UNIVERSAL DETECTION TECHNOLOGY
Private Placement of Units
PLACEMENT AGENCY AGREEMENT
Dated as of April 29, 2004
Xxxxxx Associates L.P.
00 Xxxxxxxx - 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: President
Ladies and Gentlemen:
Universal Detection Technology, a California corporation (the "COMPANY")
proposes to offer for sale (the "OFFERING") in a private offering pursuant to
Section 4(2) of the Securities Act of 1933, as amended (the "ACT"), and
Regulation D promulgated thereunder, units (the "UNITS") to certain Accredited
Investors (as defined in Regulation D). The Units shall be comprised of shares
of common stock ("COMMON STOCK") and warrants to purchase common stock
("WARRANTS"). The Units, Common Stock, and Warrants are sometimes referred to
herein as the "SECURITIES." The private offering is being made on a "best
efforts all or none" basis for gross proceeds of $250,000 ("MINIMUM OFFERING")
and on a "best efforts" basis as to an additional $750,000 of gross proceeds
(the "MAXIMUM Offering"). Offers and sales of the Securities shall be to
Accredited Investors only. This letter agreement (the "AGREEMENT") shall confirm
our agreement concerning Xxxxxx Associates L.P. acting as our exclusive
placement agent (the "PLACEMENT AGENT" or "XXXXXX ASSOCIATES") in connection
with the offer and sale of the Securities.
l. Appointment of Placement Agent.
On the basis of the representations and warranties contained herein, and
subject to the terms and conditions set forth herein, the Company hereby
appoints Xxxxxx Associates L.P. as its Placement Agent and grants to it the
exclusive right to offer, as its agent, the Securities pursuant to the terms of
this Agreement. The Company expressly acknowledges and agrees that Xxxxxx
Associates's obligations hereunder are not on a firm commitment basis and that
the execution of this Agreement does not constitute a commitment by Xxxxxx
Associates to purchase the Securities and does not ensure the successful
placement of the Securities or any portion thereof. Further, Xxxxxx Associates's
obligation to use its best efforts to assist the Company in the Offering is
subject to general market conditions. On the basis of such representations and
warranties, and subject to such conditions, Xxxxxx Associates hereby accepts
such appointment and agrees to use its best efforts to secure subscriptions to
purchase up to $1,000,000 of Units, subject to adjustment pursuant to the terms
of this Agreement.
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2. Terms of the Offering.
(a) The Company shall prepare and deliver to the Placement Agent
copies of a Confidential Disclosure Statement (the "DISCLOSURE
STATEMENT"), relating to, among other things, the Company, the
Securities, and the terms of the sale of the Securities. The
Disclosure Statement, including all exhibits, and appendices
thereto and documents delivered therewith, are referred to herein
as the "OFFERING DOCUMENTS" and shall include any supplements or
amendments in accordance with this Agreement. The Company shall
utilize the services of securities counsel with experience in
private placement offerings and the rules and regulations of the
Securities and Exchange Commission ("SEC") in drafting the
Offering Documents.
(b) The Offering shall consist of up to $1,000,000 of Units. The
terms of the Offering and Securities are further described on
EXHIBIT A attached hereto which is incorporated herein. The
Offering is being made on a "best efforts all or none" basis up
to $250,000 of gross proceeds and on a "best efforts" basis as to
an additional $750,000 of gross proceeds. The Offering may be
expanded by an additional $1,000,000 of gross proceeds at the
option of the Company and Xxxxxx Associates LP. In the event a
subscription is not accepted, such rejected subscription funds
will be returned to the subscriber without interest or
deductions.
(c) The Offering shall commence on the date that the Company delivers
to the Placement Agent the Offering Documents that have been
completed to the reasonable satisfaction of the Placement Agent
and its counsel, and shall expire at 5:00 p.m., New York time, on
a date which is 45 days thereafter; provided however, in the
event that subscriptions for the Minimum Offering has been
received into escrow prior to the expiration of such 45 day
period, the Offering Period shall be extended for an additional
75 days. Such period, as same may be so extended, shall
hereinafter be referred to as the "OFFERING PERIOD."
(d) Each prospective investor ("PROSPECTIVE INVESTOR") who desires to
purchase Securities shall deliver to the Placement Agent a fully
executed subscription agreement ("SUBSCRIPTION AGREEMENT") and
investor questionnaire ("INVESTOR QUESTIONNAIRE"), in the form
attached to the Disclosure Statement and immediately available
funds in the amount necessary to purchase the number of
Securities such Prospective Investor desires to purchase. Neither
the Company nor the Placement Agent shall have any obligation to
independently verify the accuracy or completeness of any
information contained in any Subscription Agreement or Investor
Questionnaire, or the authenticity, sufficiency, or validity of
any check delivered by any Prospective Investor in payment for
Securities.
(e) The Placement Agent shall deliver each subscription funds
received from a Prospective Investor to the Company for deposit
in a segregated escrow account at an independent banking
institution and shall deliver the executed copies of the
Subscription Agreement received from such Prospective Investor to
the Company. All funds shall be held in the segregated account
pending acceptance of the subscription. The Company shall notify
the Placement Agent promptly of the acceptance or rejection or
any subscription which shall be made
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in the Company's sole discretion; ; provided, however, any
rejection shall be made in good faith by the Company.
(f) Xxxxxx Associates may engage other persons selected by Xxxxxx
Associates to assist Xxxxxx Associates in the Offering (each such
broker/dealers being hereinafter referred to as a "SELLING GROUP
MEMBER") and Xxxxxx Associates may allow such Selling Group
Member such part of the compensation and payment of expenses
payable to Xxxxxx Associates under Section 5 hereof as Xxxxxx
Associates shall determine. Any such Selling Group Member shall
be a member firm in good standing as a broker-dealer under the
rules of the National Association of Securities Dealers, Inc.
(the "NASD"). Each Selling Group Member shall be required to
agree in writing to comply with the applicable provisions of this
Agreement. The Placement Agent shall be fully responsible for any
and all actions of each Selling Group Member in connection with
this Agreement. The Company hereby agrees to make such
representations and warranties to, and covenants and agreements
with, any Selling Group Member (including an agreement to
indemnify such Selling Group Member on terms substantially
similar to Section 12 hereof) as provided herein.
3. Closings: Release of Funds.
(a) The date that the initial subscriptions in the amount of the
Minimum Offering are accepted by the Company and funds are
released from the escrow account shall be deemed the "INITIAL
CLOSING." At least one (1) day prior to the release of funds, the
Placement Agent shall send a written notice to the Company, which
notice shall state the amount of funds to be released, the name
and address of each subscriber whose subscription has been
accepted, and the amount of each subscription.
(b) At any time prior to the expiration of the Offering Period
following the Initial Closing and after acceptance by the Company
of subscriptions for the sale of additional Securities of at
least $250,000 ("INTERIM CLOSING AMOUNT") up to the Maximum
Offering, one or more closings (each an "INTERIM CLOSING") shall
take place in the manner herein set forth with respect to the
Initial Closing. The final Interim Closing to be held in
accordance herewith shall have no minimum amount and shall be
deemed the "FINAL CLOSING" and the date thereof shall be the
"FINAL CLOSING DATE." References herein to a "CLOSING" shall mean
the Initial Closing, any Interim Closing, or the Final Closing,
as the context requires, and the date thereof shall be referred
to as a "CLOSING DATE."
4. Representations and Warranties of the Placement Agent.
The Placement Agent represents and warrants to the Company as follows:
(a) The Placement Agent is duly incorporated and validly existing and
in good standing under the laws of its State of incorporation and
has the power and authority to conduct its business as now
conducted and to enter into and perform its obligations under
this Agreement.
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(b) The Placement Agent is, and at the time of each Closing will be,
a registered broker-dealer under the Act and a member in good
standing of the NASD.
(c) Sales of Securities by the Placement Agent will only be made in
such jurisdictions in which the Placement Agent or a Selling
Group Member is a registered broker-dealer or where an applicable
exemption from such registration exists.
(d) Offers and sales of Securities by the Placement Agent will be
made only in accordance with this Agreement and in compliance
with the provisions of Rule 506 of Regulation D (it being
understood and agreed that the Placement Agent shall be entitled
to rely upon the information and statements provided by the
Prospective Investor in the Subscription Agreement and Investor
Questionnaires), and the Placement Agent will furnish to each
Prospective Investor a copy of the Offering Documents prior to
accepting any subscription for the Securities.
(e) The execution, delivery, and performance by the Placement Agent
of this Agreement have been duly authorized by all necessary
action of the Placement Agent, its officers and directors and
this Agreement has been duly executed and delivered by the
Placement Agent. This Agreement constitutes the valid and binding
obligation of the Placement Agent, enforceable in accordance with
its terms, except as rights to indemnity and contribution
hereunder and thereunder may be limited by the securities laws of
the United States and except as such enforceability may be
limited by bankruptcy, insolvency, reorganization or similar laws
or equitable principles affecting the enforcement of creditors'
rights generally.
5. Compensation.
(a) The Placement Agent shall be entitled, on each Closing Date, as
compensation for Xxxxxx Associates services as Placement Agent
under this Agreement, to selling commissions equal to 10% of the
gross proceeds received by the Company from the sale of the Units
effected at each Closing. In addition, the Placement Agent shall
be entitled to 3% of the gross proceeds from the sale of the
Units effected at each Closing in payment for a non-accountable
expense allowance, of which $10,000 has previously been paid and
will be credited against all amounts due Placement Agent at the
Initial Closing.
(b) In addition to the compensation payable to the Placement Agent
set forth in clause (a) above, the Company shall sell and issue
to the Placement Agent (or its assigns) warrants to purchase
Common Stock equal to 20% of the number of shares of Common Stock
included in the Units and underlying the investors warrants in
the Units ("AGENT WARRANTS") at an exercise price equal to
purchase price of the Units issued to investors. The Agent
Warrants shall be exercisable for a period of five (5) years from
the Final Closing Date.
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(c) The Company covenants and agrees that with respect to
registration of the Securities underlying the Agent Warrants
under the Act, the Placement Agent shall be entitled to the same
registration rights as being provided to subscribers in the
Offering.
6. Representations and Warranties of the Company.
(a) The Company represents and warrants to, and agrees with, the
Placement Agent that as of the date hereof and as of each Closing
Date (except as affected by the Offering):
(i) Assuming the accuracy of the representations and warranties
of the Prospective Investors set forth in the Subscription
Agreements and Investor Questionnaires and the
representations and warranties of the Placement Agent set
forth herein, the Offering Documents (a) contain, and at all
times during the period from the date hereof to and
including each Closing Date, will contain all information
required to be contained therein, if any, pursuant to Rules
502 and 506 of Regulation D and all applicable federal
and/or state securities and "blue sky" laws, and (b) do not
contain 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 made therein not misleading. Each contract,
agreement, instrument, lease, license, or other document
required to be described in the Offering Documents shall be,
and has been, accurately described therein in all material
respects.
(ii) No Offering Documents or information (it being understood
that neither the Company nor any of its officers or
directors or employees shall provide any written information
to any Prospective Investor which is not contained in the
Offering Documents) provided by the Company to Prospective
Investors pursuant to Section 7(f) hereof shall contain 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 circumstances made
therein not misleading.
(iii) The Company has not, directly or indirectly, sold any other
securities of the Company during the twelve-month period
ending on the date hereof, except as may be properly
described in the Offering Documents, and during the term
hereof has no present intention to solicit any offer to buy
or to offer to sell any of the Securities, any Common Stock
or any other securities of the Company other than pursuant
to this Agreement.
(iv) The Company is, and at all times during the period from the
date hereof to and including each Closing Date will be, a
corporation duly organized, validly existing, and in good
standing under the laws of the State of California, with
full corporate power and authority to own its properties and
assets. As of the date hereof, the Company is, and at all
times during the period from the date hereof to and
including each Closing Date, duly qualified to do business
and is in good standing in every jurisdiction in which its
ownership, leasing, licensing, or use of property and assets
or the conduct of its business makes such qualification
necessary except
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where the failure to be so qualified would not have a
material adverse effect on the Company's business.
(v) All sales of securities within the three years prior to the
date hereof have complied with all material requirements of
the Securities Act, applicable state blue sky laws and the
rules and regulations thereunder and there are no rights of
rescission requiring the Company to rescind prior sales of
securities existing under such laws, rules and regulations.
(vi) Since the dates as of which information is given in the
Offering Documents, other than as set forth therein, (A)
there has not been any material adverse change or any
development involving a prospective material adverse change
in the general affairs, business, prospects, properties,
management, condition (financial or otherwise) or results of
operations of the Company, whether or not arising from
transactions in the ordinary course of business, (B) except
in the ordinary course of business, the Company has not
incurred any material liabilities or obligations, direct or
indirect, and has not entered into any material transaction,
(C) the Company has not and will not have paid or declared
any dividends or other distributions on its capital stock
and (D) there has not been any change in the authorized
capital stock of the Company or any material change in the
short-term or long-term debt of the Company.
(vii) XX Xxxxxxx PC, whose report on the Company's audited
financial statements is included in the Company's filings
under the Securities and Exchange Act of 1934 ("SEC
FILINGS") to the SEC included as part of the Offering
Documents, are independent public accountants with respect
to the Company as required by the Act and the rules and
regulations thereunder.
(viii) The consolidated financial statements, together with
related notes and schedules of the Company included as part
of the Offering Documents comply in all material respects
with the requirements of the Act and the rules and
regulations thereunder and present fairly the financial
position of the Company on the respective dates indicated
and its statement of operations for the respective periods
covered thereby. Any condensed financial information
appearing in the Offering Documents is fairly stated in all
material respects in relation to the financial statements of
the Company from which they have been derived. Such
financial statements, and related notes and schedules, have
been prepared in conformity with generally accepted
accounting principles applied on a consistent basis through
the entire period involved.
(ix) Except as described in the Offering Documents, there is no
action, suit, investigation or proceeding pending or
threatened before or by any Federal or state court,
commission, regulatory body, administrative agency or other
governmental body, domestic or foreign, or arbitrator to
which the Company is or may become a party or of which any
property of the Company is subject or affected that (A)
might affect the consummation of the transactions
contemplated under this Agreement, including the issuance or
validity of the Units offered hereby, or the Common Stock
issuable upon exercise of the Warrants, or (B) might have a
material adverse effect on the condition (financial or
otherwise), sales, properties, earnings, net
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worth, prospects, results of operations or businesses of the
Company, taken as a whole ("MATERIAL ADVERSE EFFECT"), or
any of its principal officers. All pending legal or
governmental proceedings to which the Company is a party or
of which any of its properties are subject or affected which
are not described in the Offering Documents, including
ordinary routine litigation incidental to the business,
would not have a Material Adverse Effect. No labor dispute
with the employees of the Company exists or is threatened or
imminent that could have a Material Adverse Effect.
(x) The Company owns or is licensed to use all patents, patent
applications, inventions, trademarks, trade names,
applications for registration of trademarks, copyrights,
know-how, trade secrets, licenses and rights in any thereof
("PROPRIETARY RIGHTS") which it is currently using as
described in the Offering Documents. The Company does not
have any knowledge of, and has not given or received any
notice of any pending conflict with or infringement of, the
rights of others with respect to any Proprietary Rights or
with respect to any license of Proprietary Rights. No
action, suit, arbitration, or legal, administrative or other
proceeding, or domestic or foreign governmental
investigation is pending or, to the best of the Company's
knowledge, threatened, which involves any Proprietary
Rights. The Company is not subject to any judgment, order,
writ, injunction or decree of any court or any Federal,
state, local, foreign or other governmental department,
commission, board, bureau, agency or instrumentality,
domestic or foreign, or any arbitrator, or has entered into
or is a party to any contract which restricts or impairs the
use of any such Proprietary Rights in a manner which would
have a Material Adverse Effect on the use of any of the
Proprietary Rights. No Proprietary Rights used by the
Company and no services or products sold by the Company,
conflict with or infringe upon, to the knowledge of the
Company, any proprietary rights of any third party. The
Company has not received written notice of any pending
conflict with or infringement upon such third party
proprietary rights. The Company has not entered into any
consent, indemnification, forbearance to xxx or settlement
agreement with respect to Proprietary Rights other than in
the ordinary course of business. The Company has complied,
in all material respects, with its contractual obligations
relating to the protection of the Proprietary Rights used
pursuant to licenses. To the best knowledge of the Company,
no person is infringing on or violating the Proprietary
Rights owned or used by the Company.
(xi) The Company has an authorized, issued, and outstanding
capitalization as set forth in the Offering Documents. All
of the issued and outstanding shares of capital stock of the
Company have been duly authorized and are validly issued,
fully paid and non- assessable. No shares of capital stock
have been issued in violation of any preemptive rights.
Except as described in the Offering Documents, there are no
outstanding (A) securities or obligations of the Company
convertible into or exchangeable for any shares of capital
stock of the Company, (B) warrants, rights or options to
subscribe for or purchase from the Company any such capital
stock or any such convertible or exchangeable securities or
obligations or (C) obligations for the Company to issue such
shares, any such convertible or exchangeable securities or
obligations, or any such warrants, rights or obligations.
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(xii) Except as described in the SEC Filings or in Paragraph
6(a)(xii) of the Company's Disclosure Letter attached to
this Agreement ("DISCLOSURE LETTER"), there are no
contracts, agreements or understandings between the Company
and any person granting such person the right to require the
Company to file a registration statement under the Act with
respect to any securities of the Company owned or to be
owned by such person or to require the Company to include
such securities in the securities being registered pursuant
to any registration statement filed by the Company under the
Act.
(xiii) The Units to be issued and sold to Prospective Investors
as provided in the Subscription Agreements have been duly
authorized and when issued and delivered against payment
therefor, will be validly issued, fully paid and
nonassessable and will conform to the description thereof in
the Offering Documents. The shares of Common Stock issuable
upon exercise of the Warrants have been duly authorized and
when issued and delivered upon exercise and due payment
therefor will be validly issued, fully paid and
nonassessable and will conform to the description thereof in
the Offering Documents; and there are no preemptive or other
rights to subscribe for or to purchase, nor any restriction
upon the voting or transfer of, any shares of the Common
Stock issuable upon the exercise of the Warrants pursuant to
the Company's articles of incorporation or by-laws or any
agreement or other outstanding instrument to which the
Company is a party or is otherwise known to the Company. The
Company has reserved sufficient shares of Common Stock to be
issued upon exercise of the Warrants.
(xiv) The Agent Warrants have been duly authorized and, when
issued and delivered against payment therefor, will be
validly issued, fully paid and nonassessable; the Agent
Warrants are exercisable for Common Stock in accordance with
the terms of the Agent Warrants and at the price therein
provided; the shares of Common Stock issuable upon the
exercise of the Agent Warrants have been duly authorized and
reserved for issuance upon such exercise and such shares,
when issued upon such exercise in accordance with the terms
of the Agent Warrants, will be duly authorized, validly
issued, fully paid and nonassessable; and there are no
preemptive or other rights to subscribe for or to purchase,
nor any restriction upon the voting or transfer of, any
shares of the Common Stock issuable upon exercise of the
Agent Warrants pursuant to the Company's articles of
incorporation or by-laws or any agreement or other
outstanding instrument to which the Company is a party or is
otherwise known to the Company.
(xv) Except as disclosed in the Offering Documents, the Company
is not (A) in violation of its articles of incorporation or
by-laws, (B) in violation of any statute, law, rule, code,
administrative regulation, ordinance, judgment, order or
decree of any government, governmental instrumentality,
court, domestic or foreign, or arbitration panel or other
body applicable to it where such violation would have a
Material Adverse Effect or (C) in default in the performance
or observance of any obligation, agreement, covenant or
condition contained in any indenture, mortgage, deed of
trust, voting agreement, voting trust agreement, loan
agreement, bond, debenture, note or other evidence of
indebtedness, lease, sublease, license agreement, contract
or other agreement or instrument to which it is a party or
by which it or any of its respective properties are bound or
affected ("CONTRACTS"), where such defaults, singly or in
8
the aggregate, would have a Material Adverse Effect. To the
knowledge of the Company, no other party to any Contract is
in default in any material respect thereunder which affects
the Company.
(xvi) The Company has all requisite power and authority to
execute, deliver, and perform its obligations under this
Agreement, the Subscription Agreement, the Warrants and the
Agent Warrants. This Agreement has been duly and validly
authorized, executed and delivered by the Company, and
constitutes a legal, valid and binding agreement of the
Company enforceable against the Company in accordance with
its terms, except as rights to indemnity and contribution
hereunder and thereunder may be limited by the securities
laws of the United States and except as such enforceability
may be limited by bankruptcy, insolvency, reorganization or
similar laws or equitable principles affecting the
enforcement of creditors' rights generally;
(xvii) The issuance of the Units, including the Common Stock, the
Warrants, the Agent Warrants, and the execution, delivery
and performance of this Agreement, the Subscription
Agreement, the Warrants and the Agents Warrants, and the
consummation of the transactions contemplated hereby and
thereby, do not and will not conflict with or result in a
material breach or violation of any of the terms or
provisions of, or constitute a material default under, or
give rise to rights of termination under, or result in the
acceleration of any obligation under, or result in the
creation or imposition of any lien, charge or encumbrance
upon any property or assets of the Company pursuant to the
terms of any Contracts or result in a material breach or
violation of any of the terms or provisions of, or
constitute a material default under any Contracts, nor will
such action result in any violation of the provisions of the
articles of incorporation or by-laws of the Company or a
material violation of any applicable statute, law, rule,
code, administrative regulation, ordinance, judgment, order
or decree of any government, governmental instrumentality or
court, domestic or foreign, or arbitration panel or other
body, having jurisdiction over the Company or any of the
Company's properties.
(xviii) No consent, approval, authorization, license or order of
or from, or registration, qualification, declaration or
filing with, federal, state, local, or other governmental
authority or any person or court, administrative agency, or
other body is required for the consummation of the
transactions contemplated in this Agreement, or the Offering
Documents, except as may have been made or may be required
under any state securities or Blue Sky laws or pursuant to
Regulation D.
(xix) The Company is in compliance in all material respects with
all applicable federal, state and local environmental laws
and regulations, including, without limitation, those
applicable to emissions to the environment, waste management
and waste disposal (collectively, the "ENVIRONMENTAL LAWS"),
except for any noncompliance as may be described in the
Offering Documents, and to the best of the Company's
knowledge, there are no circumstances that would prevent,
interfere with, or materially increase the cost of such
compliance in the future. Except as set forth in the
Offering Documents, there is no claim under any
Environmental Law, including common law ("ENVIRONMENTAL
CLAIM"), pending or, to the knowledge of the Company,
threatened against or affecting the Company and, to the best
of the Company's
9
knowledge, there are no past or present actions, activities,
circumstances, events or incidents, including, without
limitation, releases of any material into the environment,
that could form the basis of any Environmental Claim against
or affecting the Company.
(xx) Except as set forth in Paragraph 6(a) (xx) of the Disclosure
Letter, the Company has good and marketable title to all
property owned by it, in each case free and clear of all
liens, charges, encumbrances or restrictions except as
described in the Offering Documents or such as do not
materially affect the value of such property and do not
interfere with the use made and proposed to be made of such
property by the Company. Except as described in the Offering
Documents, all material Contracts to which the Company is a
party, or by which the Company or any of its properties or
assets are bound, are valid, subsisting and enforceable and
are in full force and effect.
(xxi) Except as set forth in Paragraph 6(a) (xx) of the
Disclosure Letter, the Company (A) has paid all federal,
state, local and foreign taxes for which it is liable and
has furnished all information returns it is required to
furnish pursuant to the Internal Revenue Code of 1986, as
amended, (B) has established adequate reserves for such
taxes which are not due and payable and (C) does not have
any tax deficiency or claims outstanding, proposed or
assessed against it.
(xxii) The Company maintains insurance of the types and in
amounts which it deems adequate for its business, all of
which are in full force and effect.
(xxiii) Other than set forth in this Agreement, there are no
claims, payments, issuances, arrangements or understandings,
whether oral or written, for services in the nature of a
finder's or origination fee with respect to the sale of the
Units.
(xxiv) Neither the Company nor, to the best of the Company's
knowledge, any of the Company's officers, employees, agents
or any other person acting on behalf of, at the direction of
or for the benefit of the Company has, directly or
indirectly, given or agreed to give any money, gift or
similar benefit (other than legal price concessions to
customers in the ordinary course of business) to any
customer, supplier, employee or agent of a customer or
supplier, or official or employee of any governmental agency
(domestic or foreign) or instrumentality of any government
(domestic or foreign) or any political party or candidate
for office (domestic or foreign) or other person who was,
is, or may be in a position to help or hinder the business
of the Company (or assist the Company in connection with any
actual or proposed transaction) which (a) might subject the
Company or any other such person to any damage or penalty in
any civil, criminal or governmental litigation or proceeding
(domestic or foreign), (b) if not given in the past, might
have had a Material Adverse Effect or (c) if not continued
in the future, might result in a Material Adverse Effect.
(xxv) During the past five years, none of the current officers or
directors of the Company have been:
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(a) The subject of a petition under the federal bankruptcy laws
or any state insolvency law filed by or against them, or by
a receiver, fiscal agent or similar officer appointed by a
court for their business or property, or any partnership in
which any or them was a general partner at or within two
years before the time of such filing, or any corporation or
business association of which any of them was an executive
officer at or within two years before the time of such
filing;
(b) Convicted in a criminal proceeding or a named subject of a
pending criminal proceeding (excluding traffic violations
and other minor offenses);
(c) The subject of any order, judgment, or decree not
subsequently reversed, suspended or vacated, of any court of
competent jurisdiction, permanently or temporarily enjoining
any of them from, or otherwise limiting, any of the
following activities:
(1) acting as a futures commission merchant, introducing
broker, commodity trading advisor, commodity pool
operator, floor broker, leverage transaction merchant,
any other person regulated by the Commodity Futures
Trading Commission, or an associated person of any of
the foregoing, or as an investment adviser,
underwriter, broker or dealer in securities, or as an
affiliated person, director or employee of any
investment company, bank, savings and loan association
or insurance company, or engaging in or continuing any
conduct or practice in connection with any such
activity;
(2) engaging in any type of business practice; or
(3) engaging in any activity in connection with the
purchase or sale of any security or commodity or in
connection with any violation of federal or state
securities law or federal commodity laws;
(d) The subject of any order, judgment or decree, not
subsequently reversed, suspended or vacated of any federal
or state authority barring, suspending or otherwise limiting
for more than sixty (60) days their right to engage in any
activity described in paragraph (3)(i) above, or be
associated with persons engaged in any such activity;
(e) Found by any court of competent jurisdiction in a civil
action or by the SEC to have violated any federal or state
securities law, and the judgment in such civil action or
finding by the Commission has not been subsequently
reversed, suspended or vacated;
(f) Found by a court of competent jurisdiction in a civil action
or by the Commodity Futures Trading Commission to have
violated any federal commodities law, and the judgment in
such civil action or finding by the Commodity Futures
Trading Commission has not been subsequently reversed,
suspended or vacated; or
(g) Found by a court or an administrative agency to have or is
alleged to have violated any Canadian or foreign securities
laws.
11
(xxv) Neither the Company nor, to the knowledge of the Company,
any of its affiliates has, directly or through any agent,
sold, offered for sale or solicited offers to buy nor will
any of the foregoing directly buy any security of the
Company, as defined in the Act, which is or will be
integrated with the sale of the Units in a manner that would
require the registration, pursuant to the Act, of the
Offering.
(xxvi) During the period commencing on the date hereof and ending
on the Final Closing Date, the Company shall not, without
prior notice to and consent of the Placement Agent, which
consent shall not be unreasonably withheld: (A) issue any
securities or incur any liability or obligation, primary or
contingent, for borrowed money; (B) enter into any
transaction not in the ordinary course of business; or (C)
declare or pay any dividend on its capital stock.
(xxvii) Neither the Company nor any of its officers, directors,
or affiliates, has engaged, directly or indirectly, in any
act or activity that may jeopardize the status of the
offering and sale of the Securities as an exempt transaction
under the Act or under all applicable federal and/or state
securities or "blue sky" laws of any jurisdiction in which
the Securities may be offered or sold.
7. Covenants of the Company.
The Company covenants that it will:
(a) Notify Xxxxxx Associates immediately, and confirm such
notice in writing, (i) when any event shall have occurred
during the period commencing on the date hereof and ending
on the Final Closing 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,
in light of the circumstances under which they were made,
not misleading, and (ii) of the receipt of any notification
with respect to the modification, rescission, withdrawal, or
suspension of the qualification or registration of the
Securities, or of an exemption from such registration or
qualification, in any jurisdiction. The Company will use its
reasonable best efforts to prevent the issuance of any such
modification, rescission, withdrawal, or suspension and if
Xxxxxx Associates so request, to obtain the lifting thereof
as promptly as possible.
(b) Not make any supplement or amendment to the Offering
Documents unless such supplement or amendment complies with
the requirements of the Act and Regulation D and the
applicable federal and/or state securities and "blue sky"
laws. If, at any time during the period commencing on the
date hereof and ending on the Final Closing Date, any event
shall have occurred as a result of which the Offering
Documents contain 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, or if, in the opinion of counsel to the Company,
it is necessary at any time to supplement or amend the
Offering Documents to comply with the Act, Regulation D, or
any applicable securities or "blue sky" laws, the Company
will promptly
12
prepare an appropriate supplement or amendment in form and
substance reasonably satisfactory to the Placement Agent,
which will correct such statement or omission or which will
effect such compliance.
(c) Deliver without charge to the Placement Agent such number of
copies of the Offering Documents and any supplement or
amendment thereto as may reasonably be requested by the
Placement Agent.
(d) Not, directly or indirectly, solicit any offer to buy from,
or offer to sell to any person any Securities during the
Offering Period, except through the Placement Agent.
(e) Use its reasonable best efforts to qualify the Securities
for offering and sale under, or establish an exemption from
such qualification or registration under, the securities or
"blue sky" laws of the jurisdictions as may be required by
the Placement Agent; provided, however, that the Company
will not be obligated to qualify to do business as a dealer
in securities in any jurisdiction in which it is not so
qualified. The Company will not consummate any sale of
Securities in any jurisdiction or in any manner in which
such sale may not be lawfully made; in this regard the
Company shall be entitled to rely on the Placement Agent's
representations herein, and the representations of
Prospective Investors in the Subscription Agreement and the
Investor Questionnaires, and on the Blue Sky qualifications
affected by the Placement Agent's counsel.
(f) At all times during the period commencing on the date hereof
and ending on the Final Closing Date, provide to each
Prospective Investor or his Purchaser Representative (as
defined in Regulation D), if any, on request, such
information (in addition to that contained in the Offering
Documents) concerning the Offering, the Company and any
other relevant matters, as it possesses or can acquire
without unreasonable effort or expense, and to extend to
each Prospective Investor or his Purchaser Representative,
if any, the opportunity to ask questions of, and receive
answers from, the President or other Executive Officers of
the Company concerning the terms and conditions of the
Offering and the business of the Company and to obtain any
other additional information, to the extent it possesses the
same or can acquire it without reasonable effort or expense,
as such Prospective Investor or Purchaser Representative may
consider necessary in making an informed investment decision
or in order to verify the accuracy of the information
furnished to such Prospective Investor or Purchaser
Representative, as the case may be; PROVIDED, HOWEVER, the
Company will not provide any information pursuant to this
Section 7(f) which would violate any applicable law or
agreement to which it is a party.
(g) Notify Xxxxxx Associates promptly of the acceptance or
rejection of any subscription. The Company shall not accept
subscriptions from, or make sales of Securities to, any
Prospective Investors who are not, to the Company's
knowledge, accredited investors.
(h) Cooperate with Placement Agent's counsel to 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 Securities,
and/or such documents
13
or certificates as are required by any particular state
"blue sky" law. The Company shall file promptly such
amendments to such Notice on Form D as shall become
necessary and, as requested by Xxxxxx Associates, 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 Xxxxxx Associates with
copies of all such filings.
(i) Not, directly or indirectly, engage in any act or activity
which may jeopardize the status of the offering and sale of
the Securities as exempt transactions under the Act or under
the securities or "blue sky" laws of any jurisdiction in
which the Offering maybe made. Without limiting the
generality of the foregoing, and notwithstanding anything
contained herein to the contrary, the Company shall not,
directly or indirectly, engage in any offering of securities
which, if integrated with the Offering in the manner
prescribed by Rule 502(a) of Regulation D and applicable
releases of the Commission, may jeopardize the status of the
offering and sale of the Securities as exempt transactions
under Regulation D.
(j) Apply the net proceeds from the sale of the Securities as
set forth in the Disclosure Statement. No proceeds of the
Offering shall be used to pay, in whole or in part, (A) any
outstanding debt represented by the outstanding debt
obligations set forth on Paragraph 7j of the Disclosure
Letter or (B) any accrued but unpaid salary or bonus to
officers or directors of the Company.
(k) Not, during the period commencing on the date hereof and
ending on the Final Closing Date, 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 Xxxxxx Associates prior written
consent which consent will not be unreasonably withheld,
except as required by applicable securities laws and except
as may be related to the marketing and sale of its products
in the normal course of business.
(l) Provide each Prospective Investor with registration rights
which provide that the Company shall file a registration
statement (the "REGISTRATION STATEMENT") with the SEC within
30 days of the final closing of the Offering to provide for
the resale of the shares of Common Stock issued pursuant to
the Subscription Agreements or upon exercise of the
Warrants. The registration rights also shall provide that
the failure to file an the registration statement as
contemplated herein shall result in a two-percent (2%) per
month, pro-rated daily, penalty on the subscription price
payable through the issuance by the Company to each investor
of additional shares of Common Stock and an additional three
(3%) percent penalty for each 90 days period thereafter. The
Company shall use commercially reasonable efforts to obtain
an order of effectiveness from the SEC declaring the
registration statement effective as soon as reasonably
possible, including responding to all SEC comments within 15
business days.
14
8. Payment of Expenses.
The Company hereby agrees to pay all fees, charges, and expenses incident
to the performance by the Company of its obligations hereunder, including,
without limitation, all fees, charges, and expenses in connection with: (i) the
preparation, printing, filing, distribution, and mailing of the Offering
Documents including the cost of all copies thereof; (ii) the issuance of the
Securities including any transfer or other taxes payable thereon and the fees of
any transfer agent or registrar; (iii) the qualification of the Securities or
the securing of an exemption therefrom under state or foreign "blue sky" or
securities laws, including without limitation, filing fees payable in the
jurisdictions in which such registration or qualification or exemption therefrom
is sought and disbursements in connection therewith.
9. Conditions of Placement Agent's Obligations.
The obligations of the Placement Agent pursuant to this Agreement shall be
subject, to the continuing accuracy, in all material respects, of the
representations and warranties of the Company contained herein and in each
certificate and document contemplated under this Agreement to be delivered to
the Placement Agent, as of the date hereof and as of each Closing Date, with
respect to the performance by the Company of its obligations hereunder, and to
the following conditions:
(a) At the First Closing and the Final Closing, the Placement
Agent shall have received an opinion of Akin Gump Xxxxxxx
Xxxxx & Xxxx LLP, counsel for the Company, dated each
Closing Date, addressed to the Placement Agent, and in form
and scope satisfactory to counsel for the Placement Agent,
to the effect that:
(i) The Company is a corporation in good standing under the
laws of the State of California, the jurisdiction of
its organization. The Company has the corporate power
to enter into each of the Transaction Documents (as
shall be defined) and to perform its obligations
thereunder;
(ii) The execution and delivery of each of the Transaction
Documents by the Company and the performance by the
Company of the transactions contemplated by the
Transaction Documents have been duly authorized by all
necessary corporate action on the part of the Company.
Each of the Transaction Documents has been duly and
validly executed and delivered by the Company. The
Transaction Documents constitute the valid and binding
obligations of the Company;
(iii) The shares of Common Stock issuable pursuant to the
Transaction Documents have been duly authorized and
reserved for issuance and will be validly issued, fully
paid and non-assessable; the shares of Common Stock
underlying the Warrants (the "UNDERLYING SHARES") have
been duly authorized and reserved for issuance upon
exercise of the Warrants and, if and when issued upon
the exercise of the Warrants in accordance with the
terms of the Transaction Documents, the Underlying
Shares will be validly issued, fully paid and
non-assessable;
15
(iv) The execution and delivery of the Transaction Documents
by the Company do not, and the performance by the
Company of the transactions contemplated by the
Transaction Documents will not, (a) result in any
violation of any law, rule or regulation of any
Included Law (as shall be defined), (b) result in any
violation of any order, writ, judgment or decree known
to us, or (c) result in a violation of the Company's
articles of incorporation or bylaws;
(v) No authorization, consent or approval or other action
by, and no notice to or filing with, any governmental
authority, regulatory body or other person (each, a
"FILING") is required under any of the Included Laws
for the due execution and delivery of the Transaction
Documents by the Company and the performance by the
Company of the transactions contemplated by the
Transaction Documents except (ii) Filings necessary in
connection with the exercise of remedies under the
Transaction Documents, (iv) such other Filings as have
been obtained or made, (v) Filings required under
federal and state securities laws as contemplated by
the Transaction Documents, and (vii) Filings required
to maintain corporate and similar standing and
existence; and
(vi) The offer and sale of the Securities are exempt from
the registration and prospectus delivery requirements
of the Act. We express no opinion as to any subsequent
resale of the Securities.
In rendering such opinions, counsel for the Company may rely (A) as to
matters of fact, on certificates of responsible officers of the Company; and (B)
to the extent they deem proper, upon written statements or certificates of
officers of departments of various jurisdictions having custody of documents
respecting the corporate existence or good standing of the Company, provided
that copies of any such statements or certificates shall be delivered to counsel
for the Placement Agent.
(b) On or prior to the Initial Closing Date the Placement Agent
shall have been furnished such information, documents, and
certificates, as it may reasonably require for the purpose
of enabling it to review the matters referred to in Section
8(a), and in order to evidence the accuracy, completeness,
or satisfaction of any of the representations, warranties,
covenants, agreements, or conditions herein contained.
(c) At the First Closing and at each subsequent Closing, the
Placement Agent shall have received one or more certificates
of the chief executive officer and of the chief financial
officer of the Company, dated the applicable Closing Date to
the effect that, as of the date of this Agreement and as of
the applicable Closing Date the representations and
warranties of the Company contained herein were and are
accurate in all material respects, and that as of the
Closing Date the obligations to be performed by the Company
hereunder on or prior thereto have been fully performed in
all material respects. Notwithstanding the foregoing, the
Company hereby represents and warrants that at each Closing,
the representations and warranties contained herein shall be
true and correct in all material respects.
16
(d) All corporate action taken in connection with the issuance,
sale, and delivery of the Securities shall be reasonably
satisfactory in form and substance to Xxxxxx Associates and
its counsel.
(e) There shall not have occurred after the date hereof, at any
time prior to each Closing: (A) any domestic or
international event, act, or occurrence which has materially
disrupted, or in Xxxxxx Associates opinion will in the
immediate future materially disrupt the securities markets;
(B) a general suspension of, or a general limitation on
prices for, trading in securities on the the
over-the-counter market; (C) any banking moratorium declared
by a state or federal authority; (D) any material
interruption in the mail service or other means of
communication within the United States; (E) any material
adverse change in the business, properties, assets, results
of operations, or financial condition of the Company; or (F)
any change in the market for securities in general or in
political, financial, or economic conditions which, in
Xxxxxx Associates reasonable judgment, makes it inadvisable
to proceed with the offering, sale, and delivery of the
Securities.
(f) The Company shall have executed and delivered to Xxxxxx
Associates the Advisory and Consulting Agreement as required
under Section 13 hereunder and any required Agent Warrants
as provided herein.
(g) The Company shall have obtained an extension on the maturity
date of its outstanding bridge debt in the principal amount
of approximately $250,000 to provide for an extended
maturity date of one year from the closing of the Offering
and such other terms as may be agreed upon by the Placement
Agent and the Company.
(h) Any certificate or other document signed by any officer of
the Company and delivered to Xxxxxx Associates or to its
counsel at a Closing shall be deemed a representation and
warranty by the Company hereunder as to the statements made
therein. If any condition to Xxxxxx Associates obligations
hereunder has not been fulfilled in all material respects as
and when required to be so fulfilled, Xxxxxx Associates may
terminate this Agreement or, if Xxxxxx Associates so elect,
in writing waive any such conditions which have not been
fulfilled or extend the time for their fulfillment. If
Xxxxxx Associates elects to terminate this Agreement, Xxxxxx
Associates shall notify the Company of such election in
writing. Upon such termination, neither party shall have any
further liability or obligation to the other except as
provided in Section 11 hereof.
(i) Prior to the Initial Closing, the Company and Xxxxxxx Xxxxxx
shall have executed a written agreement, the terms of which
shall be contingent on the consummation of the Initial
Closing, whereby (A) Xx. Xxxxxx defers payment of all
accrued but unpaid bonus or salary for nine months after the
date hereof and (B) Mr. Tazabi defers payment of cash
compensation pursuant to his employment agreement in excess
of $150,000 (pro rated for each pay period) for nine months
following the date hereof.
17
(j) Prior to the Initial Closing, the Company and Astor Capital
("ASTOR") shall have executed a written agreement, the terms
of which shall be contingent on the consummation of the
Initial Closing, whereby the Company and Astor agree that
(i) the compensation payable to Astor pursuant to that
certain Agreement for Investment Banking and Advisory
Services dated June 1, 2003, shall be reduced during the
period from the date hereof and for nine months hereafter to
an amount not to exceed the sum of $5,000 per month, (ii) no
Offering proceeds shall be used to make such payments, and
(iii) no new agreements for services with compensation
payable to Astor shall be entered into between the Company
and Astor during the nine month period commencing on the
date hereof, unless Astor is successful in raising capital
for the Company or assists the Company in a corporate
transaction such as a merger, consolidation, joint venture,
strategic relationship or license agreement.
10. Conditions of Company's Obligations.
The obligations of the Company pursuant to this Agreement shall be subject,
in its discretion, to the performance by the Placement Agent in all material
respects of its obligations hereunder.
11. Termination.
This Agreement may be terminated by (a) the Placement Agent if any of the
closing conditions contained in Section 9 have not been satisfied in all
material respects or (b) the Company if any of the closing conditions contained
in Section 10 have not been satisfied in all material respects or if the Minimum
Offering has not been successfully placed by the end of the Offering Period. If
the Agreement is terminated as the result of a breach by the Company of any
covenant, representation, or warranty contained in the Agreement then, in that
event, and provided the Placement Agent is not in breach hereunder, the Company
shall be liable for the Placement Agent's reasonable expenses, including counsel
fees, after giving credit for any prior payment of expenses by the Company. If
the Agreement is terminated as the result of a breach by the Placement Agent of
any material covenant, representation, or warranty contained in the Agreement
then, in that event, and provided the Company is not in breach hereunder, the
Placement Agent shall be liable for the Company's reasonable expenses, including
counsel fees.
12. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless the
Placement Agent, its officers, directors, partners,
employees, agents, and counsel, and each person, if any, who
controls the Placement Agent (each an "INDEMNIFIED PARTY")
within the meaning of Section 15 of the Act or Section 20(a)
of the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT"), against any and all loss, liability, claim,
damage, and expense whatsoever (which shall include, for all
purposes of this Section 12, but not be limited to,
attorneys' fees and any and all expense whatsoever incurred
in investigating, preparing, or defending against any
litigation, commenced or threatened, or any claim whatsoever
and any and all amounts paid in settlement of any claim or
litigation) as and when incurred arising out of,
18
based upon, or in connection with (i) any untrue statement
or alleged untrue statement of a material fact contained in
(A) the Offering Documents or in any document delivered or
written statement made pursuant to Section 7(f) or (B) any
application or other document or communication (it being
understood that neither the Company nor any officer,
director or employee shall provide any information to any
Prospective Investor which is not contained in the Offering
Documents) (in this Section 12 collectively called an
"application") executed by or on behalf of the Company or
based upon written information furnished by or on behalf of
the Company filed in any jurisdiction in order to register
or qualify the Securities under the "blue sky" or securities
laws thereof or in order to secure an exemption from such
registration or qualification or filed with the Commission;
(ii) any omission or alleged omission to state a material
fact required to be stated therein or necessary to make the
statements therein not misleading, unless such statement or
omission was made in reliance upon and in conformity with
written information furnished to the Company as stated in
Section 12(b) with respect to the Placement Agent expressly
for inclusion in the Offering Documents or in any
application, as the case may be; or (iii) any breach of any
representation, warranty, covenant, or agreement of the
Company contained in this Agreement; PROVIDED, HOWEVER, that
the Company shall not be liable in any such case to the
extent that any such loss, liability, claim, damage, and
expense arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission
made in any Offering Documents or application relating to
the Securities in reliance upon and conformity with written
information relating to the Placement Agent furnished to the
Company by the Placement Agent. The foregoing agreement to
indemnify shall be in addition to any liability the Company
may otherwise have, including liabilities arising under this
Agreement.
If any action is brought against an Indemnified Party, in respect of which
indemnify may be sought against the Company pursuant to the foregoing paragraph,
such Indemnified Party or Parties shall promptly notify the Company (the
"INDEMNIFYING PARTY") in writing of the institution of such action. The failure
so to notify shall not relieve the Indemnifying Party from any liability it may
have except to the extent that it has been prejudiced in any respect by such
failure or from any liability that it may have to such Indemnified Party other
than pursuant to this Section 12(a). In case of such action, the Indemnifying
Party shall promptly assume the defense of such action, including the employment
of counsel (reasonably satisfactory to such Indemnified Party or Parties) and
payment of expenses. Such Indemnified Party shall have the right to employ its
own counsel in any such case, but the fees and expense of such counsel shall be
at the expense of such Indemnified Party unless the employment of such counsel
shall have been authorized in writing by the Indemnifying Party in connection
with the defense of such action or the Indemnifying Party shall not have
promptly employed counsel satisfactory to such Indemnified Party or Parties to
have charge of the defense of such action or such Indemnified Party or Parties
shall have been advised by counsel that there may be a conflict of interest
between the Indemnified Parties the Indemnifying Party in the conduct of the
defense, in any of which events such fees and expenses of one such counsel shall
be borne by the Indemnifying Party and the Indemnifying Party shall not have the
right to direct the defense of such action on behalf of the Indemnified Party or
Parties. Anything in this paragraph to the contrary notwithstanding, the
Indemnifying Party shall not be liable for any settlement of any
19
such claim or action effected without its written consent. The Company agrees
promptly to notify the Placement Agent of the commencement of any litigation or
proceedings against the Company or any of its officers or directors in
connection with the sale of the Securities, the Offering Documents, or any
application.
(b) The Placement Agent agrees to indemnify and hold harmless
the Company, its officers, directors, employees, agents, and
counsel, and each other person, if any, who controls the
Company within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act, to the same extent as the
foregoing indemnity from the Company to the Placement Agent
in Section 12(a), with respect to any and all loss,
liability, claim, damage, and expense whatsoever (which
shall include, for all purposes of this Section 12, but not
be limited to, attorneys' fees and any and all expense
whatsoever incurred in investigating, preparing, or
defending against any litigation, commenced or threatened,
or any claim whatsoever and any and all amounts paid in
settlement of any claim or litigation) as and when incurred
arising out of, based upon, or in connection with (i)
statements or omissions, if any, made in the Offering
Documents, any registration statement, or any prospectus
pursuant to this Agreement in reliance upon and in
conformity with written information furnished to the Company
as stated in this Section 12 with respect to the Placement
Agent expressly for inclusion in the Offering Documents,
(ii) the failure of the Placement Agent to comply with the
provisions of Section 2(c) hereof or with the "blue sky" or
securities laws of the jurisdictions in which the Placement
Agent solicits offers to buy or offers to sell any
Securities, or (iii) any breach of any representation,
warranty, covenant or agreement of the Placement Agent
contained in this Agreement. The foregoing agreement to
indemnify shall be in addition to any liability the
Placement Agent may otherwise have, including liabilities
arising under this Agreement. In no case, notwithstanding
anything to the contrary contained in this Section 12, shall
the Placement Agent be liable under this Section 12(b) in
excess of the compensation received by it pursuant to
Section 5(a) hereof. If any action shall be brought against
the Company or any other person so indemnified based on the
Offering Documents and in respect of which indemnity may be
sought against the Placement Agent pursuant to this Section
12, the Placement Agent shall have the rights and duties
given to the Indemnifying Party, and the Company and each
other person so indemnified shall have the rights and duties
given to the Indemnified Parties, by the provisions of
Section 12(a) hereof.
(c) To provide for just and equitable contribution, if (i) an
Indemnified Party makes a claim for indemnification pursuant
to Section 12(a) or 12(b) hereof 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 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, agent, or counsel of the Company, or any
controlling person of the Company), on the one hand, and the
Placement Agent (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, on the other hand;
20
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 in connection with the facts which
resulted in such losses, liabilities, claims, damages, and
expenses shall also be considered. The relative benefits
received by the Company, on the one hand, and the Placement
Agent, on the other hand, shall be deemed to be in the same
proportion as (x) the total proceeds from the Offering (net
of compensation payable to the Placement Agent pursuant to
Section 5(a) hereof but before deducting expenses) received
by the Company, and (y) the compensation received by the
Placement Agent pursuant to Section 5(a) hereof.
The relative fault, in the case of an untrue statement, alleged untrue
statement, omission, or alleged omission, shall 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 or per capita allocation of the
aggregate losses, liabilities, claims, damages, and expenses or by any other
method of allocation that does not reflect the equitable considerations referred
to in this Section 12(c). In no case, notwithstanding anything to the contrary
contained in this Section 12, shall the Placement Agent be responsible for a
portion of the contribution obligation in excess of the compensation received by
it pursuant to Section 5(a) hereof. 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 12(c),
each person, if any, who controls the Placement Agent within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act and each officer,
director, partners, employee, agent, and counsel of the Placement Agent, shall
have the same rights to contribution as the Placement Agent, and each person, if
any, who controls the Company within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act and each officer, director, employee, agent,
and counsel of the Company, shall have the same rights to contribution as the
Company, subject in each case to the provisions of this Section 12(c). Anything
in this Section 12(c) 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 12(c) is intended to supersede any
right to contribution under the Act, the Exchange Act, or otherwise.
13. Consulting Agreement.
Upon completion of the Minimum Offering, the Company and the Placement
Agent shall enter into an Advisory and Consulting Agreement upon mutually
agreeable terms which shall provide for the Placement Agent to serve, on a
non-exclusive basis, as a financial consultant to the Company in consideration
for warrant to purchase a number of Units equal to 10% of the Units sold in the
Offering ("CONSULTING WARRANTS"), exercisable at the Offering Price of the
Units. The Consulting Warrants shall have terms, including registration rights,
similar to the Units sold to investors, and shall have an exercise term of five
years.
21
14. Non-Solicitation.
The Company agrees that, for a period of three years from the date hereof,
it shall not solicit any offer to buy from or offer to sell to any person
originally introduced to the Company by the Placement Agent in connection with
the Offering, directly or indirectly, any securities of the Company or of any
other entity, or provide the name of any such person to any other securities
broker or dealer or selling agent. If the Company or any of its affiliates,
directly or indirectly, solicits, offers to buy from or offers to sell to any
such person any such securities, or provides the name of any such person to any
other securities broker or dealer or selling agent, and such person purchases
such securities or purchases securities from any other securities broker or
dealer or selling agent, the Company shall pay to the Placement Agent an amount
equal to 10% of the aggregate purchase price of the securities so purchased by
such person.
15. Representations and Agreements to Survive Delivery.
All representations, warranties, covenants, and agreements contained in
this Agreement shall be deemed to be representations, warranties, covenants, and
agreements at the Closing Date and, such representations, warranties, covenants,
and agreements, including the indemnification and contribution agreements
contained in Section 12, shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of the Placement Agent or
any indemnified person, or by or on behalf of the Company or any person or
entity which is entitled to be indemnified under Section 12(b), and shall
survive the issuance, sale, and delivery of the Securities. In addition,
notwithstanding any election hereunder or any termination of this Agreement, and
whether or not the terms of this Agreement are otherwise carried out, the
provisions of Sections 12 and 14 shall survive termination of this Agreement and
shall not be affected in any way by such election or termination or failure to
carry out the terms of this Agreement or any part thereof.
16. Notices.
All communications hereunder, except as may be otherwise specifically
provided herein, shall be in writing and, if sent to the Placement Agent, shall
be mailed by certified mail, hand delivered, or sent by overnight courier
service, to Xxxxxx Associates L.P. 00 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxxxx, with a copy to Xxxxxxxxx & XxXxxxx LLP, 00 Xxxxxxxx,
00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxxx X. Xxxxxxxx, Esq.; or if
sent to the Company, shall be mailed by certified mail, hand delivered, or sent
by overnight courier service, to Universal Detection Technology, 0000 Xxxxxxxx
Xxxx., Xxxxx 000, Xxxxxxx Xxxxx, Xxxxxxxxxx 00000, Attention Xxxxxxx Xxxxxx,
with a copy to Akin Gump Xxxxxxx Xxxxx & Xxxx, 0000 Xxxxxxx Xxxx Xxxx, 00xx
Xxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000, Attention: Xxxxx X. Xxxxxx. All notices
hereunder shall be effective upon receipt by the party to which it is addressed.
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17. Parties.
This Agreement shall inure solely to the benefit of, and shall be binding
upon, the Placement Agent and the Company and the persons and entities referred
to in Section 10 who are entitled to indemnification or contribution, and their
respective successors, legal representatives, and assigns (which shall not
include any purchaser, as such, of Securities), and no other person shall have
or be construed to have any legal or equitable right remedy, or claim under or
in respect of or by virtue of this Agreement or any provision herein contained.
18. Construction.
This Agreement shall be construed in accordance with the laws of the State
of New York, without giving effect to conflict of laws. Any or all actions or
proceedings which may be brought by the Company or Xxxxxx Associates under this
Agreement shall be brought in the federal or state courts having a situs within
the State of New York, New York County, and the Company and Xxxxxx Associates
each hereby consent to the jurisdiction of any local, state, or federal court
located within the State of New York, New York County and waive all objections
to venue.
19. Counterparts.
This Agreement may be executed in counterparts, each of which shall
constitute an original and all of which, when taken together, shall constitute
one agreement.
If the foregoing correctly sets forth the understanding between us, please
so indicate in the space provided below for that purpose, whereupon this letter
shall constitute a binding agreement among us.
Very truly yours,
UNIVERSAL DETECTION TECHNOLOGY
By: ________________________________
Name: Xxxxxxx Xxxxxx
Title: Chief Executive Officer
Accepted as of the date
first above written:
Xxxxxx Associates L.P.
By: Xxxxx Xxxxxxx Securities Corp
General Partner
By:
-----------------------------------------------
Name: Xxxxx Xxxxxx
Title: President
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EXHIBIT A
Additional Offering Terms
Total Offering Up to $1,000,000 of Units, subject to increase by
an additional $1,000,0000 of Units
Units Units are comprised of Shares of
common Stock and Class A and Class B
Warrants.
Offering Price The Units shall have an offering price of the
lower of (i) the average closing bid price for
the Company's Common Stock for the five trading
days ending the trading day immediately prior to
the initial closing date less 33% (rounded to the
nearest whole cent) or (ii) $0.50 per Unit.
Class A Warrants Provide for the purchase
of 1/2 share of Common Stock at the
Unit Offering price.
Class B Warrants Provide for the purchase
of 1/2 share of Common Stock at
$0.70 per share.
Registration Rights. The Company has agreed to file a registration
statement with the Securities and Exchange
Commission within 30 days of final closing of the
Offering to register for resale the shares of
Common Stock and the shares underlying the
Warrants included in the Units. This
registration statement will also register for
resale the shares of Common Stock underlying the
Placement Agent Warrants.
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