AGENCY AGREEMENT
__________ ____, 1998
Xx. Xxxxx X. Xxxxxx, President
Global Financial Group, Inc.
000 Xxxxxxxxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxxxxxx, XX 00000
Gentlemen:
Physical Spa & Fitness Inc. ("Company"), a Delaware corporation and
Xxxxxx Xxxxxxx, 0000 Xxxxxxxxx 00 Xxxxxxx, Xxxxx 000, Xx. Xxxxxxxxxx, XX 00000
("Selling Shareholder"), propose to issue and sell through you ("Agent") 375,000
and 67,000, shares respectively of the Company's $0.001 par value common stock
for $4.00 per share ("Shares"). The offering of the Shares is further described
in the Registration Statement ("Registration Statement") filed on Form SB-2 with
the United States Securities and Exchange Commission ("Commission").
1. REPRESENTATIONS AND WARRANTIES.
BY THE COMPANY. In order to induce the Agent to enter into this
Agreement, the Company represents and warrants as follows:
a) The Company has filed a Registration Statement (No. 333-38697)
on Form SB-2 relating to the Shares with the Commission pursuant to the
Securities Act of 1933 ("Act"), as amended, and the Registration
Statement was declared effective on ________________, 1998. The Company
has furnished to the Agent and to its legal counsel two signed and ten
conformed copies of the Registration Statement together with all
amendments and exhibits. As used in this Agreement, the term
"Registration Statement" means the Registration Statement, including the
Prospectus, the exhibits and the financial statements and all amendments
including any amendments after the effective date of the Registration
Statement. The term "Prospectus" means the Prospectus filed as a part of
Part II of the Registration Statement, including all pre-effective and
post-effective amendments and supplements thereto.
b) The Registration Statement and all other documents previously
filed or filed after the date hereof with the Commission conform and
will conform with all of the requirements of the Act in all material
respects. Neither the Registration Statement, the Prospectus nor the
other material filed or to be filed with the Commission contains nor
will contain any untrue statements of material fact nor are there or
will there be any omissions of material facts required to be stated
therein or that are necessary to make the statements therein not
misleading, except that this warranty does not apply to any statements
or omissions made in reliance upon and in conformity with information
furnished in writing to the Company by and with respect to you, or any
dealer through you, expressly for use in the Registration Statement or
Prospectus or any amendment or supplement thereto.
c) The Company has obtained a CUSIP number for its common stock
and the Company has used its best efforts to qualify the Shares for
offering in every state reasonably designated by the Agent. The
materials previously filed or filed after the date hereof with any state
do not and will not contain any untrue statements of material fact nor
are there or will there be any omissions of material facts required to
be stated therein or that are necessary to make the statements therein
not misleading.
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d) The outstanding capital stock of the Company has been duly and
validly authorized, issued and is fully paid and non-assessable and
conforms to all statements made in the Registration Statement and
Prospectus with respect thereto. The Shares, Warrants (as defined in
paragraph 6 hereof) have been duly and validly authorized and, when
issued and delivered against payment as provided in this Agreement, will
be validly issued, fully paid and non-assessable. The Shares and Warrant
Shares, upon issuance, will not be subject to the preemptive rights of
any shareholders of the Company. The Warrants, when sold and delivered,
will constitute valid and binding obligations of the Company enforceable
in accordance with their terms. A sufficient number of shares of common
stock have been reserved for issuance upon exercise of the Warrants. The
Shares, Warrant Shares and Warrants will conform to all statements in
the Registration Statement and Prospectus. Upon delivery of and payment
for the Warrants to be sold by the Company as set forth in this
Agreement, the Agent and its designees will receive good and marketable
title thereto, free and clear of all liens, encumbrances, charges and
claims except those created by, through or under the Agent and except
restrictions on transfer arising under federal and state securities laws
and their rules and regulations. The Company will have on the Effective
Date (as defined in paragraph 1.h) hereof) of the Registration Statement
and at the time of delivery of such Warrants full legal right and power
and all authorization and approval required by law to sell, transfer and
deliver such Warrants in the manner provided hereunder.
e) The Company has been legally incorporated and is now, and
always during the period of the offering will be, a validly existing
corporation under the laws of the State of Delaware, lawfully qualified
to conduct the business for which it was organized and which it proposes
to conduct. The Company will always during the period of the offering be
qualified to conduct business as a foreign corporation in each
jurisdiction where the nature of its business requires such
qualification.
f) The Company has an authorized capitalization of 100,000,000
shares of common stock ($0.001 par value) and 10,000,000 shares of
Preferred Stock ($0.001 par value). If the Shares are sold, the Shares
will represent at least ____% of the Company's shares of common stock
outstanding after the public offering. Common stock underlying
outstanding options and warrants except options issued pursuant to the
Company's Incentive Stock Option Plan described in paragraph 1.g) and
except the Warrants will be deemed to be outstanding for purposes of
determining the number of shares of the Company's common stock
outstanding after the public offering. There are no outstanding options,
warrants or other rights to purchase securities of the Company, however
characterized, held in its treasury. With respect to the offer to sell,
sale, offer to purchase or purchase of any of its securities, the
Company has not made any intentional or reckless violations of the
anti-fraud provisions of the federal securities laws, rules or
regulations promulgated thereunder or the laws, rules or regulations of
any jurisdiction wherein such securities transactions or solicitations
occurred.
g) The Board of Directors of the Company and the shareholders of
the Company have adopted an Incentive Stock Option Plan designed to
qualify under Section 422A of the Internal Revenue Code. the Incentive
Stock Option Plan relates to ______________ shares of the Company's
Common Stock and any options granted pursuant thereto that are
outstanding on the date hereof and that will be outstanding on the
closing of the offering of the Shares will have an exercise price of at
least $______ per share.
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h) During the period of the offering of the Shares and for one
(1) year from the date the Commission declares the Registration
Statement to be effective ("Effective Date"), the Company will not sell
any securities (except options issued pursuant to the Company's
Incentive Stock Option Plan, except any shares issued upon the exercise
of such options, except any shares issued upon the exercise of any other
options or warrants outstanding on the Effective Date and except the
Warrants) without the Agent's prior written consent, which will not be
unreasonably withheld.
i) The Company has caused each of its officers and directors and
has used its best efforts to cause each of its other shareholders to
enter into an agreement with the Agent pursuant to the terms of which
each such person has agreed not to sell any shares owned directly or
indirectly by such person for a period of eighteen (18) months from the
Effective Date of the Registration Statement without the Agent's prior
written consent, which will not be unreasonably withheld. The Company
has obtained such an agreement from shareholders owning at least
________% of the Company's outstanding common stock and no more than two
(2) shareholders have refused to sign such an agreement.
j) The Company has no subsidiaries nor contemplates acquiring
subsidiaries or engaging in mergers with or the acquisition of any
companies.
k) The financial statements, together with related schedules and
notes, included in the Registration Statement and Prospectus present
fairly the financial condition of the Company and are reported upon by
independent public accountants according to generally accepted
accounting principles and as required by the rules and regulations of
the Commission.
l) Except as disclosed in the Registration Statement and the
Prospectus, the Company does not have any contingent liabilities,
obligations or claims nor has it received threats of claims or
regulatory action. Further, except as disclosed in the Registration
Statement and the Prospectus, subsequent to the date information is
given in the Registration Statement and definitive Prospectus, and prior
to the close of the offering: (i) there shall not be any material
adverse change in the management or condition, financial or otherwise,
of the Company or in its business taken as a whole; (ii) there shall not
have been any material transaction entered into by the Company other
than transactions in the ordinary course of business; (iii) the Company
shall not have incurred any material obligations, contingent or
otherwise, which are not disclosed in the Registration Statement and the
Prospectus; (iv) there shall not have been nor will there be any change
in the capital or long-term debt (except current payments) of the
Company; and (v) the Company has not and will not have paid or declared
any dividends or other distributions on its common shares.
m) The Company's securities, however characterized, are not
subject to preemptive rights.
n) The Company will have the legal right and authority to enter
into this Underwriting Agreement upon its execution, to effect the
proposed sale of the Shares, to execute the Warrants and to effect all
other transactions contemplated by this Agreement.
o) The Company knows of no person who rendered any services in
connection with the introduction of the Company to the Agent. No
broker's or other finder's fees are due and payable by the Company and
none will be paid by it.
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p) The Company is eligible to use Form SB-2 for the offering of
the Shares.
q) The Company and its affiliates are not currently offering any
securities nor has the Company or its affiliates offered or sold any
securities except as required to be described in the Registration
Statement.
r) The Company will not file any amendment or supplement to the
Registration Statement, Prospectus or exhibits if the Agent and its
counsel have not been previously furnished a copy, or if the Agent or
its counsel have objected in writing to the filing of the amendment or
supplement.
s) The Company possesses adequate certificates or permits issued
by the appropriate federal, state and local regulatory authorities
necessary to conduct its business and to retain possession of its
properties. The Company has not received any notice of any proceeding
relating to the revocation or modification of any of these certificates
or permits.
t) The Company has filed all tax returns required to be filed and
is not in default in the payment of any taxes which have become due
pursuant to any law or any assessment.
u) The Company has marketable title to all properties including
intellectual properties described in the Registration Statement as owned
by it. The properties are free and clear of all liens, charges,
encumbrances or restrictions, however characterized, except as described
in the Registration Statement. All of the contracts, leases, subleases,
patents, copyrights, licenses and agreements, however characterized,
under which the Company holds its properties as described in the
Registration Statement are in full force and effect. The Company is not
in default under any of the material terms or provisions of any
contracts, leases, subleases, patents, copyrights, licenses or
agreements under which the Company holds its properties. There are no
known claims against the Company concerning the Company's rights under
the leases, subleases, patents, copyrights, licenses and agreements and
concerning its right to continued possession of its properties.
v) All original documents and other information relating to the
Company's affairs has and will continue to be made available upon
request to the Agent and to its counsel at the Agent's office or at the
office of the Agent's counsel and copies of any such documents will be
furnished upon request to the Agent and to its counsel. Included within
the documents made available have been at least the Articles of
Incorporation and any Amendments, Minutes of all of the meetings of the
Incorporators, Directors and Shareholders, all financial statements and
copies of all contracts, leases, patents, copyrights, licenses or
agreements to which the Company is a party or in which the Company has
an interest.
w) The Company has appointed Union Stock Transfer, 00000 Xxxx
Xxxxxxx Xxxxx, Xxxxx 000, Xxxxxxxxx, Xxxxxxxx 00000-0000, as the
Company's transfer agent. The Company will continue to retain a transfer
agent reasonably satisfactory to the Agent for so long as the Company is
subject to the reporting requirements under Section 12(g) or Section
15(d) of the Securities Exchange Act of 1934 and so long as the Agent is
a principal market-maker in shares of the Company's common stock. The
Company will make arrangements to have available at the office of the
transfer agent sufficient quantities of the Company's common stock
certificates as may be needed for the quick and efficient transfer of
the Shares.
x) The Company will use the proceeds from the sale of the Shares
as set forth in the Registration Statement and Prospectus.
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y) There are no contracts or other documents required to be
described in the Registration Statement or to be filed as exhibits to
the Registration Statement which have not been described or filed as
required.
z) The Company is not in material default under any of the
contracts, leases, licenses or agreements to which it is a party. The
proposed offering of the Shares will not cause the Company to become in
material default under any of its contracts, leases, subleases, patents,
copyrights, licenses or agreements nor will it create a conflict between
the Company and any of the contracting parties to the contracts, leases
and other agreements. Further, the Company is not in material default in
the performance of any obligation, agreement or condition contained in
any debenture or loan agreement of the Company. The execution and
delivery of this Agreement will not conflict with or result in a breach
of any of the material terms, conditions or provisions of, or constitute
a material default under, the Articles of Incorporation or By-Laws of
the Company, as amended, or any note, indenture, mortgage, deed of trust
or other agreement or instrument to which the Company is a party or by
which it or any of its property is bound, or any existing law, order,
rule, regulation, writ, injunction, or decree of any government,
governmental instrumentality, agency or body, arbitration tribunal or
court, domestic or foreign, having jurisdiction over the Company or its
property. The consent, approval, authorization or order of any court or
governmental instrumentality, agency or body is not required for the
consummation of the transactions herein contemplated except such as may
be required under the Act, under the Blue Sky or securities laws of any
state or jurisdiction, or the rules of the NASD (as defined in paragraph
2.a) hereof).
There are no contracts or other documents which are
required to be filed as exhibits to the Registration Statement by the
Act or its rules and regulations which have not been so filed. Each
contract to which the Company is a party has been duly and validly
executed, is in full force and effect in all material respects in
accordance with its respective terms, and no contracts have been
assigned by the Company, except as disclosed in the Registration
Statement and Prospectus. The Company knows of no present situation,
condition or fact which would prevent compliance with the terms of such
contracts. Except for amendments or modifications of contracts in the
ordinary course of business and except as disclosed in the Registration
Statement and Prospectus, the Company has no intention of exercising any
right which would cancel any of its obligations under any contract, and
has no knowledge that any other party to any contract, in which the
Company has an interest, has any intention not to render full
performance under such contract.
aa) The Company has not made any representation, whether oral or
in writing, to anyone, whether an existing shareholder or not, that any
of the Shares will be reserved for or directed to them during the
proposed public offering.
bb) The Company has caused each of its current shareholders to
agree in writing with respect to shares acquired by them prior to the
Effective Date that they have acquired the shares for investment
purposes only and they acknowledge that they hold "restricted
securities" as defined in Rule 144.
cc) Except as disclosed in the Registration Statement and
Prospectus, there is and prior to the close of the offering of the
Shares to the public there will be, no action, suit or proceeding before
any court or governmental agency, authority or body pending, or to the
knowledge of the Company, threatened which might result in judgments
against the Company not adequately covered by insurance or which
collectively might result in any material adverse change in the
condition (financial or otherwise), the business or the prospects of the
Company, or would materially affect the properties or assets of the
Company.
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BY THE SELLING SHAREHOLDER. In order to induce the Agent to enter
into this Agreement, the Selling Shareholder represents and warrants as
follows:
a) Ownership of and Title to Shares. The Selling Shareholder is
now the lawful owner of the Shares, to be sold by the Selling
Shareholder pursuant to this Agreement, and at the time of delivery such
Selling Shareholder will be the lawful owner of the Shares to be sold by
the Selling Shareholder pursuant to his Agreement. The Selling
Shareholder now has, and at the time of delivery will have, good and
marketable title to the Shares, free and clear of all liens,
encumbrances, equities, and claims whatsoever. The Selling Shareholder
now has, and at the time of delivery will have, full legal right and
power to execute, deliver and perform this Agreement, and upon execution
and delivery hereof, this Agreement will constitute the legal, valid and
binding agreement of the Selling Shareholder enforceable against each in
accordance with its terms. The Selling Shareholder now has, and at the
time of delivery will have, full legal right and power to sell, transfer
and deliver the Shares in the manner provided in this Agreement, and,
upon delivery of, and payment for, the Shares pursuant to this
Agreement, purchasers from Seller Shareholder will acquire good and
marketable title to the Shares, free and clear of all liens,
encumbrances, equities, and claims whatsoever. The Shares at the time of
delivery thereof will be duly authorized, validly issued and outstanding
and fully paid and nonassessable, with no personal liability attaching
to them.
b) Stabilization. The Selling Shareholder has not, and at all
times up to and at the Date of Purchase will not have, taken, directly
or indirectly, any action designed to constitute, or which has
constituted, or which might reasonably be expected to cause or result in
stabilization or manipulation of the price of any security issued by the
Company to facilitate the sale or resale of any of the Shares.
c) Accuracy of Registration Statement. The parts of the
Registration Statement and Prospectus that relate to the Selling
Shareholder (or any amendments or supplements) will not contain any
untrue statement of a material fact or omit to state any materials fact
required to be stated in the documents or necessary to make the
statements in them not misleading.
d) Representations and Warranties of Company. The Selling
Shareholder has no reason to believe that the representations and
warranties of the Company contained in paragraph 1 of this Agreement are
not true and correct, and is familiar with the Registration Statement
and has no knowledge of any material fact, condition or information no
disclosed in the Prospectus that has adversely affected, or may
adversely affect, the business of the Company or any of its
subsidiaries. The sale of the Shares to be sold by the Selling
Shareholder pursuant to this Agreement is not prompted by any
information concerning the Company or any of its subsidiaries which is
not set forth in the Prospectus.
e) Power of Attorney. The Selling Shareholder has signed an
agreement and Power of Attorney (the "Selling Shareholder's Agreement")
naming the Company as his or her attorney-in-fact (and by the execution
by it of this Agreement on behalf of the Selling Shareholders, the
attorney-in-fact represents and warrants that it has been duly appointed
as attorney-in-fact by the Selling Shareholders) for the purpose of
entering into and carrying out this Agreement. In this connection,
Selling Shareholder further represents, warrants and agrees that the
Selling Shareholder has deposited in custody, under the Selling
Shareholder's Agreement with the attorney-in-fact, as custodian,
certificates in negotiable form for, or warrants accompanied by duly
executed instruments sufficient to exercise the warrants to purchase,
the Shares to be sold by the Selling Shareholder under this Agreement
for the purpose of further delivery pursuant to this Agreement. The
Selling Shareholder agrees that the Shares to be sold by the Selling
Shareholder, represented by the certificates on deposit with the Company
are subject to the interest of purchasers from the public, that the
arrangements made for custody are to that extent irrevocable, and that
the obligations of the Selling Shareholder under the Agreement will not
be terminated, except as provided in this Agreement or in the Selling
Shareholder's Agreement, by any act of the Selling Shareholder or by
operation of law, whether by the death or incapacity of the Selling
Shareholder or the occurrence of any other event. If the Selling
Shareholder dies or becomes incapacitated, or if any other event occurs
before the delivery of the Shares hereunder, certificates for the
Shares, or the warrants to purchase those Shares deposited with the
attorney-in-fact will be delivered by the attorney-in-fact in accordance
with the terms and conditions of this Agreement as if the death or
incapacity or other event had not occurred regardless of whether the
attorney-in-fact has received notice of the death, incapacity or event.
6
All of the above representations and warranties shall survive the
performance or termination of this Agreement.
2. REPRESENTATIONS AND WARRANTIES OF THE AGENT. The Agent represents
and warrants as follows:
a) It is registered as a broker-dealer with the Commission, in
good standing with the Minnesota Division of Securities and is
registered, to the extent registration is required, with the appropriate
governmental agency in each state in which it offers or sells the shares
and is a member of the National Association of Securities Dealers, Inc.
("NASD") and will use its best efforts to maintain such registrations,
qualifications and memberships throughout the term of the offering.
b) To the knowledge of the Agent, no action or proceeding is
pending against the Agent or any of its officers or directors concerning
the Agent's activities as a broker or dealer that would affect the
Company's offering of the Shares.
c) The Agent will offer the Shares only in those states and in
the quantities that are identified in the Blue Sky Memorandum from the
Company's counsel to the Agent that the offering of the Shares has been
qualified for sale under the applicable state statutes and regulations.
The Agent, however, may offer the Shares in other states if (i) the
transaction is exempt from the registration requirements in that state,
(ii) the Company's counsel has received notice ten (10) days prior to
the proposed sale, and (iii) the Company's counsel does not object
within said 10-day period.
d) The Agent, in connection with the offer and sale of the Shares
and in the performance of its duties and obligations under this
Agreement, agrees to use its best efforts to comply with all applicable
federal laws; the laws of the states or other jurisdictions in which the
Shares are offered and sold; and the rules and regulations of the NASD.
e) The Agent is a corporation duly organized, validly existing
and in good standing under the laws of the State of Colorado with all
requisite power and authority to enter into this Agreement and to carry
out its obligations hereunder.
f) This Agreement has been duly authorized, executed and
delivered by the Agent and is a valid agreement on the part of the
Agent.
g) Neither the execution of this Agreement nor the consummation
of the transactions contemplated hereby will result in any breach of any
of the terms or conditions of, or constitute a default under, the
Articles of Incorporation or By-Laws of the Agent or any indenture,
agreement or other instrument to which the Agent is a party or violate
any order directed to the Agent of any court or any federal or state
regulatory body or administrative agency having jurisdiction over the
Agent or its affiliates.
h) The Agent knows of no person who rendered any services in
connection with the introduction of the Company to the Agent. No person
acting by, through or under the Agent will be entitled to receive from
the Agent or from the Company any finder's fees or similar payments.
7
i) The written information provided by the Agent for inclusion in
the Registration Statement and Prospectus consists of certain
information on the front and back Prospectus cover pages, and that set
forth under "Underwriting" in the Prospectus.
j) The Agent will, reasonably promptly after the closing date,
supply the Company with all information required from the Agent for the
completion of Form SR and such additional information as the Company may
reasonably request to be supplied to the securities commissions of such
states in which the Shares have been qualified for sale.
All of the above representations and warranties shall survive the
performance or termination of this Agreement.
3. EMPLOYMENT OF THE AGENT. In reliance upon the representations and
warranties and subject to the terms and conditions of this Agreement:
a) The Company and Selling Shareholder employ the Agent as their
exclusive agent to sell for the Company's account the Shares, on a cash
basis only, at a price of $4.00 per Share. The Agent agrees to use its
best efforts, as agent for the Company and Selling Shareholder, to sell
the Shares subject to the terms and conditions set forth in this
Agreement. It is understood between the parties that there is no firm
commitment by the Agent to purchase any or all of the Shares.
b) The obligation of the Agent to offer the Shares is subject to
receipt by it of written advice from the Commission that the
Registration Statement is effective, is subject to the Shares being
qualified for offering under applicable laws in the states as may be
reasonably designated by the Agent, is subject to the absence of any
prohibitory action by any governmental body, agency or official, and is
subject to the terms and conditions contained in this Agreement and in
the Registration Statement covering the offering to which this Agreement
relates.
c) The Company, Selling Shareholder and the Agent agree that,
unless all of the Shares to be offered are sold within ninety (90) days
after the Effective Date (which period may be extended for an additional
period not to exceed ninety (90) days by mutual agreement between the
Company and the Agent), the agency between the Company and the Agent
will terminate. If the agency between the Company and the Agent
terminates, the full proceeds which have been paid for the Shares shall
be returned to the purchasers. Prior to the sale of all of the Shares to
be offered, all proceeds received from the sale of the Shares will be
deposited in an escrow account entitled "Physical Spa & Fitness" with
Bank Windsor, 000 Xxxxxxxxx Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxx 00000.
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d) The Company, Selling Shareholder, the Agent and Bank Windsor
will, prior to the beginning of the offering of the Shares, enter into a
fund escrow agreement in form satisfactory to the parties. The parties
mutually agree to faithfully perform their obligations under the fund
escrow agreement. The Agent will promptly deliver the funds into the
escrow account in accordance with Rule 15(c)2-4 of the Securities
Exchange Act of 1934, as amended but in any event not to exceed five (5)
business days after receipt of such funds.
e) The Agent shall have the right to associate with other agents
and dealers as it may determine and shall have the right to grant to
such persons such concessions out of the commissions to be received by
the Agent as the Agent may determine, under and pursuant to a
Participating Dealer Agreement in the form filed as an exhibit to the
Registration Statement.
f) Subject to the sale of all of the Shares, the Company and
Selling Shareholder agree to pay to the Agent an underwriting commission
computed at the rate of $.40 (10% of the public offering price) for each
of the Shares sold by the Agent at the public offering price of $4.00
per Share. This commission shall be payable in certified funds upon the
release of the funds which have been deposited in the escrow account.
4. EXPENSES OF THE AGENT.
a) Subject to the sale of all of the Shares (including those
directed by Company) and subject to the provisions of paragraph 13.b)
hereof, the Company shall reimburse the Agent for its expenses on a
non-accountable basis in an amount of $_______________ and Selling
Shareholder shall reimburse the agent for its expenses on a
non-accountable basis in the amount of $_________. The Agent
acknowledges that it has received $___________ cash of the
non-accountable expense allowance. Subject to the provisions of
paragraph 13(b) hereof, the remaining non-accountable expense allowance
is due on the release of the funds in the escrow account to the Company.
b) Except as stated in paragraph 13(b) of this Agreement, the
Agent agrees that, out of its non-accountable expense allowance, the
Agent will pay all costs incurred or to be incurred by the Agent or by
its personnel in connection with the offering of the Shares, except
those to be paid by the Company as described in paragraph 5 hereof.
Notwithstanding the foregoing, in the event that Agent is not entitled
to receive any non-accountable expense allowance, Company shall
reimburse Agent for its accountable attorneys' fees, costs and expenses
not to exceed $___________.
5. EXPENSES OF THE COMPANY AND SELLING SHAREHOLDER. The Company and
Selling Shareholder agree that each will pay its proportionate share of the
following fees and expenses:
a) All fees and expenses of its legal counsel who will be engaged
to prepare certain information, documents and papers for filing with the
Commission and with state or local securities authorities;
9
b) All fees and expenses of its accountants incurred in
connection with the offering of the Shares and the preparation of all
documents and filings made as part of the offering;
c) All costs in issuing and delivering the Shares;
d) All costs of printing and delivering to the Agent and dealers
as many copies of the Registration Statement and amendments, preliminary
Prospectus and definitive Prospectus as reasonably requested by the
Agent;
e) All of the Company's mailing, telephone, travel, clerical and
other office costs incurred or to be incurred in connection with the
offering of the Shares;
f) All fees and costs which may be imposed by the Commission, the
various state or local securities authorities and the NASD for review of
the offering of the Shares;
g) All other expenses incurred by the Company in performance of
its obligations under this Agreement.
6. WARRANTS.
a) Subject to the sale of all of the Shares, the Company agrees
to sell to the Agent warrants to purchase common stock ("Warrants") for
a purchase price of $.01 per Warrant entitling the Agent to purchase
_____________ Shares of the Company's common stock. Each Warrant shall
entitle the holder to purchase one share of the Company's common stock.
b) The Warrants may not be exercised for a period of twelve (12)
months following the Effective Date. However, if the Company plans to
merge, reorganize or take any other action that would terminate the
Warrants, the Warrants will be exercisable immediately prior to such
action. The Company will provide the Agent with notice of any tender
offer being made for the Company's shares as soon as practicable after
the Company becomes aware of such tender offer. The Warrants will be
exercisable for a period of four (4) years, such period to begin twelve
(12) months after the Effective Date. If the Warrants are not exercised
during their term, they will by their terms automatically expire. The
purchase price of the shares underlying the Warrants will be $6.00 per
share during the period that the Warrants are exercisable. The Company
will set aside and at all times have available a sufficient number of
shares of its common stock to be issued upon the exercise of the
Warrants. The shares underlying the Warrants are hereinafter called
"Warrant Shares" which term shall include all shares of common stock
that have been issued upon the exercise of the Warrants and all unissued
shares of common stock underlying the Warrants. The Warrants may not be
sold, transferred, assigned or hypothecated for a period of twelve (12)
months after the Effective Date except to officers of the Agent, except
as a result of the death of any such officer and except to successors to
the Agent's business.
c) The Warrants will be evidenced by certificates issued by the
Company and delivered to the Agent, which shall contain such terms and
conditions as are required by the Agent, including anti-dilution
provisions reasonably acceptable to the Agent relating to stock splits,
stock dividends and other like matters. The Warrants shall provide the
holder with a cashless exercise right on terms and conditions agreeable
to Agent. Any transfer of the Warrants by the Agent to any person must
be made in compliance with the Act.
10
d) The Agent agrees that the Warrants and any certificates
representing the Warrant Shares will bear the following legend:
"The securities represented by this Certificate may not be
offered for sale, sold or otherwise transferred except
pursuant to an effective registration statement under the
Securities Act of 1933 (the "Act"), or pursuant to an
exemption from registration under the Act, the
availability of which is to be established to the
satisfaction of the Company."
e) Upon written request of the holder(s) of at least twenty-five
percent (25%) of the Warrant Shares, whether issued or not, made at any
time within the period beginning one (1) year and ending five (5) years
after the Effective Date, the Company will file, no more than once, a
registration statement or Regulation A Registration Statement under the
Act, registering or qualifying the Warrants and Warrant Shares. The
Company will use its best efforts to qualify or register the Warrants
and Warrant Shares for sale in at least the same states as the Shares
were registered or qualified. The Company must file a registration
statement if all Warrants and Warrant Shares cannot be sold under a
Regulation A Registration Statement because of the limited exemption. If
Warrants are registered or qualified, the Company agrees to take
whatever actions are necessary so that during the next twelve (12)
months after the Effective Date of such registration or qualification, a
current registration statement or Regulation A Registration Statement
relating to the Warrant Shares will be effective with the Commission.
The Company agrees to use its best efforts to cause the registration
statement or Regulation A Registration Statement to become effective.
All expenses of such registration or qualification including, but not
limited to, legal, accounting and printing fees, will be borne by the
Company.
f) The Company agrees that, if at any time within the period
beginning one (1) year and ending six (6) years after the Effective
Date, it should file a registration statement with the Commission
pursuant to the Act or file a Regulation A Registration Statement under
the Act, regardless of whether some of the holder(s) of the Warrants and
Warrant Shares have availed itself (themselves) of the right provided in
paragraph 6.e) above, the Company, at its own expense, will offer the
holder(s) the opportunity to register or qualify the Warrant and Warrant
Shares, limited in the case of a Regulation A offering to the amount of
the available exemption. The Company's obligations pursuant to this
paragraph 6.f) shall only be in effect if the holders of at least
twenty-five percent (25%) of the Warrant Shares accept the Company's
offer. This paragraph is not applicable to a registration statement
filed by the Company with the Commission on Form S-14 or Form S-8, or
any other inappropriate form.
g) In addition, the Company will cooperate, within the period
beginning one (1) year and ending five (5) years after the Effective
Date, with the then holder(s) of at least twenty-five percent (25%) of
the Warrant Shares in preparing and signing any registration statement
or Regulation A Registration Statement, in addition to the registration
statements and Regulation A Registration Statements discussed above,
required in order to sell or transfer the Warrants or Warrant Shares and
will supply all information required, but such additional registration
statement or Registration Statement shall be at the then holder(s)' cost
and expense.
h) The Company will not be required to pay any underwriting
commissions, discounts or similar expenses relating to the Warrants
and/or Warrant Shares that are registered or qualified pursuant to
paragraph 6.e), f) or g) of this Agreement.
11
7. THREAT OF REGULATORY ACTION. The Company and the Agent agree to
advise each other immediately and confirm in writing the receipt of any threat
of or the initiation of any steps or procedures which would impair or prevent
the right to offer the Shares or the issuance of any "suspension orders" or
other prohibitions preventing or impairing the proposed offering of the Shares.
In the case of the happening of any such event, neither the Company nor the
Agent will acquiesce in such steps, procedures or suspension orders if such
acquiescence would adversely affect the other party and, in such event, each
party agrees to actively defend any such actions or orders unless both parties
agree in writing to acquiesce in such actions or orders or unless counsel for
each party advises the parties that the probability of successfully defending
against such actions or orders is remote.
8. FURTHER AGREEMENTS OF THE COMPANY AND SELLING SHAREHOLDER. The
Company and (where applicable) Selling Shareholder further agrees with the Agent
as follows:
a) The Company will advise the Agent as soon as the Company is
advised of any comments by the Commission, of any request made by the
Commission for an amendment to the Registration Statement or Prospectus
or for supplemental information, and of any order or of the institution
of any adverse proceedings with respect to the offering of the Shares.
The Company will immediately deliver to the Agent copies of any papers
involved.
b) The Company will use its best efforts to qualify the sale of
the Shares in such states as shall be reasonably designated by the
Agent. The officers, directors, promoters and shareholders of the
Company will comply with applicable state escrow requirements, including
those pertaining to the escrow of shares, provided that the period of
escrow shall not exceed two (2) years from the Effective Date and
provided that the period of escrow shall only be based upon the passage
of time.
c) The Company will provide the Agent and its counsel with copies
of all applications for the registration of Shares filed with the
various state authorities and will provide the Agent and its counsel
with copies of all comments and orders received from these authorities.
d) The Company will deliver to the Agent and to other
broker-dealers as directed by the Agent as many copies of preliminary
Prospectus as the Agent may reasonably request during the period
following the filing of Amendment No. 1 to the Registration Statement
(unless the Registration Statement is not reviewed by the Commission, in
which event such copies shall be made available by the Company as
reasonably requested by the Agent) and the Effective Date. The Company
will deliver to the Agent and to other broker-dealers as requested by
the Agent as many copies of the definitive Prospectus as the Agent may
reasonably request during the period of the offering and for ninety (90)
days after the Effective Date.
e) The Company will furnish the Agent for so long as the
Company's common stock is registered under the Securities Exchange Act
of 1934 and for so long as the Agent is a principal market-maker in such
common stock with:
(i) Within ninety (90) days after the close of each fiscal
year of the Company, a financial report of the Company and its
subsidiaries, if any, on a consolidated basis, such report to
include such information in such form as the Company shall be
required to include in reports for that fiscal year to be filed
with the Commission and such report to be certified by
independent public accountants;
12
(ii) Within sixty (60) days after the end of each
quarterly fiscal period of the Company other than the last
quarterly fiscal period in any fiscal year, copies in printable
form of the financial statements of the Company and its
subsidiaries, if any, on a consolidated basis, for that period
and as of the end of that period, which financial statements
shall include a narrative discussion of such financial statements
and of the business conducted by the Company and its
subsidiaries, if any, during such fiscal quarter and such
information in such form as the Company shall be required to
include in reports for that period to be filed with the
Commission, all subject to year-end adjustment, signed by the
principal financial or accounting officer of the Company;
(iii) As soon as is available, a copy of each report of
the Company mailed to shareholders or filed with the Commission;
(iv) Copies of all news, press or public information
releases when made;
(v) Upon request in writing from the Agent, such other
information as may reasonably be requested concerning the
properties, business and affairs of the Company and its
subsidiaries, if any.
f) The Company agrees to notify the Agent immediately within the
90-day period after the Effective Date of any event that materially
affects the Company or its securities and that should be set forth in an
amendment or supplement to the Prospectus in order to make the
statements made therein not misleading. Similarly, the Company agrees to
as soon as possible thereafter prepare and furnish to the Agent as many
copies of the Agent may request of an amended Prospectus or a supplement
to the Prospectus in order that the Prospectus as amended or
supplemented will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or that is
necessary in order to make the statements made therein not misleading.
g) The Company will file with the Commission the required reports
on FORM SR ??? and will file with the appropriate state securities
commissioners any sales and other reports required by the rules and
regulations of such agencies and will supply copies to the Agent.
h) Within thirty (30) days after successful termination of the
offering of the Shares, the Company will make a filing under Section
12(g) of the Securities Exchange Act of 1934, as amended, on Form 8-A
with respect to its common stock and will use its best efforts to cause
it to become effective. The Company agrees to deliver a copy of the Form
8-A to the Agent and to its counsel when filed.
i) Except with the Agent's approval, the Company agrees that the
Company will not do the following until (i) the completion of the
offering of the Shares, or (ii) the termination of this Agreement, or
(iii) ninety (90) days after the Effective Date, whichever occurs later:
(1) Undertake or authorize any change in its capital
structure or authorize, issue or permit any public or private
offering of additional securities;
(2) Authorize, create, issue or sell any funded
obligations, notes or other evidences of indebtedness, except in
the ordinary course of business and within twelve (12) months of
their creation;
13
(3) Consolidate or merge with or into any other
corporation; or
(4) Crate any mortgage or any lien upon any of its
properties or assets except in the ordinary course of its
business.
j) For so long as the Company's common stock is registered under
the Securities Exchange Act of 1934, as amended, the Company will hold
an annual meeting of shareholders for the election of directors within
180 days after the end of the Company's fiscal year, and within 180 days
after the end of each of the Company's fiscal years, will provide the
Company's shareholders with the audited financial statements of the
Company as of the end of the fiscal year just completed prior thereto.
Such financial statements shall be those required by Rule 14a-3 under
the Securities Exchange Act of 1934, as amended, and shall be included
in an annual report meeting the requirements of the Rule. Further, the
Company agrees to make available to the Agent and the Company's
shareholders in printable form within sixty (60) days after the end of
each fiscal quarter of the Company (other than the last fiscal quarter
in any fiscal year) reasonably itemized financial statements of the
Company and its subsidiaries, if any, for the fiscal quarter just ended
and a narrative discussion of such financial statements and the business
conducted by the Company and its subsidiaries, if any, during such
quarter.
k) As soon as practical, but in any event not later than fifteen
(15) months after the Effective Date, the Company will make generally
available to its securities holders, according to Section 11(a) of the
Act, an earnings statement of the Company in reasonable detail covering
a period of at least twelve (12) months beginning after the Effective
Date and will advise the Agent in writing that such statement has been
made available.
l) The Company agrees to have the Shares listed on NASDAQ on the
first day of trading in the Shares. The Company and the Agent will agree
upon the NASDAQ symbol to be used.
m) Within thirty (30) days after the successful termination of
the offering of the Shares, the Company agrees to submit information
about the Company to be included in various securities manuals,
including Xxxxx'x OVER-THE-COUNTER MANUAL and Standard & Poor's,
STANDARD CORPORATION RECORDS to facilitate secondary trading in the
Shares.
n) The Company will qualify the Shares for secondary trading in
California, ______________, ___________________, _____________________,
______________, _______________, _______________________, as soon as
possible.
o) The Company agrees to cause the stock certificates of all of
the current shareholders of the Company and of any future officers or
directors of the Company to be clearly legended as being restricted
against transfer without compliance with the Act and to cause the
Company's transfer agent to put stop transfer instructions against such
stock certificates.
p) Subject to the sale of all of the Shares, the Company agrees
that for a period of five (5) years from the Effective Date, the Agent
shall have a preferential right to purchase for its account or to sell
for the account of the Company or its subsidiaries any securities with
respect to which the Company or its subsidiaries may seek a public or
private offering for cash. The Company will consult the Agent with
regard to any such covered offering for cash and will offer the Agent
the opportunity to purchase or sell any such securities on terms not
less favorable to the Company or its subsidiaries than it or they can
secure elsewhere. The Agent shall have fifteen (15) days in which to
accept such offer. If the Agent rejects such offer, the Company shall be
able to sell such securities on terms not less favorable than those
offered to the Agent. If such securities are not sold within a period of
225 days, the Agent shall once again have the rights specified herein
with respect to the sale or purchase of such securities.
14
q) The officers and directors of the Company at the time of
filing of the Company's Registration Statement and at the Effective Date
of the Company's Registration Statement must be reasonably acceptable to
the Agent.
r) Neither the Company nor the Selling Shareholder has taken
within the past year, or shall take for a period of six (6) months after
the completion of the Offering, directly or indirectly, any action
designed to, or that might in the future reasonably be expected to,
cause or result in stabilization or manipulation of the price of any
security of the Company.
9. COMPANY'S INDEMNIFICATION.
a) The Company agrees to indemnify, defend and hold harmless the
Agent from and against any and all losses, claims, damages, liabilities
and expenses (including reasonable legal or other expenses) incurred by
the Agent in connection with defending or investigating any such claims
or liabilities, whether or not resulting in any liability to the Agent,
which the Agent may incur under the federal or state securities laws and
regulations thereunder, state statutes or at common law or otherwise,
but only to the extent that such losses, claims, damages, liabilities
and expenses shall arise out of or be based upon a violation or alleged
violation of the federal or state securities laws or regulations
promulgated thereunder, a state statute or the common law resulting from
any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement or in any application or other
papers filed with the various state securities authorities (hereinafter
collectively called "Blue Sky Applications") or shall arise out of or be
based upon any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, provided, however, that this indemnity agreement
shall not apply to any such losses, claims, damages, liabilities or
expenses arising out of or based upon any omission or alleged omission
to state therein a material fact required to be stated therein or
necessary to make the statements there in not misleading, provided,
however, that this indemnity agreement shall not apply to any such
losses, claims, damages, liabilities or expenses arising out of or based
upon any such violation based upon a statement or omission made in
reliance upon written information furnished for use in the Registration
Statement or in a Blue Sky Application by the Agent.
b) The foregoing indemnity of the Company in favor of the Agent
shall not be deemed to protect the Agent against any liability to which
the Agent would otherwise be subject by reason of willful misfeasance,
bad faith or gross negligence in the performance of the Agent's duties,
or by reason of the Agent's reckless disregard of the Agent's
obligations and duties under the Act or this Agreement.
c) The Agent agrees to give the Company an opportunity to
participate in the defense or preparation of the defense of any action
brought against the Agent to enforce any such claim or liability and the
Company shall have the right so to participate. The agreement of the
Company under the foregoing indemnity is expressly conditioned upon
notice of any such action having been sent by the Agent to the Company,
by letter or telegram (addressed as provided in this Agreement),
promptly after the receipt of written notice of such action against the
Agent such notice either being accompanied by copies of papers served or
filed in connection with such action or by a statement of the nature of
the action to the extent known to Agent. Failure to notify the Company
as herein provided shall not relieve it from any liability which it may
have to the Agent other than on account of the indemnity agreement
contained in this paragraph 9.
15
10. SELLING SHAREHOLDER'S INDEMNIFICATION.
a) The Selling Shareholder agrees to indemnify, defend and hold
harmless the Agent from and against any and all losses, claims, damages,
liabilities and expenses (including reasonable legal or other expenses)
incurred by the Agent in connection with defending or investigating any
such claims or liabilities, whether or not resulting in any liability to
the Agent, which the Agent may incur under the federal or state
securities laws and regulations thereunder, state statutes or at common
law or otherwise, but only to the extent that such losses, claims,
damages, liabilities and expenses shall arise out of or be based upon a
violation or alleged violation of the federal or state securities laws
or regulations promulgated thereunder, a state statute or the common law
resulting from any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or in any
application or other papers filed with the various state securities
authorities (hereinafter collectively called "Blue Sky Applications") or
shall arise out of or be based upon any omission or alleged omission to
state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, provided, however, that
this indemnity agreement shall not apply to any such losses, claims,
damages, liabilities or expenses arising out of or based upon any
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements there in not
misleading, provided, however, that this indemnity agreement shall not
apply to any such losses, claims, damages, liabilities or expenses
arising out of or based upon any such violation based upon a statement
or omission made in reliance upon written information furnished for use
in the Registration Statement or in a Blue Sky Application by the Agent.
b) The foregoing indemnity of the Selling Shareholder in favor of
the Agent shall not be deemed to protect the Agent against any liability
to which the Agent would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of the
Agent's duties, or by reason of the Agent's reckless disregard of the
Agent's obligations and duties under the Act or this Agreement.
c) The Agent agrees to give the Selling Shareholder an
opportunity to participate in the defense or preparation of the defense
of any action brought against the Agent to enforce any such claim or
liability and the Selling Shareholder shall have the right so to
participate. The agreement of the Selling Shareholder under the
foregoing indemnity is expressly conditioned upon notice of any such
action having been sent by the Agent to the Selling Shareholder, by
letter or telegram (addressed as provided in this Agreement), promptly
after the receipt of written notice of such action against the Agent
such notice either being accompanied by copies of papers served or filed
in connection with such action or by a statement of the nature of the
action to the extent known to Agent. Failure to notify the Selling
Shareholder as herein provided shall not relieve it from any liability
which it may have to the Agent other than on account of the indemnity
agreement contained in this paragraph 9.
11. AGENT'S INDEMNIFICATION.
a) The Agent likewise agrees to indemnify, defend and hold
harmless the Company against any and all losses, claims, damages,
expenses and liabilities to which the Company may become subject,
arising out of or based upon any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or
in any Blue Sky Application or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, resulting from the use of
written information furnished to the Company by the Agent for use in the
preparation of the Registration Statement or in any Blue Sky
Application.
16
b) The Company agrees to give the Agent an opportunity to
participate in the defense or preparation of the defense of any action
brought against the Company to enforce any such claim or liability and
the Agent shall have the right to so participate. The Agent's liability
under the foregoing indemnity is expressly conditioned upon notice of
any such action having been sent by the Company to the Agent by letter
or telegram (addressed as provided for in this Agreement), promptly
after the receipt by the Company of written notice of such action
against the Company, such notice either being accompanied by copies of
papers served or filed in connection with such action or by a statement
of the nature of the action to the extent known to the Company. Failure
to notify the Agent as herein provided shall not relieve the Agent from
any liability which the Agent may have to the Company other than on
account of the indemnity agreement contained in this paragraph 10.
c) The provisions of paragraphs 9 and 10 shall not in any way
prejudice any right or rights which the Agent may have against the
Company or the Company may have against the Agent under any statute,
including the Act, at common law or otherwise.
d) The indemnity agreements contained in paragraph 9 and 10 shall
survive the termination of this Agreement and shall inure to the benefit
of the Company, the Agent, their respective successors and the persons
specified in paragraph 16 below, and their respective heirs, personal
representatives and successors and shall be valid irrespective of any
investigation made by or on behalf of the Agent or the Company.
12. CONTRIBUTION. If the indemnification provided for in paragraphs 9,
10 and 11 is unavailable to or insufficient to hold harmless an indemnified
party under paragraphs 9, 10 and 11 in respect of any losses, claims, damages,
expenses or liabilities (or actions in respect thereof) referred to therein,
then each indemnifying party shall in lieu of indemnifying such indemnified
party contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, expenses or liabilities (or actions in
respect thereof) in such proportion as is appropriate to reflect no only (a) the
relative benefits received by the Company on the one hand the Agent on the other
from the offering of the Shares, but also (ii) the relative fault of the Company
and the Agent in connection with the statements or omissions which resulted in
such losses, claims, damages, expenses or liabilities (or action in respect
thereof), as well as any other relevant equitable considerations. The relative
benefits received by the Company on the one hand and the Agent on the other
shall be deemed to be in the same proportion as the total net proceeds from the
offering of the Shares (before deducting expenses other than the non-accountable
expense allowance payable by the Company to the Agent) received by the Company
bear to the total underwriting commissions and expense allowance received by the
Agent in each case as set forth in the table on the cover page of the
Prospectus. The relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or the Agent and their parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the Agent agree that it would not be just
and equitable if contribution pursuant to this paragraph 11 were determined by
pro-rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to above in this paragraph 11.
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages, expenses or liabilities (or actions in respect thereof)
referred to above in this paragraph 11 shall be deemed to include any legal or
other expenses to which such indemnified party would be entitled if paragraphs 9
and 10 were applied. Notwithstanding the provisions of this paragraph 11, the
Agent shall not be required to contribute any amount in excess of the amount by
which the total price with the Shares underwritten by it and distributed to the
public exceeds the amount of any damages which the Agent has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission plus the Agent's proportionate share of such legal or other
expenses; and any punitive or exemplary damages if the untrue or alleged untrue
statement of a material fact relates to information supplied by or statements
made by the Agent. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11 of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
13. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE AGENT. All
obligations of the Agent under this Agreement are subject to the following
conditions precedent:
a) Counsel for the Agent shall have completed a review of the
form and content of the Registration Statement and Prospectus, of the
organization and present legal status of the Company and of the legality
and validity of the authorization and issuance of the issued and
outstanding stock of the Company and of the Shares.
b) The Company shall have performed all of its obligations under
this Agreement. All of the statements, representations and warranties
contained in this Agreement shall be complete and true.
c) From the date of this Agreement until the completion of the
offering, no material adverse changes shall have occurred in the
business, properties and assets of the Company other than changes
occurring in the ordinary course of business.
d) From the date of this Agreement until the completion of the
offering, no claims or litigation shall have been instituted or
threatened against the Company for substantial amounts or which would
materially adversely affect the Company, its business or its property
and no reasonable basis exists for such claims or threats. Further, no
proceeding shall have been instituted or threatened against the Company
before any regulatory body wherein an unfavorable ruling would have a
material adverse effect on the Company.
e) From the date of this Agreement until the completion of the
offering of the Shares, no material adverse change shall have occurred
in the operation financial condition, management or credit of the
Company or in any conditions affecting the prospects of its business.
f) From the date of this Agreement until the completion of the
offering, the Company shall not have sustained any loss on account of
fire, flood, accident or calamity of such character as materially
adversely affects its business or property, regardless of whether or not
the loss has been insured.
g) The Agent shall have received from the independent public
accountants for the Company two letters addressed to the Agent, one
dated the Effective Date and one dated the date of the release of the
funds from the Escrow Account to the Company, to the effect that:
18
(i) With respect to the Company, they are independent
public accountants within the meaning of the Act and the
published rules and regulations.
(ii) In their opinion, the financial statements and
supporting schedules and notes examined by them of the Company at
all dates and for all periods referred to in their opinion
included in the definitive Prospectus comply as to form in all
material respects with the applicable accounting requirements of
the Act and the published rules and regulations.
(iii) Upon the basis of a reading of the related available
interim financial statements and the financial data and
accounting records of the Company, inquiries of officers of the
Company responsible for financial and accounting matters, a
reading of the minute books of the Company and other specified
procedures and inquiries satisfactory to the Agent, if any,
nothing has come to their attention which causes them to believe
that during the period from the last audited balance sheet
included in the Registration Statement to a specified date not
more than five (5) days prior to the date of such letter (a)
there has been any change in the capital shares or other
securities of the Company or any payment or declaration of any
dividend or other distribution in respect thereof or exchange
therefor from that shown in its audited balance sheets or in the
debt of the Company from that shown or contemplated under
"Capitalization" in the Registration Statement or definitive
Prospectus (other than as set forth in or contemplated by the
Registration Statement or definitive Prospectus); (b) there have
been any material decreases in net current assets or net assets
as compared with amounts shown in the last audited balance sheet
included in the definitive Prospectus (other than in the ordinary
course of business), except in all instances the changes
disclosed in or contemplated by the Registration Statement and
definitive Prospectus; and (c) on the basis of their examinations
referred to in their opinion, report and consent included in the
Registration Statement and definitive Prospectus and the
indicated procedures and discussions referred to above, nothing
has come to their attention which, in their judgment, would cause
them to believe or indicate that the financial statements and
schedules set forth in the Registration Statement and definitive
Prospectus do not present fairly the financial position and
results of operations of the Company, for the periods indicated,
in conformity with generally accepted accounting principles
applied on a consistent basis, and are not in all material
respects a fair presentation of the information purported to be
shown.
h) On the date of the release of the funds in the Escrow Account
to the Company, the Agent shall have received from the president or vice
president of the Company and the treasurer of the Company certificates
dated as of such date, in form satisfactory to the Agent to the effect
that:
(i) The representations and warranties of the Company
contained in paragraph 1 of this Agreement are complete and true.
(ii) All of the conditions precedent in paragraphs
12.b)-12.f) of this Agreement have been performed and the
representations of these conditions precedent are true.
(iii) No stop order or other proceedings have been
instituted or threatened by the Commission or any state authority
which would adversely affect the offering of the Shares.
19
(iv) This Agreement and the Warrants have been duly
authorized and executed and constitute valid agreements of the
Company, and with respect to the Warrants, are binding agreements
and are enforceable according to their terms.
(v) The respective signers have each carefully examined
the Registration Statement and definitive Prospectus and any
amendments and supplements, and to the best of their knowledge,
the Registration Statement and definitive Prospectus and any
amendments and supplements contain all statements required to be
stated therein. All statements contained there are true and
correct. Neither the Registration Statement, definitive
Prospectus or any amendment, supplement or sticker thereto
includes any untrue statement of a material fact or omits to
state any material fact required to be stated therein or
necessary to make the statements therein not misleading. Since
the Effective Date of the Registration Statement, there has
occurred no event required to be stated therein or necessary to
make the statements therein not misleading, and since the
Effective Date of the Registration Statement, there has occurred
no event required to be set forth in an amended or supplemented
Prospectus which has not been so set forth.
i) On the Effective Date and on the closing date, the Agent shall
have received from the Company's legal counsel Blue Sky Memorandum
setting forth the states in which the Shares may be sold and the number
of Shares that may be sold in each such state.
j) On the date the funds in the Escrow Account are released to
the Company and Selling Shareholder's counsel, the Agent shall have
received a written opinion from the Company and Selling Shareholder's
counsel _____________ _________________________ stating that:
(i) The Company has filed a Registration Statement on Form
SB-2 relating to the Shares with the Commission pursuant to the
Act, the Registration Statement has become effective under the
Act and the Registration Statement, Prospectus and all other
documents filed with the Commission comply as to form with all
requirements of the Act in all material respects (except for the
financial statements and other financial data included therein,
as to which counsel need express no opinion).
(ii) Counsel is unaware of any contracts or documents
required to be described in the Registration Statement or in the
Prospectus or to be filed as exhibits to the Registration
Statement which have not been described or filed as required.
(iii) Counsel is unaware of any contracts or documents
that have not been disclosed in the Prospectus that are material
to the representations in the Prospectus and that would require
disclosure in order to make statements made not misleading.
(iv) To the best knowledge of counsel and after reasonable
investigation, the Company and the Selling Shareholder are not in
default of any of the contracts, leases or agreements to which it
is a party and the proposed offering of Shares will not cause the
Company or the Selling Shareholder to become in default of any of
its contracts, leases or agreements nor will it create a conflict
between the Company or the Selling Shareholder and any of the
contracting parties to the contracts, leases and other
agreements.
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(v) To the best knowledge of counsel and after reasonable
investigation, and except as described in the Registration
Statement, the Company has marketable title to all properties
described in the Registration Statement as owned by it; the
properties are free and clear of all liens, charges, encumbrances
or restrictions; all of the leases, subleases and other
agreements under which the Company holds its properties are in
full force and effect; the Company is not in default under any of
the material terms or provisions of any of the leases, subleases
or other agreements; and there are no claims against the Company
concerning its rights under the leases, subleases and other
agreements and concerning its right to continued possession of
its properties.
(vi) This Agreement and the Warrants issued to the Agent
or its designates have been duly authorized and executed by the
Company and the Selling Shareholder and constitute valid
agreements of the Company and the Selling Shareholder except that
no opinion need be expressed as to the validity of the
indemnification provisions insofar as they are or may be held to
be violative of public policy (under either state or federal
law), the availability of specific performance or other equitable
remedies, the effects of bankruptcy, insolvency, moratorium and
all other similar laws and decisions affecting the rights of
creditors generally and as to whether or not this Agreement may
be an illusory contract.
(vii) To the best knowledge of counsel and after
reasonable investigation, no claim or litigation has been
instituted or threatened against the Company.
(viii) To the best knowledge of counsel and after
reasonable investigation, no stop order or other proceedings have
been instituted or threatened by the Commission or any state or
local authority which would adversely affect the offering of the
Shares.
(ix) To the best knowledge of counsel and after reasonable
investigation, all documents and contracts relating to the
Company's affairs have been furnished to the Agent's counsel.
(x) To the best knowledge of counsel and after reasonable
investigation, the Company possesses adequate licenses,
certificates, authorizations or permits issued by the appropriate
federal, state and local regulatory authorities necessary to
conduct its business as described in the Registration Statement
and to retain possession of its properties. Counsel is unaware of
any notice of any proceeding relating to the revocation or
modification of any of these certificates or permits having been
received by the Company.
(xi) To the best knowledge of counsel and after reasonable
investigation, neither the Company nor its affiliates is
currently offering any securities for sale except as described in
the Registration Statement.
(xii) No preemptive rights exist with respect to the
Company's securities.
(xiii) Counsel is unaware of any subsidiaries of the
Company.
(xiv) Counsel has participated in the preparation of the
Registration Statement, and Prospectus an no facts have come to
the attention of such counsel to lead counsel to believe that
either the Registration Statement or the Prospectus or any
amendment or supplement thereto (except for the financial
statements and other financial data included therein, as to which
such counsel need express no opinion) 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 not misleading.
21
(xv) The Company has an authorized capitalization of
100,000,000 shares of common stock ($0.001 par value) and
10,000,000 shares of preferred stock ($0.001 par value). There
are no outstanding options, warrants or other rights to purchase
shares of the Company's common stock known to counsel other than
as described in the Registration Statement.
(xvi) The Company has been incorporated and is a validly
existing corporation under the laws of the State of Delaware and
has full corporate power and authority under such laws to own its
properties and to conduct its business as described in the
Registration Statement. To the best of counsel's knowledge,
information and belief, the Company is qualified to conduct
business as a foreign corporation in each jurisdiction where the
nature of its business activities requires such qualification
except where failure to so qualify would not have a material
adverse effect upon the business or financial condition of the
Company.
(xvii) The Company's shares of common stock that are
issued and outstanding are fully paid and non-assessable, and the
Shares and Warrant Shares, when issued and paid for in accordance
with their terms, will be fully paid and non-assessable. The
Shares conform to the description thereof contained in the
Registration Statement. The Company has authorized the issuance
of the Shares, Warrants and Warrant Shares on the terms and
conditions herein set forth. A sufficient number of common shares
have been duly reserved for issuance upon exercise of the
Warrants.
(xviii) The Selling Shareholder Agreement has been duly
authorized, executed and delivered by the Selling Shareholder;
this Agreement has been duly executed and delivered on behalf of
the Selling Shareholder; the attorney-in-fact is valid and
binding on the Selling Shareholder and no consent, approval,
authorization or order of any court or governmental agency or
body is required for the consummation of the transactions
contemplated by this Agreement by the Selling Shareholder, except
as may be required under the Securities Act or as may be required
under state or other securities or Blue Sky laws in connection
with the sale and distribution of the Shares by the Underwriter.
(xix) The Selling Shareholder has full legal right, power
and authority to sell, transfer and deliver the Shares being sold
by the Selling Shareholder under this Agreement.
(xx) The delivery to the Underwriter of the certificates
for the Shares to be sold by the Selling Shareholders shall
transfer to those persons purchasing the same, good and
marketable title to the Shares, free and clear of all liens,
encumbrances, equities and claims.
(xxi) All transfer taxes payable with respect to the sale
of the Shares by the Selling Shareholder have been paid.
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14. TERMINATION.
a) This Agreement may be terminated by the Agent by notice to the
Company in the event that the Company shall have failed or been unable
to comply with any of the terms, conditions or provisions of this
Agreement on the part of the Company to be performed, complied with or
fulfilled within the respective times herein provided for, unless
compliance therewith or performance or satisfaction thereof shall have
been expressly waived by the Agent in writing.
b) This Agreement may be terminated by the Agent by notice to the
Company if the Agent believes, in its sole judgment, that any adverse
changes have occurred in the financial condition or obligations of the
Company or if the Company shall have sustained a loss by strike, fire,
flood, accident or other calamity of such a character as, in the sole
judgment of the Agent, may interfere materially with the conduct of the
Company's business and operations regardless of whether or not such loss
shall have been insured.
c) This Agreement may be terminated by the Agent by notice to the
Company at any time if, in the sole judgment of the Agent, payment for
and delivery of the Shares is rendered impracticable or inadvisable
because (i) additional material governmental restrictions not in force
and effect on the date hereof shall have been imposed upon the trading
in securities generally, or minimum or maximum prices shall have been
generally established on the New York or American Stock Exchange, or
trading in securities generally on either such Exchange shall have been
suspended, or a general moratorium shall have been established by
federal or state authorities; or (ii) a war or other national calamity
shall have occurred; or (iii) substantial and material changes in the
condition of the market (either generally or with reference to the sale
of the Shares to be offered hereby) beyond normal fluctuations are such
that it would be undesirable, impracticable or inadvisable in the sole
judgment of the Agent to proceed with this Agreement or with the public
offering; or (iv) of any matter materially adversely affecting the
Company.
d) In the event any action or proceeding shall be instituted or
threatened against the Agent, either in any court of compete
jurisdiction, before the Commission or any state securities commission
concerning its activities as a broker or dealer that would prevent the
Agent from acting as such, at any time prior to the Effective Date
hereunder, or in any court pursuant to any federal, state, local or
municipal statute, a petition in bankruptcy or insolvency or for
reorganization or for the appointment of a receiver or trustee of the
Agent's assets or if the Agent makes an assignment for the benefit of
creditors, the Company shall have the right on three (3) days written
notice to the Agent to terminate this Agreement without any liability to
the Agent of any kind except for the payment of expenses as provided in
paragraphs 4.a) and 5 herein.
e) Any termination of this Agreement pursuant to this paragraph
13 shall be without liability of any character (including, but not
limited to, loss of anticipated profits or consequential damages) on the
part of any party thereto, except that in such event (i) the Agent shall
provide the Company with a statement of its accountable expenses, which
shall include but are not limited to the Agent's counsel fees,
consultants' fees, entertainment expenses, travel expenses, postage
expenses, office costs, advertising costs, clerical costs, due diligence
meeting expenses, duplication expenses, long distance telephone expenses
and general and administrative expenses incurred in connection with the
proposed offering; and (ii) if such accountable expenses are more than
the amount of the non-accountable expense payments the Company has made
to the Agent, the Agent shall bear such excess, or if such accountable
expenses are less than the amount of the non-accountable expense
payments the Agent has received from the Company, the Agent shall return
the difference to the Company.
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15. FEE UPON OCCURRENCE OF CERTAIN EVENTS. If, after signing this
Agreement and before the closing of the offering of the Shares, the Company
agrees to a merger, consolidation or other business combination, or to any
acquisition of its assets, or if the holders of at least fifty (50%) percent of
the Company's outstanding common stock agree to sell or transfer their common
stock, the Company will pay the hereinafter described fee to the Agent upon
consummation of any such transaction if the offering of the Shares is thereafter
abandoned by the Company or the Agent. If the Company and/or the Company's
shareholders receive only cash in any such transaction, the fee that the Company
will pay to the Agent is $_________ in cash which will be paid upon consummation
of the transaction. In all other cases, the fee payable to the Agent by the
Company will have a value of $________ but the actual form of such fee and the
time of the payment thereof will be negotiated between the Company and the
Agent.
16. NOTICES. All notices shall be in writing and shall be delivered at
or mailed to the following addresses or sent by telegram to the following
addresses with written confirmation thereafter:
To the Company: Xxxx Xxxxxx, President
Physical Spa & Fitness Inc.
00/X - 00/X Xxx Xxxxxxx Xxxxx
00 Xxxxxxxx Xxxxxx
Xxxxxxxx Xxx, Xxxx Xxxx
With Copy to: Xxxxx X. Xxxxx, Esq.
Law Office of Xxxxx X. Xxxxx
000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxx Xxxxx, XX 00000
To the Agent: Xxxxx X. Xxxxxx, President
Global Financial Group, Inc.
000 Xxxxxxxxxx Xxx. Xx., Xxxxx 0000
Xxxxxxxxxxx, XX 00000
With Copy to: Xxxxxx X. Xxxx, Esq.
Abdo & Abdo, P.A.
000 Xxxxxxxxx Xxxx
000 Xxxxxxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
17. BINDING EFFECT. This Agreement shall inure to the benefit of and be
binding upon the Company and the Agent (including the participating dealers as
provided in paragraphs 9 and 10) and their successors. Nothing expressed in this
Agreement is intended to give any person other than the persons mentioned in the
preceding sentence any legal or equitable right, remedy or claim under this
Agreement. However, the representations, warranties and indemnity and defense
obligations of the Company included in this Agreement also inure to the benefit
of any person who controls the Agent and participating dealers within the
meaning of Section 15 of the Act and the representations, warranties,
indemnities and defense obligations of the Agent and participating dealers inure
to the benefit of each officer who signs the Registration Statement, each
director of the Company and each person who controls the Company within the
meaning of Section 15 of the Act.
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18. MISCELLANEOUS PROVISIONS.
a) Time shall be of the essence of this Agreement.
b) This Agreement shall be construed according to the laws of the
State of Minnesota.
c) The representations and warranties made in this Agreements
shall survive the termination of this Agreement and shall continue in
full force and effect regardless of any investigation made by the party
relying upon any such representation or warranty.
d) This Agreement is made solely for the benefit of the Company
and its officers, directors and controlling persons within the meaning
of Section 15 of the Act and of the Agent and its officers, directors
and controlling persons within the meaning of Section 15 of the Act, and
their respective successors, heirs and personal representatives, and no
other person shall acquire or have any right under or by virtue of this
Agreement. The term "successor" as used in this Agreement shall not
include any purchaser, as such, of the Shares.
e) The Agent will provide upon closing a list of all names and
addresses of all participating dealers and shall provide the Company
with such changes of the address or name of such participating dealers
as occur and of which the Agent is notified. Further, the Agent shall
use its best efforts to maintain the current name and address of all
participating dealers during the term of this Agreement.
If this Agreement correctly sets forth our understanding, please
indicate your acceptance in the space provided below for that purpose.
Very truly yours,
Physical Spa & Fitness Inc.
By____________________________
Xxxx Xxxxxx, President
Selling Shareholder:
----------------------------
Xxxxxx Xxxxxxx
Confirmed and accepted as of the date of this Agreement:
GLOBAL FINANCIAL GROUP, INC.
By______________________________
Xxxxx X. Xxxxxx, President
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