1,000,000 Shares Maximum
333,334 Minimum
Common Stock
DEM, INC.
The World Trade Center - Baltimore
000 Xxxx Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxx, Xxxxxxxx 00000
PLACEMENT AGENCY AGREEMENT
November 30, 1995
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
minimum of 333,334 and a maximum of 1,000,000 shares (the
"Shares") of common stock, $.00001 par value per share (the
"Common Stock") at a public offering price of $15.00 per
share (the "Offering").
SECTION 1. APPOINTMENT
The Corporation hereby appoints the Placement Agent,
and the Placement Agent hereby agrees, to act as underwriter
of 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 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 (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 underwriter of the Shares.
(a) As agent of and underwriter for the Corporation,
the Placement Agent shall offer, and solicit offers to
subscribe to, the Shares as shall then be effectively
registered under the Securities Act and applicable state
securities laws. All subscriptions for Shares obtained by
the Placement Agent shall be directed to the Corporation for
acceptance and shall not be binding on the Corporation until
accepted by it. The Placement Agent shall have no authority
to make binding subscriptions on behalf of the Corporation.
The Corporation reserves the right to sell Shares directly
to investors through subscriptions received by the
Corporation. 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 shareholders.
(b) The Placement Agent shall use its best efforts to
obtain subscriptions to Shares upon the terms and conditions
contained herein and in the Prospectus, including the
offering price. The Placement Agent shall send to the
Corporation promptly all subscriptions placed with the
Placement Agent. 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.
(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
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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 all
statements of fact contained or to be contained therein are
or will be true and correct at the time indicated or on the
effective date as the case may be; 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 misleading to a purchaser of Shares,
but, if the Corporation shall not file such amendment or
amendments within fifteen days after receipt of a written
request from the Placement Agent to do so, the Placement
Agent may, at its option, terminate this Agreement
immediately. The Corporation shall not file any amendment
to its Registration Statement and Prospectus without giving
the Placement Agent reasonable notice thereof in advance;
provided, however, that nothing in this Agreement shall in
any way limit the Corporation's right to file at any time
such amendments to its Registration Statement and
Prospectus, of whatever character, as it deems advisable,
such right being in all respects absolute and unconditional.
The Corporation represents and warrants that any amendment
to its Registration Statement and Prospectus hereafter filed
will, when it becomes effective, contain all statements
required to be stated therein in accordance with the Act and
the rules and regulations of the Commission thereunder, that
all statements of fact contained therein will, when the same
shall become effective, be true and correct and that no such
amendment, when it becomes effective, will include an untrue
statement of a material fact or will omit to state a
material fact required to be stated therein or necessary to
make the statements therein not misleading to a purchaser of
Shares.
(f) The Corporation will indemnify, defend and hold
the Placement Agent, its several officers and directors, and
any person who controls the Placement Agent within the
meaning of Section 15 of the Securities Act (collectively,
the "Placement Agent Indemnitees"), free and harmless from
and against any and all claims, demands, liabilities and
expenses (including the cost of investigating or defending
such claims, demands or liabilities and any counsel fees
incurred in connection therewith) which any Placement Agent
Indemnitee may incur, under the Securities Act, or under
common law or otherwise, arising out of or based upon any
alleged untrue statement of a material fact contained in the
Corporation's Registration Statement and Prospectus under
the Securities Act or arising out of or based upon any
alleged omission to state a material fact required to be
stated therein or necessary to make the statements therein
not misleading; provided, however, that in no event shall
anything contained in this paragraph (f) be so construed as
to protect the Placement Agent against any liability to the
Corporation or its
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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 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
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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 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.
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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.
SECTION 5. TERMS OF THE OFFERING
The Offering shall commence upon the effectiveness of
the Registration Statement. All subscription proceeds shall
be immediately deposited into an escrow account established
at United Missouri Bank, K.C. If a minimum of 333,334
Shares is not sold by 5:00 p.m. on that date which is sixty
days after the effective date of the Registration Statement,
unless extended at the option of the Placement Agent for
another thirty days, in which case that date which is ninety
days after the effective date of the Registration Statement
(the "Termination Date"), the Offering shall terminate and
all subscription proceeds shall be returned to prospective
investors, without discount and with interest.
As soon as practicable after the sale of 333,334 Shares
and subject to the terms and conditions of this Agreement, a
closing shall occur pursuant to which the Shares shall be
issued to subscribers against release of the Offering
proceeds held in escrow with respect to such subscribers'
subscriptions ("Initial Closing"). After the Initial
Closing, subscription proceeds will be held by the
Corporation pending a subsequent closing. Subject to the
terms and conditions of this Agreement subsequent closings
("Subsequent Closings") shall be held thereafter with
respect to additional sales of Shares on a monthly basis or
on such a more frequent basis as the Corporation and
Placement Agent shall agree until the earlier of the
Termination Date or termination of the Offering as provided
herein. Initial Closing or a Subsequent Closing is
hereinafter referred to sometimes as a Closing.
The public offering price will be $15.00 per share.
The minimum subscription will be for 100 shares. The
Placement Agent shall be paid a management fee equal to
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two point seven percent (2.7%) of the subscription proceeds
($.40 per share) from all sales of shares. The Placement
Agent will also be paid a selling concession of four point
three percent (4.3%) of the subscription proceeds ($.65 per
share) 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 subscriptions 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.
(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.
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(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 Dealer, the Soliciting Dealers, 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.
(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
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THE XXXXXXX CO.
By: /s/ XXXXXX X. XXXXXXX, XX.
Xxxxxx X. Xxxxxxx, Xx.
Chairman and President
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