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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
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period___________ to _____________
Commission file number: 0-28114
PARAVANT COMPUTER SYSTEMS, INC.
(Exact Name of Small Business Issuer as Specified in Its Charter)
Florida 59-2209179
(State or Other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
780 South Apollo Boulevard
Atrium One
Melbourne, Florida 32901
(Address of Principal Executive Offices)
407-727-3672
(Issuer's Telephone Number)
N/A
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
At August 8, 1996, there were outstanding
7,953,354 shares of Common Stock, $.015 par value per share.
Transitional Small Business Disclosure Format (check one): [ ] Yes [X] No
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* The issuer's Registration Statement on Form SB-2 (Registration No. 33-91426)
was declared effective on May 31, 1996. This report is hereby filed pursuant to
Rule 15d-13(a) under the Securities Exchange Act of 1934.
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PARAVANT COMPUTER SYSTEMS, INC.
INDEX
<TABLE>
<CAPTION>
PAGE
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<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited):
Condensed Balance Sheet - June 30, 1996 .....................................................3
Condensed Statements of Earnings for the three months ended June 30, 1996 and
1995 and the nine months ended June 30, 1996 and 1995 .....................................5
Condensed Statements of Cash Flows for the nine months
ended June 30, 1996 and 1995...............................................................7
Notes to Condensed Financial Statements......................................................9
Item 2. Management's Discussion and Analysis or Plan of Operation....................11
PART II - OTHER INFORMATION
Item 2. Changes in Securities........................................................16
Item 6. Exhibits and Reports on Form 8-K.............................................17
SIGNATURES..................................................................................18
</TABLE>
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
PARAVANT COMPUTER SYSTEMS, INC.
Condensed Balance Sheet
June 30, 1996
Assets
<TABLE>
<CAPTION>
<S> <C>
Current assets: (Unaudited)
Cash and cash equivalents $76,722
Accounts receivable 2,910,263
Employee receivables and advances 62,856
Inventory (note 2) 3,850,146
Prepaid expenses 38,756
Income taxes receivable 11,017
Deferred income taxes 592,748
----------
Total current assets 7,542,508
Property, plant and equipment, net 444,540
Intangible assets, net 96,250
Demonstration pool and custom mold, net 85,636
Deferred income taxes 32,150
Other assets 31,502
----------
$8,232,586
==========
</TABLE>
See accompanying notes to condensed financial statements
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Liabilities and Stockholders' Equity
<TABLE>
<CAPTION>
<S> <C>
Current liabilities: (Unaudited)
Other notes payable $125,000
Current maturities of long-term debt 129,861
Current maturities of capital lease obligations 66,897
Accounts payable 616,737
Accrued commissions 344,289
Accrued expenses 712,015
---------
Total current liabilities 1,994,799
Long-term debt, less current maturities 626,606
Capital lease obligations, less current maturities 55,203
---------
Total liabilities 2,676,608
---------
Stockholders' equity:
Preferred stock, par value $.01 per share. Authorized 2,000,000
shares, none issued --
Common stock, par value $.015 per share. Authorized 30,000,000
shares, issued and outstanding 7,950,000 shares 119,250
Additional paid-in capital 5,043,260
Retained earnings 393,468
----------
Total stockholders' equity 5,555,978
----------
$8,232,586
==========
</TABLE>
See accompanying notes to condensed financial statements.
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PARAVANT COMPUTER SYSTEMS, INC.
Condensed Statements of Earnings
For the three months ended June 30, 1996 and 1995
<TABLE>
<CAPTION>
(Unaudited)
1996 1995
---- ----
<S> <C> <C>
Revenues $1,957,228 $1,228,822
Cost of revenues 1,121,953 519,192
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Gross profit 835,275 709,630
Selling and administrative expense 906,425 922,034
--------- -------
Loss from operations (71,150) (212,404)
Other income (expense):
Miscellaneous (30,640) 7,346
Interest expense (107,023) (101,004)
--------- -------
Loss before income taxes (208,813) (306,062)
Income tax benefit 72,701 54,323
--------- -------
Net loss $(136,112) $(251,739)
========= =========
Weighted average number of shares outstanding 4,883,333 4,500,000
========= =========
Loss per share $ (.03) $ (.06)
========= =========
</TABLE>
See accompanying notes to condensed financial statements.
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PARAVANT COMPUTER SYSTEMS, INC.
Condensed Statements of Earnings
For the nine months ended June 30, 1996 and 1995
<TABLE>
<CAPTION>
(Unaudited)
1996 1995
---- ----
<S> <C> <C>
Revenues $3,682,110 $3,080,354
Cost of revenues 2,253,864 1,604,993
---------- ----------
Gross profit 1,428,246 1,475,361
Selling and administrative expense 2,315,082 2,037,041
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Loss from operations (886,836) (561,680)
Other income (expense):
Miscellaneous (32,646) 11,681
Interest expense (329,225) (262,203)
--------- ---------
Loss before income taxes (1,248,707) (812,202)
Income tax benefit 463,769 256,423
--------- ---------
Net loss $(784,938) $(555,779)
========= =========
Weighted average number of shares outstanding 4,883,333 4,500,000
========= =========
Loss per share $ (.16) $ (.12)
========= =========
</TABLE>
See accompanying notes to condensed financial statements.
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PARAVANT COMPUTER SYSTEMS, INC.
Condensed Statements of Cash Flows
For the nine months ended June 30, 1996 and 1995
<TABLE>
<CAPTION>
(Unaudited)
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss $(784,938) $(555,779)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 165,671 174,607
Deferred income taxes (463,769) (52,953)
Increase (decrease) in cash caused by change in:
Accounts receivable 2,384,843 1,830,201
Employee receivables and advances 2,851 19,021
Inventory (1,438,312) (1,312,388)
Costs and estimated earnings in excess of billings on
uncompleted contracts 322,071 (105,573)
Prepaid expenses 12,685 (39,098)
Income taxes receivable (11,017) (207,824)
Other assets (6,172) (152,153)
Deposits -- (2,318)
Accounts payable (717,894) 65,968
Amounts due to majority shareholder (87,294) --
Accrued commissions (169,951) --
Accrued expenses (132,622) (18)
Billings in excess of costs and estimated earnings
on uncompleted contracts -- 51,571
Income taxes payable (317,665) (122,766)
---------- --------
Net cash used in operating activities (1,241,513) (409,502)
---------- --------
Cash flows from investing activities:
Acquisitions of property, plant and equipment (57,617) (54,433)
Acquisitions of demonstration pool and custom mold (59,249) (12,274)
---------- --------
Net cash used in investing activities (116,866) (66,707)
---------- --------
</TABLE>
See accompanying notes to condensed financial statements. (Continued)
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PARAVANT COMPUTER SYSTEMS, INC.
Condensed Statements of Cash Flows, Continued
<TABLE>
<CAPTION>
(Unaudited)
1996 1995
---- ----
<S> <C> <C>
Cash flows from financing activities:
Repayment of other notes payable (275,000) --
Net proceeds from notes payable to bank -- 602,000
Net repayments of notes payable to bank (2,960,000) --
Repayments on long-term debt (82,692) (73,336)
Repayment on capital lease obligations (50,189) (56,761)
Net proceeds from sale of common stock 4,591,556 --
--------- -------
Net cash provided by financing activities 1,223,675 471,903
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Net decrease in cash and cash equivalents (134,704) (4,306)
Cash and cash equivalents at beginning of the period 211,426 4,806
--------- -------
Cash and cash equivalents at end of the period $ 76,722 $ 500
=========== ==========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 329,225 $262,203
========== ========
Income taxes $ 28,406 --
========== =========
</TABLE>
Supplemental disclosure of noncash investing and financing activities:
The Company entered into capital leases totaling $27,371
during the nine months ended June 30, 1996.
The Company converted $500,000 of its notes payable to bank to
long-term debt during the nine months ended June 30, 1996.
See accompanying notes to condensed financial statements.
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PARAVANT COMPUTER SYSTEMS, INC.
Notes to Condensed Financial Statements
June 30, 1996 and 1995
(1) Basis of Presentation
The accompanying unaudited condensed financial statements of Paravant
Computer Systems, Inc. (the "Company" or "PCS") have been prepared in
accordance with the instructions and requirements of Regulation S-B and,
therefore, do not include all information and footnotes necessary for a
fair presentation of financial position, results of operations and cash
flows in conformity with generally accepted accounting principles. In the
opinion of management, such financial statements reflect all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
statement of financial position, results of operations and cash flows for
the interim periods presented. Operating results for the interim periods
are not necessarily indicative of the results that may be expected for
the full fiscal years.
These condensed financial statements and footnotes should be read in
conjunction with the Company's audited financial statements for the
fiscal years ending September 30, 1995 and 1994 included in the
Prospectus dated June 3, 1996 included in the Company's Registration
Statement on Form SB-2 (Registration No. 33-91426), as filed with the
Securities and Exchange Commission. The accounting principles used in
preparing these condensed financial statements are the same as those
described in such statements.
(2) Inventory
The following is a summary of inventory at June 30, 1996:
<TABLE>
<S> <C>
Raw materials $ 2,345,425
Work in process 1,386,199
Finished goods 194,099
---------
3,925,723
Reserve for obsolete inventory 75,577
---------
$ 3,850,146
===========
</TABLE>
(3) Loss Per Share
Loss per share has been computed by dividing net loss by the weighted
average number of shares outstanding. The weighted average number of
shares outstanding has been determined assuming all options issued were
outstanding for the periods presented. (Continued)
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PARAVANT COMPUTER SYSTEMS, INC.
Notes to Condensed Financial Statements
(4) Contingency
In March 1996, the Company's former counsel rendered an invoice to the
Company totaling approximately $365,000 for legal fees and expenses
representing both general corporate services as well as services relating
to the Company's initial public offering. The Company has contested the
invoice and accrued an estimate for the settlement, if any, of these
fees. In March 1996, the Company's former counsel filed an action against
the Company, its current underwriter and certain other defendants,
alleging, among other things, breach of contract, failure to pay
attorneys fees, fraud, copyright infringement and defamation by the
Company in connection with the aforementioned services as well as
claiming a finder's fee with respect to the underwriter's relationship
with the Company. Plaintiff is seeking damages of approximately
$28,000,000 from the Company. The Company has filed an answer denying the
claims asserted by plaintiff and has asserted defenses and counterclaims
against the plaintiff seeking recovery of amounts paid to the plaintiff,
plus punitive damages and court costs. Management, after consultation
with counsel, is of the opinion that the ultimate resolution of this
matter will not have a material adverse effect on future operations of
the Company. If the total payments are less than or more than the amount
provided in the financial statements, such differences will decrease or
increase offering costs or operating expenses, as appropriate.
(5) Initial Public Offering
In June 1996, the Company completed an underwritten initial public
offering ("IPO") of 1,150,000 shares of common stock and 1,610,000
redeemable warrants to purchase common stock, resulting in aggregate net
proceeds of $4,591,556 to the Company after deducting certain
commissions, expenses and offering costs.
(6) Subsequent Event
On July 12, 1996, the Board of Directors declared a three-for-one common
stock split for stockholders of record on July 22, 1996. The stock split
was effective on July 25, 1996 and all share related data in the
condensed financial statements reflect the stock split for all periods
presented.
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PART I - FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis or Plan of Operation
This Quarterly Report on Form 10-QSB contains certain
forward-looking statements. Actual results could differ materially from those
projected in the forward-looking statements due to a number of factors,
including but not limited to the length of sales cycles in the military,
government and commercial markets, trends in budgetary and appropriations
policies involving government contracts, the competitive environment for the
Company's products and services, the timing of new orders, the degree of market
penetration of the Company's new products and other factors set forth herein
or in reports and other documents filed by the Company with the Securities and
Exchange Commission.
Results of Operations
The operations of PCS have been cyclical and generally result in
a significant increase in deliveries and revenues in the fourth quarter of each
fiscal year as opposed to the first three quarters. The Company's fourth quarter
higher revenues levels are due to the lead-time requirements necessary to
procure, manufacture, and assemble the components for fourth quarter deliveries.
Accordingly, results of operations for the first three quarters of the Company's
fiscal year are not necessarily indicative of results expected for the full
year.
Three months ended June 30, 1996 vs. three months ended June 30, 1995
Revenues for the three-month period were $1,957,228 in 1996
compared to $1,228,822 for the same period in 1995, an increase of $728,406 or
59%. This increase is associated with improved product manufacturing
efficiencies and overall increased business levels in 1996.
Gross profit was $835,275 for the period in 1996 compared to
$709,630 in 1995, a total increase of $125,645 or 18%. As a percentage of
revenues, gross profit declined from 58% to 43% for the three months ended June
30, 1996 and 1995, respectively. Management believes the decrease in gross
profit as a percentage of revenues during the 1996 period is not indicative of a
general decrease in overall profitability at PCS, but instead results primarily
from the fact that the Company experiences fluctuations in its operating results
due to its long sales cycle and the seasonality of its business. Because so much
of the Company's revenues are related to U.S. military and government
procurement, the Company's business is greatly influenced by the timing of such
purchases, with a gradual increase in revenues developing during its first three
fiscal quarters and most sales typically occurring in the fourth quarter ending
September 30 of each year.
Selling and administrative expenses was $906,425 in 1996 or 46%
of revenues, compared to $922,034 or 75% of revenues in 1995, a decrease of
$15,609 or 2%. Although selling and administrative expenses have generally
increased from year to year in total, there has been an overall decline from
year to year as a percentage of revenues. The substantial decline of selling and
administrative expenses as a percentage of revenues in 1996 as compared to 1995
is primarily due to the increase in revenues for the period described above.
Loss from operations decreased to $71,150 in the three months
ended June 30, 1996 from $212,404 in the same period for 1995, a decrease of
67%. As a percentage of revenues, loss from operations decreased to 4% in the
three months ended June 30, 1996 from 17% in the same period for 1995. This
decrease is due primarily to the increase in revenues and gross profits
described above.
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<PAGE>
There was no significant change in interest expense of $107,023
in the three months ended June 30, 1996 from $101,004 for the same period in
1995. As a percentage of sales, interest expense decreased to 5% in 1996 from 8%
of in 1995. The decrease in total interest expense, as a percentage of revenues,
from 1995 to 1996 is due primarily to the increase in revenues described above.
As a result, a net loss of $136,112 was recorded for the three
months ended June 30, 1996 compared to a $251,739 loss in 1995, for the same
period. As a percentage of revenues, net loss decreased to 7% in the three
months ended June 30, 1996 from 20% for the same period in 1995. This decrease
is due primarily to the increase in revenues described above.
Nine months ended June 30, 1996 vs. nine months ended June 30, 1995
Revenues for the nine-month period were $3,682,110 in 1996
compared to $3,080,354 for the same period in 1995, an increase of $601,756 or
20%. This increase is associated with improved product manufacturing
efficiencies and overall increased business levels in 1996.
Gross profit was $1,428,246 for the period in 1996 compared to
$1,475,361 in 1995, a decrease of $47,115 or 3%. As a percentage of revenues,
gross profit declined from 48% to 39% for the nine months ended June 30, 1996
and 1995, respectively. Management believes the decrease in gross profit during
the 1996 period is not indicative of a general decrease in overall profitability
at PCS, but instead results primarily from the fact that the Company experiences
fluctuations in its operating results due to its long sales cycle and the
seasonality of its business. Because so much of the Company's revenues are
related to U.S. military and government procurement, the Company's business is
greatly influenced by the timing of such purchases, with a gradual increase in
revenues developing during its first three fiscal quarters and most sales
typically occurring in the fourth quarter ending September 30 of each year.
Selling and administrative expenses was $2,315,082 in 1996 or 63%
of revenues, compared to $2,037,041 or 66% of revenues in 1995, an increase of
$278,041 or 14%. The increase is partly related to an overall increase in
personnel costs associated with the requirements of the change in PCS's status
to a public company and differences in the timing of various expenditures
throughout the periods. A portion of selling and administrative expenses are
commissions which vary directly with sales volume and by customer. Commissions
accrue at the time of sale and are paid upon collection of the related accounts
receivable. For the 1996 period, commissions were $351,133, or approximately
9.5% of revenues, and $136,180 greater than the prior period. Other significant
increases include increased professional fees of $137,276. Although selling and
administrative expenses have generally increased from year to year in total,
there has been an overall decline from year to year as a percentage of revenues.
Loss from operations increased to $886,836 in the nine months
ended June 30, 1996 from $561,680 in the same period for 1995, an increase of
58%. As a percentage of revenues, loss from operations increased to 24% in the
nine months ended June 30, 1996 from 18% in the same period for 1995. This
increase is due primarily to the changes in gross profits and selling and
administrative expenses described above.
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<PAGE>
Interest expense increased to $329,225 in the nine months ended
June 30, 1996 from $262,203 for the same period in 1995, an increase of 26%. As
a percentage of revenues, interest expense was 9% and 9% of revenues, in 1996
and 1995, respectively. The increase in total interest expense from 1995 to 1996
is due primarily to increased balances outstanding under the Company's credit
arrangements.
As a result, a net loss of $784,938 was recorded for the nine
months ended June 30, 1996 compared to a $555,779 loss in 1995, for the same
period. As a percentage of revenues, net loss increased to 21% in the nine
months ended June 30, 1996 from 18% for the same period in 1995. This increase
is due primarily to the decrease in gross profit, the increase in selling and
administrative expenses and the increase in interest expense described above.
Liquidity and Capital Resources
In June 1996, the Company completed an underwritten initial
public offering ("IPO") of 1,150,000 shares of common stock ("Common Stock") and
1,610,000 redeemable warrants to purchase shares of Common Stock ("Warrants"),
resulting in aggregate net proceeds of $4,591,556 to the Company after deducting
certain commissions, expenses and offering costs. The Company used a portion of
the net proceeds of the IPO to repay certain loans in the aggregate principal
amount of $1,077,295, as described below. On July 12,1996, the Board of
Directors declared a three-for-one split of the Common Stock and, in connection
therewith, the Board of Directors also elected to adjust the number of Warrants
outstanding by effecting a three-for-one split of the Warrants. The stock split
and warrant split were effective on July 25, 1996.
The Company has a secured revolving credit arrangement with
National City Bank in Dayton, Ohio (the "Bank") for a credit line of up to
$4,000,000 that is due on demand and bears interest at prime rate plus 0.5% for
secured borrowings and prime rate plus 1% for undersecured borrowings. All
borrowings are collateralized by accounts receivable, inventory and equipment.
Such arrangement is subject to a borrowing base formula involving certain
accounts receivable, inventory and equipment. As of June 30, 1996, there were no
amounts outstanding under this arrangement. The Company intends to maintain this
arrangement with the Bank for the foreseeable future, although there can be no
assurance that the Bank will not in the future demand repayment of any amounts
then outstanding under its loan arrangement. The Company also has a secured term
loan entered into in March 1996 provided by the Bank in the amount of $811,469
to be amortized over five years, bearing interest at a fixed annual rate of 8%.
All borrowings thereunder are secured by a lien on accounts receivable,
inventory and equipment. As of June 30, 1996, there is approximately $756,000
outstanding under this arrangement with the Bank. The Company also has capital
lease obligations of approximately $122,000 at June 30, 1996. These capital
lease obligations bear interest rates of 1.25% to 1.50% over the prime rate and
are expected to be satisfied within 5 years.
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In August 1995, the Company borrowed $400,000 pursuant to bridge
notes from a group of private investors at an annual interest rate of 6%. As of
June 30, 1996, $275,000 of these notes were repaid from the net proceeds of the
IPO and $125,000 of these notes remain outstanding. It is anticipated that the
remaining principal amount of the notes will be satisfied from the net proceeds
of the IPO no later than September 1996.
In connection with certain sales of shares of Common Stock in
March 1996 by UES Florida, Inc. (an affiliate of the Company which is controlled
by Krishan K. Joshi, the Company's Chairman) ("UES"), Richard P. McNeight, the
President and Chief Operating Officer of the Company, William R. Craven, the
Vice President of Marketing of the Company, and another shareholder, such
shareholders loaned to the Company in April 1996, for working capital purposes,
the sums of $646,294; $78,000; $ 26,000 and $52,000, respectively, or an
aggregate of $802,294 of the proceeds realized from such sales, at an interest
rate of 6% per annum. Such loans, plus accrued interest thereon in an aggregate
amount of $8,681, were repaid in June 1996 in accordance with their terms from a
portion of the net proceeds of the IPO.
Following consummation of the IPO in June 1996, the Company paid
approximately $88,000 of the net proceeds of the IPO to reimburse UES for
certain health insurance and other expenses paid on the Company's behalf.
The Company has, and continues to have, a dependence upon a few
major customers for a significant portion of its revenues. This dependence for
revenues has not been responsible for any unusual fluctuations in operating
results in the past, and Management does not believe this concentration will
generate fluctuations in operating results in the future. However, the potential
impact of losing a major customer without securing offsetting and equivalent
orders could result in a significant negative impact to the operating results of
the Company. The gross margin contributions of the Company's major customers are
not generally different than those from its other customers as a whole.
The Company's operating cash flow was negative $(1,241,513) for
the nine months ended June 30, 1996. The Company's operating cash flow was
negative $(506,389) in fiscal 1995 and negative $(562,740) in fiscal 1994. These
cash outflows were primarily associated with general increases in inventory
levels and temporary increases associated with accounts receivable, all in
support of the Company's rapid increase in operations reflected by the growth in
revenues from $4,621,527 in fiscal 1993 to $8,652,553 in fiscal 1995, an
increase of almost 87%. In addition, the Company invested $57,617 for the nine
months ended June 30, 1996, $60,350 in fiscal 1995 and $99,547 in fiscal 1994 to
acquire manufacturing equipment also in support of these expanded operating
levels.
Due to the Company's orders related to United States Department
of Defense procurements, the operations of the Company have been cyclical and
generally result in a significant increase in deliveries and revenues in the
fourth quarter of its fiscal year ending on September 30. Accordingly, a
significant increase in inventory occurs late in the third quarter and continues
through the fourth quarter of each fiscal year. This increase in inventory is
followed by a corresponding increase in accounts receivable. Inventory and
accounts receivable levels then return to lower levels in the first and second
quarter of the next fiscal year. Revenues in the fourth quarter of each fiscal
year are significantly higher than the first three quarters. Inventory balances
are greatest in the third quarter in support of the significantly increased
deliveries related to the Company's fourth quarter higher revenues level due to
the lead-time requirements necessary to procure, manufacture, and assemble the
components for fourth quarter deliveries. This uneven cycle results in severe
liquidity
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pressures during the periods of increased inventory and accounts receivable
balances which management of the Company has attempted to address with equity
funding provided by the IPO. As of June 30, 1996, management believes inventory
balances are not in excess of requirements for deliveries and normal minimum
stocking levels.
Generally, accounts receivable at the end of each quarter are
collected within the following quarter. However, it may be the case that the
collection of accounts receivable are delayed due to the delayed finalization of
a prime contractor's contract with the Government, which results in an extended
collection period for the Company. Notwithstanding this condition, the Company
has not been required to write off any significant bad debt in the past, and
Management does not believe that any significant accounts receivable at June 30,
1996 are likely to be uncollectible.
As of July 31, 1996 and 1995, the Company's backlog was
$4,367,751 and $4,252,915 respectively, consisting of firm fixed price purchase
orders. All of these purchase orders are expected to generate profits within the
Company's historical levels and the Company believes that the completion of the
orders comprising its backlog, and any new orders which may be accepted by the
Company in the future, should not result in additional liquidity pressures which
cannot be addressed in a manner consistent with the Company's past practices.
The Company's backlog of $4,367,751 is scheduled for delivery within one year.
The Company anticipates, based on its currently proposed plans
and assumptions relating to its operations, that the proceeds of the IPO, which
was consummated in June 1996, together with estimated working capital from
operations and other sources of funds, will be adequate to sustain operations
for at least a 24-month period after the IPO, and anticipates that such proceeds
will be expended over the first 18 months following the IPO. As the Company
continues to grow, additional bank borrowings, other debt placements and equity
offerings may be considered, in part or in combination, as the situation
warrants. In addition, in the event the Company's plans change or its
assumptions change or prove to be inaccurate, or if projected cash flow
otherwise proves insufficient to fund operations, the Company might need to seek
other sources of financing to conduct its operations. There can be no assurance
that any such other sources of financing would be available when needed, on
commercially reasonable terms, or at all.
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<PAGE>
PART II - OTHER INFORMATION
Item 2. Changes in Securities
On July 12, 1996, the Board of Directors of Registrant declared a
three-for-one stock split of its outstanding Common Stock. In connection with
the stock split, effective July 25, 1996, each shareholder of record on July 22,
1996 was entitled to two additional shares of Common Stock for each share owned
on that date.
In connection with the stock split and as permitted by the
Business Corporation Act of the State of Florida, the Registrant amended its
Articles of Incorporation by action of its Board of Directors in order to
decrease the par value of the Common Stock from $.045 per share to $.015 per
share. An Amendment to the Articles of Incorporation was filed with the
Department of State of the State of Florida on July 25, 1996 in order to effect
the change in the par value.
In connection with the Common Stock split, the Board of Directors
also elected, pursuant to the terms of the Warrant Agreement, dated as of June
13, 1996 (the "Warrant Agreement"), between the Registrant, Continental Stock
Transfer & Trust Company and Duke & Co., Inc., to adjust the number of
outstanding Warrants by effecting a three-for-one split of the Warrants.
Prior to the Warrant split, each Warrant entitled the holder
thereof to purchase one share of Common Stock at a price of $6.00 per share for
a period of five years commencing November 30, 1997 (the "Exercise Period"). The
terms of the Warrants also provided that the Warrants were redeemable by the
Registrant at any time commencing November 30, 1997 (the "Redemption Period"),
upon notice of not less than 30 days, at a price (the "Redemption Price") of
$.05 per Warrant, provided that the last sale price of the Common Stock on the
Nasdaq National Market exceeded $8.50 per share for a period of 30 consecutive
trading days during the Exercise Period.
As a result of the Warrant split, effective July 25, 1996, each
holder of record of a Warrant on July 22, 1996 was entitled to receive two
additional Warrants. The terms of all outstanding Warrants were amended to
provide that, effective July 25, 1996, each Warrant would entitle the holder
thereof to purchase at any time during the Exercise Period one share of Common
Stock at a price of $2.00 per share. Accordingly, a holder who held on July 25,
1996 one Warrant to purchase one share of Common Stock at a price of $6.00 per
share became entitled, as a result of the Warrant split, to three Warrants, each
to purchase one share of Common Stock at a price of $2.00 per share. In
addition, the terms of the Warrants were also adjusted to provide that the
Warrants will be redeemable by the Registrant at any time during the Redemption
Period, upon notice of not less than 30 days, at a Redemption Price of $.0167
per Warrant, provided that the last sale price of the Common Stock on the Nasdaq
National Market has exceeded $2.83 per share (subject to adjustment) for a
period of 30 consecutive trading days during the Exercise Period.
-16-
<PAGE>
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
<TABLE>
<S> <C>
1 Underwriting Agreement between Registrant and Duke & Co., Inc.
3.1 Articles of Incorporation, as amended
3.2 Amendment and Restated By-Laws, as amended.
4.1 Warrant Agreement between the Registrant, Duke & Co., Inc. and the Warrant Agent
4.2 Underwriter's Warrant issued to Duke & Co., Inc.
10.1 Warrant Agent Agreement and Warrant relating to August 1995 bridge financing
10.2 Financial Advisory and Investment Banking Agreement
11 Statement re: computation of per share earnings (not required because the relevant
computation can be clearly determined from material contained in the financial
statements).
27 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K:
No reports on Form 8-K were filed by the Registrant during the thirteen
weeks ended June 30, 1996.
-17-
<PAGE>
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934,
the Registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
PARAVANT COMPUTER SYSTEMS, INC.
Date: August 13, 1996 By /s/ Kevin J. Bartczak
--------------------------
Kevin J. Bartczak Vice
President, Treasurer and
Chief Financial Officer
(as both a duly authorized
officer of Registrant and
as principal financial
officer of Registrant)
-18-
<PAGE>
<PAGE>
PARAVANT COMPUTER SYSTEMS, INC.
UNDERWRITING AGREEMENT
New York, New York
May 31, 1996
Duke & Co., Inc.
909 Third Avenue
New York, New York 10022
Dear Sirs:
The undersigned, Paravant Computer Systems, a Florida corporation
(the "Company"), hereby confirms its agreement with Duke & Co., Inc. (the
"Underwriter" or "You"), as follows:
1. INTRODUCTION. The Company proposes to issue and sell to the
Underwriter an aggregate of 1,000,000 shares of Common Stock, $.045 per value
(the "Shares"), of the Company and 1,400,000 redeemable common stock purchase
warrants, each exercisable to purchase one share of Common Stock (the
"Redeemable Warrants"). Each Redeemable Warrant shall be exercisable for a
period of five (5) years commencing eighteen months from the Effective Date (as
defined below), for one share of Common Stock at a price equal to $6.00 per
share. The Company may call for redemption of the Redeemable Warrants commencing
eighteen months from the date that the Securities and Exchange Commission (the
"Commission") declares the registration statement (the "Registration Statement")
with respect to the Securities effective (the "Effective Date") at $.05 per
Redeemable Warrant, provided the last sale price of the Common Stock for 30
consecutive trading days, during the period in which said warrants are
exercisable, exceeds $8.50 per Share, subject to adjustment. It is contemplated
that the Shares and the Redeemable Warrants will trade separately and be
purchasable separately immediately upon issuance.
These Shares and Redeemable Warrants are hereinafter referred to
as the "Firm Securities." Upon your request, as provided in Section 3 of this
Agreement, the Company shall also issue and sell to you up to an additional
150,000 shares of Common
<PAGE>
<PAGE>
Stock and/or 210,000 Redeemable Warrants for the purpose of covering
over-allotments in the sale of the Firm Securities (the "Over-allotment
Option"). Such additional Securities are hereinafter referred to as the "Option
Securities." The Firm Securities and the Option Securities are hereinafter
sometimes referred to as the "Securities." The Company also proposes to issue
and sell to you, pursuant to the terms of the warrant agreement, dated as of the
Effective Date between you and the Company (the "Underwriter's Warrant
Agreement"), warrants (the "Underwriter's Warrants") to purchase up to 100,000
shares of Common Stock and/or 140,000 Redeemable Warrants. The Underwriter's
Warrants shall be exercisable during the four-year period commencing 12 months
from the Effective Date, at $6.00 per Share and $.12 per Redeemable Warrant,
subject to adjustment in certain events to protect against dilution. The
Securities issuable upon exercise of the Underwriter's Warrants are hereinafter
sometimes referred to as the "Underwriter's Securities." The Securities, the
Underwriter's Warrants and the Underwriter's Securities are more fully described
in the Registration Statement and the Prospectus referred to below.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to the Underwriter as of the date hereof that:
a. The Company has filed with the Commission a
registration statement and an amendment or amendments thereto, on Form SB-2 (No.
33-91426), including any related preliminary prospectus (the "Preliminary
Prospectus"), for the registration of the Securities and the Underwriter's
Securities, under the Securities Act of 1933 (the "Act"), which registration
statement and amendment or amendments have been prepared by the Company in
conformity with the requirements of the Act, and the rules and regulations (the
"Regulations") of the Commission promulgated under the Act. Before the
registration statement becomes effective, the Company will not file any
amendment to such registration statement to which you shall have reasonably
objected after having been furnished with a copy thereof. Except as the context
may otherwise require, such registration statement, as amended, on file with the
Commission at the time the registration statement becomes effective (including
the prospectus, financial statements, schedules, exhibits and all other
documents filed as a part thereof or incorporated therein and all information
deemed to be a part thereof as of such time pursuant to paragraph (b) of Rule
430(A) of the Regulations), is hereinafter called the "Registration Statement,"
and the form of prospectus, in the form first filed with the Commission pursuant
to Rule 424(b) of the Regulations (or included in the Registration Statement, if
no filing under Rule 424 is required), is hereinafter called the "Prospectus."
b. On the Effective Date and at all times subsequent
thereto up to Closing Date I and Closing Date II, if any
2
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<PAGE>
(as such terms are defined in Section 3(d) hereof), the Registration Statement
and the Prospectus will comply in all material respects with the applicable
provisions of the Act and the Regulations; neither the Registration Statement
nor the Prospectus, nor any amendment or supplement thereto, will contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.
c. This Agreement, the Underwriter's Warrant Agreement and
the Consulting Agreement (as defined in Section 5(q) hereof), have been duly and
validly authorized by the Company, and this Agreement constitutes, and the
public warrant agreement dated as of the Effective Date between the Company and
the transfer agent identified in Section 5(j) hereof (the "Public Warrant
Agreement), the Underwriter's Warrant Agreement and the Consulting Agreement,
when executed and delivered pursuant to this Agreement (assuming due execution
by the Underwriter and/or the appropriate parties to such agreements), will each
constitute a valid and binding agreement of the Company, enforceable against the
Company in accordance with its respective terms, except (i) as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or similar laws affecting creditors' rights
generally, (ii) as enforceability of any indemnification, contribution or
exculpation provision may be limited under applicable Federal and state
securities laws, and (iii) that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought. The Securities and the Underwriter's Warrants to be issued and
sold by the Company pursuant to this Agreement and the Underwriter's Securities
issuable upon payment therefor, have been duly authorized and, when issued and
paid for, will be validly issued, fully paid and non-assessable; the holders
thereof are not and will not be subject to personal liability by reason of being
such holders; the Securities, the shares of Common Stock issuable upon the
exercise of the Redeemable Warrants (the "Warrant Shares"), the Underwriter's
Warrants and the Underwriter's Securities are not and will not be subject to the
preemptive rights of any holders of any security of the Company or similar
contractual rights granted by the Company; and all corporate action required to
be taken for the authorization, issuance and sale of the Securities, the Warrant
Shares, the Underwriter's Warrants and the Underwriter's Securities has been
duly and validly taken. The Redeemable Warrants and Underwriter's Warrants
constitute valid and binding obligations of the Company, enforceable in
accordance with their respective terms, to issue and sell, upon exercise in
accordance with the terms thereof, the number and type of the Company's
securities called for thereby; except (i) as such enforceability may be limited
by bankruptcy, insolvency, reorganization, moratorium, fraudulent
3
<PAGE>
<PAGE>
conveyance or similar laws affecting creditors' rights generally, (ii) as
enforceability of any indemnification, contribution or exculpation provision may
be limited under applicable Federal and state securities laws, and (iii) that
the remedy of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought.
d. All issued and outstanding Common Stock of the Company
have been duly authorized and validly issued and are fully paid and
non-assessable; the issuances and sales of all such securities complied in all
material respects with applicable Federal and state securities laws; the holders
thereof have no rights of rescission with respect thereto, and are not subject
to personal liability by reason of being such holders; and none of such
securities were issued in violation of the preemptive rights of any holders of
any security of the Company or similar contractual rights granted by the
Company.
e. Except as set forth in the Registration Statement and
the Prospectus, the Company has good and marketable title to, all material items
of real and/or personal property stated in the Prospectus to be owned by it,
respectively, free and clear of all liens, encumbrances, claims, security
interests, defects and restrictions of a material nature, other than those
referred to in the Prospectus and liens for taxes not yet due and payable or
being contested in good faith.
f. There is no action, suit, proceeding, inquiry,
investigation, litigation or governmental proceeding pending or to the knowledge
of the Company, threatened, against or involving the properties or business of
the Company which, if adversely determined, could reasonably be expected to
materially and adversely affect the financial position, or prospects, or
business of the Company, except as referred to in the Prospectus.
g. All contracts and other documents required to be
described in the Registration Statement or the Prospectus or to be filed as
exhibits to the Registration Statement have been described in the Registration
Statement or the Prospectus or filed with the Commission as Exhibits to the
Registration Statement, as required.
h. The financial statements of the Company, together with
the related notes, included in the Registration Statement and Prospectus fairly
present the financial position and the results of operations of the Company, at
the dates and for the periods to which they apply; and such financial statements
have been prepared in conformity with generally accepted accounting principles,
consistently applied throughout the periods involved. There has been no material
adverse change in financial condition or results of operations of the Company,
or to the knowledge of the Company, any development involving a prospective
change in the
4
<PAGE>
<PAGE>
condition or prospects of the Company, financial or otherwise, since the date of
the financial statements included in the Prospectus, except as disclosed
therein.
i. KPMG Peat Marwick LLP, whose reports are filed with the
Commission as a part of the Registration Statement, are independent accountants
as required by the Act and the Regulations.
j. Except as otherwise set forth in the Prospectus, the
Company does not own, directly or indirectly, an interest in any corporation,
partnership, joint venture, trust or other business entity. The Company is duly
incorporated and in good standing in its jurisdiction of incorporation and
qualified and licensed and in good standing as a foreign corporation in each
jurisdiction in which operations require such qualification or licensing, except
where the failure to be so qualified or licensed would not have a material
adverse affect on the Company. The Company has all requisite corporate power and
authority, and all necessary material authorizations, approvals, orders,
licenses, certificates and permits of and from all governmental regulatory
officials and bodies, to own or lease its properties and conduct its business as
described in the Prospectus. The Company is and has been doing business in
compliance with all such authorizations, approvals, orders, licenses,
certificates and permits and with all applicable Federal, state and local laws,
rules and regulations, including but not limited to laws and regulations
relating to environmental matters and employee health and safety matters, except
where non-compliance would not have a material adverse effect on the Company and
none of the aforementioned authorizations, approvals, orders, licenses,
certificates or permits have been suspended or revoked, nor to the knowledge of
the Company are there any proceedings pending or threatened which could
reasonably be expected to result in a suspension or revocation thereof. The
Company has all requisite corporate power and authority to enter into this
Agreement, the Underwriter's Warrant Agreement and the Consulting Agreement and
to carry out the provisions and conditions hereof and thereof, and all consents,
authorizations, approvals and orders required in connection therewith have been
obtained. No consent, authorization or order of, and no filing with, any court,
government agency or other body is required for the issuance of the Securities,
the Warrant Shares and the Underwriter's Securities, pursuant to this Agreement,
the Public Warrant Agreement and the Underwriter's Warrant Agreement, and as
contemplated by the Prospectus, except with respect to applicable Federal and
state securities laws.
k. The outstanding debt, the property and the business of
the Company conform in all material respects to the descriptions thereof
contained in the Registration Statement and Prospectus.
5
<PAGE>
<PAGE>
l. The Securities, the Warrant Shares, the Underwriter's
Warrants, the Underwriter's Securities and any other securities issued or to be
issued by the Company on or before the Closing Dates (as defined in Section 3(d)
hereof) described herein conform, or will conform when issued, in all material
respects to all statements with respect thereto contained in the Registration
Statement and the Prospectus.
m. Except as set forth in the Prospectus, no material
default exists in the due performance and observance of any term, covenant or
condition of any license, contract, indenture, mortgage, deed of trust, note,
loan or credit agreement, or any other agreement or instrument evidencing an
obligation for borrowed money, or any other agreement or instrument to which the
Company is a party or by which the Company may be bound or to which any of the
property or assets of the Company are subject which default would reasonably be
expected to have a materially adverse effect on the financial condition or
business of the Company.
n. The Company is not in violation of any term or
provision of its Certificate of Incorporation or By-Laws. Neither the execution
and delivery of this Agreement, nor the issuance and sale of the shares of
Common Stock, the Redeemable Warrants, the Warrant Shares, the Underwriter's
Warrants and the Underwriter's Securities, nor the consummation of any of the
transactions contemplated herein, nor the compliance by the Company with the
terms and provisions hereof has materially conflicted with or will materially
conflict with, or has resulted in or will result in a material breach of, any of
the terms and provisions of, or has constituted or will constitute a material
default under, or has resulted in or will result in the creation or imposition
of any material lien, charge or encumbrance upon the property or assets of the
Company pursuant to the terms of any indenture, mortgage, deed of trust, note,
loan or credit agreement or any other agreement or instrument evidencing an
obligation for borrowed money, or any other agreement or instrument to which the
Company is a party, or by which the Company is or may be bound, or to which any
of the property or assets of the Company is subject; nor will such action result
in any material violation of the provisions of the Certificate of Incorporation
or the By-Laws of the Company or of any contract or agreement, or of any statute
or any order, rule or regulation applicable to the Company (assuming compliance
with all pertinent blue sky laws in this Offering) or the Subsidiary or of any
other regulatory authority or other governmental body having jurisdiction over
the Company, except where such violation would not have a material adverse
effect on the Company.
o. Except as disclosed in the Prospectus, all taxes which
are due from the Company have been paid in full, unless being contested in good
faith by the Company and the Company has no tax deficiency or claim outstanding,
proposed or assessed against it,
6
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<PAGE>
except where the failure to so pay would not have a material adverse effect on
the Company.
p. Subsequent to the respective dates as of which
information is given in the Prospectus included as a part of the Registration
Statement, and except as may otherwise be indicated or contemplated herein or
therein, (i) the Company has not issued any securities; (ii) declared or paid
any dividend or made any other distribution on or in respect to its capital
stock; (iii) incurred any material liability or obligation, direct or
contingent, for borrowed money; or (iv) entered into any transaction other than
in the ordinary course of business.
q. To the Company's knowledge, the Commission has not
issued any order preventing or suspending the use of any Preliminary Prospectus
or part thereof.
r. On the Effective Date, (i) the authorized capital stock
of the Company will be as set forth in the Registration Statement, and (ii) not
more than an aggregate of 1,500,000 shares of Common Stock shall be issued and
outstanding, not including: (A) 1,000,000 shares of Common Stock contained
within the Securities and the 1,400,000 shares of Common Stock issuable upon the
exercise of the Redeemable Warrants; (B) up to an additional 150,000 shares of
Common Stock issuable upon the exercise of the Over-allotment Option and the
210,000 shares issuable upon the exercise of the Redeemable Warrants issuable
upon the exercise of the Over-allotment Option; (C) the 100,000 shares of Common
Stock issuable upon exercise of the Underwriter's Warrants and the 140,000
shares issuable upon exercise of the Redeemable Warrants issuable upon the
exercise of the Underwriter's Warrants (which warrants are identical to the
Redeemable Warrants); (D) 85,945 shares of Common Stock reserved for issuance
under a non-qualified stock option plan previously maintained by the Company,
which has been cancelled (the "Non-Qualified Plan"); (E) 485,000 shares of
Common Stock reserved for issuance under the Company's Incentive Stock Option
Plan ("Incentive Plan"); (F) 15,000 shares reserved for issuance under the
Company's Non-employee Director's Stock Option Plan ("Directors' Plan"); and
(G) warrants to purchase an aggregate of 160,000 shares of Common Stock issuable
in connection with a bridge financing in August 1995 (the "Bridge Warrants").
Other than the shares of Common Stock already issued (within the meaning of the
immediately preceding sentence), the Securities, the Warrant Shares, the
Underwriter's Warrants and the Underwriter's Securities to be offered in or in
connection with the public offering, no other shares of capital stock or
securities convertible into capital stock shall be outstanding or reserved for
issuance at the completion of the proposed public offering without the consent
of the Underwriter, except as contemplated by the Registration Statement.
7
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<PAGE>
s. Except for the registration rights granted under the
Underwriter's Warrant Agreement and those to the Selling Security Holders, as
defined in the Registration Statement, no holders of any securities of the
Company or of any options, warrants or convertible or exchangeable securities of
the Company exercisable for or convertible or exchangeable for securities of the
Company have the right to include any securities issued by the Company in the
Registration Statement or any registration statement to be filed by the Company.
t. Assuming that there will be two "market makers" for the
Common Stock, at least 500 beneficial owners of the Common Stock and a
sufficient "public float" of the Shares, and that the Company's registration of
the Common Stock pursuant to the Securities Exchange Act of 1934 (the "Exchange
Act") becomes effective (all as contemplated by the requirements of the National
Association of Securities Dealers, Inc. (the "NASD")), the Common Stock and the
Redeemable Warrants are eligible for quotation on The NASDAQ National Market
System ("NASDAQ"). The Company has filed a registration statement with the
Commission pursuant to Sections 12(g) and 12(b) of the Exchange Act, and has
used its best efforts to have same declared effective by the Commission on an
accelerated basis on the Effective Date.
u. Except as described in the Prospectus, to the knowledge
of the Company, there are no claims, payments, issuances, arrangements or
understandings for services in the nature of a finder's or origination fee with
respect to the sale of the Securities hereunder or any other arrangements,
agreements, understandings, commitments, payments or issuances of securities
with respect to the Company that may affect the Underwriter's compensation, as
determined by the NASD, except as previously disclosed to the Underwriter
concerning the $50,000 previously paid to S.D. Cohn & Co., Inc.
v. Neither the Company, nor, to the knowledge of the
Company, any of its employees or officers or directors, agents or any other
person acting on behalf of the Company has, directly or indirectly, given or
agreed to give any money, gift or similar benefit (other than legal price
concessions to customers in the ordinary course of business) to any customer,
supplier, employee or agent of a customer, supplier, or official or governmental
agency or instrumentality of any government (domestic or foreign) or any
political party or candidate for office (domestic or foreign) or other person
who was, is, or may be in a position to help or hinder the business of the
Company (or assist it in connection with any actual or proposed transaction)
which (i) could reasonably be expected to subject the Company to any material
damage or penalty in any civil, criminal or governmental litigation or
proceeding, (ii) could reasonably be expected to have had a materially adverse
effect on the assets, business or operations of the Company as reflected in any
of the financial statements contained in the
8
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<PAGE>
Prospectus, or (iii) if not continued in the future, could reasonably be
expected to materially adversely affect the assets, business, operations or
prospects of the Company.
w. Except as set forth in the Registration Statement, the
Company owns or possesses the requisite licenses or rights to use all
trademarks, service marks, service names, trade names, patents and patent
applications, copyrights, methods, protocols, techniques, technologies,
procedures and other rights (collectively the "Intangibles") described as owned
or used by the Company in the Registration Statement. To the knowledge of the
Company, there is no claim, action or proceeding by any person pending or,
threatened, which pertains to or challenges the rights of the Company with
respect to any Intangibles used in the conduct of the business of the Company,
except as described in the Prospectus and that the Company's former counsel has
claimed that he has a copyright on the contents of the Registration Statement.
To the knowledge of the Company, current products, services and processes of the
Company do not infringe on any Intangibles held by any third party, except as
set forth in the Registration Statement.
x. Except as set forth in the Registration Statement or
the exhibits thereto, the Company is not under any obligation to pay royalties
or fees of any kind whatsoever to any third party with respect to Intangibles
they have developed, use, employ or intend to use or employ, except any
obligation that it might have to its former counsel.
y. The Company has generally enjoyed satisfactory
employer/employee relationships with its employees and is in compliance in all
material respects with all Federal, state and local laws and regulations
respecting the employment of their respective employees and employment
practices, terms and conditions of employment and wages and hours relating
thereto. To the knowledge of the Company, there are no pending or threatened
investigations involving the Company by the U.S. Department of Labor or
corresponding foreign agency, or any other governmental agency responsible for
the enforcement of such Federal, state or local laws and regulations. To the
knowledge of the Company, there are no unfair labor practice charges or
complaints against the Company pending before the National Labor Relations Board
or corresponding foreign agency or any strikes, picketing, boycotts, disputes,
slowdowns or stoppages pending or threatened against or involving the Company,
or any predecessor entity, and none has occurred. No representation question
exists respecting the employees of the Company. No collective bargaining
agreements or modifications thereof are currently in effect or being negotiated
by the Company and its employees. No grievance or arbitration proceeding is
pending under any expired or existing collective bargaining agreements of the
Company.
9
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z. Neither the Company, nor, to the Company's knowledge,
any of its officers or directors or any of its employees or stockholders, have
taken, directly or indirectly, any action designed to or which has constituted
or which could reasonably be expected to cause or result in, under the Exchange
Act or otherwise, stabilization or manipulation of the price of any security of
the Company to facilitate the sale or resale of the Securities.
aa. The Company does not: (i) maintain nor has it
maintained, sponsored or contributed to any program or arrangement that is an
"employee pension benefit plan," an "employee welfare benefit plan" or a
"multiemployer plan" as such terms are defined in Sections 3(2), 3(1) and 3(37),
respectively of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") ("ERISA Plans"), except for the Stock Option Plan and the Directors'
Plan described in the Prospectus; (ii) presently maintain or contribute nor at
any time in the past, have they maintained or contributed to a defined benefit
plan, as defined in Section 3(35) of ERISA; or (iii) has ever completely or
partially withdrawn from a "multiemployer plan."
ab. Except as set forth in the Prospectus under
"MANAGEMENT" or "CERTAIN TRANSACTIONS," the Company is not a party to any
agreement with any officer, director or stockholder of the Company or any
affiliate or associate of any such person or entity which is required to be
disclosed in the Prospectus pursuant to Regulation SB. Except as set forth in
the Prospectus, to the knowledge of the Company, no officer, director or
stockholder of the Company or any "affiliate" or "associate" (as these terms are
defined in Rule 405 promulgated under the Regulations) of any such person or
entity or the Company, has or has had, either directly or indirectly, (i) an
interest in any person or entity which (A) furnishes or sells services or
products which are furnished or sold or are proposed to be furnished or sold by
the Company, or (B) purchases from or sells or furnishes to the Company any
goods or services, or (ii) a beneficial interest in any contract or agreement to
which the Company is a party or by which it may be bound or affected.
ac. The minute books of the Company have been made
available to counsel to the Underwriter and contain a complete summary of all
meetings and actions by unanimous consent of directors and stockholders since
the time of incorporation and reflect all transactions referred to in such
minutes accurately in all material respects.
ad. The statements in the Prospectus under "RISK FACTORS,"
"BUSINESS," "CERTAIN TRANSACTIONS," "MANAGEMENT" and "DESCRIPTION OF
SECURITIES," insofar as they refer to statements of law, descriptions of
statutes, licenses, rules or regulations or legal conclusions are correct in all
material aspects.
10
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3. PURCHASE, SALE AND DELIVERY OF THE SECURITIES AND UNDERWRITER'S
WARRANTS.
a. On the basis of the representations and warranties
herein contained, but subject to the terms and conditions herein set forth, the
Company agrees to sell to the Underwriter, 1,000,000 shares of Common Stock and
1,400,000 Redeemable Warrants, and the Underwriter, agrees to purchase such
Securities from the Company on a firm commitment basis at a purchase price of
$4.55 per Share and $.091 per Redeemable Warrant, to be sold by the Underwriter
at an initial public offering price of $5.00 per Share and $.10 per Redeemable
Warrant.
b. In addition, upon not less than two (2) days' notice
from the Underwriter to the Company, for a period of thirty (30) calendar days
from the date of the Prospectus, the Company agrees to sell to the Underwriter
at a purchase price of $4.55 per Share and/or $.091 per Redeemable Warrant, all
or any part of the Option Securities, to be sold by the Underwriter hereunder at
an initial public offering price of $5.00 per Share and $.10 per Redeemable
Warrant. Delivery of the Option Securities shall be made concurrently with
tender of payment therefor. Option Securities may be purchased by the
Underwriter only for the purpose of covering over-allotments in the sale of the
Firm Securities, and the Underwriter shall have no obligation to make any
over-allotments. No Option Securities shall be delivered and paid for unless the
Firm Securities shall be simultaneously delivered or shall theretofore have been
delivered and paid for as herein provided.
c. On Closing Date I (defined below in Section 3(d)), the
Company shall issue and sell to the Underwriter the Underwriter's Warrants,
which warrants shall entitle the holders thereof to purchase up to an aggregate
of 100,000 shares and/or 140,000 Redeemable Warrants. The total purchase price
of the Underwriter's Warrants shall be $10. The Underwriter's Warrants shall be
exercisable in whole or in part to purchase up to such 100,000 Shares and/or
140,000 Redeemable Warrants for a period of 48 months commencing 12 months from
the date of the Prospectus, at a price of $6.00 per Share and $.12 per
Redeemable Warrant (120% of the initial public offering price of the
Securities). The Underwriter's Warrant Agreement and form of Underwriter's
Warrant Certificate shall be substantially in the form filed as Exhibit 4.5 to
the Registration Statement.
d. Payment for the Underwriter's Warrants shall be made on
Closing Date I. Payment for the Firm Securities and the Option Securities shall
be made on each of Closing Date I and Closing Date II, respectively, by
certified or bank cashier's check in New York Clearing House funds, payable to
the order of the Company, or by wire transfer, at the offices of the
Underwriter, or at such other place as agreed upon by the Underwriter and the
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Company, upon delivery of certificates (in form and substance reasonably
satisfactory to the Underwriter) representing the Securities to be sold at such
closing or by confirmation of electronic transfer of the Securities to the
Underwriter for the accounts of the Underwriter. Delivery and payment for the
Firm Securities shall be made at 10:00 A.M. New York time, on or before the
fifth business day following the public offering or at such earlier time as the
Underwriter shall determine or as required by law, or at such other time as
shall be agreed upon by the Underwriter and the Company. The hour and date of
delivery and payment for the Firm Securities are called "Closing Date I." The
Firm Securities shall be registered in such name or names and in such authorized
denominations as the Underwriter may request in writing at least two (2) full
business days prior to Closing Date I. The Company will permit the Underwriter
to examine and package any certificates representing the Firm Securities for
delivery, at least one (1) full business day prior to Closing Date I. Delivery
for each of the Option Securities as provided above shall be made within the two
(2) business day period after notice of exercise to the Company, and against
payment therefor, as provided above. The hour and date of such delivery and
payment made subsequent to Closing Date I for Option Securities is referred to
as "Closing Date II." The Option Securities shall be registered in such name or
names and in such denominations as the Underwriter may request in writing at the
time of exercise of the Over-allotment Option.
e. The Company shall not be obligated to sell or deliver
any Firm Securities except upon tender of payment by the Underwriter for all the
Firm Securities.
4. PUBLIC OFFERING. The Underwriter is to make a public offering
of the Firm Securities and such of the Option Securities as it may determine.
The Securities are to be initially offered to the public at the offering price
set forth on the cover page of the Prospectus (such price being hereinafter
called the "Public Offering Price"). The Underwriter may, at its own expense,
enter into one or more agreements as the Underwriter, in its sole discretion,
deems advisable with one or more broker-dealers who shall act as dealers or
co-underwriters in connection with such public offering.
5. COVENANTS OF THE COMPANY. The Company covenants and agrees
that it will:
a. Use its best efforts to cause the Registration
Statement to become effective and will notify the Underwriter immediately, and
confirm the notice in writing if requested by Underwriter, (i) when the
Registration Statement and any post-effective amendment thereto becomes
effective, (ii) of the issuance by the Commission of any stop order or of the
initiation, of any proceeding for that purpose, (iii) of the issuance by any
state securities commission of any proceedings for the suspension
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of the qualification of the Securities and the Underwriter's Securities for
offering or sale in any jurisdiction or of the initiation of any proceeding for
that purpose, and (iv) of the receipt of any comments from the Commission. If
the Commission or any state securities commission shall enter a stop order or
suspend such qualification at any time, the Company will make every reasonable
effort to obtain promptly the lifting of such order.
b. File the Prospectus (in form and substance reasonably
satisfactory to the Underwriter) or transmit the Prospectus by a means
reasonably calculated to result in filing with the Commission in accordance with
Rule 424, if the Prospectus is required to be so filed.
c. During the time when a prospectus is required to be
delivered under the Act, use its reasonable best efforts to comply with all
requirements imposed upon it by the Act and the Exchange Act, as now and
hereafter amended, and by the Regulations, as from time to time in force, so far
as necessary to permit the continuance of sales of or dealings in the Securities
and the Underwriter's Securities in accordance with the provisions hereof and
the Prospectus. If at any time when a prospectus relating to the Securities or
the Underwriter's Securities is required to be delivered under the Act, any
event shall have occurred as a result of which, in the opinion of counsel for
the Company, the Prospectus, as then amended or supplemented, includes an untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, or if it is necessary
at any time to amend the Registration Statement to comply with the Act, the
Company will notify the Underwriter promptly and prepare and file with the
Commission an appropriate amendment or supplement in accordance with Section 10
of the Act.
d. Deliver to the Underwriter, without charge, such number
of copies of each Preliminary Prospectus and the Prospectus as the Underwriter
may reasonably request and, as soon as the Registration Statement or any
amendment or supplement thereto becomes effective, deliver to the Underwriter
two (2) signed copies of the Registration Statement, including exhibits, and all
post-effective amendments thereto and copies of all exhibits filed therewith or
incorporated therein by reference and signed copies of all consents of certified
experts.
e. Endeavor in good faith, in cooperation with the
Underwriter and Gersten, Savage, Kaplowitz & Curtin, LLP, counsel to the
Underwriters, at or prior to the time the Registration Statement becomes
effective, to qualify the Securities and the Underwriter's Securities for
offering and sale under the securities laws of such jurisdictions as the
Underwriter may reasonably designate, provided that no such qualification shall
be required in
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any jurisdiction where, as a result thereof, the Company would be subject to
service of general process or to taxation or qualification as a foreign
corporation doing business in such jurisdiction. In each jurisdiction where such
qualification shall be effected, the Company will, unless the Underwriter agrees
that such action is not at the time necessary or advisable, use its reasonable
best efforts to file and make such statements or reports at such times as are or
may reasonably be required by the laws of such jurisdiction.
f. Make generally available to its security holders as
soon as practicable, but not later than the first day of the fifteenth full
calendar month following the Effective Date, an earnings statement (which need
not be certified by independent public or independent certified public
accountants unless required by the Act or the Regulations, but which shall
satisfy the provisions of Section 11(a) of the Act) covering a period of at
least twelve (12) consecutive months beginning after the Effective Date.
g. For a period of three (3) years from the Effective
Date, furnish to the Underwriter copies of such financial statements and other
periodic and special reports as the Company from time to time furnishes
generally to holders of any class of its securities, and promptly furnish to the
Underwriter (i) a copy of each periodic report the Company shall file with the
Commission, (ii) a copy of every press release and every news item and article
with respect to the Company or its affairs, which was released by the Company,
(iii) a copy of each Form 8-K or Schedule 13D, 13G, 14D-1 or 13E-4 received or
prepared by the Company, and (iv) such additional documents and information with
respect to the Company or any future subsidiaries or affiliates of the Company
as the Underwriter may from time to time reasonably request; provided, the
Underwriter agrees to execute a confidentiality agreement with respect to any
non-public information.
h. Apply the net proceeds from the offering received by it
in a manner consistent in all material respects with the caption "USE OF
PROCEEDS" in the Prospectus.
i. Deliver to the Underwriter, prior to filing, any
amendment or supplement to the Registration Statement or Prospectus proposed to
be filed after the Effective Date and not file unless otherwise required by law
any such amendment or supplement to which the Underwriter shall reasonably and
promptly object, after being furnished such copy, in writing with reasonable
specificity as to the nature and extent of any objection.
j. For a period of two (2) years from Closing Date I,
provide the Underwriter, upon its reasonable request, at the Company's sole
expense, (i) with access to daily consolidated financial transfer sheets
relating to the Common Stock and
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designate Continental Stock Transfer & Trust Company as transfer agent for the
Company's securities or such other transfer agent mutually agreeable to the
Company and the Underwriter and (ii) to cause the Company's depository to fax a
"special security position report" to the Underwriter on a weekly basis.
k. For a period of three (3) years after Closing Date I,
nominate and use its best efforts to engage a reasonably acceptable designee of
the Underwriter as a nonvoting advisor to the Company's Board of Directors (the
"Advisor") or, in lieu thereof, to designate a reasonably acceptable individual
for election as a director, in which case the Company shall use its best efforts
to have such individual elected as a director. The designee may be a director,
officer, partner, employee or affiliate of the Underwriter, and the Underwriter
shall designate such person in writing to the Board. In the event the
Underwriter shall not have designated such individual at the time of any meeting
of the Board or such person is unavailable to serve, the Company shall notify
the Underwriter of each meeting of the Board. An individual, if any, designated
by the Underwriter shall receive all notices and other correspondence and
communications sent by the Company to members of the Board. Such Advisor or
director, as the case may be shall be entitled to receive reimbursement for all
reasonable costs incurred in attending such meetings including, but not limited
to, food, lodging, and transportation. In addition, such Advisor or Director
shall be entitled to the same compensation as the Company gives to other
non-employee directors for acting in such capacity. The Company further agrees
that, during said three (3) year period, it shall schedule no less than two (2)
formal and "in person" meetings of its Board of Directors in each such year at
which meetings such Advisor shall be permitted to attend as set forth herein;
said meetings shall be held quarterly each year and advance notice of such
meetings shall be given to the Advisor. Further, during such three (3) year
period, the Company shall give notice to the Underwriter with respect to any
proposed acquisitions, mergers, reorganizations or other similar transactions
and the Underwriter shall agree to keep such information confidential.
The Company agrees to indemnify and hold the Underwriter
harmless and such Advisor against any and all claims, actions, damages, costs
and expenses, and judgments arising solely out of the attendance and
participation of the Advisor at any such meeting described herein, except for
gross negligence or willful misconduct with respect to any confidential
information provided to such Advisor. In the event the Company maintains a
liability insurance policy affording coverage for the acts of its officers and
directors, it agrees, if possible, to include the Advisor as an insured under
such policy.
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l. For a period of five (5) years from the Effective Date,
use its best efforts to maintain the quotation of the Securities by NASDAQ.
m. Supply the Underwriter with one (1), and Gersten,
Savage, Kaplowitz & Curtin, counsel to the Underwriter, with three (3), bound
volumes of the underwriting materials within a reasonable time after the latest
Closing Date.
n. For a period of two (2) years from the Effective Date,
not issue any other shares of Common Stock or securities convertible into Common
Stock without the prior written consent of the Underwriter, which consent shall
not be unreasonably withheld or delayed. In the event that the Company requests
the Underwriter's consent for any of the above, the Underwriter shall have five
days from the date of such request to indicate its approval or disapproval. If
the Underwriter does not respond within such five day period, its consent will
be assumed. Notwithstanding the foregoing, the Company may issue securities (A)
upon (i) the exercise of any warrants or options outstanding on the date hereof
or contemplated in the Prospectus pursuant to the terms thereof; (ii) pursuant
to the exercise of the Over-allotment Option; and (iii) the exercise of the
Underwriter's Warrant, and (B) pursuant to any of the Stock Option Plans
described in the Prospectus or plans subsequently adopted.
o. So long as the Securities or the Underwriter's
Securities are registered under the Exchange Act, hold an annual meeting of
stockholders for the election of directors and provide the Company's
stockholders with the audited financial statements of the Company as of the end
of the fiscal year just completed prior thereto. Such financial statements shall
be those required by Rule 14a-3 under the Exchange Act and shall be included in
an annual report pursuant to the requirements of such Rule.
p. For a period of two years from the Effective Date, the
Company will not file a form S-8 registration statement without the consent of
the Underwriter, which consent will not be unreasonably withheld.
q. Enter into the Underwriter's Warrant Agreement and the
Financial Advisory and Investment Banking Agreement (the "Consulting Agreement")
in substantially the form filed as Exhibits 4.5 and 10.10, respectively, to the
Registration Statement.
r. As soon as possible after Closing Date I, take all
necessary and appropriate actions to be included in Standard and Poor's
Corporation Descriptions or other equivalent Manual and to maintain its listing
therein for a period of five (5) years from the Effective Date.
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s. Cause all of the Company's officers and directors and
stockholders, to enter into written agreements (the "Lock-up Agreements") that,
for a period of 18 months from the Effective Date, they will not, without the
consent of the Underwriter, (i) publicly sell any securities of the Company
owned directly or indirectly by them or owned beneficially by them (as defined
in the Exchange Act), or (ii) otherwise sell, or transfer such securities unless
the transferee agrees in writing to be bound by an identical lock-up for the
remainder of the Lock-up Period.
t. Use its best efforts to obtain key-man life insurance
in the amount of $1,000,000 per policy on the lives of such executive officers
of the Company as the Underwriter shall request, with the Company named as
beneficiary of such policies.
u. Use its best efforts to qualify its Common Stock and
Redeemable Warrants for quotation on NASDAQ.
v. For a period of two years from the Effective Date, the
Company shall not issue any of its securities in any offering pursuant to
Regulation S under the 1933 Act, without the prior written consent of the
Underwriter, which consent shall not be unreasonably withheld.
w. Designate the Underwriter as the Company's exclusive
Warrant Solicitation Agent in the event of any solicitation commencing one year
after the Effective Date of the exercise of the Redeemable Warrants, in
connection with a redemption of the Redeemable Warrants or otherwise, and shall
pay to the Underwriter a Warrant Solicitation fee of two and a half (2.5%)
percent of the exercise price of all solicited Redeemable Warrants, subject to
the rules and regulations of the NASD with regard to such fees.
x. Neither the Company nor any representative of the
Company has made or shall make any written or oral representation in connection
with the Offering and sale of the Securities or the Underwriter's Warrant which
is not contained in the Prospectus, which is otherwise inconsistent with or in
contravention of anything contained in the Prospectus, or which shall constitute
a violation of the Act, the Rules and Regulations, the Exchange Act or the rules
and regulations promulgated under the Exchange Act.
y. For so long as any Redeemable Warrant is outstanding,
the Company shall, at its own expense: (i) use its reasonable best efforts to
cause post-effective amendments to the Registration Statement, or new
registration statements relating to the Redeemable Warrants and the Common Stock
underlying the Redeemable Warrants to become effective in compliance with the
Act and without any lapse of time between the effectiveness of the Registration
Statement and of any such post-effective amendment or
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new registration statement; provided, however, that the Company shall have no
obligation to maintain the effectiveness of such Registration Statement or file
a new Registration Statement, or to keep available a prospectus at any time at
which such registration or prospectus is not then required; (ii) furnish to the
Underwriters and dealers as many copies of each such Prospectus as the
Underwriter or dealers may reasonably request; and (iii) use its reasonable best
efforts to maintain the "blue sky" qualification or registration of the
Redeemable Warrants and the Common Stock underlying the Redeemable Warrants, or
have a currently available exemption therefrom, in each jurisdiction in which
the Securities were so qualified or registered for purposes of the Offering.
6. PAYMENT OF EXPENSES.
a. The Company hereby agrees to pay all expenses (other
than fees of counsel to the Underwriter) in connection with the offering,
including but not limited to, (i) the preparation, printing, filing and mailing
(including the payment of postage and overnight delivery with respect to such
mailing) of the Registration Statement and the Prospectus and the printing and
mailing of this Agreement and related documents, including the cost of all
copies thereof and of the Preliminary Prospectus and of the Prospectus and any
amendments or supplements thereto supplied to the Underwriter in quantities as
hereinabove stated, (ii) the printing, engraving, issuance and delivery of the
shares of Common Stock, the Redeemable Warrants, and the Underwriter's Warrants,
including any transfer or other taxes payable thereon, (iii) the qualification
of the Securities, the Underwriter's Warrants and the Underwriter's Securities
under state or foreign securities or "Blue Sky" laws and determination of the
status of such securities under legal investment laws, including the costs of
printing and mailing the "Preliminary Blue Sky Memorandum," and "Supplemental
Blue Sky Memorandum" and "Legal Investments Survey," if any, and the fees and
disbursements of counsel for the Underwriter relating to Blue Sky matters (which
fees shall be payable by the Company in an amount not to exceed $5,000, $2,500
of which shall be payable upon the commencement of filing the Registration
Statement) unless the Company does not qualify for NASDAQ/NMS in which case the
fee will be $35,000, (iv) advertising costs and expenses including but not
limited to the reasonable costs and expenses in connection with the "road show,"
information meetings and presentations, "tombstones" in publications selected by
the Underwriter provided that such cost does not exceed $10,000 and prospectus
memorabilia, (v) fees and expenses of the transfer agent and warrant agent, (vi)
application and listing fees for inclusion in Moody's OTC Manual or Standard and
Poor's Corporation Descriptions or other equivalent manuals, and (vii) the fees
payable to the NASD and NASDAQ. Payments with regard to items (i), (iii), (iv)
and (v) shall be made on each of Closing Date I and Closing Date II.
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b. The Company shall pay to the Underwriter an aggregate
non-accountable expense allowance, in addition to the expenses payable pursuant
to Section 6(a), equal to three (3%) percent of the gross proceeds received by
the Company from the sale of the Securities.
7. CONDITIONS OF UNDERWRITER'S OBLIGATIONS. The obligations of
the Underwriter to purchase and pay for the Securities, as provided herein,
shall be subject to the continuing accuracy in all material respects of the
representations and warranties of the Company as of the date hereof and as of
each of the Closing Dates, to the accuracy in all material respects of the
statements of officers of the Company made pursuant to the provisions hereof and
to the performance by the Company of its obligations hereunder in all material
respects and to the following conditions:
a. The Registration Statement shall have become effective
not later than 5:00 p.m., New York time, on the date of this Agreement or such
later date and time as shall be consented to in writing by you, and, at each of
the Closing Dates, no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall have been instituted or shall be pending or to the knowledge of
the Company be contemplated by the Commission and any request on the part of the
Commission for additional information shall have been complied with to the
reasonable satisfaction of Gersten, Savage, Kaplowitz & Curtin, counsel to the
Underwriter.
b. At Closing Date I, the Underwriter shall have received
the favorable opinion of Zimet, Haines, Friedman & Kaplan, counsel to the
Company, dated Closing Date I, addressed to the Underwriter and in form and
substance mutually satisfactory to Gersten, Savage, Kaplowitz & Curtin, counsel
to the Underwriter, and Zimet, Haines, Friedman & Kaplan.
c. On or prior to each of Closing Date I and Closing Date
II, counsel for the Underwriter shall have been furnished such documents,
certificates and opinions as it may reasonably require for the purpose of
enabling it to evidence the accuracy, completeness or satisfaction of any of the
representations, warranties or conditions herein contained.
d. Prior to each of Closing Date I and Closing Date II,
(i) there shall have been no material adverse change, or development involving a
material adverse prospective change, in the conditions or prospects of the
business activities, financial or otherwise, of the Company from the latest
dates as of which such conditions are set forth in the Registration Statement
and Prospectus; (ii) there shall have been no transaction, not in the ordinary
course of business, entered into by the Company from the latest date as of which
their respective financial conditions are
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set forth in the Registration Statement and Prospectus which is materially
adverse to the Company; (iii) the Company shall not be in default under any
provision of any instrument relating to any outstanding indebtedness which
default would have a material adverse effect on the Company; (iv) no amount of
the assets of the Company shall have been pledged or mortgaged, except as set
forth in the Registration Statement and Prospectus; (v) no action, suit or
proceeding, at law or in equity, shall be pending or to the knowledge of the
Company threatened against the Company before or by any court or Federal or
state commission, board or other administrative agency wherein an unfavorable
result, decision, ruling or finding would materially adversely affect the
business, prospects, operations, or financial condition or income of the
Company, as a whole, except as set forth in the Registration Statement and
Prospectus and except where such a result is deemed remote by counsel to the
Company with respect to such action or proceeding; (vi) no stop order shall have
been issued under the Act and no proceedings with respect thereto shall have
been initiated or to the knowledge of the Company threatened by the Commission;
(vii) the market for securities in general or political, financial or economic
conditions shall not have materially adversely changed from those reasonably
foreseeable as of the date hereof as to render it impracticable in the
Underwriter's reasonable judgment to make a public offering of the Securities,
and there has not been a material adverse change in market levels for securities
in general or financial or economic conditions which render it inadvisable in
the Underwriter's judgment to proceed; and (viii) there shall not have commenced
or occurred a war or Act of God or other calamity which would have a material
adverse effect on, or result in a material loss to, the Company.
The Company agrees and acknowledges that the Underwriter
shall be the sole determining party as to the presence of any such conditions,
events, occurrences and provisions set forth in this Section 7(d).
e. At each of Closing Date I and Closing Date II, the
Underwriter shall have received a certificate of the Company signed by the
Chairman of the Board or the President and the Secretary of the Company, dated
Closing Date I and Closing Date II, respectively, to the effect that the
conditions set forth in section 7(d)(i) through (vi) above have been satisfied
and that, as of Closing Date I and Closing Date II, respectively, the
representations and warranties of the Company set forth in Section 2 hereof are
true and correct in all material respects.
f. By the Effective Date, the Underwriter shall have
received clearance from the NASD as to the amount of compensation allowable or
payable to the Underwriter, as described in the Registration Statement.
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g. At the time this Agreement is executed, and at each of
Closing Date I and Closing Date II, the Underwriter shall have received a
letter, addressed to the Underwriter and in form and substance reasonably
satisfactory in all respects (including the nonmaterial nature of the changes or
decreases, if any, referred to in clause (3) below) to the Underwriter and to
Gersten, Savage, Kaplowitz & Curtin, counsel for the Underwriter, from KPMG Peat
Marwick, LLP, dated as of the date of this Agreement and as of each of Closing
Date I and Closing Date II:
(1) confirming that they are independent
accountants with respect to the Company within the meaning of the
Act and the applicable Regulations;
(2) stating that in their opinions the financial
statements of the Company included in the Registration Statement
and Prospectus comply as to form in all material respects with
the applicable accounting requirements of the Act and the
published Regulations thereunder;
(3) stating that, on the basis of a reading of the
latest available minutes of the stockholders and boards of
directors and the various committees of the boards of directors
of the Company and any current or former subsidiaries of the
Company, consultations with officers and other employees of the
Company responsible for financial and accounting matters, a
reading of the latest interim financial statements of the Company
and other specified procedures and inquiries, nothing has come to
their attention which would lead them to believe that (A) either
the audited financial statements in the Registration Statement
for the Company for the year ended September 30, 1995 do not
comply as to form in all material respects with the applicable
accounting requirements of the Act and the Regulations or are not
fairly presented in conformity with generally accepted accounting
principles applied on a basis substantially consistent with that
of the respective audited and unaudited financial statements of
the Company included in the Registration Statement, (B) as of the
end of the Company's last fiscal quarter, there was any change in
the capital stock or long-term debt of the Company, as compared
with amounts shown in the September 30, 1995 balance sheet
included in the Registration Statement, other than as set forth
in or contemplated by the Registration Statement, or, if there
was any decrease, setting forth the amount of such decrease, and
(C) during the period from March 31, 1996 to a specified date not
more than five (5) days prior to the Effective Date there was any
decrease in net sales, other than as set forth in or contemplated
by the Registration Statement, or, if
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there was any such increase or decrease, setting forth the amount
of such increase or decrease;
(4) stating that they have compared specific dollar
amounts, numbers of shares, percentages of revenues and earnings,
statements and other financial information pertaining to the
Company set forth in the Prospectus in each case to the extent
that such amounts, numbers, percentages, statements and
information may be derived from the general accounting records,
including worksheets, of the Company and excluding any questions
requiring an interpretation by legal counsel, with the results
obtained from the application of specified readings, inquiries
and other appropriate procedures (which procedures do not
constitute an examination in accordance with generally accepted
auditing standards) set forth in the letter and found them to be
in agreement; and
(5) statements as to such other matters incident to
the transaction contemplated hereby as the Underwriter may
reasonably request.
h. All proceedings taken in connection with the
authorization, issuance or sale of the Securities, the Underwriter's Warrants
and the Underwriter's Securities as herein contemplated shall be reasonably
satisfactory in form and substance to the Underwriter and to Gersten, Savage,
Kaplowitz & Curtin, LLP counsel to the Underwriter.
i. On each of Closing Date I and Closing Date II, there
shall have been duly tendered to you for your account the appropriate number of
Securities and the Underwriter's Warrants.
j. No order suspending the sale of the Securities in any
jurisdiction designated by you pursuant to Section 5(e) hereof shall have been
issued on either Closing Date I or Closing Date II, and no proceedings for that
purpose shall have been instituted or, to the knowledge of the Underwriter or
the Company, shall be contemplated.
k. Prior to each of Closing Date I and Closing Date II
there shall not have been received or provided by the Company's independent
public accountants or attorneys, qualifications to the effect of either
difficulties in furnishing certifications as to material items including,
without limitation, information contained within the footnotes to the financial
statements, or as affecting matters incident to the issuance and sale of the
Securities or as to corporate proceedings or other matters.
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l. On or prior to Closing Date I, the Underwriter's
Warrant Agreement and the Consulting Agreement shall have been executed and
delivered by the Company, and the Lock-Up Agreements shall have been executed
and delivered by all of the Company's officers, directors and stockholders.
Any certificate signed by any officer of the Company and
delivered to the Underwriter or to counsel to the Underwriter shall be deemed a
representation and warranty by the Company to the Underwriter as to the
statements made therein. If any condition to the Underwriter's obligations
hereunder to be fulfilled prior to or at any Closing Date is not so fulfilled,
the Underwriter may terminate this Agreement or, if the Underwriter so elects,
may waive any such conditions which have not been fulfilled or extend the time
for their fulfillment.
8. INDEMNIFICATION.
a. The Company shall indemnify and hold harmless the
Underwriter, and each controlling person, if any, who controls the Underwriter
(within the meaning of Section 15 of the Act or Section 20(a) of the Exchange
Act), against any and all liabilities, claims and lawsuits, including any and
all awards and/or judgments to which either or both may become subject under the
Act, the Exchange Act or any other Federal or state statute, at common law or
otherwise, insofar as said liabilities, claims and lawsuits (including awards
and/or judgments) arise out of or are in connection with any material
misstatements or omissions in the Registration Statement, Prospectus and related
Exhibits filed under the Act, except for any liabilities, claims and lawsuits
(including awards and/or judgments), arising out of acts or omissions of the
Underwriter; provided that the indemnity provided in this Section 8 (a) with
respect to any preliminary prospectus shall not inure to the benefit of the
Underwriter from whom the person asserting any losses, claims, charges,
liabilities or lawsuits based upon any untrue statement or alleged untrue
statement of material fact or omission or alleged omission to state therein a
material fact purchased Securities, if a copy of the Prospectus in which such
untrue statement or alleged untrue statement or omission or alleged omission was
corrected is found not to have been sent or given to such person within the time
required by the Act and the Regulations. In addition, the Company shall also
indemnify and hold harmless the Underwriter against any and all costs and
expenses, including reasonable counsel fees, incurred or relating to the
foregoing liabilities, claims and lawsuits to which the indemnity applies.
The Underwriter shall give the Company prompt notice of
any such liability, claim or lawsuit which the Underwriter contends is the
subject matter of the indemnification by the Company, and the Company thereupon
shall be granted the right to take any and all necessary and proper action, at
its sole cost and
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expense, with respect to such liability, claim and lawsuit, including the right
to settle, compromise and dispose of such liability, claim or lawsuit, excepting
therefrom any and all proceedings or hearings before any regulatory bodies
and/or authorities.
The Underwriter shall indemnify and hold harmless the
Company, and each controlling person, if any, who controls the Company within
the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act,
against any and all liabilities, claims and lawsuits, including any and all
awards and/or judgments to which it may become subject under the Act, the
Exchange Act or any other Federal or state statute, at common law or otherwise,
insofar as said liabilities, claims and lawsuits (including awards and/or
judgments) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact required to be stated or necessary to make the
statement therein, not misleading, which statement or omission was made in
reliance upon information furnished in writing to the Company by or on behalf of
the Underwriter for inclusion in the Registration Statement or Prospectus or any
amendment or supplement thereto. In addition, the Underwriter, shall also
indemnify and hold harmless the Company against any and all costs and expenses,
including reasonable counsel fees, incurred or relating to the foregoing
liabilities, claims and lawsuits to which the indemnity applies.
The Company shall give to the Underwriter prompt notice of
any such liability, claim or lawsuit, which the Company contends is the subject
matter of the Underwriter's indemnification and the Underwriter thereupon shall
be granted the right to take any and all necessary and proper action, at its
sole cost and expense; provided, that counsel selected by the Underwriter shall
be acceptable to the Company, which consent shall not be unreasonably withheld,
with respect to such liability, claim and lawsuit, including the right to
settle, compromise or dispose of such liability, claim or lawsuit, excepting
therefrom any and all proceedings or hearings before any regulatory bodies
and/or authorities and provided that no such settlement shall be made without
the prior consent of the Company.
b. In order to provide for just and equitable contribution
under the Act in any case in which (i) any person entitled to indemnification
under this Section 8 makes claim for indemnification pursuant hereto but it is
judicially determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of the
last right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that this Section 8 provides for indemnification in
such case, or (ii) contribution under the Act may be required on the part of any
such person in circumstances for which indemnification is provided under this
Section 8, then, and in each such case, the Company and the
24
<PAGE>
<PAGE>
Underwriter shall contribute to the aggregate losses, claims, damages or
liabilities to which they may be subject (after any contribution from others) in
such proportion taking into consideration the relative benefits received by each
party from the offering covered by the Prospectus (taking into account the
portion of the proceeds of the offering realized by each), the parties' relative
knowledge and access to information concerning the matter with respect to which
the claim was assessed, the opportunity to correct and prevent any statement or
omission and other equitable considerations appropriate under the circumstances;
provided, however that notwithstanding the above in no event shall the
Underwriter, be required to contribute any amount in excess of 10% of the
initial public offering price of the Securities; and provided, that, in any such
case, no person guilty of a fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation.
Within fifteen (15) days after receipt by any party to
this Agreement (or its representative) of notice of the commencement of any
action, suit or proceeding, such party will, if a claim for contribution in
respect thereof is to be made against another party (the "contributing party"),
notify the contributing party of the commencement thereof, but the omission so
to notify the contributing party will not relieve it from any liability which it
may have to any other party other than for contribution hereunder. In case any
such action, suit or proceeding is brought against any party, and such party
notifies a contributing party or his or its representative of the commencement
thereof within the aforesaid fifteen (15) days, the contributing party will be
entitled to participate therein with the notifying party and any other
contributing party similarly notified. Any such contributing party shall not be
liable to any party seeking contribution on account of any settlement of any
claim, action or proceeding effected by such party seeking contribution without
the written consent of such contributing party. The indemnification provisions
contained in this Section 8 are in addition to any other rights or remedies
which either party hereto may have with respect to the other or hereunder.
9. REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY. Except as
the context otherwise requires, all representations, warranties and agreements
contained in this Agreement shall be deemed to be representations, warranties
and agreements at the Closing Dates, and such representations, warranties and
agreements of the Underwriter and the Company, including the indemnity
agreements contained in Section 8 hereof, shall remain operative and in full
force and effect regardless of any investigation made by or on behalf of the
Underwriter, the Company or any controlling person, and shall survive
termination of this Agreement or the issuance and delivery of the Securities to
the Underwriter until the earlier of the expiration of any applicable statute of
25
<PAGE>
<PAGE>
limitations and the seventh anniversary of Closing Date II, at which time the
representations, warranties and agreements shall terminate and be of no further
force and effect.
10. EFFECTIVE DATE OF THIS AGREEMENT AND TERMINATION
HEREOF.
a. This Agreement shall become effective at 9:30 a.m., New
York time, on the first full business day following the day on which the
Registration Statement becomes effective or at the time of the initial public
offering by the Underwriter of the Securities, whichever is earlier. The time of
the initial public offering, for the purpose of this Section 10, shall mean the
time, after the Registration Statement becomes effective, of the release by the
Underwriter for publication of the first newspaper advertisement which is
subsequently published relating to the Securities or the time, after the
Registration Statement becomes effective, when the Securities are first released
by the Underwriter for offering by the Underwriter or dealers by letter or
telegram, whichever shall first occur. The Underwriter may prevent this
Agreement from becoming effective without liability to any other party, except
as noted below, by giving the notice indicated below in this Section 10 before
the time this Agreement becomes effective. The Underwriter agrees to give the
undersigned notice of the commencement of the offering described herein.
b. The Underwriter shall have the right, in its sole
discretion, to terminate this Agreement, including without limitation, the
obligation to purchase the Firm Securities, by notice given to the Company prior
to delivery and payment for all the Firm Securities, if any of the conditions
enumerated in Section 7 are not either fulfilled or waived by the Underwriter on
or before any Closing Date.
c. If the Underwriter elects to prevent this Agreement
from becoming effective or to terminate this Agreement as provided in this
Section 10, the Company shall be notified on the same day as such election is
made by the Underwriter by telephone or telegram, confirmed by letter.
d. Anything herein to the contrary notwithstanding, if
this Agreement shall not be carried out within the time specified herein, or any
extensions thereof granted by the Underwriter, by reason of any failure on the
part of the Company to perform any undertaking or satisfy any condition of this
Agreement by it to be performed or satisfied then, in addition to the
obligations assumed by the Company pursuant to Section 6(a) hereof, the
Underwriter shall provide the Company with a statement of the Underwriter's
accountable expenses.
26
<PAGE>
<PAGE>
e. In the event of litigation between the parties arising
hereunder, the prevailing party shall be entitled to costs and reasonable
attorney's fees.
f. Notwithstanding any contrary provision contained in
this Agreement, any election hereunder or termination of this Agreement, and
whether or not this Agreement is otherwise carried out, the provisions of
Section 8 shall not be in any way affected by such election or termination or
failure to carry out the terms of this Agreement or any part hereof.
11. NOTICES. All communications hereunder, except as herein
otherwise specifically provided, shall be in writing and, if sent to the
Underwriter, shall be mailed, delivered or telegraphed and confirmed to Duke &
Co., Inc., 909 Third Avenue, New York, New York 10022, Attention: President,
with a copy to Gersten, Savage, Kaplowitz & Curtin, LLP, 575 Lexington Avenue,
New York, New York 10022, Attention: Jay Kaplowitz, Esq., and if to the Company,
shall be mailed, delivered or telegraphed and confirmed to Paravant Computer
Systems, Inc., 780 South Apollo Blvd., Atrium One, Melbourne, Florida 32901,
Attention: Richard McNeight, with a copy to Zimet, Haines, Friedman & Kaplan,
460 Park Avenue, New York, New York 10022, Attention: James Martin Kaplan, Esq.
12. PARTIES. This Agreement shall inure solely to the benefit of
and shall be binding upon, the Underwriter, the Company and the controlling
persons, directors and officers referred to in Section 8 hereof, and their
respective successors, legal representatives and assigns, and no other person
shall have or be construed to have any legal or equitable right, remedy or claim
under or in respect of or by virtue of this Agreement or any provisions herein
contained.
13. CONSTRUCTION. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New York,
without giving effect to conflict of laws. The parties agree to submit
themselves to the jurisdiction of the courts of the State of New York or of the
United States of America for the Southern District of New York, which shall be
the sole tribunals in which any parties may institute and maintain a legal
proceeding against the other party arising from any dispute in respect of this
Agreement. In the event either party initiates a legal proceeding in a
jurisdiction other than in the courts of the State of New York or of the United
States of America for the Southern District of New York, the other party may
assert as a complete defense and as a basis for dismissal of such legal
proceeding that the legal proceeding was not initiated and maintained in the
courts of the State of New York or of the United States of America for the
Southern District of New York, in accordance with the provisions of this Section
13.
27
<PAGE>
<PAGE>
14. ENTIRE AGREEMENT. This Agreement, the Underwriter's Warrant
Agreement and the Consulting Agreement contain the entire agreement between the
parties hereto in connection with the subject matter hereof and thereof. This
Agreement is intended to supersede the letter of intent. In the event of any
conflict between any of the above mentioned documents and the letter of intent
the referenced agreements shall govern.
If the foregoing correctly sets forth the understanding between
the Underwriter and the Company, please so indicate in the space provided below
for that purpose, whereupon this letter shall constitute a binding agreement
between us.
Very truly yours,
PARAVANT COMPUTER SYSTEMS, INC.
By: /s/ Kevin J. Bartczak
______________________________
Name: Kevin J. Bartczak
Title: Vice President,
Treasurer and
Chief Financial
Officer
Accepted as of the date
first above written.
New York, New York
DUKE & CO., INC.
By: /s/ Gregg Thaler
_________________________________
Name: Gregg Thaler
Title: President
28
<PAGE>
<PAGE>
ARTICLES OF INCORPORATION
OF
INFORMATION MANAGEMENT GROUP, INC.
The undersigned subscribers to these Articles of Incorporation, natural
persons competent to contract, hereby subscribe to and form a corporation for
profit under the laws of the State of Florida.
ARTICLE I - NAME
The name of the corporation is INFORMATION MANAGEMENT GROUP, INC.
ARTICLE II - NATURE OF BUSINESS
The corporation may engage in any activity or business permitted under
the laws of the United States and of this State, to include the transaction of
all lawful business for which corporations may be incorporated under Chapter
607, Florida Statutes.
ARTICLE III - CAPITAL STOCK
The maximum number of shares of stock that this corporation is
authorized to have outstanding at any time is seventy-five hundred (7,500)
shares of common stock, each share having the par value of ONE DOLLAR ($1.00).
ARTICLE IV - ADDRESS
The street address of the initial registered office of this corporation
is 469 Sheridan Avenue, Satellite Beach, Florida
(1)
<PAGE>
<PAGE>
32937. The initial registered agent is CHARLES E. KIERSTEAD, III, whose address
is 1714 Castaways Street, Palm Bay, Florida 32905.
ARTICLE V - PRE-EMPTIVE RIGHTS
Each of the incorporating stockholders, upon the sale for cash of new
stock of the corporation, whether it be the originally authorized and unissued
stock, or whether it be the sale of new shares of stock under an increased
authorization of capital stock shall be entitled to purchase or subscribe to the
newly issued stock in preference to nonholders and on equal terms with other
holders of the original stock in the proportion that the number of the original
shares held by him bear to the total outstanding number of original shares.
VI - DIRECTORS
The corporation shall have five directors initially, whose names and
street addresses are as follows:
<TABLE>
<CAPTION>
NAME: ADDRESS:
<S> <C>
CRAIG R. YOUNG 469 Sheridan Avenue
Satellite Beach, Florida 32937
MARY L. YOUNG 469 Sheridan Avenue
Satellite Beach, Florida 32937
CHARLES E. KIERSTEAD, III 1714 Castaways Street
Palm Bay, Florida 32905
RICHARD P. McNEIGHT 565 West Gateway Court
Merritt Island, Florida 32952
ALAN J. WHITHEAR 1925 Weber Road
Palm Bay, Florida 32905
</TABLE>
ARTICLE VII - SUBSCRIBERS
The names and street addresses of the subscribers to these Articles of
Incorporation are as follows:
(2)
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
NAME: ADDRESS:
<S> <C>
CRAIG R. YOUNG 469 Sheridan Avenue
Satellite Beach, Florida 32937
MARY L. YOUNG 469 Sheridan Avenue
Satellite Beach, Florida 32937
CHARLES E. KIERSTEAD, III 1714 Castaways Street
Palm Bay, Florida 32905
RICHARD P. McNEIGHT 565 West Gateway Court
Merritt Island, Florida 32952
ALAN J. WHITHEAR 1925 Weber Road
Palm Bay, Florida 32905
</TABLE>
IN WITNESS WHEREOF, we have hereunto set our hands and seal,
acknowledged and filed the foregoing Articles of Incorporation under the laws of
the State of Florida, this 22nd day of June, 1982.
Craig R. Young
.....................................
CRAIG R. YOUNG
Mary L. Young
.....................................
MARY L. YOUNG
Charles E. Kierstead, III
.....................................
CHARLES E. KIERSTEAD, III
Richard P. McNeight
.....................................
RICHARD P. McNEIGHT
Alan J. Whithear
.....................................
ALAN J. WHITHEAR
STATE OF FLORIDA
COUNTY OF BREVARD
BEFORE ME personally appeared CRAIG R. YOUNG, MARY L.
<PAGE>
<PAGE>
YOUNG, CHARLES E. KIERSTEAD, III, ALAN J. WHITHEAR and RICHARD P. McNEIGHT, to
me known and known to me to be the individuals described in and who executed the
foregoing Articles of Incorporation, and acknowledged before me that they
executed the same for the purposes therein expressed.
WITNESS my hand and seal in the County and State named above this 22nd day
of June, 1982.
Linda Schmidt
.....................................
NOTARY PUBLIC
STATE OF FLORIDA AT LARGE
MY COMMISSION EXPIRES:
(NOTARY PUBLIC SEAL)
<PAGE>
<PAGE>
CERTIFICATE OF AMENDMENT
TO THE ARTICLES OF INCORPORATION OF
INFORMATION MANAGEMENT GROUP, INC.
I, CRAIG R. YOUNG, the President and Secretary of INFORMATION MANAGEMENT
GROUP, INC., a Florida corporation, do hereby certify to the Secretary of State
of the State of Florida that on the 20th day of March, 1984, a meeting of the
Shareholders and Directors of said corporation was held pursuant to verbal call
of the President at which time there were present all the Shareholders
representing all of the issued and outstanding shares of the common stock of the
Corporation, who waived notice of said meeting in writing and that by the
unanimous vote of the said Shareholders and Directors, the following Resolution
which has heretofore and on the 20th day of March, 1984, been duly and legally
adopted by the Board of Directors of said corporation in meeting assembled:
"RESOLVED that pursuant to the provisions of Florida Statutes, Ch.
607, particularly F. S. 607.177 and Article III of the Articles of
Incorporation of the corporation, the Articles of Incorporation are
hereby amended by altering Article III, so as to now read as follows:
ARTICLE III -- CAPITAL STOCK
This corporation is authorized to issue Seventeen Thousand, Five
Hundred (17,500) shares of One Dollar ($1.00) par value common stock."
I DO HEREBY CERTIFY that said Resolution has not been altered, amended or
rescinded and that it is in full force and effect on this 20th day of March,
1984.
INFORMATION MANAGEMENT GROUP, INC.
By: Craig R. Young
------------------------------
CRAIG R. YOUNG, President
ATTEST:
Craig R. Young
- -----------------------------
Secretary (SEAL)
<PAGE>
<PAGE>
STATE OF FLORIDA
COUNTY OF BREVARD
BEFORE ME, this day, personally appeared CRAIG R. YOUNG, known to be and to
me to be the President and Secretary of INFORMATION MANAGEMENT GROUP, INC., and
who, as such officers, do acknowledge the execution of the foregoing certificate
in his capacity and for the purposes therein expressed.
WITNESS my hand and seal in the County and State last aforesaid on this
20th day of March, 1984.
Mary Ann Cook
----------------------------------
NOTARY PUBLIC
State of Florida at Large
My Commission Expires:
NOTARY PUBLIC STATE OF FLORIDA
MY COMMISSION EXP. NOV 13, 1987
[Notary Public Seal]
<PAGE>
<PAGE>
CERTIFICATE OF AMENDMENT TO THE ARTICLES OF INCORPORATION
OF
INFORMATION MANAGEMENT GROUP, INC.
I, CRAIG R. YOUNG and RICHARD P. MCNEIGHT, President and Secretary
respectively, of INFORMATION MANAGEMENT GROUP, INC., a Florida corporation, do
hereby certify to the Secretary of State, State of Florida, that on the 15th day
of April, 1987, that a majority of the Shareholders, pursuant to Written
Consent, adopted the following resolutions, which have heretofore and on the
15th day of April, 1987, that a majority of the Shareholders, pursuant to
Written Consent, adopted the following resolutions, which have heretofore and on
the 15th day of April, 1987, been duly and legally adopted by the Board of
Directors of this corporation in meeting assembled:
RESOLVED, that pursuant to the provisions of Florida Statutes, Chapter
607, the Articles of Incorporation are hereby amended by altering Article
III -- Capital Stock and Article V -- Preemptive Right so as to now read as
follows:
ARTICLE III -- CAPITAL STOCK
(i) The maximum number of shares of Class A Common Stock which this
corporation is authorized to have outstanding at any time is 5,000,000
shares at a par value of $.01 per share.
(ii) The maximum number of Class B Non-Voting Common Stock which this
corporation is authorized to have outstanding at any time shall be 250,000
shares at a par value of $.01 per share.
(iii) The holders of record of Class B Non-Voting Common Stock shall
be entitled to convert, at the option of said record holder thirty (30)
days after the effective date of any public offering of this corporation's
Common Stock, upon surrender to the corporation of the certificates for the
shares to be converted, into fully paid and non-assessable Class A Common
Stock of the corporation at the rate of one (1) Class B Non-Voting Common
Stock for each Class A Common Stocks. The corporation shall at all times
reserve and keep available out of its authorized but unissued Class A
Common Stock deliverable upon the conversion of all Class B Non-Voting
Common Stocks from time to time outstanding.
ARTICLE V -- PREEMPTIVE RIGHTS
By the elimination of Article V -- Preemptive Rights in its entirety.
I DO HEREBY CERTIFY THAT said resolutions have not been altered, amended,
or rescinded and that it is in full force and effect this 15 day of April,
1987.
<PAGE>
<PAGE>
CERTIFICATE OF AMENDMENT TO ARTICLES OF INCORPORATION FOR
INFORMATION MANAGEMENT GROUP, INC. continued:
STATE OF FLORIDA )
COUNTY OF BREVARD )
BEFORE me personally appeared CRAIG R. YOUNG to me well known and known to
me to be the person described in and who executed the foregoing instrument, and
acknowledged to and before me that he executed this instrument for the purposes
therein expressed.
WITNESS my hand and official seal this 15th day of April, 1987.
My Commission Expires: By: [SIGNATURE]
------------------------------
Notary Public
[Notary Public Seal]
Page 2 of 2
<PAGE>
<PAGE>
CERTIFICATE OF AMENDMENT TO THE ARTICLES OF INCORPORATION
OF
INFORMATION MANAGEMENT GROUP, INC.
I, CRAIG R. YOUNG and RICHARD P. MCNEIGHT, President and Secretary
respectively, of INFORMATION MANAGEMENT GROUP, INC., a Florida corporation, do
hereby certify to the Secretary of State, State of Florida, that on the ___ day
of April, 1987, that a majority of the Shareholders, pursuant to Written
Consent, adopted the following resolutions, which have heretofore and on the __
day of April, 1987, been duly and legally adopted by the Board of Directors of
this corporation in meeting assembled:
RESOLVED, that pursuant to the provisions of
Florida Statutes, Chapter 607, the Articles of Incorporation
are hereby amended by altering Article I-NAME- so as to to
now read as follows:
ARTICLE I - NAME
-----------------
The name of this corporation is PARAVANT COMPUTER
SYSTEMS, INC.
I DO HEREBY CERTIFY THAT said resolutions have not been altered,
amended, or rescinded and that it is in full force and effect this __ day of
April, 1987.
<TABLE>
<S> <C>
Attest: By: [Signature]
[Signature] ................................................
.................................................... President
Secretary (Seal)
</TABLE>
STATE OF FLORIDA )
COUNTY OF BREVARD )
BEFORE me personally appeared CRAIG R. YOUNG to me well known and known
to me to be the person described in and who executed the foregoing instrument,
and acknowledged to and before me that he executed this instrument for the
purposes therein expressed.
WITNESS my hand and official seal this __ day of April, 1987.
My Commission Expires: By: [Signature]
...........................
Notary Public
<PAGE>
<PAGE>
CERTIFICATE OF AMENDMENT TO THE ARTICLES OF
INCORPORATION FOR PARAVANT COMPUTER SYSTEMS, INC.
WE, the undersigned being the President and Secretary, of PARAVANT
COMPUTER SYSTEMS, INC., a Florida corporation, do hereby certify to the
Secretary of State, State of Florida, that on the 15th day of December, 1989,
pursuant to written notice executed by all voting common stockholders, the
following resolutions, which have heretofore and on the 15th day of December,
1989, been duly and legally adopted by the Board of Directors of this
corporation by written consent:
RESOLVED, that pursuant to the provisions of
Florida Statutes, Chapter 607, particularly Florida Statute
607.177, the Articles of Incorporation are hereby amended by
altering Article III-CAPITAL STOCK, to read as follows:
ARTICLE III - CAPITAL STOCK
----------------------------
(i) The number of shares of Class A Common Stock which this
Corporation is authorized to have outstanding at any time is
10,000,000 shares at a par value of $.01 per share.
(ii) The maximum number of Class B Non-Voting Common Stock which
this Corporation is authorized to have outstanding at any
time shall be 250,000 shares at a par value of $.01 per
share.
FURTHER RESOLVED, that pursuant to the provisions
of Florida Statutes, Chapter 607, particularly Florida
Statute 607.177, the Articles of Incorporation are hereby
amended by the addition of Article VIII, PRE-EMPTIVE RIGHTS,
to read as follows:
ARTICLE VIII - PRE-EMPTIVE RIGHTS
Every shareholder, upon the sale for cash fo any new or
treasury stock of this corporation of the same kind, class or
series as that which he already holds, shall have the right
to purchase his pro rata share thereof (as nearly as may be
done without issuance of fractional shares) at the price at
which it is offered to others.
Notwithstanding any provision of law or these Articles of
Incorporation to the contrary, the affirmative vote of the
holders of at least seventy-five (75%) percent of the then
issued and outstanding capital stock of the Corporation,
voting and non-voting, shall be required to repeal, amend,
etc. this Article VIII.
WE DO HEREBY CERTIFY that said resolutions have not been altered
<PAGE>
<PAGE>
amended, or rescinded and that it is full force and effect this 15th day of
December, 1989.
PARAVANT COMPUTER SYSTEMS, INC.
By: [Signature]
...................................
President
Attest:
Richard P. McNeight
.....................................
Secretary (Seal)
STATE OF FLORIDA
COUNTY OF BREVARD
BEFORE ME personally appeared CRAIG R. YOUNG to me well known and known
to me to be the individual described in and who executed the foregoing
instrument as President of the above named corporation, and severally
acknowledged to and before me that he executed such foregoing instrument and
that the seal affixed is the corporate seal of said corporation.
WITNESS my hand and official seal this 15 day of December, 1989.
My Commission Expires: Susan C. Williams
...................................
[SEAL] Notary Public
<PAGE>
<PAGE>
CERTIFICATE OF AMENDMENT TO THE
ARTICLES OF INCORPORATION OF
PARAVANT COMPUTER SYSTEMS, INC.
We, KRISHAN K. JOSHI and RICHARD P. MCNEIGHT, President and Secretary,
respectively, of PARAVANT COMPUTER SYSTEMS, INC., a Florida corporation,
pursuant to Florida Statue 607.187, do hereby certify to the Secretary of State,
State of Florida, that on the 29th day of June, 1990, a majority of Shareholders
of all classes of outstanding stock of the Corporation, by Action by Written
Consent, such majority being sufficient to approve an amendment to the Articles
of Incorporation of the corporation, adopted the following resolution, which has
heretofore and on the 15th day of June 1990, been duly and legally adopted by
the Board of Directors of this Corporation:
RESOLVED, pursuant to the provisions of Florida Statute Chapter 607,
particularly Florida Statute 607.177, the Articles of Incorporation of
the Corporation are hereby amended by altering Article III -- Capital
Stock, to read as follows:
ARTICLE III -- CAPITAL STOCK
(i) The number of shares of Class A Common Stock which this
Corporation is authorized to have outstanding at any time is
10,000,000 shares at a par value of $.01 per share.
(ii) All Class B Non-Voting Common Stock shall be exchanged for Class
A Common Stock on a one-share-for-one-share basis, with all rights and
obligations appurtenant to the Class A Common Stock vesting in the
Class B shareholders upon exchange. Such exchange shall be effected by
the Shareholder delivering all certificates evidencing all shares
owned, properly endorsed, to the Secretary of the Corporation at his
office. Replacement certificates shall then be issued and delivered to
the exchanging shareholder within 10 days by U.S. Mail.
(iii) All Class B Non-Voting Common Stock shall be cancelled upon
exchange for Class A Common Stock.
(iv) Upon exchange of all Class B Non-Voting Common Stock the only
authorized stock of the Corporation will be Common Stock at a par
Value of $.01 per share, all reference to 'Class' having been deleted.
We further certify that the exchange of stock set forth in the Amended
Articles of Incorporation shall be effected by delivery of the appropriate
1
<PAGE>
<PAGE>
The surrendered certificates will be cancelled and a new certificate issued and
delivered to the owner thereof within 10 days by U.S. Mail.
We further certify that the above resolution has not been altered, amended,
or rescinded and that it is in full force and effect this 29th day of June,
1990.
By KRISHAN K. JOSHI
--------------------------------
Krishan K. Joshi, President
ATTEST:
By: RICHARD MCNEIGHT
--------------------------------
Richard McNeight, Secretary
STATE OF OHIO
COUNTY OF MONTGOMERY
Before me personally appeared KRISHAN K. JOSHI to me well known and known
to me to be the person described in and who executed the foregoing instrument,
and acknowledged to and before me that he executed this instrument for the
purpose therein expressed.
WITNESS my hand and official seal this 29th day of June, 1990.
By: Thomas M. Poulton
----------------------------------
Notary Public
[SEAL]
THOMAS M. POUTON, Attorney at Law
Notary Public, State of Ohio
My commission has no expiration date
Section 147.03 O. R. C.
2
<PAGE>
<PAGE>
FILED
96 MAY 31 PM 3:06
SECRETARY OF STATE
TALLAHASSEE, FLORIDA
ARTICLES OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
PARAVANT COMPUTER SYSTEMS, INC.
Under Section 607.1006 of the Florida
General Corporation Act
The undersigned, being the President and Secretary of PARAVANT COMPUTER
SYSTEMS, INC., a Florida corporation, for the purpose of amending the Articles
of Incorporation, do hereby certify:
FIRST: That the name of the Corporation is
PARAVANT COMPUTER SYSTEMS, INC.
SECOND: That Article III (i) of the Corporation's Articles of
Incorporation, which Article states that the par value per share of Common Stock
is $.01, has been amended so as to read, in full, as follows: 'The number of
shares of Common Stock which this Corporation is authorized to have issued at
any time is 10,000,000 shares at a par value of $.045 per share.'
THIRD: That Article III (ii) of the Corporation's Articles of Incorporation
has been added and reads, in full, as follows:
'The number of shares of Preferred Stock that this Corporation is
authorized to have issued at any time is 2,000,000 share at par value of
$.01 per share. The Board of Directors of the Corporation is expressly
authorized to set by its own resolutions, preferences, conversion and other
rights, voting
<PAGE>
<PAGE>
powers, restrictions, limitations as to dividends, qualifications, terms
and conditions of redemption and liquidation pertaining to such Preferred
Stock.'
FOURTH: That Article VIII of the Corporation's Articles of Incorporation
which Article provides for shareholders' preemptive rights and the affirmative
vote of shareholders required to repeal or amend such rights has been amended to
eliminate all shareholders' preemptive rights and related matters.
FIFTH: That the foregoing amendments were duly adopted at the Annual
Meeting of Shareholders of the Corporation, duly called and held on the 2nd day
of March, 1995, by the affirmative vote of the holders of 96% of the shares
entitled to vote thereon and at the annual meeting of its Board of Directors,
duly called and held on even date therewith, by unanimous vote of the directors
thereof.
IN WITNESS HEREOF, we have hereunto set our hands this 31st day of March,
1995.
RICHARD P. MCNEIGHT
------------------------------------
Richard P. McNeight, President
WILLIAM R. CRAVEN,
------------------------------------
William R. Craven, Secretary
<PAGE>
<PAGE>
STATE OF FLORIDA)
SS.:
COUNTY OF BREVARD)
Before me, the undersigned authority, personally appeared Richard P.
McNeight and William R. Craven, to me known to be the President and Secretary,
respectively, of Paravant Computer Services, Inc., a Florida Corporation, and
one of the officers who executed the foregoing Articles of Amendment on behalf
of such Corporation for the purposes expressed therein.
WITNESS my hand and official seal of this 31st day of March, 1995.
[SEAL] NIKKI S. SCULLY
------------------------
(Notary Public)
<PAGE>
<PAGE>
ARTICLES OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
PARAVANT COMPUTER SYSTEMS, INC.
Under Section 607.1006 of the Florida
General Corporation Act
The undersigned, being the President and Secretary of PARAVANT COMPUTER
SYSTEMS, INC., a Florida corporation, for the purpose of amending the Articles
of Incorporation, do hereby certify:
FIRST, That the name of the Corporation is
PARAVANT COMPUTER SYSTEMS, INC.
SECOND: That Article III (i) of the Corporation's Articles of
Incorporation, as amended, which Article states that the number of shares of
Common Stock which the Corporation is authorized to have issued is 10,000,000
shares, par value $.045 per share, has been amended so as to read, in full, as
follows:
"The number of shares of Common Stock which this Corporation is authorized
to have issued at any time is 30,000,000 shares at a par value of $.045 per
share."
THIRD: That the foregoing amendment was duly adopted at a meeting of the
Board of Directors of the Corporation, duly called and held on March 14, 1996,
by majority vote of the directors thereof, and thereafter by written consent,
dated as of May 28, 1996, of shareholders representing a majority of the
Corporation
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<PAGE>
IN WITNESS HEREOF, we have hereunto set our hands this 28 day of May, 1996.
Richard P. McNeight
----------------------------------
Richard P. McNeight, President
William R. Craven
----------------------------------
William R. Craven, Secretary
<PAGE>
<PAGE>
STATE OF FLORIDA )
: ss.:
COUNTY OF BREVARD )
Before me, the undersigned authority, personally appeared Richard P.
McNeight and William R. Craven, to me known to be the President and Secretary,
respectively, of Paravant Computer Systems, Inc., a Florida corporation, and the
officers who executed the foregoing Articles of Amendment on behalf of such
Corporation for the purposes expressed therein.
WITNESS my hand and offical seal of this 28 day of May, 1996.
Cynthia E. Habercom
----------------------------------
(Notary Public)
CYNTHIA E. HABERCOM
My Comm Exp. 11/20/99
[SEAL] Bonded By Service Ins
No. CC510825
[X] Personally Known [ ] Other I.D.
<PAGE>
<PAGE>
FILED
96 JUL 25 PM 3:57
SECRETARY OF STATE
TALLAHASSEE, FLORIDA
ARTICLES OF AMENDMENT
OF THE
ARTICLES OF INCORPORATION
OF
PARAVANT COMPUTER SYSTEMS, INC.
Under Section 607.10025 of the
Florida Business Corporation Act
The undersigned, being the President and Secretary of PARAVANT COMPUTER
SYSTEMS, INC., a Florida Corporation (the "Corporation"), for the purpose of
amending the Articles of Incorporation, as amended, of the Corporation, do
hereby certify:
FIRST: That the name of the Corporation is
PARAVANT COMPUTER SYSTEMS, INC.
SECOND: That a division of the Corporation's common stock was approved by
the Board of Directors of the Corporation pursuant to a resolution adopted by
the Board of Directors on July 23, 1996.
THIRD: That Article III (i) of the Corporation's Articles of Incorporation,
as amended, which Article states that the number of shares of common stock which
the Corporation is authorized to have issued is 30,000,000 shares, par value
$.045 per share, shall be amended so as to read, in full, as follows:
"The number of shares of Common Stock which this Corporation is authorized
to have issued at any time is 30,000,000 shares at a par value of $.015 per
share."
FOURTH: That, pursuant to the aforementioned division of common stock, each
issued and outstanding share of common stock,
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<PAGE>
par value $.045 per share, of the Corporation (the "Old Common Stock") shall be
converted into three shares of common stock, par value $.015 per share, of the
Corporation (the "New Common Stock").
FIFTH: That the foregoing amendment to the Articles of Incorporation of the
Corporation does not adversely affect the rights or preferences of the holders
of the outstanding shares of any class or series and does not result in the
percentage of authorized shares of New Common Stock that remain unissued after
the division exceeding the percentage of authorized shares of Old Common Stock
that were unissued before the division.
SIXTH: The division of each issued and outstanding share of Old Common
Stock into three shares of New Common Stock shall become effective on July 25,
1996.
IN WITNESS HEREOF, we have hereunto set our hands this 23rd day of July,
1996.
Richard P. McNeight
----------------------------------
Richard P. McNeight, President
William R. Craven
----------------------------------
William R. Craven, Secretary
<PAGE>
<PAGE>
STATE OF FLORIDA )
: ss.:
COUNTY OF BREVARD )
Before me, the undersigned authority, personally appeared Richard P.
McNeight and William R. Craven, to me known to be the President and Secretary,
respectively, of Paravant Computer Systems, Inc., a Florida corporation, and the
officers who executed the foregoing Articles of Amendment on behalf of such
Corporation for the purposes expressed therein.
WITNESS my hand and official seal of this 23 day of May, 1996.
Cynthia E. Habercom
----------------------------------
(Notary Public)
CYNTHIA E. HABERCOM
My Comm Exp. 11/20/99
[SEAL] Bonded By Service Ins
No. CC510825
[X] Personally Known [ ] Other I.D.
<PAGE>
<PAGE>
AMENDED AND RESTATED
----------------
BY-LAWS OF
-----------
PARAVANT COMPUTER SYSTEMS, INC.
ARTICLE I - OFFICES
The principal office of the Corporation shall be established and maintained
at 780 South Apollo Boulevard, Atrium One, in the City of Melbourne, County of
Brevard, State of Florida. The Corporation may also have offices at such places
within or without the State of Florida as the Board of Directors may from time
to time establish.
ARTICLE II - SHAREHOLDERS
1. MEETINGS
The annual meeting of the Shareholders of this Corporation shall be held on
the 15th day of February of each year or at such other time and place designated
by the Board of Directors of the Corporation. Business transacted at the annual
meeting shall include the election of Directors of the Corporation and all other
matters properly before the Board of Directors. If the designated day shall fall
on a Sunday or legal holiday, then the meeting shall be held on the first
business day thereafter.
2. SPECIAL MEETINGS
Special meetings of the Shareholders shall be held when directed by the
President or the Board of Directors, or when requested in writing by the holders
of not less than 10% of all the shares entitled to vote at the meeting. A
meeting requested by
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Shareholders shall be called for a date not less than 10 nor more than 60 days
after the request is made unless the Shareholders requesting the meeting
designate a later date. The call for the meeting shall be issued by the
Secretary, unless the President, Board of Directors, or Shareholders requesting
the meeting shall designate another person to do so.
3. PLACE
Meetings of Shareholders shall be held at the principal place of business
of the Corporation or at such other place as may be designated by the Board of
Directors.
4. NOTICE
Written notice to each Shareholder entitled to vote stating the place, day
and hour of the meeting and, in the case of a special meeting, the purpose or
purposes for which the meeting is called, shall be delivered not less than 10
nor more than 60 days before the meeting. If any Stockholder shall transfer his
stock after notice, it shall not be necessary to notify the transferee. Any
Stockholder may waive notice of any meeting either before, during or after the
meeting.
5. QUORUM
The majority of the Shares entitled to vote, represented in person or by
Proxy, shall constitute a Quorum at a meeting of Shareholders, but in no event
shall Quorum consist of less than one third (1/3) of the shares entitled to vote
at the meeting.
After a Quorum has been established at a Shareholders meeting, the
subsequent withdrawal of Shareholders, so as to reduce the
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number of shares entitled to vote at the meeting below the number required for a
Quorum, shall not effect the validity of any action taken at the meeting or any
adjournment thereof.
6. PROXY
Every Shareholder entitled to vote at a meeting of Shareholders, or to
express consent or dissent without a meeting, or his duly authorized
attorney-in-fact, may authorize another person or persons to act for him by
Proxy. The Proxy must be signed by the Shareholder or his attorney-in-fact. No
Proxy shall be valid after the expiration of eleven months from the date
thereof, unless otherwise provided in the Proxy.
ARTICLE III - DIRECTORS
1. BOARD OF DIRECTORS
The business of the Corporation shall be managed and its corporate powers
exercised by a Board of up to nine Directors, each of whom shall be of full age.
It shall not be necessary for Directors to be Stockholders.
2. ELECTION AND TERM OF DIRECTORS
Directors shall be elected at the annual meeting of Stockholders and each
Director elected shall hold office until his successor has been elected and
qualified, or until his prior resignation or removal.
3. VACANCIES
If the office of any Director, member of a committee or other officer
becomes vacant, the remaining Directors in office, by a majority vote, may
appoint any qualified person to fill such
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vacancy, who shall hold office for the unexpired term and until his successor
shall be duly chosen.
4. REMOVAL OF DIRECTORS
Any or all of the Directors may be removed with or without cause by vote of
a majority of all of the Directors or stock outstanding and entitled to vote at
a special meeting of Directors and/or Stockholders called for such purposes.
5. NEWLY CREATED DIRECTORSHIPS
The number of Directors may be increased by amendment of these By-Laws, by
the affirmative vote of a majority in interest of the Stockholders, at the
annual meeting or at a special meeting called for that purpose, and by like vote
the additional Directors may be chosen at such meeting to hold office until the
next annual election and until their successors are elected and qualify.
6. RESIGNATION
A Director may resign at any time by giving written notice to the Board,
the President or the Secretary of the Corporation. Unless otherwise specified in
the notice, the resignation shall take effect upon receipt thereof by the Board
of such officer, and the acceptance of the resignation shall not be necessary to
make it effective.
7. QUORUM OF DIRECTORS
A majority of the Directors shall constitute a quorum for the transaction
of business. If at any meeting of the Board there shall be less than a quorum
present, a majority of those present may adjourn the meeting from time to time
until a quorum is
4
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<PAGE>
obtained, and no further notice thereof need be given other than by announcement
at the meeting which shall be so adjourned.
8. PLACE AND TIME OF BOARD MEETINGS
The Board may hold its meeting at the office of the Corporation or at such
other places either within or without the State of Florida as it may from time
to time determine.
9. NOTICE OF MEETINGS OF THE BOARD
A regular annual meeting of the Board may be held without the notice at
such time and place as it shall from time to time determine. Special meetings of
the Board shall be held upon notice to the Directors and may be called by the
President upon three days notice to each Director either personally or by mail,
telefax or wire; special meetings shall be called by the President or by the
Secretary in a like manner on written request of two Directors. Notice of a
meeting need not be given to any Director who submits a waiver of notice whether
before or after the meeting or who attends the meeting without protesting prior
thereto or at its commencement, the lack of notice to him.
10. REGULAR ANNUAL MEETING
A regular annual meeting of the Board shall be held immediately following
the annual meeting of Stockholders at the place of such annual meeting of
Stockholders.
11. EXECUTIVE AND OTHER COMMITTEES
The Board, by resolution, may designate two or more of their members to any
committee. To the extent provided in said resolution, or these By-Laws, such
committee may exercise the
5
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<PAGE>
powers of the Board, concerning the management of the business of the
Corporation.
12. COMPENSATION
No compensation shall be paid to Directors, as such, for their services,
but by resolution of the Board, a fixed sum and expense for actual attendance,
at each regular or special meeting of the Board may be authorized. Nothing
herein contained shall be constructed to preclude any Director from serving the
Corporation in any other capacity and receiving compensation thereof.
ARTICLE IV - OFFICERS
1. OFFICERS, ELECTION AND TERM
a) The Board may elect or appoint a Chairman, a President, one or more Vice
Presidents, a Secretary and a Treasurer, and such other officers as it may
determine, who shall have such duties and powers as hereinafter provided.
b) All officers shall be elected or appointed to hold office until the
meeting of the Board following the next annual meeting of Stockholders and until
their successors have been elected or appointed and qualified.
c) Any two or more offices may be held by the same person.
2. REMOVAL, RESIGNATION, SALARY, ETC.
a) Any officer elected or appointed by the Board may be removed by the
Board with or without cause.
b) In the event of the death, resignation or removal of an officer, the
Board in its discretion may elect or appoint a successor to fill the unexpired
term.
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c) Any officer elected by the Shareholders may be removed only by vote of
the Shareholders unless otherwise provided by the Shareholders.
d) The salaries of all officers shall be fixed by the Board.
e) The directors may require any Officer to give security for the faithful
performance of his duties.
3. DUTIES
The officers of this Corporation shall have the following duties:
The President shall be the chief executive or operating officer of the
Corporation, shall have general and active management of the business and
affairs of the Corporation, subject to the directions of the Board of Directors,
and shall preside at all meetings of the Shareholders and Board of Directors.
The Secretary shall have custody of, and maintain, all of the corporate
records except the financial records; shall record the minutes of all meetings
of the Shareholders and Board of Directors, send all notices of all meetings and
perform such other duties as may be prescribed by the Board of Directors or the
President.
The Treasurer shall have custody of all corporate funds and financial
records, shall keep full and accurate accounts of receipts and disbursements and
render accounts thereof at the annual meetings of Shareholders and whenever else
required by the Board of Directors or the President, and shall perform such
other duties as may be prescribed by the Board of Directors or the President.
7
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<PAGE>
4. REMOVAL OF OFFICERS
An officer or agent elected or appointed by the Board of Directors may be
removed by the Board whenever in its judgment, the best interests of the
Corporation will be served thereby.
Any vacancy in any office may be filled by the Board of Directors.
ARTICLE V - STOCK CERTIFICATES
1. ISSUANCE
Every holder of shares in this Corporation shall be entitled to have a
certificate or certificates representing all shares of which he is entitled. No
certificate shall be issued for any share until such is fully paid.
2. FORM
Certificates representing shares of stock in this Corporation shall be
signed by the President or Vice President and the Secretary or an Assistant
Secretary and may be sealed with the seal of this Corporation or a facsimile
thereof.
3. TRANSFER OF STOCK
The Corporation shall register a stock certificate presented to it for
transfer if the certificate is properly endorsed by the holder of record or by
his duly authorized attorney, subject to any restrictive legends thereon.
4. LOST, STOLEN OR DESTROYED CERTIFICATES
If the Shareholder shall claim to have lost or destroyed a certificate of
shares issued by the Corporation, a new certificate shall be issued upon the
making of an affidavit of that fact by the
8
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<PAGE>
person claiming the certificate of stock to be lost, stolen or destroyed, and at
the discretion of the Board of Directors, upon the deposit of a bond or other
indemnity in such amount and with such sureties, if any, as the Board may
reasonably require.
ARTICLE VI - BOOKS AND RECORDS
1. BOOKS AND RECORDS
This Corporation shall keep correct and complete books and records of
account and shall keep minutes of the proceedings of its Shareholders, Board of
Director and committees of Directors.
This Corporation shall keep at its registered office or principal place of
business a record of its Shareholders, giving the names and addresses of all
Shareholders and the number of the shares held by each.
Any books, records and minutes may be in written form or in any other form
capable of being converted into written form within a reasonable time.
2. SHAREHOLDERS' INSPECTION RIGHTS
Any person who shall have been a holder of record or shares or of voting
trust certificates thereof at least six months immediately preceding his demand
or shall be the holder of record of, or the holder of record of voting trust
certificates for, at least five percent for the outstanding shares of the
Corporation, upon written demand stating the purpose thereof, shall have the
right to examine, in person or by agent or attorney, at any reasonable time, for
any proper purpose, its relevant books and records of accounts, minutes and
records of Shareholders and to
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make extracts therefrom.
3. FINANCIAL INFORMATION
Not later than four months after the close of each fiscal year, this
Corporation shall prepare a balance sheet showing in reasonable detail the
financial condition of the Corporation as of the close of its fiscal year, and a
profit and loss statement showing the results of the operations of the
Corporation during its fiscal year.
Upon the written request of any Shareholders or holder of voting trust
certificates for shares of the Corporation, the Corporation shall mail each
Shareholder or holder of voting trust certificates a copy of the most recent
such balance sheet and profit and loss statement.
The balance sheets and profit loss statements shall be filed in the
registered office of the Corporation of this state, shall be kept for at least
five years, and shall be subject to inspection during business hours by any
Shareholder or holder of voting trust certificates, in person or by agent.
ARTICLE VII - DIVIDEND
The Board may out of funds legally available therefor, at any regular or
special meeting, declare dividends upon the capital stock of the Corporation as
and when it deems expedient. Before declaring any dividend there may be set
apart out of any funds of the Corporation available for dividends, such sum or
sums as the Board from time to time in their discretion deem proper for working
capital or as a reserve fund to meet contingencies or for
10
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<PAGE>
equalizing dividends or for such other purposes as the Board shall deem
conducive to the interests of the Corporation.
ARTICLE VIII - CORPORATE SEAL
The seal of the Corporation shall be circular in form and bear the name of
the Corporation, the year of its organization and the words "CORPORATE SEAL,
FLORIDA." The seal may be used by causing it to be impressed directly on the
instrument or writing to be sealed, or upon adhesive substance affixed thereto.
The seal on the certificates for shares or on any corporate obligation for the
payment of money may be facsimile, engraved or printed.
ARTICLE IX - EXECUTION
All corporate instruments and documents shall be signed or countersigned,
executed, verified or acknowledged by such officer or other person or persons as
the Board may from time to time designate.
ARTICLE X - FISCAL YEAR
The fiscal year shall begin the first day of October in each year.
ARTICLE XI - NOTICE AND WAIVER OF NOTICE
Whenever any notice is required by these By-Laws to be given, personal
notice is not meant unless expressly so stated, and any notice so required shall
be deemed to be sufficient if given by depositing the same in the post office
box in a sealed post-paid wrapper, or with an express mail or delivery service
addressed to the person entitled thereto at his last known post office or
business address or by telefaxing the same to such person using his
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appropriate telefax number, and such notice shall be deemed to have been given
on the day of such mailing or sending of the telefax. Stockholders not entitled
to vote shall not be entitled to receive notice of any meetings except as
otherwise provided by Statute.
Whenever any notice is required to be given under the provisions of any
law, or under the provisions of the Articles of Incorporation of the
Corporation, or these By-Laws, a waiver thereof in writing, signed by the person
or persons entitled to said notice, whether before or after the time stated
therein, shall be deemed equivalent thereto.
ARTICLE XII - CONSTRUCTION
Whenever a conflict arises between the language of these By-Laws and the
Articles of Incorporation, the Articles of Incorporation shall govern.
ARTICLE XIII - BUSINESS
1. CONDUCT OF BUSINESS WITHOUT MEETINGS
Any action of the Stockholders, Directors and committee may be taken
without a meeting if consent in writing, setting forth the action so taken,
shall be signed by all persons who would be entitled to vote on such action at a
meeting and filed with the Secretary of the Corporation as part of the
proceedings of the Stockholders, Directors or committee as the case may be.
2. MANAGEMENT BY STOCKHOLDER
In the event the Stockholders are named in the Articles of Incorporation
and are empowered therein to manage the affairs of the Corporation in lieu of
Directors, the Stockholders of the
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Corporation shall be deemed Directors for the purposes of these By-Laws and
whenever the words "directors", "board of directors" or "board" appear in these
By-Laws those words shall be taken to mean Stockholders.
The Shareholders may, by majority vote, create a board of directors to
manage the business of the Corporation and exercise its corporate powers.
ARTICLE XIV - AMENDMENTS
These By-Laws may be altered or repealed and By-Laws may be made at any
annual meeting of the Stockholders or at any special meeting thereof if notice
of the proposed alteration or repeal to be made be contained in the notice of
such special meeting, by the affirmative vote of a simple majority of such
shares issued and outstanding and entitled to vote thereat, or by the
affirmative vote of a simple majority of the Board at any regular meeting of the
Board or at any special meeting of the Board if notice of the proposed
alteration or repeal to be made, be contained in the notice of such special
meeting.
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PARAVANT COMPUTER SYSTEMS, INC
AMENDMENT TO THE BY-LAWS
Paragraph 1 of Article XIII of the By-Laws of Paravant Computer Systems,
Inc. currently in effect shall be amended to read in its entirety as follows:
"1. CONDUCT OF BUSINESS WITHOUT MEETINGS
"Any action of the stockholders may be taken without a meeting if a consent
in writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock of each voting group entitled to vote thereon having not less
than the minimum number of votes with respect to each voting group that would be
necessary to authorize or take such action at a meeting at which all voting
groups and shares entitled to vote thereon were present and voted.
"Any action of the Directors or a committee of Directors may be taken
without a meeting if consent in writing, setting forth the action so taken,
shall be signed by each of the Directors or members of such committee.
"Any actions taken pursuant to this Article XIII shall be filed with the
Secretary of the Corporation as part of the proceedings of the stockholders,
Directors or committee, as the case may be."
Dated: March 14, 1996
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PARAVANT COMPUTER SYSTEMS, INC.
AMENDMENT TO THE AMENDED AND RESTATED BY-LAWS
Paragraph 2 of Article V of the Amended and Restated By-Laws of Paravant
Computer Systems, Inc., as currently in effect, is hereby amended to read in its
entirety as follows:
2. FORM
The shares of the Corporation shall be represented by certificates or shall
be uncertificated securities. Any certificates representing the shares of the
Corporation shall be in such form consistent with the law and the Articles of
Incorporation of the Corporation as the Board of Directors may from time to time
prescribe. Each certificated shall be signed by the Chairman of the Board, the
President or a Vice President and by the Secretary or an Assistant Secretary of
the Corporation and may be sealed with the seal of the Corporation or a
facsimile thereof. The signatures of officers upon a certificate may be
facsimile signatures only to the extent permitted by law.
Dated: June 6, 1996
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WARRANT AGREEMENT
AGREEMENT, dated as of June 10, 1996, by and among PARAVANT
COMPUTER SYSTEMS, INC., a Florida corporation (the "Company"), CONTINENTAL STOCK
TRANSFER & TRUST COMPANY, a New York corporation, as Warrant Agent (the "Warrant
Agent") and DUKE & CO., INC., a Florida corporation (the "Underwriter").
W I T N E S S E T H
WHEREAS, in connection with (i) a public offering pursuant to a
registration statement (the "Registration Statement") on Form SB-2 declared
effective by the Securities and Exchange Commission on May 31, 1996, of up to
1,000,000 shares of Common stock, par value $.045 (the "Shares"), and 1,400,000
Redeemable Common Stock Purchase Warrants (each, a "Warrant") (and up to 150,000
shares of Common Stock and 210,000 Warrants covered by an over-allotment option
granted by the Company to the Underwriter), and pursuant to an underwriting
agreement (the "Underwriting Agreement") dated May 31, 1996 between the Company
and the Underwriter, (ii) the issuance to the Underwriter or its designees of
warrants to purchase up to an aggregate of 100,000 shares of Common Stock and
140,000 Warrants (the "Underwriter's Warrant"), the Company will issue up to an
aggregate of 1,750,000 Warrants; and
WHEREAS, the Company desires the Warrant Agent to act on behalf
of the Company, and the Warrant Agent is willing to so act, in connection with
the issuance, registration, transfer, exchange and redemption of the Warrants,
the issuance of certificates representing the Warrants, the exercise of the
Warrants, and the rights of the holders thereof.
NOW THEREFORE, in consideration of the premises and the mutual
agreements hereinafter set forth and for the purpose of defining the terms and
provisions of the Warrants and the certificates representing the Warrants and
the respective rights and obligations thereunder of the Company, the holders of
certificates representing the Warrants and the Warrant Agent, the parties hereto
agree as follows:
SECTION 1. Definitions. As used herein, the following terms
shall have the following meanings, unless the context shall otherwise require:
(a) "Common Stock" shall mean the authorized stock of the
Company of any class, whether now or hereafter authorized, which has the right
to participate in the distribution of earnings and assets of the Company without
limit as to amount or percentage,
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which at the date hereof consists of 30,000,000 shares of Common Stock, $.045
par value per share.
(b) "Corporate Office" shall mean the office of the Warrant
Agent (or its successor) at which at any particular time its principal business
shall be administered, which office is located on the date hereof at 2 Broadway,
19th Floor, New York, New York 10004.
(c) "Exercise Date" shall mean, as to any Warrant, the date on
which the Warrant Agent shall have received both (a) the Warrant Certificate
representing such Warrant, with the exercise form thereon duly executed by the
Registered Holder thereof or his attorney duly authorized in writing, and (b)
payment in cash, or by official bank or certified check made payable to the
Warrant Agent, of an amount in lawful money of the United States of America
equal to the applicable Purchase Price.
(d) "Initial Warrant Exercise Date" shall mean, as to each
Warrant, November 30, 1997 (18 months from the effective date of the
Registration Statement).
(e) "Purchase Price" shall mean the price to be paid upon
exercise of each Warrant in accordance with the terms hereof, which price shall
be $6.00 per share, subject to adjustment from time to time pursuant to the
provisions of Section 9 hereof, and subject to the Company's right to reduce the
Purchase Price upon notice to all Warrant Holders.
(f) "Redemption Price" shall mean the price at which the
Company may, at its option, redeem the Warrants, in accordance with the terms
hereof, which price shall be $.05 per Warrant.
(g) "Registered Holder" shall mean the person in whose name
any certificate representing Warrants shall be registered on the books
maintained by the Warrant Agent pursuant to Section 6.
(h) "Transfer Agent" shall mean Continental Stock Transfer &
Trust Company, as the Company's transfer agent, or its authorized successor, as
such.
(i) "Warrant Expiration Date" shall mean, with respect to each
Warrant, 5:00 p.m. (Eastern time) on November 30, 2002, or the Redemption Date
as defined in Section 8, whichever is earlier; provided that if such date shall
in the State of New York be a holiday or a day on which banks are authorized to
close, then 5:00 p.m. (Eastern time) on the next following day which in the
State of New York is not a holiday nor a day on which banks are authorized to
close. Upon notice to all Warrant Holders, the Company shall have the right to
extend the Warrant Expiration Date.
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SECTION 2. Warrants and Issuance of Warrant Certificates.
(a) Each Warrant shall initially entitle the Registered Holder
of the Warrant Certificate representing such Warrant to purchase one (1) share
of Common Stock upon the exercise thereof, in accordance with the terms hereof,
subject to modification and adjustment as provided in Section 9.
(b) Upon execution of this Agreement, Warrant Certificates
representing the number of Warrants sold pursuant to the Underwriting Agreement
shall be executed by the Company and delivered to the Warrant Agent. Upon
written order of the Company signed by its President or Chairman or a Vice
President and by its Secretary or an Assistant Secretary, the Warrant
Certificates shall be countersigned, issued and delivered by the Warrant Agent
as part of the Units.
(c) From time to time, up to the Warrant Expiration Date, the
Transfer Agent shall countersign and deliver stock certificates in required
whole number denominations representing up to an aggregate of 1,750,000 shares
of Common Stock, subject to adjustment as described herein, upon the exercise of
Warrants in accordance with this Agreement.
(d) From time to time, up to the Warrant Expiration Date, the
Warrant Agent shall countersign and deliver Warrant Certificates in required
whole number denominations to the persons entitled thereto in connection with
any transfer or exchange permitted under this Agreement; provided that no
Warrant Certificates shall be issued except to (i) those initially issued
hereunder, (ii) those issued on or after the Initial Warrant Exercise Date, upon
the exercise of fewer than all Warrants represented by any Warrant Certificate,
to evidence any unexercised Warrants held by the exercising Registered Holder,
(iii) those issued upon any transfer or exchange pursuant to Section 6; (iv)
those issued in replacement of lost, stolen, destroyed or mutilated Warrant
Certificates pursuant to Section 7; (v) those issued to certain officers of the
Company or affiliates thereof, upon the conversion of certain loans; (vi) those
issued pursuant to the Underwriter's Warrant; (vii) those issued to the investor
who provided a bridge loan to the Company as a result of the automatic
conversion of the Bridge Warrants; and (viii) at the option of the Company, in
such form as may be approved by its Board of Directors, to reflect any
adjustment or change in the Purchase Price, the number of shares of Common Stock
purchasable upon exercise of the Warrants or the Redemption Price therefor made
pursuant to Section 9.
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(e) Pursuant to the terms of the Underwriter's Warrant, the
Underwriter and its designees may purchase up to an aggregate of 140,000
Warrants.
SECTION 3. Form and Execution of Warrant Certificates.
(a) The Warrant Certificates shall be substantially in the
form annexed hereto as Exhibit A, and may have such letters, numbers or other
marks of identification or designation and such legends, summaries or
endorsements printed, lithographed or engraved thereon as the Company may deem
appropriate and as are not inconsistent with the provisions of this Agreement or
as may be required to comply with any law or with any rule or regulation made
pursuant thereto or with any rule or regulation of any stock exchange on which
the Warrants may be listed, or to conform to usage. The Warrant Certificates
shall be dated the date of issuance thereof (whether upon initial issuance,
transfer, exchange or in lieu of mutilated, lost, stolen, or destroyed Warrant
Certificates) and issued in registered form. Warrants shall be numbered serially
with the letter W on the Warrants.
(b) Warrant Certificates shall be executed on behalf of the
Company by its Chairman of the Board, President or any Vice President and by its
Secretary or an Assistant Secretary, by mutual signatures or by facsimile
signatures printed thereon, and shall have imprinted thereon a facsimile of the
Company's seal. In case any officer of the Company who shall have signed any of
the Warrant Certificates shall cease to be such officer of the Company before
the date of issuance of the Warrant Certificates or before countersignature by
the Warrant Agent and issue and delivery thereof, such Warrant Certificates may
nevertheless be countersigned by the Warrant Agent, issued and delivered with
the same force and effect as though the person who signed such Warrant
Certificates had not ceased to be such officer of the Company. After
countersignature by the Warrant Agent, Warrant Certificates shall be delivered
by the Warrant Agent to the Registered Holder without further action by the
Company, except as otherwise provided by Section 4(a).
SECTION 4. Exercise
(a) Each Warrant may be exercised by the Registered Holder
thereof at any time on or after the Initial Warrant Exercise Date, but not after
the Warrant Expiration Date, upon the terms and subject to the conditions set
forth herein and in the applicable Warrant Certificate. A Warrant shall be
deemed to have been exercised immediately prior to the close of business on the
Exercise Date and the person entitled to receive the securities deliverable upon
such exercise shall be treated for all purposes as the holder upon exercise
thereof as of the close of business on the
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Exercise Date. As soon as practicable on or after the Exercise Date, the Warrant
Agent shall deposit the cash, bank or certified check received from the exercise
of a Warrant in an account for the benefit of the Company and shall notify the
Company in writing of the exercise of the Warrants. Promptly following, and in
any event within five (5) days after the date of such notice from the Warrant
Agent, the Warrant Agent, on behalf of the Company, shall cause to be issued and
delivered by the Transfer Agent, to the person or persons entitled to receive
the same, a certificate or certificates for the securities deliverable upon such
exercise (plus a Warrant Certificate for any remaining unexercised Warrants of
the Registered Holder) unless prior to the date of issuance of such certificates
the Company shall instruct the Warrant Agent to refrain from causing such
issuance of certificates pending clearance of checks received in payment of the
Purchase Price pursuant to such Warrants. Upon the exercise of any Warrant and
clearance of the funds received, the Warrant Agent shall promptly remit the
payment received for the Warrant to the Company or as the Company may direct in
writing.
(b) If, on the Exercise Date in respect of the exercise of any
Warrant at any time on or after the first anniversary of the date hereof (i) the
market price of the Company's Common Stock is greater than the then Purchase
Price of the Warrant, (ii) the exercise of the Warrant was solicited by the
Underwriter, (iii) the Warrant was not held in a discretionary account, (iv)
disclosure of compensation arrangements was made both at the time of the
original offering and at the time of exercise, and (v) the solicitation of the
exercise of the Warrant was not in violation of Rule 10b-6 (as such rule or any
successor rule as may be in effect as of such time of exercise) promulgated
under the Securities Exchange Act of 1934, then the Warrant Agent,
simultaneously with the distribution of proceeds to the Company received upon
exercise of the Warrant(s) so exercised shall, on behalf of the Company, pay
from the proceeds received upon exercise of the Warrant(s), a fee of two and one
half percent (2.5%) of the Purchase Price to the Underwriter. Within five days
after the exercise, the Warrant Agent shall send to the Underwriter a copy of
the reverse side of each Warrant exercised. The Underwriter shall reimburse the
Warrant Agent, upon request, for its reasonable expenses relating to compliance
with this Section 4(b). In addition, the Underwriter and the Company may at any
time during business hours, examine the records of the Warrant Agent, including
its ledger of original Warrant certificates returned to the Warrant Agent upon
exercise of Warrants. The provisions of this paragraph may not be modified,
amended or deleted without the prior written consent of the Underwriter and the
Company.
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SECTION 5. Reservation of Shares; Listing; Payment of Taxes; etc.
(a) The Company covenants that it will at all times reserve
and keep available out of its authorized Common Stock, solely for the purpose of
issuance upon exercise of Warrants, such number of shares of Common Stock as
shall then be issuable upon the exercise of all outstanding Warrants. The
Company covenants that all shares of Common Stock which shall be issuable upon
exercise of the Warrants shall, at the time of delivery, be duly and validly
issued, fully paid, nonassessable and free from all taxes, liens and charges
with respect to the issuance thereof (other than those which the Company shall
promptly pay or discharge) and that upon issuance such shares shall be listed on
each national securities exchange, if any, on which the other shares of
outstanding Common Stock of the Company are then listed.
(b) The Company covenants that if any securities to be
reserved for the purpose of exercise of Warrants hereunder require registration
with, or approval of, any governmental authority under any federal securities
law before such securities may be validly issued or delivered upon such
exercise, then the Company will use its reasonable best efforts to secure such
registration or approval. The Company will use its reasonable best efforts to
obtain appropriate approvals or registrations under state "blue sky" securities
laws with respect to any such securities. However, Warrants may not be exercised
by, or shares of Common Stock issued to, any Registered Holder in any state in
which such exercise would be unlawful.
(c) The Company shall pay all documentary, stamp or similar
taxes and other governmental charges that may be imposed with respect to the
issuance of Warrants, or the issuance or delivery of any shares upon exercise of
the Warrants; provided, however, that if the shares of Common Stock are to be
delivered in a name other than the name of the Registered Holder of the Warrant
Certificate representing any Warrant being exercised, then no such delivery
shall be made unless the person requiring the same had paid to the Warrant Agent
the amount of transfer taxes or charges incident thereto, if any.
(d) The Warrant Agent is hereby irrevocably authorized to
requisition the Company's Transfer Agent from time to time for certificates
representing shares of Common Stock required upon exercise of the Warrants, and
the Company will authorize the Transfer Agent to comply with all such proper
requisitions. The Company will file with the Warrant Agent a statement setting
forth the name and address of the Transfer Agent of the Company for shares of
Common Stock issuable upon exercise of the Warrants, unless the Warrant Agent
and the Transfer Agent are the same entity.
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SECTION 6. Exchange and Registration of Transfer
(a) Warrant Certificates may be exchanged for other Warrant
Certificates representing an equal aggregate number of Warrants of the same
class or may be transferred in whole or in part. Warrant Certificates to be
exchanged shall be surrendered to the Warrant Agent at its Corporate Office, and
upon satisfaction of all the terms and provisions hereof, the Company shall
execute and the Warrant Agent shall countersign, issue and deliver in exchange
therefor the Warrant Certificate or Certificates which the Registered Holder
making the exchange shall be entitled to receive.
(b) The Warrant Agent shall keep at its office books in which,
subject to such reasonable regulations as it may prescribe, it shall register
Warrant Certificates and the transfer thereof in accordance with its regular
practice. Upon due presentment for registration of transfer of any Warrant
Certificate at such office, the Company shall execute and the Warrant Agent
shall issue and deliver to the transferee or transferees a new Warrant
Certificate or Certificates representing an equal aggregate number of Warrants
of the same class.
(c) With respect to all Warrant Certificates presented for
registration or transfer, or for exchange or exercise, the subscription form on
the reverse thereof shall be duly endorsed, or be accompanied by a written
instrument or instruments of transfer and subscription, in form satisfactory to
the Company and the Warrant Agent, duly executed by the Registered Holder or his
attorney-in-fact duly authorized in writing.
(d) A service charge may be imposed by the Warrant Agent for
any exchange or registration of transfer of Warrant Certificates. In addition,
the Company may require payment by such holder of a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection therewith.
(e) All Warrant Certificates surrendered for exercise or for
exchange in case of mutilated Warrant Certificates shall be promptly cancelled
by the Warrant Agent and thereafter retained by the Warrant Agent until
termination of this Agreement or resignation as Warrant Agent, or, with the
prior written consent of the Underwriter, disposed of or destroyed, at the
direction of the Company.
(f) Prior to due presentment for registration of transfer
thereof, the Company and the Warrant Agent may deem and treat the Registered
Holder of any Warrant Certificate as the absolute owner thereof and of each
Warrant represented thereby (notwithstanding any notations of ownership or
writing thereon made by anyone other than a duly authorized officer of the
Company or the Warrant Agent) for all purposes and shall not be affected by
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any notice to the contrary. The Warrants, which are being publicly offered with
shares of Common Stock pursuant to the Underwriting Agreement, may be purchased
separately for the shares and will be transferable separately from the Common
Stock immediately.
SECTION 7. Loss or Mutilation. Upon receipt by the Company and
the Warrant Agent of evidence satisfactory to them of the ownership of and loss,
theft, destruction or mutilation of any Warrant Certificate and (in case of
loss, theft or destruction) of indemnity satisfactory to them, and (in the case
of mutilation) upon surrender and cancellation thereof, the Company shall
execute and the Warrant Agent shall (in the absence of notice to the Company
and/or Warrant Agent that the Warrant Certificate has been acquired by a bona
fide purchaser) countersign and deliver to the Registered Holder in lieu thereof
a new Warrant Certificate of like tenor representing an equal aggregate number
of Warrants. Applicants for a substitute Warrant Certificate shall comply with
such other reasonable regulations and pay such other reasonable charges as the
Warrant Agent may prescribe.
SECTION 8. Redemption
(a) Commencing November 30, 1997, on not less than thirty (30)
days prior written notice, the Warrants may be redeemed, at the option of the
Company, at a redemption price of $0.05 per Warrant, provided the last sale
price of the Company's Common Stock on The Nasdaq National Market exceeds $8.50
per share, subject to adjustment, for 30 consecutive trading days during the
period in which the Warrants are exercisable. All Warrants must be redeemed if
any of the Warrants are redeemed.
(b) In case the Company shall desire to exercise its right to
so redeem the Warrants, it shall request the Warrant Agent, or the Underwriter,
to mail a notice of redemption to each of the Registered Holders of the Warrants
to be redeemed, first class, postage prepaid, not later than the thirtieth
(30th) day before the date fixed for redemption, at their last address as shall
appear on the records of the Warrant Agent. Any notice mailed in the manner
provided herein shall be conclusively presumed to have been duly given whether
or not the Registered Holder receives such notice.
(c) The notice of redemption shall specify (i) the Redemption
Price, (ii) the date fixed for redemption, (iii) the place where the Warrant
Certificates shall be delivered and the redemption price paid, (iv) that Duke &
Co., Inc. will assist each Registered Holder of a Warrant in connection with the
exercise thereof (if Duke & Co., Inc. has conducted, or caused to be conducted,
the mailing) and (v) that the right to exercise the Warrant shall terminate at
5:00 p.m. (Eastern time) on the business
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day immediately preceding the date fixed for redemption (the "Redemption Date").
No failure to mail such notice nor any defect therein or in the mailing thereof
shall affect the validity of the proceedings for such redemption except as to a
holder (a) to whom notice was not mailed or (b) whose notice was defective. An
affidavit of the Warrant Agent or of the Secretary or an Assistant Secretary of
Duke & Co., Inc. or the Company that notice of redemption has been mailed shall,
in the absence of fraud, be prima facie evidence of the facts stated therein.
(d) Any right to exercise a Warrant that has been called for
redemption shall terminate at 5:00 p.m. (Eastern time) on the business day
immediately preceding the Redemption Date. On and after the Redemption Date,
Holders of the redeemed Warrants shall have no further rights except to receive,
upon surrender of the redeemed Warrant, the Redemption Price.
(e) From and after the date specified for redemption, the
Company shall, at the place specified in the notice of redemption, upon
presentation and surrender to the Company by or on behalf of the Registered
Holder thereof of one or more Warrants to be redeemed, deliver or cause to be
delivered to or upon the written order of such Holder a sum in cash equal to the
Redemption Price of each such Warrant. From and after the date fixed for
redemption and upon the deposit or setting aside by the Company of a sum
sufficient to redeem all the Warrants called for redemption, such Warrants shall
expire and become void and all rights hereunder and under the Warrant
Certificates, except the right to receive payment of the Redemption Price, shall
cease.
SECTION 9. Adjustment of Exercise Price and Number of Shares of
Common Stock or Warrants.
(a) Subject to the exceptions referred to in Section 9(h), in
the event the Company shall, at any time or from time to time after the date
hereof, sell any shares of Common Stock for a consideration per share less than
the market price of a share of Common Stock as quoted on NASDAQ or issue any
shares of Common Stock as a stock dividend to the holders of Common Stock, or
subdivide or combine the outstanding shares of Common Stock into a greater or
lesser number of shares (any such sale, issuance, subdivision or combination
being herein called a "Change of Shares"), then, and thereafter upon each
further Change of Shares, the applicable Purchase Price in effect immediately
prior to such Change of Shares shall be changed to a price (including any
applicable fraction of a cent) determined by multiplying the Purchase Price in
effect immediately prior thereto by a fraction, the numerator of which shall be
the sum of (a) the total number of shares of Common Stock outstanding
immediately prior to such Change of Shares and (b) the number of shares of
Common Stock which the aggregate consideration received by the Company upon such
sale,
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issuance, subdivision or combination (determined in accordance with subsection
g(vi) below) could have purchased at the then current Purchase Price, and the
denominator of which shall be the total number of shares of Common Stock
outstanding immediately after such Change of Shares.
(b) Upon each adjustment of the applicable Purchase Price
pursuant to this Section 9, the total number of shares of Common Stock
purchasable upon the exercise of each Warrant shall (subject to the provisions
contained in Section 9(c)) be such number of shares (calculated to the nearest
tenth) purchasable at the applicable Purchase Price immediately prior to such
adjustment multiplied by a fraction, the numerator of which shall be the
applicable Purchase Price in effect immediately prior to such adjustment and the
denominator of which shall be the applicable Purchase Price in effect
immediately after such adjustment.
(c) The Company may elect, upon any adjustment of the
applicable Purchase Price hereunder, to adjust the number of Warrants
outstanding, in lieu of adjusting the number of shares of Common Stock
purchasable upon the exercise of each Warrant as hereinabove provided, so that
each Warrant outstanding after such adjustment shall represent the right to
purchase one share of Common Stock. Each Warrant held of record prior to such
adjustment of the number of Warrants shall become that number of Warrants
(calculated to the nearest tenth) determined by multiplying the number one by a
fraction, the numerator of which shall be the applicable Purchase Price in
effect immediately prior to such adjustment and the denominator of which shall
be the applicable Purchase Price in effect immediately after such adjustment.
Upon each such adjustment of the number of Warrants, the Redemption Price in
effect immediately prior to such adjustment also shall be adjusted by
multiplying such Redemption Price by a fraction, the numerator of which shall be
the Purchase Price in effect immediately after such adjustment and the
denominator of which shall be the Purchase Price in effect immediately prior to
such adjustment. Upon each adjustment of the number of Warrants pursuant to this
Section 9, the Company shall, as promptly as practicable, cause to be
distributed to each Registered Holder of Warrant Certificates on the date of
such adjustment Warrant Certificates evidencing, subject to Section 10, the
number of additional Warrants, if any, to which such Holder shall be entitled as
a result of such adjustment or, at the option of the Company, cause to be
distributed to such Holder in substitution and replacement for the Warrant
Certificates held by him prior to the date of adjustment (and upon surrender
thereof, if required by the Company) new Warrant Certificates evidencing the
number of Warrants to which such Holder shall be entitled after such adjustment.
(d) In case of any consolidation or merger of the Company with
or into another corporation (other than a consolidation or merger in which the
Company is the continuing
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corporation and which does not result in any reclassification, capital
reorganization or other change of outstanding shares of Common Stock), or in
case of any sale or conveyance to another corporation of the property of the
Company as, or substantially as, an entirety (other than a sale/leaseback,
mortgage or other financing transaction), the Company shall cause effective
provision to be made so that each holder of a Warrant then outstanding shall
have the right thereafter, by exercising such Warrant, to purchase the kind and
number of shares of stock or other securities or property (including cash)
receivable upon such consolidation, merger, sale or conveyance by a holder of
the number of shares of Common Stock that might have been purchased upon
exercise of such Warrant, immediately prior to such consolidation, merger, sale
or conveyance. Any such provision shall include provision for adjustments that
shall be as nearly equivalent as may be practicable to the adjustments provided
for in this Section 9. The foregoing provisions shall similarly apply to
successive consolidations, mergers, sales or conveyances.
(e) Irrespective of any adjustments or changes in the Purchase
Price or the number of shares of Common Stock purchasable upon exercise of the
Warrants, the Warrant Certificates theretofore and thereafter issued shall,
unless the Company shall exercise its option to issue new Warrant Certificates,
continue to express the applicable Purchase Price per share, the number of
shares purchasable thereunder and the Redemption Price therefor as were
expressed in the Warrant Certificates when the same were originally issued.
(f) After each adjustment of the Purchase Price pursuant to
this Section 9, the Company will promptly after the fiscal quarter in which such
adjustment was triggered prepare a certificate signed by the Chairman or
President, and by the Secretary or an Assistant Secretary, of the Company
setting forth: (i) the applicable Purchase Price as so adjusted, (ii) the number
of shares of Common Stock purchasable upon exercise of each Warrant after such
adjustment, and, if the Company shall have elected to adjust the number of
Warrants, the number of Warrants to which the registered holder of each Warrant
shall then be entitled, and the adjustment in Redemption Price resulting
therefrom, and (iii) a brief statement of the facts accounting for such
adjustment. The Company will promptly file such certificate with the Warrant
Agent and cause a brief summary thereof to be sent by ordinary first class mail
to the Underwriter and to each registered holder of Warrants at his last address
as it shall appear on the registry books of the Warrant Agent. No failure to
mail such notice nor any defect therein or in the mailing thereof shall affect
the validity thereof except as to the holder to whom the Company failed to mail
such notice, or except as to the holder whose notice was defective. The
affidavit of an officer of the Warrant Agent or the Secretary or an Assistant
Secretary of the Company that such notice has been
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mailed shall, in the absence of fraud, be prima facie evidence of the facts
stated therein.
(g) For purposes of Section 9(a) and 9(c) hereof, the
following provisions (i) to (vi) shall also be applicable:
(i) The number of shares of Common Stock
outstanding at any given time shall include shares of Common Stock owned or held
by or for the account of the Company and the sale or issuance of such treasury
shares or the distribution of any such treasury shares shall not be considered a
Change of Shares for purposes of said sections.
(ii) No adjustment of the Purchase Price shall be
made unless such adjustment would require an increase or decrease of at least
$0.05 in such price; provided that any adjustments which by reason of this
clause (ii) are not required to be made shall be carried forward and shall be
made at the time of and together with the next subsequent adjustment which,
together with any adjustment(s) so carried forward, shall require an increase or
decrease of at least $0.05 in the Purchase Price then in effect hereunder.
(iii) In case of (1) the sale by the Company
solely for cash of any rights or warrants to subscribe for or purchase, or any
options for the purchase of, Common Stock or any securities convertible into or
exchangeable for Common Stock without the payment of any further consideration
other than cash, if any (such convertible or exchangeable securities being
herein called "Convertible Securities"), or (2) the issuance by the Company,
without the receipt by the Company of any consideration therefor, of any rights
or warrants to subscribe for or purchase, or any options for the purchase of,
Common Stock or Convertible Securities, in each case, if (and only if) the
consideration payable to the Company upon the exercise of such rights, warrants
or options shall consist solely of cash, whether or not such rights, warrants or
options, or the right to convert or exchange such Convertible Securities, are
immediately exercisable, and the price per share for which Common Stock is
issuable upon the exercise of such rights, warrants or options or upon the
conversion or exchange of such Convertible Securities (determined by dividing
(x) the minimum aggregate consideration payable to the Company upon the exercise
of such rights, warrants or options, plus the consideration received by the
Company for the issuance or sale of such rights, warrants or options, plus, in
the case of such Convertible Securities, the minimum aggregate amount of
additional consideration, if any, other than such Convertible Securities,
payable upon the conversion or exchange thereof, by (y) the total maximum number
of shares of Common Stock issuable upon the exercise of such rights, warrants or
options or upon the conversion or exchange of such Convertible Securities
issuable upon the exercise of such rights, warrants or options) is less than the
then current
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Purchase Price immediately prior to the date of the issuance or sale of such
rights, warrants or options, then the total maximum number of shares of Common
Stock issuable upon the exercise of such rights, warrants or options or upon the
conversion or exchange of such Convertible Securities (as of the date of the
issuance or sale of such rights, warrants or options) shall be deemed to be
outstanding shares of Common Stock for purposes of Sections 9(a) and 9(c) hereof
and shall be deemed to have been sold for cash in an amount equal to such price
per share.
(iv) If the exercise or purchase price provided
for in any right, warrant or option referred to in clause (iii) above, or the
rate at which any Convertible Securities referred to in clause (ii) or (iii)
above are convertible into or exchangeable for Common Stock, shall change at any
time (other than under or by reason of provisions designed to protect against
dilution) then the Purchase Price in effect at the time of such change will be
readjusted to the Purchase Price that would have been in effect at such time had
such rights, warrants, options or Convertible Securities still outstanding
provided for such changed exercise or purchase price or rate, as the case may
be, at the time initially granted, issued, or sold; such adjustment of the
Purchase Price will be made whether the result thereof is to increase or reduce
the Purchase Price then in effect hereunder. Upon the expiration of any such
right, warrant or option, or the termination of any right to convert or exchange
any Convertible Security, without the exercise of such right, warrant or option,
the Purchase Price then in effect hereunder will be adjusted to the Purchase
Price that would have been in effect at the time of such expiration or
termination had such right, warrant or option or Convertible Security never been
issued, but such subsequent adjustment shall not affect the number of shares of
Common Stock issued upon any exercise of this Warrant prior to the date such
adjustment is made. Except as otherwise provided in this paragraph (iv), no
adjustment of the Purchase Price will be made when securities are actually
issued upon the exercise of such rights, warrants or options or upon the
conversion or exchange of such Convertible Securities.
(v) In case of the sale for cash of any shares of
Common Stock, any Convertible Securities, any rights or warrants to subscribe
for or purchase, or any options for the purchase of, Common Stock or Convertible
Securities, the consideration received by the Company therefore shall be deemed
to be the gross sales price therefor without deducting therefrom any expense
paid or incurred by the Company or any underwriting discounts or commissions or
concessions paid or allowed by the Company in connection therewith.
(h) No adjustment to the Purchase Price or to the number of
shares of Common Stock purchasable upon the exercise of each Warrant will be
made, however:
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(i) upon the grant or exercise of any other
options which may hereafter be granted or exercised under any employee benefit
plan or director plan of the Company as described in the Registration Statement;
or
(ii) upon the sale or exercise of the Warrants,
including without limitation the sale or exercise of any of the Warrants
underlying the Underwriter's Warrants; or
(iii) upon the sale of any shares of Common Stock
in the public offering pursuant to the Registration Statement, including,
without limitation, shares sold upon the exercise of any over-allotment option
granted to the Underwriter in connection with such offering; or
(iv) upon the issuance or sale of Common Stock or
Convertible Securities upon the exercise of any rights or warrants to subscribe
for or purchase, or any options for the purchase of, Common Stock or Convertible
Securities outstanding on the date of the original sale of the Warrants, or upon
the issuance or sale of any securities of the Company referred to in the
Registration Statement; or
(v) upon the issuance or sale of Common Stock upon
conversion or exchange of any Convertible Securities outstanding on the date of
the original sale of the Warrants; or
(vi) upon the issuance of any securities in a bona
fide public offering.
(i) As used in this Section 9, the term "Common Stock" shall
mean and include the Company's Common Stock authorized on the date of the
original issuance of the Shares or (i), in the case of any consolidation,
merger, sale or conveyance of the character referred to in Section 9(d) hereof,
the stock, securities or property provided for in such section or (ii), in the
case of any change in the outstanding shares of Common Stock issuable upon
exercise of the Warrants as a result of a subdivision or combination or
consisting of a change in par value, or from par value to no par value, or from
no par value to par value, such shares of Common Stock as so changed.
(j) Any determination as to whether an adjustment in the
Purchase Price in effect hereunder is required pursuant to Section 9, or as to
the amount of any such adjustment, if required, shall be binding upon the
holders of the Warrants and the Company if made in good faith by the Board of
Directors of the Company.
(k) If and whenever the Company shall grant to the holders of
Common Stock, as such, rights or warrants to subscribe for or to purchase, or
any options for the purchase of, Common Stock or securities convertible into or
exchangeable for or
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carrying a right, warrant or option to purchase Common Stock, the Company shall
concurrently therewith grant to each of the then Registered Holders of the
Warrants all of such rights, warrants or options to which each such holder would
have been entitled if, on the date of determination of stockholders entitled to
the rights, warrants or options being granted by the Company, such holder were
the holder of record of the number of whole shares of Common Stock then issuable
upon exercise (assuming, for purposes of this Section 9(j), that the exercise of
Warrants is permissible during periods prior to the Initial Warrant Exercise
Date) of his Warrants. Such grant by the Company to the holders of the Warrants
shall be in lieu of any adjustment which otherwise might be called for pursuant
to this Section 9.
SECTION 10. Fractional Warrants and Fractional Shares.
(a) If the number of shares of Common Stock purchasable upon
the exercise of each Warrant is adjusted pursuant to Section 9 hereof, the
Company shall nevertheless not be required to issue fractions of shares, upon
exercise of the Warrants or otherwise, or to distribute certificates that
evidence fractional shares. With respect to any fraction of a share called for
upon any exercise hereof, the Company shall pay to the Holder an amount in cash
equal to such fraction multiplied by the current market value of such fractional
share, determined as follows:
(i) If the Common Stock is listed on a National
Securities Exchange or admitted to unlisted trading privileges on such exchange
or listed for trading on the Nasdaq National Market, the current value shall be
the last reported sale price of the Common Stock on NASDAQ or such exchange on
the last business day prior to the date of exercise of the Warrant, or if no
such sale is made on such day, the average of the closing bid and asked prices
for such day on such exchange; or
(ii) If the Common Stock is not listed or admitted
to unlisted trading privileges, the current value shall be the mean of the last
reported bid and asked prices reported by the National Quotation Bureau, Inc. on
the last business day prior to the date of the exercise of the Warrant; or
(iii) If the Common Stock is not so listed or
admitted to unlisted trading privileges and bid and asked prices are not so
reported, the current value shall be an amount determined in such reasonable
manner as may be prescribed by the Board of Directors of the Company.
SECTION 11. Warrant Holders Not Deemed Stockholders. No holder of
Warrants shall, as such, be entitled to vote or to receive dividends or be
deemed the holder of Common Stock that may
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at any time be issuable upon exercise of such Warrants for any purpose
whatsoever, nor shall anything contained herein be construed to confer upon the
holder of Warrants, as such, any of the rights of a stockholder of the Company
or any right to vote for the election of directors or upon any matter submitted
to stockholders at any meeting thereof, or to give or withhold consent to any
corporate action (whether upon any recapitalization, issuance or
reclassification of stock, change of par value or change of stock to no par
value, consolidation, merger or conveyance or otherwise), or to receive notice
of meetings, or to receive dividends or subscription rights, until such Holder
shall have exercised such Warrants and been issued shares of Common Stock in
accordance with the provisions hereof.
SECTION 12. Rights of Action. All rights of action with respect
to this Agreement are vested in the respective Registered Holders of the
Warrants, and any Registered Holder of a Warrant, without consent of the Warrant
Agent or of the holder of any other Warrant, may, in his own behalf and for his
own benefit, enforce against the Company his right to exercise his Warrants for
the purchase of shares of Common Stock in the manner provided in the Warrant
Certificates and this Agreement.
SECTION 13. Agreement of Warrant Holders. Every holder of a
Warrant, by his acceptance thereof, consents and agrees with the Company, the
Warrant Agent and every other holder of a Warrant that:
(a) The Warrants are transferable only on the registry books
of the Warrant Agent by the Registered Holder thereof in person or by his
attorney duly authorized in writing and only if the Warrant Certificates
representing such Warrants are surrendered at the office of the Warrant Agent,
duly endorsed or accompanied by a proper instrument of transfer satisfactory to
the Warrant Agent and the Company in their sole discretion, together with
payment of any applicable transfer taxes; and
(b) The Company and the Warrant Agent may deem and treat the
person in whose name the Warrant Certificate is registered as the holder and as
the absolute, true and lawful owner of the Warrants represented thereby for all
purposes, and neither the Company nor the Warrant Agent shall be affected by any
notice or knowledge to the contrary, except as otherwise expressly provided in
Section 7 hereof.
SECTION 14. Cancellation of Warrant Certificates. If the Company
shall purchase or acquire any Warrant or Warrants, the Warrant Certificate or
Warrant Certificates evidencing the same
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shall thereupon be delivered to the Warrant Agent and cancelled by it and
retired.
SECTION 15. Concerning the Warrant Agent. The Warrant Agent acts
hereunder as agent and in a ministerial capacity for the Company, and its duties
shall be determined solely by the provisions of this Agreement. The Warrant
Agent shall not, by issuing and delivering Warrant Certificates or by any other
act hereunder be deemed to make many representations as to the validity, value
or authorization of the Warrant Certificates or the Warrants represented thereby
or of any securities or other property delivered upon exercise of any Warrant or
whether any stock issued upon exercise of any Warrant is fully paid and
nonassessable.
The Warrant Agent shall not at any time be under any duty or
responsibility to any holder of Warrant Certificates to make or cause to be made
any adjustment of the Purchase Price or the Redemption Price provided in this
Agreement, or to determine whether any fact exists which may require any such
adjustments, or with respect to the nature or extent of any such adjustment,
when made, or with respect to the method employed in making the same. It shall
not (i) be liable for any recital or statement of facts contained herein or for
any action taken, suffered or omitted by it in reliance on any Warrant
Certificate or other document or instrument believed by it in good faith to be
genuine and to have been signed or presented by the proper party or parties,
(ii) be responsible for any failure on the part of the Company to comply with
any of its covenants and obligations contained in this Agreement or in any
Warrant Certificate, or (iii) be liable for any act or omission in connection
with this Agreement except for its own negligence or willful misconduct.
The Warrant Agent may at any time consult with counsel
satisfactory to it (who may be counsel for the Company or for the Underwriter)
and shall incur no liability or responsibility for any action taken, suffered or
omitted by it in good faith in accordance with the opinion or advice of such
counsel.
Any notice, statement, instruction, request, direction, order or
demand of the Company shall be sufficiently evidenced by an instrument signed by
the Chairman of the Board, President, any Vice President, its Secretary, or
Assistant Secretary, (unless other evidence in respect thereof is herein
specifically prescribed). The Warrant Agent shall not be liable for any action
taken, suffered or omitted by it in accordance with such notice, statement,
instruction, request, direction, order or demand believed by it to be genuine.
The Company agrees to pay the Warrant Agent reasonable
compensation for its services hereunder and to reimburse it for its reasonable
expenses hereunder; it further agrees to indemnify the
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Warrant Agent and save it harmless against any and all losses, expenses and
liabilities, including judgments, costs and counsel fees, for anything done or
omitted by the Warrant Agent in the execution of its duties and powers hereunder
except losses, expenses and liabilities arising as a result of the Warrant
Agent's negligence or willful misconduct.
In the event of a dispute under this Agreement between the
Company and the Underwriter regarding proceeds received by the Warrant Agent
from the exercise of the Warrants, the Warrant Agent shall have the right, but
not the obligation, to bring an interpleader action to resolve such dispute.
The Warrant Agent may resign its duties and be discharged from
all further duties and liabilities hereunder (except liabilities arising as a
result of the Warrant Agent's own negligence or willful misconduct), after
giving 30 days' prior written notice to the Company. At least 15 days prior to
the date such resignation is to become effective, the Warrant Agent shall cause
a copy of such notice of resignation to be mailed to the Registered Holder of
each Warrant Certificate at the Company's expense. Upon such resignation, or any
inability of the Warrant Agent to act as such hereunder, the Company shall
appoint a new warrant agent in writing. If the Company shall fail to make such
appointment within a period of 15 days after it has been notified in writing of
such resignation by the resigning Warrant Agent, then the Registered Holder of
any Warrant Certificate may apply to any court of competent jurisdiction for the
appointment of a new warrant agent. Any new warrant agent, whether appointed by
the Company or by such a court shall be a bank or trust company having a capital
and surplus as shown by its last published report to its stockholders, of not
less than Ten Million ($10,000,000.00) Dollars, or a stock transfer company.
After acceptance in writing of such appointment by the new warrant agent is
received by the Company, such new warrant agent shall be vested with the same
powers, rights, duties and responsibilities as if it had been originally named
herein as the Warrant Agent, without any further assurance, conveyance, act or
deed; but if for any reason it shall be necessary or expedient to execute and
deliver any further assurance, conveyance, act or deed, the same shall be done
at the expense of the Company and shall be legally and validly executed and
delivered by the resigning Warrant Agent. Not later than the effective date of
any such appointment the Company shall file notice thereof with the resigning
Warrant Agent and shall forthwith cause a copy of such notice to be mailed to
the Registered Holder of each Warrant Certificate.
Any corporation into which the Warrant Agent or any new warrant
agent may be converted or merged or any corporation resulting from any
consolidation to which the Warrant Agent or any new warrant agent shall be a
party or any corporation succeeding to the trust business of the Warrant Agent
shall be a successor
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warrant agent under this Agreement without any further act, provided that such
corporation is eligible for appointment as successor to the Warrant Agent under
the provisions of the preceding paragraph. Any such successor warrant agent
shall promptly cause notice of its succession as warrant agent to be mailed to
the Company and to the Registered Holder of each Warrant Certificate.
The Warrant Agent, its subsidiaries and affiliates, and any of
its or their officers or directors, may buy and hold or sell Warrants or other
securities of the Company and otherwise deal with the Company in the same manner
and to the same extent and with like effects as though it were not Warrant
Agent. Nothing herein shall preclude the Warrant Agent from acting in any other
capacity for the Company or for any other legal entity.
SECTION 16. Modification of Agreement. Subject to the provisions
of Section 4(b), the Warrant Agent and the Company may by supplemental agreement
make any changes or corrections in this Agreement (i) that they shall deem
appropriate to cure any ambiguity or to correct any defective or inconsistent
provision or manifest mistake or error herein contained; or (ii) that they may
deem necessary or desirable and which shall not adversely affect the interests
of the holders of Warrant Certificates; provided, however, that this Agreement
shall not otherwise be modified, supplemented or altered in any respect except
with the consent in writing of the Registered Holders of Warrant Certificates
representing not less than 50% of the Warrants then outstanding; and provided,
further, that no change in the number or nature of the securities purchasable
upon the exercise of any Warrant, or the Purchase Price therefor, or the
acceleration of the Warrant Expiration Date, shall be made without the consent
in writing of the Registered Holder of the Warrant Certificate representing such
Warrant, other than such changes as are specifically prescribed by this
Agreement as originally executed.
SECTION 17. Notices. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have been
made three days after such is mailed first class registered or certified mail,
postage prepaid as follows: if to the Registered Holder of a Warrant
Certificate, at the address of such holder as shown on the registry books
maintained by the Warrant Agent; if to the Company, at 780 South Apollo
Boulevard, Atrium One, Melbourne, Florida 32901, Attention: Richard McNeight, or
at such other address as may have been furnished to the Warrant Agent in writing
by the Company, with a copy sent to Zimet, Haines, Friedman & Kaplan, 460 Park
Avenue, New York, New York 10022, Attention: James Martin Kaplan, Esq.; if to
the Warrant Agent, at Continental Stock Transfer & Trust Company, 2 Broadway,
19th Floor,
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New York, New York 10004; if to Duke & Co., Inc., at 909 Third Avenue, 7th
Floor, New York, New York 10022, Attention: President.
SECTION 18. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York, without
reference to principles of conflict of laws.
SECTION 19. Binding Effect. This Agreement shall be binding upon
and inure to the benefit of the Company, the Warrant Agent and the Underwriter,
and their respective successors and assigns, and the holders from time to time
of the Warrant Certificates. Nothing in this Agreement is intended or shall be
construed to confer upon any other person any right, remedy or claim, in equity
or at law, or to impose upon any other person any duty, liability or obligation.
SECTION 20. Termination. This Agreement shall terminate at the
close of business on the Warrant Expiration Date of all the Warrants of such
earlier date upon which all Warrants have been exercised, except that the
Warrant Agent shall account to the Company for cash held by it and the
provisions of Section 15 hereof shall survive such termination.
SECTION 21. Counterparts. This Agreement may be executed in
several counterparts, which taken together shall constitute a single document.
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IN WITNESS WHEREOF, the parties hereto have caused this Warrant
Agreement to be duly executed as of the date first above written.
PARAVANT COMPUTER SYSTEMS, INC.
By: /s/ William R. Craven
_______________________________________
Authorized Officer
CONTINENTAL STOCK TRANSFER & TRUST
COMPANY
By: /s/ Steven G. Nelson
______________________________________
Authorized Officer
DUKE & CO., INC.
By: /s/ Gregg Thaler
______________________________________
Authorized Officer
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THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF CAN BE
TRANSFERRED ONLY IN COMPLIANCE WITH THE SECURITIES ACT OF 1933, AS AMENDED, AND
APPLICABLE STATE SECURITIES LAWS. THIS WARRANT AND SUCH SECURITIES MAY NOT BE
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT, UNLESS, IN THE OPINION OF COUNSEL TO THE COMPANY, SUCH REGISTRATION
IS NOT THEN REQUIRED.
UNDERWRITER'S WARRANT
Dated: June 10, 1996
W-001
THIS CERTIFIES THAT DUKE & CO., INC. (the "Holder") is entitled
to purchase from PARAVANT COMPUTER SYSTEMS, INC., a Florida corporation (the
"Company"), 100,000 shares of Common Stock, $.045 per value per share at a price
of $6.00 per share and/or 140,000 Redeemable Common Stock Purchase Warrants (the
"Redeemable Warrants") at a price of $.12 per Redeemable Warrant, subject to
adjustment as provided in paragraph 8 hereof, at any time during the 48 month
period commencing May 31, 1997. Each Redeemable Warrant entitles the holder
thereof to purchase one share of Common Stock at $6.00 per share for a period of
five years, commencing 18 months from the date of this Underwriter's Warrant.
This Underwriter's Warrant (the "Underwriter's Warrant") is issued pursuant to
an Underwriting Agreement dated May 31, 1996, between the Company and Duke &
Co., Inc. (the "Underwriter"), in connection with a public offering, through the
Underwriter, of 1,000,000 shares of Common stock and 1,400,000 Redeemable
Warrants as therein described (and up to an additional 150,000 shares and/or
210,000 Redeemable Warrants covered by an over-allotment option granted by the
Company to the Underwriter, hereinafter referred to together with the 1,000,000
shares and 1,400,000 Redeemable Warrants, as the "Public Securities") and in
consideration of $10.00 received by the Company for the Underwriter's Warrant.
Except as specifically otherwise provided herein, the shares of Common Stock and
Redeemable Warrants issuable pursuant to the Underwriter's Warrant shall have
the same terms and conditions as the Common Stock and the Redeemable Warrants,
respectively, as described under the caption "Description of Securities" in the
Company's Registration Statement on Form SB-2, File No. 33-91426 (the
"Registration Statement"), except that the Holder shall have registration rights
under the Securities Act of 1933 (the "Act"), for the Underwriter's Warrant, the
Common Stock and Redeemable Warrants and the Common Stock purchasable upon
exercise of the Redeemable Warrants, as more fully described in paragraph 6
herein. The 100,000 shares of Common Stock and 140,000 Redeemable Warrants
issuable upon exercise of this Underwriter's Warrant shall be collectively
referred to as the "Underwriter's Securities."
1. The rights represented by this Underwriter's Warrant shall be
exercised at the price, subject to adjustment in accordance with paragraph 8
hereof, and during the periods as follows:
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(a) During the period from the date hereof to May 31,
1997 (the "Initial Period"), the Holder shall have
no right to purchase any Underwriter's Securities
hereunder, except that in the event of any merger,
consolidation or sale of substantially all the
assets of the Company as an entirety during the
Initial Period, the Holder shall have the right to
exercise the Underwriter's Warrant at such time and
into the kind and amount of shares of stock and
other securities and property (including cash)
receivable by a holder of the number of shares of
Common Stock and Redeemable Warrants into which the
Underwriter's Warrant might have been exercisable
immediately prior thereto.
(b) Between May 31, 1997 and May 30, 2001 (the
"Expiration Date"), the Holder shall have the
option to purchase Common Stock hereunder at a
price of $6.00 per Share and Redeemable Warrants at
$.12 per Redeemable Warrant (120% of the initial
public offering price), subject to adjustment as
provided in paragraph 8 hereof.
(c) After the Expiration Date, the Holder shall have no
right to purchase any Underwriter's Securities
hereunder.
2. The rights represented by this Underwriter's Warrant may be
exercised at any time within the periods above specified, in whole or in part,
by (i) the surrender of the Underwriter's Warrant (with the purchase form at the
end hereof properly executed) at the principal executive office of the Company
(or such other office or agency of the Company as it may designate by notice in
writing to the Holder at the address of the Holder appearing on the books of the
Company); (ii) payment to the Company of the exercise price then in effect for
the number of Units specified in the above-mentioned purchase form together with
applicable stock transfer taxes, if any; and (iii) delivery to the Company of a
duly executed agreement signed by the person(s) designated in the purchase form
to the effect that such person(s) agree(s) to be bound by the provisions of
paragraph 6 and subparagraphs (b), (c) and (d) of paragraph 7 hereof. The
Underwriter's Warrant shall be deemed to have been exercised, in whole or in
part to the extent specified, immediately prior to the close of business on the
date the Underwriter's Warrant is surrendered and payment is made in accordance
with the foregoing provisions of this paragraph 2, and the person or persons in
whose name or names the certificates for shares of Common Stock and Redeemable
Warrants shall be issuable upon such exercise shall become the holder or holders
of record of such Common Stock and Redeemable Warrants at that time and date.
Certificates representing the Common Stock and Redeemable Warrants so purchased
shall be delivered to the Holder within a reasonable time, not exceeding ten
(10) days, after the rights represented by this Underwriter's Warrant shall have
been so exercised.
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3. The Underwriter's Warrant shall not be transferred, sold,
assigned, or hypothecated during the Initial Period except that it may be
transferred to successors of the Holder, and may be assigned in whole or in part
to any person who is an officer or partner of the Holder or to any
co-underwriter or member of the selling group and their officers or partners
during such period. Any such assignment shall be effected by the Holder by (i)
executing the form of assignment at the end hereof and (ii) surrendering the
Underwriter's Warrant for cancellation at the office or agency of the Company
referred to in paragraph 2 hereof, accompanied by a certificate (signed by an
officer of the Holder if the Holder is a corporation), stating that each
transferee is a permitted transferee under this paragraph 3; whereupon the
Company shall issue, in the name or names specified by the Holder (including the
Holder) a new Underwriter's Warrant of like tenor and representing in the
aggregate rights to purchase the same number of shares of Common Stock and
Redeemable Warrants as are purchasable hereunder.
4. The Company covenants and agrees that all shares of Common
Stock which may be purchased hereunder or upon exercise of the Redeemable
Warrants will, upon issuance against payment of the purchase price therefor, be
duly and validly issued, fully paid and nonassessable, and no personal liability
will attach to the holder thereof. The Company further covenants and agrees
that, during the periods within which the Underwriter's Warrant may be
exercised, the Company will at all times have authorized and reserved a
sufficient number of shares of its Common Stock to provide for the exercise of
the Underwriter's Warrant and the Redeemable Warrants.
5. The Underwriter's Warrant shall not entitle the Holder to any
voting rights or other rights as stockholders of the Company.
6. (a)(i) The Company shall advise the Holder or its transferees,
whether the Holder holds the Underwriter's Warrant or has exercised the
Underwriter's Warrant and holds shares of Common Stock and/or Redeemable
Warrants by written notice at least two weeks prior to the filing of any
post-effective amendment to the Registration Statement or of any new
registration statement or post-effective amendment thereto under the Act
covering any securities of the Company, for its own account or for the account
of others, except for any registration statement filed on Form S-3, S-4 or S-8
or other inappropriate form, and will, for a period of four years commencing one
year from the Effective Date, upon the request of the Holder, which request
shall be made within 10 days of the receipt of the Company's notice, and subject
to subparagraph (a)(ii) of this paragraph 6, include in one such post-effective
amendment to the Registration Statement or in one new registration statement
such information as may be required to permit a public offering of the
Underwriter's Warrant, the Common Stock issuable upon the exercise thereof, the
Redeemable Warrants issuable upon exercise of the Underwriter's Warrant and the
Common Stock issuable upon exercise of the Redeemable Warrants which are
issuable upon exercise of the Underwriter's Warrant (collectively, the
"Registrable Securities"). Notwithstanding anything to the contrary contained
herein, a security is not a Registrable Security for purposes of this Agreement
if (i) such security has been effectively registered and disposed of and (ii)
registration is no longer required for the immediate public distribution of
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all or any portion of the Registrable Securities. The Company shall supply
prospectuses and such other document as the Holder may reasonably request in
order to facilitate the public sale or other disposition of the Registrable
Securities, use its reasonable best efforts to register and qualify any of the
Registrable Securities for sale in such states as the Holder reasonably
designates and do any and all other acts and things which may be necessary or
desirable to enable the Holder to consummate the public sale or other
disposition of the Registrable Securities, except that no such qualification
shall be required in any jurisdiction where, as a result thereof, the Company
would be subject to service of general process or to taxation or qualification
as a foreign corporation doing business in such jurisdiction, all at no expense
to the Holder, except for the expenses of Holder's counsel or any commissions or
underwriting discounts relating to the disposition of the Registrable
Securities, and furnish indemnification in the manner provided in paragraph 7
hereof. The Holder shall furnish information and indemnification as set forth in
paragraph 7.
(ii) If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holder as a part of the written notice given
pursuant to subparagraph (a)(i) of this paragraph 6. If the managing underwriter
determines that a limitation of the number of shares to be underwritten is
required, the underwriter may exclude some or all Registrable Securities from
such registration (the "Excluded Registrable Securities"); provided, however,
that any other securityholder may only include the same pro-rata portion of
any such securities in such Registration Statement.
(b) If any 50% Holder (as defined below) shall give
written notice to the Company at any time to the effect that such Holder desires
to register under the Act any or all of the Registrable Securities under such
circumstances that a public distribution (within the meaning of the Act) of any
such securities will be involved, unless delayed by failure of Holder to
promptly furnish requested information, then the Company will promptly, but no
later than four weeks after receipt of such written notice, file a
post-effective amendment to the current Registration Statement or a new
registration statement pursuant to the Act, so that such designated Registrable
Securities may be publicly sold under the Act as promptly as practicable
thereafter and the Company will use its best efforts to cause such registration
to become and remain effective (including the taking of such steps as are
necessary to obtain the removal of any stop order) within 90 days after the
receipt of such notice, provided, that such Holder shall furnish the Company
with appropriate information in connection therewith as the Company may
reasonably request in writing. The 50% Holder may, at its option, request the
filing of a post-effective amendment to the current Registration Statement or a
new registration statement under the Act on one occasion during the three-year
period beginning one year from the Effective Date. The 50% Holder may, at its
option, request the registration of the Registrable Securities in a registration
statement made by the Company as contemplated by subparagraph (a) of this
paragraph 6 or in connection with a request made pursuant to this subparagraph
(b) of paragraph 6 prior to acquisition of the shares of Common Stock and
Redeemable Warrants issuable upon exercise of the Underwriter's Warrant. The 50%
Holder may, at its option, request such post-effective amendment or new
registration statement during the described period with respect to
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the Underwriter's Warrant, or separately as to the Common Stock and Redeemable
Warrants issuable upon the exercise of the Underwriter's Warrant, and such
registration rights may be exercised by the 50% Holder prior to or subsequent to
the exercise of the Underwriter's Warrant, except that such Holder shall have no
right to demand registration of the Registrable Securities if the Company's
counsel and the Holder's counsel mutually agreed that such securities may be
sold without registration under the Act. Within ten days after receiving any
such notice pursuant to this subparagraph (b) of paragraph 6, the Company shall
give notice to any other Holder of the Underwriter's Warrant, advising that the
Company is proceeding with such post-effective amendment or registration
statement and offering to include therein the securities underlying that part of
the Underwriter's Warrant held by the other Holder, provided that they shall
furnish the Company with such appropriate information (relating to the
intentions of such Holder) in connection therewith as the Company shall
reasonably request in writing. All costs and expenses of the first
post-effective amendment or new registration statement shall be borne by the
Company, except that the Holder(s) shall bear the fees of their own counsel and
any underwriting discounts or commissions applicable to any of the securities
sold by them. All costs and expenses of the second such post-effective amendment
or new registration statement shall be borne by the Holder(s). The Company will
maintain such registration statement or post-effective amendment current under
the Act for a period of at least six months (and for up to an additional three
months if requested by the Holder(s)) from the effective date thereof or until
all of the Registrable Securities have been sold or registration is no longer
required. The Company shall provide prospectuses, and such other documents as
the Holder(s) may reasonably request in order to facilitate the public sale or
other disposition of the Registrable Securities, use its reasonable best efforts
to register and qualify any of the Registrable Securities for sale in such
states as such Holder(s) designate, except that no such qualification shall be
required in any jurisdiction where, as a result thereof, the Company would be
subject to service of general process or to taxation or qualification as a
foreign corporation doing business in such jurisdiction, and furnish
indemnification in the manner provided in paragraph 7 hereof. Notwithstanding
anything to the contrary contained herein, the Company would not be required to
file a registration statement if audited financial statements other than those
normally required to be produced would be necessary unless the Holder(s) agree
to pay any reasonable costs of any such special audit. In the event that
securities of any affiliate of the Company are included in such registration
statement the costs of the special audit will be pro-rated.
(c) The term "50% Holder" as used in this paragraph 6
shall mean the Holder(s) of at least 50% of the Underwriter's Warrant and/or the
Common Stock underlying the Underwriter's Warrant and the Redeemable Warrants
and shall include any owner or combination of owners of such securities, which
ownership shall be calculated by determining the number of shares of Common
Stock held by such owner or owners as well as the number of shares then issuable
upon exercise of the Underwriter's Warrant and the Redeemable Warrants.
(d) If at any time prior to the effectiveness of the
registration statement filed in connection with an offering pursuant to this
paragraph 6 the 50% Holder shall determine not to proceed with the registration,
upon notice to the Company and the payment to the
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Company by the 50% Holder of the Company's expenses, if any, theretofore
incurred in connection with the registration statement, the 50% Holder may
terminate its participation in the offering, and the registration statement
previously filed shall not be counted against the number of demand registrations
permitted under this paragraph 6. The 50% Holder need not pay to the Company its
expenses incurred in connection with the registration statement, however, if
such 50% Holder shall have reasonably determined not to proceed because of
material adverse developments on the part of the Company of which such 50%
Holder obtained knowledge subsequent to the giving to the Company of the written
request to register Registrable Securities pursuant to this paragraph 6. The 50%
Holder agrees that if its Registrable Securities are included in a registration
statement with respect to an underwritten offering that the 50% Holder will
enter into an underwriting agreement with such managing underwriter.
(e) Notwithstanding the foregoing, if the Company shall
furnish to such 50% Holder a certificate signed by the President of the Company
stating that in the good faith judgment of the Board of Directors it would be
seriously detrimental to the Company or its stockholders for a registration
statement to be filed in the near future containing the disclosure of material
information required to be included therein by reason of the federal securities
laws, then the Company's obligation to use its best efforts to file a
registration statement shall be deferred for a period during which such
disclosure would be seriously detrimental, provided that this period will not
exceed 60 days and provided further, that the Company shall not defer its
obligation in this matter more than once in any 12 month period.
7. (a) Whenever pursuant to paragraph 6 a registration statement
relating to the Underwriter's Warrant or any Common Stock issued or issuable
upon the exercise of the Underwriter's Warrant or the Redeemable Warrants, or
any Redeemable Warrants is filed under the Act, amended or supplemented, the
Company will indemnify and hold harmless each Holder of the securities covered
by such registration statement, amendment or supplement (such Holder being
hereinafter called the "Distributing Holder"), and each person, if any, who
controls (within the meaning of the Act) the Distributing Holder, and each
underwriter (within the meaning of the Act) of such securities and each person,
if any, who controls (within the meaning of the Act) any such underwriter,
against any losses, claims, damages or liabilities, joint or several, to which
the Distributing Holder, any such controlling person or any such underwriter may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities, or actions in respect thereof, arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in any such registration statement or any preliminary prospectus or
final prospectus constituting a part thereof or any amendment or supplement
thereto, or arise out of or are based upon the omission or the alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading and will reimburse the Distributing
Holder or such controlling person or underwriter in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the Company will not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in said registration statement, said preliminary prospectus, said
final prospectus or said amendment or supplement in reliance
6
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<PAGE>
upon and in conformity with written information furnished by such Distributing
Holder or any other Distributing Holder for use in the preparation thereof.
(b) The Distributing Holder will indemnify and hold
harmless the Company, each of its directors, each of its officers who have
signed said registration statement and such amendments and supplements thereto,
and each person, if any, who controls the Company (within the meaning of the
Act) against any losses, claims, damages or liabilities, joint or several, to
which the Company or any such director, officer or controlling person may become
subject, under the Act or otherwise, insofar as such losses, claims, damages or
liabilities, or actions in respect thereof, arise out of or are based upon any
untrue or alleged untrue statement of any material fact contained in said
registration statement, said preliminary prospectus, said final prospectus, or
said amendment or supplement, or arises out of or are based upon the omission or
the alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each case
to the extent, but only to the extent, that such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in said registration statement,
said preliminary prospectus, said final prospectus or said amendment or
supplement in reliance upon and in conformity with written information furnished
by such Distributing Holder for use in the preparation thereof; and will
reimburse the Company or any such director, officer or controlling person for
any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action.
(c) Promptly after receipt by an indemnified party under
this paragraph 7 of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against any indemnifying
party, give the indemnifying party notice of the commencement thereof, but the
omission so to notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party otherwise than under this
paragraph 7.
(d) In case any such action is brought against any
indemnified party, and it notified an indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate in and, to the
extent that it may wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel reasonably satisfactory to
such indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
paragraph 7 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation. The indemnified party shall have the right to settle,
compromise or dispose of such liability, claim or lawsuit, excepting therefrom
any and all proceedings or hearings before any regulatory bodies and/or
authorities and provided that no such settlement shall be made without the prior
written consent of the indemnifying party.
7
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8. The Exercise Price in effect at any time and the number and
kind of securities purchasable upon the exercise of each Underwriter's Warrant
shall be subject to adjustment from time to time upon the happening of certain
events hereinafter described; provided, however, that no adjustment shall be
required in respect of the Redeemable Warrants.
(a) In case the Company shall, (i) declare a dividend or
make a distribution on its outstanding shares of Common Stock in shares of
Common Stock, (ii) subdivide or reclassify its outstanding shares of Common
Stock into a greater number of shares, or (iii) combine or reclassify its
outstanding shares of Common Stock into a smaller number of shares, or (iv) the
outstanding shares of Common Stock of the Company are at any time changed into
or exchanged for a different number or kind of shares or other security of the
Company or of another corporation through reorganization, merger, consolidation,
liquidation or recapitalization, then appropriate adjustments in the number and
kind of such securities subject to this Underwriter's Warrant shall be made and
the Exercise Price in effect at the time of the record date for such dividend or
distribution or of the effective date of such subdivision, combination,
reclassification, reorganization, merger, consolidation, liquidation or
recapitalization shall be proportionately adjusted so that the Holder of this
Underwriter's Warrant exercised after such date shall be entitled to receive the
aggregate number and kind of securities which, if this Underwriter's Warrant had
been exercised by such Holder immediately prior to such date, they would have
owned upon such exercise and been entitled to receive upon such dividend,
distribution, subdivision, combination, reclassification, reorganization,
merger, consolidation, liquidation or recapitalization. For example, if the
Company declares a 2 for 1 stock distribution and the Exercise Price immediately
prior to such event was $6.00 per Share [120% of the initial public offering
price of the Public Shares] and the number of Shares purchasable upon exercise
of this Warrant was 100,000, the adjusted Exercise Price immediately after such
event would be $3.00 per Share and the adjusted number of Units purchasable upon
exercise of this Warrant would be 200,000. Such adjustment shall be made
successively whenever any event listed above shall occur.
(b) In case the Company shall hereafter distribute without
consideration to all holders of its Common Stock evidence of its indebtedness or
assets (excluding cash dividends or distributions and dividends or distributions
referred to in subparagraph (a) of this paragraph 8), or subscription rights or
warrants, then in each such case the Exercise Price in effect thereafter shall
be determined by multiplying the number of Shares issuable upon exercise of the
Underwriter's Warrant by the Exercise Price in effect immediately prior thereto,
multiplied by a fraction, the numerator of which shall be the total number of
shares of Common Stock then outstanding multiplied by the current Exercise
Price, less the fair market value (as determined by the Company's Board of
Directors) of said assets, or evidence of indebtedness so distributed or of such
rights or warrants, and the denominator of which shall be the total number of
shares of Common Stock outstanding multiplied by the current Exercise Price.
Such adjustment shall be made whenever any such distribution is made and shall
become effective immediately after the record date for the determination of
stockholders entitled to receive such distribution.
8
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(c) Whenever the Exercise Price payable upon exercise of
the Underwriter's Warrant is adjusted pursuant to subparagraphs (a) or (b) of
paragraph 8, the number of shares of Common Stock purchasable upon exercise of
this Underwriter's Warrant shall simultaneously be adjusted by multiplying the
number of shares of Common Stock issuable upon exercise of this Underwriter's
Warrant by the Exercise Price in effect on the date hereof and dividing the
product so obtained by the Exercise Price, as adjusted.
(d) No adjustment in the Exercise Price shall be required
(i) in the event of the sale of the Company's securities in a future bona fide
underwritten public offering; or (ii) unless such adjustment would require an
increase or decrease of at least five cents ($0.05) in such price; provided,
however, that any adjustments which by reason of this subparagraph (d) are not
required to be made shall be carried forward and taken into account in any
subsequent adjustment required to be made hereunder. All calculations under this
paragraph 8 shall be made to the nearest cent or to the nearest one-hundredth of
a share, as the case may be. Anything in this Section 8 to the contrary
notwithstanding, the Company shall be entitled, but shall not be required, to
make such changes in the Exercise Price, in addition to those required by this
Section 8, as it shall determine, in its sole discretion, to be advisable in
order that any dividend or distribution in shares of Common Stock, or any
subdivision, reclassification or combination of Common Stock, hereafter made by
the Company shall not result in any federal income tax liability to the holders
of Common Stock or securities convertible into Common Stock (including the
Redeemable Warrants issuable upon exercise of the Underwriter's Warrant).
(e) Whenever the Exercise Price is adjusted, as herein
provided, the Company shall promptly cause a notice setting forth the adjusted
Exercise Price and adjusted number of shares of Common Stock or other securities
purchasable upon exercise of the Underwriter's Warrant to be mailed to the
Holder, at the addresses listed on the books of the Company, and shall cause a
certified copy thereof to be mailed to the Company's transfer agent, if any. The
Company may retain a firm of independent certified public accountants selected
by the Board of Directors (who may be the regular accountants employed by the
Company) to make any computation required by this paragraph 8, and a certificate
signed by such firm shall be conclusive evidence of the correctness of such
adjustment.
(f) In the event that at any time, as a result of an
adjustment made pursuant to the provisions of this paragraph 8, the Holder of
the Underwriter's Warrant thereafter shall become entitled to receive any
securities of the Company, other than Common Stock and the Redeemable Warrants,
thereafter the number of such other securities so receivable upon exercise of
the Underwriter's Warrant shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with
respect to the Common Stock contained in subparagraphs (a) to (f), inclusive of
this paragraph (f).
9. The Company shall not be required to issue any fractional
shares upon the exercise of this Underwriter's Warrant.
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<PAGE>
10. Notices. All communications hereunder, except as herein
otherwise specifically provided, shall be in writing and, if sent to the
Holders, shall be mailed, delivered or telegraphed and confirmed c/o Duke & Co.,
Inc., 909 Third Avenue, New York, New York 10022, Attention: President, with a
copy to Gersten, Savage, Kaplowitz & Curtin, LLP, 575 Lexington Avenue, New
York, New York 10022, Attention: Jay Kaplowitz, Esq., and if to the Company,
shall be mailed, delivered or telegraphed and confirmed to Paravant Computer
Systems, Inc., 780 South Apollo Blvd., Atrium One, Melbourne, Florida 32901,
Attention: Richard McNeight, with a copy to Zimet, Haines, Friedman & Kaplan,
460 Park Avenue, New York, New York 10022, Attention: James Martin Kaplan, Esq.
11. In case the certificate or certificates evidencing the
Warrant shall be mutilated, lost, stolen or destroyed, the Company shall, at the
request of the Warrantholder, issue and deliver in exchange and substitution for
and upon cancellation of the mutilated certificate or certificates, or in lieu
of and substitution for the certificate or certificates lost, stolen or
destroyed, a new Warrant certificate or certificates of like tenor and
representing an equivalent right or interest, but only upon receipt of evidence
satisfactory to the Company of such loss, theft or destruction of such Warrant
and of bond of indemnity, if requested, also satisfactory in form and amount, at
the applicant's cost. Applicants for such substitute Warrant certificate shall
also comply with such other reasonable requirements and pay such other
reasonable charges as the Company may prescribe.
12. This Agreement shall be governed by and in accordance with
the laws of the State of New York.
IN WITNESS WHEREOF, PARAVANT COMPUTER SYSTEMS, INC. has caused
this Underwriter's Warrant to be signed by its duly authorized officer, and this
Underwriter's Warrant to be dated June 10, 1996.
PARAVANT COMPUTER SYSTEMS, INC.
By: /s/ William R. Craven
______________________________
Name: William R. Craven
Title: Vice President
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PURCHASE FORM
(To be signed only upon exercise of Warrant)
The undersigned, the holder of the foregoing Underwriter's Warrant,
hereby irrevocably elects to exercise the purchase rights represented by such
Underwriter's Warrant for, and to purchase thereunder, ______________ shares of
Common Stock and/or ___ Redeemable Warrants of PARAVANT COMPUTER SYSTEMS, INC.,
and herewith makes payment of $_____________________ therefor, and requests that
the certificates for shares of Common Stock and Redeemable Warrants be issued in
the name(s) of, and delivered to _____________________, whose address(es) is
(are):
Dated:__________________________ _____________________________
Signature
_________________________________
Signature Guarantee
_____________________________
(Print name under signature)
(Signature must conform in
all respects to the name of
holders specified on the face
of the Underwriter's
Warrant).
_____________________________
(Insert Social Security or
Other Identifying Number of
Holder)
<PAGE>
<PAGE>
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder
desires to transfer the Underwriter's Warrant)
FOR VALUE RECEIVED ______________________________________________
hereby sells, assigns and transfers unto _______________________________________
(Please print name and address of transferee)
this Underwriter's Warrant, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ________________ Attorney,
to transfer the within Underwriter's Warrant on the books of PARAVANT COMPUTER
SYSTEMS, INC. with full power of substitution.
Dated:______________________________ ______________________
Signature
___________________________________
Signature Guarantee
_____________________________
(Print name under signature)
(Signature must conform in
all respects to the name of
holder as specified on the
face of the Underwriter's
Warrant).
_____________________________
(Insert Social Security or
Other Identifying Number of
Holder)
<PAGE>
<PAGE>
WARRANT AGENT AGREEMENT
WARRANT AGENT AGREEMENT dated as of May 31, 1996, by and among
Paravant Computer Systems, Inc. a Florida corporation (the "Company" or "PCS"),
and Paravant Computer Systems, Inc., in its capacity as warrant agent (the
"Warrant Agent").
WHEREAS, as part of a bridge financing in August 1995 ("Bridge
Financing") the Company borrowed $400,000 from a group of private investors and
agreed to issue warrants to purchase 160,000 shares ("Warrants") of the
Company's Common Stock, par value $.045 per share ("Common Stock");
WHEREAS, each Warrant will entitle the holder to purchase one
share of Common Stock, subject to the terms hereof; and
WHEREAS, PCS is willing to act as Warrant Agent in connection
with the issuance, registration, transfer, exchange and exercise of the
Warrants;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements hereinafter set forth, the parties hereto agree as follows:
Section 1. Appointment of Warrant Agent. PCS is hereby appointed
to act as Warrant Agent for the Company in accordance with the instructions
hereinafter set forth in this Agreement, and the Warrant Agent hereby accepts
such appointment.
Section 2. Form of Warrant. The certificate representing the
Warrants and the form of election to purchase Common Stock to be printed on the
reverse thereof shall be substantially as set forth in Exhibit A attached
hereto. Each Warrant shall entitle the registered holder thereof to purchase one
share of Common Stock at a purchase price of Six and 00/100 Dollars ($6.00), at
any time from the effective date of the Company's initial public offering
through Duke & Co., Inc. ("IPO"), until 5:00 p.m. Eastern time, on June 3, 2001
(the "Expiration Date"). The Warrant exercise price and the number of shares of
Common Stock issuable upon exercise of the Warrants are subject to adjustment
upon the occurrence of certain events, all as hereinafter provided. The Warrants
shall be executed on behalf of the Company by the mutual or facsimile signature
of the present or any future Chairman of the Board, President or Vice President
of the Company, attested to by the manual or facsimile signature of the present
or any future Secretary or Assistant Secretary of the Company.
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<PAGE>
Warrants shall be dated as of the issuance by the Warrant Agent
either upon initial issuance or upon transfer or exchange.
In the event the aforesaid expiration dates of the Warrants fall
on a Saturday or Sunday, or on a legal holiday on which the New York Stock
Exchange is closed, then the Warrants shall expire at 5:00 p.m. Eastern time on
the next succeeding business day.
Section 3. Countersignature and Registration. The Warrant Agent
shall maintain books for the transfer and registration of the Warrants. Upon the
initial issuance of the Warrants, the Warrant Agent shall issue and register the
Warrants in the names of the respective holders thereof. The Warrants shall be
countersigned manually or by facsimile by the Warrant Agent (or by any successor
to the warrant agent then acting as Warrant Agent under this Agreement) and
shall not be valid for any purpose unless so countersigned. The Warrants may,
however, be so countersigned by the Warrant Agent (or by its successor as
Warrant Agent) and be delivered by the Warrant Agent, notwithstanding that the
persons whose manual or facsimile signatures appear thereon as proper officers
of the Company shall have ceased to be such officers at the time of such
countersignature or delivery.
Section 4. Transfer and Exchanges. The Warrant Agent shall
transfer, from time to time, any outstanding Warrants upon the books to be
maintained by the Warrant Agent for that purpose, upon surrender thereof for
transfer properly endorsed or accompanied by appropriate instructions for
transfer. Upon any such transfer, a new Warrant shall be issued to the
transferee and the surrendered Warrant shall be canceled by the Warrant Agent.
Warrants so canceled shall be delivered by the Warrant Agent to the Company,
from time to time, upon request. Warrants may be exchanged at the option of the
holder thereof, when surrendered at the office of the Warrant Agent, for another
Warrant, or other Warrants of different denominations of like tenor and
representing in the aggregate the right to purchase a like number of shares of
Common Stock.
Section 5. Exercise of Warrants. Subject to the provisions of
this Agreement, each registered holder of Warrants shall have the right, which
may be exercised commencing as of the Effective Date, to purchase from the
Company (and the Company shall issue and sell to such registered holder of
Warrants) the number of fully paid and non-assessable shares of Common Stock
specified in such Warrants upon surrender of such Warrants to the Company at the
office of the Warrant Agent, with the form of election to purchase on the
reverse thereof duly filled in and signed, and upon payment to the Company of
the warrant price, determined in accordance with the provisions of Sections 9
and 10
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<PAGE>
of this Agreement, for the number of shares of Common Stock in respect of which
such Warrants are then exercised. Payment of such warrant price shall be made in
cash or by certified check or bank draft to the order of the Company. Subject to
Section 6, upon such surrender of Warrants and payment of the warrant price, the
Company shall issue and cause to be delivered with all reasonable dispatch to or
upon the written order of the registered holder of such Warrants and in such
name or names as such registered holder may designate, a certificate or
certificates for the number of full shares of Common Stock so purchased upon the
exercise of such Warrants. Such certificate or certificates shall be deemed to
have been issued and any person so designated to be named therein shall be
deemed to have become a holder of record of such shares of Common Stock as of
the date of the surrender of such Warrants and payment of the warrant price as
aforesaid. The rights of purchase represented by the Warrants shall be
exercisable, at the election of the registered holders thereof, either as an
entirety or from time to time for a portion of the shares specified therein, and
in the event that any Warrant is exercised in respect of less than all of the
shares of Common Stock specified therein at any time prior to the Expiration
Date of the Warrants, a new Warrant or Warrants will be issued to the registered
holder for the remaining number of shares of Common Stock specified in the
Warrant so surrendered, and the Warrant Agent is hereby irrevocably authorized
to countersign and to deliver the required new Warrants pursuant to the
provisions of this Section and of Section 3 of this Agreement and the Company,
whenever requested by the Warrant Agent, will supply the Warrant Agent with
Warrants duly executed on behalf of the Company for such purpose.
Section 6. Payment of Taxes. The Company will pay any documentary
stamp taxes attributable to the initial issuance of Common Stock issuable upon
the exercise of Warrants and not paid 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 or delivery of any certificates
of shares of Common Stock in a name other than that of the registered holder of
Warrants in respect of which such shares are issued, and in such case, neither
the Company nor the Warrant Agent shall be required to issue or deliver any
certificate for shares of Common Stock or any Warrant until the person
requesting the same has paid to the Company the amount of such tax or has
established to the Company's satisfaction that such tax has been paid.
Section 7. Mutilated or Missing Warrants. In case any of the
Warrants shall be mutilated, lost, stolen or destroyed, the Company may, in its
discretion, issue and the Warrant Agent shall countersign and deliver in
exchange and substitution for and upon cancellation of the mutilated Warrant, or
in lieu of and in substitution for the Warrant lost, stolen or destroyed, a new
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<PAGE>
Warrant of like tenor and representing an equivalent right or interest, but only
upon receipt of evidence satisfactory to the Company and the Warrant Agent of
such loss, theft or destruction and, in case of a lost, stolen or destroyed
Warrant, indemnity, if requested, also satisfactory to them. Applicants for such
substitute Warrants shall also comply with such other reasonable regulations and
pay documentary stamp taxes and such reasonable charges as the Company or the
Warrant Agent may prescribe.
Section 8. Reservation of Common Stock. There have been reserved,
and the Company shall at all times keep reserved, out of the authorized and
unissued shares of Common Stock, a number of shares of Common Stock sufficient
to provide for the exercise of the rights of purchase represented by the
Warrants, and the transfer agent for the shares of Common Stock and every
subsequent transfer agent for any shares of the Company's Common Stock issuable
upon the exercise of any of the rights of purchase aforesaid are irrevocably
authorized and directed at all times to reserve such number of authorized and
unissued shares of Common Stock as shall be required for such purpose. The
Company agrees that all shares of Common Stock issued upon exercise of the
Warrants shall be, at the time of delivery of the certificates of such shares,
validly issued and outstanding, fully paid and non-assessable and listed on any
national securities exchange or NASDAQ Market System upon which the other shares
of Common Stock are then listed. The Company will keep a copy of this Agreement
on file with the transfer agent for the shares of Common Stock and with every
subsequent transfer agent for any shares of the Company's Common Stock issuable
upon the exercise of the rights of purchase represented by the Warrants. The
Warrant Agent is irrevocably authorized to requisition from time to time from
such transfer agent stock certificates required to honor outstanding Warrants.
The Company will supply such transfer agent with duly executed stock
certificates for that purpose. All Warrants surrendered in the exercise of
rights thereby evidenced shall be canceled by the Warrant Agent and shall
thereafter be delivered to the Company, and such canceled Warrants shall
constitute sufficient evidence of the number of shares of Common Stock which
have been issued upon the exercise of such Warrants. Promptly after the date of
expiration of the Warrants, the Warrant Agent shall certify to the Company the
total aggregate amount of Warrants then outstanding, and thereafter no shares of
Common Stock shall be subject to reservation in respect of such Warrants which
shall have expired.
Section 9. Warrant Price; Adjustments.
(a) The warrant price at which Common Stock shall be purchasable
upon the exercise of the Warrants shall be Six and 00/100 Dollars ($6.00) at any
time following the Effective Date until the Expiration Date, subject to
adjustment as provided in this
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<PAGE>
Section (the "Warrant Price").
(b) The Warrant Price shall be subject to adjustment from time to
time as follows:
(i) In case the Company shall at any time after
the date hereof pay a dividend in shares of Common Stock or make a distribution
in shares of Common Stock, then upon such dividend or distribution, the Warrant
Price in effect immediately prior to such dividend or distribution shall
forthwith be reduced to a price determined by dividing:
(A) an amount equal to the total number of
shares of Common Stock outstanding immediately prior to such dividend or
distribution multiplied by the Warrant Price in effect immediately prior to such
dividend or distribution, by
(B) the total number of shares of Common
Stock outstanding immediately after such issuance or sale.
For the purposes of any computation to be made in accordance with
the provisions of this clause (i), the following provisions shall be applicable:
Common Stock issuable by way of dividend or other distribution on any stock of
the Company shall be deemed to have been issued immediately after the opening of
business on the date following the date fixed for the determination of
stockholders entitled to receive such dividend or other distribution.
(ii) In case the Company shall at any time
subdivide or combine the outstanding Common Stock, the Warrant Price shall
forthwith be proportionately decreased in the case of subdivision or increased
in the case of combination to the nearest one cent. Any such adjustment shall
become effective at the time such subdivision or combination shall become
effective.
(C) Notwithstanding anything contained herein
to the contrary, no adjustment of the Warrant Price shall be made if the amount
of such adjustment shall be less than $.05, but in such case, any adjustment
that would otherwise be required then to be made shall be carried forward and
shall be made at the time and together with the next subsequent adjustment
which, together with any adjustment so carried forward, shall amount to not less
than $.05.
(c) In the event that the number of outstanding shares of Common
Stock is increased by a stock dividend payable in Common Stock or by a
subdivision of the outstanding Common Stock, then, from and after the time at
which the adjusted Warrant Price becomes effective pursuant to paragraph (b) of
this Section by reason of such dividend or subdivision, the number of shares of
Common Stock issuable upon the exercise of each Warrant shall be
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<PAGE>
<PAGE>
increased in proportion to such increase in outstanding shares. In the event
that the number of shares of Common Stock outstanding is decreased by a
combination of the outstanding Common Stock, then, from and after the time at
which the adjusted Warrant Price becomes effective pursuant to paragraph (b) of
this Section by reason of such combination, the number of shares of Common Stock
issuable upon the exercise of each Warrant shall be decreased in proportion to
such decrease in the outstanding shares of Common Stock.
(d) In case of any reorganization or reclassification of the
outstanding Common Stock (other than a change in par value, or from par value to
no par value, or as a result of a subdivision or combination), or in case of any
consolidation of the Company with, or merger of the Company into, another
corporation (other than a consolidation or merger in which the Company is the
continuing corporation and which does not result in any reclassification of the
outstanding Common Stock), or in case of any sale or conveyance to another
corporation of the property of the Company as an entirety or substantially as an
entirety, the holder of each Warrant then outstanding shall thereafter have the
right to purchase the kind and amount of shares of Common Stock and other
securities and property receivable upon such reorganization, reclassification,
consolidation, merger, sale or conveyance by a holder of the number of shares of
Common Stock which the holder of such Warrant shall then be entitled to
purchase; such adjustment shall apply with respect to all such changes occurring
between the date of this Warrant Agreement and the date of exercise of such
Warrant.
(e) Subject to the provisions of this Section 9, in case the
Company shall, at any time prior to the exercise of the Warrants, make any
distribution of its assets to holders of its Common Stock as a liquidating or a
partial liquidating dividend, then the holder of Warrants who exercises Warrants
after the record date for the determination of those holders of Common Stock
entitled to such distribution of assets as a liquidating or partial liquidating
dividend shall be entitled to receive for the Warrant Price per Warrant, in
addition to each share of Common Stock, the amount of such distribution (or at
the option of the Company, a sum equal to the value of any such assets at the
time of such distribution as determined by the Board of Directors of the Company
in good faith), which would have been payable to such holder had he been the
holder of record of the Common Stock receivable upon exercise of his Warrant on
the record date for the determination of those entitled to such distribution.
(f) In case of the dissolution, liquidation or winding-up of the
Company, all rights under the Warrants shall terminate on a date fixed by the
Company, such date to be no earlier than ten (10) days prior to the
effectiveness of such dissolution, liquidation or winding-up, and not later than
five (5) days prior
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<PAGE>
to such effectiveness. Notice of such termination of purchase rights shall be
given to the last registered holder of the Warrants, as the same shall appear on
the books of the Company maintained by the Warrant Agent, by registered mail at
least thirty (30) days prior to such termination date.
(g) Any adjustment pursuant to the aforesaid provisions shall be
made on the basis of the number of shares of Common Stock which the holder
thereof would have been entitled to acquire by the exercise of the Warrant
immediately prior to the event giving rise to such adjustment.
(h) Irrespective of any adjustments in the Warrant Price or the
number or kind of shares purchasable upon exercise of the Warrants, Warrants
previously or thereafter issued may continue to express the same price and
number and kind of shares as are stated in the similar Warrants initially
issuable pursuant to this Warrant Agreement.
(i) The Company may retain a firm of independent public
accountants (who may be any such firm regularly employed by the Company) to make
any computation required under this Section, and any certificate setting forth
such computation signed by such firm shall be conclusive evidence of the
correctness of any computation made under this Section.
(j) If at any time, as a result of an adjustment made pursuant to
paragraph (d) above, the holders of a Warrant or Warrants shall become entitled
to purchase any securities other than shares of Common Stock, thereafter the
number of such securities so purchasable upon exercise of each Warrant and the
Warrant Price for such shares shall be subject to adjustment, from time to time,
in a manner and on terms as nearly equivalent as practicable to the provisions
with respect to the Common Stock contained in paragraphs (b) and (c).
(k) Anything hereinabove to the contrary notwithstanding, no
adjustment shall be made pursuant to paragraph 9(a) to the Warrant Price or to
the number of shares of Common Stock purchasable upon the exercise of any
Warrant, upon:
(i) The issuance or sale by the Company of any
shares of Common Stock or options, warrants or other securities pursuant to (A)
the Warrants subject to this Agreement, (B) the Underwriter's Warrants granted
in connection with the IPO, including shares of Common Stock issuable upon the
exercise of the warrants underlying the warrants purchased pursuant to the
Underwriter's Warrants, and the Underwriter's overallotment option and all
securities underlying said option (C) the Company's stock option plans,
(D) the underwriting agreement relating to the IPO and (E) any equity
securities for which adequate consideration is received;
-7-
<PAGE>
<PAGE>
(ii) The issuance or sale of shares of Common
Stock pursuant to the exercise of options or conversion or exchange of
convertible securities hereinafter issued for which an adjustment has been made
(or was not required to be made) pursuant to the provisions of this Section 9
hereof;
(iii) The increase in the number of shares of
Common Stock subject to any option or convertible security referred to in
subsections (i) and (ii) hereof pursuant to the provisions of such options or
convertible securities designed to protect against dilution.
(iv) The increase in the number of shares of
Common Stock issued upon the exercise of Warrants pursuant to the Bridge
Financing.
(l) The form of Warrant need not be changed because of any change
pursuant to this Section 9, and Warrants issued after such change may state the
same Warrant Price and the same number of shares as is stated in the Warrants
initially issued pursuant to this Agreement. However, the Company may at any
time in its sole discretion (which shall be conclusive) make any change in the
form of Warrant that the Company may deem appropriate and that does not affect
the substance thereof; and any Warrant thereafter issued or countersigned,
whether in exchange or substitution for an outstanding Warrant or otherwise, may
be in the form as so changed.
Section 10. Fractional Interests. The Warrants may only be
exercised to purchase full shares of Common Stock and the Company shall not be
required to issue fractions of shares of Common Stock on the exercise of
Warrants. However, if a Warrantholder exercises all Warrants then owned of
record by him and such exercise would result in the issuance of a fractional
share, the Company will pay to such Warrantholder, in lieu of the issuance of
any fractional share otherwise issuable, an amount of cash based on the market
value of the Common Stock of the Company on the last trading day prior to the
exercise date.
Section 11. Notices to Warrantholders.
(a) Upon any adjustment of the Warrant Price and
the number of shares of Common Stock issuable upon exercise of a Warrant, then
and in each such case, the Company shall give written notice thereof to the
Warrant Agent, which notice shall state the Warrant Price resulting from such
adjustment and the increase or decrease, if any, in the number of shares
purchasable at such price upon the exercise of a Warrant, setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based. The Company shall also mail such notice to the holders of
the Warrants at their respective addresses appearing in the Warrant register.
Failure to give or
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<PAGE>
mail such notice, or any defect therein, shall not affect the validity of the
adjustments.
(b) In case at any time:
(i) the Company shall pay dividends payable
in stock upon its Common Stock or make any distribution (other than regular cash
dividends) to the holders of its Common Stock; or
(ii) the Company shall offer for subscription
pro rata to all of the holders of its Common Stock any additional
shares of stock of any class or other rights; or
(iii) there shall be any capital reorganization
or reclassification of the capital stock of the Company, or consolidation or
merger of the Company with, or sale of substantially all of its assets to
another corporation; or
(iv) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the Company; then in any one or more
of such cases, the Company shall give written notice in the manner set forth in
paragraph (a) of Section 11 of the date on which (A) a record shall be taken for
such dividend, distribution or subscription rights, or (B) such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up shall take place, as the case may be. Such notice shall also specify
the date as of which the holders of Common Stock of record shall participate in
such dividend, distribution or subscription rights, or shall be entitled to
exchange their Common Stock for securities or other property deliverable upon
such reorganization, reclassification, consolidation, merger, sale dissolution,
liquidation or winding-up, as the case may be. Such notice shall be given at
least thirty (30) days prior to the action in question and not less than
thirty (30) days prior to the record date in respect thereof. Failure to give
such notice, or any defect therein, shall not affect the legality or validity
of any of the matters set forth in this Section 11(b).
(c) The Company shall cause copies of its annual
report to be sent by first-class mail, postage prepaid, on the date of mailing
to such stockholders, to each registered holder of Warrants at his address
appearing in the Warrant register as of the record date for the determination of
the stockholders entitled to such documents.
Section 12. Redemption of Warrants. Until 5:00 P.M. Eastern time
on the Expiration Date, the Warrants are subject to earlier redemption as
follows: If the average of the closing bid prices of the Common Stock (if the
Common Stock is then traded in the over-the-counter market), or the average of
the closing
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<PAGE>
prices of the Common Stock (if the Common Stock is then traded on a national
securities exchange or the NASDAQ National Market System or SmallCap Market
System) exceeds $6.00 (subject to adjustment consistent with Section 9 hereof)
for any consecutive 20 trading days, then upon at least 30 days prior written
notice, given within 60 days of the period, the Company will be able to call all
(but not less than all) of the Warrants for redemption at a price of $.05 per
Warrant (subject to adjustment consistent with Section 9 hereof). The redemption
notice shall be mailed to the holders of the Warrants at their respective
addresses appearing in the Warrant register. Holders of the Warrants will have
exercise rights until the close of business on the date fixed for redemption.
Section 13. Merger, Consolidation or Change of Name of Warrant
Agent. Any corporation or company which may succeed to the business of the
Warrant Agent by any merger, consolidation or otherwise shall be the successor
to the Warrant Agent hereunder without the execution or filing of any paper or
any further act on the part of any of the parties hereto; provided that such
corporation would be eligible for appointment as a successor Warrant Agent under
the provisions of Section 16 of this Agreement. In case at the time such
successor to the Warrant Agent shall succeed to the agency created by this
Agreement, any of the Warrants shall have been countersigned but not delivered,
any such successor to the Warrant Agent may adopt the countersignature of the
original Warrant Agent and deliver such Warrants so countersigned.
In case at any time the name of the Warrant Agent shall be
changed and at such time any of the Warrants shall have been countersigned but
not delivered, the Warrant Agent may adopt the countersignature under its prior
name and deliver Warrants so countersigned. In all such cases, such Warrants
shall have the full force provided in the Warrants and in the Agreement.
Section 14. Duties of Warrant Agent. The Warrant Agent undertakes
the duties and obligations imposed by this Agreement upon the following terms
and conditions, by all of which the Company and the holders of Warrants, by
their acceptance thereof, shall be bound:
(a) The statements of act and recitals contained
herein and in the Warrants shall be taken as statements of the Company, and the
Warrant Agent assumes no responsibility for the correctness of any of the same
except as such describe the Warrant Agent or action taken or to be taken by it.
The Warrant Agent assumes no responsibility with respect to the distribution of
the Warrants except as herein expressly provided.
(b) The Warrant Agent shall not be responsible for
any failure of the Company to comply with any of the covenants in this Agreement
or in the Warrants to be complied with by the Company.
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<PAGE>
(c) The Warrant Agent may consult at any time with
counsel satisfactory to it (who may be counsel for the Company), and the Warrant
Agent shall incur no liability or responsibility to the Company or to any holder
of any Warrant in respect of any action taken, suffered or omitted by it
hereunder in good faith and in accordance with the opinion or the advice of such
counsel.
(d) The Warrant Agent shall incur no liability or
responsibility to the Company or to any holder of any Warrant for any action
taken in reliance on any notice, resolution, waiver, consent, order, certificate
or other instrument believed by it to be genuine and to have been signed, sent
or presented by the proper party or parties.
(e) The Company agrees to pay to the Warrant Agent
reasonable compensation for all services rendered by the Warrant Agent in the
execution of this Agreement, to reimburse the Warrant Agent for all reasonable
expenses, taxes and Governmental charges and other charges incurred by the
Warrant Agent in the execution of this Agreement and to indemnify the Warrant
Agent and save it harmless against any and all liabilities, including judgment,
costs and reasonable counsel fees, for anything done or omitted by the Warrant
Agent in the execution of this Agreement except as a result of the Warrant
Agent's negligence, wilful misconduct or bad faith.
(f) The Warrant Agent shall be under no obligation
to institute any action, suit or legal proceeding or to take any other action
likely to involve expenses unless the Company or one or more registered holders
of Warrants shall furnish the Warrant Agent with reasonable security and
indemnity for any costs and expenses which may be incurred, but this provision
shall not affect the power of the Warrant Agent to take such action as the
Warrant Agent may consider proper, whether with or without any such security or
indemnity. All rights of action under this Agreement or under any of the
Warrants may be enforced by the Warrant Agent without the possession of any of
the Warrants or the production thereof at any trial or other proceeding, and any
such action, suit or proceeding instituted by the Warrant Agent shall be brought
in its name as Warrant Agent, and any recovery of judgment shall be for the
ratable benefit of the registered holders of the Warrants, as their respective
rights and interests may appear.
(g) The Warrant Agent and any stockholder,
director, officer, partner or employee of the Warrant Agent may buy, sell or
deal in any of the Warrants or other securities of the Company or become
pecuniarily interested in any transaction in which the Company may be
interested, or contract with or lend money to or otherwise act as fully and
freely as though it were not the Warrant Agent under this Agreement. Nothing
herein shall
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<PAGE>
preclude the Warrant Agent from acting in any other capacity for the Company or
for any other legal entity.
(h) The Warrant Agent shall act hereunder solely as agent
and its duties shall be determined solely by the provisions hereof.
(i) The Warrant Agent may execute and exercise any of the
rights or powers hereby vested in it or perform any duty hereunder either itself
or by or through its attorneys, agents or employees.
(j) Any request, direction, election, order or demand of
the Company shall be sufficiently evidenced by an instrument signed in the name
of the Company by its President or a Vice President or its Secretary or an
Assistant Secretary or its Treasurer or an Assistant Treasurer (unless other
evidence in respect thereof be herein specifically prescribed); and any
resolution of the Board of Directors may be evidenced to the Warrant Agent by a
copy thereof certified by the Secretary or an Assistant Secretary of the
Company.
Section 15. Change of Warrant Agent. The Warrant Agent may resign
and be discharged from its duties under this Agreement by giving to the Company
sixty (60) days written notice, and to the holders of the Warrants notice by
mailing such notice to the holders at their respective addresses appearing on
the Warrant register, of such resignation, specifying a date when such
resignation shall take effect. The Warrant Agent may be removed by thirty (30)
days written notice to the Warrant Agent from the Company and the like mailing
of notice to the holders of the Warrants. If the Warrant Agent shall resign or
be removed or shall otherwise become incapable of action, the Company shall
appoint a successor to the Warrant Agent. If the Company shall fail to make such
appointment within a period of thirty (30) days after such removal or after it
has been notified in writing of such resignation or incapacity by the resigning
or incapacitated Warrant Agent or after the Company has received such notice
from a registered holder of a Warrant (who shall, with such notice, submit his
Warrant for inspection by the Company), then the registered holder of any
Warrant may apply to any court of competent jurisdiction for the appointment of
a successor to the Warrant Agent. Any successor Warrant Agent, whether appointed
by the Company or by such a court, shall be a bank or trust company, in good
standing, incorporated under New York or federal law. After appointment, the
successor Warrant Agent shall be vested with substantially the same powers,
rights, duties and responsibilities as if it had been originally named as
Warrant Agent without further act or deed, and the former Warrant Agent shall
deliver and transfer to the successor Warrant Agent all canceled Warrants,
records and property at the time held by it hereunder, and execute and deliver
any further assurance or
-12-
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<PAGE>
conveyance necessary for that purpose. Failure to file or mail any notice
provided for in this Section, however, or any defect therein, shall not affect
the validity of the resignation or removal of the Warrant Agent or the
appointment of the successor Warrant Agent, as the case may be.
Section 16. Identity of Transfer Agent. Forthwith upon the
appointment of any transfer agent for the shares of Common Stock or of any
subsequent transfer agent for the shares of Common Stock or other shares of the
Company's Common Stock issuable upon the exercise of the rights of purchase
represented by the Warrants, the Company will file with the Warrant Agent a
statement setting forth the name and address of such transfer agent.
Section 17. Notices. Any notice pursuant to this Agreement to be
given by the Warrant Agent, or by the registered holder of any Warrant to the
Company, shall be sufficiently given if sent by first-class mail, postage
prepaid, addressed (until another is filed in writing by the Company with the
Warrant Agent) as follows:
Paravant Computer Systems, Inc.
780 South Apollo Boulevard, Atrium One
Melbourne, Florida 32901
Attn: Richard P. McNeight, President
Any notice pursuant to this Agreement to be given by the Company
or by the registered holder of any Warrant to the Warrant Agent shall be
sufficiently given if sent by first-class mail, postage prepaid, addressed
(until another address is filed in writing by the Warrant Agent with the
Company) as follows:
Paravant Computer Systems, Inc.
780 South Apollo Boulevard, Atrium One
Melbourne, Florida 32901
Attn: Richard P. McNeight, President
Section 18. Supplements and Amendments. The Company and the
Warrant Agent may, from time to time, supplement or amend this Agreement in
order to cure any ambiguity or to correct or supplement any provision contained
herein which may be defective or inconsistent with any other provision herein,
or to make any other provisions in regard to matters or questions arising
hereunder which the Company and the Warrant Agent may deem necessary or
desirable and which shall not be inconsistent with the provisions of the
Warrants and which shall not adversely affect the interest of the holders of
Warrants.
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<PAGE>
Section 19. New York Contract. This Agreement and each Warrant
issued hereunder shall be deemed to be a contract made under the laws of the
State of New York and shall be construed in accordance with the laws of New York
applicable to agreements to be performed wholly within New York.
Section 20. Benefits of this Agreement. Nothing in this Agreement
shall be construed to give to any person or corporation other than the Company,
the Warrant Agent, and the registered holders of the Warrants any legal or
equitable right, remedy or claim under this Agreement; but this Agreement shall
be for the sole and exclusive benefit of the Company, the Warrant Agent, and the
registered holders of the Warrants.
Section 21. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Warrant Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
-14-
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties have entered into this Agreement
on the date first above written.
PARAVANT COMPUTER SYSTEMS, INC.
By /s/ William R. Craven
------------------------
William R. Craven
PARAVANT COMPUTER SYSTEMS, INC.,
as Warrant Agent
By /s/ William R. Craven
------------------------
William R. Craven
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<PAGE>
<PAGE>
ELECTION TO PURCHASE
(To be executed if Holder desires to
exercise the Warrant Certificate.)
The undersigned hereby elects to exercise __________ PCS Warrants
represented by this Warrant Certificate to purchase the shares of PCS Common
Stock issuable upon the exercise of such PCS Warrants and requests that
Certificates for such shares be issued in the name of and delivered to:
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
[ ]
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
If such number of PCS Warrants shall not be all PCS Warrants evidenced by this
Warrant Certificate, a new Warrant Certificate for the balance remaining of such
PCS Warrants shall be registered in the name of and delivered to:
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
[ ]
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
Dated:_____________________________
___________________________________
Signature
(Signature must conform in all
respects to name of holder as
specified on face of this Warrant
Certificate)
Signature Guaranteed:
ASSIGNMENT
(To be executed by the Registered Holder if such Holder
desires to transfer the Warrant Certificates)
FOR VALUE RECEIVED, __________________________________ hereby sells, assigns and
transfers unto
Name:___________________________________________________________________________
(please typewrite or print in block letters)
Address:________________________________________________________________________
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<PAGE>
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 the same on the books of the Company, with full power of
substitution in the premises.
Date____________________________ X_________________________
Signature Guaranteed
__________________________
Notice: The signature to
the foregoing assignment
must correspond to the
name as written upon the
face of this Warrant
Certificate in every
particular, without
alteration or enlargement
or any change whatsoever.
Authorized Signature
-2-
<PAGE>
<PAGE>
EXHIBIT A
TO WARRANT
AGENT AGREEMENT
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. SUCH
SECURITIES MAY NOT BE SOLD OR OFFERED FOR SALE, TRANSFERRED, HYPOTHECATED OR
OTHERWISE ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT WITH
RESPECT THERETO UNDER SUCH ACT OR AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO
THE COMPANY THAT AN EXEMPTION FROM REGISTRATION FOR SUCH SALE, OFFER, TRANSFER,
HYPOTHECATION OR OTHER ASSIGNMENT IS AVAILABLE UNDER SUCH ACT.
No.
NOT EXERCISABLE AFTER , 2001
WARRANT CERTIFICATE
PARAVANT COMPUTER SYSTEMS, INC.
THIS CERTIFIES that
, or registered assigns, is the registered owner of the number of warrants set
forth above, each of which entitles the owner thereof, subject to the terms,
provisions and conditions of the Warrant Agent Agreement dated as of
______________ (the "Warrant Agreement") between Paravant Computer Systems,
Inc., a corporation organized under the laws of the State of Florida ("PCS"),
and PCS, in its capacity as warrant agent, (the "Warrant Agent"), to purchase or
receive from PCS at any time after ____________, 1996 and prior to 5:00 P.M.
(New York City time) on ____________, 2001 at the principal office of the
Warrant Agent, or its successors as Warrant Agent, the number of shares of
common stock, par value $.045 per share, of PCS ("PCS Common Stock") represented
hereby to be purchased at $6 per share of PCS Common Stock (the "Exercise
Price"), in each case upon presentation and surrender of this Warrant
Certificate with the Form of Election to Purchase duly executed. The number of
PCS Warrants evidenced by this Warrant Certificate (and the number of shares of
PCS Common Stock which may be purchased upon exercise thereof) set forth above
and the Exercise Price set forth above are the number and Exercise price as of
_____________, based on the shares of PCS Common Stock as constituted at such
date. As provided in the Warrant Agreement, the Exercise Price and the number of
shares of PCS Common Stock which may be purchased upon the exercise of the PCS
Warrants evidenced by this Warrant Certificate are subject to modification and
adjustment upon the occurrence of certain events.
This Warrant Certificate is subject to all of the terms,
provisions and conditions of the Warrant Agreement, which terms, provisions and
conditions are hereby incorporated herein by reference and made a part hereof
and to which Warrant Agreement reference is hereby made for a full description
of the rights, limitations of
<PAGE>
<PAGE>
rights, obligations, duties and immunities hereunder of the Warrant Agent, PCS
and the holders of the Warrant Certificates. Copies of the Warrant Agreement are
on file at the above-mentioned office of the Warrant Agent.
This Warrant Certificate, with or without other Warrant
Certificates, upon surrender at the principal office of the Warrant Agent, may
be exchanged for another Warrant Certificate or Warrant Certificates of like
tenor and date evidencing PCS Warrants entitling the holder to purchase a like
aggregate number of shares of PCS Common Stock, in each case as the PCS Warrants
evidenced by the Warrant Certificate or Warrant Certificates surrendered shall
have entitled such holder to purchase or receive. If this Warrant Certificate
shall be exercised in part, the holder hereof shall be entitled to receive upon
surrender hereof another Warrant Certificate or Warrant Certificates for the
number of PCS Warrants not exercised.
PCS shall make a cash payment in lieu of issuing fractional PCS
Warrants or fractional shares of PCS Common Stock, as provided in the Warrant
Agreement.
No holder of this Warrant Certificate shall be entitled to vote,
receive dividends or distributions on, or be deemed for any purpose the holder
of, PCS Common Stock or of any other securities of PCS which may at any time be
issuable on the exercise hereof, nor shall anything contained in the Warrant
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of PCS or any right to vote for the election of
directors or upon any matter submitted to stockholders at any meeting thereof,
or to give or withhold consent to any corporate action, or to receive notice of
meetings or other actions affecting stockholders (except as provided in the
Warrant Agreement), or to receive dividends or subscription rights, or
otherwise, until the PCS Warrants evidenced by this Warrant Certificate shall
have been exercised as provided in the Warrant Agreement.
This Warrant Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Warrant Agent.
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<PAGE>
WITNESS the facsimile signature of the proper officers of PCS and
its corporate seal.
Dated:
ATTEST: PARAVANT COMPUTER SYSTEMS, INC.
_____________________________ By________________________________
[SEAL]
COUNTERSIGNED:
PARAVANT COMPUTER SYSTEMS, INC.,
as Warrant Agent
By________________________________
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<PAGE>
<PAGE>
FINANCIAL ADVISORY AND INVESTMENT BANKING AGREEMENT
This Agreement is made and entered into as of the 10th day of
June, 1996 by and between Duke & Co., Inc., a Florida corporation ("Duke"), and
Paravant Computer Systems, Inc., a Florida corporation (the "Company").
In consideration of the mutual promises made herein and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. PURPOSE: The Company hereby engages Duke for the term
specified in Paragraph 2 hereof to render consulting advice to the Company as an
investment banker relating to financial and similar matters upon the terms and
conditions set forth herein.
2. TERM: Except as otherwise specified in Paragraph 4 hereof,
this Agreement shall be effective for a two (2) year period commencing June 10,
1996 and ending June 9, 1998.
3. DUTIES OF DUKE: During the term of this Agreement, Duke shall
seek out Transactions (as hereinafter defined) on behalf of the Company and
shall furnish advice to the Company in connection with any such Transactions.
4. COMPENSATION: In consideration for the services rendered by
Duke to the Company pursuant to this Agreement (and in
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<PAGE>
addition to the expenses provided for in Paragraph 5 hereof), the Company shall
compensate Duke as follows:
(a) The Company shall pay Duke a fee of $3,500 per month for the
term of this Agreement. The aggregate sum of $84,000 shall be due and payable
upon the execution of this Agreement.
(b) In the event that any Transaction occurs during the term of
this Agreement, the Company shall pay fees to Duke as follows:
<TABLE>
<CAPTION>
CONSIDERATION FEE
------------- ---
<S> <C>
$ - 0 - to $ 500,000 $25,000
Above $ 500,000 to $5,000,000 5% of Consideration
Above $5,000,000 $250,000 plus 1% of the
Consideration in excess of
$5,000,000
</TABLE>
For the purposes of this Agreement, "Consideration" shall mean
the total market value, as determined by the Company's Board of Directors on the
day of the closing of the Transaction, of stock, cash, assets and all other
property (real or personal) exchanged or received, directly or indirectly, by
the Company or any of its security holders in connection with any Transaction.
Any co-broker retained by Duke shall be paid by Duke.
(c) For the purposes of the Agreement, a "Transaction" shall mean
(i) any transaction introduced to the Company by Duke, other than in the
ordinary course of trade or business of the Company, whereby, directly or
indirectly, control of, or a material interest
-2-
<PAGE>
<PAGE>
in, the Company or any of its businesses or substantially all of its assets, is
transferred for Consideration, or (ii) any transaction introduced to the Company
by Duke whereby the Company acquires any other unaffiliated company or
substantially all of the assets of any other unaffiliated company or a
controlling interest in any other company (an "Acquisition").
In the event Duke originates, at the Company's request, a line of
credit with a lender or a corporate partner, the Company and Duke will mutually
agree on a satisfactory fee and the terms of payment of such fee. In the event
Duke introduces the Company to a joint venture partner or customer and sales
develop as a result of the introduction, the Company agrees to pay a fee of two
percent (2%) of total sales generated directly from this introduction during the
first two years following the date of the first sale. Total sales shall mean
gross receipts less any applicable refunds, returns, allowances, credits, taxes
and shipping charges and monies paid by the Company by way of settlement or
judgment arising out of claims made by or threatened against the Company.
Commission payments shall be paid on the 15th day of each third month following
the receipt of customers' payments. In the event any adjustments are made to the
total sales after the commission has been paid, the Company shall be entitled,
at its option, to an appropriate refund or credit against future payments under
this Agreement.
(d) All fees to be paid pursuant to this Agreement, except as
otherwise specified, are due and payable to Duke in cash or
-3-
<PAGE>
<PAGE>
company check at the closing or closings of any Transaction specified in
Paragraph 4. In the event that the Consideration is paid out over a period of
time, Duke shall be paid its pro-rata portion of such Consideration as the
Company is paid. In the event that this Agreement shall not be renewed or if
terminated for any reason, notwithstanding any such non-renewal or termination,
Duke shall be entitled to a full fee as provided under Paragraphs 4 and 5
hereof, for any Transaction for which the discussions were initiated with a
third party at the request of the Company during the term of this Agreement and
which is consummated within a period of twelve months after non-renewal or
termination of this Agreement. Nothing herein shall impose any obligation on the
part of the Company to enter into any Transaction.
5. EXPENSES OF DUKE: In addition to the fees payable hereunder
and regardless of whether any Transaction set forth in Paragraph 4 hereof is
proposed or consummated, the Company shall reimburse Duke for Duke's reasonable
travel and out-of-pocket expenses incurred in connection with the services
performed by Duke pursuant to this Agreement and at the request of the Company,
including without limitation, hotels, food and associated expenses and
long-distance telephone calls, except that all expenses exceeding $100 must be
pre-approved in writing by the Company and that total expenses may not exceed
$1,000.
-4-
<PAGE>
<PAGE>
6. LIABILITY OF DUKE:
(1) The Company acknowledges that all opinions and advice
(written or oral) given by Duke to the Company in connection with Duke's
engagement are intended solely for the benefit and use of the Company in
considering the Transaction to which they relate, and the Company agrees that no
person or entity other than the Company shall be entitled to make use of or rely
upon the advice of Duke to be given hereunder, and no such opinion or advice
shall be used for any other purpose or reproduced, disseminated, quoted or
referred to at any time, in any manner or for any purpose, nor may the Company
make any public references to Duke, or use Duke's name in any annual reports or
any other reports or releases of the Company without Duke's prior written
consent or as required by law.
(2) The Company acknowledges that Duke makes no commitment
whatsoever as to making a market in the Company's securities or to recommending
or advising its clients to purchase the Company's securities. Research reports
or corporate finance reports that may be prepared by Duke will, when and if
prepared, be done solely on the merits or judgment of analysis of Duke or any
senior corporate finance personnel of Duke.
7. DUKE'S SERVICES TO OTHERS: The Company acknowledges that Duke
or its affiliates are in the business of providing financial services and
consulting advice to others. Nothing herein contained
-5-
<PAGE>
<PAGE>
shall be construed to limit or restrict Duke in conducting such business with
respect to others, or in rendering such advice to others, except that Duke will
not provide services to others when such services may materially and adversely
affect the Company.
8. COMPANY INFORMATION:
(a) The Company recognizes and confirms that, in
advising the Company and in fulfilling its engagement hereunder, Duke will use
and rely on data, material and other information furnished to Duke by the
Company. The Company acknowledges and agrees that in performing its services
under this engagement, Duke may rely upon the data, material and other
information supplied by the Company without independently verifying the
accuracy, completeness or veracity of same.
(b) Except as required by applicable law, Duke shall keep
confidential all non-public information provided to it by the Company, and shall
not disclose such information to any third party without the Company's prior
written consent, other than such of its employees and advisors as Duke
reasonably determines to have a need to know, provided, that Duke shall instruct
such employees and advisors to keep such information confidential and Duke shall
be liable for any breach of such confidentiality. In the event that Duke is
required by subpoena to disclose such information, the Company shall be afforded
an opportunity to seek an order preserving the confidentiality of such
information.
-6-
<PAGE>
<PAGE>
9. INDEMNIFICATION:
(a) The Company shall indemnify and hold Duke harmless against
any and all liabilities, claims, lawsuits, including any and all awards and/or
judgments to which it may become subject under the Securities Act of 1933, as
amended (the "1933 Act"), the Securities Exchange Act of 1934, as amended (the
"Act") or any other federal or state statute, at common law or otherwise,
insofar as said liabilities, claims and lawsuits (including costs, expenses,
awards and/or judgments) arise out of or are in connection with the services
rendered by Duke or any transactions in connection with this Agreement, except
for any liabilities, claims and lawsuits (including awards and/or judgments),
arising out of acts or omissions of Duke. In addition, the Company shall also
indemnify and hold Duke harmless against any and all costs and expenses,
including reasonable counsel fees, incurred relating to the foregoing.
Duke shall give the Company prompt notice of any such liability,
claim or lawsuit which Duke contends is the subject matter of the Company's
indemnification and the Company thereupon shall be granted the right to take any
and all necessary and proper action, at its sole cost and expense, with respect
to such liability, claim and lawsuit, including the right to settle, compromise
and dispose of such liability, claim or lawsuit, excepting therefrom any and all
proceedings or hearings before any regulatory bodies and/or authorities and
provided that no such settlement shall be made without the prior consent of
Duke.
-7-
<PAGE>
<PAGE>
Duke shall indemnify and hold the Company harmless against any
and all liabilities, claims and lawsuits, including any and all awards and/or
judgments to which it may become subject under the 1933 Act, the Act or any
other federal or state statute, at common law or otherwise, insofar as said
liabilities, claims and lawsuits (including costs, expenses, awards and/or
judgments) arise out of or are in connection with the services rendered by Duke
or any transactions in connection with this Agreement. In addition, Duke shall
also indemnify and hold the Company harmless against any and all costs and
expenses, including reasonable counsel fees, incurred relating to the foregoing.
The Company shall give Duke prompt notice of any such liability,
claim or lawsuit which the Company contends is the subject matter of Duke's
indemnification and Duke thereupon shall be granted the right to take any and
all necessary and proper action, at its sole cost and expense, with respect to
such liability, claim and lawsuit, including the right to settle, compromise or
dispose of such liability, claim or lawsuit, excepting therefrom any and all
proceedings or hearings before any regulatory bodies and/or authorities and
provided that no such settlement shall be made without the prior consent of the
Company.
(b) In order to provide for just and equitable contribution under
the Act in any case in which (i) any person entitled to indemnification under
this Paragraph 9 makes claim for indemnification pursuant hereto but it is
judicially determined (by
-8-
<PAGE>
<PAGE>
the entry of a final judgment or decree by a court of competent jurisdiction and
the expiration of time to appeal or the denial of the last right of appeal) that
such indemnification may not be enforced in such case notwithstanding the fact
that this Paragraph 9 provides for indemnification in such case, or (ii)
contribution under the Act may be required on the part of any such person in
circumstances for which indemnification is provided under this Paragraph 9,
then, and in each such case, the Company and Duke shall contribute to the
aggregate losses, claims, damages or liabilities to which they may be subject
(after any contribution from others) in such proportion taking into
consideration the relative benefits received by each party from the transactions
undertaken in connection with this Agreement (taking into account the portion of
the proceeds realized by each), the parties' relative knowledge and access to
information concerning the matter with respect to which the claim was assessed,
the opportunity to correct and prevent any statement or omission and other
equitable considerations appropriate under the circumstances; and provided,
that, in any such case, no person guilty of a fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
Within fifteen (15) days after receipt by any party to this
Agreement (or its representative) of notice of the commencement of any action,
suit or proceeding, such party will, if a claim for contribution in respect
thereof is to be made against another party
-9-
<PAGE>
<PAGE>
(the "Contributing Party"), notify the Contributing Party of the commencement
thereof, but the omission so to notify the Contributing Party will not relieve
it from any liability which it may have to any other party other than for
contribution hereunder. In case any such action, suit or proceeding is brought
against any party, and such party notifies a Contributing Party or his or its
representative of the commencement thereof within the aforesaid fifteen (15)
days, the Contributing Party will be entitled to participate therein with the
notifying party and any other Contributing Party similarly notified. Any such
Contributing Party shall not be liable to any party seeking contribution on
account of any settlement of any claim, action or proceeding effected by such
party seeking contribution without the written consent of the Contributing
Party. The indemnification provisions contained in this Paragraph 9 are in
addition to any other rights or remedies which either party hereto may have with
respect to the other or hereunder.
10. DUKE AN INDEPENDENT CONTRACTOR: Duke shall perform its
services hereunder as an independent contractor and not as an employee of the
Company or an affiliate thereof. The parties hereto expressly understand and
agree that Duke shall have no authority to act for, represent or bind the
Company or any affiliate thereof in any manner, except as may be agreed to
expressly by the Company in writing from time to time.
-10-
<PAGE>
<PAGE>
11. MISCELLANEOUS:
(1) This Agreement between the Company and Duke constitutes the
entire agreement and understanding of the parties hereto, and supersedes any and
all previous agreements and understandings, whether oral or written, between the
parties with respect to the matters set forth herein.
(2) All communications hereunder, except as herein otherwise
specifically provided, shall be in writing and, if sent to Duke, shall be
mailed, delivered or telegraphed and confirmed to Duke & Co., Inc., 909 Third
Avenue, New York, New York 10022, Attention: President, with a copy to Gersten,
Savage, Kaplowitz & Curtin, LLP, 575 Lexington Avenue, New York, New York 10022,
Attention: Jay Kaplowitz, Esq., and if to the Company, shall be mailed,
delivered or telegraphed and confirmed to Paravant Computer Systems, Inc., 780
South Apollo Boulevard, Atrium One, Melbourne, Florida 32901, Attention: Richard
McNeight, with a copy to Zimet, Haines, Friedman & Kaplan, 460 Park Avenue, New
York, New York 10022, Attention: James Martin Kaplan, Esq.
(3) This Agreement shall be binding upon and inure to the benefit
of each of the parties hereto and their respective successors, legal
representatives and assigns.
(4) This Agreement may be executed in any number of counterparts,
each of which together shall constitute one and the same original document.
-11-
<PAGE>
<PAGE>
(5) No provision of this Agreement may be amended, modified or
waived, except in a writing signed by all of the parties hereto.
(6) This Agreement shall be construed in accordance with and
governed by the laws of the State of New York, without giving effect to its
conflict of law principles. The parties hereby agree that any dispute which may
arise between them arising out of or in connection with this Agreement shall be
adjudicated before a court located in New York City, and they hereby submit to
the exclusive jurisdiction of the courts of the State of New York located in New
York, New York and of the federal courts in the Southern District of New York
with respect to any action or legal proceeding commenced by any party, and
irrevocably waive any objection they now or hereafter may have respecting the
venue of any such action or proceeding brought in such a court or respecting the
fact that such court is an inconvenient forum, relating to or arising out of
this Agreement, and consent to the service of process in any such action or
legal proceeding by means of registered or certified mail, return receipt
requested, in care of the address set forth in Paragraph 11(2) hereof.
-12-
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed, as of the day and year first above written.
DUKE & CO., INC.
By: GREGG THALER
Title: President
PARAVANT COMPUTER SYSTEMS, INC.
By: WILLIAM R. CRAVEN
Title: Vice President
-13-
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEETS AND STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY OF PARAVANT COMPUTER
SYSTEMS, INC. AS OF JUNE 30, 1996 AND THE RELATED STATEMENTS OF EARNINGS AND
CASH FLOWS FOR THE NINE MONTHS AND THREE MONTHS ENDED JUNE 30, 1996 AND 1995 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C> <C> <C>
<FISCAL-YEAR-END> SEP-30-1995 SEP-30-1995 SEP-30-1995 SEP-30-1995
<PERIOD-START> OCT-01-1995 OCT-01-1994 OCT-01-1995 OCT-01-1994
<PERIOD-END> JUN-30-1996 JUN-30-1995 JUN-30-1996 JUN-30-1995
<PERIOD-TYPE> 9-MOS 9-MOS 3-MOS 3-MOS
<CASH> 76,722 0 76,722 0
<SECURITIES> 0 0 0 0
<RECEIVABLES> 2,973,119 0 2,973,119 0
<ALLOWANCES> 0 0 0 0
<INVENTORY> 3,850,146 0 3,850,146 0
<CURRENT-ASSETS> 7,542,508 0 7,542,508 0
<PP&E> 1,060,383 0 1,060,383 0
<DEPRECIATION> 615,843 0 615,843 0
<TOTAL-ASSETS> 8,232,586 0 8,232,586 0
<CURRENT-LIABILITIES> 1,994,799 0 1,994,799 0
<BONDS> 681,809 0 681,809 0
<COMMON> 118,815 0 118,815 0
0 0 0 0
0 0 0 0
<OTHER-SE> 5,437,163 0 5,437,163 0
<TOTAL-LIABILITY-AND-EQUITY> 8,232,586 0 8,232,586 0
<SALES> 3,682,110 3,080,354 1,957,228 1,228,822
<TOTAL-REVENUES> 3,682,110 3,080,354 1,957,228 1,228,822
<CGS> 2,253,864 1,604,993 1,121,953 519,192
<TOTAL-COSTS> 2,253,864 1,604,993 1,121,953 519,192
<OTHER-EXPENSES> 2,315,082 2,037,041 906,425 922,034
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> 329,255 262,203 107,023 101,004
<INCOME-PRETAX> (1,248,707) (812,202) (206,813) (306,062)
<INCOME-TAX> (463,769) (256,423) (72,701) (54,323)
<INCOME-CONTINUING> (784,938) (555,779) (136,112) (251,739)
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> (784,938) (555,779) (136,112) (125,739)
<EPS-PRIMARY> (0.16) (0.12) (0.03) (0.06)
<EPS-DILUTED> (0.16) (0.12) (0.03) (0.06)
</TABLE>
