XXXXXX XXXXXXX & COMPANY, INC.
INVESTMENT BANKING
00 XXXXXX XXXX - XXX XXXX, X.X. 00000
TEL: (000) 000-0000 FAX: (000) 000-0000
December 30, 1997
Access Solutions International, Inc.
000 Xxx Xxx Xxxx
Xxxxx Xxxxxxxxx, R.I. 02852
Attention: Xxxxxx Xxxxx, President
Ladies and Gentlemen:
This letter agreement confirms the mutual intentions of Access Solutions
International, Inc. (the "Company") and Xxxxxx Xxxxxxx & Company, Inc. ("JSC" or
"Agent") to undertake a private offering of securities of the Company.
Subject to the satisfactory completion of our normal due diligence and
subject to market conditions at the time of the Offering (as hereinafter
defined), it is our intention to act as the exclusive placement agent for a
minimum 10 and a maximum of 40 Units (the "Units"), each Unit consisting of a
10% convertible promissory Note in the principal amount of $50,000 (the "Notes")
and 20,000 warrants (the "Warrants") for a purchase price of $50,000 per Unit in
a private placement offering (the "Offering") pursuant to an exemption under the
Securities Act of 1933, as amended (the "Securities Act"). The rights and
privileges of the Notes and the Warrants shall be substantially as set forth on
Exhibit A hereto. Our proposal is based on information regarding the Company
provided to us by the Company and current market conditions as of the date of
this letter, and is subject to change in the event any such information shall
change. On the closing date of the proposed private placement, the Company shall
have no more than such number of shares of Common Stock outstanding as shown on
the capitalization schedule attached hereto as Exhibit B (including any and all
(a) securities with equivalent rights as the Common Stock, (b) shares of Common
Stock, or such equivalent securities, issuable upon exercise of options,
warrants and other contract rights, (c) securities convertible directly or
indirectly into shares of Common Stock, or such equivalent securities, and
excluding any warrants issuable to JSC hereunder).
Our acting as exclusive placement agent shall be subject to the following
general terms, conditions and qualifications:
1. The Units will be marketed by the Agent as set forth herein and sold to
accredited investors in increments of $50,000 subject to the Agent's discretion.
The Agent's discount will be 10% of the purchase price of the securities sold
(the "Placement Commission") including securities sold pursuant to orders
received through the Company, provided that the Agent agrees to reduce the fees
it is entitled to receive pursuant to the Financial Advisory and Consulting
Agreement ("Consulting Agreement") by and between the Company and JSC dated
October 16, 1996 upon consummation of the Company's proposed merger with
Paperclip Software, Inc. in an amount equal to the Agent's 10% discount on the
securities sold pursuant to orders received through the Company. The Company
agrees that no less than 50% of the securities sold, in the aggregate and at
each closing, shall be pursuant to orders received through the Company.
2. There shall be no material change in the capitalization or outstanding
shares of any class of capital stock of the Company prior to the Offering,
including, without limitation, the issuance of employee options, warrants, etc.
without the consent of the Agent. Except upon the consent of JSC, the Company
shall not, for a period commencing on the date hereof and ending six (6) months
from the consummation of the Offering, sell or offer for sale any of its
securities, except pursuant to options and warrants issued on the date hereof
and except for securities to be issued in connection with the proposed merger
with PaperClip Software, Inc.
3. The Offering will be conducted pursuant to an exemption from
registration under the Securities Act. Offering materials covering the proposed
Offering, including an offering memorandum and audited financial statements
(such memorandum, as may be supplemented or amended, shall hereinafter be
referred to as the "Private Placement Memorandum"), will be promptly prepared by
the Company and its legal counsel and auditors in cooperation with the Agent and
its counsel. Upon approval of the Private Placement Memorandum by the Agent and
its counsel, all appropriate filings at the state and federal level will be
completed at the Company's expense. In this regard, all documents to be filed
shall be submitted to the Agent and their counsel for prior approval and no
amendment will be made to the Private Placement Memorandum without the prior
consent of the Agent and its counsel. The Private Placement Memorandum shall
provide that each of the Company and the Agent shall have the right, in its sole
discretion, to accept or reject any subscriptions in the Offering. The Offering
will be for a period of thirty days commencing on the date of the Private
Placement Memorandum. The Agent may, at its option, extend the Offering for
another thirty days.
4. The Company represents, warrants and covenants that the Private
Placement Memorandum 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, in light of the circumstances under which they were
made, not misleading. All statements in the Private Placement Memorandum will be
true and correct as of the date of the Private Placement Memorandum and will be
true and correct on the closing date of the Offering.
5. The Company's financial and operational history, its present condition,
financial and otherwise, and its prospects, shall be substantially as
represented to us. The Company shall supply to the Agent and their counsel such
financial statements, contracts and other corporate records and documents as the
Agent or Agent's counsel may reasonably request, and the Company shall make
reasonably available for consultation such persons involved with the Company's
business as the Agent or their counsel shall deem necessary in connection with
the Agent's due diligence examination of the Company. In addition, we shall be
fully informed of any events which might have a material effect on the business,
operations, financial condition or prospects of the Company.
6. The Company shall issue and sell, at the closing of the proposed
offering to JSC and/or its designees, five (5) year warrants to purchase ten
percent (10%) of the number of shares into which the Notes issued and sold by
the Company in the Offering will be converted at a price of $.0001 per warrant
(the "JSC Warrants"), provided, that if the Notes are not converted, the JSC
Warrants shall be exercisable to purchase 60,000 Shares of Common Stock. The JSC
Warrants shall be exercisable at any time during a period of four (4) years
commencing on the date which is one year after the date of their issuance and
sale at a price equaling the conversion price per Share as determined in
accordance with Exhibit A (whether or not the Notes are converted). The Company
agrees that, for a period of seven (7) years from the date of the closing of the
Offering of tile securities to be offered (the "Closing"), if the Company
intends to file a Registration Statement or Statements for the public sale of
securities for cash (other than Form X-0, X-0 or comparable registration
statement), it will notify all of the holders of the Warrants and/or underlying
securities and if so requested it will include therein material to permit a
public offering of the securities underlying said JSC Warrants at the expense of
the Company (excluding fees and expenses of the holders' counsel and any
underwriting or selling commissions). In addition, for a period of five (5)
years from such date, upon written demand of holders(s) representing a majority
of the JSC Warrants, the Company agrees, on one occasion, to promptly register
the underlying securities at the expense of the Company (excluding fees and
expenses of the holders' counsel and any underwriting or selling commissions).
7. The Offering will be qualified for sale under the "blue sky" or
securities laws of such states as the Company and the Agent may reasonably
request. The necessary legal work for such qualifications will be carried on at
the Company's expense by counsel for the Agent.
8. The Company and the Agent each represents and acknowledges that there
are no claims for services in the nature of a finder's fee nor are there any
royalties, commissions or other payments due to any other person or entity with
respect to the proposed offering contemplated hereby except as herein set forth.
We shall compensate any of our personnel who may have acted in such capacities
as we shall determine.
9. The Company will pay all expenses related to the Offering, including,
but not limited to, the fees and expenses of its counsel, all printing and
duplication costs related to the Private Placement Memorandum and any exhibits
thereto, in such quantities as the Agent reasonably deems necessary and all
postage, mailing and express charges and other expenses in connection with the
delivery of copies of the Private Placement Memorandum. The Company shall also
bear all expenses in connection with Blue Sky registrations (including legal
fees (such fees not to exceed $10,000) and filing and legal expenses), registrar
and transfer agent fees, accounting fees, fees and expenses of the Agent's
counsel, and issue and transfer taxes, if any. In addition, the Company will pay
to the Agent a non-accountable expense allowance of three percent (3%) of the
purchase price of the securities sold in the proposed Offering, including
securities sold pursuant to orders received through the Company, $10,000 of
which is payable upon the execution and delivery of this letter, and the balance
of which is payable at the applicable closing, provided that the Agent agrees to
reduce the fees it is entitled to receive pursuant to the Consulting Agreement
upon consummation of the Company's proposed merger with Paperclip Software, Inc.
in an amount equal to the Agent's 3% non-accountable expense allowance on the
securities sold pursuant to orders received through the Company.
10. If JSC does not or fails to complete the proposed private placement and
the reasons therefor are reasonably related to a material adverse change in the
business or financial results, prospects or condition of the Company, or a
material adverse change in market conditions or if the proposed offering is not
completed because of the Company's actions or failure to take such actions as
are reasonably required hereunder and JSC is prepared to perform in accordance
with the terms herein, then, in any such case, the Company agrees to promptly
pay JSC its actual out of pocket expenses, provided that the advance referred to
in Paragraph 9 above shall be first offset against such expenses. In addition,
the Company shall remain liable for all Blue Sky counsel fees and expenses and
Blue Sky filing fees.
11. It is understood that JSC may enter into other agreements with
brokers-dealers who shall act as sub-placement agents and/or dealers in
connection with the proposed offering contemplated herein, but you shall have no
liability to such persons for fees and expenses incurred in connection with
their participation in such offering.
12. On the date of the closing, the Agent shall receive the opinion of
counsel to the Company, dated the date of the closing and addressed to the Agent
and to each purchaser of Units in the Offering, which opinion shall include
customary opinions for private placements and shall be in form and substance
reasonably satisfactory to the Agent's counsel.
13. The Company and its present or future affiliates and subsidiaries
hereby grant to the Agent a right of first refusal for a period of six (6)
months after the closing date for any issuance or sale of the assets or
securities of the Company or any of its present or future affiliates or
subsidiaries, including a public or private offering, or any merger or
consolidation of the Company or any of its present or future affiliates or
subsidiaries with or into another corporation, partnership or other entity.
During such period, the Company will not negotiate with any other placement
agent, underwriter or other person relating to any transaction described in the
preceding sentence.
14. We shall not be responsible for any expense of the Company or others
for any charges or claims related to the proposed financing or otherwise if the
sale of securities to be offered contemplated by this letter is not consummated.
This letter agreement shall serve as an indication of our mutual intention
with regard to the proposed Offering described herein and contemplated hereby
and shall not bind either party pending execution of the Placement Agent
Agreement except as to the responsibilities referred to in paragraphs 9, 10, 11,
and 14 herein.
We look forward to working with you on the proposed Offering. If the
foregoing accurately sets forth our understanding and agreement, kindly sign
this letter agreement and the enclosed executed copies and return two (2) copies
to us.
Very truly yours,
XXXXXX XXXXXXX & COMPANY, INC.
AS AGENT
By:/s/Xxxxxx Xxxxxxx
-----------------------------------
Name: Xxxxxx Xxxxxxx
Title: Chief Executive Officer
ACCEPTED AND AGREED TO THIS
31st day of December, 1997
ACCESS SOLUTIONS INTERNATIONAL, INC.
By:/s/Xxxxxx X. Xxxxxxx
--------------------------------
Xxxxxx X. Xxxxxxx
Acting Chairman
EXHIBIT A
TERMS OF CONVERTIBLE NOTES AND WARRANTS
Interest: Ten percent (10%) per annum payable on the
Maturity Date (as herein after defined); provided
that the accrued interest on each Note shall be
cancelled upon conversion of such Note pursuant to
the terms of the Note.
Conversion: The principal of each Note shall be mandatorily
converted without any action on the part of the
holder of such Note on the Conversion Date (as
defined below). The Conversion Date shall mean the
first date that the Company has a sufficient
number of authorized shares of Common Stock to
permit the conversion of the aggregate outstanding
principal of all of the Notes, provided such date
is at least 180 days after the Final Closing Date
(as defined below) and prior to the Maturity Date
of the Notes issued in the initial closing. If the
Company does not have a sufficient number of
authorized shares of Common Stock to permit the
conversion of the aggregate outstanding principal
of all of the Notes prior to the Maturity Date of
the Notes issued in the initial closing, the
principal and accrued interest thereon, of each
Note shall be due and payable upon its respective
Maturity Date. Each dollar of principal, if
converted, shall be convertible into shares of
Common Stock initially at a conversion price equal
to the lesser of (i) $.75 and (ii) 80% of the
average closing bid price of the Common Stock on
the Nasdaq SmallCap Market for the five (5)
consecutive trading days immediately preceding (a)
the initial closing date of the Offering, (b) any
interim closing date of the Offering or (c) the
final closing date of the Offering the ("Final
Closing Date"), whichever is lowest.
Adjustment of
conversion price: Upon declaration of stock dividends, stock splits,
reclassifications and recapitalizations, and
issuances below the conversion price, the
conversion price shall not exceed the initial
conversion price.
Reset: The conversion price in effect immediately prior
to the date that is six (6) months after the Final
Closing Date (the "Reset Date") will be adjusted
and reset effective as of the Reset Date if the
average closing bid price for the thirty (30)
consecutive trading days immediately preceding the
Reset Date (the "6-Month Trading Price") is less
than 150% of the then applicable conversion price
(a "Reset Event"). Upon tile occurrence of a Reset
Event, the then applicable conversion price will
be reduced to be equal to the greater of (i) the
6-Month Trading Price divided by 1.5 and (ii) 50%
of the then applicable conversion price.
Voting rights: None.
Registration rights: No later than ninety (90) days following the Final
Closing Date, the Company will file a registration
statement (the "Shelf Registration Statement")
under the Securities Act to permit resales of the
Common Stock issuable upon conversion of the Notes
and upon exercise of the Warrants, provided that
if the Company is eligible to file a registration
statement on Form S-3 in connection with such
securities the Company may delay filing such S-3
registration statement until the date which is 150
days after the Final Closing Date.
Restriction on transfer: The Notes the Warrants and the shares of Common
Stock issuable upon conversion of the Notes will
be "locked-up" for a period of six (6) months from
issuance of the Notes.
Exercise Price: The Warrants shall be exercisable to purchase one
share of Common Stock at an exercise price equal
to the lower of (i) $.75 or (ii) 80% of the
average closing bid price of the Common Stock on
the Nasdaq market for the five (5) consecutive
trading days immediately preceding (a) the initial
closing date of the Offering, (b) any interim
closing date of the Offering or (c) the Final
Closing Date, whichever is lowest.
Term: Each Warrant shall be exercisable for thirty-six
(36) months commencing one year from issuance.
Cancellation: The Warrants will be cancelled upon the Conversion
Date, if any.
Maturity Date: One year from the date of issuance.
