Exhibit 99.2
PLACEMENT AGENCY AGREEMENT
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January 29, 2004
Xxxxxxx Xxxxx Ventures, Inc.
000 Xxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
SmartServ Online, Inc., a Delaware corporation (the "Company"), hereby
confirms its agreement (the "Agreement") with Xxxxxxx Xxxxx Ventures, Inc., a
Delaware corporation (the "Placement Agent"), as follows (unless the context
otherwise requires, as used herein, the "Company" refers to SmartServ Online,
Inc. and each of its subsidiaries, if any):
1. OFFERING.
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(a) The Company will offer (the "Offering") for sale through the Placement Agent
as exclusive agent for the Company, investment units ("Units"), each Unit
comprised of (i) one (1) share of the Company's Series A convertible preferred
stock (the "Shares") having the designations, rights, privileges set forth in
the certificate of designations annexed to the Memorandum (as defined in 1(d)
below) and (ii) one warrant ("Warrant") for the purchase of 10 shares of common
stock of the Company ("Common Stock") The Warrants and the Shares shall
collectively be referred to herein as the Securities. The offering price per
Unit (the "Purchase Price per Unit") shall be calculated at each closing to be
equal to the lesser of (A) 10 times the lesser of (i) 80% of the average of the
closing bid prices of the Common Stock over the ten trading days immediately
preceding the date of each closing of the Offering (a "Closing Date") or (ii)
80% of the closing bid price of the Common Stock on the day immediately prior to
the applicable Closing Date or (B) with respect to closings after the first
closing, the Purchase Price per Unit at the first closing. The exercise price
per share of the shares underlying the Warrants will be 150% of the Market Price
(as defined below) of the Common Stock on the day immediately prior to each
closing. Market Price ("Market Price") shall be equal to the lesser of (i) the
average of the closing bid prices of the Common Stock over the ten trading days
immediately preceding the applicable Closing Date, or (ii) the closing bid price
of the Common Stock on the day immediately prior to the applicable Closing Date.
The purchase price may be paid in cash or cancellation of indebtedness to an
investor. The total amount of gross cash proceeds from the sale of Units in the
Offering (excluding for such purpose any converted indebtedness) shall be a
minimum of $3.0 million (the "Minimum Amount") and a maximum of $6.0 million
(the "Maximum Amount"). In addition, for the purposes of covering overallotments
in the sale of the Units, the Company agrees to grant the Placement Agent an
option to sell additional Units with an aggregate purchase price of up to $1.8
million. All share prices, exercise prices and conversion prices should be
assumed to be proportionally adjusted to reflect stock splits, stock dividends,
recapitalizations and the like.
(b) The Units will be offered on a reasonable efforts basis for a period of 60
days from the date of the Memorandum (as defined below) (the "Commencement
Date"), which period may be extended by mutual agreement of the Placement Agent
and the Company for up to an additional 30 days (the "Offering Period"). The
date on which the Offering shall terminate shall be referred to as the
"Termination Date."
(c) The minimum subscription for Units shall be $25,000, however, the Placement
Agent may, in its discretion, offer less than the minimum subscription amount;
PROVIDED, HOWEVER, that the Placement Agent shall not tender to the Company and
the Company shall not accept subscriptions from, or sell Units to, any persons
or entities that do not qualify as (or are not reasonably believed to be)
"accredited investors," as such term is defined in Rule 501 of Regulation D
promulgated under Section 4(2) of the Securities Act of 1933, as amended (the
"Act").
(d) The offering of the Units will be made by the Placement Agent on behalf of
the Company solely pursuant to the Memorandum, as defined below, which at all
times will be in form and substance acceptable to the Placement Agent and its
counsel and contain such legends and other information as the Placement Agent
and its counsel may, from time to time, deem necessary and desirable to be set
forth therein. "Memorandum" as used in this Agreement means the Company's
Confidential Private Placement Memorandum, inclusive of all exhibits, and any
and all amendments, supplements and appendices thereto and other
Company-approved documents that the Placement Agent may use on the Company's
behalf to sell the Units. Unless otherwise defined, each term used in this
Agreement will have the same meaning as shall be set forth in the Memorandum.
2. REPRESENTATIONS AND WARRANTIES. Except as set forth under the corresponding
section of the Schedule of Exceptions delivered concurrently herewith (the
"Schedule of Exceptions"), the Company hereby represents and warrants to the
Placement Agent that each of the following shall be true in all respects as of
the date hereof and, as applicable, on and as of the date of the Memorandum as
if made on and as of the date hereof:
(a) The Memorandum will be, and as of the date of the Memorandum has been,
diligently prepared by the Company, at its sole cost, in conformity with all
applicable laws, and will be in compliance with Regulation D as promulgated
under Section 4(2) of the Act ("Regulation D"), the Act and the requirements of
all other rules and regulations (the "Regulations") of the Securities and
Exchange Commission (the "SEC") relating to offerings of the type contemplated
by the Offering, and the applicable securities laws and the rules and
regulations of those jurisdictions wherein the Units are to be offered and sold,
excluding foreign jurisdictions. The Units will be offered and sold pursuant to
the registration exemption provided by Regulation D and Section 4(2) and/or
Section 4(6) of the Act as a transaction not involving a public offering and the
requirements of any other applicable state securities laws and the respective
rules and regulations thereunder in those United States jurisdictions in which
the Placement Agent notifies the Company that the Units are being offered for
sale. The Memorandum will describe all material aspects, including attendant
risks, of an investment in the Company. The Company has not taken nor will it
take any action that conflicts with the conditions and requirements of, or that
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would make unavailable with respect to the Offering, the exemption(s) from
registration available pursuant to Regulation D or Section 4(2) and/or Section
4(6) of the Act and knows of no reason why any such exemption would be otherwise
unavailable to it. Neither the Company nor its affiliates has been subject to
any order, judgment or decree of any court or governmental authority of
competent jurisdiction temporarily, preliminarily or permanently enjoining such
person for failing to comply with Section 503 of Regulation D.
(b) The Memorandum will not, and as of the date of the Memorandum does not,
include any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. None
of the statements, documents, certificates or other items prepared or supplied
by the Company with respect to the transactions contemplated hereby contains or
will contain an untrue statement of a material fact or omits a material fact
necessary to make the statements contained therein not misleading. There is no
fact that the Company has not disclosed to the Placement Agent and its counsel
and of which the Company is aware that materially and adversely affects or is
likely to materially and adversely affect the business, prospects, financial
condition, operations, assets or affairs of the Company.
(c) The Company is a corporation duly organized, validly existing and in good
standing under the laws of Delaware. The Company has no active subsidiaries and
except for its wholly owned subsidiaries which are inactive, does not have an
equity interest in any other firm, partnership, association or other entity. The
Company is duly qualified to transact business as a foreign corporation and is
in good standing under the laws of each jurisdiction where the location of its
properties or the conduct of its business makes such qualification necessary,
except where the failure to be so qualified would not have a material adverse
effect on the Company or its business.
(d) The Company has all requisite power and authority (corporate and other) to
conduct its business as presently conducted and as proposed to be conducted
(described in the Memorandum), to enter into and perform its obligations under
this Agreement and the other agreements contemplated hereby, the Securities and
by the Memorandum (collectively, the "Transaction Documents") and to issue, sell
and deliver the Units and the shares of Common Stock issuable upon conversion
and exercise, as applicable, of the Securities (the "Conversion Shares"). The
execution and delivery of each of the Transaction Documents has been duly
authorized by all necessary corporate action. This Agreement has been duly
executed and delivered and constitutes, and each of the other Transaction
Documents, upon due execution and delivery, will constitute, valid and binding
obligations of the Company, enforceable against the Company in accordance with
their respective terms.
(e) None of the execution and delivery of, or performance by the Company under,
any of the Transaction Documents or the consummation of the transactions herein
or therein contemplated conflicts with or violates, or will result in the
creation or imposition of, any lien, charge or other encumbrance upon any of the
assets of the Company under any agreement or other instrument to which the
Company is a party or by which the Company or its assets may be bound, any term
of the charter or by-laws of the Company, or any license, permit, judgment,
decree, order, statute, rule or regulation applicable to the Company or any of
its assets.
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(f) The Company will have the authorized and outstanding capital stock set forth
in the Memorandum. Except as set forth in the Memorandum, all outstanding shares
of capital stock of the Company are duly authorized, validly issued and
outstanding, fully paid and nonassessable. Except as set forth in the Memorandum
and the Schedule of Exceptions: (i) there are no outstanding options, stock
subscription agreements, warrants or other rights permitting or requiring the
Company or others to purchase or acquire any shares of capital stock, or other
equity securities of the Company, or to pay any dividend or make any other
distribution in respect thereof; (ii) there are no securities issued or
outstanding that are convertible into or exchangeable for any of the foregoing
and there are no contracts, commitments or understandings, whether or not in
writing, to issue or grant any such option, warrant, right or convertible or
exchangeable security; (iii) no shares of stock or other securities of the
Company are reserved for issuance for any purpose; (iv) there are no voting
trusts or other contracts, commitments, understandings, arrangements, or
restrictions of any kind with respect to the ownership, voting or transfer of
shares of stock or other securities of the Company, including without
limitation, any preemptive rights, rights of first refusal, proxies or similar
rights; and (v) no person holds a right to require the Company to register any
securities of the Company under the Act or to participate in any such
registration. The issued and outstanding shares of capital stock of the Company
conform to all statements in relation thereto contained in the Memorandum and
the Memorandum describes all material terms and conditions thereof. All
issuances by the Company of its securities were at the time of their issuance
either (x) exempt from registration under the Act and any applicable state
securities laws or (y) appropriately registered.
(g) The Shares, the Warrants, the Conversion Shares and the Agent's Warrants (as
defined in Section 3(e) hereof) have been duly authorized and, when issued and
delivered against payment therefore as provided in the Transaction Documents,
will be validly issued, fully paid and nonassessable and will be free and clear
of all liens, charges, restrictions, claims and encumbrances imposed by or
through the Company other than as provided in the Transaction Documents. No
holder of any of the Securities, the Conversion Shares or the Agent's Warrants
or Agent's Shares (as defined in Section 3(e) hereof) will be subject to
personal liability solely by reason of being such a holder and, except as set
forth in the Memorandum and the Schedule of Exceptions, none of the Securities,
the Conversion Shares or the Agent's Warrants or Agent's Shares is subject to
preemptive or similar rights of any securityholder of the Company or an
adjustment under the antidilution or exercise rights of any holders of any
outstanding shares of capital stock, options, warrants or other rights to
acquire any securities of the Company. A sufficient number of authorized but
unissued shares of Common Stock have been reserved for issuance upon the
conversion of the Shares, exercise of the Warrants and the Agent's Warrants (as
defined in Section 3(e) defined hereof).
(h) No consent, authorization or filing of or with any court or governmental
authority is required in connection with the issuance of the Securities, the
Conversion Shares or the Agent's Warrants or Agent's Shares or the consummation
of the transactions contemplated herein or in the other Transaction Documents,
except for required filings with the SEC, if any, and applicable "blue sky" or
state securities commissions relating specifically to the Offering (all of which
will be duly made on a timely basis).
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(i) Except as set forth in the Memorandum, the financial statements, together
with the related notes thereto, of the Company included or incorporated by
reference in the Memorandum are true and complete and present fairly, in all
material respects, the financial position of the Company as of the respective
dates specified and the results of its operations and changes in financial
position for the respective periods covered thereby. Such financial statements
and related notes were prepared in accordance with U.S. generally accepted
accounting principles ("GAAP") applied on a consistent basis throughout the
periods indicated and except that the unaudited financial statements omit full
notes, and except for normal year-end adjustments. Except as set forth in such
financial statements or in the Memorandum, the Company has no material
liabilities of any kind, whether accrued, absolute, contingent or otherwise or
entered into any material transactions or commitments. The other financial and
statistical information with respect to the Company included in the Memorandum
present fairly the information shown therein on a basis consistent with the
financial statements of the Company included in the Memorandum. The Company does
not know of any facts, circumstances or conditions (or any state of facts,
circumstances or conditions which management of the Company has concluded could
give rise thereto) that could materially adversely affect its business,
operations, earnings or prospects that have not been fully disclosed in the
Memorandum or the Schedule of Exceptions.
(j) The conduct of business by the Company as presently and proposed to be
conducted is not subject to continuing oversight, supervision, regulation or
examination by any governmental official or body of the United States or any
other jurisdiction wherein the Company conducts or proposes to conduct such
business, except as described in the Memorandum or except such regulation as is
applicable to commercial enterprises generally. Except as set forth in the
Memorandum, all material licenses, permits, approvals, government
authorizations, leases, contracts and agreements referred to in the Memorandum,
along with all other material licenses, permits, approvals, leases, governmental
authorizations or contracts to which the Company is a party, have been obtained
and are valid and in full force and effect and neither the Company nor, to the
knowledge of the Company, any other party is in default thereunder, and to the
knowledge of the Company, no event has occurred which with the passage of time
or the giving of notice, or both, would constitute a default thereunder except
for a default which would not have a material adverse effect on the Company.
Except as described in the Memorandum, all material licenses, permits, approvals
or governmental authorizations necessary to permit the Company to conduct its
business have been obtained and are outstanding and will be outstanding on each
Closing Date, and the Company is in all material respects complying therewith.
There are no proceedings pending, or to the knowledge of the Company threatened,
seeking to cancel, terminate or limit such licenses, approvals or permits.
(k) Except as disclosed in the Memorandum or the Schedule of Exceptions, no
default by the Company or, to the best knowledge of the Company, any other party
exists in the due performance under any material agreement to which the Company
is a party or to which any of its assets is subject, that could have a material
adverse effect on its business, operations, earnings or prospects (collectively,
the "Company Agreements"). The Company Agreements are in full force and effect
in accordance with their respective terms.
(l) Except as set forth in the Memorandum or in the Schedule of Exceptions,
there are no actions, proceedings, claims or investigations, before or by any
court or governmental authority (or any state of facts which management of the
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Company has concluded could give rise thereto) pending or, to the best knowledge
of the Company, threatened, against the Company, or involving its assets or, to
the knowledge of the Company, involving any of its officers or directors which,
if determined adversely to the Company or such officer or director, could result
in any material adverse change in the condition (financial or otherwise) or
prospects of the Company or adversely affect the transactions contemplated by
this Agreement or the other Transaction Documents or the enforceability thereof.
(m) Except as set forth in the Memorandum or the Schedule of Exceptions, the
Company is not in violation of: (i) its charter or by-laws; (ii) any indenture,
mortgage, deed of trust, note or other agreement or instrument to which the
Company is a party or by which it is or may be bound or to which any of its
assets may be subject; (iii) any statute, rule or regulation currently
applicable to the Company; or (iv) any judgment, decree or order applicable to
the Company, which violation or violations individually, or in the aggregate,
would result in any material adverse change in the condition (financial or
otherwise) or prospects of the Company.
(n) Except as set forth in the Memorandum, the Company does not own any real
property in fee simple, and the Company has good and marketable title to all
property (personal, tangible and intangible) owned by it, free and clear of all
security interests, liens and encumbrances.
(o) The Company owns all right, title and interest in, or possesses adequate and
enforceable rights to use, all patents, patent applications, trademarks, trade
names, service marks, copyrights, rights, licenses, franchises, trade secrets,
confidential information, processes, formulations, software and source and
object codes reasonably necessary for the conduct of its business, except as
otherwise described in the Memorandum (collectively, the "Intangibles"). The
Company has not, after due inquiry, knowingly infringed upon the rights of
others with respect to the Intangibles; the Company has not received notice that
it has or may have infringed or is infringing upon the rights of others with
respect to the Intangibles, or any notice of conflict with the asserted rights
of others with respect to the Intangibles that could, individually or in the
aggregate, materially and adversely affect the business, condition (financial or
otherwise) or prospects of the Company. Except as set forth in the Memorandum,
to the best knowledge of the Company, no other parties have infringed or are
infringing upon the Intangibles.
(p) Except as set forth in the Memorandum or the Schedule of Exceptions and as
may otherwise be contemplated therein, the Company has operated its business
diligently and only in the ordinary course as theretofore conducted and there
has been no: (i) material adverse change in the business condition (financial or
otherwise) or prospects of the Company; (ii) transaction otherwise than in the
ordinary course of business; (iii) issuance of any securities (debt or equity)
or any rights to acquire any such securities; (iv) damage, loss or destruction,
whether or not covered by insurance, with respect to any asset or property of
the Company; or (v) agreement to permit any of the foregoing.
(q) Except as set forth in the Memorandum or the Schedule of Exceptions, the
Company has filed each Federal, state, local and foreign tax return which is
required to be filed by it, or has requested an extension therefor and has paid
all taxes and all related assessments, penalties and interest to the extent that
the same have become due.
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(r) The Company is not obligated to pay, and has not obligated the Placement
Agent to pay, a finder's or origination fee in connection with the Offering and
agrees to indemnify the Placement Agent from any such claim made by any other
person. The Company has not offered for sale or solicited offers to purchase the
Units except for negotiations with the Placement Agent. Except as set forth in
the Memorandum, as of the commencement of the Offering, no other person has any
right to participate in any offer, sale or distribution of the Company's
securities to which the Placement Agent's rights, described herein, shall apply.
(s) The Company has and will maintain appropriate casualty and liability
insurance coverage, in scope and amounts reasonable and customary for similar
businesses.
(t) All of the Company's filings with the SEC are true and correct in all
material respects.
3. PLACEMENT AGENT APPOINTMENT AND COMPENSATION.
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(a) In accordance with the terms hereof, the Company hereby appoints the
Placement Agent and its selected dealers, as its exclusive agent in connection
with the Offering. The Company acknowledges that the Placement Agent may use
selected dealers and sub agents to fulfill its agency hereunder provided that
such dealers and sub agents are compensated solely by the Placement Agent.
Except as expressly stated herein, the Company has not and will not make, or
permit to be made, any offers or sales of the Units other than through the
Placement Agent without the Placement Agent's prior written consent. The
Placement Agent has no obligation to purchase any of the Units. The agency of
the Placement Agent hereunder shall continue until the earlier of the
Termination Date or the Final Closing (as defined in Section 3(f) hereof).
(b) The Company will cause to be delivered to the Placement Agent copies of the
Memorandum and has consented, and hereby consents, to the use of such copies for
the purposes permitted by the Act and applicable securities laws, and hereby
authorizes the Placement Agent and its agents, employees and selected dealers to
use the Memorandum in connection with the sale of the Units until the
Termination Date, and no other person or entity is or will be authorized to give
any information or make any representations other than those contained in the
Memorandum or to use any offering materials other than those contained in the
Memorandum in connection with the sale of the Units. The Company will provide at
its own expense such quantities of the Memorandum and other documents and
instruments relating to the Offering as the Placement Agent may reasonably
request.
(c) The Company will cooperate with the Placement Agent by making available to
its representatives such information as may be requested in making a reasonable
investigation of the Company and its affairs and shall provide access to such
employees as shall be reasonably requested.
(d) At each Closing, the Company shall pay to the Placement Agent a placement
fee equal to ten percent (10%) of the aggregate cash Purchase Price per Unit
paid by each Investor and for which subscriptions are accepted by the Placement
Agent and the Company (the "Placement Agent's Fee"). In addition, the Company
shall pay all expenses set forth in Section 5(j) hereof. The Placement Agent's
Fee and the expenses set forth in Section 5(j) hereof will be deducted from the
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gross proceeds of the Units sold at each Closing, as set forth in Section 4
hereof. The Placement Agent shall direct all such amounts to be paid directly
from the escrow account established pursuant to Section 4(b) hereof.
(e) As additional compensation hereunder, at each Closing, the Company shall
sell to the Placement Agent or its designees, for $1, five-year warrants (the
"Agent's Warrants") to purchase the number of Units equal to twenty percent
(20%) of the Units purchased for cash at each Closing, at an exercise price per
Unit equal to the Purchase Price per Unit at the applicable Closing (such shares
of Common Stock underlying the components of the Agent's Warrants, the "Agent's
Shares"). The holders of the Agent's Warrants shall have registration rights
equivalent to those granted to the holders of Units. The Agent's Warrants will
contain cashless exercise and weighted-average antidilution provisions.
(f) In the event any investor in the Offering or party contacted by the
Placement Agent in connection with the Offering (except for parties that have
previously invested in the Company not as a result of an introduction by the
Placement Agent, and third parties that have a pre-existing business
relationship with the Company that did not arise from an introduction by the
Placement Agent), subsequently invests (except through an underwritten public
offering) in the Company at any time within eighteen (18) months from the later
of the termination date or the final closing of the Offering ("Final Closing"),
the Company shall pay to the Placement Agent the Placement Agent's Fee and a
nonaccountable expense allowance equal to 3%, and sell to the Placement Agent
the Agent's Warrants (exercisable at the subsequent offering share price) with
respect to, and based on the gross proceeds from investments in the Company made
within eighteen months after the Final Closing by such investors or parties.
4. SUBSCRIPTION AND CLOSING PROCEDURES.
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(a) Each prospective purchaser will be required to complete and execute one
original signature page for the Subscription Agreement in the form annexed to
the Memorandum, which will be forwarded or delivered to the Placement Agent at
the Placement Agent's offices at the address set forth in Section 11 hereof,
together with the subscriber's check or good funds in the full amount of the
Purchase Price Per Unit for the number of Units desired to be purchased.
(b) All funds for subscriptions received from the Offering will be promptly
forwarded by the Placement Agent or the Company, if received by it, to and
deposited in an escrow account (the "Escrow Account") with American Stock
Transfer & Trust Co., acting as escrow agent. established for the purpose of
holding subscription funds prior to a Closing (the "Escrow Agent"). All such
funds for subscriptions will be held in the Escrow Account pursuant to the terms
of the escrow agreement with respect thereto among the Company, the Placement
Agent and the Escrow Agent. The Company will pay all fees related to the
establishment and maintenance of the Escrow Account. The Placement Agent can
reject any subscriptions for any reason. Subject to the receipt of such
subscriptions for the Minimum Amount, the Company will either accept or reject
the Subscription Agreements in a timely fashion and at the Closing will
countersign the Subscription Agreements and provide copies of such agreements to
the Placement Agent. The Company will give written notice to the Placement Agent
of its acceptance or rejection of each subscription. The Company, or the
Placement Agent on the Company's behalf, will promptly return to subscribers
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incomplete, improperly completed, improperly executed and rejected subscriptions
and give written notice thereof to the Placement Agent upon such return.
(c) If subscriptions for at least the Minimum Amount have been accepted prior to
the Termination Date, the funds therefor have been collected by the Escrow Agent
and all of the conditions set forth elsewhere in this Agreement are fulfilled, a
closing shall be held promptly with respect to that portion of the Units sold
(the "First Closing"). Thereafter, the remaining Units will continue to be
offered and sold until the Termination Date. Additional closings ("Closings")
may from time to time be conducted at times mutually agreeable with respect to
the additional Units sold, with the Final Closing to occur within ten (10) days
from the earlier of the Termination Date or the sale of all Units offered.
Delivery of payment for the accepted subscriptions from the funds held in the
Escrow Account will be made at each Closing at the Placement Agent's offices
against delivery of the Securities comprising the Units by the Company at the
address set forth in Section 11 hereof (or at such other place as may be
mutually agreed upon between the Company and the Placement Agent), net of
amounts due to the Placement Agent and Blue Sky counsel pursuant to Section 5(j)
hereof as of such Closing. Executed Securities and the Agent's Warrants will be
in such authorized denominations and issued in such names as the Placement Agent
may request on or before the second full business day prior to each Closing
Date, and will be made available to the Placement Agent for review and packaging
at the Placement Agent's office at least one full business day prior thereto.
(d) If Subscription Agreements for the Minimum Amount have not been received and
accepted by the Company on or before the Termination Date for any reason, the
Offering will be terminated, no Units will be sold, and the Escrow Agent will,
at the request of the Placement Agent, cause all monies received from
subscribers for the Units to be promptly returned to such subscribers without
interest, penalty, expense or deduction.
5. FURTHER COVENANTS. The Company hereby covenants and agrees that:
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(a) Except with the prior written consent of the Placement Agent, the Company
shall not, at any time prior to the Final Closing, take any action that would
cause any of the representations and warranties made by it in this Agreement not
to be complete and correct on and as of each Closing Date with the same force
and effect as if such representations and warranties had been made on and as of
each such date.
(b) If, at any time prior to the Final Closing, any event shall occur that does
or may materially affect the Company or as a result of which it might become
necessary to amend or supplement the Memorandum so that the representations and
warranties herein remain true, or in case it shall, in the reasonable opinion of
counsel to the Placement Agent, be necessary to amend or supplement the
Memorandum to comply with Regulation D or any other applicable securities laws
or regulations, the Company will promptly notify the Placement Agent and shall,
at its sole cost, prepare and furnish to the Placement Agent copies of
appropriate amendments and/or supplements in such quantities as the Placement
Agent may request. The Company will not at any time, whether before or after the
Final Closing, prepare or use any amendment or supplement to the Memorandum of
which the Placement Agent will not previously have been advised and furnished
with a copy, or to which the Placement Agent or its counsel will have objected
in writing or orally (confirmed in writing within 24 hours), or which is not in
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compliance with the Act, the Regulations and other applicable securities laws.
As soon as the Company is advised thereof, the Company will advise the Placement
Agent and its counsel, and confirm the advice in writing, of any order
preventing or suspending the use of the Memorandum, or the suspension of the
qualification or registration of the Units for offering or the suspension of any
exemption for such qualification or registration of the Units for offering in
any jurisdiction, or of the institution or threatened institution of any
proceedings for any of such purposes, and the Company will use its best efforts
to prevent the issuance of any such order, judgment or decree, and, if issued,
to obtain as soon as reasonably possible the lifting thereof.
(c) The Company shall comply with the Act, the Regulations, the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and the rules and regulations
thereunder, all applicable state securities laws and the rules and regulations
thereunder in the states in which the Placement Agent's Blue Sky counsel has
advised the Placement Agent that the Units are qualified or registered for sale
or exempt from such qualification or registration, so as to permit the
continuance of the sales of the Units, and will file with the SEC, and shall
promptly thereafter forward to the Placement Agent, any and all reports on Form
D as are required.
(d) The Company shall use its reasonable best efforts to qualify the Units for
sale (or seek exemption therefrom) under the securities laws of such
jurisdictions in the United States as the Placement Agent shall designate, and
the Company will (through Blue Sky counsel) make such applications and furnish
information as may be required for such purposes. The Company will, from time to
time, prepare and file such statements and reports as are or may be required to
continue such qualifications in effect for so long a period as the Placement
Agent may reasonably request.
(e) The Company shall file on or before the later of April 30, 2004 or 30 days
following the date of the Final Closing, a resale registration statement under
the Securities Act for the resale of the shares of Common Stock (i) underlying
the Series A Preferred, (ii) underlying the Warrants, (iii) issuable upon
dividend distributions in respect of the Series A Preferred and (iv) underlying
the Agent's Warrants. The Company will (x) use reasonable best efforts to cause
the registration statement to become effective within 120 days after the date of
filing and (y) maintain the effectiveness of such registration statement for 24
months after the Final Closing of the Offering. If the Company fails to file
such registration statement on or before 45 days following the date of the Final
Closing or such registration statement does not become effective within 120 days
after such date of filing (or if earlier, the expiration of such 45-day period),
the Company will pay a cash penalty to the holders of the Shares equal to two
percent of their aggregate Purchase Price per Unit for each 30 days (or portion
thereof) such registration obligations are not met by the Company. The cash
payments shall be paid promptly on the first business day of each calendar month
during such period of noncompliance. Notwithstanding anything in this Section
5(e) to the contrary, if the Company shall furnish to the holders of the
Securities ("Holders") a certificate signed by the President or Chief Executive
Officer of the Company stating that the Board of Directors of the Company has
made the good faith determination that it is therefore essential to suspend the
use by the Holders of such registration statement (and the prospectus relating
thereto) for purposes of effecting offers or sales of Common Stock pursuant
10
thereto, then the right of such Holders to use such registration statement (and
the prospectus relating thereto) for purposes of effecting offers or sales of
Common Stock pursuant thereto, shall be suspended for a period (the "SUSPENSION
PERIOD") of not more than 30 days after delivery by the Company of the
certificate referred to above in this Section 5(e), PROVIDED, that the Company
shall provide the Holders of the Securities with no less than twenty-four (24)
hours prior written notice of any Suspension Period. During the Suspension
Period, such Holders shall not offer or sell any Common Stock pursuant to or in
reliance upon such registration statement (or the prospectus relating thereto).
The Company agrees that, as promptly as practicable, the Company will provide
such Holders with revised prospectuses, if required, and will notify the Holders
of their ability to effect offers or sales of Common Stock pursuant to or in
reliance upon such registration statement. Notwithstanding for foregoing, the
Company shall not be entitled to Suspension Periods totaling more than 30 days
in the aggregate in any twelve (12) month period.
(f) The Company shall place a legend on the certificates representing the
Securities issued to subscribers stating that the securities evidenced thereby
have not been registered under the Act or applicable state securities laws,
setting forth or referring to the applicable restrictions on transferability and
sale of such securities under the Act and applicable state laws.
(g) The Company shall apply the net proceeds from the sale of the Units to fund
its working capital requirements and/or for such other purposes as shall be
specifically described under "Use of Proceeds" in the Memorandum. Except as set
forth in the Memorandum, the SEC Reports or as approved by the Board of
Directors of the Company, the net proceeds shall not be used to repay
indebtedness to current executive officers or principal shareholders of the
Company, or to repurchase or redeem any securities, other than pursuant to
Section 1(a) hereof, and except as otherwise authorized by the Placement Agent
in writing
(h) During the Offering Period, the Company shall make available for review by
prospective purchasers of the Units during normal business hours at the
Company's offices, upon their request, copies of the Company Agreements to the
extent that such disclosure shall not violate any obligation on the part of the
Company to maintain the confidentiality thereof and shall afford each
prospective purchaser of Units the opportunity to ask questions of and receive
answers from an officer of the Company concerning the terms and conditions of
the Offering and the opportunity to obtain such other additional information
necessary to verify the accuracy of the Memorandum to the extent it possesses
such information or can acquire it without unreasonable expense.
(i) Except with the prior written consent of the Placement Agent or as set forth
in the Memorandum, the Company shall not, at any time prior to the earlier of
the Final Closing or the Termination Date, engage in or commit to engage in any
transaction outside the ordinary course of business, including, without
limitation, the incurrence of material indebtedness, materially change its
business or operations as shall be described in the Memorandum, dispose of any
material assets or make any material acquisition, or issue, agree to issue or
set aside for issuance any securities (debt or equity) or any right to acquire
such securities except as shall be contemplated by the Memorandum.
(j) Whether or not the transactions contemplated hereby are consummated, or this
Agreement is terminated, the Company hereby agrees to pay all fees, costs and
expenses incident hereto and to the Offering, including, without limitation,
those in connection with (i) preparing, distributing and binding the Memorandum
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and any and all amendments and/or supplements thereto, fees for bound volumes
and any and all agreements, contracts and other documents related hereto and
thereto; (ii) the authorization, issuance, transfer and delivery of the
Securities, the Conversion Shares, the Agent's Warrants and the Agent's Shares,
including, without limitation, fees and expenses of any transfer agent or
registrar; (iii) the fees and expenses of the Escrow Agent (subject to Section
4(b) hereof); (iv) all fees and expenses of legal, accounting and other advisers
to the Company; (v) all reasonable filing fees, costs and legal fees and
expenses for Blue Sky services and related filings with respect to Blue Sky
exemptions and qualifications, including legal fees of $3,000 for the first ten
states and $450 per state thereafter, $3,000 of which shall be paid to the
Placement Agent's counsel at the First Closing for legal fees in connection with
obtaining Blue Sky exemptions (the "Blue Sky Fees"); and (vi) subject to Section
9 hereof, a nonaccountable expense allowance ("Placement Agent Expenses")
relating to expenses incurred by the Placement Agent in connection with the
Offering (including, without limitation, travel and related expenses and fees
and expenses of legal, accounting and other advisers to the Placement Agent)
equal to three (3%) percent of the aggregate Purchase Price per Unit sold,
deducted from the gross proceeds of the Units sold in the Offering.
(k) Until the Termination Date, neither the Company nor any person or entity
acting on its behalf will negotiate or enter into any agreement with any other
placement agent or underwriter with respect to a private or public offering of
the Company's or any subsidiary's debt or equity securities. Neither the Company
nor anyone acting on its behalf will, until the Termination Date, without the
prior written consent of the Placement Agent, offer for sale to, or solicit
offers to subscribe for Units or other securities of the Company from, or
otherwise approach or negotiate in respect thereof with, any other person.
(l) Prior to the First Closing, the chief executive officer and chief financial
officer of the Company shall have provided representations and warranties in
form and substance acceptable to the Placement Agent relating to the Company's
most recent quarterly unaudited and year to date financial statements, internal
financial controls, similar to those included in the Company's 2002 annual
report on Form 10-K under the Securities Exchange Act of 1934, as amended, and
as required by the Xxxxxxxx-Xxxxx Act of 2002, the absence of undisclosed
liabilities and such other matters relating to the financial condition and
prospects of the Company as the Placement Agent may reasonably request.
6. CONDITIONS OF PLACEMENT AGENT'S OBLIGATIONS. The obligations of the Placement
Agent hereunder are subject to the fulfillment, at or before each Closing, of
the following additional conditions:
(a) Each of the representations and warranties of the Company shall be true and
correct when made on the date hereof and on and as of each Closing Date as
though made on and as of each Closing Date.
(b) The Company shall have performed and complied with all agreements, covenants
and conditions required to be performed and complied with by it under the
Transaction Documents at or before each Closing.
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(c) No order suspending the use of the Memorandum or enjoining the offering or
sale of the Units shall have been issued, and no proceedings for that purpose or
a similar purpose shall have been initiated or pending, or, to the best of the
Company's knowledge, are contemplated or threatened.
(d) As of the First Closing, the Company will have an authorized and outstanding
capitalization as set forth in the Memorandum (including the Company's SEC
filing attached thereto). Prior to the Final Closing, no additional securities
will be issued by the Company, including but not limited to shares, options,
stock subscription agreements or warrants to purchase shares of the Company or
any other obligation to issue shares or other securities of the Company, without
the prior written consent of the Placement Agent. Notwithstanding the preceding
sentence, the Company may issue (i) compensatory option grants to employees
pursuant to option plans approved by the stockholders of the Company that are in
effect as of the date hereof, (ii) shares of its Common Stock upon exercise of
outstanding options or warrants or conversion of outstanding convertible
securities, (iii) securities included in the Units sold in the Offering and the
Agent's Warrants and (iv) securities issued to former and current management and
consultants and in settlement of various claims not to exceed 275,000 shares of
underlying Common Stock in the aggregate, and in each such case as approved by
the Board of Directors of the Company.
(e) The Placement Agent shall have received certificates of the chief executive
officer of the Company, dated as of each Closing Date, certifying on behalf of
the Company, in such detail as Placement Agent may reasonably request, as to the
fulfillment of the conditions set forth in subparagraphs (a), (b), (c) and (d)
above.
(f) The Company shall have delivered to the Placement Agent (i) a currently
dated good standing certificate from the Secretary of State of Delaware and each
jurisdiction in which the Company is qualified to do business as a foreign
corporation, and (ii) certified resolutions of the Company's Board of Directors
approving this Agreement and the other Transaction Documents, and the
transactions and agreements contemplated by this agreement and the other
Transaction Documents.
(g) On or prior to the date hereof and at each Closing, the chief executive
officer and chief financial officer of the Company shall have provided a
certificate to the Placement Agent confirming on behalf of the Company that
there have been no undisclosed material and adverse changes in the business
condition (financial or otherwise) or prospects of the Company from the date of
the latest financial statements included in the Memorandum, the absence of
undisclosed liabilities and such other matters relating to the financial
condition and prospects of the Company that the Placement Agent may reasonably
request.
(h) At each Closing, the Company shall have (i) paid to the Placement Agent the
Placement Agent's Fee in respect of all Units sold at such Closing, (ii) paid
all fees, costs and expenses set forth in Section 5(j) hereof, and (iii)
executed and delivered to the Placement Agent the Agent's Warrants in an amount
proportional to the Units sold at such Closing.
(i) There shall have been delivered to the Placement Agent a signed opinion of
counsel to the Company, dated as of each Closing Date, in the form attached
hereto as Schedule A.
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(j) All proceedings taken at or prior to each Closing in connection with the
authorization, issuance and sale of the Units and the Agent's Warrants will be
reasonably satisfactory in form and substance to the Placement Agent and its
counsel, and such counsel shall have been furnished with all such documents,
certificates and opinions as they may reasonably request upon reasonable prior
notice in connection with the transactions contemplated hereby.
(k) The Placement Agent shall be satisfied with the results of its due diligence
investigation of the Company.
7. INDEMNIFICATION.
---------------
(a) The Company will (i) indemnify and hold harmless the Placement Agent, its
selected dealers and their respective officers, directors, employees and each
person, if any, who controls the Placement Agent within the meaning of the Act
and such selected dealers (each an "Indemnitee") against, and pay or reimburse
each Indemnitee for, any and all losses, claims, damages, liabilities or
expenses whatsoever (or actions or proceedings or investigations in respect
thereof), joint or several (which will, for all purposes of this Agreement,
include, but not be limited to, all reasonable costs of defense and
investigation and all reasonable attorneys' fees, including appeals), to which
any Indemnitee may become subject, under the Act or otherwise, in connection
with the offer and sale of the Units, whether such losses, claims, damages,
liabilities or expenses shall result from any claim of any Indemnitee or any
third party; and (ii) reimburse each Indemnitee for any legal or other expenses
reasonably incurred in connection with investigating or defending against any
such loss, claim, action, proceeding or investigation; PROVIDED, HOWEVER, that
the Company will not be liable in any such case to the extent that any such
claim, damage or liability results directly and primarily from (A) an untrue
statement or alleged untrue statement of a material fact made in the Memorandum,
or an omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading, in
reliance upon and in conformity with written information furnished to the
Company by the Placement Agent or any such controlling persons specifically for
use in the preparation thereof, or (B) any violations by the Placement Agent or
its selected dealers (if any) of the Act or state securities laws which does not
result from a violation thereof or a breach hereafter by the Company or any of
its affiliates. In addition to the foregoing agreement to indemnify and
reimburse, the Company will indemnify and hold harmless each Indemnitee against
any and all losses, claims, damages, liabilities or expenses whatsoever (or
actions or proceedings or investigations in respect thereof), joint or several
(which shall for all purposes of this Agreement, include, but not be limited to,
all costs of defense and investigation and all reasonable attorneys' fees,
including appeals) to which any Indemnitee may become subject insofar as such
costs, expenses, losses, claims, damages or liabilities arise out of or are
based upon the claim of any person or entity that he or it is entitled to
broker's or finder's fees from any Indemnitee in connection with the Offering.
(b) The Placement Agent will indemnify and hold harmless the Company, its
officers, directors, employees and each person, if any, who controls the Company
within the meaning of the Act against, and pay or reimburse any such person for,
any and all losses, claims, damages or liabilities or expenses whatsoever (or
actions, proceedings or investigations in respect thereof) to which the Company
or any such person may become subject under the Act or otherwise, whether such
14
losses, claims, damages, liabilities or expenses (or actions, proceedings or
investigations in respect thereof) shall result from any claim of the Company,
any of its officers, directors, employees, agents, any person who controls the
Company within the meaning of the Act or any third party, insofar as such
losses, claims, damages or liabilities are based upon any untrue statement or
alleged untrue statement of any material fact contained in the Memorandum but
only with reference to information contained in the Memorandum relating to the
Placement Agent, or an omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, if made or omitted in reliance upon and in conformity with
written information furnished to the Company by the Placement Agent or any such
controlling persons, specifically for use in the preparation thereof, or any
violations by the Placement Agent or its selected dealers (if any) of the Act or
state securities laws which does not result from a violation thereof or a breach
hereafter by the Company or any of its affiliates, officers, directors,
employees or agents. The Placement Agent will reimburse the Company or any such
person for any legal or other expenses reasonably incurred in connection with
investigating or defending against any such loss, claim, damage, liability or
action, proceeding or investigation to which such indemnity obligation applies.
Notwithstanding the foregoing, in no event shall the Placement Agent's
indemnification obligation hereunder exceed the amount of the Placement Agent's
Fees actually received by it.
(c) Promptly after receipt by an indemnified party under this Section 7 of
notice of the commencement of any action, claim, proceeding or investigation
("Action"), such indemnified party, if a claim in respect thereof is to be made
against the indemnifying party under this Section 7, will notify the
indemnifying party of the commencement thereof, but the omission to so notify
the indemnifying party will not relieve it from any liability which it may have
to any indemnified party under this Section 7 unless the indemnifying party has
been substantially prejudiced by such omission. The indemnifying party will be
entitled to participate in, and, to the extent that it may wish, jointly with
any other indemnifying party, to assume the defense thereof subject to the
provisions herein stated, with counsel reasonably satisfactory to such
indemnified party. The indemnified party will have the right to employ separate
counsel in any such Action and to participate in the defense thereof, but the
fees and expenses of such counsel will not be at the expense of the indemnifying
party if the indemnifying party has assumed the defense of the Action with
counsel reasonably satisfactory to the indemnified party; PROVIDED, HOWEVER,
that if the indemnified party shall be requested by the indemnifying party to
participate in the defense thereof or shall have concluded in good faith and
specifically notified the indemnifying party either that there may be specific
defenses available to it which are different from or additional to those
available to the indemnifying party or that such Action involves or could have a
material adverse effect upon it with respect to matters beyond the scope of the
indemnity agreements contained in this Agreement, then the counsel representing
it, to the extent made necessary by such defenses, shall have the right to
direct such defenses of such Action on its behalf and in such case the
reasonable fees and expenses of such counsel in connection with any such
participation or defenses shall be paid by the indemnifying party. No settlement
of any Action against an indemnified party will be made without the consent of
the indemnifying party and the indemnified party, which consent shall not be
unreasonably withheld or delayed in light of all factors of importance to such
party and no indemnifying party shall be liable to indemnify any person for any
settlement of any such claim effected without such indemnifying party's consent.
15
8. CONTRIBUTION. To provide for just and equitable contribution, if (i) an
indemnified party makes a claim for indemnification pursuant to Section 7 hereof
and it is finally determined, by a judgment, order or decree not subject to
further appeal that such claims for indemnification may not be enforced, even
though this Agreement expressly provides for indemnification in such case; or
(ii) any indemnified or indemnifying party seeks contribution under the Act, the
1934 Act, or otherwise, then each indemnifying party shall contribute to such
amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company on the one hand and the Placement Agent on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or expenses (or actions in respect thereof), as
well as any other relevant equitable considerations. The relative benefits
received by the Company on the one hand and the Placement Agent on the other
shall be deemed to be in the same proportion as the total net proceeds from the
Offering (before deducting expenses) received by the Company bear to the total
commissions and fees received by the Placement Agent. The relative fault, in the
case of an untrue statement, alleged untrue statement, omission or alleged
omission will be determined by, among other things, whether such statement,
alleged statement, omission or alleged omission relates to information supplied
by the Company or by the Placement Agent, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement, alleged statement, omission or alleged omission. The Company and the
Placement Agent agree that it would be unjust and inequitable if the respective
obligations of the Company and the Placement Agent for contribution were
determined by PRO RATA allocation of the aggregate losses, liabilities, claims,
damages and expenses or by any other method or allocation that does not reflect
the equitable considerations referred to in this Section 8. No person guilty of
a fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
will be entitled to contribution from any person who is not guilty of such
fraudulent misrepresentation. For purposes of this Section 8, each person, if
any, who controls the Placement Agent within the meaning of the Act will have
the same rights to contribution as the Placement Agent, and each person, if any,
who controls the Company within the meaning of the Act will have the same rights
to contribution as the Company, subject in each case to the provisions of this
Section 8. Anything in this Section 8 to the contrary notwithstanding, no party
will be liable for contribution with respect to the settlement of any claim or
action effected without its written consent. This Section 8 is intended to
supersede, to the extent permitted by law, any right to contribution under the
Act, the 1934 Act or otherwise available.
9. TERMINATION.
-----------
(a) (I) The Offering may be terminated by the Placement Agent at any time prior
to the expiration of the Offering Period in the event that (i) any of the
representations or warranties of the Company contained herein shall prove to
have been false or misleading in any material respect when made or deemed made,
(ii) the Company shall have failed to perform any of its obligations hereunder,
(iii) the Company shall have determined for any reason not to continue with the
Offering or (iv) the Placement Agent shall determine in its sole discretion,
reasonably exercised, that it is reasonably likely that any of the conditions to
Closing set forth herein will not, or cannot, be satisfied. In the event of any
such termination occasioned by or arising out of or in connection with the
matters set forth in clauses (i)-(iii) above, or occasioned by or arising out of
or in connection with a matter set forth in clause (iv) above due to any breach
or failure hereunder on the part of the Company, the Placement Agent shall be
entitled to receive, an amount equal to the sum of: (A) any Placement Agent's
16
Fees to which the Placement Agent is entitled pursuant to Section 3(d) hereof
earned through the Termination Date, (B) an amount equal to three percent (3%)
of the Purchase Price Per Unit of all Units sold in the Offering (deeming, for
this purpose, all Units offered as having been sold), less any amounts
theretofore paid in respect of Placement Agent Expenses, and all unpaid Blue Sky
Fees and other expenses set forth in Section 5(j) hereof. If the Company, for
any reason, including, without limitation, breach by it of any representation,
covenant or warranty made by it, prevents completion of the Offering (including,
without limitation, failure to obtain necessary stockholder approval), the
Company's liability for the Placement Agent's expenses shall be equal to 3% of
the Maximum Amount to cover the Placement Agent's expenses and efforts.
Notwithstanding the foregoing, in the event the Company completes one or more
public or private offerings of its securities within one (1) year after the
Company prevents the completion of the Offering the Company shall also pay the
Placement Agent an investment banking fee equal to five percent (5%) of the
total consideration received by the Company in connection with such sales of
securities.
(II) This Offering may be terminated by the Placement Agent by notice to the
Company at any time if, in the sole judgment of the Placement Agent, the
Offering or the sale or the payment for or the delivery of the Units is rendered
impracticable or inadvisable because (i) additional material governmental
restrictions not in force and effect on the date hereof shall have been imposed
upon trading in securities generally, or minimum or maximum prices shall have
been generally established on the New York Stock Exchange, or trading in
securities generally on such exchange shall have been suspended or a general
banking moratorium shall have been established by federal or New York State
authorities, (ii) a war, major hostilities, terrorist or similar activity, act
of God or other calamity shall have occurred, (iii) of a material adverse change
in the condition (financial or otherwise) of the Company, its business or
business prospects or (iv) the Placement Agent, in its sole discretion, shall be
dissatisfied with the results of its due diligence investigation.
(b) This Offering may be terminated by the Company at any time prior to the
Termination Date in the event that the Placement Agent shall have failed to
perform any of its material obligations hereunder. In the event of any
termination by the Company, the Placement Agent shall be entitled to receive all
amounts as may be due under any indemnity or contribution obligation provided
herein or any other Transaction Document, at law or otherwise. On such
Termination Date, the Company shall pay all unpaid Blue Sky Fees and other
expenses set forth in Section 5(j) hereof.
(c) Upon any such termination, the Escrow Agent will, at the request of the
Placement Agent, cause all money received in respect of subscriptions for Units
not sold to be promptly returned to such subscribers without interest, penalty,
expense or deduction. Any interest earned thereon shall be applied first to the
payment of amounts, if any, due to the Escrow Agent and next to the payment of
any amounts payable to the Placement Agent hereunder which remain unpaid.
10. SURVIVAL.
--------
(a) The obligations of the parties to pay any costs and expenses hereunder and
to provide indemnification and contribution as provided herein shall survive any
termination hereunder.
17
(b) The respective indemnities, agreements, representations, warranties and
other statements of the Company set forth in or made pursuant to this Agreement
will remain in full force and effect, regardless of any investigation made by or
on behalf of, and regardless of any access to information by, the Company or the
Placement Agent, or any of their officers or directors or any controlling person
thereof, and will survive the sale of the Units.
11. NOTICES. All communications hereunder will be in writing and, except as
otherwise expressly provided herein or after notice by one party to the other of
a change of address, if sent to the Placement Agent, will be mailed, delivered
or telefaxed and confirmed to Xxxxxxx Xxxxx Ventures, Incorporated, 000 Xxxxxxx
Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxxxxx X. Xxxxxxxxx,
President, Telefax number 000-000-0000, with a copy to Xxxxxxx Xxxxxxxxx LLP,
000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxxx X. Xxxxxxx,
Esq., Telefax number (000) 000-0000, and if sent to the Company, will be mailed,
delivered or telefaxed and confirmed to SmartServ Online, Inc., 0000 Xxxxxx
Xxxx, Xxxxx 000 Xxxxxxxx Xxxxxxx, Xxxxxxxxxxxx 00000, Attention: Xxxxxx Xxxx,
Telefax number (000) 000-0000, with a copy to Xxxxxxxx Ronon Xxxxxxx & Xxxxx,
LLP, 0000 Xxx Xxxxxxxx Xxxxxx, Xxxxxxxxxxxx, XX 00000, Attention: Xxxx Xxxxxxxx,
Telefax number (000) 000-0000.
12. APPLICABLE LAW, COSTS, ETC. THIS AGREEMENT WILL BE GOVERNED BY, CONSTRUED
AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE. ALL CONTROVERSIES,
WHICH MAY ARISE BETWEEN THE PARTIES CONCERNING THIS AGREEMENT, SHALL BE
EXCLUSIVELY DETERMINED BY ARBITRATION PURSUANT TO THE RULES THEN PERTAINING TO
THE AMERICAN ARBITRATION ASSOCIATION (THE "AAA") IN NEW YORK COUNTY, NEW YORK.
HEARINGS WITH REGARD TO SUCH DISPUTE SHALL BE HELD EXCLUSIVELY AT THE OFFICES OF
THE AAA IN THE CITY OF NEW YORK AND JUDGMENT UPON ANY AWARD RENDERED PURSUANT
THERETO MAY BE ENTERED IN ANY COURT OF COMPETENT JURISDICTION. ANY DECISION
RENDERED BY THE AAA SHALL BE FINAL AND BINDING. SERVICE OF PROCESS MAY BE MADE
UPON THE COMPANY BY MAILING A COPY THEREOF TO IT, BY CERTIFIED OR REGISTERED
MAIL, AT ITS ADDRESS TO BE USED FOR THE GIVING OF NOTICES UNDER THIS AGREEMENT.
THE COMPANY AND THE PLACEMENT AGENT EACH HEREBY WAIVES ITS RIGHT TO A JURY TRIAL
OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR
ANY DOCUMENT OR AGREEMENT CONTEMPLATED HEREBY.
13. CONFIDENTIALITY. The Company hereby agrees to hold confidential the
identities of the purchasers in the Offering and shall not disclose their names
and addresses without the prior written consent of the Placement Agent, unless
required by law. The Company hereby consents to the granting of an injunction
against it by any court of competent jurisdiction to enjoin it from violating
the foregoing confidentiality provisions. The Company hereby agrees that the
Placement Agent will not have an adequate remedy at law in the event that the
Company breaches these confidentiality provisions contained herein, and that the
Placement Agent will suffer irreparable damage and injury as a result of any
such breach. Resort to such equitable relief shall not, however, be construed to
be a waiver of any other rights or remedies which the Placement Agent may have.
18
14. MISCELLANEOUS. No provision of this Agreement may be changed or terminated
except by a writing signed by the party or parties to be charged therewith.
Unless expressly so provided, no party to this Agreement will be liable for the
performance of any other party's obligations hereunder. Any party hereto may
waive compliance by the other with any of the terms, provisions and conditions
set forth herein; PROVIDED, HOWEVER, that any such waiver shall be in writing
specifically setting forth those provisions waived thereby. No such waiver shall
be deemed to constitute or imply waiver of any other term, provision or
condition of this Agreement. This Agreement contains the entire agreement
between the parties hereto and is intended to supersede any and all prior
agreements between the parties relating to the same subject matter. This
Agreement may be executed in counterparts, each of which shall be deemed an
original and all of which shall constitute a single agreement. The parties
acknowledge that the Schedule of Exceptions to this Agreement have not been
prepared or are incomplete as of the date hereof. SmartServ shall deliver to
Placement Agent and its counsel for their review a complete and accurate version
of the Schedule of Exceptions (or written confirmation from SmartServ that no
such Schedule of Exceptions will be required) not later than 5 business days
after the date of this Agreement. Notwithstanding anything herein to the
contrary, Xxxxxxx Xxxxx shall have the right to terminate this Agreement and the
Offering by written notice to SmartServ in the event that Xxxxxxx Xxxxx has not
received such schedules (or written confirmation from SmartServ that no such
Schedule of Exceptions will be required) within 5 business days following the
date hereof or if Xxxxxxx Xxxxx, in its sole discretion, is not satisfied with
such Schedule of Exceptions.
15. ENTIRE AGREEMENT. This Agreement together with any other agreement referred
to herein is intended to supersede all prior agreements between the parties with
respect to the Units purchased hereunder and the subject matter hereof.
[SIGNATURE PAGE FOLLOWS]
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If the foregoing is in accordance with your understanding of our agreement,
kindly sign and return this Agreement, whereupon it will become a binding
agreement between the Company and the Placement Agent in accordance with its
terms.
Very truly yours,
SMARTSERV ONLINE, INC.
By: ___________________________
Name:
Title:
Accepted and agreed to this ___ day of
January ___, 2004.
XXXXXXX XXXXX VENTURES, INC.
By: ___________________________
Name:
Title:
20
SCHEDULE A
FORM OF LEGAL OPINION
The phrase "Transaction Documents," whenever it is used in this letter, means
(a) the Placement Agency Agreement dated as of January [____], 2004 by and among
SmartServ Online, Inc. (the "Company") and Xxxxxxx Xxxxx Ventures, Inc. (the
"Placement Agent") (such agreement, the "Placement Agency Agreement"), (b) the
Subscription Agreements, dated as of January [____], 2004, by and among the
Company and each investor signatory thereto (such investors, the "Investors" and
such agreement, the "Subscription Agreement"), (c) the Registration Rights
Agreement and (d) the Warrants and Placement Agent Warrants. All capitalized
terms used in this letter have the respective meanings set forth in the
Placement Agency Agreement unless otherwise defined herein.
(i) The Company has been organized as a corporation and is validly existing and
in good standing under the laws of the State of Delaware, has full corporate
power and authority to own, lease and operate its properties and conduct its
business as described in the Memorandum and is qualified as a foreign
corporation for the transaction of business and is in good standing in each
jurisdiction where the conduct of its business makes such qualification
necessary, except where the failure to so qualify would not have a material
adverse effect upon the business (as currently conducted), financial condition
or results of operation of the Company (a "Material Adverse Effect").
(ii) The Company has the full corporate power and authority to execute and
deliver the Transaction Documents and to perform its obligations thereunder. The
execution, delivery and performance thereof and thereunder has been duly
authorized by all necessary corporate action. Each of the Transaction Documents
has been duly executed and delivered on behalf of the Company, and constitutes
legal, valid and binding obligations of the Company, enforceable against it in
accordance with its terms except as such enforceability may be limited by
applicable bankruptcy, insolvency or laws affecting creditor's rights or
remedies and general principles of equity.
(iii) The Company has an authorized capital stock as set forth in the
Memorandum. The Units, the components thereof, Conversion Shares and the Agent's
Shares have been duly authorized, and when duly and validly delivered and paid
for pursuant to the terms of the Transaction Documents and the Certificate of
Designations, Voting Powers, Preferences, Limitations, Restrictions, and
Relative Rights of Series A Convertible Preferred Stock of the Company (the
"Certificate of Designations") will be validly issued, fully paid and
nonassessable. Except as set forth in the Confidential Private Placement
Memorandum (the "Memorandum"), the issuance of the Units, the components
thereof, Conversion Shares or the Agent's Shares are not subject to statutory,
or to our knowledge, based solely on a certificate from an officer of the
Company, contractual or other preemptive rights of any stockholder of the
Company. The Units, the components thereof, Conversion Shares and the Agent's
Warrants and Agent's Shares conform in all material respects to all statements
in relation thereto contained in the Memorandum.
21
(iv) None of the execution and delivery of, or performance by the Company under,
any of the Transaction Documents or the consummation of the transactions therein
contemplated, will conflict with or violate (a) any term of the charter
(including the Certificate of Designations) or by-laws of the Company, (b) any
statute, rule, regulation or ordinance or (c) any judgment, decree, or order
known to such counsel which is applicable to the Company or any of its assets,
properties or businesses.
(v) None of the execution and delivery of, or performance by the Company under,
any of the Transaction Documents or the consummation of the transactions therein
contemplated, will conflict with or result in the creation or imposition of, any
lien, charge or other encumbrance upon any of the properties or assets of the
Company pursuant to the terms of any material indenture, mortgage, deed of
trust, note, material license, agreement or other instrument described on
Attachment A annexed hereto (such attachment including all material agreements
filed as exhibits to the Company's SEC filings for the past two years) to which
the Company is a party or by which the Company may be bound or to which any of
its assets, properties or businesses is or may be subject.
(vi) No consent, approval, authorization, order, registration or qualification
of or with any court or regulatory, administrative or governmental agency, body
or authority of the United States of America or any political subdivision
thereof is required in connection with the issuance or sale of the Units or the
Agent's Warrants except for required filings with the United States Securities
and Exchange Commission and applicable "Blue Sky" or state securities
commissions relating specifically to the Offering.
(vii) To such counsel's actual knowledge, except as set forth in the Memorandum,
there are no legal or regulatory, administrative or governmental, actions,
suits, proceedings, hearings or investigations, before or by any court,
governmental authority, or instrumentality pending against the Company, which,
if determined adversely to the Company, could adversely affect the validity or
enforceability of the Transaction Documents.
(viii) To such counsel's actual knowledge, based solely on a certificate from an
officer of the Company, the Company is not in violation or breach of: (i) its
charter (including the Certificate of Designations) or by-laws, (ii) any
material indenture, mortgage, deed of trust, note or other agreement or
instrument to which the Company is a party or by which it is or may be bound or
to which any of its assets, properties or businesses may be subject and listed
on Attachment A hereto; (iii) any statute, rule, regulation or ordinance; or
(iv) any judgment, decree or order applicable to the Company which violation or
violations individually, or in the aggregate, could result in any Material
Adverse Effect.
(ix) Assuming that the Units were sold only to "accredited investors" (as
defined in Rule 501 of Regulation D) and the Placement Agent complied in all
material respects with Regulation D, such sales were made in conformity in all
material respects with the requirements of Sections 4(2) of the Act and
Regulation D. The issuance of the Units in accordance with the Memorandum is
exempt from registration under the Securities Act of 1933, as amended.
