UNDERWRITING AGREEMENT
Between
CPI AEROSTRUCTURES, INC.
And
EARLYBIRDCAPITAL, INC.
Dated: January __, 2002
Table of Contents
Page
1. Purchase and Sale of Securities..........................................1
1.1 Firm Securities.....................................................1
1.1.1 Purchase of Firm Securities................................1
1.1.2 Delivery and Payment.......................................1
1.2 Over-Allotment Option...............................................2
1.2.1 Option Securities..........................................2
1.2.2 Exercise of Option.........................................2
1.2.3 Payment and Delivery.......................................2
1.3 Representative's Warrant............................................3
1.3.1 Warrant....................................................3
1.3.2 Delivery and Payment.......................................3
2. Representations and Warranties of the Company............................3
2.1 Filing of Registration Statement....................................3
2.2 No Stop Orders, Etc.................................................3
2.3 Disclosures in Registration Statement...............................4
2.3.1 Securities Act Representation..............................4
2.3.2 Disclosure of Contracts....................................4
2.3.3 Prior Securities Transactions..............................4
2.4 Changes After Dates in Registration Statement.......................5
2.4.1 No Material Adverse Change.................................5
2.4.2 Recent Securities Transactions, Etc........................5
2.5 Independent Accountants.............................................5
2.6 Financial Statements................................................5
2.7 Authorized Capital; Options; Etc....................................5
2.8 Valid Issuance of Securities; Etc...................................6
2.8.1 Outstanding Securities.....................................6
2.8.2 Securities Sold Pursuant to this Agreement.................6
2.9 Registration and Anti-Dilution Rights of Third Parties..............6
2.10 Validity and Binding Effect of Agreements...........................7
2.11 No Conflicts, Etc...................................................7
2.12 No Defaults; Violations.............................................7
2.13 Corporate Power; Licenses; Consents.................................8
2.13.1 Conduct of Business.......................................8
2.13.2 Transactions Contemplated Herein..........................8
2.14 Title to Property; Insurance........................................8
2.15 Litigation; Governmental Proceedings................................8
2.16 Good Standing.......................................................9
2.17 Taxes...............................................................9
2.18 Transactions Affecting Disclosure to NASD...........................9
2.18.1 Finder's Fees.............................................9
2.18.2 Payments Within 12 Months.................................9
2.18.3 Use of Proceeds..........................................10
2.18.4 Insiders' NASD Affiliation...............................10
2.19 Foreign Corrupt Practices Act......................................10
2.20 American Stock Exchange Eligibility................................10
2.21 Intangibles........................................................10
2.22 Relations With Employees...........................................11
2.22.1 Employee Matters.........................................11
2.22.2 Employee Benefit Plans...................................11
2.23 Officers' Certificate..............................................11
2.24 Lock-Up Agreements.................................................11
2.25 Subsidiaries.......................................................12
2.26 Environmental Matters..............................................12
2.27 Government Clearances..............................................12
2.28 Product Liability Insurance........................................12
2.29 Company Not an Investment Company..................................12
2.30 Related Party Transactions.........................................12
2.31 Audit Committee....................................................12
3. Covenants of the Company................................................12
3.1 Amendments to Registration Statement...............................12
3.2 Federal Securities Laws............................................13
3.2.1 Compliance................................................13
3.2.2 Filing of Final Prospectus................................13
3.2.3 Exchange Act Registration.................................13
3.3 Blue Sky Filings...................................................13
3.4 Delivery to the Underwriters of Prospectuses.......................13
3.5 Events Requiring Notice to the Representative......................14
3.6 AMEX Maintenance...................................................14
3.7 Reports to the Representative and Others...........................14
3.7.1 Periodic Reports, Etc.....................................14
3.7.2 Transfer Sheets and Weekly Position Listings..............14
3.8 Agreements between the Representative and the Company..............15
3.8.1 Merger and Acquisition Agreement..........................15
3.8.2 Representative's Warrant..................................15
3.9 Payment of Expenses................................................15
3.9.1 General Expenses..........................................15
3.9.2 Non-Accountable Expenses..................................15
3.10 Application of Net Proceeds........................................16
3.11 Delivery of Earnings Statements to Security Holders................16
3.12 Key Person Life Insurance..........................................16
3.13 Stabilization......................................................16
3.14 Internal Controls..................................................16
3.15 Sale of Securities.................................................17
3.16 Disclosure Controls and Procedures.................................17
3.17 Employment Agreements..............................................17
4. Conditions of the Underwriters' Obligations.............................17
4.1 Regulatory Matters.................................................17
4.1.1 Effectiveness of Registration Statement...................17
4.1.2 NASD Clearance............................................17
4.1.3 No Blue Sky Stop Orders...................................17
4.2 Company Counsel Matters............................................18
ii
4.2.1 Effective Date Opinion of Counsel.........................18
4.2.2 Closing Date and Option Closing Date Opinions of Counsel..18
4.2.3 Reliance..................................................18
4.3 Cold Comfort Letter................................................18
4.4 Officers' Certificates.............................................19
4.4.1 Officers' Certificate.....................................19
4.4.2 Secretary's Certificate...................................20
4.5 No Material Changes................................................20
4.6 Delivery of Agreements.............................................20
4.7 Opinion of Counsel for the Underwriters............................21
5. Indemnification.........................................................21
5.1 Indemnification of the Underwriter.................................21
5.1.1 General...................................................21
5.1.2 Procedure.................................................22
5.2 Indemnification of the Company.....................................22
5.3 Contribution.......................................................22
5.3.1 Contribution Rights.......................................22
5.3.2 Contribution Procedure....................................23
6. Default by an Underwriter...............................................23
6.1 Default Not Exceeding 10% of Firm Securities or Option Securities..23
6.2 Default Exceeding 10% of Firm Securities or Option Securities......24
6.3 Postponement of Closing Date.......................................24
7. Board Designee..........................................................24
8. Representations and Agreements to Survive Delivery......................25
9. Effective Date of This Agreement and Termination Thereof................25
9.1 Effective Date.....................................................25
9.2 Termination........................................................25
9.3 Expenses...........................................................25
9.4 Indemnification....................................................25
10. Miscellaneous............................................................26
10.1 Notices............................................................26
10.2 Headings...........................................................26
10.3 Amendment..........................................................26
10.4 Entire Agreement...................................................27
10.5 Binding Effect.....................................................27
10.6 Governing Law, Jurisdiction........................................27
10.7 Execution in Counterparts..........................................27
10.8 Waiver, Etc........................................................27
10.9 Representative's Right to Assign...................................27
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INDEX OF DEFINITIONS
Term Section
Act..........................................................................2.1
AMEX........................................................................2.20
Closing Date...............................................................1.1.2
Code .....................................................................2.22.2
Commission...................................................................2.1
Common Shares..............................................................1.1.1
Company.............................................................Introductory
Paragraph
EBC.................................................................Introductory
Paragraph
Effective Date.............................................................1.2.2
ERISA.....................................................................2.22.2
ERISA Plans...............................................................2.22.2
Exchange Act.................................................................2.5
Filing Date...............................................................2.18.2
Firm Securities............................................................1.1.1
GGK..........................................................................2.5
Insiders....................................................................2.24
Intangibles.................................................................2.21
Investment Company Act......................................................2.29
Merger and Acquisition Agreement...........................................3.7.1
NASD......................................................................2.18.1
Option Closing Date........................................................1.2.2
Option Securities..........................................................1.2.1
Over-allotment Option......................................................1.2.1
Preliminary Prospectus.......................................................2.1
Prospectus...................................................................2.1
Public Securities..........................................................1.2.1
Registration Statement.......................................................2.1
Regulations..................................................................2.1
Representative......................................................Introductory
Paragraph
Representative's Warrant...................................................1.3.1
Representative's Securities................................................1.3.1
Representative's Shares....................................................1.3.1
Securities.................................................................1.3.1
Subsidiary(ies).............................................................2.25
Underwriter(s) .....................................................Introductory
Paragraph
iv
CPI AEROSTRUCTURES, INC.
1,600,000 COMMON SHARES
UNDERWRITING AGREEMENT
New York, New York
January __, 2002
EarlyBirdCapital, Inc.
Xxx Xxxxx Xxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
The undersigned, CPI Aerostructures, Inc., a New York corporation (the
"Company"), hereby confirms its agreement with EarlyBirdCapital, Inc. (being
referred to herein variously as "you", "EBC" or the "Representative") and with
the other underwriters named on Schedule I hereto for which EBC is acting as
Representative (the Representative and the other Underwriters being collectively
called the "Underwriters" or, individually, an "Underwriter") as follows:
1. Purchase and Sale of Securities.
1.1 Firm Securities.
1.1.1 Purchase of Firm Securities. On the basis of the
representations and warranties herein contained, but subject to the terms and
conditions herein set forth, the Company agrees to issue and sell, severally and
not jointly, to the several Underwriters, an aggregate of 1,600,000 Common
Shares, par value $.001 per share ("Common Shares"), of the Company ("Firm
Securities") at a purchase price (net of discounts and commissions) of $____ per
share. The Underwriters, severally and not jointly, agree to purchase from the
Company the number of Firm Securities set forth opposite their respective names
on Schedule I attached hereto and made a part hereof at a purchase price (net of
discounts and commissions) of $_____ per share.
1.1.2 Delivery and Payment. Delivery and payment for the Firm
Securities shall be made at 10:00 A.M., New York time, on or before the third
business day following the date that the Firm Securities commence trading or at
such earlier time as the Representative shall determine, or at such other time
as shall be agreed upon by the Representative and the Company, at the offices of
counsel to the Underwriters or at such other place as shall be agreed upon by
the Representative and the Company. The hour and date of delivery and payment
for the Firm Securities are called the "Closing Date." Payment for the Firm
Securities shall be made on the Closing Date at the Representative's election by
wire transfer or by certified or bank cashier's check(s) in New York Clearing
House funds, payable to the order of the Company upon delivery to the
Representative of a certificate of the Company's transfer agent stating that the
Firm Securities have been registered in book entry form in such name or names
and such denominations as are requested by the Representative. The Company shall
not be obligated to sell or deliver the Firm Securities except upon tender of
payment by the Representative for all the Firm Securities.
1.2 Over-Allotment Option.
1.2.1 Option Securities. For the purposes of covering any
over-allotments in connection with the distribution and sale of the Firm
Securities, the Company hereby grants to the Underwriters, severally and not
jointly, an option to purchase up to an additional 240,000 Common Shares from
the Company ("Over-allotment Option"). Such additional 240,000 Common Shares are
hereinafter referred to as the "Option Securities." The Firm Securities and the
Option Securities are hereinafter referred to collectively as the "Public
Securities." The purchase price to be paid for the Option Securities will be the
same price per Option Security as the price per Firm Security set forth in
Section 1.1.1 hereof.
1.2.2 Exercise of Option. The Over-allotment Option granted
pursuant to Section 1.2.1 hereof may be exercised by the Representative on
behalf of the Underwriters as to all or any part of the Option Securities at any
time, from time to time, within forty-five (45) days after the effective date
("Effective Date") of the Registration Statement (as hereinafter defined). The
Underwriters will not be under any obligation to purchase any Option Securities
prior to the exercise of the Over-allotment Option. The Over-allotment Option
granted hereby may be exercised by the giving of oral notice to the Company from
the Representative, which must be confirmed by a letter or telecopy setting
forth the number of Option Securities to be purchased, the date and time for
delivery of and payment for the Option Securities and stating that the Option
Securities referred to therein are to be used for the purpose of covering
over-allotments in connection with the distribution and sale of the Firm
Securities. If such notice is given at least two full business days prior to the
Closing Date, the date set forth therein for such delivery and payment will be
the Closing Date. If such notice is given thereafter, the date set forth therein
for such delivery and payment will not be earlier than three full business days
after the date of the notice, unless the Representative and the Company agree
upon an earlier date. If such delivery and payment for the Option Securities
does not occur on the Closing Date, the date and time of the closing for such
Option Securities will be as set forth in the notice (hereinafter the "Option
Closing Date"). Upon exercise of the Over-allotment Option, the Company will
become obligated to convey to the Underwriters, and, subject to the terms and
conditions set forth herein, the Underwriters will become obligated to purchase,
the number of Option Securities specified in such notice.
1.2.3 Payment and Delivery. Payment for the Option Securities
will be at the Representative's election by wire transfer or by certified or
bank cashier's check(s) in New York Clearing House funds, payable to the order
of the Company at the offices of the Representative or at such other place as
shall be agreed upon by the Representative and the Company upon delivery to the
Representative of a certificate of the Company's transfer agent stating that the
Option Securities have been registered in book entry form in such name or
names and in such denominations as are requested by the Representative.
2
1.3 Representative's Warrant.
1.3.1 Warrant. The Company hereby agrees to issue and sell to
the Representative (and/or its designees) on the Closing Date, for an aggregate
purchase price of $100, a warrant ("Representative's Warrant") for the purchase
of an aggregate of 160,000 Common Shares ("Representative's Shares") at an
initial exercise price equal to 100% of the initial offering price of a Common
Share (i.e., $___ per Common Share). Each of the Representative's Shares is
identical to the Common Shares constituting the Firm Securities. The
Representative's Warrant shall be exercisable for a period of four years
commencing one year from the Effective Date. The Representative's Warrant and
the Representative's Shares are hereinafter referred to collectively as the
"Representative's Securities." The Public Securities and the Representative's
Securities are hereinafter referred to collectively as the "Securities."
1.3.2 Delivery and Payment. Delivery and payment for the
Representative's Warrant shall be made on the Closing Date. The Company shall
deliver to the Representative, upon payment therefor, certificates evidencing
the Representative's Warrant in the name or names and in such authorized
denominations as the Representative may request.
2. Representations and Warranties of the Company. The Company represents
and warrants to the Underwriters as follows:
2.1 Filing of Registration Statement. The Company has filed with the
Securities and Exchange Commission ("Commission") a registration statement and
an amendment or amendments thereto, on Form SB-2 (No. 333-_____), including any
related preliminary prospectus ("Preliminary Prospectus"), for the registration
of the Securities under the Securities Act of 1933, as amended ("Act"), which
registration statement and amendment or amendments have been prepared by the
Company in conformity with the requirements of the Act, and the rules and
regulations ("Regulations") of the Commission under the Act. Except as the
context may otherwise require, such registration statement, as amended, on file
with the Commission at the time the registration statement becomes effective
(including the prospectus, financial statements, schedules, exhibits and all
other documents filed as a part thereof or incorporated therein and all
information deemed to be a part thereof as of such time pursuant to paragraph
(b) of Rule 430A of the Regulations), is hereinafter called the "Registration
Statement," and the form of the final prospectus dated the Effective Date or
such later date as may be determined by the Underwriter (or, if applicable, the
form of final prospectus filed with the Commission pursuant to Rule 424 of the
Regulations), is hereinafter called the "Prospectus." The Registration
Statement has been declared effective by the Commission on the date hereof.
2.2 No Stop Orders, Etc. No stop order suspending the effectiveness of
the Registration Statement or preventing or suspending the use of any
Preliminary Prospectus has been issued under the Act and no proceedings for that
purpose have been instituted or are pending or, to the best knowledge of the
Company, are contemplated. No state regulatory authority has issued any order
preventing or suspending the offering or sale of the Securities in such
jurisdiction, or, to the best knowledge of the Company, threatened to institute
any proceedings with respect to such order.
3
2.3 Disclosures in Registration Statement.
2.3.1 Securities Act Representation. At the time the Registration
Statement became effective and at all times subsequent thereto up to and
including the Closing Date and the Option Closing Date, if any, the Registration
Statement and the Prospectus and any amendment or supplement thereto contained
and will contain all material statements that are required to be stated therein
in accordance with the Act and the Regulations, and conformed and will conform
in all material respects to the requirements of the Act and the Regulations;
neither the Registration Statement nor the Prospectus, nor any amendment or
supplement thereto, during such time period and on such dates, contained or will
contain any untrue statement of a material fact or omitted or will omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. When any Preliminary Prospectus was first filed with the
Commission (whether filed as part of the Registration Statement or any amendment
thereto or pursuant to Rule 424(a) of the Regulations) and when any amendment
thereof or supplement thereto was first filed with the Commission, such
Preliminary Prospectus and any amendments thereof and supplements thereto
complied in all material respects with the applicable provisions of the Act and
the Regulations and did not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The representation and warranty made in this Section 2.3.1
does not apply to statements made or statements omitted in reliance upon and in
conformity with written information furnished to the Company with respect to the
Underwriters by the Representative expressly for use in the Registration
Statement or Prospectus or any amendment thereof or supplement thereto.
2.3.2 Disclosure of Contracts. The description in the
Registration Statement and the Prospectus of contracts and other documents is
accurate in all material respects and presents fairly the information required
to be disclosed and there are no contracts or other documents required to be
described in the Registration Statement or the Prospectus or to be filed with
the Commission as exhibits to the Registration Statement that have not been so
described or filed. Each contract or other instrument (however characterized or
described) to which the Company is a party or by which its property or business
is or may be bound or affected and that is (i) referred to in the Prospectus, or
(ii) material to the Company's business, has been duly and validly executed, is
in full force and effect in all material respects and is enforceable against the
Company and, to the Company's knowledge, the other parties thereto in accordance
with its terms, and none of such contracts or instruments has been assigned by
the Company, and neither the Company nor, to the Company's knowledge, any
other party is in default thereunder and, to the Company's knowledge, no event
has occurred that, with the lapse of time or the giving of notice, or both,
would constitute a default thereunder. None of the provisions of such contracts
or instruments violates or will result in a violation of any existing applicable
law, rule, regulation, judgment, order or decree of any governmental agency or
court having jurisdiction over the Company or any of its assets or businesses,
including, without limitation, those relating to environmental laws and
regulations.
2.3.3 Prior Securities Transactions. No securities of the Company
have been sold by the Company or by or on behalf of, or for the benefit of, any
person or persons controlling, controlled by, or under common control with the
Company within the three years prior to the date hereof, except as disclosed in
the Registration Statement.
4
2.4 Changes After Dates in Registration Statement.
2.4.1 No Material Adverse Change. Since the respective dates as
of which information is given in the Registration Statement and the Prospectus,
except as otherwise specifically stated therein, (i) there has been no material
adverse change in the condition, financial or otherwise, or in the results of
operations, business or business prospects of the Company, including, but not
limited to, a material loss or interference with its business from fire, storm,
explosion, flood or other casualty, whether or not covered by insurance, or from
any labor dispute or court or governmental action, order or decree, whether or
not arising in the ordinary course of business, (ii) there have been no
transactions entered into by the Company, other than those in the ordinary
course of business, that are material with respect to the condition, financial
or otherwise, or to the results of operations, business or business prospects of
the Company.
2.4.2 Recent Securities Transactions, Etc. Since the respective
dates as of which information is given in the Registration Statement and the
Prospectus, and except as may otherwise be indicated or contemplated herein or
therein, the Company has not (i) issued any securities or incurred any liability
or obligation, direct or contingent, for borrowed money; or (ii) declared or
paid any dividend or made any other distribution on or in respect to its capital
stock.
2.5 Independent Accountants. Xxxxxxxxx Xxxxx Xxxxxxx LLP ("GGK"),
whose report is filed with the Commission as part of the Registration Statement,
are independent accountants as required by the Act and the Regulations. GGK has
not, during the periods covered by the financial statements included in the
Prospectus, provided to the Company any non-audit services, as such term is used
in Section 10A(g) of the Securities Exchange Act of 1934, as amended ("Exchange
Act").
2.6 Financial Statements. The financial statements, including the
notes thereto and supporting schedules included in the Registration Statement
and Prospectus, fairly present the financial position and the results of
operations of the Company at the dates and for the periods to which they apply;
and such financial statements have been prepared in conformity with generally
accepted accounting principles, consistently applied throughout the periods
involved; and the supporting schedules included in the Registration Statement
present fairly the information required to be stated therein. The pro forma
financial information set forth in the Registration Statement and Prospectus
reflects all significant assumptions and adjustments relating to the business
and operations of the Company. The historical financial data set forth in the
Prospectus under the captions "Summary--Summary Financial Information" and
"Capitalization" fairly present in all material respect the information set
forth therein and have been compiled on a basis consistent with that of the
audited financial statements contained in the Registration Statement. The
Registration Statement discloses all material off-balance sheet transactions,
arrangements, obligations (including contingent obligations), and other
relationships of the Company with unconsolidated entities or other persons that
may have a material current or future effect on the Company's financial
condition, changes in financial condition, results of operations, liquidity,
capital expenditures, capital resources, or significant components of revenues
or expenses.
2.7 Authorized Capital; Options; Etc. The Company had at the date or
dates indicated in the Prospectus duly authorized, issued and outstanding
capitalization as set forth in the Registration Statement and the Prospectus.
Based on the assumptions and adjustments stated in the Registration Statement
5
and the Prospectus, the Company will have on the Closing Date the adjusted stock
capitalization set forth therein. Except as set forth in the Registration
Statement and the Prospectus, on the Effective Date and on the Closing Date
there will be no outstanding or authorized subscriptions, options, warrants or
other rights to purchase or otherwise acquire, or preemptive rights with respect
to the issuance or sale of, any Common Shares of the Company, including any
obligations to issue any shares pursuant to anti-dilution provisions, or any
security convertible into Common Shares of the Company, or any contracts or
commitments to issue or sell Common Shares or any such options, warrants, rights
or convertible securities.
2.8 Valid Issuance of Securities; Etc.
2.8.1 Outstanding Securities. All issued and outstanding
securities of the Company have been duly authorized and validly issued and are
fully paid and non-assessable; the holders thereof have no rights of rescission
with respect thereto, and are not subject to personal liability by reason of
being such holders; and none of such securities were issued in violation of the
preemptive rights of any holders of any security of the Company or similar
contractual rights granted by the Company. The outstanding options and warrants
to purchase Common Shares constitute valid and binding obligations of the
Company, enforceable in accordance with their terms. The authorized Common
Shares and outstanding options and warrants to purchase Common Shares conform to
all statements relating thereto contained in the Registration Statement and the
Prospectus. The offers and sales by the Company of the outstanding Common
Shares, options and warrants to purchase Common Shares, and securities
convertible into Common Shares, were at all relevant times registered under the
Act and registered or qualified under the applicable state securities or Blue
Sky laws or exempt from such registration or qualification requirements.
2.8.2 Securities Sold Pursuant to this Agreement. The Securities
have been duly authorized and, when issued and paid for, will be validly issued,
fully paid and non-assessable; the holders thereof are not and will not be
subject to personal liability by reason of being such holders; the Securities
are not and will not be subject to the preemptive rights of any holders of any
security of the Company or similar contractual rights granted by the Company;
and all corporate action required to be taken for the authorization, issuance
and sale of the Securities has been duly and validly taken. When issued, the
Representative's Warrant will constitute a valid and binding obligation of the
Company to issue and sell, upon exercise thereof and payment therefor, the
number and type of securities of the Company called for thereby and the
Representative's Warrant will be enforceable against the Company in accordance
with its terms, except (i) as such enforceability may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally, (ii) as enforceability of any indemnification or contribution
provision may be limited under the federal and state securities laws, and (iii)
that the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to the equitable defenses and to the discretion
of the court before which any proceeding therefor may be brought.
2.9 Registration and Anti-Dilution Rights of Third Parties. Except as
described in the Prospectus, no holders of any securities of the Company or of
any options or warrants of the Company or other rights exercisable for or
convertible or exchangeable into securities of the Company (i) have any right to
require the Company to register any such securities of the Company under the
Act, or (ii) have rights to have the exercise or conversion prices of their
securities lowered and/or the number of securities that they may purchase
6
increased as a result of the issuance by the Company of securities for a price
less than such exercise or conversion price.
2.10 Validity and Binding Effect of Agreements. This Agreement has
been duly and validly authorized by the Company and constitutes, and the
Representative's Warrant and the Merger and Acquisition Agreement (as defined
below) have been duly and validly authorized by the Company and, when executed
and delivered, will constitute, the valid and binding agreements of the Company,
enforceable against the Company in accordance with their respective terms,
except (i) as such enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally, (ii) as
enforceability of any indemnification or contribution provision may be limited
under the federal and state securities laws, and (iii) that the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to the equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought.
2.11 No Conflicts, Etc. The execution, delivery, and performance by
the Company of this Agreement, the Representative's Warrant and the Merger
and Acquisition Agreement, the consummation by the Company of the transactions
herein and therein contemplated and the compliance by the Company with the terms
hereof and thereof do not and will not, with or without the giving of notice or
the lapse of time or both, (i) result in a breach of, or conflict with any of
the terms and provisions of, or constitute a default under, or result in the
creation, modification, termination or imposition of any lien, charge or
encumbrance upon any property or assets of the Company pursuant to the terms of,
any indenture, mortgage, deed of trust, note, loan or credit agreement or any
other agreement or instrument evidencing an obligation for borrowed money, or
any other agreement or instrument to which the Company is a party or by which
the Company may be bound or to which any of the property or assets of the
Company is subject; (ii) result in any violation of the provisions of the
certificate of incorporation or the by-laws of the Company; (iii) violate any
existing applicable law, rule, regulation, judgment, order or decree of any
governmental agency or court, domestic or foreign, having jurisdiction over the
Company or any of its properties or businesses; or (iv) have a material adverse
effect on any permit, license, certificate, registration, approval, consent,
license or franchise of or concerning the Company.
2.12 No Defaults; Violations. Except as described in the Prospectus,
no material default exists in the due performance and observance of any term,
covenant or condition of any material license, contract, indenture, mortgage,
deed of trust, note, loan or credit agreement, or any other agreement or
instrument evidencing an obligation for borrowed money, or any other material
agreement or instrument to which the Company is a party or by which the Company
may be bound or to which any of the properties or assets of the Company is
subject. The Company is not in violation of any term or provision of its
certificate of incorporation or by-laws or in violation of any material
franchise, license, permit, applicable law, rule, regulation, judgment or
decree of any governmental agency or court, domestic or foreign, having
jurisdiction over the Company or any of its properties or businesses.
7
2.13 Corporate Power; Licenses; Consents.
2.13.1 Conduct of Business. The Company has all requisite
corporate power and authority, and has all necessary and material
authorizations, approvals, orders, licenses, certificates and permits of and
from all governmental regulatory officials and bodies to own or lease its
properties and conduct its business as described in the Prospectus, and the
Company is and has been doing business in compliance with all such material
authorizations, approvals, orders, licenses, certificates and permits and all
federal, state and local laws, rules and regulations. The disclosures in the
Registration Statement concerning the effects of federal, state and local
regulation on the Company's business as currently contemplated are correct in
all material respects and do not omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
2.13.2 Transactions Contemplated Herein. The Company has all
corporate power and authority to enter into this Agreement and to carry out the
provisions and conditions hereof, and all consents, authorizations, approvals
and orders required in connection therewith have been obtained. No consent,
approval, authorization or order of, and no filing with, any court, government
agency or other body is required for the valid authorization, issuance, sale and
delivery of the Securities and the consummation of the transactions and
agreements contemplated by this Agreement, the Representative's Warrant, the
Merger and Acquisition Agreement and the Prospectus, except with respect to
applicable federal and state securities laws.
2.14 Title to Property; Insurance. The Company has valid and
defensible title to, or valid and enforceable leasehold estates in, all items of
real and personal property (tangible and intangible) owned or leased by it, free
and clear of all liens, encumbrances, claims, security interests, defects and
restrictions of any material nature whatsoever, other than those referred to in
the Prospectus (including the financial statements and notes thereto), purchase
money security interests, and liens for taxes not yet due and payable. The
Company has adequately insured its properties against loss or damage by fire,
theft, damage, destruction, acts of vandalism or terrorism or other casualty and
maintains, in adequate amounts, such other insurance as is usually maintained by
companies engaged in the same or similar business.
2.15 Litigation; Governmental Proceedings. Except as set forth in the
Prospectus, there is no action, suit, proceeding, inquiry, arbitration,
investigation, litigation or governmental proceeding pending or, to the
Company's knowledge, threatened against, or involving the properties or business
of, the Company that might materially and adversely affect the financial
position, prospects, value or the operation of the properties or the business of
the Company, or that questions the validity of the capital stock of the Company
or this Agreement or of any action taken or to be taken by the Company pursuant
to, or in connection with, this Agreement. There are no outstanding orders,
judgments or decrees of any court, governmental agency or other tribunal,
domestic or foreign, naming the Company and enjoining the Company from taking,
or requiring the Company to take, any action, or to which the Company, its
properties or business is bound or subject.
8
2.16 Good Standing. The Company has been duly organized and is validly
existing as a corporation and is in good standing under the laws of the state of
its incorporation. The Company is duly qualified and licensed and in good
standing as a foreign corporation in each jurisdiction in which ownership or
leasing of any properties or the character of its operations requires such
qualification or licensing, except where the failure to qualify would not have a
material adverse effect on the financial position, prospects or value or the
operation of the properties or the business of the Company.
2.17 Taxes. The Company has filed all returns (as hereinafter defined)
required to be filed with taxing authorities prior to the date hereof or has
duly obtained extensions of time for the filing thereof. The Company has paid
all taxes (as hereinafter defined) shown as due on such returns that were filed
and has paid all taxes imposed on or assessed against the Company. The
provisions for taxes payable, if any, shown on the financial statements filed
with or as part of the Registration Statement are sufficient for all accrued and
unpaid taxes, whether or not disputed, and for all periods to and including the
dates of such consolidated financial statements. No issues have been raised (and
are currently pending) by any taxing authority in connection with any of the
returns or taxes asserted as due from the Company, and no waivers of statutes of
limitation with respect to the returns or collection of taxes have been given by
or requested from the Company. The term "taxes" mean all federal, state, local,
foreign, and other net income, gross income, gross receipts, sales, use, ad
valorem, transfer, franchise, profits, license, lease, service, service use,
withholding, payroll, employment, excise, severance, stamp, occupation, premium,
property, windfall profits, customs, duties or other taxes, fees, assessments,
or charges of any kind whatever, together with any interest and any penalties,
additions to tax, or additional amounts with respect thereto. The term "returns"
means all returns, declarations, reports, statements, and other documents
required to be filed in respect to taxes.
2.18 Transactions Affecting Disclosure to NASD.
2.18.1 Finder's Fees. There are no claims, payments, issuances,
arrangements or understandings for services in the nature of a finder's,
consulting or origination fee with respect to the introduction of the Company to
the Representative or any of the Underwriters or the sale of the Securities
hereunder, and except for the arrangements, agreements, understandings, payments
and issuances between the Company and the Representative that are described in
the "Underwriting" section of the Prospectus, there are no arrangements,
agreements, understandings, payments or issuances pursuant to which the Company
will make a payment (i) to any member of the National Association of Securities
Dealers, Inc. ("NASD") or (ii) to any person or entity that has any direct or
indirect affiliation or association with any NASD member.
2.18.2 Payments Within 12 Months. Except as set forth on Schedule
2.18.2, and other than payments to the Representative, the Company has not made
or became obligated to make any direct or indirect payments (in cash, securities
or otherwise) to (i) any person, as a finder's fee, investing fee or otherwise,
in consideration of such person raising capital for the Company or introducing
to the Company persons who provided capital to the Company, (ii) any NASD
member, or (iii) any person or entity that has any direct or indirect
affiliation or association with any NASD member within the 12-month period prior
to the date on which the Registration Statement was filed with the Commission
("Filing Date") or thereafter.
9
2.18.3 Use of Proceeds. None of the net proceeds of the offering
will be paid by the Company to any participating NASD member or any affiliate or
associate of any participating NASD member, except as specifically authorized
herein.
2.18.4 Insiders' NASD Affiliation. Except as set forth on
Schedule 2.18.4, no officer or director of the Company or owner of at least 5%
of the Company's outstanding Common Shares has any direct or indirect
affiliation or association with any NASD member. The Company will advise the
Underwriters and the NASD if it learns that any officer, director or owner of at
least 5% of the Company's outstanding Common Shares is or becomes an affiliate
or associated person of an NASD member participating in the offering.
2.19 Foreign Corrupt Practices Act. Neither the Company nor any of its
officers, directors, employees, agents or any other person acting on their
behalf has, directly or indirectly, given or agreed to give any money, gift or
similar benefit (other than legal price concessions to customers in the ordinary
course of business) to any customer, supplier, employee or agent of a customer
or supplier, or official or employee of any governmental agency or
instrumentality of any government (domestic or foreign) or any political party
or candidate for office (domestic or foreign) or any political party or
candidate for office (domestic or foreign) or other person who was, is, or may
be in a position to help or hinder the business of the Company (or assist it in
connection with any actual or proposed transaction) that (i) might subject the
Company to any damage or penalty in any civil, criminal or governmental
litigation or proceeding, (ii) if not given in the past, might have had a
material adverse effect on the assets, business or operations of the Company as
reflected in any of the financial statements contained in the Prospectus or
(iii) if not continued in the future, might adversely affect the assets,
business, operations or prospects of the Company. The Company's internal
accounting controls and procedures are sufficient to cause the Company to comply
with the Foreign Corrupt Practices Act of 1977, as amended.
2.20 American Stock Exchange Eligibility. As of the Effective Date,
the Public Securities have been approved for listing on The American Stock
Exchange ("AMEX").
2.21 Intangibles. The Company owns or possesses the requisite licenses
or rights to use all trademarks, service marks, service names, trade names,
patents and patent applications, copyrights and other rights (collectively,
"Intangibles") described as being licensed to or owned by it in the Registration
Statement or used by the Company in its business or relating to products or
services sold or currently or currently proposed to be sold by the Company. The
Company's Intangibles are listed on Schedule 2.21. The Company's Intangibles
that have been registered in the United States Patent and Trademark Office have
been fully maintained and are in full force and effect. There is no claim or
action by any person pertaining to, or proceeding pending or, to the Company's
knowledge, threatened relating to, and the Company has not received any notice
of conflict with the asserted rights of others that challenges the exclusive
right of the Company with respect to, any Intangibles used in the conduct of the
Company's business. To the Company's knowledge, after due inquiry, the
Intangibles and the Company's current products, services and processes do not
infringe on any Intangibles held by any third party, and no others have
infringed upon the Intangibles of the Company. The Company has in place all
confidentiality agreements with its employees, consultants and third parties as
are necessary to protect its Intangibles.
10
2.22 Relations With Employees.
2.22.1 Employee Matters. The Company has generally enjoyed a
satisfactory employer-employee relationship with its employees and is in
compliance in all material respects with all federal, state and local laws and
regulations respecting the employment of its employees and employment practices,
terms and conditions of employment and wages and hours relating thereto. There
are no pending investigations involving the Company by the U.S. Department of
Labor, or any other governmental agency responsible for the enforcement of such
federal, state and local laws and regulations. There is no unfair labor
practice charge or complaint against the Company pending before the National
Labor Relations Board or any strike, picketing, boycott, dispute, slowdown or
stoppage pending or, to the Company's knowledge, threatened against or involving
the Company or any predecessor entity, and none has ever occurred. No question
concerning representation exists respecting the employees of the Company and no
collective bargaining agreement or modification thereof is currently being
negotiated by the Company. No grievance or arbitration proceeding is pending
under any expired or existing collective bargaining agreements of the Company,
if any.
2.22.2 Employee Benefit Plans. Other than as set forth in the
Registration Statement, the Company neither maintains, sponsors nor contributes
to, nor is it required to contribute to, any program or arrangement that is an
"employee pension benefit plan," an "employee welfare benefit plan," or a,
"multi-employer plan" as such terms are defined in Sections 3(2), 3(1) and
3(37), respectively, of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") ("ERISA Plans"). The Company does not maintain or contribute
to, and has at no time maintained or contributed to, a defined benefit plan,
as defined in Section 3(35) of ERISA. No ERISA Plan (or any trust created
thereunder) has engaged in a "prohibited transaction" within the meaning of
Section 406 of ERISA or Section 4975 of the Internal Revenue Code of 1986, as
amended ("Code"), that could subject the Company to any material tax penalty for
prohibited transactions and that has not adequately been corrected. Each ERISA
Plan is in compliance with all material reporting, disclosure and other
requirements of the Code and ERISA as they relate to any such ERISA Plan.
Determination letters have been received from the Internal Revenue Service with
respect to each ERISA Plan that is intended to comply with Code Section 401(a),
stating that such ERISA Plan and the attendant trust are qualified thereunder.
The Company has never completely or partially withdrawn from a "multi-employer
plan."
2.23 Officers' Certificate. Any certificate signed by any duly
authorized officer of the Company and delivered directly to you or to your
counsel shall be deemed a representation and warranty by the Company to the
Underwriters as to the matters covered thereby and as of the date given.
2.24 Lock-Up Agreements. The Company has caused to be duly executed
legally binding and enforceable agreements pursuant to which all of the officers
and directors of the Company (including their family members and affiliates)
(collectively, the "Insiders"), agree not to sell any Common Shares or warrants
or options to purchase, or other securities convertible into Common Shares owned
by them (either pursuant to Rule 144 of the Regulations or otherwise) for a
period of 24 months following the Effective Date except (i) with the prior
written consent of the Representative, (ii) that Xxxxxx August may sell 5,000
Common Shares per month in conformity with a written plan for trading securities
designed to meet the requirements of Rule 10b5-1(c) that has been approved in
advance by the Representative, and (iii) that Xxxxxx August's son and stepson
11
may together sell up to an aggregate of 35,000 Common Shares during such period.
2.25 Subsidiaries. Except as set forth on Schedule 2.25, the Company
does not own an interest in any corporation, partnership, limited liability
company, joint venture, trust or other business entity. The Company has no
subsidiaries other than those subsidiaries set forth on Schedule 2.25, each
of which is a corporation duly organized and validly existing under the
laws of the jurisdiction of its incorporation (each a "Subsidiary" and
collectively the "Subsidiaries"). The Company owns all of the capital stock
of the Subsidiaries free and clear of all liens, security interests and
other encumbrances of any nature whatsoever, except as set forth in the
Prospectus. The representations and warranties made by the Company in this
Agreement shall also apply and be true with respect to each Subsidiary,
taken as a whole with the Company and all other Subsidiaries, as if each
representation and warranty contained herein made specific reference to the
Subsidiaries each time the term "Company" was used.
2.26 Environmental Matters. The Company has complied in all material
respects with all applicable environmental laws.
2.27 Government Clearances. Neither the Company nor any of its current
executive officers or engineers has ever been denied a security clearance.
2.28 Product Liability Insurance. To its knowledge, the Company
maintains product liability insurance of the types and in the amounts typically
maintained by similar companies operating in the industry in which the Company
operates.
2.29 Company Not an Investment Company. The Company has been advised
of the rules and requirements under the Investment Company Act of 1940, as
amended (the "Investment Company Act"). The Company is not, and after receipt of
payment for the Securities will not be, an "investment company" within the
meaning of the Investment Company Act, and will conduct its business in a manner
so that it will not become subject to the Investment Company Act.
2.30 Related Party Transactions. There are no business relationships
or related party transactions involving the Company or any other person required
to be described in the Prospectus that have not been described as required.
2.31 Audit Committee. The audit committee of the Company's board of
directors is comprised of at least three directors, a majority of whom are
"independent" within the meaning of Section 10A(m)(3) of the Exchange Act and
Section 121 of the AMEX Company Guide (Listing Standards, Policies and
Regulations), and one of whom possesses the required past employment experience
as specified in Section 121B(b)(i) of the AMEX Company Guide (Listing Standards,
Policies and Requirements). From and after the consummation of this offering,
all of the members of the audit committee shall be independent.
3. Covenants of the Company. The Company covenants and agrees as follows:
3.1 Amendments to Registration Statement. The Company will deliver to
the Representative, prior to filing, any amendment or supplement to the
Registration Statement or Prospectus proposed to be filed after the Effective
12
Date and not file any such amendment or supplement to which the Representative
shall reasonably object.
3.2 Federal Securities Laws.
3.2.1 Compliance. During the time when a Prospectus is required
to be delivered under the Act, the Company will use all reasonable efforts to
comply with all requirements imposed upon it by the Act, the Regulations and the
Exchange Act and by the regulations under the Exchange Act, as from time to time
in force, so far as necessary to permit the continuance of sales of or dealings
in the Public Securities in accordance with the provisions hereof, and the
Prospectus. If at any time when a Prospectus relating to the Public Securities
is required to be delivered under the Act, any event shall have occurred as a
result of which, in the opinion of counsel for the Company or counsel for the
Underwriters, the Prospectus, as then amended or supplemented, includes an
untrue statement of a material fact or omits to state any material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, or if it is
necessary at any time to amend the Prospectus to comply with the Act, the
Company will notify the Representative and Counsel for the Underwriters promptly
and prepare and file with the Commission, subject to Section 3.1 hereof, an
appropriate amendment or supplement in accordance with Section 10 of the Act.
3.2.2 Filing of Final Prospectus. The Company will file the
Prospectus (in form and substance reasonably satisfactory to the Representative)
with the Commission pursuant to the requirements of Rule 424 of the Regulations.
3.2.3 Exchange Act Registration. For a period of five years from
the Effective Date, the Company will use its best efforts to maintain the
registration of the Common Stock under the provisions of Section 12 of the
Exchange Act; provided, however, that the Company shall not be in breach of this
covenant if the Company consummates a "Rule 13e-3 Transaction" (as such term is
defined in Rule 13e-3 promulgated under the Exchange Act).
3.3 Blue Sky Filings. The Company will endeavor in good faith, in
cooperation with the Representative, at or prior to the time the Registration
Statement becomes effective, to qualify the Public Securities for offering and
sale under the securities laws of such jurisdictions as the Representative may
reasonably designate, provided that no such qualification shall be required in
any jurisdiction where, as a result thereof, the Company would be subject to
service of general process or to taxation as a foreign corporation doing
business in such jurisdiction. In each jurisdiction where such qualification
shall be effected, the Company will, unless the Representative agrees that such
action is not at the time necessary or advisable, use all reasonable efforts to
file and make such statements or reports at such times as are or may be required
by the laws of such jurisdiction.
3.4 Delivery to the Underwriters of Prospectuses. The Company will
deliver each of the several Underwriters, without charge, from time to time
during the period when the Prospectus is required to be delivered under the Act
or the Exchange Act, such number of copies of each Preliminary Prospectus and
the Prospectus as such Underwriter may reasonably request and, as soon as the
Registration Statement or any amendment or supplement thereto becomes effective,
deliver to the Representative two original executed Registration Statements,
including exhibits, and all post-effective amendments thereto and copies of all
13
exhibits filed therewith or incorporated therein by reference and all original
executed consents of certified experts.
3.5 Events Requiring Notice to the Representative. The Company will
notify the Representative immediately and confirm the notice in writing (i)
of the effectiveness of the Registration Statement and any amendment thereto,
(ii) of the issuance by the Commission of any stop order or of the initiation,
or the threatening, of any proceeding for that purpose, (iii) if it becomes
aware of the issuance by any state securities commission of any proceedings for
the suspension of the qualification of the Public Securities for offering or
sale in any jurisdiction or of the initiation, or the threatening, of any
proceeding for that purpose, (iv) of the mailing and delivery to the Commission
for filing of any amendment or supplement to the Registration Statement or
Prospectus, (v) of the receipt of any comments or request for any additional
information from the Commission, and (vi) of the happening of any event during
the period described in Section 3.4 hereof that, in the judgment of the Company,
makes any statement of a material fact made in the Registration Statement or the
Prospectus untrue or that requires the making of any changes in the Registration
Statement or the Prospectus in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. If the Commission
or any state securities commission shall enter a stop order or suspend such
qualification at any time, the Company will make every reasonable effort to
obtain promptly the lifting of such order.
3.5.1 AMEX Maintenance. For a period of five years from the date
hereof, the Company will use its best efforts to maintain the listing by the
AMEX of the Common Shares; provided, however, that the Company shall not be in
breach of this covenant if the Company consummates a "Rule 13e-3 Transaction"
(as such term is defined in Rule 13e-3 promulgated under the Securities
Exchange).
3.6 Reports to the Representative and Others.
3.6.1 Periodic Reports, Etc. For a period of five years from the
Effective Date, the Company will promptly furnish to the Representative, and to
each other Underwriter that may so request, copies of such financial statements
and other periodic and special reports as the Company from time to time files
with any governmental authority or furnishes generally to holders of any class
of its securities (at substantially the same time as such information is
filed with the governmental authority or furnished to securityholders), and
promptly furnish to the Representative (i) a copy of each periodic report the
Company shall be required to file with the Commission, (ii) a copy of every
press release and every news item and article with respect to the Company or its
affairs that was released by the Company, (iii) a copy of each Form 8-K or
Schedules 13D, 13G, 14D-1 or 13E-4 received or prepared by the Company, and (iv)
such additional documents and information regarding the Company and the affairs
of any subsidiaries of the Company as the Representative may from time to time
reasonably request.
3.6.2 Transfer Sheets and Weekly Position Listings. For a period
of five years from the Closing Date, the Company will furnish to the
Representative at the Company's sole expense such transfer sheets and position
listings of the Company's securities as the Representative may request,
including the daily, weekly and monthly consolidated transfer sheets of the
transfer agent of the Company and the weekly position listings of the Depository
Trust Company.
14
3.7 Agreements between the Representative and the Company.
3.7.1 Merger and Acquisition Agreement. On the Closing Date, the
Company will enter into a Merger and Acquisition Agreement with EBC in the form
filed with the Commission as an exhibit to the Registration Statement providing
for a finder's fee to be paid to EBC if the Company participates in any merger,
consolidation, or other transaction in which EBC introduced the Company to the
other party for a period of five years from the Closing Date ("Merger and
Acquisition Agreement").
3.7.2 Representative's Warrant. On the Closing Date, the Company
will execute and deliver the Representative's Warrant to the Representative or
its designees in the form filed as an exhibit to the Registration Statement.
3.8 Payment of Expenses.
3.8.1 General Expenses. The Company hereby agrees to pay on the
Closing Date and, to the extent not paid on the Closing Date, on the Option
Closing Date, all expenses incident to the performance of the obligations of the
Company under this Agreement, including but not limited to (i) the preparation,
printing, filing, delivery and mailing (including the payment of postage with
respect to such mailing) of the Registration Statement and any post-effective
amendments thereto, the Prospectus and the Preliminary Prospectuses and the
printing and mailing of this Agreement and related documents, including the cost
of all copies thereof and any amendments thereof or supplements thereto supplied
to the Underwriters in quantities as may be required by the Underwriters, (ii)
the printing, engraving, issuance and delivery of the Common Shares and the
Representative's Warrant, including any transfer or other taxes payable thereon,
(iii) the qualification of the Public Securities under state or foreign
securities or Blue Sky laws, including the filing fees under such Blue Sky laws,
the costs of printing and mailing the "Preliminary Blue Sky Memorandum" and all
amendments and supplements thereto, the fees and disbursements of the Company's
counsel, and fees and disbursements of local counsel, if any, retained for such
purpose, (iv) filing fees, costs and expenses (including fees (equal to $5,000)
and disbursements for the Representative's counsel) incurred in registering the
offering with the NASD, (v) costs of placing "tombstone" advertisements in The
Wall Street Journal, The New York Times and a third publication to be selected
by the Representative, (vi) fees and disbursements of the transfer agent, (vii)
the Company's expenses associated with "due diligence" meetings arranged by
the Representative, (viii) the preparation, binding and delivery of transaction
"bibles," in quantity, form and style satisfactory to the Representative and
transaction lucite cubes or similar commemorative items in a style and quantity
as reasonably requested by the Representative, (ix) any listing of the Public
Securities on the AMEX and (x) all other costs and expenses incident to the
performance of its obligations hereunder that are not otherwise specifically
provided for in this Section 3.14.1. Notwithstanding the foregoing, the
aggregate amount of costs relating to "tombstone" advertisements and transaction
lucite cubes or similar commemorative items that the Company shall be obligated
to pay under this Section 3.12.1 shall not exceed $25,000. The Representative
may deduct from the net proceeds of the offering payable to the Company on the
Closing Date, or the Option Closing Date, if any, the expenses set forth herein
to be paid by the Company to the Representative and/or to third parties.
3.8.2 Non-Accountable Expenses. The Company further agrees that,
in addition to the expenses payable pursuant to Section 3.14.1, it will pay to
the Representative a non-accountable expense allowance equal to three percent
(3%) of the gross proceeds received by the Company from the sale of the Firm
15
Securities and the Option Securities, of which $50,000 has been paid to date,
and the Company will pay the balance on the Closing Date and any additional
monies owed attributable to the Option Securities or otherwise on the Option
Closing Date by certified or bank cashier's check or, at the election of the
Representative, by deduction from the proceeds of the offering contemplated
herein. If the offering contemplated by this Agreement is not consummated for
any reason whatsoever then the following provisions shall apply: The Company's
liability for payment to the Representative of the non-accountable expense
allowance shall be equal to the sum of the Representative's actual out-of-pocket
expenses (including, but not limited to, counsel fees, "road-show" and due
diligence expenses). The Representative shall retain such part of the
non-accountable expense allowance previously paid as shall equal such actual
out-of-pocket expenses. If the amount previously paid is insufficient to cover
such actual out-of-pocket expenses, the Company shall remain liable for and
promptly pay any other actual out-of-pocket expenses. If the amount previously
paid exceeds the amount of actual out-of-pocket expenses, the Representative
shall promptly remit to the Company any such excess.
3.9 Application of Net Proceeds. The Company will apply the net
proceeds from the offering received by it in a manner consistent with the
application described under the caption "Use of Proceeds" in the Prospectus.
The Company hereby agrees that, except as so described, without the express
prior written consent of the Representative the Company will not apply any net
proceeds from the offering to pay (i) any debt for borrowed funds; or (ii) any
obligations (including indebtedness, both principal and any interest thereon,
for borrowed funds and unpaid salaries, fees or other compensation) owed to any
Insider (excluding salaries or fees payable on a current basis to officers and
directors in the ordinary course of the Company's business).
3.10 Delivery of Earnings Statements to Security Holders. The Company
will make generally available to its security holders as soon as practicable,
but not later than the first day of the fifteenth full calendar month following
the Effective Date, an earnings statement (which need not be certified by
independent certified public accountants unless required by the Act or the
Regulations, but which shall satisfy the provisions of Rule 158(a) under Section
11(a) of the Act) covering a period of at least twelve (12) consecutive months
beginning after the Effective Date.
3.11 Key Person Life Insurance. The Company will maintain key person
life insurance in an amount not less than $_________ on the lives of Xxxxxx
August, Xxxxxx X. Xxxx and such other executive officers of the Company as may
reasonably be selected by the Company and EBC, to be in effect as of the
Effective Date, and pay the annual premiums therefor and name the Company as the
sole beneficiary thereof for at least three years following the Effective Date.
3.12 Stabilization. Neither the Company, nor, to its knowledge, any of
its employees, directors or stockholders has taken or will take, directly or
indirectly, any action designed to or that has constituted or that might
reasonably be expected to cause or result in, under the Exchange Act, or
otherwise, stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Public Securities.
3.13 Internal Controls. The Company maintains and will continue to
maintain a system of internal accounting controls sufficient to provide
reasonable assurances that: (i) transactions are executed in accordance with
16
management's general or specific authorization, (ii) transactions are recorded
as necessary in order to permit preparation of financial statements in
accordance with generally accepted accounting principles and to maintain
accountability for assets, (iii) access to assets is permitted only in
accordance with management's general or specific authorization, and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
3.14 Sale of Securities. Subject to the exceptions described in
Section 2.24 hereof, the Company agrees not to permit or cause a private or
public sale or private or public offering of any of its securities (in any
manner, including pursuant to Rule 144 under the Act) owned nominally or
beneficially by the Insiders for the time periods set forth in Section 2.24
following the Effective Date.
3.15 Disclosure Controls and Procedures. The Company has established
and observes, and will continue to observe, disclosure controls and procedures
meeting the requirements of Rule 13a-14(c) under the Exchange Act.
3.16 Employment Agreements. Prior to the Closing Date, the Company
shall have employment agreements in effect between the Company and Xxxxxx
August, Xxxxxx X. Xxxx and such other employees of the Company as may reasonably
be selected by the Company and EBC, each of which agreements shall have such
terms as are satisfactory to EBC, including a covenant not to compete for a
period of two years after termination of employment.
4. Conditions of the Underwriters' Obligations. The obligations of the
several Underwriters to purchase and pay for the Securities, as provided herein,
shall be subject to the continuing accuracy of the representations and
warranties of the Company as of the date hereof and as of each of the Closing
Date and the Option Closing Date, if any, to the accuracy of the statements of
officers of the Company made pursuant to the provisions hereof and to the
performance by the Company of its obligations hereunder and to the following
conditions:
4.1 Regulatory Matters.
4.1.1 Effectiveness of Registration Statement. The Registration
Statement has been declared effective on the date of this Agreement and, at
each of the Closing Date and the Option Closing Date, no stop order suspending
the effectiveness of the Registration Statement shall have been issued and no
proceedings for such purpose shall have been instituted or shall be pending or,
to the Company's knowledge, contemplated by the Commission and any request on
the part of the Commission for additional information shall have been complied
with to the reasonable satisfaction of Xxxxx & Xxxxxxx LLP, counsel to the
Underwriters.
4.1.2 NASD Clearance. By the Effective Date, the Representative
shall have received clearance from the NASD as to the amount of compensation
allowable or payable to the Underwriters as described in the Registration
Statement.
4.1.3 No Blue Sky Stop Orders. No order suspending the sale of
the Securities in any jurisdiction designated by the Representative pursuant to
Section 3.3 hereof shall have been issued on or before either the Closing Date
or the Option Closing Date, and no proceedings for that purpose shall have been
instituted or, to the Company's knowledge, shall be contemplated.
17
4.2 Company Counsel Matters.
4.2.1 Effective Date Opinion of Counsel. On the Effective Date,
the Representative shall have received the favorable opinion of Xxxxxxxx Xxxxxx,
counsel to the Company, dated the Effective Date, addressed to the
Representative and in the form attached hereto as Exhibit A.
4.2.2 Closing Date and Option Closing Date Opinions of Counsel.
On each of the Closing Date and the Option Closing Date, if any, the
Representative shall have received the opinion of Xxxxxxxx Xxxxxx, counsel to
the Company, dated the Closing Date or the Option Closing Date, as the case may
be, addressed to the Representative and in form and substance satisfactory to
Xxxxx & Xxxxxxx LLP, counsel to the Underwriters, confirming as of the Closing
Date and, if applicable, the Option Closing Date, the statements made by
Xxxxxxxx Xxxxxx in their opinion delivered on the Effective Date.
4.2.3 Reliance. In rendering such opinions, such counsel may rely
(i) as to matters involving the application of laws other than the laws of the
United States and jurisdictions in which they are admitted, to the extent such
counsel deem proper and to the extent specified in such opinion, if at all, upon
an opinion or opinions (in form and substance reasonably satisfactory to
Underwriters' counsel) of other counsel reasonably acceptable to Underwriters'
counsel, familiar with the applicable laws, and (ii) as to matters of fact, to
the extent they deem proper, on certificates or other written statements of
officers of departments of various jurisdiction having custody of documents
respecting the corporate existence or good standing of the Company, provided
that copies of any such statements or certificates shall be delivered to
Underwriters' counsel. Any opinion relied upon by counsel for the Company, and
the opinions of counsel for the Company, shall include statements to the effect
that they may be relied upon by counsel for the Underwriters in its opinion
delivered to the Underwriters.
4.3 Cold Comfort Letter. At the time this Agreement is executed, and
at each of the Closing Date and the Option Closing Date, if any, you shall
have received a letter, addressed to the Representative and in form and
substance satisfactory in all respects (including the non-material nature of the
changes or decreases, if any, referred to in clause (iii) below) to you and to
Xxxxx & Xxxxxxx LLP, counsel for the Underwriters, from GGK dated, respectively,
as of the date of this Agreement and as of the Closing Date and the Option
Closing Date, if any:
(i) confirming that they are independent certified public
accountants with respect to the Company within the meaning of the Act and the
applicable Regulations and that they have not, during the periods covered by the
financial statements included in the Prospectus, provided to the Company any
non-audit services, as such term is used in Section 10A(g) of the Exchange Act;
(ii) stating that in their opinion the financial statements and
the financial statement schedules of the Company included (or incorporated by
reference) in the Registration Statement and Prospectus comply as to form in all
material respects with the applicable accounting requirements of the Act and the
published Regulations thereunder;
(iii) stating that, based on the performance of procedures
specified by the American Institute of Certified Public Accountants for a review
of the latest available unaudited interim financial statements of the Company
(as described in Statement on Auditing Standards ("SAS") No. 71 -- "Interim
18
Financial Information"), with an indication of the date of the latest available
unaudited interim financial statements, a reading of the latest available
minutes of the shareholders and board of directors and the various committees of
the board of directors, consultations with officers and other employees of
the Company responsible for financial and accounting matters and other specified
procedures and inquiries, nothing has come to their attention that would lead
them to believe that (a) the unaudited financial statements of the Company
included or incorporated by reference in the Registration Statement do not
comply as to form in all material respects with the applicable accounting
requirements of the Act and the Regulations or any material modification should
be made to the unaudited interim financial statements included in the
Registration Statement for them to be in conformity with generally accepted
accounting principles applied on a basis substantially consistent with that of
the audited financial statements of the Company included or incorporated by
reference in the Registration Statement, (b) at a date not later than five days
prior to the Effective Date, Closing Date or Option Closing Date, as the case
may be, there was any change in the capital stock or long-term debt of the
Company, or any decrease in the net current assets (working capital) or
shareholders' equity of the Company as compared with amounts shown in the
September 30, 2002 balance sheet included in the Registration Statement, other
than as set forth in or contemplated by the Registration Statement, or, if there
was any decrease, setting forth the amount of such decrease, and (c) during the
period from October 1, 2002 to a specified date not later than five days prior
to the Effective Date, Closing Date or Option Closing Date, as the case may
be, there was any decrease in revenues, net earnings or net earnings per Common
Share, in each case as compared with the corresponding period in the preceding
year and as compared with the corresponding period in the preceding quarter,
other than as set forth in or contemplated by the Registration Statement, or, if
there was any such decrease, setting forth the amount of such decrease;
(iv) Setting forth, at a date not later than five days prior to
the Effective Date, the amount of liabilities of the Company (including a
break-down of commercial paper and notes payable to banks);
(v) stating that they have compared specific dollar amounts,
numbers of shares, percentages of revenues and earnings, statements and other
financial information pertaining to the Company set forth in the Prospectus in
each case to the extent that such amounts, numbers, percentages, statements and
information may be derived from the general accounting records, and work sheets,
of the Company with the results obtained from the application of specified
readings, inquiries and other appropriate procedures (which procedures do not
constitute an examination in accordance with generally accepted auditing
standards) set forth in the letter and found them to be in agreement; and
(vi) statements as to such other matters incident to the
transaction contemplated hereby as you may reasonably request.
4.4 Officers' Certificates.
4.4.1 Officers' Certificate. At each of the Closing Date and the
Option Closing Date, if any, the Representative shall have received a
certificate, that is true and correct in fact, of the Company signed by the
Chief Executive Officer and the Secretary of the Company, dated the Closing Date
or the Option Closing Date, as the case may be, respectively, to the effect that
the Company has in all material respects performed all covenants and complied
with all conditions required by this Agreement to be performed or complied with
19
by the Company prior to and as of the Closing Date, or the Option Closing
Date, as the case may be, and that the conditions set forth in Section 4.5
hereof have been satisfied in all material respects as of such date and that, as
of Closing Date and the Option Closing Date, as the case may be, the
representations and warranties of the Company set forth in Section 2 hereof are
true and correct. In addition, the Representative will have received such other
and further certificates of officers of the Company as the Representative may
reasonably request.
4.4.2 Secretary's Certificate. At each of the Closing Date and
the Option Closing Date, if any, the Representative shall have received a
certificate of the Company signed by the Secretary of the Company, dated the
Closing Date or the Option Date, as the case may be, respectively, certifying
(i) that the By-Laws and Certificate of Incorporation, as amended, of the
Company are true and complete, have not been modified and are in full force and
effect, (ii) that the resolutions relating to the public offering contemplated
by this Agreement are in full force and effect and have not been modified,
(iii) all correspondence between the Company or its counsel and the Commission,
(iv) all correspondence between the Company or its counsel and the AMEX
concerning listing of the Securities on the AMEX and (vi) as to the incumbency
of the officers of the Company. The documents referred to in such certificate
shall be attached to such certificate.
4.5 No Material Changes. Prior to and on each of the Closing Date and
the Option Closing Date, if any, (i) there shall have been no material adverse
change or development involving a prospective material change in the assets,
condition or prospects or the business activities, financial or otherwise, of
the Company from the latest dates as of which such condition is set forth in the
Registration Statement and Prospectus, (ii) there shall have been no
transaction, not in the ordinary course of business, entered into by the Company
from the latest date as of which the financial condition of the Company is set
forth in the Registration Statement and Prospectus that is materially adverse to
the Company, taken as a whole, (iii) the Company shall not be in default under
any provision of any instrument relating to any outstanding indebtedness which
default would have a material adverse effect on the Company, (iv) no material
amount of the assets of the Company shall have been pledged or mortgaged, except
as set forth in the Registration Statement and Prospectus, (v) no action suit
or proceeding, at law or in equity, shall have been pending or threatened
against the Company or affecting any of its property or business before or by
any court or federal or state commission, board or other administrative agency
wherein an unfavorable decision, ruling or finding may materially adversely
affect the business, operations, prospects or financial condition or income of
the Company, except as set forth in the Registration Statement and Prospectus,
(vi) no stop order shall have been issued under the Act and no proceedings
therefor shall have been initiated or threatened by the Commission, and (vii)
the Registration Statement and the Prospectus and any amendments or supplements
thereto contain all material statements that are required to be stated therein
in accordance with the Act and the Regulations and conform in all material
respects to the requirements of the Act and the Regulations, and neither the
Registration Statement nor the Prospectus nor any amendment or supplement
thereto contains any untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
4.6 Delivery of Agreements. The Company has delivered to the
Representative an executed copy of the Representative's Warrant and an executed
copy of the Merger and Acquisition Agreement.
20
4.7 Opinion of Counsel for the Underwriters. All proceedings taken in
connection with the authorization, issuance or sale of the Securities as
herein contemplated shall be reasonably satisfactory in form and substance
to you and to Xxxxx & Xxxxxxx LLP, counsel to the Underwriters, and you shall
have received from such counsel a favorable opinion, dated the Closing Date and
the Option Closing Date, if any, with respect to such of these proceedings as
you may reasonably require. On or prior to the Effective Date, the Closing Date
and the Option Closing Date, as the case may be, counsel for the Underwriters
shall have been furnished such documents, certificates and opinions as they may
reasonably require for the purpose of enabling them to review or pass upon the
matters referred to in this Section 4.7, or in order to evidence the accuracy,
completeness or satisfaction of any of the representations, warranties or
conditions herein contained.
5. Indemnification.
5.1 Indemnification of the Underwriter.
5.1.1 General. Subject to the conditions set forth below, the
Company agrees to indemnify and hold harmless each of the Underwriters, their
respective directors, officers, agents and employees and each person, if any,
who controls any such Underwriter ("controlling person") within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act, against any and all
loss, liability, claim, damage and expense whatsoever (including but not limited
to any and all legal or other expenses reasonably incurred in investigating,
preparing or defending against any litigation, or any claims whatsoever,
commenced or threatened, whether arising out of any action between any of the
Underwriters and the Company or between any of the Underwriters and any third
party or otherwise) to which they or any of them may become subject under the
Act, the Exchange Act or any other statute or at common law or otherwise or u
nder the laws of foreign countries (including in settlement of any litigation,
if such settlement is effected with the written consent of the Company), arising
out of or based upon any untrue statement or alleged untrue statement of a
material fact (i) contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus (as from time to time each may be amended and
supplemented, and including any information deemed to be a part thereto pursuant
to Rule 430A or Rule 434 of the Regulations); (ii) contained in any
post-effective amendment or amendments or any new registration statement and
prospectus in which is included securities of the Company issued or issuable
upon exercise of the Representative's Purchase Option; (iii) contained in any
application or other document or written communication (in this Section 5
collectively called "application") executed by the Company or based upon written
information furnished by the Company in any jurisdiction in order to qualify the
Securities under the securities laws thereof or filed with the Commission, any
state securities commission or agency, the NASD (including Nasdaq and NASD
Regulation, Inc.) or any securities exchange; or the omission or alleged
omission therefrom of a material fact required to be stated therein or necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading, unless such statement or omission was made in
reliance upon, and in strict conformity with, written information furnished to
the Company with respect to an Underwriter by or on behalf of such Underwriter
expressly for use in any Preliminary Prospectus, the Registration Statement or
Prospectus, or any amendment or supplement thereof, or in any application, as
the case may be. The Company agrees promptly to notify the Representative of the
commencement of any litigation or proceedings against the Company or any of its
officers, directors or controlling persons in connection with the issue and sale
of the Securities or in connection with the Registration Statement or
Prospectus.
21
5.1.2 Procedure. If any action is brought against an Underwriter
or controlling person in respect of which indemnity may be sought against the
Company pursuant to Section 5.1.1, such Underwriter shall promptly notify the
Company in writing of the institution of such action and the Company shall
assume the defense of such action, including the employment and fees of counsel
(subject to the approval of such Underwriter) and payment of actual expenses.
Such Underwriter or controlling person shall have the right to employ its or
their own counsel in any such case, but the fees and expenses of such counsel
shall be at the expense of such Underwriter or such controlling person unless
(i) the employment of such counsel shall have been authorized in writing by the
Company in connection with the defense of such action, or (ii) the Company shall
not have employed counsel to have charge of the defense of such action, or (iii)
such indemnified party or parties shall have reasonably concluded that there may
be defenses available to it or them that are different from or additional to
those available to the Company (in which case the Company shall not have the
right to direct the defense of such action on behalf of the indemnified party or
parties), in any of which events the fees and expenses of not more than one
additional firm of attorneys selected by the Underwriter and/or controlling
person shall be borne by the Company. Notwithstanding anything to the contrary
contained herein, if the Underwriter or controlling person shall assume the
defense of such action as provided above, the Company shall have the right to
approve the terms of any settlement of such action which approval shall not be
unreasonably withheld.
5.2 Indemnification of the Company. Each Underwriter, severally and
not jointly, agrees to indemnify and hold harmless the Company against any and
all loss, liability, claim, damage and expense described in the foregoing
indemnity from the Company to the several Underwriters, as incurred, but only
with respect to untrue statements or omissions, or alleged untrue statements or
omissions directly relating to the transactions effected by the Underwriters in
connection with this offering made in any Preliminary Prospectus, the
Registration Statement or Prospectus or any amendment or supplement thereto or
in any application in reliance upon, and in strict conformity with, written
information furnished to the Company with respect to such Underwriter by or on
behalf of the Underwriter expressly for use in such Preliminary Prospectus, the
Registration Statement or Prospectus or any amendment or supplement thereto or
in any such application. In case any action shall be brought against the Company
based on any Preliminary Prospectus, the Registration Statement or Prospectus or
any amendment or supplement thereto or any application, and in respect of which
indemnity may be sought against any Underwriter, such Underwriter shall have the
rights and duties given to the Company, and the Company shall have the rights
and duties given to the several Underwriters, by the provisions of Section
5.1.2.
5.3 Contribution.
5.3.1 Contribution Rights. In order to provide for just and
equitable contribution under the Act in any case in which (i) any person
entitled to indemnification under this Section 5 makes claim for indemnification
pursuant hereto but it is judicially determined (by the entry of a final
judgment or decree by a court of competent jurisdiction and the expiration of
time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
this Section 5 provides for indemnification in such case, or (ii) contribution
under the Act, the Exchange Act or otherwise may be required on the part of any
such person in circumstances for which indemnification is provided under this
Section 5, then, and in each such case, the Company and the Underwriters shall
contribute to the aggregate losses, liabilities, claims, damages and expenses of
the nature contemplated by said indemnity agreement incurred by the Company and
22
the Underwriters, as incurred, in such proportions that the Underwriters are
responsible for that portion represented by the percentage that the underwriting
discount appearing on the cover page of the Prospectus bears to the initial
offering price appearing thereon and the Company is responsible for the balance;
provided, that, no person guilty of a fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. Notwithstanding
the provisions of this Section 5.3.1, no Underwriter shall be required to
contribute any amount in excess of the amount by which the total price at which
the Public Securities underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages that such Underwriter
has otherwise been required to pay in respect of such losses, liabilities,
claims, damages and expenses. For purposes of this Section, each director,
officer and employee of an Underwriter, and each person, if any, who controls an
Underwriter within the meaning of Section 15 of the Act, shall have the same
rights to contribution as the Underwriter.
5.3.2 Contribution Procedure. Within fifteen days after receipt
by any party to this Agreement (or its representative) of notice of the
commencement of any action, suit or proceeding, such party will, if a claim for
contribution in respect thereof is to be made against another party
("contributing party"), notify the contributing party of the commencement
thereof, but the omission to so notify the contributing party will not relieve
it from any liability that it may have to any other party other than for
contribution hereunder. In case any such action, suit or proceeding is brought
against any party, and such party notifies a contributing party or its
representative of the commencement thereof within the aforesaid fifteen days,
the contributing party will be entitled to participate therein with the
notifying party and any other contributing party similarly notified. Any such
contributing party shall not be liable to any party seeking contribution on
account of any settlement of any claim, action or proceeding that was effected
by the party seeking contribution without the written consent of such
contributing party. The contribution provisions contained in this Section are
intended to supersede, to the extent permitted by law, any right to contribution
under the Act, the Exchange Act or otherwise available.
6. Default by an Underwriter.
6.1 Default Not Exceeding 10% of Firm Securities or Option Securities.
If any Underwriter or Underwriters shall default in its or their obligations to
purchase the Firm Securities or the Option Securities if exercised, hereunder,
and if the number of the Firm Securities or Option Securities with respect to
which such default relates does not exceed in the aggregate 10% of the number of
Firm Securities or Option Securities that all Underwriters have agreed to
purchase hereunder, then such Firm Securities or Option Securities to which the
default relates shall be purchased by the non-defaulting Underwriters in
proportion to their respective commitments hereunder.
23
6.2 Default Exceeding 10% of Firm Securities or Option Securities. In
the event that such default relates to more than 10% of the Firm Securities
or Option Securities, you may in your discretion arrange for yourself or for
another party or parties to purchase such Firm Securities or Option Securities
to which such default relates on the terms contained herein. If within one
business day after such default relating to more than 10% of the Firm Securities
or Option Securities you do not arrange for the purchase of such Firm Securities
or Option Securities, then the Company shall be entitled to a further period of
one business day within which to procure another party or parties satisfactory
to you to purchase said Firm Securities or Option Securities on such terms. In
the event that neither you nor the Company arrange for the purchase of the Firm
Securities or Option Securities to which a default relates as provided in this
Section 6, this Agreement may be terminated by you or the Company without
liability on the part of the Company (except as provided in Sections 3.8 and 5
hereof) or the several Underwriters (except as provided in Section 5 hereof);
provided, however, that if such default occurs with respect to the Option
Securities, this Agreement will not terminate as to the Firm Securities; and
provided further that nothing herein shall relieve a defaulting Underwriter of
its liability, if any, to the other several Underwriters and to the Company for
damages occasioned by its default hereunder.
6.3 Postponement of Closing Date. In the event that the Firm
Securities or Option Securities to which the default relates are to be purchased
by the non-defaulting Underwriters, or are to be purchased by another party or
parties as aforesaid, you or the Company shall have the right to postpone the
Closing Date or Option Closing Date for a reasonable period, but not in any
event exceeding five 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 to file promptly any
amendment to the Registration Statement or the Prospectus that in the opinion of
counsel for the Underwriters may thereby be made necessary. The term
"Underwriter" as used in this Agreement shall include any party substituted
under this Section 6 with like effect as if it had originally been a party to
this Agreement with respect to such Securities.
7. Board Designee. For a period of five years from the Effective Date, the
Company will appoint a designee of EBC (reasonably acceptable to the Company) as
a member of the Board of Directors of the Company. Such designee shall receive
no more or less compensation than is paid to other non-management directors of
the Company and shall be entitled to be reimbursed for all reasonable
out-of-pocket expenses incurred in attending such meetings, including but not
limited to food, lodging and transportation. To the extent permitted by law, the
Company will agree to indemnify EBC and its designee for the actions of such
designee as a director of the Company. In addition, the Company will obtain and
maintain a liability insurance policy affording coverage for the acts of its
officers and directors in an amount not less than $3,000,000 and will include
EBC's designee as an insured under such policy. If EBC has not exercised its
option to designate a member of the Company's Board of Directors, EBC shall have
the right to send a representative (who need not be the same individual from
meeting to meeting) to observe each meeting of the Board of Directors. The
Company agrees to give EBC written notice of each such meeting and to provide
EBC with an agenda and minutes of the meeting no later than it gives such notice
and provides such items to the other directors, and reimburse the representative
of EBC for its reasonable out-of-pocket expenses incurred in connection with its
attendance at the meeting, including but not limited to, food, lodging and
transportation and any fees paid to the directors for attending such meeting.
24
8. Representations and Agreements to Survive Delivery. Except as the
context otherwise requires, all representations, warranties and agreements
contained in this Agreement shall be deemed to be representations, warranties
and agreements at the Closing Dates and such representations, warranties and
agreements of the Underwriters and Company, including the indemnity agreements
contained in Section 5 hereof, shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of any Underwriter,
the Company or any controlling person, and shall survive termination of this
Agreement or the issuance and delivery of the Securities to the several
Underwriters until the earlier of the expiration of any applicable statute of
limitations and the seventh anniversary of the later of the Closing Date or the
Option Closing Date, if any, at which time the representations, warranties and
agreements shall terminate and be of no further force and effect.
9. Effective Date of This Agreement and Termination Thereof.
9.1 Effective Date. This Agreement shall become effective on the
Effective Date at the time that the Registration Statement is declared
effective.
9.2 Termination. You shall have the right to terminate this Agreement
at any time prior to any Closing Date, (i) if any domestic or international
event or act or occurrence has materially disrupted, or in your opinion will in
the immediate future materially disrupt, general securities markets in the
United States; or (ii) if trading on the New York Stock Exchange, the American
Stock Exchange or in the over-the-counter market shall have been suspended, or
minimum or maximum prices for trading shall have been fixed, or maximum ranges
for prices for securities shall have been fixed, or maximum ranges for prices
for securities shall have been required on the over-the-counter market by the
NASD or by order of the Commission or any other government authority having
jurisdiction, or (iii) if the United States shall have become involved in a war
or major hostilities, or (iv) if a banking moratorium has been declared by a
New York State or federal authority, or (v) if a moratorium on foreign exchange
trading has been declared that materially and adversely impacts the United
States securities market, or (vi) if the Company shall have sustained a material
loss by fire, flood, accident, hurricane, earthquake, theft, sabotage, terrorism
or other calamity or malicious act that, whether or not such loss shall have
been insured, will, in your opinion, make it inadvisable to proceed with the
delivery of the Securities, or (vii) if the Company has breached any of its
representations or warranties, or failed to perform any of its obligations
hereunder, or (ix) if the Representative shall have become aware after the date
hereof of such a material adverse change in the condition (financial or
otherwise), business, or prospects of the Company, or such adverse material
change in general market conditions as in the Representative's judgment would
make it impracticable to proceed with the offering, sale and/or delivery of the
Securities or to enforce contracts made by the Underwriters for the sale of the
Securities.
9.3 Expenses. In the event that this Agreement shall not be carried
out for any reason whatsoever, within the time specified herein or any
extensions thereof pursuant to the terms hereof, the obligations of the Company
to pay the expenses related to the transactions contemplated herein shall be
governed by Section 3.8 hereof.
9.4 Indemnification. Notwithstanding any contrary provision contained
in this Agreement, any election hereunder or any termination of this Agreement,
and whether or not this Agreement is otherwise carried out, the provisions of
Section 5 shall not be in any way affected by, such election or termination or
25
failure to carry out the terms of this Agreement or any part hereof.
10. Miscellaneous.
10.1 Notices. All communications hereunder, except as herein otherwise
specifically provided, shall be in writing and shall be mailed, delivered or
telecopied and confirmed
If to the Representative:
EarlyBirdCapital, Inc.
Xxx Xxxxx Xxxxxx Xxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxx
Telecopier: (000) 000-0000
Copy to:
Xxxxx & Xxxxxxx LLP
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxx, Esq.
Telecopier: (000) 000-0000
If to the Company:
CPI Aerostructures, Inc.
000X Xxxxxxxxx Xxxxx
Xxxxxxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxx
Telecopier: (000) 000-0000
Copy to:
Xxxxxxxx Xxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxx Xxxxxx, Esq.
Telecopier: (000) 000-0000
10.2 Headings. The headings contained herein are for the sole purpose
of convenience of reference, and shall not in any way limit or affect the
meaning or interpretation of any of the terms or provisions of this Agreement.
10.3 Amendment. This Agreement may be amended only by a written
instrument executed by each of the parties hereto.
26
10.4 Entire Agreement. This Agreement (together with the other
agreements and documents being delivered pursuant to or in connection with this
Agreement) constitutes the entire agreement of the parties hereto with respect
to the subject matter hereof and supersedes all prior agreements and
understandings of the parties, oral and written, with respect to the subject
matter hereof.
10.5 Binding Effect. This Agreement shall inure solely to the benefit
of and shall be binding upon, the Representative, the Underwriters, the Company
and the controlling persons, directors and officers referred to in Section 5
hereof, and their respective successors, legal representatives and assigns, and
no other person shall have or be construed to have any legal or equitable right,
remedy or claim under or in respect of or by virtue of this Agreement or any
provisions herein contained.
10.6 Governing Law, Jurisdiction. This Agreement shall be governed by
and construed and enforced in accordance with the law of the State of New York,
without giving effect to principles of conflicts of law. The Company hereby
agrees that any action, proceeding or claim against it arising out of or
relating in any way to this Agreement shall be brought and enforced in the
courts of the State of New York or the United States District Court for the
Southern District of New York, and irrevocably submits to such jurisdiction,
which jurisdiction shall be exclusive. The Company hereby waives any objection
to such exclusive jurisdiction and that such courts represent an inconvenient
forum. Any such process or summons to be served upon the Company may be served
by transmitting a copy thereof by registered or certified mail, return receipt
requested, postage prepaid, addressed to it at the address set forth in Section
10.1 hereof. Such mailing shall be deemed personal service and shall be legal
and binding upon the Company in any action, proceeding or claim. The parties
agree that the prevailing party(ies) in any such action shall be entitled to
recover from the other party(ies) all of its reasonable attorneys' fees and
expenses relating to such action or proceeding and/or incurred in connection
with the preparation therefor.
10.7 Execution in Counterparts. This Agreement may be executed in one
or more counterparts, and by the different parties hereto in separate
counterparts, each of which shall be deemed to be an original, but all of which
taken together shall constitute one and the same agreement, and shall become
effective when one or more counterparts has been signed by each of the parties
hereto and delivered to each of the other parties hereto.
10.8 Waiver, Etc. The failure of any of the parties hereto at any time
to enforce any of the provisions of this Agreement shall not be deemed or
construed to be a waiver of any such provision, nor in any way to affect the
validity of this Agreement or any provision hereof or the right of any of the
parties hereto thereafter to enforce each and every provision of this Agreement.
No waiver of any breach, non-compliance or non-fulfillment of any of the
provisions of this Agreement shall be effective unless set forth in a written
instrument executed by the party or parties against whom or which enforcement of
such waiver is sought; and no waiver of any such breach, non-compliance or
non-fulfillment shall be construed or deemed to be a waiver of any other or
subsequent breach, non-compliance or non-fulfillment.
10.9 Representative's Right to Assign. The Representative shall be
entitled at any time to assign any or all of its rights or duties hereunder,
without the consent of the Company or any other person, to any registered
broker-dealer a majority of the outstanding equity securities of which is owned
by Research Partners International, Inc.
27
If the foregoing correctly sets forth the understanding between the
Underwriters and the Company, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement between
us.
Very truly yours,
CPI AEROSTRUCTURES, INC.
By:____________________________________
Name: Xxxxxx August
Title: Chairman and Chief Executive Officer
Accepted as of the date first
above written.
New York, New York
EARLYBIRDCAPITAL, INC.
By:_________________________________________
Name: Xxxxxx Xxxxxx
Title: Managing Director
