SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. ___)
PROTOSOURCE CORPORATION
(Name of Issuer)
Common Stock. no par value
(Title of Class of Securities)
743958 10 0
(CUSIP Number)
Charles Snow, Esq.
Snow Becker Krauss P.C.
605 Third Avenue, New York, New York 10021
(212) 687-3860
(Name, Address and Telephone Number of
Person Authorized to Receive Notices and Communications)
October 11, 1996
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is filing
this schedule because of Rule 13D-1(b)(3) or (4), check the following box [ ].
Page 1 of 4 pages
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SCHEDULE 13D
CUSIP No. 743958 10 0 Page 2 of 4 Pages
- --------------------------------------------------------------------------------
1) NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Andrew, Alexander, Wise & Company, Inc.
2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [ ]
3) SEC USE ONLY
4) SOURCE OF FUNDS
OO
5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) [ ]
6) CITIZENSHIP OR PLACE OF ORGANIZATION
USA
7) SOLE VOTING POWER
0
NUMBER 8) SHARED VOTING POWER
OF SHARES 0
BENEFICIALLY
OWNED BY 9) SOLE DISPOSITIVE POWER
EACH 1,026,667
REPORTING
PERSON WITH 10) SHARED DISPOSITIVE POWER
0
11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,026,667
12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES [ ]
13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13.3%
14) TYPE OF REPORTING PERSON
BD
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Page 3 of 4
Item 1. Security and Issuer.
This Statement relates to shares of Common Stock, without par value (the
"Shares"), underlying certain warrants (the "Warrants") issued to the Reporting
Person by ProtoSource Corporation, a California corporation (the "Issuer"). The
principal executive offices of the Issuer are located at 2580 West Shaw Lane,
Suite 102, Fresno, CA 93711-2765.
Item 2. Identity and Background.
The Reporting Person is Andrew, Alexander, Wise & Company, Inc., a
Broker-Dealer with an address at 17 State Street, New York, NY 10004.
During the last five years, the Reporting Person has not been convicted in
a criminal proceeding (excluding traffic violations or similar misdemeanors).
During the past five years, the Reporting Person has not been a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction
resulting in a judgment, decree or final order enjoining future violations of,
or prohibiting or mandating activities subject to, Federal or state securities
laws or finding any violation with respect to such laws.
The Reporting Person is a corporation formed in New York State, United
States of America.
Item 3. Source and Amount of Funds or Other Consideration.
The Reporting Person acquired the Warrants as compensation for acting as
Placement Agent for the Issuer in a private offering by the Issuer of an
aggregate of 6,400,000 Shares for an aggregate amount of 1,700,000 (the
"Offering").
Item 4. Purpose of Transaction.
The Reporting Person acquired the Warrants for investment purposes only and
not with a view to their resale or distribution. Absent any change in personal
circumstances, the Reporting Person intends to maintain its equity position in
the Issuer. The Reporting Person, however, has been granted registration rights
with respect to the Shares underlying the Warrants and intends to review on a
continuing basis its investment in the Issuer and may, depending upon such
evaluation of the Issuer's business and prospects and upon future developments
in the Issuer's business and economic conditions, determine to increase,
decrease, continue to hold or dispose of its position in the Issuer.
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Page 4 of 4
Item 5. Interest in Securities of the Issuer.
(a) The Reporting Person beneficially owns 1,026,667 Warrants. This amount
represents approximately 13.3% of the outstanding Shares of the Issuer.
(b) The Warrants confer no voting power. The Reporting Person has sole
dispositive power over the Warrants.
(c) The Reporting Person has not, in the past sixty days, engaged in any
other transactions involving Shares of the Issuer.
(d) and (e) N/A.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to
Securities of the Issuer.
The Reporting Person has no agreements or understandings with any person or
entity respecting the Warrants other than the Placement Agent Agreement with the
Issuer relating to the 1,026,667 Warrants and the Offering and Lock-Up
Agreements with certain holders of securities of the Issuer.
Item 7. Material to be Filed as Exhibits.
1. Placement Agent Agreement
2. Form of Lock-up Agreement signed between the Reporting person and each
of Howard Silverman, The Kriegsman Group, James C. Robinson, Charles T. Howard,
David L. Green, Ding Yang, and Steven L. Wilson
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: November 6, 1996
/s/ Andreas Zigouras
Andreas Zigouras
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Exhibit 1
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.
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
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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.
(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.
(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,
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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.
(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.
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(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.
(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.
(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.
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(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.
(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.
(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.
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(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.
(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.
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(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.
(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
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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.
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.
(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
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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.
(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
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made. The Company shall furnish the Placement Agent with copies of all such
filings.
(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.
(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
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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;
(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
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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".
(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;
(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
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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;
(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
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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.
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.
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.
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(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.
(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: /s/ Charles Howard
Charles Howard
Agreed:
ANDREW, ALEXANDER, WISE &
COMPANY, INCORPORATED
By: /s/ Andreas Zigouras
Andreas Zigouras
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Exhibit 2
LOCK-UP AGREEMENT
LOCK-UP AGREEMENT (the "Agreement" or "Lock-Up Agreement") dated October
31, 1996 by and between , an officer of ProtoSource Corporation with a place
of business at 2580 West Shaw Road, Fresno California 93711 ("Holder"), and
Andrew, Alexander, Wise & Co. with a place of business at 17 State Street,
New York, NY 10004 ("AAWC").
W I T N E S S E T H:
WHEREAS, Holder is the holder of shares of the restricted Common Stock (the
"Shares") of ProtoSource Corporation (the "Company");
WHEREAS, AAWC is the holder warrants to purchase up to 2,200,000 Shares;
WHEREAS, Holder, AAWC and the Kriegsman Group have agreed not to sell,
transfer or otherwise dispose of the Shares except during the time periods set
forth in accordance with the terms of this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the terms, conditions
and mutual covenants appearing in this Agreement and the Release, the parties
hereto hereby agree as follows:
SECTION 1.
(A) Holder hereby agrees that it will not offer, sell, transfer or
otherwise dispose of the Shares without the prior written consent of AAWC for a
period of three (3) years following the date hereof (the "Term").
(B) Holder hereby agrees that for a period of two (2) years following the
Term of this three (3) year Lock-Up Agreement, any and all sales or other
disposition of the Shares subject to this Lock-Up Agreement will be effectuated
by or at the direction of AAWC as the selling broker unless another broker is
designated in writing by AAWC.
(C) Holder acknowledges that its breach or impending violation of any of
the provisions of this Agreement may cause irreparable damage to AAWC for which
remedies at law would be inadequate. Holder further acknowledge that the
provisions set forth herein are essential terms and conditions of the Release.
Holder therefore agrees that AAWC shall be entitled to a decree or order by any
court of competent jurisdiction enjoining such impending or actual violation of
any of such provisions. Such decree or order, to the extent appropriate, shall
specifically enforce the full performance of any such provision by Holder, and
Holder and AAWC hereby consent to the jurisdiction of any such court of
competent jurisdiction, state or federal, sitting in the State of New York, and
authorizes the entry on its behalf of any required appearance for such purpose.
This remedy shall be in addition to all other remedies available to AAWC at law
or equity. If any portion of this Section 1 is adjudicated to be invalid or
unenforceable, this Section 1 shall be deemed amended to delete therefrom the
portion so adjudicated, such deletion to apply only with respect to the
operation of this Section 1 in the jurisdiction in which such adjudication is
made.
SECTION 2. Subject to Section 5 hereunder, this Agreement shall inure to
the benefit of and be binding upon AAWC and Holder, their successors and
assigns.
SECTION 3. Should any part of this Agreement, for any reason whatsoever, be
declared invalid, illegal, or incapable of being enforced in whole or in part,
such decision shall not affect the validity of any remaining portion, which
remaining portion shall remain in full force and effect as if this Agreement had
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been executed with the invalid portion thereof eliminated, and it is hereby
declared the intention of the parties hereto that they would have executed the
remaining portion of this Agreement without including therein any portion which
may for any reason be declared invalid.
SECTION 4. This Agreement shall be construed and enforced in accordance
with the laws of the State of New York applicable to agreements made and to be
performed in such State without application of the principles of conflicts of
laws of such State.
SECTION 5. This Agreement and all rights hereunder are personal to the
parties and shall not be assignable, and any purported assignment in violation
thereof shall be null and void.
SECTION 6. Any notice, statement, report, request or demand required or
permitted to be given by this Agreement shall be in writing, and shall be
sufficient if delivered in person or if addressed and sent by certified mail,
return receipt requested, postage prepaid; or by overnight courier service; or
by facsimile transmission, followed promptly by first class mail, to the parties
at the addresses set forth above, or at such other place that either party may
designate by notice in the foregoing manner to the other. Any such notice shall
be deemed given five (5) days after being mailed by certified mail, three (3)
days after being sent by facsimile transmission followed by being mailed by
first class mail, one (1) day after being sent by overnight courier service with
morning delivery and immediately when personally delivered.
SECTION 7. The failure of either party to insist upon the strict
performance of any of the terms, conditions and provisions of this Agreement
shall not be construed as a waiver or relinquishment of future compliance
therewith, and said terms, conditions and provisions shall remain in full force
and effect. No waiver of any term or any condition of this Agreement on the part
of either party shall be effective for any purpose whatsoever unless such waiver
is in writing and signed by such party.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first written above.
ANDREW, ALEXANDER, WISE & CO.
By: _____________________________________
Andreas Zigouras
By: _____________________________________
21
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