EX-1
AGENCY AGREEMENT
FREESTAR TECHNOLOGIES, INC.
0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000
AGENCY AGREEMENT
March 24, 2002
vFinance Investments, Inc.
000 Xxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
FreeStar Technologies, Inc., a Nevada corporation ("Company"),
proposes to offer for sale in private placements ("Offerings") (i)
the Company's 2002A 8% Convertible Notes Due March 1, 2003 ("Notes")
in the original aggregate principal amount of up to $270,000, and
(ii) $5,000,000 of the Company's common stock, par value $.001, as
part of an Equity Line of Credit ("ELOC") both in accordance with the
terms and conditions set forth on the Term Sheets annexed hereto as
Exhibit A. The Notes and ELOC shall be offered with registration
rights under the Securities Act of 1933, as amended ("Securities
Act") and in accordance with Sections 4(2) and 4(6) of the Securities
Act and/or Rule 506 of Regulation D ("Reg D") promulgated thereunder,
only to "accredited investors" (as such term is defined in Reg D).
This is to confirm our agreement concerning your acting as our
exclusive placement agent ("Placement Agent") in connection with
such sale of the Notes and placement of the ELOC, subject to your
right to have Selected Dealers, as defined in Section 1.1 hereof,
participate in the Offerings.
1. Appointment of Placement Agent: The Offering
1.1 Appointment of Placement Agent. You are hereby
appointed exclusive Placement Agent of the Company for the Offerings
during the offering period herein specified ("Offering Period") for
the purpose of assisting the Company in finding accredited investors
for the Notes and ELOC ("Subscribers"). The Offering Period for the
Notes shall continue until April 1, 2002. The Offering Period for
the ELOC shall commence on March 20, 2002 and shall continue until
July 20, 2002; provided, however, that the Offering Period may be
extended for a period not beyond September 20, 2002, by the written
mutual agreement of the Company and Placement Agent. The Notes
shall be offered on a "best efforts, all or none" basis during the
Offering Period. The day that the Offering Period terminates is
hereinafter referred to as the "Termination Date." You hereby accept
such agency and agree to assist the Company in finding qualified
Subscribers. Your agency hereunder is not terminable by the Company
except upon termination of the Offering or upon expiration of the
Offering Period in accordance with the terms of this Agreement.
You may engage other persons, selected by you in your
discretion, that are members of the National Association of
Securities Dealers, to assist you in the Offerings (each such person
being herein referred to as a "Selected Dealer") and you may allow
such persons such part of the compensation and payment of expenses
payable to you hereunder as you shall determine.
1.2 Offering Documents. The Finance Agreement for the
Notes and accompanying transaction documents shall be prepared by
counsel selected by the Placement Agent. The ELOC Agreement and
accompanying transaction documents shall be prepared, in the first
instance by Company counsel, but may be subject to revision or re-
preparation by counsel selected by the Placement Agent. Prior to
undertaking such review, the Company shall deposit with counsel
selected by the Placement Agent the sum of $20,000 to cover the
Placement Agent's and Subscriber's costs in connection with the
review or re-drafting of the ELOC documents. The Placement Agent
shall not have any obligation to independently verify the accuracy or
completeness of any information contained in any agreement in
connection with the Notes or the ELOC or the authenticity,
sufficiency, or validity of any check delivered by any Subscriber in
payment for the Notes or in connection with the ELOC.
1.3 INTENTIONALLY LEFT BLANK.
2. Closing. Subject to the conditions set forth in Section 5
hereof, the closing date (the "Closing Date") for the Notes will be
no later than April 1, 2002 and for the ELOC will be within the next
5 business days following the acceptance by the Company of
subscriptions for the ELOC Offering and, in any event, will occur on
or before the Termination Date. With regard to the ELOC, there shall
be a closing date for each purchase of shares under the ELOC during
the course of the Term ("Subsequent Closing Date").
3. Compensation. On the Closing Date, the Company shall (i)
cause to be paid to the Placement Agent by certified or official
check or wire a commission equal to ten percent (10%) of the gross
proceeds of the Notes being sold on such Closing Date, and (ii) issue
warrants to the Placement Agent to purchase 700,000 shares of the
Company's common stock, 350,000 of such warrants at an exercise price
equal to the lower of (i) the average closing bid price of a share of
the Company's common stock as reported on the OTC Bulletin Board for
the 10 trading days prior to March 25, 2002, or (ii) the average
closing bid price of a share of the Company's common stock as
reported by the OTC Bulletin Board for the 5 trading days immediately
preceding the date of receipt by the Company of a Notice of Exercise
from the Placement Agent ("Exercise Price"), and 350,000 of such
warrants at an exercise price equal to 125% of the Exercise Price,
with piggy back registration rights. On each Subsequent Closing
Date, the Company shall be caused to be paid to the Placement Agent
ten percent (10%) of the gross proceeds paid by any Subscriber in
connection with the ELOC. Upon the execution of the ELOC
transaction documents by the Subscribers, the Company shall issue to
the Placement Agent warrants to purchase 300,000 shares of the
Company's common stock at an exercise price of $0.15 per share with
piggy back registration rights. In addition, on each Closing Date
and Subsequent Closing Date, the Company shall pay the Placement
Agent a consulting fee equal to three percent (3%) raised in such
Closing and Subsequent Closing. In addition to the foregoing, the
Company shall be responsible to pay the Placement Agent a retainer
fee of $7,500 per month, for a period of 12 consecutive months from
the date of this Agreement, which shall be payable on the 25th of
each month ("Retainer Fee") provided however that the Retainer Fee
shall accrue and not be paid until the Company has sold shares
pursuant to the ELOC, or some other financing arranged by the
Placement Agent, other than the ELOC. With regard to both the Notes
and the ELOC, the Company hereby gives its instructions and mandate
to the Subscribers to pay the Placement Agent directly from the
funding proceeds.
4. Representations and Warranties of the Company. The Company
represents and warrants as follows:
4.1 Due Incorporation and Qualification. The Company has
been duly incorporated, and is validly existing as a corporation and
is in good standing under the laws of the State of Nevada and is duly
qualified as a foreign corporation for the transaction of business
and is in good standing in each jurisdiction in which the ownership
or leasing of their properties or the conduct of their business
requires such qualification (except where the failure to so qualify
would not have a material adverse effect on the business of the
Company). The Company has all requisite corporate power and
authority and have obtained all necessary consents, authorizations,
approvals, orders, licenses and permits of and from any governmental
authority or agency or any court or other tribunal necessary to own
or hold their properties and conduct their business (except where the
failure to have such consents, authorization, approval orders,
licenses and permits would not have a material adverse effect on the
business of the Company).
4.2 Authorized Capital. The Company's authorized
capitalization consists of 80,000,000 shares of Common Stock and
approximately 42,000,000 shares of Common Stock issued and
outstanding, and no shares of preferred stock issued and outstanding
as of the date hereof. All of the issued and outstanding shares of
capital stock have been duly authorized and validly issued and are
fully paid and non-assessable. None of the holders of such
outstanding shares of capital stock is subject to personal liability
solely by reason of being such a holder (except to the extent such
holder has created such liability). The offers and sales of all the
Company's outstanding securities were at all relevant times prior to
the Closing Date either registered under the Securities Act and the
applicable state securities or Blue Sky laws, or exempt from such
registration. The Company has no subsidiaries. The Company does not
own, directly or indirectly, any capital stock, equity or interest in
any corporation, firm, partnership, joint venture or other entity.
4.3 No Preemptive Rights: Options. There is no commitment,
plan, or arrangement to issue, and there is no outstanding option,
warrant, or other right calling for the issuance of, any share of
capital stock of the Company or any security or other instrument
which by its terms is convertible into, exercisable for, or
exchangeable for capital stock of the Company. No person has any
preemptive rights to purchase securities of the Company and no person
holds securities of the Company that have reset/repricing provisions.
No holder of any of the Company's securities has any rights,
"demand," "piggyback" or otherwise, to have such securities
registered or to demand the filing of a registration statement. The
Company has reserved for issuance a sufficient number of shares of
Common Stock to be issued upon conversion of the holders of its
warrants and options.
4.4 Financial Statements: Operating Business. The
Company's financial and operational history, its present condition,
financial and otherwise, and its prospects are as represented by the
Company in the reports filed with the Securities and Exchange
Commission ("Reports"). The financial statements of the Company
included in the Reports ("Financials") fairly present in all material
respects the financial position and results of operations of the
Company at the dates thereof and for the periods covered thereby.
The Financials have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the
periods involved, are current and complete, and are in accordance
with the books and records of the Company. The Company has no
liabilities or obligations, contingent, direct, indirect or otherwise
required to be accrued or reserved against in the Financials except
(i) as set forth in the Financials, (ii) except as incurred in the
ordinary course of business or (iii) as disclosed in the Reports.
4.5 No Material Adverse Changes. Since the date of the
Financials there has not been any change in the condition, financial
or otherwise, of the Company that would have a material adverse
effect upon the operations, business, properties or assets of the Company.
4.6 Taxes. The Company has filed all federal tax returns
and all state and municipal and local tax returns (whether relating
to income, sales, franchise, withholding, real or personal property
or other types of taxes) required to be filed (after giving effect
to all permissible extensions) through the date hereof under the laws
of the United States and applicable states and have paid in full all
taxes which have become due pursuant to such returns or claimed to be
due by any taxing authority or otherwise due and owing; provided,
however, that the Company has not paid any tax, assessment, charge,
levy or license fee that it contests in good faith and by proper
proceedings and adequate reserves for the accrual of same are
maintained if required by generally accepted accounting principles.
4.7 Finder's Fees: Other Arrangements. The Company is not
obligated to pay a finder's fee to anyone in connection with the
introduction of the Company to the Placement Agent or pay for any
other arrangements, agreements or understanding in connection with
the Offering. The Company has not paid any monies or other
compensation or issued any securities to any member of the National
Association of Securities Dealers Inc. ("NASD") or to any affiliate
or associate of such a member during the prior twelve months (except
for payments to the Placement Agent hereunder).
4.8 No Pending Actions. There are no actions, suits,
proceedings, claims or hearings of any kind or nature or, to the
knowledge of the Company, any investigations or inquiries, before or
by any court, governmental authority, tribunal or instrumentality (or
to the knowledge of the Company, any state of facts which would give
rise thereto), pending or threatened against the Company, or
involving the properties of the Company, which may have a material
adverse effect upon the operations, business, properties, or assets
of the Company. The Company are not in violation of, or in default
with respect to, any law, rule, regulation, order, judgment, or
decree or such as in the aggregate do not now have and will not in
the future have a material adverse effect upon the operations,
business, properties, or assets of the Company.
4.9 Private Offering Exemption: Offering Documents. This
Offering will conform in all material respects with the requirements
of Rule 506 of Reg D (assuming all subscribers are "accredited
investors" as that term is defined in Rule 501 of Reg D) and with the
requirements of all other applicable published rules and regulations
of the Commission currently in effect relating to "private
offerings." The Offering Documents, at all times during the period
from the date hereof through the last Additional Closing Date do not
and will not contain an untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were
made, not misleading. The preceding sentence does not apply to
information contained in or omitted from the Offering Documents in
reliance upon and in conformity with written information furnished to
the Company by or on behalf of the Placement Agent specifically for
use therein.
4.10 Intentionally Left Blank.
4.11 Intentionally Left Blank.
4.12 No Subsequent Actions. Except as may otherwise be
properly described in this Agreement, the Company has not (A) issued
any securities, (B) incurred any liability or obligation, primary or
contingent, for borrowed money or entered into any transaction, not
in the ordinary course of business, or (C) declared or paid any
dividend on its capital stock.
4.13 No Anti-Dilution Adjustment; No Right to Participate
in Offering; No Right of First Refusal. (a) The issuance of the
Notes and the ELOC will not give any holder of any of the Company's
outstanding options, warrants or other convertible securities or
rights to purchase shares of the Company's capital stock, the right
to purchase any additional shares of capital stock, the right to be
issued any capital stock and/or the right to purchase capital stock
at a reduced price.
(b) No person has the right of first refusal to provide
the Company with financing or to act as managing underwriter or
placement agent of the Company=s securities.
(c) No person has the right to participate as a
placement agent or other selling agent in the transactions contemplated by this
Agreement other than the Placement Agent and Selected Dealers.
4.14 No Regulatory Problems. Except as disclosed in the
Reports, the Company (i) has not filed a registration statement which
is the subject of any proceeding or examination under Section 8 of
the Securities Act, or is not the subject of any refusal order or
stop order thereunder; (ii) is not subject to any pending proceeding
under Rule 258 of the Securities Act or any similar rule adopted
under Section 3(b) of the Securities Act, or to an order entered
thereunder; (iii) has not been convicted of any felony or misdemeanor
in connection with the purchase or sale of any security or involving
the making of any false filing with the Commission; (iv) is not
subject to any order, judgment, or decree of any court of competent
jurisdiction temporarily, preliminarily, or permanently restraining
or enjoining, the Company from engaging in or continuing any conduct
or practice in connection with the purchase or sale of any security
or involving the making of any false filing with the Commission; and
(v) is not subject to a United States Postal Service false
representation order entered under Section 3005 of Xxxxx 00, Xxxxxx
Xxxxxx Code; or a temporary restraining order or preliminary
injunction entered under Section 3007 of Title 39, United States
Code, with respect to conduct alleged to have violated Section 3005
of Xxxxx 00, Xxxxxx Xxxxxx Code. None of the Company's directors,
officers, or beneficial owners of five percent or more of any class
of its equity securities (i) has been convicted of any felony or
misdemeanor in connection with the purchase or sale of any security,
involving the making of a false filing with the Commission, or
arising out of the conduct of the business of an underwriter, broker,
dealer, municipal securities dealer, or investment advisor; (ii) is
subject to any order, judgment, or decree of any court of competent
jurisdiction temporarily or preliminary enjoining or restraining, or
is subject to any order, judgment, or decree of any court of
competent jurisdiction, permanently enjoining or restraining such
person from engaging in, or continuing, any conduct or practice in
connection with the purchase or sale of any security, or the
involving of making a false filing with the Commission, (iii) is
subject to an order of the Commission entered pursuant to Section
15(b), 15B(a), or 15B(c) of the Securities Exchange Act of 1934, as
amended ("1934 Act"), or is subject to an order of the Commission
entered pursuant to Section 203(e) or (f) of the Investment Advisers
Act of 1940; (iv) has been suspended or expelled from membership in,
or suspended or barred from association with a member of, an exchange
registered as a national securities exchange pursuant to Section 6 of
the 1934 Act, an association registered as a national securities
association under Section 15A of the 1934 Act, or a Canadian
securities exchange or association for any act or omission to act
constituting conduct inconsistent with just and equitable principles
of trade; or (v) is subject to a United States Postal Service false
representation order entered under Section 3005 of Xxxxx 00, Xxxxxx
Xxxxxx Code; or is subject to a restraining order or preliminary
injunction entered under Section 3007 of Title 39, United States
Code, with respect to conduct alleged to have violated Section 3005
of Xxxxx 00, Xxxxxx Xxxxxx Code.
4.15 No Defaults; Violations. No default exists in the
due performance and observance by the Company of any term, covenant
or condition of any material license, contract, indenture, mortgage,
deed of trust, note, loan or credit agreement, or any other agreement
or instrument evidencing an obligation for borrowed money, or any
other agreement or instrument to which the Company is a party or by
which the Company may be bound or to which any of the properties or
assets of the Company are subject. The Company is not in violation
of any term or provision of their respective Certificate of
Incorporation or By-Laws or in violation of any franchise, license,
permit, applicable law, rule, regulation, judgment or decree of any
governmental agency or court, domestic or foreign, having
jurisdiction over the Company or any of their properties or business
which violation would have a material adverse effect on the Company.
4.16 Conduct of Business. (i) The Company and its
Subsidiaries have all requisite corporate power and authority, and
have all necessary authorizations, approvals, orders, licenses,
certificates and permits of and from all governmental regulatory
officials and bodies to own or lease properties and conduct its
business, and (ii) the Company are and have been doing business in
compliance with all such material authorizations, approvals, orders,
licenses, certificates and permits and all federal, state and local
laws, rules and regulations except where the failure to be in
compliance would not have a material adverse effect on the Company.
4.17 Title to Property; Insurance. The Company has good
and marketable title to, or valid and enforceable leasehold estates
in, all items of real and personal property (tangible and intangible)
owned or leased by it, free and clear of all liens, encumbrances,
claims, security interests, defects and restrictions of any material
nature whatsoever, and liens for taxes not yet due and payable. The
Company has insured its properties against loss or damage by fire or
other casualty in amounts customarily maintained by companies of
comparable size to the Company engaged in similar business.
4.18 Intangibles. The Company owns or possesses the
requisite licenses or rights to use all trademarks, service marks,
service names, trade names, patents, patent applications, copyrights
and other rights (collectively, "Intangibles") described as used or
owned by it. There is no pending or threatened claim or action by any
person pertaining to, or which challenges the exclusive right of the
Company with respect to any Intangibles used in the conduct of the
Company's or Subsidiaries' business. The Intangibles and the
Company's current products, services and processes do not infringe on
any intangibles rights held by any third party. No others have
infringed upon the Intangibles of the Company.
4.19 Employment and Consulting Agreements. The Company is
not a party to any consulting or employment agreements.
4.20 SEC Filings. The Commission has not issued any order
preventing or suspending the use of any Company prospectus. At the
time the public filings of the Company were filed none of such
filings included any untrue statement of a material fact or omitted
to state any material fact required to be stated therein or necessary
to make the statements therein not misleading in light of the
circumstances under which they were made.
4.21 Transactions with Affiliates. (i) The Company has no
indebtedness due from its respective officers, directors or
stockholders or any of their respective relatives or affiliates, or
(b) none of the officers, directors or stockholders of the Company or
their respective relatives or affiliates has made any claim against
the Company.
4.22 Related Party Transactions. There are no business
relationships or related-party transactions of the nature described
in Item 404 of Regulation S-K involving the Company and any person
described in such Item that are required to be disclosed in the
public filings and that have not been so disclosed therein.
5. Representation, Warranties and Covenants of the Placement
Agent. The Placement Agent represents, warrants and covenants as
follows:
(a) During the Offering Period, the Placement Agent
shall use its best efforts to make offers and sales to qualified
accredited investors.
(b) The Placement Agent is and shall remain until the
Termination Date a member in good standing of the NASD and duly
registered under the 1934 Act.
(c) Offers and sales of the Units by the Placement
Agent will only be made in such jurisdictions in which the Placement
Agent is a registered broker-dealer or where an applicable exemption
from such registration exists and/or where required "blue sky"
filings were made.
(d) The Placement Agent shall not solicit any offer
to buy or offer to sell Notes or subscriptions for the ELOC: (x) by
any form of general solicitation or advertising (as such terms are
used in Reg D), including, but not limited to, any advertisement,
article, notice, or other communication published in any newspaper,
magazine, or similar medium or broadcast over television or radio or
any seminar or meeting whose attendees have been invited by any
general solicitation or advertising, (y) in any manner involving a
public offering within the meaning of Section 4(2) of the Securities
Act; provided, however, that nothing in this Section 5(d) shall
impute any liability on the Placement Agent for any actions of the
Company or to a purchaser which the Placement Agent has reason to
believe is or may not be an Aaccredited investor@ (as such term is
defined in Reg D).
(e) The Placement Agent shall comply with all
requirements imposed upon the Placement Agent by the Securities Act,
as now and hereafter amended, and by all applicable state securities
laws and regulations, to permit the continuance of offers and sales
of the Units, in accordance with Section 4(2) and Reg D, the
provisions hereof and the Offering Documents.
(f) The Placement Agent has full right, power and
authority to enter into this Agreement, to act as Placement Agent
with respect to the offer and sale of the Units and to carry out the
requirements and obligations imposed upon it by this Agreement. This
Agreement has been duly authorized, executed and delivered by the
Placement Agent, is the legal, valid and binding obligation of the
Placement Agent, and is enforceable as to the Placement Agent in
accordance with its terms (except as rights to indemnification may be
limited by federal or state securities laws and subject to applicable
bankruptcy, insolvency and other laws affecting the enforceability of
creditors' rights generally and to general equitable principles).
6. Intentionally Left Blank.
7. Intentionally Left Blank.
8. Indemnification and Contribution.
(a) Indemnification by the Company. The Company
agrees to indemnify and hold harmless the Placement Agent and its
officers, directors, employees, agents, and each person, if any, who
controls the Placement Agent within the meaning of the Securities Act
and/or the 1934 Act and its counsel from and against any losses,
claims, damages or liabilities, joint or several, to which the
Placement Agent or such other indemnified person may become subject,
under the Securities Act or otherwise, insofar as and to the extent
that such losses, claims, damages or liabilities (or action in
respect thereof) arise out of are based upon (i) any untrue statement
or alleged untrue statement of a material fact contained (A) in the
Offering Documents, or (B) in any Blue Sky application or other
document executed by the Company specifically for Blue Sky purposes
or based upon any other written information furnished by the Company
or on its behalf to any state or other jurisdiction in order to
qualify any or all of the Common Stock under the securities laws
thereof (any such application, document, or information being
hereinafter called "Blue Sky Application"), or (ii) the omission or
alleged omission by the Company to state in the Offering Documents or
in any Blue Sky Application 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; and will
reimburse the Placement Agent and each such other indemnified person
for any legal or other expenses reasonably incurred by the Placement
Agent or such other indemnified person in connection with
investigating or defending any such loss, claim, damage, liability or action.
(b) Indemnification by the Placement Agent. The
Placement Agent agrees to indemnify and hold harmless the Company and
each person, if any, who controls the Company within the meaning of
the Securities Act and/or the 1934 Act, including all officers and
directors of the Company, counsel and accountants from and against
any losses, claims, damages or liabilities, joint or several, to
which they may become subject, under the Securities Act or otherwise
insofar as such losses, claims, damages or liabilities (or action in
respect thereof) arise out of or are based upon (i) any untrue
statement or alleged untrue statement of a material fact contained
(A) in the Offering Documents, or (B) in any Blue Sky Application, or
(ii) the omission or alleged omission by the Company to state in the
Offering Documents or in any Blue Sky Application 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; but in each case, only if and to the extent that such
untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with written
information furnished to the Company by the Placement Agent
specifically for use with reference to the Placement Agent in the
preparation of the Offering Documents or any such Blue Sky
Application; or (iii) any other Non-Indemnity Event; and will
reimburse the Company and for any legal or other expenses reasonably
incurred by the Company in connection with investigating or defending
any such loss, claim, damage, liability or action; provided that such
loss, claim, damage or liability is found ultimately to arise out of
or be based upon the circumstances described in clauses (i), (ii), or
(iii) of this Section 8(b).
(c) Procedure. Promptly after receipt by an
indemnified party under this Section 8 of notice of the commencement
of any action, such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this
Section 8, notify in writing the indemnifying party of the
commencement thereof; and the omission so to notify the indemnifying
party within thirty (30) days will relieve the indemnifying party
from any liability under this Section 8 as to the particular item for
which indemnification is then being sought, but not from any other
for which it may have to be an indemnifying party. In case any such
action is brought against any indemnified party, and it notifies an
indemnifying party of the commencement thereof within the time period
set forth above, the indemnifying party will be entitled to
participate therein, and to the extent that it may wish, jointly with
any other indemnifying party, similarly notified, to assume the
defense thereof, with counsel who shall be to the reasonable
satisfaction of such indemnified party, and after notice from the
indemnifying party to such indemnified party of its election so to
assume the defense thereof and the retaining of such counsel by the
indemnifying party, the indemnifying party shall not be liable to
such indemnified party in connection with the defense thereof, other
than the reasonable costs of investigation, unless the indemnified
party shall have reasonably concluded that there are or may be
defenses available to it which are different from or in addition to
those available to the indemnifying party (in which case the
indemnifying party shall not have the right to direct the defense of
such action on behalf of the indemnified party), in any of which
circumstances expenses of one additional counsel shall be borne by
the indemnifying party. Any such indemnifying party shall not be
liable to any such indemnified party on account of any settlement of
any claim or action effected without the consent of such indemnifying party.
(d) Contribution. If the indemnification provided
for in this Section 8 is unavailable to any indemnified party in
respect to any losses, claims, damages, liabilities or expenses
referred to therein, then the indemnifying party, in lieu of
indemnifying such indemnified party, will contribute to the amount
paid or payable by such indemnified party, as a result of such
losses, claims, damages, liabilities or expenses (i) in such
proportion as is appropriate to reflect the relative benefits
received by the Company on the one hand, and the Placement Agent on
the other hand, from the Offering, (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above, but also the relative fault
of the Company on one hand, and of the Placement Agent on the other
hand in connection with statements or omissions which resulted in
such losses, claims, damages, liabilities or expenses 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 hand, shall be deemed to be in the same proportion as the
total proceeds from the Offering (net of sales commissions, but
before deducting expenses) received by the Company, bear to the
commissions received by the Placement Agent. The relative fault of
the Company on the one hand, and the Placement Agent on the other
hand, will be determined with reference to, among other things,
whether the untrue or alleged untrue statement of material fact or
the omission to state a material fact relates to information supplied
by the Company or the Placement Agent, and its relative intent,
knowledge, access to information and opportunity to correct or
prevent such statement or omission by either party.
(e) Attorneys' Fees. The amount payable by a party
under this Section 8 as a result of the losses, claims, damages,
liabilities or expenses referred to above will be deemed to include
any legal or other fees or expenses reasonably incurred by such party
in connection with investigating or defending any action or claim.
9. Termination. The Placement Agent will have the right to
terminate this Agreement by giving written notice as herein
specified, at any time, at or prior to the Closing Date if the
Company shall have failed, refused, or been unable to perform any of
its obligations hereunder, or breached any of its representations or
warranties hereunder not cured promptly after 20 days' notice. The
Placement will have the further right to terminate this Agreement by
giving written notice at any time at or prior to the Closing Date if,
in the Placement Agent's opinion, there has occurred an event
materially and adversely affecting the Company.
10. Notices. Any notice hereunder shall be in writing and
shall be effective when delivered in person or by facsimile
transmission, or mailed by certified mail or private courier service,
postage prepaid, return receipt requested, to the appropriate
parties, at the following addresses: if to the Placement Agent, to
vFinance Investments, Inc., 000 Xxxxx Xxxxxx, 0xx Xxxxx, Xxx Xxxx,
Xxx Xxxx 00000; if to the Company, to Mr. Xxxx Xxxx, FreeStar
Technologies, Inc., 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx
00000, or in each case, to such other address as the parties may
hereinafter designate by like notice.
11. Parties. This Agreement will inure to the benefit of and
be binding upon the parties hereto and their respective successors
and permitted assigns. Neither party may assign this Agreement or
its obligations hereunder without the prior written consent of the
other party. This Agreement is intended to be, and is for the sole
and exclusive benefit of the parties hereto and the persons described
in Section 8(a) and 8(b) hereof, and their respective successors and
permitted assigns, and for the benefit of no other person, and no
other person will have any legal or equitable right, remedy or claim
under, or in respect of this Agreement.
12. Amendment and/or Modification. Neither this Agreement, nor
any term or provision hereof, may be changed, waived, discharged,
amended, modified, or terminated orally, or in any manner other than
by an instrument in writing signed by each of the parties hereto.
13. Further Assurances. Each party to this Agreement will
perform any and all acts and execute any and all documents as may be
necessary and proper under the circumstances in order to accomplish
the intents and purposes of this Agreement and to carry out its
provisions.
14. Validity. In case any term of this Agreement will be held
invalid, illegal or unenforceable, in whole or part, the validity of
any of the other terms of this Agreement will not in any way be
affected thereby.
15. Waiver of Breach. The failure of any party hereto to
insist upon strict performance of any covenants and agreements herein
contained, or to exercise any option or right herein conferred in any
one or more instances, will not be construed to be a waiver or
relinquishment of any such option or right, or of any other covenants
or agreements, and the same will be and remain in full force and effect.
16. Entire Agreement. This Agreement contains the entire
agreement and understanding of the parties with respect to the
subject matter hereof and thereof, respectively, and there are no
representations, inducements, promises or agreements, oral or
otherwise, not embodied in this Agreement. Any and all prior
discussions, negotiations, commitments and understanding relating to
the subject matter of these agreements are superseded by this Agreement.
17. Counterparts. This Agreement may be executed in
counterparts and each of such counterparts will for all purposes be
deemed to be an original, and such counterparts will together
constitute one and the same instrument.
18. Law. This Agreement will be deemed to have been made and
delivered in New York City and will be governed as to validity,
interpretation, construction, effect and all other respects by
internal laws of the State of New York. The Company and the
Placement Agent (i) agree that any legal suit, action or proceeding
arising out of or relating to this Agreement shall be instituted
exclusively in New York State Supreme Court, County of New York, or
in the United States District Court for the Southern District of New
York. The Company and the Placement Agent further agree to accept
and acknowledge service of any and all process which may be served in
any such suit, action or proceeding in the New York Supreme Court,
County of New York, or in the United States District Court for the
Southern District of New York and agree that service of process upon
either of them mailed by certified mail to their respective address
shall be deemed in every respect effective service of process upon
either of them in any suit, action or proceeding.
19. Representations and Agreements to Survive Delivery. All
representations, warranties, covenants and agreements contained in
this Agreement shall be deemed to be representations, warranties,
covenants and agreements at the Closing Date and, if applicable, any
Additional Closing Date, and such representations, warranties,
covenants and agreements, including the indemnity and contribution
agreements contained in Section 8, shall remain operative and in full
force and effect regardless of any investigation made by or on behalf
of the Placement Agent or any indemnified person, or by or on behalf
of the Company or any person or entity which is entitled to be
indemnified under Section 8, and shall survive termination of this
Agreement or the issuance, sale and delivery of the Units. In
addition, notwithstanding any election hereunder or any termination
of this Agreement, and whether or not the terms of this Agreement are
otherwise carried out, the provisions of Sections 7 (if applicable),
8, 9, 10, 11 and 18 shall survive termination of this Agreement and
shall not be affected in any way by such election or termination or
failure to carry out the terms of this Agreement or any part thereof.
If you find the foregoing is in accordance with our
understanding, kindly sign and return to us a counterpart hereof,
whereupon this instrument along with all counterparts will become a
binding agreement between us.
Very truly yours,
FREESTAR TECHNOLOGIES, INC.
By: /s/ Xxxxxx Xxxx
Name: Xxxxxx Xxxx
Title: Chief Financial Officer
AGREED:
vFINANCE INVESTMENTS, INC.
By: /s/ Xxxxxxx Xxxxxxxxx
Name: Xxxxxxx Xxxxxxxxx
EXHIBIT B
FORM OF WARRANT
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE
SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES OR AN OPINION OF COUNSEL OR OTHER
EVIDENCE ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
FREESTAR TECHNOLOGIES, INC.
FORM OF COMMON STOCK PURCHASE WARRANT
1. Issuance; Certain Definitions. In consideration of
good and valuable consideration, the receipt of which is hereby
acknowledged by FREESTAR TECHNOLOGIES, INC., a Nevada corporation
(the "Company"), ___________________, a _________________ or
registered assigns (the "Holder") is hereby granted the right to
purchase at any time until 5:00 P.M., New York City time, on March
20, 2005 (the "Expiration Date"), 105,000 fully paid and
nonassessable shares of the Company's Common Stock, $0.001 par value
per share (the "Common Stock") or any successor to or assign of the
Holder, under a certain Series 2002 A 8% Convertible Note Due March
1, 2003 (the "Note") upon all Notices of Conversion of the Note, at
an exercise price per share (the "Exercise Price") equal to
_____________________________, subject to further adjustment as set
forth herein. This Warrant is being issued pursuant to the terms of
that certain Financing Agreement, dated as of March 25, 2002 (the
"Agreement"), to which the Company and Holder (or Holder's
predecessor in interest) are parties. Capitalized terms not
otherwise defined herein shall have the meanings ascribed to them in
the Agreement.
2. Exercise of Warrants.
(a) This Warrant is exercisable in whole or in part
at any time and from time to time. Such exercise shall be
effectuated by submitting to the Company (either by delivery to the
Company or by facsimile transmission as provided in Section 8 hereof)
a completed and duly executed Notice of Exercise (substantially in
the form attached to this Warrant Certificate) as provided in this
paragraph. The date such Notice of Exercise is faxed to the Company
shall be the "Exercise Date," provided that the Holder of this
Warrant tenders full payment of the Exercise Price to the Company
within five (5) business days thereafter. The Notice of Exercise
shall be executed by the Holder of this Warrant and shall indicate
the number of shares then being purchased pursuant to such exercise.
Upon payment of the Exercise Price for the shares of Common Stock
purchased, the Holder shall be entitled to receive a certificate or
certificates for the shares of Common Stock so purchased. The
Company shall deliver the shares of Common Stock to the Holder, or
pursuant to the Holder's directions, within three (3) business days
of any such payment.
(b) The Exercise Price per share of Common Stock for
the shares then being exercised shall be payable in cash or by
certified or official bank check or Fed wire transfer.
2.2 Limitation on Exercise. Notwithstanding the
provisions of this Warrant or the Agreement, in no event (except (i)
as specifically provided in this Warrant as an exception to this
provision, (ii) while there is outstanding a tender offer for any or
all of the shares of the Company's Common Stock, or (iii) at the
Holder's option, on at least sixty-five (65) days' advance written
notice from the Holder) shall the Holder be entitled to exercise this
Warrant, or shall the Company have the obligation to issue shares
upon such exercise of all or any portion of this Warrant to the
extent that, after such exercise the sum of
(1) the number of shares of Common Stock beneficially owned by
the Holder and its affiliates (other than shares of Common Stock
which may be deemed beneficially owned through the ownership of
the unexercised portion of the Warrants or other rights to
purchase Common Stock or through the ownership of the
unconverted portion of the Notes or other convertible
securities), and
(2) the number of shares of Common Stock issuable upon the
exercise of the Warrants with respect to which the determination
of this proviso is being made,
would result in beneficial ownership by the Holder and its affiliates
of more than 4.99% of the outstanding shares of Common Stock (after
taking into account the shares to be issued to the Holder upon such
exercise). For purposes of the proviso to the immediately preceding
sentence, beneficial ownership shall be determined in accordance with
Section 13(d) of the Securities Exchange Act of 1934, as amended (the
"1934 Act"), except as otherwise provided in clause (1) of such
sentence. The Holder, by its acceptance of this Warrant, further
agrees that if the Holder transfers or assigns any of the Warrants to
a party who or which would not be considered such an affiliate, such
assignment shall be made subject to the transferee=s or assignee=s
specific agreement to be bound by the provisions of this Section 2.2
as if such transferee or assignee were the original Holder hereof.
3. Reservation of Shares. The Company hereby agrees that
at all times during the term of this Warrant there shall be reserved
for issuance upon exercise of this Warrant such number of shares of
its Common Stock as shall be required for issuance upon exercise of
this Warrant (the "Warrant Shares").
4. Mutilation or Loss of Warrant Upon receipt by the
Company of evidence satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and (in the case of loss,
theft or destruction) receipt of reasonably satisfactory
indemnification, and (in the case of mutilation) upon surrender and
cancellation of this Warrant, the Company will execute and deliver a
new Warrant of like tenor and date and any such lost, stolen,
destroyed or mutilated Warrant shall thereupon become void.
5. Rights of the Holder. The Holder shall not, by virtue
hereof, be entitled to any rights of a stockholder in the Company,
either at law or equity, and the rights of the Holder are limited to
those expressed in this Warrant and are not enforceable against the
Company except to the extent set forth herein.
6. Protection Against Dilution and Other Adjustments.
6.1 Adjustment Mechanism If an adjustment of the
Exercise Price is required pursuant to Section 6.2, the Holder shall
be entitled to purchase such number of additional shares of Common
Stock as will cause
(i) the total number of shares of Common Stock Holder is
entitled to purchase pursuant to this Warrant, multiplied by
(ii) the adjusted Exercise Price per share, to equal
(iii) the dollar amount of the total number of shares of Common
Stock Holder is entitled to purchase before adjustment
multiplied by the total Exercise Price before adjustment.
6.2 Capital Adjustments. In case of any stock split
or reverse stock split, stock dividend, reclassification of the
Common Stock, recapitalization, merger or consolidation, or like
capital adjustment affecting the Common Stock of the Company, the
provisions of this Section 6 shall be applied as if such capital
adjustment event had occurred immediately prior to the date of this
Warrant and the original Exercise Price had been fairly allocated to
the stock resulting from such capital adjustment; and in other
respects the provisions of this Section shall be applied in a fair,
equitable and reasonable manner so as to give effect, as nearly as
may be, to the purposes hereof. A rights offering to stockholders
shall not be deemed a stock dividend.
6.3 Adjustment for Spin Off. If, for any reason,
prior to the exercise of this Warrant in full, the Company spins off
or otherwise divests itself of a part of its business or operations
or disposes all or a part of its assets in a transaction (the "Spin
Off") in which the Company does not receive compensation for such
business, operations or assets, but causes securities of another
entity (the "Spin Off Securities") to be issued to security holders
of the Company, then
(a) the Company shall cause (i) to be reserved Spin Off
Securities equal to the number thereof which would have been
issued to the Holder had all of the Holder=s unexercised
Warrants outstanding on the record date (the "Record Date") for
determining the amount and number of Spin Off Securities to be
issued to security holders of the Company (the "Outstanding
Warrants") been exercised as of the close of business on the
trading day immediately before the Record Date (the "Reserved
Spin Off Shares"), and (ii) to be issued to the Holder on the
exercise of all or any of the Outstanding Warrants, such amount
of the Reserved Spin Off Shares equal to (x) the Reserved Spin
Off Shares multiplied by (y) a fraction, of which (I) the
numerator is the amount of the Outstanding Warrants then being
exercised, and (II) the denominator is the amount of the
Outstanding Warrants; and
(b) the Exercise Price on the Outstanding Warrants shall be
adjusted immediately after consummation of the Spin Off by
multiplying the Exercise Price by a fraction (if, but only if,
such fraction is less than 1.0), the numerator of which is the
average Closing Bid Price of the Common Stock for the five (5)
trading days immediately following the fifth trading day after
the Record Date, and the denominator of which is the average
Closing Bid Price of the Common Stock on the five (5) trading
days immediately preceding the Record Date; and such adjusted
Exercise Price shall be deemed to be the Exercise Price with
respect to the Outstanding Warrants after the Record Date.
7. Transfer to Comply with the Securities Act;
Registration Rights.
7.1 Transfer. This Warrant has not been registered
under the Securities Act of 1933, as amended, (the "Act") and has
been issued to the Holder for investment and not with a view to the
distribution of either the Warrant or the Warrant Shares. Neither
this Warrant nor any of the Warrant Shares or any other security
issued or issuable upon exercise of this Warrant may be sold,
transferred, pledged or hypothecated in the absence of an effective
registration statement under the Act relating to such security or an
opinion of counsel satisfactory to the Company that registration is
not required under the Act. Each certificate for the Warrant, the
Warrant Shares and any other security issued or issuable upon
exercise of this Warrant shall contain a legend on the face thereof,
in form and substance satisfactory to counsel for the Company,
setting forth the restrictions on transfer contained in this Section.
7.2 Registration Rights. (a) Reference is made to
the Registration Rights Agreement. The Company's obligations under
the Registration Rights Agreement and the other terms and conditions
thereof with respect to the Warrant Shares, including, but not
necessarily limited to, the Company's commitment to file a
registration statement including the Warrant Shares, to have the
registration of the Warrant Shares completed and effective, and to
maintain such registration, are incorporated herein by reference.
(b) In addition to the registration rights referred
to in the preceding provisions of Section 7.2(a), effective after the
expiration of the effectiveness of the Registration Statement as
contemplated by the Registration Rights Agreement, the Holder shall
have piggy-back registration rights with respect to the Warrant
Shares then held by the Holder or then subject to issuance upon
exercise of this Warrant (collectively, the "Remaining Warrant
Shares"), subject to the conditions set forth below. If, at any time
after the Registration Statement has ceased to be effective, the
Company participates (whether voluntarily or by reason of an
obligation to a third party) in the registration of any shares of the
Company's stock (other than a registration on Form X-0, X-0 or
successor form), the Company shall give written notice thereof to the
Holder and the Holder shall have the right, exercisable within ten
(10) business days after receipt of such notice, to demand inclusion
of all or a portion of the Holder's Remaining Warrant Shares in such
registration statement. If the Holder exercises such election, the
Remaining Warrant Shares so designated shall be included in the
registration statement at no cost or expense to the Holder (other
than any costs or commissions which would be borne by the Holder
under the terms of the Registration Rights Agreement). The Holder's
rights under this Section 7 shall expire at such time as the Holder
can sell all of the Remaining Warrant Shares under Rule 144(k)
without volume or other restrictions or limit.
8. Notices Any notice or other communication required or
permitted hereunder shall be in writing and shall be delivered
personally, telegraphed, telexed, sent by facsimile transmission or
sent by certified, registered or express mail, postage pre-paid. Any
such notice shall be deemed given when so delivered personally,
telegraphed, telexed or sent by facsimile transmission, or, if
mailed, two days after the date of deposit in the United States
mails, as follows:
if to the Company, to:
FreeStar Technologies, Inc.
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
ATT: Xxxx Xxxx, President
Telephone No.: (646)
Telecopier No.: (646)
if to the Holder, to:
vFinance Investments, Inc.
000 0xx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
with a copy to:
Xxxxxx Xxxxxxxx Xxxxxxx LLP
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxxxx, Esq.
Any party may be notice given in accordance with this Section to the
other parties designate another address or person for receipt of
notices hereunder.
9. Supplements and Amendments; Whole Agreement. This
Warrant may be amended or supplemented only by an instrument in
writing signed by the parties hereto. This Warrant contains the full
understanding of the parties hereto with respect to the subject
matter hereof and thereof and there are no representations,
warranties, agreements or understandings other than expressly
contained herein and therein.
10. Governing Law. This Warrant shall be deemed to be a
contract made under the laws of the State of New York for contracts
to be wholly performed in such state and without giving effect to the
principles thereof regarding the conflict of laws. Each of the
parties consents to the jurisdiction of the federal courts whose
districts encompass any part of the City of New York or the state
courts of the State of New York sitting in the City of New York in
connection with any dispute arising under this Warrant and hereby
waives, to the maximum extent permitted by law, any objection,
including any objection based on forum non conveniens, to the
bringing of any such proceeding in such jurisdictions. To the extent
determined by such court, the Company shall reimburse the Holder for
any reasonable legal fees and disbursements incurred by the Buyer in
enforcement of or protection of any of its rights under any of the
Transaction Agreements.
11. Jury Trial Waiver. The Company and the Holder hereby
waive a trial by jury in any action, proceeding or counterclaim
brought by either of the Parties hereto against the other in respect
of any matter arising out or in connection with this Warrant.
12. Counterparts This Warrant may be executed in any
number of counterparts and each of such counterparts shall for all
purposes be deemed to be an original, and all such counterparts shall
together constitute but one and the same instrument.
13. Descriptive Headings Descriptive headings of the
several Sections of this Warrant are inserted for convenience only
and shall not control or affect the meaning or construction of any of
the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Warrant
as of the 25th day of March, 2002.
FREESTAR TECHNOLOGIES, INC.
By: ________________________
Xxxx Xxxx, President
ATTEST:
Xxxxxx Xxxx, Secretary
NOTICE OF EXERCISE OF WARRANT
The undersigned hereby irrevocably elects to exercise the right,
represented by the Warrant Certificate dated as of
, , to purchase shares of the Common
Stock, no par value, of FREESTAR TECHNOLOGIES, INC. and tenders
herewith payment in accordance with Section 1 of said Common Stock
Purchase Warrant.
CASH:$ = (Exercise Price x Exercise Shares)
Payment is being made by:
_ enclosed check
_ wire transfer
_ other
CASHLESS EXERCISE
Net number of Warrant Shares to be issued to Holder : _________*
* based on: Current Market Value - (Exercise Price x Exercise Shares)
Market Price of Common Stock
where:
Market Price of Common Stock [AMP@] = $_______________
Current Market Value [MP x Exercise Shares] = $_______________
It is the intention of the Holder to comply with the provisions of
Section 2.2 of the Warrant regarding certain limits on the Holder's
right to exercise thereunder. Based on the analysis on the attached
Worksheet Schedule, the Holder believes this exercise complies with
the provisions of said Section 2.2. Nonetheless, to the extent that,
pursuant to the exercise effected hereby, the Holder would have more
shares than permitted under said Section, this notice should be
amended and revised, ab initio, to refer to the exercise that would
result in the issuance of shares consistent with such provision. Any
exercise above such amount is hereby deemed void and revoked.
Please deliver the stock certificate to:
Dated:
[Name of Holder]
By:
