July 3, 1997
Noesis Capital Corp.
0000 Xxxxx Xxxxx Xxxx
Xxxx Xxxxx, XX 00000
Dear Sirs:
PSI Industries, Inc., a Florida corporation (the "Company"), hereby
confirms its agreement with you (the "Placement Agent") as follows:
1. DESCRIPTION OF TRANSACTION. Company proposes to issue and sell
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through the Placement Agent, in a transaction (the "Offering") exempt from
registration under the Securities Act of 1933, as amended (the "1933 Act"), to
persons meeting certain criteria for "Accredited Investor" status and other
qualified investors (collectively, the "Investors") (as more fully described in
the private placement memorandum and exhibits thereto (the "Memorandum")), a
maximum of 700,000 shares (the "Shares") of the Company's Series A Convertible
Preferred Stock (the "Preferred Stock"), on a "best efforts" basis. The
Preferred Stock will be sold in units (the "Units-"), each Unit consisting of
1000 Shares of Preferred Stock, at a purchase price of $30,000 per Unit. Each
Share of Preferred Stock will be convertible at the option of the holder into
ten (10) shares of the Company's common stock (the "Common Stock"). The
conversion price is subject to adjustment in the event that the average of the
Company's earnings per share for its fiscal years of 1997 and 1998, on a fully
diluted basis, is less than $.20 per share, in which case the conversion price
shall be reduced to a rate that equals 15 times the Company's actual earning per
share for the same period; provided, however, that in no event shall the
conversion price be reduced below $2.50. At any time after one year from the
date of issuance, the Company can require that all outstanding shares of
Preferred Stock be automatically converted at the conversion price then in
effect if at the time (i) the closing bid price of the Company's Common Stock
has exceeded $7.50 for 20 consecutive trading days, (ii) the Company's Common
Stock has been listed on the Nasdaq or such other comparable national stock
exchange and (iii) a registration statement covering the shares of Common Stock
issuable upon conversion of the Preferred Stork has been filed with the
Securities and Exchange Commission and declared effective. The full terms of the
Offering and the Shares is more fully described in the Memorandum. Capitalized
terms not defined herein shall have the meaning set forth in the Memorandum.
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2. APPOINTMENT OF THE PLACEMENT AGENT. The Company hereby appoints the
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Placement Agent as its exclusive agent to offer and sell the Units to Investors
on a "best efforts" basis, subject to the earlier termination of the Offering as
provided herein. The Offering shall terminate on the earliest of (i) September
30, 1997, Subject to extension until December 31, 1997 by the Company and the
Placement Agent in their sole discretion), (ii) the date all of the Units are
sold; or (iii) such earlier date as determined by the Company and the Placement
Agent. The Placement Agent, on the basis of the representations, warranties,
covenants and agreements of the Company, and subject to the conditions contained
herein, accepts such appointment and agrees to use its best efforts to sell the
Units. It is understood that the Placement Agent has no commitment to sell the
Units other than to use its best efforts.
3. PURCHASE, SALE AND DELIVERY OF SHARES. On the basis of the
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representations and warranties, contained herein, and subject to the term and
conditions set forth herein, the parties agree that:
(a) REGULATION D OFFERING. Neither the offer nor the sale of the
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Shares has been or will be registered with the Securities and Exchange
Commission. The Shares will be offered and sold in reliance upon the
exemption from registration provided by Regulation D ("Reg D") adopted
under the 1933 Act, and will only be sold to "Accredited Investors" as
such term is defined under Reg D and other qualified investors; the
Shares will be offered for sale only in states in which the Shares have
been qualified or registered for sale or are exempt from such
qualification or registration; and the Company will provide the
Placement Agent for delivery to all offerees and purchasers and their
representatives, if any, with any information, documents and
instruments which the Placement Agent and the Company deem necessary to
comply with the rules, regulations and judicial and administrative
interpretations concerning compliance with applicable state and federal
statues and regulations.
(b) SUBSCRIPTION FOR SHARES. Subscription for the Shares shall occur
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by execution and delivery by the Investor of a subscription agreement
(the "Subscription Agreement") in the form annexed to the Memorandum;
(c) DISTRIBUTION OF PROCEEDS, CLOSING; TERMINATION OF OFFERING. The
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proceeds of the Offering will be deposited into an account designated
by the Company for purposes of this Offering. One or more closings will
occur, from time to time, at such time as a subscription is accepted by
the Company and the Placement Agent. The Company shall deliver to the
Placement Agent on each Closing Date, on behalf of the Subscribers, the
certificates evidencing the Shares against payment therefor, after
deducting the amounts set forth in Section 4 below.
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(d) REGISTRATION OF SHARES. The Shares of Preferred Stock are
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convertible into shares of Common Stock of the Company, at the
conversion price and in accordance with the terms set forth in the
Memorandum. The Company shall grant the investors in the Offering
"piggyback" registration rights entitling the holders to have their
Shares included in any registration statement (other than in connection
with a merger or pursuant to Forms S-8 or S-4) any time from the last
Closing Date for a period of three years thereafter. In addition,
subject to the Placement Agent raising $1,000,000 in gross proceeds for
the Company, the holders of a majority in interest of the Shares shall
have the right on one occasion to demand that the Company file a
registration statement with the SEC. The Company shall bear all costs
and expenses incurred in the preparation and filing of such
registration statements or post-effective amendment (and related state
registrations, to the extent permitted by applicable, law) and
furnishing of copies of the preliminary and final prospectus thereof to
the Placement Agent and such holders of securities, other than expenses
of the Placement Agent's counsel, and other than sales commissions
incurred by the then holders with respect to the sale of such
securities.
4. COMPENSATION OF PLACEMENT AGENT. As compensation for its services
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rendered as Placement Agent under this Agreement, the Placement Agent shall
receive a sales commission equal to 5% of the gross proceeds from the sale of
the Shares, payable by deducting the sales commission from such gross proceeds
on each Closing Date, or as the proceeds are distributed to the Company. In
addition, on the final Closing Date, the Company will sell to the Placement
Agent or it designee, five year warrants (the "Placement Agent's Warrants") to
purchase a number of shares of Common Stock, as set forth below, at an exercise
price of $3.00 per share. The Placement Agent shall receive 250,000 Placement
Agent Warrants in the event that the Placement Agent raises $1,800,000 in gross
proceeds for the Company, which number shall be increased or decreased on a
pro-rata basis in the event that it raises more or less than $1,800,000. For
example, in the event that the Placement Agent raises $1,000,000 in gross
proceeds, the Placement Agent shall receive 137,000 Placement Agent Warrants,
and in the event that the Placement Agent raises $2,100,000 in gross proceeds,
the Placement Agent shall receive 292,000 Placement Agent Warrant. The Placement
Agent's Warrants will be non-transferable during the first 12 months following
the Final Closing Date, except to officers or directors of the Placement Agent
and to selected dealers, and may be exercised in whole or in part at any time
and from time to time during the period of four years following the expiration
of the one-year period of non-transferability. The Placement Agent shall have
the same registration rights with respect to the Placement Agent Warrants as the
holders of Shares. The Company shall bear all costs and expenses iii connection
with such registration.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
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represents and warrants to, and agrees with, the Placement Agent that:
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(a) MEMORANDUM. The Company has prepared or will promptly upon
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execution hereof prepare a Memorandum, which may be supplemented from
time to time, which contains information, accurate as of the date
specified therein, of the kind specified by applicable statues and
regulations. The Memorandum as of its date and at an times subsequent
thereto up to and including the final Closing Date does not and will
not include any untrue statement of a material fact, or omit to state
any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances in which they
were made, not misleading.
(b) ADDITIONAL INFORMATION. The Company has provided, and shall
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provide to the Placement Agent, such information, documents and
instruments as may be required under Section 4(2) of the 1933 Act and
Reg D.
(c) ORGANIZATION: GOOD STANDING. The Company, and each of its
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subsidiaries, is a corporate duly organized, validly existing and in
good standing under the laws of the State of Florida, with full power
and authority, corporate and other, to own or lease and operate its
properties and to conduct its business as described in the Memorandum
and to execute, deliver and perform this Agreement, and the Placement
Agent's Warrants and to consummate the transactions contemplated hereby
and thereby. The Company and each of its subsidiaries (as hereinafter
defined) is fully qualified to do business as a foreign corporation and
is in good standing in all jurisdictions where such qualification is
necessary and where failure so to qualify could have a material adverse
effect on the financial condition, results of operations, business or
properties of the Company.
(d) CORPORATE AUTHORIZATION. This Agreement has been duly executed
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and delivered by the Company and constitutes the valid and binding
obligation of the Company, and the Placement Agent's Warrants, when
executed and delivered by the Company against payment therefor will be
the valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms except as such enforceability
may be limited by applicable bankruptcy, insolvency, moratorium, or
other similar laws or arrangements affecting creditors' rights
generally and subject to principles of equity and public policy
considerations. The execution, delivery and performance of this
Agreement and the Placement Agent's Warrants by the company, the
consummation by the Company of the transactions herein and therein
contemplated, and the compliance by the Company with terms of this
Agreement and the Placement Agent's Warrants have been duly authorized
by all necessary corporate action and do not and will not. with or
without the giving of notice or the lapse of time, or both: (i) result
in any violation of the Articles of Incorporation or by-laws of the
Company; (ii) result in a material breach of or conflict with any of
the terms or provisions of, or constitute a default under, or result in
the modification or termination of, or result in the creation or
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imposition of any lien, security interest, charge or encumbrance upon
any of the properties or assets of the Company pursuant to any
indenture, mortgage, note, contract, commitment or other agreement or
instrument to which the company is a party or by which the Company or
any of its properties or assets are or may be bound or affected; (iii)
violate in any material respect 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; or (iv) have any effect on any permit,
certification, registration, approval, consent, license or franchise
necessary for the Company to own or lease and operate its properties
and to conduct its business or the ability of the Company to make use
thereof.
(e) CAPITALIZATION. The Company has a duly authorized and
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outstanding capitalization as set forth in the Memorandum. The
outstanding shares of Preferred Stock, Common Stock, and outstanding
options, warrants and other securities to purchase Common Stock, have
been, or will be immediately following this Offer, duly authorized and
validly issued. All such outstanding shares of Common Stock and
Preferred Stock are, or will be, fully paid and nonassessable. All such
outstanding options, warrants and other securities to purchase Common
Stock and Preferred Stock constitute valid and binding obligations of
the Company, enforceable in accordance with their terms. None of such
outstanding shares of Common Stock and Preferred Stock, options or
warrants to purchase Common Stock and Preferred Stock has been, or will
be, issued in violation of the preemptive rights of any security holder
of the Company. The Company's Articles of Incorporation does not
subject the holders of such outstanding shares of Common Stock and
Preferred Stock to personal liability solely by reason of being such a
holder. All issuances of securities by the Company prior to the date
hereof were not subject to the registration requirements of the 1933
Act, as amended, except to the extent registered thereunder, and were
made in full compliance with all applicable federal or state laws,
rules and regulations, and the holders thereof have no rights of
rescission with respect thereto. The authorized shares of Common Stock
and Preferred Stock, outstanding options, warrants and other securities
to purchase Common Stock and Preferred Stock issued by the Company,
conform to the description thereof contained in the Memorandum. Except
as otherwise set forth in the Memorandum, no holder of any of the
Company's securities has any rights, "demand," "piggyback" or
otherwise, to have such securities registered or to demand the filing
of a prospectus, or has any material antidilution rights with respect
to securities of the Company. Except as otherwise set forth in the
Memorandum, on each of the Closing Dates there will be no outstanding
options or warrants for the purchase of, or other outstanding rights to
purchase, Common Stock or securities convertible into Common Stock.
(f) AUTHORIZATION OF SECURITIES. The issuance of the Shares has been
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duly authorized and, when such Shares have been duly delivered, such
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Shares will be validly issued, fully paid and nonassessable. The Shares
are not subject to statutory preemptive rights, preemptive rights under
the Company's Articles of Incorporation and By-laws and contractual
preemptive rights of any security holder of the Company.. The
certificates representing the Shares will be in proper legal form when
delivered in accordance with the terms of this Agreement and the
Memorandum.
(g) NONCONTRAVENTION. The Company is not in violation of, or in
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default under, (i) any term or provision of its Articles of
Incorporation or By-laws, (ii) any material term or provision of any
financial covenants of any indenture, mortgage, contract, commitment or
other agreement or instrument to which it is a party or by which it or
any of its properties or business is or may be bound or affected, or
(iii) any existing applicable law, rule, regulation, judgment, order or
decree of arty governmental agency or court, domestic or foreign,
having jurisdiction over the Company or any of its properties or
business. The Company owns, possesses or has obtained all governmental
and other licenses, permits, certifications, registrations, approvals,
or consents and other authorizations necessary to own or lease, as the
case may be, and to operate its properties and to conduct its business
or operations as currently conducted and all such governmental and
other licenses, permits, certifications, registrations, approvals,
consents and other authorizations are outstanding and in good standing,
and there are no proceedings pending or, to the best of the Company's
knowledge, threatened, nor is there any basis therefor, see" to cancel,
terminate or limit such licenses, permits. certifications,
registrations, approvals or consents or authorizations.
(h) LITIGATION. Except as otherwise set forth in the Memorandum,
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there are no claims, actions, suits, proceedings, arbitrations,
investigation or inquiries before any governmental agency, court or
tribunal, domestic or foreign, or before any private arbitration
tribunal, pending or to the best of the Company's knowledge threatened
or involving the Company or its subsidiaries or any of their respective
properties or businesses (i) that are required to be disclosed in the
Memorandum or the exhibits thereto in accordance with the Act and are
not so disclosed, (ii) which question the validity of the capital stock
of the Company, (iii) which question the validity, performance or
enforceability of this Agreement or any action taken or to be taken by
the Company or its subsidiaries pursuant hereto or in connection
therewith, or (iv) which, if adversely determined, would have a
material adverse effect on the condition, financial or otherwise,
prospects, properties, businesses, net worth or results of operation of
the Company or its subsidiaries; nor is there any basis for any such
claim, action, suit, proceeding arbitration, investigation or inquiry.
There are no outstanding orders, judgments or decrees of any court,
governmental agency or other tribunal specifically naming the Company
and enjoining the Company from taking, or requiring the Company to
take, any action, or to which the Company, its properties or business
is bound or subject.
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(i) LIABILITIES. Except as otherwise set forth in the Memorandum,
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the Company as of March 31, 1997, had no material liabilities, debts,
obligations or claims asserted against it, whether accrued, absolute,
contingent or otherwise, and whether due or to become due, including,
but not limited to, liabilities on account of taxes. Subsequent to
March 31, 1997, the Company has not incurred material liabilities or
debts or obligations of any nature whatsoever other than those incurred
in the ordinary course of its business.
(j) TAXES. The Company has filed all federal tax returns in the
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United States and all state and municipal and local tax returns
(whether relating to income, sales, franchise, withholding, real or
personal property or other type of taxes) required to be filed under
the laws of the United States and applicable states, and has paid in
full all taxes which have become due pursuant to such returns or
claimed to be due by any taxing authority or otherwise due and owing.
Each of the tax returns heretofore filed by the Company correctly and
accurately reflects the amount of its tax liability thereunder. The
Company has withheld, collected and paid all other levies, assessments,
license fees and taxes to the extent required and. with respect to
payments. to the extent that the same have become due and payable.
(k) CONDUCT OF BUSINESS. Since the respective dates as of which
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information is given in the Memorandum and except as otherwise set
forth in the Memorandum, the Company has not: (a) incurred any material
obligation or liability (absolute or contingent) except obligations and
liabilities incurred in the ordinary course of operation of business of
the Company as carried on at and prior to such date; (b) canceled,
without payment in full, any notes loans or other obligations
receivable or other debts or claims held by it other than in the
ordinary course of business; (c) sold, assigned transferred, abandoned,
mortgaged, pledged or subjected to lien any of its material properties,
tangible or intangible, or rights under any material contract, permit,
license, franchise or other agreement other than sales or other
dispositions of goods or services in the ordinary course of business at
customary terms and prices; (d) increased compensation payable to any
of its officers, directors or other employees (including in the term
"compensation," salaries, fringe benefits, pensions, profit
participations and payments or benefits of any kind whatsoever) other
than in the ordinary course of business; (e) entered into any line of
business other than that conducted by it on such date or entered into
any transaction not in the ordinary course of its business; (f)
conducted any line of business in any manner except by transactions
customary in the operation of its business as conducted on such date;
or (g) declared, made or paid or set aside for payment any cash or
non-cash distribution on any shares of its capital stock.
(l) REG D QUALIFICATION. The Company has used its best efforts to
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ensure that the offer and sale of the Shares and of the Placement
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Agent's Warrants by the Company has satisfied, and on each of the
Closing Dates will have satisfied, all of the requirements of Reg D.
(m) INTANGIBLES. Except as disclosed in the Memorandum and the
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exhibits thereto (i) there is no claim or action by any person
pertaining to, or proceeding pending or threatened, that challenges the
ownership or use by the Company or any of its subsidiaries of any
patent, trademark, service mark, service name and trade name used by
the Company or any of its subsidiaries in the conduct of its business;
and (ii) the Company owns and has full right, title and interest in and
to, or has the valid and exclusive right to, all trademarks, services
marks, trade names and copyrights necessary in the conduct of its
business as presently conducted, or as proposed to be conducted as
described in the Memorandum and the exhibits thereto, except where such
failure has not and will not have a material adverse effect on the
condition, financial or otherwise, prospects, properties, business, net
worth or results of operation of the Company or any of its
subsidiaries.
(n) LABOR RELATIONS. No labor problem exists with the Company's
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employees or is imminent which could materially adversely affect the
Company.
(o) FINANCIAL STATEMENTS. The financial statements and notes thereto
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contained in the Memorandum present fairly the financial position of
the Company as of the respective dates thereof and the results of
operations, and changes in financial position of the Company for each
of the periods covered thereby. The financial statements contained in
the Memorandum have been prepared m conformity with generally accepted
accounting principles for unaudited financial statements, applied on a
consistent basis throughout the entire periods involved.
(p) NO ADVERSE CHANGE. Since the respective dates as of which
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information is given in the Memorandum, the Company has not sustained
any material loss or interference with its business from fire, storm,
explosion, flood or other casualty, whether or not covered by
insurance, of from any labor dispute or court or governmental action,
order or decree; and since the respective dates as of which information
is given in the Memorandum, there have not been, and prior to each of
the Closing Dates there will not be, any changes in the capital stock
or any material adverse change in or affecting the general affairs,
management, financial condition, shareholders' equity, results of
operations or prospects of the Company, otherwise than as set forth or
contemplated in the Memorandum.
(q) GOVERNMENTAL REGULATION. There are no laws, rules or
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regulations, judgments, orders or decrees, required to be described in
the Memorandum or the exhibits thereto other than those described
therein. The statements in the Memorandum and the exhibits thereto,
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insofar as such statements constitute a summary of laws, rules,
regulations or legal conclusions, are accurate summaries and fairly and
correctly present the information called for in the Act with respect to
such laws, rules, regulations or conclusions.
(r) MATERIAL AGREEMENTS. There are no agreements. contacts or other
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documents or instruments required to be described in the Memorandum and
the exhibits thereto other than those described in therein.
(s) NOTE AN INVESTMENT COMPANY. The Company is not an "investment
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company" or an "affiliated person" of, or "promoter" or "principal
underwriter" for, an "investment company," as that term is defined in
the investment Company Act of 1940, as amended.
(t) VIOLATIONS OF AND DEFAULTS UNDER AGREEMENTS. Except as described
-------------------------------------------
in the Memorandum and the exhibits thereto, the Company and its
subsidiaries are not in violation of. or breach of, or in default under
(i) their respective Articles of Incorporation or By-laws, (ii) any
material license, contract, indenture, mortgage, installment contract.
deed of trust, lease, voting trust agreement, stockholders agreement,
note, loan or credit agreement, other agreement or instrument to which
the Company or its subsidiaries are a party, by which the Company and
its subsidiaries are bound or to which any of their respective
properties are subject, or (iii) any law, rule or regulation applicable
to the Company or any of its subsidiaries or any of their properties,
or, any judgment, decree or order of any arbitrator, court, regulatory,
administrative body or other governmental agency or body having
jurisdiction over the Company or its subsidiaries and their respective
properties.
(u) LICENSES AND PERMITS. Except for such licenses, permits,
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certificates, registrations, approvals, consents and exemptions, the
absence of which would not have a materially adverse effect on the
Company or its subsidiaries or their respective business and
properties, the Company and its subsidiaries hold all licenses,
permits, certifications, registrations, approvals, consents and
franchises from all governmental or regulatory authorities, officials
or agencies necessary to own or lease and operate their respective
properties and to conduct their respective business as described in the
Memorandum and the exhibits thereto.
(v) NO ADVERSE CLAIM. Upon delivery to investors of certificates for
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the Shares being sold under this Agreement by the Company against
payment therefor as provided in this Agreement, investors will acquire
the shares of Preferred Stock free and clear of any "adverse claim" (as
such term is used in Section 678,302(2) of the Uniform Commercial Code
as in effect in the State of Florida), assuming the investors acquired
such shares of Preferred Stock in good faith and without notice of any
such "adverse claim".
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(w) CRIMINAL HISTORY OR BANKRUPTCY. The Company represents that
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except as disclosed in the Memorandum or otherwise disclosed to the
Placement Agent, no director, executive officer, or key employee of the
Company has been convicted of any felony, experienced a personal
bankruptcy, or been an officer, director, or key employee of any
company that during their tenure with such company experienced any
bankruptcy, or bad any trustee, receiver, or conservator appointed with
respect to its business or assets
6. COVENANTS OF THE COMPANY.
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(a) MEMORANDUM. The Company will furnish the Placement Agent, during
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the Offering with as many copies of the Memorandum (and any amendments
or supplements thereto) as the Placement Agent may reasonably request.
if during the Offering any event occurs as a result of which the
Memorandum, as then amended or supplemented, would include an untrue
statement of a material fact, or omit to state a material fact
necessary in order to make the statements made in light of the
circumstances in which they were made not misleading, or if it
otherwise shall be necessary to amend or supplement the Memorandum to
comply with applicable law, the Company will forthwith notify the
Placement Agent thereof, and furnish to the Placement Agent in such
quantities as may be reasonably requested, an amendment, supplement or
amended or supplemented Memorandum which corrects such statements or
omissions or causes the Memorandum to comply with applicable law. No
copies of the Memorandum, or any exhibit thereto, or any material
prepared by the Company in connection with the Offering will be given
without the prior written permission of the Placement Agent, by the
Company or its counsel or by a principal or agent of the Company to any
person not a party to this Agreement, unless such person is a director
or principal shareholder of, or directly employed by. the Company, or
unless required by law.
(b) STATE SECURITIES REGISTRATION. The Company will provide
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Placement Agent's counsel with all information which such counsel
reasonably determines to be necessary and otherwise cooperate with such
counsel, to permit such counsel to take all necessary action and file
all necessary forms and documents in order to qualify or register the
Shares for sale under the securities laws of the states in which offers
or sales will be made or to take any necessary action and file any
necessary forms which are required to obtain an exemption from such
qualification or registration in such jurisdictions. The Company will
pay all fees and expenses of registering or qualifying the Shares for
offer and sale in the applicable states, or obtaining exemptions
therefrom.
The Company will provide the Placement Agent with any additional
information, documents and instruments which the Placement Agent's
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counsel shall determine to be necessary to comply with the rules,
regulations and judicial and administration interpretation in those
states and jurisdictions where the Shares are to be offered for sale or
sold for delivery to all offerees and purchasers. The Company will file
all post-offering forms, documents or materials and take all other
actions required by states in which the Shares has been offered or
sold. The Placement Agent will not make offers or sales of the Shares
in any jurisdiction in which the Shares have not been qualified or
registered, or are not exempt from such or registration.
(c) USE OF PROCEEDS. The Company will apply the net Proceeds from
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this offering in the manner set forth in the Memorandum.
(d) REG D COMPLIANCE. The Company will use its reasonable best
----------------
efforts to determine whether an investor is qualified, and the Company
will comply in all respects with the terms and conditions of Reg D and
applicable state securities laws with respect to the offering and the
sale of the Shares.
(e) APPOINTMENT. Provided that the Placement Agent raises at least
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$1,000,000 in the Offering. the Placement Agent shall have the right to
designate a member of the Company's Board of Directors for a period of
five (5) years from the final Closing Date. The Company will indemnify
and provide liability insurance for such appointee on the same basis
and pursuant to the same terms as other members of the Company's Board
of Directors.
(g) RIGHT OF FIRST REFUSAL. Provided that the Placement Agent raises
----------------------
at least $1,000,000 in the Offering, the Company will grant to the
Placement Agent a right of first refusal for a period of three (3)
years after the final Closing Date for the underwriting of any public
or private sales of securities to be made by the Company.
7. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PLACEMENT AGENT.
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The Placement Agent represents, warrants and covenants to the Company that:
(a) DULY REGISTERED. The Placement Agent is duly registered,
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pursuant to the applicable provisions of the Securities Exchange Act of
1934, as amended (the "Securities Act"), as a dealer, and as a member
in good standing of the National Association of Securities Dealers,
Inc., and is duly registered as a broker-dealer in such states as the
Placement Agent is required to be registered in order to complete the
Offering contemplated by this Agreement and the Memorandum.
(b) NO GENERAL SOLICITATION OR ADVERTISING. The Placement Agent has
--------------------------------------
not and will not offer to sell the Shares by means of general
solicitation or general advertising.
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(c) FURNISH MEMORANDA. A reasonable time prior to each applicable
-----------------
Closing Date, the Placement Agent will furnish to each offeree of the
Shares a copy of the Memorandum, each supplement or amendment thereto,
the Subscription Agreement, Investor Questionnaire and other ancillary
documents (the "Subscription Documents"). Notwithstanding the
foregoing, the delivery of the Memorandum shall not constitute an offer
to sell the Shares to any person. Such sale my be made only upon
acceptance by the Company of an offeree's subscription, after a
determination that the offeree satisfied all of the applicable
requirements.
(d) REG D COMPLIANCE. The Placement Agent will use its reasonable
----------------
best efforts to determine whether an offeree is qualified and the
Placement Agent will comply in all respects with Reg D and
corresponding state statutes and regulations regarding qualifications
of prospective and actual investors.
(e) BLUE SKY COMPLIANCE. The Placement Agent will solicit purchasers
-------------------
only in those jurisdictions where such solicitation could and can be
made and which it is so qualified to act.
(f) AUTHORIZATION. This Agreement has been duly authorized, executed
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and delivered by the Placement Agent and is enforceable in accordance
with its terms, subject, as to enforcement of remedies, to applicable
bankruptcy, insolvency, reorganization, moratorium and other laws
affecting the rights of creditors generally and at the discretion of
courts in granting equitable remedies and except that enforceability of
the indemnification provisions and the contribution provisions SET
forth herein may be limited by federal or state securities laws or
public policy underlying such laws .
(g) COMPLIANCE. In connection with the offer and sale of the Units,
----------
the Placement Agent will comply with all applicable requirements of the
1933 Act, the 1934 Act, and the rules and regulations of the SEC
promulgated thereunder, including Reg D, and the Rules of Fair Practice
of the National Association of Securities Dealers.
(h) CONFLICTS. In connection with the offer and sale of the Units,
---------
the Placement Agent will not take or omit to take any action in
conflict with the applicable requirements of the 1933 Act or Reg D, or
applicable state securities or Blue Sky laws, or which would make the
exemptions provided by the Act, Reg D, or exemptions pursuant to
applicable state securities or Blue Sky laws unavailable with respect
to the Offering and sale of the Units.
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8. (a) CONDITIONS TO PLACEMENT AGENT'S OBLIGATIONS. The obligations of the
-------------------------------------------
Placement Agent hereunder will be subject to the accuracy of the representations
and warranties of the Company herein contained as of the date hereof and as of
each of the Closing Dates, to the performance by the Company of its obligations
hereunder and to the following additional conditions:
(i) DUE QUALIFICATION OR EXEMPTION. (A) The Offering will become
------------------------------
qualified or be exempt from qualification under the securities laws
of the several states pursuant to paragraph 6(b) above not later
than the Initial Closing Date, and (B) at each of the Closing Dates,
no stop order suspending the sale of the Shares shall have been
issued, and no proceeding for that purpose shall have been initiated
or threatened;
(ii) NO MATERIAL MISSTATEMENTS; SATISFACTORY MEMORANDUM. (A) The
--------------------------------------------------
Placement Agent will not have notified the Company that the Blue Sky
qualification materials or the Memorandum, or any amendment
supplement thereto, contains an untrue statement of a fact which in
its opinion is material, or omits to state a fact, which in its
opinion is material and is required to be stated therein, or is
necessary to make the statement therein not misleading, and (B) The
Placement Agent will not have notified the Company that the
Memorandum is not reasonably satisfactory in form and in substance
to the Placement Agent and its legal and accounting advisors;
(iii) COMPLIANCE WITH AGREEMENTS. The Company will have complied
--------------------------
with all agreements and satisfied all conditions on its part to be
performed or satisfied hereunder at or prior to each Closing Date;
(iv) CORPORATE ACTION. The Company will have taken all necessary
----------------
corporate, action, including, without limitation, obtaining the
approval of the Company's board of directors for the execution and
delivery of this Agreement, and the performance by the Company of
its obligations hereunder and thereunder and the commencement of the
offering contemplated hereby;
(v) OPINION OF COUNSEL. On the Closing Date, the Placement Agent
------------------
will have received from the Company's counsel, ("Company Counsel"),
a signed opinion, reasonably satisfactory to Placement Agent's
counsel in substantially the form attached hereto as Exhibit A. In
rendering its opinion, Company Counsel may rely upon (1) opinions of
counsel reasonably acceptable to Placement Agent's counsel with
respect to matters relating to the laws of any jurisdiction other
than Florida, Delaware and federal law, (2) the certificates of
government officials and officers of the Company as to matters of
fact (3) the genuineness of all signatures, and (4) the authenticity
and completeness of the books and records of the Company and such
other qualifications and conditions consistent with the Company's
Counsel's opinion practices, provided that Company Counsel shall
13
state that they have no reason to believe, and do not believe, that
they are not justified in relying upon any of the foregoing. It is
agreed and understood that the Placement Agent's requirements for
the opinion of Company counsel, and Company's Counsel's ability to
render such opinion, may be modified as a result of due diligence
investigations in connection with the Offering. Notwithstanding the
foregoing, it is further agreed and understood that a condition
precedent to the Placement Agent's obligations hereunder shall be
receipt by the Placement Agent of a satisfactory opinion of Company
Counsel. Nothing herein shall be construed as a waiver of the
Placement Agent's right to require further or additional opinions in
connection with a public offering of the Company's securities.
(b) CONDITIONS TO THE COMPANY'S OBLIGATIONS. The obligations of the
---------------------------------------
Company hereunder will be subject to the accuracy of the
representations, warranties and covenants of the Placement Agent
contained herein as of the date hereof and as of each of die Closing
Dates, to the performance by the Placement Agent of its obligations
hereunder and to the following additional conditions:
(i) ABSENCE OF CERTAIN EVENTS. Not stop order or other judicial
-------------------------
or administrative action suspending the sale of the Shares win have
been issued, and no proceeding for that purpose will have been
initiated or threatened; and
(ii) NO MATERIAL MISSTATEMENTS. The Company will not have
-------------------------
notified the Placement Agent that the Blue Sky qualification
material, or the Memorandum, or any amendment or supplement thereto,
contains an untrue statement of fact, which in its opinion is
material and is required to be stated therein or is necessary to
make the statements therein not misleading, in each case only with
respect to information Contained therein concerning the Placement
Agent.
9. INDEMNIFICATION BY THE COMPANY.
-------------------------------
(a) INDEMNIFICATION 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 Act
or the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), against any losses, claim , damages or liabilities, joint or
several to which the Placement Agent or such controlling person may
become subject, under the Act or otherwise, to the extent and only
to the extent 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 Memorandum, or (B) in any Blue Sky Application
(as hereinafter defined) or other document executed by the Company
specifically for that purpose or based upon false or misleading
14
written information furnished by the Company filed in any state or
other jurisdiction in order to qualify the Shares under the
securities laws thereof (any such application, document or
information being hereinafter called a "Blue Sky Application"), (ii)
the omission or alleged omission to state in the Memorandum or in
any Blue Sky Application a material fact required to be stated
therein or necessary to make the statements therein not misleading,
or (iii) any untrue statement or alleged untrue statement of a
material fact contained in the Memorandum or the omission or alleged
omission to stated therein a material fact required to be stated
therein or necessary in order to make the statements therein, in the
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; 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 an
untrue statement or alleged untrue statement or omission or alleged
omission made in reliance upon and in conformity with written
information furnished to the Company by the Placement Agent or Blue
Sky counsel specifically for use in the preparation of the
Memorandum or any such Blue Sky Application.
(b) INDEMNIFICATION BY THE PLACEMENT AGENT. The Placement Agent
--------------------------------------
agrees to indemnify and hold harmless the Company, its directors and
officers and each person, if any, who controls the Company within
the meaning of the Act and 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 Act
or otherwise to the extent 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 Memorandum, or (B) in any Blue
Sky Application, or (ii) the omission or alleged omission to state
in the Memorandum or in any Blue Sky Application a material fact
required to be stated therein or necessary to make the statements
therein not misleading, or (iii) any untrue statement or alleged
untrue statement of a material fact contained in the Memorandum, or
the omission or alleged omission to state therein a material fact
required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which
they were made, not misleading; in each case to the extent but only
to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon
and in conformity with written information furnished to the Company
by the Placement Agent or Blue Sky counsel specifically for use in
the preparation of the Memorandum or any such Blue Sky Application.
(c) PROCEDURE. Promptly after receipt by an indemnified party
---------
under this Section 9 of notice of the commencement of any action,
15
such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 9, notify in
writing the indemnifying party of commencement thereof; and the
omission so to notify the indemnifying party will relieve it from
any liability under this Section 9 as to the particular item for
which indemnification is then being sought, but not from any other
liability which 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 9 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 consent of such indemnifying party.
(d) CONTRIBUTION. If the indemnification provided for in this
------------
Section 9 is unavailable to any indemnified party 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 is appropriate to reflect the
relative benefits received by the Company on the one hand, and the
Placement Agent on the other hand, from the offering of the Shares
or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company on the one hand,
and of the Placement Agent on the other hand. in connection with the
statements or omissions which 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 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 non-accountable
expense allowance, but before deducting expenses) received by the
Company relative to the commission and non-accountable expense
allowance received by the Placement Agent. The relative fault of the
Company on the one hand, and the Placement Agent on the other hand,
will be determined with reference to, among other things, whether
the untrue or alleged untrue statement of a matter fact or the
omission to state a material fact relates to information supplied by
the Company or the Placement Agent, and its relative intent,
knowledge, access to information and opportunity to correct or
prevent such statement or omission. The amount payable by a party as
a result of the losses, claims, damages, liabilities or expenses
referred to above will be deemed to include, subject to the
16
limitations set forth in Section 9(c) below. any legal or other fees
or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim.
(e) EQUITABLE CONSIDERATIONS. The Company and the Placement Agent
------------------------
agree that it would not be just and equitable if contribution
pursuant to this Section 9 were determined by pro rata allocation or
by any other method of allocation which does not take into account
the equitable considerations referred to in the immediately
preceding paragraph. No person committing fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution or indemnification from any person
not committing such fraudulent misrepresentation.
10. REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY. All
--------------------------------------------------
representations. warranties and agreements of the Company and of the Placement
Agent herein will survive the delivery and execution hereof and the Closings
hereunder for a period of two (2) years from the Final Closing Date, and shall
remain operative and in full force and effect regardless of any investigation
made by or on behalf of the Placement Agent or any person who controls the
Placement Agent within the meaning of the Act, or by the Company or any person
who controls the Company within the meaning of the Act, and will survive
delivery of the securities constituting the Shares and the Placement Agent
Warrants hereunder and any termination of this Agreement.
11. TERMINATION. Either the Placement Agent or the Company will have
-----------
the right to terminate this Agreement by giving written notice as herein
specified, at any time, at or prior to the initial Closing Date:
(a) If either the Company or the Placement Agent shall have
failed, refused, or been unable at or prior to the date of
termination of this Agreement, to perform any of its respective
obligations hereunder;
(b) If any other condition of the Company's or Placement Agent's
obligations hereunder is not fulfilled; or
(c) If there has occurred an event materially or adversely
affecting the value of the Company.
If the Placement Agent or the Company elects to terminate this
Agreement pursuant to subsection 12(a), (b) or (e) hereof, notice
will be provided to the non-terminating party promptly by telephone,
telecopier or telegram, and such notification will be confirmed by
written notice as provided for in Section 13 below.
12. NOTICES. Any notice hereunder shall be In writing and shall be
-------
effective when delivered, or mailed by certified or registered mail, postage
17
prepaid, return receipt requested to the appropriate party or parties, at the
following addresses: if to the Placement Agent, to Noesis Capital Corp., 0000
Xxxxx Xxxxx Xxxx, Xxxxx 000, Xxxx Xxxxx, Xxxxxxx 00000, Attention: Mr. Xxxx X.X.
Xxxxxxxxx; if to the Company, PSI Industries, Inc., 0000-X Xxxxx Xxxxxx Xxxxxx,
Xxxx Xxxxx, Xxxxxxx 00000, Attention: Xxxxxxxx Xxxxxxxx, CEO.
13. PARTIES. This Agreement will inure to the benefit of and be
-------
binding upon the Placement Agent, the Company and their respective successors
and assigns. This Agreement is intended to be, and is for the sole and exclusive
benefit of the parties hereto and the persons described in Sections 9(a) and
9(b) 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 and the parties hereto
may not assign their rights or obligations hereunder. No purchaser of the Shares
will be construed as successor assign merely by reason of such purchase.
14. AMENDMENT AND/OR MODIFICATION. Neither this Agreement, nor any
-----------------------------
term of 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.
15. 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.
16. 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.
17. WAIVER OF BREACH. The failure of any party hereto to insist upon
----------------
strict performance of any of the covenants and agreement 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 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.
18. ENTIRE AGREEMENT. This Agreement contains the entire agreement and
----------------
understanding of the parties with respect to the entire subject matter hereof,
and there are no representations, inducements, promises or agreements, oral or
otherwise, not embodied herein. Any and all prior discussions, negotiations,
commitments and understanding relating thereto are superseded hereby. There are
no conditions precedent to the effectiveness of this Agreement other than as
stated herein, and there arc no related collateral agreements existing between
the parties that are not referred to herein.
18
19. 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.
20. LAW. This Agreement will be deemed to have been made and delivered
---
in Palm Beach County, Florida and will be governed as to validity,
interpretation, construction, effect and in all other respects by the internal
laws of the State of Florida. The Company (a) agrees that any legal suit, action
or proceeding arising out of or relating to this letter will be instituted
exclusively in the appropriate state court in the State of Florida, Palm Beach
County, or in the United States District Court for the Southern District of
Florida; (b) waives any objection which the Company may have now or hereafter to
the venue of any such suit, action or proceeding, and (c) irrevocably consents
to the jurisdiction of the state courts of the State of Florida, County of Palm
Beach or in the United States District Court for the Southern District of
Florida and agrees that service of process upon the Company mailed by certified
mail to the Company's address will be deemed in every respect effective service
or process upon the Company, in any suit, action or proceeding.
If the foregoing correctly sets forth our understanding, please so
indication in the space provided below for that purpose, whereupon this letter
will constitute a binding agreement between us.
PSI INDUSTRIES, INC.
By: /S/ XXXXXXXX XXXXXXXX
------------------------
Xxxxxxxx Xxxxxxxx, CEO
CONFIRMED and ACCEPTED, as of this 3 day of July, 1997, by the
undersigned authorized representative.
NOESIS CAPITAL CORP.
By: /S/ XXXX X.X. XXXXXXXXX
----------------------------
Xxxx X.X. Xxxxxxxxx, CEO
19
