6,000,000 Units
(each Unit consisting of one share of Class A Common Stock, par
value $.0001 per share; one redeemable Class A warrant
and one redeemable Class B warrant)
ADVANCED AERODYNAMICS
& STRUCTURES, INC.
UNDERWRITING AGREEMENT
New York, New York
__________, 1996
X.X. Xxxxx Investment Banking Corp.
00 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Advanced Aerodynamics & Structures, Inc., a Delaware corporation (the
"Company"), proposes to issue and sell to X.X. Xxxxx Investment Banking Corp.
(the "Underwriter"), an aggregate of 6,000,000 Units, each unit being
hereinafter referred to as a "Unit" and consisting of one share of Class A
Common Stock, par value $.0001 per share, ("Shares"), one redeemable Class A
warrant ("Class A Warrant") and one redeemable Class B warrant ("Class B
Warrant"). Each Class A Warrant is exercisable to purchase one share of Common
Stock and one Class B Warrant at a price of $6.50 from ___________, 1996 to
___________, 2001. Each Class B Warrant is exercisable to purchase one share of
Class A Common Stock at a price of $8.75 from __________ , 1996 to ___________ ,
2001. The Class A Warrants and Class B Warrants are collectively referred to as
the "Warrants". The Warrants are subject to redemption, in certain instances
commencing one year from the date of this Agreement. In addition, the Company
proposes to grant to the Underwriter the option referred to in Section 2(b) to
purchase all or any part of an aggregate of 900,000 additional Units. Unless
the context otherwise indicates, the term "Units" shall include the 900,000
additional Units referred to above.
The aggregate of 6,000,000 Units to be sold by the Company, together
with all or any part of the 900,000 Units which the Underwriter has the option
to purchase, and the Shares and the Warrants comprising such Units, are herein
called the "Units." The Class A Common Stock of the Company to be outstanding
after giving effect to the sale of the Shares is herein called the "Class A
Common Stock." The Shares and Warrants included in the Units (including the
Units which the Underwriter has the option to purchase) are herein collectively
called the "Securities."
You have advised the Company that you desire to purchase the Units.
The Company confirms the agreements made by it with respect to the purchase of
the Units by you as follows:
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to, and agrees with, the Underwriter that:
(a) A registration statement (File No. 333-12273) on Form SB-2
relating to the public offering of the Units, including a form of prospectus
subject to completion, copies of which have heretofore been delivered to you,
has been prepared by the Company in conformity with the requirements of the
Securities Act of 1933, as amended (the "Act"), and the rules and regulations
(the "Rules and Regulations") of the Securities and Exchange Commission (the
"Commission") thereunder, and has been filed with the Commission under the Act
and one or more amendments to such registration statement may have been so
filed. After the execution of this Agreement, the Company will file with the
Commission either (i) if such registration statement, as it may have been
amended, has been declared by the Commission to be effective under the Act,
either (A) if the Company relies on Rule 434 under the Act, a Term Sheet (as
hereinafter defined) relating to the Units that shall identify the Preliminary
Prospectus (as hereinafter defined) that it supplements containing such
information as is required or permitted by Rules 434, 430A and 424(b) under the
Act or (B) if the Company does not rely on Rule 434 under the Act a prospectus
in the form most recently included in an amendment to such registration
statement (or, if no such amendment shall have been filed, in such registration
statement), with such changes or insertions as are required by Rule 430A under
the Act or permitted by Rule 424(b) under the Act and in the case of either
clause (i)(A) or (i)(B) of this sentence, as have been provided to and approved
by you prior to the execution of this Agreement, or (ii) if such registration
statement, as it may have been amended, has not been declared by the Commission
to be effective under the Act, an amendment to such registration statement,
including a form of prospectus, a copy of which amendment shall be furnished to
and approved by you prior to the execution of this Agreement.
As used in this Agreement, the term "Registration Statement" means
such registration statement, as amended at the time when it was or is declared
effective, including all financial schedules and exhibits thereto and including
any information omitted therefrom pursuant to Rule 430A under the Act and
included in the Prospectus (as hereinafter defined); the term "Preliminary
Prospectus" means each prospectus subject to completion filed with such
registration statement or any amendment thereto (including the prospectus
subject to completion, if any, included in the Registration Statement or any
amendment thereto at the time it was or is declared effective); the term
"Prospectus" means (A) if the Company relies on Rule 434 under the Act, the Term
Sheet relating to the Shares and Warrants that is first filed pursuant to Rule
424(b)(7) under the Act, together with the Preliminary Prospectus identified
therein that such Term Sheet supplements; (B) if the Company does not rely on
Rule 434 under the Act, the prospectus first filed with the Commission pursuant
to Rule 424(b) under the Act or (C) if the Company does not rely on Rule 434
under the Act and if no prospectus is required to be filed pursuant to said
Rule 424(b), such term means the prospectus included in the Registration
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Statement; except that if such registration statement or prospectus is amended
or such prospectus is supplemented, after the effective date of such
registration statement and prior to the Option Closing Date (as hereinafter
defined), the terms "Registration Statement" and "Prospectus" shall include such
registration statement and prospectus as so amended, and the term "Prospectus"
shall include the prospectus as so supplemented, or both, as the case may be;
and the term "Term Sheet" means any term sheet that satisfies the requirements
of Rule 434 under the Act. Any reference to the "date" of a Prospectus that
includes a Term Sheet shall mean the date of such Term Sheet.
(b) The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus. At the time the
Registration Statement becomes effective and at all times subsequent thereto
up to and on the Closing Date (as hereinafter defined) or the Option Closing
Date (as hereafter defined), as the case may be, (i) the Registration
Statement and Prospectus will in all respects conform to the requirements of
the Act and the Rules and Regulations; and (ii) neither the Registration
Statement nor the Prospectus will include any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make statements therein not misleading; provided, however, that
the Company makes no representations, warranties or agreements as to
information contained in or omitted from the Registration Statement or
Prospectus in reliance upon, and in conformity with, written information
furnished to the Company by or on behalf of the Underwriter specifically for
use in the preparation thereof. It is understood that the statements set
forth in the Prospectus on page 2 with respect to stabilization, under the
heading "Underwriting" and the identity of counsel to the Underwriter under
the heading "Legal Matters" constitute the only information furnished in
writing by or on behalf of the Underwriter for inclusion in the Registration
Statement and Prospectus, as the case may be.
(c) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the jurisdiction of
its incorporation, with full power and authority (corporate and other) to own
its properties and conduct its business as described in the Prospectus and is
duly qualified to do business as a foreign corporation and is in good standing
in all other jurisdictions in which the nature of its business or the character
or location of its properties requires such qualification, except where failure
to so qualify will not materially affect the Company's business, properties or
financial condition.
(d) The authorized, issued and outstanding capital stock of the
Company as of September 30, 1996 is as set forth in the Prospectus under
"Capitalization"; the shares of issued and outstanding capital stock of the
Company set forth thereunder have been duly authorized, validly issued and are
fully paid and non-assessable; except as set forth in the Prospectus, no
options, warrants, or other rights to purchase, agreements or other obligations
to issue, or agreements or other rights to convert any obligation into, any
shares of capital stock of the Company have been granted or entered into by the
Company; and the capital stock conforms to all statements relating thereto
contained in the Registration Statement and Prospectus.
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(e) The Units and the Shares are duly authorized, and when
issued and delivered pursuant to this Agreement, will be duly authorized,
validly issued, fully paid and nonassessable and free of preemptive rights of
any security holder of the Company. Neither the filing of the Registration
Statement nor the offering or sale of the Units as contemplated in this
Agreement gives rise to any rights, other than those which have been waived or
satisfied, for or relating to the registration of any shares of Common Stock,
except as described in the Registration Statement.
The Warrants have been duly authorized and, when issued and delivered
pursuant to this Agreement, will have been duly executed, issued and delivered
and will constitute valid and legally binding obligations of the Company
enforceable in accordance with their terms and entitled to the benefits provided
by the warrant agreement pursuant to which such Warrants are to be issued (the
"Warrant Agreement"), which will be substantially in the form filed as an
exhibit to the Registration Statement. The shares of Class A Common Stock
issuable upon exercise of the Warrants have been reserved for issuance upon the
exercise of the Warrants and when issued in accordance with the terms of the
Warrants and Warrant Agreement, will be duly and validly authorized, validly
issued, fully paid and non-assessable and free of preemptive rights and no
personal liability will attach to the ownership thereof. The Warrant Agreement
has been duly authorized and, when executed and delivered pursuant to this
Agreement, will have been duly executed and delivered and will constitute the
valid and legally binding obligation of the Company enforceable in accordance
with its terms. The Warrants and the Warrant Agreement conform to the
respective descriptions thereof in the Registration Statement and Prospectus.
The Shares and the Warrants contained in the Unit Purchase Option have
been duly authorized and, when duly issued and delivered, such Warrants will
constitute valid and legally binding obligations of the Company enforceable in
accordance with their terms and entitled to the benefits provided by the Unit
Purchase Option. The Shares included in the Unit Purchase Option (and the
shares of Common Stock issuable upon exercise of such Warrants) when issued and
sold, will be duly authorized, validly issued, fully paid and non-assessable and
free of preemptive rights and no personal liability will attach to the ownership
thereof.
(f) This Agreement, the Unit Purchase Option and the M/A
Agreement (as defined herein) have been duly and validly authorized, executed
and delivered by the Company. The Company has full power and lawful
authority to authorize, issue and sell the Units to be sold by it hereunder
on the terms and conditions set forth herein, and no consent, approval,
authorization or other order of any governmental authority is required in
connection with such authorization, execution and delivery or with the
authorization, issue and sale of the Units or the Unit Purchase Option,
except such as may be required under the Act or state securities laws.
(g) Except as described in the Prospectus, the Company is not in
violation, breach or default of or under, and consummation of the transactions
herein contemplated and the fulfillment of the terms of this Agreement will not
conflict with, or result in a breach or violation of, any of the terms or
provisions of, or constitute a default under, or
-4-
result in the creation or imposition of any lien, charge or encumbrance upon any
of the property or assets of the Company pursuant to the terms of any indenture,
mortgage, deed of trust, loan agreement or 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, nor will such action
result in any violation of the provisions of the articles of incorporation or
the by-laws of the Company, as amended, or any statute or any order, rule or
regulation applicable to the Company of any court or of any regulatory authority
or other governmental body having jurisdiction over the Company.
(h) Subject to the qualifications stated in the Prospectus, the
Company has good and marketable title to all properties and assets described in
the Prospectus as owned by it, free and clear of all liens, charges,
encumbrances or restrictions, except such as are not materially significant or
important in relation to its business; all of the material leases and subleases
under which the Company is the lessor or sublessor of properties or assets or
under which the Company holds properties or assets as lessee or sublessee as
described in the Prospectus are in full force and effect, and, except as
described in the Prospectus, the Company is not in default in any material
respect with respect to any of the terms or provisions of any of such leases or
subleases, and no claim has been asserted by anyone adverse to rights of the
Company as lessor, sublessor, lessee or sublessee under any of the leases or
subleases mentioned above, or affecting or questioning the right of the Company
to continued possession of the leased or subleased premises or assets under any
such lease or sublease except as described or referred to in the Prospectus; and
the Company owns or leases all such properties described in the Prospectus as
are necessary to its operations as now conducted and, except as otherwise stated
in the Prospectus, as proposed to be conducted as set forth in the Prospectus.
(i) Price Waterhouse LLP, who have given their reports on
certain financial statements filed and to be filed with the Commission as a part
of the Registration Statement, which are incorporated in the Prospectus, are
with respect to the Company, independent public accountants as required by the
Act and the Rules and Regulations.
(j) The financial statements, together with related notes, set
forth in the Prospectus (or if the Prospectus is not in existence, the most
recent Preliminary Prospectus) or the Registration Statement present fairly the
financial position and results of operations and changes in cash flow position
of the Company on the basis stated in the Registration Statement, at the
respective dates and for the respective periods to which they apply. Said
statements and Schedules and related notes have been prepared in accordance with
generally accepted accounting principles applied on a basis which is consistent
during the periods involved. The information set forth under the captions
"Dilution", "Capitalization", and "Selected Financial Data" in the Prospectus
fairly present, on the basis stated in the Prospectus, the information included
therein. The pro forma financial information filed as part of the Registration
Statement or included in the Prospectus (or preliminary prospectus) has been
prepared in accordance with the Commission's rules and guidelines with respect
to pro forma financial statements, and includes all adjustments necessary to
present fairly the pro forma financial condition and results
-5-
of operations at the respective dates and for the respective periods indicated
and all assumptions used in preparing such pro forma financial statements are
reasonable.
(k) Subsequent to the respective dates as of which information
is given in the Registration Statement and Prospectus (or, if the Prospectus is
not in existence, the most recent Preliminary Prospectus), the Company has not
incurred any liabilities or obligations, direct or contingent, not in the
ordinary course of business, or entered into any transaction not in the ordinary
course of business, which is material to the business of the Company, and there
has not been any change in the capital stock of, or any incurrence of short-term
or long-term debt by, the Company or any issuance of options, warrants or other
rights to purchase the capital stock of the Company or any adverse change or any
development involving, so far as the Company can now reasonably foresee a
prospective adverse change in the condition (financial or other), net worth,
results of operations, business, key personnel or properties of it which would
be material to the business or financial condition of the Company and the
Company has not become a party to, and neither the business nor the property of
the Company has become the subject of, any material litigation whether or not in
the ordinary course of business.
(l) Except as set forth in the Prospectus, there is not now
pending or, to the knowledge of the Company, threatened, any action, suit or
proceeding to which the Company is a party before or by any court or
governmental agency or body, which might result in any material adverse change
in the condition (financial or other), business prospects, net worth, or
properties of the Company, nor are there any actions, suits or proceedings
related to environmental matters or related to discrimination on the basis of
age, sex, religion or race; and no labor disputes involving the employees of the
Company exist or are imminent which might be expected to adversely affect the
conduct of the business, property or operations or the financial condition or
results of operations of the Company.
(m) Except as disclosed in the Prospectus, the Company has filed
all necessary federal, state and foreign income and franchise tax returns and
has paid all taxes shown as due thereon; and there is no tax deficiency which
has been or to the knowledge of the Company might be asserted against the
Company.
(n) The Company has sufficient licenses, permits and other
governmental authorizations currently required for the conduct of its business
or the ownership of its properties as described in the Prospectus and is in all
material respects complying therewith and owns or possesses adequate rights to
use all material patents, patent applications, trademarks, service marks,
trade-names, trademark registrations, service xxxx registrations, copyrights and
licenses necessary for the conduct of such business and had not received any
notice of conflict with the asserted rights of others in respect thereof. To
the best knowledge of the Company, none of the activities or business of the
Company are in violation of, or cause the Company to violate, any law, rule,
regulation or order of the United States, any state, county or locality, or of
any agency or body of the United States or of any state, county or locality, the
violation of which would have a material adverse impact upon the condition
(financial or otherwise), business, property, prospective results of operations,
or net worth of the Company.
-6-
(o) The Company has not, directly or indirectly, at any time
(i) made any contributions to any candidate for political office, or failed to
disclose fully any such contribution in violation of law or (ii) made any
payment to any state, federal or foreign governmental officer or official, or
other person charged with similar public or quasi-public duties, other than
payments or contributions required or allowed by applicable law. The Company's
internal accounting controls and procedures are sufficient to cause the Company
to comply in all material respects with the Foreign Corrupt Practices Act of
1977, as amended.
(p) On the Closing Dates (hereinafter defined) all transfer or
other taxes, (including franchise, capital stock or other tax, other than income
taxes, imposed by any jurisdiction) if any, which are required to be paid in
connection with the sale and transfer of the Units to the Underwriter hereunder
will have been fully paid or provided for by the Company and all laws imposing
such taxes will have been fully complied with.
(q) All contracts and other documents of the Company which are,
under the Rules and Regulations, required to be filed as exhibits to the
Registration Statement have been so filed.
(r) The Company has not taken and will not take, directly or
indirectly, any action designed to cause or result in, or which has constituted
or which might reasonably be expected to constitute, the stabilization or
manipulation of the price of the shares of Common Stock to facilitate the sale
or resale of the Units hereby.
(s) The Company has no subsidiaries.
(t) The Company has not entered into any agreement pursuant to
which any person is entitled either directly or indirectly to compensation from
the Company for services as a finder in connection with the proposed public
offering.
(u) Except as previously disclosed in writing by the Company to
you, no officer, director or stockholder of the Company has any affiliation or
association with any member of the National Association of Securities Dealers
Inc. ("NASD").
(v) The Company is not, and upon receipt of the proceeds from
the sale of the Units will not be, an "investment company" within the meaning of
the Investment Company Act of 1940, as amended, and the rules and regulations
thereunder.
(w) The Company has not distributed and will not distribute
prior to the First Closing Date any offering material in connection with the
offering and sale of the Units other than the Preliminary Prospectus,
Prospectus, the Registration Statement or the other materials permitted by the
Act, if any.
(x) The conditions for use of Form SB-2, as set forth in the
General Instructions thereto, have been satisfied.
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(y) There are no business relationships or related-party
transactions of the nature described in Item 404 of Regulation S-B involving the
Company and any person described in such Item that are required to be disclosed
in the Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus) and that have not been so disclosed.
2. PURCHASE, DELIVERY AND SALE OF THE UNITS.
(a) Subject to the terms and conditions of this Agreement, and
upon the basis of the representations, warranties, and agreements herein
contained, the Company agrees to issue and sell to the Underwriter, and the
Underwriter agrees, to buy from the Company at $_______ per Unit, at the place
and time hereinafter specified, 6,000,000 Units.
Delivery of the First Units against payment therefor shall take
place at the offices of X.X. Xxxxx Investment Banking Corp., 00 Xxxx Xxxxxx, Xxx
Xxxx, X.X. (or at such other place as may be designated by agreement between
you and the Company) at 10:00 a.m., New York time, on , 1996, or at such
later time and date as you may designate, such time and date of payment and
delivery for the First Units being herein called the "First Closing Date."
(b) In addition, subject to the terms and conditions of this
Agreement, and upon the basis of the representations, warranties and agreements
herein contained, the Company hereby grants an option to the Underwriter to
purchase all or any part of an aggregate of an additional 900,000 Units at the
same price per Unit as the Underwriter shall pay for the First Units being sold
pursuant to the provisions of subsection (a) of this Section 2 (such additional
Units being referred to herein as the "Option Units"). This option may be
exercised within 30 days after the effective date of the Registration Statement
upon notice by you to the Company advising as to the amount of Option Units as
to which the option is being exercised, the names and denominations in which the
certificates for such Option Units are to be registered and the time and date
when such certificates are to be delivered. Such time and date shall be
determined by you but shall not be earlier than four nor later than ten full
business days after the exercise of said option, nor in any event prior to the
First Closing Date, and such time and date is referred to herein as the "Option
Closing Date." Delivery of the Option Units against payment therefor shall take
place at the offices of X.X. Xxxxx Investment Banking Corp., 00 Xxxx Xxxxxx, Xxx
Xxxx, X.X. The Option granted hereunder may be exercised only to cover
overallotments in the sale by the Underwriter of First Units referred to in
subsection (a) above. In the event the Company declares or pays a dividend or
distribution on its Common Stock, whether in the form of cash, shares of Common
Stock or any other consideration, prior to the Option Closing Date, such
dividend or distribution shall also be paid on the Option Units on the Option
Closing Date.
(c) The Company will make the certificates for the securities
comprising the Units to be purchased by the Underwriter hereunder available to
you for checking at least two full business days prior to the First Closing Date
or the Option Closing Date (which are collectively referred to herein as the
"Closing Dates"). The certificates shall be in such names and denominations as
you may request, at least two full business days prior to the Closing
-8-
Dates. Time shall be of the essence and delivery at the time and place
specified in this Agreement is a further condition to the obligations of the
Underwriter.
Definitive certificates in negotiable form for the Units to be
purchased by the Underwriter hereunder will be delivered by the Company to you
against payment of the purchase price by certified or bank cashier's checks in
New York Clearing House funds, payable to the order of the Company.
In addition, in the event the Underwriter exercises the option to
purchase from the Company all or any portion of the Option Units pursuant to the
provisions of subsection (b) above, payment for such Units shall be made to or
upon the order of the Company by certified or bank cashier's checks payable in
New York Clearing House funds at the offices of X.X. Xxxxx Investment Banking
Corp., at the time and date of delivery of such Units as required by the
provisions of subsection (b) above, against receipt of the certificates for such
Units by the Underwriter for the account of the Underwriter registered in such
names and in such denominations as the Underwriter may request.
It is understood that the Underwriter propose to offer the Units
to be purchased hereunder to the public upon the terms and conditions set forth
in the Registration Statement, after the Registration Statement becomes
effective.
3. COVENANTS OF THE COMPANY. The Company covenants and agrees with
the Underwriter that:
(a) The Company will use its best efforts to cause the
Registration Statement to become effective as promptly as possible. If
required, the Company will file the Prospectus or any Term Sheet that
constitutes a part thereof and any amendment or supplement thereto with the
Commission in the manner and within the time period required by Rules 434 and
424(b) under the Act. Upon notification from the Commission that the
Registration Statement has become effective, the Company will so advise you and
will not at any time, whether before or after the effective date, file the
Prospectus, Term Sheet or any amendment to the Registration Statement or
supplement to the Prospectus of which you shall not previously have been advised
and furnished with a copy or to which you or your counsel shall have objected in
writing or which is not in compliance with the Act and the Rules and
Regulations. At any time prior to the later of (A) the completion by the
Underwriter of the distribution of the Units contemplated hereby (but in no
event more than nine months after the date on which the Registration Statement
shall have become or been declared effective) and (B) 25 days after the date on
which the Registration Statement shall have become or been declared effective,
the Company will prepare and file with the Commission, promptly upon your
request, any amendments or supplements to the Registration Statement or
Prospectus which, in your opinion, may be necessary or advisable in connection
with the distribution of the Units.
As soon as the Company is advised thereof, the Company will
advise you, and confirm the advice in writing, of the receipt of any comments of
the Commission, of the
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effectiveness of any post-effective amendment to the Registration Statement, of
the filing of any supplement to the Prospectus or any amended Prospectus, of any
request made by the Commission for amendment of the Registration Statement or
for supplementing of the Prospectus or for additional information with respect
thereto, of the issuance by the Commission or any state or regulatory body of
any stop order or other order or threat thereof suspending the effectiveness of
the Registration Statement or any order preventing or suspending the use of any
preliminary prospectus, or of the suspension of the qualification of the Units
for offering in any jurisdiction, or of the institution of any proceedings for
any of such purposes, and will use its best efforts to prevent the issuance of
any such order, and, if issued, to obtain as soon as possible the lifting
thereof.
The Company has caused to be delivered to you copies of each
Preliminary Prospectus, and the Company has consented and hereby consents to the
use of such copies for the purposes permitted by the Act. The Company
authorizes the Underwriter and dealers to use the Prospectus in connection with
the sale of the Units for such period as in the opinion of counsel to the
Underwriter the use thereof is required to comply with the applicable provisions
of the Act and the Rules and Regulations. In case of the happening, at any time
within such period as a Prospectus is required under the Act to be delivered in
connection with sales by an underwriter or dealer of any event of which the
Company has knowledge and which materially affects the Company or the securities
of the Company, or which in the opinion of counsel for the Company or counsel
for the Underwriter should be set forth in an amendment of the Registration
Statement or a supplement to the Prospectus in order to make the statements
therein not then misleading, in light of the circumstances existing at the time
the Prospectus is required to be delivered to a purchaser of the Units or in
case it shall be necessary to amend or supplement the Prospectus to comply with
law or with the Rules and Regulations, the Company will notify you promptly and
forthwith prepare and furnish to you copies of such amended Prospectus or of
such supplement to be attached to the Prospectus, in such quantities as you may
reasonably request, in order that the Prospectus, as so amended or supplemented,
will not contain any untrue statement of a material fact or omit to state any
material facts necessary in order to make the statements in the Prospectus, in
the light of the circumstances under which they are made, not misleading. The
preparation and furnishing of any such amendment or supplement to the
Registration Statement or amended Prospectus or supplement to be attached to the
Prospectus shall be without expense to the Underwriter, except that in case any
Underwriter is required, in connection with the sale of the Units to deliver a
Prospectus nine months or more after the effective date of the Registration
Statement, the Company will upon request of and at the expense of the
Underwriter, amend or supplement the Registration Statement and Prospectus and
furnish the Underwriter with reasonable quantities of prospectuses complying
with Section 10(a)(3) of the Act.
The Company will comply with the Act, the Rules and Regulations
and the Securities Exchange Act of 1934 and the rules and regulations thereunder
in connection with the offering and issuance of the Units.
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(b) The Company will use its best efforts to qualify to register
the Units for sale under the securities or "blue sky" laws of such jurisdictions
as the Underwriter may designate and will make such applications and furnish
such information as may be required for that purpose and to comply with such
laws, provided the Company shall not be required to qualify as a foreign
corporation or a dealer in securities or to execute a general consent of service
of process in any jurisdiction in any action other than one arising out of the
offering or sale of the Units. The Company will, from time to time, prepare and
file such statements and reports as are or may be required to continue such
qualification in effect for so long a period as the Underwriter may reasonably
request.
(c) If the sale of the Units provided for herein is not
consummated for any reason caused by the Company, the Company shall pay all
costs and expenses incident to the performance of the Company's obligations
hereunder, including but not limited to, all of the expenses itemized in
Section 8, including the actual accountable out-of-pocket expenses of the
Underwriter.
(d) The Company will use its best efforts to (i) cause a
registration statement under the Securities Exchange Act of 1934 to be declared
effective concurrently with the completion of this offering and will notify the
Underwriter in writing immediately upon the effectiveness of such registration
statement, and (ii) if requested by the Underwriter, to obtain a listing on the
Pacific Stock Exchange and to obtain and keep current a listing in the Standard
& Poors or Xxxxx'x Industrial OTC Manual.
(e) For so long as the Company is a reporting company under
either Section 12(g) or 15(d) of the Securities Exchange Act of 1934, the
Company, at its expense, will furnish to its stockholders an annual report
(including financial statements audited by independent public accountants), in
reasonable detail and at its expense, will furnish to you during the period
ending five (5) years from the date hereof, (i) as soon as practicable after the
end of each fiscal year, a balance sheet of the Company and any of its
subsidiaries as at the end of such fiscal year, together with statements of
income, surplus and cash flow of the Company and any subsidiaries for such
fiscal year, all in reasonable detail and accompanied by a copy of the
certificate or report thereon of independent accountants; (ii) as soon as
practicable after the end of each of the first three fiscal quarters of each
fiscal year, consolidated summary financial information of the Company for such
quarter in reasonable detail; (iii) as soon as they are available, a copy of all
reports (financial or other) mailed to security holders; (iv) as soon as they
are available, a copy of all non-confidential reports and financial statements
furnished to or filed with the Commission or any securities exchange or
automated quotation system on which any class of securities of the Company is
listed; and (v) such other information as you may from time to time reasonably
request.
(f) In the event the Company has an active subsidiary or
subsidiaries, such financial statements referred to in subsection (e) above will
be on a consolidated basis to the extent the accounts of the Company and its
subsidiary or subsidiaries are consolidated in reports furnished to its
stockholders generally.
-11-
(g) The Company will deliver to you at or before the First
Closing Date two signed copies of the Registration Statement including all
financial statements and exhibits filed therewith, and of all amendments
thereto, and will deliver to the Underwriter such number of conformed copies of
the Registration Statement, including such financial statements but without
exhibits, and of all amendments thereto, as the Underwriter may reasonably
request. The Company will deliver to or upon the order of the Underwriter, from
time to time until the effective date of the Registration Statement, as many
copies of any Preliminary Prospectus filed with the Commission prior to the
effective date of the Registration Statement as the Underwriter may reasonably
request. The Company will deliver to the Underwriter on the effective date of
the Registration Statement and thereafter for so long as a Prospectus is
required to be delivered under the Act, from time to time, as many copies of the
Prospectus, in final form, or as thereafter amended or supplemented, as the
Underwriter may from time to time reasonably request. The Company, not later
than (i) 5:00 p.m., New York City time, on the date of determination of the
public offering price, if such determination occurred at or prior to 12:00 noon,
New York City time, on such date or (ii) 6:00 p.m., New York City time, on the
business day following the date of determination of the public offering price,
if such determination occurred after 12:00 noon, New York City time, on such
date, will deliver to the Underwriter, without charge, as many copies of the
Prospectus and any amendment or supplement thereto as the Underwriter may
reasonably request for purposes of confirming orders that are expected to settle
on the First Closing Date.
(h) The Company will make generally available to its security
holders and to the registered holders of its Warrants and deliver to you as soon
as it is practicable to do so but in no event later than 90 days after the end
of twelve months after its current fiscal quarter, an earnings statement (which
need not be audited) covering a period of at least twelve consecutive months
beginning after the effective date of the Registration Statement, which shall
satisfy the requirements of Section 11(a) of the Act.
(i) The Company will apply the net proceeds from the sale of the
Units for the purposes set forth under "Use of Proceeds" in the Prospectus, and
will file such reports with the Commission with respect to the sale of the Units
and the application of the proceeds therefrom as may be required pursuant to
Rule 463 under the Act.
(j) The Company will, promptly upon your request, prepare and
file with the Commission any amendments or supplements to the Registration
Statement, Preliminary Prospectus or Prospectus and take any other action, which
in the reasonable opinion of Bachner, Tally, Xxxxxxx & Xxxxxx LLP, counsel to
the Underwriter, may be reasonably necessary or advisable in connection with the
distribution of the Units, and will use its best efforts to cause the same to
become effective as promptly as possible.
(k) The Company will reserve and keep available that maximum
number of its authorized but unissued securities which are issuable upon
exercise of the Unit Purchase Option outstanding from time to time.
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(l) For a period of thirteen months from the First Closing Date,
no officer, director or stockholder of the Company (the "Principal
Stockholders") will directly or indirectly, offer, sell (including any short
sale), grant any option for the sale of, acquire any option to dispose of, or
otherwise dispose of any shares of Common Stock or other securities of the
Company without the prior written consent of the Underwriter. In order to
enforce this covenant, the Company shall impose stop-transfer instructions with
respect to the shares owned by the Principal Stockholders until the end of such
period.
(m) Prior to completion of this offering, the Company will make
all filings required, including registration under the Securities Exchange Act
of 1934, to obtain the listing of the Units, Common Stock, and Warrants on the
Nasdaq National Market (or a listing on such other market or exchange as the
Underwriter consents to), and will effect and maintain such listing for at least
five years from the date of this Agreement.
(n) The Company and each of the Principal Stockholders
represents that it or he has not taken and agree that it or he will not take,
directly or indirectly, any action designed to or which has constituted or which
might reasonably be expected to cause or result in the stabilization or
manipulation of the price of the Units, Shares or the Warrants or to facilitate
the sale or resale of the Securities.
(o) On the Closing Date and simultaneously with the delivery of
the Units, the Company shall execute and deliver to you, the Unit Purchase
Option. The Unit Purchase Option will be substantially in the form of the
Underwriter's Unit Purchase Option filed as an Exhibit to the Registration
Statement.
(p) During the 18 month period commencing on the date of this
Agreement, the Company will not, without the prior written consent of the
Underwriter, grant options to purchase shares of Common Stock at an exercise
price less than the greater of (i) the initial public offering price of the
Units (without allocating any value to the Warrants) or (ii) the fair market
value of the Common Stock on the date of grant. In addition, all of such
options shall vest over a five year period from the date of issuance. During
the six month period commencing on the date of this Agreement, the Company will
not, without the prior written consent of the Underwriter, grant options to any
current officer of the Company. During the three year period from the First
Closing Date, the Company will not, without the prior written consent of the
Underwriter, offer or sell any of its securities pursuant to Regulation S under
the Act.
(q) The Company will not, without the prior written consent of
the Underwriter, grant registration rights to any person which are exercisable
sooner than 13 months from the First Closing Date.
(r) Xx. Xxxx X. Xxxx shall be President and Chief Executive
Officer of the Company on the Closing Dates and Gene Comfort shall be Senior
Vice President and General Manager on the Closing Date. The Company has
obtained key person life insurance on
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the lives of Xx. Xxxx and Mr. Comfort, respectively, in an amount of not less
than $2 million and $1 million and will use its best efforts to maintain such
insurance during the three year period commencing on the First Closing Date or
the term of their employment, whichever period is longer. In the event Xx.
Xxxx'x employment is terminated prior to the three year period commencing on the
First Closing Date, the Company will obtain a comparable policy on the life of
his successor for the balance of the three year period. For a period of
thirteen months from the First Closing Date, the compensation of the executive
officers of the Company shall not be increased from the compensation levels
disclosed in the Prospectus.
(s) On the Closing Date and simultaneously with the delivery of
the Units the Company shall execute and deliver to you, an agreement with you
regarding mergers, acquisitions, joint ventures and certain other forms of
transactions, in the form previously delivered to the Company by you (the "M/A
Agreement").
(t) So long as any Warrants are outstanding, the Company shall
use its best efforts to cause post-effective amendments to the Registration
Statement to become effective in compliance with the Act and without any lapse
of time between the effectiveness of any such post-effective amendments and
cause a copy of each Prospectus, as then amended, to be delivered to each holder
of record of a Warrant and to furnish to the Underwriter and dealer as many
copies of each such Prospectus as the Underwriter or dealer may reasonably
request. The Company shall not call for redemption any of the Warrants unless a
registration statement covering the securities underlying the Warrants has been
declared effective by the Commission and remains current at least until the date
fixed for redemption. In addition, for so long as any Warrant is outstanding,
the Company will promptly notify the Underwriter of any material change in the
business, financial condition or prospects of the Company.
(u) Upon the exercise of any Warrant or Warrants after
_______, 1997, the Company will pay X.X. Xxxxx Investment Banking Corp., a
fee of 5% of the aggregate exercise price of the Warrants, of which 1% may be
reallowed to the dealer who solicited in writing the exercise (which may also
be X.X. Xxxxx Investment Banking Corp.) if (i) the market price of the
Company's Common Stock is greater than the exercise price of the Warrants on
the date of exercise; (ii) the exercise of the Warrant was solicited in
writing by a member of the National Association of Securities Dealers, Inc.,
(iii) the Warrant is not held in a discretionary account; (iv) the disclosure
of compensation arrangements has been made in documents provided to
customers, both as part of the original offering and at the time of exercise,
and (v) the solicitation of the Warrant was not in violation of Rule 10b-6
promulgated under the Securities Exchange Act of 1934, as amended. The
Company agrees not to solicit the exercise of any Warrants other than through
X.X. Xxxxx Investment Banking Corp. and will not authorize any other dealer
to engage in such solicitation without the prior written consent of X.X.
Xxxxx Investment Banking Corp.
(v) For a period of five (5) years from the Effective Date the
Company (i) at its expense, shall cause its regularly engaged independent
certified public accountants to review (but not audit) the Company's financial
statements for each of the first three (3) fiscal
-14-
quarters prior to the announcement of quarterly financial information, the
filing of the Company's 10-Q quarterly report and the mailing of quarterly
financial information to stockholders and (ii) shall not change its accounting
firm without the prior written consent of the Chairman or the President of the
Underwriter.
(w) As promptly as practicable after the Closing Date, the
Company will prepare, at its own expense, hard cover "bound volumes" relating to
the offering, and will distribute at least four of such volumes to the
individuals designated by the Underwriter or counsel to the Underwriter.
(x) For a period of five years from the First Closing Date (i)
the Underwriter shall have the right, but not the obligation, to designate one
director of the Board of Directors of the Company and (ii) the Company shall
engage a public relations firm acceptable to the Underwriter.
(y) The Company shall, for a period of six years after date of
this Agreement, submit which reports to the Secretary of the Treasury and to
stockholders, as the Secretary may require, pursuant to Section 1202 of the
Internal Revenue Code, as amended, or regulations promulgated thereunder, in
order for the Company to qualify as a "small business" so that stockholders may
realize special tax treatment with respect to their investment in the Company.
(z) With respect to the Selling Stockholders, the Company will
send all post-effective amendments or prospectus supplements disclosing actual
price and selling terms to the NASD concurrently with the filing thereof with
the Commission. The Company will notify the Underwriter and the NASD if the
Company becomes aware that any 5% or greater stockholder of the Company becomes
an affiliated or associated person of an NASD member participating in the
distribution of this offering.
4. CONDITIONS OF UNDERWRITER'S OBLIGATION. The obligations of the
Underwriter to purchase and pay for the Units which they have respectively
agreed to purchase hereunder, are subject to the accuracy (as of the date
hereof, and as of the Closing Dates) of and compliance with the representations
and warranties of the Company herein, to the performance by the Company of its
obligations hereunder, and to the following conditions:
(a) The Registration Statement shall have become effective and
you shall have received notice thereof not later than 10:00 A.M., New York time,
on the date on which the amendment to the registration statement originally
filed with respect to the Units or to the Registration Statement, as the case
may be, containing information regarding the initial public offering price of
the Units has been filed with the Commission, or such later time and date as
shall have been agreed to by the Representative; if required, the Prospectus or
any Term Sheet that constitutes a part thereof and any amendment or supplement
thereto shall have been filed with the Commission in the manner and within the
time period required by Rule 434 and 424(b) under the Act; on or prior to the
Closing Dates no stop order suspending the effectiveness of the
-15-
Registration Statement shall have been issued and no proceedings for that or a
similar purpose shall have been instituted or shall be pending or, to your
knowledge or to the knowledge of the Company, shall be contemplated by the
Commission; any request on the part of the Commission for additional information
shall have been complied with to the reasonable satisfaction of Bachner, Tally,
Xxxxxxx & Xxxxxx LLP, counsel to the Underwriter;
(b) At the First Closing Date, you shall have received the
opinion, dated as of the First Closing Date, of Xxxx, Forward, Xxxxxxxx &
Scripps LLP, counsel for the Company, in form and substance satisfactory to
counsel for the Underwriter, to the effect that:
(i) the Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
State of Delaware, with full corporate power and authority to own
its properties and conduct its business as described in the
Registration Statement and Prospectus. The Company is duly
qualified to do business as a foreign corporation in California
and is in good standing in the State of California.
(ii) to the best knowledge of such counsel, (a) the Company
has obtained, or is in the process of obtaining, all licenses,
permits and other governmental authorizations necessary to the
conduct of its business as described in the Prospectus, (b) such
licenses, permits and other governmental authorizations obtained
are in full force and effect, and (c) the Company is in all
material respects complying therewith;
(iii) the authorized capitalization of the Company as of
September 30, 1996 is as set forth under "Capitalization" in the
Prospectus; all shares of the Company's outstanding stock
requiring authorization for issuance by the Company's board of
directors have been duly authorized, validly issued, are fully
paid and non-assessable and conform to the description thereof
contained in the Prospectus. To the best knowledge of such
counsel, the outstanding shares of Common Stock of the Company
have not been issued in violation of the preemptive rights of
any shareholder and no preemptive rights of stockholders exist
with respect to any of the outstanding shares of stock of the
Company or the issue and sale thereof. To the best knowledge
of such counsel, there are no outstanding rights, warrants or
options to acquire, or instruments convertible into or
exchangeable for, any shares of capital stock or other equity
interest in the Company, except as disclosed in the Prospectus.
There are no restrictions upon the voting or transfer of any of
the Shares; the Class A Common Stock, the Warrants, the Unit
Purchase Option and the Warrant Agreement conform to the
respective descriptions thereof contained in the Prospectus; the
Shares have been, and the shares of Class A Common Stock to be
issued upon exercise of the Warrants and the Unit Purchase Option,
upon issuance in accordance with the terms of such Warrants, the
Warrant Agreement and Unit Purchase Option have been duly
authorized and, when issued and delivered, will be duly and
validly issued, fully paid and non-assessable; all prior sales
by the
-16-
Company of the Company's securities have been made in compliance
with or under an exemption from registration under the Act and
applicable state securities laws and no shareholders of the
Company have any rescission rights with respect to Company
securities; a sufficient number of shares of Class A Common Stock
has been reserved for issuance upon exercise of the Warrants and
Unit Purchase Option and to the best of such counsel's knowledge,
neither the filing of the Registration Statement nor the offering
or sale of the Units as contemplated by this Agreement gives rise
to any registration or other rights, other than those
which have been waived or satisfied, for or relating to the
registration of any shares of Common Stock;
(iv) this Agreement, the Unit Purchase Option, the Warrant
Agreement amd the M/A Agreement have been duly and validly
authorized, executed and delivered by the Company and, assuming
due execution by each other party hereto or thereto, each
constitutes a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its respective
terms (except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws
of general application relating to or affecting enforcement of
creditors' rights and the application of equitable principles in
any action, legal or equitable, and except as rights to indemnity
or contribution may be limited by applicable law;
(v) the certificates evidencing the shares of Class A
Common Stock are in valid and proper legal form; the Warrants
will be exercisable for shares of Class A Common Stock of the
Company in accordance with the terms of the Warrants and at the
prices therein provided for. The shares of Class A Common
Stock of the Company issuable upon exercise of the Warrants
have been duly authorized and reserved for issuance. Upon the
exercise thereof in accordance with the terms of the Warrants and
at the price provided for, the shares underlying such Warrants
will be duly and validly issued, fully paid and non-assessable;
(vi) such counsel knows of no pending or threatened legal or
governmental proceedings to which the Company is a party which
could materially adversely affect the business, property,
financial condition or operations of the Company; or which
question the validity of the Securities, this Agreement, the
Warrant Agreement, the Unit Purchase Option or the M/A Agreement,
or of any action taken or to be taken by the Company pursuant to
this Agreement, the Warrant Agreement, the Unit Purchase Option
or the M/A Agreement; and no such proceedings are known to such
counsel to be contemplated against the Company; there are
-17-
no governmental proceedings or regulations required to be
described or referred to in the Registration Statement which are
not so described or referred to;
(vii) to the best of such counsel's knowledge, the Company is
not in violation of or default under, nor will the execution and
delivery of this Agreement, the Unit Purchase Option, the
Warrant Agreement or the M/A Agreement, and the incurrence of
the obligations herein and therein set forth and the consummation
of the transactions herein or therein contemplated, result
in a breach or violation of, or constitute a default under
the certificate or articles of incorporation or by-laws, in the
performance or observance of any material obligations, agreement,
covenant or condition contained in any bond, debenture, note or
other evidence of indebtedness or in any contract, indenture,
mortgage, loan agreement, lease, joint venture or other agreement
or instrument to which the Company is a party or by which it or
any of its properties may be bound or in violation of any material
order, rule, regulation, writ, injunction, or decree of any
government, governmental instrumentality or court, domestic or
foreign;
(viii) the Registration Statement has become effective under
the Act, and no stop order proceedings with respect thereto have
been instituted or are pending under the Act and, to the best of
such counsel's knowledge, no such proceedings are threatened or
contemplated by the Commission; any required filing of the
Prospectus and any supplement thereto pursuant to Rule 424(b)
and Rule 430A of the Rules and Regulations of the Act have been
made in the manner and in the time period required by such
Rules; the Registration Statement and the Prospectus (except
for the financial statements and other financial data contained
therein, or omitted therefrom, as to which such counsel need
express no opinion) comply as to form in all material respects
with the applicable requirements of the Act and the Rules and
Regulations;
(ix) such counsel has participated in conferences with
officers and other representatives of the Company, representatives
of the independent public accountants of the Company and
representatives of the Underwriters at which the contents of
the Registration Statement were discussed and, although such
counsel need not pass upon, assume responsibility for or
independently verify the accuracy, completeness or fairness of
the statements contained in the Registration Statement, no
facts have come to such counsel's attention which cause such
counsel to believe that the Registration Statement, or any
amendment thereto, at the time the Registration Statement or
such amendment thereto became effective, contained an untrue
statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which
they were made, not misleading, or that the Prospectus, or any
amendment thereto, at the time it was filed pursuant to Rule
424(b) or at the Closing Date, contained an untrue statement of
a material fact or omitted to state a material fact required to
be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not
misleading (provided that such counsel need not express a view as
to the financial statements, schedules or other financial
information and statistical data and information included therein
or any information regarding the Underwriter of the
Underwriting).;
-18-
(x) to the best of such counsel's knowledge, descriptions
in the Registration Statement and the Prospectus, and any
amendment or supplement thereto, of contracts and other
documents are accurate and fairly present the information
required to be shown, and such counsel is familiar with all
contracts and other documents referred to in the Registration
Statement and the Prospectus and any such amendment or supplement
or filed as exhibits to the Registration Statement, and such
counsel does not know of any contracts or documents of a
character required to be summarized or described therein or to be
filed as exhibits thereto which are not so summarized, described
or filed;
(xi) Except for the order of the Commission, which has been
obtained, declaring the Registration Statement effective and
except for permits and similar authorizations required under the
securities or blue sky laws of certain jurisdictions, as to
which such counsel need not express an opinion, to such
counsel's knowledge, no consent, approval, authorization or
other order of any court or regulatory body, administrative
agency or other governmental body is required for the
execution, delivery and performance of the Underwriting
Agreement and the consummation of the transactions contemplated
by the Underwriting Agreement or the issuance of the Unit
Purchase Option or the Securities underlying the Unit Purchase
Option; and no consents or waivers from the holders of the
Company's capital stock are required in connection with the
consummation of the transactions contemplated by the Underwriting
Agreement.
(xii) the statements in the Registration Statement under the
captions "Business", "Use of Proceeds", "Management", and
"Description of Securities" have been reviewed by such counsel
and insofar as they refer to descriptions of agreements,
statements of law, descriptions of statutes, licenses, rules or
regulations or legal conclusions, are correct in all material
respects;
(xiii) the Class A Common Stock and the Warrants
have been duly authorized for quotation on the Nasdaq National
Market, and the Units have been duly authorized for quotation
on the Nasdaq SmallCap Market; and
(xiv) to such counsel's knowledge, there are no business
relationships or related-party transactions of the nature
described in Item 404 of Regulation S-B involving the Company
and any person described in such Item that are required to be
disclosed in the Prospectus and which have not been so disclosed.
(c) At the First Closing Date, you shall have received the
opinion, addressed to the Underwriter, dated as of the First Closing Date, of
Xxxxx & Xxxxxxxx, aviation counsel to the Company, in form and substance
satisfactory to counsel for the Underwriter, to the effect that:
-19-
(i) the information in the Registration Statement
accurately and adequately describes in all material respects the
nature and extent to which the Company's business is subject to
regulation by the Federal Aviation Administration ("FAA").
(ii) the business as presently conducted by the Company, as
described in the Registration Statement, does not, to our
knowledge, violate any rule or regulation or the FAA.
Such opinion[s] shall also cover such matters incident to the
transactions contemplated hereby as the Underwriter shall reasonably request.
In rendering such opinion, such counsel may rely upon certificates of any
officer of the Company or public officials as to matters of fact; and may rely
as to all matters of law other than the law of the United States or of the State
of Delaware upon opinions of counsel satisfactory to you, in which case the
opinion shall state that they have no reason to believe that you and they are
not entitled to so rely.
(d) All corporate proceedings and other legal matters relating
to this Agreement, the Registration Statement, the Prospectus and other related
matters shall be satisfactory to or approved by Bachner, Tally, Xxxxxxx &
Xxxxxx LLP, counsel to the Underwriter, and you shall have received from such
counsel a signed opinion, dated as of the First Closing Date, with respect to
the validity of the issuance of the Units, the form of the Registration
Statement and Prospectus (other than the financial statements and other
financial data contained therein), the execution of this Agreement and other
related matters as you may reasonably require. The Company shall have furnished
to counsel for the Underwriter such documents as they may reasonably request for
the purpose of enabling them to render such opinion.
(e) You shall have received a letter prior to the effective date
of the Registration Statement and again on and as of the First Closing Date from
Price Waterhouse LLP, independent public accountants for the Company,
substantially in the form approved by you, and including estimates of the
Company's revenues and results of operations for the period ending at the end of
the month immediately preceding the effective date and results of the comparable
period during the prior fiscal year.
(f) At the Closing Dates, (i) the representations and warranties
of the Company contained in this Agreement shall be true and correct with the
same effect as if made on and as of the Closing Dates and the Company shall have
performed all of its obligations hereunder and satisfied all the conditions on
its part to be satisfied at or prior to such Closing Date; (ii) the Registration
Statement and the Prospectus and any amendments or supplements thereto shall
contain all statements which are required to be stated therein in accordance
with the Act and the Rules and Regulations, and shall in all material respects
conform to the requirements thereof, and neither the Registration Statement nor
the Prospectus nor any amendment or supplement thereto shall contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not
-20-
misleading; (iii) there shall have been, since the respective dates as of which
information is given, no material adverse change, or any development involving a
prospective material adverse change, in the business, properties, condition
(financial or otherwise), results of operations, capital stock, long-term or
short-term debt or general affairs of the Company from that set forth in the
Registration Statement and the Prospectus, except changes which the Registration
Statement and Prospectus indicate might occur after the effective date of the
Registration Statement, and the Company shall not have incurred any material
liabilities or entered into any agreement not in the ordinary course of business
other than as referred to in the Registration Statement and Prospectus; and
(iv) except as set forth in the Prospectus, no action, suit or proceeding at law
or in equity shall be pending or threatened against the Company which would be
required to be set forth in the Registration Statement, and no proceedings shall
be pending or threatened against the Company before or by any commission, board
or administrative agency in the United States or elsewhere, wherein an
unfavorable decision, ruling or finding would materially and adversely affect
the business, property, condition (financial or otherwise), results of
operations or general affairs of the Company, and (v) you shall have received,
at the First Closing Date, a certificate signed by each of the Chairman of the
Board or the President and the principal financial or accounting officer of the
Company, dated as of the First Closing Date, evidencing compliance with the
provisions of this subsection (f).
(g) Upon exercise of the option provided for in Section 2(b)
hereof, the obligations of the Underwriter to purchase and pay for the Option
Units referred to therein will be subject (as of the date hereof and as of the
Option Closing Date) to the following additional conditions:
(i) The Registration Statement shall remain effective at
the Option Closing Date, and no stop order suspending the
effectiveness thereof shall have been issued and no proceedings
for that purpose shall have been instituted or shall be pending,
or, to your knowledge or the knowledge of the Company, shall be
contemplated by the Commission, and any reasonable request on the
part of the Commission for additional information shall have been
complied with to the satisfaction of Bachner, Tally, Xxxxxxx &
Xxxxxx LLP, counsel to the Underwriter.
(ii) At the Option Closing Date there shall have been
delivered to you the signed opinions of Xxxx, Forward, Xxxxxxxx &
Scripps LLP and Xxxxx & Xxxxxxxx, counsels for the Company, dated
as of the Option Closing Date, in form and substance satisfactory
to Bachner, Tally, Xxxxxxx & Xxxxxx LLP, counsel to the
Underwriter, which opinions shall be substantially the same in
scope and substance as the opinions furnished to you at the First
Closing Date pursuant to Section 4(b) and (c) hereof, except that
such opinion, where appropriate, shall cover the Option Units.
(iii) At the Option Closing Date there shall have been
delivered to you a certificate of the Chairman of the Board or
the President and the
-21-
principal financial or accounting officer of the Company, dated
the Option Closing Date, in form and substance satisfactory to
Bachner, Tally, Xxxxxxx & Xxxxxx LLP, counsel to the Underwriter,
substantially the same in scope and substance as the certificate
furnished to you at the First Closing Date pursuant to
Section 4(f) hereof.
(iv) At the Option Closing Date there shall have been
delivered to you a letter in form and substance satisfactory to
you from Price Waterhouse LLP, dated the Option Closing Date and
addressed to the Underwriter confirming the information in their
letter referred to in Section 4(f) hereof and stating that
nothing has come to their attention during the period from the
ending date of their review referred to in said letter to a date
not more than five business days prior to the Option Closing
Date, which would require any change in said letter if it were
required to be dated the Option Closing Date.
(v) All proceedings taken at or prior to the Option Closing
Date in connection with the sale and issuance of the Option Units
shall be satisfactory in form and substance to you, and you and
Bachner, Tally, Xxxxxxx & Xxxxxx LLP, counsel to the Underwriter,
shall have been furnished with all such documents, certificates,
and opinions as you may request in connection with this
transaction in order to evidence the accuracy and completeness of
any of the representations, warranties or statements of the
Company or its compliance with any of the covenants or conditions
contained herein.
(h) No action shall have been taken by the Commission or the
NASD the effect of which would make it improper, at any time prior to the
Closing Date, for members of the NASD to execute transactions (as principal or
agent) in the Units, Common Stock or the Warrants and no proceedings for the
taking of such action shall have been instituted or shall be pending, or, to the
knowledge of the Underwriter or the Company, shall be contemplated by the
Commission or the NASD. The Company represents that at the date hereof it has
no knowledge that any such action is in fact contemplated by the Commission or
the NASD. The Company shall have advised the Underwriter of any NASD
affiliation of any of its officers, directors, stockholders or their affiliates.
(i) If any of the conditions herein provided for in this Section
shall not have been fulfilled as of the date indicated, this Agreement and all
obligations of the Underwriter under this Agreement may be cancelled at, or at
any time prior to, each Closing Date by the Underwriter. Any such cancellation
shall be without liability of the Underwriter to the Company.
5. CONDITIONS OF THE OBLIGATIONS OF THE COMPANY. The obligation of
the Company to sell and deliver the Units is subject to the condition that at
the Closing Dates, no
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stop orders suspending the effectiveness of the Registration Statement shall
have been issued under the Act or any proceedings therefor initiated or
threatened by the Commission.
If the condition to the obligations of the Company provided for
in this Section have been fulfilled on the First Closing Date but are not
fulfilled after the First Closing Date and prior to the Option Closing Date,
then only the obligation of the Company to sell and deliver the Units on
exercise of the option provided for in Section 2(b) hereof shall be affected.
6. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless the
Underwriter and each person, if any, who controls the Underwriter within the
meaning of the Act against any losses, claims, damages or liabilities, joint or
several (which shall, for all purposes of this Agreement, include, but not be
limited to, all reasonable costs of defense and investigation and all attorneys'
fees), to which the Underwriter or such controlling person may become subject,
under the Act or otherwise, and will reimburse, as incurred, such Underwriter
and such controlling persons for any legal or other expenses reasonably incurred
in connection with investigating, defending against or appearing as a third
party witness in connection with any losses, claims, damages or liabilities,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in (A) the Registration Statement, any
Preliminary Prospectus, the Prospectus, or any amendment or supplement thereto,
(B) any blue sky application or other document executed by the Company
specifically for that purpose or based upon written information furnished by the
Company filed in any state or other jurisdiction in order to qualify any or all
of the Units under the securities laws thereof (any such application, document
or information being hereinafter called a "Blue Sky Application"), or arise out
of or are based upon the omission or alleged omission to state in the
Registration Statement, any Preliminary Prospectus, Prospectus, or any amendment
or supplement thereto, or in any Blue Sky Application, a material fact required
to be stated therein or necessary to make the statements therein not misleading;
provided, however, that the Company will not be liable in any such case to the
extent, but only to the extent, that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in reliance upon and in conformity with
written information furnished to the Company by or on behalf of the Underwriter
specifically for use in the preparation of the Registration Statement or any
such amendment or supplement thereof or any such Blue Sky Application or any
such preliminary Prospectus or the Prospectus or any such amendment or
supplement thereto. This indemnity will be in addition to any liability which
the Company may otherwise have.
(b) The Underwriter will indemnify and hold harmless the
Company, each of its directors, each nominee (if any) for director named in the
Prospectus, each of its officers who have signed the Registration Statement, and
each person, if any, who controls the Company within the meaning of the Act,
against any losses, claims, damages or liabilities (which shall, for all
purposes of this Agreement, include, but not be limited to, all costs of defense
and
-23-
investigation and all attorneys' fees) to which the Company or any such
director, nominee, officer or controlling person may become subject under the
Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto (i) in reliance upon and in conformity with written
information furnished to the Company by you specifically for use in the
preparation thereof and (ii) relates to the transactions effected by the
Underwriter in connection with the offer and sale of the Units contemplated
hereby. This indemnity agreement will be in addition to any liability which the
Underwriter may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section, notify in writing the indemnifying party of the commencement
thereof; but the omission to so notify the indemnifying party will not relieve
it from any liability which it may have to any indemnified party otherwise than
under this Section. In case any such action is brought against any indemnified
party, and it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate in, and, to the extent that
it may wish, jointly with any other indemnifying party similarly notified, to
assume the defense thereof, subject to the provisions herein stated, with
counsel reasonably satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party will not be liable to such
indemnified party under this Section for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation. The indemnified party
shall have the right to employ separate counsel in any such action and to
participate in the defense thereof, but the fees and expenses of such counsel
shall not be at the expense of the indemnifying party if the indemnifying party
has assumed the defense of the action with counsel reasonably satisfactory to
the indemnified party; provided that if the indemnified party is an Underwriter
or a person who controls such Underwriter within the meaning of the Act, the
fees and expenses of such counsel shall be at the expense of the indemnifying
party if (i) the employment of such counsel has been specifically authorized in
writing by the indemnifying party or (ii) the named parties to any such action
(including any impleaded parties) include both such Underwriter or such
controlling person and the indemnifying party and in the judgment of the
Underwriter, it is advisable for the Underwriter or controlling persons to be
represented by separate counsel (in which case the indemnifying party shall not
have the right to assume the defense of such action on behalf of such
Underwriter or such controlling person, it being understood, however, that the
indemnifying party shall not, in connection with any one such action or separate
but substantially similar or related actions in the same jurisdiction arising
out of the same general allegations or
-24-
circumstances, be liable for the reasonable fees and expenses of more than one
separate firm of attorneys for the Underwriter and controlling persons, which
firm shall be designated in writing by you). No settlement of any action
against an indemnified party shall be made without the consent of the
indemnifying party, which shall not be unreasonably withheld in light of all
factors of importance to such indemnifying party.
7. CONTRIBUTION.
In order to provide for just and equitable contribution under the
Act in any case in which the Underwriter makes claim for indemnification
pursuant to Section 6 hereof 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
the express provisions of Section 6 provide for indemnification in such case, or
(ii) contribution under the Act may be required on the part of the Underwriter,
then the Company and each person who controls the Company, in the aggregate, and
the Underwriter shall contribute to the aggregate losses, claims, damages or
liabilities to which they may be subject (which shall, for all purposes of this
Agreement, include, but not be limited to, all reasonable costs of defense and
investigation and all reasonable attorneys' fees) in either such case (after
contribution from others) in such proportions that the Underwriter is
responsible in the aggregate for that portion of such losses, claims, damages or
liabilities represented by the percentage that the underwriting discount per
Unit appearing on the cover page of the Prospectus bears to the public offering
price appearing thereon, and the Company shall be responsible for the remaining
portion, provided, however, that (a) if such allocation is not permitted by
applicable law then the relative fault of the Company and the Underwriter and
controlling persons, in the aggregate, in connection with the statements or
omissions which resulted in such damages and other relevant equitable
considerations shall also be considered. The relative fault shall be determined
by reference to, among other things, whether in the case of an untrue statement
of a material fact or the omission to state a material fact, such statement or
omission relates to information supplied by the Company, or the Underwriter and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such untrue statement or omission. The Company and the
Underwriter agree that it would not be just and equitable if the respective
obligations of the Company and the Underwriter to contribute pursuant to this
Section 7 were to be determined by pro rata or per capita allocation of the
aggregate damages (even if the Underwriter in the aggregate were treated as one
entity for such purpose) or by any other method of allocation that does not take
account of the equitable considerations referred to in the first sentence of
this Section 7. No person guilty of a fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who is not guilty of such fraudulent misrepresentation. As used in this
paragraph, the word "Company" includes any officer, director, or person who
controls the Company within the meaning of Section 15 of the Act. If the full
amount of the contribution specified in this paragraph is not permitted by law,
then the Underwriter and each person who controls the Underwriter shall be
entitled to contribution from the Company, its officers, directors and
controlling persons to the full extent permitted by law. The foregoing
contribution agreement shall in no way affect the contribution
-25-
liabilities of any persons having liability under Section 11 of the Act other
than the Company and the Underwriter. No contribution shall be requested with
regard to the settlement of any matter from any party who did not consent to the
settlement; provided, however, that such consent shall not be unreasonably
withheld in light of all factors of importance to such party.
8. COSTS AND EXPENSES.
(a) Whether or not this Agreement becomes effective or the sale
of the Units to the Underwriter is consummated, the Company will pay all costs
and expenses incident to the performance of this Agreement by the Company
including, but not limited to, the fees and expenses of counsel to the Company
and of the Company's accountants; the costs and expenses incident to the
preparation, printing, filing and distribution under the Act of the Registration
Statement (including the financial statements therein and all amendments and
exhibits thereto), Preliminary Prospectus and the Prospectus, as amended or
supplemented, or the Term Sheet, the fee of the NASD in connection with the
filing required by the NASD relating to the offering of the Units contemplated
hereby; all expenses, including reasonable fees and disbursements of counsel to
the Underwriter, in connection with the qualification of the Units under the
state securities or blue sky laws which the Underwriter shall designate; the
cost of printing and furnishing to the Underwriter copies of the Registration
Statement, each Preliminary Prospectus, the Prospectus, this Agreement, Selling
Agreement and the Blue Sky Memorandum, any fees relating to the listing of the
Units, Class A Common Stock and Warrants on the Nasdaq National Market or any
other securities exchange, the cost of printing the certificates representing
the securities comprising the Units, the fees of the transfer agent and warrant
agent the cost of publication of at least three "tombstones" of the offering (at
least one of which shall be in national business newspaper and one of which
shall be in a major New York newspaper) and the cost of preparing at least four
hard cover "bound volumes" relating to the offering, in accordance with the
Underwriter's request. The Company shall pay any and all taxes (including any
transfer, franchise, capital stock or other tax imposed by any jurisdiction) on
sales to the Underwriter hereunder. The Company will also pay all costs and
expenses incident to the furnishing of any amended Prospectus or of any
supplement to be attached to the Prospectus as called for in Section 3(a) of
this Agreement except as otherwise set forth in said Section.
(b) In addition to the foregoing expenses the Company shall at
the First Closing Date pay to X.X. Xxxxx Investment Banking Corp., a
non-accountable expense allowance of $900,000 of which $40,000 has been paid.
In the event the overallotment option is exercised, the Company shall pay to
X.X. Xxxxx Investment Banking Corp. at the Option Closing Date an additional
amount equal to 3% of the gross proceeds received upon exercise of the
overallotment option. In the event the transactions contemplated hereby are not
consummated by reason of any action by the Underwriter (except if such
prevention is based upon a breach by the Company of any covenant, representation
or warranty contained herein or because any other condition to the Underwriter's
obligations hereunder required to be fulfilled by the Company is not fulfilled)
the Company shall be liable for the accountable expenses of the Underwriter,
including legal fees up to a maximum of $40,000. In the event the transactions
contemplated hereby are not consummated by reason of any action of the Company
or because of a breach by
-26-
the Company of any covenant, representation or warranty herein, the Company
shall be liable for the actual accountable out-of-pocket expenses of the
Underwriter, including legal fees, up to a maximum of $540,000. In the event
the offering is not consummated for any reason, any portion of the
non-accountable expense allowance previously paid to the Underwriter which is
not accounted for shall be returned to the Company.
(c) No person is entitled either directly or indirectly to
compensation from the Company, from the Underwriter or from any other person for
services as a finder in connection with the proposed offering, and the Company
agrees to indemnify and hold harmless the Underwriter, against any losses,
claims, damages or liabilities, joint or several (which shall, for all purposes
of this Agreement, include, but not be limited to, all costs of defense and
investigation and all attorneys' fees), to which the Underwriter or person may
become subject insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon the claim of any
person (other than an employee of the party claiming indemnity) or entity that
he or it is entitled to a finder's fee in connection with the proposed offering
by reason of such person's or entity's influence or prior contact with the
indemnifying party.
9. EFFECTIVE DATE.
The Agreement shall become effective upon its execution except
that you may, at your option, delay its effectiveness until 11:00 A.M., New York
time on the first full business day following the effective date of the
Registration Statement, or at such earlier time after the effective date of the
Registration Statement as you in your discretion shall first commence the
initial public offering by the Underwriter of any of the Units. The time of the
initial public offering shall mean the time of release by you of the first
newspaper advertisement with respect to the Units, or the time when the Units
are first generally offered by you to dealers by letter or telegram, whichever
shall first occur. This Agreement may be terminated by you at any time before
it becomes effective as provided above, except that Sections 3(c), 6, 7, 8, 12,
13, 14 and 15 shall remain in effect notwithstanding such termination.
10. TERMINATION.
(a) This Agreement, except for Sections 3(c), 6, 7, 8, 12, 13,
14 and 15 hereof, may be terminated at any time prior to the First Closing Date,
and the option referred to in Section 2(b) hereof, if exercised, may be
cancelled at any time prior to the Option Closing Date, by you if in your
judgment it is impracticable to offer for sale or to enforce contracts made by
the Underwriter for the resale of the Units agreed to be purchased hereunder by
reason of (i) the Company having sustained a material loss, whether or not
insured, by reason of fire, earthquake, flood, accident or other calamity, or
from any labor dispute or court or government action, order or decree;
(ii) trading in securities on the New York Stock Exchange, the American Stock
Exchange, the Nasdaq SmallCap Market or the Nasdaq National Market having been
suspended or limited; (iii) material governmental restrictions having been
imposed on trading in securities generally (not in force and effect on the date
hereof); (iv) a banking moratorium having been declared by federal or New York
state authorities; (v) an outbreak of international hostilities or other
national or international calamity or crisis or change in economic or political
conditions having occurred; (vi) a pending or threatened legal or governmental
proceeding or
-27-
action relating generally to the Company's business, or a notification having
been received by the Company of the threat of any such proceeding or action,
which could materially adversely affect the Company; (vii) except as
contemplated by the Prospectus, the Company is merged or consolidated into or
acquired by another company or group or there exists a binding legal commitment
for the foregoing or any other material change of ownership or control occurs;
(viii) the passage by the Congress of the United States or by any state
legislative body or federal or state agency or other authority of any act, rule
or regulation, measure, or the adoption of any orders, rules or regulations by
any governmental body or any authoritative accounting institute or board, or any
governmental executive, which is reasonably believed likely by the
Representative to have a material impact on the business, financial condition or
financial statements of the Company or the market for the securities offered
pursuant to the Prospectus; (ix) any adverse change in the financial or
securities markets beyond normal market fluctuations having occurred since the
date of this Agreement, or (x) any material adverse change having occurred,
since the respective dates of which information is given in the Registration
Statement and Prospectus, in the earnings, business prospects or general
condition of the Company, financial or otherwise, whether or not arising in the
ordinary course of business.
(b) If you elect to prevent this Agreement from becoming
effective or to terminate this Agreement as provided in this Section 10 or in
Section 9, the Company shall be promptly notified by you, by telephone or
telegram, confirmed by letter.
11. UNIT PURCHASE OPTION.
At or before the First Closing Date, the Company will sell to
X.X. Xxxxx Investment Banking Corp. (for its own account), or its designees for
a consideration of $600, and upon the terms and conditions set forth in the form
of Unit Purchase Option annexed as an exhibit to the Registration Statement, a
Unit Purchase Option to purchase an aggregate of 600,000 Units. In the event of
conflict in the terms of this Agreement and the Unit Purchase Option, the
language of the Unit Purchase Option shall control.
12. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE DELIVERY.
The respective indemnities, agreements, representations,
warranties and other statements of the Company or its Principal Stockholders,
where appropriate, and the undertakings set forth in or made pursuant to this
Agreement will remain in full force and effect, regardless of any investigation
made by or on behalf of the Underwriter, the Company or any of its officers or
directors or any controlling person and will survive delivery of and payment of
the Units and the termination of this Agreement.
13. NOTICE.
Any communications specifically required hereunder to be in
writing, if sent to the Underwriter, will be mailed, delivered and confirmed to
them at X.X. Xxxxx Investment Banking Corp., 00 Xxxx Xxxxxx,, Xxx Xxxx, Xxx Xxxx
00000, with a copy sent to
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Bachner, Tally, Xxxxxxx & Xxxxxx LLP, 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000, or if sent to the Company, will be mailed, delivered and confirmed to it
at Advanced Aerodynamics & Structures, Inc., 0000 Xxxxxxx Xxx, Xxxx Xxxxx,
Xxxxxxxxxx 00000, with a copy sent to Xxxx, Forward, Xxxxxxxx & Scripps LLP, 000
Xxxx Xxxxxxxx, Xxxxx 0000, Xxx Xxxxx, Xxxxxxxxxx 00000.
14. PARTIES IN INTEREST.
The Agreement herein set forth is made solely for the benefit of
the Underwriter, the Company and, to the extent expressed, the Principal
Stockholders, any person controlling the Company or the Underwriter, and
directors of the Company, nominees for directors (if any) named in the
Prospectus, its officers who have signed the Registration Statement, and their
respective executors, administrators, successors, assigns and no other person
shall acquire or have any right under or by virtue of this Agreement. The term
"successors and assigns" shall not include any purchaser, as such purchaser,
from the Underwriter of the Units.
15. APPLICABLE LAW.
This Agreement will be governed by, and construed in accordance
with, the laws of the State of New York applicable to agreements made and to be
entirely performed within New York.
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If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return this agreement, whereupon it will become a
binding agreement between the Company and the Underwriter in accordance with its
terms.
Very truly yours,
ADVANCED AERODYNAMICS & STRUCTURES, INC.
By:
-----------------------------------
Xxxx X. Xxxx, President
The foregoing Underwriting Agreement is hereby confirmed and accepted
as of the date first above written.
X.X. XXXXX INVESTMENT BANKING CORP.
By:
------------------------------------
Xxxxxx X. Xxxx, Vice Chairman and
General Counsel
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