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Exhibit 1
iMALL, INC.
AGENCY AGREEMENT
Commonwealth Associates
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
as of November 26, 1997
Gentlemen:
iMALL, INC. a Nevada corporation (the "Company"), proposes to offer for
sale to "accredited investors", in a private placement, up to 200 units
("Units"), each Unit consisting of 25,000 shares ("Shares") of the Company's
Series A 9% Convertible Preferred Stock ("Preferred Stock") and 62,500 common
stock purchase warrants ("Warrants"). Such offering and sale are referred to
herein as the "Offering." Each Warrant will be exercisable during the four-year
period commencing one year after the initial closing to purchase one share of
the Company's Common Stock, $.001 par value (the "Common Stock"), at an exercise
price of $.40 per share. A minimum of 50 Units ("Minimum Offering") and a
maximum of 200 Units ("Maximum Offering") will be sold in the offering at
$100,000 per Unit. The Units will be offered pursuant to those terms and
conditions acceptable to you as reflected in the Private Placement Memorandum
(the "Memorandum"). Of the Xxxxx, 00 will be offered on a "best efforts -
all-or-none" basis and the remaining 150 Units will be offered on a "best
efforts" basis. The Units are being offered pursuant to the Memorandum and
related documents in accordance with Section 4(2) of the Securities Act of 1933,
as amended (the "Securities Act") and Regulation D promulgated thereunder. The
Preferred Stock shall have the rights and preferences set forth in the form of
Certificate of Designation, Preferences and Rights (the "Designation").
Commonwealth Associates is sometimes referred to herein as the "Placement
Agent." The Memorandum (including the exhibits thereto), as it may be amended
from time to time, and the form of proposed subscription agreement between the
Company and each subscriber (the "Subscription Agreement") and the exhibits
which are part of the Memorandum and/or Subscription Agreement are collectively
referred to herein as the "Offering Documents."
The Company will prepare and deliver to the Placement Agent a reasonable
number of copies of the Offering Documents in form and substance satisfactory to
counsel to the Placement Agent.
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Each prospective investor subscribing to purchase Units ("Subscriber") will
be required to deliver, among other things, a Subscription Agreement and a
confidential purchaser questionnaire ("Questionnaire") in the form to be
provided to offerees. Capitalized terms used herein, unless otherwise defined or
unless the context otherwise indicates, shall have the same meanings provided in
the Offering Documents.
1. Appointment of Placement Agent.
(a) You are hereby appointed exclusive Placement Agent of the Company
(subject to your right to have Selected Dealers, as defined in Section 1(c)
hereof, participate in the Offering) during the Offering Period herein specified
for the purposes of assisting the Company in finding qualified Subscribers
pursuant to the offering (the "Offering") described in the Offering Documents.
The Offering Period shall commence on the day (the "Commencement Date") the
Offering Documents are first made available to you by the Company for delivery
in connection with the offering for sale of the Units and shall continue until
the earlier to occur of (i) the sale of all of the Maximum Offering or (ii) 60
days after the Commencement Date (unless extended for a period of up to 60 days
under circumstances specified in the Memorandum). If the Minimum Offering is not
sold prior to the end of the Offering Period, the Offering will be terminated
and all funds received from Subscribers will be returned, without interest and
without any deduction. The day that the Offering Period terminates is
hereinafter referred to as the "Termination Date."
(b) Subject to the performance by the Company of all of its obligations to
be performed under this Agreement and to the completeness and accuracy of all
representations and warranties of the Company contained in this Agreement,
Commonwealth Associates hereby accepts such agency and agrees to use its best
efforts to assist the Company in finding qualified subscribers pursuant to the
Offering described in the Offering Documents. It is understood that the
Placement Agent has no commitment to sell the Units. Your agency hereunder is
not terminable by the Company except upon termination of the Offering Period.
(c) You may engage other persons, selected by you in your discretion, that
are members of the National Association of Securities Dealers, Inc., ("NASD")
and that have executed a Selected Dealers Agreement substantially in the form
attached hereto as Schedule A, to assist you in the Offering (each such person
being hereinafter 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. Each Selected Dealer shall be required to
agree in writing to comply with the provisions of, and to make the
representations, warranties and covenants contained in, this Section 1.
(d) Subscriptions for Units shall be evidenced by the execution by
Subscribers of a Subscription Agreement. No Subscription Agreement shall be
effective unless and until it is accepted by the Company. Any subscription may
be rejected at the sole discretion of the Company or the Placement Agent. Until
the Closing, all subscription funds received shall be held as described in the
Subscription Agreement. The Placement Agent shall not have any obligation to
independently verify the accuracy or completeness of any information contained
in any Subscription
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Agreement or the authenticity, sufficiency, or validity of any check delivered
by any prospective investor in payment for Units.
(e) The Placement Agent and its affiliates may purchase Units sold in
the Offering.
2. Representations and Warranties of the Company. The Company represents
and warrants to the Placement Agent and each Selected Dealer, if any, as
follows:
(a) Securities Law Compliance. The Offering Documents conform in all
respects with the requirements of Section 4(2) of the Securities Act and
Regulation D promulgated thereunder and with the requirements of all other
published rules and regulations of the Securities and Exchange Commission
(the "Commission") currently in effect relating to "private offerings" to
"accredited investors" of the type contemplated by the Company. The
Offering Documents will not contain an untrue statement of a material fact
or omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances in which they were made,
not misleading. If at any time prior to the completion of the Offering or
other termination of this Agreement any event shall occur as a result of
which it might become necessary to amend or supplement the Offering
Documents so that they do not include any untrue statement of any material
fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances then existing, not
misleading, the Company will promptly notify you and will supply you with
amendments or supplements correcting such statement or omission. The
Company will also provide the Placement Agent for delivery to all offerees
and purchasers and their representatives, if any, any information,
documents and instruments which the Placement Agent deems necessary to
comply with applicable state and federal law.
(b) Organization. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Nevada and has
all requisite corporate power and authority to own and lease its
properties, to carry on its business as currently conducted and as proposed
to be conducted, to execute and deliver this Agreement and to carry out the
transactions contemplated by this Agreement, as appropriate, and is duly
licensed or qualified to do business as a foreign corporation in
California, Utah and in each other jurisdiction in which the conduct of its
business or ownership or leasing of its properties requires it to be so
qualified, except where the failure to be so licensed or qualified would
not have a material adverse effect on the business, financial condition or
prospects of the Company (a "Material Adverse Effect").
(c) Capitalization. The authorized, issued and outstanding capital
stock of the Company prior to the consummation of the transactions
contemplated hereby is as set forth in the Offering Documents. All issued
and outstanding shares of the Company are validly issued, fully paid and
nonassessable and have not been issued in violation of the preemptive
rights of any stockholder of the Company. All prior sales of securities of
the Company were either registered under the Act and applicable state
securities laws or exempt from such registration, and no security holder
has any rescission rights with respect thereto.
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(d) Warrants, Preemptive Rights, Etc. Except for the warrants to
purchase shares of the Company's Common Stock to be issued to you or your
designees in consideration for your acting as Placement Agent hereunder
(the "Agent's Warrants"), and except as set forth in or contemplated by the
Memorandum, there are not, nor will there be immediately after the Closing
(as hereinafter defined), any outstanding warrants, options, agreements,
convertible securities, preemptive rights to subscribe for or other
commitments pursuant to which the Company is, or may become, obligated to
issue any shares of its capital stock or other securities of the Company
and this Offering will not cause any anti-dilution adjustments to such
securities or commitments except as reflected in the Memorandum.
(e) Subsidiaries and Investments. Except as set forth in Exhibit A,
the Company has no other subsidiaries. The subsidiaries listed in Exhibit A
(the "Subsidiaries") are corporations duly organized and validly existing
under the laws of the States of Utah and California. The Company owns all
of the capital stock of the Subsidiaries free and clear of all liens,
security interests and encumbrances.
(f) Financial Statements. The financial information contained in the
Offering Documents is accurate in all material respects. The Company's Form
10-QSB for the nine months ended September 30, 1997 contains the Company's
(i) Balance Sheets at September 30, 1997, (ii) Statements of Operations for
the year ended December 31, 1996 and for the three and nine months ended
September 30, 1997, and (iii) Statements of Cash Flows for each of the year
ended December 31, 1996 and the nine months ended September 30, 1997 (such
financial statements attached to the Offering Documents hereinafter
referred to collectively as the "Financial Statements"). The Financial
Statements have been prepared in conformity with generally accepted
accounting principles consistently applied and show all material
liabilities, absolute or contingent, of the Company required to be recorded
thereon and present fairly the financial position and results of operations
of the Company as of the dates and for the periods indicated.
(g) Absence of Changes. Since the date of the Memorandum, the Company
has not incurred any liabilities or obligations, direct or contingent, not
in the ordinary course of business, or entered into any transaction not in
the ordinary course of business, which is material to the business of the
Company, and, except as set forth in Schedule G to this Agreement there has
not been any change in the capital stock of, or any incurrence of long-term
debt by, the Company, or any issuance of options, warrants or other rights
to purchase the capital stock of the Company, or any adverse change or any
development involving, so far as the Company can now reasonably foresee, a
prospective adverse change in the condition (financial or otherwise), net
worth, results of operations, business, key personnel or properties which
would be material to the business or financial condition of the Company,
and the Company has not become a party to, and neither the business nor the
property of the Company has become the subject of, any material litigation
whether or not in the ordinary course of business.
(h) Title. Except as set forth on Schedule H hereto, the Company has
good and marketable title to all properties and assets, owned by it, free
and clear of all liens, charges, encumbrances or restrictions, except such
as are not materially significant or important in relation to the Company's
business; all of the material leases and subleases under which the Company
is the
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lessor or sublessor of properties or assets or under which the Company
holds properties or assets as lessee or sublessee are in full force and
effect, and the Company is not in default in any material respect with
respect to any of the terms or provisions of any of such leases or
subleases, and no material claim has been asserted by anyone adverse to
rights of the Company as lessor, sublessor, lessee or sublessee under any
of the leases or subleases mentioned above, or affecting or questioning the
right of the Company to continued possession of the leased or subleased
premises or assets under any such lease or sublease. The Company owns or
leases all such properties as are necessary to its operations as now
conducted and to be conducted, as presently planned.
(i) Proprietary Rights. Except as set forth in Schedule I hereto, the
Company owns or possesses adequate and enforceable rights to use all
patents, patent applications, trademarks, service marks, copyrights, trade
secrets, processes, formulations, technology or know-how used or proposed
to be used in the conduct of its business as described in or contemplated
by the Memorandum (the "Proprietary Rights"). The Company has not received
any notice of any claims, nor does it have any knowledge of any threatened
claims, and knows of no facts which would form the basis of any claim,
asserted by any person to the effect that the sale or use of any product or
process now used or offered by the Company or proposed to be used or
offered by the Company infringes on any patents or infringes upon the use
of any such Proprietary Rights of another person and, to the best of the
Company's knowledge, no others have infringed the Company's Proprietary
Rights.
(j) Litigation. There is no material action, suit, investigation,
customer complaint, claim or proceeding at law or in equity by or before
any arbitrator, governmental instrumentality or other agency now pending
or, to the knowledge of the Company, threatened against the Company (or
basis therefore known to the Company) the adverse outcome of which would
have a Material Adverse Effect. The Company is not subject to any judgment,
order, writ, injunction or decree of any Federal, state, municipal or other
governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign which would have a Material Adverse
Effect.
(k) Non-Defaults; Non-Contravention. The Company is not in violation
of or default under, nor will the execution and delivery of this Agreement
or any of the Offering Documents, the Fund Escrow Agreement (as defined
herein), the Advisory Agreement (as defined herein) or the Agent's Warrants
(as defined herein) or consummation of the transactions contemplated herein
or therein result in a violation of or constitute a default in the
performance or observance of any obligation (i) under its Articles of
Incorporation, as amended, or its By-laws, or any indenture, mortgage,
contract, material purchase order or other agreement or instrument to which
the Company is a party or by which it or its property is bound or affected
or (ii) with respect to any material order, writ, injunction or decree of
any court of any Federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic
or foreign, and there exists no condition, event or act which constitutes,
nor which after notice, the lapse of time or both, could constitute a
default under any of the foregoing, which in either case would have a
Material Adverse Effect.
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(l) Taxes. The Company has filed all Federal, state, local and foreign
tax returns which are required to be filed by it and all such returns are
true and correct in all material respects. The Company has paid all taxes
pursuant to such returns or pursuant to any assessments received by it or
which it is obligated to withhold from amounts owing to any employee,
creditor or third party. The Company has properly accrued all taxes
required to be accrued. The tax returns of the Company have never been
audited by any state, local or Federal authorities. The Company has not
waived any statute of limitations with respect to taxes or agreed to any
extension of time with respect to any tax assessment or deficiency.
(m) Compliance With Laws; Licenses, Etc. The Company has not received
notice of any violation of or noncompliance with any Federal, state, local
or foreign, laws, ordinances, regulations and orders applicable to its
business which has not been cured, the violation of, or noncompliance with
which, would have a Material Adverse Effect. The Company has all licenses
and permits and other governmental certificates, authorizations and permits
and approvals (collectively, "Licenses") required by every Federal, state
and local government or regulatory body for the operation of its business
as currently conducted and the use of its properties, except where the
failure to be licensed would not have a Material Adverse Effect. The
Licenses are in full force and effect and no violations are or have been
recorded in respect of any License and no proceeding is pending or
threatened to revoke or limit any thereof.
(n) Authorization of Agreement, Etc. This Agreement has been duly and
validly authorized, executed and delivered by the Company and the
execution, delivery and performance by the Company of this Agreement, the
Subscription Agreement, the Warrant Agreement, the Fund Escrow Agreement,
the Advisory Agreement and the M/A Agreement have been duly authorized by
all requisite corporate action by the Company and when delivered,
constitute or will constitute the legal, valid and binding obligations of
the Company, enforceable in accordance with their respective terms.
(o) Authorization of Shares and Warrants, Etc. The issuance, sale and
delivery of the Shares and Warrants and the Agent's Warrants have been, or
prior to issuance and delivery will be, duly authorized by all requisite
corporate action of the Company. When so issued, sold and delivered, the
Shares, the Warrants and the Agent's Warrants will be duly executed, issued
and delivered and will constitute valid and legal obligations of the
Company enforceable in accordance with their respective terms and, in each
case, will not be subject to preemptive or any other similar rights of the
stockholders of the Company or others which rights shall not have been
waived prior to the Initial Closing.
(p) Authorization of Reserved Shares. The issuance, sale and delivery
by the Company of the shares of Common Stock issuable upon conversion of
the Shares and the underlying Common Stock issuable upon the exercise of
the Warrants and the Agent's Warrants (collectively, the "Reserved Shares")
have been duly authorized by all requisite corporate action of the Company,
and the Reserved Shares have been duly reserved for issuance upon
conversion of all or any of the Shares and exercise of the Agent's Warrants
and when so issued, sold, paid for and delivered, the Reserved Shares will
be validly issued and outstanding, fully paid and nonassessable,
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and not subject to preemptive or any other similar rights of the
stockholders of the Company or others which rights shall not have been
waived prior to the Initial Closing.
(q) Exemption from Registration. Assuming (i) the accuracy of the
information provided by the respective Subscribers in the Subscription
Documents and (ii) that the Placement Agent has complied in all material
respects with the provisions of Regulation D promulgated under the
Securities Act, the offer and sale of the Units pursuant to the terms of
this Agreement are exempt from the registration requirements of the
Securities Act and the rules and regulations promulgated thereunder (the
"Regulations"). The Company is not disqualified from the exemption under
Regulation D by virtue of the disqualifications contained in Rule
505(b)(2)(iii) or Rule 507 promulgated thereunder.
(r) Registration Rights. Except with respect to holders of the Units
and the Agent's Warrants, and except as set forth in the Memorandum, no
person has any right to cause the Company to effect the registration under
the Securities Act of any securities of the Company. The Company shall
grant registration rights under the Securities Act of 1933, as amended to
the investors in the Offering and/or their transferees with respect to the
Shares, including the Common Stock issuable upon conversion of the Shares,
and the Warrants, including the Common Stock issuable upon exercise of the
Warrants, purchased in the Offering as more fully described in the
Subscription Agreement between the Company and the investors. The Company
will also grant one demand registration commencing six months after the
Closing, which, at the discretion of the Company, may be filed on any
applicable short form registration statement that the Company is eligible
to use, and unlimited "piggyback" registrations to Commonwealth Associates
with respect to its Agent's Warrants and the Common Stock underlying such
securities. The procedure to implement these registration rights will be as
described in the Agent's Warrants.
(s) Brokers. Neither the Company nor any of its officers, directors,
employees or stockholders has employed any broker or finder in connection
with the transactions contemplated by this Agreement other than the
Placement Agent.
(t) Title to Units. When certificates representing the securities
comprising the Units and/or the Reserved Shares shall have been duly
delivered to the purchasers and payment shall have been made therefor, the
several purchasers shall have good and marketable title to the Shares,
Warrants and/or the Reserved Shares free and clear of all liens,
encumbrances and claims whatsoever (with the exception of claims arising or
through the acts of the purchasers and except as arising from applicable
Federal and state securities laws), and the Company shall have paid all
taxes, if any, in respect of the original issuance thereof.
(u) Right of First Refusal. Except for the right of first refusal
granted to the Placement Agent under Section 4(j) hereof, no person, firm
or other business entity is a party to any agreement, contract or
understanding, written or oral entitling such party to a right of first
refusal with respect to the Company.
(v) Securities Exchange Act Compliance. The Company has filed with the
Securities and Exchange Commission ("SEC") on a timely basis all filings
required of a
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company whose securities have been registered under the Securities Exchange
Act of 1934, as amended ("Exchange Act"). All information contained in such
filings is true, accurate and complete in all material respects. The
Company covenants to maintain the registration of its Common Stock under
the Exchange Act and to make all filings thereunder on a timely basis. For
the purpose of this paragraph, filings pursuant to Rule 12b-25 of the
Exchange Act shall be deemed timely.
(w) Non-Affiliated Directors. Within two months after the Initial
Closing, the Company's Board of Directors will have a majority (but not
less than four) directors who qualify under the criteria of the Nasdaq
Stock Market as independent directors, one of which may be a designee of
Commonwealth. Unless any of such individuals refuse to serve, the following
shall be the four appointees: Xxxxxxxx Xxxxxx, Xxxxxxx X. Xxxxxxxxxx,
Xxxxxx X. Blue and Xxxxxxx X. Xxxxxxxx.
3. Closing; Placement and Fees.
(a) Closing. Provided the Minimum Offering shall have been subscribed for
and funds representing the sale thereof shall have cleared, a closing (the
"Initial Closing") shall take place at the offices of the Placement Agent, 000
Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx within ten (10) days following the Termination
Date (which date (the "Closing Date") may be accelerated or adjourned by
agreement between the Company and the Placement Agent). At the Initial Closing,
payment for the Units issued and sold by the Company shall be made against
delivery of certificates representing the Shares and Warrants comprising such
Units. In addition, subsequent closings (if applicable) may be scheduled at the
discretion of the Company and Placement Agent, each of which shall be deemed a
"Closing" hereunder.
(b) Conditions to Placement Agent's Obligations. The obligations of the
Placement Agent hereunder will be subject to the accuracy of the representations
and warranties of the Company herein contained as of the date hereof and as of
each Closing Date, to the performance by the Company of its obligations
hereunder and to the following additional conditions:
(i) Due Qualification or Exemption. (A) The offering contemplated by
this Agreement will become qualified or be exempt from qualification under
the securities laws of the several states pursuant to paragraph 4(e) below
not later than the Closing Date, and (B) at the Closing Date no stop order
suspending the sale of the Units shall have been issued, and no proceeding
for that purpose shall have been initiated or threatened;
(ii) No Material Misstatements. Neither the Blue Sky qualification
materials nor the Memorandum, nor any supplement thereto, will contain an
untrue statement of a fact which in the opinion of the Placement Agent is
material, or omits to state a fact, which in the opinion of the Placement
Agent is material and is required to be stated therein, or is necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading;
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(iii) Compliance with Agreements. The Company will have complied with
all agreements and satisfied all conditions on its part to be performed or
satisfied hereunder at or prior to each Closing;
(iv) Corporate Action. The Company will have taken all necessary
corporate action, including, without limitation, obtaining the approval of
the Company's board of directors, for the execution and delivery of this
Agreement, the performance by the Company of its obligations hereunder and
the offering contemplated hereby;
(v) Opinion of Counsel. The Placement Agent shall receive the opinion
of Loeb & Loeb LLP, dated the Closing(s), substantially to the effect that:
(A) the Company has been duly organized and is validly existing
and in good standing under the laws of the State of Nevada, has all
requisite power and authority necessary to own or hold its respective
properties and conduct its business and is duly qualified or licensed
to do business as a foreign corporation and is in good standing in the
State of California, Utah and in each other jurisdiction in which the
ownership or leasing of its properties or conduct of its business
requires such qualification, except where the failure to so qualify or
be licensed would not have a Material Adverse Effect;
(B) each of this Agreement, the Fund Escrow Agreement, the
Warrant Agreement, the Subscription Agreement, the Advisory Agreement,
the M/A Agreement and the Agent's Warrants has been duly and validly
authorized, executed and delivered by the Company, and is the valid
and binding obligation of the Company, enforceable against it in
accordance with its terms, subject to any applicable bankruptcy,
insolvency or other laws affecting the rights of creditors generally
and to general equitable principles;
(C) the authorized, issued and outstanding capital stock of the
Company as of the date hereof (before giving effect to the
transactions contemplated by this Agreement) is as set forth in the
Offering Documents. Except for the Shares, the Warrants and the
Agent's Warrants to be issued as contemplated by this Agreement, to
such counsel's knowledge, there are no outstanding warrants, options,
agreements, convertible securities, preemptive rights or other
commitments pursuant to which the Company is, or may become, obligated
to issue any shares of its capital stock or other securities of the
Company other than as set forth in the Memorandum. All of the issued
shares of capital stock of the Company issued in connection with the
Company's acquisition of Madison, York & Associates on January 16,
1997 and subsequent thereof have been duly and validly authorized and
issued, are fully paid and nonassessable and have not been issued in
violation of the preemptive rights of any securityholder of the
Company. The offers and sales of such outstanding securities were
either registered under the Act and applicable state securities laws
or exempt from such registration requirements. The Shares and the
Warrants included in the Units and the Agent's Warrants have been duly
authorized, validly issued, fully paid and nonassessable and no
personal liability will attach to the ownership thereof. The Reserved
Shares have been, or prior to the issuance and delivery of the Shares,
the Warrants and the Agent's Warrants will be, duly reserved, and when
issued in accordance with the terms of the Shares, the Warrants and
the Agent's
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Warrants will be validly issued, fully paid and nonassessable and not
subject to preemptive or any other similar rights and no personal
liability will attach to the ownership thereof;
(D) assuming (i) the accuracy of the information provided by the
Subscribers in the Subscription Documents and (ii) that the Placement
Agent has complied in all material respects with the requirements of
section 4(2) of the Securities Act (and the provisions of Regulation D
promulgated thereunder), the issuance and sale of the Units is exempt
from registration under the Securities Act and Regulation D
promulgated thereunder;
(E) neither the execution and delivery of this Agreement, the
Fund Escrow Agreement, the Warrant Agreement, the Subscription
Agreement, the Advisory Agreement, the M/A Agreement or the Agent's
Warrants nor compliance with the terms hereof or thereof, nor the
consummation of the transactions herein or therein contemplated, nor
the issuance of the Shares, the Warrants or the Agent's Warrants, has,
nor will, conflict with, result in a breach of, or constitute a
default under the Articles of Incorporation, as amended, or By-laws of
the Company, or any material contract, instrument or document to which
the Company is a party, or by which it or any of its properties is
bound or violate any applicable law, rule, regulation, judgment, order
or decree of any governmental agency or court having jurisdiction over
the Company or any of its properties or business;
(F) to the best of such counsel's knowledge after due inquiry,
there are no claims, actions, suits, investigations or proceedings
before or by any arbitrator, court, governmental authority or
instrumentality pending or, to the knowledge of such counsel,
threatened, against or affecting the Company or involving the
properties of the Company which might materially and adversely affect
the business, properties or financial condition of the Company or
which might materially adversely affect the transactions or other acts
contemplated by this Agreement or the validity or enforceability of
this Agreement, except as set forth in or contemplated by the Offering
Documents; and
(G) such counsel has participated in the preparation of the
Offering Documents and nothing has come to the attention of such
counsel to cause them to have reason to believe that the Offering
Documents contained any untrue statement of a material fact required
to be stated therein or omitted to state any material fact required to
be stated therein or necessary to make the statements therein not
misleading (except for the financial statements, notes thereto and
other financial information and statistical data contained therein, as
to which such counsel need express no opinion).
(vi) Opinion of Trademark and Copyright Counsel. The Placement Agent
shall receive the opinion of special trademark and copyright counsel to the
Company, dated the Closing(s), in form and substance satisfactory to
counsel for the Placement Agent, to the effect that:
(a) The Company holds a valid registered trademark for "iMALL" (the
"Trademark");
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(b) Neither the Company nor its subsidiaries has received any notice
challenging the validity or enforceability of the Trademark;
(c) there have been no claims asserted against the Company relating to the
potential infringement of or conflict with any trademarks, copyrights or trade
secrets of others.
(vii) Officers' Certificate. The Placement Agent shall receive a
certificate of the Company, signed by the President and Secretary thereof,
that the representations and warranties contained in Section 2 hereof are
true and accurate in all material respects at such Closing with the same
effect as though expressly made at such Closing.
(viii) Fund Escrow Agreement. The Placement Agent shall receive a copy
of a duly executed escrow agreement in the form acceptable to the Company
and the Placement Agent regarding the deposit of funds pending the
Closing(s) with a bank or trust company acceptable to the Placement Agent
(the "Fund Escrow Agreement").
(ix) Lock-Up Agreements. On or prior to the Initial Closing, the
Placement Agent shall receive agreements from each of Messrs. Xxxxx X.
Xxxxxxxxx, Xxxx X. Xxxxx, Xxxxxxx Xxxxxxxxxx and Xxxxxx Xxxxxxxxxx to the
effect that (i) such individual shall not publicly sell, assign or transfer
any of their securities of the Company for a period of 12 months from the
final Closing of this offering without the prior written consent of the
Placement Agent.
(x) Transmittal Letters. The Placement Agent shall receive copies of
all letters from the Company to the investors transmitting the Warrants and
Shares and shall receive a letter from the Company confirming transmittal
of the securities to the investors.
(xi) Charter Amendment. On or prior to the Initial Closing, the
Company shall have obtained the necessary board of director and shareholder
approval of an amendment to the Company's articles of incorporation
authorizing the Preferred Stock and shall have filed such amendment with
the Secretary of State of the State of Nevada.
(c) Blue Sky. A summary blue sky survey shall be prepared by counsel to the
Placement Agent stating the extent to which and the conditions upon which offers
and sales of the Units may be made in certain jurisdictions. It is understood
that such survey may be based on or rely upon (i) the representations of each
Subscriber set forth in the Subscription Agreement delivered by such Subscriber,
(ii) the representations, warranties and agreements of the Company set forth in
Section 2 of this Agreement, (iii) the representations and warranties of the
Placement Agent, and (iv) the representations of the Company set forth in the
certificate to be delivered at the Closing pursuant to paragraph (vii) of
Section 3(b).
(d) Placement Fee and Expenses. Simultaneously with payment for and
delivery of the Units at each Closing as provided in paragraph 3(a) above, the
Company shall at such Closing pay to the Placement Agent (i) a commission equal
to 7% of the aggregate purchase price of the Units sold; (ii) a structuring fee
equal to 3% of the aggregate purchase price of the Units sold; and (iii) an
expense allowance of $200,000. The Company shall also pay all expenses in
connection
Page 23 of 74 Pages
with the qualification of the Units under the securities or Blue Sky laws of the
states which the Placement Agent shall designate. The Company will, at each
Closing, issue to you or your designees (which may include any Selected Dealer
or any officer of the Placement Agent or a Selected Dealer) the Agent's Warrants
in the form annexed hereto as Exhibit 1 to purchase 5,500,000 shares of Common
Stock in case of the Minimum Offering and increasing by 500,000 shares for each
additional $1,000,000 raised up to a total of 10,500,000 shares in the case of
the Maximum Offering, at an exercise price of $.40 per share. The number of
warrants to be issued to the Placement Agent will be reduced on a pro rata basis
for each $1.00 less than the Maximum Offering raised. In th event that any of
the Overallotment Units (as defined herein) are sold in the Offering, the number
of warrants to be issued to the Placement Agent will be increased on a pro rata
basis for each $1.00 in excess of the Maximum Offering raised. The Agent's
Warrants will be exercisable for a period of five years from the Initial
Closing. At the Initial Closing, the Company shall enter into (i) a 12-month
financial advisory agreement (the "Advisory Agreement") with the Placement Agent
under which it will pay the Placement Agent $5,000 per month for 12 months and
(ii) a two-year agreement regarding mergers and acquisitions ("M/A Agreement")
pursuant to which it will pay the Placement Agent 5% of any consideration
received in such a transaction with a party introduced by the Placement Agent.
(f) Bring-Down Opinions and Certificates. If there is more than one
Closing, then at each such Closing there shall be delivered to the Placement
Agent updated opinions and certificates as described in (v), (vi) and (vii) of
Section 3(b) above, respectively.
(g) No Adverse Changes. There shall not have occurred, at any time prior to
the Closing or, if applicable, any additional Closing, (i) any domestic or
international event, act or occurrence which has materially disrupted, or in the
Placement Agent's opinion will in the immediate future materially disrupt, the
securities markets; (ii) a general suspension of, or a general limitation on
prices for, trading in securities on the New York Stock Exchange or the American
Stock Exchange or in the over-the-counter market; (iii) any outbreak of major
hostilities or other national or international calamity; (iv) any banking
moratorium declared by a state or federal authority; (v) any moratorium declared
in foreign exchange trading by major international banks or other persons; (vi)
any material interruption in the mail service or other means of communication
within the United States; (vii) any material adverse change in the business,
properties, assets, results of operations, or financial condition of the
Company; or (viii) any change in the market for securities in general or in
political, financial, or economic conditions which, in the Placement Agent's
reasonable judgment, makes it inadvisable to proceed with the offering, sale,
and delivery of the Units.
4. Covenants of the Company.
(a) Use of Proceeds. The net proceeds of the Offering will be used by the
Company substantially as set forth in the Memorandum. The Company shall not use
more than $650,000 of the proceeds from the Offering to repay any indebtedness
of the Company, including but not limited to indebtedness to any current
executive officers, directors or principal stockholders of the Company, other
than as set forth in the Memorandum.
Page 24 of 74 Pages
(b) Break-Up Fee. If the Private Placement is not completed for any reason
except those specified in the next sentence, the Company shall be liable for the
Placement Agent's out of pocket expenses, not to exceed $200,000, in addition to
the other costs and expenses of the Offering set forth in Section 3(d). If the
Placement Agent raises at least $5,000,000 in escrow and if, within 60 days from
the printing of a final Memorandum, the Private Placement is not completed
because the Company prevents it or because of a breach by the Company of any
such covenants, representations or warranties, the Company shall, in addition to
the payments set forth above and in Section 3(d), pay the Placement Agent
$500,000. In such event, the Placement Agent shall receive 5,500,000 Warrants to
purchase Common Stock with an exercise price of $.40 per share.
(c) Reservation of Common Stock. The Company shall reserve and keep
available that maximum number of its authorized but unissued shares of Common
Stock which are issuable upon conversion and/or exercise of the Shares and the
Warrants, including the shares underlying the Agent's Warrants.
(d) Notification. The Company shall notify the Placement Agent immediately,
and in writing, (A) when any event shall have occurred during the period
commencing on the date hereof and ending on the later of the last Closing or the
Termination Date as a result of which the Offering Documents would include any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading,
and (B) of the receipt of any notification with respect to the modification,
rescission, withdrawal or suspension of the qualification or registration of the
Units, or of any exemption from such registration or qualification, in any
jurisdiction. The Company will use its best efforts to prevent the issuance of
any such modification, rescission, withdrawal or suspension and, if any such
modification, rescission, withdrawal or suspension is issued and you so request,
to obtain the lifting thereof as promptly as possible.
(e) Blue Sky. The Company will use its best efforts to qualify or register
the Units for offering and sale under, or establish an exemption from such
qualification or registration under, the securities or "blue sky" laws of such
jurisdictions as you may reasonably request; provided however, that the Company
will not be obligated to qualify as a dealer in securities in any jurisdiction
in which it is not so qualified. The Company will not consummate any sale of
Units in any jurisdiction in which it is not so qualified or in any manner in
which such sale may not be lawfully made.
(f) Form D Filing. The Company shall file five copies of a Notice of Sales
of Securities on Form D with the Securities and Exchange Commission (the
"Commission") no later than 15 days after the first sale of the Units. The
Company shall file promptly such amendments to such Notices on Form D as shall
become necessary and shall also comply with any filing requirement imposed by
the laws of any state or jurisdiction in which offers and sales are made. The
Company shall furnish the Placement Agent with copies of all such filings.
(g) Press Releases, Etc. The Company shall not, during the period
commencing on the date hereof and ending on the later of the last Closing and
the Termination Date,
Page 25 of 74 Pages
issue any press release or other communication, or hold any press conference
with respect to the Company, its financial condition, results of operations,
business, properties, assets, or liabilities, or the Offering, without the prior
consent of the Placement Agent, which consent shall not be unreasonably
withheld.
(h) Form 10-QSB The Company will provide to the Placement Agent, promptly
upon the filing thereof with the Commission (and in any event no later than 5
days of such filing), a copy of its Annual Report in Form 10-KSB for the year
ended December 31, 1997.
(i) Restrictions on Issuance of Securities. Prior to the Initial Closing
Date, the Company will not, without the prior written consent of the Placement
Agent, issue additional shares of Common Stock or grant any warrants, options or
other securities of the Company.
(j) Absence of Changes. Subsequent to the date of the Memorandum and prior
to the Closing, the Company will not, without the prior written consent of the
Placement Agent, incur any liabilities or obligations, direct or contingent, not
in the ordinary course of business, or enter into any transaction not in the
ordinary course of business, which is material to the business of the Company,
and there will not be any change in the capital stock of, or any incurrence of
long-term debt by, the Company, or any issuance of options, warrants or other
rights to purchase the capital stock of the Company.
(k) Advisory Agreement. Prior to or on the Initial Closing, the Company
shall execute and deliver to the Placement Agent the Advisory Agreement in the
form previously delivered to the Company by the Placement Agent.
(l) Key-Man Insurance. Prior to the Initial Closing, the Company shall have
obtained "key-man" life insurance policies in the amount of at least $2,000,000
on each of the lives of Messrs. Xxxxxxxxxx, Xxxxx and Xxxxxxxxx. Such policies
will be kept in for at least three years from the Initial Closing Date or the
term of the employment agreements with such officers, whichever period is
longer.
(m) Executive Compensation. The compensation of the executive officers of
the Company shall not increase from the date of this Agreement until 12 months
from the Termination Date.
(n) Board Designee. The Company shall, for a period of three years
following the Initial Closing Date or such earlier date after the second
anniversary of the Initial Closing Date as the Preferred Stock has been
converted pursuant to the automatic conversion feature set forth in Section 6(B)
of the Designation, at the Placement Agent's option, nominate a designee of the
Placement Agent to the Company's Board of Directors or, at the option of the
Placement Agent appoint an observer selected by the Placement Agent to attend
all meetings of the Company's Board of Directors.
Page 26 of 74 Pages
(o) Accounting Firm. The Company shall retain an accounting firm acceptable
to the Placement Agent promptly following the Initial Closing Date and for a
period of three years following the Initial Closing Date, shall not effect a
change in such accounting firm, without the prior written consent of the
Placement Agent, unless such new firm is a "big four" accounting firm.
(p) Reports. The Company will deliver to all purchasers in this Offering
(and/or their transferees), within 45 days after the close of each of the
Company's first three fiscal quarters, a quarterly report and shareholders
letter substantially similar in form and substance to a Form 10-QSB under the
Securities Exchange Act of 1934 and an abbreviated form of an annual report
within 90 days after its year end.
(q) M/A Agreement. Prior to or on the Initial Closing, the Company shall
execute and deliver to the Placement Agent the M/A Agreement in the form
previously delivered to the Company by the Placement Agent.
(r) Checks. For a period of one year following the Final Closing, all
checks, wires or money transfers issued by the Company for an amount over $500
must bear two signatures, one of which must be that of Xxxxxxx Xxxxxxxxxx.
5. Indemnification.
(a) The Company agrees to indemnify and hold harmless the Placement Agent
and each Selected Dealer, if any, and their respective shareholders, directors,
officers, agents and controlling persons (an "Indemnified Party") against any
and all loss, liability, claim, damage and expense whatsoever (and all actions
in respect thereof), and to reimburse the Placement Agent for legal fees and
related expenses as incurred (including, but not limited to the costs of giving
testimony or furnishing documents in response to a subpoena or otherwise, and
the costs of investigating, preparing or defending any such action or claim
whether or not in connection with litigation in which the Placement Agent is a
party), arising out of any untrue statement or alleged untrue statement of a
material fact contained in the Offering Documents or the omission or alleged
omission therefrom of a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading;
(b) The Company agrees to indemnify and hold harmless an Indemnified Party
to the same extent as the foregoing indemnity, against any and all loss,
liability, claim, damage and expense whatsoever directly arising out of the
exercise by any person of any right under the Securities Act or the Exchange Act
or the securities or Blue Sky laws of any state on account of violations of the
representations, warranties or agreements set forth in Section 2 hereof.
(c) Promptly after receipt by a person entitled to indemnification pursuant
to the foregoing subsection (a) or (b) (an "indemnified party") under this
Section of notice of the commencement of any action, the indemnified party will,
if a claim in respect thereof is to be made against the Company under this
Section, notify in writing the Company of the commencement
Page 27 of 74 Pages
thereof; but the omission so to notify the Company will not relieve it from any
liability which it may have to the indemnified party otherwise than under this
Section. In case any such action is brought against an indemnified party, and it
notifies the Company of the commencement thereof, the Company will be entitled
to participate in, and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, subject to
the provisions herein stated, with counsel reasonably satisfactory to the
indemnified party, and after notice from the Company to the indemnified party of
its election so to assume the defense thereof, the Company will not be liable to
the indemnified party under this Section for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation. The indemnified party
shall have the right to employ separate counsel in any such action and to
participate in the defense thereof, but the fees and expenses of such counsel
shall not be at the expense of the Company if the Company has assumed the
defense of the action with counsel reasonably satisfactory to the indemnified
party; provided that the fees and expenses of such counsel shall be at the
expense of the Company if (i) the employment of such counsel has been
specifically authorized in writing by the Company or (ii) the named parties to
any such action (including any impleaded parties) include both the indemnified
party or parties and the Company and, in the judgment of the indemnified party,
it is advisable for the indemnified party or parties to be represented by
separate counsel (in which case the Company shall not have the right to assume
the defense of such action on behalf of the indemnified party or parties, it
being understood, however, that the Company shall not, in connection with any
one such action or separate but substantially similar or related actions in the
same jurisdiction arising out of the same general allegations or circumstances,
be liable for the reasonable fees and expenses of more than one separate firm of
attorneys for the indemnified party or parties. No settlement of any action
against an indemnified party shall be made without the consent of the
indemnified party, which shall not be unreasonably withheld in light of all
factors of importance to the indemnified party.
6. Contribution.
To provide for just and equitable contribution, if (i) an indemnified party
makes a claim for indemnification pursuant to Section (5) but it is found in a
final judicial determination, not subject to further appeal, that such
indemnification may not be enforced in such case, even though this Agreement
expressly provides for indemnification in such case, or (ii) any indemnified or
indemnifying party seeks contribution under the Securities Act, the Exchange
Act, or otherwise, then the Company (including for this purpose any contribution
made by or on behalf of any officer, director, employee or agent for the
Company, or any controlling person of the Company), on the one hand, and the
Placement Agent and any Selected Dealers (including for this purpose any
contribution by or on behalf of an indemnified party), on the other hand, shall
contribute to the losses, liabilities, claims, damages, and expenses whatsoever
to which any of them may be subject, in such proportions as are appropriate to
reflect the relative benefits received by the Company, on the one hand, and the
Placement Agent and the Selected Dealers, on the other hand; provided, however,
that if applicable law does not permit such allocation, then other relevant
equitable considerations such as the relative fault of the Company and the
Placement Agent and the Selected Dealers in connection with the facts which
resulted in such losses, liabilities, claims, damages, and expenses shall also
be considered. In no case shall the Placement Agent or a Selected Dealer be
responsible for a portion of the contribution obligation in excess of the
compensation
Page 28 of 74 Pages
received by it pursuant to Section 3 hereof or the Selected Dealer Agreement, as
the case may be. No person guilty of a fraudulent misrepresentation shall be
entitled to contribution from any person who is not guilty of such fraudulent
misrepresentation. For purposes of this Section 6, each person, if any, who
controls the Placement Agent or a Selected Dealer within the meaning of Section
15 of the Securities Act or Section 20(a) of the Exchange Act and each officer,
director, stockholder, employee and agent of the Placement Agent or a Selected
Dealer, shall have the same rights to contribution as the Placement Agent or the
Selected Dealer, and each person, if any who controls the Company within the
meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act
and each officer, director, employee and agent of the Company, shall have the
same rights to contribution as the Company, subject in each case to the
provisions of this Section 6. Anything in this Section 6 to the contrary
notwithstanding, no party shall be liable for contribution with respect to the
settlement of any claim or action effected without its written consent. This
Section 6 is intended to supersede any right to contribution under the
Securities Act, the Exchange Act, or otherwise.
7. Miscellaneous.
(a) Survival. Any termination of the Offering without consummation thereof
shall be without obligation on the part of any party except that the
indemnification provided in Section 5 hereof and the contribution provided in
Section 6 hereof shall survive any termination and shall survive the Closing for
a period of five years.
(b) Representations, Warranties and Covenants to Survive Delivery. The
respective representations, warranties, indemnities, agreements, covenants and
other statements of the Company as of the date hereof shall survive execution of
this Agreement and delivery of the Shares and the Warrants. All of the Company's
obligations for the payment of fees and expenses shall survive termination of
this Agreement, subject to the maximum amounts payable by the Company provided
in Section 4(b) hereof.
(c) No Other Beneficiaries. This Agreement is intended for the sole and
exclusive benefit of the parties hereto and their respective successors and
controlling persons, and no other person, firm or corporation shall have any
third-party beneficiary or other rights hereunder.
(d) Governing Law. This Agreement shall be governed by and construed in
accordance with the law of the State of New York without regard to conflict of
law provisions. The Placement Agent and the Company will attempt to settle any
claim or controversy arising out of this Agreement through consultation and
negotiation in good faith and a spirit of mutual cooperation. Should such
attempts fail, then the dispute will be mediated by a mutually acceptable
mediator to be chosen by the Placement Agent and the Company within 15 days
after written notice from either party demanding mediation. Neither party may
unreasonably withhold consent to the selection of a mediator, and the parties
will share the costs of the mediation equally. Any dispute which the parties
cannot resolve through negotiation or mediation within six months of the date of
the initial demand for it by one of the parties may then be submitted to the
courts for resolution. The use of mediation will not be construed under the
doctrine of latches, waiver or estoppel to affect adversely the rights of either
party. Nothing in this paragraph will prevent either party from
Page 29 of 74 Pages
resorting to judicial proceedings if (a) good faith efforts to resolve the
dispute under these procedures have been unsuccessful or (b) interim relief from
a court if necessary to prevent serious and irreparable injury.
(e) Counterparts. This Agreement may be signed in counterparts with the
same effect as if both parties had signed one and the same instrument.
(f) Notices. Any communications specifically required hereunder to be in
writing, if sent to the Placement Agent, will be mailed, delivered and confirmed
to it at Commonwealth Associates, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000,
Att: Xxxxx Xxxxxxxxxx, with a copy to Bachner, Tally, Xxxxxxx & Xxxxxx LLP, 000
Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Att: Xxxx X. Xxxxxxx, Esq. and if sent
to the Company, will be mailed, delivered or telegraphed and confirmed to it at
0000 Xxxxxxxxx Xxxxxx Xxxxxxxxx, Xxxxx 000, Xxxxxx Xxxx, Xxxxxxxxxx 00000, Att:
Xxxxxxx Xxxxxxxxxx, with a copy to Loeb & Loeb LLP, 0000 Xxxxxxxx Xxxxxxxxx,
Xxxxx 0000, Xxx Xxxxxxx, Xxxxxxxxxx 00000, Att: Xxxxx X. Xxxxxxxx, Esq.
(g) Entire Agreement. This Agreement constitutes the entire agreement of
the parties with respect to the matters herein referred and supersedes all prior
agreements and understandings, written and oral, between the parties with
respect to the subject matter hereof. Neither this Agreement nor any term hereof
may be changed, waived or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver or
termination is sought.
Page 30 of 74 Pages
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,
iMALL, INC.
By: ______________________
Name: Xxxxxxx Xxxxxxxxxx
Title: Chief Executive Officer
Agreed:
COMMONWEALTH ASSOCIATES,
a New York limited partnership
By: COMMONWEALTH MANAGEMENT CO., INC.
a New York corporation,
its general partner
By: _____________________________
Name: Xxxxxx Xxxxx
Title: Chief Financial Officer
