1
EXHIBIT 10.27
AUGMENT SYSTEMS, INC.
A minimum of 6,000,000 and
a maximum of 9,000,000 Shares of Common Stock
SALES AGENCY AGREEMENT
Sunrise Securities Corp.
▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
December 8, 1997
Dear Sirs:
Augment Systems, Inc., a Delaware corporation (the "Company"), proposes to
offer for sale in a private offering (the "Offering") pursuant to Rule 506 of
Regulation D ("Regulation D") under the Securities Act of 1933, as amended (the
"Act"), a minimum of 6,000,000 (including "Affiliate Shares", as hereinafter
defined, if any) and a maximum of 9,000,000 shares of common stock, par value
$.01 per share (the "Shares"). This Offering is being made solely to "accredited
investors" as defined in Regulation D. This is to confirm our agreement
concerning your acting as our exclusive placement agent (the "Placement Agent")
in connection with the Offering.
The Company has prepared and has delivered to the Placement Agent copies
of a confidential private placement memorandum, dated December 8, 1997, relating
to, among other things, the Company, the Shares and the terms of the sale of the
Shares. Such confidential private placement memorandum, including all exhibits
thereto and all documents delivered therewith and incorporated by reference
therein, is referred to herein as the "Memorandum" unless such confidential
private placement memoranda or any such exhibits or documents shall be
supplemented or amended in accordance with this Agreement, in which event the
term "Memorandum" shall refer to such confidential private offering memorandum
and such exhibits and documents as so supplemented or amended from and after the
time of delivery to the Placement Agent of such supplement or amendment.
1. Appointment of Placement Agent.
On the basis of the representations and warranties contained herein, and
subject to the terms and conditions set forth herein, the Company hereby
appoints you as its Placement Agent and grants to you the exclusive right to
offer, as its agent, the Shares pursuant to the terms of this Agreement. On the
basis of such representations and warranties, and subject to such conditions,
2
you hereby accept such appointment and agree to use your best efforts to secure
subscriptions to purchase a minimum of 6,000,000 and a maximum of 9,000,000
Shares pursuant to the terms of this Agreement. The agency created hereby is not
terminable by the Company except upon termination of the Offering pursuant to
the terms of this Agreement or upon expiration of the Offering Period (as
hereinafter defined) in accordance with the terms of this Agreement.
2. Terms of the Offering.
(a) A minimum of 6,000,000 and a maximum of 9,000,000 Shares shall be
offered for sale to prospective investors in this Offering ("Prospective
Investors") at a purchase price of $1.00 per share (the "Purchase Price") of the
Company's common stock, par value $.01 (the "Common Stock"). Officers, directors
and employees of the Company and the Placement Agent may purchase Shares on the
same terms and conditions as other investors (the "Affiliate Shares"). The
Affiliate Shares shall be included in determining whether the minimum and
maximum number of Shares have been subscribed for, and all references herein to
subscriptions from Prospective Investors shall be deemed to include the
Affiliate Shares.
(b) The Offering shall commence on the date hereof and shall expire at
5:00 P.M., New York time, on January 31, 1998, unless extended from time to time
for up to an aggregate of 30 days by mutual agreement of the Company and the
Placement Agent. Such period, as the same may be so extended, shall hereinafter
be referred to as the "Offering Period".
(c) Each Prospective Investor who desires to purchase Shares shall be
required to deliver to the Placement Agent one copy of a subscription agreement
in the form annexed to the Memorandum (a "Subscription Agreement"), including
the investor questionnaire, and payment in the amount necessary to purchase the
number of Shares such Prospective Investor desires to purchase. The Placement
Agent shall not have any obligation to independently verify the accuracy or
completeness of any information contained in any Subscription Agreement or the
authenticity, sufficiency or validity of any check or other form of payment
delivered by any Prospective Investor in payment for Shares.
(d) Pursuant to an Escrow Agreement, dated as of December 8, 1997 (the
"Escrow Agreement"), the Placement Agent has established a special account with
the United States Trust Company of New York (the "Escrow Agent") entitled
"Augment Systems, Inc. - Escrow Account" (the "Special Account"). The Placement
Agent shall deliver each check received from a Prospective Investor to the
Escrow Agent for deposit in the Special Account and shall deliver the executed
copy of the Subscription Agreement received from such Prospective Investor to
the Company. The Company shall notify the Placement Agent promptly of the
acceptance or rejection of any subscription. The Company shall not unreasonably
reject any subscription.
(e) If subscriptions to purchase at least 6,000,000 Shares are not
received from Prospective Investors prior to the expiration of the Offering
Period and accepted by the Company, the Offering shall be canceled, all funds
received by the Escrow Agent on behalf of the Company shall be refunded in full
with interest, and this Agreement and the agency created hereby shall be
terminated without any further obligation on the part of either party, except as
provided in ▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇.
- ▇ -
▇
(▇) Pursuant to a Stock Escrow Agreement to be entered into on or prior to
the Closing Date (the "Stock Escrow Agreement"), certain stockholders of the
Company will place their shares of Common Stock into escrow with the Escrow
Agent. These shares will remain in escrow until certain conditions as described
therein have been satisfied, at which point, the Company and the Placement Agent
shall deliver a letter to the Escrow Agent notifying it of the termination of
the Stock Escrow Agreement.
(g) You may engage other persons selected by you to assist you in the
Offering (each such person being hereinafter referred to as a "Selected Dealer")
and you may allow such persons such part of the compensation payable to you
hereunder as you shall determine. Each Selected Dealer shall be required to
agree in writing to comply with the provisions of, and to make the
representations, warranties and covenants contained in Sections 5(b) and 6(b)
hereof by executing a form of Selected Dealer Agreement attached hereto as
Exhibit I. On or prior to the Closing (as hereinafter defined), the Placement
Agent shall deliver a copy of each executed Selected Dealer Agreement to the
Company. By executing this Agreement, the Company hereby agrees to make, and is
deemed to make, the representations and warranties to, and covenants and
agreements with, each Selected Dealer (including an agreement to indemnify such
Selected Dealer under Section 9 hereof) who has executed the Selected Dealer
Agreement as are contained in this Agreement.
3. Closing.
(a) Subject to the conditions set forth in Section 8 hereof, if
subscriptions to purchase at least 6,000,000 Shares have been received prior to
the expiration of the Offering Period and accepted by the Company, the initial
closing under this Agreement (the "Closing") shall be held at the offices of
Squadron, Ellenoff, Plesent & ▇▇▇▇▇▇▇▇▇, LLP ("SEP&S"), ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇, at 10:00 A.M., New York time, on the third business day
following the date upon which the Placement Agent receives notice from the
Company that subscriptions to purchase at least 6,000,000 Shares (including
Affiliate Shares) have been so accepted or at such other place, time and/or date
as the Company and the Placement Agent shall agree upon. The Company shall
provide the notice required by the preceding sentence as promptly as
practicable. The date upon which the Closing is held shall hereinafter be
referred to as the "Closing Date."
(b) Subject to the conditions set forth in Section 8 hereof, if,
subsequent to the date the subscriptions referred to in Section 3(a) hereof are
received and accepted and prior to the expiration of the Offering Period,
additional subscriptions to purchase Shares are received from Prospective
Investors, which subscriptions are accepted by the Company, one or more
additional closings under this Agreement (each, an "Additional Closing") shall
be held at the offices of SEP&S at 10:00 A.M., New York time, on the third
business day following the date upon which the Placement Agent receives notice
from the Company that additional subscriptions have been so accepted, or at such
other place, time or date as the Company and the Placement Agent shall agree
upon. The Company shall notify the Placement Agent as promptly as practicable
whether any additional subscriptions so received have been accepted. The date
upon which any Additional Closing is held shall hereinafter be referred to as an
"Additional Closing Date."
Notwithstanding anything contained here into the contrary, in no event
shall the Company accept subscriptions to purchase in excess of 9,000,000 Shares
including Affiliate Shares.
- 3 -
4
(c) At the Closing, or an Additional Closing, as the case may be, the
Company shall instruct the Escrow Agent to pay to the Placement Agent at the
Closing or an Additional Closing, from the funds deposited in the Special
Account in payment for the Shares, the amounts payable to the Placement Agent
pursuant to Section 4 of this Agreement. Promptly after the Closing Date, or an
Additional Closing Date, as the case may be, the Company shall deliver to the
purchasers of Shares certificates representing the Shares to which they are
entitled.
4. Compensation.
(a) If subscriptions to purchase at least 6,000,000 Shares (including
Affiliate Shares) are received from Prospective Investors prior to the
expiration of the Offering Period and accepted by the Company, you shall be
entitled, as compensation for your services as Placement Agent under this
Agreement, to an amount equal to 10% of the gross proceeds received by the
Company from the sale of the Shares. Such compensation is payable by the Company
on the Closing Date, or an Additional Closing Date, as the case may be, with
respect to the Shares sold on such date and may be paid, at the Placement
Agent's option, in part or in whole, in shares of the Common Stock, valued at
$.90 per share, provided, however, that any such shares of Common Stock shall
not be included in the calculation of the minimum or the maximum number of
Shares offered for sale to prospective investors in the Offering. Any such
shares of Common Stock issued pursuant to this paragraph shall be subject to the
identical registration rights granted pursuant to the Registration Rights
Agreement (as defined below) to investors in the Offering.
(b) If subscriptions to purchase at least 6,000,000 Shares (including
Affiliate Shares) have been received from Prospective Investors prior to the
expiration of the Offering Period and accepted by the Company, the Company shall
issue to you or, at your discretion, your Selected Dealers or your designees, in
addition to the amount set forth in Section 4(a) above, warrants (individually,
a "Warrant" and collectively, the "Warrants") to purchase a number of Shares of
the Company equal to 10% of the aggregate number of Shares issued in the
Offering including Shares issued, if any, to the Placement Agent in satisfaction
of its selling commission or the non-accountable expense allowance. Each Warrant
will entitle the holder thereof for a five-year period commencing on the first
anniversary of the Closing Date or any Additional Closing Date as the case may
be, to purchase one share of Common Stock of the Company at an exercise price
equal to the Purchase Price per share (the "Warrant Shares"). The Warrants shall
be in the form attached hereto as Exhibit II.
(c) Notwithstanding anything contained herein to the contrary, the number
of Shares upon which the commission provided for in Section 4(a) and the
Warrants described in Section 4(b) shall be based shall include Shares with
respect to which the Company unreasonably rejected subscriptions.
- 4 -
5
(d) If the Offering is terminated by the Company (i) during the Offering
Period (provided you are actively pursuing the Offering during such period),
(ii) during the 30 day extension period (provided you are actively pursuing the
Offering during such period), or (iii) at the completion of the Offering
(provided that you shall have obtained offers to purchase at least the required
minimum), and within six months after such termination, the Company completes
the sale of any of its equity securities (including securities convertible into
equity securities) for cash, other than in connection with exercise of existing
options, strategic alliances or pursuant to a transaction incident to a sale of
the Company, then in any such case, the Company shall pay to you 10% of the
gross sales price of such securities and shall issue to you, on the terms set
forth in Section 4, warrants to purchase 10% of the securities so sold.
5. Representations and Warranties.
(a) Representations and Warranties of the Company. The Company represents
and warrants to, and agrees with, the Placement Agent and the Selected Dealers
that:
(i) The Memorandum, as supplemented or amended from time to time, at
all times during the period from the date hereof to and including the later of
the Closing Date and the expiration of the Offering Period, and the last
Additional Closing Date (if any), does not, and during such period will not,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading, all in light of the circumstances under which they were made.
Each contract, agreement, instrument, lease, license or other document described
in the Memorandum has been accurately described therein in all material
respects.
(ii) No document provided by the Company to Prospective Investors
pursuant to Section 6(a)(vii) hereof, and no oral information provided by the
Company to Prospective Investors, will contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading. Contracts to which
the Company is a party provided by the Company to Prospective Investors shall
not be deemed to contain any untrue statement of a material fact or to omit to
state any material fact if the contract so provided is a true, correct and
complete copy of such contract, as amended or modified through the date it is so
provided.
(iii) The Company has not, directly or indirectly, solicited any
offer to buy or offered to sell any Shares or any other securities of the
Company during the twelve-month period ending on the date hereof except as may
be described in the Memorandum or which would not be integrated with the sale of
the Shares in a manner that would require the registration of the Offering
pursuant to the Act and has no present intention to solicit any offer to buy or
offer to sell any Shares or any other securities of the Company other than
pursuant to this Agreement or pursuant to a registered public offering of the
Company's securities which may be commenced after the completion of the
Offering.
(iv) The Company is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Delaware, with full power
and authority, and all necessary consents, authorizations, approvals, orders,
licenses, certificates, and permits of and from, and declarations and filings
with (collectively, "Consents"), all federal, state, local, foreign, and other
governmental authorities and all courts and other tribunals, to own, lease,
license and use its
- 5 -
6
properties and assets and to carry on its business in the manner described in
the Memorandum, except where the failure to have obtained such Consents would
not have a material adverse effect on the Company and the Company has not
received any notice of proceedings relating to the revocation or modification of
any such consent, authorization, approval, order, license certificate, or permit
which, singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding would result in a material adverse change in the financial
condition, results of operations, business, properties, assets, liabilities or
future prospects of the Company. The Company is duly qualified to do business
and is in good standing in every jurisdiction in which its ownership, leasing,
licensing or use of property and assets or the conduct of its business makes
such qualification necessary. The Company does not have any subsidiaries.
(v) The Company has, as of the date hereof, an authorized and
outstanding capitalization as set forth in the Memorandum. Each outstanding
share of capital stock of the Company is duly authorized, validly issued, fully
paid and nonassessable and has not been issued and is not owned or held in
violation of any preemptive rights set forth in the Company's Certificate of
Incorporation or By-laws, each as amended to date, or any agreement to which the
Company is a party. There is no commitment, plan or arrangement to issue, and no
outstanding option, warrant or other right calling for the issuance of, any
share of capital stock of the Company or any security or other instrument which
by its terms is convertible into, exercisable for or exchangeable for shares of
capital stock of the Company, except as may be described in the Memorandum.
There is outstanding no security or other instrument which by its terms is
convertible into or exchangeable for any class of share of capital stock of the
Company, except as may be described in the Memorandum. The capital stock of the
Company conforms to the description thereof contained in the Memorandum.
(vi) The financial statements of the Company included in the
Memorandum (by incorporation by reference or otherwise) fairly present the
financial position, the results of operations, cash flows and the other
information purported to be shown therein at the respective dates and for the
respective periods to which they apply. Such financial statements have been
prepared in accordance with United States generally accepted accounting
principles consistently applied throughout the periods involved, are correct and
complete and are in accordance with the books and records of the Company. The
selected financial data set forth under the caption "Selected Financial Data" in
the Company's Quarterly Report on Form 10-QSB for the quarter ended September
30, 1997 ("Form 10-QSB") fairly presents on the basis stated in the Form 10- QSB
the information included therein. There has at no time been a material adverse
change in the financial condition, results of operations, business, properties,
assets, liabilities or future prospects of the Company from the latest
information set forth in the Memorandum, except as may be described in the
Memorandum as having occurred.
(vii) The financial projections provided to the Placement Agent were
prepared by the management of the Company and reflect management's best
estimates of future performance based upon assumptions which management believes
were reasonable and fair at the time of preparation in context of the Company's
history and current and reasonably foreseeable business conditions.
(viii) There is no litigation, arbitration, governmental or other
proceeding (formal or informal) or claim or investigation pending or, to the
knowledge of the Company, threatened with respect to the Company or any of its
operations, businesses, properties or assets, except as may
- 6 -
7
be described in the Memorandum or such as individually or in the aggregate do
not now have and will not in the future have a material adverse effect upon the
operations, business, properties or assets of the Company. The Company is not in
violation of, or in default with respect to, any law, rule, regulation, order,
judgment or decree, except as may be described in the Memorandum or such as in
the aggregate do not now have and will not in the future have a material adverse
effect upon the operations, business, properties, assets or future prospects of
the Company.
(ix) Any real property and buildings held under lease by the Company
are held by it under valid, subsisting and enforceable leases with such
exceptions as in the aggregate are not material.
(x) Neither the Company, nor, to the knowledge of the Company, any
other party, is in violation or breach of or in default with respect to,
complying with any material provision of any contract, agreement, instrument,
lease, license, arrangement or understanding which is material to the Company,
and each such contract, agreement, instrument, lease, license, arrangement and
understanding is in full force and effect and is the legal, valid and binding
obligation of the parties thereto enforceable as to them in accordance with its
terms (subject to applicable bankruptcy, insolvency and other laws affecting the
enforceability of creditors' rights generally and to general equitable
principles). Except as described in the Memorandum, the Company enjoys peaceful
and undisturbed possession under all real property leases under which it is
operating. The Company is not in violation or breach of, or in default with
respect to, any term of its Certificate of Incorporation or its By-laws, each as
amended to date.
(xi) There is no right under any patent, patent application,
trademark, trademark application, trade name, service ▇▇▇▇, copyright, franchise
or other intangible property or asset (all of the foregoing being herein called
"Intangibles") necessary to the business of the Company as presently conducted
or as the Memorandum indicates it contemplates conducting, except as may be so
designated in the Memorandum and which the Company has the right or license to
use as necessary. To the Company's knowledge, except as described in the
Memorandum, the Company has not infringed nor is it infringing with respect to
Intangibles of others, and the Company has not received notice of infringement
with respect to asserted Intangibles of others. Except as described in the
Memorandum, there is no Intangible of others which has had or may in the future
have a materially adverse effect on the financial condition, results of
operations, business, properties, assets, liabilities or future prospects of the
Company.
(xii) The Company has all requisite power and authority to execute,
deliver and perform this Agreement, the Warrants, the Subscription Agreements,
the Escrow Agreement, the Stock Escrow Agreement and the Registration Rights
Agreement made by the Company for the benefit of purchasers of Shares (the
"Registration Rights Agreement") (collectively, the "Operative Agreements") and
to consummate the transactions contemplated by the Operative Agreements. All
necessary corporate proceedings of the Company have been duly taken to authorize
the execution, delivery and performance by the Company of the Operative
Agreements. This Agreement, the Escrow Agreement and the Stock Escrow Agreement
have been duly authorized, executed, and delivered by the Company, are the
legal, valid and binding obligations of the Company and are enforceable as to
the Company in accordance with their terms (subject to applicable bankruptcy,
insolvency and other laws affecting the enforceability of creditors' rights
generally and to general equitable principles). The Subscription Agreements and
the Registration Rights Agreement have been duly authorized by the Company and,
when executed and delivered by the Company, will be
- 7 -
8
the legal, valid and binding obligations of the Company enforceable against it
in accordance with their respective terms (subject to applicable bankruptcy,
insolvency and other laws affecting the enforceability of creditors' rights
generally and to general equitable principles). No consent, authorization,
approval, order, license, certificate or permit of or from, or registration,
qualification, declaration or filing with, any federal, state, local, foreign or
other governmental authority or any court or other tribunal is required by the
Company for the execution, delivery or performance by the Company of the
Operative Agreements or the consummation of the transactions contemplated by the
Operative Agreements, except (A) the filing of a Notice of Sales of Securities
on Form D pursuant to Regulation D and (B) such consents, authorizations,
approvals, registrations and qualifications as may be required under securities
or "blue sky" laws in connection with the issuance, sale and delivery of the
Shares pursuant to this Agreement. No consent of any party to any contract,
agreement, instrument, lease, license, arrangement or understanding to which the
Company is a party or to which any of their properties or assets are subject is
required for the execution, delivery or performance of the Operative Agreements
or the consummation of the transactions contemplated by the Operative
Agreements, which has not been or will not be obtained prior to the Closing or
any Additional Closings and the execution, delivery and performance of the
Operative Agreements, and the consummation of the transactions contemplated by
the Operative Agreements, will not violate, result in a breach of, conflict with
or (with or without the giving of notice or the passage of time or both) entitle
any party to terminate or call a default under any such contract, agreement,
instrument, lease, license, arrangement or understanding (except for any such
violation, breach or conflict which has been properly waived thereunder),
violate or result in a breach of any term of the Company's Certificate of
Incorporation or By-laws, each as amended to date, or violate, result in a
breach of or conflict with any law, rule, regulation, order, judgment or decree
binding on the Company, or to which any of its operations, businesses,
properties or assets are subject.
(xiii) The Shares, the Warrants and the Warrant Shares conform to
all statements relating thereto contained in the Memorandum. The Shares, when
issued and delivered to the subscribers therefor, pursuant to the terms of this
Agreement and the Subscription Agreements, and the Warrant Shares, when issued
and delivered pursuant to the terms of the Warrants, shall be duly authorized,
validly issued, fully paid and nonassessable and shall not have been issued in
violation of any preemptive rights set forth in the Company's Certificate of
Incorporation or By-laws, each as amended to date, or any agreement to which the
Company is a party.
(xiv) Subsequent to the dates as of which information is given in
the Memorandum, and except as may otherwise be properly described in the
Memorandum, (A) the Company has not, except in the ordinary course of business,
incurred any liability or obligation, primary or contingent, for borrowed money,
(B) there has not been any material change in the capital stock, short-term debt
or long-term debt of the Company, (C) the Company has not entered into any
transaction not in the ordinary course of business, (D) the Company has not
purchased any of its outstanding capital stock nor declared or paid any dividend
or distribution of any kind on its capital stock, (E) the Company has not
sustained any material loss or interference with its businesses or properties
from fire, flood, hurricane, accident or other calamity, whether or not covered
by insurance, or from any labor dispute or any legal or governmental proceeding
or (F) there has not been any material adverse change, or any development which
the Company reasonably believes could result in a prospective material adverse
change, in the financial condition results of operations, business, properties,
assets, liabilities or future prospects of the Company, except in each case as
described in or contemplated by the Memorandum.
- 8 -
9
(xv) Neither the Company nor, to the knowledge of the Company, any
of its affiliates has, directly or through any agent, sold, offered for sale or
solicited offers to buy, nor will any of the foregoing directly buy (other than
pursuant to the Offering) any security of the Company, as defined in the Act,
which is or will be integrated with the sale of the Shares, the Warrants or the
Warrant Shares in a manner that would require the registration, pursuant to the
Act, of the Offering.
(xvi) The Company has not, directly or indirectly, taken any action
designed to cause or to result in, or that has constituted or which might
reasonably be expected to constitute, the stabilization or manipulation of the
price of any security of the Company to facilitate the sale or resale of the
Shares or sold, bid for, purchased, or paid anyone any compensation for
soliciting purchases of, the Shares.
(xvii) The Company has good and marketable title to all real and
personal property owned by it, in each case free and clear of any security
interests, liens, encumbrances, equities, claims and other defects, except such
as do not materially and adversely affect the value of such property and do not
interfere with the use made or proposed to be made of such property by the
Company, and any real property and buildings held under lease by the Company are
held under valid, subsisting and enforceable leases, with such exceptions as are
not material and do not interfere with the use made or proposed to be made of
such property and buildings by the Company, in each case except as described in
or contemplated by the Memorandum.
(xviii) No labor dispute with the employees of the Company exists or
is threatened or imminent that could result in a material adverse change in the
financial condition results of operations, business, properties, assets,
liabilities or future prospects of the Company, except as described in or
contemplated by the Memorandum.
(xix) The Company is insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are prudent
and customary in the businesses in which they are engaged; the Company has not
been refused any insurance coverage sought or applied for; and the Company has
no reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
insurers of recognized financial responsibility as may be necessary to continue
its business at a cost that would not materially and adversely affect the
financial condition results of operations, business, properties, assets,
liabilities or future prospects of the Company, except as described in or
contemplated by the Memorandum.
(xx) The Company has filed all foreign, federal, state and local tax
returns that are required to be filed or has requested extensions thereof
(except in any case in which the failure so to file would not have a material
adverse affect on the Company; and has paid all taxes required to be paid by it
and any other assessment, fine or penalty levied against it to the extent that
any of the foregoing is due and payable, except for any such assessment, fine or
penalty that is currently being contested in good faith or as described in or
contemplated by the Memorandum.
(xxi) The Company is not in violation of any federal or state law or
regulation relating to occupational safety and health or to the storage,
handling or transportation of hazardous or toxic materials and the Company has
received all permits, licenses or other approvals required of it under
applicable federal and state occupational safety and health and environmental
laws and
- 9 -
10
regulations to conduct its business, and the Company is in compliance with all
terms and conditions of any such permit, license or approval, except any such
violation of law or regulation, failure to receive required permits, licenses or
other approvals or failure to comply with the terms and conditions of such
permits, licenses or approvals which would not, singly or in the aggregate,
result in a material adverse change in the financial condition, results of
operations, business, properties, assets, liabilities or future prospects of the
Company, except as described in or contemplated by the Memorandum.
(xxii) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management's general or specific authorizations;
(ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain asset accountability; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(xxiii) No default by the Company exists, and no event has occurred
which, with notice or lapse of time or both, would constitute a default by the
Company in the due performance and observance of any term, covenant or condition
of any contract, agreement, instrument, lease, license, arrangement or
understanding to which the Company is a party or by which the Company or any of
its properties is bound or may be affected in any material adverse respect with
regard to property, business or operations of the Company.
(xxiv) The Company has complied with all provisions of Section
517.075, Florida Statutes (Chapter 92-198, Laws of Florida).
(b) Representations and Warranties of the Placement Agent and Selected
Dealers. The Placement Agent, and each Selected Dealer that the Placement Agent
may from time to time appoint, by signing the Selected Dealer Agreement, hereby
represent and warrant to, and agree with, the Company and each other as to
themselves only as follows:
(i) Neither the Placement Agent nor any Selected Dealer will offer
or sell any Shares to any investor which the Placement Agent or such Selected
Dealer did not have reasonable grounds to believe and did not believe, was an
"accredited investor".
(ii) Neither the Placement Agent nor any Selected Dealer will offer
or sell any Shares by means of any form of general solicitation or general
advertising, including, without limitation, the following:
(A) any advertisement, article, notice or other communication
published in any newspaper, magazine or similar medium or broadcast over
television or radio; and
(B) any seminar or meeting whose attendees have been invited
by any general solicitation or general advertising.
- 10 -
11
(iii) The Placement Agent and each Selected Dealer is a member in
good standing of the National Association of Securities Dealers, Inc. or a
registered representative thereof.
(iv) The representations and warranties contained in the Certificate
of Selected Dealer attached to the form of Selected Dealer Agreement are true
and correct as to the Selected Dealer which executed such Certificate and are
true and correct as to the Placement Agent as if it had executed such a
certificate.
(v) Each of the Placement Agent and each Selected Dealer has all
requisite power and authority to execute, deliver and perform this Agreement and
to consummate the transactions contemplated hereby. All necessary corporate
proceedings of the Placement Agent and each Selected Dealer have been duly taken
to authorize the execution, delivery and performance by the Placement Agent and
each Selected Dealer of this Agreement. This Agreement has been duly authorized,
executed, and delivered by the Placement Agent and each Selected Dealer and is
the legal, valid and binding obligation of the Placement Agent and each Selected
Dealer in accordance with its terms (subject to applicable bankruptcy,
insolvency and other laws affecting the enforceability of creditors' rights
generally and to general equitable principles).
6. Covenants.
(a) Covenants of the Company. The Company covenants to the Placement Agent
and each Selected Dealer that it will:
(i) Notify you immediately, and confirm such notice promptly in
writing, (A) when any event shall have occurred during the period commencing on
the date hereof and ending on the later of the Closing Date, the expiration of
the Offering Period and the last Additional Closing Date (if any) as a result of
which the Memorandum would include any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading, and (B) of the receipt of any
notification with respect to the modification, rescission, withdrawal or
suspension of the qualification or registration of the Shares or of an exemption
from such registration or qualification in any jurisdiction. The Company will
use its best efforts to prevent the issuance of any such modification,
rescission, withdrawal or suspension and, if any such modification, rescission,
withdrawal or suspension is issued and you so request, to obtain the lifting
thereof as promptly as possible.
(ii) Not supplement or amend the Memorandum unless you shall have
approved of such supplement or amendment in writing. If, at any time during the
period commencing on the date hereof and ending on the later of the Closing
Date, the expiration of the Offering Period or the last Additional Closing Date
(if any), any event shall have occurred as a result of which the Memorandum
contains any untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading, or if, in the opinion of counsel to the Company or counsel to
the Placement Agent, it is necessary at any time to supplement or amend the
Memorandum to comply with the Act, Regulation D or any applicable securities or
"blue sky" laws, the Company will promptly prepare an appropriate supplement or
amendment (in form and substance satisfactory to you) which will correct such
statement or omission or which will effect such compliance.
- 11 -
12
(iii) Deliver without charge to the Placement Agent such number of
copies of the Memorandum and any supplement or amendment thereto as may
reasonably be requested by the Placement Agent.
(iv) Not, directly or indirectly, solicit any offer to buy from, or
offer to sell to any person any Shares except through the Placement Agent.
(v) Not solicit any offer to buy or offer to sell Shares by any form
of general solicitation or advertising, including, without limitation, any
advertisement, article, notice or other communication published in any
newspaper, magazine or similar medium or broadcast over television or radio or
any seminar or meeting whose attendees have been invited by any general
solicitation or advertising.
(vi) Use its best efforts to qualify or register the Shares for
offering and sale under, or establish an exemption from such qualification or
registration under, the securities or "blue sky" laws of such jurisdictions as
you may reasonably request. The Company will not consummate any sale of Shares
in any jurisdiction or in any manner in which such sale may not be lawfully
made.
(vii) At all times during the period commencing on the date hereof
and ending on the later of the Closing Date, the expiration of the Offering
Period and the last Additional Closing Date (if any), provide to each
Prospective Investor or his purchaser representative, if any, on request, such
information (in addition to that contained in the Memorandum) concerning the
Offering, the Company and any other relevant matters as it possesses or can
acquire without unreasonable effort or expense and extend to each Prospective
Investor or his purchaser representative, if any, the opportunity to ask
questions of, and receive answers from, the Company concerning the terms and
conditions of the Offering and the business of the Company and to obtain any
other additional information, to the extent it possesses the same or can acquire
it without unreasonable effort or expense, as such Prospective Investor or
purchaser representative may consider necessary in making an informed investment
decision or in order to verify the accuracy of the information furnished to such
Prospective Investor or purchaser representative, as the case may be.
(viii)Before accepting any subscription to purchase Shares from, or
making any sale to, any Prospective Investor, have reasonable grounds to believe
and actually believe that (A) such Prospective Investor meets the suitability
requirements for investing in the Shares set forth in the Memorandum and (B)
such Prospective Investor is an accredited investor.
(ix) Notify you promptly of the acceptance or rejection of any
subscription. The Company shall not unreasonably reject any subscription for
Shares unless it pays the Placement Agent its compensation pursuant to Section 4
with respect thereto. Any subscription unreasonably rejected shall be deemed to
have been accepted for purposes of determining whether at least 6,000,000 Shares
(including Affiliate Shares) have been sold solely for the purpose of
determining whether the Placement Agent is entitled to its compensation pursuant
to Section 4 hereof and this subsection (ix).
- 12 -
13
(x) File five (5) copies of a Notice of Sales of Securities on Form
D with the Securities and Exchange Commission (the "Commission") no later than
15 days after the first sale of the Shares and file a final notice on Form D
with the Commission no later than 60 days after the last sale of Shares. The
Company shall file promptly such amendments to such Notices on Form D as shall
become necessary and shall also comply with any filing requirement imposed by
the laws of any state or jurisdiction in which offers and sales are made. The
Company shall furnish you with copies of all such filings.
(xi) Place the following legend on all certificates representing the
Shares and the Warrants:
"The securities represented hereby have not been registered
under the Securities Act of 1933, as amended or any state securities
laws and neither the securities nor any interest therein may be
offered, sold, transferred, pledged or otherwise disposed of except
pursuant to an effective registration statement under such act or
such laws or an exemption from registration under such act and such
laws which, in the opinion of counsel for the holder, which counsel
and opinion are reasonably satisfactory to counsel for this
corporation, is available."
(xii) Not, directly or indirectly, engage in any act or activity
which may jeopardize the status of the offering and sale of the Shares as exempt
transactions under the Act or under the securities or "blue sky" laws of any
jurisdiction in which the Offering may be made. Without limiting the generality
of the foregoing, and notwithstanding anything contained herein to the contrary,
the Company shall not, during the six (6) months following completion of the
Offering, (A) directly or indirectly, engage in any offering of securities
which, if integrated with the Offering in the manner prescribed by Rule 502(a)
of Regulation D and applicable releases of the Commission, may jeopardize the
status of the Offering and sale of the Shares as exempt transactions under
Regulation D or (B) engage in any offering of securities, without the opinion of
counsel reasonably satisfactory to the Placement Agent, to the effect that such
offering would not result in integration with this Offering, or if integration
would so result, that such integration would not jeopardize the status of this
Offering as an exempt transaction under Regulation D.
(xiii) Apply the net proceeds from the sale of the Shares for the
purposes set forth under the caption "Use of Proceeds" in the Memorandum in
substantially the manner indicated thereunder.
(xiv) Not, during the period commencing on the date hereof and
ending on the later of the Closing Date, the expiration of the Offering Period
and the last Additional Closing Date (if any), issue any press release or other
communication or hold any press conference with respect to the Company, its
financial condition, results of operations, business, properties, assets,
liabilities or future prospects or the Offering, without your prior written
consent.
(xv) Not, for a period of 12 months if the minimum number of Shares
is sold, or 18 months if the maximum number of Shares is sold, from the
effective date (the "Effective Date")
- 13 -
14
on which on which the registration statement pursuant to which the Shares sold
in the Offering are registered, as the same may be amended from time to time
shall have been declared effective by the Securities and Exchange Commission
under the Securities Act of 1933, as amended, without your prior written
consent, offer, issue, sell, contract to sell, grant any option for the sale of
or otherwise dispose of, directly or indirectly, any shares of Common Stock (or
any security or other instrument which by its terms is convertible into,
exercisable for, or exchangeable for shares of Common Stock), except for (A) the
securities issuable under this Agreement or the Warrants, (B) shares of Common
Stock issuable upon the exercise of stock options under any stock option plan of
the Company, warrants and other commitments, each of which are outstanding on
the date hereof and which are described in the Memorandum, (C) options granted
after the date hereof under existing stock option plans, provided that the
shares underlying the options granted to certain officers and directors of the
Company are subject to the lock-up provided in Section 8(g) hereof and (D)
securities disposed of in strategic alliances. Additionally, for a period of 24
months after the date hereof the Company will not, without your prior written
consent, change any terms of the Company's outstanding stock options or
warrants.
(xvi) For a period of five years after the date hereof, furnish you,
without charge, the following:
(A) within 90 days after the end of each fiscal year, three
(3) copies of financial statements certified by independent certified public
accountants, including a balance sheet, statement of income and statement of
cash flows of the Company and its then existing subsidiaries, with supporting
schedules, prepared in accordance with generally accepted accounting principles,
- 14 -
15
as at the end of such fiscal year and for the 12 months then ended, which may be
on a consolidated basis, copies of which financial statements shall also be
furnished to the purchasers in this Offering and, within 45 days after the end
of each fiscal quarter, three (3) copies of unaudited interim financial
statements, as at the end of such quarter and for the three (3) months then
ended;
(B) as soon as practicable after they have been sent to
stockholders of the Company or filed with the Commission, three (3) copies of
each annual and interim financial and other report or communication sent by the
Company to its stockholders or filed with the Commission; and
(C) as soon as practicable, two copies of every press release
and every material news item and article in respect of the Company or its
affairs which was released by the Company.
(xvii)Comply in all respects with its obligations under the
Operative Agreements.
(xviii) Not, prior to the completion of the Offering, bid for,
purchase, attempt to induce others to purchase, or sell, directly or indirectly,
any Shares or any other securities of the Company of the same class and series
as the Shares in violation of the provisions of Regulation M under the Exchange
Act.
(xix) For a period of two years from the Closing Date, the Company
shall use its best efforts to cause two individuals selected by the Placement
Agent to be elected as directors of the Company. Such directors shall be
entitled to receive reimbursement for expenses and shall be compensated in the
same manner as the other directors of the Company. Such directors shall be
indemnified to the same extent as the other directors of the Company.
(b) Covenants of the Placement Agent and Selected Dealers.
(i) Neither the Placement Agent nor any Selected Dealer, by signing
the Selected Dealer Agreement, will accept the subscription of any person unless
immediately before accepting such subscription the Placement Agent or such
Selected Dealer has reasonable grounds to believe and does believe that (A) such
person is an accredited investor and (B) all representations made and
information furnished by such person in the Subscription Agreement and related
documents are true and correct in all material respects. The Placement Agent and
Selected Dealers agree to notify the Company promptly if the Placement Agent or
a Selected Dealer, as applicable, shall, at any time during the period after
delivery of the documents furnished by such person to the Company in connection
with subscription for Shares and immediately before the sale of Shares to such
person, no longer reasonably believe one or more of the foregoing matters with
respect to such person.
(ii) Neither the Placement Agent nor any Selected Dealer will
solicit purchasers of Shares other than in the jurisdictions in which such
solicitation may, upon the advice of counsel, be made under applicable
securities or "blue sky" laws and in which the Placement Agent or such Selected
Dealer, as the case may be, is qualified so to act.
- 15 -
16
(iii) Neither the Placement Agent nor any Selected Dealer will sell
any Shares to any investor unless a Memorandum is furnished to such investor
within a reasonable time prior thereto.
(iv) Upon notice from the Company that the Memorandum is to be
amended or supplemented (which the Company will promptly give upon becoming
aware of any untrue statement of a material fact required to be stated in the
Memorandum or omission to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading), the Placement Agent and each Selected Dealer, if any, will
immediately cease use of the Memorandum until the Placement Agent and such
Selected Dealers have received such amendment or supplement and thereafter will
make use of the Memorandum only as so amended or supplemented, and the Placement
Agent and each Selected Dealer, if any, will deliver a copy of such amendment or
supplement to each Prospective Investor to whom a copy of the Memorandum had
previously been delivered (and who had not returned such copy) and whose
subscription had not been rejected.
7. Payment of Expenses.
(a) The Company hereby agrees to pay all fees, charges and expenses of the
Offering, including, without limitation, all fees, charges, and expenses in
connection with (i) the preparation, printing, reproduction, filing,
distribution and mailing of the Memorandum, and all other documents relating to
the offering, purchase, sale and delivery of the Shares, and any supplements or
amendments thereto, including the fees and expenses of counsel to the Company,
and the cost of all copies thereof, (ii) the issuance, sale, transfer and
delivery of the Shares and the Warrants, including any transfer or other taxes
payable thereon and the fees of any Transfer Agent, Warrant Agent or Registrar,
(iii) the registration or qualification of the Shares or the securing of an
exemption therefrom under state or foreign "blue sky" or securities laws,
including, without limitation, filing fees payable in the jurisdictions in which
such registration or qualification or exemption therefrom is sought, the costs
of preparing preliminary, supplemental and final "Blue Sky Surveys" relating to
the offer and sale of the Shares and the fees and disbursements of counsel
actually incurred to the Placement Agent in connection with such "blue sky"
matters, (iv) the filing fees, if any, payable to the Commission; and (v) the
retention of the Escrow Agent, including the fees and expenses of the Escrow
Agent for serving as such and the fees and expenses of its counsel.
(b) If subscriptions to purchase at least 6,000,000 shares (including the
Affiliate Shares) are received prior to the expiration of the Offering Period
and accepted by the Company, the Company shall pay to the Placement Agent a
non-accountable expense allowance equal to 3% of the gross proceeds. Such
amounts (less amounts, if any, previously paid to you in respect of such
non-accountable expense allowance) shall be paid by the Company out of the funds
received from the sale of the Shares or, at the Placement Agent's option, in
part or in whole, in shares of Common Stock valued at $.90 per share.
(c) If subscriptions to purchase at least 6,000,000 shares (including the
Affiliate Shares) are not received prior to the expiration of the Offering
Period or if this Agreement is terminated by the Placement Agent pursuant to
Section 8 hereof prior to the issuance, sale and delivery of any
- 16 -
17
Shares, the Company shall reimburse the Placement Agent for its reasonable
out-of-pocket expense hereunder (including, without limitation, the reasonable
fees and expenses of counsel).
8. Conditions of Placement Agent's Obligations. The obligations of the
Placement Agent pursuant to this Agreement shall be subject, in its discretion,
to the continuing accuracy of the representations and warranties of the Company
contained herein and in each certificate and document contemplated under this
Agreement to be delivered to the Placement Agent, as of the date hereof and as
of the Closing Date (and, if applicable, each Additional Closing Date) to the
performance by the Company of its obligations hereunder, and to the following
conditions:
(a) At the Closing and each Additional Closing, as the case may be, the
Placement Agent shall have received the favorable opinion of Warner & ▇▇▇▇▇▇▇▇▇,
LLP, counsel for the Company, dated the date of delivery, addressed to the
Placement Agent, in substantially the forms of Exhibit III-1 and Exhibit III-2
hereto, respectively.
(b) On or prior to the Closing Date and each Additional Closing Date, as
the case may be, the Placement Agent shall have been furnished such information,
documents and certificates as it may reasonably require for the purpose of
enabling it to review the matters referred to in this Section 8 and in order to
evidence the accuracy, completeness or satisfaction of any of the
representations, warranties, covenants, agreements or conditions herein
contained, or as it may otherwise reasonably request.
(c) At the Closing and each Additional Closing, as the case may be, the
Placement Agent shall have received a certificate of the chief executive officer
and of the chief financial officer of the Company, dated the Closing Date or
such Additional Closing Date, as the case may be, to the effect that, as of the
date of this Agreement and as of the Closing Date or such Additional Closing
Date, as the case may be, the representations and warranties of the Company
contained herein were and are accurate, and that as of the Closing Date or such
Additional Closing Date, as the case may be, the obligations to be performed by
the Company hereunder on or prior thereto have been fully performed.
(d) All proceedings taken in connection with the issuance, sale and
delivery of the Shares shall be reasonably satisfactory in form and substance to
you and your counsel.
(e) There shall not have occurred, at any time prior to the Closing or, if
applicable, an Additional Closing, as the case may be, (i) any domestic or
international event, act or occurrence which has materially disrupted, or in
your reasonable opinion will in the immediate future materially disrupt, the
securities markets; (ii) a general suspension of, or a general limitation on
prices for, trading in securities on the New York Stock Exchange or the American
Stock Exchange or in the over-the-counter market; (iii) any outbreak of major
hostilities or other national or international calamity affecting securities
markets in the United States; (iv) any banking moratorium declared by a state or
federal authority; (v) any moratorium declared in foreign exchange trading by
major international banks or other persons; (vi) any material interruption in
the mail service or other means of communication within the United States; (vii)
any material adverse change in the business, properties, assets, results of
operations or financial condition of the Company; or (viii) any change in the
market for securities in general or in political, financial or
- 17 -
18
economic conditions which, in your reasonable business judgment, makes it
inadvisable to proceed with the offering, sale and delivery of the Shares.
(f) The Sales Agent shall have received an agreement reflecting the
provisions of Section 6(a)(xv) hereof.
(g) The Sales Agent shall have received from certain officers or directors
of the Company agreements to the effect that such officers and directors will
not, without the Sales Agent's prior written consent, offer, issue, sell,
contract to sell, grant any option for the sale of or otherwise dispose of,
directly or indirectly, any shares of Common Stock (or any security or other
instrument which by its terms is convertible into, exercisable for, or
exchangeable for shares of Common Stock) for a period of 12 months from the
filing date of a Registration Statement for the resale of the Shares. This
paragraph shall not be applicable to the Escrow Agent or to an officer or
director who has terminated service to the Company.
(h) The Sales Agent shall have received evidence of the resignation of two
current members of the Company's Board of Directors.
Any certificate or other document signed by any officer of the Company on
behalf of the Company and delivered to you or to your counsel as required
hereunder shall be deemed a representation and warranty by the Company hereunder
as to the statements made therein. If any condition to your obligations
hereunder has not been fulfilled as and when required to be so fulfilled, you
may terminate this Agreement or, if you so elect, in writing waive any such
conditions which have not been fulfilled or extend the time for their
fulfillment. In the event that you elect to terminate this Agreement, you shall
notify the Company of such election in writing. Upon such termination, neither
party shall have any further liability or obligation to the other except as
provided in Section 10 hereof.
9. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless the Placement Agent,
the Selected Dealers, their officers, directors, stockholders, employees,
agents, advisors, consultants and counsel, and each person, if any, who controls
the Placement Agent or a Selected Dealer within the meaning of Section 15 of the
Act or Section 20(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), against any and all loss, liability, claim, damage and expense
whatsoever (which shall include, for all purposes of this Section 9, without
limitation, attorneys' fees and any and all expenses whatsoever incurred in
investigating, preparing or defending against any litigation, commenced or
threatened, or any claim whatsoever and any and all amounts paid in settlement
of any claim or litigation) as and when incurred arising out of, based upon or
in connection with (i) any untrue statement or alleged untrue statement of a
material fact contained in (A) the Memorandum or in any document delivered or
statement made pursuant to Section 6(a)(vii), or (B) in any application or other
document or communication (in this Section 9 collectively called an
"application") executed by or on behalf of the Company or based upon written
information furnished by or on behalf of the Company filed in any jurisdiction
in order to register or qualify the Shares under the "blue sky" or securities
laws thereof or in order to secure an exemption from such registration or
qualification or filed with the Commission; or any omission
- 18 -
19
or alleged omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, all in light of the
circumstances in which made, unless such statement or omission was made in
reliance upon and in conformity with written information furnished to the
Company as stated in Section 9(b) with respect to the Placement Agent expressly
for inclusion in the Memorandum or in any application, as the case may be; or
(ii) any breach of any representation, warranty, covenant or agreement of the
Company contained in this Agreement or any Operative Agreement. The foregoing
agreement to indemnify shall be in addition to any liability the Company may
otherwise have, including liabilities arising under this Agreement.
If any action is brought against the Placement Agent, a Selected Dealer or
any of their officers, directors, stockholders, employees, agents, advisors,
consultants and counsel, or any controlling persons of the Placement Agent or a
Selected Dealer (an "indemnified party"), in respect of which indemnity may be
sought against the Company pursuant to the foregoing paragraph, such indemnified
party or parties shall promptly notify the Company (the "indemnifying party") in
writing of the institution of such action (but the failure so to notify shall
not relieve the indemnifying party from any liability it may have other than
pursuant to this Section 9(a) unless such failure materially prejudices the
indemnifying party), and the indemnifying party shall promptly assume the
defense of such action, including the employment of counsel (reasonably
satisfactory to such indemnified party or parties) and payment of expenses. Such
indemnified party shall have the right to employ its own counsel in any such
case, but the fees and expenses of such counsel shall be at the expense of such
indemnified party unless the employment of such counsel shall have been
authorized in writing by the indemnifying party in connection with the defense
of such action or the indemnifying party shall not have promptly employed
counsel reasonably satisfactory to such indemnified party or parties to have
charge of the defense of such action or such indemnified party or parties shall
have reasonably concluded that there may be one or more legal defenses available
to it or them or to other indemnified parties which are different from or
additional to those available to one or more of the indemnifying parties and it
would be inappropriate for the same counsel to represent both parties due to
actual or potential differing interests between them, in any of which events
such fees and expenses shall be borne by the indemnifying party and the
indemnifying party shall not have the right to direct the defense of such action
on behalf of the indemnified party or parties. Anything in this paragraph to the
contrary notwithstanding, the indemnifying party shall not be liable for any
settlement of any such claim or action effected without its written consent. The
Company agrees promptly to notify the Placement Agent of the commencement of any
litigation or proceedings against the Company or any of its officers or
directors in connection with the sale of the Shares, the Memorandum or any
application.
(b) The Placement Agent agrees to indemnify and hold harmless the Company,
its officers, directors, employees, agents and counsel, and each other person,
if any, who controls the Company within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act, to the same extent as the foregoing indemnity
from the Company to the Placement Agent in Section 9(a), but only with respect
to statements or omissions, if any, made in the Memorandum in reliance upon and
in conformity with written information furnished to the Company as stated in
this Section 9(b) with respect to the Placement Agent expressly for inclusion in
the Memorandum. If any action shall be brought against the Company or any other
person so indemnified based on the Memorandum and in respect of which indemnity
may be sought against the Placement Agent pursuant to this Section 9(b), the
Placement Agent shall have the rights and duties given to the
- 19 -
20
indemnifying party, and the Company and each other person so indemnified shall
have the rights and duties given to the indemnified parties, by the provisions
of Section 9(a). The foregoing agreement to indemnify shall be in addition to
any liability the Placement Agent may otherwise have, including liabilities
arising under this Agreement.
(c) To provide for just and equitable contribution, if (i) an indemnified
party makes a claim for indemnification pursuant to Section 9(a) or 9(b) but it
is found in a final judicial determination, not subject to further appeal, that
such indemnification may not be enforced in such case, even though this
Agreement expressly provides for indemnification in such case, or (ii) any
indemnified or indemnifying party seeks contribution under the Act, the Exchange
Act, or otherwise, then the Company (including for this purpose any contribution
made by or on behalf of any officer, director, employee, agent or counsel of the
Company or any controlling person of the Company), on the one hand, and the
Placement Agent and the Selected Dealers (including for this purpose any
contribution by or on behalf of an indemnified party), on the other hand, shall
contribute to the losses, liabilities, claims, damages and expenses whatsoever
to which any of them may be subject, in such proportions as are appropriate to
reflect the relative benefits received by the Company, on the one hand, and the
Placement Agent and the Selected Dealers, on the other hand; provided, however,
that if applicable law does not permit such allocation, then other relevant
equitable considerations such as the relative fault of the Company and the
Placement Agent and the Selected Dealers in connection with the facts which
resulted in such losses, liabilities, claims, damages and expenses shall also be
considered. The relative benefits received by the Company, on the one hand, and
the Placement Agent and the Selected Dealers, on the other hand, shall be deemed
to be in the same proportion as (x) the total proceeds from the Offering (net of
compensation payable to the Placement Agent pursuant to Section 4 hereof but
before deducting expenses) received by the Company, and (y) the compensation
received by the Placement Agent pursuant to Section 4 hereof or, in the case of
a Selected Dealer, the allowance paid to such Selected Dealer.
The relative fault, in the case of an untrue statement, alleged untrue
statement, omission or alleged omission, shall be determined by, among other
things, whether such statement, alleged statement, omission or alleged omission
relates to information supplied by the Company or by the Placement Agent and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement, alleged statement, omission or alleged
omission. The Company and the Placement Agent agree that it would be unjust and
inequitable if the respective obligations of the Company and the Placement Agent
and the Selected Dealers for contribution were determined by pro rata or per
capita allocation of the aggregate losses, liabilities, claims, damages and
expenses or by any other method of allocation that does not reflect the
equitable considerations referred to in this Section 9(c). In no case shall the
Placement Agent or a Selected Dealer be responsible for a portion of the
contribution obligation in excess of the compensation received by it pursuant to
Section 4 hereof or the Selected Dealer Agreement, as the case may be, less the
aggregate amount of any damages that such Placement Agent or Selected Dealer has
otherwise been required to pay in respect of the same or any substantially
similar claim. No person guilty of a fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who is not guilty of such fraudulent misrepresentation. For purposes of
this Section 9(c), each person, if any, who controls the Placement Agent or a
Selected Dealer within the meaning of Section 15 of the Act or Section 20(a) of
the Exchange Act and each officer, director, stockholder, employee, agent and
counsel of the Placement Agent and the Selected Dealers shall have the same
rights to contribution as the Placement Agent or the Selected Dealer, and each
person, if any, who controls the Company within the meaning of Section 15 of the
Act or Section 20(a) of the Exchange Act
- 20 -
21
and each officer, director, employee, agent and counsel of the Company shall
have the same rights to contribution as the Company, subject in each case to the
provisions of this Section 9(c). Anything in this Section 9(c) to the contrary
notwithstanding, no party shall be liable for contribution with respect to the
settlement of any claim or action effected without its written consent. This
Section 9(c) is intended to supersede any right to contribution under the Act,
the Exchange Act or otherwise.
10. Representations and Agreements to Survive Delivery. All
representations, warranties, covenants and agreements contained in this
Agreement shall be deemed to be representations, warranties, covenants and
agreements at the Closing Date and, if applicable, each Additional Closing Date,
and such representations, warranties, covenants and agreements, including the
indemnity and contribution agreements contained in Section 9, shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of the Placement Agent or any indemnified person, or by or on
behalf of the Company or any person or entity which is entitled to be
indemnified under Section 9(b), and shall survive termination of this Agreement
or the issuance, sale and delivery of the Shares. In addition, notwithstanding
any election hereunder or any termination of this Agreement, and whether or not
the terms of this Agreement are otherwise carried out, the provisions of
Sections 6(a)(xvii), 7, 9, 10 and 12 shall survive termination of this Agreement
and shall not be affected in any way by such election or termination or failure
to carry out the terms of this Agreement or any part thereof.
11. Notices. All communications hereunder, except as may be otherwise
specifically provided herein, shall be in writing and, if sent to the Placement
Agent, shall be mailed, delivered or telexed or telegraphed and confirmed by
letter, to its address set forth above, or if sent to the Company, shall be
mailed, delivered or telexed or telegraphed and confirmed by letter, to Augment
Systems, Inc., ▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇. All notices
hereunder shall be effective upon receipt by the party to which it is addressed.
12. Assignment. This Agreement shall not be assigned by any party hereto
without the prior written consent of the other parties hereto.
13. Parties. This Agreement shall inure solely to the benefit of, and
shall be binding upon, the Placement Agent and the Company and the persons and
entities referred to in Section 9 who are entitled to indemnification or
contribution and their respective successors, legal representatives and assigns
(which shall not include any purchaser, as such, of Shares), 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.
14. Construction. This Agreement shall be construed in accordance with the
laws of the State of New York, without giving effect to conflict of laws.
15. Counterparts. This Agreement may be executed in counterparts, each of
which shall constitute an original and all of which, when taken together, shall
constitute one agreement.
- 21 -
22
16. Entire Agreement. This Agreement, including the Exhibits attached
hereto, constitutes the entire agreement between the parties hereto and
supersedes all previous negotiations, agreements and commitments with respect
thereto, and may only be amended by a written document, signed by duly
authorized officers or representatives of each of the parties hereto.
- 22 -
23
If the foregoing correctly sets forth the understanding between us, please
so indicate in the space provided below for that purpose, whereupon this letter
shall constitute a binding agreement among us.
Very truly yours,
AUGMENT SYSTEMS, INC.
By:____________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇
President
Accepted as of the date first above written.
New York, New York
SUNRISE SECURITIES CORP.
By:_____________________________
▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Vice President
- 23 -