TII INDUSTRIES, INC.
AGENCY AGREEMENT
As of May 15, 2000
X.X. Xxxxxxxx & Co., Inc.
000 Xxxxxxxxxx Xxxxxxxxx
Xxxxxx Xxxx, Xxx Xxxxxx 00000
Gentlemen:
TII Industries, Inc., a Delaware corporation ("Company"),
proposes to offer for sale in a private placement ("Offering") a minimum of
1,300,000 and a maximum of 1,800,000 units ("Units") at a purchase price equal
to 75% of the average of the mean between the closing bid and asked prices for
the Company's common stock for the five consecutive trading days ending on the
last trading day prior to the closing of the Offering (100% of such average
being referred to as the "Market Price") with a minimum offering price of $1.75
and a maximum offering price of $3.00 per Unit. Each Unit consists of one share
("Share(s)") of the Company's Common Stock ("Common Stock") and one warrant
("Warrant(s)") to purchase an additional share of the Company's Common Stock at
an exercise price equal to the lower of 125% of the Market Price or $4.75, but
in either case not less than $2.69 per share. The Units will be offered on a
"best efforts, minimum 1,3000,000 Units, maximum 1,800,000 Units" basis, in
accordance with Section 4(2) of the Securities Act of 1933, as amended
("Securities Act"), and Regulation D ("Reg D") promulgated thereunder, only to
"accredited investors," as defined in Reg D. The minimum subscription amount
will be $50,000, although subscriptions for amounts less than $50,000 may be
accepted at the discretion of the Placement Agent (as hereinafter defined) with
the Company's consent.
The Units, Shares and Warrants have the terms and conditions
reflected in the Company's Confidential Private Placement Memorandum dated May
15, 2000 to be delivered to each purchaser of the Units ("Memorandum"). The
Memorandum, together with all exhibits thereto, will be referred to herein as
the "Offering Documents."
1. Appointment of Placement Agent; The Offering Period.
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1.1 Appointment of Placement Agent. X.X. Xxxxxxxx & Co., Inc. ("Xxxxxxxx"
or "Placement Agent") is hereby appointed exclusive Placement Agent of the
Company during the offering period herein specified ("Offering Period") for the
purpose of assisting the Company in placing the Units with purchasers who are
qualified accredited investors ("Subscribers"). The Placement Agent hereby
accepts such agency and agrees to assist the Company in placing the Units with
the Subscribers. The Placement Agent's agency hereunder is not terminable by the
Company except upon termination of the Offering, a breach by the Placement Agent
of its material obligations hereunder or as otherwise provided in Section 7
hereon.
1.2 Offering Period. The Offering Period shall commence on May 15, 2000,
the day the Offering Documents are first made available to the Placement Agent
by the Company and shall continue until June 29, 2000; provided, however, that
the Offering Period may be extended for up
to an additional period of forty-five (45) days by the mutual decision of the
Placement Agent and the Company without notice to any Subscriber (the last day
of the Offering Period, as it may be extended, is referred to as the
"Termination Date"). If, at any time during the Offering Period, subscriptions
for at least 1,300,000 of the Units have been received and accepted by you and
the Company (and funds in payment therefor have cleared), then, upon the mutual
consent of the Company and the Placement Agent, a closing ("Closing") shall take
place with respect to such accepted subscriptions and the Offering shall
terminate. If subscriptions for at least 1,300,000 of the Units are not received
and accepted (and funds in payment therefor cleared) by the Termination Date,
then the Offering will be terminated and all funds received from Subscribers
will be returned, without interest and without any deduction.
1.3 Placement Agent's Purchase Option. The Company hereby agrees to issue
and sell to the Placement Agent (and/or its designees) at the Closing, for an
aggregate purchase price of $100.00, an option ("Placement Agent's Purchase
Option") to purchase a number of Units equal to that percentage of Units sold in
the Offering as set forth on Schedule 1.3 hereto, ("Placement Agent's Units")
which percentage will be dependent on the Market Price, at an exercise price
equal to 110% of the Market Price, but in any event, not less than $2.69 per
Unit. The Placement Agent Purchase Option will be in the form attached hereto.
The Placement Agent's Units shall be identical to the Units sold in the
Offering. The Placement Agent's Purchase Option shall be exercisable for a
period of four years commencing on the day following the six-month anniversary
of the Closing.
1.4 Offering Documents. The Company will provide the Placement Agent with
a sufficient number of copies of the Offering Documents and the forms of
Subscription Agreement and Investor Information Statement ("Subscription
Agreement"), to be executed by each Subscriber for delivery to potential
Subscribers and such other information, documents and instruments that the
Placement Agent deems reasonably necessary to act as Placement Agent hereunder
and to comply with the rules, regulations and judicial and administrative
interpretations respecting compliance with applicable state and federal statutes
related to the Offering.
1.5 Segregation of Funds. Each Subscriber for the Units shall tender to
the Placement Agent a wire transfer payable to the order of "X.X. Xxxxxxxx &
Co., Inc.--TII Industries Special Account" in the amount of the investment
subscribed for, which funds shall be held by Xxxxxxxx in a segregated,
non-interest-bearing bank account, in accordance with Rules 10b-9 and 15c2-4
promulgated under the Securities Exchange Act of 1934 ("Exchange Act").
1.6 No Firm Commitment. The Company understands and acknowledges that the
undertaking by the Placement Agent pursuant to this Agreement is not a "firm
commitment" offering and that the Placement Agent is not obligated in any way to
purchase or sell the Units offered hereby.
1.7 Participation by Selected Dealers. The Placement Agent may engage
other persons that are members of the National Association of Securities
Dealers, Inc. ("NASD") or registered representatives of such members to assist
the Placement Agent in the Offering (each such person being hereinafter referred
to as a "Selected Dealer") and the Placement Agent may allow such persons such
part of the compensation and payment of expenses payable to the Placement Agent
hereunder as the Placement Agent shall determine.
2. Representations and Warranties of the Company. The Company hereby represents
and warrants to the Placement Agent and the Selected Dealers upon the execution
of this Agreement and again at each Closing as follows:
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2.1 Due Incorporation and Qualification. The Company has been duly
incorporated, is validly existing and is in good standing under the laws of its
state of incorporation and is duly qualified as a foreign corporation for the
transaction of business and is in good standing in each jurisdiction in which
the ownership or leasing of its properties or the conduct of its business
requires such qualification, except where the failure to so qualify would not
have a material adverse effect on the business, operations, assets, financial
condition or prospects of the Company and its subsidiaries taken as a whole
("Material Adverse Effect"). The Company has all requisite corporate power and
authority necessary to own or hold its properties and conduct its business as
described in the Offering Documents.
2.2 Authorized Capital; Outstanding Securities. As of the date hereof,
the Company's capitalization, including all options, warrants and convertible
securities, is as described on SCHEDULE 2.2. Except as set forth on SCHEDULE
2.2, the Company does not have outstanding any option, warrant, convertible
security, or other right permitting or requiring it to issue, or otherwise to
purchase or convert any obligation into, shares of Common Stock or other
securities of the Company and the Company has not agreed to issue or sell any
shares of Common Stock or other securities of the Company. As of the date of
Closing, there will be no other securities of the Company outstanding, except
for (i) stock options granted to employees since the date hereof in the ordinary
course with exercise prices no less than fair market value on the date of grant,
and (ii) additional Common Stock issued upon conversion or exercise of such
outstanding options, warrants and convertible securities. All of the issued and
outstanding shares of Common Stock have been duly and validly authorized and
issued and are fully paid and non-assessable. None of the holders of such
outstanding shares of Common Stock is subject to personal liability solely by
reason of being such a holder. The offers and sales of all securities of the
Company within the last three years were at all relevant times either registered
under the Securities Act and the applicable state securities or Blue Sky laws or
exempt from such registration.
2.3 No Preemptive Rights; Registration Rights. Except as set forth on
SCHEDULE 2.3, there are no preemptive or other rights to subscribe for or
purchase, or any restriction upon the voting or transfer of, any shares of
Common Stock or other securities of the Company, under the Certificate of
Incorporation or By-Laws of the Company or under any agreement or other
outstanding instrument to which the Company is a party or by which it is bound.
No holder of any of the Company's securities has any "piggyback" or demand
registration rights with respect to which the Company has not already registered
such securities. The Company has reserved for issuance a sufficient number of
shares of Common Stock to be issued to the Subscribers upon the issuance of the
Units, the exercise of the Warrants ("Warrant Shares") and upon the exercise of
the Placement Agent's Purchase Option and the exercise of the Warrants
underlying the Placement Agent's Purchase Option.
2.4 Financial Statements. The financial statements of the Company
included in the Offering Documents ("Financials") fairly present the financial
position and results of operations of the Company at the dates thereof and for
the periods covered thereby, subject, in the case of interim periods, to
year-end adjustments and normal recurring accruals. The Company has no material
liabilities or obligations, contingent, direct, indirect or otherwise except (i)
as set forth in the latest balance sheet included in the Financials or the
footnotes thereto (the date of such balance sheet being referred to as the
"Balance Sheet Date"), and (ii) those incurred in the ordinary course of
business since the Balance Sheet Date. Except as may be disclosed in the
Financials, there are no amounts due to any officers, directors or 5% or greater
stockholders of the Company, or to any of their respective affiliates, other
than salary and other compensation disclosed in the Offering Documents and
expense reimbursements.
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2.5 No Material Adverse Changes. Except as otherwise stated in the
Offering Documents, since the Balance Sheet Date, there has not been any
material adverse change in the condition, financial or otherwise, of the
Company.
2.6 Subsidiaries. Except for the subsidiaries set forth on SCHEDULE 2.8,
the Company has no subsidiaries and has no interest in, shares of capital stock
of or right to acquire an interest in or shares of capital stock of any other
corporation, limited liability company, partnership or other entity.
2.7 Taxes. The Company has filed all federal tax returns and all state
and municipal and local tax returns (whether relating to income, sales,
franchise, withholding, real or personal property or other types of taxes)
required to be filed under the laws of the United States and applicable states,
and has paid in full all taxes that have become due pursuant to such returns or
claimed to be due by any taxing authority; provided, however, that the Company
has not paid any tax, assessment, charge, levy or license fee that it is
contesting in good faith and by proper proceedings and adequate reserves for the
accrual of same are maintained if required by generally accepted accounting
principles. The Company has withheld, collected and paid all levies,
assessments, license fees and taxes to the extent required. As used herein,
"tax" or "taxes" include all taxes, charges, fees, levies or other assessments
imposed by any Federal, state, local, or foreign taxing authority, including,
without limitation, income, premium, recapture, credit, excise, property, sales,
use, occupation, service, service use, leasing, leasing use, value added,
transfer, payroll, employment, license, stamp, franchise or similar taxes
(including any interest earned thereon or penalties or additions attributable
thereto).
2.8 Finder's Fees; Other Underwriters. The Company is not obligated to
pay a finder's fee to anyone in connection with the introduction of the Company
to the Placement Agent or the consummation of the Offering contemplated
hereunder. Since May 15, 1999, the Company has not paid or issued any monies,
securities or other compensation to any member of the NASD or to any affiliate
or associate of such a member or to any other person in consideration for such
person raising funds for the Company or providing financial or public relations
consulting services to the Company, except as set forth on SCHEDULE 2.8. The
Company does not owe any monies or other obligations to any NASD member,
affiliate or associate other than as may be owed to the Placement Agent under
this Agreement.
2.9 No Pending Actions. There are no actions, suits, proceedings, claims
or hearings of any kind or nature existing or pending or, to the best knowledge
of the Company, threatened and, to the best knowledge of the Company, no
investigations or inquiries, before or by any court, or other governmental
authority, tribunal or instrumentality (or, to the Company's best knowledge, any
state of facts that would give rise thereto), pending or threatened against the
Company, or involving the properties of the Company, that, as to any matter
covered by this Section 2.9, are reasonably likely to result in any Material
Adverse Effect or that might adversely affect the transactions or other acts
contemplated by this Agreement or the validity or enforceability of this
Agreement.
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2.10 Private Offering Exemption; Offering Documents. The Offering
Documents taken as a whole do not contain any 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, in the light of the circumstances under which
they were made, not misleading. The Units, Warrants and "Extra Warrants" (as
defined in the Subscription Agreement and the Placement Agent's Purchase Option)
("Extra Warrants"), if any, and the Placement Agent's Purchase Option, conform
in all material respects to the descriptions thereof contained in the Offering
Documents. Assuming that (i) a proper Form D is filed in accordance with Rule
503 of Reg D, (ii) the offer and the sale of the Units by the Placement Agent
was made in compliance with Rule 502(c) of Reg D and/or Section 4(2) of the
Securities Act, and (iii) the representations of the Subscribers in the
Subscription Agreements signed by them are true and correct (which facts will
not be independently verified by the Company), the sale of Units in the Offering
is exempt from registration under the Securities Act and is in compliance with
Reg D.
2.11 Due Authorization. The Company has full right, power and authority
to enter into this Agreement, the Subscription Agreements, the Warrants, Extra
Warrants, if any, and the Placement Agent's Purchase Option, to issue the Units,
Shares, Warrants, Extra Warrants, if any, and the Placement Agent's Purchase
Option and to perform all of its obligations hereunder and thereunder. This
Agreement has been, and the Subscription Agreements, Warrants, Extra Warrants,
if any, and the Placement Agent's Purchase Option, when executed and delivered,
will have been, duly authorized by all necessary corporate action and no further
corporate action or approval is or will be required for their respective
execution, delivery and performance. This Agreement constitutes, and the
Subscription Agreements, Warrants, Extra Warrants, if any, and the Placement
Agent's Purchase Option, upon execution and delivery will constitute, valid and
binding obligations of the Company, enforceable in accordance with their
respective terms, except (i) as the enforceability thereof may be limited by
bankruptcy, fraudulent conveyance, insolvency, moratorium, reorganization or
similar laws affecting creditors' rights generally, (ii) that the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court before which
any proceedings therefor may be brought, and (iii) that the enforceability of
the indemnification and contribution provisions of the respective agreements may
be limited by the federal and state securities laws and public policy.
2.12 Non-Contravention; Consents. The Company's execution and delivery of
this Agreement, the Subscription Agreements, Warrants, Extra Warrants, if any,
and the Placement Agent's Purchase Option, and the incurrence of the obligations
herein and therein set forth, and the consummation of the transactions
contemplated herein and therein will not (i) conflict with, or constitute a
breach of, or a default under, the certificate of incorporation or by-laws of
the Company, or any contract, lease or other agreement or instrument to which
the Company is a party or in which the Company has a beneficial interest or by
which the Company is bound; (ii) violate any existing applicable law, rule,
regulation, judgment, order or decree of any governmental agency or court,
domestic or foreign, having jurisdiction over the Company or any of its
properties or business (collectively, "Laws"), except where such violation(s)
would not, singly or in the aggregate, result in a Material Adverse Effect; or
(iii) have any effect on any permit, certification, registration, approval,
consent, license or franchise (collectively, "Permits") necessary for the
Company to own or lease and operate any of its properties or to conduct its
business, except for such effects as would not, singly or in the aggregate, have
a Material Adverse Effect. No consent, Permit, approval, authorization, order
of, or filing with, any court or governmental authority or any other third party
is required to consummate the transactions contemplated by this Agreement, the
Subscription Agreements, Warrants, Extra Warrants, if any, and the Placement
Agent's Purchase Option, and the issuance of the Shares, Warrants, Extra
Warrants, if any, and the securities underlying the Placement Agent's Purchase
Option, except that the offer and sale of such
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securities in certain jurisdictions may be subject to the provisions of the
securities or Blue Sky laws of such jurisdictions.
2.13 Valid Issuances. The Warrants included in the Units and underlying
the Placement Agent's Purchase Option and the Extra Warrants, if any, when
issued and delivered in accordance with the terms of the Subscription Agreement,
the Placement Agent's Purchase Option and this Agreement, will be duly and
validly issued. The Shares included in the Units and underlying the Placement
Agent's Purchase Option and underlying the Warrants and Extra Warrants, if any,
have been duly and validly authorized and, when issued and delivered in
accordance with the terms of this Agreement, Warrants, Extra Warrants and the
Placement Agent's Purchase Option will be duly and validly issued, fully paid
and non-assessable. The holders of the Shares will not be subject to personal
liability by reason of being such holders and will not be subject to the
preemptive rights of any holders of any security of the Company or similar
contractual rights granted by the Company.
2.14 No Right to Purchase. Except for the reduction in the maximum
conversion price of the Series C Convertible Preferred Stock from $7.08 per
share to approximately $5.55 per share, the issuance of the Units or underlying
Shares and Warrants in the Offering and upon exercise of the Placement Agent's
Purchase Option will not give any holder of any of the Company's outstanding
shares of Common Stock, options, warrants or other convertible securities or
rights to purchase securities of the Company (i) the right to purchase any
additional shares of Common Stock or any other securities of the Company, or
(ii) the right to purchase any securities at a reduced price.
2.15 No Regulatory Problems. The Company (i) has not filed a registration
statement that is the subject of any pending proceeding or examination under
Section 8 of the Securities Act, and is not and has not been the subject of any
refusal order or stop order thereunder; (ii) is not subject to any pending
proceeding under Rule 258 of the Securities Act or any similar rule adopted
under Section 3(b) of the Securities Act, or to an order entered thereunder;
(iii) has not been convicted of any felony or misdemeanor in connection with the
purchase or sale of any security or involving the making of any false filing
with the Commission; (iv) is not subject to any order, judgment, or decree of
any court of competent jurisdiction temporarily or preliminarily restraining or
enjoining, or any order, judgment, or decree of any court of competent
jurisdiction permanently restraining or enjoining, the Company from engaging in
or continuing any conduct or practice in connection with the purchase or sale of
any security or involving the making of any false filing with the Securities and
Exchange Commission ("Commission"); and (v) is not subject to a United States
Postal Service false representation order entered under Section 3005 of Xxxxx
00, Xxxxxx Xxxxxx Code or a temporary restraining order or preliminary
injunction entered under Section 3007 of Title 39, United States Code, with
respect to conduct alleged to have violated Section 3005 of Xxxxx 00, Xxxxxx
Xxxxxx Code. To the Company's knowledge, none of the Company's directors,
officers, or beneficial owners of 10 percent or more of any class of its equity
securities (i) has been convicted of any felony or misdemeanor in connection
with the purchase or sale of any security, involving the making of a false
filing with the Commission, or arising out of the conduct of the business of an
underwriter, broker, dealer, municipal securities dealer, or investment advisor;
(ii) is subject to any order, judgment or decree of any court of competent
jurisdiction temporarily or preliminarily enjoining or restraining, or is
subject to any order, judgment or decree of any court of competent jurisdiction
permanently enjoining or restraining, such person from engaging in or continuing
any conduct or practice in connection with the purchase or sale of any security,
or involving the making of a false filing with the Commission, or arising out of
the conduct of the business of an underwriter, broker, dealer, municipal
securities dealer, or investment adviser; (iii) is subject to an order of the
Commission entered pursuant to Section 15(b), 15B(a) or 15B(c) of the Exchange
Act, or is subject to an order of the Commission entered pursuant to Section
203(e) or (f) of the Investment Advisers Act of 1940; (iv) is suspended or
expelled from membership in, or suspended or barred from
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association with a member of, an exchange registered as a national securities
exchange pursuant to Section 6 of the Exchange Act, an association registered as
a national securities association under Section 15A of the Exchange Act, or a
Canadian securities exchange or association for any act or omission to act
constituting conduct inconsistent with just and equitable principles of trade;
or (v) is subject to a United States Postal Service false representation order
entered under Section 3005 of Title 39, United States Code, or is subject to a
restraining order or preliminary injunction entered under Section 3007 of Title
39, United States Code, with respect to conduct alleged to have violated Section
3005 of Xxxxx 00, Xxxxxx Xxxxxx Code.
2.16 Material Contracts; No Defaults. The exhibit index set forth in the
Form 10-K annexed as Exhibit C to the Memorandum, as it may have been updated
with subsequent filings by the Company with the Securities and Exchange
Commission, contains a true and complete list of all material contracts,
agreements, instruments, indentures, mortgages, loans, leases, licenses,
arrangements or undertakings of any nature, of the Company that are required to
be filed with the Securities and Exchange Commission (collectively,
"Contracts"). Except in instances which singly or in the aggregate would not
cause a Material Adverse Effect, each of the Contracts is in full force and
effect, the Company has performed in all material respects all of its
obligations thereunder and is not in default thereunder, and no party to a
Contract has made a claim to the effect that the Company has failed to perform
any obligations thereunder. To the knowledge of the Company, there is no plan,
intention, or indication of any contracting party to a Contract to cause
termination, cancellation or modification of such Contract or to reduce or
otherwise change its activity thereunder so as to adversely affect in any
material respect the benefits derived or expected to be derived therefrom by the
Company. The Company does not know of the occurrence of any event or the
existence of any state of facts that with notice or the passage of time or both
could cause it to be in default under any Contract which could result in a
Material Adverse Effect.
2.17 Conduct of Business; Compliance with Law. The Company has all
requisite corporate power and authority, and has all necessary Permits, to own
or lease its properties and conduct its business as described in the Offering
Documents, except where the failure to have such Permits would not have a
Material Adverse Effect. The Company has been operating its business in
compliance with all such Permits, except where such noncompliance would not have
a Material Adverse Effect. The disclosures in the Offering Documents concerning
the effects of federal, state and local regulation on the Company's business as
currently contemplated are correct in all material respects and do not omit to
state a material fact. The Company is in compliance with all Laws except where
noncompliance, singly or in the aggregate, would not have a Material Adverse
Effect. The Company is not in violation of any term or provision of its
certificate of incorporation or by-laws.
2.18 Title to Property; Insurance. The Company has good and marketable
title to, or valid and enforceable leasehold estates in, all items of real and
personal property (tangible and intangible) owned or leased by it, free and
clear of all liens, encumbrances, claims, security interests, defects and
restrictions of any material nature whatsoever, except (a) as reflected in the
Financials and (b) such as would not, singly or in the aggregate, have a
Material Adverse Effect. The Company has adequately insured its properties
against loss or damage by fire or other casualty and maintains such insurance in
adequate amounts.
2.19 Intangibles. The Company owns, licenses or possesses or, to its
knowledge, can acquire "off-the-shelf" on an as needed basis, the requisite
licenses or rights to use all trademarks, service marks, service names, trade
names, patents and patent applications, and copyrights (collectively,
"Intangibles") to be used by the Company in its business as described in the
Memorandum. There is no claim or action by any person pertaining to, or
proceeding pending or, to the Company's knowledge, threatened and the Company
has not received any notice of conflict with, the asserted rights of others that
challenges the exclusive right (except that "off-the-shelf"
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licenses may be non-exclusive) of the Company with respect to any Intangibles
used in the conduct of the Company's proposed business except in instances which
would not cause a Material Adverse Effect. To the best of the Company's
knowledge, the Intangibles and the Company's proposed services and processes do
not infringe on any intangibles held by any third party. To the best of the
Company's knowledge, no others have infringed upon the Intangibles of the
Company, except in instances which would not cause a Material Adverse Effect.
2.20 Employee Matters. The Company has generally enjoyed a satisfactory
employer-employee relationship with its employees and is in compliance in all
material respects with all federal, state and local laws and regulations
respecting the employment of its employees and employment practices, terms and
conditions of employment and wages and hours relating thereto, except where
noncompliance, singly or in the aggregate, would not have a Material Adverse
Effect. To the best of the Company's knowledge, there are no pending
investigations involving the Company by any government Department of Labor or
any other governmental agency responsible for the enforcement of employment laws
and regulations. There is no unfair labor practice charge or complaint against
the Company pending before a Labor Relations Board or any strike, picketing,
boycott, dispute, slowdown or stoppage pending or, to the best of the Company's
knowledge, threatened against or involving the Company or any predecessor
entity. To the best of the Company's knowledge, no questions concerning
representation exist respecting the employees of the Company. No collective
bargaining agreement or modification thereof is currently being negotiated by
the Company. No grievance or arbitration proceeding is pending under any expired
or existing collective bargaining agreements of the Company, if any.
2.21 Subsidiaries Included in Representations and Warranties. The
representations and warranties made by the Company in this Agreement shall also
apply and be true with respect to each subsidiary, individually and taken as a
whole with the Company and all other subsidiaries, as if each representation and
warranty contained herein made specific reference to the subsidiary each time
the term "Company" was used, except as the context of the representation of
warranty clearly indicates otherwise.
3. Representations, Warranties and Certain Covenants 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, severally represents and warrants as follows:
3.1 Due Incorporation. Such Placement Agent or Selected Dealer is duly
incorporated and validly existing and in good standing under the laws of its
state of incorporation and is duly qualified as a foreign corporation for the
transaction of business and is in good standing in each jurisdiction where the
failure to be so qualified would have a material adverse effect on the business
of such Placement Agent or Selected Dealer.
3.2 Broker/Dealer Registration. Such Placement Agent or Selected Dealer
is registered as a broker-dealer under Section 15 of the Exchange Act.
3.3 Good Standing. Such Placement Agent or Selected Dealer is a member in
good standing of the NASD.
3.4 Sale In Certain Jurisdictions. Sales of Units by such Placement Agent
or Selected Dealer will be made only in such jurisdictions in which (i) the
Placement Agent or Selected Dealer is a registered broker-dealer or where an
applicable exemption from such registration exists and (ii) the Offering and
sale of the Units is registered under, or is exempt from, applicable
registration requirements.
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3.5 Compliance with Laws. Offers and sales of the Units by the Placement
Agent or Selected Dealer will be made in compliance with the provisions of Rule
502(c) of Reg D and Section 4(2) of the Securities Act, and the Placement Agent
or Selected Dealer will furnish to each investor a copy of the Offering
Documents prior to accepting any payments for the Units.
4. Closing.
4.1 Closing. At any time prior to the Termination Date and after the sale
of 1,300,000 Units and the clearance of the funds representing the sale of such
Units, upon the mutual consent of the Company and the Placement Agent that there
shall be a closing, a closing ("Closing") shall take place at the offices of
Xxxxxxxx Xxxxxx & Xxxxxx ("GM&M"), 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx or such
other location as may be agreed upon by the parties. At the Closing, payment for
the Units issued and sold by the Company (by certified check or wire transfer
payable to the order of the Company), less the amount deductible by the
Placement Agent pursuant to Section 4.4 hereof, shall be made against delivery
of certificates representing Shares and Warrants comprising the Units. If
certificates representing the Shares and Warrants are not available at the time
of Closing, the other items to be delivered hereunder and the payments to be
made hereunder shall be held in escrow by Placement Agent's counsel for a
maximum of three business days pending delivery of such certificates.
4.2 Deliveries at Closing. At the Closing, and as a condition to the
Closing, the Company shall deliver or cause to be delivered to the Placement
Agent:
4.2.1 Opinion of Counsel. The opinions of Xxxxxx Xxxxxx LLP and
Xxxxxxx X. Xxxxxx, Esq., dated as of the date of the Closing, in the forms
annexed hereto as Exhibits A and B and the letter of Xxxxxx Xxxxxx LLP, dated as
of the date of the Closing, in the form annexed hereto as Exhibit C.
4.2.2 Officers' Certificate. A certificate of the Company, signed by
two executive officers thereof, stating (a) that the representations and
warranties contained in Section 2 hereof are true and accurate at the Closing as
applied to the Company with the same effect as though expressly made at the
Closing, and (b) that the Company has complied with all covenants and agreements
required to be complied with as of the Closing.
4.2.3 Subscription Agreements. Subscription Agreements signed by the
Company and each of the Subscribers.
4.2.4 Certificates. The certificates representing the Shares and the
Warrants.
4.2.5 Consents. Consents of any parties required to consummate this
Offering.
4.2.6 Placement Agent's Purchase Option. The Placement Agent's
Purchase Option in the names and denominations designated by the Placement
Agent.
4.2.7 Lock-Up Agreements. The Lock-Up Agreements executed by Xxxxxx
Xxxxx and Xxxxxxx Xxxxx (together, the "Insiders") referred to in Section 5.10
hereof.
4.2.8 Other Documents. Such other closing documents as shall be
reasonably requested by the Placement Agent or its counsel.
4.3 Conditions.
4.3.1 Conditions to the Placement Agent's Obligations. The
obligations of the Placement Agent under this Agreement shall be subject to the
following conditions:
9
(1) All representations and warranties of the Company set
forth in this Agreement shall be true and accurate as of the Closing with the
same effect as though expressly made at the Closing;
(2) The Company has complied with all covenants and agreements
required to be complied with as of the date of the Closing;
(3) The Company has obtained all consents of third parties
required to be obtained in connection with this Offering; and
(4) There shall be no action, lawsuit, administrative or other
proceeding pending or threatened that seeks to enjoin the transactions
contemplated by this Agreement.
4.3.2 Conditions to Company's Obligations. The obligations of the
Company under this Agreement shall be subject to the conditions that:
(1) The representations and warranties of the Placement Agent
set forth in this Agreement are true and accurate as of the Closing with the
same effect as though expressly made at the Closing; and
(2) There shall be no action, lawsuit, administrative or other
proceeding pending or threatened that seeks to enjoin the transactions
contemplated by this Agreement; and
(3) The Placement Agent has complied with all covenants and
agreements required to be complied with as of the Closing; and
(4) The Company shall have received the payments contemplated
to be made to it under the Agreement; and
(5) The Company shall have received Subscription Agreements
signed by each Subscriber.
4.4 Placement Agent's Fees and Expenses. At Closing, the Company shall
pay to the Placement Agent a cash commission equal to 5% of the gross proceeds
of the sale of the Units, a cash Placement Manager's fee equal to 3% of the
gross proceeds of the sale of the Units, a nonaccountable expense allowance
equal to 2% of the gross proceeds of the sale of the Units less the $25,000
deposit paid by the Company upon the execution of the Letter of Intent dated May
3, 2000. No compensation shall be payable to the Placement Agent with respect to
the sale of the Placement Agent's Purchase Option, the exercise thereof, or the
exercise of the Warrants contained in the Units issuable upon exercise of the
Placement Agent's Purchase Option. At the Closing, the Company also shall
reimburse the Placement Agent for the expenses described in Section 5.3 hereof.
All the foregoing amounts and any other expenses to be paid pursuant to Section
5.3 are payable at the Placement Agent's direction directly to the parties who
are owed same by deduction from the aggregate purchase price of the Units sold.
5. Covenants. The Company covenants and agrees that:
5.1 Amendments to Offering Documents. Until the Offering has been
completed or terminated, if there shall occur any event relating to or
affecting, among other things, the Company or any affiliate, or the proposed
operations of the Company as described in the Offering Documents, as a result of
which it is necessary, in the reasonable opinion of Xxxxxx Xxxxxx LLP or counsel
for the Placement Agent, to amend or supplement the Offering Documents in order
that the Offering Documents will not contain an untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances
10
under which they were made, not misleading, the Company shall promptly prepare
and furnish to the Placement Agent a reasonable number of copies of an
appropriate amendment of or supplement to the Offering Documents, in form and
substance satisfactory to counsel for the Placement Agent.
5.2 Use of Proceeds. The proceeds of the Offering will be used for such
purposes as described in the Memorandum and no proceeds will be used to prepay
any indebtedness for borrowed funds (other than debt under the Company's
revolving credit facility) or any obligations owed to any Insider, without the
Placement Agent's prior written consent.
5.3 Expenses of Offering and Other Expenses. The Company shall be
responsible for, and shall pay, all fees, disbursements and expenses incurred in
connection with the Offering, including, but not limited to, the Company's legal
and accounting fees and disbursements, the costs of preparing, printing, mailing
and delivering, and filing, where necessary, the Offering Documents and all
amendments and supplements thereto (all in such quantities as the Placement
Agent may reasonably require), preparing and printing the certificates for the
Shares and Warrants, and Extra Warrants, if any, preparation of transaction
"bibles" in such reasonable quantities as requested by the Placement Agent, the
reasonable costs of any "due diligence" meetings held by the Company, filing
fees, costs and expenses as incurred (including fees and disbursements of
Xxxxxxxx Mollen & Xxxxxx, blue sky counsel as provided in Section 5.4) incurred
in qualifying the Offering under the "blue sky" laws of the states reasonably
specified by the Placement Agent, the substantiated costs of "tombstone" and
other advertisements in various publications selected by the Placement Agent, as
well as lucite momentos and transfer taxes, transfer and warrant agent and
registrar fees. The Company shall also reimburse the Placement Agent for legal
fees and disbursements. Notwithstanding the foregoing, the Company shall not be
required to spend more than an aggregate of $120,000 for "due diligence"
meetings, tombstone and other advertisements and the Placement Agent's legal
fees and disbursements. The Company shall also prepay an on account retainer to
Placement Agent's counsel of $15,000 for legal fees in connection with their
engagement as special counsel for the Investors under the Subscription Agreement
in connection with the preparation of the Registration Statement provided for
therein, which amount shall be an "on account" retainer from which any amounts
in excess of actual time (at regular hourly rates) and disbursements expended
shall be refunded to the Company.
5.4 Blue Sky Requirements. The Company shall "Blue Sky" the Offering in
such states as the Placement Agent shall reasonably request and shall pay for
all blue sky filing fees and costs and expenses of any necessary blue sky
registration or qualification or notice filings associated with an exemption
from registration or qualification, including the fees and disbursements of
counsel. All blue sky work shall be undertaken by counsel designated by the
Placement Agent. Upon the commencement of blue sky filings (which shall be at or
prior to the Commencement Date), the Company shall pay $2,500 to such counsel
for such professional services (plus the filing fees to be paid to the various
states), with the balance due for professional services of $2,500, plus
counsel's other out-of-pocket disbursements, due at the Closing.
5.5 Board of Directors. For a period of three years from the closing (or
such earlier time as 75% of the Warrants have been exercised) at the Company's
discretion, the Company will either (i) appoint a person to the Board of
Directors of the Company that is mutually agreeable to the Placement Agent and
the Company, or (ii) if such a person is not appointed, permit the Placement
Agent to send a representative (who need not be the same individual from meeting
to meeting) to observe each meeting of the Board of Directors. Such
representative shall be entitled to receive reimbursement for all reasonable
costs incurred in attending such meetings, including, but not limited to, food,
lodging and transportation. The Company agrees to give the Placement Agent
written notice of each such meeting and to provide the Placement Agent with an
agenda and
11
minutes of the meeting no later than it gives such notice and provides such
items to the other directors.
5.6 Right of First Refusal. The Company hereby grants the Placement Agent
a right of first refusal to manage or co-manage any underwriting or private
placement of debt or equity securities (excluding sales to employees under any
compensation or stock option plan approved by the stockholders of the Company
and shares issued in payment of the consideration for an acquisition) of the
Company or any subsidiary or successor of the Company during the nine-month
period following the Closing. If the Placement Agent fails to accept in writing
any such proposal for such public or private sale within 30 days after receipt
of a written notice from the Company containing such proposal, then the
Placement Agent shall have no claim or right with respect to any such sale
contained in any such notice. If, thereafter, such proposal is modified in any
material respect, the Company shall adopt the same procedure as with respect to
the original proposed public or private sale.
5.7 Warrant Solicitation Fees. The Company will pay the Placement Agent a
warrant solicitation fee of four percent of the exercise price of the Warrants
for each Warrant exercised, payable within five days from the receipt of the
proceeds received upon exercise of the Warrant(s). The Company will not solicit
the exercise of the Warrants other than through the Placement Agent. The Company
will not be obligated to be pay any warrant solicitation fees for the exercise
of Warrants issued upon exercise of the Placement Agent's Purchase Option.
5.8 Issuance of Securities. For a period of one year after the Effective
Date (as defined in the Subscription Agreement), without the prior consent of
Placement Agent, the Company shall not issue any securities pursuant to Reg D or
Regulation S, subject to the proviso that this restriction will lapse at such
earlier time as 75% of the Warrants have been exercised.
5.9 Transfer Sheets. Upon Placement Agent's reasonable request, the
Company shall provide Placement Agent with copies of the Company's daily stock
transfer sheets and lists of the beneficial and record holders of the Company's
securities from the Company's transfer agent and the Weekly Position Listings
from the Depository Trust Company, at the Company's sole cost and expense.
5.10 Transfer Restrictions. The Company agrees not to permit or cause a
private or public sale or private or public offering of any securities of the
Company (in any manner, including pursuant to Rule 144 under the Act) that are
owned or to be owned of record, or beneficially by Xxxxxx or Xxxxxxx Xxxxx
(excluding shares held by any family member as of the date hereof)
(collectively, "Insiders") for a period commencing on the date of this letter
and terminating twelve months after the Effective Date (as defined in the
Subscription Agreement) without obtaining the prior written approval of the
Placement Agent. The Company shall cause the Insiders to execute an agreement
("Lock-Up Agreement") with the Placement Agent regarding such restrictions,
subject to the proviso that this restriction will lapse at such earlier time as
75% of the Warrants have been exercised.
5.11 Further Assurances. The Company will take such actions as may be
reasonably required or desirable to carry out the provisions of this Agreement
and the transactions contemplated hereby.
5.12 Accuracy of Representations and Warranties. The Company hereby
agrees that, prior to the Termination Date or the Closing, as the case may be,
it will not enter into any transaction or take any action, and will use its best
efforts to prevent the occurrence of any event, that could result in any of its
representations, warranties or covenants contained in this Agreement or any of
the Offering Documents not to be true and correct, or not to be performed as
contemplated, at and as of the time immediately after the occurrence of such
transaction or event.
12
5.13 Reservation of Shares. If the Company becomes obligated to issue any
Extra Warrants, it will promptly reserve with its transfer agent and register
the number of shares of Common Stock issuable upon exercise thereof.
6. Indemnification and Contribution.
6.1 Indemnification of the Placement Agent by the Company. The Company
agrees to indemnify and hold harmless the Placement Agent and each person, if
any, who controls the Placement Agent within the meaning of the Securities Act
and/or the Exchange Act against any losses, claims, damages or liabilities,
joint or several, to which such Placement Agent or controlling person may become
subject, under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon (i) any untrue statement or alleged untrue statement of a material fact
contained (A) in the Offering Documents, or (B) in any blue sky application or
other document executed by the Company specifically for blue sky purposes or
based upon any other written information furnished by the Company or on its
behalf to any state or other jurisdiction in order to qualify any or all of the
Shares under the securities laws thereof (any such application, document or
information being hereinafter called a "Blue Sky Application"), (ii) any breach
by the Company of any of its representations, warranties or covenants contained
herein or in any of the Offering Documents, or (iii) the omission or alleged
omission by the Company to state in the Offering Documents or in any Blue Sky
Application a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading; and will reimburse the Placement Agent and each such
controlling person for any legal or other expenses reasonably incurred by the
Placement Agent or such controlling person in connection with investigating or
defending any such loss, claim, damage, liability or action, whether arising out
of an action between the Placement Agent and the Company or the Placement Agent
and a third party; provided, however, that the Company will not be liable in any
such case to the extent that any such loss, claim, damage or liability arises
out of or is based upon (i) an untrue statement or alleged untrue statement or
omission or alleged omission made in reliance upon and in conformity with
written information regarding the Placement Agent that is furnished to the
Company by the Placement Agent specifically for inclusion in the Offering
Documents or any such Blue Sky Application or (ii) any breach by the Placement
Agent of the representations, warranties or covenants contained herein
(together, (I) and (ii) above are referred to as the "Placement Agent
Non-Indemnity Events"), or (iii) a Selected Dealer Non-Indemnity Event, as
defined below.
6.2 Indemnification of the Company by the Placement Agent. The Placement
Agent agrees to indemnify and hold harmless the Company and each person, if any,
who controls the Company within the meaning of the Securities Act and/or the
Exchange Act against any losses, claims, damages or liabilities, joint or
several, to which the Company or such controlling person may become subject,
under the Securities Act or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon
any Placement Agent Non-Indemnity Event; and will reimburse the Company and each
such controlling person for any legal or other expenses reasonably incurred by
the Company or such controlling person in connection with investigating or
defending any such loss, claim, damage, liability or action, provided that such
loss, claim, damage or liability is found ultimately to arise out of or be based
upon any Placement Agent Non-Indemnity Event.
6.3 Indemnification of the Selected Dealers by the Company. The Company
agrees to indemnify and hold harmless each Selected Dealer and each person, if
any, who controls a Selected Dealer within the meaning of the Securities Act
and/or the Exchange Act against any losses, claims, damages or liabilities,
joint or several, to which such Selected Dealer or controlling person may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon (I) any untrue
13
statement or alleged untrue statement of a material fact contained (A) in the
Offering Documents, or (B) in any Blue Sky Application, (ii) any breach by the
Company of any of its representations, warranties or covenants contained herein
or in any of the Offering Documents, or (iii) the omission or alleged omission
by the Company to state in the Offering Documents or in any Blue Sky Application
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading; and will reimburse each Selected Dealer and each such
controlling person for any legal or other expenses reasonably incurred by such
Selected Dealer or controlling person in connection with investigating or
defending any such loss, claim, damage, liability or action, whether arising out
of an action between such Selected Dealer and the Company or such Selected
Dealer and a third party; provided, however, that the Company will not be liable
in any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon (i) an untrue statement or alleged untrue
statement or omission or alleged omission made in reliance upon and in
conformity with written information regarding such Selected Dealer specifically
for inclusion in the Offering Documents or any such Blue Sky Application or (ii)
any breach by such Selected Dealer of the representations, warranties or
covenants contained herein together, (i) and (ii) above are referred to as the
"Selected Dealer Non-Indemnity Events") or (iii) a Placement Agent Non-Indemnity
Event.
6.4 Indemnification of the Company by the Selected Dealers. The Selected
Dealers, severally and not jointly, agree to indemnify and hold harmless the
Company and each person, if any, who controls the Company within the meaning of
the Securities Act and/or the Exchange Act against any losses, claims, damages
or liabilities, joint or several, to which the Company or such controlling
person may become subject, under the Securities Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any Selected Dealer Non-Indemnity Event; and will
reimburse the Company and each such controlling person for any legal or other
expenses reasonably incurred by the Company or such controlling person in
connection with investigating or defending any such loss, claim, damage,
liability or action provided that such loss, claim, damage or liability is found
ultimately to arise out of or be based upon any Selected Dealer Non-Indemnity
Event.
6.5 Procedure. Promptly after receipt by an indemnified party under this
Section 6 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against any indemnifying party
under this Section 6, notify in writing the indemnifying party of the
commencement thereof; and the omission so to notify the indemnifying party will
relieve the indemnifying party from any liability under this Section 6 as to the
particular item for which indemnification is then being sought, but not from any
other liability that it may have to any indemnified party. In case any such
action is brought against any indemnified party, and it notifies an indemnifying
party of the commencement thereof, the indemnifying party will be entitled to
participate therein, and to the extent that it may wish, jointly with any other
indemnifying party, similarly notified, to assume the defense thereof, with
counsel who shall be to the reasonable satisfaction of such indemnified party,
and after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party under this Section 6 for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation. Any such
indemnifying party shall not be liable to any such indemnified party on account
of any settlement of any claim or action effected without the consent of such
indemnifying party.
14
6.6 Contribution. If the indemnification provided for in this Section 6
is unavailable to any indemnified party (other than as a result of the failure
to notify the indemnifying party as provided in Section 6.5 hereof) in respect
to any losses, claims, damages, liabilities or expenses referred to therein,
then the indemnifying party, in lieu of indemnifying such indemnified party,
will contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities or expenses (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand, and the Placement Agent or Selected Dealer, on the
other hand, from the Offering, or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause (i) above, but
also the relative fault of the Company, on the one hand, and of the Placement
Agent or Selected Dealer, on the other hand, in connection with the statements
or omissions that resulted in such losses, claims, damages, liabilities or
expenses as well as any other relevant equitable considerations. The relative
benefits received by the Company, on the one hand, and the Placement Agent or
Selected Dealer, on the other hand, shall be deemed to be in the same proportion
as the total proceeds from the Offering (net of sales commissions and the
nonaccountable expense allowance, but before deducting other expenses) received
by the Company bear to the commissions and nonaccountable expense allowance
received by the Placement Agent or Selected Dealer. The relative fault of the
Company, on the one hand, and the Placement Agent or Selected Dealer, on the
other hand, will be determined with reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission to
state a material fact relates to information supplied by the Company, on the one
hand, and the Placement Agent or Selected Dealer, on the other hand, and their
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
6.7 Equitable Considerations. The Company, the Placement Agent and each
Selected Dealer agree that it would not be just and equitable if contribution
pursuant to this Section 6 were determined by pro rata allocation or by any
other method of allocation that does not take into account the equitable
considerations referred to in the immediately preceding paragraph.
6.8 Attorneys' Fees. The amount payable by a party under this Section 6
as a result of the losses, claims, damages, liabilities or expenses referred to
above will be deemed to include any reasonable legal or other fees or expenses
reasonably incurred by such party in connection with investigating or defending
any action or claim (including, without limitation, fees and disbursements of
counsel incurred by an indemnified party in any action or proceeding between the
indemnifying party and indemnified party or between the indemnified party and
any third party or otherwise).
7. Termination. Placement Agent reserves the right not to proceed with the
Offering for any reason, including if: (i) material adverse information known to
management and not previously disclosed to Placement Agent by the Company comes
to Placement Agent's attention relating to the Company, its management or its
position in the industry which would preclude a successful Offering; (ii) a
material adverse change not yet reported in the Company's public filings has
occurred in the financial condition, business or prospects of the Company; or
(iii) the Company has breached any of its material representations, warranties
or obligations hereunder, or failed to expeditiously proceed with the Offering.
If Placement Agent elects not to proceed with the Offering as a result of the
conditions enumerated in either of clauses (i) or (iii) above, or (except as
provided in the next sentence) if the Company elects not to proceed with the
Offering for any reason, then the Company, in full satisfaction of its
obligations to Placement Agent hereunder (other than with respect to the payment
of "Source Fees," described below), shall reimburse Placement Agent in full for
its reasonable out-of-pocket expenses (including, without limitation, its legal
fees and disbursements), against which the Deposit shall be applied as a credit
and, in addition, pay to Placement Agent a fee of $150,000 ("Break-up Fee").
Notwithstanding anything contained herein to the contrary, if (a) the Closing
does not occur within 90 days of the Commencement Date through no fault of the
Company (it being deemed to be the Company's "fault" if it refuses to accept
15
subscriptions from qualified investors sufficient to have a Closing), or (b) the
Offering requires stockholder approval under NASD Marketplace Rule 4310, then
the Company may elect to abandon the Offering. In such event, or in the event
Placement Agent elects not to proceed with the Offering other than as a result
of the condition enumerated in clauses (i) or (iii) above, Placement Agent shall
be entitled to be reimbursed for its expenses, including legal fees and
disbursements, and shall apply the Deposit against such expenses, but the
Company shall not be liable to Placement Agent for any other expenses or the
Break-up Fee. Notwithstanding anything contained herein to the contrary, whether
or not the Offering is consummated, the Company shall pay to Placement Agent the
commissions and Placement Manager's Fees referenced herein ("Source Fees") with
respect to, and based on, any investment in the Company by any "Source" (as
defined below) made at any time within 24 months after May 3, 2000. A Source
shall be any person whose name had not been first provided to the Placement
Agent in writing by the Company and who shall have received a copy of the
Memorandum from Placement Agent in connection with the Offering, a list of whom
shall be provided to the Company by Placement Agent promptly following the
Closing or the abandonment of the Offering, as the case may be.
8. Notices. Any notice hereunder shall be in writing and shall be effective when
delivered in person or by facsimile transmission or mailed by certified mail,
postage prepaid, return receipt requested, to the appropriate party or parties,
at the following addresses: if to the Placement Agent, to X.X. Xxxxxxxx & Co.,
Inc., 000 Xxxxxxxxxx Xxxxxxxxx, Xxxxxx Xxxx, Xxx Xxxxxx 00000, Attention: Xx.
Xxxxxx X. Xxxxxx (Fax No. (000) 000-0000); with a copy to Xxxxxxxx Xxxxxx &
Xxxxxx, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxxx X. Xxxxxx,
Esq. (Fax No. (000) 000-0000); if to the Company, to TII Industries, Inc., 0000
Xxxxx Xxxxxx, Xxxxxxxx, Xxx Xxxx 00000, Attention: Xxxx X. Xxxxxxx, (Fax No.
(000) 000-0000); with a copy to Xxxxxx Xxxxxx LLP, 000 Xxxxxxxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx 00000, Attention: Xxxxxxx X. Xxxxx, Esq. (Fax No. (212)
000-0000); or, in each case, to such other address as the parties may
hereinafter designate by like notice.
9. Parties. This Agreement will inure to the benefit of and be binding upon the
parties hereto and their respective successors and assigns. Neither party may
assign this Agreement or its obligations hereunder without the prior written
consent of the other party. This Agreement is intended to be, and is, for the
sole and exclusive benefit of the parties hereto and the persons described in
Sections 6.1 through 6.4 hereof and their respective successors and assigns, and
for the benefit of no other person, and no other person will have any legal or
equitable right, remedy or claim under, or in respect of this Agreement.
10. Amendment and/or Modification. Neither this Agreement, nor any term or
provision hereof, may be changed, waived, discharged, amended, modified or
terminated orally, or in any manner other than by an instrument in writing
signed by each of the parties hereto.
11. Further Assurances. Each party to this Agreement will perform any and all
acts and execute any and all documents as may be necessary and proper under the
circumstances in order to accomplish the intents and purposes of this Agreement
and to carry out its provisions.
12. Validity. In case any term of this Agreement will be held invalid, illegal
or unenforceable, in whole or in part, the validity of any of the other terms of
this Agreement will not in any way be affected thereby.
13. Waiver of Breach. The failure of any party hereto to insist upon strict
performance of any of the covenants and agreements herein contained, or to
exercise any option or right herein conferred in any one or more instances, will
not be construed to be a waiver or relinquishment of any such option or right,
or of any other covenants or agreements, and the same will be and remain in full
force and effect.
16
14. Entire Agreement. This Agreement contains the entire agreement and
understanding of the parties with respect to the subject matter hereof, and
there are no representations, inducements, promises or agreements, oral or
otherwise, not embodied in this Agreement. Any and all prior discussions,
negotiations, commitments and understanding relating to the subject matter of
this Agreement are superseded by this Agreement.
15. Counterparts. This Agreement may be executed in counterparts and each of
such counterparts will for all purposes be deemed to be an original, and such
counterparts will together constitute one and the same instrument.
16. Law. Pursuant to Section 5-401 of the New York General Obligation Law, this
Agreement will be governed as to validity, interpretation, construction, effect
and in all other respects by the internal law of the State of New York. The
Company and the Placement Agent each (i) agree that any legal suit, action or
proceeding arising out of or relating to this Agreement shall be instituted
exclusively in the New York State Supreme Court, County of New York, or in the
United States District Court for the Southern District of New York, (ii) waives
any objection to the venue of any such suit, action or proceeding, and the right
to assert that such forum is an inconvenient forum, and (iii) irrevocably
consents to the jurisdiction of the New York State Supreme Court, County of New
York, and the United States District Court for the Southern District of New York
in any such suit, action or proceeding. The Company and the Placement Agent
further agree to accept and acknowledge service of any and all process that may
be served in any such suit, action or proceeding in the New York State Supreme
Court, County of New York, or in the United States District Court for the
Southern District of New York and agree that service of process upon either of
them mailed by certified mail to their respective addresses shall be deemed in
every respect effective service of process in any such suit, action or
proceeding.
17. Representations, Warranties and Covenants to Survive Delivery. The
respective representations, indemnities, agreements, covenants, warranties and
other statements of the Company and the Placement Agent shall survive execution
of this Agreement and delivery of the Units and/or the termination of this
Agreement prior thereto.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
17
If you find the foregoing is in accordance with our
understanding, kindly sign and return to us a counterpart hereof, whereupon this
instrument along with all counterparts will become a binding agreement between
us.
Very truly yours,
TII INDUSTRIES, INC.
By:
---------------------------------------
Xxxx X. Xxxxxxx, Vice President-Finance
AGREED:
X.X. XXXXXXXX & CO., INC.
By:
---------------------------------
Xxxxxx Xxxxxxxxxx, Vice President
18
SCHEDULE 1.3 PLACEMENT AGENT PURCHASE OPTION
--------------------------------------------
----------------------------------------- --------------------------------------
Percentage Market Price
----------------------------------------- --------------------------------------
20% $2.50 or more
----------------------------------------- --------------------------------------
21% $2.40 to $2.49
----------------------------------------- --------------------------------------
22% $2.30 to $2.39
----------------------------------------- --------------------------------------
23% $2.20 to $2.29
----------------------------------------- --------------------------------------
24% $2.10 to $2.19
----------------------------------------- --------------------------------------
25% Less than $2.10
----------------------------------------- --------------------------------------
