UNITED STATES SECURITIES AND EXCHANGES COMMISSION
Washington D.C. 20549
________________________
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
October 11, 1996
Commission file number 33-86242
ProtoSource Corporation
(exact name of registrant as specified in its charter)
California 77-0190772
(State of other jurisdiction of (IRS Employer
Incorporation of organization) Identification No.)
2580 West Shaw
Fresno, California 93711-2765
(address of principal executive offices, zip code)
Registrant's telephone number, including area code: (209) 448-8040
Not Applicable
(Former name or former address, if changed since last report)
<PAGE>
ITEM 5. OTHER EVENTS
On October 11, 1996, the Registrant issued 2,800,000 shares of common stock at
$0.25 per share pursuant to a private placement through Andrew, Alexander, Wise
& Company,an investment banker in New York. The Registrant will also issue
400,000 shares related to a $200,000 bridge loan prior to the private
placement. The Registrant may issue up to 3,2000,000 additional shares.
In connection with the private placement, the Registrant paid a cash
commission of 10% of the gross proceeds and issued common stock purchase
warrants which are subject to demand and piggy back registration rights.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits:
10.11 Private placement agreement
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PROTOSOURCE CORPORATION
By:/s/ Andrew Chu
Andrew Chu
Chief Financial Officer
Dated: October 16, 1996
<PAGE>
Exhibits 10.11 Private placement agreement
ProtoSource Corp.
2580 West Shaw
Fresno, California 93711-2765
September 27, 1996
Andrew, Alexander, Wise & Company, Incorporated
17 State Street
New York, New York 10004
Gentlemen:
ProtoSource Corp., a California corporation (the "Company"),
proposes to offer (the "Offering") a minimum of 2,000,000 and a
maximum of 6,000,000 shares of the Company's Common Stock (the
"Shares"), at an offering price of $.25 per Share. The Offering
of the minimum number of Shares is referred to as the "Minimum
Offering" and the Offering of the maximum number of Shares is
referred to as the "Maximum Offering."
The Offering will be made on terms and conditions acceptable
to you and as set forth in the confidential subscription
agreement (the "Subscription Agreement") and the exhibits
thereto, which are collectively referred to herein as the
"Offering Documents." The Shares will be offered on a "best
efforts" basis through you, as the Company's placement agent in
an Offering that is exempt from registration under the Securities
Act of 1933 (the "Securities Act") in accordance with Section
4(6) of the Securities Act. Andrew, Alexander, Wise & Company,
Incorporated is sometimes referred to herein as the "Placement
Agent." The Company will prepare and deliver to the Placement
Agent a reasonable number of copies of the Offering Documents.
<PAGE>
Each prospective investor subscribing for Shares (each, a
"Subscriber") will be required to be an "accredited investor" as
defined in Rule 501 of Regulation D and to deliver, among other
things, a Subscription Agreement and a questionnaire
("Questionnaire") in the forms to be provided by the Company.
Capitalized terms used herein, unless otherwise defined or unless
the context otherwise indicates, shall have the same meanings as
in the Offering Documents.
The Placement Agent has consummated a bridge financing
(the "Bridge Financing") on behalf of the Company. In
connection with the Bridge Financing, the Company is issued
an aggregate of $200,000 of its 10%, 1 year promissory notes
(the "Notes") and an aggregate of 400,000 shares of its
Common Stock (the "Bridge Shares"). In connection with its
services rendered in completion of the Bridge Financing, the
Company agrees to pay commissions and non-accountable
expenses to the Placement Agent as more fully described in
Section (3)(c) below.
1. Appointment of Placement Agent.
(a) You are hereby appointed Placement Agent of
the Company during the Offering Period specified below for
the purposes of assisting the Company in finding qualified
Subscribers for Shares. As Placement Agent, you may engage
the services of other placement agents in order to assist
you in finding qualified Subscribers for the Shares,
provided that such other placement agents possess all
requisite federal, state and NASD registrations and
memberships to act as placement agents. Any compensation to
which you may become entitled in accordance with Section (3)
of this Agreement shall be allocated between you as
Placement Agent and any other placement agents which you
engage to assist you in this Offering. The Offering Period
shall commence on the day the Offering Documents are first
made available to you by the Company for delivery to
prospective Subscribers and shall continue until the earlier
of (1) the sale of all of the Shares or (2) the close of
business on October 31, 1996, except that the Company and
the Placement Agent may agree to extend the Offering from
time to time for up to an additional 60 days, if the Minimum
Offering is sold prior to the close of business on September
27, 1996. However, if the Minimum Offering is not sold
prior to the close of business on September 27, 1996, the
Offering will be terminated and all funds received from
Subscribers will be returned, without interest and without
any deduction. The day that the Offering Period terminates
is referred to as the "Termination Date."
(b) Subject to the performance by the Company of
all of its obligations under this Agreement and to the
completeness and accuracy of all representations and
warranties of the Company contained in this Agreement, you
hereby accept your appointment as exclusive Placement Agent
and agree to assist the Company in finding qualified
Subscribers for Shares. Your agency hereunder is not
terminable by the Company except upon termination of the
Offering.
<PAGE>
(c) Subscriptions for Shares shall be evidenced by
the execution by Subscribers of a Subscription Agreement
including a Questionnaire. No Subscription Agreement shall
be regarded as effective unless and until it is accepted by
the Company. Until the Closing (as defined below), all
subscription funds received shall be held in escrow as
described in the Subscription Agreement.
2. Representations and Warranties of the Company. The
Company represents and warrants (which representations and
warranties will be true on the date of each Closing) as
follows:
(a) Offering Documents. The Offering Documents
conform in all respects with the requirements of Section
4(6) of the Securities Act and Regulation D and with the
requirements of all other published rules and regulations of
the Securities and Exchange Commission (the "SEC") currently
in effect relating to "private offerings" to "accredited
investors" of the type contemplated by the Company. The
Offering Documents have not been amended or supplemented and
no amendment or supplement thereto will be made without your
prior consent.
(b) Organization. The Company and each of its
subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of the state of
its incorporation and has all requisite corporate power and
authority to own and lease its properties, to carry on its
business as currently conducted, to enter into this
Agreement and to consummate all of the transactions
contemplated by this Agreement and the Offering Documents.
The Company and each of its subsidiaries is duly qualified
as a foreign corporation for the transaction of business and
is in good standing as a foreign corporation in each
jurisdiction in which the conduct of its business or
ownership or leasing of its properties requires it to be so
qualified, except where the failure to be so qualified would
not have a material adverse effect on the business,
financial condition or prospects of the Company or its
subsidiaries.
(c) Capitalization. The authorized capital stock
of the Company consists of __________ shares of Common
Stock, $____ par value and _________ shares of Preferred
Stock. As of the date hereof, the issued and outstanding
capital stock of the Company consists of __________ shares
of Common Stock and _________ shares of Preferred Stock.
All such issued and outstanding shares of the Company are
duly authorized, validly issued, fully paid and
nonassessable.
<PAGE>
(d) Warrants. Preemptive Rights Etc. Except for
the Company's outstanding, publicly traded warrants, options
and warrants to purchase _________ shares by employees and
others and Preferred Stock, there are not as of the date
hereof any outstanding warrants, options, agreements,
convertible securities, preemptive rights to subscribe for
or other commitments pursuant to which the Company is, or
may become, obligated to issue any shares of its capital
stock or other securities of the Company.
(e) Title. The Company and each of its
subsidiaries have good and marketable title to all
properties and assets, owned by them, free and clear of all
liens, charges, encumbrances or restrictions, except as
described in the Subscription Agreement or the exhibits
thereto; all of the material leases and subleases under
which the Company or its subsidiaries is the lessor or
sublessor of properties or assets or under which the Company
or its subsidiaries holds properties or assets as lessee or
sublessee are in full force and effect; and the Company and
its subsidiaries own or lease all such properties as are
necessary to its operations as now conducted.
(f) Litigation. Except as set forth in the
Subscription Agreement or the exhibits thereto, there is no
action, suit, investigation, claim or proceeding at law or
in equity by or before any arbitrator, governmental
instrumentality or agency now pending or, to the knowledge
of the Company, threatened against the Company or its
subsidiaries. Except as set forth in the Subscription
Agreement or the exhibits thereto, neither the Company nor
its subsidiaries is subject to any judgment, order, writ,
injunction or decree of any Federal state, municipal or
other governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign which would
materially adversely affect the business, financial
condition or prospects of the Company or its subsidiaries.
(g) Non-Defaults; Non-Contravention. Neither the
Company nor its subsidiaries is in violation of, or in
default under, (1) its Certificate of Incorporation, or its
By-laws, or any indenture, mortgage or other agreement or
instrument to which it is a party or by which it or its
property is bound or affected or (2) to the Company's
knowledge, any order, writ, injunction or decree of any
court of any Federal, state, municipal or other governmental
department, commission, board, bureau, agency or
instrumentality, domestic or foreign; and, to the Company's
knowledge, there exists no condition, event or act which
constitutes, nor which after notice, the lapse of time or
both, could constitute a default under any of the foregoing,
which in any case would have a material adverse effect on
the business, financial condition or prospects of the
Company or its subsidiaries.
<PAGE>
(h) Taxes. The Company and each of its
subsidiaries has filed all tax returns which are required to
be filed by it and all such returns are true and correct in
all material respects. The Company has paid all taxes
pursuant to such returns or pursuant to any assessments
received by it or which it is obligated to withhold from
amounts owing to any employee, creditor or third party.
(i) Compliance With Laws; Environmental Matters
Licenses. Etc. Neither the Company nor its subsidiaries has
received any notice of any violation of, or noncompliance
with, any Federal, state, local or foreign, laws,
ordinances, regulations and orders applicable to its
business, the violation of which, or noncompliance with
which, would have a material adverse effect on the business,
financial condition or prospects of the Company or its
subsidiaries. The Company and each of its subsidiaries has
all licenses and permits and other governmental
certificates, authorizations and permits and approvals
(collectively, "Licenses") required by every Federal, state
and local government or regulatory body for the operation of
its business as currently conducted and for the use of its
properties, except where the failure to be licensed would
not have a material adverse effect on the business,
financial condition or prospects of the Company or its
subsidiaries. The Licenses are in full force and effect and
no violations have been recorded in respect of any License
and no proceeding is pending or threatened to revoke or
limit any thereof, except where such violations, revocations
or limitations would not have a material adverse effect on
the business, financial condition or prospects of the
Company or its subsidiaries.
(j) Authorization of Agreement, Etc. This
Agreement has been duly executed and delivered by the
Company. The execution, delivery and performance by the
Company of this Agreement has been duly authorized by all
requisite corporate action by the Company and this Agreement
constitutes the legal, valid and binding obligation of the
Company, enforceable in accordance with its terms. The
execution, delivery and performance of this Agreement, the
issuance, sale and delivery of the Notes, the Bridge Shares,
the Shares, the Placement Agent's Warrants and the Common
Stock issuable upon exercise of the Placement Agent's
Warrants will not (1) violate any provision of law or
statute or, to the Company's knowledge, any order of any
court or other agency of government or (2) conflict with or
result in any breach of any of the terms, conditions or
provisions of, or constitute (with due notice or lapse of
time or both) a default under, or result in the creation of
any lien, security interest, charge or encumbrance upon any
of the properties or assets of the Company under its
Certificate of Incorporation or By-Laws or any material
indenture, mortgage, lease agreement or other material
agreement or instrument to which the Company is a party or
by which it or any of its property is bound or affected,
except as to which requisite waivers or consents shall have
been obtained by the Company.
<PAGE>
(k) Issuance of Shares, Etc. When issued, sold and
delivered, the Common Stock purchasable upon exercise of the
Placement Agent's Warrants (as hereinafter defined) (1)
will have been validly issued and will be fully paid and
nonassessable and will constitute valid and legal
obligations of the Company enforceable in accordance with
their respective terms, and (2) will not be subject to
preemptive or any other similar rights of the stockholders
of the Company or others. When issued and delivered, the
Placement Agent's Warrants will be a valid and legal
obligation of the Company enforceable in accordance with its
terms.
(l) Authorization of Reserved Shares. The Company
has reserved for issuance shares of its Common
Stock for issuance upon exercise of the Placement Agents's
Warrants. Such reserved shares are collectively referred to
as the "Reserved Shares." When paid for, issued and
delivered, the Reserved Shares will have been duly
authorized and validly issued, will be fully paid and
nonassessable, and will not be subject to preemptive or any
other similar rights of the stockholders of the Company or
others.
(m) Exempt Offering. Assuming (1) the accuracy of
the representations and warranties of each Subscriber in the
Subscription Agreement executed and delivered by such
Subscriber and (2) that the Placement Agent has complied in
all material respects with the requirements of Sections
4(6), 12(2) and 17(a) of the Securities Act, the offer and
sale of the Shares in accordance with the terms of the
Offering Documents and this Agreement are exempt from the
registration requirements of the Securities Act by reason of
the exemption afforded by Section 4(6) of the Securities
Act.
(n) Disclosure. The Offering Documents do not
contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the
statements made in the Offering Documents, in light of the
circumstances under which they were made, not misleading.
<PAGE>
(o) Registration Rights. Except as contemplated by
the Subscription Agreement and the Placement Agent's
Warrants with respect to the rights of holders of the
Placement Agent's Warrants and the Reserved Shares, and
except as set forth in Subscription Agreement or the
exhibits thereto, no person has any right to cause the
Company to effect the registration under the Securities Act
of any securities of the Company.
(p) Brokers. Neither the Company nor any of its
officers, directors, employees, agents or stockholders has
employed any broker or finder in connection with the
transactions contemplated by this Agreement, other than the
Placement Agent.
(q) Title to Securities. When certificates
representing the Placement Agent's Warrants and the Reserved
Shares have been duly issued and delivered to the purchasers
thereof and payment has been made therefor, such purchasers,
respectively, will have good and marketable title to such
securities, free and clear of all liens, encumbrances and
claims whatsoever (with the exception of claims arising or
through the acts of such purchasers) and the Company will
have paid all taxes, if any, in respect of the original
issuance thereof
(r) Right of First Refusal. No person, firm or
other business entity is a party to any agreement, contract
or understanding, written or oral, entitling such party to a
right of first refusal with respect to financings made by
the Company.
(s) Listing. The Company's securities are
currently traded in the Nasdaq Smallcap Market and except to
the extent disclosed in the Offering Documents by the
Company, the Company has not received any notice of, nor
does it have any reason to believe, that its securities are
subject to delisting from or suspension of trading in such
system.
<PAGE>
(t) Exchange Act Compliance. The Company has filed
with the Securities and Exchange Commission on a timely
basis all filings required of a company whose securities
have been registered under the Securities Exchange Act of
1934 (the "Exchange Act"). All information contained in such
filings was true accurate and complete in all material
respects as of the date of such filings.
(u) Changes. Since January 1, 1995, and except as
disclosed in the Offering Documents, (i) neither the Company
nor its subsidiaries has entered into any transaction that
was not in the ordinary course of its business, and (ii)
there has been no material adverse change in the condition
(financial or otherwise), business, properties, assets or
liabilities of the Company or any of its subsidiaries.
<PAGE>
(v) Trademarks Etc. Each of the Company and its
subsidiaries has, or has the right to use, all trademarks
and copyrights required to conduct its business as now
conducted; and the Company has not received any notice of
any claims, nor does it have any knowledge of any threatened
claims, and knows of no facts that would form the basis of
any claim, asserted by any person to the effect that the
sale or use of any product or process now used or offered by
the Company or its subsidiaries or proposed to be used by
the Company or its subsidiaries infringes upon any
trademarks, technology, know-how, processes or other
intellectual property of another person.
3. Closing: Blue Sky; Fees and Expenses, Etc.
(a) Closing. Provided the minimum number of Shares
have been subscribed for and funds representing the sale
thereof have cleared, a closing (the "Closing") shall take
place at the offices of Snow Becker Krauss P.C., 605 Third
Avenue, New York, N.Y. within seven days following the
Termination Date (which date may be accelerated or adjourned
by agreement between the Company and the Placement Agent).
The Closing can be a staged closing ("Stage Closing") with
an initial closing of at least five hundred thousand
dollars ($500,000), to occur no later than Monday, September
30, 1996. The Final Closing must occur no later than
Thursday, October 31, 1996. At the Closing, payment for the
Shares then being issued and sold by the Company shall be
made against delivery of certificates representing the
Common Stock included in the Shares. As used herein,
references to "Closing" shall include the initial and each
Stage Closing, unless the context requires otherwise. The
Kriegsman Group and all other holders of the Company's
restricted Common Stock will enter into lock-up agreements
with the Placement Agent upon the Closing of the Maximum
Offering to refrain from the sale or disposition of the
securities of the Company owned by them for a two (2) year
period following the later of the completion of the Maximum
Offering or the Termination Date, unless pursuant to the
written consent of the Placement Agent.
<PAGE>
(b) Warrants.
(i) At each Closing, the Company shall issue to
both the Placement Agent or its designees or their assignees
(the "Holders") and to the Kriegsman Group, warrants (the
"Placement Agent's Warrants" and the Kriegsman Group's
Warrants respectively). The Placement Agent's Warrants and
the Kriegsman Group's Warrants will permit each of those
parties to purchase a number of Shares of the Company's
Common Stock in an amount equal to 2,200,000 multiplied by a
fraction, the numerator of which is the gross proceeds
raised in connection with the particular Stage Closing and
the denominator of which is $1,500,000 (to a maximum grant
of Placement Agent's Warrants for 2,200,000 Shares and a
maximum grant of Kriegsman Group's Warrants for 2,200,000
Shares). The Placement Agent's Warrants and the Kriegsman
Group warrants shall be exercisable for five years from
their date of issuance (unless extended) at a price equal to
$.25 per share.
(ii) The Company covenants and agrees with the
Placement Agent that, if at any time within the five-year
period commencing on the date of the first Closing, the
Company proposes to file a registration statement with
respect to any class of security (other than pursuant to a
registration statement on Forms S-4 or S-8 or any successor
form or a post-effective amendment to the registration
statement relating to the Company's publicly traded
warrants) under the Securities Act in a primary registration
on behalf of the Company and/or in a secondary registration
on behalf of holders of the Company's securities, the
Company will give prompt written notice (which, in the case
of a registration statement pursuant to the exercise of
registration rights shall be within ten (10) business days
after the Company's receipt of notice of such exercise and,
in any event, shall be at least twenty (20) days prior to
such filing) to the Holders, at the address appearing on the
records of the Company, of its intention to file a
registration statement, and will offer to include in such
registration statement all or any portion of the shares
underlying the Holder's Warrants (the "Registrable
Securities"). Unless otherwise indicated, all registrations
requested pursuant to this Section 3(b)(ii) are referred to
herein as "Piggyback Registrations." The offer to include
the Registrable Securities in any Piggyback Registration
Statement is limited by subparagraphs (A) and (B) of this
Section 3(b)(ii).
The Company will use its best efforts, through its
officers, directors, auditors and counsel in all matters
necessary or advisable, to cause to become effective any
registration statement filed pursuant to this Section 3 (b)
(ii) as promptly as practicable. In that regard, the
Company makes no representations or warranties as to its
ability to have the registration statement declared
effective. All registrations pursuant to this Section 3 (b)
(ii) will be made solely at the Company's expense, exclusive
of any sales commissions incurred from the sale of the
Registrable Securities and any attorneys' fees incurred by
the Holders resulting from the hiring of the Holders own
attorneys, if any Registrable Securities are sold.
<PAGE>
(A) Priority on Primary Registrations. If a
Piggyback Registration includes an underwritten primary
registration on behalf of the Company, and if the
underwriter for the offering being registered by the Company
determines in good faith and advises the Company in writing
that in its opinion the number of Registrable Securities
requested to be included in such registration statement
exceeds the number that can be sold in such offering without
materially adversely affecting the distribution of such
securities by the Company, then the Company will promptly
furnish the Holders with a copy of such letter, and the
Company will include in such registration statement first,
the securities that the Company proposes to sell and second,
the securities requested to be included in such registration
statement, any sales of which shall be apportioned pro rata
among the Holders and the holders of any other securities
requesting registration according to the number of
Registrable Securities, and other securities to be
registered.
(B) Priority on Secondary Registrations. If a
Piggyback Registration consists only of an underwritten
secondary registration on behalf of stockholders of
securities of the Company, and the underwriter for the
offering being registered by the Company advises the Company
in writing that in its opinion the number of Registrable
Securities requested to be included in such registration
statement exceeds the number which can be sold in such
offering without materially adversely affecting the
distribution of such securities, then the Company will
promptly furnish the Placement Agent with a copy of such
letter, and the Company will include in such registration
statement the securities requested to be included in such
registration statement, any sales of which shall be
apportioned pro rata among the Placement Agent and the
holders of any other securities requesting registration
according to the number of Registrable Securities and other
securities requested to be registered.
Notwithstanding Subparagraph (a) above, if any such
underwriter shall determine in good faith and advise the
Company in writing that the distribution of the Registrable
Securities requested to be included in the registration
statement concurrently with the securities being registered
by the Company would materially adversely affect the
distribution of such securities by the Company, then the
Company may delay the Holders' offering and sale for such
period ending on the earliest of (i) 90 days following the
effective date of the Company's registration statement or
(ii) such date as the Company, managing underwriter and
Holders shall otherwise agree. In the event of such delay,
the Company shall file such supplements, post-effective
amendments and take any such other steps as may be necessary
to permit the Holders to make a proposed offering and sale
for a period of ninety (90) days immediately following the
end of such period of delay. If any party disapproves of
the terms of any such underwriting, it may elect to withdraw
therefrom by written notice to the Company, the underwriter,
and the Holders. Notwithstanding the foregoing, the Company
shall not be required to file a registration statement to
include the Registrable Securities pursuant to this Section
3(b) (ii) if, in the opinion of counsel for the Company, all
of the Registrable Securities proposed to be disposed of may
be transferred pursuant to the provisions of Rule 144 under
the Securities Act.
<PAGE>
(C) Demand Registration Rights. The Company covenants
and agrees that upon written request of no less than fifty
percent (50%) of the Holders, on one occasion, made at any
time during the term, the Company will file with the SEC as
promptly as practicable and, in any event, within ninety
(90) days after receipt of such written request, at its sole
expense, a registration statement or a post-effective
amendment to an existing registration statement, under the
Securities Act (collectively a "Demand Registration
Statement") registering or qualifying the Registrable
Securities requested to be so registered for sale. The
expenses of such Demand Registration Statement shall be paid
solely by the Company, exclusive of any sales commissions
incurred from the sale of the Registrable Securities and any
attorneys' fees incurred by the Holders resulting from the
employment of their own attorneys which shall be the
obligations solely of such Holders. The registration right
requested pursuant to this Section 3(b)(ii) is referred to
herein as the "Demand Registration." Within fifteen (15)
days after receiving any such notice, the Company shall give
notice to the remaining holders of the Registrable
Securities, if any, advising that the Company had received a
request for registration and is proceeding with such Demand
Registration Statement and offering to include therein the
Registrable Securities of such remaining Holders. The
Company shall not be obligated to include the Registrable
Securities of any such remaining Holders in a Demand
Registration Statement unless the Company shall have
received an acceptance from such holder by notice in writing
to the Company within ten (10) days thereafter. The Company
will file and use its best efforts, through its officers,
directors, auditors and counsel in all matters necessary or
advisable, to cause such Demand Registration Statement to
become effective as promptly as practicable. For a period
of nine months after the Registration Statement becomes
effective, the Company will reflect in an amendment to the
registration Statement, financial statements which are
prepared in accordance with Section 10(a)(3) of the
Securities Act and any facts or events arising that,
individually, or in the aggregate, represent a fundamental
and/or material change in the information set forth in the
Demand Registration Statement to enable the holders to sell
such Registrable Securities during said nine month period.
The Company shall not be obligated to file another Demand
Registration Statement pursuant to this paragraph for any
holder who does not accept the offer herein.
<PAGE>
Notwithstanding anything else herein, no Demand
Registration shall be utilized or be deemed to have been
utilized under this Section 3(b)(ii)(C) unless and until the
Demand Registration Statement relating to the Registrable
Securities which are the subject of the Demand Registration
Statement is declared effective by the SEC and the
Registerable Securities are qualified for sale with the
appropriate State Securities Commissions, and no stop order
suspending the effectiveness of such Demand Registration
Statement shall have been issued and the registration
Statement has remained in effect and current for a minimum
period of nine months.
If requested by the underwriter for any underwritten
offering of the Company's or its stockholder's securities in
which the Registerable Securities are or may be included,
and the underwriter of such offering by the Company and/or
its stockholder requests that the Registerable Securities
also be underwritten, then the Company and the Holder of
Registrable Securities will enter into an underwriting
agreement with such underwriter for such offering, which
shall be reasonably satisfactory in substance and form to
the Company and the Company's counsel, the Holder of
Registrable Securities and the underwriter, and such
agreement shall contain such representations and warranties
by the Company and the Holders of Registrable Securities and
such other terms and provisions as are customarily contained
in an underwriting agreements with respect to secondary
distributions including, without limitation, indemnities.
(d) Bridge Financing Fees. Upon the earlier of
September 27, 1996 or the Closing of the Minimum Offering,
the Company hereby agrees to pay to the Placement Agent
commissions equal to ten percent (10%) of the gross proceeds
of the Bridge Financing as well as a non-accountable expense
allowance equal to three percent (3%) of the gross proceeds
of the Bridge Financing.
(e) Commissions. Upon the Closing the Minimum
Offering and any subsequent Closings, the Company hereby
covenants and agrees to pay to the Placement Agent a sales
commission consisting of ten percent (10.0%) of the gross
proceeds of the Offering received by the Company at such
Closing.
<PAGE>
(f) Non-Accountable Expense Allowance. Upon the
Closing the Minimum Offering and any subsequent Closings,
the Company hereby covenants and agrees to pay to the
Placement Agent a non-accountable expense allowance equal to
three percent (3.0%) of the gross proceeds of the Offering
received by the Company at such Closing.
(g) Consulting Agreement. Upon Closing of the
Maximum Offering, the Company and the Placement Agent shall
execute a financial consulting agreement for a term of two
(2) years which provides for the Company to pay a monthly
consulting fee of $5,000 to the Placement Agent commencing
with the Closing of the Maximum Offering, in a form
satisfactory to counsel for the Placement Agent.
(h) Termination. A Closing may be postponed or
this Agreement may be terminated by the Placement Agent by
giving notice to the Company in the event that: (i) the
Company shall have failed, refused or been unable, at or
prior to a Closing, to perform any agreement on its part to
be performed, or (ii) there shall have occurred, at any time
prior to a Closing, (A) any domestic or international event,
act or occurrence that has materially disrupted, or in the
Placement Agent's opinion, will in the immediate future
materially disrupt, the securities markets; (B) a general
suspension of, or a general limitation on prices for,
trading in securities on the New York Stock Exchange, the
American Stock Exchange or in the over-the-counter market;
(C) any outbreak of major hostilities or other national or
international calamity; (D) any banking moratorium declared
by a state or federal authority; (E) any moratorium declared
in foreign exchange trading by major international banks or
other persons; (F) any material interruption in the mail
service or other means of communication within the Shared
States; (G) any material adverse change in the business,
properties, assets, results of operations, or financial
condition of the Company; or (H) any change in the market
for securities in general or in political, financial, or
economic conditions that, in the Placement Agent's
reasonable judgement, makes it inadvisable to proceed with
the Offering.
4. Covenants of the Company.
(a) Use of Proceeds. The net proceeds of the
Offering will be used by the Company substantially as set
forth in the Offering Documents.
(b) Reservation of Common Stock. The Company will,
at all times while the Placement Agent's Warrants and the
Kriegsman Group's Warrants are outstanding, have a
sufficient number of shares of its Common Stock available
for issuance upon exercise thereof.
<PAGE>
(c) Warrants. The Company shall not issue any
warrants to purchase Common Stock of the Company other than
the Placement Agent's Warrants and the Kriegsman Group's
Warrants pursuant to Section three of this agreement. The
company shall not issue any warrants to the Kriegsman Group
in excess of those permitted by Section 3 of this Agreement.
(d) Expenses of Offering. The Company shall be
responsible for, and shall bear all reasonable expenses
directly and necessarily incurred in connection with, the
Offering including, but not limited to, legal fees relating
to the costs of preparing the Offering Documents and all
exhibits and amendments
thereto; preparing and delivering all placement agent and
selling documents, including, but not limited to, the Common
Stock, Blue Sky fees, filing fees and the fees and
reimbursement of counsel in connection with Blue Sky
matters.
(e) Notification. The Company shall notify the
Placement Agent immediately, and in writing, (A) when any
event shall have occurred during the period commencing on
the date hereof and ending the last Closing Date as a result
of which the Offering Documents would 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 not misleading, and (B) of the receipt of
any notification with respect to the modification,
rescission, withdrawal or suspension of the qualification or
registration of the Shares, or of any exemption from such
registration or qualification, in any jurisdiction. The
Company shall use its best efforts to prevent the issuance
of any such modification, rescission, withdrawal or
suspension and, if issued and the Placement Agent so
requests, to obtain the lifting thereof as promptly as
possible.
(f) Blue Sky. The Company shall use its best
efforts to qualify or register the Shares for offering and
sale under, or establish an exemption from such
qualification or registration under, the Blue Sky laws of
such jurisdiction as you may reasonably request. The Company
will not consummate any sale of Shares in any jurisdiction
or in any manner in which such sale may not be lawfully
made.
(g) Form D Filing. The Company shall file five
copies of a Notice of Sales of Securities on Form D with the
SEC no later than 15 days after the first sale of the
Shares. The Company shall file promptly such amendments to
such notices on Form D as shall become necessary and shall
also comply with any filing requirement imposed by the laws
of any state or jurisdiction in which offers are made. The
Company shall furnish the Placement Agent with copies of all
such filings.
<PAGE>
(h) Press Releases. Etc. The Company shall not,
during the period commencing on the date hereof and ending
the last Closing Date, issue any press release or other
communication, or hold any press conference with respect to
the Company, its financial condition, results of operations,
business, properties, assets or liabilities, or the
Offering, without the prior consent of the Placement Agent,
which consent shall not be unreasonably withheld. The
foregoing notwithstanding, the Company may issue press
releases or other communications if such releases are made
in the ordinary course of the Company's business or are
otherwise required by law.
5. Conditions of the Placement Agent's Obligations
(a) As of the date of the first Stage Closing,
the Company will deliver to the Placement Agent, at the
Placement Agent's option, either (i) an opinion letter from
Angell & Deering, the Company's auditors, that based upon
June 30, 1996 financial statements, upon the Closing of this
Offering the Company will be eligible for listing on the
Nasdaq SmallCap market; or (ii) a pre-determination from
Nasdaq that upon the Closing of this Offering the Company
will be eligible for listing on the Nasdaq SmallCap market.
(b) On the Closing Dates the Placement Agent shall
have received the favorable opinion of counsel for the
Company, dated the Closing Date, addressed to the Placement
Agent and in form, scope and substance satisfactory to
counsel for the Placement Agent, to the effect that:
(i) Each of the Company and its subsidiaries
(the "Subsidiaries") is a corporation validly existing and
in good standing under the laws of the jurisdiction of its
incorporation, has full corporate power and authority under
such laws to own its properties and to conduct its business
as described in the Offering Documents and is duly qualified
to do business as a foreign corporation and is in good
standing in such jurisdictions as the Representative may
request.
<PAGE>
(ii) the Company has an authorized and
outstanding capitalization as set forth under the caption
"Capitalization" in the Offering Documents; and the Common
Stock and preferred stock conform in all material respects
as to legal matters to the description thereof contained in
the Offering Documents. The Company has all requisite
corporate power and authority to issue, sell and deliver the
Company Shares and Option Shares in accordance with and upon
the terms and conditions set forth in this Agreement and in
the Offering Documents, and all corporate action required to
be taken by the Company for the due and proper
authorization, issuance, sale and delivery of the Company
Shares has been validly and sufficiently taken. The Company
Shares, upon issuance and delivery and payment therefor in
the manner herein described, will be, duly authorized,
validly issued, fully paid and nonassessable. The terms and
provisions of the capital stock of the Company conform in
all material respects to the description thereof contained
under the caption ''Description of Capital Stock'' in the
Offering Documents; and except as set forth in the Offering
Documents and except as previously disclosed to the
Placement Agent in writing, there are no preemptive or other
rights to subscribe for or to purchase, or any restriction
upon the voting or transfer of, any shares of Stock pursuant
to the Company's certificate of incorporation, or by-laws;
(iii) this Agreement and the execution and
performance by the Company has been duly and validly
authorized, executed and delivered by the Company;
(iv) no consent, approval, authorization or
order of any court or governmental agency or body is
required in connection with the consummation of the
transactions contemplated by this Agreement, except such as
may be required under the Act or state or foreign securities
or Blue Sky laws;
(v) the Offering Documents and any amendments
or supplements thereto (other than the financial statements
and other financial and statistical data included therein,
as to which no opinion need be rendered) as of their
respective dates comply as to form in all material respects
with the requirements of the Act and the Rules and
Regulations thereunder;
(vi) except as set forth in the Offering
Documents and except as previously disclosed to the
Placement Agent in writing, there are no preemptive or other
rights to subscribe for or to purchase, nor any restriction
upon the voting or transfer of, any shares of Stock pursuant
to any agreement or other instrument known to such counsel
to which the Company or any subsidiary is a party; and to
the best of such counsel's knowledge, the offering or sale
of the Stock as contemplated by this Agreement does not give
rise to any registration rights or other rights, other than
those which have been waived or satisfied for or relating to
the registration of any shares of Common Stock;
(vii) to the best of such counsel's
knowledge, there are no legal or governmental proceedings
pending or threatened before or by any court or governmental
agency or body against the Company of a character required
to be disclosed in the Prospectus which have not been so
disclosed;
<PAGE>
(viii) Such counsel have participated in
conferences with representatives of the Placement Agent and
with representatives of the Company and it accountants
concerning the Registration Statement and the Offering
Documents and have considered the matters required to be
stated therein and the statements contained therein,
although they have not independently verified the accuracy,
completeness or fairness of such statements. Such counsel
shall also state that based upon and subject to the
foregoing, nothing has come to their attention to cause them
to believe that the Offering Documents, at their issue date,
or at the date of the Closing, contained any untrue
statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the
statements, in light of the circumstances under which they
were made, not misleading (it being understood that they
have not been requested to and do not make any comment with
respect to the financial statements, schedules and other
financial and statistical in formation contained in the
offering Documents).
(c) Prior to either Closing Date (i) there shall
have been no material adverse change in the condition of the
Company or its business or business activities, financial or
otherwise, from the date as of which such condition is set
forth in the Offering Documents, except as referred to
therein; (ii) there shall have been no material transaction,
not in the ordinary course of business, entered into by the
Company from the date as of which the financial condition of
the Company is set forth in the Offering Documents, other
than transactions referred to or contemplated therein or to
which the Placement Agent has given its written consent;
(iii) the Company shall not be in default under any
provisions of any instruments relating to any outstanding
indebtedness; (iv) no material amount of the assets of the
Company shall have been pledged or mortgaged, except as set
forth in the Offering Documents; (v) no action, suit or
proceeding, at law or in equity, shall have been pending or
to the Company's knowledge threatened against the Company or
affecting its properties or business before or by any court
or federal or state commission, board or other
administrative agency wherein an unfavorable decision,
ruling or finding would materially adversely affect the
business, operations, income or financial condition of the
Company, except as set forth in the Offering Documents; and
(vi) no stop order shall have been issued under the Act and
no proceedings therefor shall have been initiated or
threatened by the Commission, (vii) the Offering Documents
do not contain any untrue statement of a material fact or
omitted to state a material fact required to be stated
therein or necessary to make the statements, in light of the
circumstances under which they were made, not misleading and
(viii) The Offering Documents conform in all respects with
the requirements of Section 4(6) of the Securities Act and
Regulation D and with the requirements of all other
published rules regulations of the Securities and Exchange
Commission (the "SEC") currently in effect relating to
"private offerings" to "accredited investors".
<PAGE>
(d) On the Closing Dates the Placement Agent
shall have received a certificate of the President or
Chairman of the Board and Secretary or the Treasurer of the
Company, dated the Closing Date, to the effect that the
conditions set forth in subsection (c) above have been
satisfied, and that as of the Closing Date, the
representations and warranties set forth in Section 2
hereof, and that the Company has performed all its
obligations and satisfied all conditions on its part to be
performed or satisfied at or prior to the Closing Date.
(e) At the time this Agreement is executed, and
on the Closing Dates, the Placement Agent shall have
received a certificate from the Treasurer or Chief Financial
Officer of the Company in form, scope and substance
satisfactory to the Placement Agent in all respects
(including the non-material nature of the changes or
decreases, if any, referred to below, that as of the date of
this Agreement and as of the Closing Dates the Interim
Results of Operations included in the Offering Documents for
the period ended June 30, 1996 and the latest available
unaudited interim financial statements of the Company (with
an indication of the date of the latest available unaudited
interim financial statements), the unaudited Interim Results
of Operations of the Company included in the Disclosure
Documents comply as to form in all material respects with
the applicable accounting requirements of the Act and the
regulations thereunder and are fairly presented in
conformity with generally accepted accounting principles
applied on a basis substantially consistent with that of the
audited financial statements of the Company included in the
Offering Documents and that at a specified date not more
than five business days prior to the date of such letter,
there was no material change in the Common Stock, preferred
stock or long term debt of the Company, in each case as
compared with amounts shown on the June 30, 1996
consolidated balance sheets other than as set forth in or
contemplated by the Offering Documents, or, if there was any
change or decrease, setting forth the amount of such change
or decrease, or during the period from June 30, 1996 to a
specified date not more than five business days prior to the
date of such letter, there was any decrease in revenues, or
in earnings before income taxes, and extraordinary items or
in the total or per share amounts of net earnings or loss of
the Company, in each case as compared with the corresponding
period beginning other than as set forth in or contemplated
by the Disclosure Documents, or, if there was any decrease,
setting forth the amount of such decrease;
<PAGE>
(f) The certificates for the Stock comprising the
Shares shall have been duly tendered to the Placement Agent
for the accounts of the Subscribers.
(g) No order suspending the sale of the Shares
prior to the Closing in any jurisdiction designated by the
Placement Agents shall have been issued on or before the
Closing and no proceedings for that purpose shall have been
instituted or, to the Representative's knowledge or that of
the Company, shall be contemplated.
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 a representation and
warranty by the Company to the Placement Agent as to the
statements made therein. If any condition to the Placement
Agent's obligations hereunder to be fulfilled prior to or at
the Closing Date is not so fulfilled, the Placement Agent
may terminate this Agreement or, if it so elects, waive any
such conditions which have not been fulfilled or extend the
time for their fulfillment.
6. Indemnification.
(a) The Company agrees to indemnify and hold
harmless the Placement Agent and its officers, directors,
employees, agents and counsel, and each person, if any, who
controls the Placement Agent within the meaning of Section
15 of the Securities Act (each, an "Indemnified Party") as
follows:
(i) against any and all loss, liability,
claim, damage and expense whatsoever arising out of any
untrue statement or alleged untrue statement of a material
fact contained in the Offering Documents or the omission or
alleged omission therefrom of a material fact necessary in
order to make the statements therein, in light of the
circumstances under which they were made, not misleading;
(ii) against any and all loss, liability,
claim, damage and expense whatsoever to the extent of the
aggregate amount paid in settlement of any litigation,
commenced or threatened, or any claim whatsoever based upon
any such untrue statement or omission or any such alleged
untrue statement or omission;
<PAGE>
(iii) against any and all expense whatsoever
incurred in investigating, preparing or defending against
any litigation, commenced or threatened, or any claim
whatsoever based upon any such untrue statement or omission,
or any such alleged untrue statement or omission, to the
extent that any such expense is not paid under clause (i) or
(ii) above; and
(iv) notwithstanding the foregoing, the
Company shall have no obligation to indemnify an Indemnified
Party for any loss, liability, claim, damage or expense
found in the final judgement of a court to have resulted
from such Indemnified Party's gross negligence or
intentional misconduct.
(b) The Company agrees to indemnify and hold
harmless each Indemnified Party, to the same extent as the
foregoing indemnity, against any and all loss, liability,
claim, damage and expense whatsoever directly arising out of
the exercise by any person of any right under the Securities
Act or the Exchange Act or the securities or Blue Sky laws
of any state on account of violations by the Company of its
representations, warranties or agreements set forth in
Section 2 hereof or by the Company and any subscriber for
Shares in the Subscription Agreement.
(c) Promptly after receipt by an Indemnified Party
under this Section of notice of the commencement of any
action, the Indemnified Party will, if a claim for
indemnification in respect thereof is to be made against the
Company under this Section, notify in writing the Company of
the commencement thereof; but the omission so to notify the
Company will not relieve it from any liability which it may
have to the Indemnified Party otherwise than under this
Section. In case any such action is brought against the
Indemnified Party, and it notifies the Company of the
commencement thereof, the Company will be entitled to
participate in, and, to the extent that it may wish, to
assume the defense thereof, subject to the provisions herein
stated, with counsel reasonably satisfactory to the
Indemnified Party, and after notice from the Company to the
Indemnified Party of its election so to assume the defense
thereof, the Company will not be liable to the Indemnified
Party under this Section for any legal or other expenses
subsequently incurred by the Indemnified Party in connection
with the defense thereof other than reasonable costs of
investigation and other than as set forth below. The
Indemnified Party shall 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 shall not
be at the expense of the Company if the Company has assumed
the defense of the action with counsel reasonably
satisfactory to the Indemnified Party; provided that the
fees and expenses of such counsel shall be at the expense of
the Company if (i) the employment of such counsel has been
specifically authorized in writing by the Company or (ii)
the named parties to any such action (including any
impleaded parties) include both the Placement Agent and one
or more other Indemnified Parties and/or the Company and, in
the judgment of the Placement Agent, it is advisable for the
Placement Agent or any other Indemnified Party to be
represented by separate counsel (in which case the Company
shall not have the right to assume the defense of such
action on behalf of the Placement Agent or any other
Indemnified Parties, it being understood, however, that the
Company shall not, in connection with any one such action or
separate but substantially similar or related actions in the
same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable
fees and expenses of more than one separate firm of
attorneys for the Indemnified Parties, which firm shall be
designated in writing by you). No settlement of any action
against the Indemnified Party shall be made without the
consent of the Indemnified Party, which shall not be
unreasonably withheld in light of all factors of importance
to the Indemnified Party.
<PAGE>
7. Contribution. To provide for just and equitable
contribution, if (a) an Indemnified Party makes a claim for
indemnification under Section 5 but it is found in a final
judicial determination, not subject to further appeal, that
such indemnification may not be enforced in such case, even
though this Agreement provides for indemnification in such
case, or (b) any Indemnified Party or the Company seeks
contribution under the Securities Act, or otherwise, then
the Company (including for this purpose any contribution
made by or on behalf of any officer, director, employee,
agent, or counsel of the Company, or any controlling person
within the meaning of Section 15 of the Securities Act (each
a "controlling person") of the Company), on the one hand,
and the Placement Agent (including for this purpose any
contribution made by or on behalf of any officer, director,
employee, agent or counsel of the Placement Agent or any
controlling person of the Placement Agent), on the other
hand, shall contribute to the losses, liabilities, claims,
damages, and expenses whatsoever to which any of them may be
subject, in such proportions as are appropriate to reflect
the relative benefits received by the Company, on the one
hand, and the Placement Agent, on the other hand; provided,
however, that if applicable law does not permit such
allocation, then their contributions shall be in such
proportions as are appropriate to reflect not only the
relevant benefits received by each of them but also other
relevant equitable considerations such as the relative fault
of the Company and the Placement Agent in the cause of such
losses, liabilities, claims, damages, and expenses. No
person guilty of a fraudulent representation shall be
entitled to contribution from any person who is not guilty
of such fraudulent representation. For purposes of this
Section 6, each officer, director, employee, agent, counsel
and controlling person of the Placement Agent shall have the
same rights to contribution as the Placement Agent, and each
officer, director, employee, agent, counsel and controlling
person of the Company shall have the same rights to
contribution as the Company subject, in each case, to the
provisions of this Section 6. Anything in this Section 6 to
the contrary notwithstanding, no party shall be liable for
contribution with respect to the settlement of any claim or
action effected without his, her or its written consent.
This Section 6 is intended to supersede any right to
contribution under the Securities Act, or otherwise.
<PAGE>
8. Miscellaneous.
(a) Representations and Warranties. Certain
Covenants and Indemnities to Survive. All representations
and warranties contained in this Agreement, or contained in
any certificate of any officer of the Company delivered
pursuant to this Agreement, and the indemnification and
contribution provisions of Sections 5 and 6 hereof, shall
remain operative, in full force and effect, regardless of
any termination or cancellation of this Agreement or any
investigation made by or on behalf of the Placement Agent or
the Company and shall survive the sale and delivery of the
Shares.
(b) No Other Beneficiaries. This Agreement is
solely for the benefit of the parties specified herein and
their respective successors and assigns.
(c) Governing Law. This Agreement shall be
governed by and construed in accordance with the law of the
State of New York without regard to principles of conflict
of laws.
(d) Counterparts. This Agreement may be signed in
counterparts with the same effect as if both parties had
signed one and the same instrument.
(e) Notices. All notices or other communications
given or made hereunder shall be in writing and shall be
delivered by hand, against written receipt, sent by
facsimile transmission, receipt confirmed, or mailed by
registered or certified mail, return receipt requested,
postage prepaid, if to the Placement Agent at Noble
Investment Co. of Palm Beach, 1801 Clint Moore, Boca Raton,
Florida 33487, Attention: Nick Pronk, and if to the Company
at 790 East Market Street, Suite 270, West Chester,
Pennsylvania 19382, Attention: Joyce A. Rizzo. Notices shall
be deemed given on the date of receipt or, if mailed, three
business days after mailing, except notices of change of
address, which will be deemed given when received.
<PAGE>
(f) Entire Agreement. This Agreement constitutes
the entire agreement of the parties with respect to the
matters herein referred and supersedes all prior agreements
and understandings, written and oral, between the parties
with respect to the subject matter hereof. Neither this
Agreement nor any term hereof may be changed, waived or
terminated orally, but only by an instrument in writing
signed by the party against which enforcement of the change,
waiver or termination is sought.
If you find the foregoing is in accordance with
our understanding, kindly sign and return to us a
counterpart hereof, whereupon this instrument along with all
counterparts will become a binding agreement between us.
Very truly yours,
PROTOSOURCE CORPORATION
By:
Chief Executive Officer
Agreed:
ANDREW, ALEXANDER, WISE &
COMPANY, INCORPORATED
By:
Andreas Zigouras
