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EXHIBIT 1.1
UNDERWRITING AGREEMENT
May ___, 1998
CRUTTENDEN ROTH INCORPORATED
LAIDLAW GLOBAL SECURITIES, INC.
As Representative of the Several Underwriters
named on Schedule "A" hereto
c/o Cruttenden Roth Incorporated
18301 Von Karman, Suite 100
Irvine, California 92715
Re: American Aircarriers Support, Incorporated
Ladies and Gentlemen:
American Aircarriers Support, Incorporated, a Delaware corporation
(the "Company"), addresses you collectively as the Representative of each of
the persons, firms and corporations listed on Schedule "A" attached hereto
(herein collectively called the "Underwriters") and hereby confirms its
agreement with the several Underwriters as follows:
1. DESCRIPTION OF SHARES. The Company proposes to issue and sell two
million (2,000,000) shares of its authorized and unissued Common Stock, $0.001
par value per share (the "Firm Shares"), to the several Underwriters. The
Company also proposes to grant to the Underwriters an option to purchase up to
three hundred thousand (300,000) additional shares of the Company's Common
Stock, $0.001 par value per share (the "Option Shares"), as provided in Section
7 hereof. In addition, the Company proposes to sell to you, individually and
not in your capacity as Representative, five (5) year warrants exercisable
commencing one (1) year from the effective date of the Company's Registration
Statement (as hereinafter defined) (the "Representative's Warrants") to
purchase up to two hundred thousand (200,000) shares of Common Stock, $0.001
par value per share, of the Company (the "Representative's Warrant Stock"),
which sale will be consummated in accordance with the terms and conditions of
the Representative's Warrant Agreement (the "Representative's Warrant
Agreement"), the form of which is filed as an exhibit to the Registration
Statement. As used in this Underwriting Agreement (the "Agreement"), the term
"Shares" shall include the Firm Shares and the Option Shares. All shares of
Common Stock, $.001 par value per share, of the Company to be outstanding after
giving effect to the sales contemplated hereby, including the sale of the
Shares, are hereinafter referred to as the "Common Stock". Unless the context
otherwise requires, references herein to the "Company" include American
Aircarriers Support, Incorporated, a Delaware corporation, together with its
subsidiaries described in the Prospectus, if any, and includes American
Aircarriers Support, Incorporated, a South Carolina corporation, the
predecessor thereto.
2. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY.
The Company represents and warrants to and agrees with each
Underwriter that:
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(a) The Registration Statement on Form SB-2 (File No. 333-48497)
with respect to the Shares, the Representative's Warrants and the
Representative's Warrant Stock, including a prospectus subject to completion,
has been prepared by the Company in conformity with the requirements of the
Securities Act of 1933, as amended (the "1933 Act"), and the applicable rules
and regulations (the "Rules and Regulations") of the United States Securities
and Exchange Commission (the "Commission") under the 1933 Act and have been
filed with the Commission; such amendments to the Registration Statement and
such amended prospectuses subject to completion as may have been required prior
to the date hereof have been similarly prepared and filed with the Commission;
and the Company will file such additional amendments to the Registration
Statement and such amended prospectuses subject to completion as may hereafter
be required. Copies of the Registration Statement and all amendments and of
each related prospectus subject to completion (collectively, the "Preliminary
Prospectuses") have been delivered to you.
If the Registration Statement relating to the Shares has been
declared effective under the 1933 Act by the Commission, the Company will
prepare and promptly file with the Commission the information previously
omitted from the Registration Statement, as applicable, pursuant to Rule
430A(a) of the Rules and Regulations pursuant to subparagraph (1) or (4) of
Rule 424(b) of the Rules and Regulations or as part of a post-effective
amendment to the Registration Statement (including a final form of prospectus).
If the Registration Statement relating to the Shares has not been declared
effective under the 1933 Act by the Commission, the Company will prepare and
promptly file amendments to the Registration Statement, including a final form
of prospectus, as applicable. The term "Registration Statement" as used in
this Agreement shall mean such registration statement, including financial
statements (and the notes thereto), and all schedules and exhibits thereto, in
the form in which it became or becomes, as the case may be, effective
(including, if the Company omitted information from the registration statement
pursuant to Rule 430A(a) of the Rules and Regulations, the information deemed
to be a part of the registration statement at the time it became effective
pursuant to Rule 430A(b) of the Rules and Regulations) and, in the event of any
amendment thereto after the effective date of such registration statement,
shall also mean (from and after the effectiveness of such amendment) such
registration statement as so amended. The term "Prospectus" as used in this
Agreement shall mean the prospectus relating to the Shares as included in the
Registration Statement at the time it becomes effective (including, if the
Company omitted information from the Registration Statement pursuant to Rule
430A(a) of the Rules and Regulations, the information deemed to be a part of
the Registration Statement at the time it became effective pursuant to Rule
430A(b) of the Rules and Regulations), except that if any revised prospectus
shall be provided to the Underwriters by the Company for use in connection with
the offering of the Shares that differs from the prospectus on file with the
Commission at the time the Registration Statement became or becomes, as the
case may be, effective (whether or not such revised prospectus is required to
be filed with the Commission pursuant to Rule 424(b)(3) of the Rules and
Regulations), the term "Prospectus" shall refer to such revised prospectus from
and after the time it is first provided to the Underwriters for such use.
(b) The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus or instituted proceedings for
that purpose, and each such Preliminary Prospectus, at the time of the filing
thereof, has conformed in all material respects to the requirements of the 1933
Act and the Rules and Regulations, and, as of its date, has not included any
untrue statement of a material fact or omitted to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; and at the time the Registration
Statement became or becomes, as the case may be, effective and at all times
subsequent thereto up to and on the Closing Date (as hereinafter defined) and
on any later date on which Option Shares are to be purchased, (i) the
Registration Statement and the Prospectus, and any amendments or supplements
thereto, contained and will contain all material information required to be
included therein by the 1933 Act and the Rules and Regulations and will in all
material respects conform to
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the requirements of the 1933 Act and the Rules and Regulations, (ii) the
Registration Statement, and any amendments or supplements thereto, did not and
will not include any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and (iii) the Prospectus, and any amendments or
supplements thereto, did not and will not include any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading; provided, however, that none of the representations and warranties
contained in this subparagraph (b) shall apply to information contained in or
omitted from the Registration Statement or the Prospectus, or any amendment or
supplement thereto, in reliance upon, and in conformity with, written
information relating to any Underwriter furnished to the Company by such
Underwriter specifically for use in the preparation thereof.
(c) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the jurisdiction of its
incorporation with full power and authority (corporate and otherwise) to own,
lease and operate its properties and conduct its business as described in the
Prospectus; the Company is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in which the ownership
or leasing of its properties or the conduct of its business requires such
qualification, except where the failure to be so qualified or be in good
standing would not have a material adverse effect on the condition (financial
or otherwise), earnings, operations, business or business prospects of the
Company taken as a whole; no proceeding has been instituted in any such
jurisdiction, revoking, limiting or curtailing, or seeking to revoke, limit or
curtail, such power and authority or qualification; the Company is in
possession of and operating in compliance with all authorizations, licenses,
certificates, consents, orders and permits from all state, federal and other
regulatory authorities that are material to the conduct of its business, all of
which are valid and in full force and effect; the Company is not in material
violation of its Certificate of Incorporation or Bylaws or in default in the
performance or observance of any material obligation, agreement, covenant or
condition contained in any bond, debenture, note or other evidence of
indebtedness, or in any lease, contract, indenture, mortgage, deed of trust,
loan agreement, joint venture or partnership agreement, or any other agreement
or instrument to which the Company is a party or by which it or its properties
or assets may be bound; and the Company is not in material violation of any
known law, order, rule, regulation, writ, injunction, judgment or decree of any
court, government, or regulatory or governmental agency or body, domestic or
foreign, having jurisdiction over the Company or over its properties, assets or
operations. The Prospectus accurately describes any corporation, company,
partnership, association or other entity owned or controlled, directly or
indirectly, by the Company.
(d) The Company has full legal right, power and authority to enter
into this Agreement and the Representative's Warrant Agreement and to perform
the transactions contemplated hereby and thereby. Each of this Agreement and
the Representative's Warrant Agreement has been duly authorized, executed and
delivered by the Company and is a valid and binding agreement on the part of
the Company, enforceable in accordance with its terms, except as rights to
indemnification under this Agreement or the Representative's Warrant Agreement
may be limited by applicable law and except as the enforcement thereof may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws or rules relating to or affecting creditors' rights
generally or by general equitable principles; the performance of this Agreement
and the Representative's Warrant Agreement and the consummation of the
transactions herein or therein contemplated will not result in a material
breach or violation of any of the terms and provisions of, or constitute a
default under, (i) any bond, debenture, note or other evidence of indebtedness,
or under any lease, contract, indenture, mortgage, deed of trust, loan
agreement, joint venture or partnership agreement, or other agreement or
instrument to which the Company is a party or by which it or its properties or
assets may be bound, (ii) the Certificate of Incorporation or Bylaws of the
Company, or (iii) any law, order, rule, regulation, writ, injunction, judgment
or decree of any court, government, or regulatory or governmental agency or
body,
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domestic or foreign, having jurisdiction over the Company or its properties,
assets or operations. No consent, approval, authorization or order of or
qualification with any court, government, or regulatory or governmental agency
or body, domestic or foreign, having jurisdiction over the Company or its
properties, assets or operations is required for the execution and delivery of
this Agreement or the Representative's Warrant Agreement and the consummation
by the Company of the transactions herein and therein contemplated, except such
as may be required under the 1933 Act or the Rules and Regulations, or under
state or other securities or "blue sky" laws, rules or regulations, all of
which requirements have been satisfied in all material respects.
(e) There is not any pending or, to the best of the Company's
knowledge, threatened action, suit, claim or proceeding against the Company, or
any of its officers or any of its properties, assets or rights before any
court, government, or regulatory or governmental agency or body, domestic or
foreign, having jurisdiction over the Company or its officers, properties or
assets or otherwise that (i) is reasonably likely to result in any material
adverse change in the condition (financial or otherwise), earnings, operations,
business or business prospects of the Company or that might materially and
adversely affect its officers, properties, assets or rights, (ii) might prevent
consummation of the transactions contemplated hereby, or (iii) is required to
be disclosed in the Registration Statement or the Prospectus and is not so
disclosed; and there are no agreements, contracts, leases or documents of the
Company of a character required to be described or referred to in the
Registration Statement or the Prospectus or to be filed as an exhibit to the
Registration Statement by the 1933 Act or the Rules and Regulations or by the
Securities Exchange Act of 1934, as amended (the "1934 Act"), or the rules and
regulations of the Commission thereunder that have not been accurately
described in all material respects in the Registration Statement or the
Prospectus or filed as exhibits to the Registration Statement.
(f) All outstanding shares of capital stock of the Company have
been duly authorized and validly issued and are fully paid and nonassessable,
have been issued in compliance with all federal and state securities laws,
rules and regulations, were not issued in violation of or subject to any
preemptive rights or other rights to subscribe for or purchase securities, and
the authorized and outstanding capital stock of the Company is as set forth in
the Prospectus under the caption "Capitalization" and conforms in all material
respects to the statements relating thereto contained in the Registration
Statement and the Prospectus (and such statements correctly state the substance
of the documents and instruments defining the capitalization of the Company);
the Firm Shares and the Option Shares have been duly authorized for issuance
and sale to the Underwriters pursuant to this Agreement and, when issued and
delivered by the Company against payment therefor in accordance with the terms
of this Agreement, will be duly and validly issued and fully paid and
nonassessable, and will be sold free and clear of any pledge, lien, security
interest, encumbrance, claim or equitable interest; and no preemptive right,
co-sale right, registration right, right of first refusal or other similar
right exists with respect to any of the Firm Shares or Option Shares or the
issuance and sale thereof other than those that will automatically expire upon
the consummation of the transactions contemplated on the Closing Date. No
further approval or authorization of any stockholder, the Board of Directors of
the Company or others is required for the issuance and the sale or transfer of
the Shares except as may be required under the 1933 Act, the Rules and
Regulations, or under state or other securities or "blue sky" laws, rules or
regulations. Except as disclosed in or contemplated by the Prospectus and the
financial statements of the Company (and the notes thereto) included in the
Prospectus, the Company has no outstanding options to purchase, or any
preemptive rights or other rights to subscribe for or purchase, any securities
or obligations convertible into, or any contracts or commitments to issue or
sell, shares of its capital stock or any such options, rights, convertible
securities or obligations. The description of the Company's stock option,
stock bonus and other stock plans or arrangements, and the options or other
rights granted and exercised thereunder, set forth in the Prospectus accurately
and fairly presents the information required to be shown with respect to such
plans, arrangements, options and rights under the 1933 Act and the Rules and
Regulations.
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(g) Cherry, Bekaert & Holland, L.L.P., which has examined the
financial statements of the Company, together with the related schedules and
notes thereto, as of December 31, 1996 and 1997 filed with the Commission as a
part of the Registration Statement, which are included in the Prospectus, are
independent accountants within the meaning of the 1933 Act and the Rules and
Regulations; the audited financial statements of the Company, together with the
related schedules and notes thereto, and the unaudited financial information,
forming part of the Registration Statement and the Prospectus, fairly present
the financial position and results of operations of the Company at the
respective dates and for the respective periods to which they apply; and all
audited financial statements of the Company, together with the related
schedules and notes thereto, and the unaudited financial information, filed
with the Commission as part of the Registration Statement, have been prepared
in accordance with generally accepted accounting principles consistently
applied throughout the periods involved, except as may be otherwise stated
therein. The selected and summary financial and statistical data included in
the Registration Statement presents fairly the information shown therein and
have been compiled on a basis consistent with the audited financial statements
presented therein. No other financial statements or schedules or notes are
required to be included in the Registration Statement.
(h) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, there has not been (i)
any material adverse change in the condition (financial or otherwise),
earnings, operations, business or business prospects of the Company, (ii) any
transaction that is material to the Company outside the ordinary course of
business, (iii) any material obligation, direct or contingent, incurred by the
Company, except obligations incurred in the ordinary course of business, (iv)
any material change in the capital stock or outstanding indebtedness of the
Company, (v) any dividend or distribution of any kind or nature declared, paid
or made on the capital stock of the Company (other than the distributions made
to the Existing Common Stockholders (as that term is defined in the
Prospectus), as disclosed under "S Corporation Distributions" therein), or (vi)
any loss or damage (whether or not insured) to the property or assets of the
Company that has had or may have a material adverse effect on the condition
(financial or otherwise), earnings, operations, business or business prospects
of the Company.
(i) Except as set forth in the Registration Statement and the
Prospectus, (i) the Company has good and marketable title to all properties and
assets described in the Registration Statement and the Prospectus as being
owned by it, free and clear of any pledge, lien, security interest,
encumbrance, claim or equitable interest, other than such as would not have a
material adverse effect on the condition (financial or otherwise), earnings,
operations, business or business prospects of the Company, and (ii) the
agreements to which the Company is a party described in the Registration
Statement and the Prospectus are valid agreements, enforceable by the Company,
except as the enforcement thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or
affecting creditors' rights generally or by general equitable principles and,
to the best of the Company's knowledge, the other contracting party or parties
thereto are not in material breach or material default under any of such
agreements. Except as set forth in the Registration Statement and the
Prospectus, the Company owns or leases all such properties as are necessary to
its operations as now conducted and as described in the Registration Statement
and the Prospectus.
(j) The Company has timely filed all federal, state, local and
foreign tax returns required to be filed by it and has paid all taxes shown
thereon as being due, and there is no tax deficiency that has been or, to the
best of the Company's knowledge, is reasonably likely to be asserted against
the Company or any of its properties or assets that might have a material
adverse effect on the condition (financial or otherwise), earnings, operations,
business or business prospects of the Company, and all tax liabilities are
adequately provided for on the books of the Company.
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(k) The Company maintains insurance with insurers of recognized
financial responsibility of the types and in the amounts generally deemed
adequate for its business, including, but not limited to, (i) insurance
covering real and personal property owned or leased by the Company against
theft, damage, destruction, acts of vandalism and all other risks customarily
insured against, and (ii) product liability insurance concerning the products
sold and leased by the Company and the services provided by the Company in
connection therewith, all of which insurance is in full force and effect; the
Company has not been refused any insurance coverage sought or applied for; and
the Company does not have any reason to believe that it will not be able to
renew its existing insurance coverage as and when such coverage expires or to
obtain similar coverage from similar insurers as may be necessary to continue
its business, at a cost that would not materially and adversely affect the
condition (financial or otherwise), earnings, operations, business or business
prospects of the Company.
(l) To the best of Company's knowledge, no labor disturbance by
the employees of the Company exists or is imminent. No collective bargaining
agreement exists with any of the Company's employees and, to the best of the
Company's knowledge, no such agreement is imminent.
(m) The Company owns or possesses adequate rights to use all trade
secrets, know-how, trademarks, service marks and trade names that are necessary
to conduct its businesses as described in the Registration Statement and the
Prospectus; the Company has not received any notice of, and has no knowledge
of, any infringement of or conflict with asserted rights of the Company by
others with respect to any trade secrets, know-how, trademarks, service marks
or trade names; and the Company has not received any notice of, and has no
knowledge of, any infringement of or conflict with asserted rights of others
with respect to any trade secrets, know-how, trademarks, service marks or trade
names that, singly or in the aggregate, in the event of an unfavorable
decision, ruling or finding, would have a material adverse effect on the
condition (financial or otherwise), earnings, operations, business or business
prospects of the Company.
(n) The Common Stock is registered pursuant to Section 12(g) of
the 1934 Act and is approved for quotation on the Nasdaq National Market, and
the Company has taken no action designed to, or likely to have the effect of,
terminating the registration of the Common Stock under the 1934 Act or
delisting the Common Stock from the Nasdaq National Market, nor has the Company
received any notification that the Commission or the National Association of
Securities Dealers, Inc. (the "NASD") is contemplating terminating such
registration or listing.
(o) The Company has been advised concerning the Investment Company
Act of 1940, as amended (the "1940 Act"), and the rules and regulations
thereunder, and has in the past conducted, and intends in the future to
conduct, its business and affairs in such a manner as to ensure that it will
not become an "investment company" or a company "controlled" by an "investment
company" within the meaning of the 1940 Act and such rules and regulations.
(p) The Company has not distributed and will not distribute prior
to the later of (i) the Closing Date, or any date on which Option Shares are to
be purchased, as the case may be, and (ii) the completion of the distribution
of the Shares, any offering material in connection with the offer and sale of
the Shares other than any Preliminary Prospectuses, the Prospectus, the
Registration Statement and other materials, if any, permitted by the 1933 Act.
(q) The Company has not at any time since its inception (i) made
any unlawful contribution to any candidate for foreign office or failed to
disclose fully any contribution in violation of law, or (ii) made any payment
to any federal or state regulatory or governmental officer or official, or any
other person charged
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with similar public or quasi-public duties, other than payments required or
permitted by the laws of the United States or any jurisdiction thereof.
(r) The Company has not taken and will not take, directly or
indirectly, any action designed to or that might reasonably be expected to
cause or result in stabilization in violation of law or manipulation of the
price of the Common Stock to facilitate the sale or resale of the Shares.
(s) Each officer and director of the Company and each beneficial
owner of five percent (5%) or more of the Company's Common Stock has agreed in
writing that such person will not, for a period of three hundred sixty-five
(365) days following the date of the Prospectus relating to the public offering
of the Shares (the "Lock-up Period"), offer to sell, contract to sell, or
otherwise sell, dispose of, loan, pledge or grant any rights with respect to
(collectively, a "Disposition") any shares of Common Stock, any options or
warrants to purchase any shares of Common Stock, or any securities convertible
into or exchangeable for shares of Common Stock (collectively, "Securities")
owned directly by such person or entity or with respect to which such person or
entity has the power to dispose of as of the date of this Agreement, other than
(i) as a bona fide gift or gifts, provided the donee or donees thereof agree in
writing to be bound by this restriction, or (ii) with the prior written consent
of Cruttenden Roth Incorporated. The foregoing restriction is expressly agreed
to preclude the holder of the Securities from engaging in any hedging or other
transaction that is designed to or reasonably expected to lead to or result in
a Disposition of Securities during the Lock-up Period, even if such Securities
would be disposed of by someone other than such holder. Such prohibited
hedging or other transactions would include, without limitation, any short sale
(whether or not against the box) or any purchase, sale or grant of any right
(including, without limitation, any put or call option) with respect to any
Securities or with respect to any security (other than a broad-based market
basket or index) that includes, relates to or derives any significant part of
its value from the Securities. Furthermore, such person or entity will also
agree and consent to the entry of stop transfer instructions with the Company's
transfer agent against the transfer of the Securities held by such person or
entity except in compliance with this restriction. The Company has provided to
counsel for the Underwriters a complete and accurate list of all security
holders of the Company and the number and type of securities held by each
security holder. The Company has provided to counsel for the Underwriters
true, accurate and complete copies of all of the agreements pursuant to which
its officers, directors and stockholders have agreed to such restrictions (the
"Lock-up Agreements").
(t) Except as set forth in the Registration Statement and the
Prospectus, (i) the Company is in material compliance with all laws, rules and
regulations relating to the use, treatment, storage and disposal of toxic
substances and protection of health or the environment ("Environmental Laws")
that are applicable to its business, (ii) the Company has received no notice
from any regulatory or governmental authority or third party of an asserted
claim under any Environmental Laws, which claim is required to be disclosed in
the Registration Statement or the Prospectus, (iii) to its best knowledge, the
Company is not likely to be required to make future material capital
expenditures to comply with any Environmental Laws, and (iv) no property that
is owned and, to the Company's knowledge, no property that is leased or
occupied by the Company, has been designated as a Superfund site pursuant to
the Comprehensive Response, Compensation and Liability Act of 1980, as amended
(42 U.S.C. Section 9601, et seq.), or otherwise designated as a contaminated
site under applicable state or local law.
(u) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are executed
in accordance with management's general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for property and assets, including, without limitation,
cash receipts, (iii) access to inventory and assets is permitted only in
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accordance with management's general or specific authorization, and (iv) the
recorded accountability for property and assets is compared with existing
inventory and assets at reasonable intervals and appropriate action is taken
with respect to any differences.
(v) There are no outstanding loans, advances (except normal
advances for business expenses in the ordinary course of business) or
guarantees of indebtedness by the Company to or for the benefit of any of the
officers or directors of the Company or any of the members of the families of
any of them, except as disclosed in the Registration Statement and the
Prospectus.
(w) The Representative's Warrants have been duly and validly
authorized by the Company and upon delivery to you in accordance with the
Representative's Warrant Agreement, will be duly issued and legal, valid and
binding obligations of the Company.
(x) The Representative's Warrant Stock has been duly authorized
and reserved for issuance upon the exercise of the Representative's Warrants
and, when issued upon payment of the exercise price therefor, will be validly
issued, fully paid and nonassessable shares of Common Stock of the Company.
(y) All relationships involving control persons within the meaning
of the 1933 Act are accurately and fully described in the Registration
Statement, and there are no relationships between the Company and any control
person that are not fully described in the Registration Statement.
3. PURCHASE, SALE AND DELIVERY OF SHARES. On the basis of the
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the Company agrees to sell to the
Underwriters, and each Underwriter agrees, severally and not jointly, to
purchase from the Company, at a purchase price of $_____________ per share, the
respective number of Firm Shares as set forth in Schedule "A" attached hereto.
The obligation of each Underwriter to the Company shall be to purchase from the
Company that number of Firm Shares set forth opposite the name of such
Underwriter in Schedule "A" attached hereto (subject to adjustment as provided
in Section 10 hereof).
Delivery of definitive certificates evidencing the Firm Shares to
be purchased by the Underwriters pursuant to this Section 3 shall be made
against payment of the purchase price therefor by the several Underwriters by
certified or official bank check or checks drawn in next-day funds, payable to
the order of the Company (and the Company agrees not to deposit any such check
in the bank on which it is drawn, and not to take any other action with the
purpose or effect of receiving immediately available funds, until the business
day following the date of its delivery to the Company and in the event of any
breach of the foregoing, the Company shall reimburse the Underwriters for the
interest lost and any other expenses borne by the Underwriters by reason of
such breach), at the offices of Cruttenden Roth Incorporated 18301 Von Karman,
Suite 100, Irvine, California or such other place as may be agreed upon by the
Representative and the Company, at 7:00 a.m., Los Angeles, California time, (a)
on the third (3rd) full business day following the first day that the Shares
begin trading, (b) if this Agreement is executed and delivered after 1:30 p.m.
Los Angeles, California time, the fourth (4th) full business day following the
day that this Agreement is executed and delivered, or (c) at such other time
and date not later than seven (7) full business days following the first day
that Shares are traded as the Representative, the Company and legal counsel for
the Representative and the Company may determine (or at such time and date to
which payment and delivery shall have been postponed pursuant to Section 10
hereof), such time and date of payment and delivery being herein called the
"Closing Date"; provided, however, that if the Company has not made available
to the Representative a copy of the Prospectus within the time provided in
Section 4(d) hereof, the Representative may, in its sole discretion, postpone
the Closing Date until no later than two (2) full business days following
delivery of copies
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of the Prospectus to the Representative. The Shares will begin trading on the
day the Registration Statement is declared effective by the Commission, or if
the Registration Statement is declared effective after the close of trading,
then on the next trading day. The certificates evidencing the Firm Shares to
be so delivered will be made available to you at such office or such other
location including, without limitation, New York City, as you may reasonably
request for checking at least one (1) full business day prior to the Closing
Date and will be in such names and denominations as you may request, such
request to be made at least two (2) full business days prior to the Closing
Date. If the Representative so elects, delivery of the Firm Shares may be made
by credit through full fast transfer to the accounts at The Depository Trust
Company designated by the Representative.
It is understood that you, individually, and not as the
Representative of the several Underwriters, may (but shall not be obligated to)
make payment of the purchase price on behalf of any Underwriter or Underwriters
whose check or checks shall not have been received by you prior to the Closing
Date for the Firm Shares to be purchased by such Underwriter or Underwriters.
Any such payment by you shall not relieve any such Underwriter or Underwriters
of any of its or their obligations hereunder.
After the Registration Statement becomes effective, the several
Underwriters intend to make an initial public offering (as such term is
described in Section 11 hereof) of the Firm Shares at an initial public
offering price of $___________ per share.
The information set forth in the last paragraph on the front cover
page (insofar as such information relates to the Underwriters), on the inside
front cover page (concerning stabilization, passive market marking, penalty
bids, purchases to cover short positions and over-allotment by the
Underwriters), and under the caption "Underwriting", in any Preliminary
Prospectus and in the final form of the Prospectus filed pursuant to Rule
424(b), constitutes the only information furnished by the Underwriters to the
Company for inclusion in any Preliminary Prospectus, the Prospectus or the
Registration Statement, and you, on behalf of the respective Underwriters,
represent and warrant to the Company that the statements made therein do not
include any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
4. FURTHER AGREEMENTS OF THE COMPANY. The Company further agrees
with the several Underwriters that:
(a) The Company will use reasonable efforts to cause the
Registration Statement and any amendments thereto, if not effective at the time
and date that this Agreement is executed and delivered by the parties hereto,
to become effective as promptly as possible; it will notify you, promptly after
it shall receive notice thereof, of the times when the Registration Statement
or any subsequent amendments to the Registration Statement have become
effective or any supplement to the Prospectus has been filed; if the Company
omitted information from the Registration Statement at the time it was
originally declared effective in reliance upon Rule 430A(a) of the Rules and
Regulations, the Company will provide evidence satisfactory to you that the
Prospectus contains such information and has been filed, within the time period
prescribed, with the Commission pursuant to subparagraph (1) or (4) of Rule
424(b) of the Rules and Regulations or as part of a post-effective amendment
to the Registration Statement as originally declared effective by the
Commission; if for any reason the filing of the final form of Prospectus is
required under Rule 424(b)(3) of the Rules and Regulations, it will provide
evidence satisfactory to you that the Prospectus contains such information and
has been filed with the Commission within the time period prescribed; it will
notify you promptly of any request by the Commission for the amendment or
supplementation of the Registration Statement or the Prospectus or for
additional information; promptly upon your request, it will prepare and file
with the Commission any
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amendments or supplements to the Registration Statement or the Prospectus that,
in the opinion of counsel for the several Underwriters ("Underwriters'
Counsel"), may be necessary or advisable in connection with the distribution of
the Shares by the Underwriters; it will promptly prepare and file with the
Commission, and promptly notify you of the filing of, any amendments or
supplements to the Registration Statement or the Prospectus that may be
necessary to correct any statements or omissions, if, at any time when a
prospectus relating to the Shares is required to be delivered under the 1933
Act, any event shall have occurred as a result of which the Prospectus or any
other prospectus relating to the Shares as then in effect would include any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading; in case any Underwriter is required to deliver a
prospectus nine (9) months or more after the applicable effective date of the
Registration Statement in connection with the sale of the Shares, it will
prepare promptly upon request, but at the expense of such Underwriter, such
amendment or amendments to the Registration Statement and such prospectus or
prospectuses as may be necessary to permit compliance with the requirements of
Section 10(a)(3) of the 1933 Act; and it will file no amendment or supplement
to the Registration Statement or the Prospectus that shall not previously have
been submitted to you a reasonable time prior to the proposed filing thereof or
to which you shall reasonably object in writing, subject, however, to
compliance with the 1933 Act and the Rules and Regulations of the Commission
thereunder and the provisions of this Agreement.
(b) The Company will advise you, promptly after it shall receive
notice or obtain knowledge, of the issuance of any stop order by the Commission
suspending the effectiveness of the Registration Statement or of the initiation
or threat of any proceeding for that purpose; and it will promptly use its best
efforts to prevent the issuance of any stop order or to obtain its withdrawal
at the earliest possible moment if any such stop order should be issued.
(c) The Company will use reasonable efforts to qualify the Shares
for offer and sale under the securities laws of such states and jurisdictions
as you may designate and to continue such qualifications in effect for so long
as may be required for purposes of the distribution of the Shares, except that
the Company shall not be required in connection therewith or as a condition
thereof to qualify as a foreign corporation or to execute a general consent to
service of process in any state or jurisdiction in which it is not otherwise
required to be so qualified or to so execute a general consent to service of
process. In each state or jurisdiction in which the Shares shall have been
qualified as above provided, the Company will make and file such statements and
reports in each year as are or may be reasonably required by the laws of such
state or jurisdiction.
(d) The Company will furnish to you, as soon as available, and, in
the case of the Prospectus and any term sheet or abbreviated term sheet under
Rule 434, in no event later than the first (1st) full business day following
the first day that Shares are traded, copies of the Registration Statement (two
of which will be signed and will include all exhibits), each Preliminary
Prospectus, the Prospectus and any amendments or supplements to such documents,
including any prospectus prepared to permit compliance with Section 10(a)(3) of
the Act, all in such quantities as you may from time to time reasonably
request. Notwithstanding the foregoing, if Cruttenden Roth Incorporated, on
behalf of the several Underwriters, shall agree to the utilization of Rule 434,
the Company shall provide to you copies of a Preliminary Prospectus updated in
all respects through the date specified by you in such quantities as you may
from time to time reasonably request.
(e) The Company will make generally available to its security
holders as soon as practicable, but in any event not later than the forty-fifth
day following the end of the fiscal quarter first occurring after the first
anniversary of the effective date of the Registration Statement, an earnings
statement (which will be in reasonable detail but need not be audited)
complying with the provisions of Section 11(a) of the 1933 Act and covering a
twelve (12) month period beginning after the effective date of the Registration
Statement.
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(f) During a period of five (5) years after the date hereof and
for so long as the Company is subject to Section 13 or Section 15 of the 1934
Act, the Company will furnish to its stockholders as soon as practicable after
the end of each respective fiscal year, annual reports (including financial
statements audited by an independent certified public accountant) and unaudited
quarterly reports of operations for each of the first three (3) quarters of the
fiscal year, and will furnish to you and the other several Underwriters
hereunder, upon request (i) concurrently with furnishing such reports to its
stockholders, statements of operations of the Company for each of the first
three (3) quarters of the fiscal year in the form furnished to the Company's
stockholders, (ii) concurrently with furnishing to its stockholders, a balance
sheet of the Company as of the end of such fiscal year, together with
statements of operations, stockholders' equity, and cash flows of the Company
for such fiscal year, accompanied by a copy of the certificate or report
thereon of the independent certified public accountant, (iii) as soon as they
are available, copies of all reports (financial or otherwise) mailed to
stockholders, (iv) as soon as they are available, copies of all reports and
financial statements furnished to or filed with the Commission, any securities
exchange or the NASD, (v) every material press release and every material news
item or article related to the Company or its affairs that was generally
released to stockholders or prepared by the Company, and (vi) any additional
information of a public nature concerning the Company or its business that you
may reasonably request. During such five (5) year period, if the Company shall
have active subsidiaries, the foregoing financial statements shall be on a
consolidated basis to the extent that the accounts of the Company and its
subsidiaries are consolidated, and shall be accompanied by similar financial
statements for any significant subsidiary that is not so consolidated.
(g) The Company will apply the net proceeds from the sale of the
Shares being sold by it in the manner set forth under the caption "Use of
Proceeds" in the Prospectus.
(h) The Company will maintain a transfer agent and, if necessary
under the state or jurisdiction of incorporation of the Company, a registrar
(which may be the same entity as the transfer agent) for its Common Stock.
(i) If the transactions contemplated hereby are not consummated
by reason of any failure, refusal or inability on the part of the Company to
perform any agreement on its part to be performed hereunder or to fulfill any
condition of the Underwriters' obligations hereunder, or if the Company shall
terminate this Agreement pursuant to Section 11(a) hereof, or if the
Underwriters shall terminate this Agreement pursuant to Section 11(b)(i)
hereof, the Company will reimburse the several Underwriters for all
out-of-pocket expenses (including fees and disbursements of Underwriters'
Counsel), but not to exceed an aggregate of $30,000, incurred by the
Underwriters in investigating or preparing to market or marketing the Shares
and shall pay all state securities or "blue sky" filing fees and expenses
(including "blue sky" legal fees) not to exceed an aggregate of $15,000 and, to
the extent any advances to the Underwriters exceed such expenses, the
Underwriter shall return such excess to the Company.
(j) If at any time during the sixty (60) day period after the
Registration Statement becomes effective, any rumor, publication or event
relating to or affecting the Company shall occur as a result of which in your
opinion the market price of the Common Stock has been or is likely to be
materially affected (regardless of whether such rumor, publication or event
necessitates a supplement to or amendment of the Prospectus), the Company will,
if reasonably requested by you, forthwith prepare, and, if permitted by law,
disseminate a press release or other public statement, reasonably satisfactory
to you, responding to or commenting on such rumor, publication or event.
(k) During the Lock-up Period, the Company will not, without the
prior written consent of Cruttenden Roth Incorporated, effect the Disposition
of, directly or indirectly, any Securities other than (i)
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the sale of the Firm Shares and the Option Shares hereunder, (ii) the Company's
issuance of options or Common Stock under the Company's presently authorized
stock option plans or restricted stock plans (collectively, the "Option
Plans"), and (iii) any securities issued in connection with acquisitions.
5. EXPENSES.
(a) The Company agrees with each Underwriter that:
(i) The Company will pay and bear all costs and expenses
in connection with the preparation, printing and filing of the Registration
Statement (including financial statements, schedules and exhibits thereto),
Preliminary Prospectuses and the Prospectus and any amendments or supplements
thereto; the printing of this Agreement, the Agreement Among Underwriters, the
Selected Dealer Agreement, the Preliminary "Blue Sky" Survey and any
Supplemental "Blue Sky" Survey, the Underwriters' Questionnaire and Power of
Attorney, and any instruments related to any of the foregoing; the issuance and
delivery of the Shares hereunder to the several Underwriters, including
transfer taxes, if any, the cost of all certificates evidencing the Shares and
transfer agents' and registrars' fees; the fees and disbursements of counsel
and accountants for the Company; all fees and other charges of the Company's
independent certified public accountant; the cost of furnishing to the several
Underwriters copies of the Registration Statement (including financial
statements and appropriate schedules and exhibits thereto), Preliminary
Prospectus and the Prospectus, and any amendments or supplements to any of the
foregoing; NASD filing fees and the cost of qualifying the Shares under the
laws of such states and jurisdictions as you may designate; all state
securities or "blue sky" filing fees and fees and disbursements of
Underwriters' Counsel related to such "blue sky" matters up to a maximum of
$15,000; the Company's road show costs and expenses, the cost of preparing
bound volumes of the documents relating to the public offering of Common Stock
contemplated hereby; and all other expenses directly incurred by the Company in
connection with the performance of its obligations hereunder.
(ii) In addition to its other obligations under Section
5(a)(i) hereof, the Company will pay to you a non-accountable expense allowance
equal to three percent (3%) of the gross sales price of the Shares to the
public. This non-accountable expense allowance with respect to the Firm Shares
shall be paid to you on the Closing Date and the non-accountable expenses with
respect to the Option Shares shall be paid to you on the closing of the sale to
you of the Option Shares. The Company has previously paid to you a fee of
$30,000, which shall be credited to said non-accountable expense allowance.
6. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of the
several Underwriters to purchase and pay for the Shares as provided herein
shall be subject to the accuracy, as of the date hereof and the Closing Date
and any later date on which Option Shares are to be purchased, as the case may
be, of the representations and warranties of the Company and the performance by
the Company of its obligations hereunder and to the following additional
conditions:
(a) The Registration Statement shall have become effective not
later than 2:00 p.m., Los Angeles, California time, on the day following the
date of this Agreement, or such later date as shall be consented to in writing
by you; and no stop order suspending the effectiveness thereof shall have been
issued and no proceedings for that purpose shall have been initiated or, to the
knowledge of the Company or any Underwriter, threatened by the Commission, and
any request by the Commission for additional information (to be included in the
Registration Statement or the Prospectus or otherwise) shall have been complied
with to the satisfaction of Underwriters' Counsel.
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(b) All corporate proceedings and other legal matters in
connection with this Agreement, the form of the Registration Statement and the
Prospectus, and the registration, authorization, issuance, sale and delivery of
the Shares, shall have been reasonably satisfactory to Underwriters' Counsel,
and Underwriters' Counsel shall have been furnished with such documents and
information as they may reasonably have requested to enable them to pass upon
the matters referred to in this Section 6.
(c) Subsequent to the execution and delivery of this Agreement and
prior to the Closing Date there shall not have been any change in the condition
(financial or otherwise), earnings, operations, business or business prospects
of the Company from that set forth in the Registration Statement or the
Prospectus, which, in your sole judgment, is material and adverse and that
makes it, in your sole judgment, impracticable or inadvisable to proceed with
the public offering of the Shares as contemplated by the Prospectus.
(d) You shall have received on the Closing Date and on any later
date on which Option Shares are purchased, as the case may be, the following
opinion of Berliner Zisser Walter & Gallegos, P.C., counsel for the Company,
dated the Closing Date or such later date on which Option Shares are purchased,
addressed to the Underwriters (and stating that it may be relied upon by
LeBoeuf, Lamb, Greene & MacRae, L.L.P., Underwriters' Counsel, in rendering its
opinion pursuant to Section 6(e) of this Agreement) and with reproduced copies
or signed counterparts thereof for each of the Underwriters, to the effect
that:
(i) The Company is a corporation in good standing under
the laws of the jurisdiction of its incorporation and the Company
has validly been reincorporated in the State of Delaware;
(ii) The Company has the corporate power and authority to
own, lease and operate its properties and to conduct its business
as described in the Prospectus;
(iii) The Company is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction,
if any, in which the ownership or leasing of its properties and
assets or the conduct of its business requires such qualification,
except where the failure to be so qualified or be in good standing
would not have a material adverse effect on the condition
(financial or otherwise), earnings, operations, business or
business prospects of the Company taken as a whole. To such
counsel's knowledge, the Prospectus accurately describes any
corporation, association or other entity owned or controlled,
directly or indirectly, by the Company;
(iv) The authorized, issued and outstanding capital stock
of the Company is as set forth in the Prospectus under the caption
"Capitalization" as of the dates stated therein, the issued and
outstanding shares of capital stock of the Company have been duly
and validly issued and are fully paid and nonassessable, and, to
such counsel's knowledge, have not been issued in violation of or
subject to any preemptive right, co-sale right, registration
right, right of first refusal or other similar right;
(v) The Firm Shares and the Option Shares, as the case
may be, to be issued by the Company pursuant to the terms of this
Agreement each have been duly authorized and, upon issuance and
delivery against payment therefor in accordance with the terms
hereof, will be duly and validly issued and fully paid and
nonassessable, and, to such counsel's knowledge, will not have
been issued in violation of or subject to any preemptive right,
co-sale right, registration right, right of first refusal or other
similar right of the stockholders;
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(vi) The Company has the corporate power and authority to
enter into this Agreement and to issue, sell and deliver to the
Underwriters the Shares to be issued and sold by it hereunder;
(vii) The Company has the corporate power and authority to
enter into the Representative's Warrant Agreement and to issue,
sell and deliver to the Representative the Representative's
Warrants to be issued and sold by it thereunder;
(viii) Each of this Agreement and the Representative's
Warrant Agreement has been duly authorized by all necessary
corporate action on the part of the Company and has been duly
executed and delivered by the Company and, assuming due
authorization, execution and delivery by you, is a valid and
binding agreement of the Company, enforceable in accordance with
its terms, except insofar as indemnification provisions may be
limited by applicable law and to which counsel need not express
any opinion and except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or affecting creditors' rights generally or by general
equitable principles;
(ix) The Registration Statement has become effective under
the 1933 Act and, to such counsel's knowledge, no stop orders
suspending the effectiveness of the Registration Statement have
been issued and no proceedings for that purpose have been
instituted or are pending or threatened under the 1933 Act;
(x) The Registration Statement and the Prospectus and
each amendment or supplement thereto (other than the financial
statements (including supporting schedules) and financial and
statistical data included in the Registration Statement, as to
which such counsel need express no opinion), as of its effective
date, and with respect to the Prospectus as of ________, 1998,
complied as to form in all material respects with the requirements
of the 1933 Act and the applicable Rules and Regulations;
(xi) The information in the Prospectus under the captions
(a) "Management", "Description of Securities" and "Shares Eligible
For Future Sale," to the extent that the same constitutes a matter
of law or a legal conclusion, has been reviewed by such counsel
and is a fair summary of such matters and conclusions, and (b)
"Business," to the extent that it reflects matters of law or
summaries of laws or regulations, is correct in all material
respects (provided that such counsel need not express any opinion
as to its completeness);
(xii) The form of certificate evidencing the Common Stock
and filed as an exhibit to the Registration Statement complies
with Delaware law;
(xiii) The descriptions in the Registration Statement and
the Prospectus of the Certificate of Incorporation and Bylaws of
the Company and of any applicable statutes are accurate and fairly
present the information required to be presented by the 1933 Act
and the applicable Rules and Regulations (provided that such
counsel need not express any opinion as to its completeness);
(xiv) To such counsel's knowledge, there are no agreements,
contracts, leases or documents to which the Company is a party of
a character required to be described or referred to in the
Registration Statement or the Prospectus or to be filed as an
exhibit to the Registration Statement that are not described or
referred to in this Agreement or filed as required;
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(xv) The performance of this Agreement and the
Representative's Warrant Agreement and the consummation of the
transactions herein and therein contemplated (other than
performance of the Company's indemnification obligations hereunder
or under the Representative's Warrant Agreement, concerning which
no opinion need be expressed) will not (a) result in any violation
of the Company's Certificate of Incorporation or Bylaws or (b) to
such counsel's knowledge, result in a material breach or violation
of any of the terms and provisions of, or constitute a default
under, any bond, debenture, note or other evidence of
indebtedness, or under any lease, contract, indenture, mortgage,
deed of trust, loan agreement, joint venture agreement, or other
agreement or instrument known to such counsel to which the Company
is a party or by which its properties or assets are bound, or any
applicable statute, law, rule or regulation known to such counsel
or, to such counsel's knowledge, any order, writ or decree of any
court, government or governmental agency or body having
jurisdiction over the Company or over any of its properties,
assets or operations;
(xvi) To such counsel's knowledge, no consent, approval,
authorization or order of or qualification with any court,
government, or regulatory or governmental agency or body having
jurisdiction over the Company or over any of its properties,
assets or operations is necessary in connection with the
consummation by the Company of the transactions contemplated by
the Agreement, except such as have been obtained under the 1933
Act or as may be required by the NASD, the National Market System
or under any state or other securities or "blue sky" laws, rules
or regulations in connection with the purchase and distribution of
the Shares by the Underwriters;
(xvii) To such counsel's knowledge, there are no legal,
regulatory or governmental proceedings pending or threatened
against the Company of a character required to be disclosed in the
Registration Statement or the Prospectus by the 1933 Act or the
Rules and Regulations or by the 1934 Act or the applicable rules
and regulations of the Commission thereunder, other than those
described therein;
(xviii) The Representative's Warrants have been duly and
validly authorized by the Company and, upon delivery to you in
accordance with the Representative's Warrant Agreement, will be
duly issued and legal, valid and binding obligations of the
Company;
(xix) The Representative's Warrant Stock to be issued by
the Company pursuant to the terms of the Representative's Warrant
has been duly authorized and, upon issuance and delivery against
payment therefor in accordance with the terms of the
Representative's Warrant Agreement, will be duly and validly
issued and fully paid and nonassessable, and, to such counsel's
knowledge, will not have been issued in violation of or subject to
any preemptive right, co-sale right, registration right, right of
first refusal or other similar right of the stockholders;
(xx) To such counsel's knowledge, no holders of Common
Stock or other securities of the Company have registration rights
with respect to any securities of the Company; and
(xxi) The offer and sale of all outstanding securities of
the Company made since its inception as set forth in the
Registration Statement were exempt from the registration
requirements of the 1933 Act and from the registration or
qualification requirements of all relevant state securities or
"blue sky" laws, rules and regulations.
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In addition, such counsel shall state that such counsel has
participated in conferences with officials and other representatives of the
Company, the Representative, Underwriters' Counsel and the independent
certified public accountant for the Company, at which the contents of the
Registration Statement and the Prospectus and related matters were discussed,
and although (except as specifically set forth in paragraphs (x) and (xiii)
above) they have not verified the accuracy or completeness of the statements
contained in the Registration Statement or the Prospectus, nothing has come to
the attention of such counsel that leads such counsel to believe that, at the
time the Registration Statement became effective and at all times subsequent
thereto up to and on the Closing Date and on any later date on which Option
Shares are to be purchased, the Registration Statement and any amendments or
supplements thereto, when such documents became effective or were filed with
the Commission (other than the financial statements, including supporting
schedules and other financial and statistical data included in the Registration
Statement, as to which such counsel need express no comment) contained any
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or on the Closing Date or any later date on which the Option Shares
are to be purchased, as the case may be, the Registration Statement, the
Prospectus and any amendment or supplement thereto contained any untrue
statement of a material fact or omitted to state a material fact necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading.
Counsel rendering the foregoing opinion may rely as to
questions of law not involving the laws of the United States or the State of
Delaware upon opinions of local counsel, and as to questions of fact upon
representations or certificates of officers of the Company, and of government
officials, in which case such counsel's opinion is to state that they are so
relying and that they have no knowledge of any material misstatement or
inaccuracy in any such opinion, representation or certificate. Copies of any
opinion, representation or certificate so relied upon shall be delivered to
you, as Representative of the Underwriters, and to Underwriters' Counsel.
(e) You shall have received on the Closing Date and on any later
date on which Option Shares are to be purchased, as the case may be, an opinion
of LeBoeuf, Lamb, Greene & MacRae, L.L.P. in form and substance reasonably
satisfactory to you, with respect to the sufficiency of all such corporate
proceedings and other legal matters relating to this Agreement and the
transactions contemplated hereby as you may reasonably require, and the Company
shall have furnished to such counsel such documents as they may have requested
for the purpose of enabling them to pass upon such matters.
(f) You shall have received on the effective date of the
Registration Statement and on the Closing Date and on any later date on which
Option Shares are to be purchased, as the case may be, a letter from Cherry,
Bekaert & Holland, L.L.P., addressed to the Company and the Underwriters, dated
the Closing Date or such later date on which Option Shares are to be purchased,
as the case may be, confirming that they are independent certified public
accountants with respect to the Company within the meaning of the 1933 Act and
the applicable Rules and Regulations and based upon the procedures described in
such letter delivered to you concurrently with the execution of this Agreement
(herein called the "Original Letter"), but carried out to a date not more than
five (5) business days prior to the Closing Date or such later date on which
Option Shares are to be purchased, as the case may be, (i) confirming, to the
extent true, that the statements and conclusions set forth in the Original
Letter are accurate as of the Closing Date or such later date on which Option
Shares are to be purchased, as the case may be, and (ii) setting forth any
revisions and additions to the statements and conclusions set forth in the
Original Letter that are necessary to reflect any changes in the facts
described in the Original Letter since the date of the Original Letter, or to
reflect the availability of more recent financial statements, data or
information. The letter shall not disclose any change in the condition
(financial or otherwise), earnings, operations, business or business prospects
of the Company from that set forth in the
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Registration Statement or the Prospectus, which, in your sole judgment, is
material and adverse and that makes it, in your sole judgment, impracticable or
inadvisable to proceed with the public offering of the Shares as contemplated
by the Prospectus. The Original Letter from Cherry, Bekaert & Holland, L.L.P.
shall be addressed to or for the use of the Underwriters in form and substance
satisfactory to the Underwriters and shall (i) represent, to the extent true,
that they are independent certified public accountants with respect to the
Company within the meaning of the 1933 Act and the applicable Rules and
Regulations, (ii) set forth its opinion with respect to its examination of the
balance sheets of the Company as of December 31, 1996 and 1997, and the related
statements of operations, stockholders' equity, and cash flows for the years
then ended and its review of the balance sheet as of March 31, 1998 and the
related statements of operations, stockholders' equity and cash flows for the
quarter then ended, and (iii) address other matters agreed upon by Cherry,
Bekaert & Holland, L.L.P. and you. In addition, you shall have received from
Cherry, Bekaert & Holland, L.L.P. a letter addressed to the Company and made
available to you for the use of the Underwriters stating that its review of the
Company's system of internal accounting controls, to the extent they deemed
necessary in establishing the scope of its examination of the Company's
financial statements as of December 31, 1997 and March 31, 1998, did not
disclose any weaknesses in internal controls that they considered to be
material weaknesses.
(g) You shall have received on the Closing Date and on any later
date on which Option Shares are to be purchased, as the case may be, a
certificate from the Company, dated the Closing Date or such later date on
which Option Shares are to be purchased, as the case may be, signed by the
President and the Chief Financial Officer of the Company, to the effect that,
and you shall be satisfied that:
(i) The representations and warranties of the Company in
this Agreement are true and correct, as if made on and as of the
Closing Date or any later date on which Option Shares are to be
purchased, as the case may be, and the Company has complied, in
all material aspects, with all the agreements and satisfied all
the conditions on its part to be performed or satisfied, in all
material respects, at or prior to the Closing Date or any later
date on which Option Shares are to be purchased, as the case may
be;
(ii) No stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that
purpose have been instituted or, to their knowledge, are pending
or threatened under the 1933 Act;
(iii) When the Registration Statement became effective and
at all times subsequent thereto up to the delivery of such
officer's certificate, the Registration Statement and the
Prospectus, and any amendments or supplements thereto, contained
all material information required to be included therein by the
1933 Act and the Rules and Regulations or the 1934 Act and the
applicable rules and regulations of the Commission thereunder, as
the case may be, and in all material respects conformed to the
requirements of the 1933 Act and the Rules and Regulations or the
1934 Act and the applicable rules and regulations of the
Commission thereunder, as the case may be, the Registration
Statement, and any amendment or supplement thereto, did not and
does not include any untrue statement of a material fact or omit
to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, the
Prospectus, and any amendment or supplement thereto, did not and
does not include any untrue statement of a material fact or omit
to state a material fact necessary to make the statements therein,
in light of the circumstances under which they were made, not
misleading, and, since the effective date of the Registration
Statement, there has occurred no event that is required to be set
forth in an amended or supplemented Prospectus that has not been
so set forth;
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(iv) Subsequent to the respective dates as of which
information is given in the Registration Statement and the
Prospectus, there has not been (a) any material adverse change in
the condition (financial or otherwise), earnings, operations,
business or business prospects of the Company, (b) any transaction
that is material to the Company, except transactions entered into
in the ordinary course of its business, (c) any obligation, direct
or contingent, that is material to the Company, incurred by the
Company, except obligations incurred in the ordinary course of its
business, (d) any change in the capital stock or outstanding
indebtedness of the Company that is material to the Company, (e)
any dividend or distribution of any kind or nature declared, paid
or made on the capital stock of the Company (other than the
distributions made to the Existing Common Stockholders (as that
term is defined in the Prospectus), as disclosed under "S
Corporation Distributions" therein), or (f) any loss or damage
(whether or not insured) to the property or assets of the Company
that had a material adverse effect on the condition (financial or
otherwise), earnings, operations, business or business prospects
of the Company; and
(v) The S Corporation distributions made by the Company as
of the date of termination of its S Corporation election shall not
exceed or shall not have exceeded the lesser of (a) 50% of the
accumulated adjustments account of the Company (after taking into
account the distributions made to pay any applicable federal and
state income taxes at the highest applicable rates for the tax
years ending (i) December 31, 1997, and (ii) with the date of the
public offering (that is, the date the Company terminates its S
Corporation election)), or (b) $2,000,000.
(h) The Company shall have obtained and delivered to you
a written agreement from each officer and director of the Company,
and each beneficial owner of five percent (5%) or more of the
Common Stock immediately after the offering contemplated hereby,
prior to the date hereof that such person or entity will not,
during the Lock-up Period, effect the Disposition of any
Securities owned directly by such person or entity or with respect
to which such person or entity has the power of disposition as of
the date of this Agreement, otherwise than (i) as a bona fide gift
or gifts, provided the donee or donees thereof agrees in writing
to be bound by this restriction, or (ii) with the prior written
consent of Cruttenden Roth Incorporated. The foregoing restriction
is expressly agreed to preclude the holder of the Securities from
engaging in any hedging or other transaction that is designed to
or reasonably expected to lead to or result in a Disposition of
Securities during the Lock-up Period, even if such Securities
would be disposed of by someone other than the such holder. Such
prohibited hedging or other transactions would include, without
limitation, any short sale (whether or not against the box) or any
purchase, sale or grant of any right (including, without
limitation, any put or call option) with respect to any Securities
or with respect to any security (other than a broad-based market
basket or index) that includes, relates to or derives any
significant part of its value from the Securities. Furthermore,
such person or entity will have also agreed and consented to the
entry of stop transfer instructions with the Company's transfer
agent against the transfer of the Securities held by such person
or entity except in compliance with this restriction.
(i) The Company shall have furnished to you such further
certificates and documents as you shall request, including,
without limitation, certificates of officers of the Company as to
the accuracy of the representations and warranties of the Company
herein, the performance by the Company of its obligations
hereunder, and as to the other conditions concurrent and precedent
to the obligations of the Underwriters hereunder.
(j) The Representative's Warrant Agreement shall have
been entered into by the Company and you, and the Representative's
Warrants shall have been issued and sold to you pursuant thereto.
All such opinions, certificates, letters and documents will be in
compliance with the provisions hereof only if they are satisfactory to
Underwriters' Counsel. The Company will furnish you with such number of
conformed copies of such opinions, certificates, letters and documents as you
shall request.
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7. OPTION SHARES.
(a) On the basis of the representations, warranties and agreements
herein contained, but subject to the terms and conditions herein set forth, the
Company hereby grants to the several Underwriters, for the purpose of covering
over-allotments in connection with the distribution and sale of the Firm Shares
only, a nontransferable option to purchase up to an aggregate of three hundred
thousand (300,000) Option Shares at the purchase price per share for the Firm
Shares set forth in Section 3 hereof. Such option may be exercised by the
Representative on behalf of the several Underwriters on one (1) or more
occasions in whole or in part during the period of forty-five (45) days after
the date on which the Firm Shares are initially offered to the public, by
giving written notice to the Company. The number of Option Shares to be
purchased by each Underwriter upon the exercise of such option shall be the
same proportion of the total number of Option Shares to be purchased by the
several Underwriters pursuant to the exercise of such option as the number of
Firm Shares purchased by such Underwriter (as set forth in Schedule "A"
attached hereto) bears to the total number of Firm Shares purchased by the
several Underwriters (as set forth in Schedule "A" attached hereto), adjusted
by the Representative in such manner as to avoid fractional shares.
Delivery of definitive certificates evidencing the Option
Shares to be purchased by the several Underwriters pursuant to the exercise of
the option granted by this Section 7 shall be made against payment of the
purchase price therefor by the several Underwriters by certified or official
bank check or checks drawn in next-day funds, payable to the order of the
Company (and the Company agrees not to deposit any such check in the bank on
which it is drawn until the day following the date of its delivery to the
Company). Such delivery and payment shall take place at the offices of
Cruttenden Roth Incorporated, 18301 Von Karman, Suite 100, Irvine, California,
or at such other place as may be agreed upon between the Representative and the
Company (i) on the Closing Date, if written notice of the exercise of such
option is received by the Company at least two (2) full business days prior to
the Closing Date, or (ii) on a date that shall not be later than the third
(3rd) full business day following the date the Company receives written notice
of the exercise of such option, if such notice is received by the Company less
than two (2) full business days prior to the Closing Date.
The certificates evidencing the Option Shares to be so
delivered will be made available to you at such office or such other location
as you may reasonably request for inspection at least one (1) full business day
prior to the date of payment and delivery and will be in such names and
denominations as you may request, such request to be made at least two (2) full
business days prior to such date of payment and delivery. If the
Representative so elects, delivery of the Option Shares may be made by credit
through full fast transfer to the accounts at The Depository Trust Company
designated by the Representative.
It is understood that you, individually, and not as the
Representative of the several Underwriters, may (but shall not be obligated to)
make payment of the purchase price on behalf of any Underwriter or Underwriters
whose check or checks shall not have been received by you prior to the date of
payment and delivery for the Option Shares to be purchased by such Underwriter
or Underwriters. Any such payment by you shall not relieve any such
Underwriter or Underwriters of any of its or their obligations hereunder.
(b) Upon exercise of the option provided for in Section 7(a)
hereof, the obligations of the several Underwriters to purchase such Option
Shares will be subject (as of the date hereof and as of the date of payment and
delivery for such Option Shares) to the accuracy of and compliance with the
representations, warranties and agreements of the Company herein, to the
accuracy of the statements of the Company and officers of the Company made
pursuant to the provisions hereof, to the performance by the Company of its
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obligations hereunder, and to the condition that all proceedings taken at or
prior to the payment date in connection with the sale and transfer of such
Option Shares shall be reasonably satisfactory in form and substance to you and
to Underwriters' Counsel, and you shall have been furnished with all such
documents, instruments, certificates and opinions as you may reasonably request
in order to evidence the accuracy and completeness of any of the
representations, warranties or statements, the performance of any of the
covenants or agreements of the Company, or the compliance with any of the
conditions herein contained in each case in all material respects.
8. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company agrees to indemnify and hold harmless each
Underwriter against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter may become subject (including, without
limitation, in its capacity as an Underwriter within the meaning of Rule 2720
of the Bylaws of the NASD (formerly Schedule E to the NASD Bylaws), under the
1933 Act, the 1934 Act or otherwise, specifically including, but not limited
to, losses, claims, damages or liabilities, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon (i) any breach of any representation, warranty, agreement or
covenant of the Company herein contained, (ii) any untrue statement or alleged
untrue statement of any material fact contained in the Registration Statement
or any amendment or supplement thereto, or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading, or (iii) any untrue statement or alleged untrue
statement of any material fact contained in any Preliminary Prospectus or in
the Prospectus or any amendment or supplement thereto, or the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, and further agrees to reimburse
each Underwriter for any legal or other expenses reasonably incurred by it in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company shall not be liable in
any such case to the extent that any such loss, claim, damage, liability or
action arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in the Registration Statement,
any Preliminary Prospectus or in the Prospectus, or any amendment or supplement
thereto, in reliance upon, and in conformity with, written information relating
to any Underwriter furnished to the Company by such Underwriter, directly or
through you, specifically for use in the preparation thereof; provided further,
however, that the indemnity agreement provided in this Section 8(a) with
respect to any Preliminary Prospectus shall not inure to the benefit of any
Underwriter from whom the person or entity asserting any losses, claims,
damages, liabilities or actions based upon any untrue statement or alleged
untrue statement of a material fact or omission or alleged omission to state
therein a material fact purchased Shares, if a copy of the Prospectus in which
such untrue statement or alleged untrue statement or omission or alleged
omission was corrected had not been sent or given to such person or entity
within the time required by the 1933 Act and the Rules and Regulations, unless
such failure is the result of noncompliance by the Company with Section 4(d)
hereof.
The indemnity agreement in this Section 8(a) shall extend upon
the same terms and conditions to, and shall inure to the benefit of, each
person or entity, if any, who controls any Underwriter within the meaning of
the 1933 Act or the 1934 Act. This indemnity agreement shall be in addition to
any liabilities that the Company may otherwise have.
(b) Each Underwriter, severally and not jointly, agrees to
indemnify and hold harmless the Company against any losses, claims, damages or
liabilities, joint or several, to which the Company may become subject under
the 1933 Act or otherwise, specifically including, but not limited to, losses,
claims,
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damages or liabilities, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon (i) any breach
of any representation, warranty, agreement or covenant of such Underwriter
contained herein, (ii) any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement or in any amendments or
supplements thereto, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, or (iii) any untrue statement or alleged untrue statement of any
material fact contained in any Preliminary Prospectus or in the Prospectus or
any amendment or supplement thereto, or the omission or alleged omission to
state therein a material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, in the
case of subparagraphs (ii) and (iii) of this Section 8(b) to the extent, but
only to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in conformity with
written information furnished to the Company by such Underwriter, directly or
through you, specifically for use in the preparation thereof, and agrees to
reimburse the Company for any legal or other expenses reasonably incurred by
the Company in connection with investigating or defending any such loss, claim,
damage, liability or action.
The indemnity agreement in this Section 8(b) shall extend upon
the same terms and conditions to, and shall inure to the benefit of, each
officer of the Company who signed the Registration Statement and each director
of the Company and each person or entity, if any, who controls the Company
within the meaning of the 1933 Act or the 1934 Act. This indemnity agreement
shall be in addition to any liabilities each Underwriter may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against any indemnifying
party under this Section 8, notify the indemnifying party in writing of the
commencement thereof, but the omission so to notify the indemnifying party will
not relieve it from any liability that it may have to any indemnified party
otherwise than under this Section 8. In case any such action is brought
against any indemnified party, and it notified the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
therein and, to the extent that it shall elect by written notice delivered to
the indemnified party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party; provided, however, that if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be legal defenses available to it and/or other indemnified
parties that are different from or in addition to those available to the
indemnifying party that pose a conflict of interest for such counsel, the
indemnified party or parties shall have the right to select separate counsel to
assume such legal defenses and to otherwise participate in the defense of such
action on behalf of such indemnified party or parties. Upon receipt of notice
from the indemnifying party to such indemnified party of the indemnifying
party's election so to assume the defense of such action and approval by the
indemnified party of such counsel, the indemnifying party will not be liable to
such indemnified party under this Section 8 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof unless (i) the indemnified party shall have employed separate counsel
in accordance with the proviso to the next preceding sentence (it being
understood, however, that the indemnifying party shall not be liable for the
expenses of more than one (1) separate counsel (together with appropriate local
counsel) approved by the indemnifying party representing all the indemnified
parties under Section 8(a) or Section 8(b) hereof who are parties to such
action), (ii) the indemnifying party shall not have employed counsel reasonably
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after notice of commencement of the action, or (iii) the
indemnifying party has authorized the employment of counsel for the indemnified
party at the expense of the indemnifying party. In no event shall any
indemnifying party be
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liable in respect of any amounts paid in settlement of any action unless the
indemnifying party shall have approved the terms of such settlement in writing
in advance; provided, however, that such consent shall not be unreasonably
withheld. No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement of any pending or threatened
proceeding or action in respect of which any indemnified party is or could have
been a party and indemnification could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such indemnification.
(d) In order to provide for just and equitable contribution in any
action in which a claim for indemnification is made pursuant to this Section 8
but in which 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, all the parties hereto shall
contribute to the aggregate losses, claims, damages or liabilities to which
they may be subject (after contribution from others) in such proportion so that
the Underwriters severally and not jointly are responsible pro rata for the
portion represented by the percentage that the underwriting discount bears to
the initial public offering price, and the Company is responsible for the
remaining portion; provided, however, that (i) no Underwriter shall be required
to contribute any amount in excess of the underwriting discount applicable to
the Shares purchased by such Underwriter and (ii) no person guilty of a
fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933
Act) shall be entitled to contribution from any person who is not guilty of
such fraudulent misrepresentation. The contribution agreement in this Section
8(d) shall extend upon the same terms and conditions to, and shall inure to the
benefit of, each person or entity, if any, who controls each of the
Underwriters or the Company within the meaning of the 1933 Act or the 1934 Act
and each officer of the Company who signed the Registration Statement and each
director of the Company.
(e) The parties to this Agreement hereby acknowledge that they are
sophisticated business persons who were represented by counsel during the
negotiations regarding the provisions hereof, including, without limitation,
the provisions of this Section 8, and are fully informed regarding said
provisions. They further acknowledge that the provisions of this Section 8
fairly allocate the risks in light of the ability of the parties to investigate
the Company and its business in order to assure that adequate disclosure is
made in the Registration Statement and the Prospectus as required by the 1933
Act and the 1934 Act. The parties are advised that federal or state public
policy, as interpreted by the courts in certain jurisdictions, may be contrary
to certain of the provisions of this Section 8, and the parties hereto hereby
expressly waive and relinquish any right or ability to assert such public
policy as a defense to a claim under this Section 8 and further agree not to
attempt to assert any such defense.
9. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS TO SURVIVE
DELIVERY. All representations, warranties, covenants and agreements of the
Company and the Underwriters herein or in certificates delivered pursuant
hereto, and the indemnity and contribution agreements contained in Section 8
hereof, shall remain operative and in full force and effect for a period of the
applicable federal and state statutes of limitations regardless of any
investigation made by or on behalf of any Underwriter or any control person
within the meaning of the 1933 Act or the 1934 Act, or by or on behalf of the
Company or any of its officers, directors or control persons within the meaning
of the 1933 Act or the 1934 Act, and shall survive the delivery of the Shares
to the several Underwriters hereunder and the termination of this Agreement.
10. SUBSTITUTION OF UNDERWRITERS. If any Underwriter or Underwriters
shall fail to take up and pay for the number of Firm Shares agreed by such
Underwriter or Underwriters to be purchased hereunder upon tender of such Firm
Shares in accordance with the terms hereof, and if the aggregate number of Firm
Shares
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that such defaulting Underwriter or Underwriters so agreed but fails to
purchase does not exceed ten percent (10%) of the Firm Shares, the remaining
Underwriters shall be obligated, severally in proportion to their respective
commitments hereunder, to take up and pay for the Firm Shares of such
defaulting Underwriter or Underwriters.
If any Underwriter or Underwriters so defaults and the aggregate
number of Firm Shares that such defaulting Underwriter or Underwriters agreed
but fails to take up and pay for exceeds ten percent (10%) of the Firm Shares,
the remaining Underwriters shall have the right, but shall not be obligated, to
take up and pay for (in such proportions as may be agreed upon among them) the
Firm Shares that the defaulting Underwriter or Underwriters so agreed but fail
to purchase. If such remaining Underwriters do not, on the Closing Date, take
up and pay for the Firm Shares that the defaulting Underwriter or Underwriters
so agreed but fail to purchase, the Closing Date shall be postponed for twenty-
four (24) hours to allow the several Underwriters the opportunity of
substituting within said twenty-four (24) hours (including non-business hours)
another underwriter or underwriters (which may include any non-defaulting
Underwriter or Underwriters) reasonably satisfactory to the Company. If no
such underwriter or underwriters shall have been substituted as aforesaid by
such postponed Closing Date, the Closing Date may, at the option of the
Company, be postponed for an additional twenty-four (24) hours, if necessary,
to allow the Company the opportunity of finding another underwriter or
underwriters, satisfactory to you, to purchase the Firm Shares that the
defaulting Underwriter or Underwriters so agreed but failed to purchase. If it
shall be arranged for the remaining Underwriters or substituted underwriter or
underwriters to take up the Firm Shares of the defaulting Underwriter or
Underwriters as provided in this Section 10, (i) the Company shall have the
right to postpone the time of delivery for a period of not more than seven (7)
full business days, in order to effect whatever changes may thereby be made
necessary in the Registration Statement or the Prospectus, or in any other
documents or arrangements, and the Company agrees promptly to file any
amendments to the Registration Statement or supplements to the Prospectus that
may thereby be made necessary, and (ii) the respective number of Firm Shares to
be purchased by the remaining Underwriters and substituted underwriter or
underwriters shall be taken as the basis of their underwriting obligation. If
the remaining Underwriters shall not take up and pay for all such Firm Shares
so agreed to be purchased by the defaulting Underwriter or Underwriters or
substitute another underwriter or underwriters as aforesaid and the Company
shall not find or shall not elect to seek another underwriter or underwriters
for such Firm Shares as aforesaid, then this Agreement shall terminate.
In the event of the termination of this Agreement pursuant to the
preceding paragraph of this Section 10, the Company shall not be liable to any
Underwriter (except as provided in Sections 5 and 8 hereof) nor shall any
Underwriter (other than an Underwriter who shall have failed, otherwise than
for some reason permitted under this Agreement, to purchase the number of Firm
Shares agreed by such Underwriter to be purchased hereunder, which Underwriter
shall remain liable to the Company and the other Underwriters for damages, if
any, resulting from such default) be liable to the Company (except to the
extent provided in Sections 5 and 8 hereof).
The term "Underwriter" as used in this Agreement shall include any
person or entity substituted for an Underwriter under this Section 10.
11. EFFECTIVE DATE OF THIS AGREEMENT; TERMINATION.
(a) This Agreement shall become effective at the earlier of (i)
6:30 a.m., Los Angeles, California time, on the first full (1st) business day
following the effective date of the Registration Statement, or (ii) the time of
the initial public offering of any of the Shares by the Underwriters after the
Registration Statement
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becomes effective. The time of the initial public offering shall mean the time
of the release by you, for publication, of the first newspaper advertisement
relating to the Shares, or the time at which the Shares are first generally
offered by the Underwriters to the public by letter, telephone, telegram or
telecopy, whichever shall first occur. By giving notice as set forth in
Section 12 hereof before the time this Agreement becomes effective, you, as
Representative of the several Underwriters, or the Company, may prevent this
Agreement from becoming effective without liability of any party to any other
party, except as provided in Sections 4(i), 5 and 8 hereof.
(b) You, as Representative of the several Underwriters, shall have
the right to terminate this Agreement by giving notice as hereinafter specified
at any time on or prior to the Closing Date or on or prior to any later date on
which Option Shares are to be purchased, as the case may be, (i) if the Company
shall have failed, refused or been unable to perform any agreement on its part
to be performed, or because any other condition of the Underwriters'
obligations hereunder required to be fulfilled is not fulfilled, including,
without limitation, there shall have occurred any change in the condition
(financial or otherwise), earnings, operations, business or business prospects
of the Company from that set forth in the Registration Statement or the
Prospectus, which, in your sole judgment, is material and adverse to the
Company, or (ii) if additional material regulatory or governmental
restrictions, not in force and effect on the date hereof, shall have been
imposed upon trading in securities generally or minimum or maximum prices shall
have been generally established on the New York Stock Exchange, the American
Stock Exchange or in the over- the-counter market by the NASD, or trading in
securities generally shall have been suspended on either such exchange or in
the over-the-counter market by the NASD, or if a banking moratorium shall have
been declared by federal, New York or California authorities, or (iii) if the
Company shall have sustained a loss by strike, fire, flood, earthquake,
accident or other calamity of such character as to interfere materially in your
reasonable judgment with the conduct of the business and operations of the
Company regardless of whether or not such loss shall have been insured, or (iv)
if there shall have been a material adverse change in the general political,
regulatory or economic conditions or financial markets that affects the issuer
and materially impairs the investment quality of the Shares and that, in your
reasonable judgment, makes it inadvisable or impracticable to proceed with the
offer, sale and delivery of the Shares, or (v) if there shall have been an
outbreak or escalation of hostilities or of any other insurrection or armed
conflict or the declaration by the United States of a national emergency that,
in the opinion of the Representative, makes it impracticable or inadvisable to
proceed with the public offering of the Shares as contemplated by the
Prospectus. Any termination pursuant to any of subparagraphs (ii) through (v)
above shall be without liability of any party to any other party, except as
provided in Sections 4(i), 5 and 8 hereof; provided, however, that the Company
will reimburse the Representative for a maximum of $30,000 for its
out-of-pocket expenses (which $30,000 was paid by the Company upon the
execution of the Letter of Intent with the Representative). In the event of
termination pursuant to subparagraph (i) above, the Company shall also remain
obligated to pay costs and expenses pursuant to Sections 4(i), 5 and 8 hereof
(in addition to the out-of-pocket expenses identified in Section 4(i) hereof).
If you elect to prevent this Agreement from becoming effective or
terminate this Agreement as provided in this Section 11, you shall promptly
notify the Company by telephone, telecopy or telegram, in each case confirmed
by letter. If the Company elects to prevent this Agreement from becoming
effective, the Company shall promptly notify you by telephone, telecopy or
telegram, in each case promptly confirmed by letter.
12. NOTICES. All notices or communications hereunder, except as
herein otherwise specifically provided, shall be in writing and if sent to you
shall be mailed, hand-delivered, telegraphed (and confirmed by letter) or
telecopied (and confirmed by letter) to you c/o Cruttenden Roth Incorporated,
18301 Von Karman, Suite 100, Irvine, California 92715, telecopier number (714)
852-9603, Attention: Byron C. Roth
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and Monte Brem; and, if sent to the Company, such notice shall be mailed,
hand-delivered, telegraphed (and confirmed by letter) or telecopied (and
confirmed by letter) to 3516 Centre Circle Drive, Fort Mill, South Carolina
29715, telecopier number (803) 548-2207, Attention: Karl F. Brown.
13. PARTIES. This Agreement shall inure to the benefit of and be
binding upon the several Underwriters and the Company and their respective
executors, administrators, successors and assigns. Nothing expressed or
mentioned in this Agreement is intended or shall be construed to give any
person or entity, other than the parties hereto and their respective executors,
administrators, successors and assigns, and their control persons within the
meaning of the 1933 Act or the 1934 Act, and the officers and directors
referred to in Section 8 hereof, any legal or equitable right, remedy or claim
in respect of this Agreement or any provisions contained herein, this Agreement
and all conditions and provisions hereof being intended to be and being for the
sole and exclusive benefit of the parties hereto and their respective
executors, administrators, successors and assigns and said control persons and
said officers and directors, and for the benefit of no other person or entity.
No purchaser of any of the Shares from any Underwriter shall be construed as
being a successor or assign of such Underwriter by reason merely of such
purchase. This Agreement constitutes the entire agreement and understanding of
the parties with respect to the subject matter hereof.
In all dealings with the Company under this Agreement, you shall
act on behalf of each of the several Underwriters, and the Company shall be
entitled to act and rely upon any statement, request, notice or agreement made
or given by you on behalf of each of the several Underwriters.
14. APPLICABLE LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of California.
15. COUNTERPARTS. This Agreement may be signed in several
counterparts, each of which will constitute an original.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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If the foregoing correctly sets forth the understanding among the
Company and the several Underwriters, please so indicate in the space provided
below for that purpose, whereupon this Agreement shall constitute a binding
agreement among the Company and the several Underwriters as provided herein.
Very truly yours,
AMERICAN AIRCARRIERS SUPPORT,
INCORPORATED
By: ----------------------------
Karl F. Brown
Its: President
ACCEPTED AS OF THE DATE FIRST ABOVE WRITTEN:
CRUTTENDEN ROTH INCORPORATED,
on its behalf and on behalf of each of the several
Underwriters named in Schedule "A" attached hereto.
By:
----------------------
Name:
---------------------
Its:
---------------------
LAIDLAW GLOBAL SECURITIES, INC.
on its behalf and on behalf of each of the several
Underwriters named on Schedule "A" attached hereto.
By:
----------------------
Name:
---------------------
Its:
---------------------
27
SCHEDULE "A"
NUMBER OF
FIRM
SHARES
TO BE
UNDERWRITERS PURCHASED
- ------------ ---------
Cruttenden Roth Incorporated . . . . . . . . . . . . . . . . . . . . . . . ________
Laidlaw Global Securities, Inc. . . . . . . . . . . . . . . . . . . . . . . ________
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000,000
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