EXHIBIT 10.3
PLACEMENT AGENCY AGREEMENT
September 2, 1998
Xxxxxxx Xxxxx Securities Incorporated
000 Xxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
GraphOn Corporation, a California corporation (the "Company"), hereby confirms
its agreement with Xxxxxxx Xxxxx Securities Incorporated, a Delaware corporation
(the "Placement Agent"), as follows (unless the context otherwise requires, as
used herein, the "Company" refers to GraphOn Corporation and each of its
subsidiaries, if any):
1. OFFERING. (a) The Company will offer (the "Offering") for sale through the
Placement Agent and its selected dealers, as exclusive agent for the Company, up
to 45 units (the "Units"), plus an additional 6.75 Units to cover
oversubscriptions, if any. Each Unit will consist of I 00,000 shares (the
"Shares") of the Company's common stock, no par value per share (the "Common
Stock").
(b) Placement of the Units will be made on a "best efforts--all or none" basis
with respect to the first 25 Units (the "Minimum Amount") and on a "best
efforts" basis as to the remaining Units. The minimum subscription for Units
shall be one Unit, however, the Placement Agent may, in its discretion, offer
fractional Units. The Units will be offered commencing on the date of the
Memorandum (as defined below) for a period of 90 days, unless extended by mutual
agreement of the Company and the Placement Agent for an additional 90 days or
terminated earlier as provided herein (the "Offering Period"). The date on which
the Offering shall terminate shall be referred to as the "Termination Date."
(c) Subject to Section 4(c) hereof, subscriptions for the Units will be accepted
by the Company at a price of $100,000 per Unit (the "Offering Price"); provided,
however, that the Company shall not accept subscriptions for, or sell Units to,
any persons or entities who do not qualify as "accredited investors," as such
term is defined in Rule 501 of Regulation D promulgated under the Securities Act
of 1933 (the "Act").
(d) The offering of the Units will be made by the Company solely pursuant to the
Memorandum, which at all times will be in form and substance acceptable to the
Placement Agent and its counsel and contain such legends and other information
as the Placement Agent and its counsel may, from time to time, deem necessary
and desirable to be set forth therein. "Memorandum" as used in this Agreement
means the Company's Confidential Private Placement Memorandum dated September 2,
1998, inclusive of all
exhibits, and all amendments, supplements and appendices thereto. Unless
otherwise defined, each term used in this Agreement will have the same meaning
as set forth in the Memorandum.
2. REPRESENTATIONS AND WARRANTIES. The Company hereby represents and warrants to
the Placement Agent that:
(a) The Memorandum has been diligently prepared by the Company, in conjunction
with its legal counsel and independent accountants, in conformity with all
applicable laws, and the Offering and the consummation thereof is in compliance
with Regulation D as promulgated under Section 4(2) of the Act ("Regulation D"),
the Act and the requirements of all other rules and regulations (the
"Regulations") of the Securities and Exchange Commission (the "SEC") relating to
offerings of the type contemplated by the Offering, and the applicable
securities laws and the rules and regulations of those jurisdictions wherein the
Units are to be offered and sold. Subject in part to the truth and accuracy of
each Purchaser's representations set forth in Section 5 of the Subscription
Agreement attached as Annex A to the Memorandum, the Units will be offered and
sold pursuant to the registration exemption provided by Regulation D and Section
4(2) and/or Section 4(6) of the Act as a transaction not involving a public
offering and the requirements of any other applicable state securities laws and
the respective rules and regulations thereunder in those jurisdictions in which
the Placement Agent notifies the Company that the Units are being offered for
sale. The Memorandum describes all material aspects, including attendant risks,
of an investment in the Company. The Company has not taken nor will it take any
action which conflicts with the conditions and requirements of, or which would
make unavailable with respect to the Offering, the exemption(s) from
registration available pursuant to Regulation D or Section 4(2) and/or Section
4(6) of the Act and knows of no reason why any such exemption would be otherwise
unavailable to it. None of the Company, its predecessors or affiliates has been
subject to any order, judgment or decree of any court of competent jurisdiction
temporarily, preliminarily or permanently enjoining such person for failing to
comply with Section 503 of Regulation D.
(b) The Memorandum does 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 under which they were
made, not misleading. None of the statements, documents, certificates or other
items prepared or supplied by the Company with respect to the transactions
contemplated hereby contains an untrue statement of a material fact or omits a
material fact necessary to make the statements contained therein not misleading.
There is no fact which the Company has not disclosed to the Placement Agent and
its counsel in writing and of which the Company is aware which materially and
adversely affects or could materially and adversely affect the business,
prospects, financial condition, operations, property or affairs of the Company
or any of its subsidiaries.
(c) The Company is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation. Except as set
forth in the Memorandum,
the Company has no subsidiaries and does not have an equity interest. in any
other firm, partnership, association or other entity. The Company is duly
qualified to transact business and is in good standing under the laws of each
jurisdiction in which the failure to so qualify would have a material adverse
effect on its business or properties.
(d) The Company has all requisite power and authority (corporate and other) to
conduct its business as presently conducted and as proposed to be conducted (as
described in the Memorandum), to enter into and perform its obligations under
this Agreement and the other agreements contemplated hereby and by the
Memorandum (collectively, the "Transaction Documents") and to issue, sell and
deliver the Shares and to issue and deliver the Agent's Securities (as defined
below). Each of the Transaction Documents has been duly authorized. This
Agreement has been duly executed and delivered and constitutes, and each of the
other Transaction Documents, upon due execution and delivery, will constitute,
valid and binding obligations of the Company, enforceable against the Company in
accordance with their respective terms except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium, and other laws of general
application affecting enforcement of creditors' rights generally, (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief, or other equitable remedies, and (iii) to the extent the indemnification
provisions contained in the Transaction Documents may be limited by applicable
federal or state securities laws.
(e) None of the execution and delivery of, or performance by the Company under
any of the Transaction Documents or the consummation of the transactions herein
or therein contemplated conflicts with or violates, or will result in the
creation or imposition of, any lien, charge or other encumbrance upon any of the
assets of the Company under any agreement or other instrument to which the
Company is a party or by which the Company or its assets may be bound, or any
term of the charter or by-laws of the Company, or any license, permit, judgment,
decree, order, statute, rule or regulation applicable to the Company or any of
its assets.
(f) The Company has authorized and outstanding capital stock as set forth under
the heading "Capitalization" in the Memorandum. All outstanding shares of
capital stock of the Company are duly authorized, validly issued and
outstanding, fully paid and nonassessable. Except as set forth in the
Memorandum: (i) there are no outstanding options, stock subscription agreements,
warrants or other rights permitting or requiring the Company or others to
purchase or acquire any shares of capital stock or other equity securities of
the Company or to pay any dividend or make any other distribution in respect
thereof, (ii) there are no securities issued or outstanding which are
convertible into or exchangeable for any of the foregoing and there are no
contracts, commitments or understandings, whether or not in writing, to issue or
grant any such option, warrant, right or convertible or exchangeable security;
(iii) no shares of stock or other securities of the Company are reserved for
issuance for any purpose; (iv) there are no voting trusts or other contracts,
commitments, understandings, arrangements or restrictions of any kind with
respect to the ownership, voting or transfer of shares of stock or other
securities of the Company, including without limitation, any preemptive rights,
rights of first refusal, proxies
or similar rights and (v) no person holds a right to require the Company to
register any securities of the Company under the Act or to participate in any
such registration. The issued and outstanding shares of capital stock of the
Company conform to all statements in relation thereto contained in the
Memorandum and the Memorandum describes all material terms and conditions
thereof All issuances by the Company of its securities were exempt from
registration under the Act and any applicable state securities laws.
(g) The Shares and the Agent's Shares (as defined below) have been duly
authorized and, when issued and delivered against payment therefor as provided
in the Transaction Documents, will be validly issued, fully paid and
nonassessable, and will be free and clear of all liens, charges, restrictions,
claims and encumbrances imposed by or through the Company other than as provided
in the Transaction Documents and under applicable state and federal securities
laws. No holder of any of the Shares or the Agent's Securities (as defined
below) will be subject to personal liability solely by reason of being such a
holder, and none of the Shares or the Agent's Securities are subject to
preemptive or similar rights of any shareholder or securityholder of the Company
or an adjustment under the anti-dilution or exercise rights of any holders of
any outstanding shares of capital stock, options, warrants or other rights to
acquire any securities of the Company. A sufficient number of authorized but
unissued shares of Common Stock have been reserved for issuance upon the
exercise of the Agent's Warrants (as defined below).
(h) No consent, authorization or filing of or with any court or governmental
authority is required in connection with the issuance of the Shares or the
Agent's Securities or the consummation of the transactions contemplated herein
or in the other Transaction Documents, except for required filings with the SEC
and applicable "Blue Sky" or state securities commissions relating specifically
to the Offering (all of which filings have been made by, or on behalf of, the
Company, other than those which are required to be made after the First Closing
(as defined below), and which will be duly made on a timely basis).
(i) The financial statements, together with the related notes thereto, of the
Company included in the Memorandum present fairly the financial position of the
Company as of the respective dates specified therein and the results of its
operations and changes in financial position for the respective periods covered
thereby, subject in the case of unaudited ' interim financial statements to
normal year-end adjustments. Such financial statements and related notes were
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods indicated, except the unaudited
financial statements may not contain all footnotes required by generally
accepted accounting principles. Except as set forth in such financial statements
or in the Memorandum, the Company has incurred no material liabilities of any
kind, whether accrued, absolute, contingent or otherwise or entered into any
material transactions other than (i) liabilities incurred in the ordinary course
of business subsequent to June 30, 1998, and (ii) obligations under contracts
and commitments incurred in the ordinary course of business and not required
under generally accepted principles to be reflected in the financial statements,
which, in both cases, individually or in the aggregate, are not material to the
financial condition or operating results of the Company. The other financial and
statistical information with respect to the Company and any pro forma
information and related notes included in the Memorandum present fairly the
information shown therein on a basis consistent with the audited and unaudited
financial statements of the Company included in the Memorandum. The Company does
not know of any facts, circumstances or conditions adversely affecting its
operations, earnings or prospects which have not been fully disclosed in the
Memorandum.
0) The conduct of business by the Company as presently and proposed to be
conducted is not subject to continuing oversight, supervision, regulation or
examination by any governmental official or body of the United States or any
other jurisdiction wherein the Company conducts or proposes to conduct such
business, except as described in the Memorandum and except such regulation as is
applicable to commercial enterprises generally. The Company has obtained all
requisite licenses, permits and other governmental authorizations to conduct its
business as presently conducted, the lack of which could materially and
adversely affect the business, properties, prospects or financial condition of
the Company, and the Company believes it can obtain, without undue burden or
expense, any similar authority for the conduct of its business as proposed to be
conducted.
(k) No default by the Company or, to the best knowledge of the Company, any
other party exists in the due performance under any of the agreements referred
to in the Memorandum to which the Company is a party or to which any of its
assets is subject (collectively, the "Company Agreements"). The Company
Agreements are the only material agreements to which the Company is bound or by
which its assets are subject, are accurately and fairly described in the
Memorandum and are in full force and effect in accordance with their respective
terms.
(1) Except as set forth in the Memorandum, there are no actions, proceedings,
claims or investigations before or by any court or governmental authority (or
any state of facts which management of the Company has concluded could give rise
thereto) pending or, to the best knowledge of the Company, threatened against
the Company, or involving its assets or any of its officers or directors which,
if determined adversely to the Company or such officer or director, could result
in any material adverse change in the condition (financial or otherwise) or
prospects of the Company or adversely affect the transactions contemplated by
this Agreement or the other Transaction Documents or the enforceability thereof.
(m) The Company is not in violation of. (i) its charter or by-laws; (ii) any
indenture, mortgage, deed of trust, note or other agreement or instrument to
which the Company is a party or by which it is or may be bound or to which any
of its assets may be subject; (iii) any statute, rule or regulation; or (iv) any
judgment, decree or order applicable to the Company, which violation or
violations individually, or in the aggregate, might result in any material
adverse change in the condition (financial or otherwise) or prospects of the
Company.
(n) The Company does not own any real property in fee simple except as disclosed
in the Memorandum, and the Company has good and marketable title to all property
(real and personal, tangible and intangible) owned by it, free and clear of all
security interests, liens and encumbrances, except such as are described in the
Memorandum.
(o) The Company owns all right, title and interest in, or possesses adequate
and enforceable rights to use, all patents, patent applications, trademarks,
trade names, service marks, copyrights, rights, licenses, franchises, trade
secrets, confidential information, processes and formulations necessary for the
conduct of its business, except as otherwise described in the Memorandum
(collectively, the "Intangibles"). Except as set forth in the Memorandum, to the
best knowledge of the Company, the Company has not infringed upon the rights of
others with respect to the Intangibles and the Company has not received notice
that it has or may have infringed or is infringing upon the rights of others
with respect to the Intangibles, or any notice of conflict with the asserted
rights of others with respect to the Intangibles which could, individually or in
the aggregate, materially and adversely affect the condition (financial or
otherwise) or prospects of the Company. Except as set forth in the Memorandum,
to the best knowledge of the Company, no others have infringed upon the
Intangibles.
(P) Subsequent to the respective dates as of which information is given in the
Memorandum, the Company has operated its business diligently and only in the
ordinary course as theretofore conducted and, except as may otherwise be set
forth in the Memorandum, there has been no: (i) material adverse change in the
condition (financial or otherwise) or prospects of the Company; (ii) transaction
otherwise than in the ordinary course of business; (iii) issuance of any
securities (debt or equity) or any rights to acquire any such securities; (iv)
damage, loss or destruction, whether or not covered by insurance, materially and
adversely affecting any asset or property of the Company; or (v) agreement to
permit any of the foregoing.
(q) The Company has filed, on a timely basis, each Federal, state, local and
foreign tax return which is required to be filed, or has requested an extension
therefor, and has paid all taxes and all related assessments, penalties and
interest to the extent that the same have become due.
(r) The Company is not obligated to pay, and has not obligated the Placement
Agent to pay, a finder's or origination fee in connection with the Offering and
agrees to indemnify the Placement Agent from any such claim made by any other
person. The Company has not offered for sale or solicited offers to purchase the
Units except for negotiations with the Placement Agent. No other person has any
right to participate in any offer, sale or distribution of the Company's
securities to which the Placement Agent's rights, described herein, shall apply.
(s) The Company has and will maintain appropriate casualty and liability
insurance coverage, in scope and amounts reasonable and customary for similar
businesses.
3. PLACEMENT AGENT APPOINTMENT AND COMPENSATION. (a) The Company hereby appoints
the Placement Agent and its selected dealers as its exclusive agent in
connection with the Offering. The Company has not and will not make, or permit
to be made, any offers or sales of the Units other than through the Placement
Agent without its prior written consent. The Placement Agent has no obligation
to purchase any of the Units. The agency of the Placement Agent hereunder shall
continue until the later of the Termination Date or the Final Closing (as
defined below).
(b) The Company has caused to be delivered to the Placement Agent copies of the
Memorandum and has consented, and hereby consents, to the use of such copies for
the purposes permitted by the Act and applicable securities laws, and hereby
authorizes the Placement Agent and its agents, employees and selected dealers to
use the Memorandum in connection with the sale of the Units until the
Termination Date, and no other person or entity is or will be authorized by the
Company to give any information or make any representations other than those
contained in the Memorandum or to use any offering materials other than those
contained in the Memorandum in connection with the sale of the Units.
(c) The Company will cooperate with the Placement Agent by making available to
its representatives such information as may be requested in making a reasonable
investigation of the Company and its affairs and shall provide access to such
employees as shall be reasonably requested. Prior to the First Closing, the
Company shall provide, at its own expense, background checks, credit or similar
reports on such key management persons as the Placement Agent shall reasonably
request. Prior to the First Closing, the Company shall make available to a
credit reporting firm such materials relating to the Company, and shall provide
such firm with access to such employees, as shall be reasonably requested by the
Placement Agent.
(d) The Company shall pay to the Placement Agent a placement fee equal to ten
percent (IO%) of the Offering Price of all the Units sold and for which net
proceeds are disbursed to the Company in the Offering (the "Placement Agent's
Fee") and a non-accountable expense allowance of three percent (3%) of the
Offering Price of all the Units sold and for which net proceeds are disbursed to
the Company in the Offering (the "Expense Allowance"), a non-refundable portion
of which equal to $25,000 has been paid to the Placement Agent, which amount
shall be credited toward the Expense Allowance at the First Closing. Payment of
the proportional amounts of the Placement Agent's Fee and the Expense Allowance
will be made out of the proceeds of subscriptions for the Units sold at each
Closing. The Placement Agent may direct all such amounts to be paid directly
from the escrow account established pursuant to Section 4 hereof.
(e) As additional compensation hereunder, at each Closing (as defined below),
the Company shall sell to the Placement Agent or its designees for an aggregate
purchase price of $1.00, warrants (the "Agent's Warrants") to purchase, at an
exercise price of $ 1.00 per share, a number of shares of Common Stock equal to
twenty percent (20%) of the Shares contained in the Units sold in the Offering
(the "Agent's Shares"; and, collectively
with the Agent's Warrants, the "Agent's Securities"). The Agent's Warrants shall
be exercisable until the later of the date seven years after the date of the
Final Closing or the date which is three years after the closing date of the
initial public offering of the Company's securities within such seven year
period (the "Warrant Exercise Term"). If the Company at any time has any
securities registered under the Act or the Securities Exchange Act of 1934 (the
"1934 Act"), the Company agrees to register the Agent's Securities promptly on
two separate occasions, at the request of the holders of a majority of the
Agent's Securities made at any time during the Warrant Exercise Tenn. The
Company shall pay all expenses, other than underwriters' discounts and
commissions, relating to registering the Agent's Securities covered by the first
request, and the holder(s) of such Agent's Securities shall pay all registration
expenses arising from the second registration. Notwithstanding the foregoing, if
the Company shall furnish to holders of the Agent's Securities requesting a
registration statement pursuant to their demand rights, a certificate signed by
the Chief Executive Officer of the Company stating that, in the good faith
judgment of the Board of Directors of the Company, it would be seriously
detrimental to the Company and its shareholders for such registration statement
to be filed and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer taking action
with respect to such filing for a period of not more than 120 days after receipt
of the request of the holders of the Agent's Securities provided, however, that
the Company may not utilize this right more than once in any twelve-month
period. Prior to the First Closing, the Company and Placement Agent shall enter
into a warrant agreement (the "Warrant Agreement") which shall contain such
terms and other customary provisions including piggyback registration rights and
anti-dilution provisions in form and substance satisfactory to the Placement
Agent and the Company.
(f) In the event that any purchaser of Units subsequently invests in the Company
at any time within the earlier of (i) five years from the later of the
Termination Date or the First Closing (if any) or (ii) the effectiveness of an
initial public offering of the Company's securities, the Company shall pay to
the Placement Agent cash and warrant compensation with respect to such
subsequent investments as it paid with respect to the sale of the Units in the
Offering (I.E., 10% of per share price paid and 20% warrant coverage).
(g) At the First Closing, the Company shall enter into an agreement which will
provide that, in the event of an initial public offering of securities of the
Company or its shareholders, the Placement Agent shall have the right to
participate, at its option, for up to five percent (5%) of such offering
(including any over-allotment option) as a member of the underwriting or selling
group unless such participation unreasonably interferes (in the reasonable
judgment of the underwriters) with the successful completion of such initial
public offering, or in the event of such asserted interference as a member of
the selling group. Additionally, in the event the Placement Agent introduces the
Company to an underwriter (pursuant to the Company's request for such
introduction) which effects an initial public offering of the Company's
securities, upon the closing of such offering, the Placement Agent shall be
entitled to a fee equal to one percent (1%) of the gross proceeds of such
offering. The Placement Agent will, at the request of the Company, document any
such introductions.
(h) At the First Closing, the Company shall enter into a consulting agreement
with the Placement Agent which shall provide that the Company shall pay the
Placement Agent a one-time fee of $30,000, due and payable at the First Closing,
for the Placement Agent's agreement to provide such investment banking advisory
services for two years as the Company may from time to time request, such
services to include advice relating to corporate finance, strategic planning,
financial planning and relationships with banks, securities firms and financial
institutions.
4. SUBSCRIPTION AND CLOSING PROCEDURES. (a) Each prospective purchaser will be
required to complete and execute two copies of the Combined Signature Page to
the Subscription Agreement and Registration Rights Agreement, which agreements
shall be in the forms annexed to the Memorandum ("Subscription Documents"),
which will be forwarded or delivered to the Placement Agent at the Placement
Agent's offices at the address set forth in Section 11I hereof, together with
the subscriber's check or good funds in the full amount of the Offering Price
for the number of Units desired to be purchased.
(b) All funds for subscriptions received from the offering of the Units will be
promptly forwarded by the Placement Agent or the Company, if received by it, to
and deposited into the escrow account (the "Escrow Account") established for
such purpose with United States Trust Company of New York (the "Escrow Agent").
All such funds for subscriptions will be held in the Escrow Account pursuant to
the terms of the Escrow Agreement among the Company, the Placement Agent and the
Escrow Agent. The Company will pay all fees related to the establishment and
maintenance of the Escrow Account. Any interest accruing on funds in the Escrow
Account shall be utilized first to reimburse the Company for such fees and the
balance shall be distributed in equal proportion to the Company and the
Placement Agent. Subject to the receipt of such subscriptions for the Minimum
Amount, the Company will either accept or reject the Subscription Documents in a
timely fashion and at each 'Closing will countersign the Subscription Documents
and provide duplicate copies of such agreements to the Placement Agent for
distribution to the subscribers. The Company will give notice to the Placement
Agent of its acceptance or rejection of each subscription. The Company will
promptly return to subscribers incomplete, improperly completed, improperly
executed and rejected subscriptions and give written notice thereof to the
Placement Agent upon such return.
(c) If subscriptions for at least the Minimum Amount have been accepted prior to
the Termination Date, the funds therefor have been collected by the Escrow Agent
and all of the conditions set forth elsewhere in this Agreement are fulfilled, a
closing shall be held promptly with respect to the Units sold (the "First
Closing"). Thereafter, the remaining Units will continue to be offered and sold
until the Termination Date. Additional closings ("Closings") may from time to
time be conducted at times mutually agreeable with respect to additional Units
sold with the final closing ("Final Closing") to occur not later than IO days
from the earlier of the Termination Date or the sale of all Units offered.
Delivery of payment for the accepted subscriptions for Units from the funds held
in the Escrow Account will be made at each Closing at the Placement Agent's
offices against delivery of the Units by the Company at the address set forth in
Section I I hereof (or at such other
place as may be mutually agreed upon between the Company and the Placement
Agent). Executed certificates for the Shares constituting the Units and the
Agent's Warrants will be in such authorized denominations and registered in such
names as the Placement Agent may request on or before the second full business
day prior to the date of each Closing ("Closing Date"), and will be made
available to the Placement Agent for checking and packaging at the Placement
Agent's office at least one full business day prior thereto.
(d) If Subscription Documents for the Minimum Amount have not been received and
accepted by the Company on or before the Termination Date for any reason, the
Offering will be terminated, no Units will be sold, and the Escrow Agent will,
at the request of the Company and the Placement Agent, cause all monies received
from subscribers for the Units to be promptly returned to such subscribers
without interest, penalty, expense or deduction. Any interest accruing on such
funds shall be distributed as set forth in Section 4(b).
5. FURTHER COVENANTS. The Company hereby covenants and agrees that:
(a) Except with the prior written consent of the Placement Agent, the Company
shall not, at any time prior to the Final Closing, take any action which would
cause any of the representations and warranties made by it in this Agreement not
to be complete and correct on and as of each Closing Date with the same force
and effect as if such representations and warranties had been made on and as of
each such date, including, without limitation, incurring any material
indebtedness, disposing of any material assets or making any material
acquisition or change in its business or operations as described in the
Memorandum.
(b) If, at any time prior to the Final Closing, any event shall, to the
Company's knowledge, occur which does or may materially affect the Company or as
a result of which it might become necessary to amend or supplement the
Memorandum so that the representations and warranties herein remain true, or in
case it shall, in the opinion of counsel to the Placement Agent, be necessary to
amend or supplement the Memorandum to comply with Regulation D or any other
applicable securities laws or regulations, the Company will promptly notify the
Placement Agent and shall, at its sole cost, prepare and furnish to the
Placement Agent copies of appropriate amendments and/or supplements in such
quantities as the Placement Agent may request. The Company will not at any time,
whether before or after the Final Closing, prepare or use any amendment or
supplement to the Memorandum of which the Placement Agent will not previously
have been advised and furnished with a copy, or to which the Placement Agent or
its counsel will have objected in writing or orally (confirmed in writing within
24 hours), or which is not in compliance with the Act, the Regulations and other
applicable securities laws. As soon as the Company is advised thereof, the
Company will advise the Placement Agent and its counsel, and confirm the advice
in writing, of any order preventing or suspending the use of the Memorandum, or
the suspension of the qualification or registration of the Shares for offering
or the suspension of any exemption for such qualification or registration of the
Shares for offering in any jurisdiction, or of the institution or threatened (in
writing) institution of any proceedings for any of such purposes, and the
Company will use its best efforts to prevent the issuance of any such order and,
if issued, to obtain as soon as reasonably possible the lifting thereof.
(c) The Company shall comply with the Act, the Regulations, the Securities
Exchange Act of 1934 and the rules and regulations thereunder, and all
applicable state securities laws and the rules and regulations thereunder in the
states in which counsel to the Company has advised the Company that the Units
are qualified or registered for sale or exempt from such qualification or
registration, so as to permit the continuance of the sales of the Units, and
will file with the SEC, and shall promptly thereafter forward to the Placement
Agent, any and all reports on Form D as are required.
(d) The Company shall use its reasonable best efforts to qualify the Units for
sale under the securities laws of such jurisdictions as may be mutually agreed
to by the Company and the Placement Agent, and the Company will make such
applications and furnish information as may be required for such purposes,
provided that the Company will not be required to qualify as a foreign
corporation in any jurisdiction. The Company will, from time to time, prepare
and file such statements and reports as are or may be required to continue such
qualifications in effect for so long a period as the Placement Agent may
reasonably request. The Company shall pay all filing fees, costs and legal fees
for Blue Sky services and related filings and expenses of counsel with respect
to Blue Sky qualifications.
(e) The Company shall place a legend on the certificates representing the Shares
issued to subscribers stating that the securities evidenced thereby have not
been registered under the Act or applicable state securities laws and setting
forth or referring to the applicable restrictions on transferability and sale of
such securities under the Act and applicable state laws.
(f) The Company shall apply the net proceeds from the sale of the Units to fund
its working capital requirements and for such other purposes as specifically
described under "Use of Proceeds" in the Memorandum. Except as specifically set
forth in the Memorandum, the net proceeds of the Offering shall not be used to
repay indebtedness to officers, directors or shareholders of the Company without
the prior written consent of the Placement Agent.
(g) During the Offering Period, the Company shall make available for review by
prospective purchasers of the Units during normal business hours at the
Company's offices, upon their request, copies of the Company Agreements to the
extent that such shall not violate any obligation on the part of the Company to
maintain the confidentiality thereof. The Company may request that a prospective
purchaser of Units sign a non-disclosure agreement prior to review of any of the
Company Agreements if the Company, in its reasonable judgment, determines that
disclosure thereof to a particular prospective purchaser may be detrimental to
the Company. The Company shall afford each prospective purchaser of Units the
opportunity to ask questions of and receive answers
from an officer of the Company concerning the terms and conditions of the
Offering and the opportunity to obtain such other additional information
necessary to verify the accuracy of the Memorandum to the extent it possesses
such information or can acquire it without unreasonable expense.
(h) Except with the prior written consent of the Placement Agent, the Company
shall not, at any time prior to the Final Closing, engage in or commit to engage
in any transaction outside the ordinary course of business or issue, agree to
issue or set aside for issuance any securities (debt or equity) or any rights to
acquire any such securities except as contemplated by the Memorandum.
(i) For a period of the earlier of five years from the First Closing or the
closing of an initial public offering, the Company shall deliver (i) to the
Placement Agent and the Company's shareholders annual audited financial
statements setting forth fairly the financial position of the Company, (ii) to
the Placement Agent quarterly unaudited financial statements including both a
balance sheet and statement of income (including year over year quarterly
comparisons), (iii) to the Placement Agent and the investors in the Offering a
quarterly report of the progress and status of the Company and an annual report
setting forth clearly the financial position, progress and status of the
Company, (iv) to the Placement Agent a copy of a list of its shareholders as and
when so requested and (v) to the Placement Agent such additional information and
documents concerning the business and financial condition of the Company as the
Placement Agent may from time to time reasonably request.
(j) The Company shall pay all reasonable expenses incurred in connection with
the preparation and printing of all necessary offering documents and instruments
related to the Offering and the issuance of the Shares, the Agent's Shares and
the Agent's Warrants and will also pay the Company's own expenses for accounting
fees, legal fees and other costs involved with the Offering. The Company will
provide at its own expense such quantities of the Memorandum and other documents
and instruments relating to the Offering as the Placement Agent may reasonably
request.
(k) Prior to the Termination Date, neither the Company nor any person or entity
acting on its behalf will negotiate with any other placement agent or
underwriter with respect to a private or public offering of the Company's or any
subsidiary's debt or equity securities. Neither the Company nor anyone acting on
its behalf will, until the Termination Date, without the prior written consent
of the Placement Agent, offer for sale to, or solicit offers to subscribe for,
Units or other securities of the Company from, or otherwise approach or
negotiate in respect thereof with, any other person. Prior to the second
anniversary of the First Closing, and subject to Section 6(i) hereof, the
Company will not, without the Placement Agent's prior written consent, sell any
securities, or any rights to acquire any securities, of the Company (except
pursuant to any existing options, warrants and rights and option plans described
in the Memorandum) at a price less than $ 1.00 per share or create any
additional classes or series of capital stock.
(l) The following officers of the Company will continue in their current
positions following the Offering, and prior to the First Closing, the Company
will enter into employment agreements reasonably acceptable to the Placement
Agent with such persons: Xxxxxx Xxxxxx and Xxxxx Xxxx. Such agreements shall set
forth terms of two (2) years, reasonable compensation and expense provisions,
non-competition agreements and other reasonable terms and conditions. The
Company may establish a management incentive compensation plan reasonably
acceptable to and with the prior written consent of the Placement Agent.
(m) The Company shall secure prior to the First Closing and thereafter maintain
"key man" life insurance for the benefit of the Company in the amount of
$1,000,000 on Xxxxxx Xxxxxx, the President of the Company.
(n) The Placement Agent shall have the right, for a period of the earlier of
five (5) years from the First Closing or the effectiveness of an initial public
offering, to designate one (1) person reasonably acceptable to the Company to
be, at the Placement Agent's sole discretion, a nominee for director of the
Company. The Principal Shareholders (as defined below) at the First Closing
shall agree to vote in favor of such nominee and the Company shall use its best
efforts (which shall include, without limitation, the solicitation of proxies on
behalf of such nominee) to elect such nominee to the Board of Directors. The
Board of Directors shall consist of at least five (5) but not more than seven
(7) directors. The Company further agrees that it shall hold "in person"
directors' meetings no less frequently than quarterly. Notice of regular or
special meetings as may be required to be given to directors by statute or the
Company's bylaws shall be given to the Placement Agent. The Company agrees to
indemnify and hold the Placement Agent harmless against any and all claims,
actions, awards and judgments arising solely out of the attendance and
participation of the Placement Agent's designated nominee at any such meeting
described herein. In the event the Company maintains a liability insurance
policy affording coverage for the acts of its officers and directors, it agrees,
if possible, to include the Placement Agent's designated nominee as an insured
under such policy. For the purposes hereof, a "Principal Shareholder" shall mean
any person, entity or group that beneficially owns, directly or indirectly, five
percent (5%) of the Company's capital stock immediately preceding the First
Closing and all executive officers and directors of the Company.
6. CONDITIONS OF PLACEMENT AGENT'S OBLIGATIONS. The obligations of the Placement
Agent at each Closing hereunder are subject to the fulfillment, at or before
each such Closing, of the following additional conditions:
(a) Each of the representations and warranties of the Company shall be true and
correct when made on the date hereof and on and as of each Closing Date as
though made on and as of each Closing Date.
(b) The Company shall have performed and complied with all agreements, covenants
and conditions required to be performed and complied with by it under the
Transaction Documents at or before each Closing.
(c) No order suspending the use of the Memorandum or enjoining the offering or
sale of the Units shall have been issued, and no proceedings for that purpose or
a similar purpose shall have been initiated or pending, or, to the best of the
Company's knowledge, are contemplated or threatened.
(d) As of the First Closing, the Company will have an authorized capitalization
of not more than 50,000,000 shares of Common Stock and 5,000,000 shares of
preferred stock, no par value, of which not more than 7,028,500 shares of Common
stock shall be issued and outstanding or issuable under any convertible or
exchangeable securities, options, warrants or similar rights outstanding or
reserved for issuance (excluding (i) up to 475,000 shares issuable upon
conversion of the Convertible Note (as defined in the Memorandum), (ii) up to
300,000 shares issuable upon conversion of the Notes (as defined in the
Memorandum) and (iii) up to 150,000 shares issuable upon exercise of warrants
issued to Xxxxxx Xxxxxx and Xxxxxxx Xxxxx Investors on the date hereof). No
shares of preferred stock shall be issued and outstanding or issuable under
securities or rights.
(e) The Placement Agent shall have received certificates of the Chief Executive
Officer and Chief Financial Officer of the Company, dated as of each Closing
Date, certifying, in such detail as the Placement Agent may reasonably request,
as to the fulfillment of the conditions set forth in subparagraphs (a), (b), (c)
and (d) above.
(f) The Company shall have delivered to the Placement Agent a certificate
regarding incumbency of officers and the following (i) a currently dated good
standing certificate from the secretary of state of its jurisdiction of
incorporation and (ii) certified copies of the Company's bylaws and resolutions
of the Company's Board of Directors approving this Agreement and the other
Transaction Documents, and the transactions and agreements contemplated by this
Agreement and the other Transaction Documents.
(g) On or prior to the date hereof and at each Closing, the independent auditors
for the Company shall have provided a letter confirming such matters as the
Placement Agent may reasonably request; and (ii) the Chief Executive Officer and
the Chief Financial Officer of the Company shall have provided a certificate to
the Placement Agent confirming that there have been no material and adverse
changes in the condition (financial or otherwise) or prospects of the Company
from the date of the financial statements included in the Memorandum, the
absence of undisclosed liabilities and such other matters relating to the
financial condition and prospects of the Company that the Placement Agent may
reasonably request.
(h) At each Closing, the Company shall have (i) paid to the Placement Agent, the
Placement Agent's Fee and the Expense Allowance as set forth in Section 3(d)
hereof and (iii) executed and delivered to the Placement Agent the Agent's
Warrants in an amount equal to twenty percent (20%) of the Shares contained in
the Units sold.
(i) On or prior to the First Closing, each of the Company's officers, directors
and shareholders owning, beneficially or of record, five percent (5%) or more of
the Common
Stock outstanding immediately prior to the First Closing shall have agreed in
writing not to sell, transfer or otherwise dispose of more than fifteen percent
(15%) of the Company's securities beneficially owned by them or issuable to them
pursuant to the exercise of options, warrants or conversion of other securities
without the Placement Agent's prior written consent, which consent shall not be
unreasonably withheld, until the second anniversary of the First Closing, except
that such persons may make transfers to a parent, spouse, sibling or descendent,
or to a trust for the benefit of any of the foregoing persons; provided,
however, that such transfers shall be subject to this Section 6(i) and that the
Placement Agent may require that any such permitted transfer be made subject to
a voting agreement pursuant to which the transferring shareholder retains the
right to vote all transferred shares until the second anniversary of the First
Closing. In addition, if within two years of the First Closing, the Company
registers any of its securities under the Act which registration is effective,
the officers, directors and present shareholders and any permitted transferees
will extend the terms of the "lock-up" set forth in this Section 6(i) for a
period of twelve months from completion of the offering contemplated thereby or
such longer or shorter period as the underwriter shall require; provided,
however, that in the event that such registration is an underwritten
registration and the underwriter shall agree, the Company may permit such
officers, directors and present shareholders to sell shares in such offering
subject to the rights of investors under the Registration Rights Agreement.
(j) There shall have been delivered to the Placement Agent a signed opinion of
counsel to the Company, dated as of each Closing Date, substantially in the form
of Exhibit A hereto and otherwise in form and substance satisfactory to counsel
to the Placement Agent.
(k) All proceedings taken at or prior to each Closing in connection with the
authorization, issuance and sale of the Units and the Agent's Warrants will be
reasonably satisfactory in form and substance to the Placement Agent and its
counsel, and such counsel shall have been furnished with all such documents,
certificates and opinions as they may reasonably request upon reasonable prior
notice in connection with the transactions contemplated hereby.
(l) On or prior to the First Closing, the Principal Shareholders shall agree to
vote their shares of Common Stock in favor of any directors nominated by the
investors in the Offering pursuant to Section 9 of the Subscription Agreement at
any meeting of the Company's shareholders or pursuant to any written consent in
which the election of such directors is submitted to a vote of the Company's
shareholders (and to remove directors as necessary to create vacancies
therefor). The obligations of the Principal Shareholders under this Section 6(l)
shall terminate upon the registration of each such investor's shares pursuant to
the Registration Rights Agreement; provided that an investor's shares shall be
deemed to be so registered if such investor elects not to include shares in any
registration statement in which such shares are entitled to be included pursuant
to the Registration Rights Agreement. Additionally, on or prior to the First
Closing, the Principal Shareholders shall agree to vote in favor of the
Placement Agent's nominee to the Board of Directors.
7. INDEMNIFICATION. (a) The Company will (i) indemnify and hold harmless the
Placement Agent, its selected dealers and their respective officers, directors,
employees and each person, if any, who controls the Placement Agent within the
meaning of the Act and such selected dealers (each an "Indemnitee") against, and
pay or reimburse each Indemnitee for, any and all losses, claims, damages,
liabilities or expenses whatsoever (or actions or proceedings or investigations
in respect thereof), joint or several (which will, for all purposes of this
Agreement, include, but not be limited to, all costs of defense and
investigation and all reasonable attorneys' fees, including appeals), to which
any Indemnitee may become subject, under the Act or otherwise, in connection
with the offer and sale of the Units, whether such losses, claims, damages,
liabilities or expenses shall result from any claim of any Indemnitee or any
third party; and (ii) reimburse each Indemnitee for any legal or other expenses
reasonably incurred in connection with investigating or defending against any
such loss, claim, action, proceeding or investigation; provided, however, that
the Company will not be liable in any such case to the extent that any such
loss, claim, damage, liability or expense results from (A) an untrue statement
or alleged untrue statement of a material fact made in the Memorandum, or an
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, in
reliance upon and in conformity with written information furnished to the
Company by the Placement Agent or any such controlling persons specifically for
use in the preparation thereof, or (B) any violations by the Placement Agent of
the Act or state securities laws which does not result from a violation thereof
by the Company or any of its affiliates. In addition to the foregoing agreement
to indemnify and reimburse, the Company will indemnify and hold harmless each
Indemnitee against any and all losses, claims, damages, liabilities or expenses
whatsoever (or actions or proceedings or investigations in respect thereof),
joint or several (which shall for all purposes of this Agreement, include, but
not be limited to, all costs of defense and investigation and all reasonable
attorneys' fees, including appeals) to which any Indemnitee may become subject
insofar as such costs, expenses, losses, claims, damages or liabilities arise
out of or are based upon the claim of any person or entity that he or it is
entitled to broker's or finder's fees from any Indemnitee in connection with the
Offering. The foregoing indemnity agreements will be in addition to any
liability which the Company may otherwise have.
(b) The Placement Agent will indemnify and hold harmless the Company, its
officers, directors, employees and each person, if any, who controls the Company
within the meaning of the Act against, and pay or reimburse any such person for,
any and all losses, claims, damages or liabilities or expenses whatsoever (or
actions, proceedings or investigations in respect thereof) to which the Company
or any such person may become subject, under the Act or otherwise, whether such
losses, claims, damages, liabilities or expenses shall result from any claim of
the Company, any of its officers, directors, employees, any person who controls
the Company within the meaning of the Act or any third party, insofar as such
losses, claims, damages or liabilities are based upon any untrue statement or
alleged untrue statement of any material fact contained in the Memorandum, but
only with reference to information contained in the Memorandum relating to the
Placement Agent fumished in writing to the Company by the Placement Agent,
specifically
for use in the preparation thereof. The Placement Agent will reimburse the
Company or any such person for any legal or other expenses reasonably incurred
in connection with investigating or defending against any such loss, claim,
damage, liability or action, proceeding or investigation to which such indemnity
obligation applies. The foregoing indemnity agreements will be in addition to
any liability which the Placement Agent may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section 7 of
notice of the commencement of any action, claim, proceeding or investigation
("Action"), such indemnified party, if a claim in respect thereof is to be made
against the indemnifying party under this Section 7, will notify the
indemnifying party of the commencement thereof, but the omission to so notify
the indemnifying party will not relieve it from any liability which it may have
to any indemnified party under this Section 7 except to the extent the
indemnifying party has been substantially prejudiced by such omission. The
indemnifying party will be entitled to participate in, and, to the extent that
it may wish, jointly with any other indemnifying party, to assume the defense
thereof subject to the provisions herein stated, with counsel reasonably
satisfactory to such indemnified party. The indemnified party will have the
right to employ separate counsel in any such Action and to participate in the
defense thereof, but the fees and expenses of such counsel will not be at the
expense of the indemnifying party if the indemnifying party has assumed the
defense of the Action with counsel reasonably satisfactory to the indemnified
party, provided, however, that if the indemnified party shall be requested by
the indemnifying party to participate in the defense thereof or shall have
concluded in good faith and specifically notified the indemnifying party either
that there may be specific defenses available to it which are different from or
additional to those available to the indemnifying party or that such Action
involves or could have a material adverse effect upon it with respect to matters
beyond the scope of the indemnity agreements contained in this Agreement, then
the counsel representing it, to the extent made necessary by such defenses,
shall have the right to direct such defenses of such Action on its behalf and in
such case the fees and expenses of such counsel in connection with any such
participation or defenses shall be paid by the indemnifying party. No settlement
of any Action against an indemnified party will be made without the consent of
the indemnifying party and the indemnified party, which consent shall not be
unreasonably withheld or delayed in light of all factors of importance to such
party and no indemnifying party shall be liable to indemnify any person for any
settlement of any such claim effected without such indemnifying party's consent.
8. CONTRIBUTION. To provide for just and equitable contribution, if (i) an
indemnified party makes a claim for indemnification pursuant to Section 7 hereof
and it is finally determined, by a judgment, order or decree not subject to
further appeal that such claims for indemnification may not be enforced, even
though this Agreement expressly provides for indemnification in such case; or
(ii) any indemnified or indemnifying party seeks contribution under the Act, the
1934 Act, or otherwise in a situation in which it would be entitled to
indemnification under Section 7, then each indemnifying party shall contribute
to such amount paid or payable by such indemnified party in such proportion as
is appropriate to reflect not only such relative benefits but also the relative
fault of the
Company on the one hand and the Placement Agent on the other in connection with
the statements or omissions which resulted in such losses, claims, damages,
liabilities or expenses (or actions in respect thereof), 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 shall be deemed to be in
the same proportion as the total net proceeds from the Offering (before
deducting expenses) received by the Company bear to the total commissions and
fees received by the Placement Agent. The relative fault, in the case of an
untrue statement, alleged untrue statement, omission or alleged omission will be
determined by, among other things, whether such statement, alleged statement,
omission or alleged omission relates to information supplied by the Company or
by the Placement Agent, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement, alleged
statement, omission or alleged omission. The Company and the Placement Agent
agree that it would be unjust and inequitable if the respective obligations of
the Company and the Placement Agent for contribution were determined by pro rata
allocation of the aggregate losses, liabilities, claims, damages and expenses or
by any other method or allocation that does not reflect the equitable
considerations referred to in this Section 8. No person guilty of a fraudulent
misrepresentation (within the meaning of Section 11 (f) of the Act) will be
entitled to contribution from any person who is not guilty of such fraudulent
misrepresentation. For purposes of this Section 8, each person, if any, who
controls the Placement Agent within the meaning of the Act will have the same
rights to contribution as the Placement Agent, and each person, if any, who
controls the Company within the meaning of the Act will have the same rights to
contribution as the Company, subject in each case to the provisions of this
Section 8. Anything in this Section 8 to the contrary notwithstanding, no party
will be liable for contribution with respect to the settlement of any claim or
action effected without its written consent. This Section 8 is intended to
supersede, to the extent permitted by law, any right to contribution under the
Act, the 1934 Act or otherwise available.
9. TERMINATION. (a) The Offering may be terminated by the Placement Agent at any
time prior to the expiration of the Offering Period as contemplated in Section
1(b) hereof ("Expiration Date") in the event that (i) any of the representations
or warranties of the Company contained herein, in the Memorandum or in any other
Transaction Document shall prove to have been false or misleading in any
material respect when made or deemed made, (ii) the Company shall have failed to
perform any of its material obligations hereunder, (iii) the Placement Agent
shall determine that it is reasonably likely that any of the conditions to
Closing set forth herein will not, or cannot, be satisfied or (iv) there shall
occur any event which could adversely affect the transactions contemplated
hereby or the other Transaction Documents or the ability of the parties to
perform thereunder. In the event of any such termination occasioned by or
arising out of or in connection with any breach or failure hereunder on the part
of the Company, the Placement Agent shall be entitled to receive, in addition to
other rights and remedies it may have hereunder, at law or otherwise, an amount
equal to the sum of. (A) all Placement Agent's Fees earned through the
Termination Date, (B) up to $75,000 of the Expense Allowance, including any
non-refundable amounts referred to in Section 3(d) hereof, (C) all amounts which
may become payable pursuant to Section 3(f) hereof and (D) in the event that the
Company is
sold, merged or otherwise acquired, or the Company enters into a letter of
intent or completes a public or private offering of its securities within one
year from the Termination Date, an investment banking fee equal to the lesser of
(i) $300,000 or (ii) five percent (5%) of the total consideration received by
the Company and/or its shareholders in connection with such sale, merger,
acquisition or sale of securities. In the event of any such termination by the
Placement Agent as a result of any event described in clause (iii) or (iv)
above, or pursuant to Section 4(d) hereof, not occasioned by or arising out of
or in connection with any breach or failure hereunder by the Company, the
Placement Agent will be entitled to receive the sum of all Placement Agent's
Fees earned through the Termination Date, the non-refundable portion of the
Expense Allowance and the amounts set forth in clauses (C) and (D) of this
Section 9(a).
(b) This Offering may be terminated by the Company at any time prior to the
Expiration Date in the event that (i) the Placement Agent shall have failed to
perform any of its material obligations hereunder or (ii) there shall occur any
event described in Section 9(a)(iv) above not occasioned by or arising out of or
in connection with any breach or failure hereunder on the part of the Company.
In the event of any termination by the Company pursuant to clause (i) above, the
Placement Agent shall be entitled to retain the non-refundable portions of the
Expense Allowance, but shall be entitled to no other amounts whatsoever except
as may be due under any indemnity or contribution obligation provided herein or
any other Transaction Document, at law or otherwise. In the event of any
termination by the Company pursuant to clause (ii) above, the provisions of the
last sentence of Section 9(a) hereof shall apply.
(c) Upon any such termination, the Escrow Agent will, at the request of the
Placement Agent, cause all monies held by it in respect of subscriptions for
Units to be promptly returned to such subscribers without interest, penalty,
expense or deduction. Any interest earned thereon shall be applied (i) first to
the payment of amounts, if any, due to the Escrow Agent, (ii) second to the
payment of any amounts payable to the Placement Agent hereunder which remain
unpaid and (iii) third, in equal amounts to the Company and the Placement Agent.
10. SURVIVAL. (a) The obligations of the parties to pay any costs and expenses
hereunder and to provide indemnification and contribution as provided herein
shall survive any termination hereunder.
(b) The respective indemnities, agreements, representations, warranties and
other statements of the Company set forth in or made pursuant to this Agreement
will remain in full force and effect, regardless of any investigation made by or
on behalf of, and regardless of any access to information by, the Company or the
Placement Agent, or any of their officers or directors or any controlling person
thereof, and will survive the sale of the Units.
II. NOTICES. All communications hereunder will be in writing and, except as
otherwise expressly provided herein or after notice by one party to the other of
a change of address,
if sent to the Placement Agent, will be mailed, delivered or telefaxed and
confirmed to Xxxxxxx Xxxxx Securities Incorporated, 000 Xxxxxxx Xxxxxx, 00xx
Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxxxxx Xxxxxxxxx, Telefax number
(000) 000-0000, with a copy to Xxxxxxx, Calamari & Xxxxxxx, I 00 Xxxx Xxxxxx,
Xxx Xxxx, XX 100 1 7, Attn: Xxxxxxx X. Xxxxxxxxxx, Esq., Telefax number (212)
213-1199 and if sent to the Company, will be mailed, delivered or telefaxed and
confirmed to GraphOn Corporation, 000 Xxxxxxxx Xxxxxx, Xxxxxxxx, XX 00000, Attn:
Xxxxxx Xxxxxx, Telefax number (000) 000-0000, with a copy to Xxxxxxx, Phleger &
Xxxxxxxx LLP, Two Embarcadero Place, 0000 Xxxx Xxxx, Xxxx Xxxx, Xxxxxxxxxx
00000-0000, Attn:'Xxxxxx X. Xxxxxxxxxx, Esq., Telefax number (000) 000-0000.
12. APPLICABLE LAW, COSTS, ETC. THIS AGREEMENT WILL BE GOVERNED BY, CONSTRUED
AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE. IN THE EVENT THAT
EITHER PARTY INSTITUTES A LEGAL PROCEEDING PRIOR TO THE FIRST CLOSING, SUCH
PROCEEDING MUST BE INSTITUTED IN A COURT IN THE STATE OF CALIFORNIA, COUNTY OF
SANTA XXXXX. IN THE EVENT EITHER PARTY INSTITUTES A LEGAL PROCEEDING AFTER THE
FIRST CLOSING, SUCH PROCEEDING MUST BE INSTITUTED IN EITHER THE STATE OF
CALIFORNIA, COUNTY OF SANTA XXXXX, OR THE STATE OF NEW YORK, NEW YORK COUNTY, AT
THE CHOICE OF THE PARTY INSTITUTING THE PROCEEDING. SUBJECT TO THE FOREGOING,
(A) THE COMPANY HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY NEW YORK
STATE OR UNITED STATES FEDERAL COURT SITTING IN NEW YORK COUNTY AND (B) THE
PLACEMENT AGENT HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY CALIFORNIA
STATE OR UNITED STATES FEDERAL COURT SITTING IN THE COUNTY OF SANTA XXXXX OVER
ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY
AGREEMENT CONTEMPLATED HEREBY, AND THE COMPANY AND THE PLACEMENT AGENT,
RESPECTIVELY, EACH HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH
ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK OR CALIFORNIA
STATE OR FEDERAL COURTS. SUBJECT TO THE SECOND AND THIRD SENTENCES OF THIS
PARAGRAPH, EACH OF THE COMPANY AND THE PLACEMENT AGENT FURTHER WAIVES ANY
OBJECTION TO VENUE IN SUCH STATE AND ANY OBJECTION TO AN ACTION OR PROCEEDING IN
SUCH STATE ON THE BASIS OF A NON-CONVENIENT FORUM. EACH OF THE COMPANY AND THE
PLACEMENT AGENT FURTHER AGREES THAT ANY ACTION OR PROCEEDING BROUGHT AGAINST THE
OTHER PARTY HERETO SHALL BE BROUGHT ONLY IN THE COURTS AS SPECIFIED IN THE
SECOND AND THIRD SENTENCES OF THIS PARAGRAPH. SERVICE OF PROCESS MAY BE MADE
UPON THE COMPANY OR THE PLACEMENT AGENT BY MAILING A COPY THEREOF TO IT, BY
CERTIFIED OR REGISTERED MAIL, AT ITS ADDRESS TO BE USED FOR THE GIVING OF
NOTICES UNDER THIS AGREEMENT. THE COMPANY AND THE PLACEMENT AGENT EACH HEREBY
WAIVES ITS RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING
OUT OF THIS AGREEMENT OR ANY DOCUMENT OR AGREEMENT CONTEMPLATED HEREBY. THE
PLACEMENT AGENT OR THE COMPANY, AS THE CASE MAY BE, SHALL BE ENTITLED TO COSTS
AND REASONABLE ATTORNEY'S FEES IN THE EVENT IT PREVAILS IN ANY CLAIMS, ACTIONS,
AWARDS OR JUDGMENT UNDER THIS AGREEMENT.
13. CONFIDENTIALITY. The Company hereby agrees to hold confidential the
identities of the Purchasers in the Offering and prospective investors contacted
by the Placement Agent in connection with the Offering, and shall not disclose
their names and addresses without the prior written consent of the Placement
Agent, unless required by law. The Company hereby consents to the granting of an
injunction against it by any court of competent jurisdiction to enjoin it from
violating the foregoing confidentiality provisions. The Company hereby agrees
that the Placement Agent will not have an adequate remedy at law in the event
that the Company breaches the confidentiality provisions contained herein and
that the Placement Agent will suffer irreparable damage and injury as a result
of any such breach. Resort to such equitable relief shall not, however, be
construed to be a waiver of any other rights or remedies which the Placement
Agent may have.
14. PLACEMENT AGENT REPRESENTATION. The Placement Agent is in compliance in all
material respects with all applicable federal and state securities laws and
rules and regulations of the National Association of Securities Dealers, Inc.
with which it must comply to perform its obligations hereunder.
15. MISCELLANEOUS. No provision of this Agreement may be changed or terminated
except by a writing signed by the party or parties to be charged therewith.
Unless expressly so provided, no party to this Agreement will be liable for the
performance of any other party's obligations hereunder. Any party hereto may
waive compliance by the other with any of the terms, provisions and conditions
set forth herein; provided, however that any such waiver shall be in writing
specifically setting forth those provisions waived thereby. No such waiver shall
be deemed to constitute or imply waiver of any other term, provision or
condition of this Agreement. This Agreement contains the entire agreement
between the parties hereto and is intended to supersede any and all prior
agreements between the parties relating to the same subject matter. This
Agreement may be executed in counterparts, each of which shall be deemed an
original and all of which shall constitute a single agreement.
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return this Agreement, whereupon it will become a
binding agreement between the Company and the Placement Agent in accordance with
its terms.
Very truly yours,
GRAPHON CORPORATION
-------------------------------
By: Xxxxxx Xxxxxx
Its: President
Accepted and agreed to this
2nd day of September, 1998.
XXXXXXX XXXXX SECURITIES INCORPORATED
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By:
Its:
