Exhibit 10.4
1,194,917 Shares
Common Stock
DEM, INC.
The World Trade Center--Baltimore
000 Xxxx Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxx, Xxxxxxxx 00000
PLACEMENT AGENCY AGREEMENT
May 30, 1997
The Xxxxxxx Co.
The World Trade Center--Baltimore
000 Xxxx Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Ladies and Gentlemen:
DEM, Inc. a Maryland corporation registered under the Investment Company
Act of 1940, as amended (the "Act") as a closed-end investment company, (the
"Corporation"), proposes to cause to be issued, and sold through The Xxxxxxx
Co. (the "Placement Agent") on a "best efforts" basis a maximum of 1,194,917
Shares (the "Shares") of common stock, $.00001 par value per share (the
"Common Stock") at a public offering price per share equal to the greater of
$15.00 or the Company's net asset value per share (calculated within 48 hours
prior to any sale) (the "Offering").
SECTION 1. APPOINTMENT
The Corporation hereby appoints the Placement Agent, and the Placement
Agent hereby agrees, to act as Placement Agent for the Shares for the period
and on the terms set forth in this Agreement. In connection therewith, the
Corporation has delivered to the Placement Agent copies of its Articles of
Incorporation and Bylaws, the Corporation's Registration Statement with
respect to the Shares and all amendments thereto filed pursuant to the
Securities Act of 1933, as amended (the "Securities Act") or the Act (the
"Registration Statement"), and the Corporation's current Prospectus and
Statement of Additional Information with respect to the Shares (collectively,
as currently in effect and as amended or supplemented, the "Prospectus") and
shall promptly furnish the Placement Agent with all amendments of or
supplements to the foregoing.
SECTION 2. DISTRIBUTION SERVICES
Subject to the direction and control of the Corporation's Board of
Directors (the "Board"), the Placement Agent shall serve as Placement Agent
for the Shares.
(a) As agent for the Corporation, the Placement Agent shall offer, and
solicit offers to purchase the Shares. An offer to purchase the Shares shall
not be binding on the Corporation until the Placement Agent, on behalf of the
Corporation confirms the acceptance of such offer by delivery of a
confirmation of sale and if not previously delivered, a final Prospectus. The
Placement Agent's rights hereunder shall not apply to Shares issued in
connection with the reinvestment in shares by the Corporation's stockholders
of dividends or other distributions or any other offering by the Corporation
of securities to its stockholders.
(b) The Placement Agent shall use its best efforts to obtain offers to
purchase Shares upon the terms and conditions contained herein and in the
Prospectus, including the offering price. The Placement Agent shall notify
the Corporation promptly of all offers to purchase the Shares that the
Placement Agent intends to accept on behalf of the Corporation. The
Corporation shall furnish to the Placement Agent from time to time, for use
in connection with the offering of Shares, such information with respect to
the Corporation and Shares as the Placement Agent may reasonably request. The
Corporation shall supply the Placement Agent with such copies of the
Prospectus as the Placement Agent may request. The Placement Agent may use
its employees, agents and other persons who need not be its employees, at its
cost and expense, to assist it in carrying out its obligations hereunder, but
no such employee, agent or other person shall be deemed to be an agent of the
Corporation or have any rights under this Agreement.
(c) The Corporation reserves the right to suspend the offering of Shares
at any time, in the absolute discretion of the Board, and upon notice of such
suspension the Placement Agent shall cease to offer the Shares.
(d) The Corporation and the Placement Agent will cooperate with each
other in taking such action as may be necessary to qualify Shares for sale
under the securities laws of such states as the Corporation may designate.
The Corporation shall pay all fees and expenses of registering Shares under
the Securities Act and of registering or qualifying Shares and the
Corporation's qualification under applicable state securities laws. The
Placement Agent shall pay all expenses relating to its broker-dealer
qualification. The Placement Agent shall not confirm sales to any purchasers
unless the Shares to be sold are qualified for sale under the securities laws
of any state applicable to such sale.
(e) The Corporation represents that its Registration Statement and
Prospectus under the Securities Act have been or will be, as the case may be,
carefully prepared in conformity with the requirements of the Securities Act
and the rules and regulations of the Securities and Exchange Commission (the
"Commission") thereunder. The Corporation represents and warrants that its
Registration Statement and Prospectus contain or will contain all statements
required to be stated therein in accordance with the Securities Act and the
rules and regulations of the Commission thereunder, and that the
Corporation's Registration Statement and Prospectus, when they shall become
effective or be authorized for use, will not include an untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading to a purchaser of
Shares. The Corporation will from time to time file such amendment or
amendments to its Registration Statement and Prospectus as, in the light of
future developments, shall, in the opinion of the Corporation's counsel, be
necessary in order to have such Registration Statement and Prospectus at all
times contain all material facts required to be stated therein or necessary
to make any statements therein not mislead-
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ing to a purchaser of Shares, but, if the Corporation shall not file such
amendment or amendments within fifteen days after receipt of a written
request from the Placement Agent to do so, the Placement Agent may, at its
option, terminate this Agreement immediately. The Corporation shall not file
any amendment to its Registration Statement and Prospectus without giving the
Placement Agent reasonable notice thereof in advance; provided, however, that
nothing in this Agreement shall in any way limit the Corporation's right to
file at any time such amendments to its Registration Statement and
Prospectus, of whatever character, as it deems advisable, such right being in
all respects absolute and unconditional. The Corporation represents and
warrants that any amendment to its Registration Statement and Prospectus
hereafter filed will, when it becomes effective, contain all statements
required to be stated therein in accordance with the Act and the rules and
regulations of the Commission thereunder, that all statements of fact
contained therein will, when the same shall become effective, be true and
correct and that no such amendment, when it becomes effective, will include
an untrue statement of a material fact or will omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading to a purchaser of Shares.
(f) The Corporation will indemnify, defend and hold the Placement Agent,
its several officers and directors, and any person who controls the Placement
Agent within the meaning of Section 15 of the Securities Act (collectively,
the "Placement Agent Indemnitees"), free and harmless from and against any
and all claims, demands, liabilities and expenses (including the cost of
investigating or defending such claims, demands or liabilities and any
counsel fees incurred in connection therewith) which any Placement Agent
Indemnitee may incur, under the Securities Act, or under common law or
otherwise, arising out of or based upon any alleged untrue statement of a
material fact contained in the Corporation's Registration Statement and
Prospectus under the Securities Act or arising out of or based upon any
alleged omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided, however,
that in no event shall anything contained in this paragraph (f) be so
construed as to protect the Placement Agent against any liability to the
Corporation or its security holders to which the Placement Agent would
otherwise be subject by reason of willful misfeasance, bad faith, or gross
negligence in the performance of its duties, or by reason of its reckless
disregard of its obligations and duties under this Section 2. This agreement
to indemnify the Placement Agent Indemnitees is expressly conditioned upon
the Corporation being notified of any action brought against any Placement
Agent Indemnitee, such notification to be given by letter, facsimile
transmission or telegram to the Corporation and referring to the person
against whom such action is brought within ten days after the summons or
other first legal process shall have been served on such person. The failure
so to notify the Corporation of any such action shall not relieve the
Corporation from any liability which it may have to any Placement Agent
Indemnitee otherwise than on account
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of the indemnification provided for in this paragraph (f). The Corporation
will be entitled to assume the defense of any suit brought to enforce any
such claim, and to retain counsel of good standing chosen by it and approved
by the Placement Agent. In the event the Corporation elects to assume the
defense of any such suit and retain counsel of good standing approved by the
Placement Agent, the defendants in such suit shall bear the fees and expenses
of any additional counsel retained by any of them. In the event the
Corporation does not elect to assume the defense of any such suit, or in case
the Placement Agent does not approve of counsel chosen by the Corporation or
has been advised that it may have available defenses or claims which are not
available to or conflict with those available to the Corporation, the
Corporation will reimburse any Placement Agent Indemnitee named as defendant
in such suit for the fees and expenses of any counsel retained by such
person. The indemnification provisions contained in this paragraph (f) and
the Corporation's representations and warranties in this Agreement shall
remain operative and in full force and effect regardless of any investigation
made by or on behalf of any Placement Agent Indemnitee and shall survive the
sale of any Shares made pursuant to subscriptions obtained by the Placement
Agent. The indemnification provisions of this paragraph (f) will inure
exclusively to the benefit of the Placement Agent Indemnitees and their
respective successors and assigns. The Corporation agrees promptly to notify
the Placement Agent of the commencement of any litigation or proceeding
against the Corporation or any of its Directors or officers in connection
with the issue or sale of Shares.
(g) The Placement Agent agrees to indemnify, defend and hold the
Corporation, its several officers and directors, and any person who controls
the Corporation within the meaning of Section 15 of the Securities Act
(collectively, the "Corporation Indemnitees"), free and harmless from and
against any and all claims, demands, liabilities and expenses (including the
cost of investigating or defending such claims, demands or liabilities and
any reasonable counsel fees incurred in connection therewith) which any
Corporation Indemnitee may incur under the Act, or under common law or
otherwise, but only to the extent that such liability or expense incurred by
the Corporation Indemnitees resulting from such claims or demands shall arise
out of or be based upon any alleged untrue statement of a material fact
contained in information furnished in writing by the Placement Agent in its
capacity as distributor to the Corporation for use in the Corporation's
Registration Statement or Prospectus under the Securities Act, or shall arise
out of or be based upon any alleged omission to state a material fact in
connection with such information required to be stated in the Registration
Statement or Prospectus or necessary to make such information not misleading.
The Placement Agent's agreement to indemnify the Corporation Indemnitees is
expressly conditioned upon the Placement Agent being notified of any action
brought against a Corporation Indemnitee, such notification to be given by
letter, facsimile transmission or telegram addressed and referring to the
person against whom such action is brought within ten days after the summons
or other first legal process shall have been served on such person. The
Placement Agent shall have a right to control the defense of such action,
with counsel of its own choosing, satisfactory to the Corporation, if such
action is based solely upon such alleged misstatement or omission on the
Placement Agent's part, and in any other event the Placement Agent and
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the Corporation Indemnitees named shall each have the right to participate in
the defense or preparation of the defense of any such action. The failure to
so notify the Placement Agent of any such action shall not relieve the
Placement Agent from any liability which it may have to any Corporation
Indemnitee otherwise than on account of the indemnification provisions in
this paragraph (g).
(h) The Corporation shall advise the Placement Agent immediately: (i) of
any request by the Commission for amendments to the Corporation's
Registration Statement or Prospectus or for additional information; (ii) in
the event of the issuance by the Commission or any stop order suspending the
effectiveness of the Corporation's Registration Statement or Prospectus or
the initiation of any proceedings for that purpose; (iii) of the happening of
any material event which makes untrue any statement made in the Corporation's
Registration Statement or Prospectus or which requires the making of a change
in either thereof in order to make the statements therein not misleading; and
(iv) of all action of the Commission with respect to any amendments to the
Corporation's Registration Statement or Prospectus which may from time to
time be filed with the Commission under the Act or the Securities Act.
SECTION 3. STANDARD OF CARE
The Placement Agent shall give the Corporation the benefit of its best
judgment and efforts in rendering its services to the Corporation and shall
not be liable for error of judgment or mistake of law, for any loss arising
out of any investment, or in any event whatsoever, provided that nothing
herein shall be deemed to protect, or purport to protect, the Placement Agent
against any liability to the Corporation or to the security holders of the
Corporation to which it would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of its duties
hereunder, or by reason of reckless disregard of its obligations and duties
hereunder.
SECTION 4. EXPENSES
The Corporation will pay all fees, costs and expenses incident to the
performance by the Corporation of its obligations hereunder, including: (a)
the preparation, printing, filing and distribution of the Registration
Statement (including the exhibits thereto), all amendments and supplements
thereto and the Prospectus; (b) the preparation, printing, and issuance of
the Shares including any stamp taxes and transfer agent and registrar fees
payable in connection with the original issuance of the Shares; (c) the
registrations or qualifications referred to in Section (2)(d) and 2(e) hereof
including fees and disbursements of counsel for the Placement Agent relating
to such registrations or qualifications; (d) the fees and expenses of the
Corporation's accountants and the fees and expenses of counsel for the
Corporation; (e) the expenses of delivery to the Placement Agent of copies of
the Prospectus, as may be requested for use in connection with the offering
and sale of the Shares; (f) any filings required to be made by the Placement
Agent with the National Association of Securities Dealers, Inc.; (g) the fees
and expenses incurred with respect to the listing of the Shares on the NASDAQ
SmallCap Market.
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SECTION 5. TERMS OF THE OFFERING
The Offering shall commence upon the effectiveness of the Registration
Statement and shall continue until such date as all of the Shares are sold or
the Offering is terminated by the Corporation or the Placement Agent as
provided in Section 6 hereof (the "Termination Date").
Subscription proceeds will be held by the Corporation pending a closing
("Closing"). Subject to the terms and conditions of this Agreement, Closings
shall be held with respect to sales of the Shares on a monthly basis or on
such a more frequent basis as the Corporation and Placement Agent shall agree.
The public offering price per share is the greater of $15.00 or the
Company's net asset value per share (calculated within 48 hours prior to any
sale) (the "Offering Price"). The minimum subscription will be for 100
shares. The Placement Agent shall be paid a management fee of 2.7% of the
Offering Price from all sales of the Shares. The Placement Agent will also be
paid a selling concession of 4.3% of the Offering Price from all sales of the
Shares all, or any portion, of which the Placement Agent may reallow to other
selling agents. The Corporation shall have the right to accept or reject in
whole or in part offers to purchase for the Shares.
SECTION 6. TERMINATION
This Agreement may be terminated at any time, without the payment of any
penalty, (i) by the Board of Directors of the Corporation or by a vote of a
majority of the outstanding voting securities of the Corporation, on 10 days'
written notice to the Placement Agent or (ii) by the Placement Agent on 10
days' written notice to the Corporation. This Agreement shall automatically
terminate in the event of its assignment.
SECTION 7. ACTIVITIES OF PLACEMENT AGENT
Except to the extent necessary to perform its obligations under this
Agreement, nothing herein shall be deemed to limit or restrict the Placement
Agent's right, or the right of any of its officers, directors or employees
(whether or not they are a director, officer, employee or other affiliated
person of the Corporation) to engage in any other business or to devote time
and attention to the management or other aspects of any other business,
whether of a similar or dissimilar nature, or to render services of any kind
to any other company, corporation, firm, individual or association.
SECTION 8. MISCELLANEOUS
(a) No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by both
parties hereto and, if required by the Act, by a vote of a majority of the
outstanding voting securities of the Corporation.
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(b) If any part, term or provision of this Agreement is held to be
illegal, in conflict with any law or otherwise invalid, the remaining portion
or portions shall be considered severable and not be affected, and the rights
and obligations of the parties shall be construed and enforced as if the
Agreement did not contain the particular part, term or provision held to be
illegal or invalid.
(c) Section headings in this Agreement are included for convenience only
and are not to be used to construe or interpret this Agreement.
(d) Notices, requests, instructions and communications received by the
parties at their respective principal places of business, or at such other
address as a party may have designated in writing, shall be deemed to have
been properly given.
(e) This Agreement shall be governed by and shall be construed in
accordance with the laws of the State of Maryland without reference to
principles of conflict of law.
(f) The terms "vote of a majority of the outstanding voting securities,"
"affiliated person," and "assignment" shall have the meanings ascribed
thereto in the Act.
(g) This Agreement has been and is made solely for the benefit of the
Placement Agent, the Corporation and their respective successors, executors,
administrators, heirs and assigns, and the officers, directors and
controlling persons referred to herein, and no other person will have any
right or obligation hereunder. The term "successors" shall not include any
purchaser of the Shares merely because of such purchase.
(h) The indemnification agreement contained in this Agreement and the
representations, warranties and covenants in this Agreement shall remain in
full force and effect regardless of (i) any termination of this Agreement,
(ii) any investigation made by or on behalf of the Placement Agent or
controlling person thereof, or by or on behalf of the Corporation or its
directors or officers, and (iii) a Closing under this Agreement.
(i) This Agreement embodies the entire agreement between the Corporation
and the Placement Agent relating to the subject matter hereof and supersedes
all prior agreements, representations and understandings, if any, relating to
the subject matter hereof.
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(j) Please confirm that the foregoing correctly sets forth the agreement
between the Corporation and the Placement Agent.
Very Truly Yours,
DEM, INC.
By: /S/ XXXXXX X. XXXXXXX, XX.
-------------------------------
Xxxxxx X. Xxxxxxx, Xx.
Chairman and President
THE XXXXXXX CO.
By: /S/ XXXXXX X. XXXXXXX, XX.
-------------------------------
Xxxxxx X. Xxxxxxx, Xx.
Chairman and President
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