PLACEMENT AGENCY AGREEMENT
Exhibit
10.21
October
17, 2007
Xxxxxxx
Xxxxx Ventures, Inc.
000
Xxxxxxx Xxxxxx
00xx
Xxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Re: KnowFat
Franchise Company, Inc. and UFood Restaurant Group, Inc.
Ladies
and Gentlemen:
This
Placement Agency Agreement ("Agreement")
sets
forth the terms upon which Xxxxxxx Xxxxx Ventures, Inc., a Delaware corporation,
and a registered broker-dealer and member of the Financial Industry Regulatory
Authority ("FINRA")
(the
“Placement
Agent”),
shall
be engaged by KnowFat Franchise Company, Inc., a Delaware corporation
(“KnowFat”)
and
UFood Restaurant Group, Inc., a Nevada corporation (“Pubco”),
to
act as exclusive Placement Agent in connection with the private placement (the
“Offering”)
of
units (“Units”)
of
securities of
Pubco,
each Unit
consisting of (i) one share of common stock, par value $0.001 per share (the
“Common
Stock”),
of
Pubco (“Shares”)
and
(ii) one half of one warrant (“Warrants”),
with
each full warrant entitling the holder to purchase one share of Common Stock
for
a five-year period at an exercise price of $1.25 per share. The Offering will
consist of a minimum of 5,500,000 Units ($5,500,000) (the “Minimum
Amount”)
and a
maximum of 8,000,000 Units ($8,000,000) (the “Maximum
Amount”).
In
the event the Offering is oversubscribed, Pubco, KnowFat and the Placement
Agent
may, in their mutual discretion, sell up to 5,000,000 additional Units for
an
aggregate purchase price of $5,000,000 (the “Over-allotment”). Concurrently with
the initial closing of the Offering, a
wholly-owned subsidiary of Pubco
will
merge with and into KnowFat and, with the proceeds of the Offering, continue
the
existing operations of KnowFat as a wholly owned subsidiary of Pubco (the
“Reverse
Merger”).
As
part
of or in conjunction with the Reverse Merger, Pubco will issue shares of its
Common Stock, warrants and options to KnowFat’s then-existing securityholders
and to the investors in the Offering as further described in the Memorandum
(as
hereinafter defined). As used in this Agreement, unless the context otherwise
requires, the term “Company”
refers
to Pubco and KnowFat on a combined basis after giving effect to the Offering
and
the Reverse Merger.
The
purchase price for the Units will be $1.00 per Unit (the “Offering
Price”),
with
a minimum investment of 25,000 Units; provided, however,
that
subscriptions in lesser amounts may be accepted in Pubco’s and Placement Agent’s
discretion. The Placement Agent shall accept
subscriptions only
from
(i) persons
or entities who
qualify
as “accredited investors,” as such term is defined in Rule 501 of Regulation D
(“Regulation
D”)
as
promulgated by
the
United States Securities and Exchange Commission (the “SEC”) under
Section 4(2) of the Securities Act of 1933, as amended (the “Act”)
and (ii)
persons or entities who were offered and purchased the Units in an Offshore
Transaction (as such term is defined in Regulation S (“Regulation
S”)
as
promulgated by the SEC under the Act) and who are not U.S. Persons (as such
term
is defined in Regulation S) and are not acting for the account or benefit of
a
person in the United States or a U.S. Person. The
Units
will be offered until the earlier of the time that all Units offered in the
Offering are sold or December 31, 2007 (“Initial
Offering Period”),
which
date may be extended by Pubco and the Placement Agent until February 14, 2008
(this additional period and the Initial Offering Period shall be referred to
as
the “Offering
Period”).
The
date
on which the Offering is terminated shall be referred to as the “Termination
Date.”
With
respect to the Offering, KnowFat and Pubco shall provide the Placement Agent,
on
terms set forth herein, the right to offer and sell all of the Units being
offered. It is understood that no sale shall be regarded as effective unless
and
until accepted by the Company. The Company may, in its sole discretion, accept
or reject, in whole or in part, any prospective investment in the Units or
allot
to any prospective subscriber less than the number of Units that such subscriber
desires to purchase. Purchases of Units may be made by the Placement Agent
and
its officers, directors, employees and affiliates. All such purchases, together
with purchases by officers, directors, employees and affiliates of KnowFat
or
Pubco, may be used to satisfy the Minimum Amount if the Minimum Amount has
not
been subscribed for on or before the end of the Offering Period.
The
Offering will be made by Pubco
solely
pursuant to the Memorandum, which at all times will be in form and substance
reasonably acceptable to Pubco, KnowFat, the Placement Agent and their
respective counsel and contain such legends and other information as Pubco,
KnowFat, the Placement Agent and their respective counsel, may, from time to
time, deem necessary and desirable to be set forth therein. “Memorandum”
as
used
in this Agreement means Pubco’s Confidential Private Placement Memorandum dated
October 17, 2007, inclusive of all annexes, and all amendments, supplements
and
appendices thereto.
1. Appointment
of Placement Agent.
On the
basis of the representations and warranties provided herein, and subject to
the
terms and conditions set forth herein, the Placement Agent is appointed as
exclusive Placement Agent of KnowFat and Pubco during the Offering Period to
assist KnowFat and Pubco in finding qualified subscribers for the Offering.
The
Placement Agent may sell Units through other broker-dealers who are FINRA
members and may reallow all or a portion of the Agent Compensation (as defined
in Section 3(b) below) it receives to such other broker-dealers. On the basis
of
such representations and warranties and subject to such terms and conditions,
the Placement Agent hereby accepts such appointment and agrees to perform its
services hereunder diligently and in good faith and in a professional and
businesslike manner and to use its reasonable efforts to assist KnowFat and
Pubco in (A)
finding
subscribers of Units who either
(i) qualify
as
“accredited investors,” as such term is defined in Rule 501 of Regulation D,
or
(ii)
were offered and purchased the Units outside the United States in an Offshore
Transaction (as such term is defined in Regulation S) and who are not U.S.
Persons (as such term is defined in Regulation S) and are not acting for the
account or benefit of a person in the United States or a U.S. Person and
(B)
completing the Offering.
The
Placement Agent has no obligation to purchase any of the Units. Unless sooner
terminated in accordance with this Agreement, the engagement of the Placement
Agent hereunder shall continue until the later of the Termination Date or the
Final Closing (as defined below).
2. Representations,
Warranties and Covenants of KnowFat.
The
representations and warranties of KnowFat (as
used
in this Section 2, “KnowFat” refers to KnowFat Franchise Company, Inc. and its
subsidiaries) contained
in this Section 2 are true and correct as of the date of this Agreement and
KnowFat covenants as follows, as applicable.
2
(a)
The
Memorandum has been prepared by KnowFat, in conformity with all applicable
laws,
and is in compliance with Regulation D, Regulation S and Section 4(2) of the
Act
and the requirements of all other rules and regulations (the “Regulations”)
of the
SEC relating to offerings of the type contemplated by the Offering, and the
applicable securities laws and the rules and regulations of those jurisdictions
wherein the Placement Agent notifies KnowFat that the Units are to be offered
and sold excluding any foreign jurisdictions. The Units will be offered and
sold
pursuant to the registration exemption provided by Regulation D, Regulation
S
and Section 4(2) of the Act as a transaction not involving a public offering
and
the requirements of any other applicable state securities laws and the
respective rules and regulations thereunder in those United States jurisdictions
in which the Placement Agent notifies KnowFat that the Units are being offered
for sale. None of KnowFat, its affiliates, or any person acting on its or their
behalf (other than the Placement Agent, its affiliates or any person acting
on
its behalf, in respect of which no representation is made) has taken nor will
it
take any action that conflicts with the conditions and requirements of, or
that
would make unavailable with respect to the Offering, the exemption(s) from
registration available pursuant to Rule 506 of Regulation D, Rule 903 of
Regulation S or Section 4(2) of the Act, or knows of any reason why any such
exemption would be otherwise unavailable to it (including, without limitation,
any Directed Selling Efforts (as such term is defined in Regulation S)). None
of
KnowFat, its predecessors or affiliates has been subject to any order, judgment
or decree of any court of competent jurisdiction temporarily, preliminarily
or
permanently enjoining such person for failing to comply with Section 503 of
Regulation D. KnowFat
has not, for a period of six months prior to the commencement of the offering
of
Units, sold, offered for sale or solicited any offer to buy any of its
securities in a manner that would be integrated with the offer and sale of
the
Units pursuant to this Agreement, would cause the exemption from registration
set forth in Rule 506 of Regulation D to become unavailable with respect to
the
offer and sale of the Units pursuant to this Agreement in the United States
or
to, by or for the benefit or account of, U.S. Persons, or would cause the
exclusion from registration provided by Rule 903 of Regulation S to become
unavailable for offers and sales of the Units pursuant to this Agreement outside
the United States to non-U.S. Persons.
(b)
The
Memorandum does not include any untrue statement of a material fact or omit
to
state any material fact required to be stated therein or necessary to make
the
statements therein, in light of the circumstances under which they were made,
not misleading: provided,
however,
the
foregoing does not apply to any statements or omissions made solely in reliance
on and in conformity with written information furnished to KnowFat by the
Placement Agent specifically for use in the preparation thereof. To the
knowledge of KnowFat, none of the statements, documents, certificates or other
items made, prepared or supplied by KnowFat with respect to the transactions
contemplated hereby contains an untrue statement of a material fact or omits
to
state a material fact necessary to make the statements contained therein not
misleading in light of the circumstances in which they were made. There is
no
fact which KnowFat has not disclosed in the Memorandum and of which KnowFat
is
aware that materially adversely affects or that could reasonably be expected
to
have a material adverse effect on
the
(i) assets, liabilities, results of operations, condition (financial or
otherwise), business or business prospects of KnowFat or (ii) ability of KnowFat
to perform its obligations under this Agreement (“KF Material
Adverse Effect”).
Notwithstanding anything to the contrary herein, KnowFat makes no representation
or warranty with respect to any estimates, projections and other forecasts
and
plans (including the reasonableness of the assumptions underlying such
estimates, projections and other forecasts and plans) that may have been
delivered to the Placement Agent or its representatives, except that such
estimates, projections and other forecasts and plans have been prepared in
good
faith on the basis of assumptions stated therein, which assumptions were
believed to be reasonable at the time of such preparation.
(c)
KnowFat has all requisite corporate power and authority to conduct its business
as presently conducted and as proposed to be conducted (as described in the
Memorandum), to enter into and perform its obligations under this Agreement,
and
the other agreements contemplated hereby (this Agreement and the other
agreements contemplated hereby that KnowFat is executing and delivering
hereunder are collectively referred to herein as the “KnowFat
Transaction Documents”).
Prior
to the First Closing, as defined herein, each of the KnowFat Transaction
Documents (other than this Agreement, which has already been authorized) will
have been duly authorized. This Agreement has been duly authorized, executed
and
delivered and constitutes, and each of the other KnowFat Transaction Documents,
upon due execution and delivery, will constitute, valid and binding obligations
of KnowFat, enforceable against KnowFat in accordance with their respective
terms (i) except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter
in
effect related to laws affecting creditors’ rights generally, including the
effect of statutory and other laws regarding fraudulent conveyances and
preferential transfers, and except that no representation is made herein
regarding the enforceability of KnowFat’s obligations to provide indemnification
and contribution remedies under the securities laws and (ii) subject to the
limitations imposed by general equitable principles (regardless of whether
such
enforceability is considered in a proceeding at law or in
equity).
3
(d)
None
of the execution and delivery of or performance by KnowFat under this Agreement
or any of the other Know Fat Transaction Documents or the consummation of the
transactions herein or therein contemplated conflicts with or violates, or
will
result in the creation or imposition of, any lien, charge or other encumbrance
upon any of the assets of KnowFat under any agreement or other instrument to
which KnowFat is a party or by which KnowFat or its assets may be bound, or
any
term of the certificate of incorporation or by-laws of KnowFat, or any license,
permit, judgment, decree, order, statute, rule or regulation applicable to
KnowFat or any of its assets, except in the case of a conflict, violation,
lien,
charge or other encumbrance (except with respect to KnowFat’s certificate of
incorporation or by-laws) which would not,
or
could not reasonably be expected to, have a KF
Material Adverse Effect.
(e)
KnowFat’s financial statements, together with the related notes, if any,
included in the Memorandum, present fairly, in all material respects, the
financial position of KnowFat as of the dates specified and the results of
operations for the periods covered thereby. Such financial statements and
related notes were prepared in accordance with United
States generally accepted accounting principles applied on a consistent basis
throughout the periods indicated, except that the unaudited financial statements
omit full notes, and except for normal year end adjustments. Except as set
forth
in such financial statements or otherwise disclosed in the Memorandum, KnowFat
has no known material liabilities of any kind, whether accrued, absolute or
contingent, or otherwise, and subsequent to the date of the Memorandum and
prior
to the date of the First Closing?] it shall not enter into any material
transactions or commitments without promptly thereafter notifying the Placement
Agent in writing of any such material transaction or commitment. The other
financial and statistical information with respect to KnowFat and any pro forma
information and related notes included in the Memorandum present fairly the
information shown therein on a basis consistent with the financial statements
of
KnowFat included in the Memorandum. KnowFat
does not know of any facts, circumstances or conditions which could materially
adversely affect its operations, earnings or prospects that have not been fully
disclosed in the Memorandum.
(f)
The
conduct of business by KnowFat as presently and proposed to be conducted is
not
subject to continuing oversight, supervision, regulation or examination by
any
governmental official or body of the United States, or any other jurisdiction
wherein KnowFat conducts or proposes to conduct such business, except as
described in the Memorandum and except as such regulation is applicable to
commercial enterprises generally. KnowFat has obtained all material licenses,
permits and other governmental authorizations necessary to conduct its business
as presently conducted. KnowFat has not received any notice of any violation
of,
or noncompliance with, any federal, state, local or foreign laws, ordinances,
regulations and orders (including, without limitation, those relating to
environmental protection, occupational safety and health, securities laws,
equal
employment opportunity, consumer protection, credit reporting,
“truth-in-lending”, and warranties and trade practices) applicable to its
business, the violation of, or noncompliance with, would have a KF Material
Adverse Effect, and KnowFat knows of no facts or set of circumstances which
could give rise to such a notice.
(g)
No
default by KnowFat or, to the knowledge of KnowFat, any other party, exists
in
the due performance under any material agreement to which KnowFat is a party
or
to which any of its assets is subject (collectively, the “KnowFat
Agreements”).
The
KnowFat Agreements disclosed in the Memorandum are the only material agreements
to which KnowFat is bound or by which its assets are subject, are accurately
described in the Memorandum and are in full force and effect in accordance
with
their respective terms, subject to any applicable bankruptcy, insolvency or
other laws affecting the rights of creditors generally and to general equitable
principles and the availability of specific performance.
4
(h)
Subsequent to the respective dates as of which information is given in the
Memorandum, KnowFat has operated its business in the ordinary course and, except
as may otherwise be set forth in the Memorandum, there has been no: (i) KF
Material Adverse Effect; (ii) transaction otherwise than in the ordinary
course of business consistent with past practice; (iii) issuance of any
securities (debt or equity) or any rights to acquire any such securities other
than pursuant to equity incentive plans approved by its Board of Directors;
(iv)
damage, loss or destruction, whether or not covered by insurance, with respect
to any asset or property of KnowFat; or (v) agreement to permit any of the
foregoing.
(i)
Except as set forth in the Memorandum, there are no actions, suits, claims,
hearings or proceedings pending before any court or governmental authority
or,
to the knowledge of KnowFat, threatened, against KnowFat, or involving its
assets or any of its officers or directors (in their capacity as such) which,
if
determined adversely to KnowFat or such officer or director, could reasonably
be
expected to have a KF Material Adverse Effect or adversely affect the
transactions contemplated by this Agreement or the Merger Agreement (as
hereinafter defined) or the enforceability thereof.
(j)
KnowFat is not: (i) in violation of its Certificate of Incorporation or By-laws;
(ii) in default of any indenture, mortgage, deed of trust, note or other
agreement or instrument to which KnowFat is a party or by which it is or may
be
bound or to which any of its assets may be subject, the default of which could
reasonably be expected to have a KF Material Adverse Effect; (iii) in violation
of any statute, rule or regulation applicable to KnowFat, the violation of
which
would have a KF Material Adverse Effect; or (iv) in violation of any judgment,
decree or order of any court or governmental body having jurisdiction over
KnowFat and specifically naming KnowFat, which violation or violations
individually, or in the aggregate, could reasonably be expected to have a KF
Material Adverse Effect.
(k)
Except as disclosed in the Memorandum, as of the date of this Agreement, no
current or former stockholder, director, officer or employee of
KnowFat,
nor,
to
the knowledge of KnowFat, any affiliate of any such person is presently,
directly or indirectly through his affiliation with any other person or entity,
a party to any loan from KnowFat or any other transaction (other than as an
employee) with KnowFat providing for the furnishing of services by, or rental
of
any personal property from, or otherwise requiring cash payments to any such
person.
(l)
KnowFat is not obligated to pay, and has not obligated the Placement Agent
to
pay, a finder’s or origination fee in connection with the Offering (other than
to the Placement Agent), and hereby agrees to indemnify the Placement Agent
from
any such claim made by any other person as more fully set forth in Section
8
hereof. KnowFat has not offered for sale or solicited offers to purchase the
Units except for negotiations with the Placement Agent.
(m)
Until
the earlier of (i) the Termination Date and (ii) the Final Closing (as
hereinafter defined), KnowFat will not issue any press release, grant any
interview, or otherwise communicate with the media in any manner whatsoever
with
respect to the Offering without the Placement Agent’s prior written consent,
which consent will not unreasonably be withheld or delayed.
(n)
For
the benefit of the Placement Agent, KnowFat hereby incorporates by reference
all
of the representations and warranties contained in Article II, and its covenants
contained in Article IV, of that certain Agreement
and Plan of Merger and Reorganization to be entered into prior to the Closing
by
and among Pubco, KnowFat and KnowFat Acquisition Corp. (the “Merger
Agreement”),
in
each case with the same force and effect as if specifically set forth herein.
5
(o)
No
representation or warranty contained in Section 2 of this Agreement contains
any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements herein not misleading in the context of such
representations and warranties.
2A.
Representations,
Warranties and Covenants of Pubco.
The
representations and warranties of Pubco (as
used
in this Section 2A, “Pubco” refers to UFood Restaurant Group, Inc. and its
subsidiaries) contained
in this Section 2A are true and correct as of the date of this Agreement.
(a)
The
Memorandum has been prepared by Pubco, in conformity with all applicable laws,
and is in compliance with Regulation D, the Act and the requirements of all
other Regulations of the SEC relating to offerings of the type contemplated
by
the Offering, and the applicable securities laws and the rules and regulations
of those jurisdictions wherein the Placement Agent notifies Pubco that the
Units
are to be offered and sold excluding any foreign jurisdictions. The Units will
be offered and sold pursuant to the registration exemptions provided by
Regulation D, Regulation S and Section 4(2) of the Act as a transaction not
involving a public offering and the requirements of any other applicable state
securities laws and the respective rules and regulations thereunder in those
United States jurisdictions in which the Placement Agent notifies Pubco that
the
Units are being offered for sale. None of Pubco, its
affiliates, or any person acting on its or their behalf (other than the
Placement Agent, its affiliates or any person acting on its behalf, in respect
of which no representation is made) has taken
nor
will it take any action that conflicts with the conditions and requirements
of,
or that would make unavailable with respect to the Offering, the exemption(s)
from registration available pursuant to Rule 506 of Regulation D, Rule 903
of
Regulation S or Section 4(2) of the Act, or knows of any reason why any such
exemption would be otherwise unavailable to it (including, without limitation,
any Directed Selling Efforts (as such term is defined in Regulation S)). None
of
Pubco, its predecessors or affiliates has been subject to any order, judgment
or
decree of any court of competent jurisdiction temporarily, preliminarily or
permanently enjoining such person for failing to comply with Section 503 of
Regulation D.
Pubco
has not, for a period of six months prior to the commencement of the offering
of
Units, sold, offered for sale or solicited any offer to buy any of its
securities in a manner that would be integrated with the offer and sale of
the
Units pursuant to this Agreement, would cause the exemption from registration
set forth in Rule 506 of Regulation D to become unavailable with respect to
the
offer and sale of the Units pursuant to this Agreement in the United States
or
to, by or for the benefit or account of, U.S. Persons, or would cause the
exclusion from registration provided by Rule 903 of Regulation S to become
unavailable for offers and sales of the Units pursuant to this Agreement outside
the United States to non-U.S. Persons.
(b)
As to
Pubco only, the Memorandum does not include any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading: provided,
however,
the
foregoing does not apply to any statements or omissions made solely in reliance
on and in conformity with written information furnished to Pubco by the
Placement Agent specifically for use in the preparation thereof. To the
knowledge of Pubco, none of the statements, documents, certificates or other
items made, prepared or supplied by Pubco with respect to the transactions
contemplated hereby contains an untrue statement of a material fact or omits
to
state a material fact necessary to make the statements contained therein not
misleading in light of the circumstances in which they were made. There is
no
fact which Pubco has not disclosed in the Memorandum and of which Pubco is
aware
that materially adversely affects or that could reasonably be expected to have
a
material adverse effect on the prospects, condition (financial or otherwise),
operations or assets of Pubco (a “Pubco
Material Adverse Effect”).
Notwithstanding anything to the contrary herein, Pubco makes no representation
or warranty with respect to any estimates, projections and other forecasts
and
plans (including the reasonableness of the assumptions underlying such
estimates, projections and other forecasts and plans) that may have been
delivered to the Placement Agent or its representatives, except that such
estimates, projections and other forecasts and plans have been prepared in
good
faith on the basis of assumptions stated therein, which assumptions were
believed to be reasonable at the time of such preparation.
6
(c)
Pubco
has all requisite corporate power and authority to conduct its business as
presently conducted and as proposed to be conducted (as described in the
Memorandum), to enter into and perform its obligations under this Agreement,
the
Subscription Agreement substantially in the form of Annex A to the Memorandum
(the “Subscription
Agreement”),
the
Registration Rights Agreement substantially in the form of Annex B to the
Memorandum (the “Registration
Rights Agreement”),
and
the other agreements contemplated hereby (this Agreement, the Subscription
Agreement, the Registration Rights Agreement and the other agreements
contemplated hereby that Pubco is required to execute and deliver are
collectively referred to herein as the “Pubco
Transaction Documents”)
and
subject to necessary Board and stockholder approvals, to issue, sell and deliver
the Units, the shares of Common Stock underlying the Units, and the shares
of
Common Stock issuable upon exercise of the Warrants (the “Warrant
Shares”),
the
Agent Warrants (as defined in Section 3(b)) and the Agent Warrant Shares (as
defined in Section 3(b)). Prior to the First Closing, as defined herein, each
of
the Pubco Transaction Documents will have been duly authorized. This Agreement
has been duly authorized, executed and delivered and constitutes, and each
of
the other Pubco Transaction Documents, upon due execution and delivery, will
constitute, valid and binding obligations of Pubco, enforceable against Pubco
in
accordance with their respective terms (i) except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect related to laws affecting
creditors’ rights generally, including the effect of statutory and other laws
regarding fraudulent conveyances and preferential transfers, and except that
no
representation is made herein regarding the enforceability of Pubco’s
obligations to provide indemnification and contribution remedies under the
securities laws and (ii) subject to the limitations imposed by general equitable
principles (regardless of whether such enforceability is considered in a
proceeding at law or in equity).
(d)
None
of the execution and delivery of, or performance by Pubco under this Agreement
or any of the other Pubco Transaction Documents or the consummation of the
transactions herein or therein contemplated conflicts with or violates, or
will
result in the creation or imposition of, any lien, charge or other encumbrance
upon any of the assets of Pubco under any agreement or other instrument to
which
Pubco is a party or by which Pubco or its assets may be bound, or any term
of
the certificate of incorporation or by-laws of Pubco, or any license, permit,
judgment, decree, order, statute, rule or regulation applicable to Pubco or
any
of its assets, except in the case of a conflict, violation, lien, charge or
other encumbrance (except with respect to Pubco’s certificate of incorporation
or by-laws) which would not,
or
could not reasonably be expected to, have a Pubco Material Adverse
Effect.
(e)
As of
the date of the First Closing, Pubco will have the authorized and outstanding
capital stock as set forth under the heading “Capitalization” in the Memorandum.
All outstanding shares of capital stock of Pubco are duly authorized, validly
issued and outstanding, fully paid and nonassessable. Except as described in
the
Memorandum, as of the date of the First Closing: (i) there will be no
outstanding options, stock subscription agreements, warrants or other rights
permitting or requiring Pubco or others to purchase or acquire any shares of
capital stock or other equity securities of Pubco or to pay any dividend or
make
any other distribution in respect thereof; (ii) there will be no securities
issued or outstanding which are convertible into or exchangeable for any of
the
foregoing and there are no contracts, commitments or understandings, whether
or
not in writing, to issue or grant any such option, warrant, right or convertible
or exchangeable security; (iii) no shares of stock or other securities of Pubco
are reserved for issuance for any purpose; (iv) there will be no voting trusts
or other contracts, commitments, understandings, arrangements or restrictions
of
any kind with respect to the ownership, voting or transfer of shares of stock
or
other securities of Pubco, including, without limitation, any preemptive rights,
rights of first refusal, proxies or similar rights, and (v) no person holds
a
right to require Pubco to register any securities of Pubco under the Act or
to
participate in any such registration. As of the date of the First Closing,
the
issued and outstanding shares of capital stock of Pubco will conform in all
material respects to all statements in relation thereto contained in the
Memorandum and the Memorandum describes all material terms and conditions
thereof. All issuances by Pubco of its securities have been, at the times of
their issuance, exempt from registration under the Act and any applicable state
securities laws.
7
(f)
Immediately prior to the First Closing, the shares of Common Stock underlying
the Units, the Warrants, the Warrant Shares, the Agent Warrants and the Agent
Warrant Shares will have been duly authorized and, when issued and delivered
against payment therefor as provided in the Pubco Transaction Documents, will
be
validly issued, fully paid and nonassessable. No holder of any of the shares
of
Common Stock underlying the Units, the Warrants, the Warrant Shares, the Agent
Warrants or the Agent Warrant Shares will be subject to personal liability
solely by reason of being such a holder, and except as described in the
Memorandum, none of the shares of Common Stock underlying the Units, the
Warrants, the Warrant Shares, the Agent Warrants or the Agent Warrant
Shares are
subject to preemptive or similar rights of any stockholder or security holder
of
Pubco or an adjustment under the antidilution or exercise rights of any holders
of any outstanding shares of capital stock, options, warrants or other rights
to
acquire any securities of Pubco. Immediately prior to the First Closing, a
sufficient number of authorized but unissued shares of Common Stock will have
been reserved for issuance upon the exercise of the Warrants and the Agent
Warrants.
(g)
No
consent, authorization or filing of or with any court or governmental authority
is required in connection with the issuance or the consummation of the
transactions contemplated herein or in the other Pubco Transaction Documents,
except for required filings with the SEC and the applicable state securities
commissions relating specifically to the Offering (all of which filings will
be
duly made by, or on behalf of, Pubco), other than those which are required
to be
made after the First Closing (all of which will be duly made on a timely basis).
(h)
Subsequent to the respective dates as of which information is given in the
Memorandum, Pubco has operated its business in the ordinary course and, except
as may otherwise be set forth in the Memorandum, there has been no: (i) Pubco
Material Adverse Effect; (ii) transaction otherwise than in the ordinary
course of business consistent with past practice; (iii) issuance of any
securities (debt or equity) or any rights to acquire any such securities other
than pursuant to equity incentive plans approved by its Board of Directors;
(iv)
damage, loss or destruction, whether or not covered by insurance, with respect
to any asset or property of Pubco; or (v) agreement to permit any of the
foregoing.
(i)
Except as set forth in the Memorandum, there are no actions, suits, claims,
hearings or proceedings pending before any court or governmental authority
or,
to the knowledge of Pubco, threatened, against Pubco, or involving its assets
or
any of its officers or directors (in their capacity as such) which, if
determined adversely to Pubco or such officer or director, could not reasonably
be expected to have a Pubco Material Adverse Effect or adversely affect the
transactions contemplated by this Agreement or the Merger Agreement or the
enforceability thereof.
(j)
Pubco
is not obligated to pay, and has not obligated the Placement Agent to pay,
a
finder’s or origination fee in connection with the Offering (other than to the
Placement Agent), and hereby agrees to indemnify the Placement Agent from any
such claim made by any other person as more fully set forth in Section 8 hereof.
Pubco has not offered for sale or solicited offers to purchase the Units except
for negotiations with the Placement Agent. Except as set forth in the
Memorandum, no other person has any right to participate in any offer, sale
or
distribution of Pubco’s securities to which the Placement Agent’s rights,
described herein, shall apply.
8
(k)
Neither the sale of the Units by Pubco nor its use of the proceeds thereof
will
violate the Trading with the Enemy Act, as amended, or any of the foreign assets
control regulations of the United States Treasury Department (31 CFR, Subtitle
B, Chapter V, as amended) or any enabling legislation or executive order
relating thereto. Without limiting the foregoing, Pubco is not (a) a person
whose property or interests in property are blocked pursuant to Section 1 of
Executive Order 13224 of September 23, 2001 Blocking Property and Prohibiting
Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism
(66 Fed. Reg. 49079 (2001)) or (b) a person who engages in any dealings or
transactions, or be otherwise associated, with any such person. Pubco and its
subsidiaries, if any, are in compliance, in all material respects, with the
USA
Patriot Act of 2001 (signed into law October 26, 2001).
(l)
Until
the earlier of (i) the Termination Date and (ii) the Final Closing (as
hereinafter defined), Pubco will not issue any press release, grant any
interview, or otherwise communicate with the media in any manner whatsoever
with
respect to the Offering without the Placement Agent’s prior written consent,
which consent will not unreasonably be withheld or delayed.
(m)
For
the benefit of the Placement Agent, Pubco hereby incorporates by reference
all
of the representations and warranties contained in Article III, and its
covenants contained in Article IV, of the Merger Agreement,
in each case with the same force and effect as if specifically set forth herein
2B.
Representations,
Warranties and Covenants of Placement Agent.
The
Placement
Agent hereby represents and warrants to the Company that the following
representations
and warranties are true and correct as of the date of this
Agreement:
(a)
The
Placement Agent is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all requisite corporate
power and authority to enter into this Agreement and to carry out and perform
its obligations under the terms of this Agreement.
(b)
This
Agreement has been duly authorized, executed and delivered by the Placement
Agent, and upon due execution and delivery by the Company, this Agreement will
be a valid and binding agreement of the Placement Agent enforceable against
it
in accordance with its terms, except as may be limited by principles of public
policy and, as to enforceability, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws relating to or affecting creditor’s
rights from time to time in effect and subject to general equity
principles.
(c)
The
Placement Agent is a member of FINRA and is registered as a broker-dealer under
the Exchange Act (as defined below), and under the securities acts of each
state
into which it is making offers or sales of the Units.
None of
the Placement Agent or its affiliates, or any person acting on behalf of the
foregoing (other than Pubco, KnowFat, its or their affiliates or any person
acting on its or their behalf, in respect of which no representation is made)
has taken nor will it take any action that conflicts with the conditions and
requirements of, or that would make unavailable with respect to the Offering,
the exemption(s) from registration available pursuant to Rule 506 of Regulation
D, Rule 903 of Regulation S or Section 4(2) of the Act, or knows of any reason
why any such exemption would be otherwise unavailable to it.
(d)
None
of the Placement Agent or its affiliates, or any person acting on behalf of
the
foregoing, has engaged or will engage in any Directed Selling Efforts (as such
term is defined in Regulation S).
9
(e)
Any
offer or solicitation of an offer to buy Units made by the Placement Agent
or
its affiliates, or any person acting on behalf of the foregoing, in reliance
on
Rule 903 of Regulation S and in reliance upon similar exemptions from
registration available under applicable state securities laws, was made outside
of the United States exclusively to persons or entities that were, and are
at
the time of the delivery of the Units, not a U.S. Person (as such term is
defined in Regulation S) and were, and are at the time of the delivery of the
Units, not acting for the account or benefit of a person in the United States
or
a U.S. Person.
3. Placement
Agent Compensation.
(a)
In
connection with the Offering, the Company will pay a cash fee (the “Agent
Cash Fee”)
to the
Placement Agent at each Closing equal to 10% of the gross proceeds from the
sale
of the Units consummated at such Closing. The Agent Fee shall not be paid on
the
conversion of Pubco Notes (as defined in the Memorandum) into Units as
contemplated in the Offering.
(b)
As
additional compensation at each Closing the Company will issue to the Placement
Agent (or its designee(s)) for nominal consideration, warrants (the
“Agent
Warrants;”
the
Agent Cash Fee and Agent Warrants are sometimes referred to herein collectively
as “Agent
Compensation”)
to
purchase shares of Common Stock (the shares of Common Stock issuable upon
exercise of the Agent Warrants are hereinafter referred to as the “Agent
Warrant Shares”
and
the
Agent Warrants and the Agent Warrant Shares are collectively referred to as
the
“Agent
Securities”).
The
Agent Warrants shall be exercisable for that number of shares of Common Stock
equaling 20% of the Units sold in the Offering and shall have an exercise price
equal to the offering price of the Units. The Agent’s Warrants shall be
exercisable until the date that is seven (7) years after issuance and shall
contain customary weighted average anti-dilution price protection provisions
and
immediate cashless exercise provisions.
(c)
At
Closing, the Company will pay the Placement Agent a non-accountable expense
allowance not to exceed Two Hundred Twenty Five Thousand Dollars ($225,000),
which shall be paid at the First Closing (the “Agent
Expense Allowance”).
(d)
The
Company shall also pay and issue to the Placement Agent the Agent Compensation
calculated according to the percentages set forth in Sections 3(a) and (b)
of
this Agreement, if any person or entity contacted by the Placement Agent in
connection with the Offering invests in the Company (the “Post-Closing
Investors”)
at any
time prior to the date that is twelve (12) months after the Termination Date
or
the Final Closing, whichever is applicable, regardless of whether such
Post-Closing Investor purchased Units in the Offering.
If an
event or transaction shall occur that would entitle the Placement Agent to
receive both the Agent Compensation and the Finder’s Fee (as such term is
defined below), then the Placement Agent shall have the right to elect which
fee
it shall receive in full satisfaction of the Company’s obligations pursuant to
this Section 3(d) and the Finder’s Agreement, as described in Section 3(e)
below. In that regard, the Placement Agent shall provide a written list of
all
investors that it contacted in connection with the Offering within 20 business
days of the later to occur of the Termination Date or the Final
Closing.
(e)
At
the First Closing, the Company and the Placement Agent shall enter into a
non-exclusive Finder’s Fee Agreement (the “Finder’s
Agreement”),
which
will provide that, during the five-year period following the later of the
Termination Date or the First Closing, if the Company or any of its affiliates
shall enter into any of the transactions enumerated in the Finder’s Agreement
with any party introduced to the Company by the Placement Agent, directly or
indirectly, then the Company shall pay or cause to be paid to the Placement
Agent a cash finder’s fee (the “Finder’s
Fee”)
payable in cash at the closing of such transaction, equal to 7% of the first
$1
million of consideration paid by or to the Company, plus 6% of the next $1
million of consideration paid by or to the Company, plus 5% of the next $5
million of the consideration paid by or to the Company, plus 4% of the next
$1
million paid by or to the Company, plus 3% of the next $1 million paid by or
to
the Company, plus 2.5% of any consideration paid by or to the Company in excess
of $9 million; provided, however, that the Placement Agent will not be entitled
to a finder's fee for any Significant Corporate Transaction entered into with
any party with whom the Company had a pre-existing relationship prior to the
date of any proposed introduction and who was not introduced to the Company
by
the Placement Agent. In addition, the Company must agree to have the Placement
Agent facilitate any proposed introduction in advance in order for the Placement
Agent to be entitled to a finder's fee. A "Significant Corporate Transaction"
shall include mergers, acquisitions, joint ventures and any other business
combination consummated by the Company.
10
(f)
To
the extent there is more than one Closing, payment of the proportional amount
of
the Agent Cash Fee will be made out of the proceeds of subscriptions for the
Units sold at each Closing and Agent Warrants shall be issued at each Closing.
4. Subscription
and Closing Procedures.
(a)
KnowFat and Pubco shall cause to be delivered to the Placement Agent copies
of
the Memorandum and has consented, and hereby consents, to the use of such copies
for the purposes permitted by the Act and applicable securities laws and in
accordance with the terms and conditions of this Agreement, and hereby
authorizes the Placement Agent and its agents and employees to use the
Memorandum in connection with the sale of the Units until the earlier of (i)
the
Termination Date or (ii) the Final Closing, and no person or entity is or will
be authorized to give any information or make any representations other than
those contained in the Memorandum or to use any offering materials other than
those contained in the Memorandum in connection with the sale of the
Units.
(b)
KnowFat and Pubco shall make available to the Placement Agent and its
representatives such information as may be reasonably requested in making a
reasonable investigation of KnowFat and Pubco and their respective affairs
and
shall provide access to such employees during normal business hours as shall
be
reasonably requested by the Placement Agent.
(c)
Each
prospective purchaser will be required to complete and execute two (2) original
omnibus signature pages, for each of the Subscription Agreement and the
Registration Rights Agreement (the “Subscription Documents”),
which
will be forwarded or delivered to the Placement Agent at the Placement Agent’s
offices at the address set forth in Section 12 hereof, together with the
subscriber’s check or other good funds in the full amount of the purchase price
for the number of Units desired to be purchased.
(d)
All
funds for subscriptions received from the Offering will be promptly forwarded
by
the Placement Agent and deposited into a non-interest bearing escrow account
(the “Escrow
Account”)
established for such purpose with Signature Bank (the “Escrow
Agent”).
All
such funds for subscriptions will be held in the Escrow Account pursuant to
the
terms of an escrow agreement among Pubco, the Placement Agent and the Escrow
Agent. The Company will pay all fees related to the establishment and
maintenance of the Escrow Account. Subject to the receipt of subscriptions
for
the Minimum Amount, the Company will either accept or reject, for any or no
reason, the Subscription Documents in a timely fashion and at each Closing
will
countersign the Subscription Documents and provide duplicate copies of such
documents to the Placement Agent for distribution to the subscribers. The
Company will give notice to the Placement Agent of its acceptance of each
subscription. The Company, or the Placement Agent on the Company’s behalf, will
promptly return to subscribers incomplete, improperly completed, improperly
executed and rejected subscriptions and give written notice thereof to the
Placement Agent upon such return.
11
(e)
If
subscriptions for at least the Minimum Amount have been accepted prior to the
Termination Date, the funds therefor have been collected by the Escrow Agent
and
all of the conditions set forth elsewhere in this Agreement are fulfilled,
a
closing shall be held promptly with respect to Units sold (the “First
Closing”).
Thereafter, the remaining Units will continue to be offered and sold until
the
Termination Date. Additional closings (“Closings”)
may
from time to time be conducted at times mutually agreed to between the Placement
Agent and the Company with respect to additional Units sold, with the final
closing (“Final
Closing”)
to
occur within 10 days after the earlier of the Termination Date and the date
on
which the Maximum Amount has been subscribed for. Delivery of payment for the
accepted subscriptions for Units from the funds held in the Escrow Account
will
be made at each Closing at the Placement Agent’s offices against delivery of the
Units by the Company at the address set forth in Section 12 hereof (or at
such other place as may be mutually agreed upon between the Company and the
Placement Agent), net of amounts due to the Placement Agent and its Blue Sky
counsel as of such Closing. Executed certificates for the shares of Common
Stock
and Warrants constituting the Units and the Agent’s Warrants will be in such
authorized denominations and registered in such names as the Placement Agent
may
request on or before the date of each Closing (“Closing
Date”),
and
will be made available to the Placement Agent for checking and packaging at
the
Placement Agent’s office at each Closing.
(f)
If
Subscription Documents for the Minimum Amount have not been received and
accepted by the Company on or before the Termination Date for any reason, the
Offering will be terminated, no Units will be sold, and the Escrow Agent will,
at the request of the Placement Agent, cause all monies received from
subscribers for the Units to be promptly returned to such subscribers without
interest, penalty, expense or deduction.
5. Further
Covenants.
KnowFat
and Pubco hereby covenant and agree that:
(a) Except
upon prior written notice to the Placement Agent, neither KnowFat nor Pubco
shall, at any time prior to the Final Closing, knowingly take any action which
would cause any of the representations and warranties made by it in this
Agreement not to be complete and correct in all material respects on and as
of
each Closing Date with the same force and effect as if such representations
and
warranties had been made on and as of each such date (except to the extent
any
representation or warranty relates to an earlier date).
(b) If,
at
any time prior to the Final Closing, any event shall occur that causes (i)
a KF
Material Adverse Effect or (ii) a Pubco Material Adverse Effect, either of
which
as a result it becomes necessary to amend or supplement the Memorandum so that
the representations and warranties herein remain true and correct in all
material respects, or in case it shall be necessary to amend or supplement
the
Memorandum to comply with Regulation D or any other applicable securities laws
or regulations, either KnowFat or Pubco, as applicable, will promptly notify
the
Placement Agent and shall, at its sole cost, prepare and furnish to the
Placement Agent copies of appropriate amendments and/or supplements in such
quantities as the Placement Agent may reasonably request. Neither KnowFat nor
Pubco will at any time before the Final Closing prepare or use any amendment
or
supplement to the Memorandum of which the Placement Agent will not previously
have been advised and furnished with a copy, or which is not in compliance
in
all material respects with the Act and other applicable securities laws. As
soon
as KnowFat or Pubco is advised thereof, KnowFat or Pubco, as applicable, will
advise the Placement Agent and its counsel, and confirm the advice in writing,
of any order preventing or suspending the use of the Memorandum, or the
suspension of any exemption for such qualification or registration thereof
for
offering in any jurisdiction, or of the institution or threatened institution
of
any proceedings for any of such purposes, and KnowFat and Pubco, as applicable,
will use their best efforts to prevent the issuance of any such order and,
if
issued, to obtain as soon as reasonably possible the lifting
thereof.
12
(c) KnowFat
and Pubco shall comply with the Act, the Securities Exchange Act of 1934, as
amended (the “Exchange
Act”),
and
the rules and regulations thereunder, all applicable state securities laws
and
the rules and regulations thereunder in the states in which Placement Agent's
Blue Sky counsel has advised the Placement Agent, KnowFat and/or Pubco that
the
Units are qualified or registered for sale or exempt from such qualification
or
registration, so as to permit the continuance of the sales of the Units, and
will file or cause to be filed with the SEC, and shall promptly thereafter
forward or cause to be forwarded to the Placement Agent, any and all reports
on
Form D as are required.
(d) Pubco
shall use best efforts to qualify the Units for sale under the securities laws
of such jurisdictions in the United States as may be mutually agreed to by
KnowFat, Pubco and the Placement Agent, and Pubco will make or cause to be
made
such applications and furnish information as may be required for such purposes,
provided that Pubco will not be required to qualify as a foreign corporation
in
any jurisdiction or execute a general consent to service of process. Pubco
will,
from time to time, prepare and file such statements and reports as are or may
be
required to continue such qualifications in effect for so long a period as
the
Placement Agent may reasonably request with respect to the
Offering.
(e) The
Company shall place a legend on the certificates representing the Shares,
Warrants and the Agent Warrants that the securities evidenced thereby have
not
been registered under the Act or applicable state securities laws, setting
forth
or referring to the applicable restrictions on transferability and sale of
such
securities under the Act and applicable state laws.
(f) The
Company shall apply the net proceeds from the sale of the Units for the purposes
substantially as described under the “Use of Proceeds” section of the
Memorandum. Except as set forth in the Memorandum, the Company shall not use
any
of the net proceeds of the Offering to repay indebtedness to officers (other
than accrued salaries incurred in the ordinary course of business), directors
or
stockholders of the Company without the prior written consent of the Placement
Agent.
(g) During
the Offering Period, KnowFat or Pubco, as applicable, shall afford each
prospective purchaser of Units the opportunity to ask questions of and receive
answers from an officer of KnowFat or Pubco concerning the terms and conditions
of the Offering and the opportunity to obtain such other additional information
necessary to verify the accuracy of the Memorandum to the extent KnowFat or
Pubco possesses such information or can acquire it without unreasonable
expense.
(h) Except
with the prior written consent of the Placement Agent, KnowFat and Pubco shall
not, at any time prior to the earlier of the Final Closing or the Termination
Date, except as contemplated by the Memorandum (i) engage in or commit to engage
in any transaction outside the ordinary course of business as described in
the
Memorandum, (ii) issue, agree to issue or set aside for issuance any securities
(debt or equity) or any rights to acquire any such securities, (iii) incur,
outside the ordinary course of business, any material indebtedness, (iv) dispose
of any material assets, (v) make any material acquisition or (vi) change its
business or operations.
(i) The
Company shall pay all reasonable expenses incurred in connection with the
preparation and printing of all necessary offering documents and instruments
related to the Offering and the issuance of the Shares, the Warrants and the
Agent Warrants and will also pay the Company's own expenses for accounting
fees,
legal fees and other costs involved with the Offering. The Company will provide
at its own expense such quantities of the Memorandum and other documents and
instruments relating to the Offering as the Placement Agent may reasonably
request.
In
addition, the Company shall pay all filing fees, costs and legal fees for Blue
Sky services and related filings and expenses of the Placement Agent’s counsel
with respect to Blue Sky exemptions not to exceed $15,000 for legal fees
(exclusive of filing fees, costs and disbursements), $7,500 of which shall
be
paid to the Placement Agent’s counsel by KnowFat upon execution of this
Agreement for legal fees in connection with obtaining Blue Sky exemptions and
additional amounts, if any, which shall be paid at any Closing, as applicable.
The Blue Sky filings shall be prepared by the Placement Agent’s counsel for the
Company’s account. Further,
as promptly as practicable after the Closing, the Company shall prepare, at
its
own expense, velobound "closing binders" relating to the Offering and will
distribute such binders to the individuals designated by counsel to the
Placement Agent.
13
(j) Until
the
earlier of the Termination Date or the Final Closing , neither KnowFat nor
Pubco
nor any person or entity acting on such persons’ behalf will negotiate with any
other placement agent or underwriter with respect to a private or public
offering of such entity’s debt or equity securities. Neither KnowFat nor Pubco
nor anyone acting on such persons’ behalf will, until the earlier of the
Termination Date or the Final Closing, without the prior written consent of
the
Placement Agent, offer for sale to, or solicit offers to subscribe for Shares
from, or otherwise approach or negotiate in respect thereof with, any other
person.
(k) Effective
with the First Closing, Placement Agent shall have a right of first negotiation
(“Right of Negotiation”) to act as lead placement agent on any subsequent
private placement of the Company's securities for a period of three years from
such effectiveness.
(l) Effective
with the First Closing, the Company will, at Placement Agent’s option and if so
requested by Placement Agent, recommend and use its best efforts to elect one
designee of Placement Agent, at the option of Placement Agent, as a member
of
its Board of Directors; such designee, if elected or appointed, shall attend
meetings of the Board and receive no more or less compensation than is paid
to
other non-management directors of the Company and shall be entitled to receive
reimbursement for all reasonable costs incurred in attending such meetings
including, but not limited to, food, lodging and transportation. To the extent
permitted by law, the Company will agree to indemnify Placement Agent’s designee
for the actions of such designee as a director of the Company. In the event
the
Company maintains a liability insurance policy affording coverage for the acts
of its officers and directors, it will agree to include Placement Agent’s
designee as an insured under such policy. If Placement Agent does not exercise
its option to designate such member of the Company's Board of Directors,
Placement Agent shall nonetheless have the right to send a representative (who
need not be the same individual from meeting to meeting) to observe each meeting
of the Board of Directors. The Company agrees to give Placement Agent notice
of
each such meeting (or copies of any consents in lieu of meetings) and to provide
Placement Agent with an agenda and minutes of the meeting no later than it
gives
such notice and provides such items to the directors.
6. Conditions
of Placement Agent’s Obligations.
The
obligations of the Placement Agent hereunder to effect a Closing are subject
to
the fulfillment, at or before each Closing, of the following additional
conditions:
(a) Each
of
the representations and warranties made by KnowFat and Pubco qualified as to
materiality shall be true and correct at all times prior to and on each Closing
Date, except to the extent any such representation or warranty expressly speaks
as of an earlier date, in which case such representation or warranty shall
be
true and correct as of such earlier date, and the representations and warranties
made by KnowFat and Pubco not qualified as to materiality shall be true and
correct in all material respects at all times prior to and on each Closing
Date,
except to the extent any such representation or warranty expressly speaks as
of
an earlier date, in which case such representation or warranty shall be true
and
correct in all material respects as of such earlier date.
(b) KnowFat
and Pubco shall have performed and complied in all material respects with all
agreements, covenants and conditions required to be performed and complied
with
by it at or before the Closing.
14
(c) The
Memorandum did not, and as of the date of any amendment or supplement
thereto
will not, include any untrue statement of a material fact or omit to state
any
material fact necessary in order to make the statements therein, in light of
the
circumstances under which they were made, not misleading.
(d) No
order
suspending the use of the Memorandum or enjoining the Offering or sale of the
Units shall have been issued, and no proceedings for that purpose or a similar
purpose shall have been initiated or pending, or, to the best of KnowFat’s and
Pubco’ knowledge, be contemplated or threatened.
(e) The
Placement Agent shall have received a certificate of the Chief Executive Officer
of each of KnowFat and Pubco, dated as of the Closing Date, certifying, as
to
the fulfillment of the conditions set forth in subparagraphs (a), (b), (c)
and
(d) above.
(f) KnowFat
and Pubco shall have delivered to the Placement Agent: (i) a good standing
certificate dated as of a date within 10 days prior to the Closing Date from
the
secretary of state of its jurisdiction of incorporation; and (ii) resolutions
of
KnowFat's and Pubco's Board of Directors approving this Agreement and the
transactions and agreements contemplated by this Agreement, the Merger Agreement
and the Memorandum, certified by the Chief Executive Officer of KnowFat and
Pubco, and (iii) resolutions of KnowFat's and KnowFat Acquisition Corp.’s
shareholders approving the Merger Agreement and the transactions and agreements
contemplated by the Merger Agreement.
(g) At
each
Closing, the Company shall pay and/or issue to the Placement Agent the Agent
Compensation and Agent Expense Allowance earned in such Closing.
(h) KnowFat
shall deliver to the Placement Agent a signed opinion of Xxxxxxxx Xxxx, counsel
to KnowFat, dated as of the Closing Date, substantially in the form annexed
hereto as Exhibit A-1. Pubco shall deliver to the Placement Agent a signed
opinion of Gottbetter & Partners, LLP, counsel to Pubco, dated as of the
Closing Date, substantially in the form annexed hereto as Exhibit A-2.
(i) All
proceedings taken at or prior to the Closing in connection with the
authorization, issuance and sale of the Shares, the Warrants and the Agent
Warrants will be reasonably satisfactory in form and substance to the Placement
Agent and its counsel, and such counsel shall have been furnished with all
such
documents, certificates and opinions as it may reasonably request upon
reasonable prior notice in connection with the transactions contemplated
hereby.
(j) The
Merger Agreement shall have been consummated.
(k) Lock-up
agreements with all of the Company’s executive officers, directors and key
employees, in form and substance reasonably acceptable to the Placement Agent
and consistent with the terms set forth in the Memorandum, shall have been
executed and delivered to the Placement Agent.
(l) If
requested by the Placement Agent, a registration rights agreement, in form
and
substance reasonably acceptable to the Placement Agent, shall be executed and
delivered by the Company, covering the Agent Warrant Shares.
7. Conditions
of Pubco’s and KnowFat’s Obligations.
The
obligations of Pubco and KnowFat hereunder to effect a Closing are subject
to
each of the representations and warranties made by Placement Agent herein being
true and correct as of each Closing Date.
15
7A. Mutual
Condition.
The
obligations of the Placement Agent, KnowFat and Pubco hereunder are subject
to
the execution by each investor of a Subscription Agreement in form and substance
acceptable to the Placement Agent and the Company.
8. Indemnification.
(a) Pubco
and
KnowFat jointly and severally will: (i) indemnify and hold harmless the
Placement Agent, its agents and their respective officers, directors, employees,
selected dealers and each person, if any, who controls the Placement Agent
within the meaning of the Act and such agents (each an “Indemnitee”
or
a
"Placement
Agent Party")
against, and pay or reimburse each Indemnitee for, any and all losses, claims,
damages, liabilities or expenses whatsoever (or actions or proceedings or
investigations in respect thereof), joint or several (which will, for all
purposes of this Agreement, include, but not be limited to, all reasonable
costs
of defense and investigation and all reasonable attorneys’ fees, including
appeals), to which any Indemnitee may become subject (x) under the Act or
otherwise, in connection with the offer and sale of the Units and
(y)
as a
result of the breach of any representation, warranty or covenant made by either
KnowFat or Pubco herein, regardless of whether such losses, claims, damages,
liabilities or expenses shall result from any claim by any Indemnitee or by
any
third party; and
(ii)
reimburse each Indemnitee for any legal or other expenses reasonably incurred
in
connection with investigating or defending against any such loss, claim, action,
proceeding or investigation; provided,
however,
that
Pubco and KnowFat will not be liable in any such case to the extent that any
such claim, damage or liability is finally judicially determined to have
resulted exclusively from (A) an untrue statement or alleged untrue statement
of
a material fact made in the Memorandum, or an omission or alleged omission
to
state therein a material fact required to be stated therein or necessary to
make
the statements therein not misleading, made solely in reliance upon and in
conformity with written information furnished to Pubco and/or KnowFat by the
Placement Agent specifically for use in the Memorandum or (B) any violations
by
the Placement Agent of the Act or state securities laws which does not result
from a violation thereof by KnowFat, Pubco, or any of their respective
affiliates. In addition to the foregoing agreement to indemnify and reimburse,
Pubco and KnowFat jointly and severally will indemnify and hold harmless each
Indemnitee against any and all losses, claims, damages, liabilities or expenses
whatsoever (or actions or proceedings or investigations in respect thereof),
joint or several (which shall, for all purposes of this Agreement, include,
but
not be limited to, all reasonable costs of defense and investigation and all
reasonable attorneys' fees, including appeals) to which any Indemnitee may
become subject insofar as such costs, expenses, losses, claims, damages or
liabilities arise out of or are based upon the claim of any person or entity
that he or it is entitled to broker’s or finder’s fees from any Indemnitee in
connection with the Offering, other than fees due to the Placement Agent. The
foregoing indemnity agreements will be in addition to any liability Pubco and
KnowFat may otherwise have.
(b) The
Placement Agent will indemnify and hold harmless Pubco and KnowFat, their
respective officers, directors, and each person, if any, who controls such
entity within the meaning of the Act against, and pay or reimburse any such
person for, any and all losses, claims, damages, liabilities or expenses
whatsoever (or actions, proceedings or investigations in respect thereof) to
which Pubco or KnowFat or any such person may become subject under the Act
or
otherwise, whether such losses, claims, damages, liabilities or expenses shall
result from any claim of Pubco, KnowFat or any such person who controls Pubco
or
KnowFat within the meaning of the Act or by any third party, but only to the
extent that
such
losses, claims, damages or liabilities are based upon any untrue statement
or
alleged untrue statement of any material fact contained in the Memorandum made
in reliance upon and in conformity with information contained in the Memorandum
relating to the Placement Agent, or an omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make
the
statements therein not misleading, in either case, if made or omitted in
reliance upon and in conformity with written information furnished to
Pubco
or
KnowFat
by the
Placement Agent, specifically for use in the preparation thereof. The Placement
Agent will reimburse the Company or any such person for any legal or other
expenses reasonably incurred in connection with investigating or defending
against any such loss, claim, damage, liability or action, proceeding or
investigation to which such indemnity obligation applies. The foregoing
indemnity agreements are in addition to any liability which the Placement Agent
may otherwise have.
16
(c)
Promptly after receipt by an indemnified party under this Section 8 of notice
of
the commencement of any action, claim, proceeding or investigation (the
“Action”),
such
indemnified party, if a claim in respect thereof is to be made against the
indemnifying party under this Section 8, will notify the indemnifying party
of
the commencement thereof, but the omission to so notify the indemnifying party
will not relieve it from any liability that it may have to any indemnified
party
under this Section 8 unless the indemnifying party has been substantially
prejudiced by such omission. The indemnifying party will be entitled to
participate in and, to the extent that it may wish, jointly with any other
indemnifying party, to assume the defense thereof subject to the provisions
herein stated, with counsel reasonably satisfactory to such indemnified party.
The indemnified party will have the right to employ separate counsel in any
such
Action and to participate in the defense thereof, but the fees and expenses
of
such counsel will not be at the expense of the indemnifying party if the
indemnifying party has assumed the defense of the Action with counsel reasonably
satisfactory to the indemnified party, provided,
however,
that if
the indemnified party shall be requested by the indemnifying party to
participate in the defense thereof or shall have concluded in good faith and
specifically notified the indemnifying party either that there may be specific
defenses available to it that are different from or additional to those
available to the indemnifying party or that such Action involves or could have
a
material adverse effect upon it with respect to matters beyond the scope of
the
indemnity agreements contained in this Agreement, then the counsel representing
it, to the extent made necessary by such defenses, shall have the right to
direct such defenses of such Action on its behalf and in such case the
reasonable fees and expenses of such counsel in connection with any such
participation or defenses shall be paid by the indemnifying party. No settlement
of any Action against an indemnified party will be made without the consent
of
the indemnifying party and the indemnified party, which consent shall not be
unreasonably withheld or delayed in light of all factors of importance to such
party, and no indemnifying party shall be liable to indemnify any person for
any
settlement of any such claim effected without such indemnifying party’s
consent.
9. Contribution.
To
provide for just and equitable contribution, if: (i) an indemnified party makes
a claim for indemnification pursuant to Section 8 hereof and it is finally
determined, by a judgment, order or decree not subject to further appeal that
such claims for indemnification may not be enforced, even though this Agreement
expressly provides for indemnification in such case; or (ii) any
indemnified or indemnifying party seeks contribution under the Act, the Exchange
Act, or otherwise, then each indemnifying party shall contribute to such amount
paid or payable by such indemnified party in such proportion as is appropriate
to reflect not only such relative benefits but also the relative fault of the
Company on the one hand and the Placement Agent on the other in connection
with
the statements or omissions which resulted in such losses, claims, damages,
liabilities or expenses (or actions in respect thereof), as well as any other
relevant equitable considerations. The relative benefits received by the Company
on the one hand and the Placement Agent on the other shall be deemed to be
in
the same proportion as the total net proceeds from the Offering (before
deducting expenses) received by the Company bear to the total Agent Cash Fees
received by the Placement Agent. The relative fault, in the case of an untrue
statement, alleged untrue statement, omission or alleged omission will be
determined by, among other things, whether such statement, alleged statement,
omission or alleged omission relates to information supplied by the Company
or
by the Placement Agent, and the parties’ relative intent, knowledge, access to
information and opportunity to correct or prevent such statement, alleged
statement, omission or alleged omission. The Company and the Placement Agent
agree that it would be unjust and inequitable if the respective obligations
of
the Company and the Placement Agent for contribution were determined by
pro rata
allocation of the aggregate losses, liabilities, claims, damages and expenses
or
by any other method or allocation that does not reflect the equitable
considerations referred to in this Section 9. No person guilty of a fraudulent
misrepresentation (within the meaning of Section 10(f) of the Act) will be
entitled to contribution from any person who is not guilty of such fraudulent
misrepresentation. For purposes of this Section 9, each person, if any, who
controls the Placement Agent within the meaning of the Act will have the same
rights to contribution as the Placement Agent, and each person, if any, who
controls the Company within the meaning of the Act will have the same rights
to
contribution as the Company, subject in each case to the provisions of this
Section 9. Anything in this Section 9 to the contrary notwithstanding, no party
will be liable for contribution with respect to the settlement of any claim
or
action effected without its written consent. This Section 9 is intended to
supersede, to the extent permitted by law, any right to contribution under
the
Act, the Exchange Act or otherwise available.
17
10. Termination.
(a)
The
Offering may be terminated by the Placement Agent at any time prior to the
expiration of the Offering Period in the event that: (i) any of the
representations, warranties or covenants of the KnowFat or Pubco contained
herein or in the Memorandum shall prove to have been false or misleading in
any
material respect when actually made; (ii) KnowFat or Pubco shall have failed
to
perform any of its material obligations hereunder or under any other KnowFat
Transaction Document, Pubco Transaction Document or any other transaction
document; (iii) there shall occur any event, within the control of either
KnowFat or Pubco, that could materially adversely affect the transactions
contemplated hereunder or the ability of KnowFat or Pubco to perform hereunder;
or (iv) the Placement Agent determines that it is reasonably likely that any
of
the conditions to Closing set forth herein will not, or cannot, be satisfied.
In
the event of any such termination by the Placement Agent pursuant to clauses
(i), (ii) and (iii) of this Section 10(a), the Placement Agent shall be entitled
to receive from the breaching party, within five (5) business days of the
Termination Date, in addition to other rights and remedies it may have
hereunder, at law or otherwise, an amount equal to the sum of: (x) the Agent
Cash Fee calculated as if there had been a closing on the Minimum Amount, and
(y) the Agent Expense Allowance (collectively, the “Termination
Amount”).
(b)
This
Offering may be terminated by Pubco and KnowFat on a joint basis only at any
time prior to the expiration of the Offering Period (i)
in
the event that the
Placement Agent shall have failed to perform any of its material obligations
hereunder, or (ii)
on
account of the Placement Agent’s fraud, illegal or willful misconduct or gross
negligence.
In the
event of any such termination by Pubco, the Placement Agent shall not be
entitled to any amounts whatsoever except (i) as may be due under any indemnity
or contribution obligation provided herein or any other KnowFat Transaction
Document or Pubco Transaction Document, at law or otherwise and (ii) it shall
retain any Agent Compensation and Agent Expense Allowance received for Closings
that occurred prior to the Termination Date.
(c)
In
the event Pubco or KnowFat unilaterally decides for any reason (other than
pursuant to Section 10(b) above or Section 10(d) below) to terminate the
Offering at any time prior to the First Closing (the “Unilateral
Termination”),
the
Placement Agent shall be entitled to receive from the terminating party the
Termination Amount.
In
addition, if within six (6) months after the Unilateral Termination, either
Pubco or KnowFat conduct a public or private offering of its securities or
enters into a letter of intent with respect to the foregoing, then upon the
closing of any such transaction, the Placement Agent shall be entitled to
receive from the terminating party an amount equal to the sum of: (x) the Agent
Cash Fee calculated as if there had been a closing on the Maximum Amount and
(y)
the Agent Expense Allowance (the “Unilateral
Termination Amount”);
provided,
however,
that if
the Company has previously paid to the Placement Agent the Termination Amount,
the Placement Agent shall be entitled to receive only such portion of the
Unilateral Termination Amount that is in excess of the Termination Amount
previously paid to the Placement Agent.
18
(d)
This
Offering may be terminated upon mutual agreement of Pubco, KnowFat and
the
Placement Agent at
any
time prior to the expiration of the Offering Period. If the Offering is
terminated pursuant to this Section 10(d) or pursuant to Section 10(a)(iv),
then
the Company shall pay the Placement Agent
any
documented out of pocket expenses of the Placement Agent incurred through the
date of such termination.
(e)
Before any termination by the Placement Agent under Section 10(a) or by Pubco
and KnowFat under Section 10(b) shall become effective, the terminating party
shall give written notice to the other party of its intention to terminate
the
Offering (the “Termination
Notice”).
The
Termination Notice shall specify the grounds for the proposed termination.
If
the specified grounds for termination, or their resulting adverse effect on
the
transactions contemplated hereby, are curable, then the other party shall have
ten (10) days from the Termination Notice within which to remove such grounds
or
to eliminate all of their material adverse effects on the transactions
contemplated hereby; otherwise, the Offering shall terminate.
(f)
In
the event that a majority of the KnowFat’s capital stock or assets is sold, or
KnowFat is merged with or merges with or into another entity or otherwise
combined with or acquired, or completes a public or private offering of its
securities, or enters into a letter of intent or memorandum of understanding
with respect to any of the foregoing, within one year after the Offering is
terminated, then upon the closing of any such transaction, KnowFat or its
successor shall pay the Placement Agent in cash, within five (5) business days
of the closing of any such transaction, an amount equal to five percent (5%)
of
the total consideration received or receivable by KnowFat or any of its
officers, directors or stockholders in connection with such transaction (the
“Transaction
Fee”);
provided,
however,
the
Transaction Fee shall be payable only in the event that the Offering was
terminated as a result of (i) any of the events set forth in clauses (i) -
(iii) in Section 10(a) above or (ii) KnowFat’s determination not to continue
with the Offering for any reason other than as a result of Placement Agent’s
failure to perform any of its material obligations hereunder. Notwithstanding
the foregoing, however, if an event or transaction shall occur that would
entitle the Placement Agent to receive both the Termination Amount and the
Transaction Fee, then the Placement Agent may elect which of the two such fees,
but may elect only one of such fees, it shall collect from KnowFat. In the
event
that the Placement Agent has elected to receive the Termination Amount in
accordance with this Section 10, and subsequently an event or transaction occurs
that would have entitled the Placement Agent to receive a Transaction Fee in
excess of such Termination Amount, then the Placement Agent may require KnowFat
to pay it the difference between the Termination Amount already paid and the
amount of the Transaction Fee to which it otherwise would have been entitled
to
receive from KnowFat.
(e)
Upon
any termination pursuant to this Section 10, the Placement Agent and Pubco
will
instruct Escrow Agent to cause all monies received with respect to the
subscriptions for Units not accepted by the Company to be promptly returned
to
such subscribers without interest, penalty or deduction.
11. Survival.
(a)
The
obligations of the parties to pay any costs and expenses hereunder and to
provide indemnification and contribution as provided herein shall survive any
termination hereunder. In addition, the provisions of Sections 3(d), and 10
through 16 shall survive the sale of the Units or any termination of the
Offering hereunder.
(b)
The
respective indemnities, covenants, representations, warranties and other
statements of Pubco, KnowFat and the Placement Agent set forth in or made
pursuant to this Agreement will remain in full force and effect, regardless
of
any investigation made by or on behalf of, and regardless of any access to
information by, Pubco, KnowFat or the Placement Agent, or any of their officers
or directors or any controlling person thereof, and will survive the sale of
the
Units or any termination of the Offering hereunder.
19
12. Notices.
All
communications hereunder will be in writing and, except as otherwise expressly
provided herein or after notice by one party to the other of a change of
address, if sent to the Placement Agent, will be mailed, delivered or telefaxed
and confirmed to Xxxxxxx Xxxxx Ventures, Inc., 000 Xxxxxxx Xxxxxx,
00xx
Xxxxx,
Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxxxxx X. Xxxxxxxxx, President, telefax
number (000) 000-0000, with a copy to: Xxxxxxx Xxxxxx LLP, 000 Xxxxx Xxxxxx,
00xx
Xxxxx,
Xxx Xxxx, Xxx Xxxx 00000, Attn: Xxxxxx X. Xxxxxxx, Esq., telefax number (000)
000-0000, if sent to KnowFat or the Company, will be mailed, delivered or
telefaxed and confirmed to KnowFat Franchise Company, Inc., 000 Xxxxxxxxxx
Xxxxxx, Xxxxx 000, Xxxxxx, XX 00000, Attn: Xxxxxx Xxxxxxx, Chief Executive
Officer, telefax number (000) 000-0000, with a copy to Xxxxxxxx Xxxx LLP, 000
Xxxx Xxxx Xxxxxx, Xxxxxxxx, XX 00000-0000, Attn: Xxxxxxx X. Xxxxxx,
Esq., telefax number (000) 000-0000 and if sent to Pubco, will be mailed,
delivered or telefaxed and confirmed to UFood Restaurant Group, Inc., 00000-00X
Xxxxxx, Xxxxxx, Xxxxxxx Xxxxxxxx X0X 0X0, Attention: Xxxxx Xxxx, President,
telefax number (000) 000-0000, with a copy to Gottbetter&
Partners, LLP, 488 Madison Ave., 12th Fl., Xxx Xxxx, XX 00000, Attn: Xxxxxxx
X.
Xxxxxxx, Esq., telefax number (000) 000-0000.
13.
Governing
Law, Jurisdiction.
This
Agreement shall be deemed to have been made and delivered in New York City
and
shall be governed as to validity, interpretation, construction, effect and
in
all other respects by the internal laws of the State of New York without regard
to principles of conflicts of law thereof. Any and all disputes, controversies
or claims arising out of or relating to this Agreement, or the breach,
termination or invalidity thereof, shall be finally and exclusively resolved
by
arbitration in accordance with the Arbitration Rules of the American Arbitration
Association (“AAA”)
as at
present in force. The arbitration shall take place in New York City, the State
of New York. The parties hereby submit themselves to the exclusive jurisdiction
of the arbitration tribunal in the City of New York, the State of New York
under
the auspices of AAA. To the extent permitted by law, the award of the
arbitrators may include, without limitation, one or more of the following:
a
monetary award, a declaration of rights, an order of specific performance,
an
injunction, and/or a reformation of the contract. The decision of the
arbitrators shall be final and binding upon the parties hereto, and judgment
on
the award may be entered in any court having jurisdiction over the subject
matter thereof. The cash expenses of the arbitration (including without
limitation reasonable fees and expenses of counsel, experts and consultants)
shall be borne by the party against whom the decision of the arbitrators is
rendered; provided that
if a
party prevails only partially, such party shall be entitled to be reimbursed
for
such costs and expenses in the proportion that the dollar amount successfully
claimed by the prevailing party bears to the aggregate dollar amount
claimed.
14. Miscellaneous.
No
provision of this Agreement may be changed or terminated except by a writing
signed by the party or parties to be charged therewith. Unless expressly so
provided, no party to this Agreement will be liable for the performance of
any
other party’s obligations hereunder. Either party hereto may waive compliance by
the other with any of the terms, provisions and conditions set forth herein;
provided, however, that any such waiver shall be in writing specifically setting
forth those provisions waived thereby. No such waiver shall be deemed to
constitute or imply waiver of any other term, provision or condition of this
Agreement. Neither party may assign its rights or obligations under this
Agreement to any other person or entity without the prior written consent of
the
other party.
15. Entire
Agreement; Severability.
This
Agreement together with any other agreement referred to herein supersedes all
prior understandings and written or oral agreements between the parties with
respect to the Offering and the subject matter hereof. If any portion of this
Agreement shall be held invalid or unenforceable, then so far as is reasonable
and possible (i) the remainder of this Agreement shall be considered valid
and
enforceable and (ii) effect shall be given to the intent manifested by the
portion held invalid or unenforceable.
20
16. Counterparts.
This
Agreement may be executed in multiple counterparts, each of which may be
executed by less than all of the parties and shall be deemed to be an original
instrument which shall be enforceable against the parties actually executing
such counterparts and all of which together shall constitute one and the same
instrument. The exchange of copies of this Agreement and of signature pages
by
facsimile transmission shall constitute effective execution and delivery of
this
Agreement as to the parties and may be used in lieu of the original Agreement
for all purposes. Signatures of the parties transmitted by facsimile shall
be
deemed to be their original signatures for all purposes.
[Signatures
on following page.]
21
If
the
foregoing is in accordance with your understanding of the agreement among Pubco,
KnowFat and the Placement Agent, kindly sign and return this Agreement,
whereupon it will become a binding agreement among Pubco, KnowFat and the
Placement Agent in accordance with its terms.
|
KNOWFAT
FRANCHISE COMPANY, INC.
|
|
|
By:
|
/s/
Xxxxxx Xxxxxxx
|
|
Xxxxxx
Xxxxxxx
|
|
|
Chief
Executive Officer
|
|
|
By:
|
/s/
Xxxxx Xxxx
|
|
Xxxxx
Xxxx
|
|
|
President
|
|
Accepted
and agreed to this
17th
day of
October, 2007:
|
By:
|
/s/
Xxxxxxx X. Xxxxxxxxx
|
|
Xxxxxxx X. Xxxxxxxxx
|
|
|
President
|
|
22
SCHEDULE
1
DISCLOSURE
SCHEDULES
[NONE]
23
Exhibit
A-1
Form
of Opinion-KnowFat Counsel
2.1 KnowFat
(the
term
"Company" when used herein, refers to KnowFat) has
been
duly organized as a corporation and is validly existing and in good standing
under the laws of the jurisdiction of its incorporation, has full corporate
power and authority to own, lease and operate its properties and conduct its
business as described in the Memorandum and is duly qualified as a foreign
corporation for the transaction of business and is in good standing in each
jurisdiction where the conduct of its business makes such qualification
necessary, except where the failure to so qualify would not have a material
adverse effect upon the business (as currently conducted), financial condition,
prospects or results of operation of the Company (a "Material Adverse
Effect").
2.2 The
authorized capital stock of the Company on the date hereof consists of (i)
[_______________] shares of Common Stock, [$0.___] par value per share, and
(ii)
[_________________] shares of Preferred Stock, [$0.____] par value per share.
2.3 The
execution, delivery and performance by KnowFat of the Transaction Documents
to
which it is a party and the consummation by KnowFat of the transactions
contemplated thereby have been duly authorized by all necessary corporate action
on the part of KnowFat and duly executed and delivered by KnowFat. Each of
the
Transaction Documents to which it is a party constitutes the legal, valid and
binding obligation of KnowFat, enforceable against KnowFat in accordance with
its terms.
2.4 The
execution, delivery and performance by KnowFat of the Transaction
Documents1 to
which
it is a party and the consummation by KnowFat of the transactions contemplated
thereby will not (i) violate the provisions of the Delaware General Corporation
Law or any United States federal or state law, rule or regulation known to
us to
be currently applicable to KnowFat or (ii) violate the provisions of KnowFat's
Certificate of Incorporation or By-Laws; (iii) violate any judgment, decree,
order or award known to us of any court, governmental body or arbitrator having
jurisdiction over KnowFat; or (iv) result in the breach or termination of any
material term or provision of an agreement known to us to which KnowFat is
a
party, except in any such case where the breach or violation would not have
a
Material Adverse Effect on KnowFat or its ability to perform its obligations
under the Transaction Documents.
2.5 To
our
knowledge, there is no action, proceeding or litigation pending or threatened
against KnowFat before any court, governmental or administrative agency or
body.
2.6 Either
(i) no consent, approval or authorization of, or other action by, and no notice
to or filing with, any United States federal or state governmental authority
on
the part of KnowFat is required in connection with the valid execution and
delivery of the Transaction Documents to which it is a party and the
consummation by KnowFat of the transactions contemplated thereunder, except
for
(A) the filing of a Form D that may be filed with the United States Securities
and Exchange Commission; (B) any filings under the securities laws of the
various jurisdictions in which the Shares, Warrants and Placement Agent Warrants
are being offered and sold in the Offering; and (C) any filings relating to
public disclosure of the transactions contemplated by the Transaction Documents,
or (ii) any required consent, approval, authorization, action or filing has
been
obtained, performed or made by KnowFat.
1 Transaction
Documents should include the Placement Agency Agreement, Escrow Deposit
Agreement, the Merger Agreement and Subscription Agreement.
24
We
participated in the preparation of the Memorandum and in conferences with
officers and other representatives of KnowFat, at which the contents of the
Memorandum and related matters were discussed, and although we have not
undertaken to determine independently, and do not assume any responsibility
for,
the accuracy or completeness of the statements contained in the Memorandum,
based on such conferences and our participation in the preparation of the
Memorandum, and any amendment or supplement thereto (other than the financial
statements, including supporting schedules and other financial and statistical
information derived therefrom), the Memorandum, as of its date, does not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein,
in
light of the circumstances under which they were made, not misleading.
25
Exhibit
A-2
Form
of Opinion-Pubco Counsel
[subject
to change; may accept opinion issued under Merger Agreement if it covers
Offering related docs]
2.1 Pubco
(the
term
"Company" when used herein, refers to UFood Restaurant Group, Inc.) has
been
duly organized as a corporation and is validly existing and in good standing
under the laws of the jurisdiction of its incorporation, has full corporate
power and authority to own, lease and operate its properties and conduct its
business as described in the Memorandum and is duly qualified as a foreign
corporation for the transaction of business and is in good standing in each
jurisdiction where the conduct of its business makes such qualification
necessary, except where the failure to so qualify would not have a material
adverse effect upon the business (as currently conducted), financial condition,
prospects or results of operation of the Company (a "Material Adverse
Effect").
2.2 The
authorized capital stock of the Company on the date hereof consists of (i)
[_______________] shares of Common Stock, [$0.___] par value per share, and
(ii)
[_________________] shares of Preferred Stock, [$0.____] par value per share.
All outstanding shares of capital stock of the Company have been duly authorized
and are validly issued, fully paid and non-assessable.
2.3 The
Shares, the Warrants, the Placement Agent Warrants, and the shares of Common
Stock issuable upon exercise of the Warrants and the Placement Agent Warrants
have been duly authorized for issuance by all necessary corporate action on
the
part of the Company. The Shares and the shares of Common Stock issuable upon
exercise of the Warrants and the Placement Agent Warrants, when issued, sold
and
delivered against payment therefore in accordance with the provisions of the
Memorandum, the Subscription Agreements, the Warrants or the Placement Agent
Warrants, as applicable, will be duly and validly issued, fully paid and
non-assessable. The issuance of the Shares, the Warrants and the Placement
Agent
Warrants and the shares of Common Stock issuable upon exercise of the Warrants
and the Placement Agent Warrants are not subject to any statutory or, to our
knowledge, contractual or other preemptive rights. A sufficient number of
authorized but unissued shares of Common Stock have been reserved for issuance
upon exercise of the Warrants and the Placement Agent Warrants.
2.4 The
execution, delivery and performance by the Company of the Transaction Documents
to which they are a party and the consummation by the Company of the
transactions contemplated thereby have been duly authorized by all necessary
corporate action on the part of the Company (including its Board of Directors),
and duly executed and delivered by the Company, as applicable. Each of the
Transaction Documents to which it is a party constitutes the legal, valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms.
2.5 The
execution, delivery and performance by the Company of the Transaction
Documents2 to
which
they are a party and the consummation by the Company of the transactions
contemplated thereby will not (i) violate the provisions of the Nevada
Corporation Law or any United States federal or state law, rule or regulation
known to us to be currently applicable to the Company, (ii) violate the
provisions of the Company's Certificate of Incorporation or By-Laws; (iii)
violate any judgment, decree, order or award known to us of any court,
governmental body or arbitrator having jurisdiction over the Company; or (iv)
result in the breach or termination of any material term or provision of an
agreement known to us to which the Company is a party, except in any such case
where the breach or violation would not have a Material Adverse Effect on the
Company or its ability to perform its obligations under the Transaction
Documents.
2
Transaction Documents should include the Placement Agency Agreement, Escrow
Deposit Agreement, Merger Agreement, Warrant, Placement Agent Warrant,
Registration Rights Agreement, and Subscription Agreements.
26
2.6 Assuming
that the Shares were sold only to "accredited investors" (as defined in Rule
501
of Regulation D promulgated under the Securities Act of 1933, as amended ("1933
Act")) or “non U.S. Persons” (as defined in Regulation S promulgated under the
Act) and the Placement Agent complied in all material respects with Regulation
D
or Regulation S and the terms and conditions of the Offering set forth in the
Placement Agency Agreement and the Memorandum, such sales were made in
conformity with the requirements of Section 4(2) of the 1933 Act, Regulation
D
or Regulation S, and with the requirements of all other United States federal
regulations applicable to the Company currently in effect relating to private
offerings of securities of the type made in the Offering.
2.7 To
our
knowledge, there is no action, proceeding or litigation pending or threatened
against the Company before any court, governmental or administrative agency
or
body.
2.8 Either
(i) no consent, approval or authorization of, or other action by, and no notice
to or filing with, any United States federal or state governmental authority
on
the part of the Company is required in connection with the valid execution
and
delivery of the Transaction Documents to which it is a party and the
consummation by the Company of the transactions contemplated thereunder, except
for (A) the filing of a Form D that may be filed with the United States
Securities and Exchange Commission; (B) any filings under the securities laws
of
the various jurisdictions in which the Shares, Warrants and Placement Agent
Warrants are being offered and sold in the Offering; and (C) any filings
relating to public disclosure of the transactions contemplated by the
Transaction Documents, or (ii) any required consent, approval, authorization,
action or filing has been obtained, performed or made by the
Company.
27
Exhibit
B
Form
of Placement Agent Warrant
28
