[DRAFT]
1,000,000 SHARES
AVIATION DISTRIBUTORS, INC.
COMMON STOCK
UNDERWRITING AGREEMENT
November __, 1996
Cruttenden Xxxx Incorporated
As Representative of the Several Underwriters
Named in Schedule I Attached Hereto
00000 Xxx Xxxxxx
Xxxxxx, Xxxxxxxxxx 00000-0000
Ladies and Gentlemen:
Aviation Distributors, Inc., a Delaware corporation (the "Company"),
and Xxxxxx X. Xxxxxx (the "Selling Stockholder") severally propose to issue and
sell an aggregate of 1,000,000 shares (the "Offered Shares") of the Company's
common stock, $0.01 par value (the "Common Stock"), to Cruttenden Xxxx
Incorporated (the "Representative") and the several underwriters named in
Schedule I hereto (collectively with the Representative, the "Underwriters" and
individually, an "Underwriter," which terms shall also include any Underwriter
substituted as hereinafter provided in Section 12). The Offered Shares consist
of 860,000 shares of Common Stock to be issued and sold by the Company and
140,000 outstanding shares of Common Stock to be sold by the Selling
Stockholder. The Offered Shares shall be offered to the public at an initial
offering price of $_____ per Offered Share (the "Offering Price").
In addition, the several Underwriters, in order to cover over-
allotments in the sale of the Offered Shares, may purchase from the Company and
the Selling Stockholder within 45 days after the Effective Date (as hereinafter
defined), for their own account for offering to the public at the Offering
Price, up to 100,000 and 50,000, respectively, additional shares of Common Stock
(the "Optional Shares"), upon the terms and conditions set forth in Section 5
hereof. The Offered Shares and the Optional Shares are hereinafter collectively
referred to as the "Shares." The Company, intending to be legally bound hereby,
confirms its agreement with each of the Underwriters as follows:
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
and warrants to, and agrees with, the several Underwriters that:
(a) The Company has prepared in conformity with the requirements
of the Securities Act of 1933, as amended (the "Act"), and the rules,
regulations, releases and instructions (the "Regulations") of the
Securities and Exchange Commission (the "SEC") under the Act in effect
at all applicable times and has filed with the SEC a registration
statement on Form SB-2 (File No. 333-8061) and one or more amendments
thereto registering the offering and sale of the Shares under the Act.
Any preliminary prospectus included in such registration statement or
filed with the SEC pursuant to Rule 424(a) of the Regulations is
hereinafter called a "Preliminary Prospectus." The various parts of
such registration statement, including all exhibits thereto and the
information contained in any form of final prospectus filed with the
SEC pursuant to Rule 424(b) of the Regulations in accordance with
Section 6(a) of this Agreement and deemed by virtue of Rule 430A of
the Regulations to be part of such registration statement at the time
it was declared effective, each as amended at the time such
registration statement became effective, and each registration
statement, if any, filed pursuant to Rule 462(b) under the Act
increasing the size of the offering registered under the Act, are
hereinafter collectively referred to as the "Registration Statement."
The final prospectus in the form included in the Registration
Statement or first filed with the SEC pursuant to Rule 424(b) of the
Regulations and any amendments or supplements thereto is hereinafter
referred to as the "Prospectus."
(b) The Registration Statement has or will become effective
under the Act as of the Effective Date, and the SEC has not issued any
stop order suspending the effectiveness of the Registration Statement
or preventing or suspending the use of any Preliminary Prospectus nor
has the SEC instituted, threatened to institute or, to the Company's
knowledge, contemplated proceedings with respect to such an order.
The Company has not received any stop order suspending the sale of the
Shares in any jurisdiction designated by the Representative pursuant
to Section 6(f) hereof, and no proceedings for that purpose have been
instituted or, to the Company's knowledge, are threatened or
contemplated. The Company has complied with all requests of the SEC
and any state securities commission in a state
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designated by the Representative pursuant to Section 6(f) hereof,
for additional information to be included in the Registration
Statement or Prospectus or otherwise. Each Preliminary Prospectus
conformed in all material respects to the requirements of the Act
and the Regulations as of its date and did not as of its date
contain an untrue statement of material fact or omit to state a
material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which
they were made, not misleading, except the foregoing shall not
apply to statements in or omissions from any Preliminary Prospectus
in reliance upon and in conformity with information furnished to
the Company in writing by or on behalf of any Underwriter through
the Representative expressly for use therein. The Registration
Statement on the date on which it was declared effective by the SEC
(the "Effective Date") conformed, and any post-effective amendment
thereof on the date it shall become effective, and the Prospectus
at the time it is filed with the SEC pursuant to Rule 424(b) of the
Regulations and on the Closing Date (as defined in Section 4
hereof) and any Option Closing Date (as defined in Section 5(b)
hereof) will conform in all material respects, to the requirements
of the Act and the Regulations, and neither the Registration
Statement, any post-effective amendment thereof nor the Prospectus
will, on any of such respective dates, contain any untrue statement
of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not
misleading, except that this representation and warranty does not
apply to statements in or omissions from the Registration Statement
or the Prospectus made in reliance upon and in conformity with
information furnished to the Company in writing by or on behalf of
any Underwriter through the Representative expressly for use
therein. It is understood that the written information described
in Section 13 constitutes the only information furnished in writing
by or on behalf of any Underwriter for inclusion in any Preliminary
Prospectus, the Prospectus or the Registration Statement.
(c) The consolidated financial statements (including the notes
thereto) filed as part of any Preliminary Prospectus, the Prospectus
and the Registration Statement present fairly the consolidated
financial position of the Company and each corporation
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or other entity of which the Company owns or will own fifty percent or
more of the outstanding equity securities as of the Closing Date
(individually a "Subsidiary," and collectively the "Subsidiaries"), as
of the respective dates thereof, and the consolidated results of
operations and cash flows of the Company and its Subsidiaries, for the
periods indicated therein, all in conformity with generally accepted
accounting principles consistently applied through the periods
involved, except as may be otherwise stated therein. The supporting
schedules, if any, included in the Registration Statement fairly state
the information required to be stated therein in relation to the basic
financial statements taken as a whole. The other financial and
statistical information included in the Prospectus, including without
limitation the data under the captions "Prospectus Summary" and
"Selected Financial Data," presents fairly the information shown
therein and has been compiled on a basis consistent with that of the
audited financial statements included in the Registration Statement
and the books and records of the Company.
(d) The Company does not have any "significant" Subsidiaries (as
defined in Regulation S-X promulgated under the Act) other than ADI
Consignment Sales, Inc., a California corporation ("ADICSI"), and,
except Aviation Distributors (Europe) Ltd., the Company does not own
any stock or other equity interest in, or control, directly or
indirectly, any other corporation, partnership or other entity.
(e) Each of the Company and ADICSI is a corporation duly
incorporated, validly existing and in good standing under the laws of
its jurisdiction of incorporation with all necessary corporate power
and authority, and all required licenses, permits, certifications,
registrations, approvals, consents and franchises to own or lease and
operate its properties and to conduct its business as described in the
Prospectus and to execute, deliver and perform this Agreement, except
where failure to have such licenses, permits, certifications,
registrations, approvals, consents and franchises would not reasonably
be expected to have a material adverse effect on the Company and
ADICSI taken as a whole. Each of the Company and ADICSI is duly
qualified to do business and is in good standing as a foreign
corporation in each jurisdiction in which the nature of its business
or its ownership or leasing of property requires such
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qualification, except where the failure to be so qualified would not
reasonably be expected to have a material adverse effect on the
Company and its Subsidiaries taken as a whole.
(f) The Company has all necessary corporate power and authority
to execute and deliver this Agreement and the Warrant to purchase the
shares of Common Stock to be issued and sold to the Representative
under the terms of the Warrant Agreement (as hereinafter defined) in
accordance with Section 6(p) of this Agreement (the "Representative's
Warrant").
(g) This Agreement, the Warrant Agreement and the
Representative's Warrant have been duly authorized, executed and
delivered by the Company and constitute its valid and binding
obligations, enforceable against the Company in accordance with their
respective terms, except as rights to indemnity and contribution
hereunder or thereunder may be limited by federal or state securities
laws or principles of public policy, and except as enforcement may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting creditors'
rights generally or by general equitable principles. This Agreement,
the Warrant Agreement and the Representative's Warrant conform to the
description thereof in the Prospectus.
(h) The execution, delivery and performance of this Agreement,
the Warrant Agreement and the Representative's Warrant by the Company
does not and will not, with or without the giving of notice or the
lapse of time, or both, (A) conflict with any terms or provisions of
the Certificate of Incorporation or Bylaws of the Company, as amended
to the date hereof and the Closing Date or Option Closing Date, as the
case may be; (B) result in a breach of, constitute a default under,
result in the termination or modification of or result in the creation
or imposition of any lien, security interest, charge or encumbrance
upon any of the properties of the Company pursuant to any indenture,
mortgage, deed of trust, contract, commitment or other agreement or
instrument to which the Company is a party or by which any of its
properties or assets are bound or affected, the effect of which would
reasonably be expected to have a material adverse effect on the
business or properties of the Company; (C) violate any law, rule,
regulation, judgment, order or decree of any government or
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governmental agency, instrumentality or court, domestic or foreign,
having jurisdiction over the Company or any of its properties or
businesses; or (D) result in a breach, termination or lapse of the
power and authority of the Company to own or lease and operate its
properties and conduct its business as described in the Prospectus,
the effect of which could reasonably be expected to have a material
adverse effect on the business or properties of the Company.
(i) The capitalization of the Company is as set forth in the
Prospectus under the heading "Capitalization" as of the date set forth
therein and at the Closing Date the Company will have the as-adjusted
capitalization set forth under the caption "Capitalization" in the
Prospectus. On the Effective Date, the Closing Date and any Option
Closing Date, there will be no options or warrants for the purchase
of, other outstanding rights to purchase, agreements or obligations to
issue or agreements or other rights to convert or exchange any
obligation or security into, capital stock of the Company or
securities convertible into or exchangeable for capital stock of the
Company, except as described in the Prospectus.
(j) The authorized capital stock of the Company, including,
without limitation, the outstanding shares of Common Stock and the
Shares being issued on the Closing Date and Option Closing Date (if
any and to the extent applicable), conforms to the descriptions
thereof in the Prospectus, and such descriptions conform to the
descriptions thereof set forth in the instruments defining the same.
The information in the Prospectus insofar as it relates to outstanding
options that have been granted to employees, agents, consultants and
directors and the Representative's Warrant, in each case as of the
Effective Date, the Closing Date and any Option Closing Date, is true,
correct and complete in all material respects. As of the Closing
Date, all of the outstanding capital stock or other securities
evidencing equity ownership of ADICSI will have been duly and validly
authorized and issued and will be fully paid and nonassessable and,
except as described in the Prospectus, will be owned, directly or
indirectly, by the Company, free and clear of any security interest,
claim, lien or encumbrance; 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 any
Subsidiary.
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(k) The outstanding shares of Common Stock (including the Shares
to be sold by the Selling Stockholder) have been duly authorized and
are validly issued, fully paid and non-assessable. The shares of
Common Stock issuable pursuant to the Representative's Warrant, when
issued and paid for in accordance with the respective terms thereof,
will be duly authorized, validly issued, fully paid and non-
assessable. None of such outstanding shares of Common Stock were, and
none of the Representative's Warrant or the shares of Common Stock
issuable upon exercise of the Representative's Warrant will be, issued
in violation of any preemptive rights of any security holder of the
Company. The Company has reserved a sufficient number of shares of
Common Stock for issuance pursuant to the Representative's Warrant.
The offers and sales of the outstanding shares of Common Stock were,
and the issuance of Common Stock upon exercise of the Representative's
Warrant will be, made in conformity with applicable registration
requirements or exemptions therefrom under federal and applicable
state securities laws.
(l) The issuance and sale of the Shares by the Company have been
duly authorized and, when the Shares have been duly delivered against
payment therefor as contemplated by this Agreement, the Shares will be
validly issued, fully paid and non-assessable. None of the Shares
will be issued in violation of any preemptive rights of any security
holder of the Company. The certificates representing the Shares are
in proper legal form under, and conform to the requirements of the
Delaware General Corporation Law, as amended (the "GCL"). Neither the
filing of the Registration Statement nor the offering or sale of the
Shares as contemplated by this Agreement gives any security holder of
the Company any rights for or relating to the registration of any
shares of Common Stock or any other security of the Company other than
the Representative's Warrant and the shares of Common Stock issuable
upon exercise of the Representative's Warrant.
(m) No consent, approval, authorization, order, registration,
license or permit of any court, government, governmental agency,
instrumentality or other regulatory body or official is required for
the valid authorization, issuance, sale and delivery by the Company of
any of the Shares (including the anticipated use of proceeds
therefrom), or for the execution,
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delivery or performance by the Company of this Agreement, except
such as may be required for the registration of the Shares under
the Act, the Regulations and the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), which consent, approval and
authorization have been obtained, and for compliance with the
applicable state securities or Blue Sky laws, or the Bylaws, rules
and other pronouncements of the National Association of Securities
Dealers, Inc. (the "NASD"). The Common Stock is registered under
Section 12(g) of the Exchange Act and all necessary filings have
been made to include the Shares in such registration. Upon the
effectiveness of the Registration Statement, the Shares will be
listed on the Nasdaq Stock Market's SmallCap Market. The Company
has taken no action designed, or likely, to have the effect of
terminating the registration of the Common Stock under Section
12(g) of the Exchange Act, nor has the Company received any
notification that the SEC is contemplating terminating such
registration.
(n) The statements in the Registration Statement and Prospectus,
insofar as they are descriptions of or references to contracts,
agreements or other documents, are accurate in all material respects
and present or summarize fairly, the information required to be
disclosed under the Act and the Regulations, and there are no
contracts, agreements or other documents required to be described or
referred to in the Registration Statement or Prospectus or to be filed
as exhibits to the Registration Statement under the Act or the
Regulations that have not been so described, referred to or filed, as
required.
(o) Since the respective dates as of which information is given
in the Registration Statement and the Prospectus, except as otherwise
stated therein, there has not been (A) any material adverse change
(including, whether or not insured against, any material loss or
damage to any assets), or development involving a prospective material
adverse change, in the general affairs, properties, assets,
management, condition (financial or otherwise), results of operations,
stockholders' equity, business or prospects of the Company and ADICSI
taken as a whole, (B) any transaction entered into by the Company or
any Subsidiary that is material to the Company and ADICSI taken as a
whole and not in the ordinary course of business, (C) any dividend or
distribution of any kind declared, paid or made by the Company on its
capital
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stock, (D) any liabilities or obligations, direct or indirect,
incurred by the Company or any Subsidiary that are material to the
Company and ADICSI taken as a whole, or (E) any material change in the
short-term debt or long-term debt of the Company and ADICSI taken as a
whole. The Company and ADICSI taken as a whole do not have any
contingent liabilities or obligations that are material and that are
not disclosed in the Prospectus.
(p) The Company has not distributed and, prior to the later to
occur of the Closing Date, the Option Closing Date or the completion
of the distribution of the Shares, will not distribute any offering
material in connection with the offering or sale of the Shares other
than the Registration Statement, each Preliminary Prospectus and the
Prospectus, in any such case only as permitted by the Act and the
Regulations.
(q) Each of the Company and ADICSI has filed with the
appropriate federal, state and local governmental agencies, and all
foreign countries and political subdivisions thereof, all tax returns
that are required to be filed, or has duly obtained extensions of time
for the filing thereof and has paid all taxes shown on such returns
and all assessments received by it to the extent that the same have
become due other than taxes and/or assessments which are being
contested in good faith and for which adequate reserves have been
established in accordance with generally accepted accounting
principles. Neither the Company nor ADICSI has executed or filed
with any taxing authority, foreign or domestic, any agreement
extending the period for assessment or collection of any income taxes
or is a party to any pending action or proceeding by any foreign or
domestic governmental agencies for the assessment or collection of
taxes, and no claims for assessment or collection of taxes have been
asserted against the Company or ADICSI that might materially adversely
affect the general affairs, properties, assets, condition (financial
or otherwise), results of operations, stockholders' equity, business
or prospects of the Company and ADICSI taken as a whole.
(r) Xxxxxx Xxxxxxxx LLP, which is certifying the financial
statements and supporting schedules included in the Prospectus and
forming a part of the Registration Statement, is a firm of independent
public accountants as required by the Act and the Regulations.
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(s) Neither the Company nor ADICSI is in violation of, or in
default under, any of the terms or provisions, of (A) its Certificate
of Incorporation or Bylaws, as applicable, each as amended to the date
hereof, the Closing Date or the Option Closing Date, as the case may
be, (B) any indenture, mortgage, deed of trust, contract, loan or
credit agreement, commitment or other agreement or instrument to which
the Company or ADICSI is a party or by which any of them or any of
their properties are bound or affected, (C) any law, rule, regulation,
judgment, order or decree of any government or governmental agency,
instrumentality or court, domestic or foreign, having jurisdiction
over the Company or ADICSI or any of their properties or businesses or
(D) any license, permit, certification, registration, approval,
consent or franchise referred to in subsections (e) or (m) of this
Section 1, except where such violation or default would not reasonably
be expected to have a material adverse effect on the business or
properties of the Company and ADICSI taken as a whole.
(t) Except as disclosed in the Prospectus, there are no claims,
actions, suits, proceedings, arbitrations, investigations or inquiries
pending before or, to the Company's knowledge, threatened or
contemplated by, any governmental agency, instrumentality, court or
tribunal, domestic or foreign, or before any private arbitrational
tribunal, relating to or affecting the Company or ADICSI or their
properties or businesses that might affect the issuance or validity of
any of the Shares or the validity of any of the outstanding shares of
Common Stock, or that, if determined adversely to the Company or
ADICSI, respectively, would, individually or in the aggregate, could
reasonably be expected to result in any material adverse change in the
general affairs, properties, assets, condition (financial or
otherwise), results of operations, stockholders' equity, business or
prospects, of the Company and ADICSI taken as a whole; nor, to the
Company's knowledge, is there any reasonable basis for any such claim,
action, suit, proceeding, arbitration, investigation or inquiry; all
pending legal or governmental proceedings to which the Company or any
Subsidiary is a party or of which any of their property is the subject
which are not described in the Registration Statement and the
Prospectus, including ordinary routine litigation incidental to the
business, are, considered in the aggregate, not material. There are
no outstanding orders, judgments
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or decrees of any court, governmental agency, instrumentality or other
ribunal enjoining the Company or ADICSI from, or requiring the Company
or ADICSI to take or refrain from taking any action, or to which the
Company or ADICSI, or any of their properties, assets or businesses is
bound or subject.
(u) Except as otherwise stated in the Prospectus, the Company
and ADICSI own, or possess adequate rights to use all patents, patent
applications, trademarks, trademark registrations, applications for
trademark registration, trade names, service marks, licenses,
inventions, copyrights, know-how (including trade secrets and other
unpatented and/or unpatentable proprietary or confidential technology,
information, systems, design methodologies and devices or procedures
developed or derived from the Company's or ADICSI' businesses), trade
secrets, confidential information, processes and formulations
necessary for, used in or proposed to be used in the conduct of their
businesses as described in the Prospectus (collectively, the
"Intellectual Property") that, if not so owned or possessed, would
reasonably be expected to have a material adverse effect on the
general affairs, properties, condition (financial or otherwise),
results of operations, stockholders' equity, business or prospects of
the Company and ADICSI taken as a whole. To the best of the Company's
knowledge, neither the Company nor ADICSI has infringed, is infringing
or has received any notice of conflict with the asserted rights of
others with respect to the Intellectual Property, and, to the
Company's knowledge, no others have infringed upon or are in conflict
with the Intellectual Property.
(v) The Company and ADICSI have obtained all permits, licenses
and other authorizations that are required under all applicable
environmental laws (collectively, the "Environmental Laws"), other
than any permits, licenses or other authorizations which, if not
obtained, would not have a material adverse effect on the business or
properties of the Company and ADICSI taken as a whole. Each of the
Company and ADICSI is in compliance with all terms and conditions of
any required permits, licenses and authorizations, and is in
compliance with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and
timetables contained in the Environmental Laws, except where the
failure to so
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comply would not have a material adverse effect on the Company and
ADICSI.
(w) There are no present or past events, conditions,
circumstances, activities, practices, incidents, actions or plans
relating to the business as currently being conducted by the Company
and ADICSI that interfere with or prevent compliance with or continued
compliance with the Environmental Laws, the non-compliance with which
would reasonably be expected to have a material adverse effect on the
Company and ADICSI taken as a whole, or which would be reasonably
likely to give rise to any material legal liability (whether statutory
or common law) or otherwise would be reasonably likely to form the
basis of any claim, action, demand, suit, proceeding, hearing, notice
of violation, study, investigation, remediation, or clean up based on
or related to the generation, manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling, or the
emission, discharge, release into the workplace, community or
environment of any pollutant, contaminant, chemical or industrial,
toxic, or hazardous substance or waste, which claim, action, demand,
suit, proceeding, hearing, notice of violation, study, investigation,
remediation, or clean up would reasonably be expected to have a
material adverse effect on the Company and ADICSI taken as a whole.
(x) Each of the Company and ADICSI has good and marketable title
in fee simple to all real property, interests in real property and
personal property (tangible and intangible) described in the
Prospectus as being owned by them, in each case, free and clear of all
liens, security interests, charges or encumbrances, except such as are
described in the Prospectus or which do not materially affect the
aggregate value of such property and interests taken as a whole and do
not interfere with the use made and proposed to be made of such
property and interests by the Company or any of its Subsidiaries.
Each of the Company and ADICSI has adequately insured the property of
the Company and ADICSI, respectively, against loss or damage by fire
or other casualty and maintains, in adequate amounts, insurance
against such other risks as management of the Company deems
appropriate. Except as described in the Prospectus, neither the
Company nor ADICSI owns any real property, and all real property
currently used or leased by the Company and ADICSI, as described in
the Prospectus (the "Premises"), is held by the Company or
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ADICSI, as applicable, under a valid, subsisting and enforceable
lease, and except as enforcement may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to or affecting creditors' rights generally or by
general equitable principles. The Premises, and all operations
conducted thereon, are now and, since the Company or ADICSI, as
applicable, began to use such Premises, always have been and, to
the Company's knowledge, prior to when the Company or ADICSI, as
applicable, began to use such Premises, always had been, in
compliance with the Environmental Laws except where such operations
would not reasonably be expected to have a material adverse effect
on the Company and ADICSI taken as a whole. To the Company's
knowledge, there is no, and the Company and ADICSI have not
received notice of any, claim, demand, investigation, regulatory
action, suit or other action instituted or threatened against any
of them or the Premises relating to any of the Environmental Laws.
The Company has not received any notice of material violation,
citation, complaint, order, directive, request for information or
response thereto, notice letter, demand letter or compliance
schedule to or from any governmental or regulatory agency arising
out of or in connection with hazardous substances (as defined by
applicable Environmental Laws) on, about, beneath, arising from, or
generated at the Premises.
(y) The Company and ADICSI maintain a system of internal
accounting controls sufficient to provide reasonable assurances that
(A) transactions are executed in accordance with management's general
or specific authorization, (B) transactions are recorded as necessary
in order to permit preparation of financial statements in accordance
with generally accepted accounting principles and to maintain
accountability for assets, (C) access to assets is permitted only in
accordance with management's general or specific authorization and (D)
the recorded accountability for assets is compared with existing
assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(z) No unregistered securities of the Company have been sold by
the Company or on behalf of the Company by any person or persons
controlling, controlled by or under common control with the Company
within the three years prior to the date hereof, except as disclosed
in the Registration Statement.
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(aa) Each contract or other instrument (however characterized or
described) to which the Company or ADICSI is a party or by which any
of the properties or business of it or them is bound or affected and
to which reference has been made in the Prospectus or which has been
filed as an exhibit to the Registration Statement has been duly and
validly executed by the Company or ADICSI, as applicable, and, to the
Company's knowledge, by the other parties thereto. Except as
described in the Prospectus, each such contract or other instrument is
in full force and effect and is enforceable against the parties
thereto in accordance with its terms, and except as enforcement may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting creditors'
rights generally or by general equitable principles, and none of the
Company, ADICSI or any other party is in default thereunder and no
event has occurred that, with the lapse of time or the giving of
notice, or both, would constitute a default thereunder.
(ab) Except as disclosed in the prospectus, neither the Company
nor ADICSI has any employee benefit plan, profit sharing plan,
employee pension benefit plan or employee welfare benefit plan or
deferred compensation arrangements (collectively, "Plans") that is
subject to the provisions of the Employee Retirement Income Security
Act of 1974, as amended, or the rules and regulations thereunder
("ERISA"). To the Company's knowledge, all Plans that are subject to
ERISA are, and have been at all times since their establishment, in
compliance with ERISA and, to the extent required by the Internal
Revenue Code of 1986, as amended (the "Code"), in compliance with the
Code. To the Company's knowledge, neither the Company nor ADICSI has
had any employee pension benefit plan that is subject to Part 3 of
Subtitle B of Title 1 of ERISA or any defined benefit plan or
multiemployer plan. To the Company's knowledge, neither the Company
nor ADICSI has maintained retiree life and retiree health insurance
plans that are employee welfare benefit plans providing for continuing
benefit or coverage for any employee or any beneficiary of any
employee after such employee's termination of employment, except as
required by Section 4980B of the Code. To the Company's knowledge, no
fiduciary or other party in interest with respect to any of the Plans
has caused any of such Plans to engage in a "prohibited action" as
defined in Section 406 of ERISA. As used in this subsection, the
terms "defined
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benefit plan," "employee benefit plan," "employee pension benefit
plan," "employee welfare benefit plan," "fiduciary" and
"multiemployer plan" shall have the respective meanings assigned to
such terms in Section 3 of ERISA.
(ac) To the best of their knowledge, neither the Company nor any
of its Subsidiaries is engaged in any unfair labor practice which
could reasonably be expected to have a material adverse effect on the
Company and its Subsidiaries taken as a whole. Except for matters
which are not material in the aggregate to the Company and its
Subsidiaries taken as a whole, (A) there is (x) no unfair labor
practice complaint pending or, to the best of their knowledge,
threatened against the Company or any of its Subsidiaries before the
National Labor Relations Board, and no grievance or arbitration
proceeding arising out of or under collective bargaining agreements is
pending or, to the best of their knowledge, threatened, (y) no strike,
labor dispute, slowdown or stoppage pending or, to the best knowledge
of the Company or any of its Subsidiaries after due inquiry,
threatened against the Company or any of its Subsidiaries and (z) no
union representation question existing with respect to the employees
of the Company or any of its Subsidiaries and, to the best knowledge
of the respective managements of the Company or any of its
Subsidiaries, no union organizing activities are taking place and (B)
there has been no violation of any federal, state or local law
relating to discrimination in the hiring, promotion or pay of
employees, nor of any applicable wage or hour laws.
(ad) Except for certain compensation to be paid to the
Representative, the Company has not incurred any liability for any
finder's fees or similar payments in connection with the transactions
contemplated herein.
(ae) Except as disclosed in the Prospectus, there are no business
relationships or related party transactions required to be disclosed
therein by Item 404 of Regulation S-B of the Regulations.
(af) The Company is familiar with the Investment Company Act of
1940, as amended (the "1940 Act"), and the rules and regulations
thereunder, and has in the past conducted, and intends in the future
to continue to conduct, its affairs in such a manner to ensure that
- 15 -
it will not become an "investment company" within the meaning of the
1940 Act and such rules and regulations.
(ag) None of the Company, ADICSI or director, officer, agent,
employee or other person associated with or acting on behalf of the
Company or ADICSI has, directly or indirectly, (A) used any corporate
funds for unlawful contributions, gifts, entertainment or other
unlawful expenses relating to any political activity, (B) made any
unlawful payment to foreign or domestic governments or governmental
officials or employees or to foreign or domestic political parties or
campaigns from corporate funds, (C) violated any provision of the
Foreign Corrupt Practices Act of 1977, as amended, or (D) made any
bribe, rebate, payoff, influence payment, kickback or other unlawful
payment.
(ah) The Company and its Subsidiaries have all governmental
licenses, certificates, permits, authorizations, approvals, franchises
or other rights necessary to carry on their business as such business
is presently conducted by them, except where failure to have such
licenses, certificates, permits, authorizations, approvals, franchises
or other rights would not reasonably be expected to have a material
adverse effect on the Company and its Subsidiaries taken as a whole.
Neither the Company nor any of its Subsidiaries has any reason to
believe that any governmental body or agency is considering limiting,
suspending or revoking any such license, certificate, permit,
authorization, approval, franchise or right in any material respect.
Neither the Company nor any of its Subsidiaries has any reason to
believe that any such license, permit or approval necessary in the
future to conduct the business of the Company and its Subsidiaries as
described in the Prospectus will not be granted upon application, or
that any governmental agencies are investigating the Company or any of
its Subsidiaries other than in ordinary course administrative reviews
or an ordinary course review of the transactions contemplated hereby.
(ai) The Directors' and Officers' Questionnaires delivered by the
Company to the Representatives on or prior to the Effective Date are
true and correct in all material respects.
(aj) There are no outstanding loans, advances (except normal
advances for business expenses in the ordinary course of business) or
guarantees of
- 16 -
indebtedness by the Company to or for the benefit of any of the
officers or directors of the Company or any of the members of the
families of any of them, except as disclosed in the Registration
Statement and the Prospectus.
(ak) Except as set forth in the Registration Statement and
Prospectus, the Company has not consummated the acquisition or
disposition of any business or property which is "significant" to the
Company within the meaning of Regulation S-X under the Act, and no
such acquisition or disposition is probable.
Any certificate signed by any officer of the Company in such capacity
and delivered to the Representative or to counsel for the Underwriters pursuant
to this Agreement shall be deemed a representation and warranty by the Company
to the several Underwriters as to the matters covered thereby.
2. REPRESENTATIONS AND WARRANTIES OF THE SELLING STOCKHOLDER. The
Selling Stockholder severally represents and warrants to each Underwriter that:
(a) Such Selling Stockholder is the lawful owner of the Shares
to be sold by such Selling Stockholder pursuant to this Agreement and
has, and on the Closing Date (and Option Closing Date, if applicable)
will have, good and clear title to such Shares, free of all
restrictions on transfer, liens, encumbrances, security interests and
claims whatsoever.
(b) Upon delivery of and payment for such Shares pursuant to
this Agreement, good and clear title to such Shares will pass to the
Underwriters, free of all restrictions on transfer, liens,
encumbrances, security interests and claims whatsoever.
(c) The Selling Stockholder has, and on the Closing Date and the
Option Closing Date will have, full legal right, power and authority
to enter into this Agreement and to sell, assign, transfer and deliver
such Shares in the manner provided herein and therein, and this
Agreement has been duly executed and delivered by or on behalf of the
Selling Stockholder and this Agreement is a valid and binding
agreement of the Selling Stockholder enforceable in accordance with
its terms, except as rights to indemnity and contribution hereunder
may be limited by applicable law.
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(d) The Selling Stockholder has not taken, and will not take,
directly or indirectly, any action designed to, or which might
reasonably be expected to, cause or result in stabilization or
manipulation of the price of any security of the Company to facilitate
the sale or resale of the Shares pursuant to the distribution
contemplated by this Agreement, and other than as permitted by the
Act, the Selling Stockholder has not distributed and will not
distribute any prospectus or other offering material in connection
with the offering and sale of the Shares.
(e) The execution, delivery and performance of this Agreement by
the Selling Stockholder, compliance by the Selling Stockholder with
all the provisions hereof and the consummation of the transactions
contemplated hereby will not require any consent, approval,
authorization or other order of any court, regulatory body,
administrative agency or other governmental body (except as such may
be under the Act, state securities laws or Blue Sky laws) and will not
conflict with or constitute a breach of any of the terms or provisions
of agreement, indenture or other instrument to which the Selling
Stockholder is a party or by which the Selling Stockholder or property
of the Selling Stockholder is bound, or violate or conflict with any
laws, administrative regulation or ruling or court decree applicable
to the Selling Stockholder or property of the Selling Stockholder.
(f) Such parts of the Registration Statement under the caption
"Principal and Selling Stockholder" which specifically relate to the
Selling Stockholder do not, and will not on the Closing Date (and any
Option Closing Date, if applicable), contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of
circumstances under which they were made, not misleading.
(g) At any time during the period described in paragraph 6(b)
hereof, if there is any change in the information referred to in
paragraph 2(g) above, the Selling Stockholder will immediately notify
you of such change.
(i) The Selling Stockholder is not aware, and has no reason to
believe, that any representation or
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warranty of the Company set forth in Section 1 above is untrue or
inaccurate in any material respect.
3. PURCHASE AND SALE OF OFFERED SHARES. On the basis of the
representations, warranties, covenants and agreements herein contained, but
subject to the terms and conditions herein set forth, (i) the Company shall sell
860,000 Offered Shares; and (ii) the Selling Stockholder agrees to sell 140,000
Offered Shares to the several Underwriters at the Offering Price less the
underwriting discount shown on the cover page of the Prospectus (the
"Underwriting Discount"), and the Underwriters, severally and not jointly, shall
purchase from the Company and the Selling Stockholder, on a firm commitment
basis, at the Offering Price less the Underwriting Discount, the respective
Offered Shares set forth opposite their names on Schedule I hereto. In making
this Agreement, each Underwriter is contracting severally, and not jointly, and,
except as provided in Sections 5 and 12 hereof, the agreement of each
Underwriter is to purchase only that number of Offered Shares specified with
respect to that Underwriter in Schedule I hereto. The Underwriters shall offer
the Offered Shares to the public as set forth in the Prospectus.
4. PAYMENT AND DELIVERY. Payment for the Offered Shares shall be made to
the Company and the Selling Stockholder by certified or official bank check
payable to the order of the Company and the Selling Stockholder in next day
funds, at the offices of Skadden, Arps, Slate, Xxxxxxx & Xxxx, Los Angeles,
California, or at such other location as shall be agreed upon by the Company and
the Representative, or in immediately available funds wired to such account or
accounts as the Company and the Selling Stockholder may specify (with all costs
and expenses incurred by the Underwriters in connection with such settlement
(including, but not limited to, interest or cost of funds expenses) to be borne
by the Company and the Selling Stockholder), against delivery of the Offered
Shares to the Representative at such place as you shall designate, for the
respective accounts of the Underwriters. Such payments and delivery will be
made at 7:00 a.m., Pacific time, on the third or fourth business day after the
date of this Agreement or at such other time and date thereafter as the
Representative and the Company shall agree upon. Such time and date are
referred to herein as the "Closing Date." The certificates representing the
Offered Shares to be sold and delivered will be in such denominations and
registered in such names as the Representative requests not less than two full
business days prior to the Closing Date, and will be made available to the
Representative for inspection, checking and packaging at the office of the
Company's Transfer Agent, on the business day prior to the Closing Date. The
Representative has advised the Company that each Underwriter has authorized the
Representative to accept
- 19 -
delivery of the Offered Shares and to make payment and receipt therefor.
5. OPTION TO PURCHASE OPTIONAL SHARES.
(a) For the purposes of covering any over-allotments in connection
with the distribution and sale of the Offered Shares as contemplated by the
Prospectus, subject to the terms and conditions herein set forth, the
several Underwriters are hereby granted an option by the Company to
purchase all or any part of the Optional Shares from the Company and the
Selling Stockholder (the "Over-allotment Option"). The purchase price per
share to be paid for the Optional Shares shall be the Offering Price less
the Underwriting Discount. The Over-allotment Option granted hereby may be
exercised by the Representative on behalf of the several Underwriters as to
all or any part of the Optional Shares at any time (but not more than once)
within 45 days after the Effective Date. No Underwriter shall be under any
obligation to purchase any Optional Shares prior to an exercise of the
Overallotment Option.
(b) The Over-allotment Option granted hereby may be exercised by the
Representative on behalf of the several Underwriters by giving notice to
the Company by a letter sent by registered or certified mail, postage
prepaid, telex, telegraph, telegram or facsimile (such notice to be
effective when sent), addressed as provided in Section 14 hereof, setting
forth the number of Optional Shares to be purchased, the date and time for
delivery of and payment for the Optional Shares and stating that the
Optional Shares referred to therein are to be used for the purpose of
covering over-allotments in connection with the distribution and sale of
the Offered Shares. If such notice is given prior to the Closing Date, the
date set forth therein for such delivery and payment shall not be earlier
than either two full business days thereafter or the Closing Date,
whichever occurs later. If such notice is given on or after the Closing
Date, the date set forth therein for such delivery and payment shall be a
date selected by the Representative that is not later than three full
business days after the exercise of the Over-allotment Option. The date
and time set forth in such a notice is referred to herein as the "Option
Closing Date," and a closing held pursuant to such a notice is referred to
herein as the "Option Closing." The number of Optional Shares to be sold
to each Underwriter pursuant to the exercise of the Over-allotment Option
shall be the number that bears the same ratio to the aggregate number of
Optional Shares being purchased through such Over-allotment Option exercise
as the
- 20 -
number of Offered Shares opposite the name of such Underwriter in
Schedule I hereto bears to the total number of all Offered Shares; subject,
however, to such adjustment as the Representative may approve to eliminate
fractional shares and subject to the provisions for the allocation of
Optional Shares purchased for the purpose of covering over-allotments set
forth in Section 10 of the Agreement Among Underwriters. Upon the exercise
of the Over-allotment Option, the Company shall become obligated to sell to
the Representative for the respective accounts of the Underwriters, and on
the basis of the representations, warranties, covenants and agreements
herein contained, but subject to the terms and conditions herein set forth,
and the several Underwriters shall become severally, but not jointly,
obligated to purchase from the Company, the number of Optional Shares
specified in each notice of exercise of the Over-allotment Option.
(c) Payment for the Optional Shares shall be made to the Company and
the Selling Stockholder by certified or official bank check payable to the
order of the Company in next day funds, at the office of Skadden, Arps,
Slate, Xxxxxxx & Xxxx, Los Angeles, California, or such other location as
shall be agreed upon by the Company and the Representative, or in
immediately available funds wired to such accounts as the Company and the
Selling Stockholder may specify (with all costs and expenses incurred by
the Underwriters in connection with such settlement in immediately
available funds (including, but not limited to, interest or cost of funds
expenses) to be borne by the Company and the Selling Stockholder), against
delivery of the Optional Shares to the Representative at such place as you
shall designate, for the respective accounts of the Underwriters. The
certificates representing the Optional Shares to be issued and delivered
will be in such denominations and registered in such names as the
Representative requests not less than two full business days prior to the
Option Closing Date, and will be made available to the Representative for
inspection, checking and packaging at the office of the Company's Transfer
Agent on the business day prior to the Option Closing Date.
6. CERTAIN COVENANTS AND AGREEMENTS OF THE COMPANY. The Company
covenants and agrees with the several Underwriters as follows:
(a) If Rule 430A of the Regulations is employed, the Company will
timely file the Prospectus pursuant to and in compliance with Rule 424(b)
of the Regulations and will
- 21 -
advise the Representative of the time and manner of such filing.
(b) The Company will not at any time, whether before or after the
Registration Statement shall have become effective, during such period as,
in the opinion of counsel for the Underwriters, the Prospectus is required
by law to be delivered in connection with sales by the Underwriters or a
dealer, file or publish any amendment or supplement to the Registration
Statement or Prospectus of which the Representative have not been
previously advised and furnished a copy, or which is not in compliance with
the Regulations, or, during the period before the distribution of the
Offered Shares and the Optional Shares is completed, file or publish any
amendment or supplement to the Registration Statement or Prospectus to
which the Representative reasonably objects in writing.
(c) The Company will use its best efforts to cause the Registration
Statement, if not effective at the time and date that this Agreement is
executed and delivered by the parties hereto, to become effective and will
advise the Representative immediately, and confirm such advice in writing,
(i) when the Registration Statement, or any post-effective amendment to the
Registration Statement, is filed with the SEC, (ii) of the receipt of any
comments from the SEC, (iii) when the Registration Statement has become
effective and when any post-effective amendment thereto becomes effective,
or when any supplement to the Prospectus or any amended Prospectus has been
filed, (iv) of any request of the SEC for amendment or supplementation of
the Registration Statement or Prospectus or for additional information, (v)
during the period when the Prospectus is required to be delivered under the
Act and Regulations, of the happening of any event which in the Company's
judgment makes any material statement in the Registration Statement or the
Prospectus untrue or which requires any changes to be made in the
Registration Statement or Prospectus in order to make any material
statements therein, in light of the circumstances under which they were
made, not misleading and (vi) of the issuance by the SEC of any stop order
suspending the effectiveness of the Registration Statement or of any order
preventing or suspending the use of any Preliminary Prospectus or the
Prospectus, the suspension of the qualification of any of the Shares for
offering or sale in any jurisdiction in which the Underwriters intend to
make such offers or sales, or of the initiation or threatening of any
proceedings for any such purposes. The Company will use its best efforts
to prevent the issuance of any such stop order or of any order preventing
or suspending such use and,
- 22 -
if any such order is issued, to obtain as soon as possible the lifting
thereof.
(d) The Company has delivered to the Representative, without charge,
and will continue to deliver from time to time until the Effective Date, as
many copies of each Preliminary Prospectus as the Representative may
reasonably request. The Company will deliver to the Representative,
without charge, as soon as possible after the Effective Date, and
thereafter from time to time during the period when delivery of the
Prospectus is required under the Act, such number of copies of the
Prospectus (as supplemented or amended, if the Company makes any
supplements or amendments to the Prospectus) as the Representative may
reasonably request. The Company hereby consents to the use of such copies
of each Preliminary Prospectus and the Prospectus for purposes permitted by
the Act, the Regulations and the securities or Blue Sky laws of the
jurisdictions in which the Shares are offered or sold by the several
Underwriters and by all dealers to whom Shares may be offered or sold, both
in connection with the offering and sale of the Shares and for such period
of time thereafter as the Prospectus is required by the Act to be delivered
in connection with sales by any Underwriter or dealer. The Company has
furnished or will furnish to the Representative two signed copies of the
Registration Statement as originally filed and of all amendments thereto,
whether filed before or after the Effective Date, two copies of all
exhibits filed therewith and two signed copies of all consents and
certificates of experts, and will deliver to the Representative such number
of conformed copies of the Registration Statement, including financial
statements and exhibits, and all amendments thereto, as the Representative
may reasonably request.
(e) The Company will comply with the Act, the Regulations, the
Exchange Act and the rules and regulations thereunder so as to permit the
continuance of offers and sales of, and dealings in, the Shares for as long
as may be necessary to complete the distribution of the Shares as
contemplated hereby.
(f) The Company will furnish such information as may be required and
otherwise reasonably cooperate in the registration or qualification of the
Shares, or exemption therefrom, for offering and sale by the several
Underwriters and by dealers under the securities or Blue Sky laws of such
jurisdictions in which the Representative determines to offer the Shares,
after consultation with the Company, and will file such consents to service
of process or other documents necessary or appropriate in order to effect
such
- 23 -
registration or qualification; provided, however, that no such
qualification shall be required in any jurisdiction where, solely as a
result thereof, the Company would be subject to taxation or qualification
as a foreign corporation doing business in such jurisdiction where it is
not now so qualified or to take any action which would subject it to
service of process in suits, other than those arising out of the offering
or sale of the Shares, in any jurisdiction where it is not now so subject.
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 is required under the laws of such jurisdiction for
such offering and sale.
(g) Subject to subsection (b) of this Section 6, in case of any
event, at any time within the period during which, in the opinion of
counsel for the Underwriters, a prospectus is required to be delivered
under the Act and Regulations, as a result of which event any Preliminary
Prospectus or the Prospectus, as then amended or supplemented, would
contain, in the judgment of the Company or in the opinion of counsel for
the Underwriters, an untrue statement of a material fact, or omit to state
any material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading, or,
if it is necessary at any time to amend any Preliminary Prospectus or the
Prospectus to comply with the Act and Regulations or any applicable
securities or Blue Sky laws, the Company promptly will prepare and file
with the SEC, and any applicable state securities commission, an amendment
or supplement that will correct such statement or omission or an amendment
that will effect such compliance and will furnish to the Representative
such number of copies of such amendment or amendments or supplement or
supplements to such Preliminary Prospectus or the Prospectus (in form and
substance satisfactory to the Representative and counsel for Underwriters)
as the Representative may reasonably request. For purposes of this
subsection, the Company will furnish such information to the
Representative, the Underwriters' counsel and counsel for the Company as
shall be necessary to enable such persons to consult with the Company with
respect to the need to amend or supplement any Preliminary Prospectus or
the Prospectus, and shall furnish to the Representative and the
Underwriters' counsel such further information as each may from time to
time reasonably request. If the Company and the Representative agree that
any Preliminary Prospectus or the Prospectus should be amended or
supplemented, the Company, if requested by the Representative, will, if and
to the extent required by law,
- 24 -
promptly issue a press release announcing or disclosing the matters to be
covered by the proposed amendment or supplement.
(h) The Company will make generally available to its security holders
as soon as practicable and in any event not later than 45 days after the
end of the period covered thereby, an earnings statement of the Company
(which need not be audited unless required by the Act, the Regulations, the
Exchange Act or the rules or regulations thereunder) that shall comply with
Section 11(a) of the Act and cover a period of at least 12 consecutive
months beginning not later than the first day of the Company's fiscal
quarter next following the Effective Date.
(i) For a period of five years from the Effective Date, the Company
will deliver to the Representative: (A) a copy of each report or document,
including, without limitation, reports on Forms 8-K, 10-C, 10-K and 10-Q
(or such similar forms as may be designated by the SEC), registration
statements and any exhibits thereto, filed with or furnished to the SEC or
any securities exchange or the NASD, as soon as practicable after the date
each such report or document is so filed or furnished, (B) as soon as
practicable, copies of any reports or communications (financial or other)
of the Company mailed to its security holders and (C) every material press
release in respect of the Company or ADICSI or their affairs that was
released or prepared by the Company or ADICSI.
(j) During the course of the distribution of the Shares, the Company
has not taken, nor will it take, directly or indirectly, any action
designed to or that might, in the future, reasonably be expected to cause
or result in stabilization or manipulation of the price of the Common
Stock.
(k) The Company will cause each person listed on Schedule II hereto
to execute a legally binding and enforceable agreement (a "lockup
agreement") to, for the period commencing on the Effective Date and ending
180 days after the Effective Date, not sell, offer to sell, contract to
sell, grant any option for the sale of or otherwise transfer or dispose of
any shares of Common Stock (except for the sale of the Shares as
contemplated by this Agreement or transfers permitted pursuant to the
lockup agreement), any options to purchase Common Stock or any securities
convertible into or exchangeable for Common Stock without the prior written
consent of the Representative, which lockup agreement shall be in form and
substance satisfactory
- 25 -
to the Representative and the Underwriters' counsel, and deliver
such lockup agreement to the Representative prior to the Effective
Date. Appropriate stop transfer instructions will be issued by the
Company to the transfer agent for the securities affected by the
lockup agreements.
(l) The Company will not sell, issue, contract to sell, offer to sell
or otherwise dispose of any Common Stock, options to purchase Common Stock
or any other security convertible into or exchangeable for Common Stock,
from the date of the Effective Date through 180 days after the Effective
Date, without the prior written consent of the Representative, except for
the sale of the Shares as contemplated by this Agreement, the granting of
options, and the issuance of Common Stock upon their exercise, under the
Company's stock option plans described in the Prospectus and the issuance
of the Representative's Warrant.
(m) The Company will use all reasonable efforts to maintain the
inclusion of the Common Stock on the Nasdaq SmallCap Market (or on the
Nasdaq National Market or a national securities exchange) for a period of
five years after the date hereof.
(n) The Company shall, at its sole cost and expense, supply and
deliver to the Representative and the Underwriters' counsel, within a
reasonable period after the Closing Date, one set of transaction documents,
which shall include the Registration Statement, as amended or supplemented,
all exhibits to the Registration Statement, each Preliminary Prospectus,
the Prospectus, the Preliminary Blue Sky Memorandum and any supplement
thereto and all underwriting and other closing documents.
(o) The Company will use the net proceeds from the sale of the Shares
to be sold by it hereunder substantially in accordance with the description
thereof set forth in the Prospectus and shall file such reports with the
SEC with respect to the sale of such Shares and the application of the
proceeds therefrom as may be required in accordance with Rule 463 under the
Act.
(p) On the Closing Date, the Company shall sell to the
Representative, at a purchase price of $0.001 per warrant, a
Representative's Warrant to purchase 100,000 shares of Common Stock. Such
Representative's Warrant shall be issued pursuant to the terms of the
Warrant Agreement and shall have an exercise price per share equal to 135%
of the Offering Price, shall be exercisable during the period beginning on
the first anniversary of the Effective Date and
- 26 -
ending on the fifth anniversary of the Effective Date, and shall contain
customary anti-dilution and registration rights provisions.
(q) The Company confirms as of the date hereof that it is in
compliance with all provisions of Section 1 of Laws of Florida, Chapter 92-
198, AN ACT RELATING TO DISCLOSURE OF DOING BUSINESS WITH CUBA, and the
Company further agrees that if it commences engaging in business with the
government of Cuba or with any person or affiliate located in Cuba after
the date the Registration Statement becomes or has become effective with
the Securities and Exchange Commission or with the Florida Department of
Banking and Finance (the "Department"), whichever date is later, or if the
information reported in the Prospectus, if any, concerning the Company's
business with Cuba or with any person or affiliate located in Cuba changes
in any material way, the Company will provide the Department notice of such
business or change, as appropriate, in a form acceptable to the Department.
(r) The Company will use its best efforts to do and perform all
things reasonably required to be done and performed by it prior to or after
the Closing Date and will use its best efforts to satisfy all conditions
precedent on its part to the delivery of the Shares.
7. PAYMENT OF EXPENSES.
(a) Whether or not the transactions contemplated by this Agreement
are consummated and regardless of the reason this Agreement is terminated,
the Company will pay or cause to be paid, and bear or cause to be borne,
all costs and expenses incident to the performance of the obligations of
the Company under this Agreement, including: (i) the fees and expenses of
the accountants and counsel for the Company incurred in the preparation of
the Registration Statement and any post-effective amendments thereto
(including financial statements and exhibits), each Preliminary Prospectus
and the Prospectus and any amendments or supplements thereto; (ii) printing
and mailing expenses associated with the Registration Statement and any
post-effective amendments thereto, each Preliminary Prospectus, the
Prospectus (including any supplement thereto), this Agreement, the
Agreement Among Underwriters, the Underwriters' Questionnaire, the Selected
Dealer Agreement and related documents and the Preliminary Blue Sky
Memorandum and any supplement thereto; (iii) the costs incident to the
authentication, issuance, delivery and transfer of the Shares to the
Underwriters; (iv) all taxes,
- 27 -
if any, on the issuance, delivery and transfer of the Shares to be
sold by the Company; (v) the fees, expenses and all other costs of
qualifying the Shares for the sale under the securities or Blue Sky
laws of those jurisdictions in which the Shares are to be offered
or sold including the fees and disbursements of Underwriters'
counsel and such local counsel as may have been reasonably required
and retained for such purpose up to a maximum of $45,000; (A) the
fees, expenses and other costs of, or incident to, securing any
review or approvals by or from the NASD exclusive of fees of the
Underwriters' counsel; (vii) the filing fees of the SEC; (viii) the
cost of furnishing to the Underwriters copies of the Registration
Statement, each Preliminary Prospectus and the Prospectus
(including any supplement or amendment thereto) as herein provided;
(ix) the Company's travel expenses in connection with meetings with
the brokerage community and institutional investors and expenses
associated with hosting such meetings, including meeting rooms,
meals, facilities and ground transportation expenses; (x) the costs
and expenses associated with settlement in same day funds
(including, but not limited to, interest or cost of funds
expenses), if desired by the Company; (xi) the fees for inclusion
of the Shares on the Nasdaq SmallCap Market; (xii) the cost of
printing and engraving certificates for the Shares; (xiii) the cost
and charges of any transfer agent; and (xiv) all other costs and
expenses reasonably incident to the performance of its obligations
hereunder that are not otherwise specifically provided for in this
Section 7.
(b) In addition to the foregoing expenses, the Company shall at the
Closing Date pay to the Representative a non-accountable expense allowance
equal to three percent (3%) of the gross proceeds received from the sale of
the Offered Shares. In the event the Over-allotment Option is exercised,
the Company shall pay to the Representative at the Option Closing Date an
additional amount equal to three percent (3%) of the gross proceeds
received upon exercise of the Over-allotment Option.
8. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligation of each
Underwriter to purchase and pay for the Offered Shares that it has agreed to
purchase hereunder on the Closing Date, and to purchase and pay for any Optional
Shares as to which its right to purchase under Section 5 has been exercised on
an Option Closing Date, is subject at the date hereof, the Closing Date and any
Option Closing Date, as applicable, to the continuing accuracy of the
representations and warranties of the Company and the Selling Stockholder set
forth herein, to the performance by the Company and the Selling Stockholder of
its
- 28 -
covenants, agreements and obligations hereunder and to the following additional
conditions:
(a) The Registration Statement shall have become effective not later
than 1:00 p.m. (and in the case of a Registration Statement filed under
Rule 462(b) of the Act, no later than 7:00 p.m.), Pacific time, on the date
of this Agreement, or at such later time or on such later date as the
Representative may agree to in writing; if required by the Regulations, the
Prospectus shall have been filed with the SEC pursuant to Rule 424(b) of
the Regulations within the applicable time period prescribed for such
filing by the Regulations and in accordance with subsection (a) of
Section 6 hereof; on or prior to the Closing Date or any Option Closing
Date, as the case may be, no stop order or other order preventing or
suspending the effectiveness of the Registration Statement or the sale of
any of the Shares shall have been issued under the act or any state
securities law and no proceedings for that purpose shall have been
initiated or shall be pending or, to the Representatives' knowledge or the
knowledge of the Company, shall be contemplated by the SEC or any authority
in any jurisdiction designated by the Representative pursuant to subsection
(f) of Section 6 hereof and any request on the part of the SEC for
additional information shall have been complied with to the reasonable
satisfaction of counsel for the Underwriters.
(b) The Company shall have furnished to the Representatives a
certificate of the Company, signed by the Chairman of the Board or the
President and the principal financial or accounting officer of Company,
dated the Closing Date, to the effect that the signers of such certificate
have carefully examined the Registration Statement, the Prospectus, any
supplement to the Prospectus and this Agreement and that:
(i) the representations and warranties of the Company in this
Agreement are true and correct in all material respects on and as of
the Closing Date and the Option Closing Date, if any, with the same
effect as if made on the Closing Date and the Option Closing Date, if
any, and the Company has complied with all the agreements and
satisfied all the conditions on its part to be performed or satisfied
at or prior to the Closing Date and the Option Closing Date, if any;
(ii) no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that
purpose have been instituted or, to the Company's knowledge,
threatened; and
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(iii) since the date of the most recent financial statements
included in the Prospectus (exclusive of any supplement thereto),
there has been no material adverse change in the condition (financial
or other), earnings, business or properties of the Company and ADICSI
taken as a whole, whether or not arising from transactions in the
ordinary course of business, except as set forth in or contemplated in
the Prospectus (exclusive of any supplement thereto).
(c) The Selling Stockholder shall have furnished to the
Representatives a certificate, signed by the Selling Stockholder, dated the
Closing Date and the Option Closing Date, if any, to the effect that the
signer of such certificate has carefully examined the Registration
Statement, the Prospectus, any supplement to the Prospectus and this
Agreement and that the representations and warranties of such Selling
Stockholder in this Agreement are true and correct in all material respects
on and as of the Closing Date to the same effect as if made on the Closing
Date.
(d) All corporate proceedings and other matters incident to the
authorization, form and validity of this Agreement, the Warrant Agreement,
the Representative's Warrant and the Shares and the form of the
Registration Statement, each Preliminary Prospectus and the Prospectus, and
all other legal matters relating to this Agreement and the transactions
contemplated hereby, shall be satisfactory in all respects to counsel to
the Underwriters; the Company shall have furnished to such counsel all
documents and information that they may reasonably request to enable them
to pass upon such matters; and the Representative shall have received from
the Underwriters' counsel, Milbank, Tweed, Xxxxxx & XxXxxx, a customary
opinion, dated as of the Closing Date and any Option Closing Date, as the
case may be, and addressed to the Representative individually and as the
Representative of the several Underwriters.
(e) The NASD shall have indicated that it has no objection to the
underwriting arrangements pertaining to the sale of any of the Shares.
(f) The Representative shall have received copies of the lockup
agreements described in subsection (k) of Section 6 signed by those persons
set forth on Schedule III hereto.
(g) The Representative shall have received at or prior to the Closing
Date from the Underwriters' counsel a
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memorandum or summary, in form and substance satisfactory to the
Representative, with respect to the qualification for offering and sale by
the Underwriters of the Shares under the securities or Blue Sky laws of
such jurisdictions designated by the Representative pursuant to subsection
(f) of Section 6 hereof.
(h) You shall have received on the Closing Date and on the Option
Closing Date, if any, an opinion from Skadden, Arps, Slate, Xxxxxxx & Xxxx,
counsel for the Company and the Selling Stockholder, dated the Closing Date
and the Option Closing Date, if any, and addressed to the Underwriters and
with reproduced copies or signed counterparts thereof for each of the
Underwriters, substantially in the form attached hereto as "Exhibit A."
(i) At the Closing Date and any Option Closing Date: (A) the
Registration Statement and any post-effective amendment thereto and the
Prospectus and any amendments or supplements thereto shall contain all
statements that are required to be stated therein in accordance with the
Act and the Regulations and shall conform, in all material respects, to the
requirements of the Act and the Regulations, and neither the Registration
Statement nor any post-effective amendment thereto nor the Prospectus and
any amendments or supplements 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, in light of the
circumstances under which they were made, not misleading, (B) since the
respective dates as of which information is given in the Registration
Statement and any post-effective amendment thereto and the Prospectus and
any amendments or supplements thereto, except as otherwise stated therein,
there shall have been no material adverse change in the properties,
condition (financial or otherwise), results of operations, stockholders'
equity, business or management of the Company, from that set forth therein,
whether or not arising in the ordinary course of business, other than as
referred to in the Registration Statement or Prospectus; (C) since the
respective dates as of which information is given in the Registration
Statement and any post-effective amendment thereto and the Prospectus or
any amendment or supplement thereto, there shall have been no transaction,
contract or agreement entered into by the Company or ADICSI, other than in
the ordinary course of business and as set forth in the Registration
Statement or Prospectus, that has not been, but would be required to be,
set forth in the Registration Statement or Prospectus; (D) no action, suit
or proceeding at law or in equity shall be pending or, to the knowledge of
the Company or ADICSI,
- 31 -
threatened against the Company that would be required to be set forth in
Prospectus, other than as set forth therein, and no proceedings shall be
pending or, to the knowledge of the Company, threatened against the
Company or ADICSI before or by any federal, state or other commission,
board or administrative agency wherein an unfavorable decision, ruling
or finding would materially adversely affect the properties, condition
(financial or otherwise), results of operations, stockholders' equity or
business of the Company or ADICSI taken as a whole, other than as set
forth in the Prospectus.
(j) You shall have received a letter on and as of the date hereof as
well as on and as of the Closing Date and the Option Closing Date (in the
case of a letter delivered on the Closing Date or Option Closing Date, such
letter shall constitute an affirmation of the statements set forth in the
former), in form and substance satisfactory to you, from Xxxxxx Xxxxxxxx,
LLP, independent public accountants, with respect to the financial
statements and certain financial information contained in the Registration
Statement and the Prospectus.
(k) The Company shall have executed and delivered an agreement
memorializing the Representative's Warrant in a form satisfactory to the
Representative (the "Warrant Agreement") and there shall have been tendered
to the Representative certificates representing the Representative's
Warrant described in subsection (p) of Section 6, to be purchased by the
Representative on the Closing Date.
(l) At the Closing Date and any Option Closing Date, the
Representative shall have been furnished such additional documents and
certificates as they shall reasonably request.
(m) No action shall have been taken by the NASD, the effect of which
is to make it improper, at any time prior to the Closing Date or any Option
Closing Date, for members of the NASD to execute transactions as principal
or as agent in the Shares or to trade or deal in the Shares, and no
proceedings for the purpose of taking such action shall have been
instituted or shall be pending or, to the Company's or the Representatives'
knowledge, shall be contemplated by the NASD.
If any conditions to the Underwriters' obligations hereunder to be
fulfilled prior to or at the Closing Date, shall not have been fulfilled, the
Representative may on behalf of the several Underwriters terminate this
Agreement or, if they so elect, waive
- 32 -
any such conditions which have not been fulfilled or extend the time for their
fulfillment.
9. INDEMNIFICATION.
(a) The Company and the Selling Stockholder, jointly and severally,
agree to indemnify and hold harmless each Underwriter and each person, if
any, who controls any Underwriter within the meaning of Section 15 of the
Act or Section 20 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), to the fullest extent lawful, from and against any and all
losses, claims, damages, liabilities and judgments caused by any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement or the Prospectus (as amended or supplemented if the
Company shall have furnished any amendments or supplements thereto) or any
preliminary prospectus, or caused by any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading, except insofar as such losses, claims, damages,
liabilities or judgments are caused by any such untrue statement or
omission or alleged untrue statement or omission which is based upon
information relating to any Underwriter furnished in writing to the Company
by or on behalf of any Underwriter through the Representative expressly for
use therein; PROVIDED, HOWEVER, that if the Company has complied with its
obligations under Section 6(d) hereof, the foregoing indemnity agreement
with respect to any preliminary prospectus shall not inure to the benefit
of any Underwriter from whom the person asserting any such loss, claim,
damage, liability or judgment purchased the Shares (or any person who
controls such Underwriter within the meaning of Section 15 of the Exchange
Act) if a copy of the Prospectus (as then amended or supplemented if the
Company shall have furnished any amendments or supplements thereto) was not
sent or given by or on behalf of any Underwriter to such person, if such is
required by law, at or prior to the written confirmation of the sale of
such Shares to such person and if the Prospectus (as so amended or
supplemented) would have cured the defect giving rise to such loss, claim,
damage, liability or judgment. Notwithstanding the foregoing, the
liability of the Selling Stockholder under this paragraph shall be limited
to an amount equal to the net proceeds of the Shares sold by the Selling
Stockholder to the Underwriters.
(b) In case any action shall be brought against any Underwriter or
any person controlling such Underwriter,
- 33 -
based upon any preliminary prospectus, the Registration Statement or the
Prospectus or any amendment or supplement thereto and with respect to
which indemnity may be sought against the Company and the Selling
Stockholder, such Underwriter shall promptly notify the parties against
whom indemnification is being sought (the "Indemnifying Parties") in
writing and the Indemnifying Parties shall assume the defense thereof,
including the employment of counsel reasonably satisfactory to such
indemnified party and payment of all fees and expenses. Any Underwriter
or any such controlling person shall have the right to employ separate
counsel in any such action and participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such
Underwriter or such controlling person unless (i) the employment of such
counsel has been specifically authorized in writing by the Indemnifying
Parties, (ii) the Indemnifying Parties shall have failed to assume the
defense and employ counsel or (iii) the named parties to any such action
(including any impleaded parties) include both such Underwriter or such
controlling person and the Indemnifying Parties and such Underwriter or
such controlling person shall have been advised by such counsel that
there may be one or more legal defenses available to it which are
different from or additional to those available to the Indemnifying
Parties (in which case the Indemnifying Parties 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 Parties 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
circumstances, be liable for the fees and expenses of more than one
separate firm of attorneys (in addition to any local counsel) for all
such Underwriters and controlling persons, which firm shall be
designated in writing by the Representative and that all such fees and
expenses shall be reimbursed as they are incurred). The Indemnifying
Parties shall not be liable for any settlement of any such action
effected without their written consent. If settled with such written
consent, the Indemnifying Parties agree to indemnify and hold harmless
any Underwriter and any such controlling person from and against any
loss or liability by reason of such settlement. Notwithstanding the
immediately preceding sentence, if in any case where the fees and
expenses of counsel are at the expense of the Indemnifying Parties and
an indemnified party shall have requested the Indemnifying Parties to
reimburse the indemnified party for such fees and expenses of counsel as
incurred, the Indemnifying Parties agree that they shall be liable for any
- 34 -
settlement of any action effected without its written consent if (i) such
settlement is entered into more than ten business days after the receipt by
such indemnifying party of the aforesaid request and (ii) such indemnifying
party shall have failed to reimburse the indemnified party in accordance
with such request for reimbursement prior to the date of such settlement.
No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could have been
a party and indemnity could have been sought hereunder by such indemnified
party, unless such settlement includes an unconditional release of such
indemnified party from all liability on claims that are the subject matter
of such proceeding.
(c) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company, its directors, its officers who sign the
Registration Statement, any person controlling the Company within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act, the
Selling Stockholder and each person, if any, controlling such Selling
Stockholder within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act to the same extent as the foregoing indemnity from the
Company and the Selling Stockholder to each Underwriter but only with
reference to information relating to such Underwriter furnished in writing
by or on behalf of such Underwriter through you expressly for use in the
Registration Statement, the Prospectus or any preliminary prospectus. In
case any action shall be brought against the Company, any of its directors,
any such officer or any person controlling the Company or the Selling
Stockholder or any person controlling the Selling Stockholder based on the
Registration Statement, the Prospectus or any preliminary prospectus and in
respect of which indemnity may be sought against any Underwriter, the
Underwriter shall have the rights and duties given to the Company and the
Selling Stockholder by paragraph (b) above (except that if the Company or
Selling Stockholder shall have assumed the defense thereof, such
Underwriter shall not be required to do so, but may employ separate counsel
therein and participate in the defense thereof but the fees and expenses of
such counsel shall be at the expense of such Underwriter), and the Company,
its directors, any such officers and any person controlling the Company and
the Selling Stockholder and any person controlling the Selling Stockholder
shall have the rights and duties given to the Underwriter by Section 9(b)
hereof.
- 35 -
(d) If the indemnification provided for in this Section 9 is
unavailable to an indemnified party in respect of any losses, claims,
damages, liabilities or judgments referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities and judgments (i) in
such proportion as is appropriate to reflect the relative benefits received
by the Company and the Selling Stockholder on the one hand and the
Underwriters on the other hand from the offering of the Shares or (ii) if
the allocation provided by clause (i) above is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative fault of the
Company and the Selling Stockholder and the Underwriters in connection with
the statements or omissions which resulted in such losses, claims, damages,
liabilities or judgments, as well as any other relevant equitable
considerations. The relative benefits received by the Company and the
Selling Stockholder and the Underwriters shall be deemed to be in the same
proportion as the total net proceeds from the offering (before deducting
expenses) received by the Company and the Selling Stockholder, and the
total underwriting discounts and commissions received by the Underwriters,
bear to the total price to the public of the Shares, in each case as set
forth in the table on the cover page of the Prospectus. The relative fault
of the Company and the Selling Stockholder and the Underwriters shall be
determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission to state a
material fact relates to information supplied by the Company, the Selling
Stockholder or the Underwriters and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
The Company and the Selling Stockholder and the Underwriters agree
that it would not be just and equitable if contribution pursuant to this
Section 9(d) were determined by pro rata allocation (even if the
Underwriters were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations
set forth above, any legal or other expenses reasonably incurred by such
indemnified party
- 36 -
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 9, no Underwriter shall
be required to contribute any amount in excess of the amount by which
the total price at which the Shares underwritten by it and distributed
to the public were offered to the public exceeds the amount of any
damages which such Underwriter has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation.
The Underwriters' obligations to contribute pursuant to this Section
9(d) are several in proportion to the respective number of Shares
purchased by each of the Underwriters hereunder and not joint.
10. REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY. Except as the
context otherwise requires, all representations, warranties and agreements
contained in this Agreement shall be deemed to be representations, warranties
and agreements at the Closing Date and any Option Closing Date; and such
representations, warranties and agreements of the Underwriters and the Company,
including without limitation the indemnity and contribution agreements contained
in Section 9 hereof and the agreements contained in Sections 7, 10, 11 and 13
hereof, shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any Underwriter or any controlling person,
and shall survive delivery of and payment for the Shares and termination of this
Agreement, whether before or after the Closing Date or any Option Closing Date.
11. EFFECTIVE DATE OF THIS AGREEMENT AND TERMINATION THEREOF.
(a) This Agreement shall become effective immediately as to Sections
7, 9, 10, 11 and 13 and, as to all other provisions, (i) if at the time of
execution and delivery of this Agreement the Registration Statement has not
become effective, at 6:30 a.m., Pacific time, on the first business day
following the Effective Date, or (ii) if at the time of execution and
delivery of this Agreement the Registration Statement has been declared
effective, at 6:30 a.m., Pacific time, on the date of execution of this
Agreement; but this Agreement shall nevertheless become effective at such
earlier time after the Registration Statement becomes effective as the
Representative may determine by notice to the Company or by release of any
of the Shares for sale to the public. For the purposes of this Section 11,
the Shares shall be deemed to have been so released upon the release
- 37 -
for publication of any newspaper advertisement relating to the Shares or
upon the release by the Representative of telegrams (i) advising the
Underwriters that the shares are released for public offering or (ii)
offering the Shares for sale to securities dealers, whichever may occur
first. The Representative may prevent the provisions of this Agreement
(other than those contained in Sections 7, 9, 10, 11 and 13) hereof from
becoming effective without liability of any party to any other party,
except as noted below, by giving the notice indicated in subsection (c) of
this Section 10 before the time the other provisions of this Agreement
become effective.
(b) The Representative shall have the right to terminate this
Agreement at any time prior to the Closing Date as provided in Sections 8
and 12 hereof or by written notice to the Company if any of the following
have occurred: (i) since the respective dates as of which information is
given in the Registration Statement and the Prospectus, any material
adverse change or any development involving a prospective material adverse
change in or affecting the condition, financial or otherwise, of the
Company, or the earnings, business affairs, management or business
prospects of the Company, whether or not arising in the ordinary course of
business that would make it, in the Representative's judgement, impractical
to market the Shares or enforce contracts for the sale of the Shares; (ii)
any outbreak of hostilities or other national or international calamity or
crisis or change in economic, political or financial market conditions if
such outbreak, calamity, crisis or change would, in the Representative's
reasonable judgment, make it impractical or inadvisable to commence or
continue the offering of the Shares; (iii) suspension of trading generally
in securities on the New York Stock Exchange or the over-the-counter market
or limitation on prices (other than limitations on hours or numbers of days
of trading) for securities or the promulgation of any federal or state
statute, regulation, rule or order of any court or other governmental
authority which in the Representative's reasonable opinion materially and
adversely affects trading on either such Exchange or the over-the-counter
market; (iv) the enactment, publication, decree or other promulgation of
any federal or state statute, regulation, rule or order of any court or
other governmental authority that would make it, in the Representative's
judgement, impractical to market the Shares or enforce contracts for the
sale of the Shares; (v) declaration of a banking moratorium by either
federal or New York or California authorities; (vi) the taking of any
action by any federal, state or local government or agency in respect of
- 38 -
its monetary or fiscal affairs which in the Representative's reasonable
opinion has a material adverse effect on the securities markets in the
United States which would in the Representative's judgment make it
impractical to market the Shares or enforce contracts for the sale of the
Shares; (vii) declaration of a moratorium in foreign exchange trading by
major international banks or other institutions or (viii) trading in any
securities of the Company shall have been suspended or halted by the NASD
or the SEC.
(c) If the Representatives elect to prevent this Agreement from
becoming effective or to terminate this Agreement as provided in this
Section 11, the Representative shall notify the Company thereof promptly by
telephone, telex, telegraph or facsimile, confirmed by letter.
12. DEFAULT BY AN UNDERWRITER.
(a) If any Underwriter or Underwriters shall default in its or their
obligation to purchase Offered Shares or Optional Shares hereunder, and if
the Offered Shares or Optional Shares with respect to which such default
relates do not exceed the aggregate of ten percent (10%) of the number of
Offered Shares or Optional Shares, as the case may be, that all
Underwriters have agreed to purchase hereunder, then such Offered Shares or
Optional Shares to which the default relates shall be purchased severally
by the non-defaulting Underwriters in proportion to their respective
commitments hereunder.
(b) If such default relates to more than ten percent (10%) of the
Offered Shares or Optional Shares, as the case may be, the Representative
may in its discretion arrange for another party or parties (including a
non-defaulting Underwriter) to purchase such Offered Shares or Optional
Shares to which such default relates, on the terms contained herein. In
the event that the Representative does not arrange for the purchase of the
Offered Shares or Optional Shares to which a default relates as provided in
this Section 12 within 36 hours after such default, this Agreement may be
terminated by the Representative or by the Company without liability on the
part of the nondefaulting Underwriters (except as provided in Section 9
hereof) or the Company (except as provided in Sections 7 and 9 hereof), but
nothing herein shall relieve a defaulting Underwriter of its liability, if
any, to the other several Underwriters and to the Company for damages
occasioned by its default hereunder.
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(c) If the Offered Shares or Optional Shares to which the default
relates are to be purchased by the non-defaulting Underwriters, or are to
be purchased by another party or parties as aforesaid, the Representative
or the Company shall have the right to postpone the Closing Date or any
Option Closing Date, as the case may be, for a reasonable period but not in
any event exceeding seven days, in order to effect whatever changes may
thereby be made necessary in the Registration Statement or the Prospectus
or in any other documents and arrangements, and the Company agrees to file
promptly any amendment to the Registration Statement or supplement to the
Prospectus which in the opinion of counsel for the Underwriters may thereby
be made necessary. The terms "Underwriters" and "Underwriter" as used in
this Agreement shall include any party substituted under this Section 12
with like effects as if it had originally been a party to this Agreement
with respect to such Offered Shares or Optional Shares.
13. INFORMATION FURNISHED BY UNDERWRITERS. The Representative, on behalf
of the Underwriters, represents and warrants to the Company that the information
appearing in any preliminary prospectus, the Prospectus or the Registration
Statement (a) on the cover page of the Prospectus with respect to price,
underwriting discounts and commissions and terms of offering, (b) in the section
entitled "Underwriting," and (c) in the section entitled "Legal Matters" with
respect to the identity of counsel for the Underwriters was furnished to the
Company by and on behalf of the Underwriters for use in connection with the
preparation of the Registration Statement and the Prospectus and is correct in
all material respects. The parties acknowledge that this information
constitutes the only information furnished in writing by or on behalf of any
Underwriter for inclusion in any preliminary prospectus, the Prospectus or the
Registration Statement referred to in subsection (b) of Section 1 hereof and
subsection (a) of Section 9 hereof.
14. NOTICES. All communications hereunder, except as herein otherwise
specifically provided, shall be in writing and, if sent to any Underwriter,
shall be mailed, delivered, telexed, telegrammed, telegraphed or telecopied and
confirmed to such Underwriter, c/o Cruttenden Xxxx Incorporated, 00000 Xxx
Xxxxxx, Xxxxxx, Xxxxxxxxxx 00000-0000, Attention: President, with a copy to
Milbank, Tweed, Xxxxxx & XxXxxx, 000 Xxxxx Xxxxxxxx Xxxxxx, 00xx Xxxxx, Xxx
Xxxxxxx, Xxxxxxxxxx 00000, Attention: Xxxxxxx X. Xxxxxxxx, Esq.; if sent to the
Company shall be mailed, delivered, telexed, telegrammed, telegraphed or
telecopied and confirmed to Aviation Distributors, Inc., 0 Xxxxxxx Xxxxx,
Xxxxxx, Xxxxxxxxxx 00000, Attention: Chief Executive Officer, with a copy to
Skadden, Arps, Slate, Xxxxxxx & Xxxx, 300 South
- 00 -
Xxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000, Attention: Xxxxx X.
XxXxxxxx, Esq.
15. PARTIES. This Agreement shall inure solely to the benefit of, and
shall be binding upon, the several Underwriters, the Company, and the
controlling persons, directors and officers referred to in Section 9 hereof, and
their respective successors, assigns, heirs and legal representatives, and no
other person shall have or be construed to have any legal or equitable right,
remedy or claim under or in respect of or by virtue of this Agreement or any
provision herein contained. The term "successors" and "assigns" shall not
include any purchaser of the Shares merely because of such purchase.
16. DEFINITION OF BUSINESS DAY. For purposes of this Agreement, "business
day" means any day on which the New York Stock Exchange, Inc. is open for
trading.
17. COUNTERPARTS. This Agreement may be executed in one or more
counterparts and all such counterparts will constitute one and the same
instrument.
18. CONSTRUCTION. This Agreement shall be governed by and construed in
accordance with the laws of the State of California applicable to agreements
made and performed entirely within such State.
- 41 -
If the foregoing correctly sets forth the understanding among the
Underwriters and the Company, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement by and
among the Underwriters and the Company.
Very truly yours,
AVIATION DISTRIBUTORS, INC.,
a Delaware corporation
________________________________
Xxxxxx X. Xxxxxx
Chief Executive Officer
________________________________
Xxxxxx X. Xxxxxx
The foregoing Underwriting Agreement
is hereby confirmed and accepted as
of the date first above written.
CRUTTENDEN XXXX INCORPORATED
By:___________________________
Its______________________
Acting severally on behalf of itself and the several Underwriters named in
Schedule I hereto
- 42 -
SCHEDULE I
UNDERWRITERS
NUMBER OF OFFERED SHARES
UNDERWRITER TO BE PURCHASED
----------- ---------------
- 43 -
SCHEDULE II
PERSONS SUBJECT TO LOCKUP AGREEMENTS
- 44 -
EXHIBIT A
FORM OF OPINION OF SKADDEN, ARPS, SLATE, XXXXXXX & XXXX, COUNSEL FOR THE COMPANY
- 45 -
