Exhibit H(2)
1,194,917 SHARES
COMMON STOCK
DEM, INC.
THE WORLD TRADE CENTER - BALTIMORE
000 XXXX XXXXX XXXXXX, 00XX XXXXX
XXXXXXXXX, XXXXXXXX 00000
PLACEMENT AGENCY AGREEMENT
, 1997
The Xxxxxxx Co.
The World Trade Center - Baltimore
000 Xxxx Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Ladies and Gentlemen:
DEM, Inc. a Maryland corporation registered under the Investment Company
Act of 1940, as amended (the "Act") as a closed-end investment company, (the
"Corporation"), proposes to cause to be issued, and sold through The Xxxxxxx Co.
(the "Placement Agent") on a "best efforts" basis a maximum of 1,194,917 Shares
(the "Shares") of common stock, $.00001 par value per share (the "Common Stock")
at a public offering price per share equal to the greater of $15.00 or the
Company's net asset value per share (calculated within 48 hours prior to any
sale) (the "Offering").
SECTION 1. APPOINTMENT
The Corporation hereby appoints the Placement Agent, and the Placement
Agent hereby agrees, to act as Placement Agent for the Shares for the period and
on the terms set forth in this Agreement. In connection therewith, the
Corporation has delivered to the Placement Agent copies of its Articles of
Incorporation and Bylaws, the Corporation's Registration Statement with respect
to the Shares and all amendments thereto filed pursuant to the Securities Act of
1933, as amended (the "Securities Act") or the Act (the "Registration
Statement"), and the Corporation's current Prospectus and Statement of
Additional Information with respect to the Shares (collectively, as currently in
effect and as amended or supplemented, the "Prospectus") and shall promptly
furnish the Placement Agent with all amendments of or supplements to the
foregoing.
SECTION 2. DISTRIBUTION SERVICES
Subject to the direction and control of the Corporation's Board of
Directors (the "Board"), the Placement Agent shall serve as Placement Agent for
the Shares.
(a) As agent for the Corporation, the Placement Agent shall offer, and
solicit offers to purchase the Shares. An offer to purchase the Shares shall
not be binding on the Corporation until the Placement Agent, on behalf of the
Corporation confirms the acceptance of such offer by delivery of a confirmation
of sale and if not previously delivered, a final Prospectus. The Placement
Agent's rights hereunder shall not apply to Shares issued in connection with the
reinvestment in shares by the Corporation's stockholders of dividends or other
distributions or any other offering by the Corporation of securities to its
stockholders.
(b) The Placement Agent shall use its best efforts to obtain offers to
purchase Shares upon the terms and conditions contained herein and in the
Prospectus, including the offering price. The Placement Agent shall notify the
Corporation promptly of all offers to purchase the Shares that the Placement
Agent intends to accept on behalf of the Corporation. The Corporation shall
furnish to the Placement Agent from time to time, for use in connection with the
offering of Shares, such information with respect to the Corporation and Shares
as the Placement Agent may reasonably request. The Corporation shall supply the
Placement Agent with such copies of the Prospectus as the Placement Agent may
request. The Placement Agent may use its employees, agents and other persons
who need not be its employees, at its cost and expense, to assist it in carrying
out its obligations hereunder, but no such employee, agent or other person shall
be deemed to be an agent of the Corporation or have any rights under this
Agreement.
(c) The Corporation reserves the right to suspend the offering of Shares
at any time, in the absolute discretion of the Board, and upon notice of such
suspension the Placement Agent shall cease to offer the Shares.
(d) The Corporation and the Placement Agent will cooperate with each other
in taking such action as may be necessary to qualify Shares for sale under the
securities laws of such states as the Corporation may designate. The
Corporation shall pay all fees and expenses of registering Shares under the
Securities Act and of registering or qualifying Shares and the Corporation's
qualification under applicable state securities laws. The Placement Agent shall
pay all expenses relating to its broker-dealer qualification. The Placement
Agent shall not confirm sales to any purchasers unless the Shares to be sold are
qualified for sale under the securities laws of any state applicable to such
sale.
(e) The Corporation represents that its Registration Statement and
Prospectus under the Securities Act have been or will be, as the case may be,
carefully prepared in conformity with the requirements of the Securities Act and
the rules and regulations of the Securities and Exchange Commission (the
"Commission") thereunder. The Corporation represents and warrants that its
Registration Statement and Prospectus contain or will contain all statements
required to be stated therein in accordance with the Securities Act and the
rules and regulations of the Commission thereunder, and that the Corporation's
Registration Statement and Prospectus, when they shall become effective or be
authorized for use, will not include an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein not mislead-
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ing to a purchaser of Shares. The Corporation will from time to time file such
amendment or amendments to its Registration Statement and Prospectus as, in the
light of future developments, shall, in the opinion of the Corporation's
counsel, be necessary in order to have such Registration Statement and
Prospectus at all times contain all material facts required to be stated therein
or necessary to make any statements therein not misleading to a purchaser of
Shares, but, if the Corporation shall not file such amendment or amendments
within fifteen days after receipt of a written request from the Placement Agent
to do so, the Placement Agent may, at its option, terminate this Agreement
immediately. The Corporation shall not file any amendment to its Registration
Statement and Prospectus without giving the Placement Agent reasonable notice
thereof in advance; provided, however, that nothing in this Agreement shall in
any way limit the Corporation's right to file at any time such amendments to its
Registration Statement and Prospectus, of whatever character, as it deems
advisable, such right being in all respects absolute and unconditional. The
Corporation represents and warrants that any amendment to its Registration
Statement and Prospectus hereafter filed will, when it becomes effective,
contain all statements required to be stated therein in accordance with the Act
and the rules and regulations of the Commission thereunder, that all statements
of fact contained therein will, when the same shall become effective, be true
and correct and that no such amendment, when it becomes effective, will include
an untrue statement of a material fact or will omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading to a purchaser of Shares.
(f) The Corporation will indemnify, defend and hold the Placement Agent,
its several officers and directors, and any person who controls the Placement
Agent within the meaning of Section 15 of the Securities Act (collectively, the
"Placement Agent Indemnitees"), free and harmless from and against any and all
claims, demands, liabilities and expenses (including the cost of investigating
or defending such claims, demands or liabilities and any counsel fees incurred
in connection therewith) which any Placement Agent Indemnitee may incur, under
the Securities Act, or under common law or otherwise, arising out of or based
upon any alleged untrue statement of a material fact contained in the
Corporation's Registration Statement and Prospectus under the Securities Act or
arising out of or based upon any alleged omission to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading; provided, however, that in no event shall anything contained in this
paragraph (f) be so construed as to protect the Placement Agent against any
liability to the Corporation or its security holders to which the Placement
Agent would otherwise be subject by reason of willful misfeasance, bad faith, or
gross negligence in the performance of its duties, or by reason of its reckless
disregard of its obligations and duties under this Section 2. This agreement to
indemnify the Placement Agent Indemnitees is expressly conditioned upon the
Corporation being notified of any action brought against any Placement Agent
Indemnitee, such notification to be given by letter, facsimile transmission or
telegram to the Corporation and referring to the person against whom such action
is brought within ten days after the summons or other first legal process shall
have been served on such person. The failure so to notify the Corporation of
any such action shall not relieve the Corporation from any liability which it
may have to any Placement Agent Indemnitee otherwise than on account
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of the indemnification provided for in this paragraph (f). The Corporation will
be entitled to assume the defense of any suit brought to enforce any such claim,
and to retain counsel of good standing chosen by it and approved by the
Placement Agent. In the event the Corporation elects to assume the defense of
any such suit and retain counsel of good standing approved by the Placement
Agent, the defendants in such suit shall bear the fees and expenses of any
additional counsel retained by any of them. In the event the Corporation does
not elect to assume the defense of any such suit, or in case the Placement Agent
does not approve of counsel chosen by the Corporation or has been advised that
it may have available defenses or claims which are not available to or conflict
with those available to the Corporation, the Corporation will reimburse any
Placement Agent Indemnitee named as defendant in such suit for the fees and
expenses of any counsel retained by such person. The indemnification provisions
contained in this paragraph (f) and the Corporation's representations and
warranties in this Agreement shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of any Placement Agent
Indemnitee and shall survive the sale of any Shares made pursuant to
subscriptions obtained by the Placement Agent. The indemnification provisions
of this paragraph (f) will inure exclusively to the benefit of the Placement
Agent Indemnitees and their respective successors and assigns. The Corporation
agrees promptly to notify the Placement Agent of the commencement of any
litigation or proceeding against the Corporation or any of its Directors or
officers in connection with the issue or sale of Shares.
(g) The Placement Agent agrees to indemnify, defend and hold the
Corporation, its several officers and directors, and any person who controls the
Corporation within the meaning of Section 15 of the Securities Act
(collectively, the "Corporation Indemnitees"), free and harmless from and
against any and all claims, demands, liabilities and expenses (including the
cost of investigating or defending such claims, demands or liabilities and any
reasonable counsel fees incurred in connection therewith) which any Corporation
Indemnitee may incur under the Act, or under common law or otherwise, but only
to the extent that such liability or expense incurred by the Corporation
Indemnitees resulting from such claims or demands shall arise out of or be based
upon any alleged untrue statement of a material fact contained in information
furnished in writing by the Placement Agent in its capacity as distributor to
the Corporation for use in the Corporation's Registration Statement or
Prospectus under the Securities Act, or shall arise out of or be based upon any
alleged omission to state a material fact in connection with such information
required to be stated in the Registration Statement or Prospectus or necessary
to make such information not misleading. The Placement Agent's agreement to
indemnify the Corporation Indemnitees is expressly conditioned upon the
Placement Agent being notified of any action brought against a Corporation
Indemnitee, such notification to be given by letter, facsimile transmission or
telegram addressed and referring to the person against whom such action is
brought within ten days after the summons or other first legal process shall
have been served on such person. The Placement Agent shall have a right to
control the defense of such action, with counsel of its own choosing,
satisfactory to the Corporation, if such action is based solely upon such
alleged misstatement or omission on the Placement Agent's part, and in any other
event the Placement Agent and
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the Corporation Indemnitees named shall each have the right to participate in
the defense or preparation of the defense of any such action. The failure to so
notify the Placement Agent of any such action shall not relieve the Placement
Agent from any liability which it may have to any Corporation Indemnitee
otherwise than on account of the indemnification provisions in this
paragraph (g).
(h) The Corporation shall advise the Placement Agent immediately: (i) of
any request by the Commission for amendments to the Corporation's Registration
Statement or Prospectus or for additional information; (ii) in the event of the
issuance by the Commission or any stop order suspending the effectiveness of the
Corporation's Registration Statement or Prospectus or the initiation of any
proceedings for that purpose; (iii) of the happening of any material event which
makes untrue any statement made in the Corporation's Registration Statement or
Prospectus or which requires the making of a change in either thereof in order
to make the statements therein not misleading; and (iv) of all action of the
Commission with respect to any amendments to the Corporation's Registration
Statement or Prospectus which may from time to time be filed with the Commission
under the Act or the Securities Act.
SECTION 3. STANDARD OF CARE
The Placement Agent shall give the Corporation the benefit of its best
judgment and efforts in rendering its services to the Corporation and shall not
be liable for error of judgment or mistake of law, for any loss arising out of
any investment, or in any event whatsoever, provided that nothing herein shall
be deemed to protect, or purport to protect, the Placement Agent against any
liability to the Corporation or to the security holders of the Corporation to
which it would otherwise be subject by reason of willful misfeasance, bad faith
or gross negligence in the performance of its duties hereunder, or by reason of
reckless disregard of its obligations and duties hereunder.
SECTION 4. EXPENSES
The Corporation will pay all fees, costs and expenses incident to the
performance by the Corporation of its obligations hereunder, including: (a) the
preparation, printing, filing and distribution of the Registration Statement
(including the exhibits thereto), all amendments and supplements thereto and the
Prospectus; (b) the preparation, printing, and issuance of the Shares including
any stamp taxes and transfer agent and registrar fees payable in connection with
the original issuance of the Shares; (c) the registrations or qualifications
referred to in Section (2)(d) and 2(e) hereof including fees and disbursements
of counsel for the Placement Agent relating to such registrations or
qualifications; (d) the fees and expenses of the Corporation's accountants and
the fees and expenses of counsel for the Corporation; (e) the expenses of
delivery to the Placement Agent of copies of the Prospectus, as may be requested
for use in connection with the offering and sale of the Shares; (f) any filings
required to be made by the Placement Agent with the National Association of
Securities Dealers, Inc.; (g) the fees and expenses incurred with respect to the
listing of the Shares on the NASDAQ SmallCap Market.
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SECTION 5. TERMS OF THE OFFERING
The Offering shall commence upon the effectiveness of the Registration
Statement and shall continue until such date as all of the Shares are sold or
the Offering is terminated by the Corporation or the Placement Agent as provided
in Section 6 hereof (the "Termination Date").
Subscription proceeds will be held by the Corporation pending a
closing ("Closing"). Subject to the terms and conditions of this Agreement,
Closings shall be held with respect to sales of the Shares on a monthly basis or
on such a more frequent basis as the Corporation and Placement Agent shall
agree.
The public offering price per share is the greater of $15.00 or the
Company's net asset value per share (calculated within 48 hours prior to any
sale) (the "Offering Price"). The minimum subscription will be for 100 shares.
The Placement Agent shall be paid a management fee of 2.7% of the Offering Price
from all sales of the Shares. The Placement Agent will also be paid a selling
concession of 4.3% of the Offering Price from all sales of the Shares all, or
any portion, of which the Placement Agent may reallow to other selling agents.
The Corporation shall have the right to accept or reject in whole or in part
offers to purchase for the Shares.
SECTION 6. TERMINATION
This Agreement may be terminated at any time, without the payment of any
penalty, (i) by the Board of Directors of the Corporation or by a vote of a
majority of the outstanding voting securities of the Corporation, on 10 days'
written notice to the Placement Agent or (ii) by the Placement Agent on 10 days'
written notice to the Corporation. This Agreement shall automatically terminate
in the event of its assignment.
SECTION 7. ACTIVITIES OF PLACEMENT AGENT
Except to the extent necessary to perform its obligations under this
Agreement, nothing herein shall be deemed to limit or restrict the Placement
Agent's right, or the right of any of its officers, directors or employees
(whether or not they are a director, officer, employee or other affiliated
person of the Corporation) to engage in any other business or to devote time and
attention to the management or other aspects of any other business, whether of a
similar or dissimilar nature, or to render services of any kind to any other
company, corporation, firm, individual or association.
SECTION 8. MISCELLANEOUS
(a) No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by both
parties hereto and, if required by the Act, by a vote of a majority of the
outstanding voting securities of the Corporation.
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(b) If any part, term or provision of this Agreement is held to be
illegal, in conflict with any law or otherwise invalid, the remaining portion or
portions shall be considered severable and not be affected, and the rights and
obligations of the parties shall be construed and enforced as if the Agreement
did not contain the particular part, term or provision held to be illegal or
invalid.
(c) Section headings in this Agreement are included for convenience only
and are not to be used to construe or interpret this Agreement.
(d) Notices, requests, instructions and communications received by the
parties at their respective principal places of business, or at such other
address as a party may have designated in writing, shall be deemed to have been
properly given.
(e) This Agreement shall be governed by and shall be construed in
accordance with the laws of the State of Maryland without reference to
principles of conflict of law.
(f) The terms "vote of a majority of the outstanding voting securities,"
"affiliated person," and "assignment" shall have the meanings ascribed thereto
in the Act.
(g) This Agreement has been and is made solely for the benefit of the
Placement Agent, the Corporation and their respective successors, executors,
administrators, heirs and assigns, and the officers, directors and controlling
persons referred to herein, and no other person will have any right or
obligation hereunder. The term "successors" shall not include any purchaser of
the Shares merely because of such purchase.
(h) The indemnification agreement contained in this Agreement and the
representations, warranties and covenants in this Agreement shall remain in full
force and effect regardless of (i) any termination of this Agreement, (ii) any
investigation made by or on behalf of the Placement Agent or controlling person
thereof, or by or on behalf of the Corporation or its directors or officers, and
(iii) a Closing under this Agreement.
(i) This Agreement embodies the entire agreement between the Corporation
and the Placement Agent relating to the subject matter hereof and supersedes all
prior agreements, representations and understandings, if any, relating to the
subject matter hereof.
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(j) Please confirm that the foregoing correctly sets forth the agreement
between the Corporation and the Placement Agent.
Very truly yours,
DEM, INC.
By:
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Xxxxxx X. Xxxxxxx, Xx.
Chairman and President
THE XXXXXXX CO.
By:
----------------------------
Xxxxxx X. Xxxxxxx, Xx.
Chairman and President
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