23 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.24 Eligible Portfolio Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.25 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
</TABLE>
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF AGF
<TABLE>
<S> <C>
5.1 Organization and Qualification; Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.2 Articles of Incorporation and By-Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.3 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.4 Authority of AGF and AGFMC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.5 No Conflict; Required Filings and Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.6 Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.7 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.8 Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.9 Absence of Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.10 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
</TABLE>
ii
<PAGE> 5
<TABLE>
<S> <C> <C>
5.11 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.12 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.13 Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.14 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.15 Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.16 Environmental Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.17 Conduct of Business in the Ordinary Course . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.18 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.19 Subsidiaries and Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.20 Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.21 Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.22 Suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.23 SEC Filings; Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.24 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.25 Tallard Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.26 Vote Required for Approval of Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.27 Cash or Cash Equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.28 Compliance with 1940 Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.29 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
</TABLE>
ARTICLE VI
CONDUCT OF BUSINESSES PENDING THE MERGER
<TABLE>
<S> <C> <C>
6.1 Conduct of Respective Businesses by AESP
and AGF Pending the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.2 Examples . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.3 Exclusivity; Fiduciary Duty of AGF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
</TABLE>
ARTICLE VII
ADDITIONAL COVENANTS
<TABLE>
<S> <C> <C>
7.1 Access to Information; Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.2 Directors' and Officers' Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.3 Consulting Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.4 Non-Compete Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.5 Severance Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.6 Employment Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.7 Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.8 Loan from AESP Stockholders to AESP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.9 Loan to AESP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.10 Notification of Certain Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.11 Tax Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.12 Registration Statement; Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.13 Stockholders' Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.14 AESP Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.15 Stock Option Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
</TABLE>
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<PAGE> 6
<TABLE>
<S> <C> <C>
7.16 Public Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.17 Lock-Up Letters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.18 Further Actions; Reasonable Best Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.19 Debt Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.20 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.21 Transactions with Significant Stockholder
After the Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.22 Continued Exchange Act Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.23 Use of Merged Working Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
</TABLE>
ARTICLE VIII
CLOSING CONDITIONS
<TABLE>
<S> <C> <C>
8.1 Conditions to Obligations of Each Party
to Effect the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.2 Additional Conditions to Obligations of AGF . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.3 Additional Conditions to Obligations of AESP . . . . . . . . . . . . . . . . . . . . . . . . . . 39
</TABLE>
ARTICLE IX
DELIVERIES AT CLOSING
<TABLE>
<S> <C> <C>
9.1 Deliveries by AGF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
9.2 Deliveries by AESP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
</TABLE>
iv
<PAGE> 7
ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
<TABLE>
<S> <C> <C>
10.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
10.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10.3 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10.4 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10.5 Fees, Expenses and Other Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
</TABLE>
ARTICLE XI
GENERAL PROVISIONS
<TABLE>
<S> <C>
11.1 Effectiveness of Representations, Warranties and Agreements . . . . . . . . . . . . . . . . . . . 43
11.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.3 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.4 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.5 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.6 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.7 Parties in Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.8 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.9 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
v
</TABLE>
<PAGE> 8
LIST OF EXHIBITS
Exhibit No. Description
- ----------- -----------
3.5(b) Form of Mahoney and Sokolow Warrants
3.5(c) Form of Cohen, Engelmann, Villamil and Winter Warrants
7.3 Form of Consulting Agreement
7.4 Form of Non-Compete Agreement
7.5 Form of Severance Agreement
7.6 Form of Employment Agreements
7.8 Form of Convertible Note
7.9 Form of Note
vi
<PAGE> 9
LIST OF SCHEDULES
Schedule No. Description
- ------------ -----------
4.3 Capitalization - AESP
4.5 Required Filings and Consents - AESP
4.7 Financial Statements - AESP
4.8 Absence of Certain Changes and Events - AESP
4.9 Absence of Litigation - AESP
4.12(a) Taxes - AESP
4.12(b) Taxes - AESP
4.12(e) Taxes - AESP
4.13(a) Material Contracts - AESP
4.15 Receivables - AESP
4.16 Environmental Compliance - AESP
4.17 Conduct of Business in the Ordinary Course - AESP
4.19 Affiliates - AESP
4.20 Real Property - AESP
4.21 Assets - AESP
4.23 Brokers - AESP
5.3 Capitalization - AGF
5.7(b) Financial Statements - AGF
5.8 Absence of Certain Changes and Events - AGF
5.10 Employee Benefit Plans - AESP
5.11 Intellectual Property - AGF
5.13(a) Material Contracts - AGF
5.13(b) Material Contracts Exceptions - AGF
5.19 Subsidiaries and Affiliates - AGF
5.20 Real Property - AGF
5.24 Brokers - AGF
5.27 Cash or Cash Equivalents
6.2 Examples
6.2(f) Examples
6.2(g) Examples
vii
<PAGE> 10
AGREEMENT AND PLAN OF MERGER, dated as of July 15, 1996 (this
"Agreement"), among THE AMERICAS GROWTH FUND, INC., a Maryland corporation
("AGF"), AGF MERGER CORPORATION, a Florida corporation and wholly owned
subsidiary of AGF ("AGFMC"), ADVANCED ELECTRONIC SUPPORT PRODUCTS, INC., a
Florida corporation ("AESP"), Slav Stein ("Stein"), Roman Briskin ("Briskin")
and Leonard J. Sokolow ("Sokolow").
RECITALS:
A. Upon the terms and subject to the conditions of this Agreement
and in accordance with the Florida Business Corporation Act ("Florida Law") and
the Maryland General Corporation Law ("Maryland Law"), AESP and AGF will enter
into a business combination transaction pursuant to which: (i) AGFMC will merge
with and into AESP (the "Merger"); and (ii) AGF will acquire all of the issued
and outstanding stock of each of AESP Computerzubehor Gmbh, a German
Corporation ("AESP Germany") and Advanced Electronic Support Products
Computertillbehor I Sweden Aktiebolag, a Swedish corporation ("AESP Sweden").
B. The Boards of Directors and stockholders of AESP have approved
and adopted this Agreement and AESP has approved the Merger and the other
transactions contemplated hereby.
C. The Board of Directors of AGF has determined that the Merger
is consistent with and in furtherance of the long-term business strategy of AGF
and is in the best interests of AGF and its stockholders and has approved and
adopted this Agreement and has approved the Merger and the other transactions
contemplated hereby and recommended approval and adoption of this Agreement and
approval of the Merger by the holders of the common stock, par value $.01 per
share, of AGF (the "AGF Common Stock").
D. For federal income tax purposes, it is intended that the
Merger qualify as a reorganization under the provisions of Section 368(a) of
the United States Internal Revenue Code of 1986, as amended.
E. The parties intend that the Merger qualify as a reverse merger
under U.S. generally accepted accounting principles ("GAAP").
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
For purposes of this Agreement, the following terms shall have the
following meanings:
<PAGE> 11
1.1 "Affiliate" means any Person who or which, directly or
indirectly, through one or more intermediaries, Controls, is Controlled by, or
is under Common Control with, any specified Person.
1.2 "Business Day" means any day other than a day on which (i)
banks in the State of Florida are authorized or obligated to be closed or (ii)
the New York Stock Exchange is closed;
1.3 "Control" (including the terms "Controlling," "Controlled by"
and "under Common Control with"), with respect to the relationship between or
among two or more Persons, means the possession, directly or indirectly or as
trustee or executor, of the power to direct or cause the direction of the
affairs or management of a Person, whether through the ownership of voting
securities, as trustee or executor, by contract or otherwise, including,
without limitation, the ownership, directly or indirectly, of securities having
the power to elect a majority of the board of directors or similar body
governing the affairs of such Person.
1.4 "Code" means the Internal Revenue Code of 1986, as amended.
1.5 "Effective Time" shall have the meaning set forth in Section
2.3.
1.6 "Encumbrance" means any security interest, pledge, mortgage,
lien (including, without limitation, environmental and tax liens), charge,
encumbrance, adverse claim, option, preferential arrangement or restriction of
any kind, including, without limitation, any restriction on the use, voting,
transfer, receipt of income or other exercise of any attributes of ownership.
1.7 "Environmental Laws" means any foreign, federal, state or
local statute, code, ordinance, rule, regulation, permit, consent, approval,
license, judgment, order, writ, judicial decision, common law rule, decree,
agency interpretation, injunction or other authorization or requirement
whenever promulgated, issued, or modified, including the requirement to
register underground storage tanks, relating to:
(a) emissions, discharges, spills, releases or threatened
releases of pollutants, contaminants, Hazardous Substances (as hereinafter
defined), materials containing Hazardous Substances, or hazardous or toxic
materials or wastes into ambient air, surface water, groundwater, watercourses,
publicly or privately owned treatment works, drains, sewer systems, wetlands,
septic systems or onto land;
(b) the use, treatment, storage, disposal, handling,
manufacturing, transportation, or shipment of Hazardous Substances, materials
containing Hazardous Substances or hazardous and/or toxic wastes, material,
products or by-products (or of equipment or apparatus containing Hazardous
Substances) as defined in or regulated under the following statutes and their
implementing regulations: the Hazardous Materials Transportation Act, 49
U.S.C. Section 1801 et seq., the Resource Conservation and Recovery Act, 42
U.S.C. Section 6901 et seq., the Comprehensive Environmental Response,
Compensation and Liability Act, as amended by the Superfund
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<PAGE> 12
Amendments and Reauthorization Act, 42 U.S.C. Section 9601 et seq., and/or the
Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq., each as amended
from time to time; or
(c) otherwise relating to pollution or the protection of
human health or the environment.
1.8 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
1.9 "Exchange Ratio" shall have the meaning set forth in Section
3.1(a).
1.10 "Governmental Authority" means any federal, state or local, or
foreign government, governmental, regulatory or administrative authority (or
subdivision thereof) and any agency or commission or any court, tribunal or
judicial or arbitral body that has jurisdiction over a designated Person and
its business.
1.11 "Governmental Order" means any order, writ, judgment,
injunction, decree, stipulation, determination or award entered by or with any
Governmental Authority.
1.12 "Intellectual Property" means: (a) inventions, whether or not
patentable, whether or not reduced to practice, and whether or not yet made the
subject of a pending patent application or applications, (b) ideas and
conceptions of potentially patentable subject matter, including, without
limitation, any patent disclosures, whether or not reduced to practice and
whether or not yet made the subject of a pending patent application or
applications, (c) national and multinational statutory invention registrations,
patents, patent registrations and patent applications (including all reissues,
divisions, continuations, continuations-in-part, extensions and reexaminations)
and all rights therein provided by international treaties or conventions and
all improvements to the inventions disclosed in each such registration, patent
or application, (d) trademarks, service marks, trade dress, logos, trade names
and corporate and partnership names, whether or not registered, including all
common law rights, and registrations and applications for registration thereof,
including, but not limited to, all marks registered in trademark offices
throughout the world, and all rights therein provided by international treaties
or conventions, (e) copyrights (registered or otherwise) and registrations and
applications for registration thereof, and all rights therein provided by
international treaties or conventions, (f) moral rights (including, without
limitation, rights of paternity and integrity), and waivers of such rights by
others, (g) computer software, including, without limitation, operating systems
and specifications, data, data bases, files, documentation and other materials
related thereto, (h) trade secrets and confidential, technical and business
information (including ideas, flow charts, logic diagrams, formulas,
compositions, patterns, devices, methods, techniques, processes, inventions,
and conceptions of inventions whether patentable or unpatentable and whether or
not reduced to practice), (i) whether or not confidential, technology
(including know-how and show-how), manufacturing and production processes and
techniques, research and development information, drawings, specifications,
designs, plans, proposals, technical data, copyrightable works, financial,
marketing and business data, selling, pricing and cost information or
procedures, business and marketing plans and customer and supplier lists and
information, (j) copies and tangible
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<PAGE> 13
embodiments of all the foregoing, in whatever form or medium, (k) all rights to
obtain and rights to apply for patents, and to register trademarks and
copyrights, (l) all rights to sue or recover and retain damages and costs and
attorneys' fees for present and past infringement of any of the foregoing, and
(m) all goodwill associated with the foregoing.
1.13 "Material Adverse Effect" means any circumstance, change in,
or effect on the business of any party that: (a) is, or could reasonably be
expected to be, materially adverse to the business, operations, assets or
liabilities, results of operations or the financial condition of such party, or
(b) could reasonably be expected to adversely affect the ability of such party
to operate or conduct its business in the manner in which it is currently or
currently anticipated to be operated or conducted.
1.14 "Opt-Out Time" shall have the meaning set forth in Section
2.3.
1.15 "Person" means any individual, partnership, firm corporation,
limited liability company, association, joint venture, trust, unincorporated
organization or other entity, as well as any syndicate or group that would be
deemed to be a person under Section 13(d)(3) of the Exchange Act of 1934, as
amended.
1.16 "Receivables" means any and all accounts, notes and other
receivables of a Person from third parties, including, without limitation,
customers, arising from the conduct of such Person's business or otherwise
before the date hereof, whether or not in the ordinary course, together with
all unpaid financing charges accrued thereon.
1.17 "Securities Act" means the Securities Act of 1933, as amended.
1.18 "Subsidiary" or "Subsidiaries" of a person means any
corporation, partnership, joint venture or other legal entity of which such
person (either alone or through or together with any other subsidiary), owns,
directly or indirectly, 50% or more of the stock or other equity interests, the
holders of which are generally entitled to vote for the election of the board
of directors or other governing body of such corporation or other legal entity.
1.19 "Surviving Corporation" shall have the meaning set forth in
Section 2.1 hereof.
ARTICLE II
THE MERGER
2.1 The Merger. Upon the terms and subject to the conditions
set forth in this Agreement, and in accordance with Florida Law, at the
Effective Time (as defined in Section 2.3), AGFMC shall be merged with and into
AESP. As a result of the Merger, the separate corporate existence of AGFMC
shall cease and AESP shall continue as the surviving corporation of the Merger
(the "Surviving Corporation"). As a result of the Merger, the Surviving
Corporation shall become a wholly owned subsidiary of AGF.
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<PAGE> 14
2.2 Closing. Unless this Agreement shall have been terminated and
the transactions herein contemplated shall have been abandoned pursuant to
Section 10.1 and subject to the satisfaction or waiver of the conditions set
forth in Article X, the consummation of the Merger (the "Closing") will take
place as promptly as practicable (and in any event within five (5) business
days) after satisfaction or waiver of the conditions set forth in Article X at
the offices of Lucio, Mandler, Croland, Bronstein & Garbett, P.A., 701 Brickell
Avenue, Suite 2000, Miami, Florida 33131, unless another date, time or place is
agreed to in writing by the parties hereto.
2.3 Effective Time. On the same day as the Closing, the parties
hereto shall cause the Merger to be consummated by filing Articles of Merger
with the Secretary of State of the State of Florida in such form as required
by, and executed in accordance with the relevant provisions of, Florida Law
(the date and time of such filing, or such later date or time as set forth
therein, being the "Effective Time"). On the same day as, and immediately
after, the Effective Time the parties hereto shall cause Form N-54C to be filed
with the Securities and Exchange Commission ("SEC"). The date and time of the
receipt by the SEC of such filing is hereinafter referred to as the "Opt-Out
Time".
2.4 Effect of the Merger. At the Effective Time, the effect of
the Merger shall be as provided in the applicable provisions of Florida law.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time, except as otherwise provided herein, all the property, rights,
privileges, powers and franchises of AGFMC and AESP shall vest in the Surviving
Corporation, and all debts, liabilities and duties of AGFMC and AESP shall
become the debts, liabilities and duties of the Surviving Corporation.
2.5 Articles of Incorporation; By-Laws. At the Effective Time,
the Articles of Incorporation and the By-Laws of AESP, as in effect immediately
prior to the Effective Time, shall be the Articles of Incorporation and the
By-Laws of the Surviving Corporation.
ARTICLE III
CONVERSION OF SECURITIES AND EXCHANGE OF CERTIFICATES
3.1 Conversion of Securities. At the Effective Time, by virtue of
the Merger and without any action on the part of AGF, AGFMC, AESP or the
holders of any of the following securities:
(a) Each share of common stock of AESP ("AESP Common
Stock"), issued and outstanding immediately prior to the Effective Time (other
than any shares of AESP Common Stock to be canceled pursuant to Section
3.1(b)), shall be converted into the right to receive 25,605.645 (the "Exchange
Ratio") shares of AGF Common Stock. As a result of such conversion, the
current holders of AESP Common Stock will, at the Effective Time, hold the
aggregate amount of 1,707,043 shares of AGF Common Stock which will, at the
Effective Time, represent fifty seven percent (57%) of the AGF Common Stock
then issued and outstanding. However, if between the date of this Agreement
and the Effective Time the outstanding shares
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<PAGE> 15
of AGF Common Stock or AESP Common Stock shall have been changed into a
different number of shares or a different class, by reason of any stock
dividend, subdivision, reclassification, recapitalization, split, combination
or exchange of shares, the Exchange Ratio shall be correspondingly adjusted to
reflect such stock dividend, subdivision, reclassification, recapitalization,
split, combination or exchange of shares. All such shares of AESP Common Stock
shall no longer be outstanding and shall automatically be canceled and retired
and shall cease to exist, and each certificate previously evidencing any such
shares shall thereafter represent the right to receive, upon the surrender of
such certificate in accordance with the provisions of Section 3.2, certificates
evidencing such number of whole shares of AGF Common Stock into which such AESP
Common Stock was converted in accordance with the Exchange Ratio. The holders
of such certificates previously evidencing such shares of AESP Common Stock
outstanding immediately prior to the Effective Time shall cease to have any
rights with respect to such shares of AESP Common Stock except as otherwise
provided herein or by law.
(b) Each share of AESP Common Stock held in the treasury
of AESP or held by any directly or indirectly owned Subsidiary of AESP
immediately prior to the Effective Time shall automatically be canceled and
extinguished without any conversion thereof and no payment shall be made with
respect thereto.
3.2 Exchange of Certificates. At the Closing, the holders of AESP
Common Stock shall deliver certificates representing all of the issued and
outstanding AESP Common Stock to AGF. AGF shall then provide the holders of
AESP Common Stock with certificates representing all of the AGF Common Stock
issued to the holders of AESP Common Stock pursuant to Section 3.1 hereof.
3.3 Stock Transfer Books. On the date hereof, the stock transfer
books of AESP shall be closed, and there shall be no further registration of
transfers of shares of AESP Common Stock thereafter on the records of AESP.
3.4 [INTENTIONALLY OMITTED]
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<PAGE> 16
3.5 Issuance of AGF Warrants.
(a) At the Opt-Out Time, AGF shall issue the following
number of warrants (each, a "Warrant") to the following persons:
<TABLE>
<CAPTION>
Person Number of Warrants
------ ------------------
<S> <C>
Sokolow 90,000
Sanford B. Cohen ("Cohen") 20,000
Martin C. Engelmann ("Engelmann") 20,000
Hon. J. Antonio Villamil ("Villamil") 30,000
Neil R. Winter ("Winter") 20,000
Timothy E. Mahoney ("Mahoney") 50,000
</TABLE>
(b) The form of each Warrant to be issued to Sokolow and
Mahoney is attached hereto as Exhibit 3.5(b). However, 60,000 of the Warrants
issued to Sokolow hereunder shall provide for an exercise price of $3.60 per
share, and the remaining 30,000 Warrants issued to Sokolow hereunder shall
provide for an exercise price of $5.00 per share.
(c) The form of each Warrant to be issued to Cohen,
Engelmann, Villamil and Winter is attached hereto as Exhibit 3.5(c).
3.6 Acquisition of AESP Germany and AESP Sweden. Stein and
Briskin shall, at the Closing, deliver certificates representing all of the
issued and outstanding stock of AESP Germany and AESP Sweden to AGF or its
designee. Such certificates shall be duly endorsed in favor of AGF. In
consideration of such transfer, Stein and Briskin shall each receive 20,000
shares of AGF Common Stock.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF AESP
As of the date hereof and the Closing, AESP hereby represents and
warrants to AGF as follows:
4.1 Organization and Qualification. Each of AESP, AESP Germany
and AESP Sweden (each, an "AESP Entity" and collectively, the "AESP Entities")
is a corporation, partnership or other legal entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization and has the requisite power and
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<PAGE> 17
authority and all necessary governmental approvals to own, lease and operate
its properties and assets and to carry on its business as it has been, is
currently and is currently anticipated to be conducted, except where the
failure to be so organized, existing or in good standing or to have such power,
authority and governmental approvals does not have, or could not reasonably be
expected to have a Material Adverse Effect. Each AESP Entity is duly qualified
or licensed as a foreign corporation to do business, and is in good standing,
in each jurisdiction where the character of the properties owned, leased or
operated by it or the nature of its business makes such qualification or
licensing necessary, except for such failures to be so qualified or licensed
and in good standing that would not, individually or in the aggregate, have a
Material Adverse Effect.
4.2 Articles of Incorporation and By-Laws. Each AESP Entity has
heretofore made available to AGF a complete and correct copy of its Articles of
Incorporation and By-Laws or equivalent organizational documents, each as
amended to date. Such Articles of Incorporation, By-Laws and equivalent
organizational documents are in full force and effect. Each AESP Entity is not
in violation of any provision of its Articles of Incorporation, By-Laws or
equivalent organizational documents, except for such violations that would not,
individually or in the aggregate, have a Material Adverse Effect.
4.3 Capitalization.
(a) Schedule 4.3 accurately: (a) sets forth, as of the
Closing, the names of the holders of all of the outstanding capital stock of
each AESP Entity and the number of shares owned by each such stockholder; and
(b) describes any preferences in distributions to which each such stockholder
is entitled. There are now and, as of the Closing, will be no preemptive
rights with respect to any capital stock of any AESP Entity and, except as set
forth on Schedule 4.3, there are now and, as of the Closing, will be no
outstanding options, subscriptions, warrants, calls, contracts, convertible
securities, or other rights, agreements, arrangements or commitments of any
character under which any AESP Entity is or may become obligated to issue,
assign or transfer any shares of capital stock of any AESP Entity or purchase,
redeem or otherwise acquire any outstanding shares of capital stock of any AESP
Entity. Each outstanding share of capital stock of each AESP Entity has been
duly and validly authorized and issued and is fully paid and owned,
beneficially and of record, by the stockholder(s) listed on Schedule 4.3.
Neither any AESP Entity nor any stockholder listed on Schedule 4.3 has granted
any option or other right to purchase any capital stock of any AESP Entity or
any interest therein from any such stockholder.
(b) Briskin and Stein jointly and severally warrant and
represent to AGF that, as of the date hereof and as of the Closing: (i) Briskin
and Stein have good and marketable title to and beneficial ownership of all of
the outstanding securities (collectively, the "AESP Entity Shares") of the AESP
Entities; and (ii) Briskin and Stein have full right, power and authority to
sell, assign, transfer and deliver the AESP Entity Shares to AGF, free and
clear of any Encumbrance. Furthermore, Briskin and Stein waive any right of
first refusal that either of them may have with regard to the AESP Entity
Shares.
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4.4 Authority of Each AESP Entity. Each AESP Entity has all
necessary power and authority to execute and deliver this Agreement, to perform
its obligations hereunder and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement by each AESP Entity and
the consummation by each AESP Entity of the transactions contemplated hereby
have been duly and validly authorized by all necessary corporate action and no
other corporate action on the part of each AESP Entity is necessary to
authorize this Agreement or to consummate the transactions contemplated herein.
This Agreement has been duly and validly executed and delivered by each AESP
Entity and, assuming the due authorization, execution and delivery by AGF,
constitutes a legal, valid and binding obligation of each AESP Entity,
enforceable against such AESP Entity in accordance with its terms, subject to
the effect of any applicable bankruptcy, reorganization, insolvency, moratorium
or similar laws affecting creditors' rights generally and subject, as to
enforceability, to the effect of general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
4.5 No Conflict; Required Filings and Consents.
(a) Except as set forth on Schedule 4.5, the execution
and delivery of this Agreement by each AESP Entity do not, and each AESP
Entity's performance of the transactions contemplated herein will not:
(i) conflict with or violate the Articles of
Incorporation or By-Laws or equivalent organizational documents of any AESP
Entity;
(ii) conflict with or violate any law, rule,
regulation, order, judgment or decree applicable to any AESP Entity or by which
any property or asset of any AESP Entity is bound or affected, except for any
such conflicts, violations, breaches, defaults or other occurrences which would
not prevent or delay consummation of the Merger in any material respect, or
otherwise prevent each AESP Entity from performing its obligations under this
Agreement in any material respect, and would not, individually or in the
aggregate, have a Material Adverse Effect; or
(iii) result in any breach of or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, result in the loss of a material benefit under, or give to
others any right of termination, amendment, acceleration or cancellation of, or
result in the creation of a lien or other encumbrance on any property or asset
of any AESP Entity pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which any AESP Entity is a party or by which any AESP Entity or any property
or asset of any AESP Entity is bound or affected, except for any such
conflicts, violations, breaches, defaults or other occurrences which would not
prevent or delay consummation of the Merger in any material respect, or
otherwise prevent an AESP Entity from performing its obligations under this
Agreement in any material respect, and would not, individually or in the
aggregate, have a Material Adverse Effect.
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<PAGE> 19
(b) The execution and delivery of this Agreement by the
AESP Entities do not, and the performance of this Agreement by the AESP
Entities will not, require any consent, approval, authorization or permit of,
or filing with or notification to any Governmental Authority, except for:
(i) applicable requirements, if any, of the
Exchange Act, the Securities Act and state securities or "blue sky" laws ("Blue
Sky Laws");
(ii) filing and recordation of appropriate merger
documents as required by Florida Law; and
(iii) any non-United States competition, antitrust
and investment laws;
and where failure to obtain such consents, approvals, authorizations or
permits, or to make such filings or notifications, would not prevent or delay
consummation of the Merger in any material respect, or otherwise prevent the
AESP Entities from performing their obligations under this Agreement in any
material respect, and could not, individually or in the aggregate, have a
Material Adverse Effect.
4.6 Compliance. Each AESP Entity is not in conflict with, or in
default or violation of, (i) any law, rule, regulation, order, judgment or
decree applicable to such AESP Entity or by which any property or asset of such
AESP Entity is bound or affected, or (ii) any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which such AESP Entity is a party or by which such AESP Entity or
any property or asset of such AESP Entity is bound or affected, except for any
such conflicts, defaults or violations that would not, individually or in the
aggregate, have a Material Adverse Effect.
4.7 Financial Statements.
(a) The AESP combined financial statements for the twelve
month period ended December 31, 1995, including all notes thereto,
(collectively, the "AESP Financial Statements") provided to AGF were prepared
in accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods indicated and each fairly presented the
financial position, results of operations and cash flows of the AESP Entities,
as the case may be, as at the respective dates thereof and for the respective
periods indicated therein (subject, in the case of unaudited statements, to
normal and recurring year-end adjustments which were not and are not expected,
individually or in the aggregate, to be material in amount).
(b) Except as set forth in Schedule 4.7 or the AESP
Financial Statements, the AESP Entities do not have any liability or obligation
of any nature (whether accrued, absolute, contingent or otherwise) other than
liabilities and obligations which would not, individually or in the aggregate,
have a Material Adverse Effect. Without limiting the generality of the
foregoing, the AESP Financial Statements reflect the annual costs of all real
estate leases between any AESP Affiliate and the AESP Entities.
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<PAGE> 20
4.8 Absence of Certain Changes or Events. Since the date of the
AESP Financial Statements, each AESP Entity has conducted its business only in
the ordinary course and in a manner consistent with past practice and, except
as set forth in Schedule 4.8, there has not been:
(a) any damage, destruction or loss (whether or not
covered by insurance) with respect to any property or asset of any AESP Entity
and having, individually or in the aggregate, a Material Adverse Effect;
(b) any change by any AESP Entity in its accounting
methods, principles or practices;
(c) any declaration, setting aside or payment of any
dividend or distribution in respect of any capital stock of any AESP Entity or
any redemption, purchase or other acquisition of any of its securities;
(d) other than as set forth in Section 4.3 and pursuant
to the plans, programs or arrangements referred to in Section 4.10 and other
than in the ordinary course of business consistent with past practice, any
increase in or establishment of any bonus, insurance, severance, deferred
compensation, pension, retirement, profit sharing, stock option (including,
without limitation, the granting of stock options, stock appreciation rights,
performance awards, or restricted stock awards), stock purchase or other
employee benefit plan, or any other increase in the compensation payable or to
become payable to any officers or key employees of any AESP Entity.
4.9 Absence of Litigation. Except as disclosed on Schedule 4.9
hereof, there is no claim, action, proceeding or investigation pending or
overtly threatened against any AESP Entity, or any property or asset of any
AESP Entity, before any court, arbitrator or administrative, governmental or
regulatory authority or body, domestic or foreign, which, individually or in
the aggregate, could have a Material Adverse Effect. Neither any AESP Entity
nor any property or asset of any AESP Entity is subject to any order, writ,
judgment, injunction, decree, determination or award which could have,
individually or in the aggregate, a Material Adverse Effect.
4.10 Employee Benefit Plans.
(a) With respect to all the employee benefit plans,
programs and arrangements maintained or contributed to by the AESP Entities for
the benefit of any current or former employee, officer or director of the AESP
Entities (the "AESP Plans"), and except as would not, individually or in the
aggregate, have a Material Adverse Effect:
(i) each AESP Plan intended to be qualified under
Section 401(a) of the Code has received a favorable determination letter from
the Internal Revenue Service (the
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<PAGE> 21
"IRS") that it is so qualified and nothing has occurred since the date of such
letter that could reasonably be expected to affect the qualified status of such
AESP Plan;
(ii) each AESP Plan has been operated in all
material respects in accordance with its terms and the requirements of
applicable law;
(iii) the AESP Entities have not incurred any
direct or indirect liability under, arising out of or by operation of Title IV
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
in connection with the termination of, or withdrawal from, any AESP Plan or
other retirement plan or arrangement, and no fact or event exists that could
reasonably be expected to give rise to any such liability; and
(iv) the AESP Entities have not incurred any
liability under, and have complied in all material respects with, the Worker
Adjustment Retraining Notification Act ("WARN"), and no fact or event exists
that could give rise to liability under such act.
(b) None of the AESP Plans currently maintained by or
contributed to by any of the AESP Entities nor any Plan maintained by any
entity that together with the AESP Entities would be deemed a "single employer"
within the meaning of Section 4001(b) of ERISA (a "AESP Affiliate Plan") is
subject to Title IV of ERISA. No AESP Plan or AESP Affiliate Plan has incurred
any "accumulated funding deficiency" (as defined in Section 302 of ERISA and
Section 412 of the Code), whether or not waived as of the most recently
completed plan year of such plan.
4.11 Intellectual Property.
(a) AGF heretofore has been provided a true and complete
list of all Intellectual Property which each AESP Entity owns or has the right
to use. Each AESP Entity has full ownership thereof or the right to use all
such rights, in each case except to the extent heretofore disclosed in writing
to AGF, and the AESP Entities have no knowledge that the conduct of their
respective businesses as now operated, as of the date hereof, conflicts with,
misappropriates or infringes, or has been alleged to infringe, any Intellectual
Property rights or franchises of any person (including patents, trade secrets
or other proprietary rights of any third party). AGF heretofore has been
provided with a true and complete copy of every material license or other
material agreement, including all amendments thereto, pursuant to which an AESP
Entity agreed to grant or has granted rights with respect to the Intellectual
Property, or pursuant to which an AESP Entity enjoys rights in any Intellectual
Property of any person. No current or former consultant, employee or Affiliate
of the AESP Entities or any of their respective shareholders, officers or
directors has any right, title or interest in any of the Intellectual Property
used and/or owned by the AESP Entities. Furthermore, no AESP Entity has any
royalty obligations to Stein, Briskin or any Affiliate of AESP.
(b) Each AESP Entity has the right to use all
Intellectual Property which is used in its business.
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<PAGE> 22
(c) To the best knowledge of the AESP Entities, none of
the Intellectual Property owned by or licensed to the AESP Entities is being
infringed by any person.
4.12 Taxes.
(a) Except as set forth in Schedule 4.12(a) and except as
regards taxes which are not yet due, the AESP Entities have timely filed all
federal, state, local and foreign tax returns and reports required to be filed
by them through the date hereof and shall timely file all returns and reports
required on or before the Effective Time, except for such returns and reports
the failure of which to file timely would not, individually or in the
aggregate, have a Material Adverse Effect. Such reports and returns are and
will be true, correct and complete, except for such failures to be true,
correct and complete as would not, individually or in the aggregate, have a
Material Adverse Effect.
(b) Except as set forth in Schedule 4.12(b), the AESP
Entities or, where appropriate, the stockholders of the AESP Entities, have
paid and discharged all federal, state, local and foreign taxes due from the
activities of the AESP Entities, other than such taxes that are being contested
in good faith by appropriate proceedings and are adequately reserved as shown
in the audited combined balance sheet of AESP dated December 31, 1995 (the
"AESP 1995 Balance Sheet") and its most recent combined quarterly financial
statements, except for such failures to so pay and discharge which would not,
individually or in the aggregate, have a Material Adverse Effect.
(c) Neither the IRS nor any other taxing authority or
agency, domestic or foreign, is now asserting or threatening to assert against
any AESP Entity or any stockholder of an AESP Entity, any deficiency or
material claim for additional taxes or interest thereon or penalties in
connection therewith which, if such deficiencies or claims were finally
resolved against such AESP Entity or stockholder of an AESP Entity would,
individually or in the aggregate, have a Material Adverse Effect.
(d) The accruals and reserves for taxes (including
interest and penalties, if any, thereon) reflected in the AESP 1995 Balance
Sheet and the most recent quarterly financial statements are adequate in
accordance with generally accepted accounting principles, except where the
failure to be adequate would not have a Material Adverse Effect.
(e) Except as set forth on Schedule 4.12(e), the AESP
Entities and, where appropriate, each stockholder of the AESP Entities, have
withheld or collected and paid over to the appropriate Governmental Authorities
or are properly holding for such payment all taxes required by law to be
withheld or collected, except for such failures to have so withheld or
collected and paid over or to be so holding for payment which would not,
individually or in the aggregate, have a Material Adverse Effect.
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(f) There are no liens for taxes upon the assets of the
AESP Entities, other than liens for current taxes not yet due and payable and
liens for taxes that are being contested in good faith by appropriate
proceedings.
(g) No AESP Entity has agreed to or is required to make
any adjustment under Section 481(a) of the Code. No AESP Entity has made an
election under Section 341(f) of the Code.
(h) For purposes of this Section, where a determination
of whether a failure by an AESP Entity to comply with the representations
herein has a Material Adverse Effect is necessary, such determination shall be
made on an aggregate basis with all other failures within this Section 4.12.
4.13 Material Contracts.
(a) Each AESP Entity has, or has caused to be, made
available to AGF for review and duplication, correct and complete copies (or in
the case of oral contracts, accurate summaries thereof) of all of the following
contracts and agreements of each AESP Entity (solely for purposes of this
Section 4.13, all references to AESP shall be deemed to include each AESP
Entity), together with all material contracts, agreements, leases and subleases
to which AESP is a party concerning the management or operation of any real
property and all material agreements relating to Intellectual Property (such
material contracts and agreements listed on Schedule 4.13(a) are collectively
referred to as the "Material Contracts"):
(i) each contract and agreement for the
purchase of inventory or personal property with any supplier or for the
furnishing of services to AESP, or otherwise related to AESP's business under
the terms of which AESP: (A) is reasonably anticipated to pay or otherwise give
consideration of more than $20,000 in the aggregate over the remaining term of
such contract or (B) cannot cancel without penalty or further payment and
without more than 30 days' notice;
(ii) each contract and agreement for the
sale of inventory or other personal property or for the furnishing of services
by AESP which: (A) is reasonably anticipated to involve consideration of more
than $100,000 in the aggregate during the fiscal year ending December 31, 1996
or in any fiscal year thereafter, (B) is reasonably anticipated to involve
consideration of more than $100,000 in the aggregate over the remaining term of
the contract or (C) cannot be canceled by AESP without penalty or further
payment and without more than 30 days' notice;
(iii) all broker, distributor, dealer,
manufacturer's representative, franchise, agency, sales promotion, market
research, marketing, consulting and advertising contracts and agreements to
which AESP is a party;
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(iv) all management contracts and
contracts with independent contractors, consultants or other persons (including
Affiliates) (or similar arrangements) involving exclusive rights or requiring
payments in excess of $20,000 individually to which AESP is a party and which
are not cancelable without penalty or further payment on 30 days' or less
notice;
(v) all contracts and agreements
relating to indebtedness of AESP in excess of $20,000 individually or in the
aggregate;
(vi) all contracts and agreements with
any Governmental Authority to which AESP is a party;
(vii) all contracts and agreements that
limit or purport to limit the ability of AESP to compete in any line of
business, or with any person, or in any geographic area or during any period of
time;
(viii) all contracts and agreements between
or among AESP on the one hand and any Affiliate of AESP on the other hand;
(ix) all leases and subleases for
tangible personal property having a value in excess of $20,000; for purposes of
this Agreement, the term "lease" shall include any and all leases, subleases,
sale/leaseback agreements or similar arrangements; and
(x) all contracts relating to
Intellectual Property and all contracts relating to real property owned, leased
or used by AESP.
(b) Each Material Contract: (i) is valid and binding on
the respective parties thereto and is in full force and effect and (ii) upon
consummation of the transactions contemplated hereby shall continue in full
force and effect without penalty or other adverse consequence. AESP is not,
and no other party to any Material Contract is, to AESP's knowledge, in breach
of or default under any Material Contract, which breach or default would have a
Material Adverse Effect on AESP.
(c) There is no contract, agreement or other arrangement
granting any person any preferential right to purchase, other than in the
ordinary course of business consistent with past practice, any of the
properties, assets or services of AESP.
(d) Except as set forth in Schedule 4.13, there is not
now outstanding any guarantee or agreement for indemnity or for suretyship
either given by or for the benefit of AESP.
4.14 Books and Records. The books of account and other financial
records of each AESP Entity: (a) reflect all items of income and expense and
all assets and liabilities required to be reflected therein, except to the
extent that the omission to reflect such items could not, individually or in
the aggregate, have a Material Adverse Effect on the business of each AESP
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Entity, (b) are complete and correct, not misleading and do not contain or
reflect any inaccuracies or discrepancies, except as could not, individually or
in the aggregate, have a Material Adverse Effect on the business of each AESP
Entity, and (c) have been maintained in accordance with good business and
accounting practices.
4.15 Receivables. Except as set forth in Schedule 4.15 and to the
extent, if any, provided for on the balance sheets included in the AESP
Financial Statements, all Receivables reflected on the balance sheets included
in the AESP Financial Statements arose from, and the Receivables existing as of
the Effective Time will have arisen from, the sale of goods or services to
persons who are not Affiliates of an AESP Entity and in the ordinary course of
its business consistent with past practice and, except as provided against on
the balance sheets included in the AESP Financial Statements, constitute or
will constitute, as the case may be, only valid, undisputed claims of an AESP
Entity not subject to valid claims of set-off, off-set or other defenses or
counterclaims. The AESP Financial Statements make full provision for all
doubtful debts and all bad debts have been written off, except for doubtful
debts and bad debts that, individually or in the aggregate, would not have a
Material Adverse Effect on the AESP Entities or their respective businesses.
4.16 Environmental Compliance. Except as disclosed on Schedule
4.16, each AESP Entity is, and at all times has been, in compliance with all
applicable Environmental Laws.
4.17 Conduct of Business in the Ordinary Course. Except as
disclosed on Schedule 4.17, since the date of the AESP Financial Statements,
each AESP Entity has conducted business only in the ordinary course and
consistent with past practice.
4.18 Compliance with Laws. Each AESP Entity has conducted and
continues to conduct its business in all material respects in accordance with
all applicable laws and all Governmental Orders entered by or with any
Governmental Authorities, and each AESP Entity is in compliance with all such
laws or Governmental Orders, except to the extent that the failure to so
conduct or comply therewith would not, in the aggregate, have a Material
Adverse Effect on any AESP Entity, the businesses of any AESP Entity or on the
transactions contemplated hereby.
4.19 Affiliates. Schedule 4.19 contains a true and complete list
of all Affiliates of each of the AESP Entities, as of the date hereof, and as
of the date of the Closing. For each such Affiliate, Schedule 4.19 sets forth:
(a) the entity's name; (b) the entity's state of place of incorporation or
organization; (c) a brief description of the entity's principal business; and
(d) with regard to each beneficial or legal owner of equity in such entity,
such owner's name, address and percentage of equity held.
4.20 Real Property. The particulars of the real property set forth
on Schedule 4.20 attached hereto (the "Real Property") are true and correct in
all respects and each AESP Entity has good and marketable title to the Real
Property free from Encumbrances and other adverse rights. The Real Property
comprises all the real property owned, used or occupied by each AESP
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Entity in connection with its business and no AESP Entity has ever owned any
interest in any other real property other than the Real Property. There is no
violation of any applicable law (including, without limitation, any building,
planning, zoning law or environmental law) or any covenants, stipulations or
conditions relating to any of the Real Property and each AESP Entity is in
peaceful and undisturbed possession of each parcel of Real Property. There are
no contractual or legal restrictions that preclude or restrict in any material
manner the ability to use any of the Real Property in the manner in which they
are currently being used and the Real Property has all rights and easements
reasonably necessary for their use and enjoyment for the purposes of its
business. None of AESP Entities are leasing or subleasing (or has leased or
sublet) any parcel or any portion of any parcel of Real Property to any other
Person, nor has any AESP Entity assigned its interest under any lease or
sublease for any leased Real Property to any third party. There are no
outstanding material disputes with any Person relating to the Real Property or
its use and no notices have been given or received by any AESP Entity which
would adversely affect the use and enjoyment of the Real Property.
4.21 Assets. Except as set forth on Schedule 4.21, each AESP
Entity owns, leases or has the legal right to use all the properties and assets
used or intended to be used or required in the conduct of its business and
which are material and, with respect to contract rights, is a party to and
enjoys the right to the benefits of all material contracts and agreements used
and/or intended to be used by each AESP Entity or required in or relating to
the conduct of its business (such properties, assets and contract rights
collectively referred to as the "Assets"). Each AESP Entity has good title to
or, in the case of leased or subleased Assets, valid and subsisting leasehold
interests in, all the Assets, free and clear of all Encumbrances. All the
Assets are in good operating condition and repair, ordinary wear and tear
excepted, and are suitable for the purposes for which they are used and
intended. Each Asset including without limitation, the benefit of any
licenses, leases or other agreements or arrangements) acquired since the date
of the AESP Financial Statements has been acquired for consideration and on
terms no less favorable to each AESP Entity than otherwise would have been
available in a comparable arms' length transaction on the date of such
acquisition.
4.22 Suppliers. No AESP Entity has received any notice, nor is any
AESP Entity aware, that any supplier will not sell supplies and other goods or
provide services to it at any time after the date hereof on terms and
conditions substantially similar to those used in its current sales to the AESP
Entity, subject only to general and customary price increases.
4.23 Brokers. Except as set forth on Schedule 4.23, no broker,
finder or investment banker is entitled to any brokerage, finder's or other fee
or commission in connection with the transactions contemplated herein based
upon arrangements made by or on behalf of any AESP Entity.
4.24 Eligible Portfolio Company.
(a) AESP:
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(i) is organized under the laws of, and has its
principal place of business in, Florida;
(ii) is neither an "investment company, as defined
in the Investment Company Act of 1940 (the "1940 Act"), nor a company which
would be an investment company except for the exclusion from the definition of
investment company in Section 3(c) of the 1940 Act; and
(iii) does not have any class of securities with
respect to which a member of a national securities exchange, broker, or dealer
may extend or maintain credit to or for a customer pursuant to rules or
regulations adopted by the Board of Governors of the Federal Reserve System
under Section 7 of the Exchange Act.
(b) For purposes of Section 55 of the 1940 Act, the value
of AESP's assets represent at least seventy percent (70%) of the total assets
of the AESP Entities on a combined basis.
4.25 Full Disclosure. No representation or warranty with respect
to AESP contained in this Agreement and no written statement contained in any
financial or operating data or certificate furnished to AGF pursuant to this
Agreement, or in connection with the transactions contemplated by this
Agreement, contains any untrue statement of a material fact, or omits to state
a material fact necessary to make the statements contained herein or therein
not misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF AGF
As of the date hereof and the Closing, AGF hereby represents and
warrants to AESP as follows:
5.1 Organization and Qualification; Subsidiaries. Each of AGF and
each Subsidiary of AGF (each, an "AGF Subsidiary") is a corporation,
partnership or other legal entity duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization and has the requisite power and authority and all necessary
governmental approvals to own, lease and operate its properties and assets and
to carry on its business as it has been, is currently and is currently
anticipated to be conducted, except where the failure to be so organized,
existing or in good standing or to have such power, authority and governmental
approvals does not have, or could not reasonably be expected to have a Material
Adverse Effect. AGF and each AGF Subsidiary are duly qualified or licensed as
foreign corporations to do business, and are in good standing, in each
jurisdiction where the character of the properties owned, leased or operated by
them or the nature of their business makes such qualification or licensing
necessary, except for such failures to be so qualified or licensed and in good
standing that would not, individually or in the aggregate, have a Material
Adverse Effect.
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5.2 Articles of Incorporation and By-Laws. AGF has heretofore
made available to AESP a complete and correct copy of the Articles of
Incorporation and the By-Laws or equivalent organizational documents, each as
amended to date, of AGF and each AGF Subsidiary. Such Certificates of
Incorporation, By-Laws and equivalent organizational documents are in full
force and effect. Neither AGF nor any AGF Subsidiary is in violation of any
provision of its Articles of Incorporation, By-Laws or equivalent
organizational documents, except for such violations that would not,
individually or in the aggregate, have a Material Adverse Effect.
5.3 Capitalization. AGF has provided to AESP a list, as of
February 12, 1996, of the names of the record holders of all of the outstanding
capital stock of AGF and each AGF Subsidiary and the number of shares owned by
each such stockholder. Schedule 5.3 accurately describes any preferences in
distributions to which each such stockholder is entitled. There are now and,
as of the Closing, will be no preemptive rights with respect to any capital
stock of AGF or any AGF Subsidiary and, except as set forth on Schedule 5.3,
there are now and, as of the Closing, will be no outstanding options,
subscriptions, warrants, calls, contracts, convertible securities, or other
rights, agreements, arrangements or commitments of any character under which
AGF or any AGF Subsidiary is or may become obligated to issue, assign or
transfer any shares of capital stock of AGF or any AGF Subsidiary or purchase,
redeem or otherwise acquire any outstanding shares of capital stock of AGF or
any AGF Subsidiary. Each outstanding share of capital stock of AGF and each
AGF Subsidiary has been duly and validly authorized and issued and is fully
paid and was held, as of February 12, 1996, in the name of the stockholder(s)
listed on Schedule 5.3. AGF has not granted any option or other right to
purchase any capital stock of any AGF Subsidiary or any interest therein from
AGF.
5.4 Authority of AGF and AGFMC. Subject to the conditions set
forth in Article VIII and the approval of AGF's stockholders: (a) AGF and AGFMC
have all necessary power and authority to execute and deliver this Agreement,
to perform its obligations hereunder and to consummate the transactions
contemplated hereby; (b) the execution and delivery of this Agreement by AGF
and AGFMC and the consummation by AGF and AGFMC of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action and no other corporate action on the part of AGF and AGFMC is
necessary to authorize this Agreement or to consummate the transactions
contemplated herein; and (c) this Agreement has been duly and validly executed
and delivered by AGF and AGFMC and, assuming the due authorization, execution
and delivery by AGF and AGFMC, constitutes a legal, valid and binding
obligation of AGF and AGFMC, enforceable against AGF and AGFMC in accordance
with its terms, subject to the effect of any applicable bankruptcy,
reorganization, insolvency, moratorium or similar laws affecting creditors'
rights generally and subject, as to enforceability, to the effect of general
principles of equity (regardless of whether such enforceability is considered
in a proceeding in equity or at law).
5.5 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by AGF
and AGFMC do not, and the performance by AGF and AGFMC of the transactions
contemplated herein will not:
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(i) conflict with or violate the Articles of
Incorporation or By-Laws or equivalent organizational documents of AGF or any
AGF Subsidiary;
(ii) conflict with or violate any law, rule,
regulation, order, judgment or decree applicable to AGF or any AGF Subsidiary
or by which any property or asset of AGF or any AGF Subsidiary is bound or
affected, except for any such conflicts, violations, breaches, defaults or
other occurrences which would not prevent or delay consummation of the Merger
in any material respect, or otherwise prevent AGF or AGFMC from performing
their respective obligations under this Agreement in any material respect, and
would not, individually or in the aggregate, have a Material Adverse Effect; or
(iii) result in any breach of or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, result in the loss of a material benefit under, or give to
others any right of termination, amendment, acceleration or cancellation of, or
result in the creation of a lien or other encumbrance on any property or asset
of AGF or any AGF Subsidiary pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which AGF or any AGF Subsidiary is a party or by which AGF or any
AGF Subsidiary or any property or asset of AGF or any AGF Subsidiary is bound
or affected, except for any such conflicts, violations, breaches, defaults or
other occurrences which would not prevent or delay consummation of the Merger
in any material respect, or otherwise prevent AGF or AGFMC from performing
their respective obligations under this Agreement in any material respect, and
would not, individually or in the aggregate, have a Material Adverse Effect.
(b) The execution and delivery of this Agreement by AGF
and AGFMC do not, and the performance of this Agreement by AGF and AGFMC will
not, require any consent, approval, authorization or permit of, or filing with
or notification to, any Governmental Authority, except for:
(i) applicable requirements, if any, of the
Exchange Act, the 1940 Act, the Securities Act and state securities or "blue
sky" laws ("Blue Sky Laws");
(ii) filing and recordation of appropriate merger
documents as required by Florida Law; and
(iii) any non-United States competition, antitrust
and investment laws;
and where failure to obtain such consents, approvals, authorizations or
permits, or to make such filings or notifications, would not prevent or delay
consummation of the Merger in any material respect, or otherwise prevent AGF or
AGFMC from performing their respective obligations under this Agreement in any
material respect, and could not, individually or in the aggregate, have a
Material Adverse Effect.
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5.6 Compliance. Neither AGF nor any AGF Subsidiary is in
conflict with, or in default or violation of, (i) any law, rule, regulation,
order, judgment or decree applicable to AGF or any AGF Subsidiary or by which
any property or asset of AGF or any AGF Subsidiary is bound or affected, or
(ii) any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which AGF or any AGF
Subsidiary is a party or by which AGF or any AGF Subsidiary or any property or
asset of AGF or any AGF Subsidiary is bound or affected, except for any such
conflicts, defaults or violations that would not, individually or in the
aggregate, have a Material Adverse Effect.
5.7 Financial Statements.
(a) The AGF consolidated financial statements for the
twelve month period ended December 31, 1995 and the three month period ended
March 31, 1996, including all notes thereto (collectively, the "AGF Financial
Statements") provided to AESP were prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods indicated and each fairly presented the financial position, results of
operations and cash flows of AGF and the consolidated AGF Subsidiaries, as the
case may be, as at the respective dates thereof and for the respective periods
indicated therein (subject, in the case of unaudited statements, to normal and
recurring year-end adjustments which were not and are not expected,
individually or in the aggregate, to be material in amount).
(b) Except as set forth in the AGF Financial Statements,
AGF and the AGF Subsidiaries do not have any liability or obligation of any
nature (whether accrued, absolute, contingent or otherwise) other than
liabilities and obligations which would not, individually or in the aggregate,
have a Material Adverse Effect. Without limiting the generality of the
foregoing and except as set forth on Schedule 5.7(b), the AGF Financial
Statements reflect the costs of any transaction between AGF or the AGF
Subsidiaries and any Affiliate of AGF, including any leases or other agreements
relating to real property.
5.8 Absence of Certain Changes or Events. Since the date of the
AGF Financial Statements, AGF and the AGF Subsidiaries have conducted their
businesses only in the ordinary course and in a manner consistent with past
practice and there has not been:
(a) any damage, destruction or loss (whether or not
covered by insurance) with respect to any property or asset of AGF or any AGF
Subsidiary and having, individually or in the aggregate, a Material Adverse
Effect;
(b) any change by AGF in its accounting methods,
principles or practices;
(c) any declaration, setting aside or payment of any
dividend or distribution in respect of any capital stock of AGF or any AGF
Subsidiary or any redemption, purchase or other acquisition of any of their
respective securities other than dividends by an AGF Subsidiary to AGF;
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(d) other than as set forth in Section 5.3 or Schedule
5.8, and pursuant to the plans, programs or arrangements referred to in Section
5.10 and other than in the ordinary course of business consistent with past
practice, any increase in or establishment of any bonus, insurance, severance,
deferred compensation, pension, retirement, profit sharing, stock option
(including, without limitation, the granting of stock options, stock
appreciation rights, performance awards, or restricted stock awards), stock
purchase or other employee benefit plan, or any other increase in the
compensation payable or to become payable to any officers or key employees of
AGF or any AGF Subsidiary.
5.9 Absence of Litigation. There is no claim, action,
proceeding or investigation pending or threatened against AGF or any AGF
Subsidiary, or any property or asset of AGF or any AGF Subsidiary, before any
court, arbitrator or administrative, governmental or regulatory authority or
body, domestic or foreign, which, individually or in the aggregate, could have
a Material Adverse Effect. Neither AGF nor any AGF Subsidiary nor any property
or asset of AGF or any AGF Subsidiary is subject to any order, writ, judgment,
injunction, decree, determination or award which could have, individually or in
the aggregate, a Material Adverse Effect.
5.10 Employee Benefit Plans. Except as set forth on Schedule
5.10, AGF has no employee benefit plans, programs and arrangements maintained
or contributed to by AGF or any AGF Subsidiary for the benefit of any current
or former employee, officer or director of AGF or any AGF Subsidiary.
5.11 Intellectual Property.
(a) AESP heretofore has been provided a true and complete
list of all Intellectual Property which AGF or any AGF Subsidiary owns or has
the right to use. AGF and each AGF Subsidiary has full ownership thereof or
the right to use all such rights, in each case except to the extent heretofore
disclosed in writing to AESP, and AGF has no knowledge that the conduct of the
businesses of AGF and each AGF Subsidiary as now operated, as of the date
hereof, conflicts with, misappropriates or infringes, or has been alleged to
infringe, any Intellectual Property rights or franchises of any person
(including patents, trade secrets or other proprietary rights of any third
party). AESP heretofore has been provided with a true and complete copy of
every material license or other material agreement, including all amendments
thereto, pursuant to which AGF or any AGF Subsidiary agreed to grant or has
granted rights with respect to the Intellectual Property, or pursuant to which
AGF or any AGF Subsidiary enjoys rights in any Intellectual Property of any
person. Except as set forth on Schedule 5.11, no current or former consultant,
employee or Affiliate of AGF, any AGF Subsidiary, or any of their respective
shareholders, officers or directors has any right, title or interest in any of
the Intellectual Property used and/or owned by AGF or any AGF Subsidiary.
(b) To the best of AGF's knowledge, none of the
Intellectual Property owned by or licensed to AGF or any AGF Subsidiary is
being infringed by any person.
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5.12 Taxes.
(a) AGF and the AGF Subsidiaries have timely filed all
federal, state, local and foreign tax returns and reports required to be filed
by them through the date hereof and shall timely file all returns and reports
required on or before the Effective Time, except for such returns and reports
the failure of which to file timely would not, individually or in the
aggregate, have a Material Adverse Effect. Such reports and returns are and
will be true, correct and complete, except for such failures to be true,
correct and complete as would not, individually or in the aggregate, have a
Material Adverse Effect.
(b) AGF and the AGF Subsidiaries have paid and discharged
all federal, state, local and foreign taxes due from them, other than such
taxes that are being contested in good faith by appropriate proceedings and are
adequately reserved as shown in the audited consolidated balance sheet of AGF
dated December 31, 1995 (the "AGF 1995 Balance Sheet") and its most recent
quarterly financial statements, except for such failures to so pay and
discharge which would not, individually or in the aggregate, have a Material
Adverse Effect.
(c) Neither the IRS nor any other taxing authority or
agency, domestic or foreign, is now asserting or threatening to assert against
AGF or any AGF Subsidiary any deficiency or material claim for additional taxes
or interest thereon or penalties in connection therewith which, if such
deficiencies or claims were finally resolved against AGF and the AGF
Subsidiaries would, individually or in the aggregate, have a Material Adverse
Effect.
(d) The accruals and reserves for taxes (including
interest and penalties, if any, thereon) reflected in the AGF 1995 Balance
Sheet and the most recent quarterly financial statements are adequate in
accordance with generally accepted accounting principles, except where the
failure to be adequate would not have a Material Adverse Effect.
(e) AGF and the AGF Subsidiaries have withheld or
collected and paid over to the appropriate Governmental Authorities or are
properly holding for such payment all taxes required by law to be withheld or
collected, except for such failures to have so withheld or collected and paid
over or to be so holding for payment which would not, individually or in the
aggregate, have a Material Adverse Effect.
(f) There are no liens for taxes upon the assets of AGF
or the AGF Subsidiaries, other than liens for current taxes not yet due and
payable and liens for taxes that are being contested in good faith by
appropriate proceedings.
(g) Neither AGF nor any AGF Subsidiary has agreed to or
is required to make any adjustment under Section 481(a) of the Code. Neither
AGF nor any AGF Subsidiary has made an election under Section 341(f) of the
Code.
(h) For purposes of this Section, where a determination
of whether a failure by AGF or a AGF Subsidiary to comply with the
representations herein has a Material Adverse
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Effect is necessary, such determination shall be made on an aggregate basis
with all other failures within this Section 5.12.
5.13 Material Contracts.
(a) AGF has, or has caused to be, made available to AESP
for review and duplication, correct and complete copies (or in the case of oral
contracts, summaries thereof) of all of the following contracts and agreements
of AGF and each AGF Subsidiary (solely for purposes of this Section 5.13, all
references to AGF shall be deemed to include each AGF Subsidiary), together
with all material contracts, agreements, leases and subleases to which AGF is a
party concerning the management or operation of any real property and all
material agreements relating to Intellectual Property (such material contracts
and agreements listed on Schedule 5.13(a), are collectively referred to as the
"Material Contracts"):
(i) each contract and agreement for the
purchase of inventory or personal property with any supplier or for the
furnishing of services to AGF, or otherwise related to AGF's business under the
terms of which AGF; (A) is reasonably anticipated to pay or otherwise give
consideration of more than $20,000 in the aggregate over the remaining term of
such contract or (B) cannot cancel without penalty or further payment and
without more than 30 days' notice;
(ii) each contract and agreement for the
sale of inventory or other personal property or for the furnishing of services
by AGF which: (A) is reasonably anticipated to involve consideration of more
than $100,000 in the aggregate during the fiscal year ending December 31, 1996
or in any fiscal year thereafter, (B) is reasonably anticipated to involve
consideration of more than $100,000 in the aggregate over the remaining term of
the contract or (C) cannot be canceled by AGF without penalty or further
payment and without more than 30 days' notice;
(iii) all broker, distributor, dealer,
manufacturer's representative, franchise, agency, sales promotion, market
research, marketing, consulting and advertising contracts and agreements to
which AGF is a party;
(iv) all management contracts and
contracts with independent contractors, consultants or other persons (including
Affiliates) (or similar arrangements) involving exclusive rights to which AGF
is a party and which are not cancelable without penalty or further payment on
30 days' or less notice;
(v) all contracts and agreements
relating to indebtedness of AGF;
(vi) all contracts and agreements with
any Governmental Authority to which AGF is a party;
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(vii) all contracts and agreements that
limit or purport to limit the ability of AGF to compete in any line of
business, or with any person, or in any geographic area or during any period of
time;
(viii) all contracts and agreements between
or among AGF on the one hand and any Affiliate of AGF on the other hand;
(ix) all leases and subleases for
tangible personal property having a value in excess of $20,000; for purposes of
this Agreement, the term "lease" shall include any and all leases, subleases,
sale/leaseback agreements or similar arrangements; and
(x) all contracts relating to
Intellectual Property and all contracts relating to real property owned, leased
or used by AGF.
(b) Except as set forth on Schedule 5.13(b), each
Material Contract: (i) is valid and binding on the respective parties thereto
and is in full force and effect and (ii) upon consummation of the transactions
contemplated hereby shall continue in full force and effect without penalty or
other adverse consequence. AGF is not, and no other party to any Material
Contract is, to AGF's knowledge, in breach of or default under any Material
Contract, which breach or default would have a Material Adverse Effect on AGF.
(c) There is no contract, agreement or other arrangement
granting any person any preferential right to purchase, other than in the
ordinary course of business consistent with past practice, any of the
properties, assets or services of AGF.
(d) There is not now outstanding any guarantee or
agreement for indemnity or for suretyship either given by or for the benefit of
AGF.
5.14 Books and Records. The books of account and other financial
records of AGF: (a) reflect all items of income and expense and all assets and
liabilities required to be reflected therein, except to the extent that the
omission to reflect such items could not, individually or in the aggregate,
have a Material Adverse Effect on AGF's business, (b) are complete and correct,
not misleading and do not contain or reflect any inaccuracies or discrepancies,
except as could not, individually or in the aggregate, have a Material Adverse
Effect on AGF's business, and (c) have been maintained in accordance with good
business and accounting practices.
5.15 Receivables. Except to the extent, if any, provided for on
the balance sheet included in the AGF Financial Statements, all Receivables
reflected on the balance sheets included in the AGF Financial Statements arose
from, and the Receivables existing as of the Effective Time will have arisen
from, the sale of services to persons who are not Affiliates of AGF and in the
ordinary course of its business consistent with past practice and, except as
provided against on the balance sheets included in the AGF Financial
Statements, constitute or will constitute, as the case may be, only valid,
undisputed claims of AGF not subject to valid claims of set-off, off-set or
other defenses or counterclaims. The AGF Financial Statements make
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full provision for all doubtful debts and all bad debts have been written off,
except for doubtful debts and bad debts that, individually or in the aggregate,
would not have a Material Adverse Effect on AGF or its business.
5.16 Environmental Compliance. AGF and each AGF Subsidiary is, and
at all times has been, in compliance with all applicable Environmental Laws.
5.17 Conduct of Business in the Ordinary Course. Since the date of
the 1995 AGF Financial Statement, AGF and each AGF Subsidiary has conducted
business only in the ordinary course and consistent with past practice.
5.18 Compliance with Laws. AGF and each AGF Subsidiary has
conducted and continues to conduct its business in all material respects in
accordance with all applicable laws and all Governmental Orders entered by or
with any Governmental Authorities, and AGF and each AGF Subsidiary is in
compliance with all such laws or Governmental Orders, except to the extent that
the failure to so conduct or comply therewith would not, in the aggregate, have
a Material Adverse Effect on AGF, each AGF Subsidiary, the respective
businesses of AGF and each AGF Subsidiary or on the transactions contemplated
hereby.
5.19 Subsidiaries and Affiliates. Schedule 5.19 contains a true
and complete list of all of AGF's Subsidiaries, as of the date hereof, and as
of the date of the Closing. For each such Subsidiary, Schedule 5.19 sets
forth: (a) the entity's name; (b) the entity's state of place of incorporation
or organization; (c) a brief description of the entity's principal business;
and (d) with regard to each beneficial or legal owner of equity in such entity,
such owner's name, address and percentage of equity held.
5.20 Real Property. The particulars of the real property set forth
on Schedule 5.20 attached hereto (the "Real Property") are true and correct in
all respects and AGF and each AGF Subsidiary has good and marketable title to
the Real Property free from Encumbrances and other adverse rights. The Real
Property comprises all the real property owned, used or occupied by AGF and
each AGF Subsidiary in connection with their respective businesses and neither
AGF nor any AGF Subsidiary has ever owned any interest in any other real
property other than the Real Property. There is no violation of any applicable
law (including, without limitation, any building, planning, zoning law or
environmental law) or any covenants, stipulations or conditions relating to any
of the Real Property and AGF and each AGF Subsidiary is in peaceful and
undisturbed possession of each parcel of Real Property. There are no
contractual or legal restrictions that preclude or restrict in any material
manner the ability to use any of the Real Property in the manner in which they
are currently being used and the Real Property has all rights and easements
reasonably necessary for their use and enjoyment for the purposes of the
Business. Neither AGF nor any of the AGF Subsidiaries are leasing or
subleasing (or has leased or sublet) any parcel or any portion of any parcel
of Real Property to any other Person, nor has AGF or any AGF Subsidiary
assigned its interest under any lease or sublease for any leased Real Property
to any third party. There are no outstanding material disputes with any Person
relating to the
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Real Property or its use and no notices have been given or received by AGF or
any AGF Subsidiary which would adversely affect the use and enjoyment of the
Real Property.
5.21 Assets. AGF and each AGF Subsidiary owns, leases or has the
legal right to use all the properties and assets used or intended to be used or
required in the conduct of their respective businesses and which are material
and, with respect to contract rights, is a party to and enjoys the right to the
benefits of all material contracts and agreements used and/or intended to be
used by AGF and each AGF Subsidiary or required in or relating to the conduct
of their respective businesses (such properties, assets and contract rights
collectively referred to as the "Assets"). AGF and each AGF Subsidiary has
good title to or, in the case of leased or subleased Assets, valid and
subsisting leasehold interests in, all the Assets, free and clear of all
Encumbrances. All the Assets are in good operating condition and repair,
ordinary wear and tear excepted, and are suitable for the purposes for which
they are used and intended. Each Asset including without limitation, the
benefit of any licenses, leases or other agreements or arrangements) acquired
since the date of the AGF Financial Statements has been acquired for
consideration and on terms no less favorable to AGF and each AGF Subsidiary
than otherwise would have been available in a comparable arms' length
transaction on the date of such acquisition.
5.22 Suppliers. Neither AGF nor any AGF Subsidiary has received
any notice, nor is AGF or any AGF Subsidiary aware, that any supplier will not
sell supplies and other goods or provide services to AGF or any AGF Subsidiary
at any time after the date hereof on terms and conditions substantially similar
to those used in its current sales to AGF or any AGF Subsidiary, subject only
to general and customary price increases.
5.23 Securities and Exchange Commission Filings; Financial
Statements.
(a) AGF has filed all forms, reports and documents
required to be filed by it with the SEC since August 19, 1994, and has
heretofore made available to AESP, in the form filed with the SEC collectively,
all such forms, reports and documents (the "AGF SEC Reports").
(b) The AGF SEC Reports and any other forms, reports and
other documents filed by AGF (i) were prepared in accordance with the
requirements of the Securities Act and the Exchange Act, as the case may be,
and the rules and regulations thereunder and (ii) did not at the time they were
filed, and presently do not, contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading. No Material AGF Subsidiary is
required to file any form, report or other document with the SEC.
(c) Each of the financial statements (including, in each
case, any notes thereto) contained in the AGF SEC Reports was prepared in
accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods indicated (except as may be indicated
in the notes thereto) and each fairly presented the consolidated financial
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position, results of operations and cash flows of AGF and the consolidated AGF
Subsidiaries, as the case may be, as at the respective dates thereof and for
the respective periods indicated therein (subject, in the case of unaudited
statements, to normal and recurring year-end adjustments which were not and are
not expected, individually or in the aggregate, to be material in amount).
(d) Except as and to the extent set forth in this
Agreement and the AGF SEC Reports filed with the SEC prior to the date of this
Agreement, AGF and the AGF Subsidiaries do not have any liability or obligation
of any nature (whether accrued, absolute, contingent or otherwise) other than
liabilities and obligations which would not, individually or in the aggregate,
have a Material Adverse Effect.
5.24 Brokers. Except as set forth on Schedule 5.24, no broker,
finder or investment banker is entitled to any brokerage, finder's or other fee
or commission in connection with the transactions contemplated herein based
upon arrangements made by or on behalf of AGF.
5.25 Tallard Transaction. AGF has terminated its merger
negotiations with Tallard Technologies, B.V. ("Tallard") and Tallard has
advised AGF that AGF has no liability to Tallard as a result of the termination
of such negotiations.
5.26 Vote Required for Approval of Merger. The affirmative vote
of more than fifty percent (50%) of the AGF Common Stock is required for the
approval of the Merger.
5.27 Cash or Cash Equivalents. At the Effective Time, and after
giving effect to all of the payments listed on Schedule 5.27, AGF shall have no
liabilities (as determined in accordance with GAAP) and at least $3,000,000,
in: (a) cash or cash equivalents (as determined in accordance with GAAP); (b)
treasury bills with maturity dates on or prior to December 31, 1996 (such bills
to be valued at face value); (c) treasury bills with maturity dates after
December 31, 1996 (such bills to be valued at market value); (d) and including
the principal amount of the Note.
5.28 Compliance with 1940 Act. Since its formation, AGF has
complied in all respects with all applicable requirements of the 1940 Act,
including all applicable rules and regulations relating to the operation of a
business development company under the 1940 Act, except where the failure to
comply with such requirements, rules and regulations would not, individually or
in the aggregate, have a Material Adverse Effect.
5.29 Full Disclosure. No representation or warranty with respect
to AGF contained in this Agreement and no written statement contained in any
financial or operating data or certificate furnished to AGF pursuant to this
Agreement, or in connection with the transactions contemplated by this
Agreement, contains any untrue statement of a material fact, or omits to state
a material fact necessary to make the statements contained herein or therein
not misleading.
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ARTICLE VI
CONDUCT OF BUSINESSES PENDING THE MERGER
6.1 Conduct of Respective Businesses by AESP and AGF Pending the
Merger. Each of AESP and AGF covenants and agrees that, between the date of
this Agreement and the Effective Time, unless the other party shall have
consented in writing (such consent not to be unreasonably withheld):
(a) the businesses of each of AESP and AGF and their
respective Subsidiaries shall, in all material respects, be conducted in, and
each of AESP and AGF and their respective Subsidiaries shall not take any
material action except in, the ordinary course of business, consistent with
past practice;
(b) each of AESP and AGF shall use its reasonable best
efforts to preserve substantially intact its business organization, to keep
available the services of its and its Subsidiaries' current officers, employees
and consultants and to preserve its and its Subsidiaries' relationships with
customers, suppliers and other persons with which it or any of its Subsidiaries
has significant business relations.
6.2 Examples. By way of example and not limitation, except (a) as
contemplated by this Agreement or (b) as set forth on Schedule 6.2, neither AGF
nor AESP nor any of their respective Subsidiaries shall, between the date of
this Agreement and the Effective Time, directly or indirectly do, or propose or
agree to do, any of the following without the prior written consent of the
other (provided that the following restrictions shall not apply to any
Subsidiaries which AESP or AGF, as the case may be, do not Control):
(a) amend or otherwise change the Articles of
Incorporation or By-Laws, or other corporate governing instruments of AGF, AESP
or any of their respective Subsidiaries;
(b) issue, sell, pledge, dispose of, grant, encumber, or
authorize the issuance, sale, pledge, disposition, grant or encumbrance of, (a)
any shares of capital stock of any class of it or any of its Subsidiaries, or
any options, warrants, convertible securities or other rights of any kind to
acquire any shares of such capital stock, or any other ownership interest
(including, without limitation, any phantom interest), of it or any of its
Subsidiaries or (b) any assets of it or any of its Subsidiaries, except for
sales in the ordinary course of business or which, individually, do not exceed
$100,000 or which, in the aggregate, do not exceed $100,000;
(c) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect to
any of its capital stock, or enter into or amend any contract, agreement,
commitment or arrangement with respect to any of the foregoing;
(d) reclassify, combine, split, subdivide or redeem,
purchase or otherwise acquire, directly or indirectly, any of its capital
stock, consistent with applicable securities laws,
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or enter into or amend any contract, agreement, commitment or arrangement with
respect to any of the foregoing;
(e) acquire (for cash or shares of stock including,
without limitation, by merger, consolidation, or acquisition of stock or
assets) any corporation, partnership, other business organization or any
division thereof or any assets, or enter into or amend any contract, agreement,
commitment or arrangement with respect to any of the foregoing;
(f) except as set forth on Schedule 6.2(f), incur any
indebtedness for borrowed money or issue any debt securities or assume,
guarantee or endorse, or otherwise as an accommodation become responsible for,
the obligations of any person, or make any loans or advances, except borrowings
under existing bank lines of credit in the ordinary course of business, the
Note and the Convertible Note, or enter into or amend any contract, agreement,
commitment or arrangement with respect to any of the foregoing;
(g) except as set forth in Schedule 6.2(g), increase the
compensation payable or to become payable to its executive officers or
employees, except for increases in the ordinary course of business in
accordance with past practice, or grant any severance or termination pay to, or
enter into any employment or severance agreement with any director or executive
officer of it or any of its Subsidiaries, or establish, adopt, enter into or
amend in any material respect or take action to accelerate any rights or
benefits under any collective bargaining, bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance or other plan, agreement,
trust, fund, policy or arrangement for the benefit of any director, executive
officer or employee; or
(h) take any action, other than reasonable and usual
actions in the ordinary course of business and consistent with past practice,
with respect to accounting policies or procedures.
6.3 Exclusivity; Fiduciary Duty of AGF.
(a) From the date of this Agreement through to the date
that the holders of the AGF Common Stock vote on the matters set forth in
Section 7.12, neither AGF nor any of its directors, officers, financial
advisors, attorneys or accountants shall solicit or initiate the submission of
any proposal or offer from any Person relating to any transaction involving the
capital stock or assets of AGF including, but not limited to, any assets, joint
venture, lease, licensing agreement, dividend, tender offer, merger,
consolidation, acquisition or other business combination. However, AGF shall
remain free to participate in any discussions or negotiations, furnish any
information with respect to, assist or participate in, or facilitate in any
other manner, any unsolicited proposal by any person or entity to do or seek
any of the actions described in Sections 6.1 and 6.2, if: (a) counsel to AGF's
board of directors (the "AGF Board") advises the AGF Board that the failure to
participate in such discussions or negotiations or provide any information
could involve the members of the AGF Board in a breach of their fiduciary
duties to the stockholders of AGF, or (b) the Board determines at its
discretion, after consultation with
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its financial advisors, that any such proposal may be more favorable to the
stockholders of AGF from a financial point of view than the Merger and other
transactions contemplated in this Agreement.
(b) If: (i) AGF terminates this Agreement based on
Sections 6.3(a) and 10.1(c), (ii) AESP has not breached any of the terms of
this Agreement, (iii) AGF has concluded a merger or other business combination
with a third party, then AGF shall pay AESP, within ten (10) Business Days of
the closing of such transaction between AGF and the third party, $250,000 in
immediately available funds to compensate AESP for the costs it incurred in
attempting to consummate the Merger.
ARTICLE VII
ADDITIONAL COVENANTS
7.1 Access to Information; Confidentiality.
(a) From the date hereof to the Effective Time, each of
AESP and AGF shall (and shall cause its Subsidiaries and officers, directors,
employees, auditors and agents to) afford the officers, employees and agents of
the other party (the "Respective Representatives") reasonable access at all
reasonable times to its officers, employees, agents, properties, offices,
plants and other facilities, books and records, and shall furnish such
Respective Representatives with all financial, operating and other data and
information as may be reasonably requested. All information and documents
received by a party pursuant to this Section 7.1 are hereinafter collectively
referred to as the "Confidential Information". Confidential Information shall
not include any information which is, or becomes, publicly available
information, other than due to the wrongful disclosure of a party or its
Respective Representatives.
(b) Each of AESP and AGF shall, and shall cause their
Respective Representatives to: (i) hold all Confidential Information in
confidence, unless compelled to disclose such Confidential Information by
judicial or administrative process, or in the opinion of such party's counsel,
by other requirements of law; (ii) not release or disclose the Confidential
Information to any other person except, solely in connection with this
Agreement, to its auditors, attorneys, financial advisors and other consultants
and advisors; and (iii) not use any Confidential Information for any purpose
other than its consideration and evaluation of the transactions contemplated by
this Agreement. If this Agreement is terminated for any reason, AESP and AGF
shall promptly return or destroy all documents containing Confidential
Information obtained from the other party, as well as any copies made of such
documents and any summaries, analyses or compilations made therefrom.
(c) No investigation pursuant to this Section 7.1 shall
affect any representation or warranty in this Agreement of any party hereto or
any condition to the obligations of the parties hereto.
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7.2 Directors' and Officers' Indemnification.
(a) From and after the Effective Time, AGF shall
indemnify and hold harmless each person who is an officer or director of AGF on
the date of this Agreement (each, an "Indemnified Person") from and against all
damages, liabilities, judgements, claims and related expenses (including
attorneys' fees and amounts paid in settlement) based upon or arising out of
the transactions contemplated by this Agreement or based upon or arising from
his capacity as an officer or director of AGF, to the same extent he would have
been indemnified under the Articles of Incorporation or Bylaws of AGF as such
documents were in effect on the date of this Agreement. Subject to the
requirements of Maryland Law, AGF shall advance all litigation costs reasonably
incurred by an Indemnified Person.
(b) The rights granted hereunder to Indemnified Persons
shall be contractual rights inuring to the benefit of all Indemnified Persons
and shall survive this Agreement and any merger, consolidation or
reorganization of AGF.
(c) The rights to indemnification granted by this Section
7.2 are subject to the following limitations: (i) amounts otherwise required to
be paid to an Indemnified Person by AGF pursuant to this Section 7.2 shall be
reduced by any amounts that such Indemnified Person has recovered by virtue of
the claim for which indemnification is sought and the Indemnified Person shall
reimburse AGF for any amounts received from AGF that such Indemnified Person
subsequently recovers by virtue of such claim; (ii) any claim for
indemnification pursuant to this Section 7.2 must be submitted in writing to
AGF's Chief Executive Officer promptly upon such Indemnified Person becoming
aware of such claim, unless the failure to advise promptly has no prejudicial
effect on AGF; and (iii) an Indemnified Person shall not settle any claim for
which indemnification is provided herein, without the prior written consent of
AGF (such consent not to be unreasonably withheld).
7.3 Consulting Agreement. At the Opt-Out Time, AGF shall enter
into a Consulting Agreement (the "Consulting Agreement"), in the form of
Exhibit 7.3, with Sokolow.
7.4 Non-Compete Agreement. At the Opt-Out Time, AGF shall enter
into a Non-Compete Agreement (the "Non- Compete Agreement") with Sokolow, in
the form of Exhibit 7.4.
7.5 Severance Agreement. At the Opt-Out Time, AGF shall enter
into a Severance Agreement (the "Severance Agreement") with Sokolow, in the
form of Exhibit 7.5.
7.6 Employment Agreements. At the Opt-Out Time, the Surviving
Corporation shall enter into employment agreements (each an "Employment
Agreement"), in the form of Exhibit 7.6, with Stein and Briskin.
7.7 Board of Directors. AGF's Board of Directors shall not,
between the Effective Time and the Opt-Out Time, take any actions other than
those contemplated herein. At the Opt-Out Time, all members of AGF's Board of
Directors, except Sokolow, shall tender their written
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resignation. At the same time, Sokolow shall vote to elect Stein and Briskin
(and any other designees of Stein and Briskin) to AGF's Board of Directors.
Thereafter Stein and Briskin shall vote their shares in AGF to ensure that
Sokolow remains on AGF's Board of Directors until the termination of his Class
3 Directorship, which shall terminate at AGF's annual meeting in April of 1998.
7.8 Loan from AESP Stockholders to AESP. The parties acknowledge
that due to AESP's status as an 'S' corporation under the Code, Stein and
Briskin have personally paid, and will personally pay, taxes on undistributed
profits of AESP. Consequently, in order to reimburse Stein and Briskin for the
payment of such taxes, at the Opt-Out Time, AESP shall execute a convertible
promissory note (the "Convertible Note"), in the form of Exhibit 7.8 hereto, in
favor of Stein and Briskin for the principal amount of $1,430,000, as increased
by the amount of taxes owed by Stein and Briskin on the pre-merger 1996 net
pre-tax income of AESP, in accordance with the following formula:
Amount of increase = Net pre-tax income of AESP from 1/1/96 to
Effective Time x 42%
The amount outstanding under the Note shall be convertible, at the
option of the holder, into AGF Common Stock at an exercise price of $3.60 per
share.
7.9 Loan to AESP. If the Interim Financial Statements meet the
financial requirements of Section 7.14(b), or notwithstanding AGF agrees to
proceed with this transaction, then AESP shall execute a promissory note (the
"Note"), in the form of Exhibit 7.9 hereto, in favor of AGF in the principal
amount of $100,000 and AGF shall loan such amount to AESP in accordance
therewith.
7.10 Notification of Certain Matters. AESP shall give prompt
notice to AGF, and AGF shall give prompt notice to AESP, of:
(a) the occurrence, or non-occurrence, of any event the
occurrence, or non-occurrence, of which would be likely to cause (a) any
representation or warranty contained in this Agreement to be untrue or
inaccurate or (b) any covenant, condition or agreement contained in this
Agreement not to be complied with or satisfied; and
(b) any failure of AESP or AGF, as the case may be, to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it hereunder.
However, the delivery of any notice pursuant to this Section 7.10 shall not
limit or otherwise affect the remedies available hereunder to the party
receiving such notice.
7.11 Tax Treatment. Each of AESP and AGF will use its reasonable
best efforts to cause the Merger to qualify as a reorganization under the
provisions of Section 368(a) of the Code.
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7.12 Registration Statement; Proxy Statement.
(a) As soon as reasonably practicable after the execution
of this Agreement, AGF shall use its best efforts to prepare and file with the
SEC a proxy statement (together with any amendments thereof or supplements
thereto, the "Proxy Statement") relating to the meeting of AGF's stockholders
to be held in connection with the solicitation of approval of: (i) the Merger;
(ii) the withdrawal, after the Effective Time, of AGF's election as a Business
Development Company under the 1940 Act; and (iii) such other matters as are
deemed appropriate by the AGF Board.
(b) Each of AESP and AGF shall take all or any action
required under any applicable federal or state securities laws in connection
with the issuance of shares of AGF Common Stock and Warrants pursuant to the
Merger. AESP shall use its best efforts furnish all information concerning
itself to AGF as AGF may reasonably request in connection with such actions and
the preparation of the Proxy Statement. The Proxy Statement shall include the
recommendation of the Board of Directors of AGF in favor of the Merger.
(c) Within six (6) months after the Closing, AGF shall,
at its sole cost and expense, prepare and file with the SEC a registration
statement (the "Registration Statement") on the applicable form, in connection
with the registration under the Securities Act of the shares of AGF Common
Stock and the Warrants (and underlying AGF Common Stock) to be issued pursuant
to the Merger. In connection with the Registration Statement, AGF shall: (i)
comply with all applicable state and federal securities laws, rules and
regulations; and (ii) shall prepare and file with the SEC such amendments and
post-effective amendments and supplements to the Registration Statement or any
prospectus as may be necessary to keep the Registration Statement effective for
a period of two (2) years following the effective date of the Registration
Statement. Notwithstanding the foregoing, AGF shall not be responsible for the
payment of any brokerage commissions or legal expenses of any stockholder,
which are incurred in connection with the registration of such AGF Common
Stock.
(d) The information supplied by AESP for inclusion in the
Proxy Statement shall 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 not misleading: (i) at the time the Proxy
Statement (or any amendment thereof or supplement thereto) is first mailed to
the stockholders of AGF, (ii) the time of the Stockholders' Meeting (as defined
in Section 9.13), and (iii) the Effective Time. If at any time prior to the
Effective Time any event or circumstance relating to any AESP Entity, or their
respective officers or directors, should be discovered by AESP which should be
set forth in an amendment or a supplement to the Proxy Statement, AESP shall
promptly inform AGF.
(e) AGF will submit the proposed Proxy Statement to AESP,
for AESP's comments, as soon as possible, but not later than five (5) calendar
days before AGF proposes to file such Proxy Statement with the SEC.
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7.13 Stockholders' Meeting. AGF shall call and hold a meeting of
the holders of the AGF Common Stock (the "Stockholders' Meeting") as promptly
as practicable for the purpose of, among other things, voting upon the approval
of: (a) the Merger; (b) an amendment of the Articles of Incorporation to change
the name of AGF to Advanced Electronic Support Products, Inc.; and (c) the
withdrawal of AGF's Business Development Company election under the 1940 Act.
AGF shall use its reasonable best efforts to hold the Stockholders' Meeting as
soon as practicable after the date of this Agreement.
7.14 AESP Financial Statements.
(a) At or before the Effective Time, AESP shall cause its
accountants, BDO Seidman, LLP, to provide AESP with audited financial
statements of AESP for the fiscal years 1994 and 1995. The audited financial
statements for fiscal year 1995 shall reflect a minimum after tax earnings of
$850,000.
(b) Prior to August 15, 1996, AESP shall provide to AGF
AESP unaudited combined financial statements (the "AESP Interim Financial
Statements") for the six month period ended June 30, 1996, including all notes
thereto. The AESP Interim Financial Statements shall be subject to the
representations and warranties hereof (including, without limitation, Section
4.7 hereof) and AESP shall accordingly update the schedules to this Agreement.
If the AESP Interim Financial Statements reflect minimum after tax earnings
that are less than the after tax earnings for the comparable six month period
of 1995, then AGF may terminate this Agreement, without penalty, within three
(3) Business Days after AGF's receipt of the Interim Financial Statements and,
in such event: (i) neither AESP nor AGF shall have any liability to each other;
and (ii) AESP shall not be entitled to borrow any money from AGF under the
Note.
7.15 Stock Option Plan. At the Effective Time and subject to
shareholder approval as required by applicable law, AGF shall establish a stock
option plan (the "Stock Option Plan") which shall permit AGF's board of
directors to grant options to purchase AGF Common Stock (each, an "Employee
Option") to the Surviving Corporation's employees as compensation for
exceptional performance by such employees. The Stock Option Plan shall
initially have no more than 400,000 Employee Options.
7.16 Public Relations. As soon as reasonably after the Effective
Time, AGF shall retain a financial public relations firm on terms acceptable to
AGF's board of directors.
7.17 Lock-Up Letters. At the Effective Time, Stein and Briskin
shall each enter into "lock-up" letters (each, a "Lock-Up Letter"), whereby
Stein and Briskin agree not to dispose of the shares of AGF Common Stock which
they receive as a result of the Merger, for a period of one (1) year from the
Effective Time.
35
<PAGE> 45
7.18 Further Action; Reasonable Best Efforts.
(a) Upon the terms and subject to the conditions hereof,
each of the parties hereto shall use its reasonable best efforts to take, or
cause to be taken, all appropriate action, and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated herein, including,
without limitation, using its reasonable best efforts to obtain all licenses,
permits, consents, approvals, authorizations, qualifications and orders of
Governmental Authorities and parties to contracts with AGF and AESP and their
respective Subsidiaries as are necessary for the consummation of the
transactions contemplated herein.
(b) If, at any time after the Effective Time, any further
action is necessary or desirable to carry out the purposes of this Agreement,
the proper officers and directors of each party to this Agreement shall use
their reasonable best efforts to take all such action.
(c) Each party shall use its best efforts not to take any
action, or enter into any transaction, which would cause any of its
representations or warranties contained in this Agreement to be untrue or
result in a breach of any covenant made by it in this Agreement.
7.19 Debt Instruments. Prior to or at the Effective Time, each of
the AESP Entities shall use its reasonable best efforts to prevent the
occurrence, as a result of the Merger and the other transactions contemplated
by this Agreement, of a change in control or any event which constitutes a
default (or an event which with notice or lapse of time or both would become a
default) under any of its debt instruments.
7.20 Public Announcements. AGF and AESP shall consult with each
other before issuing any press release or otherwise making any public
statements with respect to this Agreement or any transaction contemplated
herein and shall not issue any such press release or make any such public
statement without the prior consent of the other party, which shall not be
unreasonably withheld. However, a party may, without the prior consent of the
other party, issue such press release or make such public statement as may be
required by law or any listing agreement with a national securities exchange if
it has used all reasonable efforts to consult with the other party and to
obtain such party's consent but has been unable to do so in a timely manner.
7.21 Transactions with Significant Stockholder After the Effective
Time. From and after the Effective Time and until the third anniversary of the
Effective Time, AGF shall not enter into any agreement with any stockholder
(the "Significant Stockholder") who beneficially owns more than 20% of the then
outstanding securities entitled to vote at a meeting of the stockholders of AGF
that would constitute a Rule 13e-3 (as such rule is in effect today)
transaction under the Exchange Act with respect to any class of common stock of
AGF (any such transaction being a "Going Private Transaction"), unless AGF
provides in any agreement pursuant to which such Going Private Transaction
shall be effected that, as a condition to the consummation of such Going
Private Transaction, (a) the holders of a majority of the shares not
beneficially owned by
36
<PAGE> 46
the Significant Stockholder that are voted and present (whether in person or by
proxy) at the meeting of stockholders called to vote on such Going Private
Transaction shall have voted in favor thereof and (b) a special committee (the
"Special Committee") of AGF's Board comprised solely of the independent
directors of AGF shall have (i) approved the terms and conditions of the Going
Private Transaction and shall have recommended that the stockholders vote in
favor thereof and (ii) received from its financial advisor a written opinion
addressed to the Special Committee, for inclusion in the proxy statement to be
delivered to the stockholders, and dated the date thereof, substantially to the
effect that the consideration to be received by the stockholders (other than
the majority stockholder) in the Going Private Transaction is fair to them from
a financial point of view.
7.22 Continued Exchange Act Registration. From and after the
Effective Time, and until the third anniversary of the Effective Time, AGF
shall cause the AGF Common Stock to continue to be registered under the
Exchange Act and shall use its best efforts to timely file all periodic reports
and other documents required to be filed by AGF thereunder.
7.23 Use of Merged Working Capital. After the Effective Time, and
subject to the good faith exercise of the business judgement of the boards of
directors of AGF and the Surviving Corporation, AGF and the Surviving
Corporation shall only use its available working capital to satisfy their
corporate obligations and to pursue business opportunities which their
respective boards of directors consider to be in the best interests of AGF, the
Surviving Corporation and their respective stockholders. However, the
Surviving Corporation may use such working capital to make payments under the
Convertible Note and to pay the tax obligations of Briskin and Stein arising
from Stein and Briskin's status as stockholders of AESP prior to the Effective
Time.
ARTICLE VIII
CLOSING CONDITIONS
8.1 Conditions to Obligations of Each Party to Effect the Merger.
The respective obligations of each party to effect the Merger and the other
transactions contemplated herein shall be subject to the satisfaction at or
prior to the Effective Time of the following conditions, any or all of which
may be waived, in whole or in part, to the extent permitted by applicable law:
(a) Stockholder Approval. This Agreement and the
Merger (including the withdrawal of AGF's Business Development Company election
under the 1940 Act) shall have been approved and adopted by the requisite vote
of the stockholders of AGF. However, if the Proxy Statement has been
distributed to the AGF Stockholders and the AGF Stockholders do not approve
this Agreement and the Merger (including the withdrawal of AGF's Business
Development Company election under the 1940 Act), AGF shall, at the request of
AESP, forgive all principal and interest due to AGF under the Note.
37
<PAGE> 47
(b) No Order. No Governmental Authority or federal
or state court of competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive
order, decree, injunction or other order (whether temporary, preliminary or
permanent) which is in effect and which materially restricts, prevents or
prohibits consummation of the Merger or any transaction contemplated by this
Agreement. However, the parties shall use their reasonable best efforts to
cause any such decree, judgment, injunction or other order to be vacated or
lifted.
(c) Approvals. Other than the filing of merger
documents in accordance with Florida Law and the filing of Form N-54C with the
SEC, all authorizations, consents, waivers, orders or approvals required to be
obtained, and all filings, notices or declarations required to be made, by AGF
and AESP prior to the consummation of the Merger and the transactions
contemplated hereunder shall have been obtained from, and made with, all
required Governmental Authorities except for such authorizations, consents,
waivers, orders, approvals, filings, notices or declarations which the failure
to obtain or make would not have a material adverse effect, at or after the
Effective Time, on the financial condition (as existing immediately prior to
the consummation of the Merger) of (i) AESP Entities, taken as a whole, or (ii)
AGF and the AGF Subsidiaries, taken as a whole.
8.2 Additional Conditions to Obligations of AGF. The obligations
of AGF to effect the Merger and the transactions contemplated herein are also
subject to the following conditions:
(a) Representations and Warranties. Each of the
representations and warranties of AESP contained in this Agreement, without
giving effect to any notification to AGF delivered pursuant to Section 7.10,
shall be true and correct as of the Effective Time as though made on and as of
the Effective Time, except (i) for changes specifically permitted by this
Agreement and (ii) that those representations and warranties which address
matters only as of a particular date shall remain true and correct as of such
date, except in any case for such failures to be true and correct which would
not, individually or in the aggregate, have a Material Adverse Effect. AGF
shall have received a certificate of the Chief Executive Officer and Chief
Financial Officer of AESP to such effect.
(b) Agreement and Covenants. AESP shall have performed
or complied in all material respects with all agreements and covenants required
by this Agreement to be performed or complied with by it on or prior to the
Effective Time or, as the case may be, the Opt-Out Time. AGF shall have
received a certificate of the Chief Executive Officer and Chief Financial
Officer of AESP to that effect.
(c) Fairness Opinion. AGF shall have received an
opinion, which is acceptable to the AGF Board, from Advanced Business
Valuations, Inc. as to the fairness of the Merger from a financial point of
view.
38
<PAGE> 48
8.3 Additional Conditions to Obligations of AESP. The obligation
of AESP to effect the Merger and the other transactions contemplated in this
Agreement are also subject to the following conditions:
(a) Representations and Warranties. Each of the
representations and warranties of AGF contained in this Agreement, without
giving effect to any notification made by AGF to AESP pursuant to Section 7.10,
shall be true and correct as of the Effective Time, as though made on and as of
the Effective Time, except (i) for changes specifically permitted by this
Agreement and (ii) that those representations and warranties which address
matters only as of a particular date shall remain true and correct as of such
date, except in any case for such failures to be true and correct that would
not, individually or in the aggregate, have a Material Adverse Effect. AESP
shall have received a certificate of the Chief Executive Officer and Chief
Financial Officer of AGF to such effect.
(b) Agreements and Covenants. AGF shall have performed
or complied in all material respects with all agreements and covenants required
by this Agreement to be performed or complied with by it on or prior to the
Effective Time or, as the case may be, the Opt-Out Time. AESP shall have
received a certificate of the Chief Executive Officer and Chief Financial
Officer of AGF to that effect.
(c) No 1940 Act Obligations. AESP shall have reasonably
determined that AGF will have no further obligations under the 1940 Act after
the Opt Out Time. In order for any such determination to be reasonable, AESP
shall have delivered to AGF a legal opinion from an AV rated law firm to the
effect that: (i) it is more likely than not that AGF will have further
obligations under the 1940 Act after the Opt Out Time; and (ii) such
obligations result from AGF's status and operations as a business development
company under the 1940 Act, or otherwise under the 1940 Act, and do not include
those general obligations under the 1940 Act that are applicable to all
companies, wherever situated.
ARTICLE IX
DELIVERIES AT CLOSING
9.1 Deliveries by AGF. On or prior to the Closing, AGF shall
execute or cause to be executed and deliver or cause to be delivered to AESP
the following documents, certificates and agreements:
(a) Representations and Warranties. A certificate
executed by a duly authorized officer of AGF certifying that the
representations and warranties of AGF contained in this Agreement are true and
correct in all material respects as of the Closing, except for any
representations or warranties that relate solely to an earlier date (in which
case such representations and warranties were true and correct as of such
earlier date);
39
<PAGE> 49
(b) Resolutions. A true and complete copy, certified by
the Secretary of AGF, of the resolutions duly and validly adopted by the board
of directors of AGF evidencing its authorization of the execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby;
(c) Incumbency Certificate. A certificate of the
Secretary of AGF certifying the names and signatures of the officers of AGF
authorized to sign this Agreement and the other documents to be delivered
hereunder on its behalf;
(d) Legal Opinions. The following legal opinions:
(i) an opinion of AGF's Florida counsel, Lucio,
Mandler, Croland, Bronstein & Garbett, P.A., in such form as AGF and AESP shall
agree upon;
(ii) an opinion of AGF's Maryland counsel,
Venable, Baetjer and Howard, LLP, in such form as AGF and AESP shall agree
upon; and
(iii) an opinion of AGF's 1940 Act counsel,
Stradley, Ronon, Stevens & Young, in such form as AGF and AESP shall agree
upon.
(e) Other Documents. A copy of each of the following
documents, each executed by all of the parties thereto: (i) the Consulting
Agreement with Sokolow, (ii) the Severance Agreement, (iii) the Non-Compete
Agreement, (iv) each of the Employment Agreements, and (v) the Stock Option
Plan;
9.2 Deliveries by AESP. On or prior to the Closing, AESP shall
execute or cause to be executed and deliver or cause to be delivered to AGF the
following documents, certificates and agreements:
(a) Stock Certificates. Certificates (or such other
documents as are necessary to vest ownership in ) representing all of the
issued and outstanding shares of AESP Common Stock, AESP Germany common stock
and AESP Sweden common stock.
(b) Representations and Warranties. A certificate
executed by a duly authorized officer of AESP certifying that the
representations and warranties relating to AESP, AESP Germany and AESP Sweden
contained in this Agreement are true and correct in all material respects as of
the Closing, except for any representations or warranties that relate solely to
an earlier date (in which case such representations and warranties were true
and correct as of such earlier date);
(c) Resolutions of AESP. A true and complete copy,
certified by the Secretary of AESP, of the resolutions duly and validly adopted
by the board of directors of AESP evidencing its authorization of the execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby;
40
<PAGE> 50
(d) Incumbency Certificate of AESP A certificate of the
Secretary of AESP certifying the names and signatures of the officers of AESP
authorized to sign this Agreement and the other documents to be delivered
hereunder on behalf of AESP;
(e) Legal Opinion. The following legal opinions:
(i) an opinion of AESP's Florida counsel,
Akerman, Senterfitt & Eidson, P.A., in such form as AGF and AESP shall agree
upon;
(ii) an opinion of AESP's German counsel, in such
form as AGF and AESP shall agree upon; and
(iii) an opinion of AESP's Swedish counsel, in such
form as AGF and AESP shall agree upon.
(f) Other Documents. A copy of each of the following
documents, each executed by all of the parties thereto: (i) each of the
Employment Agreements, (ii) the Convertible Note; and (iii) each of the Lock-Up
Letters.
ARTICLE X
TERMINATION, AMENDMENT AND WAIVER.
10.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval of this Agreement
and the Merger by the stockholders of AGF:
(a) by mutual consent of AESP and AGF;
(b) by AGF, upon a breach of any representation,
warranty, covenant or agreement on the part of AESP set forth in this
Agreement, or if any representation or warranty of AESP shall have become
untrue;
(c) by AGF, if the Interim Financial Statements do not
meet the financial requirements of Section 7.14(b) hereof and AGF determines to
terminate this Agreement and the Merger;
(d) by AGF, if the AGF Board exercises its fiduciary
duties to the AGF stockholders and terminates this Agreement pursuant to
Section 6.3;
(e) by AESP, upon a breach of any representation,
warranty, covenant or agreement on the part of AGF set forth in this Agreement,
or if any representation or warranty of AGF shall have become untrue;
41
<PAGE> 51
(f) by either AGF or AESP, if any permanent injunction or
action by any Governmental Authority preventing the consummation of the Merger
shall have become final and nonappealable;
(g) by either AGF or AESP, if the Merger or the Opt Out
Time shall not have been consummated or shall not have occurred before December
31, 1996; or
(h) by either AGF or AESP, if this Agreement and the
Merger shall fail to receive the requisite vote for approval and adoption by
the stockholders of AGF.
The right of any party hereto to terminate this Agreement
pursuant to this Section shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of any party hereto, any
person controlling any such party or any of their respective officers or
directors, whether prior to or after the execution of this Agreement.
10.2 Effect of Termination. Except as provided in Section 10.5, in
the event of the termination of this Agreement pursuant to Section 10.1, this
Agreement shall forthwith become void, there shall be no liability on the part
of AESP or AGF or any of their respective officers or directors to the other
and all rights and obligations of any party hereto shall cease. However,
nothing herein shall relieve any party from liability for the wilful breach of
any of its representations, warranties, covenants or agreements set forth in
this Agreement.
10.3 Amendment. This Agreement may be amended by the parties
hereto by action taken by or on behalf of their respective Boards of Directors
at any time prior to the Effective Time. However, after approval of the Merger
by the stockholders of AGF, no amendment, which under applicable law may not be
made without the approval of the stockholders of AGF, may be made without such
approval. This Agreement may not be amended except by an instrument in writing
signed by the parties hereto.
10.4 Waiver. At any time prior to the Effective Time, either party
hereto may (a) extend the time for the performance of any of the obligations or
other acts of the other party hereto; (b) waive any inaccuracies in the
representations and warranties of the other party contained herein or in any
document delivered pursuant hereto; and (c) waive compliance by the other party
with any of the agreements or conditions contained herein. Any such extension
or waiver shall be valid only if set forth in an instrument in writing signed
by the party or parties to be bound thereby.
10.5 Fees, Expenses and Other Payments. All out-of-pocket costs
and expenses, including, without limitation, fees and disbursements of counsel,
financial advisors and accountants, incurred by the parties hereto shall be
borne solely and entirely by the party which has incurred such costs and
expenses (with respect to such party, its "Expenses"). However, all costs and
expenses related to printing, filing and mailing the Proxy Statement and all
SEC and other regulatory filing fees incurred in connection with the Proxy
Statement shall be borne solely by AGF.
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<PAGE> 52
ARTICLE XI
GENERAL PROVISIONS
11.1 Effectiveness of Representations, Warranties and Agreements.
(a) Except as set forth in Section 11.1(b) the
representations, warranties and agreements of each party hereto shall remain
operative and in full force and effect, regardless of any investigation made by
or on behalf of any other party hereto, any person controlling any such party
or any of their officers or directors, whether prior to or after the execution
of this Agreement.
(b) The representations and warranties in this Agreement
shall terminate at the Effective Time or upon the termination of this Agreement
pursuant to Section 10.
11.2 Notices. All notices, requests, claims, demands, and other
communications under this Agreement shall be in writing and shall be deemed to
have been given or made upon the earliest to occur of: (a) receipt, if made by
personal service, (b) two (2) days after dispatch, if made by reputable
overnight courier service, (c) upon the delivering party's receipt of a written
confirmation of a transmission made by cable, by telecopy, by telegram or by
telex, or (d) seven (7) days after being mailed by registered mail (postage
prepaid, return receipt requested) to the respective parties at the following
addresses (or at such other address for a Party as shall be specified in a
notice given in accordance with this Section):
to AGF: The Americas Growth Fund, Inc.
701 Brickell Avenue
Suite 2000
Miami, Florida 33131
Attention: Leonard J. Sokolow, President
Telefax: (800) 696-9597
with a copy to: Lucio, Mandler, Croland, Bronstein & Garbett, P.A.
701 Brickell Avenue
Suite 2000
Miami, Florida 33131
Attention: Leslie J. Croland, Esq.
Telefax: (305) 579-4722
to AESP: Advanced Electronic Support Products, Inc.
1810 N.E. 144 Street
North Miami, Florida 33181
Attn: Slav Stein, General Manager
Telefax: (305) 652-8489
43
<PAGE> 53
with a copy to: Akerman, Senterfitt & Eidson, P.A.
One Southeast Third Avenue
28th Floor
Miami, Florida 33131
Attn: Philip B. Schwartz, Esq.
Telefax: (305) 374-5095
11.3 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
11.4 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or
other provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible to the fullest extent
permitted by applicable law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
11.5 Entire Agreement. This Agreement together with the attached
schedules, exhibits and other documents delivered pursuant hereto) and the
Confidentiality Agreement constitute the entire agreement of the parties and
supersede all prior agreements and undertakings, both written and oral, between
the parties, or any of them, with respect to the subject matter hereof.
11.6 Assignment. This Agreement shall not be assigned by operation
of law or otherwise.
11.7 Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any person
any right, benefit or remedy of any nature whatsoever under or by reason of
this Agreement.
11.8 Governing Law. Except to the extent that Maryland Law is
mandatorily applicable to the Merger and the rights of the stockholders of AGF,
this Agreement shall be governed by, and construed in accordance with, the laws
of the State of Florida, regardless of the laws that might otherwise govern
under applicable principles of conflicts of law.
11.9 Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
44
<PAGE> 54
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first written above by their respective officers
thereunto duly authorized.
<TABLE>
<CAPTION>
ATTEST: THE AMERICAS GROWTH FUND, INC.
<S> <C>
By: /s/ John C. Hamlin By: /s/ Leonard J. Sokolow
------------------ ----------------------
Name: John C. Hamlin Name: Leonard J. Sokolow
------------------ ----------------------
Title: Title: President
------------------ ----------------------
ATTEST: ADVANCED ELECTRONICS
SUPPORT PRODUCTS, INC.
By: /s/ Roman Briskin By: /s/ Slav Stein
------------------ ----------------------
Name: Roman Briskin Name: Slav Stein
------------------ ----------------------
Title: Secretary Title: President
------------------ ----------------------
/s/ Slav Stein /s/ Roman Briskin
- ------------------------------------------- ----------------------------------------------
Slav Stein, solely for purposes of Sections Roman Briskin, solely for purposes of Sections
3.6, 4.3(b), 7.7, and 7.17 hereof 3.6, 4.3(b), 7.7, and 7.17 hereof
/s/ Leonard J. Sokolow
- ------------------------------------------
Leonard J. Sokolow, solely for purposes of
Section 7.7 hereof
ATTEST: AGF MERGER CORPORATION
By: /s/ John C. Hamlin By: /s/ Leonard J. Sokolow
------------------ ----------------------
Name: John C. Hamlin Name: Leonard J. Sokolow
------------------ ----------------------
Title: Title:
------------------ ----------------------
</TABLE>
45
<PAGE> 55
Exhibit 3.5(b)
Form of Mahoney and Sokolow Warrants
<PAGE> 56
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE OR SECURITIES LAWS
AND NEITHER THE SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD,
TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT OR SUCH LAWS OR AN EXEMPTION
FROM REGISTRATION UNDER SUCH SECURITIES ACT AND SUCH LAWS WHICH, IN THE OPINION
OF COUNSEL FOR THE HOLDER, WHICH COUNSEL AND OPINION ARE REASONABLY
SATISFACTORY TO COUNSEL FOR THIS CORPORATION, IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH EXHIBIT I REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:30 P.M., MIAMI TIME, ,
------- ----
No. W- Warrants
---------- ----------
WARRANT TO PURCHASE _________
SHARES OF ADVANCED ELECTRONIC
SUPPORT PRODUCTS, INC. COMMON
STOCK
WARRANT CERTIFICATE
THIS WARRANT CERTIFICATE certifies that __________, or
registered assigns, is the registered holder of Warrants (the "Warrants") to
purchase initially, at any time from the date hereof until 5:30 p.m., Miami
time, on _________, ____ ("Expiration Date"), up to the number of fully paid
and nonassessable shares of common stock, $.01 par value ("Common Stock") of
ADVANCED ELECTRONIC SUPPORT PRODUCTS, INC., a Maryland corporation (the
"Company") set forth above, at the initial exercise price, subject to
adjustment in certain events (the "Exercise Price"), of $____ per share of
Common Stock upon surrender of this Warrant 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 Exhibit I hereto. Payment of the Exercise
Price shall be made by certified or official bank check payable to the order of
the Company.
<PAGE> 57
No Warrant may be exercised after 5:30 p.m., Miami time, on
the Expiration Date, at which time all Warrants evidenced hereby, unless
exercised prior thereto, shall thereafter be void. If the Expiration Date
shall in the State of Florida be a holiday or a day on which banks are
authorized to close, then the Expiration Date shall mean 5:30 P.M., Miami Time,
the next following day which in the State of Florida is not a holiday or a day
on which banks are authorized to close.
The Warrants evidenced by this Warrant Certificate are part of
a duly authorized issue of Warrants issued pursuant to the Agreement and Plan
of Merger dated as of the date hereof (the "Merger Agreement"), between, among
other parties, the Company and the initial Holder hereof and subject to the
provisions of Exhibit I hereto, which Exhibit I 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 Warrants.
Exhibit I hereto provides that upon the occurrence of certain
events, the Exercise Price and the type 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
Warrant Certificate evidencing the adjustment in the Exercise Price and the
number and/or type of securities issuable upon the exercise of the Warrants;
provided, however, that the failure of the Company to issue such new Warrant
Certificates shall not in any way change, alter, or otherwise impair the rights
of the holder as set forth in Exhibit I.
Upon due presentment for registration of transfer of this
Warrant Certificate at an office or agency of the Company, a new Warrant
Certificate or Warrant Certificates of like tenor and evidencing in the
aggregate a like number of Warrants shall be issued to the transferee(s) in
exchange for this Warrant Certificate, subject to the limitations provided
herein and in Exhibit I, 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 Warrants evidenced
by this Certificate, the Company shall forthwith issue to the holder hereof a
new Warrant Certificate representing such number of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof
as the absolute owner(s) of this Warrant 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 Warrant Certificate which are defined
in Exhibit I hereto shall have the meanings assigned to them in Exhibit I
hereto.
-2-
<PAGE> 58
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed under its corporate seal.
Dated as of _______________________
ADVANCED ELECTRONIC SUPPORT
PRODUCTS, INC.
By:
------------------------
Name:
----------------------
Title:
---------------------
Attest:
- --------------------------------------
, Secretary
- ------------------ --------
-3-
<PAGE> 59
FORM OF ELECTION TO PURCHASE
TO: ADVANCED ELECTRONIC SUPPORT PRODUCTS, INC.
THE UNDERSIGNED hereby irrevocably elects to exercise the
right, represented by this Warrant Certificate, to purchase ________ shares of
Common Stock 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 Warrant Certificate.)
--------------------------------------------
(Insert Social Security or Other Identifying
Number of Holder)
--------------------------------------------
Signature Guarantee
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<PAGE> 60
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate)
FOR VALUE RECEIVED ______________________ hereby sells, assigns and transfers
unto _________________________________________________________________________
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ________________ Attorney,
to transfer the within Warrant Certificate on the books of the within named
Company, with full power of substitution.
Dated: _____________
Signature_______________________________
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant Certificate.)
----------------------------------------
(Insert Social Security or Other
Identifying Number of Assignee)
----------------------------------------
Signature Guarantee
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<PAGE> 61
EXHIBIT I
Section 1. Exercise of Warrant. The Warrants initially
are exercisable at an aggregate initial exercise price per share of common
stock, $.01 par value per share (the "Common Stock") of Advanced Electronic
Support Products, Inc. (the "Company") set forth in Section 3 hereof (subject
to adjustment as provided in Section 5 hereof) payable by certified or official
bank check. Upon surrender of a Warrant Certificate with the annexed Form of
Election to Purchase duly executed, together with payment of the Exercise Price
(as hereinafter defined) for the shares of Common Stock purchased at the
Company's principal offices in Florida (presently located at 1810 N.E. 144th
Street, North Miami, FL 33181), the registered holder of a Warrant Certificate
("Holder" or "Holders") shall be entitled to receive a certificate or
certificates for the shares of Common Stock so purchased. The purchase rights
represented by each Warrant Certificate are exercisable at the option of the
Holder thereof, in whole or in part (but not as to fractional shares of the
Common Stock underlying the Warrants). In the case of the purchase of less
than all the shares (the "Shares") of Common Stock purchasable under any
Warrant Certificate, the Company shall cancel said Warrant Certificate upon the
surrender thereof and shall execute and deliver a new Warrant Certificate of
like tenor for the balance of the shares of Common Stock purchasable
thereunder.
Section 2. Issuance of Certificates. Upon the exercise
of the Warrants, the issuance of certificates for shares of Common Stock or
other securities, properties or rights underlying such Warrants, shall be made
forthwith (and in any event within ten (10) business days thereafter) without
charge to the Holder thereof including, without limitation, any tax which may
be payable in respect of the issuance thereof, and such certificates shall be
issued in the name of, or in such names as may be directed by, the Holder
thereof; provided, however, that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the issuance
and delivery of any such certificates in a name other than that of the Holder
and the Company shall not be required to issue or deliver such certificates
unless or until the persons or persons requesting the issuance thereof shall
have paid to the Company the amount of such tax or shall have established to
the satisfaction of the Company that such tax has been paid.
The Warrant Certificates and the certificates representing the
Shares (and/or other securities, property or rights issuable upon the exercise
of the Warrants) shall be executed on behalf of the Company by the manual or
facsimile signature of the then present Chairman or Vice Chairman of the Board
of Directors or President or Vice President of the Company under its corporate
seal reproduced thereon, attested to by the manual or facsimile signature of
the then present Secretary or Assistant Secretary of the Company.
Section 3. Exercise Price.
3.1 Initial and Adjusted Exercise Price. Except as
otherwise provided in Section 5 hereof, the exercise price of each Warrant
shall be $_______ share of Common Stock. The
<PAGE> 62
adjusted exercise price shall be the price which shall result from time to time
from any and all adjustments of the initial exercise price in accordance with
the provisions of Section 5 hereof.
3.2 Exercise Price. The term "Exercise Price" as used
herein shall mean the initial exercise price or the adjusted exercise price,
depending upon the context.
Section 4. Registration Rights.
4.1 Securities Act of 1933 Legend. The Warrants, the
Shares and any of the other securities issuable upon exercise of the Warrants
have not been registered under the Securities Act of 1933, as amended (the
"Act"). Upon exercise of the Warrants, in part or in whole, the certificates
representing the Shares underlying the Warrants and any of the other securities
issuable upon exercise of the Warrants (collectively, the "Warrant Shares")
shall bear the following legend:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE OR SECURITIES LAWS
AND NEITHER THE SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD,
TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT OR SUCH LAWS OR AN EXEMPTION
FROM REGISTRATION UNDER SUCH SECURITIES ACT AND SUCH LAWS WHICH, IN THE OPINION
OF COUNSEL FOR THE HOLDER, WHICH COUNSEL AND OPINION ARE REASONABLY
SATISFACTORY TO COUNSEL FOR THIS CORPORATION, IS AVAILABLE.
4.2 Required Registration. The Holders of the Warrants
shall be entitled to the benefits of the registration rights with respect to
the Warrant Shares contained in Section 7.12(c) of the Merger Agreement. Said
Section 7.12(c) is hereby incorporated by reference in and made a part of this
Exhibit I as if fully set forth herein.
Section 5. Adjustments to Exercise Price and Number of
Shares.
5.1 Subdivision and Combination. In case the Company
shall at any time (i) subdivide the outstanding shares of Common Stock into a
larger number of shares, (ii) combine the outstanding shares of Common Stock
into a smaller number of shares, (iii) declare a dividend on the outstanding
shares of Common Stock payable in shares of Common Stock, or (iv) issue by
reclassification of its Common Stock any shares of its capital stock, the
Exercise 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 Exercise 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
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<PAGE> 63
denominator shall be the number of shares of Common Stock outstanding
immediately after such dividend, distribution, subdivision, combination or
reclassification. Such adjustment shall be made successively whenever any
event specified above shall occur.
5.2 Adjustment in Number of Shares. Upon each adjustment
of the Exercise Price pursuant to the provisions of this Section 5, the number
of Shares issuable upon the exercise of each Warrant shall be adjusted to the
nearest full share by multiplying a number equal to the Exercise Price in
effect immediately prior to such adjustment by the number of Warrant Shares
issuable upon exercise of the Warrants immediately prior to such adjustment and
dividing the product so obtained by the adjusted Exercise Price.
5.3 Definition of Common Stock. For the purpose of this
Agreement, the term "Common Stock" shall mean (i) the class of stock designated
as Common Stock in the Articles of Incorporation of the Company as may be
amended as of the date hereof, or (ii) any other class of stock resulting from
successive changes or reclassifications of such Common Stock consisting solely
of changes in par value, or from par value to no par value, or from no par
value to par value. In the event that the Company shall after the date hereof
issue Common Stock with greater or superior voting rights than the shares of
Common Stock outstanding as of the date hereof, the Holder, at its option, may
receive upon exercise of any Warrant either shares of Common Stock or a like
number of such securities with greater or superior voting rights.
5.4 Merger or Consolidation. (a) In case the Company
after the date hereof (i) shall consolidate with or merge into any other person
and shall not be the continuing or surviving corporation of such consolidation
or merger, or (ii) shall permit any other person to consolidate with or merge
into the Company and the Company shall be the continuing or surviving person
but, in connection with such consolidation or merger, the Common Stock shall be
changed into or exchanged for stock or other securities of any other person or
cash or any other property, or (iii) shall transfer all or substantially all of
its properties or assets to any other person, or (iv) shall effect a capital
reorganization or reclassification of the Common Stock (other than a capital
reorganization or reclassification resulting in the issue of additional shares
of Common Stock for which adjustment in the Exercise Price is provided in this
Section 5), then, and in the case of each such transaction, proper provision
shall be made so that, upon the basis and the terms and in the manner provided
in the Warrants, the Holders of the Warrants, upon the exercise thereof at any
time after the consummation of such transaction, shall be entitled to receive
(at the aggregate Exercise Price in effect at the time of such consummation for
all Common Stock issuable upon such exercise immediately prior to such
consummation), in lieu of the Common Stock or other securities issuable upon
such exercise prior to such consummation, the highest amount of securities,
cash or other property to which such Holders would actually have been entitled
as shareholders upon such consummation if such Holders had exercised the rights
represented by the Warrants immediately prior thereto, subject to adjustments
(subsequent to such consummation) as nearly equivalent as possible to the
adjustments provided for in this Section 5.
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<PAGE> 64
5.5 Assumption of Obligations. Notwithstanding anything
contained in the Warrants to the contrary, the Company will not effect any of
the transactions described in clauses (i) through (iv) of Section 5.4 unless,
prior to the consummation thereof, each person (other than the Company) which
may be required to deliver any stock, securities, cash or property upon the
exercise of the Warrants as provided herein shall assume, by written instrument
delivered to the Holders of the Warrants, (a) the obligations of the Company
under the Warrants (including this Exhibit I) (and if the Company shall survive
the consummation of such transaction, such assumption shall be in addition to,
and shall not release the Company from, any continuing obligations of the
Company under this Exhibit I and the Warrants) and (b) the obligation to
deliver to such Holders such shares of stock, securities, cash or property as,
in accordance with the foregoing provisions of this Section 5, such Holders may
be entitled to receive, and such person shall have similarly delivered to such
Holders an opinion of counsel for such person stating that the Warrants
(including this Exhibit I) shall thereafter continue in full force and effect
and the terms hereof (including, without limitation, all of the provisions of
this Section 5) shall be applicable to the stock, securities, cash or property
which such person may be required to deliver upon any exercise of the Warrants
or the exercise of any rights pursuant hereto.
5.6 Dividends and Other Distributions. If, at any time
or from time to time after the date of this Warrant, the Company shall issue or
distribute to the holders of shares of Common Stock evidences of its
indebtedness, any other securities of the Company or any cash, property or
other assets (excluding a subdivision, combination or reclassification, or
dividend or distribution payable in shares of Common Stock, referred to in
Section 5.1, and also excluding cash dividends or cash distributions paid out
of net profits legally available therefor if the full amount thereof, together
with the value of other dividends and distributions made substantially
concurrently therewith or pursuant to a plan which includes payment thereof, is
equivalent to not more than 5% of the Company's net worth) (any such
non-excluded event being herein called a "Special Dividend"), the Exercise
Price shall be adjusted by multiplying the Exercise Price then in effect by a
fraction, the numerator of which shall be the then current market price of the
Common Stock (defined as the average for the thirty consecutive business days
immediately prior to the record date of the daily closing price of the Common
Stock as reported by the national securities exchange upon which the Common
Stock is then listed or if not listed on any such exchange, the average of the
closing prices as reported by the National Association of Securities Dealers,
Inc. Automated Quotations System ("NASDAQ") Stock Market's National Market, or
if not then listed on the NASDAQ National Market, the average of the highest
reported bid and lowest reported asked prices as reported by the NASDAQ, or if
not then publicly traded, as the fair market price as determined by the
Company's Board of Directors) less the fair market value (as determined by the
Company's Board of Directors) of the evidences of indebtedness, cash,
securities or property, or other assets issued or distributed in such Special
Dividend applicable to one share of Common Stock and the denominator of which
shall be such then current market price per share of Common Stock. An
adjustment made pursuant to this Section 5.6 shall become effective immediately
after the record date of any such Special Dividend.
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<PAGE> 65
5.7 Other Dilutive Events. In case any event shall occur
as to which the other provisions of this Section 5 are similar to, but not
strictly applicable but as to which the failure to make any adjustment would
not fairly protect the purchase rights represented by the Warrants (including
this Exhibit I) in accordance with the essential intent and principles hereof
then, in each such case, the Holders of a majority of all Warrants issued
simultaneously herewith may appoint a firm of independent public accountants of
recognized national standing reasonably acceptable to the Company, which shall
give their opinion as to the adjustment, if any, on a basis consistent with the
essential intent and principles established herein, necessary to preserve the
purchase rights represented by the Warrants (including this Exhibit I). Upon
receipt of such opinion the Company will promptly mail a copy thereof to the
Holders and shall make the adjustments described therein. The fees and
expenses of such independent public accountants shall be borne by the Company.
The issuance by the Company of shares of capital stock, including, without
limitation, shares of Common Stock, for consideration less than the Exercise
Price, or the issuance of convertible securities or derivative securities,
convertible into shares of capital stock at a conversion price or exercise
price less than the Exercise Price shall not be deemed an event that requires
an adjustment under this Section 5.7.
5.8 Notice of Adjustment Events. Whenever the Company
contemplates the occurrence of an event which would give rise to adjustments
under this Section 5, the Company shall mail to each Holder, at least thirty
(30) days prior to the record date with resect to such event or, if no record
date shall be established, at least thirty (30) days prior to such event, a
notice specifying (i) the nature of the contemplated event, (ii) the date of
which any such record is to be taken for the purpose of such event, (iii) the
date on which such event is expected to become effective and (iv) the time, if
any is to be fixed, when the holders of record of Common Stock shall be
entitled to exchange their shares of Common Stock for securities or other
property deliverable in connection with such event.
5.9 Notice of Adjustments. Whenever the Exercise Price
or the kind of securities or property issuable upon exercise of the Warrants,
or both, shall be adjusted pursuant to this Section 5, the Company shall make a
certificate signed by its President or a Vice President and by its Chief
Financial Officer, Secretary or Assistant Secretary, setting forth, in
reasonable detail, the event requiring the adjustment, the amount of the
adjustment, the method of which such adjustment was calculated (including a
description of the basis on which the Company made any determination
hereunder), and the Exercise Price and the kind of securities or property
issuable upon exercise of the Warrants after giving effect to such adjustment,
and shall cause copies of such certificate to be mailed (by first class mail
postage prepaid) to each Holder promptly after each adjustment.
5.10 Preservation of Rights. The Company will not, by
amendment of its Articles of Incorporation or through any consolidation,
merger, reorganization, transfer of assets, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of the Warrants (including this Exhibit I)
or the rights represented thereby, but will at all times in good faith assist
in the carrying out of all such
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<PAGE> 66
terms and in the taking of all such action as may be necessary or appropriate
in order to protect the rights of the Holders of the Warrants against dilution
or other impairment.
5.11 When No Adjustment Required. No adjustment in the
Exercise Price shall be required unless such adjustment would require an
increase or decrease of at least $0.05 per share of Common Stock; provided,
however, that any adjustments which by reason of this Section 5.11 are not
required to be made shall be carried forward and taken into account in any
subsequent adjustment; provided further, however, that adjustments shall be
required and made in accordance with the provisions of this Section 5 (other
than this Section 5.11) not later than such time as may be required in order to
preserve the tax-free nature of a distribution to the Holders of the Warrants.
All calculations under this Section 5 shall be made to the nearest cent or to
the nearest 1/100th of a share, as the case may be. Anything in this Section 5
to the contrary notwithstanding, the Company shall be entitled to make such
reductions in the Exercise Price, in addition to those required by this Section
5, as it in its discretion shall deem to be advisable in order that any stock
dividend, subdivision of shares or distribution of rights to purchase stock or
securities convertible or exchangeable for stock hereafter made by the Company
to its shareholders shall not be taxable.
Section 6. Redemption.
6.1 At any time up to the Expiration Date and so long as
the shares of Common Stock issuable upon the exercise of this warrant are
registered for public sale under the Securities Act of 1933, as amended, the
Company may redeem the Warrants, at its option, upon thirty days' notice at a
price of $.01 per Warrant, at any time after the market price for the Common
Stock for the 20 consecutive days ending not more than 10 days prior to the
date that the notice of redemption is given equals or exceeds $10.80.
6.2 If the Company exercises its right to redeem the
Warrants, it shall mail, certified, return receipt requested, a notice of
redemption to the Holder of the warrants proposed for redemption, at such
holder's last address as shall appear on the records of the Company. Any
notice mailed in the manner provided herein shall be conclusively presumed to
have been duly given whether or not the Holder receives such notice. The
Company will use their reasonable best efforts to contact the holders of the
Warrants prior to the Redemption Date (as hereinafter defined).
6.3 The notice of redemption shall specify the redemption
price, date fixed for redemption, the place where the Warrant Certificate shall
be delivered and the redemption price shall be paid, and that the right to
exercise the Warrant shall terminate at 5:00 P.M. (Miami time) on the business
day immediately preceding the date fixed for redemption. The date fixed for
the redemption of the Warrants shall be the "Redemption Date."
6.4 Any right to exercise a Warrant shall terminate at
5:00 P.M. (Miami time) on the business day immediately preceding the Redemption
Date. On and after the Redemption Date, the Holder of the Warrants shall have
no further rights except to receive, upon surrender
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of the Warrant duly endorsed or accompanied by a written instrument or
instruments of redemption in form satisfactory to the Company, the redemption
price of $.01, without interest, per Warrant.
Section 7. Exchange and Replacement of Warrant
Certificates. Each Warrant Certificate is exchangeable without expense except
as provided below in this Section 7, upon the surrender thereof by the
registered Holder at the principal executive office of the Company, for a new
Warrant Certificate of like tenor and date representing in the aggregate the
right to purchase the same number of Warrant Shares in such denominations as
shall be designated by the Holder thereof at the time of such surrender.
Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of any Warrant
Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to it, and reimbursement to the Company of all
reasonable expenses incidental thereto, and upon surrender and cancellation of
the Warrants, if mutilated, the Company will make and deliver a new Warrant
Certificate of like tenor, in lieu thereof.
Section 8. Elimination of Fractional Interests. The
Company shall not be required to issue certificates representing fractions of
shares of Common Stock upon the exercise of the Warrants, nor shall it be
required to issue scrip or pay cash in lieu of fractional interests, it being
the intent of the parties that all fractional interests shall be eliminated by
rounding any fraction up to the nearest whole number of shares of Common Stock
or other securities, properties or rights.
Section 9. Reservation and Listing of Securities. The
Company shall at all times reserve and keep available out of its authorized
shares of Common Stock, solely for the purpose of issuance upon the exercise of
the Warrants, such number of shares of Common Stock or other securities,
properties or rights as shall be issuable upon the exercise thereof. The
Company covenants and agrees that, upon exercise of the Warrants and payment of
the Exercise Price therefor, all shares of Common Stock and other securities
issuable upon such exercise shall be duly and validly issued, fully paid,
nonassessable and not subject to the preemptive rights of any shareholder. As
long as the Warrants shall be outstanding, the Company shall use its best
efforts to cause all shares of Common Stock issuable upon the exercise of the
Warrants to be listed on all securities exchanges and/or included in the
automated quotation system of the NASDAQ Stock Market (subject to official
notice of issuance) with respect to which the Common Stock issued to the public
in connection herewith may then be so listed and/or quoted.
Section 10. Notices to Warrant Holders. Nothing
contained in this Exhibit I shall be construed as conferring upon the Holders
the right to vote or to consent or to receive notice as a shareholder in
respect of any meetings of shareholders for the election of directors or any
other matter, or as having any rights whatsoever as a shareholder of the
Company. If,
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however, at any time prior to the expiration of the Warrants and their
exercise, any of the following events shall occur:
(a) the Company shall take a record of the
holders of its shares of Common Stock for the purpose of
determining the holders thereof who are entitled to receive
any dividend or other distribution payable; or
(b) the Company shall offer to all the holders of
its Common Stock any additional shares of capital stock of the
Company or securities convertible into or exchangeable for
shares of capital stock of the Company, or any option, right
or warrant to subscribe therefor; or
(c) a voluntary or involuntary dissolution,
liquidation or winding-up of the Company (other than in
connection with a consolidation or merger) or any capital
reorganization, recapitalization or reclassification or a sale
of all or substantially all of its property, assets and
business as an entirety shall be proposed;
then, in any one or more of said events, the Company will mail to each Holder
of a Warrant a notice specifying (i) the date or expected date on which any
such record is to be taken for the purpose of such dividend, distribution or
right, and the amount and character of such dividend, distribution or right,
and (ii) the date or expected date on which any such reorganization,
reclassification, recapitalization, consolidation, merger, sale, dissolution,
liquidation or winding-up is to take place and the time, if any such time is to
be fixed, as of which the holders of record of Common Stock shall be entitled
to exchange their shares of Common Stock for the securities or other property
deliverable upon such reorganization, reclassification, recapitalization,
consolidation, merger, sale, dissolution, liquidation or winding-up. Such
notice shall be mailed at least thirty (30) days prior to the date therein
specified.
Section 11. Notices.
All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been duly given or
made at the time delivered by hand if personally delivered; five calendar days
after mailing if sent by registered or certified mail; when answered back, if
telexed; when receipt is acknowledged, if telecopied; and the next business day
after timely delivery to the courier, if sent by overnight air courier
guaranteeing next day delivery (except that a notice of change of address shall
not be deemed to have been given until actually received by the addressee):
(a) If to the registered Holder of the Warrants,
to the address of such Holder as shown on the books of the
Company; or
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(b) If to the Company, to the address set forth
in Section 1 hereof or to such other address as the Company
may designate by notice to the Holders.
Section 12. Successors. All the covenants and provisions
of this Exhibit I shall be binding upon and inure to the benefit of the
Company, the Holders and their respective successors and assigns hereunder.
Section 13. Governing Law. This Exhibit I and each
Warrant shall be governed and construed in accordance with the laws of the
State of Florida applicable to contracts made and performed in the State of
Florida without giving effect to the principles of conflicts of law thereof.
Section 14. Entire Agreement; Modification. This Exhibit
I (including the Warrant Certificate and the Merger Agreement solely with
respect to registration rights) contains the entire understanding between the
parties hereto with respect to the subject matter hereof and may not be
modified or amended except by a writing duly signed by the party against whom
enforcement of the modification or amendment is sought.
Section 15. Severability. If any provision of this
Exhibit I shall be held to be invalid or unenforceable, such invalidity or
unenforceability shall not affect any other provision of this Exhibit I.
Section 16. Captions. The caption headings of the
Sections of this Exhibit I are for convenience of reference only and are not
intended to be, nor should they be construed as, part of this Exhibit I and
shall be given no substantive effect.
Section 17. Benefits of This Exhibit I. Nothing in this
Exhibit I shall be construed to give any person or corporation other than the
Company and the registered Holder(s) of the Warrant Certificates or Warrant
Shares any legal or equitable right, remedy or claim under this Exhibit I; and
this Exhibit I shall be for the sole and exclusive benefit of the Company and
any registered Holder(s) of the Warrant Certificates or Warrant Shares.
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Exhibit 3.5(c)
Form of Cohen, Engelmann, Villamil and Winter Warrants
<PAGE> 71
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE OR SECURITIES LAWS
AND NEITHER THE SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD,
TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT OR SUCH LAWS OR AN EXEMPTION
FROM REGISTRATION UNDER SUCH SECURITIES ACT AND SUCH LAWS WHICH, IN THE OPINION
OF COUNSEL FOR THE HOLDER, WHICH COUNSEL AND OPINION ARE REASONABLY
SATISFACTORY TO COUNSEL FOR THIS CORPORATION, IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH EXHIBIT I REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:30 P.M., MIAMI TIME, _______, ____
No. W-__________ __________ Warrants
WARRANT TO PURCHASE _________
SHARES OF ADVANCED ELECTRONIC
SUPPORT PRODUCTS, INC. COMMON
STOCK
WARRANT CERTIFICATE
THIS WARRANT CERTIFICATE certifies that __________, or
registered assigns, is the registered holder of Warrants (the "Warrants") to
purchase initially, at any time from the date hereof until 5:30 p.m., Miami
time, on _________, ____ ("Expiration Date"), up to the number of fully paid
and nonassessable shares of common stock, $.01 par value ("Common Stock") of
ADVANCED ELECTRONIC SUPPORT PRODUCTS, INC., a Maryland corporation (the
"Company") set forth above, at the initial exercise price, subject to
adjustment in certain events (the "Exercise Price"), of $____ per share of
Common Stock upon surrender of this Warrant 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 Exhibit I hereto. Payment of the Exercise
Price shall be made by certified or official bank check payable to the order of
the Company.
<PAGE> 72
No Warrant may be exercised after 5:30 p.m., Miami time, on
the Expiration Date, at which time all Warrants evidenced hereby, unless
exercised prior thereto, shall thereafter be void. If the Expiration Date
shall in the State of Florida be a holiday or a day on which banks are
authorized to close, then the Expiration Date shall mean 5:30 P.M., Miami Time,
the next following day which in the State of Florida is not a holiday or a day
on which banks are authorized to close.
The Warrants evidenced by this Warrant Certificate are part of
a duly authorized issue of Warrants issued pursuant to the Agreement and Plan
of Merger dated as of the date hereof (the "Merger Agreement"), between, among
other parties, the Company and the initial Holder hereof and subject to the
provisions of Exhibit I hereto, which Exhibit I 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 Warrants.
Exhibit I hereto provides that upon the occurrence of certain
events, the Exercise Price and the type 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
Warrant Certificate evidencing the adjustment in the Exercise Price and the
number and/or type of securities issuable upon the exercise of the Warrants;
provided, however, that the failure of the Company to issue such new Warrant
Certificates shall not in any way change, alter, or otherwise impair the rights
of the holder as set forth in Exhibit I.
Upon due presentment for registration of transfer of this
Warrant Certificate at an office or agency of the Company, a new Warrant
Certificate or Warrant Certificates of like tenor and evidencing in the
aggregate a like number of Warrants shall be issued to the transferee(s) in
exchange for this Warrant Certificate, subject to the limitations provided
herein and in Exhibit I, 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 Warrants evidenced
by this Certificate, the Company shall forthwith issue to the holder hereof a
new Warrant Certificate representing such number of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof
as the absolute owner(s) of this Warrant 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 Warrant Certificate which are defined
in Exhibit I hereto shall have the meanings assigned to them in Exhibit I
hereto.
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<PAGE> 73
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed under its corporate seal.
Dated as of
------------------------------
ADVANCED ELECTRONIC SUPPORT
PRODUCTS, INC.
By:
------------------------
Name:
----------------------
Title:
---------------------
Attest:
- --------------------------------------
, Secretary
- ------------------ ----------
-3-
<PAGE> 74
FORM OF ELECTION TO PURCHASE
TO: ADVANCED ELECTRONIC SUPPORT PRODUCTS, INC.
THE UNDERSIGNED hereby irrevocably elects to exercise the
right, represented by this Warrant Certificate, to purchase ________ shares of
Common Stock 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
to name of holder as specified on the face
of the Warrant Certificate.)
-------------------------------------------
(Insert Social Security or Other
Identifying Number of Holder)
-------------------------------------------
Signature Guarantee
-4-
<PAGE> 75
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate)
FOR VALUE RECEIVED ______________________ hereby sells, assigns and transfers
unto
- --------------------------------------------------------------------------------
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ________________ Attorney,
to transfer the within Warrant Certificate on the books of the within named
Company, with full power of substitution.
Dated:
-----------------
Signature__________________________________
(Signature must conform in all respects to
name of holder as specified on the face of
the Warrant Certificate.)
-------------------------------------------
(Insert Social Security or Other
Identifying Number of Assignee)
-------------------------------------------
Signature Guarantee
-5-
<PAGE> 76
EXHIBIT I
Section 1. Exercise of Warrant. The Warrants initially
are exercisable at an aggregate initial exercise price per share of common
stock, $.01 par value per share (the "Common Stock") of Advanced Electronic
Support Products, Inc. (the "Company") set forth in Section 3 hereof (subject
to adjustment as provided in Section 5 hereof) payable by certified or official
bank check. Upon surrender of a Warrant Certificate with the annexed Form of
Election to Purchase duly executed, together with payment of the Exercise Price
(as hereinafter defined) for the shares of Common Stock purchased at the
Company's principal offices in Florida (presently located at 1810 N.E. 144th
Street, North Miami, FL 33181), the registered holder of a Warrant Certificate
("Holder" or "Holders") shall be entitled to receive a certificate or
certificates for the shares of Common Stock so purchased. The purchase rights
represented by each Warrant Certificate are exercisable at the option of the
Holder thereof, in whole or in part (but not as to fractional shares of the
Common Stock underlying the Warrants). In the case of the purchase of less
than all the shares (the "Shares") of Common Stock purchasable under any
Warrant Certificate, the Company shall cancel said Warrant Certificate upon the
surrender thereof and shall execute and deliver a new Warrant Certificate of
like tenor for the balance of the shares of Common Stock purchasable
thereunder.
Section 2. Issuance of Certificates. Upon the exercise
of the Warrants, the issuance of certificates for shares of Common Stock or
other securities, properties or rights underlying such Warrants, shall be made
forthwith (and in any event within ten (10) business days thereafter) without
charge to the Holder thereof including, without limitation, any tax which may
be payable in respect of the issuance thereof, and such certificates shall be
issued in the name of, or in such names as may be directed by, the Holder
thereof; provided, however, that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the issuance
and delivery of any such certificates in a name other than that of the Holder
and the Company shall not be required to issue or deliver such certificates
unless or until the persons or persons requesting the issuance thereof shall
have paid to the Company the amount of such tax or shall have established to
the satisfaction of the Company that such tax has been paid.
The Warrant Certificates and the certificates representing the
Shares (and/or other securities, property or rights issuable upon the exercise
of the Warrants) shall be executed on behalf of the Company by the manual or
facsimile signature of the then present Chairman or Vice Chairman of the Board
of Directors or President or Vice President of the Company under its corporate
seal reproduced thereon, attested to by the manual or facsimile signature of
the then present Secretary or Assistant Secretary of the Company.
Section 3. Exercise Price.
3.1 Initial and Adjusted Exercise Price. Except as
otherwise provided in Section 5 hereof, the exercise price of each Warrant
shall be $_______ share of Common Stock. The
<PAGE> 77
adjusted exercise price shall be the price which shall result from time to time
from any and all adjustments of the initial exercise price in accordance with
the provisions of Section 5 hereof.
3.2 Exercise Price. The term "Exercise Price" as used
herein shall mean the initial exercise price or the adjusted exercise price,
depending upon the context.
Section 4. Registration Rights.
4.1 Securities Act of 1933 Legend. The Warrants, the
Shares and any of the other securities issuable upon exercise of the Warrants
have not been registered under the Securities Act of 1933, as amended (the
"Act"). Upon exercise of the Warrants, in part or in whole, the certificates
representing the Shares underlying the Warrants and any of the other securities
issuable upon exercise of the Warrants (collectively, the "Warrant Shares")
shall bear the following legend:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE OR SECURITIES LAWS
AND NEITHER THE SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD,
TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT OR SUCH LAWS OR AN EXEMPTION
FROM REGISTRATION UNDER SUCH SECURITIES ACT AND SUCH LAWS WHICH, IN THE OPINION
OF COUNSEL FOR THE HOLDER, WHICH COUNSEL AND OPINION ARE REASONABLY
SATISFACTORY TO COUNSEL FOR THIS CORPORATION, IS AVAILABLE.
4.2 Required Registration. The Holders of the Warrants
shall be entitled to the benefits of the registration rights with respect to
the Warrant Shares contained in Section 7.12(c) of the Merger Agreement. Said
Section 7.12(c) is hereby incorporated by reference in and made a part of this
Exhibit I as if fully set forth herein.
Section 5. Adjustments to Exercise Price and Number of
Shares.
5.1 Subdivision and Combination. In case the Company
shall at any time (i) subdivide the outstanding shares of Common Stock into a
larger number of shares, (ii) combine the outstanding shares of Common Stock
into a smaller number of shares, (iii) declare a dividend on the outstanding
shares of Common Stock payable in shares of Common Stock, or (iv) issue by
reclassification of its Common Stock any shares of its capital stock, the
Exercise 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 Exercise 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
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<PAGE> 78
denominator shall be the number of shares of Common Stock outstanding
immediately after such dividend, distribution, subdivision, combination or
reclassification. Such adjustment shall be made successively whenever any
event specified above shall occur.
5.2 Adjustment in Number of Shares. Upon each adjustment
of the Exercise Price pursuant to the provisions of this Section 5, the number
of Shares issuable upon the exercise of each Warrant shall be adjusted to the
nearest full share by multiplying a number equal to the Exercise Price in
effect immediately prior to such adjustment by the number of Warrant Shares
issuable upon exercise of the Warrants immediately prior to such adjustment and
dividing the product so obtained by the adjusted Exercise Price.
5.3 Definition of Common Stock. For the purpose of this
Agreement, the term "Common Stock" shall mean (i) the class of stock designated
as Common Stock in the Articles of Incorporation of the Company as may be
amended as of the date hereof, or (ii) any other class of stock resulting from
successive changes or reclassifications of such Common Stock consisting solely
of changes in par value, or from par value to no par value, or from no par
value to par value. In the event that the Company shall after the date hereof
issue Common Stock with greater or superior voting rights than the shares of
Common Stock outstanding as of the date hereof, the Holder, at its option, may
receive upon exercise of any Warrant either shares of Common Stock or a like
number of such securities with greater or superior voting rights.
5.4 Merger or Consolidation. (a) In case the Company
after the date hereof (i) shall consolidate with or merge into any other person
and shall not be the continuing or surviving corporation of such consolidation
or merger, or (ii) shall permit any other person to consolidate with or merge
into the Company and the Company shall be the continuing or surviving person
but, in connection with such consolidation or merger, the Common Stock shall be
changed into or exchanged for stock or other securities of any other person or
cash or any other property, or (iii) shall transfer all or substantially all of
its properties or assets to any other person, or (iv) shall effect a capital
reorganization or reclassification of the Common Stock (other than a capital
reorganization or reclassification resulting in the issue of additional shares
of Common Stock for which adjustment in the Exercise Price is provided in this
Section 5), then, and in the case of each such transaction, proper provision
shall be made so that, upon the basis and the terms and in the manner provided
in the Warrants, the Holders of the Warrants, upon the exercise thereof at any
time after the consummation of such transaction, shall be entitled to receive
(at the aggregate Exercise Price in effect at the time of such consummation for
all Common Stock issuable upon such exercise immediately prior to such
consummation), in lieu of the Common Stock or other securities issuable upon
such exercise prior to such consummation, the highest amount of securities,
cash or other property to which such Holders would actually have been entitled
as shareholders upon such consummation if such Holders had exercised the rights
represented by the Warrants immediately prior thereto, subject to adjustments
(subsequent to such consummation) as nearly equivalent as possible to the
adjustments provided for in this Section 5.
5
<PAGE> 79
5.5 Assumption of Obligations. Notwithstanding anything
contained in the Warrants to the contrary, the Company will not effect any of
the transactions described in clauses (i) through (iv) of Section 5.4 unless,
prior to the consummation thereof, each person (other than the Company) which
may be required to deliver any stock, securities, cash or property upon the
exercise of the Warrants as provided herein shall assume, by written instrument
delivered to the Holders of the Warrants, (a) the obligations of the Company
under the Warrants (including this Exhibit I) (and if the Company shall survive
the consummation of such transaction, such assumption shall be in addition to,
and shall not release the Company from, any continuing obligations of the
Company under this Exhibit I and the Warrants) and (b) the obligation to
deliver to such Holders such shares of stock, securities, cash or property as,
in accordance with the foregoing provisions of this Section 5, such Holders may
be entitled to receive, and such person shall have similarly delivered to such
Holders an opinion of counsel for such person stating that the Warrants
(including this Exhibit I) shall thereafter continue in full force and effect
and the terms hereof (including, without limitation, all of the provisions of
this Section 5) shall be applicable to the stock, securities, cash or property
which such person may be required to deliver upon any exercise of the Warrants
or the exercise of any rights pursuant hereto.
5.6 Dividends and Other Distributions. If, at any time
or from time to time after the date of this Warrant, the Company shall issue or
distribute to the holders of shares of Common Stock evidences of its
indebtedness, any other securities of the Company or any cash, property or
other assets (excluding a subdivision, combination or reclassification, or
dividend or distribution payable in shares of Common Stock, referred to in
Section 5.1, and also excluding cash dividends or cash distributions paid out
of net profits legally available therefor if the full amount thereof, together
with the value of other dividends and distributions made substantially
concurrently therewith or pursuant to a plan which includes payment thereof, is
equivalent to not more than 5% of the Company's net worth) (any such
non-excluded event being herein called a "Special Dividend"), the Exercise
Price shall be adjusted by multiplying the Exercise Price then in effect by a
fraction, the numerator of which shall be the then current market price of the
Common Stock (defined as the average for the thirty consecutive business days
immediately prior to the record date of the daily closing price of the Common
Stock as reported by the national securities exchange upon which the Common
Stock is then listed or if not listed on any such exchange, the average of the
closing prices as reported by the National Association of Securities Dealers,
Inc. Automated Quotations System ("NASDAQ") Stock Market's National Market, or
if not then listed on the NASDAQ National Market, the average of the highest
reported bid and lowest reported asked prices as reported by the NASDAQ, or if
not then publicly traded, as the fair market price as determined by the
Company's Board of Directors) less the fair market value (as determined by the
Company's Board of Directors) of the evidences of indebtedness, cash,
securities or property, or other assets issued or distributed in such Special
Dividend applicable to one share of Common Stock and the denominator of which
shall be such then current market price per share of Common Stock. An
adjustment made pursuant to this Section 5.6 shall become effective immediately
after the record date of any such Special Dividend.
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<PAGE> 80
5.7 Other Dilutive Events. In case any event shall occur
as to which the other provisions of this Section 5 are similar to, but not
strictly applicable but as to which the failure to make any adjustment would
not fairly protect the purchase rights represented by the Warrants (including
this Exhibit I) in accordance with the essential intent and principles hereof
then, in each such case, the Holders of a majority of all Warrants issued
simultaneously herewith may appoint a firm of independent public accountants of
recognized national standing reasonably acceptable to the Company, which shall
give their opinion as to the adjustment, if any, on a basis consistent with the
essential intent and principles established herein, necessary to preserve the
purchase rights represented by the Warrants (including this Exhibit I). Upon
receipt of such opinion the Company will promptly mail a copy thereof to the
Holders and shall make the adjustments described therein. The fees and
expenses of such independent public accountants shall be borne by the Company.
The issuance by the Company of shares of capital stock, including, without
limitation, shares of Common Stock, for consideration less than the Exercise
Price, or the issuance of convertible securities or derivative securities,
convertible into shares of capital stock at a conversion price or exercise
price less than the Exercise Price shall not be deemed an event that requires
an adjustment under this Section 5.7.
5.8 Notice of Adjustment Events. Whenever the Company
contemplates the occurrence of an event which would give rise to adjustments
under this Section 5, the Company shall mail to each Holder, at least thirty
(30) days prior to the record date with resect to such event or, if no record
date shall be established, at least thirty (30) days prior to such event, a
notice specifying (i) the nature of the contemplated event, (ii) the date of
which any such record is to be taken for the purpose of such event, (iii) the
date on which such event is expected to become effective and (iv) the time, if
any is to be fixed, when the holders of record of Common Stock shall be
entitled to exchange their shares of Common Stock for securities or other
property deliverable in connection with such event.
5.9 Notice of Adjustments. Whenever the Exercise Price
or the kind of securities or property issuable upon exercise of the Warrants,
or both, shall be adjusted pursuant to this Section 5, the Company shall make a
certificate signed by its President or a Vice President and by its Chief
Financial Officer, Secretary or Assistant Secretary, setting forth, in
reasonable detail, the event requiring the adjustment, the amount of the
adjustment, the method of which such adjustment was calculated (including a
description of the basis on which the Company made any determination
hereunder), and the Exercise Price and the kind of securities or property
issuable upon exercise of the Warrants after giving effect to such adjustment,
and shall cause copies of such certificate to be mailed (by first class mail
postage prepaid) to each Holder promptly after each adjustment.
5.10 Preservation of Rights. The Company will not, by
amendment of its Articles of Incorporation or through any consolidation,
merger, reorganization, transfer of assets, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of the Warrants (including this Exhibit I)
or the rights represented thereby, but will at all times in good faith assist
in the carrying out of all such
7
<PAGE> 81
terms and in the taking of all such action as may be necessary or appropriate
in order to protect the rights of the Holders of the Warrants against dilution
or other impairment.
5.11 When No Adjustment Required. No adjustment in the
Exercise Price shall be required unless such adjustment would require an
increase or decrease of at least $0.05 per share of Common Stock; provided,
however, that any adjustments which by reason of this Section 5.11 are not
required to be made shall be carried forward and taken into account in any
subsequent adjustment; provided further, however, that adjustments shall be
required and made in accordance with the provisions of this Section 5 (other
than this Section 5.11) not later than such time as may be required in order to
preserve the tax-free nature of a distribution to the Holders of the Warrants.
All calculations under this Section 5 shall be made to the nearest cent or to
the nearest 1/100th of a share, as the case may be. Anything in this Section 5
to the contrary notwithstanding, the Company shall be entitled to make such
reductions in the Exercise Price, in addition to those required by this Section
5, as it in its discretion shall deem to be advisable in order that any stock
dividend, subdivision of shares or distribution of rights to purchase stock or
securities convertible or exchangeable for stock hereafter made by the Company
to its shareholders shall not be taxable.
Section 6. Redemption.
6.1 At any time up to the Expiration Date and so long as
the shares of Common Stock issuable upon the exercise of this warrant are
registered for public sale under the Securities Act of 1933, as amended, the
Company may redeem the Warrants, at its option, upon thirty days' notice at a
price of $.01 per Warrant, at any time after the market price for the Common
Stock for the 20 consecutive days ending not more than 10 days prior to the
date that the notice of redemption is given equals or exceeds $10.80.
6.2 If the Company exercises its right to redeem the
Warrants, it shall mail, certified, return receipt requested, a notice of
redemption to the Holder of the warrants proposed for redemption, at such
holder's last address as shall appear on the records of the Company. Any
notice mailed in the manner provided herein shall be conclusively presumed to
have been duly given whether or not the Holder receives such notice. The
Company will use their reasonable best efforts to contact the holders of the
Warrants prior to the Redemption Date (as hereinafter defined).
6.3 The notice of redemption shall specify the redemption
price, date fixed for redemption, the place where the Warrant Certificate shall
be delivered and the redemption price shall be paid, and that the right to
exercise the Warrant shall terminate at 5:00 P.M. (Miami time) on the business
day immediately preceding the date fixed for redemption. The date fixed for
the redemption of the Warrants shall be the "Redemption Date."
6.4 Any right to exercise a Warrant shall terminate at
5:00 P.M. (Miami time) on the business day immediately preceding the Redemption
Date. On and after the Redemption Date, the Holder of the Warrants shall have
no further rights except to receive, upon surrender
8
<PAGE> 82
of the Warrant duly endorsed or accompanied by a written instrument or
instruments of redemption in form satisfactory to the Company, the redemption
price of $.01, without interest, per Warrant.
Section 7. Exchange and Replacement of Warrant
Certificates. Each Warrant Certificate is exchangeable without expense except
as provided below in this Section 7, upon the surrender thereof by the
registered Holder at the principal executive office of the Company, for a new
Warrant Certificate of like tenor and date representing in the aggregate the
right to purchase the same number of Warrant Shares in such denominations as
shall be designated by the Holder thereof at the time of such surrender.
Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of any Warrant
Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to it, and reimbursement to the Company of all
reasonable expenses incidental thereto, and upon surrender and cancellation of
the Warrants, if mutilated, the Company will make and deliver a new Warrant
Certificate of like tenor, in lieu thereof.
Section 8. Elimination of Fractional Interests. The
Company shall not be required to issue certificates representing fractions of
shares of Common Stock upon the exercise of the Warrants, nor shall it be
required to issue scrip or pay cash in lieu of fractional interests, it being
the intent of the parties that all fractional interests shall be eliminated by
rounding any fraction up to the nearest whole number of shares of Common Stock
or other securities, properties or rights.
Section 9. Reservation and Listing of Securities. The
Company shall at all times reserve and keep available out of its authorized
shares of Common Stock, solely for the purpose of issuance upon the exercise of
the Warrants, such number of shares of Common Stock or other securities,
properties or rights as shall be issuable upon the exercise thereof. The
Company covenants and agrees that, upon exercise of the Warrants and payment of
the Exercise Price therefor, all shares of Common Stock and other securities
issuable upon such exercise shall be duly and validly issued, fully paid,
nonassessable and not subject to the preemptive rights of any shareholder. As
long as the Warrants shall be outstanding, the Company shall use its best
efforts to cause all shares of Common Stock issuable upon the exercise of the
Warrants to be listed on all securities exchanges and/or included in the
automated quotation system of the NASDAQ Stock Market (subject to official
notice of issuance) with respect to which the Common Stock issued to the public
in connection herewith may then be so listed and/or quoted.
Section 10. Notices to Warrant Holders. Nothing
contained in this Exhibit I shall be construed as conferring upon the Holders
the right to vote or to consent or to receive notice as a shareholder in
respect of any meetings of shareholders for the election of directors or any
other matter, or as having any rights whatsoever as a shareholder of the
Company. If,
9
<PAGE> 83
however, at any time prior to the expiration of the Warrants and their
exercise, any of the following events shall occur:
(a) the Company shall take a record of the
holders of its shares of Common Stock for the purpose of
determining the holders thereof who are entitled to receive
any dividend or other distribution payable; or
(b) the Company shall offer to all the holders of
its Common Stock any additional shares of capital stock of the
Company or securities convertible into or exchangeable for
shares of capital stock of the Company, or any option, right
or warrant to subscribe therefor; or
(c) a voluntary or involuntary dissolution,
liquidation or winding-up of the Company (other than in
connection with a consolidation or merger) or any capital
reorganization, recapitalization or reclassification or a sale
of all or substantially all of its property, assets and
business as an entirety shall be proposed;
then, in any one or more of said events, the Company will mail to each Holder
of a Warrant a notice specifying (i) the date or expected date on which any
such record is to be taken for the purpose of such dividend, distribution or
right, and the amount and character of such dividend, distribution or right,
and (ii) the date or expected date on which any such reorganization,
reclassification, recapitalization, consolidation, merger, sale, dissolution,
liquidation or winding-up is to take place and the time, if any such time is to
be fixed, as of which the holders of record of Common Stock shall be entitled
to exchange their shares of Common Stock for the securities or other property
deliverable upon such reorganization, reclassification, recapitalization,
consolidation, merger, sale, dissolution, liquidation or winding-up. Such
notice shall be mailed at least thirty (30) days prior to the date therein
specified.
Section 11. Notices.
All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been duly given or
made at the time delivered by hand if personally delivered; five calendar days
after mailing if sent by registered or certified mail; when answered back, if
telexed; when receipt is acknowledged, if telecopied; and the next business day
after timely delivery to the courier, if sent by overnight air courier
guaranteeing next day delivery (except that a notice of change of address shall
not be deemed to have been given until actually received by the addressee):
(a) If to the registered Holder of the Warrants,
to the address of such Holder as shown on the books of the
Company; or
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<PAGE> 84
(b) If to the Company, to the address set forth
in Section 1 hereof or to such other address as the Company
may designate by notice to the Holders.
Section 12. Successors. All the covenants and provisions
of this Exhibit I shall be binding upon and inure to the benefit of the
Company, the Holders and their respective successors and assigns hereunder.
Section 13. Governing Law. This Exhibit I and each
Warrant shall be governed and construed in accordance with the laws of the
State of Florida applicable to contracts made and performed in the State of
Florida without giving effect to the principles of conflicts of law thereof.
Section 14. Entire Agreement; Modification. This Exhibit
I (including the Warrant Certificate and the Merger Agreement solely with
respect to registration rights) contains the entire understanding between the
parties hereto with respect to the subject matter hereof and may not be
modified or amended except by a writing duly signed by the party against whom
enforcement of the modification or amendment is sought.
Section 15. Severability. If any provision of this
Exhibit I shall be held to be invalid or unenforceable, such invalidity or
unenforceability shall not affect any other provision of this Exhibit I.
Section 16. Captions. The caption headings of the
Sections of this Exhibit I are for convenience of reference only and are not
intended to be, nor should they be construed as, part of this Exhibit I and
shall be given no substantive effect.
Section 17. Benefits of This Exhibit I. Nothing in this
Exhibit I shall be construed to give any person or corporation other than the
Company and the registered Holder(s) of the Warrant Certificates or Warrant
Shares any legal or equitable right, remedy or claim under this Exhibit I; and
this Exhibit I shall be for the sole and exclusive benefit of the Company and
any registered Holder(s) of the Warrant Certificates or Warrant Shares.
11
<PAGE> 85
Exhibit 7.3
Form of Consulting Agreement
<PAGE> 86
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (this "Agreement) is entered into as of this
_____ day of __________, 1996 by and between ADVANCED ELECTRONIC SUPPORT
PRODUCTS, INC., a Maryland corporation with its principal office at 1810 NE
144th Street, North Miami, Florida 33181 (the "Company); ADVANCED ELECTRONIC
SUPPORT PRODUCTS, INC., a Florida corporation with its principal office at 1810
NE 144th Street, North Miami, Florida 33181 ("AESP Florida"); and LEONARD J.
SOKOLOW, residing at __________________________________________________,
Florida ____________________ (the "Consultant").
W I T N E S S E T H:
WHEREAS, the Company, through its wholly-owned subsidiary AESP
Florida, is engaged in the distribution of products utilized in the operation
of computers (the "Business"); and
WHEREAS, the Company desires to engage the Consultant to render
services to the Company and AESP Florida in connection with its Business, and
Consultant desires to provide such services, on the terms and conditions set
forth below:
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, the receipt and sufficiency of which is hereby acknowledged
by the parties, the parties hereby agree as follows:
1. CONSULTING ENGAGEMENT. The Company agrees to engage the
Consultant to render consulting and advisory services in connection with the
Company's and AESP Florida's Business, and the Consultant accepts engagement
by the Company as a consultant, upon the terms and conditions set forth herein.
2. SERVICES. The Consultant shall perform such consulting and
advisory services primarily from South Florida pertaining to the Company's and
AESP Florida's Business as the Company shall from time to time reasonably
request, which services may include, without limitation, services in the
following areas:
(a) development of a strategy to increase revenue and brand
awareness among consumers;
(b) identification of the Company's weaknesses;
(c) capital raising and where appropriate provide introductions to
public relations companies, underwriters and other sources of
capital within the financial community;
(d) identification of potential acquisition targets; and
<PAGE> 87
(e) introductions to potential customers.
The items identified in (a) through (g) above do not represent specific tasks
to be performed by the Consultant, but rather, are broad objectives. The actual
services to be provided will be determined from time to time by the Company's
President and/or board of directors. Further, with respect to capital raising,
the Consultant will use his reasonable efforts to assist the Company in
obtaining financing, but cannot guaranty that the Company will be successful in
raising capital from sources introduced to the Company by the Consultant.
3. TERM. The term of this Agreement shall be for a period of one
(1) year commencing as of the Effective Time (as hereinafter defined), unless
such term is sooner terminated by either party upon 30 days' prior written
notice.
4. EFFECTIVE TIME. This Agreement, and all rights and
obligations thereto, shall only become effective as of the Effective Time of
the merger between the Company and AESP Florida, as that term is defined in the
Agreement and Plan of Merger between said parties, dated on or about the date
hereof.
5. COMPENSATION. So long as this Agreement remains in effect, as
compensation for the consulting services to be provided hereunder and in
consideration for, without limitation, the representations and covenants
provided by the Consultant hereunder, the Consultant shall be entitled to a
monthly fee in the amount of Two Thousand and No/100 ($2,000.00), payable in
arrears on the last business day of each month in accordance with normal
payment policies of the AESP Florida.
6. REIMBURSEMENT. The Company will reimburse the Consultant for
all reasonable out-of-pocket business expenses incurred by the Consultant in
connection with the performance of his services under this Agreement, so long
as such expenses have been approved by the Company in writing prior to their
being incurred. Notwithstanding the foregoing, the Company shall not be
obligated to pay as reimbursement for expenses the Consultant's ordinary course
expenses in connection with the operation of its business (i.e., such as a
portion of the rent for its office facilities).
7. GENERATION OF BUSINESS. The Company and the Consultant will
negotiate in good faith any additional compensation to be received by the
Consultant in connection with capital raising transactions brought to the
Company by the Consultant.
8. STATUS OF CONSULTANT. This Agreement calls for the
performance of services of the Consultant as an independent contractor and the
Consultant will not be considered an employee of the Company for any purpose.
The Consultant shall have no authority to act on behalf of or to bind the
Company in any manner whatsoever. The Consultant shall be solely responsible
for any and all federal, state or local filings and payments in connection with
payments made pursuant to this Agreement.
2
<PAGE> 88
9. SERVICE FOR OTHERS. The Consultant may, during the term of
this Agreement, perform services for any other person or firm, without the
Company's prior approval, provided the Consultant conducts himself in
accordance with the covenants set forth in Section 10 below, and provided such
other services do not interfere with the Consultant's performance of his duties
as required under this Agreement.
10. CONFIDENTIAL MATTERS. The Consultant agrees that during his
engagement as a consultant with the Company and subsequent to the termination
of his engagement as a consultant with the Company, he will not use for his own
account, or release or divulge or make known for any reason or purpose, any
information not otherwise publicly available whatsoever relating to the Company
or confidential information about the Company to any other person or persons
whatsoever without the prior written consent of the Company. The Consultant is
aware and acknowledges that he will have access to confidential information by
virtue of his engagement with the Company and he agrees to keep such
information confidential at all times. The type of confidential information
covered by this section shall include, but is not limited to, customer and
supplier lists (prospective, current, and former), financial information,
pricing information, marketing information, trade secrets, and proprietary
services, processes and products performed or provided by the Company to or for
customers or clients. Further, the Consultant agrees not to use for himself or
for any person, corporation or other entity the Company's confidential
information. Notwithstanding the foregoing, any information which (i) the
Company provides and which is in the public domain prior to disclosure
hereunder, (ii) was known by the Consultant prior to disclosure, or (ii) is
required to be disclosed under applicable law, shall not be deemed
"confidential" for purposes of this Agreement
11. DOCUMENTS AND INFORMATION. The Consultant agrees that
following the termination of the consulting engagement with the Company
pursuant this Agreement, he will immediately deliver and surrender to the
Company all materials of any nature relating to the Company in his possession.
12. INJUNCTION WITHOUT BOND. In the event there is a breach by
the Consultant of the provisions of Sections 10 or 11 hereof, the Company shall
be entitled to a temporary and permanent injunction without bond to restrain
the Consultant from engaging in the activities prohibited in Sections 10 or 11
above, and the Company will be entitled to reimbursement for all costs and
expenses, including reasonable attorneys' fees, in connection therewith.
13. INDEMNIFICATION
(a) The Consultant agrees to indemnify and hold harmless the
Company, including without limitation, the Company's agents, members of its
Board of Directors, officers and employees from any and all liability, losses,
claims, damages, costs, causes of action, judgments or settlements arising
therefrom, including reasonable attorneys' fee caused or asserted to be caused,
directly or indirectly, by or as a result of any breach of the terms of this
Agreement by the Consultant, gross negligence, or intentional acts or omissions
of the Consultant in the performance of his duties hereunder.
3
<PAGE> 89
(b) The Company agrees to indemnify and hold harmless the
Consultant from any and all liability, losses, claims, damages, costs, causes
of action, judgments or settlements arising therefrom, including reasonable
attorneys' fee caused or asserted to be caused, directly or indirectly, by or
as a result of any breach of the terms of this Agreement by the Company, or
caused by gross negligence or intentional acts or omissions by the officers,
directors or employees of the Company.
14. GENERAL PROVISIONS.
(a) No Assignment; Binding Nature of Agreement. The Consultant
may not at any time assign this Agreement nor any right or interest hereunder.
This Agreement shall be binding upon and inure to the benefit of the parties
hereto, the Consultant's legal representatives and the Company's successors and
assigns.
(b) The Term "Company". For purposes of this Agreement, the term
"Company" shall, were appropriate, mean and include subsidiaries, parents and
affiliated companies of the Company in existence from time to time.
(c) Notices. All notices, requests, claims, demands, and other
communications under this Agreement shall be in writing and shall be deemed to
have been given or made upon the earliest to occur of: (a) receipt, if made by
personal service, (b) to (2) days after dispatch if made by reputable overnight
courier service, (c) upon the delivering party's receipt of a written
confirmation of a transmission made by cable, by telecopy, by facsimile, by
telegram or by telex, or (d) seven (7) days after being mailed by registered
mail (postage prepaid, return receipt requested) to the respective parties at
the addresses on the face of this Agreement.
(d) Entire Agreement; No Amendments. This Agreement together with
any attached schedules, exhibits and other documents delivered pursuant hereto,
constitute the entire agreement of the parties and supersede all prior
agreements and undertakings, both written and oral, between the parties, or any
of them, with respect to the subject matter hereof. This Agreement may not be
changed, modified, extended, renewed or supplemented and no provision hereof
may be waived, except by an instrument in writing signed by the party against
whom enforcement of any change, modification, extension, renewal, supplement or
waiver is sought.
(e) Governing Law; Severability. This Agreement shall be governed
by and construed in accordance with the laws of the State of Florida. The
invalidity of any portion of this Agreement shall not affect the enforceability
of the remaining portions of this Agreement or any part thereof, all of which
are inserted herein conditionally on their being valid in law. In the event
that any portion or portions contained herein shall be invalid, this Agreement
shall be construed so as to make such portion or portions valid or, if such
construction is not legally possible, as is such invalid portion or portions
shad not been inserted.
(f) Waiver. Failure to insist upon strict compliance with any of
the terms, covenants or conditions hereof shall not be deemed a waiver or
relinquishment of any such terms, covenants or
4
<PAGE> 90
conditions, nor shall any waiver or relinquishment of any right or power
hereunder at any one time or more times be deemed a waiver or relinquishment of
such right or power at any other time or times.
(g) Attorneys' Fees; Jurisdiction and Venue. Should it become
necessary for any party to institute legal action to enforce the terms and
conditions of this Agreement, the successful party will be awarded reasonable
attorneys' fees at all trial and appellate levels, expenses and costs. Any
suit, action or proceeding with respect to this Agreement shall be brought in
the courts of Dade County in the State of Florida or in the U.S. District Court
for the Southern District of Florida. The parties hereto hereby accept the
exclusive jurisdiction of those courts for the purpose of any such suit, action
or proceeding. Venue for any such action, in addition to any other venue
permitted by statute, will be Dade County, Florida. The parties hereto hereby
irrevocably waive, to the fullest extent permitted by law, any objection that
any of them may now or hereafter have to delaying of venue of any suit, action
or proceeding arising out of or relating to this Agreement or any judgment
entered by any court in respect thereof brought in Dade County, Florida, and
hereby further irrevocably waive any claim that any such suit, action or
proceeding brought in Dade County, Florida has been brought in an inconvenient
forum.
(h) Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
(i) 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.
5
<PAGE> 91
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date written above.
ADVANCED ELECTRONIC SUPPORT
PRODUCTS, INC., A MARYLAND CORPORATION
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
ADVANCED ELECTRONIC SUPPORT
PRODUCTS, INC., A FLORIDA CORPORATION
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
----------------------------------------
LEONARD J. SOKOLOW
6
<PAGE> 92
EXHIBIT 7.4
Form of Non-Compete Agreement
<PAGE> 93
NON-COMPETITION AGREEMENT
THIS NON-COMPETITION AGREEMENT ("Agreement") is entered into as of the
_____ day of ________________, 1996 between THE AMERICAS GROWTH FUND, INC., a
Maryland corporation ("Corporation") and LEONARD J. SOKOLOW ("Sokolow").
RECITALS:
A. Corporation employed Sokolow as its Chairman of the Board,
President and Portfolio Manager pursuant to the terms of that certain
Employment Agreement between Corporation and Employee, dated August 30, 1994;
B. Corporation has decided to enter into a reverse triangular
merger with Advanced Electronic Support Products, Inc, and AESP and has
terminated Sokolow's employment pursuant to the terms of that certain Severance
Agreement of even date herewith;
C. Sokolow has extensive experience regarding U.S., Europe, Latin
America and Far East distribution, sale and sourcing of consumer appliances,
consumer electronics and technology products and has extensive knowledge
regarding the computer software and high-tech industries in the U.S., Europe,
Latin America and the Far East; and
D. Corporation wishes to ensure that Sokolow does not compete
with Corporation or AESP for a certain period of time and believes it advisable
for the Corporation to pay compensation to Sokolow to achieve that end.
NOW, THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged by Corporation and Sokolow, Corporation and
Sokolow agree as follows:
1. Recitals. The above recitals are true and correct.
2. Non-Competition. During the Restricted Period (as hereinafter
defined), Sokolow shall not, directly, or indirectly, alone or as a partner,
officer, director, employee, consultant, agent, independent contractor, member
or stockholder of any company or business organization, engage in any business
activity in the Restricted Area (as hereinafter defined), which is directly or
indirectly in competition with the products or services being provided,
developed, manufactured, marketed, sold, or otherwise provided by Corporation
or by any of its subsidiaries, including AESP (collectively, unless the context
otherwise requires, the "Corporation"). Furthermore, during the Restricted
Period, Sokolow shall not in any capacity, either separately or in association
with others, directly or indirectly, do any of the following: (a) recruit,
solicit, induce or otherwise influence any of Corporation's employees,
consultants, agents, suppliers, customers, bankers, investment bankers or
prospects that were such with respect to Corporation at any time prior to or
during the Restricted Period to discontinue, reduce or modify such relationship
with Corporation; or (b) employ or seek to employ any person or agent who is
then employed or retained by Corporation (or who was so employed or retained at
any time within the two (2) year period prior to the date Sokolow employs or
seeks to employ such person). For
<PAGE> 94
purposes of this Agreement, Restricted Period shall mean the period of five (5)
years from the date hereof. For purposes of this Agreement, "Restricted Area"
means the entire world.
3. Compensation. Contemporaneous with the signing of this
Agreement, and in consideration of the restrictive covenants agreed to by
Sokolow hereunder, Corporation shall pay to Sokolow the sum of $925,000,
representing $185,000 per year for the 5 year Restricted Period. Corporation
shall pay such funds to Sokolow by wire transfer of immediately available
funds.
4. Standstill Agreement. During the Restricted Period and except
with regard to the exercise of options, Sokolow shall not: (a) directly or
indirectly (as either part of a group or with respect to any entity in which he
has a direct or indirect interest) acquire any Corporation securities; or (b)
provide any information, encouragement or financial support to any person or
entity for the purpose of causing such person or entity to acquire Corporation
securities.
5. Enforcement.
(a) In the event of an actual or threatened breach by
Sokolow of any of the covenants contained herein, Corporation shall be entitled
to an injunction restraining Sokolow from the prohibited conduct. If a court
of competent jurisdiction should hold that the duration and/or scope
(geographic or otherwise) of the covenants contained herein are unreasonable,
then, to the extent permitted by law, the court may prescribe a duration and/or
scope (geographic or otherwise) that is reasonable, and the parties agree to
accept such determination, subject to their rights of appeal. Nothing herein
stated shall be construed as prohibiting Corporation or any third party from
pursuing any other remedies available to it for such breach or threatened
breach, including the recovery of damages from Corporation. In any action or
proceeding to enforce the provisions of this Agreement, the prevailing party
shall be reimbursed by the other party for all costs incurred in such action or
proceeding including, without limitation, all court costs and filing fees, and
all reasonable attorneys' fees, incurred either at the trial level or at the
appellate level.
(b) The existence of any claim or cause of action by
Sokolow against Corporation, unless predicated upon a breach of this Agreement
by Corporation, shall not constitute a defense to the enforcement by
Corporation of the foregoing restrictive covenants.
6. Governing Law and Litigation. This Agreement shall be
governed by and construed in accordance with the laws of the State of Florida.
Any proceeding or action arising out of this Agreement shall be commenced in
the Florida state courts located in Dade County or, if federal jurisdiction
exists, in the federal courts located in the Southern District of Florida.
Both Corporation and Sokolow consent to such jurisdiction, agree that venue
will be proper in such courts and waive any objection based on "forum non
conveniens." The choice of forum set forth in this Section 6 shall not
preclude the bringing of an action in any other appropriate jurisdiction for
purposes of enforcing any judgement rendered hereunder.
7. Waiver. The waiver by Corporation of any breach of any
provision of this Agreement by Sokolow shall not operate or be construed as a
waiver of any subsequent breach by Sokolow.
<PAGE> 95
8. Binding Effect and Assignment. This Agreement shall be
binding upon the parties, their heirs, personal representatives, successors and
assigns.
9. Severability. None of the provisions of this Agreement is
dependent upon the validity of any other provision and the invalidity,
illegality or unenforceability, in whole or in part, of any provision shall not
affect any other provision herein contained.
10. Amendment. This Agreement may not be changed orally but only
by an agreement in writing signed by the parties against whom enforcement of
any waiver, change, modification, extension or discharge is sought.
11. Headings. The headings contained herein are for reference
purposes only and shall be without substantive meaning.
12. Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, and such counterparts, taken
together, shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
THE AMERICAS GROWTH FUND, INC.
a Maryland corporation
<TABLE>
<S> <C>
By:
------------------------------------------------ -------------------------------------------------------------
Name: Leonard J. Sokolow
----------------------------------------------
Title:
---------------------------------------------
</TABLE>
<PAGE> 96
Exhibit 7.5
Form of Severance Agreement
<PAGE> 97
SEVERANCE AGREEMENT
THIS AGREEMENT is entered into on the day of ____________ 1996
between THE AMERICAS GROWTH FUND, INC., a Maryland corporation
("Corporation"), and LEONARD J. SOKOLOW ("Employee").
RECITALS:
A. Corporation agreed to employ Employee as its Chairman of the
Board, President and Portfolio Manager for an initial period of three years,
with automatic renewals, pursuant to the terms of that certain Employment
Agreement between Corporation and Employee, dated August 30, 1994 (the
"Employment Agreement");
B. Corporation has decided to enter into a reverse triangular merger
with Advanced Electronic Support Products, Inc, and as a result of such merger
Employee's services as Chairman of the Board, President and Portfolio Manager,
will no longer be needed and therefore Corporation and Employee have decided
to terminate the Employment Agreement;
C. Corporation is grateful for the exceptional services already
rendered by Employee to Corporation and wishes to reward Employee for his
efforts as well as to compensate Employee for the loss of compensation and
benefits to which the Employee is entitled under the Employment Agreement.
D. At the time of the proposed merger, approximately a three year
employment period will remain pursuant to the terms of the Employment
Agreement.
NOW THEREFORE, for good and valuable consideration, the receipt of which
is acknowledged by Corporation and Employee, Corporation and Employee agree as
follows:
1. Recitals. The above recitals are true and correct.
2. Termination of Employment Agreement. The Employment Agreement is
terminated as of the date hereof and neither party has, or will have, any
right, liability or obligation arising from the Employment Agreement.
3. Severance Compensation. Contemporaneous with the signing of this
Agreement and to reward Employee for the exceptional efforts which Employee
has made on behalf of Corporation and to compensate Employee for the loss of
compensation and benefits resulting from the termination of the Employment
Agreement, Corporation shall pay Employee the following severance compensation
by wire transfer of immediately available funds:
(a) $350,000 in cash, as compensation for Employee's loss of
three year's salary under the Employment Agreement;
(b) $620,000 in cash, as compensation for Employee's loss of
three year's Performance Award, based on the Profit Sharing Plan of the
Corporation, which Employee is
<PAGE> 98
entitled to receive under Section 7 of the Employment Agreement and
which is otherwise available for distribution pursuant to such Profit
Sharing Plan; and
(c) the office and computer equipment listed on Exhibit "A"
hereto.
4. Resignation. Employee hereby resigns from his positions as
Chairman of the Board, President and Portfolio Manager of the Corporation,
effective as of the date hereof.
5. Release by Employee. Employee hereby fully releases Corporation
and all present and past officers, directors, employees and agents of
Corporation (collectively, the "Released Parties") from any claim, liability,
expense, money owed, judgement, action or cause of action that he has against
the Released Parties from the beginning of time to the date of this Agreement.
This release specifically excludes: (a) the rights and obligations of the
parties under this Agreement, the Consulting Agreement, and the Non-
Competition Agreement, each of even date herewith; and (b) any criminal act or
fraudulent act or omission by Corporation or any of the Released Parties.
6. Release by Corporation. Corporation hereby fully releases
Employee from any claim, liability, expense, money owed, judgement, action or
cause of action that it has against Employee from the beginning of time to the
date of this Agreement. This release specifically excludes: (a) the rights
and obligations of the parties under this Agreement, the Non-Competition
Agreement and Trust Agreement, each of even date herewith; and (b) any
criminal act or fraudulent act or omission by Employee.
7. Indemnity by Corporation. To the maximum extent permitted under
Maryland law, Corporation shall indemnify and defend Employee against any
action brought against Employee as a result of Employee's performance of his
duties for Corporation if such duties were performed by Employee: (a) in good
faith; (b) in a manner Employee reasonably believed to be in the best
interests of Corporation; and (c) as an officer, director or employee of
Corporation. On the date hereof, Corporation's senior executives are unaware
of any action taken by Employee in performing his duties for Corporation, that
was not performed in good faith or in a manner not reasonably believed by
Employee to be in the best interests of Corporation.
8. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Florida.
9. Remedies and Waivers. If a party is in breach of any provision of
this Agreement, the non-breaching party shall be entitled to pursue all
remedies available to the non-breaching party for such breach, including, but
not limited to, the recovery of damages and injunctive relief. The waiver by
either party hereto of any breach of any provision of this Agreement shall not
operate or be construed as a waiver of any subsequent breach by either party
hereto.
10. Binding Effect and Assignment. This Agreement shall be binding
upon the parties, their heirs, personal representatives, successors and
assigns.
2
<PAGE> 99
11. Severability. None of the provisions of this Agreement depend on
the validity of any other provision and the invalidity, illegality or
unenforceability, in whole or in part, of any provision shall not affect any
other provision herein contained.
12. Entire Understanding. This Agreement contains the entire
understanding of the parties relating to the severance of Employee's
employment by Corporation. It may not be changed orally but only by agreement
in writing signed by the party against whom enforcement of any waiver, change,
modification, extension or discharge is sought.
13. Headings. The headings contained herein are for reference
purposes only and shall be without substantive meaning.
14. Counterparts. This Agreement may be executed in identical
counterparts, each of which shall be deemed an original, and such
counterparts, taken together, shall constitute one and the same instrument.
15. Authority. Corporation warrants that it is a corporation in good
standing organized under and by virtue of the laws of the State of Maryland.
The representative of Corporation executing this Agreement has been duly
authorized to sign this Agreement, and all necessary and proper action has
been taken by the Corporation in order that the Corporation may enter into
this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written.
THE AMERICAS GROWTH FUND, INC.
a Maryland corporation
By:
--------------------------------- ------------------------------------
Name: Leonard J. Sokolow
-------------------------------
Title:
------------------------------
3
<PAGE> 100
Exhibit 7.6
Form of Employment Agreements
<PAGE> 101
EMPLOYMENT AGREEMENT
BY AND BETWEEN
ADVANCED ELECTRONIC SUPPORT PRODUCTS, INC.
(THE "COMPANY")
AND
-----------------
(THE "EXECUTIVE")
DATED:
JULY ___, 1996
<PAGE> 102
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
1. Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Employment Term, Duties and Acceptance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
3. Compensation and Benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(a) Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(b) Insurance and Reimbursement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(c) Automobile Allowance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(d) Expense Reimbursement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(e) Vacation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(f) Life Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4. Term and Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(a) Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(b) Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(c) Change in Control Without Board Approval. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(d) Change in Control With Board Approval. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(e) Change in Control Benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(f) Change in Control Defined . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(g) Exercise in Change in Control. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
5. Nondisclosure of Confidential Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(a) Non-Disclosure and Non-Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(b) Return of Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(c) Inventions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(d) Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(e) Proprietary Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(f) Specific Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(g) Survival of Section . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
6. Agreement Not-to-Compete . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
7. Key-Man Life Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
8. General Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(a) No Assignment; Binding Nature of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 9
(b) The Term "Company" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(c) Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(d) Entire Agreement; No Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(e) Governing Law; Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>
i
<PAGE> 103
<TABLE>
<S> <C> <C>
(f) Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(g) Attorneys' Fees; Jurisdiction and Venue . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(h) Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(i) Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>
ii
<PAGE> 104
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and effective
this ____ day of ___________, 1996, by and between ADVANCED ELECTRONIC SUPPORT
PRODUCTS, INC., a corporation organized under the laws of the State of
Maryland, having its principal office at 1810 N.E. 144th Street, North Miami,
Florida 33181 (the "Company"), and __________________, residing at
_________________________, _____________, Florida _____ (the "Executive").
W I T N E S S E T H
WHEREAS, the Company, through its wholly-owned subsidiary, Advanced
Electronic Support Products, Inc., a Florida corporation ("AESP Florida"), is
engaged in the distribution of products utilized in the operation of computers;
and
WHEREAS, the Company is desirous of employing the Employee, and the
Employee is desirous of being employed by the Company, in accordance with the
terms and conditions contained hereinafter.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, the receipt and sufficiency of which is hereby acknowledged
by the parties, the parties hereby agree as follows:
1. Employment. The Company hereby agrees to employ the Employee,
and the Employee agrees to be employed by the Company and by AESP Florida, in
accordance with and pursuant to the terms and conditions set forth below.
2. Employment Term, Duties and Acceptance.
(a) The Company shall employ the Executive, for the
Employment Period, as defined in Section 4 below, as an executive to perform
such executive and managerial duties as are associated with his positions with
the Company and AESP Florida as may, from time to time, be assigned to the
Executive by the Company's Board of Directors. The Executive shall devote his
full time and attention to his duties and to use his best efforts in and to the
faithful performance of his duties hereunder, subject to the general direction
and control of the Board of Directors of the Company.
(b) The Executive hereby agrees to contribute his best
skills and services at all times to the Company and AESP Florida. The
Executive agrees to diligently and competently perform the duties and
responsibilities assigned to him by the Board of Directors of the Company. The
Executive shall work full-time for the Company.
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(c) The Executive hereby agrees to abide by all
reasonable rules and regulations established by the Board of Directors of the
Company and such restrictions, if any, applicable to the Executive which may,
from time to time, be set forth in the Company's Articles of Incorporation and
Bylaws.
3. Compensation and Benefits.
(a) Compensation. As compensation for all duties to be
rendered by the Executive hereunder, the Company agrees to pay to the Executive
during the Employment Period and hereby grants to the Executive the following:
(i) A salary (the "Annual Salary") at the rate of
One Hundred Twenty Five Thousand Dollars ($125,000.00) per annum. The
Annual Salary shall increase on each anniversary date of the
commencement of the Employment Period, by an amount equal to ten
percent (10%) of the prior year's Annual Salary plus the increase in
the Consumer Price Index, but in no event greater than an amount which
exceeds twenty percent (20%) of the prior year's Annual Salary.
Consumer Price Index as used herein shall mean the Consumer Price
Index shown on the U.S. City Average for all urban consumers,
unadjusted, all items, as promulgated by the Bureau of Labor
Statistics of the U.S. Department of Labor, using the year 1967 as the
base of 100. In the event that the Consumer Price Index referred to
herein ceases to incorporate a significant number of the items as
currently set forth therein, or if a substantial change is made in the
method of establishing said Consumer Price Index, then the Consumer
Price Index shall be adjusted to the figure that would have resulted
had no change occurred in the manner of computing the Consumer Price
Index. In the event that the Consumer Price Index is not available,
then the Board of Directors may select, in its discretion, another
index which measures the cost of living increases in a manner similar
to the Consumer Price Index or may, in its sole discretion, otherwise
determine the annual increase in the Executive's Annual Salary, but in
no event greater than an amount which exceeds twenty percent (20%) of
the Executive's prior year's Annual Salary.
(ii) An annual bonus (the "Annual Bonus") at least
equal to five percent (5%) of the pre- tax net income of the Company
in each fiscal year. The Annual Bonus shall not exceed an amount
which is equal to three hundred percent (300%) of the prior year's
Annual Salary for any one year. The Annual Bonus shall be paid to
Executive upon completion of each annual audit of the Company, and
shall be calculated without taking the Annual Bonus of the Executive
into account. If any annual audit shall be less than for a full year,
then the aforesaid figures shall be determined and paid on a pro-rata
basis.
(b) Insurance and Reimbursement. The Executive shall be
eligible, subject to the terms and conditions of each plan or program, to
participate, at the expense of the Company, in such group medical, health,
accident, disability and life insurance and medical reimbursement programs as
are made generally available from time to time by the Company to other senior
executives and
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such other fringe benefit programs, including, but not limited to, retirement
plans and deferred compensation, which may be adopted by the Company from time
to time.
(c) Automobile Allowance. The Company shall provide the
Executive with an automobile allowance of $500 per month.
(d) Expense Reimbursement. The Company shall reimburse
the Executive for his reasonable out-of pocket expenses and costs incurred in
connection with the performance of his services hereunder, upon presentation of
proper vouchers and documentary support therefor in accordance with the
Company's usual and customary practices and procedures.
(e) Vacation. During the term of this Agreement, the
Executive shall be entitled to four weeks of paid vacation time per year. The
time or times at which the Executive will be permitted to take such vacation
time shall be determined by the mutual agreement of the Company and the
Executive. Vacation time not taken by fiscal year end may be accumulated and
used not more than one year from the end of such fiscal year.
(f) Life Insurance. The Company shall provide the
Executive, at the Company's expense, with One Million and no/100 Dollars
($1,000,000) of term life insurance (the "Policy") on the life of the Executive
naming such beneficiaries thereunder as the Executive shall designate. If the
Policy permits, the Executive, upon his leaving the employment of the Company,
shall have the right to purchase or otherwise acquire said term life insurance
Policy pursuant to the terms and conditions stated in the Policy.
4. Term and Termination.
(a) Term. Unless sooner terminated pursuant to the
provisions of this Section 4, the initial term of this Agreement shall be a
period of five (5) years commencing the date hereof (the "Employment Period").
Thereafter, unless sooner terminated pursuant to the provisions of this Section
4, this Agreement shall continue for successive one year terms, unless either
party cancels the Agreement by written notice to the other party of their
intent to cancel. In order to be effective, notices of intent to cancel must be
delivered to the other party not later than 90 days prior to any anniversary
date of this Agreement. For example, assuming employment hereunder commenced on
July 1, 1996, if the Company were to seek to cancel such employment effective
December 31, 2001, it would have to notify Executive of its decision by not
later than October 1, 2001.
(b) Termination. Notwithstanding anything contained
herein to the contrary, the Company shall have the right to terminate this
Agreement and the Executive's employment hereunder at any time for Cause (as
defined hereafter). For purposes of this Agreement, "Cause" means the
following:
(i) a material breach or violation by the
Executive of any provision of this Agreement or the failure of the
Executive to materially perform his duties or responsibilities
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hereunder (unless said material default is caused by a physical or
mental infirmity or disability which renders Executive incapable of
performing the customary duties for which Executive was employed)
after the Executive has been given at least thirty (30) days prior
written notice together with an opportunity to cure said breach,
violation or failure during such thirty (30) day period; or
(ii) actions by the Executive constituting fraud
and/or embezzlement; or
(iii) in the event that Executive becomes
incapable, for more than a four (4) month period, of performing the
customary duties for which Executive was employed due to a physical or
mental infirmity or disability, or as a result of Executive's death.
The right of the Company to so terminate this Agreement and
Executive's employment hereunder pursuant to this Section 4(b) shall be
exercisable by the Company upon the giving of written notice to the Executive
specifying the grounds for such termination. Such termination shall be
effective upon the giving of such written notice by the Company subject to the
cure period provided in this Section 4. Except as set forth in the next
sentence, if the Executive is terminated for Cause, the Executive shall be only
be compensated through the date of his termination and the provisions set forth
in Sections 5 and 6 hereof shall remain in full forge and effect. If the
Executive's termination is the result of the happening of an event under
subsection (iii) above, then notwithstanding the termination of this Agreement
for Cause, the Company shall pay to the Executive, or to the estate of the
Executive, an amount equal to the Executive's Annual Salary for the twenty-four
(24) month period subsequent to Executive's termination of Employment. The
provisions of this subsection shall survive the termination of this Agreement.
(c) Change in Control Without Board Approval. In the
event of a Change in Control (as defined hereafter) of the Company, and such
Change in Control has not been approved prior to such Change of Control by the
Company's Board of Directors, the Executive may, at any time within the three
(3) month period following the date of such Change in Control, terminate this
Agreement and his employment hereunder if, in his sole discretion, he
reasonably determines that such Change in Control would be a material detriment
to his ability to effectively render services to the Company hereunder. In the
event that the Executive terminates this Agreement and his employment hereunder
pursuant to and in accordance with this Section 4(c), the Executive shall
receive the sum of One Million and no/100 Dollars ($1,000,000), payable within
60 days following the date of such termination, without having to fulfill his
obligations or perform his duties hereunder, and, in such event, the Executive
shall also be released from any and all restrictive covenants contained herein
during the Employment Period. Further, when the Executive terminates his
employment with the Company pursuant to and in accordance with Section 4(c) any
unvested stock options granted to the Executive by the Company pursuant to this
Agreement or pursuant to any other agreements shall automatically become
vested.
(d) Change in Control With Board Approval. In the event
of a Change in Control of the Company, and such Change in Control has been
approved prior to such Change in Control by
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the Company's present Board of Directors, the Executive may, at any time within
the three (3) month period following the date of such Change in Control,
terminate this Agreement and his employment hereunder if, in his sole
discretion, he reasonably determines hat such change in Control would be a
material detriment to his ability to effectively render services to the Company
hereunder. In the event that the Executive terminates this Agreement and his
employment hereunder pursuant to and in accordance with this Section 4(d), the
Executive shall receive a sum equal to the Executive's Annual Salary for the
preceding year, payable within 60 days following the date of such termination.
If the Executive terminates this Agreement pursuant to this Section 4(d), any
unvested stock options granted to the Executive by the Company pursuant to any
other agreements shall automatically vest on a pro rata basis proportional to
the ratio of (i) the time period in which the Executive was employed by the
Company pursuant to this Agreement and (ii) the Employment Period. For example,
if the Executive was employed by the Company for three (3) years, the ratio of
the time period in which the Executive was employed by the Company pursuant to
this Agreement to the Employment Period would be sixty percent (60%). In this
example, if the Executive were to terminate his employment with the Company
pursuant to this Section 4(d), sixty percent (60%) of the Executive's stock
options would automatically become vested, to the extent not already vested.
(e) Change in Control Benefits. In addition, upon a
Change in Control, the Company shall remain obligated to keep all benefits
available and paid to the Executive as if he will still an employee (i) for a
period of two years from the date that the Executive terminates his employment
with the Company pursuant to Section 4(c) of this Agreement or (ii) for a
period of one year from the date that the Executive terminates his employment
with the Company pursuant to Section 4(d) of this Agreement. In the event that
the Executive's participation in such benefit programs is barred by any such
plans or programs, the Company shall arrange to provide Executive with
substantially similar benefits. Further, Executive shall not be required to
mitigate the amount of any payment provided by this Section 4 by seeking other
employment or otherwise nor shall the amount of any payment provided pursuant
to this Section 4 be reduced by any compensation earned or received by Employee
from any source, including without limitation compensation received as a result
of other employment.
(f) Change in Control Defined. For purposes of Sections
4(c), 4(d) and 4(e), "Change in Control" shall mean a change in control of a
nature that would be required to be reported in response to Item 6(e) of
Schedule 14(a) of Regulation 14A promulgated under the Securities Exchange Act
of 1934, as amended from time to time (the "Exchange Act"); provided that,
without limitation, a Change in Control shall be deemed to have occurred if:
(i) any "person" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act and excluding from such definition Slav Stein and Roman
Briskin), directly or indirectly, of securities of the Company representing 20%
or more of the combined voting power of the Company's then outstanding
securities; or (ii) individuals who, on the effective date of this Agreement,
constitute the Board of Directors cease for any reason to constitute at least a
majority thereof unless the election, or the nomination for election by the
Company's stockholders, of each new director was approved by a vote of at least
two-thirds of the directors then still in office who were directors as of the
effective date of this Agreement.
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(g) Exercise in Change in Control. The right of the
Executive to terminate this Agreement and the Executive's employment hereunder
pursuant to Section 4(c) or Section 4(d) shall be exercisable by the Executive
upon delivery of written notice to the Company specifying the grounds for such
termination.
5. Nondisclosure of Confidential Information.
The Executive hereby acknowledges and agrees that the duties
and services to be performed by the Executive hereunder are special and unique
and that, by reason of and/or as a result of his employment hereunder, the
Executive will acquire, make sue of and/or add to confidential information of a
special and unique nature and value relating to certain records, secrets,
documentation, ledgers and general information, accounts receivable and payable
ledgers, customer lists, prospective customer lists, financial and other
records of and/or with respect to the Company, its subsidiaries and affiliates,
customers and other similar matters (all such information, together with that
certain information described herein, being hereinafter referred to as
"Confidential Information"). The Executive further acknowledges and agrees that
the Confidential Information is of great value to the Company and/or its
subsidiaries and affiliates and that it is reasonably necessary to protect the
Confidential Information and the goodwill of the Company and/or its
subsidiaries and affiliates. Accordingly, the Executive hereby agrees that:
(a) Non-Disclosure and Non-Solicitation. The Executive
will not, at any time, directly or indirectly, except in connection with the
Executive's employment hereunder or as otherwise authorized by the Board of
Directors of the Company for the benefit of the Company:
(i) divulge to any person, firm or corporation
other than the Company hereinafter referred to as "Third Parties"), or
use or cause or authorize any Third Parties to use, the Confidential
Information or any other information relating to the business or
interests of the Company which the Executive knows or should know is
regarded as confidential and valuable by the Company and/or its
subsidiaries and affiliates (whether or not any of the foregoing
information is actually novel or unique or is actually known to
others), except as required by law; or
(ii) solicit or cause or authorize to be
solicited, directly or indirectly, for or on behalf of himself or any
Third Parties, any business competitive to the business of the Company
and/or its subsidiaries and affiliates from Third Parties who are, at
any time within one (1) year prior to the expiration of the term of
this Agreement, customers of the Company and/or its subsidiaries and
affiliates; or
(iii) accept, cause or authorize to be accepted,
directly or indirectly, for or on behalf of himself or the Third
Parties, any business competitive to the business of the Company or
its subsidiaries and affiliates from any such customers of the Company
and/or its subsidiaries and affiliates; or
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(iv) solicit, cause or authorize to be solicited,
directly or indirectly, for employment for or on behalf of himself or
any Third Parties, any persons who are, at any time within one (1)
year prior to the expiration of the terms of this Agreement, employees
of the Company or its subsidiaries and affiliates in an executive
capacity.
(b) Return of Records. Upon the termination of his
employment with the Company for any reason whatsoever, the Executive shall
forthwith deliver or cause to be delivered to the Company any and all
Confidential Information, including drawings, notebooks, keys, data and other
documents and materials belonging to the Company and/or its subsidiaries and
affiliates which is in his possession or under his control relating to the
Company and/or its subsidiaries and affiliates, or the business of the Company
and/or its subsidiaries and affiliates, and will deliver to the Company upon
such termination of employment any other property of the Company and/or its
subsidiaries and affiliates which is in his possession or under his control.
(c) Inventions. The Executive will disclose promptly in
writing to the Company all Inventions (as defined hereafter), whether or not he
considers them to be patentable or having the ability to be trademarked or
copyrighted, which he alone or with others conceives or makes, whether or not
during regular working hours, and the Executive hereby assigns and agrees to
assign to the Company or its subsidiaries and affiliates all right, title and
interest in and to all Inventions which relate to the business of the Company
or its subsidiaries and affiliates and agrees not to disclose any Inventions to
others without the prior written consent of the Board of Directors of the
Company, except as required by the conditions of his employment hereunder. For
purposes of this Agreement, "Invention" means any and all machines, apparatus,
compositions of matter, methods, know-how, processes, designs, configurations,
uses, ideas, concepts or writings of any kind, concerning or relating in any
way to the business of the Company and/or its subsidiaries and affiliates,
discovered, conceived, developed, made or produced, or any improvements
thereto, and shall not be limited to the definition of an "invention" contained
in United States patent laws. The Executive understands and agrees that all
Inventions, trademarks, copyrights or service marks relating thereto which
reasonably relate to the business of the Company and/or its subsidiaries and
affiliates and which are conceived or made by him during the term of this
Agreement, either alone or with others, are the sole and exclusive property of
the Company whether or not they are conceived or made during or outside regular
working hours.
(d) Further Assurances. The Executive will, at any time
during his employment hereunder or after the termination of this Agreement for
any reason, at the request of the Company and without further consideration,
execute (i) specific agreements in favor of the Company and/or its subsidiaries
and affiliates, or their nominees, of any and all Inventions, (ii) all papers
and perform all acts which the Company and/or its subsidiaries and affiliates
considers necessary or advisable for the preparation, application, procurement,
maintenance, enforcement and defense of any United States or foreign patent
applications and patents for any and all Inventions, for the perfection or
enforcement of any trademarks or copyrights relating to Inventions and for the
transfer of any interest which the Executive may have, (iii) any and all papers
and documents required or necessary to vest
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sole right, title and interest in the Company and/or its subsidiaries and
affiliates, or their nominees, of any and all Inventions, patents, patent
applications or any trademarks, service marks or copyrights relating thereto,
and (iv) all documents including those documents referred to above, and do all
other acts necessary to assist in the preservation of all of the interests of
the Company and/or its subsidiaries and affiliates in any and all Inventions
arising under this Agreement.
(e) Proprietary Information. The Executive understands
and agrees that all Proprietary Information (as defined hereafter) conceived by
him either alone or with others or provided to him by the Company and/or its
subsidiaries and affiliates or others is the sole and exclusive property of the
Company and/or its subsidiaries and affiliates. For purposes of this Agreement,
"Proprietary Information" means any information relating to the business of the
Company and/or its subsidiaries and affiliates that has not previously been
publicly released by duly authorized representative of the Company and/or its
subsidiaries and affiliates and shall include, without limitation, information
included in all drawings, designs, plans, proposals, marketing and sales
programs, financial information, costs, pricing information, customer
information and all methods, concepts or ideas in or reasonably related to the
business of the Company and/or its subsidiaries and affiliates.
(f) Specific Performance. The Executive hereby
acknowledges and agrees that the services to be rendered by him to the Company
hereunder are of a special and unique nature and that it would be very
difficult or impossible to measure the damages resulting from a breach of this
Agreement. The Executive hereby further acknowledges and agrees that the
restrictions herein are reasonable and necessary for the protection of the
business and the goodwill of the Company and its subsidiaries and affiliates
and that a violation by the Executive of any such covenant will cause
irreparable damage to the Company and/or its subsidiaries and affiliates. The
Executive therefore agrees that any breach or threatened breach by him of any
provisions of this Section 5 shall entitle the Company and/or its subsidiaries
and affiliates, in addition to any other legal remedy available to them, to
apply to any court of competent jurisdiction for a temporary and permanent
injunction of any other applicable decree of specific performance, without any
bond or security being required thereof, in order to enjoin such breach or
threatened breach. The parties understand and intend that each provision and
restriction agreed to in this Section 5 shall be construed as separate and
divisible from every other provision and restriction and that the
unenforceability of any one provision or restriction shall not limit the
enforceability, in whole or in part, of any other provision or restriction and
that one or more of all of such provisions or restrictions may be enforced, in
whole or in part, as the circumstances warranty.
(g) Survival of Section. The provisions of this Section
5 shall survive the termination of this Agreement.
6. Agreement Not-to-Compete. The Executive hereby agrees, to the
extent permitted by law, that during the twelve (12) month period subsequent to
the date of termination of his employment with the Company hereunder, for Cause
or any reason other than if the Executive terminates his employment with the
Company pursuant to Section 4(c) of this Agreement, the
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Executive shall not, directly or indirectly, engage in any activity competitive
with the Company's business whether alone, as a partner, or as an officer,
director, employee, agent, consultant or shareholder of any other entity, or as
a trustee, fiduciary or other representative of any other person or entity. In
the event of a breach or threatened breach by Executive of the covenants
contained in this Section 6, Executive acknowledges that the Company will not
have an adequate remedy at law and that the Company shall be entitled to such
equitable and injunctive relief as may be available to restrain Executive from
the violation of the provisions hereof. Nothing herein shall be construed as
prohibiting the Company from pursuing any other remedies available to it for
breach or threatened breach, including the recovery of damages from Executive.
Executive acknowledges and agrees that the covenants contained in this Section
are of the essence in this Agreement, that each of the covenants is reasonable
and necessary to protect and preserve the interests and properties of the
Company and the business of the Company, and that irreparable loss and damage
will be suffered by the Company should Executive breach any of such covenants.
The provisions of this Section shall survive the termination of this Agreement.
7. Key-Man Life Insurance.
The Company may, at any time and from time to time, make
application for one or more policies of life insurance on the life of the
Executive, which policies shall name the Company as the beneficiary thereof.
The Executive hereby acknowledges and agrees that he shall have no interest
whatsoever in any such policies and that any amounts paid thereon will inure
solely to the benefit of the Company and not to estate of the Executive. The
Executive hereby agrees to cooperate with the Company in obtaining any such
insurance, including submitting to physical examinations at a reasonable time
or times, if required, and completing applications furnished by insurers for
such purposes.
8. General Provisions.
(a) No Assignment; Binding Nature of Agreement. The
Executive may not at any time assign this Agreement nor any right or interest
hereunder. Except as otherwise herein provided, this Agreement shall be binding
upon and inure to the benefit of the parties hereto, the Executive's legal
representative and the Company's successors and assigns.
(b) The Term "Company". For purposes of this Agreement,
the term "Company" shall mean and include subsidiaries, parents and affiliated
companies of the Company in existence from time to time.
(c) Notices. All notices, requests, claims, demands, and
other communications under this Agreement shall be in writing and shall be
deemed to have been given or made upon the earliest to occur of: (a) receipt,
if made by personal service, (b) to (2) days after dispatch if made by
reputable overnight courier service, (c) upon the delivering party's receipt of
a written confirmation of a transmission made by cable, by telecopy, by
facsimile, by telegram or by telex, or (d) seven (7)
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days after being mailed by registered mail (postage prepaid, return receipt
requested) to the respective parties at the addresses on the face of this
Agreement.
(d) Entire Agreement; No Amendments. This Agreement
together with any attached schedules, exhibits and other documents delivered
pursuant hereto, constitute the entire agreement of the parties and supersede
all prior agreements and undertakings, both written and oral, between the
parties, or any of them, with respect to the subject matter hereof. This
Agreement may not be changed, modified, extended, renewed or supplemented and
no provision hereof may be waived, except by an instrument in writing signed by
the party against whom enforcement of any change, modification, extension,
renewal, supplement or waiver is sought.
(e) Governing Law; Severability. This Agreement shall be
governed by and construed in accordance with the laws of the State of Florida.
(f) Waiver. Failure to insist upon strict compliance
with any of the terms, covenants or conditions hereof shall not be deemed a
waiver or relinquishment of any such terms, covenants or conditions, nor shall
any waiver or relinquishment of any right or power hereunder at any one time or
more times be deemed a waiver or relinquishment of such right or power at any
other time or times.
(g) Attorneys' Fees; Jurisdiction and Venue. Should it
become necessary for any party to institute legal action to enforce the terms
and conditions of this Agreement, the successful party will be awarded
reasonable attorneys' fees at all trial and appellate levels, expenses and
costs. Any suit, action or proceeding with respect to this Agreement shall be
brought in the courts of Dade County in the State of Florida or in the U.S.
District Court for the Southern District of Florida. The parties hereto hereby
accept the exclusive jurisdiction of those courts for the purpose of any such
suit, action or proceeding. Venue for any such action, in addition to any
other venue permitted by statute, will be Dade County, Florida. The parties
hereto hereby irrevocably waive, to the fullest extent permitted by law, any
objection that any of them may now or hereafter have to delaying of venue of
any suit, action or proceeding arising out of or relating to this Agreement or
any judgment entered by any court in respect thereof brought in Dade County,
Florida, and hereby further irrevocably waive any claim that any such suit,
action or proceeding brought in Dade County, Florida has been brought in an
inconvenient forum.
(h) Headings. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
(i) 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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IN WITNESS WHEREOF, the parties hereto have duly executed this
Employment Agreement as of the day and year first above written.
ADVANCED ELECTRONIC SUPPORT
PRODUCTS, INC.
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
EXECUTIVE:
-------------------------------
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Exhibit 7.8
Form of Convertible Note
<PAGE> 116
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE OR SECURITIES LAWS
AND NEITHER THE SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD,
TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT OR SUCH LAWS OR AN EXEMPTION
FROM REGISTRATION UNDER SUCH SECURITIES ACT AND SUCH LAWS WHICH, IN THE OPINION
OF COUNSEL FOR THE HOLDER, WHICH COUNSEL AND OPINION ARE REASONABLY
SATISFACTORY TO COUNSEL FOR THIS COMPANY, IS AVAILABLE.
U.S. $__________ __________, 1996
ADVANCED ELECTRONIC SUPPORT PRODUCTS, INC.
7-YEAR CONVERTIBLE SUBORDINATED NOTE
DUE ______________, 199_
ADVANCED ELECTRONIC SUPPORT PRODUCTS, INC., a corporation duly
organized and existing under the laws of the State of Maryland (the "Company"),
for value received, hereby promises to pay to ____________________ (the initial
"Holder") at __________, Florida _____, or at such other place or places as the
Holder hereof may designate in writing, from time to time, the principal sum of
______________________________________________________________________________
($____________), or such lesser amounts as from time to time may be due and
owing hereunder including any accrued interest, on the _____ day of
__________, 199_ (the "Maturity Date"), upon presentation and surrender of this
Convertible Subordinated Note (this "Note") at the office of the Company at
1810 N.E. 144th Street, North Miami, Florida 33181, in such coin or currency of
the United States of America as at the time of payment shall be legal tender
for the payment of public and private debts, from the date hereof at the rate
of one percent (1%) over the floating prime rate charged by Citibank, N.A. (New
York, New York) as adjusted from time to time, with such interest payable
monthly, in like coin or currency, on the first day of each month, commencing
__________, 1996, until payment of all principal hereunder, and any outstanding
accrued interest, on the Maturity Date.
1. Conversion. This Note shall be convertible, in whole or in
part, at the Holder's option, at any time prior to maturity, regardless of the
amount of principal outstanding (the "Conversion Right"), into the number of
fully paid and nonassessable shares of the common stock
<PAGE> 117
of the Company ("Common Stock") which shall equal the product of the Exercise
Price (as hereinafter defined) multiplied by the aggregate amount of principal
and interest then outstanding (the "Shares"), upon surrender of this Note,
together with all rights appertaining hereto, at the office of the Company.
The "Exercise Price" shall be $3.60 per Share of Common Stock. The Company
shall have ten (10) days to (a) issue the Shares after receipt by the Company
of written notice of the Holder's election to exercise the Conversion Right,
and (b) in the case of a partial exercise, reissue a new note in the same form
and containing the same terms as this Note, with the new outstanding principal.
The Exercise Price will be adjusted for: dividends or distributions on
the Company's Common Stock payable in Common Stock; subdivisions, combinations
or certain reclassifications of Common Stock; distributions to all holders of
the Common Stock of certain rights to purchase Common Stock at less than the
current market price at the time; and distributions to such holders of assets
or debt securities of the Company or certain rights to purchase securities of
the Company (excluding cash dividends or distributions from current retained
earnings). However, no adjustment need be made if the Holder may participate
in the transaction. If the Company is a party to a consolidation or merger or
a transfer of all or substantially all of its assets, the right to convert the
Note into Common Stock will be changed into a right to convert it into
securities, cash or other assets of the Company or another entity, on the same
basis as the other common stockholders of the Company.
Upon exercise of the Conversion Right, all accrued and unpaid interest
hereon shall be due and payable by the Company. No other adjustments in
respect of interest or dividends will be made upon any conversion. No
fractional shares or scrip representing fractional shares will be issued upon
any conversion, but an adjustment in cash will be made by the Company
subsequent to the conversion.
2. Subordination. This Note is subordinated to Senior Debt (as
defined below). "Senior Debt" is the principal of and premium, if any, and
interest on, all payments due pursuant to the terms of instruments creating or
evidencing Indebtedness (as defined below) of the Company outstanding as of the
date hereof and all renewals, extensions and refundings thereof, which are
payable to financial institutions. The term "Indebtedness," as applied to any
entity, means any indebtedness, contingent or otherwise, in respect of borrowed
money (whether or not the recourse of the lender is to the whole of the assets
of such entity or only to a portion thereof), as evidenced by bonds, notes,
debentures or similar instruments or letters of credit, or representing the
balance deferred and unpaid of the purchase price of any property or interest
thereof, of and to the extent such indebtedness would appear as a liability
upon a balance sheet of such entity prepared on a consolidated basis in
accordance with generally accepted accounting principles. The Company agrees,
and each Holder agrees by accepting this Note, to the subordination hereunder.
3. Events of Default. This Note shall be considered in default,
if any of the following events ("Event(s) of Default") shall have occurred
(whatever the reason for such Event of Default and whether it shall be
voluntary or involuntary or be effected by operation of law pursuant to any
judgment, decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
2
<PAGE> 118
a. a default in the payment of any interest upon this
Note when it becomes due and payable, and continuance of such default for a
period of 10 days after receipt of written notice from the Holder to the
Company;
b. a default in the payment of the principal amount of
this Note on the Maturity Date and continuance of such default for a period of
10 days after receipt of written notice from the Holder to the Company; or
c. the Company shall suspend the operations of any of
its businesses, shall become insolvent, be unable to meet its debts as they
mature, or make an admission in writing to such effect, call a meeting of its
creditors, commit any act of bankruptcy or file for or suffer to be filed
against it any petition under any provision of any bankruptcy, insolvency,
reorganization, rearrangement, readjustment of debt or similar law or statute.
4. Exercise of Rights in Event of Default. In the Event of
Default, the Holder may, at any time after such occurrence and by written
notice to the Company, declare the entire unpaid principal amount hereunder,
together with any unpaid accrued interest thereon, to be immediately due and
payable without presentment, demand, protest or other notice of any kind, all
of which are hereby expressly waived. Notwithstanding the foregoing with
respect to written notice, this Note shall be considered in default upon the
occurrence of any of the Events of Default and shall remain in default until
the entire unpaid principal together with any unpaid interest thereon has been
paid to the Holder. While in default, this Note shall bear interest at the
maximum rate permitted by law. In addition to the foregoing, upon the
occurrence of an Event of Default and at any time thereafter, the Holder shall
have the right in its sole discretion to determine which rights, liens,
guarantees, security interests or remedies it shall retain, pursue, release,
subordinate, modify or take any other action with respect thereto, without in
any way modifying or affecting any of the other of them or any of its rights
hereunder. Notwithstanding any other rights which the Holder may have under
applicable law and hereunder, the Company agrees that, should at any time an
Event of Default specified in Section 3 hereof occur or be continuing, the
Holder shall have the right to apply (including, without limitation, by way of
setoff) any monies, deposits, accounts, balances or other property of the
Company held by, or thereafter coming into the possession of, the Holder to a
reduction of amounts owed hereunder, including without limitation the principal
amount and interest due on this Note.
5. Principal Obligation. No provision of this Note shall alter
or impair the obligation of the Company, which is absolute and unconditional,
to pay the principal of and interest on this Note at the place, at the
respective times, at the rate, and in the currency herein prescribed, until
effective exercise by Holder of the Conversion Right for the entire principal
and interest due.
6. Prepayment. This Note may be prepaid, in whole or in part, at
any time without penalty provided that any partial payment shall be first
applied against any accrued interest due hereunder.
3
<PAGE> 119
7. Registration Rights.
a. One-Time Demand Registration Rights. Within 60 days
following written demand of the Holder, the Company shall prepare and file with
the Securities and Exchange Commission (the "Commission"), and use its best
efforts to cause to become effective no later than 60 days after the date of
filing, a registration statement on Form S-3 (if such form is then available
for use by the Company, or such other available registration statement)
("Registration Statement") and such other documents, as may be necessary in
the opinion of counsel for both the Company and the Holder, so as to permit a
public offering and sale of the Shares, under the Securities Act of 1933, as
amended (the "Securities Act"). All expenses incurred in connection with the
registration of the Shares, including without limitation, all blue sky
registration and filing fees, legal fees, printing expenses, fees of experts
used in connection with such registration and expenses incidental to any
post-effective amendment to the Registration Statement, shall be borne and paid
by the Company. The Company shall keep such Registration effective for a
period of not less than 2 years after becoming effective.
b. Piggy Back Registration Rights. If, at any time, the
Company shall propose the registration under the Securities Act of an offering
of any of its capital stock to be sold for its own account and/or for the
account of other persons, the Company, on each such occasion, shall as promptly
as practicable, but in no event later than thirty (30) days prior to the
proposed filing date of the Registration Statement, give written notice to the
Holder of its intention to effect such registration (which notice shall state
an estimated selling price for Common Stock in such offering) and the Holder
shall be entitled, on each such occasion, to request to have all or a portion
of the Shares included in such Registration Statement. Upon the written
request of the Holder that the Company include the Shares, in such Registration
Statement (which request shall state the number of Shares for which
registration is sought and the intended method of disposition thereof), the
Company shall cause such Shares to be so included in the offering covered by
such Registration Statement.
8. Exchange Privilege and Transferability. Subject to the
provisions of the last paragraph of this Section, the Holder at its option may
surrender the Note for exchange at the principal office of the Company and,
without expense (except for any stamp tax or other governmental charge with
respect to any transfer involved therein), receive in exchange therefor notes,
in denominations designated by the Holder and payable to such person or persons
or order as may be designated by such Holder and for the same aggregate
principal amount as the then unpaid principal balance of this Note. Every
instrument made and delivered in exchange for this Note shall in all other
respects be in the same form and have the same terms, on a pro rata basis, as
this Note, except that the Conversion Right shall only exist with respect to an
instrument in favor of the Holder. The Conversion Right shall exist on a pro
rata basis in the remaining Note(s) in favor of the Holder.
The Holder, by acceptance hereof, agrees that the rights represented
by this Note are not transferable, in whole or in part, whether by sale,
transfer, gift, or other hypothecation unless and until (1) a registration
statement relating to such sale, transfer, gift or hypothecation shall have
become effective under the Securities Act or (2) a legal opinion satisfactory
to the Company is
4
<PAGE> 120
furnished with respect to such sale, transfer, gift or other hypothecation to
the effect that such registration under the Securities Act is not required with
respect thereto or (3) the Company shall have been furnished with a copy of a
"no-action letter" of the Commission with respect to such sale, transfer, gift
or other hypothecation.
9. Intent Not to Commit Usury. Nothing herein contained, nor any
transaction related hereto, shall be construed or so operate as to require the
Company to pay interest at a greater rate than is now lawful in such case to
contract for, or to make any payment, or to do any act contrary to law. Should
any interest or other charges paid by the Company, or parties liable for the
payment of this Note, in connection with the loan evidenced by this Note, or
any document delivered in connection with said loan, result in the computation
or earning of interest in excess of the maximum legal rate of interest which is
legally permitted by law, then any and all such excess of the maximum legal
rate of interest which is legally permitted by law, then any and all such
excess shall be and the same is hereby waived by the Holder hereof, and any and
all such excess shall be automatically credited against and in reduction of the
balance due under this Note, and the portion of said excess which exceeds the
balance due under this Note shall be paid by the Holder to the Company and
parties liable for the payment of this Note.
10. Notices. All notices, requests, claims, demands, and other
communications under this Note shall be in writing and shall be deemed to have
been given or made upon the earliest to occur of: (a) receipt, if made by
personal service, (b) to (2) days after dispatch if made by reputable overnight
courier service, (c) upon the delivering party's receipt of a written
confirmation of a transmission made by cable, by telecopy, by facsimile, by
telegram or by telex, or (d) seven (7) days after being mailed by registered
mail (postage prepaid, return receipt requested) to the respective parties at
the addresses on the face of this Note.
11. Miscellaneous.
a. Binding Nature of Note. Except as otherwise herein
provided, this Note shall be binding upon and inure to the benefit of the
parties hereto, their legal representatives, successors and assigns.
b. Entire Agreement; No Amendments. This Note together
with any attached, schedules, exhibits and other documents delivered pursuant
hereto, constitute the entire agreement of the parties and supersede all prior
agreements and undertakings, both written and oral, between the parties, or any
of them, with respect to the subject matter hereof. This Note may not be
changed, modified, extended, renewed or supplemented and no provision hereof
may be waived, except by an instrument in writing signed by the party against
whom enforcement of any change, modification, extension, renewal, supplement or
waiver is sought.
c. Governing Law; Severability. This Note shall be
governed by and construed in accordance with the laws of the State of Florida.
The invalidity of any portion of this Note shall not affect the enforceability
of the remaining portions of this Note or any part thereof, all of which are
inserted herein conditionally on their being valid in law. In the event that
any portion or portions contained herein shall be invalid, this Note shall be
construed so as to make such portion or portions
5
<PAGE> 121
valid or, if such construction is not legally possible, as if such invalid
portion or portions had not been inserted.
d. Waiver. Failure to insist upon strict compliance
with any of the terms, covenants or conditions hereof shall not be deemed a
waiver or relinquishment of any such terms, covenants or conditions, nor shall
any waiver or relinquishment of any right or power hereunder at any one time or
more times be deemed a waiver or relinquishment of such right or power at any
other time or times.
e. Attorneys' Fees; Jurisdiction and Venue. Should it
become necessary for any party to institute legal action to enforce the terms
and conditions of this Note, the successful party will be awarded reasonable
attorneys' fees at all trial and appellate levels, expenses and costs. Any
suit, action or proceeding with respect to this Note shall be brought in the
courts of Dade County in the State of Florida or in the U.S. District Court for
the Southern District of Florida. The parties hereto hereby accept the
exclusive jurisdiction of those courts for the purpose of any such suit, action
or proceeding. Venue for any such action, in addition to any other venue
permitted by statute, will be Dade County, Florida. The parties hereto hereby
irrevocably waive, to the fullest extent permitted by law, any objection that
any of them may now or hereafter have to delaying of venue of any suit, action
or proceeding arising out of or relating to this Note or any judgment entered
by any court in respect thereof brought in Dade County, Florida, and hereby
further irrevocably waive any claim that any such suit, action or proceeding
brought in Dade County, Florida has been brought in an inconvenient forum.
f. Headings. The headings contained in this Note are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Note.
IN WITNESS WHEREOF, the Company has caused this Note to be signed in
its name and attested to by the signature of its Secretary this _____ day of
______________, 1996.
ADVANCED ELECTRONIC SUPPORT
PRODUCTS, INC.
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
6
<PAGE> 122
Exhibit 7.9
Form of Note
<PAGE> 123
TERM PROMISSORY NOTE
July __, 1996
U.S. $100,000.00
Miami, Florida
FOR VALUE RECEIVED, ADVANCED ELECTRONIC SUPPORT PRODUCTS, INC., a
Florida corporation ("Maker"), hereby promises to pay to the order of THE
AMERICAS GROWTH FUND, INC., a Maryland corporation ("Payee"), at its principal
place of business at 701 Brickell Avenue, Suite 2000, Miami, Florida 33131 or
at such other place or places as the Payee or the holder hereof may designate
in writing, from time to time, or order, the principal sum of ONE HUNDRED
THOUSAND AND NO DOLLARS (U.S. $100,000.00), plus accrued interest, as set forth
below:
1. TERM AND PAYMENTS. Principal, and any accrued interest, shall
be payable in full one (1) year from the date hereof. All payments hereunder
will be made in such coin or currency of the United States of America as at the
time of payment shall be legal tender for the payment of public and private
debts.
2. INTEREST RATE. This Note shall bear interest at a rate equal
to one percent (1%) over the floating prime rate charged by Citibank, N.A. (New
York, New York) as adjusted from time to time .
3. DEFAULT. This Promissory Note (this "Note") shall be
considered in default when any payment required to be made hereunder shall not
be paid on the date it becomes due, and shall remain in default until such
payment shall have been made. The Maker agrees to pay Payee's (or its
assigns') reasonable expenses to obtain or enforce payment or performance of
any of the Maker's obligations under this Note, which expenses shall include
reasonable attorneys' fees.
4. INTENT NOT TO COMMIT USURY. Nothing herein contained, nor any
transaction related hereto, shall be construed or so operate as to require
Maker to pay interest at a greater rate than is now lawful in such case to
contract for, or to make any payment, or to do any act contrary to law. Should
any interest or other charges paid by Maker, or parties liable for the payment
of this Note, in connection with the loan evidenced by this Note, or any
document delivered in connection with said loan, result in the computation or
earning of interest in excess of the maximum legal rate of interest which is
legally permitted by law, then any and all such excess shall be and the same is
hereby waived by Payee and holder hereof, and any and all such excess shall be
automatically credited against and in reduction of the balance due under this
Note, and the portion of said excess which exceeds the balance due under this
Note shall be paid by Payee or its assigns to Maker and parties liable for the
payment of this Note.
<PAGE> 124
5. WAIVERS OF DEMAND, ETC. The Maker hereby waives presentment,
demand, demand for payment, notice of non-payment, notice of dishonor, protest
and notice of protest and, except as set forth herein, all other notices or
demands in connection with the delivery, acceptance, performance, default or
enforcement of this Note.
6. CONSENT TO CHANGES. All parties liable for the payment hereof
consent and agree that the granting to Maker or to any other party of any
extension of time for the payment of any sums due hereunder, or for the
performance of any covenant or stipulation herein or in any document securing
the loan hereunder, or the release of Maker or any other party, or the
agreement of Payee not to sue Maker or any other party, or the suspension of
the right to enforce this Note against Maker or, any other party, or the
discharge of Maker or any other party, or the taking or releasing of other or
additional security, shall not in any way release or affect the liability of
Maker; all rights against such parties being expressly reserved.
7. PREPAYMENT. This Note may be prepaid, in whole or in part, at
any time without penalty provided that any partial payment shall be first
applied against any accrued interest due hereunder.
8. MISCELLANEOUS.
(a) Binding Nature of Note. Except as otherwise herein
provided, this Note shall be binding upon and inure to the benefit of the
parties hereto, their legal representatives, successors and assigns.
(b) Entire Agreement; No Amendments. This Note together
with any attached, schedules, exhibits and other documents delivered pursuant
hereto, constitute the entire agreement of the parties and supersede all prior
agreements and undertakings, both written and oral, between the parties, or any
of them, with respect to the subject matter hereof. This Note may not be
changed, modified, extended, renewed or supplemented and no provision hereof
may be waived, except by an instrument in writing signed by the party against
whom enforcement of any change, modification, extension, renewal, supplement or
waiver is sought.
(c) Notices. All notices, requests, claims, demands, and
other communications under this Note shall be in writing and shall be deemed to
have been given or made upon the earliest to occur of: (a) receipt, if made by
personal service, (b) to (2) days after dispatch if made by reputable overnight
courier service, (c) upon the delivering party's receipt of a written
confirmation of a transmission made by cable, by telecopy, by facsimile, by
telegram or by telex, or (d) seven (7) days after being mailed by registered
mail (postage prepaid, return receipt requested) to the respective parties at
the addresses on the face of this Note.
(d) Governing Law; Severability. This Note shall be
governed by and construed in accordance with the laws of the State of Florida.
The invalidity of any portion of this Note shall
2
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<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 4,555,700
<INVESTMENTS-AT-VALUE> 4,586,700
<RECEIVABLES> 0
<ASSETS-OTHER> 524,900
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<SHARES-COMMON-STOCK> 1,265,100
<SHARES-COMMON-PRIOR> 1,265,100
<ACCUMULATED-NII-CURRENT> (74,500)
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<NET-ASSETS> 5,087,500
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 126,700
<OTHER-INCOME> 0
<EXPENSES-NET> 190,200
<NET-INVESTMENT-INCOME> (74,200)
<REALIZED-GAINS-CURRENT> (700)
<APPREC-INCREASE-CURRENT> (17,600)
<NET-CHANGE-FROM-OPS> (92,500)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (92,500)
<ACCUMULATED-NII-PRIOR> (300)
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 28,200
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 190,200
<AVERAGE-NET-ASSETS> 5,133,750
<PER-SHARE-NAV-BEGIN> 4.09
<PER-SHARE-NII> (.06)
<PER-SHARE-GAIN-APPREC> (.01)
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<EXPENSE-RATIO> 3.7
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<AVG-DEBT-PER-SHARE> .02
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