PLACEMENT AGENT AGREEMENT
June 23, 2003
Xxxxxxx Xxxxxx Xxxxxx Inc.
000 Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Dear Sirs:
1. Introductory. Innovo Group, Inc., a Delaware
corporation (the "Company"), proposes to sell up to
3,000,000 shares (the "Shares") of common stock, $.10 par
value ("Common Stock"), of the Company at a purchase price
of $ 3.33 per share (the "Offering Price").
2. Representations and Warranties of the Company.
The Company represents, warrants, and agrees that:
(i) All reports and statements required to be
filed by the Company with the Securities and Exchange
Commission (the "Commission") under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"),
and the rules and regulations thereunder, due at or
prior to the date of this Agreement have been made.
Such filings, together with all documents incorporated
by reference therein, are referred to as "Exchange Act
Documents." Each Exchange Act Document, as amended,
conformed in all material respects to the requirements
of the Exchange Act and the rules and regulations
thereunder, and no Exchange Act Document, as amended,
at the time each such document was filed, included any
untrue statement of a material fact or omitted to state
any material fact required to be stated therein or
necessary to make the statements therein, in light of
the circumstances under which they were made, not
misleading.
(ii) The audited financial statements, together
with the related notes of the Company at November 30,
2002 and December 1, 2001, and for the years then
ended, included in the Company's Annual Report on Form
10-K for the year ended November 30, 2002, and the
unaudited financial statements of the Company at May 1,
2003, and for the three months then ended
(collectively, the "Company Financial Statements"),
included in the Company's Quarterly Report on Form 10-Q
for the quarter ended March 1, 2003, respectively,
fairly present in all material respects, on the basis
stated therein and on the date thereof, the financial
position of the Company at the respective dates therein
specified and its results of operations and cash flows
for the periods then ended (subject to, in the case of
the unaudited financial statements, normal audit
adjustments). To the knowledge of the Company, such
statements and related notes have been prepared in
accordance with generally accepted accounting
principles in the United States applied on a consistent
basis except as expressly noted therein.
(iii) Except as disclosed on Schedule 2(iii),
subsequent to March 1, 2003, the Company has not
incurred any material liabilities or obligations,
direct or contingent, except in the ordinary course of
business and except for liabilities or obligations
reflected or reserved against on the Company's balance
sheet dated March 1, 2003, and there has not been any
material adverse change, or to the actual knowledge of
the Company, any development involving a prospective
material adverse change, in the condition (financial or
otherwise), business, or results of operations of the
Company or any change in the capital or increase in the
long-term debt of the Company, nor has the Company
declared, paid, or made any dividend or distribution of
any kind on its capital stock.
(iv) All action required to be taken by the
Company as a condition to the due and proper
authorization, issuance, sale, and delivery of the
Shares to subscribers therefor in accordance with the
terms of this Agreement has been, or prior to the
Closing Date (as herein defined), will have been taken;
and upon the payment of the consideration for the
Shares specified herein the Shares will be duly and
validly issued, fully paid, and non-assessable with no
personal liability attaching to the ownership thereof
and free and clear of all liens imposed by or through
the Company.
(v) The Company is a corporation duly organized,
validly existing, and in good standing under the laws
of the State of Delaware, and has all requisite
corporate right, power, and authority to own or lease
its properties, to conduct its business as described in
the Exchange Act Documents, and to execute, deliver,
and perform this Agreement; the Company is duly
qualified to do business and in good standing as a
foreign corporation in all other jurisdictions in which
its ownership or leasing of properties, or the conduct
of its business requires or may require such
qualification except where the failure to be so
qualified would not have a material adverse effect on
the Company. The Company has complied in all material
respects with all material laws, rules, regulations,
applicable to the Company's business, operations,
properties, assets, products, and services, and the
Company is in possession of and operating in compliance
with all material permits, licenses, and other
authorization, required to conduct its business as
currently conducted.
(vi) The authorized capital stock of the Company
consists of 40,000,000 shares of Common Stock, $0.10
par value, of which 15,066,054 shares were issued and
outstanding as of the date hereof, and 5,000 shares of
8% redeemable preferred stock, $0.10 par value, of
which 194 shares were issued and outstanding as of the
date hereof. Except as contemplated by this Agreement,
or as described in the Exchange Act Documents or on
Schedule 2(vi), (a) there is no commitment by the
Company to issue any shares of capital stock,
subscriptions, warrants, options, convertible
securities, or other similar rights to purchase or
receive Company securities or to distribute to the
holders of any of its equity securities any evidence of
indebtedness, cash, or other assets, (b) the Company is
under no obligation (contingent or otherwise) to
purchase, redeem, or otherwise acquire any of its
equity or debt securities or any interest therein or
except with respect to its outstanding preferred stock
to pay any dividend or make any other distribution in
respect thereof, and (c) to the Company's knowledge
there are no voting trusts or similar agreements,
stockholders' agreements, pledge agreements, buy-sell
agreements, rights of first refusal, preemptive rights,
or proxies relating to any securities of the Company.
Except as set forth in the Exchange Act Documents or
filings with the Commission made by third parties
pursuant to Schedule 13D or 13G or Form 3 or 4, and to
the knowledge of the Company, no person holds of record
or beneficially, 5% or more of the outstanding shares
of the capital stock of the Company. All outstanding
securities of the Company were issued in compliance
with applicable Federal and state securities laws.
(vii) Except as disclosed in the Exchange Act
Documents or as described on Schedule 2(vii), there is
no material pending or, to the knowledge of the
Company, threatened (a) action, suit, claim,
proceeding, or investigation against the Company, at
law or in equity, or before or by any Federal, state,
municipal, or other governmental department,
commission, board, bureau, agency or instrumentality,
domestic or foreign (each, a "Governmental Body"), (b)
arbitration proceeding against the Company, (c)
governmental inquiry against the Company, or (d) any
action or suit by or on behalf of the Company pending
or threatened against others.
(viii) The Company is not in violation of its
certificate of incorporation or bylaws, or in default,
or with the giving of notice or lapse of time or both,
would be in default, in the performance of any material
obligation, agreement, or condition contained in any
lease, license, material contract, indenture, or loan
agreement or in any bond, debenture, note, or any other
evidence of indebtedness, except for such defaults
resulting from the closing of stores or as would not
have a material adverse effect on the Company. The
execution, delivery, and performance of this Agreement
and the Escrow Agreement (as hereinafter defined), the
incurrence of the obligations herein, the issuance,
sale, and delivery of the Shares, and the consummation
of the transactions contemplated herein, have been duly
authorized by all requisite corporate action on the
part of the Company and (a) do not and will not
conflict with the Company's certificate of
incorporation or bylaws, (b) do not and will not, with
or without the passage of time or the giving of notice,
result in the breach of, or constitute a default, cause
the acceleration of performance, or require any consent
under, or result in the creation of any lien, charge or
encumbrance upon any property assets of the Company
pursuant to, any material loan agreement, mortgage,
deed of trust, indenture, or other instrument or
agreement to which the Company is a party or by which
the Company or its properties are bound, except such
consents as have been obtained as of the date hereof or
to the extent that the same have been, or prior to the
Closing Date will be, waived or cured, or (c) do not
and will not result in the violation of any law,
statute, order, rule, administrative regulation, or
decree of any court, or governmental agency or body
having jurisdiction over the Company or its properties.
(ix) Except as disclosed in the Exchange Act
Documents or as described on Schedule 2(ix), there are
no pre-emptive rights or other rights to subscribe for
or to purchase, or any restriction upon the voting or
transfer of, shares of Common Stock pursuant to the
Company's certificate of incorporation, bylaws, or any
agreement or other instrument to which the Company is a
party. Except as disclosed on Schedule 2(ix), the
issuance of the Shares is not subject to any preemptive
right of any stockholder of the Company or to any right
of first refusal or other right in favor of any person.
(x) This Agreement has been duly and validly
executed and delivered by or on behalf of the Company
and constitutes a legal, valid, and binding obligation
of the Company enforceable in accordance with its
terms, except to the extent that its enforceability is
limited by (a) applicable bankruptcy, insolvency,
reorganization, moratorium, or other laws of general
application relating to or affecting the enforcement of
creditors' rights generally, and (b) laws relating to
the availability of specific performance, injunctive
relief, or other equitable remedies and except as
enforceability of the indemnity and contribution
provisions contained in Section 7 hereof may be limited
by applicable law or principles of public policy.
(xi) The escrow agreement (the "Escrow Agreement")
among the Company, you, and Sterling Bank (the "Escrow
Agent") has been duly and validly executed and
delivered by or on behalf of the Company and
constitutes a legal, valid, and binding obligation of
the Company enforceable in accordance with its terms,
except as such enforceability may be limited by (a)
applicable bankruptcy, insolvency, reorganization,
moratorium, or other laws of general application
relating to or affecting enforcement of creditors'
rights generally and (b) laws relating to the
availability of specific performance, injunctive
relief, or other equitable remedies.
(xii) No consent, approval, authorization, or
order of any court or governmental authority or agency
is required for the consummation by the Company of the
transactions contemplated by this Agreement, except
such as may be required by the National Association of
Securities Dealers, Inc. ("NASD"), the Securities Act
of 1933, as amended (the "Act"), or the rules and
regulations thereunder or state securities or Blue Sky
laws.
(xiii) Except as would not have a material
adverse effect on the business, assets, results of
operation, or condition of the Company, the Company has
filed, or caused to be filed, on a timely basis, all
tax returns (including payroll, unemployment, and other
taxes related to its employees and independent
contractors) required to be filed with any Governmental
Body and has paid or caused to be paid all taxes,
levies, assessments, tariffs, duties or other fees
imposed, assessed, or collected by any Governmental
Body that may have become due and payable pursuant to
those tax returns or otherwise except taxes being
disputed by the Company in good faith. No deficiency
assessment with respect to or proposed adjustment of
any of the Company's Federal, state, municipal, or
local tax returns has occurred or, to the Company's
knowledge, is threatened. There has been no tax lien
imposed by any Governmental Body outstanding against
the Company's assets or properties, except the lien for
current taxes not yet due. The charges, accruals, and
reserves on the books of the Company with respect to
taxes for all fiscal periods are adequate, in the
opinion of the Company, and the Company does not know
of any actual or proposed tax assessment for any fiscal
period or of any basis therefor against which adequate
reserves have not been set up. Except as disclosed on
Schedule 2(xiv), the Company has not been advised that
any Federal income tax return of the Company has been,
or will be, examined or audited by the Internal Revenue
Service.
(xiv) The Common Stock is registered pursuant
to Section 12(g) of the Exchange Act and is listed for
quotation with the symbol "INNO" on the Nasdaq Small
Cap Market maintained by the Nasdaq Stock Market, Inc.
(xv) The Company has not during the past six
months offered or sold any security by or for the
Company that is of the same or a similar class as the
Shares, other than offers of securities made solely to
accredited investors or otherwise under an employee
benefit plan as defined in Rule 405 under the Act,
securities issued in connection with acquisitions, or
other securities that will not invalidate the exemption
from registration relied on to offer and sell the
Shares.
(xvi) Neither the Company nor any of its
affiliates is or has been subject to any order,
judgment, or decree of any court of competent
jurisdiction temporarily, preliminarily, or permanently
enjoining such person for failure to comply with Rule
503 under Regulation D.
3. Representations and Warranties of Xxxxxxx Xxxxxx
Xxxxxx Inc. You represent and warrant to, and agree with,
the Company that:
(i) You have been duly organized and are validly
existing and in good standing as a corporation under
the laws of the State of Texas, with power and
authority (corporate and other) to perform your
obligations under this Agreement and the Escrow
Agreement; you are a broker-dealer registered and in
good standing under the Exchange Act and under the
securities or Blue Sky laws of each state in which the
Shares are being offered or sold by you, and you are a
member in good standing of the NASD; you are in
possession of and operating in compliance with all
authorizations, licenses, permits, consents,
certificates, and orders required for the performance
of your duties under this Agreement and the Escrow
Agreement, and your performance of your duties
hereunder and thereunder will be in compliance with all
applicable laws, including state securities and Blue
Sky laws.
(ii) There are no legal or governmental
proceedings pending to which you are a party or of
which any of your properties is the subject or, to your
knowledge, threatened, which, if determined adversely
to you, would individually or in the aggregate
materially and adversely affect your ability to perform
your obligations under this Agreement or the Escrow
Agreement.
(iii) No consent, approval, authorization or
order of any court or governmental authority or agency
is required for the performance by you of your
obligations under this Agreement, except such as may be
required by the NASD or under Regulation D or state
securities or Blue Sky laws.
(iv) This Agreement has been duly and validly
executed and delivered by or on behalf of you and
constitutes a legal, valid, and binding obligation of
you enforceable in accordance with its terms, except to
the extent that its enforceability is limited by (a)
applicable bankruptcy, insolvency, reorganization,
moratorium, or other laws of general application
relating to or affecting the enforcement of creditors'
rights generally, and (b) laws relating to the
availability of specific performance, injunctive
relief, or other equitable remedies and except as
enforceability of the indemnity and contribution
provisions contained in Section 7 hereof may be limited
by applicable law or principles of public policy.
(v) The escrow agreement (the "Escrow Agreement")
among the Company, you, and Sterling Bank (the "Escrow
Agent") has been duly and validly executed and
delivered by or on behalf of you and constitutes a
legal, valid, and binding obligation of you enforceable
in accordance with its terms, except as such
enforceability may be limited by (a) applicable
bankruptcy, insolvency, reorganization, moratorium, or
other laws of general application relating to or
affecting enforcement of creditors' rights generally
and (b) laws relating to the availability of specific
performance, injunctive relief, or other equitable
remedies.
4. Offering and Sale of the Shares. (a) On the basis
of the representations, warranties, and covenants herein
contained, but subject to the terms and upon the conditions
herein set forth, you are hereby appointed the non-exclusive
selling agent of the Company during the term herein
specified (the "Offering Period") for the purpose of finding
subscribers for the Shares on a best-efforts basis for the
account of the Company at the Offering Price through a
private offering (the "Offering") to an unlimited number of
"accredited investors" (as such term is defined in Rule 501
of Regulation D)("Accredited Investors") pursuant to and in
accordance with the Act. Subject to the performance by the
Company of all its obligations to be performed hereunder,
and to the completeness and accuracy of all the
representations and warranties contained herein, you hereby
accept such agency and agree on the terms and conditions
herein set forth to use your best efforts during the
Offering Period to find subscribers for Shares at the
Offering Price. Your agency hereunder, which is terminable
as provided in Section 11 hereof, shall terminate at 11:59
p.m., Houston, Texas time, on June 30, 2003; provided that
such termination date (the "Termination Date") may be
extended by mutual written agreement of the parties until
July 31,2003, and thereafter by mutual written agreement of
the parties.
(b) Each Investor desiring to purchase Common Stock
will be required to: (i) complete, execute, and deliver to
you an executed copy of (a) a Subscription Agreement between
the Investor and the Company, in the form attached as
Exhibit A hereto (the "Subscription Agreement"), and (b) an
Investor Questionnaire, in the form attached as Exhibit B
hereto, and (ii) deliver to you payment for such
subscription in the form of a check payable to the order of
"Innovo Group, Inc. - Escrow Account" or a wire transfer of
immediately available funds in the amount that the Investor
desires to purchase. Any payment you receive that does not
conform to this requirement will be returned to an Investor
by the end of the next business day following receipt. Upon
receipt, you shall hold all such Subscription Agreements and
Investor Questionnaires for safekeeping and immediately
forward all funds delivered to you to the Escrow Agent. The
Escrow Agent, upon receipt of such funds, will hold the
funds in an escrow account pursuant to the Escrow Agreement.
You shall promptly forward each executed Subscription
Agreement received to the Company for acceptance or
rejection together with a schedule setting forth the name
and address of each subscriber and the amount received from
each subscriber. The Company shall notify you of such
acceptance or rejection within 10 days of receipt of a
Subscription Agreement.
(c) In the event that acceptable subscriptions for
$8,000,000 in Shares (the "Minimum Shares") shall not have
been received and accepted by the Company by the Termination
Date, all funds received from subscribers (if any) shall be
returned in full, and your agency and this Agreement shall
terminate without obligation on your part or on the part of
the Company.
(d) If, by the Termination Date or such earlier time
as may be agreed upon by you and the Company, you have
received subscriptions for the Minimum Shares and such
subscriptions have been accepted by the Company (in its sole
discretion), you shall promptly notify the Company in
writing of the aggregate amount of Shares for which you have
received subscriptions (the "Notice Date"). Payment of the
purchase price for the Shares for which you have found
subscribers, and delivery, with respect to each subscriber
for Shares, of a copy of a Subscription Agreement signed by
such subscriber, shall then be made at such place and time
as shall be agreed upon between you and the Company, no
later than the fifth full business day after the Notice Date
(the "Closing Date").
(e) As compensation for your services, a cash
commission will be paid to you with respect to subscriptions
received by you as to which the payments and deliveries
provided for in this Section 4 are made at the Closing Date
equal to 7.0% of the purchase price of each Share purchased
at the Closing. Such commissions shall be paid to you on the
Closing Date by bank wire transfer payable in immediately
available funds. In addition, the Company agrees to
reimburse you for your reasonable out-of-pocket expenses in
accordance with Section 6 hereof.
(f) Neither you nor the Company shall, directly or
indirectly, pay or award any finder's fees, commissions or
other compensation to any person engaged by a potential
investor for investment advice as an inducement to such
advisor to advise the purchase of the Shares; provided,
however, that normal sales commissions payable to a
registered broker-dealer or other properly licensed person
for selling the Shares shall not be prohibited hereby.
(g) You will prepare and file such statements and
reports as are or may be required to enable the Shares to be
qualified for sale under the securities laws of such
jurisdictions as you may designate.
(h) As additional compensation, the Company will issue
to you on the Closing Date a Common Stock purchase warrant
(the "Agent's Warrant") in substantially the form attached
hereto as Exhibit C granting you the right to purchase from
the Company for a period of five years after the Closing
Date, 300,000 shares of Common Stock, at a per share
purchase price equal to the higher of the closing price of
the Common Stock as reported by The Nasdaq Stock Market on
the trading day immediately before the Closing Date or the
book value per share (i.e., shareholders' equity divided by
shares outstanding) of the Common Stock on the trading day
immediately before the Closing Date.
(i) In connection with the Offering you will, to the
extent within your control, conduct the Offering in
accordance with the applicable provisions of the Act and
Regulation D so as to preserve for the Company the exemption
provided by Rule 506 of Regulation D. You agree not to offer
or sell the Shares by means of (a) any means of general
solicitation, including any advertisement, article, notice,
or other communication published in any newspaper, magazine,
or similar media or broadcast over television or radio or
(b) any seminar or meeting, whose attendees have been
invited by any general solicitation or general advertising.
Prior to the sale of any of the Shares, you will have
reasonable grounds to believe, and in fact believe, that
each subscriber for Shares is an Accredited Investor. You
agree not to disclose any material nonpublic information
regarding the Company to any subscriber except as such
disclosure may be permitted pursuant to Regulation F-D and
is agreed to in advance by the Company.
5. Covenants and Agreements of the Company. The
Company covenants and agrees with you that:
(a) Except as contemplated or described in this
Agreement, it will not, prior to the Closing Date, incur any
material liability or obligation, direct or contingent, or
enter into any material transaction, in each case, other
than in the ordinary course of business. It will not, prior
to the Closing Date, declare or pay any dividend on the
Common Stock or make any distribution on the Common Stock
payable to stockholders of record on a date prior to the
Closing Date or declare or pay any bonuses to employees or
increase any the compensation of any officers of the Company
except normal and customary bonuses and increases.
(b) It will cooperate with you to enable the Shares to
be qualified for sale under the securities laws of such
jurisdictions as you may designate, subject to approval by
the Company, and at your request will make such applications
and furnish such information as may be required of it for
that purpose; provided, however, that you and the Company
shall first determine whether an exemption from registration
other than the Uniform Limited Offering Exemption (ULOE) or
a similar exemption is available in each such jurisdiction
and the Company shall not be required to qualify to do
business or to file a general consent to service of process
in any such jurisdiction or to subject itself to taxation.
It will, from time to time, prepare and file such statements
and reports as are or may be required to continue such
qualifications in effect for so long a period as you may
reasonably request for the distribution of the Shares.
(c) It will make available to you and each purchaser
of Shares at a reasonable time prior to the Closing Date the
opportunity to ask questions and receive answers concerning
the terms and conditions of the Offering and to obtain any
additional information that the Company possesses or can
acquire without unreasonable effort or expense that is
necessary to verify the accuracy of any information in the
Exchange Act Documents or otherwise furnished by the Company
to you or any purchaser of Shares; provided, however, that
the Company shall not be required to disclose any material
nonpublic information to any purchaser of Shares.
(d) It will file all reports required by Regulation D
with regard to sales of the Shares and use of the proceeds
therefrom; provided that you provide all relevant
information to the Company in writing as to purchasers of
the Shares required for such filings.
(e) It will not offer or sell any securities of the
Company that are of the same or a similar class as the
Shares for a period of six months after the Closing Date,
other than those offers or sales of securities under an
employee benefit plan as defined in Rule 405 under the Act,
in connection with options, warrants, or convertible
securities outstanding as of the Closing Date, or in
connection with an acquisition of assets or another business
by the Company, if such offering will be integrated with the
Offering of the Shares pursuant to this Agreement for
purposes of the exemptions under Regulation D, so as to
invalidate the exemption from registration relied on to
offer and sell the Shares.
(f) It will use its commercially reasonable best
efforts to, as promptly as practicable after the Closing
Date, but in any event within 60 days of the Closing Date
(the "Filing Due Date"), file with the Commission a shelf
registration (the "Registration Statement") on Form S-3 (or
such successor form) relating to the resale of the Shares by
the purchasers of the Shares. If a Registration Event
occurs, then the Company will make payments to the
purchasers of the Shares as full liquidated damages to the
purchasers by reason thereof, at the rate of $0.05 per share
per month, for each calendar month of the registration
default period (pro rated for any period less than 30 days).
Each such payment shall be due and payable within five days
after the end of each calendar month of the registration
default period. Such payments shall be in full compensation
to the purchasers and shall constitute the purchasers'
exclusive remedy for such events. A "Registration Event"
means the occurrence of any of the following events:
(i) the Company fails to file with the Commission
the Registration Statement on or before the date by
which the Company is required to file the Registration
Statement pursuant to paragraph 5(f),
(ii) the Registration Statement is not declared
effective by the Commission within 90 days following
the Closing Date; provided, however, that if the
Registration Statement is subject to review by the SEC
staff, such effective date shall be within 150 days
following the Closing Date,
(iii) after the effective date of the
Registration Statement, sales cannot be made pursuant
to the Registration Statement for any reason (including
without limitation by reason of a stop order, or the
Company's imposition of a blackout period or periods in
excess of 45 trading days in any 365-day period;
provided, however, that the Company's obligation to
maintain the effectiveness of the Registration
Statement shall cease at such time as each purchaser
can sell its or his Shares immediately under Rule 144).
(g) The Company will maintain the registration of its
Common Stock under Section 12 of the Exchange Act so long as
the Exchange Act requires it to be so registered, will
comply in all respects with its reporting and filing
obligations under the Exchange Act, and will not take any
action or file any document (whether or not permitted by the
Exchange Act or the rules thereunder) to terminate or
suspend such registration or to terminate or suspend its
reporting and filing obligations under said Act unless
required to do so by the Exchange Act.
(h) The Company shall prepare and file with the Nasdaq
Stock Market an additional shares listing application
covering the Shares and take all steps necessary to cause
such shares to be approved for listing as soon as
practicable thereafter.
(i) The Company will use its commercially reasonable
best efforts (i) to timely file all reports required to be
filed by the Company after the date hereof under the
Securities Act and the Exchange Act (including the reports
pursuant to Section 13(a) or 15(d) of the Exchange Act
referred to in subparagraph (c)(1) of Rule 144) and the
rules and regulations adopted by the Commission thereunder),
(ii) if the Company is not required to file reports pursuant
to such sections, it will prepare and furnish to the
purchasers of Shares and make publicly available in
accordance with Rule 144(c) such information as is required
for the purchasers to sell the Shares under Rule 144, and
(iii) to take such further action as any holder of Shares
may reasonably request, all to the extent required from time
to time to enable the purchasers to sell Shares without
registration under the Securities Act within the limitation
of the exemptions provided by Rule 144, including causing
its attorneys to issue and deliver any appropriate legal
opinion required to permit a purchaser to sell Shares under
Rule 144 upon receipt of appropriate documentation relating
to such sale.
6. Payment of Expenses. If this Agreement becomes
effective and the transactions contemplated by this
Agreement are consummated, the Company will pay (a) all
reasonable expenses incident to the performance of the
obligations of the Company under this Agreement, (b) all of
your reasonable out-of-pocket expenses (including fees and
disbursements of your counsel, travel, and related expenses
incurred in connection with this Agreement and the Offering)
incurred in connection with this Agreement, preparing to
market, and marketing the Shares not to exceed $25,000, (c)
the fees and expenses of the Escrow Agent, and (d) the
reasonable legal fees and expenses incurred by counsel to
subscribers for Shares in connection with the negotiation,
execution, and delivery of subscription agreements and any
related agreements not to exceed $5,000 in the aggregate.
7. Indemnification and Contribution. (a) The Company
agrees to indemnify and hold harmless you and each person,
if any, who controls you within the meaning of the Act,
against any losses, claims, damages, liabilities, or
expenses (including, unless the Company elects to assume the
defense as hereinafter provided, the reasonable cost of
investigating and defending against any claims therefor and
counsel fees incurred in connection therewith), joint or
several, which arise out of the Company's breach of a
representation or warranty or covenant or agreement
contained in this Agreement; provided that in no case is the
Company to be liable with respect to any claims made against
you, or any such controlling person unless you or such
controlling person shall have notified the Company in
writing promptly after the summons or other first legal
process giving information of the nature of the claim shall
have been served upon you or such controlling person, but
failure to notify the Company of any such claim shall not
relieve it from any liability that it may have to you or
such controlling person otherwise than on account of the
indemnity agreement contained in this paragraph. In
addition, the Company shall not be liable for any losses,
claims, damages, liabilities or expenses of you or any other
indemnified person that are determined by final and
nonappealable judgment of a court of competent jurisdiction
to have resulted primarily from actions taken or omitted to
be taken by such indemnified person in bad faith or from
such indemnified person's gross negligence or willful
misconduct. The Company will be entitled to participate at
its own expense in the defense, or if it so elects, to
assume the defense of any suit brought to enforce any such
liability, but, if the Company elects to assume the defense,
such defense shall be conducted by counsel chosen by it and
reasonably acceptable to you. In the event the Company
elects to assume the defense of any such suit and retain
such counsel, you or such controlling person or persons,
defendant or defendants in the suit, may retain additional
counsel but shall bear the fees and expenses of such counsel
unless (i) the Company shall have specifically authorized
the retaining of such counsel or (ii) the parties to such
suit include you or such controlling person or persons, and
the Company and you or such controlling person or persons
have been advised by counsel that one or more material legal
defenses may be available to you or them that may not be
available to the Company in which case the Company shall not
be entitled to assume the defense of such suit
notwithstanding its obligation to bear the reasonable fees
and expenses of such counsel. In no event shall the Company
be liable for the fees and expenses of more than one counsel
for all indemnified parties in connection with any one
action or separate but similar or related actions arising
out of the same general allegations or circumstances. The
Company shall not be required to indemnify any person for
any settlement of any such claim effected without the
Company's consent, which shall not be unreasonably withheld.
The Company shall not, without your consent, consent to the
entry of any judgment or enter into any settlement that does
not include as an unconditional term thereof, the giving by
the claimant or plaintiff to such indemnified party of a
release from all liability in respect of such claim or
litigation. This indemnification obligation will be in
addition to any primary liability that the Company might
otherwise have. The foregoing obligation of indemnification
of the Company shall be limited to the net proceeds of the
Offering.
(b) You agree to indemnify and hold harmless the
Company, each of the Company's officers, directors, and each
other person, if any, who controls the Company within the
meaning of the Act, against any losses, claims, damages,
liabilities, or expenses (including, unless you elect to
assume the defense, the reasonable cost of investigating and
defending against any claims therefor and counsel fees
incurred in connection therewith), joint or several, which
(i) arise of any untrue statement of a material fact with
respect to the Company made by you or any purchaser of
Shares not contained in an Exchange Act Document or other
written material provided to you by the Company, (ii) arise
out of any acts or omissions by you or any purchaser of
Shares that cause the offering to involve a public offering
under the Act or your failure to be properly licensed to
sell the Shares or (iii) arise out of your breach of a
representation or warranty or covenant or agreement
contained in this Agreement; provided, however, that in no
case are you to be liable with respect to any claims made
against the Company or any such person against whom the
action is brought unless the Company or such person shall
have notified you in writing within a reasonable time after
the summons or other first legal process giving information
of the nature of the claim shall have been served upon the
Company or such person, but failure to notify you of such
claim shall not relieve you from any liability that you may
have to the Company or such person otherwise than on account
of the indemnity agreement contained in this paragraph. You
shall be entitled to participate at your expense in the
defense, or if you so elect, to assume the defense of any
suit brought to enforce any such liability, but, if you
elect to assume the defense, counsel chosen by you and
reasonably acceptable to the Company shall conduct such
defense. In the event that you elect to assume the defense
of any such suit and retain such counsel, the Company, said
officers and directors and any person or persons, defendant
or defendants in the suit, may retain additional counsel but
shall bear the fees and expenses of such counsel unless (i)
you shall have specifically authorized the retaining of such
counsel or (ii) the parties to such suit include you or such
controlling person or persons, and the Company and you or
such controlling person or persons have been advised by
counsel that one or more material legal defenses may be
available to the Company that may not be available to you or
them in which case you shall not be entitled to assume the
defense of such suit notwithstanding your obligation to bear
the reasonable fees and expenses of such counsel. You shall
not be liable to indemnify any person for any settlement of
any such claim effected without your or its consent which
consent shall not be unreasonably withheld. You shall not,
without the consent of the Company, consent to entry of any
judgment or enter into any settlement that does not include
as an unconditional term thereof, the giving by the claimant
or plaintiff to such indemnified party of a release from all
liability in respect of such claim or litigation. This
indemnification obligation will be in addition to any
primary liability that you might otherwise have.
(c) If the indemnification provided for in this
Section 7 is unavailable, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) in
such proportion as is appropriate to reflect not only the
relative benefits received by the Company on one hand and
you on the other from the offering, but also the relative
fault of the Company on the one hand and you on the other in
connection with the statements or omissions which resulted
in such losses, claims, damages, liabilities, or expenses
(or actions in respect thereof), as well as any other
relevant equitable considerations. The relative benefits
received by the Company on the one hand and you on the
other, shall be deemed to be in the same proportion as the
total net proceeds from the Offering (before deducting
expenses) received by the Company, bear to the total selling
commissions received by you and the value of the warrants
issued to you pursuant to Section 4(h). The relative fault
shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material
fact relates to information supplied by the Company, the
parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or
omission, and whether a party breached a representation or
warranty or covenant or agreement contained in this
Agreement. The Company and you agree that it would not be
just and equitable if contribution were determined by pro
rata allocation or by any other method of allocation which
does not take account of the equitable considerations
referred to above. The amount paid or payable by an
indemnified party as a result of the losses, claims,
damages, liabilities or expenses (or actions in respect
thereof) referred to above shall be deemed to include any
legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or
defending any such claim. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
8. Survival of Indemnities, Representations,
Warranties, etc. The respective representations and
warranties of you and the Company as set forth in this
Agreement or made by them respectively, pursuant to this
Agreement, shall remain in full force and effect, regardless
of any investigation made by or on behalf of you, the
Company, or any of the officers or directors of the Company
or any controlling person, and shall survive delivery of and
payment for the Shares for a period ending on March 15,
2005.
9. Conditions of Your Obligations. Your obligations
hereunder are subject to the accuracy in all material
respects at and (except as otherwise stated herein) as of
the date hereof and at and as of the Closing Date, of the
representations and warranties made herein by the Company,
to the compliance in all material respects at and as of the
Closing Date by the Company with its covenants and
agreements herein contained and other provisions hereof to
be satisfied at or prior to the Closing Date and to the
following additional conditions:
(a) You shall not have stated in writing prior to the
Closing Date to the Company that any Exchange Act Document,
or any amendment or supplement thereto contains an untrue
statement of fact which, in your reasonable opinion, is
material, or omits to state a fact which, in your reasonable
opinion, is necessary to make the statements therein, in
light of the circumstances under which they were made, not
misleading.
(b) You shall have received a certificate, dated the
Closing Date, on behalf of the Company by the Chief
Executive Officer or the President and the chief financial
or accounting officer of the Company to the effect that:
(i) To the best of the knowledge of the signers,
the representations and warranties of the Company in
this Agreement are true and correct in all material
respects at and as of the Closing Date, and the Company
has complied in all material respects with all the
agreements and satisfied in all material respects all
the conditions on its part to be performed or satisfied
at or prior to the Closing Date;
(ii) Between the date of this Agreement and the
Closing Date, no litigation has been instituted or, to
the knowledge of the Company, threatened against the
Company of a character required to be disclosed in an
Exchange Act Document under Item 103 of Regulation S-K
that has not been so disclosed to you; and
(iii) Between the date of this Agreement and
the Closing Date, there has not been any material
adverse change in the financial condition, business, or
results of operations of the Company.
(d) The Company shall have entered into the
Registration Rights Agreement with the Purchasers in the
form attached hereto as Exhibit D.
If any of the conditions provided for in this Section 9
shall not have been satisfied when and as required by this
Agreement, this Agreement may be terminated by you by
notifying the Company of such termination in writing at or
prior to the Closing Date, but you shall be entitled to
waive any of such conditions.
10. Effective Date. This Agreement shall become
effective at 11:00 A.M., Houston Time, on the date hereof
(the "Effective Time").
11. Termination. In the event of any termination of
this Agreement under this or any other provision of this
Agreement, there shall be no liability of any party to this
Agreement to any other party, other than as provided in
Sections 6, 7, and 8.
This Agreement may be terminated after the Effective
Time by (a) the Company for any reason by notice to you and
(b) you by notice to the Company (i) if at or prior to the
Closing Date trading in securities on the New York Stock
Exchange, the American Stock Exchange, or the Nasdaq Stock
Market (collectively, the "Exchanges") shall have been
suspended for longer than four consecutive hours or minimum
or maximum prices shall have been established on either such
exchange or stock market, or a banking moratorium shall have
been declared by Texas or United States authorities (unless
such suspension is made pending completion of the sale of
the Shares, at which time, such suspension will be lifted);
(ii) if at or prior to the Closing Date there shall have
been an material escalation of hostilities between the
United States and any foreign country (other than Iraq), or
any other material insurrection or armed conflict involving
the United States which, in your reasonable judgment, after
consultation with the Company, makes it impracticable or
inadvisable to offer or sell the Shares; or (iii) if there
shall be any material litigation or regulatory action,
pending or threatened against or involving the Company,
which, in your reasonable judgment, after consultation with
the Company, makes it impracticable or inadvisable to offer
or deliver the Shares on the terms contemplated by this
Agreement.
If, and only if, the Company terminates this Agreement
after it becomes effective for any reason (other than your
material failure to comply with your obligations under this
Agreement or material breach of your representations and
warranties) or the Offering fails to close because of the
Company's breach of any representations or warranties
contained in this Agreement or the Company's failure to
fulfill its covenants and agreements contained in this
Agreement, the Company shall pay you your actual out-of-
pocket expenses incurred as provided in Section 6 hereof.
12. Agreement Concerning Disclosure of Information.
You agree to treat confidentially any material nonpublic
information that is furnished to you (or to parties acting
on your behalf) by or on behalf of the Company (the
"Information"). You agree that you will use the Information
only for the purposes related to a determination of your
willingness to act as exclusive selling agent pursuant to
this Agreement, and that the Information will be kept
confidential by you and your partners, members, managers,
officers, directors, employees, agents, and other affiliates
(collectively, the "Affiliates"), and your attorneys and
accountants (collectively, the "Professionals"), and that
you, such Affiliates, or Professionals will not disclose the
Information to any investor or other person; provided,
however, that the Information may be disclosed to (a)
Affiliates and Professionals who need to know such
Information for the purpose of evaluating or providing
services in connection with the your and your clients'
investment in the Company; provided such parties agree to be
bound by this undertaking, (b) to any federal or state
regulatory agency and their employees, agents, and attorneys
(collectively, "Regulators") for the purpose of making any
filings with Regulators if disclosure of such Information
is required by law (provided that you advise the Company in
writing of the Information to be so disclosed within a
reasonable time prior to such filing), and (c) any other
person to which the Company consents in writing prior to any
such disclosure.
In the event that you are requested or required (by
oral questions, documents, subpoena, civil investigation,
demand, interrogatories, request for information, or other
similar process) to disclose to any person or entity any
information supplied to you, your Affiliates, or your
Professionals in the course of their dealings with the
Company or their respective representatives, you agree that
you will provide the Company with prompt notice of such
request(s) within a reasonable time prior to such disclosure
so that the Company may seek an appropriate protective order
and/or waiver of compliance with the provisions of this
Agreement. It is further agreed that, if a protective order
is not obtained, or a waiver is not granted hereunder, and
you are nonetheless, in the written opinion of counsel,
compelled to disclose information concerning the Company to
any tribunal or else stand liable for contempt or suffer the
censure or penalty, you may disclose such information to
such tribunal without liability hereunder. Prior to making
such disclosure, you shall deliver a written opinion of your
counsel to the Company's counsel that disclosure is
compelled by law. You will exercise your best efforts to
obtain a protective order or other reliable assurance that
confidential treatment will be accorded the Information.
13. Notices. All communications hereunder shall be in
writing and, if sent to you shall be mailed, delivered or
telegraphed and confirmed to you, at 000 Xxxxxx, Xxxxx 0000,
Xxxxxxx, Xxxxx 00000, Attention: President, or if sent to
the Company shall be mailed, delivered or telegraphed and
confirmed to the Company, at 0000 X. Xxxxxxx Xxx., Xxxxx
000, Xxxxxxxx, Xxxxxxxxxx 00000, Attention, Chief Executive
Officer.
14. Successors. This Agreement shall inure to the
benefit of and be binding upon you, the Company, and their
respective successors and legal representatives, except that
neither the Company nor you may assign or transfer any of
its or your rights or obligations under this Agreement
without the prior written consent of the other. Nothing
expressed or mentioned in this Agreement is intended or
shall be construed to give any person other than the persons
mentioned in the preceding sentence any legal or equitable
right, remedy or claim under or in respect of this
Agreement, or any provisions herein contained, this
Agreement and all conditions and provisions hereof being
intended to be and being for the sole and exclusive benefit
of such persons and for the benefit of no other person;
except that the representations, warranties, covenants,
agreements and indemnities of the Company contained in this
Agreement shall also be for the benefit of the person or
persons, if any, who control you within the meaning of
Section 15 of the Act, and your indemnities shall also be
for the benefit of each officer and director of the Company
and the person or persons, if any, who control the Company
within the meaning of Section 15 of the Act.
15. Applicable Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of
Delaware. Any judicial proceeding brought against either of
the parties to this agreement or any dispute arising out of
this Agreement or any matter related hereto may be brought
in the courts of the State of Texas or in the United States
District Court for the Southern District of Texas and, by
its execution and delivery of this agreement, each party to
this Agreement accepts the jurisdiction of such courts. The
foregoing consent to jurisdiction shall not be deemed to
confer rights on any person other than the parties to this
Agreement. The prevailing party in any such litigation shall
be entitled to receive from the losing party or parties all
costs and expenses, including reasonable attorney fees,
incurred by the prevailing party.
[Signatures on the following page]
If the foregoing correctly sets forth our understanding
please indicate your acceptance thereof in the space
provided below for that purpose, whereupon this letter and
your acceptance shall constitute a binding agreement between
us.
Very truly yours,
INNOVO GROUP, INC.
By /s/ Xxxxxx Xxxxxx Xxxxxx,Xx.
Name: Xxxxxx Xxxxxx Xxxxxx,Xx.
Title: CEO
Accepted and delivered in Houston,
Texas as of the date first above written
XXXXXXX XXXXXX XXXXXX INC.
By: Xxxx Xxxxx
Name: Xxxx Xxxxx
Title: Managing Director
Exhibit A
SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT (the "Agreement") is made
as of this day of June 2003, by and among INNOVO
GROUP, INC. a Delaware corporation (the "Company"), and
_______________________________________________ (the
"Investor").
W I T N E S S E T H:
WHEREAS, the Investor desires to subscribe for,
purchase and acquire from the Company and the Company
desires to sell and issue to the Investor ____________
shares (the "Shares") of the Company's Common Stock, par
value $0.10 per share (the "Common Stock"), upon the terms
and conditions and subject to the provisions hereinafter set
forth.
NOW, THEREFORE, for and in consideration of the mutual
premises contained herein and for other good and valuable
consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. Purchase and Sale of the Shares. Subject to the terms
and conditions of this Agreement, the Investor subscribes
for and agrees to purchase and acquire from the Company and
the Company agrees to sell and issue to the Investor the
Shares, in the manner set forth in Section 2 hereof, at a
purchase price of $3.33 per Share, yielding an aggregate
purchase price of $__________________ (the "Purchase
Price").
2. Terms of Purchase and Sale of the Shares. The closing
of the transactions contemplated hereby (the "Closing")
shall take place on the fifth full business day after the
Notice Date (as such term is defined in that certain
Placement Agent Agreement dated June 20, 2003 (the
"Placement Agent Agreement"), by and between the Company and
the Placement Agent), at the offices of Xxxxxxx Xxxxxx
Xxxxxx Inc. (the "Placement Agent"), or at such other time
and place as the Company and the Placement Agent may agree
upon. Contemporaneously with the delivery of this
Agreement, the Investor shall deliver to Sterling Bank (the
"Escrow Agent") the Purchase Price by wire transfer of
immediately available funds pursuant to wire transfer
instructions given to the Investor by the Company. At the
Closing, the Escrow Agent shall deliver to the Company the
Purchase Price by wire transfer of immediately available
funds pursuant to wire transfer instructions given to the
Escrow Agent by the Company, and the Company shall deliver
to the Investor a certificate, registered in the name of the
Investor, representing the Shares. Notwithstanding any
provision to the contrary herein, the obligations of the
Company and Investor hereunder are subject to the Company's
receipt of aggregate subscriptions for a minimum of
$8,000,000 in aggregate proceeds for shares of Common Stock
on or prior to June 30, 2003 (or such earlier closing date
as may be agreed by the Company and the Placement Agent),
which date may be extended by the Company and the Placement
Agent pursuant to the terms of the Placement Agent
Agreement.
3. Representations and Warranties of the Company. The
Company represents and warrants to Investor the following:
(a) Authority. The Company is a corporation duly
organized, validly existing, and in good standing under the
laws of the State of Delaware, and has all requisite
corporate right, power, and authority to execute, deliver
and perform this Agreement.
(b) Enforceability. The execution, delivery, and
performance of this Agreement by the Company have been duly
authorized by all requisite corporate action. This
Agreement has been duly executed and delivered by the
Company, and, upon its execution by the Investor, shall
constitute the legal, valid, and binding obligation of the
Company, enforceable in accordance with its terms, except to
the extent that its enforceability is limited by bankruptcy,
insolvency, reorganization, moratorium or other laws
relating to or affecting the enforcement of creditors'
rights generally and by general principles of equity.
(c) No Violations. The execution, delivery, and
performance of this Agreement by the Company do not and will
not violate or conflict with any provision of the Company's
Certificate of Incorporation or Bylaws and do not and will
not, with or without the passage of time or the giving of
notice, result in the breach of, or constitute a default,
cause the acceleration of performance, or require any
consent under (except such consents as have been obtained as
of the date hereof), or result in the creation of any lien,
charge or encumbrance upon any property or assets of the
Company pursuant to, any material instrument or agreement to
which the Company is a party or by which the Company or its
properties are bound.
(d) Capitalization. The authorized capital stock of the
Company consists of: 40,000,000 shares of Common Stock, of
which 15,066,054 were issued and outstanding as of April 14,
2003, and 5,000 shares of 8% redeemable preferred stock,
$0.10 par value, of which 194 shares were issued and
outstanding on March 1, 2003. As of March 1, 2003, the
Company has granted options to purchase 1,257,981 shares of
Common Stock at prices ranging from $0.10 to $4.75 per share
and has issued warrants to purchase 7,122,400 shares at
prices ranging from $0.90 to $3.00 per share. Upon issuance
in accordance with the terms of this Agreement against
payment of the Purchase Price therefor the Shares will be
duly and validly issued, fully paid, and nonassessable and
free and clear of all liens imposed by or through the
Company, and, assuming the accuracy of the representations
and warranties of the Investor, will be issued in accordance
with a valid exemption from the registration or
qualification provisions of the Securities Act of 1933, as
amended (the "Securities Act"), and any applicable state
securities laws (the "State Acts").
(e) Exchange Act Filing. During the twelve (12) calendar
months immediately preceding the date of this Agreement, all
reports and statements required to be filed by the Company
with the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the rules and regulations thereunder, have been
timely filed. Such filings, together with all documents
incorporated by reference therein, are referred to as
"Exchange Act Documents." Each Exchange Act Document, as
amended, conformed in all material respects to the
requirements of the Exchange Act and the rules and
regulations thereunder, and no Exchange Act Document, as
amended, at the time each such document was filed, included
any untrue statement of a material fact or omitted to state
any material fact required to be stated therein or necessary
to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(f) Company Financial Statements. The audited
financial statements, together with the related notes
of the Company at November 30, 2002 and December 1,
2001, and for the years then ended, included in the
Company's Annual Report of Form 10-K for the year ended
November 30, 2002, and the unaudited financial
statements of the Company at March 1, 2003, and for the
three months then ended, (collectively, the "Company
Financial Statements") included in the Company's
Quarterly Report on Form 10-Q for the quarter ended
March 1, 2003, respectively, fairly present in all
material respects, on the basis stated therein and on
the date thereof, the financial position of the Company
at the respective dates therein specified and its
results of operations and cash flows for the periods
then ended (provided that the unaudited financial
statements are subject to normal audit adjustments and
lack footnotes and other presentation items). To the
knowledge of the Company, such statements and related
notes have been prepared in accordance with generally
accepted accounting principles in the United States
applied on a consistent basis except as expressly noted
therein.
(g) No Material Liabilities. Except as set forth
on Schedule 3(g), since March 1, 2003, the Company has
not incurred any material liabilities or obligations,
direct or contingent, except in the ordinary course of
business and except for liabilities or obligations
reflected or reserved against on the Company's balance
sheet as March 1, 2003, and there has not been any
material adverse change, or to the actual knowledge of
the Company, any development involving a prospective
material adverse change, in the condition (financial or
otherwise), business, prospects, or results of
operations of the Company or any change in the capital
or increase in the long-term debt of the Company, nor
has the Company declared, paid, or made any dividend or
distribution of any kind on its capital stock.
(h) No Disputes Against Company. Except as
disclosed on Schedule 3(h) and/or in the Exchange Act
Documents, there is no material pending or, to the
knowledge of the Company, threatened (a) action, suit,
claim, proceeding, or investigation against the
Company, at law or in equity, or before or by any
Federal, state, municipal, or other governmental
department, commission, board, bureau, agency or
instrumentality, domestic or foreign, (b) arbitration
proceeding against the Company, (c) governmental
inquiry against the Company, or (d) any action or suit
by or on behalf of the Company pending or threatened
against others.
4. Representations and Warranties of the Investor. The
Investor represents and warrants to the Company the
following:
(a) Authority. If a corporation, partnership, limited
partnership, limited liability company, or other form of
entity, the Investor is an entity duly organized or formed,
as the case may be, validly existing, and in good standing
under the laws of its jurisdiction of organization or
formation, as the case may be. The Investor has all
requisite individual or entity right, power, and authority
to execute, deliver, and perform this Agreement.
(b) Enforceability. The execution, delivery, and
performance of this Agreement by the Investor have been duly
authorized by all requisite partnership or corporate action,
as the case may be. This Agreement has been duly executed
and delivered by the Investor, and, upon its execution by
the Company, shall constitute the legal, valid, and binding
obligation of the Investor, enforceable in accordance with
its terms, except to the extent that its enforceability is
limited by bankruptcy, insolvency, reorganization,
moratorium or other laws relating to or affecting the
enforcement of creditors' rights generally and by general
principles of equity.
(c) No Violations. The execution, delivery, and
performance of this Agreement by the Investor do not and
will not, with or without the passage of time or the giving
of notice, result in the breach of, or constitute a default,
cause the acceleration of performance, or require any
consent under, or result in the creation of any lien, charge
or encumbrance upon any property or assets of the Investor
pursuant to, any material instrument or agreement to which
the Investor is a party or by which the Investor or its
properties may be bound or affected, and, do not or will not
violate or conflict with any provision of the articles of
incorporation or bylaws, partnership agreement, operating
agreement, trust agreement, or similar organizational or
governing document of the Investor, as applicable.
(d) Knowledge of Investment and its Risks. The Investor
has knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks
of Investor's investment in the Shares. The Investor
understands that an investment in the Company represents a
high degree of risk and there is no assurance that the
Company's business or operations will be successful. The
Investor has considered carefully the risks attendant to an
investment in the Company, and that, as a consequence of
such risks, the Investor could lose Investor's entire
investment in the Company.
(e) Investment Intent. The Investor hereby represents and
warrants that (i) the Shares are being acquired for
investment for the Investor's own account, and not as a
nominee or agent and not with a view to the resale or
distribution of all or any part of the Shares, and the
Investor has no present intention of selling, granting any
participation in, or otherwise distributing any of the
Shares within the meaning of the Securities Act and (ii) the
Investor does not have any contracts, understandings,
agreements, or arrangements with any person and/or entity to
sell, transfer, or grant participations to such person
and/or entity, with respect to any of the Shares.
(f) Accredited Investor. The Investor is an "Accredited
Investor" as that term is defined by Rule 501 of Regulation
D promulgated under the Securities Act.
(g) Disclosure. The Investor has reviewed information
provided by the Company in connection with the decision to
purchase the Shares, consisting of the Company's publicly
available filings with the Securities and Exchange
Commission and the information contained therein. The
Company has provided the Investor with all the information
that the Investor has requested in connection with the
decision to purchase the Shares. The Investor further
represents that the Investor has had an opportunity to ask
questions and receive answers from the Company regarding the
business, properties, prospects, and financial condition of
the Company. To the Investor's knowledge, the Company has
not disclosed any material non-public information to the
Investor. All such questions have been answered to the full
satisfaction of the Investor.
(h) No Registration. The Investor understands that
Investor may be required to bear the economic risk of
Investor's investment in the Company for an indefinite
period of time. The Investor further understands that
(i) neither the offering nor the sale of the Shares has been
registered under the Securities Act or any applicable State
Acts in reliance upon exemptions from the registration
requirements of such laws, (ii) the Shares must be held by
he, she or it indefinitely unless the sale or transfer
thereof is subsequently registered under the Securities Act
and any applicable State Acts, or an exemption from such
registration requirements is available, (iii) except as set
forth in the Registration Rights Agreement between the
Company and the Investor, the Company is under no obligation
to register any of the Shares on the Investor's behalf or to
assist the Investor in complying with any exemption from
registration, and (iv) the Company will rely upon the
representations and warranties made by the Investor in this
Subscription Agreement in order to establish such exemptions
from the registration requirements of the Securities Act and
any applicable State Acts.
(i) Transfer Restrictions. The Investor will not transfer
any of the Shares unless such transfer is registered or
exempt from registration under the Securities Act and such
State Acts, and, if requested by the Company in the case of
an exempt transaction, the Investor has furnished an opinion
of counsel reasonably satisfactory to the Company that such
transfer is so exempt. The Investor understands and agrees
that (i) the certificates evidencing the Shares will bear
appropriate legends indicating such transfer restrictions
placed upon the Shares, (ii) the Company shall have no
obligation to honor transfers of any of the Shares in
violation of such transfer restrictions, and (iii) the
Company shall be entitled to instruct any transfer agent or
agents for the securities of the Company to refuse to honor
such transfers.
(j) Principal Address. The Investor's principal residence,
if an individual, or principal executive office, if an
entity, is set forth on the signature page of this
Agreement.
5. Further Assurances. The parties hereto will, upon
reasonable request, execute and deliver all such further
assignments, endorsements and other documents as may be
necessary in order to consummate the purchase by the
Investor of the Shares.
6. Registration Rights Agreement; Power of Attorney. The
Investor agrees to be bound by the terms of and hereby
executes the Registration Rights Agreement among the Company
and the purchasers of the Shares (the "Registration Rights
Agreement"). By signing below, the Investor irrevocably
constitutes and appoints the Placement Agent as his, her, or
its true and lawful agent and attorney-in-fact with full
power of substitution and full power and authority in the
Investor's name, place, and stead to execute and deliver the
Registration Rights Agreement and to take such actions as
may be necessary or appropriate to carry out the terms of
the Registration Rights Agreement. The power of attorney
hereby granted will be deemed coupled with an interest, will
be irrevocable, and will survive and not be affected by the
Investor's subsequent death, incapacity, dissolution,
insolvency, or termination or any delivery by the Investor
of an assignment in whole or in part of the Shares. The
Placement Agent may exercise the foregoing power of attorney
either by signing separately or jointly as attorney-in-fact
for each or all of the subscribers in the offering of Common
Stock by the Company or be a single signature of the
Placement Agent acting as attorney-in-fact for all of them.
The Company may rely and act upon any writing believed in
good faith to be signed by the Placement Agent or any
authorized representative of the Placement Agent, and may
assume that all actions of the Placement Agent and any
authorized representative of the Placement Agent have been
duly authorized by the Investor, and the Investor does
hereby agree that, in the absence of gross negligence or
willful misconduct, the Company shall not be liable for any
action so taken or omitted in reliance thereon, or any loss
or injury resulting from such act or omission.
7. Entire Agreement; No Oral Modification. This Agreement
contains the entire agreement among the parties hereto with
respect to the subject matter hereof and supersedes all
prior agreements and understandings with respect thereto and
may not be amended or modified except in a writing signed by
both of the parties hereto.
8. Binding Effect; Benefits. This Agreement shall inure
to the benefit of and be binding upon the parties hereto and
their respective heirs, successors and assigns; however,
nothing in this Agreement, expressed or implied, is intended
to confer on any other person other than the parties hereto,
or their respective heirs, successors or assigns, any
rights, remedies, obligations or liabilities under or by
reason of this Agreement.
9. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be
an original and all of which together shall be deemed to be
one and the same instrument.
10. Governing Law. This Agreement shall be governed by,
and construed and enforced in accordance with, the laws of
the State of Delaware. Any judicial proceeding brought
against either of the parties to this agreement or any
dispute arising out of this Agreement or any matter related
hereto may be brought in the courts of the State of Texas or
in the United States District Court for the Southern
District of Texas and, by its execution and delivery of this
agreement, each party to this Agreement accepts the
jurisdiction of such courts.
11. Prevailing Parties. In any action or proceeding
brought to enforce any provision of this Agreement, or where
any provision hereof is validly asserted as a defense, the
prevailing party shall be entitled to receive and the
nonprevailing party shall pay upon demand reasonable
attorneys' fees in addition to any other remedy.
12. Notices. All communications hereunder shall be in
writing and, if sent to you shall be mailed, delivered, or
telegraphed and confirmed to an Investor at the address set
forth on the signature page of this Agreement, or if sent to
the Company, shall be mailed, delivered, or telegraphed and
confirmed to the Company, at 0000 X. Xxxxxxx Xxx., Xxxxx
000, Xxxxxxxx, Xxxxxxxxxx 00000, Attention, Chief Executive
Officer.
13. Headings. The section headings herein are included for
convenience only and are not to be deemed a part of this
Agreement.
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the date first written above.
INNOVO GROUP, INC., a Delaware
corporation
By:
Name:
_________________________
___
Title:________________________
_______
INVESTOR
______________________________
______
By:
____________________________________
Print Name
____________________________________
____________________________________
Principal Residence or Executive Office
Exhibit B
CONFIDENTIAL
PURCHASER'S QUESTIONNAIRE
Innovo Group, Inc.
Attention: Xxxx X. Xxxxxxxx, Chief Financial Officer
0000 X. Xxxxxxx Xxx., Xxxxx 000
Xxxxxxxx, Xxxxxxxxxx 00000
The information contained herein is being furnished to
you in order for you to determine whether the undersigned's
subscription to purchase a minimum of $25,000 of common
stock, $0.10 par value (the "Common Stock") of Innovo Group,
Inc., a Delaware corporation (the "Company"), may be
accepted by you pursuant to Sections 3(b), 4(2) and 4(6) of
the Securities Act of 1933, as amended (the "Securities
Act"), and Regulation D promulgated thereunder ("Regulation
D"). I understand that (i) the Company will rely upon the
information contained herein for purposes of determining the
availability of exemptions from the registration
requirements of the Securities Act and (ii) the issuance of
the Common Stock will not be registered under the Securities
Act in reliance upon such exemptions.
All information furnished is for the sole use of the
Company and will be held in confidence by you, except that
this Questionnaire may be furnished to such parties as the
Company's counsel deems necessary or desirable to establish
compliance with federal or state securities laws.
In accordance with the foregoing, the undersigned makes
the following representations and warranties:
1. (This item is presented in alternative form.
Please initial, in the space provided, the alternative
you select.)
ALTERNATIVE ONE: The undersigned has such know
ledge and experience in
financial and business matters so as to be
capable of evaluating the relative merits and
risks of an investment in the Common Stock; the
undersigned is not utilizing a Purchaser
Representative (as defined below) in connection
with evaluating such merits and risks. The
undersigned offers as evidence of knowledge and
experience in these matters the information
requested below on this Purchaser
Questionnaire.
ALTERNATIVE TWO*: The undersigned will use a
representative(s) ("Purchaser
Representative") acceptable to the Company in
connection with evaluating a potential
investment in the Common Stock. The
undersigned acknowledges that the following
person(s) will be acting as Purchaser
Representative(s) in connection with evaluating
the merits and risks of an investment in the
Common Stock.
List name(s) of Purchaser Representative(s):
________________________________________
________________________________________
The above-named Purchaser Representative(s) has (have)
furnished to the undersigned a completed Purchaser
Representative Questionnaire, a copy of which is
available from the Company upon
request. The undersigned and the above-named Purchaser
Representative(s) together have such knowledge and
experience in financial and business matters that they
are capable of evaluating the merits and risks of an
investment in the Common Stock.
(*IF YOU HAVE INITIALED ALTERNATIVE TWO, THIS PURCHASER
QUESTIONNAIRE MUST BE ACCOMPANIED BY A COMPLETED AND SIGNED
PURCHASER REPRESENTATIVE QUESTIONNAIRE.)
2. Except as indicated below, any purchase of the Common
Stock will be solely for the account of the
undersigned, and not for the account of any other
person or with a view to any resale, division or
distribution thereof.
(STATE "NO EXCEPTIONS" OR SET FORTH EXCEPTIONS AND GIVE
DETAILS. ATTACH ADDITIONAL PAGES IF NECESSARY.)
_______________________________________________________
_________________________
PART ONE:
INFORMATION REQUIRED OF EACH PROSPECTIVE PURCHASER:
1. Name: --------------------------------------------
(Investor's exact name, as it should
appear in the records of the Company.)
2. Address: -------------------------------------------
----------------------------------------------------
Telephone FAX: ----------------
number: -------------------
Social Security or
Taxpayer ID number:__________________________
3. Describe any preexisting business or personal
relationship between yourself and any director or
officer of the Company:
PART TWO: TO BE COMPLETED ONLY BY PROSPECTIVE PURCHASERS
WHO ARE NATURAL PERSONS
4.Check one of the following representations (a) or (b),
IF APPLICABLE:
(a) My individual net worth, or joint net worth
with my spouse, exceeds $1,000,000
(b) My individual income (without my spouse) was
in excess of $200,000 in each of
the two most recent years or joint income
with my spouse was in excess of $300,000 in
each of those years, and I reasonably expect
an income reaching the same income level in
the current year. For purposes of this
Purchaser Questionnaire, individual income
means adjusted gross income, as reported for
federal income tax purposes, less any income
attributable to a spouse or to property
owned by a spouse, increased by the
following amounts (but not including any
amounts attributable to a spouse or to
property owned by a spouse): (i) the amount
of any tax exempt interest income received,
(ii) the amount of losses claimed as a
limited partner in a limited partnership,
(iii) any deduction claimed for depletion,
(iv) deductions for alimony paid, (v)
amounts contributed to an XXX or Xxxxx
retirement plan, and (vi) any amount by
which income from long-term capital gains
has been reduced in arriving at adjusted
gross income pursuant to the provisions of
Section 1202 of the Internal Revenue Code.
5. Please describe your educational background:
6. Professional licenses or registrations, including bar
admissions, accounting certification, real estate
brokerage licenses, and SEC or state broker-dealer
registrations, if any:
7. Prior employment, positions or occupations during the
past five years (and the inclusive dates of each) are
as follows:
Employment or
Occupation:
Nature of
Responsibility:
From - To:
8. The undersigned has previously purchased securities,
which were sold in reliance upon the private offering
exemption from registration under the Securities Act:
Yes No
9. Please specify your investment objectives:
Income Other,
please
state:
Appreciatio
n
10. Describe what type of prior investments you have
participated in and the amounts involved:
Nature of
Investment:
Amount
Invested:
PART THREE: TO BE COMPLETED BY ALL PROSPECTIVE PURCHASERS WHO
ARE NOT NATURAL PERSONS.
12. Type of Organization
(partnership, corporation,
etc.):
13. Date and place of
organization:
14. The undersigned is:
(a) (___) a bank as defined in Section 3(a)(2) of the
Securities Act, or any savings and loan association or
other institution as defined in Section 3(a)(5)(A) of
the Securities Act acting in either an individual or
fiduciary capacity;
(___) a broker or dealer registered pursuant to Section
15 of the Securities and Exchange Act of 1934;
(___) a Small Business Investment Company licensed by the
U. S. Small Business Administration under Section 301(c) or
(d) of the Small Business Investment Act of 1958;
(___) an investment company registered under the
Investment Company Act of 1940 or a business
development company as defined in Section 2(a)(48) of
that Act; or
(___) an insurance company as defined in Section 2(13)
of the Securities Act of 1933;
(b) (___) a private business development company as
defined in Section 202(a)(22) of the Investment
Advisers Act of 1940;
(c) (___) a corporation, partnership, limited liability
company, Massachusetts or similar business trust, or an
organization described in Section 501(c)(3) of the
Internal Revenue Code, not formed for the specific
purpose of acquiring the securities offered with total
assets in excess of $5,000,000;
(d) (___) any trust, with total assets in excess of
$5,000,000, not formed for the specific purpose of
acquiring the securities offered, whose purchase is
directed by a sophisticated person as described in the
rules and regulations of the Securities Act;
(e) (___) an employee benefit plan within the meaning
of the Employee Retirement Income Security Act of 1974
if the investment decision is made by a plan fiduciary,
as defined in Section 3(21) of such Act, which is a
bank, an insurance company, a savings and loan
association, or a registered investment advisor;
(___) an employee benefit plan with total assets
in excess of $5,000,000; or
(___) an employee benefit plan that is a self-directed
plan (such as a self-directed individual retirement
account (XXX), Xxxxx or SEP plan) with investment
decisions made solely by persons that are accredited
investors; or
(f) (___) an entity in which all of the equity owners
are Accredited Investors as defined in Rule 501(a) of
Regulation D. Note: each equity owner must submit an
individual Purchaser Questionnaire.
(1) List all equity
owners of the
entity:
(2) Type of
entity:
1Attach a copy of the entity's: Articles of
5Incorporation and Directors' Resolution authorizing
.the investment, or Partnership or Trust Agreement, if
any.
REPRESENTATIONS AND WARRANTIES OF EACH PROSPECTIVE PURCHASER:
The undersigned understands that the Company will be relying
on the accuracy and completeness of the responses to the
foregoing questions and represents and warrants to the Company as
follows:
(i) The answers to the above questions are complete and
correct and may be relied upon by the Company in
determining whether the undersigned meets the investor
suitability requirements set forth in the Memorandum,
and whether the offering in which the undersigned
proposes to participate is exempt from registration
under the 1933 Act and the rules promulgated
thereunder;
(ii) The undersigned will notify the Company immediately of
any material change in any statement made herein
occurring prior to the completion of the offering; and
(iii) The undersigned has adequate means of providing
for the undersigned's current needs and personal
contingencies, has no need for liquidity in its
investment in the Common Stock, and is able to bear the
economic risk of an investment in the Common Stock of
the size contemplated. In making this statement, the
undersigned at the present time could afford a complete
loss of such investment.
IN WITNESS WHEREOF, I have executed this Purchaser Questionnaire
this ___ day of __________, 2003.
INDIVIDUALS: ENTITIES:
Print Name Print Name of Subscriber
Signature Authorized Signature
Signature (if Joint Tenants Print Name of Signatory and
Or Tenants in Common) Capacity in which Signed
Exhibit C
(Filed as Exhibit 4.3 with the Company Form 10-q report for
the second quarter of 2003)
Exhibit D
(Filed as Exhibit 4.3 with the Company Form 10-q report for
the second quarter of 2003)
