EXHIBIT 10.1
As of May 10, 199
Barber & Bronson Incorporated
2101 West Commercial Boulevard
Suite 1500
Fort Lauderdale, Florida 33309
Ladies and Gentlemen:
CPI Aerostructures, Inc., a New York corporation (the "Company"),
hereby confirms its agreement with you (the "Placement Agent") as follows:
I. Description of Transaction. The Company proposes to issue and sell
through the Placement Agent, in a transaction exempt from registration under the
Securities Act of 1933, as amended (the "Securities Act"), to a limited number
of persons meeting certain criteria for "Accredited Investor" status or other
suitability criteria (as more fully described in the confidential private
placement memorandum and exhibits thereto, as the same may be supplemented from
time to time (the "Memorandum"), 80 units (the "Units"), each consisting of (i)
25,000 shares of the Company's common stock, $.001 par value per share (the
"Common Stock"), and (ii) warrants (the "Warrants") to purchase 12,500 shares of
the Company's Common Stock, at an exercise price of $2.00 per share, on a
"best-efforts, all-or-none" basis, as described in the Memorandum (the
"Placement"). The purchase price for the Units shall be $25,000 per Unit (the
"Offering Price"). The full terms of the Placement, and the securities included
therein and to be received upon exercise thereof, are more fully described in
the Memorandum. The Units, Shares, Warrants and shares of Common Stock issuable
upon exercise of the Warrants are hereinafter collectively referred to as the
"Securities". Capitalized terms not defined herein shall have the meaning set
forth in the Memorandum.
II. Appointment of the Placement Agent. On the basis of the
representations, warranties, covenants and agreements of the Placement Agent
contained herein and subject to the conditions contained herein, the Company
hereby appoints the Placement Agent as its exclusive agent to offer and sell to
qualified investors 80 Units on a "best efforts, all-or-none" basis, until the
earlier of (i) the date on which all of the Units from the Placement have been
sold; or (ii) August 10, 1996 (the "Offering Termination Date") unless (A)
extended by the mutual written agreement of the Company and Placement Agent for
an additional forty-five (45) days; or (B) terminated earlier, at any time, by
mutual written agreement of the Company and the Placement Agent (the "Offering
Expiration Date"). The Placement Agent, on the basis of the representations,
warranties, covenants and agreements of the Company contained herein, and
subject to the conditions contained herein, accepts such appointment and agrees
to use its best efforts to sell the Units. It is understood that the Placement
Agent has no commitment to sell the Units other than to use its best efforts.
III. Purchase, Sale and Delivery of Units. On the basis of the
representations and
warranties contained herein, and subject to the terms and conditions set forth
herein, the parties agree that:
1. Regulation D Placement. Neither the offer nor the sale of
the Units has been or will be registered with the Securities and Exchange
Commission ("SEC"). The Units will be offered and sold in reliance upon the
exemption from registration provided by Regulation D ("Reg D") adopted under the
Securities Act, and will only be sold to "Accredited Investors" as such term is
defined under Reg D; the Units will be offered for sale only in states in which
the Units have been qualified or registered for sale or are exempt from such
qualification or registration and the conditions for such exemption have been
met; and the Company will provide the Placement Agent for delivery to all
offerees and purchasers and their representatives, if any, with any information,
documents and instruments which the Placement Agent and the Company deem
necessary to comply with the rules, regulations and judicial and administrative
interpretations concerning compliance with applicable federal and state statutes
and regulations.
2. Subscription for Units. Subscription for Units shall occur
by execution and delivery by the subscriber (the "Subscriber") of a subscription
agreement (the "Subscription Agreement") in the form annexed to the Memorandum,
together with such other documents and instruments as are set forth in the
Memorandum and payment of the required subscription amount all in accordance
with the terms of the Subscription Agreement.
3. Distribution of Proceeds; Closing; Termination of
Placement. The proceeds of the Placement will be held in a segregated
interest-bearing escrow account at a bank selected by the Placement Agent until
such funds are released to the Company at the closing of the Placement (the
"Closing Date"). The Company shall deliver to the Placement Agent on the Closing
Date, on behalf of the Subscribers, the certificates evidencing the Shares and
Warrants against payment therefor, after deducting the amounts set forth in
Section 4 below.
4. Registration Rights. The Company will file by September 5,
1996 a Registration Statement with the SEC for the purpose of registering the
Securities. The investors in the Placement will be granted demand registration
rights on two occasions and "piggy back" registration rights at any time from
the Closing Date and for a period of five years thereafter and on such other
specific terms as the Placement Agent and its counsel deem appropriate. The
Company shall bear all expenses incurred in the preparation and filing of such
registration statements or post-effective amendments thereto (and related state
registrations, to the extent permitted by applicable law) and the furnishing of
copies of the preliminary and final prospectus thereof to the Placement Agent
and such holders of securities, other than expenses of the Placement Agent's
counsel, and other than sales commissions incurred by the then holders with
respect to the sale of such securities.
IV. Compensation of Placement Agent.
1. As compensation for its services rendered as Placement
Agent under this Agreement, the Placement Agent shall receive: (i) a sales
commission equal to 10% of the gross proceeds from the sale of the Units,
payable by deducting the sales commission from such gross
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proceeds on the Closing Date; and (ii) a non-accountable expense allowance equal
to 3% of the gross proceeds from the sale of the Units, of which the sum of
$20,000 has already been paid and the balance of which shall be payable upon
Closing.
2. Placement Agent's Units. In addition, on the Closing Date,
the Company will sell to the Placement Agent or its designee five-year warrants
(the "Placement Agent's Warrants") for an aggregate price of $100 for the
purchase of 8 Units at an exercise price of $25,000 per unit (the "Placement
Agent's Units"). Each Placement Agent's Unit shall consist of 25,000 shares of
Common Stock and Warrants to purchase 12,500 shares of the Company's Common
Stock (the "Underlying Warrants"). The Placement Agent's Units and the
securities included therein may be transferable to shareholders, directors,
officers, employees or partners of the Placement Agent.
At any time during the term of the Placement Agent's Warrants,
other than a time when the Warrant Securities (as defined below) are already
covered for sale or resale by an effective and current registration statement
that permits the method of distribution desired by the holders thereof, the
Placement Agent or the then holders of the securities issued upon the exercise
of the Placement Agent's Warrants (collectively, the "Warrant Securities"),
shall have the right to require the Company (i) upon written request of a
majority of the Warrant Securities, to prepare and file with the SEC up to two
new registration statements under the Securities Act (the "Demand Registration
Rights"), covering all or any portion of the Warrant Securities and to use its
best efforts to obtain promptly and maintain the effectiveness thereof for at
least one hundred twenty (120) days, or upon the request of any holder of
Warrant Securities to include the securities included in the Placement Agent's
Units and underlying the Placement Agent's Warrants in any Registration
Statement filed by the Company and (ii) to register or qualify the subject
Warrant Securities for sale in up to ten (10) states identified by the Placement
Agent or such holders. The Company shall bear all expenses incurred in the
preparation and filing of such registration statements or post-effective
amendments thereto (and related state registrations, to the extent permitted by
applicable law) and the furnishing of copies of the preliminary and final
prospectus thereof to the Placement Agent or such holders of Warrant Securities,
other than expenses of the Placement Agent's counsel, and other than sales
commissions incurred by the then holders with respect to the sale of such
securities. Notwithstanding anything contained herein to the contrary, with
respect to Demand Registration Rights, the Company shall only be obligated to
bear all of such expenses with respect to the first Demand Registration Right
requested by a majority of the then holders of the Warrant Securities, provided
that with respect to any second Demand Registration Right, the expenses shall be
borne by the holders of the Warrant Securities included thereunder on a pro-rata
basis with the expenses to be borne by the Company with respect to any
securities included therein on behalf of the investors in the Placement, as
described above, and which pro-rata allocation shall be based on the percentage
of shares (including derivative securities) being registered thereunder.
V. Representations and Warranties of the Company. The Company
represents and warrants to the Placement Agent that:
1. Memorandum. The Company has prepared, or will by the
commencement of the Placement have prepared, the Memorandum, which contains
information, accurate as of the date specified therein, of the kind specified by
applicable statutes and regulations. The
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Memorandum, as of its date and at all times subsequent thereto up to and
including the Closing Date, does not and will not include any untrue statement
of a material fact, or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading.
2. Additional Information. The Company has provided, and shall
provide to the Placement Agent, such information, documents and instruments as
may be required under Reg D for an offer made to qualified investors pursuant to
Reg D.
3. Reg D Qualification. The Company has used its best efforts
to ensure that the offer and sale of the Units by the Company has satisfied, and
on the Closing Date will have satisfied, in all material respects, all of the
requirements of Reg D; the Units are not disqualified from the exemption under
Rule 505 contained in Reg D by virtue of the disqualifications contained in Rule
505(b)(2)(iii), except that no representation or warranty is made hereunder by
the Company as to any disqualification based upon Rule 262(b) and (c) of
Regulation A as it may be applied to the Placement Agent.
4. Organization and Good Standing. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of New York, with full power and authority to own or lease and
operate its properties and to conduct its business as described in the
Memorandum and to execute, deliver and perform this Agreement and to consummate
the transactions contemplated hereby. The Company is duly qualified to do
business as a foreign corporation and is in good standing in all jurisdictions
where such qualification is necessary and where failure to so qualify could have
a material adverse effect on the financial condition, results of operations,
business or properties of the Company. The Company has no subsidiaries or
predecessors.
5. Corporate Authorization. This Agreement has been duly
executed and delivered by the Company and constitutes the valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms except as such enforceability may be limited by applicable bankruptcy,
insolvency, moratorium, or other similar laws or arrangements affecting
creditors' rights generally and subject to principles of equity and public
policy considerations, including with respect to indemnification and
contribution for liabilities under the Securities Act and the Securities
Exchange Act of 1934 (the "Exchange Act"). The execution, delivery and
performance of this Agreement by the Company, the consummation by the Company of
the transactions herein contemplated, and the compliance by the Company with the
terms of this Agreement have been duly authorized by all necessary corporate
action and do not and will not, with or without the giving of notice or the
lapse of time, or both: (i) result in any violation of the Certificate of
Incorporation, as amended ("Certificate of Incorporation"), or Amended and
Restated Bylaws ("Bylaws") of the Company; (ii) result in a material breach of
or material conflict with any of the terms or provisions of, or constitute a
default under, or result in the modification or termination of, or result in the
creation or imposition of any lien, security interest, charge or encumbrance
upon any of the properties or assets of the Company pursuant to any indenture,
mortgage, note, contract, commitment or other agreement or instrument to which
the Company is a party or by which the Company or any of its properties or
assets are or may be bound or affected;
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(iii) violate any existing applicable law, rule, regulation, judgment, order or
decree of any governmental agency or court, domestic or foreign, having
jurisdiction over the Company or any of its properties or business except for
violations which, individually, or in the aggregate, would not have a material
adverse effect on the financial condition, results of operations, business or
properties of the Company; or (iv) have any effect on any permit, certification,
registration, approval, consent, license or franchise necessary for the Company
to own or lease and operate its properties and to conduct its business.
6. Consents. No authorization, approval, consent, order,
registration, license or permit of any court or governmental agency or body,
other than under the Securities Act, the rules and regulations of the Commission
promulgated pursuant thereto (the "Regulations"), and the rules and regulations
of the state securities laws of the states in which offers or sales will be
made, is required for the valid authorization, issuance, sale and delivery of
the Securities in accordance herewith or the consummation by the Company of the
transactions contemplated by this Agreement.
7. Capitalization. The Company had at the date or dates
indicated in the Memorandum a duly authorized and outstanding capitalization as
set forth in the Memorandum. Based on the assumptions stated in the Memorandum,
the Company will have on the Closing Date the capitalization set forth therein.
Except as set forth in the Memorandum, on the Closing Date, there will be no
options to purchase, warrants, or other rights to subscribe for securities, or
any securities or obligations convertible into, or any contracts or commitments
to issue or sell, shares of the Company's capital stock or any such warrants,
convertible securities or obligations. Except as set forth in the Memorandum, no
holder of any of the Company's securities has any rights, "demand," "piggyback"
or otherwise, to have such securities registered under the Securities Act.
8. Material Contracts. The descriptions in the Memorandum of
contracts and other agreements of the Company do not include any untrue
statement of material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein in light of the
circumstances in which they are made, not misleading and present fairly the
information required to be disclosed, and there are no material contracts or
other agreements which have not been so described.
9. Financial Statements. Goldstein Golub Kessler & Company,
P.C. the accountants who have audited the financial statements attached as an
exhibit to the Memorandum, are independent public accountants within the meaning
of the Securities Act and the Regulations. The financial statements and
schedules and the notes thereto incorporated by reference in the Memorandum and
made a part thereof are complete and correctly and fairly present the financial
position of the Company as of the dates thereof, and the results of operations
and cash flows of the Company for the periods indicated therein, all in
conformity with generally accepted accounting principles applied on a consistent
basis throughout the periods involved except as otherwise stated in the
Memorandum.
10. Taxes. The Company has filed with the appropriate federal,
state and local governmental agencies, and all foreign countries and political
subdivisions thereof, all tax returns, including franchise tax returns, which
are required to be filed or have duly obtained extensions of
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time for the filing thereof and have paid all taxes shown on such returns and
all assessments received by them to the extent that the same have become due;
and the provisions for income taxes payable, if any, shown on the financial
statements included as part of the Memorandum are sufficient for all accrued and
unpaid foreign and domestic taxes, whether or not disputed, and for all periods
to and including the dates of such financial statements. Except as disclosed in
writing to the Placement Agent, the Company has not executed or filed with any
taxing authority, foreign or domestic, any agreement extending the period for
assessment or collection of any income taxes and is not a party to any pending
action or proceeding by any foreign or domestic governmental agency for
assessment or collection of taxes; and no claims for assessment or collection of
taxes have been asserted against the Company.
11. Authorization of Outstanding Shares. The outstanding
shares of Common Stock and outstanding options to purchase shares of Common
Stock have been duly authorized and validly issued. The outstanding shares of
Common Stock are fully paid and non-assessable. The outstanding options to
purchase shares of Common Stock, all as disclosed in the Memorandum, constitute
the valid and binding obligations of the Company, enforceable in accordance with
their terms. None of the outstanding shares of Common Stock or options to
purchase shares of Common Stock has been issued in violation of the preemptive
rights of any shareholder of the Company. None of the holders of the outstanding
shares of Common Stock are subject to personal liability solely by reason of
being such a holder. The authorized shares of Common Stock and outstanding
options to purchase shares of Common Stock and all promissory notes conform to
the descriptions thereof contained in the Memorandum. Except as set forth in the
Memorandum, on the Closing Date, there will be no outstanding options, warrants,
debentures or notes for the purchase of, or other outstanding rights to
purchase, Common Stock or securities convertible into Common Stock.
12. Authorization of Units. The issuance and sale of the Units
and the Placement Agent's Units have been duly authorized and, upon closing of
the Placement and delivery to the Company of the net proceeds therefrom, the
Units, the Placement Agent's Units, Placement Agent's Warrants, the Shares and
the Warrant Securities will be validly issued, fully paid and (with respect to
the shares of Common Stock only) non-assessable, and holders thereof will not be
subject to personal liability solely by reason of being such holders. Except as
described in the Memorandum, the Common Stock is not and will not be subject to
preemptive rights of any shareholder of the Company. The Securities and the
Warrant Securities conform to the descriptions thereof contained in the
Memorandum.
13. Noncontravention. The Company is not in violation of, or
in default under: (i) any term or provision of its Certificate of Incorporation
or Bylaws; (ii) any material term or provision or any financial covenants of any
indenture, mortgage, contract, commitment or other agreement or instrument to
which it is a party or by which it or its property or business is or may be
bound or affected; or (iii) any existing applicable law, rule, regulation,
judgment, order or decree of any governmental agency or court, domestic or
foreign, having jurisdiction over the Company or any its properties or business
except for violations which, individually or in the aggregate, do not have a
material adverse effect on the financial condition, results of operations,
business or properties of the Company. The Company owns, possesses or has
obtained all governmental and other (including those obtainable from third
parties) licenses, permits, certifications, registrations,
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approvals or consents and other authorizations necessary to own or lease, as the
case may be, and to operate its properties, whether tangible or intangible, and
to conduct any of the business or operations of the Company as presently
conducted and all such licenses, permits, certifications, registrations,
approvals, consents and other authorizations are outstanding and in good
standing, and there are no proceedings pending or, to the best knowledge of the
Company, threatened or, to the best of knowledge of the Company, any basis
therefor, seeking to cancel, terminate or limit such licenses, permits,
certifications, registrations, approvals or consents or other authorizations.
14. Litigation. Except as set forth in the Memorandum, there
are no pending actions, suits, proceedings, or arbitrations, and the Company is
not aware of any claims, investigations or inquiries, before any governmental
agency, court or tribunal, domestic or foreign, or before any private
arbitration tribunal against the Company or involving its properties or business
that, if determined adversely to the Company, would, individually or in the
aggregate, result in any materially adverse change in the financial condition,
shareholders' equity, results of operations, properties, business, management,
affairs or business prospects of the Company or that question the validity of
the capital stock of the Company or this Agreement or of any action taken or to
be taken by the Company pursuant to, or in connection with, this Agreement; to
the best knowledge of the Company, there is no basis for any such action, suit,
proceeding, arbitration, claim, investigation or inquiry. There are no
outstanding orders, judgments or decrees of any court, governmental agency or
other tribunal naming the Company and enjoining the Company from taking, or
requiring the Company to take, any action, or to which the Company, its
properties or businesses are bound or subject.
15. Finder's Fees. The Company has not incurred any liability
for any finder's fees or payments in connection with the transaction herein
contemplated, except as specifically provided in this Agreement.
16. Intangibles. As of the date of this Agreement, the Company
owns, possesses, and has the right to use, or has pending applications for the
requisite licenses or other rights to use all trademarks, service marks, service
names, trade names, inventions, product processes and formulations (the
"Intangibles") utilized in the conduct of its business as now conducted or
proposed to be conducted without, to the Company's knowledge, infringing upon or
otherwise acting adversely to the right or claimed right of any person,
corporation or other entity under or with respect to any of the foregoing. The
Company is not obligated or under any liability whatsoever to make any payments
by way of royalties, fees or otherwise to any owner or licensee of, or other
claimant to, any patent, trademark, service mark, trade name, or other
intangible asset, with respect to the use thereof or in connection with the
conduct of its business or otherwise. The Company has no knowledge of any
conflicting rights which might impair the Company's use of the Intangibles and
has not received any notice of conflict with the asserted rights of others with
respect to the Intangibles that could, singly or in the aggregate, materially
and adversely affect its business as presently conducted, prospects, financial
condition or results of operations, and the Company knows of no basis therefor;
and, to the Company's knowledge, no other persons or entities have infringed
upon or are infringing upon the Intangibles of the Company.
17. No Adverse Change. Since the respective dates as of which
information is
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given in the Memorandum and the Company's latest financial statements, the
Company has not incurred any material liability or obligation, direct or
contingent, or entered into any material transaction, whether or not in the
ordinary course of business, and has not sustained any material loss or
interference with its business from fire, storm, explosion, flood or other
casualty, whether or not covered by insurance, or from any labor dispute or
court or governmental action, order or decree; there have not been, and prior to
the Closing Date there will not be, any changes in the capital stock or any
material increases in the long-term debt of the Company or any materially
adverse change in or affecting the general affairs, management, financial
condition, shareholders' equity, results of operations or prospects of the
Company, other than as set forth in the Memorandum.
18. Title to Properties. The Company has good and marketable
title in fee simple to all real property and good title to all personal property
(tangible and intangible) owned by it, free and clear of all security interests,
charges, mortgages, liens, encumbrances and defects, except as are described in
the Memorandum. The leases, licenses or other contracts or instruments under
which the Company leases, holds or is entitled to use any property, real or
personal, are valid, subsisting and enforceable, except as such enforceability
may be limited by applicable bankruptcy, insolvency, moratorium or other similar
laws or arrangements affecting creditors' rights generally and subject to
principles of equity and public policy considerations. All rentals, royalties or
other payments accruing thereunder that became due prior to the date of this
Agreement have been duly paid, and neither the Company nor any other party is in
default thereunder, and no event has occurred that, with the passage of time or
the giving of notice, or both, would constitute a default thereunder. The
Company is not in violation of any applicable law, ordinance, regulation, order
or requirement relating to its owned or leased properties except for violations
which, individually or in the aggregate, do not have a material adverse effect
on the financial condition, results of operations, business or properties of the
Company, and has not received any notice of an alleged violation. The Company
has adequately insured its properties against loss or damage by fire or other
casualty and maintains, in adequate amounts, such other insurance as is usually
maintained by companies engaged in the same or similar businesses located in its
geographical area.
19. Enforceability of Contracts. Each contract or other
instrument (however characterized or described) to which the Company is a party
or by which its property or business is or may be bound or affected and to which
reference is made in the Memorandum has been duly and validly executed, is in
full force and effect in all material respects and is enforceable against the
parties thereto in accordance with its terms, and none of such contracts or
instruments has been assigned by the Company and neither the Company nor any
other party is in default thereunder, and no event has occurred that, with the
lapse of time or the giving of notice, or both, would constitute a default
thereunder. None of the material provisions of such contracts or instruments
violates any existing applicable law, rule, regulation, judgment, order or
decree of any governmental agency or court having jurisdiction over the Company
or any of its assets or businesses except for violations which, individually or
in the aggregate, do not have a material adverse effect on the financial
condition, results of operations, business or properties of the Company.
20. Employee Benefit Plans. Except as set forth in the
Memorandum, the Company has no employee benefit plans (including, without
limitation, profit sharing and welfare
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benefit plans) or deferred compensation arrangements that are subject to the
provisions of the Employee Retirement Income Security Act of 1974, as amended
("ERISA").
21. Labor Relations. No labor problem exists with any of the
Company's employees or is imminent that could reasonably be expected to
materially and adversely affect the Company.
22. Foreign Corrupt Practices Act. The Company has not,
directly or indirectly, at any time (i) made any contributions to any candidate
for political office in violation of law or failed to disclose fully any such
contribution, or (ii) made any payment to any state, federal or foreign
governmental officer or official, or other person charged with similar public or
quasi-public duties, other than payments or contributions required or allowed by
applicable law. The Company's internal accounting controls and procedures are
sufficient to cause the Company to comply in all material respects with the
Foreign Corrupt Practices Act of 1977, as amended.
Any certificate signed by an officer of the Company and
delivered to the Placement Agent or to counsel for the Placement Agent shall be
deemed to be a representation and warranty by the Company to the Placement Agent
as to the matters covered thereby.
VI. Covenants of the Company.
1. Memorandum. The Company will furnish the Placement Agent,
during the Placement, with as many copies of the Memorandum (and any amendments
or supplements thereto) as the Placement Agent may reasonably request. If,
during the Placement, any event occurs as a result of which the Memorandum, as
then amended or supplemented, would include an untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
made in light of the circumstances in which they were made not misleading, or if
it otherwise shall be necessary to amend or supplement the Memorandum to comply
with applicable law, the Company will forthwith notify the Placement Agent
thereof, and furnish to the Placement Agent in such quantities as may be
reasonably requested, an amendment, supplement or amended or supplemented
Memorandum which corrects such statements or omissions or causes the Memorandum
to comply with applicable law. No copies of the Memorandum, or any exhibit
thereto, or any material prepared by the Company in connection with the
Placement will be given, without the prior written permission of the Placement
Agent, by the Company or its counsel or by a principal or agent of the Company
to any person not a party to this Agreement, unless such person is a director or
principal shareholder of, or directly employed by, the Company, or unless
required by law.
2. State Securities Registration. The Company will provide
Placement Agent's counsel with all information which such counsel reasonably
determines to be necessary, and otherwise cooperate with such counsel, to permit
such counsel to take all necessary action and file all necessary forms and
documents in order to qualify or register the Securities for sale under the
securities laws of the states in which offers or sales will be made, such states
to be mutually agreed upon between the Company and the Placement Agent, or to
take any necessary action and file any
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necessary forms which are required to obtain an exemption from such
qualification or registration in such jurisdictions. The Company will promptly
advise the Placement Agent:
a. If any securities regulator of any state shall
make a request or suggestion of or to the Company of any
amendment to the Memorandum or any registration materials or
for any additional information, including the nature and
substance thereof; and
b. Of the issuance of a stop order suspending the
qualification of the Securities for sale in any state,
including the initiation or threatening of any proceeding for
such purpose, and the Company will use its reasonable best
efforts to prevent the issuance of such a stop order, or if
such an order shall be issued, to obtain the withdrawal
thereof at the earliest reasonably practicable date.
The Company will provide the Placement Agent with any
additional information, documents and instruments which the Placement Agent's
counsel shall determine to be necessary to comply with the rules, regulations
and judicial and administrative interpretations in those states and
jurisdictions where the Units are to be offered for sale or sold for delivery to
all offerees and purchasers. The Company will file all post-offering forms,
documents or materials and take all other actions required by states in which
the Units have been offered or sold. The Placement Agent will not make offers or
sales of the Units in any jurisdiction in which the Units have not been
qualified or registered, or are not exempt from such qualification or
registration.
3. Use of Proceeds and the Chrysler Debt. The Company will
apply the net proceeds from this offering in the manner set forth in the
Memorandum. Specifically, within fifteen (15) days of the Closing Date, the
Company will use the net proceeds of this offering and, if necessary, available
cash to satisfy the Company's debt to Chrysler Credit Corporation in its
entirety and obtain a release of the collateral.
4. Reg D Compliance. The Company will use its reasonable best
efforts to determine whether a Subscriber is an "Accredited Investor" or
otherwise qualified, and the Company will comply in all respects with the terms
and conditions of Reg D and applicable state securities laws with respect to the
offering and the sale of the Units to qualified investors.
VII. Representations, Warranties and Covenants of the Placement Agent.
The Placement Agent represents, warrants and covenants to the Company that:
1. Duly Registered. The Placement Agent is duly registered,
pursuant to the applicable provisions of the Exchange Act, as a dealer, and is a
member in good standing of the National Association of Securities Dealers, Inc.
("NASD"), and is duly registered as a broker-dealer in such states as the
Placement Agent is required to be registered in order to complete the Placement
contemplated by this Agreement and the Memorandum. In connection with the
Placement, the Placement Agent shall have the right to form a syndicate of
selected dealers who will assist it in the Placement. Any firm with which the
Placement Agent associates will be (i) a fully registered broker-dealer and a
member of the NASD or (ii) a foreign broker-dealer and/or a member of a national
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stock exchange of its country of origin who is lawfully registered or licensed
to act in such jurisdiction.
2. No General Solicitation or Advertising. The Placement Agent
has not and will not offer or sell the Units by means of general solicitation or
general advertising.
3. Furnish Memoranda. A reasonable time prior to the Closing
Date, the Placement Agent will furnish to each offeree of the Units a copy of
the Memorandum, each supplement or amendment thereto, the Subscription Agreement
and Confidential Subscriber Questionnaire (the "Subscription Documents").
Notwithstanding the foregoing, the delivery of the Memorandum shall not
constitute an offer to sell the Units to any person. Such sale may be made only
upon acceptance by the Company of a Subscriber's subscription, after a
determination that the Subscriber satisfies all of the applicable requirements.
4. Reg D Compliance. The Placement Agent is not disqualified
from participation in the Placement by reason of Rules 262(b) and (c) of
Regulation A and Reg D. The Placement Agent will not conduct the Placement
contrary to any of the provisions of Reg D or corresponding state statutes or
regulations.
5. Blue Sky Compliance. The Placement Agent will solicit
purchasers of the Units only in those jurisdictions where such solicitation
could and can be made in and which it is so qualified to act and will conduct
the Placement in such jurisdictions in full compliance with all applicable state
statutes and regulations.
6. Authorization. This Agreement has been duly authorized,
executed and delivered by the Placement Agent and is enforceable in accordance
with its terms, subject, as to enforcement of remedies, to applicable
bankruptcy, insolvency, reorganization, moratorium and other laws affecting the
rights of creditors generally and the discretion of courts in granting equitable
remedies and except that enforceability of the indemnification provisions and
the contribution provisions set forth herein may be limited by federal or state
securities laws or public policy underlying such laws.
7. Litigation. There are no pending actions, suits,
proceedings, or arbitrations, and the Placement Agent is not aware of any claims
investigations or inquiries, before any governmental agency, court or tribunal,
domestic or foreign, or before any private arbitration tribunal, against or
involving the Placement Agent or its business that question the validity of this
Agreement or of any action taken or to be taken by the Placement Agent pursuant
to or in connection with this Agreement.
VIII. Conditions to Obligations.
1. Conditions to Placement Agent's Obligations. The
obligations of the Placement Agent hereunder will be subject to the accuracy of
the representations and warranties of the Company herein contained as of the
date hereof and as of the Closing Date, to the performance by the Company of its
obligations hereunder and to the following additional conditions:
11
a. Due Qualification or Exemption. (A) The
Placement contemplated by this Agreement will become qualified
or be exempt from qualification under the securities laws of
the several states pursuant to Subsection 6(b) above not later
than the Closing Date, and (B) at the Closing Date, no stop
order suspending the sale of the Units shall have been issued,
and no proceeding for that purpose shall have been initiated
or threatened;
b. No Material Misstatements; Satisfactory
Memorandum. (A) The Placement Agent will not have notified the
Company that the Blue Sky qualification materials or the
Memorandum, or any amendment or supplement thereto, contains
an untrue statement of a fact which in its opinion is
material, or omits to state a fact, which in its opinion is
material and is required to be stated therein, or is necessary
to make the statements therein not misleading, and (B) the
Memorandum shall be reasonably satisfactory in form and in
substance to the Placement Agent and its legal and accounting
advisors;
c. Compliance with Agreements. The Company will
have complied with all agreements and satisfied all conditions
on its part to be performed or satisfied hereunder at or prior
to the Closing Date;
d. Corporate Action. The Company will have taken
all necessary corporate action, including, without limitation,
obtaining the approval of the Company's board of directors for
the execution and delivery of this Agreement, the Securities,
the Placement Agent's Units and the Warrant Securities and the
performance by the Company of its obligations hereunder and
thereunder, if applicable, and the consummation of the
Placement;
e. Certificate of President. At the Closing Date,
the Company will have delivered a certificate of its President
as to the conditions set forth in this Subsection 8(a).
f. Opinion of Counsel. On the Closing Date, the
Placement Agent will have received from the Company's counsel,
Snow Becker Krauss P.C. ("Company Counsel"), a signed opinion,
reasonably satisfactory to Placement Agent's counsel,
substantially to the effect of Exhibit A attached hereto.
In rendering its opinion, Company Counsel may
rely upon (1) opinions of counsel reasonably acceptable to
Placement Agent's counsel with respect to matters relating to
the laws of any jurisdiction other than New York and federal
law or matters to which Company Counsel was not significantly
involved, (2) the certificates of government officials and
officers of the Company as to matters of fact, (3) the
genuineness of all signatures, and (4) the authenticity of the
books and records of the Company and such other qualifications
and conditions consistent with the Company Counsel's opinion
practices, provided that Company Counsel shall state that they
have no reason to believe, and do not believe, that they are
not justified in relying upon any
12
of the foregoing. It is agreed and understood that the
Placement Agent's requirements for the opinion of Company
Counsel, and Company Counsel's ability to render such opinion,
may be modified as a result of due diligence investigations in
connection with the Placement. Notwithstanding the foregoing,
it is further agreed and understood that a condition precedent
to the Placement Agent's obligations hereunder shall be
receipt by the Placement Agent of a satisfactory opinion of
Company Counsel. Nothing herein shall be construed as a waiver
of the Placement Agent's right to require further or
additional opinions in connection with a public offering of
the Company's securities.
g. Due Diligence. Due diligence satisfactory to
the Placement Agent and its legal and accounting advisors.
h. Representations and Warranties. The
representations and warranties of the Company remain accurate
and in full force and effect.
2. Conditions to the Company's Obligations. The obligations of
the Company hereunder will be subject to the accuracy of the representations,
warranties and covenants of the Placement Agent contained herein as of the date
hereof and as of the Closing Date, to the performance by the Placement Agent of
its obligations hereunder and to the following additional conditions:
a. Absence of Certain Events. No stop order or
other judicial or administrative action suspending the sale of
the Units will have been issued, and no proceeding for that
purpose will have been initiated or threatened;
b. No Material Misstatements. The Company will not
have notified the Placement Agent that the Blue Sky
qualification materials, or the Memorandum, or any amendment
or supplement thereto, contains an untrue statement of a fact,
which in its opinion is material, or omits to state a fact,
which in its opinion is material and is required to be stated
therein or is necessary to make the statements therein not
misleading, in each case only with respect to information
contained therein concerning the Placement Agent;
c. Compliance with Agreements. The Placement
Agent will have complied with all agreements and satisfied all
conditions on its part to be performed or satisfied hereunder
at or prior to the Closing Date; and
d. Corporate Action. The Placement Agent will have
taken all necessary corporate action, including, without
limitation, obtaining the approval of the Placement Agent's
board of directors for the execution and delivery of this
Agreement and the performance by the Placement Agent of its
obligations hereunder and the consummation of the Placement.
e. Registration. The Placement Agent will
continue to be duly registered
13
as a member in good standing of the NASD and as a
broker-dealer in states required for the Placement.
f. Representations and Warranties. The
representations and warranties of the Placement Agent remain
accurate and in full force and effect.
IX. Expenses of Sale. The Company will pay all of its expenses in
addition to those provided in Section 4 herein, incident to the proposed sale of
Units, whether or not the Placement is consummated, including, without
limitation, (a) the fees, disbursements and expenses of its counsel and
accountants, (b) all fees and expenses of registering or qualifying the Units
for offer and sale in the applicable states, or obtaining exemptions therefrom,
and (c) all other expenses relating to the offering of the Units. The Placement
Agent shall be responsible for the fees, disbursements and expenses of its
counsel with the exception of the fees and expenses of the Placement Agent's
counsel in connection with the registering and qualifying of the Units in such
jurisdictions as the Placement Agent deems appropriate. If the Placement is not
completed because (i) of any reason solely within the control of the Company or
its management, (ii) the Company unilaterally withdraws the Placement from the
Placement Agent, or (iii) of any material discrepancy in any representation made
to the Placement Agent or the failure of the Company to meet any of its material
obligations under this Agreement, then the Company will be obligated to
reimburse the Placement Agent for its actual costs, expenses and legal fees
incurred in connection herewith (which amount shall include the $20,000 initial
payment). If the Placement is not completed for reasons solely within the
control of the Placement Agent, then the Company will only be responsible for
the Placement Agent's actual expenses. It is understood and agreed by the
parties hereto that any expenses incurred by the Placement Agent will be deemed
to be reasonable and unobjectionable upon demonstration by the Placement Agent
that such expenses were incurred, directly or indirectly, in connection with the
proposed transaction and/or relationship of the parties hereto, as described
herein.
X. Indemnification and Contribution.
1. Indemnification by the Company. The Company agrees to
indemnify and hold harmless the Placement Agent and each person, if any, who
controls the Placement Agent within the meaning of the Securities Act or the
Exchange Act against any losses, claims, damages or liabilities, joint or
several, to which the Placement Agent or such controlling person may become
subject, under the Securities Act or otherwise, to the extent and only to the
extent such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon (i) any untrue statement or alleged
untrue statement of a material fact contained (A) in the Memorandum, or (B) in
any Blue Sky Application (as hereinafter defined) or other document executed by
the Company specifically for that purpose or based upon false or misleading
written information furnished by the Company filed in any state or other
jurisdiction in order to qualify any or all of the Units under the securities
laws thereof (any such application, document or information being hereinafter
called a "Blue Sky Application"), (ii) the omission or alleged omission to state
in the Memorandum or in any Blue Sky Application a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
(iii) any untrue statement or alleged untrue statement of a material fact
contained in the Memorandum or the omission or alleged omission to state therein
a material fact required to be stated therein or necessary in order to make the
14
statements therein, in the light of the circumstances under which they were
made, not misleading; and will reimburse the Placement Agent and each such
controlling person for any legal or other expenses reasonably incurred by the
Placement Agent or such controlling person in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the Company will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
reliance upon and in conformity with written information furnished to the
Company by the Placement Agent or Blue Sky counsel specifically for use in the
preparation of the Memorandum or any such Blue Sky Application.
2. Indemnification by the Placement Agent. The Placement Agent
agrees to indemnify and hold harmless the Company, its directors and officers
and each person, if any, who controls the Company within the meaning of the
Securities Act and the Exchange Act against any losses, claims, damages or
liabilities, joint or several, to which the Company or such controlling person
may become subject, under the Securities Act or otherwise to the extent such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon (i) any untrue statement or alleged untrue statement of a
material fact contained (A) in the Memorandum, or (B) in any Blue Sky
Application, or (ii) the omission or alleged omission to state in the Memorandum
or in any Blue Sky Application a material fact required to be stated therein or
necessary to make the statements therein not misleading, or (iii) any untrue
statement or alleged untrue statement of a material fact contained in the
Memorandum, or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; in each case to the extent but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with written information furnished to the
Company by the Placement Agent or Blue Sky counsel specifically for use in the
preparation of the Memorandum or any such Blue Sky Application.
3. Procedure. Promptly after receipt by an indemnified party
under this Section 10 of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made against any
indemnifying party under this Section 10, notify in writing the indemnifying
party of the commencement thereof; and the omission so to notify the
indemnifying party will relieve it from any liability under this Section 10 as
to the particular item for which indemnification is then being sought, but not
from any other liability which it may have to any indemnified party. In case any
such action is brought against any indemnified party, and it notifies an
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate therein, and to the extent that it may wish, jointly
with any other indemnifying party, similarly notified, to assume the defense
thereof, with counsel who shall be to the reasonable satisfaction of such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Section 10 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation. Any such indemnifying party shall not be liable to any
such indemnified party on account of any settlement of any claim or action
effected without the consent of such indemnifying party.
15
4. Contribution. If the indemnification provided for in this
Section 10 is unavailable to any indemnified party with respect to any losses,
claims, damages, liabilities or expenses referred to therein, then the
indemnifying party, in lieu of indemnifying such indemnified party, will
contribute to the amount paid or payable by such indemnified party, as a result
of such losses, claims, damages, liabilities or expenses (i) in such proportion
as is appropriate to reflect the relative benefits received by the Company on
the one hand, and the Placement Agent on the other hand, from the offering of
the Units or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the Company on the one hand, and of the Placement Agent on the other
hand, in connection with the statements or omissions which resulted in such
losses, claims, damages, liabilities or expenses as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand, and the Placement Agent on the other hand, shall be deemed to be in
the same proportion as the total proceeds from the Placement (net of sales
commissions and non-accountable expense allowance, but before deducting
expenses) received by the Company relative to the commissions and
non-accountable expense allowance received by the Placement Agent. The relative
fault of the Company on the one hand, and the Placement Agent on the other hand,
will be determined with reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission to state a material
fact relates to information supplied by the Company or the Placement Agent, and
its relative intent, knowledge, access to information and opportunity to correct
or prevent such statement or omission. The amount payable by a party as a result
of the losses, claims, damages, liabilities or expenses referred to above will
be deemed to include, subject to the limitations set forth in Subsection 10(e)
below, any legal or other fees or expenses reasonably incurred by such party in
connection with investigating or defending any action or claim.
5. Equitable Considerations. The Company and the Placement
Agent agree that it would not be just and equitable if contribution pursuant to
this Section 10 were determined by pro rata allocation or by any other method of
allocation which does not take into account the equitable considerations
referred to in the immediately preceding paragraph. No person committing
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution or indemnification from any
person not committing such fraudulent misrepresentation.
XI. Representations and Agreements to Survive Delivery. All
representations, warranties and agreements of the Company and of the Placement
Agent herein will survive the delivery and execution hereof and the closings
hereunder, and shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of the Placement Agent or any person who
controls the Placement Agent within the meaning of the Securities Act, or by the
Company or any person who controls the Company within the meaning of the
Securities Act, and will survive delivery of the securities constituting the
Units hereunder and any termination of this Agreement.
16
XII. Termination. Either the Placement Agent or the Company will have
the right to terminate this Agreement by giving written notice as herein
specified, at any time, at or prior to the Closing Date:
a. If the other shall have failed, refused, or been unable,
at or prior to the date of termination of this Agreement, to perform
any of its respective obligations hereunder;
b. If any other condition to its obligations hereunder is
not fulfilled; or
c. If there has occurred an event materially or adversely
affecting the value of the Units or any of the Securities.
If the Placement Agent or the Company elects to terminate this
Agreement pursuant to Subsections (i), (ii) or (iii) hereof, notice will be
provided to the non-terminating party promptly by telephone, telecopier or
telegram, and such notification will be confirmed by written notice as provided
for in Section 13 below.
XIII. Notices. Any notice hereunder shall be in writing and shall be
effective when delivered, or mailed by certified or registered mail, postage
prepaid, return receipt requested, to the appropriate party or parties, at the
following addresses: if to the Placement Agent, to Barber & Bronson
Incorporated, 2101 West Commercial Boulevard, Fort Lauderdale, Florida 33309,
Attention: Mr. Steven N. Bronson; with a copy to Broad and Cassel, Miami Center,
201 South Biscayne Boulevard, Suite 3000, Miami, Florida 33131, Attention:
William C. Phillippi, P.A.; if to the Company, CPI Aerostructures, Inc., 200A
Executive Drive, Edgewood, New York 11717, Attention: Mr. Arthur August,
President; with a copy to Snow Becker Krauss P.C., 605 Third Avenue, New York,
New York 10158, Attention: Elliot H. Lutzker, Esquire; or, in each case, to such
other address as the parties may hereinafter designate by like notice.
XIV. Parties. This Agreement will inure to the benefit of and be
binding upon the Placement Agent, the Company and their respective successors
and assigns. This Agreement is intended to be, and is for the sole and exclusive
benefit of the parties hereto and the persons described in Subsections 10(a) and
10(b) hereof, and their respective successors and assigns, and for the benefit
of no other person, and no other person will have any legal or equitable right,
remedy or claim under, or in respect of this Agreement and the parties hereto
may not assign their rights or obligations hereunder. No purchaser of any of the
Units will be construed as successor or assign merely by reason of such
purchase.
XV. Amendment and/or Modification. Neither this Agreement, nor any term
or provision hereof, may be changed, waived, discharged, amended, modified or
terminated orally, or in any manner other than by an instrument in writing
signed by each of the parties hereto.
XVI. Further Assurances. Each party to this Agreement will perform any
and all acts and execute any and all documents as may be necessary and proper
under the circumstances in order to accomplish the intents and purposes of this
Agreement and to carry out its provisions.
17
XVII. Validity. In case any term of this Agreement will be held
invalid, illegal or unenforceable, in whole or in part, the validity of any of
the other terms of this Agreement will not in any way be affected thereby.
XVIII. Non-Waiver. The failure of any party hereto to insist upon
strict performance of any of the covenants and agreements herein contained, or
to exercise any option or right herein conferred in any one or more instances,
will not be construed to be a waiver or relinquishment of any such option or
right, or of any other covenants or agreements, and the same will be and remain
in full force and effect.
XIX. Entire Agreement. This Agreement contains the entire agreement and
understanding of the parties with respect to the entire subject matter hereof,
and there are no representations, inducements, promises or agreements, oral or
otherwise, not embodied herein. Any and all prior discussions, negotiations,
commitments and understanding relating thereto are superseded hereby. There are
no conditions precedent to the effectiveness of this Agreement other than as
stated herein, and there are no related collateral agreements existing between
the parties that are not referred to herein.
XX. Counterparts. This Agreement may be executed in counterparts and
each of such counterparts will for all purposes be deemed to be an original, and
such counterparts will together constitute one and the same instrument.
XXI. Law. This Agreement will be deemed to have been made and delivered
in Miami, Florida, and will be governed as to validity, interpretation,
construction, effect and in all other respects by the internal laws of the State
of Florida, without application of the principles of conflicts of law. The
Company (a) agrees that any legal suit, action or proceeding arising out of or
relating to this Agreement will be instituted exclusively in the appropriate
state court in Dade County, Florida, or in the United States District Court for
the Southern District of Florida; (b) waives any objection which the Company may
have now or hereafter to the venue of any such suit, action or proceeding, and
(c) irrevocably consents to the jurisdiction of the state courts of the State of
Florida in Dade County and the United States District Court for the Southern
District of Florida in any such suit, action or proceeding. The Company further
agrees to accept and acknowledge service of any and all process which may be
served in any such suit, action or proceeding in the state courts of Dade
County, Florida, or in the United States District Court for the Southern
District of Florida and agrees that service of process upon the Company mailed
by certified mail to the Company's address will be deemed in every respect
effective service of process upon the Company in any suit, action or proceeding.
18
If the foregoing correctly sets forth our understanding, please so
indicate in the space provided below for that purpose, whereupon this letter
will constitute a binding agreement between us.
CPI AEROSTRUCTURES, INC., a New York
corporation
By:___________________________________
Arthur August, President
CONFIRMED and ACCEPTED, this _____ day of May, 1996 by the undersigned
authorized representative.
BARBER & BRONSON INCORPORATED, a
Florida corporation
By:_______________________________
Steven N. Bronson, President
19
EXHIBIT A
OPINION OF COMPANY COUNSEL
1. The Company has been duly organized, is validly existing as a
corporation under the laws of the State of New York and is in good standing
under the laws of its jurisdiction of incorporation.
2. The Company is registered or qualified to do business as a foreign
corporation and is in good standing in all jurisdictions in which the nature of
the activities conducted by it or the character of the assets owned or leased by
it makes such registration or qualification necessary, except for such
jurisdictions where the failure to so register or qualify in such jurisdiction
has not and will not have a material adverse effect on the condition, financial
or otherwise, prospects, properties, business, net worth or results of operation
of the Company.
3. The Company has full corporate power and authority to own or lease
its properties and conduct its business as presently conducted and as described
in the Memorandum. To such counsel's knowledge1, the Company does not own,
directly or indirectly, any shares of stock or any other securities of any
corporation, or have any equity interest in any firm, partnership, joint
venture, association or other entity.
4. The Company has full corporate power and authority to execute,
deliver and perform the Financial Consulting Agreement, Common Stock Purchase
Warrant, Placement Agreement, Warrants, and the Placement Agent's Warrants
(collectively, the "Transaction Documents"), and to consummate the transactions
provided for therein. The execution and delivery of the Transaction Documents by
the Company, the performance of its obligations thereunder, the consummation by
the Company of the transactions contemplated thereby and the Company's
compliance with the terms of the Transaction Documents has been duly authorized
by all necessary corporate action on the part of the Company. The Transaction
Documents have been duly executed and delivered by the Company and constitute
legal, valid and binding obligations of the Company, enforceable against the
Company in accordance with their respective terms, except to the extent that (i)
enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally and by general equitable principles, and (ii) enforceability of the
indemnification and contribution provisions set forth in the Placement Agreement
may be limited by federal or state securities laws or public policy underlying
such laws.
5. None of (i) the Company's issuance and sale of the Units, Shares,
Warrants, the
- --------
1 Knowledge = actual current recollection of those lawyers in the firm
who have given substantive attention to the Offering or to the client's
matters. This definition should be included in the opinion.
A-1
Placement Agent's Warrants, and the shares of Common Stock included in the
Placement Agent's Units and issuable upon the exercise of the Warrants and
Placement Agent's Warrants (collectively, the "Securities"), and (ii) the
execution and delivery of the Transaction Documents, performance of the
Company's obligations thereunder, consummation of the transactions contemplated
therein or the conduct by the Company of its business as described in the
Memorandum, conflicts with, or will conflict with, results in, or will result
in, any breach or violation of any of the terms or provisions of, constitutes,
or will constitute, a default under, or results in, or will result in, the
creation of any lien, charge, claim, encumbrance or security interest of any
kind or nature whatsoever upon any properties of the Company pursuant to (A) the
Certificate of Incorporation or Bylaws of the Company, (B) to such counsel's
knowledge after discussion with the Company's officers, any note, contract,
commitment, indenture, deed of trust, mortgage, voting trust agreement,
shareholders' agreement, license or other agreement or instrument to which the
Company is a party, by which it is bound or to which any of its properties may
be subject, or (C) any federal, state or local law, rule or regulation
applicable to the Company or any judgment, order or decree of any court,
arbitrator, regulatory, administrative or other governmental agency or body
having jurisdiction over the Company or any of its properties or business.
6. No consent, approval, authorization or order of, and no registration
or filing with, any third party or any court, regulatory body, administrative
agency or other governmental agency or official (other than pursuant to the
Securities Act, the Regulations and applicable state securities or blue sky
laws, as to which such counsel need not express an opinion) is required for the
valid authorization, issuance, sale and delivery of the Securities pursuant to
the Transaction Documents, for the execution, delivery and performance by the
Company of its obligations under the Transaction Documents and for the
consummation by the Company of the transactions contemplated by the Transaction
Documents.
7. There are no laws, rules or regulations, judgments, orders or
decrees, required to be described in the Memorandum other than those described
in the Memorandum. The statements in the Memorandum, insofar as such statements
constitute a summary of laws, rules, regulations or legal conclusions, are
accurate summaries and fairly and correctly present in all material respects the
information called for in the Securities Act with respect to such laws, rules,
regulations or conclusions.
8. There are no agreements, contracts or other documents or instruments
required to be described in the Memorandum or required to be attached as an
exhibit to the Memorandum other than those described in the Memorandum and
attached as exhibits thereto.
9. Except as described in the Memorandum, to such counsel's knowledge,
there are no claims, payments, issuances, arrangements or understandings for
services in the nature of a finder's or origination fee with respect to the
Units.
10. The Company is not an "investment company" or an "affiliated
person" of, or "promoter" or "principal underwriter" for, an "investment
company," as such terms are defined in the Investment Company Act of 1940, as
amended.
A-2
11. No transfer tax, stamp duty or other tax, levy, impost, deduction,
charge or withholding is payable by or on behalf of the Placement Agent in
connection with (i) the issuance by the Company of the Securities, (ii) the
purchase by the Placement Agent of the Placement Agent's Units or the purchase
of the shares of Common Stock by the Placement Agent (or its permitted
assignees) upon receipt of the Placement Agent's Units and/or the exercise of
the Placement Agent's Warrant, and (iii) the execution, delivery or performance
by the Company of any of its obligations under the Transaction Documents or the
certificates and instruments representing the Securities.
12. All of the Company's material contracts, agreements, documents or
instruments have been duly and validly authorized, executed and delivered by the
Company and constitute legal, valid and binding agreements of the Company,
enforceable against the Company in accordance with their respective terms,
except to the extent that enforceability thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and by general equitable principles. None
of the provisions of any such agreements, contracts, documents or instruments
violates any existing applicable law, rule, or regulation, or any judgment,
order or decree or any governmental agency or court having jurisdiction over the
Company or its properties or business, except where such violation has not and
will not have a material adverse effect on the condition, financial or
otherwise, prospects, properties, business, net worth or results of operation of
the Company ("Material Adverse Effect").
13. Except as described in the Memorandum, the Company is not in
violation of, breach of, or default under (i) its Certificate of Incorporation
or Bylaws, (ii) to such counsel's knowledge after discussion with the Company's
officers, any material license, contract, indenture, mortgage, installment
contract, deed of trust, lease, voting trust agreement, stockholders agreement,
note, loan or credit agreement, or other agreement or instrument to which the
Company is a party, by which the Company is bound or to which any of its
properties is subject, or (iii) any law, rule or regulation applicable to the
Company or any of its properties, or any judgment, decree or order of any
arbitrator, court, regulatory, administrative or other governmental agency or
body having jurisdiction over the Company or any of its properties or business.
14. Except for such licenses, permits, certificates, registrations,
approvals, consents and exemptions, the absence of which would not have a
Material Adverse Effect on the Company or its business and properties, to such
counsel's knowledge after due inquiry, the Company holds all licenses, permits,
certifications, registrations, approvals, consents and franchises from all
governmental or regulatory authorities, officials or agencies necessary to own
or lease and operate its properties and to conduct its business as described in
the Memorandum.
15. There are no claims, actions, suits, proceedings, arbitrations,
investigations or inquiries pending, or, to such counsel's knowledge after
discussion with the Company's officers, threatened against or involving the
Company or any of its properties (i) that are required to be disclosed in the
Memorandum and are not so disclosed, (ii) which question the validity of the
capital stock of the Company, (iii) which question the validity, performance or
enforceability of the Placement Agreement or any action taken or to be taken by
the Company pursuant thereto or in connection therewith, or (iv) which, in such
counsel's opinion, if adversely determined, would have a Material Adverse
Effect.
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16. Except as disclosed in the Memorandum (i) there is no claim or
action by any person pertaining to, or proceeding pending or, to such counsel's
knowledge, threatened, that challenges the ownership or use by the Company of
any patent, trademark, service mark, service name and trade name used by the
Company in the conduct of its business; and (ii) the Company owns and has full
right, title and interest in and to, or has the valid and exclusive right to,
all trademarks, service marks, trade names and copyrights necessary in the
conduct of its business as presently conducted, or as proposed to be conducted
as described in the Memorandum, except where such failure has not and will not
have a Material Adverse Effect.
17. The Company has the capitalization set forth in the Memorandum. All
of the issued and outstanding shares of Common Stock of the Company have been
duly authorized, validly issued and are fully paid and nonassessable, and (i)
the holders thereof have no rights of rescission with respect thereto and are
not subject to personal liability solely by reason of being such holders, and
(ii) none of such securities were issued in violation of any preemptive or
similar right. Except as described in the Memorandum, the Company is not a party
to or bound by any outstanding options, warrants or similar rights to subscribe
for, or contractual rights or obligations to issue, sell, transfer or acquire,
any of the capital stock of the Company or any securities convertible into or
exchangeable for any of the capital stock of the Company. All issuances of
capital stock by the Company prior to the date hereof which were not made
pursuant to the registration requirements of the Securities Act were not subject
to such requirements and were made in full compliance with all applicable
federal or state laws, rules and regulations.
18. The documents representing the Shares, Warrants and Placement
Agent's Warrants are in due and proper form. The Securities conform to the
descriptions thereof set forth in the Memorandum.
19. Except as described in the Memorandum or in the Company's reports
filed with the Commission, no person (i) has the right to require the Company to
file any registration statement or, if filed, to include any security in any
registration statement filed by the Company, or (ii) holds any anti-dilution
rights with respect to any securities of the Company.
20. Each of (i) the Shares and Warrants to be sold by the Company and
the Placement Agent, (ii) the shares of Common Stock to be sold in connection
with the exercise of the Warrants, (iii) the Placement Agent's Warrants to be
sold by the Company under the Placement Agreement, (iv) the shares of Common
Stock to be issued or sold by the Company in connection with the Placement
Agent's Units and upon the exercise of the Placement Agent's Warrant have been
duly authorized, are not and will not be in violation of any pre-emptive rights
or any similar rights, and, when issued, paid for and delivered in accordance
with their terms, will be validly issued, fully paid and nonassessable. The
holders thereof will not be subject to any restriction on the voting or transfer
thereof or to any personal liability solely by reason of being such holders, and
the issuance thereof will not be in violation of any preemptive or similar
right.
21. All corporate action required to be taken for the authorization,
issue and sale of (i) the Units, (ii) the Shares, (iii) the Warrants, (iv) the
Placement Agent's Warrants, and (v) the shares of Common Stock issuable upon the
exercise of the Warrants, issuance of the Placement Agent's Units
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and exercise of the Placement Agent's Warrants, and for the reservation of the
shares of Common Stock required to be reserved, have been duly and validly
taken.
22. The shares of Common Stock issuable upon exercise of the Warrants,
issuance of the Placement Agent's Units and exercise of the Placement Agent's
Warrants have been duly reserved for issuance.
23. The Placement Agent will, upon the issuance and delivery of the
shares of Common Stock pursuant to the Placement Agent's Units and Placement
Agent's Warrants against payment therefor pursuant to the Placement Agreement
and the Placement Agent's Warrants, acquire good and marketable title to the
shares of Common Stock, free and clear of any and all liens, charges, claims,
encumbrances, pledges, security interest, defects or other restrictions or
equities of any kind or nature whatsoever (except those arising out of acts or
claims against the Placement Agent).
24. Counsel has participated in conferences with officers and other
representatives of the Company, representatives of the Company's accountants and
representatives of the Placement Agent, at which the contents of the Memorandum
and related matters were discussed. Although counsel is not passing upon and
does not assume responsibility for the accuracy, completeness or fairness of the
statements contained in the Memorandum, on the basis of the foregoing, no facts
or circumstances have come to its attention which lead it to believe that, on
the Closing Date, the Memorandum contained or contains any untrue statement of a
material fact or omitted or omits to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading (other than the
financial statements and other financial and statistical data included therein,
as to which such counsel need not express an opinion).
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