EXHIBIT 1
PLACEMENT AGENCY AGREEMENT
October 14, 2004
The Sagemark Companies, Ltd.
0000 Xxxxxx xx xxx Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Ladies and Gentlemen:
This Placement Agency Agreement (the "Agreement") confirms the
retention by The Sagemark Companies Ltd., a New York corporation (the
"Company"), of Xxxxxx Xxxxxxx & Company, Inc. (the "Placement Agent"), to act as
the exclusive placement agent on a "best efforts" basis in connection with the
private placement (the "Placement") of Units (as defined below) of the Company
on the terms set forth below.
1. PLACEMENT
(a) The securities of the Company which are the subject of the
Placement shall consist of a minimum of Two Million Dollars ($2,000,000) (the
"Minimum Amount") and a maximum of Six Million Dollars ($6,000,000) (the
"Maximum Amount") of units (the "Units"), at a price per Unit of $100,000 (the
"Unit Price"), with each Unit consisting of:
(i) a number of shares (the "Shares") of common stock of
the Company, par value $0.01 per share (the "Common Stock"), determined by
dividing: (i) the Unit Price by (ii) a price equal to 70% of the closing bid
price of the shares of Common Stock on the OTC Bulletin Board (the "Common Stock
Purchase Price") on the last trading day immediately prior to the initial
closing of the Placement (the "Initial Closing") or on the last trading day
immediately prior to any subsequent closing of the Placement as contemplated
hereby (each, a "Subsequent Closing" and, together with the Initial Closing,
each, a "Closing" and collectively, the "Closings"), with a floor (the "Lowest
Permissible Purchase Price") on the Common Stock Purchase Price of Two Dollars
($2.00) and a ceiling (the "Maximum Purchase Price") on the Common Stock
Purchase Price of Two Dollars and Forty Cents ($2.40). If one or more Subsequent
Closings occurs, the Common Stock Purchase Price for the Shares purchased in
each prior Closing shall be adjusted to equal the lowest Common Stock Purchase
Price for all of the Closings and the number of Shares and Warrants previously
issued to purchasers in the Placement shall be adjusted accordingly so that each
purchaser in the Placement purchases the Units at the same Common Stock Purchase
Price; and
(ii) a warrant (each a "Warrant" and, collectively, the
"Warrants") to purchase, at any time prior to the fifth (5th) anniversary
following the date of issuance of the Warrant, a number of shares of Common
Stock equal to fifty percent (50%) of the number of Shares included within each
Unit, at a price per share of Common Stock equal to two hundred percent (200%)
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October 14, 2004
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of the Common Stock Purchase Price (the "Warrant Exercise Price"). If one or
more Subsequent Closings occurs, the Warrant Exercise Price of the Warrants
purchased in each prior Closing shall be adjusted to equal the lowest Warrant
Exercise Price for all of the Closings. The shares of Common Stock underlying
each Warrant are referred to herein as the "Warrant Shares." The Units, the
Shares, the Warrants, the Warrant Shares and the Placement Agent Warrants (and
underlying securities) are sometimes referred to collectively herein as the
"Securities."
No fractional Shares or Warrants will be issued in connection with the
Placement. All fractional Shares and Warrants to be issued in connection with
the Placement, and all fractional Warrant Shares to be issued upon exercise of
the Warrants, will be rounded up or down to the next full number of Shares,
Warrants or Warrant Shares, as applicable.
(b) The Placement Agent will, on an exclusive basis, conduct the
Placement on a "best efforts" basis, it being understood and agreed, however,
that the Placement Agent shall have the right, in its sole discretion, to invite
other NASD member firms to participate in the Placement, and to pay (or, with
the reasonable agreement of the Company, cause the Company to pay) a portion of
the compensation to be received by the Placement Agent pursuant to this
Agreement to any such NASD member firm. The Company shall not pursue any other
equity financing (including convertible securities) of the Company's securities
during the term of this Agreement. Additionally, the Company and the Placement
Agent may mutually agree to increase the number of Units offered in the
Placement up to a maximum of seventy-five (75) Units ($7,500,000), without
notice to the Investors (defined below).
(c) The Initial Closing is expected to be on or before the
Termination Date (hereinafter defined) (the "Initial Closing Date"), subject to
extension by the Placement Agent in its sole discretion without notice to
investors in the Placement (the "Investors"), and Subsequent Closings may be
conducted during the Offering Period (defined below) until the date on which the
Maximum Amount is subscribed for by Investors and accepted by the Company (the
"Final Closing Date"). Unless terminated earlier in the Company's sole
discretion, the offering period for the Placement (the "Offering Period") will
commence on the date hereof and expire on the earlier to occur of: (i) November
29, 2004 (the "Termination Date"), (ii) the date on which the Maximum Amount is
subscribed for and accepted by the Company or (iii) the termination of the
Placement pursuant to the terms of this Agreement. The Termination Date may be
extended by an additional 45 days at the sole discretion of the Placement Agent
without notice to the Investors. The minimum subscription amount per Investor
shall be One Hundred Thousand Dollars ($100,000), except that the Company and
the Placement Agent may, in their sole discretion and without notice to the
Investors, accept subscriptions for a lesser amount.
(d) The Placement will be made pursuant to the Memorandum (as
defined in Section 2 below). The Securities will not be registered under the
Securities Act of 1933, as amended, or any applicable successor statute (the
"Securities Act"), but will be issued in reliance on the private offering
exemption available under Section 4(2) of the Securities Act and the Rules and
Regulations (as defined below) promulgated thereunder, including Regulation D
("Regulation D"). The Placement Agent understands that all subscriptions for
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October 14, 2004
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Units are subject to acceptance by the Company. The Company and the Placement
Agent reserve the right in their reasonable discretion to accept or reject any
or all subscriptions for Units, in whole or in part, regardless whether any
funds have been deposited into an escrow account. Any subscription monies
received by the Placement Agent from Investors will be handled in accordance
with Rule 15c2-4 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), whether or not the Placement Agent is subject to the Exchange
Act, and as otherwise may be prescribed by the terms of the Memorandum. As used
herein, the term "Rules and Regulations" means the applicable rules and
regulations promulgated under the Securities Act and the Exchange Act.
(e) Until the Initial Closing is held, all subscription funds
received shall be held by American Stock Transfer & Trust Company (the "Escrow
Agent") in a non-interest bearing escrow account established for such purpose
(the "Escrow Account"). The Placement Agent shall not have any independent
obligation to verify the accuracy or completeness of any information contained
in any Subscription Documents (as defined in Section 2 below) or the
authenticity, sufficiency or validity of any check delivered by any prospective
Investor in payment for the Units, nor shall the Placement Agent incur any
liability with respect to any such verification or failure to verify. All
subscription checks and funds shall be promptly and directly delivered without
offset or deduction to the Escrow Agent for deposit into the Escrow Account.
2. OFFERING MEMORANDUM AND RELATED MATTERS
(a) The Company has prepared a Confidential Private Placement
Memorandum, dated as of October 14, 2004, relating to the Company and the
Placement (such memorandum, together with the exhibits and attachments thereto
or available thereunder and any amendments or supplements thereto prepared and
furnished by the Company, being referred to herein as the "Memorandum"), which
Memorandum, among other things, describes the Placement and certain investment
risks relating thereto.
(b) The Company has been and will continue to be responsible for
preparing and filing required documentation, if any, with the authorities in the
United States or any state located therein (and subsequent to, if required by
the laws of any such jurisdiction) in connection with the distribution of the
Memorandum to prospective Investors (the parties acknowledging, however, that
the Placement of the Units is intended and expected to be wholly or partially
exempt from filing requirements in the United States by reason of an "accredited
investor" exemption). Notwithstanding the foregoing, the Placement Agent's
counsel will be responsible for filing all documents required by each
jurisdiction in which the Units will be offered.
(c) The Placement Agent and its counsel and the Company and its
counsel have or will jointly prepare a form of subscription agreement (the
"Subscription Agreement") and a form of confidential purchaser questionnaire
(collectively with the Subscription Agreement, and any other stock purchase or
other documents required in connection with subscriptions to Units in the
Placement, the "Subscription Documents"), which Subscription Documents shall
contain such representations, warranties, conditions and covenants as are
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October 14, 2004
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customary in private placements of corporate debt and equity securities with
United States investors that qualify as "accredited investors", as defined in
Rule 501(a) under the Securities Act ("Accredited Investors"). The Placement
Agent and its counsel have had or will have a sufficient opportunity, in their
discretion, to review the final form of the Memorandum and Subscription
Documents and the form of Warrant prior to the distribution thereof to
prospective Investors, and the Memorandum and the Subscription Documents will be
the only offering documents (other than cover letters which may be used by the
Placement Agent for which the Company will not be responsible unless it approves
such letters, in writing, and any documents made available to Investors in
accordance with the terms of the Memorandum) shown to prospective Investors. The
Placement Agent shall advise the Company of those jurisdictions in which the
Placement Agent is licensed as a broker-dealer and in which the Placement Agent
desires to offer the Units and the Company and its counsel will thereafter
advise the Placement Agent and its counsel in writing of those jurisdictions in
which the Units may lawfully be offered and sold and the Placement Agent agrees
that the Units will be offered or sold only in such jurisdictions and in the
manner specified by the Company; provided, however, that the Placement Agent
shall not be responsible for independently verifying such written advice with
respect to the jurisdictions in which the Units may be offered and sold and with
respect to the manner in which the Units may be offered and sold in such
jurisdictions. Notwithstanding the foregoing, the Placement Agent shall
determine whether it is licensed to offer and sell the Units and Securities in
each jurisdiction in which it intends to do so and the Company will have no
responsibility with respect thereto.
(d) The Placement will be made in accordance with the requirements
of Section 4(2) under the Securities Act and/or Regulation D only to Accredited
Investors, purchasing for their own account for investment purposes only and not
for distribution in violation of applicable securities laws. Furthermore,
prospective Investors will have been provided with the Memorandum and access to
the management of the Company and afforded the opportunity to ask questions
concerning the Company and the Units.
(e) The Company recognizes, agrees and confirms that the Placement
Agent (or any selling agent permitted to be utilized by the Placement Agrement
under Section 3(a) hereof): (i) will use and rely primarily on the information
contained in the Memorandum and the Subsciption Documents and on information
available from generally recognized public sources in performing the services
contemplated by this Agreement without having independently verified the same;
(ii) is authorized, as the Company's exclusive financial advisor and placement
agent in connection with the Placement, to transmit to any prospective Investor
a copy or copies of the Memorandum, the Subsciption Documents and any other
documentation supplied to the Placement Agent for transmission to any
prospective Investor by or on behalf of the Company or by any of the Company's
officers, representatives or agents, in connection with the performance of the
Placement Agent's services hereunder or any transaction contemplated hereby;
(iii) does not assume responsibility for the accuracy or completeness of any
information contained in the Memorandum and the Subsciption Documents or any
such other information; (iv) will not make an appraisal of the Company or any
assets of the Company or the securities being offered by the Company in the
Placement; and (v) retains the right to continue to perform due diligence of the
Company during the course of the Company's engagement of the Placement Agent.
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October 14, 2004
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3. PLACEMENT AGENT
(a) The Company hereby employs the Placement Agent as its
exclusive placement agent (subject to the provisions of Section 1(b) hereof) in
the United States for the purpose of offering the Units to Investors and
engaging in any equity financing during the Offering Period for the account and
risk of the Company. This appointment shall be exclusive with respect to the
Placement and otherwise as provided herein, and the Company shall not have the
right to appoint additional sales agents in the United States in connection
therewith without the Placement Agent's express prior written consent. The
Company hereby agrees that the Placement Agent shall have the right to utilize
other selling broker-dealers in connection with the Placement of the Units on
terms approved by the Placement Agent and the Company will have no
responsibility therefor. Subject to the provisions of Section 5 hereof and to
the performance by the Company of all of its obligations to be performed
hereunder, the Placement Agent agrees to use its best efforts to assist in
arranging for sales of the Units. The Company acknowledges and agrees that "best
efforts" does not assure that the Placement will be consummated. It is
understood and agreed that this Agreement does not create any partnership, joint
venture or other similar relationship between or among the Placement Agent and
the Company, and that the Placement Agent is acting only as a sales agent.
(b) For the services of the Placement Agent hereunder, the Company
will pay or cause to be paid to the Placement Agent at any Closing (or following
the Placement in the case of Section 3(b)(iii) below) the following fees:
(i) a cash fee equal to nine percent (9%) of the
aggregate gross proceeds (prior to the payment of expenses) received by the
Company in the Placement (to be paid simultaneously with each applicable
Closing);
(ii) a non-accountable expense allowance equal to one
percent (1%) of the aggregate gross proceeds (prior to the payment of expenses)
received by the Company in the Placement (to be paid simultaneously with each
applicable Closing);
(iii) a cash fee equal to three percent (3%) of the gross
proceeds received by the Company upon the exercise of Warrants, payable on the
day of the Company's receipt of the proceeds of such exercise. If a holder of a
Warrant exercises such Warrant, the Company shall give written notice of such
occurrence to the Placement Agent, which notice shall include a statement of the
fee to be paid to the Placement Agent;
(iv) a cash fee equal to two percent (2%) of the aggregate
gross proceeds received by the Company in the Placement (to be paid
simultaneously with each applicable Closing) in connection with the execution of
a six month consulting agreement to be executed prior to the First Closing
between the Company and the Placement Agent; and
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October 14, 2004
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(v) warrants to purchase up to twenty percent (20%) of
the number of shares issuable upon exercise of all of the Warrants issued in the
Placement and warrants to purchase up to twenty percent (20%) of the Shares
comprising part of the Units sold in the Placement, such warrants to be issued
in the names to be designated by the Placement Agent (the "Placement Agent
Warrants"). The Placement Agent Warrants shall be immediately exercisable for a
period of five (5) years from the Final Closing Date at an exercise price equal
to the lowest Common Stock Purchase Price, shall contain a cashless exercise
provision and shall contain anti-dilution provisions which are the same as the
Warrants, among other provisions.
(c) Notwithstanding any termination of this Agreement pursuant to
the terms hereof or otherwise, if on or before the twelve (12) month anniversary
of the Final Closing Date (or twelve (12) months after any termination of this
Agreement), the Company enters into a commitment or letter of intent relating to
any offering of debt or equity securities of the Company or any other financing:
(i) with any financing source to whom the Company was introduced by the
Placement Agent, in writing, or who was contacted by the Placement Agent in
connection with its services for the Company hereunder (i.e., received a copy of
the Memorandum from the Placement Agent), or (ii) as a result of the use by the
Company of materials or other work product prepared by the Placement Agent in
connection with the Placement (not including the Memorandum), the Company shall
pay to the Placement Agent, at and subject to the closing of any such offering
or financing, the fees described in, and in accordance with the terms and
provisions of, Section 3(b)(i), (ii), (iii), (iv) and (v) above.
(d) In addition to the foregoing, the Company hereby grants to the
Placement Agent the exclusive right of first refusal to manage any private or
public offering of debt or equity or other securities of the Company (a "Future
Offering") for a period of two (2) years from and subject to the Initial
Closing. At any time during such two (2) year period that the Company
contemplates conducting a Future Offering, the Company shall deliver to the
Placement Agent a written notice (the "Notice") stating its intention to conduct
the Future Offering, the material terms and conditions thereof, including the
amount to be raised and the type of security to be issued (the "Offer Terms")
and an offer to the Placement Agent to manage the Future Offering. At any time
within 30 days after receipt of the Notice, the Placement Agent may, by giving
written notice to the Company, elect to accept the Company's offer to manage the
Future Offering. The failure of the Placement Agent to give such acceptance
notice within such 30 day period will be deemed a rejection of the offer solely
with respect to the applicable Future Offering. Subject to the provisions of
this Section 3(d) hereof, if applicable (i.e., if the Future Offering does not
involve the Placement Agent electing to match any such offering terms offered by
another financing source), the terms of any Future Offering managed by the
Placement Agent (including the fees payable to the Placement Agent in connection
therewith) shall be mutually agreed upon by the Company and the Placement Agent.
In the event, however, that the Company and the Placement Agent are unable to
agree upon such fees payable to the Placement Agent, the Company shall have a
reasonable time thereafter to enter into an agreement with another placement
agent with respect to such Future Offering. In the event that at any time during
the aforementioned two (2) year period that the Placement Agent is under any
legal or administrative limitation or restriction which would preclude or limit
its right or ability to manage any such Future Offering, the Company will not be
bound by the aforementioned right of first refusal.
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October 14, 2004
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4. PAYMENT BY COMPANY OF EXPENSES
The Company will pay for or promptly reimburse the Placement Agent, as the case
may be, and whether or not any Units are sold in connection with the Placement,
all expenses of the Company and the Placement Agent relating to the Placement,
including legal fees incurred by the Placement Agent not to exceed fifty
thousand ($50,000) dollars ($7,500 of which was paid simultaneously with the
execution of the letter of intent by and between the Company and the Placement
Agent dated September 15, 2004), plus all out-of-pocket expenses incurred by
counsel to the Placement Agent and all other reasonable out-of-pocket expenses
of the Placement Agent relating to activities under this Agreement, including,
without limitation: (i) the preparation, printing, reproduction, filing,
distribution and mailing of the Memorandum and all other documents relating to
the Placement (estimated to be two thousand dollars ($2,000)), and any
supplements or amendments thereto, including the fees and expenses of counsel to
the Company, and the cost of all copies thereof; (ii) the public registration
and listing of, or the registration and qualification of the Shares and the
Warrant Shares and the shares of Common Stock underlying the Placement Agent
Warrants (the "Placement Agent Warrant Shares") , or the securing of an
exemption therefrom under state of 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, the costs
of preparing preliminary, supplemental and final "blue sky surveys" relating to
the offer and sale of the Units and the fees and disbursements of counsel to the
Placement Agent in connection with such "blue sky" matters; (iii) the filing
fees, if any, payable to the applicable securities regulatory authorities; (iv)
all Escrow Agent fees; and (v) all road show expenses, travel, and other related
expenses. Regardless of who pays the initial expense with respect to all such
out-of-pocket expenses, the Company shall promptly reimburse such expenses if
such expenses are not paid by it. Any such expenses (other than the Placement
Agent's legal or other professional expenses) in excess of $2,000 shall be
subject to prior approval by the Company, which approval shall not be
unreasonably withheld or delayed. For the avoidance of doubt, the fees and
disbursements of legal counsel to the Placement Agent in connection with the
Registration Statement (as defined below) as contemplated by Section 9(p) hereof
shall be separate from and in addition to the foregoing fees.
5. TERMINATION OF PLACEMENT
The Placement may be terminated: (i) by the Placement Agent or the
Company at any time upon thirty (30) days prior written notice or (ii)
immediately by the Placement Agent upon giving written notice to the Company,
but only in the event that:
(a) in the opinion of the Placement Agent, the Memorandum contains
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary in order to make the statements
appearing therein not misleading in the light of the circumstances in which they
were made, and the Company shall not have corrected such untrue statement or
omission to the reasonable satisfaction of the Placement Agent and its counsel
within ten (10) days after the Company receives notice of such untrue statement
or omission, provided that notwithstanding such ten (10) day period, in the
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October 14, 2004
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event of the Company's receipt of any such notice, the Initial Closing or, as
the case may be, any Subsequent Closing shall not occur hereunder until the
Placement Agent shall notify the Company that it is satisfied, in its sole and
absolute determination, that the Company has taken such steps (including
circulating amended offering materials and affording prospective Investors a
reasonable opportunity to review such amendments) to allow the Closing to occur;
or
(b) the Company shall be in material breach of any representation,
warranty, agreement or covenant made by it in this Agreement, any Subscription
Document or any other document relating to the Placement and, in the case
thereof, the Company has not cured any such breach after the expiration of ten
(10) days written notice by the Placement Agent. Notwithstanding any provision
of this Agreement to the contrary, the Company shall no be in breach of this
Agreement unless it receives notice of such breach from the Placement Agent and
fails to cure same within ten (10) days after the receipt of any such notice; or
(c) (i) any calamitous domestic or international event or act or
occurrence has taken place and, in the Placement Agent's opinion, has or will
materially disrupt general securities markets in the United States in the
immediate future; or (ii) if trading on the New York Stock Exchange, the
American Stock Exchange, or in the over-the-counter market shall have been
suspended or minimum or maximum prices for trading shall have been fixed, or
maximum ranges for prices for securities shall have been required on the
over-the-counter market by the National Association of Securities Dealers, Inc.
("NASD") or by order of the Securities and Exchange Commission ("SEC") or any
other government authority having jurisdiction; or (iii) if the United States
shall have become involved in a war, major hostilities or the like; or (iv) if a
banking moratorium has been declared by a New York State or federal authority;
or (v) if the Company shall have sustained a material loss, whether or not
insured, by reason of fire, flood, accident or other calamity; or (vi) if there
shall have been such material adverse change in the conditions or prospects of
the Company, involving a change not contemplated by the Memorandum; or (vii) if
there shall have been such material adverse general market conditions as in the
Placement Agent's reasonable judgment would make it inadvisable to proceed with
the Placement or the sale or delivery of the Units.
6. OFFERING PERIOD; CLOSINGS
Subject to the terms and conditions set forth in Sections 5 and 10 hereof, the
Units will be offered during the Offering Period as described in Section 1(b)
hereof. Unless the Minimum Amount is subscribed for and accepted by the Company
by the Termination Date (as the same may be extended pursuant to the terms
hereof), the Placement will be terminated and all subscription proceeds will be
returned to Investors without interest or deduction. Each Closing shall be
undertaken in a manner agreed to by the Company and the Placement Agent.
7. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY
The Company represents and warrants to the Placement Agent, as of the
date hereof, the Initial Closing Date and each Subsequent Closing Date, that:
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October 14, 2004
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(a) The Company has been validly formed and is legally existing as
a corporation in good standing under the laws of the State of New York, with
full corporate power and authority to conduct its business as currently
conducted, and is in good standing in each jurisdiction in which the conduct of
its business or the nature of its properties requires such qualification or
authorization, except where the failure to be so qualified or authorized and in
good standing could not reasonably be expected to have a material adverse effect
on the business and financial condition of the Company and its subsidiaries,
taken as a whole (a "Material Adverse Effect"). As of the date hereof, the
Company does not have, directly or indirectly, any subsidiaries other than as
disclosed in the Company's filings with the SEC (collectively, the
"Subsidiaries"). Each Subsidiary has been duly organized, is validly existing
and in good standing under the laws of the jurisdiction of its organization, has
the power and authority to own its properties and to conduct its business and is
duly qualified and authorized to transact business and is in good standing in
each jurisdiction in which the conduct of its business or the nature of its
properties requires such qualification or authorization, except where the
failure to be so qualified or authorized and in good standing could not
reasonably be expected to have a Material Adverse Effect.
(b) Except for the Subsidiaries and as otherwise disclosed in the
Memorandum and the Company's SEC filings, the Company holds no ownership or
other interest, nominal or beneficial, direct or indirect, in any corporation,
partnership, joint venture or other business entity. Except as otherwise
disclosed in the Memorandum and the Company's SEC filings, all of the issued and
outstanding capital stock of each Subsidiary is owned by the Company, free and
clear of any lien, charge, mortgage, pledge, security interest, claim, equity,
trust or other encumbrance, preferential arrangement, defect or restriction of
any kind whatsoever (each, a "Lien"), and has been duly authorized and validly
issued, and is non-assessable.
(c) The authorized capital stock of the Company consists of
27,000,000 shares of capital stock, of which 25,000,000 are classified as Common
Stock and 2,000,000 are classified as preferred stock, par value $1.00 per share
(the "Preferred Stock"). There are no other shares of capital stock of the
Company authorized. As of the date hereof and as of the Initial Closing Date,
4,017,011 shares of Common Stock are issued (3,670,253 shares are outstanding),
2,962 shares of Preferred Stock are issued and outstanding (designated as Series
B (170 shares), Series E (92 shares), and Series F (2,700 shares)) and no other
shares of capital stock of the Company are or will be issued and outstanding
(other than the Securities issued in the Placement or as otherwise disclosed in
the Memorandum or the Company Documents and except for any shares of Common
Stock issued upon the exercise of outstanding warrants or options), and all such
shares of capital stock (including the Securities issued in the Placement or as
disclosed in the Memorandum or the Company's SEC filings or reserved for
issuance pursuant to outstanding options, warrants and other rights and
agreements to purchase such shares of capital stock as disclosed in the SEC
filings) are, as the case may be, duly authorized, validly issued, fully paid
and nonassessable and not subject to preemptive rights. The Shares, the Warrant
Shares and the Placement Agent Warrant Shares have been duly reserved, and when
issued in accordance with the terms of the Placement, will be validly issued,
fully paid and nonassessable and not subject to preemptive or any other similar
rights. The outstanding options, warrants, rights to obtain securities of the
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October 14, 2004
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Company and other convertible securities of the Company are as set forth in the
Memorandum and the Company's filings with the SEC (collectively, the "Company
Documents"). Neither the Company nor any Subsidiary is a party to any agreement,
instrument or understanding which calls for, and no securities of the Company or
any Subsidiary contain provisions relating to, the resetting or repricing of any
debt or equity security instrument of the Company or any Subsidiary, except as
provided in the Placement and as to customary anti-dilution adjustment clauses
in the currently outstanding securities of the Company. Neither the issuance of
the Securities nor the consummation of the Placement will trigger any resetting
or repricing of any debt or equity security instrument of the Company or any
Subsidiary, except as provided in the Placement.
(d) Except as set forth on Schedule A, there are no holders of any
registration rights with respect to the Company's securities. No additional
securities will be included in the registration statement that will be filed in
connection with this Placement other than the Securities, and the Company will
obtain the necessary waivers from holders with registration rights.
(e) Except as set forth on Schedule A, there are no persons
holding any rights to share in the profits of any of the Company's facilities,
nor holders of rights with respect to future acquisitions of the Company or the
Company's subsidiaries or other rights to purchase securities of the Company as
of the date of the Memorandum.
(f) Neither the Memorandum, the Subscription Documents, nor any of
Company Documents contain any untrue statement of a material fact, and the
Company Documents will not omit to state any material fact necessary in order to
make the statements made, in light of the circumstances under which they were
made, not misleading, except that the Company shall have no liability for any
information provided to the Company in writing by, and relating to, the
Placement Agent, for use in and used in the Memorandum. It is understood that
any summary in the Memorandum of a document which is referred to therein does
not constitute an untrue or misleading statement merely because it is a summary;
provided, however, that any such summary may not contain any untrue statement of
a material fact or omit to state any material fact necessary to make the
statements made, in light of the circumstances under which they were made, not
misleading. If, at any time before the Placement is completed or terminated or
before all subscriptions are accepted by the Company, there should be any change
which would cause the Company Documents not to comply with this Section 7(d),
the Company will promptly advise the Placement Agent thereof and make any
necessary corrective filings with the SEC and prepare and furnish the Placement
Agent with, for distribution to Investors, after prior review and approval by
the Placement Agent and its counsel (such approval not to be unreasonably
withheld, conditioned or delayed), such copies of such supplements or amendments
to the Memorandum and the Subscription Documents as will cause the Memorandum
and the Subscription Documents, as so supplemented or amended, to comply with
this Section 7(d), and will authorize the Placement Agent to make to Investors,
if: (i) deemed necessary by counsel to the Placement Agent and approved by the
Placement Agent, or (ii) if deemed necessary by counsel to the Company, an offer
of rescission.
The Sagemark Companies, Ltd.
October 14, 2004
Page 11 of 35
(g) Neither the Company nor any Subsidiary is in: (i) violation of
its certificate or articles of incorporation, by-laws or other organizational
documents, (ii) default under, and no event has occurred which, with notice or
lapse of time or both, would constitute a default under or result in the
creation or imposition of any Lien upon any of its property or assets pursuant
to, any indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which it is a party or by which it is bound or to which any of its
property or assets is subject (except as disclosed in the Memorandum or the
Company Documents) or (iii) violation in any respect of any law, rule,
regulation, ordinance, directive, judgment, decree or order of any judicial,
regulatory or other legal or governmental agency or body, foreign or domestic,
except (in the case of clause (ii) above) for any Lien disclosed in the
Memorandum and the exhibits thereto and except, in the cases of clauses (ii) and
(iii), where such defaults or violations do not, individually or in the
aggregate, have a Material Adverse Effect.
(h) The execution, delivery and performance of this Agreement, all
Company Documents, the Subscription Documents, the Share certificates, the
Warrants, the Placement Agent Warrants and all other documents to be entered
into by the Company in connection with any transaction described in the
Memorandum or in connection with the Placement, and the consummation of the
transactions contemplated hereby and thereby, have been or will be prior to such
execution, delivery, performance or consummation, as the case may be, duly and
validly authorized by the Company and do not and will not: (i) constitute, or
result in, a breach or violation of any of the terms, provisions or conditions
of the Articles of Incorporation or Bylaws of the Company or any of its
Subsidiaries, (ii) constitute, or result in, a material violation of any
applicable statute, law, ordinance or regulation of any state, territory or
other jurisdiction, or (iii) violate, constitute, or result in, a default under
(or an event which with the passing of time or the giving of notice or both
would constitute a default under) or breach of the terms, provisions or
conditions of any material indenture, note, contract, commitment, instrument or
document to which the Company or any of its Subsidiaries is or will be a party
or by which the Company, any of its Subsidiaries or any of their respective
properties are bound, or any award, judgment, decree, rule or regulation of any
court or governmental or regulatory agency or body having jurisdiction over the
Company or any of its Subsidiaries or their respective activities or properties
except, in the cases of clauses (ii) and (iii), where such defaults or
violations do not, individually or in the aggregate, have a Material Adverse
Effect.
(i) This Agreement, the Subscription Documents, the Share
certificates, the Warrants, the Placement Agent Warrants and all other documents
to be entered into by the Company in connection with any transaction described
in the Memorandum or in connection with the Placement have been duly authorized,
executed and delivered by the Company and constitute the legal, valid and
binding obligation of the Company, enforceable against the Company in accordance
with their terms, except insofar as enforcement of the indemnification or
contribution provisions hereof may be limited by applicable laws or principles
of public policy and except further as to enforcement, to the availability of
equitable remedies and limitations imposed by bankruptcy, insolvency,
reorganization and other similar laws and related court decisions relating to or
affecting creditors' rights generally.
The Sagemark Companies, Ltd.
October 14, 2004
Page 12 of 35
(j) Except as disclosed in the Company Documents, and except for
such matters that, individually or in the aggregate, would not have a Material
Adverse Effect on the business, operations or financial results of the Company
and its Subsidiaries (either individually or in the aggregate):
(i) The Company and each of its Subsidiaries are, and
have been, in compliance with all Environmental Laws (as defined below), and
neither the Company nor any of its Subsidiaries has received any (A)
communication that alleges that the Company or any such Subsidiary is in
violation of, or has liability under, any Environmental Law, (B) written request
for information pursuant to any Environmental Law, or (C) notice regarding any
requirement that is proposed for adoption or implementation under any
Environmental Law and that would be applicable to the operations of the Company
or any of its Subsidiaries;
(ii) (A) the Company and each of its Subsidiaries have
obtained and are in compliance with all permits, licenses and governmental
authorizations pursuant to all Environmental Laws (collectively, "Environmental
Permits") necessary for their operations as currently conducted, (B) all such
Environmental Permits are valid and in good standing, and (C) neither the
Company nor any of its Subsidiaries has been advised by any governmental entity
or authority of any actual or potential change in the status or terms and
conditions of any Environmental Permit;
(iii) there are no Environmental Claims (as defined below)
pending or, to the knowledge of the Company, threatened, against the Company or
any of its Subsidiaries;
(iv) there have been no Releases (as defined below) of any
Hazardous Material that could reasonably be expected to form the basis of any
Environmental Claim against the Company or any of its Subsidiaries or against
any person whose liabilities for such Environmental Claims the Company or any of
its Subsidiaries has, or may have, retained or assumed, either contractually or
by operation of law; and
(v) (A) neither the Company nor any of its Subsidiaries
has retained or assumed, either contractually or by operation of law, any
liabilities or obligations that could reasonably be expected to form the basis
of any Environmental Claim against the Company or any Company Subsidiary, and
(B) to the knowledge of the Company, no Environmental Claims are pending against
any person or entity whose liabilities for such Environmental Claims the Company
or any Company Subsidiary has, or may have, retained or assumed, either
contractually or by operation of law.
As used in this Agreement, the terms: (A) "Environmental Claim" means
any and all administrative, regulatory or judicial actions, suits, orders,
demands, directives, claims, investigations, proceedings or notices of violation
by or from any person or entity alleging liability of whatever kind or nature
arising out of, based on or resulting from (y) the presence or release of, or
exposure to, any Hazardous Materials at any location; or (z) the failure to
comply with any Environmental Law; (B) "Environmental Laws" means all applicable
federal, state, local and foreign laws, rules, regulations, orders, decrees,
judgments, legally binding agreements or Environmental Permits issued,
promulgated or entered into by or with any governmental entity or authority,
relating to pollution, natural resources or protection of endangered or
threatened species, human health or the environment (including ambient air,
The Sagemark Companies, Ltd.
October 14, 2004
Page 13 of 35
surface water, groundwater, land surface or subsurface strata); (C) "Hazardous
Materials" means (y) any petroleum or petroleum products, radioactive materials
or wastes, asbestos in any form, urea formaldehyde foam insulation and
polychlorinated biphenyls; and (z) any other radioactive, chemical, material,
substance or waste that in relevant form or concentration is prohibited, limited
or regulated under any Environmental Law; and (D) "Release" means any actual or
threatened release, spill, emission, leaking, dumping, injection, pouring,
deposit, disposal, discharge, dispersal, leaching or migration into or through
the environment (including ambient air, surface water, groundwater, land surface
or subsurface strata) or within any building, structure, facility or fixture.
(k) Intentionally Omitted.
(l) The Company has never declared, paid or made any dividends or
other distributions of any kind on or in respect of its capital stock except for
dividends previously paid by the Company with respect to shares of its Preferred
Stock which were, or are now, issued and outstanding.
(m) Except as disclosed in the Company Documents, since June 30,
2004, there has been no material adverse change (or any development involving a
prospective material adverse change), whether or not arising from transactions
in the ordinary course of business, in or affecting: (i) the business, condition
(financial or otherwise), results of operations, shareholders' equity,
properties or prospects of the Company and each Subsidiary, taken as a whole;
(ii) the long-term debt or capital stock of the Company or any of its
Subsidiaries; or (iii) the Placement or consummation of any of the other
transactions contemplated by this Agreement. Since the date of the latest
balance sheet presented in or attached to the Memorandum, neither the Company
nor any Subsidiary has incurred or undertaken any liabilities or obligations,
whether direct or indirect, liquidated or contingent, matured or unmatured, or
entered into any transactions, including any acquisition or disposition of any
business or asset, which are material to the Company and the Subsidiaries taken
as a whole, except for liabilities, obligations and transactions which are
disclosed in the Memorandum and/or the exhibits thereto.
(n) The financial statements, including the notes thereto, and the
supporting schedules included in the Memorandum and in the Company Documents
present fairly, in all material respects and as of the dates indicated and for
the periods specified the financial position and the cash flows and results of
operations of the Company and the Subsidiaries. Except as otherwise stated in
the Memorandum and in the Company Documents, such financial statements have been
prepared in conformity with United States generally accepted accounting
principles applied on a consistent basis throughout the periods involved. The
supporting schedules, if any, included in the Memorandum and the Company
Documents present fairly the information required to be stated therein. The
other financial and statistical information included in the Memorandum and the
Company Documents present fairly the information included therein in all
material respects subject to all qualifications or disclaimers included therein.
The Sagemark Companies, Ltd.
October 14, 2004
Page 14 of 35
(o) Xxxxx Xxxxxxxx, P.C., whose report is included or attached to
the Memorandum (or the exhibits thereto), are independent public accountants as
required by the Securities Act, the Exchange Act and the Rules and Regulations.
(p) The statistical, industry-related and market-related data
included in the Memorandum are based on or derived from sources which the
Company reasonably and in good faith believes are reliable and accurate, and
such data agree with the sources from which they are derived.
(q) No consent, approval, authorization or order of any court or
governmental or regulatory agency or body or any individual or entity is
required on the part of the Company or any Subsidiary for the lawful
consummation of the transactions contemplated hereby and thereby, except for
such consents and approvals as may be required under applicable state securities
laws.
(r) Each of the Company and the Subsidiaries has all necessary
consents, approvals, authorizations, orders, registrations, qualifications,
licenses, filings and permits of, with and from all applicable judicial,
regulatory and other legal or governmental agencies and bodies and all third
parties, foreign and domestic (collectively, the "Consents"), to own, lease and
operate their respective properties and conduct their respective businesses as
are now being conducted and as disclosed in the Memorandum (including the
exhibits thereto), except where the failure to have any such Consent would not
have a Material Adverse Effect. Each such Consent is valid and in full force and
effect, and neither the Company nor any Subsidiary has received written notice
of any investigation or proceedings which results in or, if decided adversely to
the Company or any Subsidiary, could reasonably be expected to result in, the
revocation of, or imposition of a materially burdensome restriction on, any
Consent.
(s) Each of the Company and the Subsidiaries is, to the best of
the Company's knowledge, in compliance with all applicable laws, rules,
regulations, ordinances, directives, judgments, decrees and orders, foreign and
domestic, except where the failure to so comply does or would not have a
Material Adverse Effect.
(t) Neither the Company nor any of its directors, officers,
employees, agents or representatives ("Company Representatives") has taken or
will take any action which has caused or may cause the Placement not to qualify
for exemption from the registration requirements of the Securities Act or of
other federal, state or other securities or other laws. In connection with the
Placement, neither the Company nor the Company Representatives shall offer or
cause to be offered the Units by any form of general solicitation or general
advertising as defined in Rule 502(c) of Regulation D. The Company and the
Company Representatives have not taken and shall not take any action (except for
actions contemplated by the Memorandum) that would cause the Placement to be
integrated with other transactions under Rule 502(a) of Regulation D. Neither
the Company nor, to the Company's knowledge, any of its Affiliates or Company
Representatives has, prior to the date hereof, made any offer or sale of any
securities which could be "integrated" for purposes of the Securities Act or the
Rules and Regulations with the offer and sale of the Securities pursuant to the
Memorandum.
The Sagemark Companies, Ltd.
October 14, 2004
Page 15 of 35
(u) Except as disclosed in the Company Documents, and except for
such matters that, individually or in the aggregate, would not have a Material
Adverse Effect on the business, operations or financial results of the Company
and its subsidiaries (either individually or in the aggregate) there are no
claims, actions, suits, investigations or proceedings before or by any
arbitrator, court, governmental authority or instrumentality pending or
threatened against or affecting the Company or any of its subsidiaries or
involving the properties of the Company which might have a Material Adverse
Effect on the business, properties or financial condition of the Company or any
of its subsidiaries or which might adversely affect the transactions or other
acts contemplated by this Agreement or the validity or enforceability of this
Agreement.
(v) The Company will not offer the Units for sale hereunder on the
basis of any communications or documents relating to the Placement Agent or the
Units except the Memorandum and the exhibits thereto and documents described or
referred to therein, including the Subscription Documents.
(w) The Company and the Subsidiaries maintain a system of internal
accounting and other controls sufficient to provide reasonable assurances that:
(i) transactions are executed in accordance with management's general or
specific authorizations, (ii) transactions are recorded as necessary to permit
preparation of reliable financial statements in conformity with United States
generally accepted accounting principles and to maintain accountability for
assets, (iii) access to assets is permitted only in accordance with management's
general or specific authorization, and (iv) the recorded accounting for assets
is compared with existing assets at reasonable intervals and appropriate action
is taken with respect to any material differences.
(x) Neither the Company nor any of its Subsidiaries has violated
or is currently in violation of any provisions of any federal or state law, rule
or regulation relating to the operation of their businesses, including, without
limitation: (a) the federal Medicare-Medicaid Anti-Kickback Law and state law
counterparts, (b) Ethics in Patient Referral Act of 1989 and state law
counterparts, (c) the Health Insurance Portability and Accountability Act of
1996, (d) the federal False Claims Act and state law counterparts, (e) state
laws prohibiting the practice of medicine by non-physicians, (f) state laws
prohibiting fee-splitting arrangement between a physician and a referring person
or entity, (g) state "certificate of need" laws and (h) any other rule or
regulation promulgated by any governmental agency with oversight of the
Company's or any Subsidiary's business, including the U.S. Department of Health
and Human Services, the Health Care Financing Administration, the U.S.
Department of Justice or similar state regulatory agencies, except for such
violations which, singly or in the aggregate, would not have a Material Adverse
Effect.
(y) Neither the Company nor any of its Subsidiaries has violated
or is currently in violation of any provisions of: (a) Employee Retirement
Income Security Act of 1974, as amended, including the regulations and published
interpretations thereunder ("ERISA"), (b) the Bank Secrecy Act, as amended, (c)
the Money Laundering Control Act of 1986, as amended, (e) the Foreign Corrupt
Practices Act, or (d) the Uniting and Strengthening of America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT ACT)
The Sagemark Companies, Ltd.
October 14, 2004
Page 16 of 35
Act of 2001, and the rules and regulations promulgated under any such law, or
any successor law, except for such violations which, singly or in the aggregate,
would not have a Material Adverse Effect.
(z) So long as the Common Stock and the Warrants (including the
Common Stock issuable upon the exercise thereof) are "restricted securities"
within the meaning of Rule 144(a)(3) under the Securities Act, the Company,
during any period in which it is not subject to and in compliance with Section
13 or 15(d) of the Exchange Act, or is not exempt from such reporting
requirements pursuant to and in compliance with Rule 12g3-2b under the Exchange
Act, will provide to each holder of Common Stock and to each prospective
purchaser (as designated by such holder) of Common Stock upon the request of
such holder or prospective holder, any information required to be provided by
Rule 144A(d)(4) under the Securities Act.
(aa) The Company is not and, at all times up to and including
consummation of the Placement, and after giving effect to application of the net
proceeds of the Placement, will not be, subject to registration as an
"investment company" under the Investment Company Act of 1940, as amended (the
"1940 Act"), and is not and will not be an entity "controlled" by an "investment
company" within the meaning of the 1940 Act. The Company will: (i) utilize the
proceeds of the Placement in accordance with the "Use of Proceeds" section of
the Memorandum and (ii) initially utilize the proceeds of the Placement and all
other funds of the Company in such a manner so as to cause the Company not to be
subject to the 1940 Act, and will thereafter use its best efforts to avoid the
Company's becoming subject to the 1940 Act.
(bb) Except as disclosed in the Memorandum, there are no contracts,
agreements or understandings between the Company and any person that would give
rise to a valid claim against the Company or the Placement Agent for a brokerage
commission, finder's fee or other like payment in connection with the
transactions contemplated by this Agreement or, to the Company's knowledge, any
arrangements, agreements, understandings, payments or issuance with respect to
the Company or any of its officers, directors, shareholders, partners,
employees, Subsidiaries or affiliates that may affect the Placement Agent's
compensation.
(cc) No relationship, direct or indirect, exists between or among
any of the Company or any Affiliate of the Company, on the one hand, and any
director, officer, stockholder, customer or supplier of the Company or any
Affiliate of the Company, on the other hand, which is required by the Securities
Act, the Exchange Act or the Rules and Regulations to be described in the
Memorandum or the Company's filings with the SEC which is not so described
therein. There are no outstanding loans (except for mortgage loans made in the
ordinary course of business), advances (except normal advances for business
expenses in the ordinary course of business) or guarantees of indebtedness by
the Company to or for the benefit of any of the officers or directors of the
Company or any of their respective family members, except as disclosed in the
Memorandum.
(dd) The Company and each Subsidiary owns or leases all such
properties as are necessary to the conduct of its business as presently
operated. Neither the Company nor any of the Subsidiaries own any real property.
The Sagemark Companies, Ltd.
October 14, 2004
Page 17 of 35
The Company and its Subsidiaries have good and marketable title to all personal
property owned by them, in each case free and clear of all Liens except such as
are described in the Memorandum and the Company Documents or such as do not
(individually or in the aggregate) materially interfere with the use made or
proposed to be made of such property by the Company and the Subsidiaries. Any
real property and buildings held under lease or sublease by the Company and the
Subsidiaries are held by them under valid and enforceable leases with such
exceptions as are not material to, and do not interfere with, the use made and
proposed to be made of such property and buildings by the Company and the
Subsidiaries. Neither the Company nor any Subsidiary has received any written
notice (or, to the Company's knowledge, any other notice) of any claim adverse
to its ownership of any personal property or of any claim against the continued
possession of any real property, whether held under lease or sublease by the
Company or any Subsidiary.
(ee) The Company and each Subsidiary: (i) owns or possesses all
rights to use, option and/or license, as the case may be, all patents, patent
applications, provisional patents, trademarks, service marks, trade names,
trademark registrations, service xxxx registrations, copyrights, licenses,
formulae, mask works, customer lists, internet domain names, know-how and other
intellectual property, including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or procedures (the
"Intellectual Property"), if any, necessary for the conduct of their respective
businesses as being conducted and as described in the Memorandum and (ii) does
not believe that the conduct of their respective businesses does or will
conflict with, and have not received any notice of any claim of conflict with,
any such right of others, which conflict would have a Material Adverse Effect.
To the best of the Company's knowledge, all Intellectual Property, if any,
developed by and belonging to the Company or any Subsidiary (including, without
limitation, that which is developed by consultants to the Company or any
Subsidiary) which has not been patented has been kept confidential so as, among
other things, all such information may be deemed proprietary to the Company, if
applicable. To the Company's knowledge, there is no infringement by third
parties of any Intellectual Property to the extent applicable to the Company's
business. There are no pending or, to the Company's knowledge, threatened
actions, suits, proceedings or claims by others challenging the Company's or any
Subsidiary's rights in or to any Intellectual Property, if any, and there are no
facts which would form a reasonable basis for any such claim. There is no
pending or, to the Company's knowledge, threatened action, suit, proceeding or
claim by others that the Company or any Subsidiary infringes or otherwise
violates any Intellectual Property rights of others, in each case which would be
reasonably likely to have a Material Adverse Effect, and the Company is unaware
of any other fact which would form a reasonable basis for any such claim.
(ff) The Company and the Subsidiaries maintain insurance in such
amounts and covering such risks as are customary for similarly-sized public
companies engaged in similar businesses in similar industries, all of which
insurance is in full force and effect. There are no material claims by the
Company or any Subsidiary under any such policy or instrument as to which any
insurance company is denying liability or defending under a reservation of
rights clause. The Company reasonably believes that it will be able to renew its
existing insurance as and when such coverage expires or will be able to obtain
replacement insurance adequate for the conduct of its business.
The Sagemark Companies, Ltd.
October 14, 2004
Page 18 of 35
(gg) Each of the Company and the Subsidiaries has properly prepared
and timely filed all federal, state, foreign and other tax returns that are
required to be filed by it and has paid or made provision for the payment of,
except such as may be contested in good faith, all taxes, assessments,
governmental or other similar charges, including without limitation, all sales
and use taxes and all taxes which the Company or any Subsidiary is obligated to
withhold from amounts owing to employees, creditors and third parties, with
respect to the periods covered by such tax returns (whether or not such amounts
are shown as due on any tax return). No deficiency assessment with respect to a
proposed adjustment of the Company's or any Subsidiary' federal, state, local or
foreign taxes is pending or, to the Company's knowledge, threatened which, if
the subject of an unfavorable decision, ruling or finding, would have a Material
Adverse Effect. The accruals and reserves on the books and records of the
Company and the Subsidiaries in respect of tax liabilities for any taxable
period not finally determined are adequate in all material respects to meet any
assessments and related liabilities for any such period and, since the date of
the Company's most recent audited financial statements, the Company and the
Subsidiaries have not incurred any liability for taxes other than in the
ordinary course of its business. There is no tax Lien, whether imposed by any
federal, state, foreign or other taxing authority, outstanding against the
assets, properties or business of the Company or any Subsidiary.
(hh) No labor disturbance by the employees of the Company or any
Subsidiary currently exists or, to the Company's knowledge, is likely to occur.
(ii) No "prohibited transaction" (as defined in either Section 406
of the ERISA or Section 4975 of the Internal Revenue Code of 1986, as amended
from time to time (the "Code")), "accumulated funding deficiency" (as defined in
Section 302 of ERISA) or other event of the kind described in Section 4043(b) of
ERISA (other than events with respect to which the 30-day notice requirement
under Section 4043 of ERISA has been waived) has occurred with respect to any
employee benefit plan for which the Company or any Subsidiary would have any
liability; each employee benefit plan of the Company or any Subsidiary is in
compliance in all material respects with applicable law, including (without
limitation) ERISA and the Code; the Company has not incurred and does not expect
to incur liability under Title IV of ERISA with respect to the termination of,
or withdrawal from any "pension plan"; and each employee benefit plan of the
Company or any Subsidiary that is intended to be qualified under Section 401(a)
of the Code is so qualified and nothing has occurred, whether by action or by
failure to act, which could cause the loss of such qualification.
(jj) Neither the Company, any Subsidiary nor, to the Company's
knowledge, any of their respective employees or agents has at any time during
the last five (5) years: (i) made any unlawful contribution to any candidate for
foreign office, or failed to disclose fully any contribution in violation of
law, or (ii) made any payment to any federal or state governmental officer or
official, or other person charged with similar public or quasi-public duties,
other than payments that are not prohibited by the laws of the United States or
any jurisdiction thereof or any foreign jurisdiction.
The Sagemark Companies, Ltd.
October 14, 2004
Page 19 of 35
(kk) The Company has not offered, or caused the Placement Agent to
offer, the Units to any person or entity with the intention of unlawfully
influencing: (i) a customer or supplier of the Company or any Subsidiary to
alter the customer's or supplier's level or type of business with the Company or
any Subsidiary or (ii) a journalist or publication to write or publish favorable
information about the Company, any Subsidiary or its products or services
(ll) In addition to the foregoing, to the extent not set forth
herein, the Placement Agent may rely on the representations and warranties made
by the Company in the Subscription Agreement provided by the Company and used in
connection with the Placement.
8. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PLACEMENT AGENT
The Placement Agent hereby represents and warrants to, and covenants
with, the Company that:
(a) This Agreement has been duly authorized, executed and
delivered by the Placement Agent and constitutes the legal, valid and binding
obligation of the Placement Agent, enforceable against it in accordance with its
terms, except insofar as enforcement of the indemnification or contribution
provisions hereof may be limited by applicable laws or principles of public
policy and subject, as to enforcement, to the availability of equitable remedies
and limitations imposed by bankruptcy, insolvency, reorganization and other
similar laws and related court decisions relating to or affecting creditors'
rights generally.
(b) The Placement Agent will not conduct the Placement in
violation of applicable federal and state securities laws and will cooperate
with the Company to ensure that the offering and sale of the Units will comply
with the requirements of the Securities Act, including, without limitation, the
general conditions contained in Regulation D and the federal securities laws,
and will follow the reasonable advice of the Company with respect to the manner
in which to offer and sell the Units so as to ensure that the offering and sale
thereof will comply with the securities laws of any jurisdiction in which
Securities are offered by the Placement Agent, and the Placement Agent will not
make an offer of Securities in any jurisdiction in which the Company advises it
in writing that such offer would be unlawful for the Placement Agent to offer or
sell securities.
(c) The Placement Agent is: (i) a registered broker-dealer under
the Exchange Act; (ii) a member in good standing of the NASD; and (iii)
registered as a broker-dealer in each jurisdiction in which it is required to be
registered as such in order to offer and sell the Units in such jurisdiction.
(d) The Placement Agent has not and will not make an offer of
Units (or of any securities, the offering of which may be integrated with the
Placement) on the basis of any communications or documents relating to the
Company or the Units except the Memorandum and the exhibits thereto and
documents described or referred to therein (including the Subscription
Documents), and the cover letters referred to in Section 2 hereof. Without
limiting the generality of the foregoing, the Placement Agent has not and will
The Sagemark Companies, Ltd.
October 14, 2004
Page 20 of 35
not make any representation as to any rate of return on investment that an
offeree may obtain from the ownership of the Securities other than as set forth
in the Memorandum or any other representation regarding the Company or the
Placement that is not contained in the Memorandum. The Placement Agent will
deliver a copy of the Memorandum to each prospective Investor solicited by it
prior to such offeree's execution of the Subscription Documents or, in the case
of amendments or supplements to the Memorandum (other than those amendments and
supplements approved in writing by the Company but designated in writing as not
subject to this requirement), prior to such offeree's execution of an
acknowledgment of receipt of such amendment or supplement and reconfirmation of
intent to subscribe.
(e) The Placement Agent has not and will not knowingly make an
offer of Units on behalf of the Company, or of any securities, the offering of
which may be integrated with the Placement, by any form of general solicitation
or general advertising in violation of Rule 502(c) of Regulation D such as would
cause the offering of Units not to qualify under Section 4(2) of the Securities
Act as a transaction exempt from Section 5 thereof. The Placement Agent has not
and will not supply in writing for inclusion in the Memorandum or any related
sales materials any information relating to the Placement Agent containing any
untrue statement of a material fact or omitting to state any material fact
required to be stated therein or necessary to make such information, in light of
the circumstances under which it is used, not misleading.
(f) The Placement Agent will not transmit to the Company any
written offer from an offeree to purchase Securities unless, immediately prior
thereto, it reasonably believes that:
(i) the offeree is an Accredited Investor; and
(ii) the offeree meets all other offeree and/or purchaser
suitability standards, if any, required under
applicable securities laws and regulations.
(g) The Placement Agent will exercise reasonable care to determine
that prospective Investors are not "underwriters" within the meaning of Section
2(11) of the Securities Act, and in that connection will obtain from each
investor purchasing Securities in the Placement duly executed Subscription
Documents, in the forms attached to the Memorandum or otherwise provided to the
Placement Agent by the Company with the approval of the Placement Agent and its
counsel.
(h) The Placement Agent will periodically notify the Company of
the jurisdiction in which the Securities are being offered by it or will be
offered by it pursuant to this Agreement, and will periodically notify the
Company of the status of the offering conducted pursuant to this Agreement. Such
notices will be accompanied by copies of all filings made by the Placement
Agent's counsel in each such jurisdiction so as to enable the Company to timely
comply with its filing obligations under applicable state laws (the Company will
be responsible for all filings under applicable federal securities laws).
The Sagemark Companies, Ltd.
October 14, 2004
Page 21 of 35
(i) The Placement Agent has delivered or caused to be delivered
(or will so deliver prior to the applicable closing date) the Memorandum to each
prospective Investor.
(j) The Placement Agent will cause all NASD member firms
participating in the Placement to comply with the representations, warranties,
covenants and undertakings of the Placement Agent in this Agreement and the
Placement Agent will be responsible therefor and no compensation or other
inducement will be offered by the Placement Agent to any such firm or to any
Investor with respect to the Placement, other than as provided in this Agreement
or as disclosed in the Memorandum.
9. ADDITIONAL COVENANTS AND AGREEMENTS OF THE COMPANY
The Company covenants to and agrees with the Placement Agent that it
shall:
(a) Notify the Placement Agent as soon as practicable, and confirm
such notice promptly in writing: (i) when any event shall have occurred during
the period commencing on the date hereof and ending on the later of the Final
Closing Date as a result of which the Memorandum would include any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and
(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
any such modification, rescission, withdrawal or suspension is issued, to obtain
the lifting thereof as promptly as possible.
(b) Not supplement or amend the Memorandum unless the Placement
Agent and its counsel shall have approved of such supplement or amendment in
writing, such approval not to be unreasonably withheld, delayed or conditioned.
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
Memorandum contains any untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading, or if, in the opinion of counsel to the
Company or counsel to the Placement Agent, it is necessary at any time to
supplement or amend the Memorandum to comply with the Securities Act, Regulation
D or any applicable securities or "blue sky" laws, the Company will promptly
prepare an appropriate supplement or amendment (in form and substance reasonably
satisfactory to the Placement Agent and its counsel) 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 Memorandum and any supplement or amendment thereto as may
reasonably be requested by the Placement Agent.
(d) Not, directly or indirectly, in connection with the Placement
or as otherwise agreed to in this Agreement, solicit any offer to buy from, or
offer to sell to, any person or entity, any Securities or other securities of
the Company except through the Placement Agent.
The Sagemark Companies, Ltd.
October 14, 2004
Page 22 of 35
(e) Not solicit any offer to buy or offer to sell Securities by
any form of general solicitation or advertising, including, without limitation,
any advertisement, article, notice or other communication published in any
newspaper, magazine or similar medium or broadcast over the Internet, television
or radio or at any seminar or meeting whose attendees have been invited by any
general solicitation or advertising or accept any subscription from an investor
who contacted the Company regarding the Placement due to any Company
announcement or public filing.
(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, if any, on reasonable request, such information
(in addition to that contained in the Memorandum) concerning the Placement, the
Company, the Securities and any other relevant matters as it possesses or can
acquire without unreasonable effort or expense and extend to each prospective
Investor or his purchaser representative, if any, the opportunity to ask
questions of, and receive answers from the Company concerning the terms and
conditions of the Placement 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 unreasonable 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.
(g) Notify the Placement Agent promptly of the acceptance or
rejection of any subscription.
(h) File five (5) copies of a Notice of Sales of Securities on
Form D with the SEC no later than 15 days after the first sale of the
Securities, if required by law. The Company shall file promptly such amendments
to such Notices on Form D as shall become necessary and shall also comply with
any filing requirement imposed by the laws of any state, province or
jurisdiction in which offers and sales are made, including all appropriate "blue
sky" filings pursuant to documentation prepared by the Placement Agent's
counsel. The Placement Agent's counsel shall furnish the Placement Agent and the
Company with copies of all filings made hereunder with respect to the laws of
any such state, province, or jurisdiction and the Company shall furnish the
Placement Agent with copies of all such filings with the SEC.
(i) Place substantially the following legend on all certificates
representing the Shares and the Warrants:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS AND NEITHER THE SECURITIES NOR ANY INTEREST
THEREIN MAY BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR
OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT OR SUCH LAWS OR AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND SUCH LAWS
WHICH, IN THE OPINION OF COUNSEL FOR THE COMPANY, IS
AVAILABLE."
The Sagemark Companies, Ltd.
October 14, 2004
Page 23 of 35
(j) Not, directly or indirectly, engage in any act or activity
which may jeopardize the status of the offering and sale of the Units as exempt
transactions under the Securities Act or under the securities or "blue sky" laws
of any jurisdiction in which the Placement may be made.
(k) Apply the net proceeds from the sale of the Units for the
purposes set forth under the caption "Use of Proceeds" in the Memorandum in the
manner indicated thereunder.
(l) 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, liabilities or
future prospects of the Placement, without the prior written consent of the
Placement Agent, which consent will not be unreasonably withheld, conditioned or
delayed.
(m) Not, prior to the completion of the Placement, bid for,
purchase, attempt to induce others to purchase, or sell, directly or indirectly,
any shares of Common Stock or any other securities in violation of the
provisions of Regulation M under the Exchange Act.
(n) Use its good faith best efforts after the date hereof to
become compliant with all aspects of the Xxxxxxxx-Xxxxx Act of 2002 ("Sarb-Ox")
and the rules and regulations promulgated thereunder that are applicable to the
Company at the date of this Agreement and the rules and regulations with respect
to Sarb-Ox that are now or will be applicable to the Company from time to time
including, without limitation, those provisions relating to loans to Company
officers and directors (it being covenanted and agreed to by the Company that it
shall not, after the date hereof, make any loans to any officer or director of
the Company).
(o) Not, for a period of one (1) year from the Final Closing Date,
increase the base salary of any officer of the Company in excess of ten percent
(10%) per year, except that the foregoing covenant shall not prohibit the
Company from hiring any other officer of the Company or paying Xxxxxxx X.
Xxxxxxxx, M.D., the Chief Executive Officer of Premier P.E.T. Imaging
International, Inc., a base salary of not more than $200,000 per year. Subject
to the sale of not less than forty (40) of the Units offered in the Placement,
the Company intends to establish a compensation committee of its Board of
Directors as soon as practicable following the Placement.
(p) Within 45 days following the Final Closing Date, prepare and
file with the SEC an appropriate registration statement (collectively, the
"Registration Statement") for the purpose of registering for public resale: (i)
the Common Stock and the Warrant Shares sold as part of the Units and (ii) the
Placement Agent Warrant Shares. The Company shall use its good faith best
efforts to cause such Registration Statement to be declared effective within 150
days of the Final Closing Date. In the event that the Registration Statement is
The Sagemark Companies, Ltd.
October 14, 2004
Page 24 of 35
not filed with the SEC within 45 days of the Final Closing Date or is not
declared effective within 150 days of the Final Closing or the registration does
not stay effective for 30 consecutive days (subject to extension as described in
Annex A to the Subscription Agreement), then the number of shares of Common
Stock included within each Unit and the number of Warrant Shares underlying the
Warrants shall be increased by two percent (2%) for each new 30 day period
following such 150, 45 or 30 day period, as the case may be. The Company agrees
to take all actions as are necessary to keep the Registration Statement
effective until the earlier of: (i) the third anniversary of the first date on
which no Warrants remain unexercised or unexpired or (ii) the date on which all
Registrable Securities (as defined in the Memorandum) underlying the Units may
be sold without any restrictions under Rule 144 during any 90 day period in
accordance with all Rules and Regulations regarding sales of securities pursuant
to Rule 144. The Company shall bear all expenses of the Registration Statement,
including fees and expenses, if any, of counsel or other advisors to the
Investors and Placement Agent, which fees and expenses shall (i) not exceed
fifteen thousand dollars ($15,000), and (ii) come from the proceeds of the
Initial Closing and be placed in escrow with the Company or its counsel. The
Company shall also pay all reasonable legal fees of the Company's counsel for
any "144 opinions" or other opinions which are required by the Investors or the
Placement Agent in connection with any sales or dispositions of Securities made
by such parties under Rule 144 or any other applicable sale or transfer
(including, without limitation, sales made pursuant to prospectus delivery, or
the reasonable legal fees of counsel to the Investors or the Placement Agent if
the Company's counsel declines to provide any such opinion). In addition to the
foregoing, the Company also grants to the Placement Agent, with respect to the
Placement Agent Warrant Shares, each of the registration rights and the
anti-dilution protections granted to the Investors in the Placement, as such
rights are memorialized, respectively, on Annex A and Annex B to the
Subscription Agreement, such Annexes being incorporated by reference herein.
(q) Within three (3) months of the Initial Closing, engage a
financial public relations firm acceptable to the Placement Agent, to provide
its services to the Company for a period of no less than twelve (12) months from
the date the Company engages such firm.
(r) Use its best efforts to obtain the approval of the listing of
its Common Stock on the Nasdaq SmallCap Market as soon as reasonably possible
following the date on which the Company complies with all of the listing
criteria thereof.
(s) Not, and will not knowingly, make an offer of Units, or of any
securities, the offering of which may be integrated with the Placement, by any
form of general solicitation or general advertising in violation of Rule 502(c)
of Regulation D such as would cause the offering of Units not to qualify under
Section 4(2) of the Securities Act as a transaction exempt from Section 5
thereof. The Company has not and will not supply in writing for inclusion in the
Memorandum or any related sales materials any information relating to the
Company containing any untrue statement of a material fact or omitting to state
any material fact required to be stated therein or necessary to make such
information, in light of the circumstances under which it is used, not
misleading.
The Sagemark Companies, Ltd.
October 14, 2004
Page 25 of 35
(t) In addition to the foregoing, to the extent not set forth
herein, the Placement Agent may rely on the covenants made by the Company in the
Subscription Documents used in connection with the Placement.
(u) For so long as that certain right of first refusal granted to
the Xxxxx Xxxxx Grantor Trust, Xxxxx Xxxxxxxx Grantor Trust, and the Xxxxxxx
Xxxxxxxxx Grantor Trust (collectively, the "Trusts") pursuant to the letter
agreement between Premier P.E.T. Imaging International, Inc. and such Trusts
dated April 26, 2004, remains in effect and provided that the Trusts exercise
their first refusal rights thereunder, none of the proceeds from the Placement
will be used by the Company to establish any new PET center in which one or more
physicians own less than forty percent (40%) of the equity interests in such
center in the absence of the Placement Agent's consent, which consent shall not
be unreasonably withheld, conditioned or delayed.
(v) As soon as practical after the Final Closing, use its best
efforts to redeem all outstanding shares of its redeemable preferred stock.
10. CONDITIONS OF THE PLACEMENT AGENT'S OBLIGATIONS
The obligations of the Placement Agent pursuant to this Agreement shall
be subject, in its discretion, to the continuing accuracy 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 or otherwise at any Closing (including, without limitation, all
Subscription Documents and all Company Documents), as of the date hereof and as
of the Initial Closing Date or the date of any Closing subsequent to the Initial
Closing Date, to the performance by the Company of its obligations hereunder,
and to the following conditions:
(a) The Initial Closing and each Subsequent Closing, the Placement
Agent shall have received certificates for the Shares sold to the Investors in
the Placement, duly executed and made out in the name of such Investors for the
amount of Shares purchased (the Placement Agent will be responsible for
delivering such certificates to the Investors).
(b) At the Initial Closing and each Subsequent Closing, the
Placement Agent shall have received warrant certificates for the Warrants sold
to the Investors in the Placement, duly executed and made out in the name of
such Investors for the amount of the Warrant Shares which may be received upon
the exercise thereof (the Placement Agent will be responsible for delivering
such certificates to the Investors).
(c) At the Initial Closing and each Subsequent Closing, the
Placement Agent shall have received warrant certificates for the Placement Agent
Warrants issued to the Placement Agent in the Placement, duly executed and made
out in the names to be designated by the Placement Agent for the amount of
Placement Agent Warrant Shares which may be received upon the exercise thereof.
The Sagemark Companies, Ltd.
October 14, 2004
Page 26 of 35
(d) At the Initial Closing and each Subsequent Closing, the
Placement Agent shall have received the applicable fees payable to the Placement
Agent as described in Section 3 hereof.
(e) At the Initial Closing and each Subsequent Closing, the
Placement Agent shall have received the favorable opinion of Xxxxxx X. Xxxxxxx,
Esq., as counsel for the Company, and the favorable opinion of the Company's
special healthcare counsel, each such opinion to be in the form and substance
customary for transactions such as the placement and reasonably satisfactory to
the Placement Agent and such counsel. Such opinion of Xxxxxx X. Xxxxxxx, Esq.
shall contain, among other customary opinions, and subject to customary
qualifications and in reliance upon appropriate documents and certificates of
officers of the Company and government officials, the following required legal
opinions:
(i) The Company has been duly organized and is validly
existing and in good standing under the laws of the State of New York, has all
requisite power and authority necessary to own or hold its properties and
conduct its business, and is duly qualified or licensed to do business as a
foreign corporation in each other jurisdiction in which the ownership or leasing
of its properties or the conduct of its business requires such qualification,
except where the failure to so qualify or be licensed would not have a Material
Adverse Effect;
(ii) Each Subsidiary is validly existing and is in good
standing under the laws of the jurisdiction of its organization, has the power
and authority to own its properties and to conduct its business and is duly
qualified and authorized to transact business and is in good standing in each
jurisdiction in which the conduct of its business or the nature of its
properties requires such qualification or authorization, except where the
failure to be so qualified or authorized and in good standing could not
reasonably be expected to have a Material Adverse Effect. Except as disclosed in
the Company Documents, all of the issued and outstanding shares of capital stock
of each Subsidiary are owned by the Company and, to the knowledge of such
counsel, all such issued and outstanding shares have been duly authorized and
validly issued, and are non-assessable. To the knowledge of such counsel, and
except as disclosed in the Memorandum and the Company Documents, the Company
owns the outstanding capital stock of each Subsidiary free and clear of any
Liens.
(iii) Each of this Agreement, the Escrow Agreement by and
among the Placement Agent, the Company and the Escrow Agent, the shares of
Common Stock, the Warrants, the Placement Agent Warrants and the Subscription
Documents has been duly and validly authorized, executed and delivered by the
Company, and is the valid and binding obligation of the Company, enforceable
against it in accordance with its terms, subject to, insofar as enforcement of
the indemnification or contribution provisions hereof and thereof may be limited
by applicable laws or principles of public policy and further subject to any
applicable bankruptcy, insolvency or other laws affecting the rights of
creditors generally and to general equitable principles;
(iv) The authorized capital stock of the Company as of the
date hereof (before giving effect to the transactions contemplated by this
Agreement) is as set forth in the Memorandum.
The Sagemark Companies, Ltd.
October 14, 2004
Page 27 of 35
(v) The Securities have been duly authorized, validly
issued, fully paid and nonassessable. The Shares, the Warrant Shares and the
Placement Agent Warrants have all been duly reserved, and when issued in
accordance with the terms of the Placement, will be validly issued, fully paid
and nonassessable and not subject to preemptive or any other similar rights;
(vi) Assuming: (A) the accuracy of the information
provided by the Investors in the Subscription Documents, and (B) that the
Company and the Placement Agent have complied in all material respects with the
requirements of Section 4(2) of the Securities Act (and the provisions of
Regulation D promulgated thereunder), the issuance and sale of the Units and the
Placement Agent Warrants issued to the Placement Agent are exempt from
registration under the Securities Act and Regulation D promulgated thereunder;
(vii) To the best knowledge of such counsel, neither the
execution and delivery of this Agreement and the Warrants, nor compliance with
the terms hereof, nor the consummation of the transactions herein contemplated,
has, nor will, conflict with, result in a breach of, or constitute a default
under the Articles of Incorporation or Bylaws of the Company, or any material
contract, instrument or document to which the Company or any Subsidiary is a
party (which material contract, instrument or document will be enumerated on a
schedule to such opinion provided by the Company), in each case as of the date
of such opinion. To the actual knowledge of such counsel none of such material
contracts, instruments or documents violate any judgment, order or decree of any
governmental agency or court having jurisdiction over the Company or any of its
properties or business to which the Company is subject;
(viii) To the actual knowledge of such counsel, there are no
claims, actions, suits, investigations or proceedings before or by any
arbitrator, court, governmental authority or instrumentality pending or
threatened against or affecting the Company or involving the properties of the
Company, an unfavorable outcome to which would have a Material Adverse Effect,
except as set forth in or contemplated by the Memorandum or Subscription
Documents.
(ix) such counsel has reviewed the Memorandum, the
Company's Annual Report on Form 10-KSB for the year ended December 31, 2003, and
its Quarterly Report on Form 10-QSB for the quarter ended June 30, 2004 (the
"SEC Reports") and, based upon such review, nothing has come to the attention of
such counsel to cause such counsel to believe that the Memorandum or the SEC
Reports contained any untrue statement of a material fact required to be stated
therein or omitted to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, except that the
foregoing opinion shall specifically exclude and shall not cover: (A) any
matters relating to the Intellectual Property of the Company or the
Subsidiaries, (B) any audited or unaudited financial statements or Schedules of
the Company (including footnotes thereto and all other financial disclosures
contained therein or occurring subsequent thereto), (C) any disclosures based
upon or relating to healthcare or environmental statutes, rules or regulations,
and (D) any documents incorporated by reference in the Memorandum or the SEC
Reports.
The Sagemark Companies, Ltd.
October 14, 2004
Page 28 of 35
(f) At the Initial Closing, the Placement Agent shall have
received "lock-up" agreements, in the form to be agreed upon by the Company and
the Placement Agent, duly executed by each director, officer and holder of five
percent (5%) or more of the Company's Common Stock as of the Closing, which
"lock-up" agreement shall provide that such persons shall not offer, sell,
contract to sell, pledge or otherwise dispose of, directly or indirectly, any
shares of Common Stock of the Company (currently owned or hereafter acquired by
them, through the exercise of warrants or options, or otherwise) for a period of
twelve (12) months from the Final Closing Date, except as otherwise provided for
therein.
(g) At each Closing, the Placement Agent shall have received a
certificate of the Chief Executive Officer of the Company, dated, as applicable,
as of the date of such Closing: (i) to the effect that, as of the date of this
Agreement and as of the applicable date, the representations and warranties of
the Company contained herein were and are accurate, and that, as of the
applicable date, the obligations to be performed by the Company hereunder on or
prior thereto have been fully performed, and (ii) with respect to the incumbency
of the officers of the Company executing the documentation delivered at such
Closing.
(h) At each Closing, the Placement Agent shall have received a
certificate of the Secretary of the Company, dated, as applicable, as of the
date of such Closing, certifying to the charter, by-laws, good standing in their
respective states of incorporation and board resolutions relating to the
Placement of, as applicable, the Company and the Subsidiaries.
(i) All proceedings taken in connection with the issuance, sale
and delivery of the Securities shall be reasonably satisfactory in form and
substance to the Placement Agent and its counsel.
(j) On or prior to or following the Initial Closing Date or the
date of any Subsequent Closing, as the case may be, the Placement Agent shall
have been furnished with: (i) such information, documents and certificates as it
may reasonably require for the purpose of enabling it to review the matters
referred to in this Section 10 and in order to evidence the accuracy,
completeness or satisfaction of any of the representations, warranties,
covenants, agreements or conditions herein contained, and (ii) such other
closing documentation as may be required in order to affect the applicable
Closing or as the Placement Agent may otherwise reasonably request.
(k) Any certificate or other document signed by any officer of the
Company and delivered to the Placement Agent and its counsel as required
hereunder shall, unless stated otherwise therein, be deemed a representation and
warranty by the Company hereunder as to the statements made therein. If any
condition to the Placement Agent's obligations hereunder have not been fulfilled
as and when required to be so fulfilled, the Placement Agent may terminate this
Agreement or, if the Placement Agent so elects, in writing waive any such
conditions which have not been fulfilled or extend the time for their
fulfillment. In the event that Placement Agent elects to terminate this
Agreement, Placement Agent shall notify the Company of such election in writing.
Upon such termination, neither party shall have any further liability nor
obligation to the other except as provided in Section 11 hereof.
The Sagemark Companies, Ltd.
October 14, 2004
Page 29 of 35
(l) If there is more than one Closing, then at each such Closing
there shall be delivered to the Placement Agent updated opinions, certificates
or other information described in this Section 10.
11. INDEMNIFICATION
(a) The Company agrees to indemnify and hold harmless the
Placement Agent, any person who controls the Placement Agent within the meaning
of the Securities Act, Section 20(a) of the Exchange Act or any applicable
statute, and each partner, director, officer, employee, counsel, agent and
representative of the Placement Agent and its representatives from and against
any loss, damage, expense, liability or claim, or actions or proceedings in
respect thereof (including, without limitation, reasonable attorneys' fees and
expenses incurred in investigating, preparing or defending against any
litigation commenced, collectively "Damages") which any such person or entity
may incur or which may be made or brought against any such person arising out of
or based upon: (i) any breach of any of the agreements, representations or
warranties of the Company contained in or contemplated by this Agreement or the
Subscription Documents, including, without limitation, those arising out of or
based on any alleged untrue statement of a material fact or omission to state a
material fact required to be stated in the Memorandum or the Subscription
Documents or necessary in order to make the statements appearing therein not
misleading in the light of the circumstances in which they were made, (ii) any
violation of any federal or state securities laws attributable to the Placement
and not caused by the Placement Agent or its agents or any NASD member from
participating in the Placement, or (iii) any violation of law by the Company or
any affiliate thereof, or any director, officer, employee, agent or
representative of any of them, related to or arising out of the Placement. This
indemnity agreement by, and the agreements, warranties and representations of,
the Company shall survive the offer, sale and delivery of the Units and the
termination of this Agreement and shall remain in full force and effect
regardless of any investigation made by or on behalf of any person indemnified
hereunder, and termination of this Agreement and acceptance of any payment for
the Units hereunder.
(b) The Placement Agent agrees to indemnify and hold harmless the
Company and its affiliates, any person who controls any of them within the
meaning of the Securities Act, Section 20(a) of the Exchange Act or any
applicable statute, and each officer, director, employee, counsel, agent and
representative of the Company or any of its affiliates from and against any
Damages which any such person or entity may incur or which may be made or
brought against any such person, but only to the extent the same arises out of
or is based upon: (i) any breach of any of the agreements, representations or
warranties of the Placement Agent contained in or contemplated by this
Agreement, or (ii) any untrue statement of a material fact in any information
provided to the Company in writing by the Placement Agent, expressly for use in
and used in the Memorandum, or (iii) any violations of federal or state
securities or other laws by the Placement Agent or its officers, directors,
employees or agents, including any NASD member firm participating in the
Placement. This indemnity agreement by, and the agreements, warranties and
representations of, the Placement Agent shall survive the offer, sale and
delivery of the Units and the termination of this Agreement and shall remain in
full force and effect regardless of any investigation made by or on behalf of
any person indemnified hereunder, and termination of this Agreement and
acceptance of any payment for the Units hereunder.
The Sagemark Companies, Ltd.
October 14, 2004
Page 30 of 35
(c) If any action is brought against a party (the "Indemnified
Party") in respect of which indemnity may be sought against one or more other
parties (the "Indemnifying Party" or "Indemnifying Parties"), the Indemnified
Party shall promptly notify the Indemnifying Party or Parties in writing of the
institution of such action; provided, however, the failure to give such notice
shall not release the Indemnifying Party or Parties from its or their obligation
to indemnify the Indemnified Party hereunder except to the extent the
Indemnifying Party actually incurs damage by reason of such failure and shall
not release the Indemnifying Party or Parties from any other obligations or
liabilities to the Indemnified Party in any event. The Indemnifying Party or
Parties may at its or their own expense elect to assume the defense of such
action, including the employment of counsel reasonably acceptable to the
Indemnified Party; provided, however, that no Indemnifying or Indemnified Party
shall consent to the entry of any judgment or enter into any settlement by which
the other party is to be bound without the prior written consent of such other
party, which consent shall not be unreasonably withheld, conditioned or delayed.
In the event the Indemnifying Party or Parties assume a defense hereunder, the
Indemnified Party shall be entitled to retain its own counsel in connection
therewith and, except as provided below, shall bear the fees and expenses of any
such counsel, and counsel to the Indemnified Party or Parties shall cooperate
with such counsel to the Indemnifying Party in connection with such proceeding.
If an Indemnified Party reasonably determines that there are or may be differing
or additional defenses available to the Indemnified Party which are not
available to the Indemnifying Party, or that there is or may be a conflict
between the respective positions of the Indemnifying Party and of the
Indemnified Party in conducting the defense of any action, then the Indemnifying
Party shall bear the reasonable fees and expenses of any counsel retained by the
Indemnified Party in connection with such proceeding. All references to the
Indemnified Party contained in this Section 11(c) include, and extend to and
protect with equal effect, any persons who may control the Indemnified Party
within the meaning of the Securities Act, Section 20(a) of the Exchange Act or
any applicable statute, any successor to the Indemnified Party and each of its
partners, officers, directors, employees, agents and representatives. The
indemnity agreements set forth in this Section 11 shall be in addition to any
other obligations or liabilities of the Indemnifying Party or Parties hereunder
or at common law or otherwise. Notwithstanding anything herein to the contrary,
in no event shall the Placement Agent be obligated to indemnify any person or
entity in an amount in excess of the gross consideration received by the
Placement Agent for services rendered hereunder.
(d) Notwithstanding the provisions of Sections 11(a) and 11(b)
hereof, no Indemnified Party hereunder shall be entitled to or receive
indemnification pursuant to this Agreement if it is determined by a court of
competent jurisdiction (not subject to appeal) that the Damages in question were
caused primarily by the gross negligence or willful misconduct of such
Indemnified Party.
(e) If recovery is not available under the foregoing
indemnification provisions of this Section 11, for any reason other than as
specified therein, the party entitled to indemnification by the terms thereof
shall be entitled to contribution to losses, damages, liabilities and expenses
of the nature contemplated by such indemnification provisions. In determining
The Sagemark Companies, Ltd.
October 14, 2004
Page 31 of 35
the amount of such contribution, there shall be considered the relative benefits
received by the Company on the one hand, and the Placement Agent on the other
hand from the Placement (which shall be deemed to be the portion of the proceeds
of the Placement realized by each party), the parties' relative knowledge and
access to information concerning the matter with respect to which the claim was
asserted, the opportunity to correct and prevent any statement or omission, the
relative culpability of the parties, the relative benefits received by the
parties and any other equitable considerations appropriate under the
circumstances. No party shall be liable for contribution with respect to any
action or claim settled without its consent. Any party entitled to contribution
will, promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect of which a claim for contribution may
be made against another party or parties under this Section 11, notify such
party or parties from whom contribution may be sought, but the omission to so
notify such party or parties shall not relieve the party or parties from whom
contribution may be sought from any obligation it or they may have under this
Section 11 or otherwise. For purposes of this Section 11, each person, if any,
who controls a party to this Agreement within the meaning of Section 15 of the
Securities Act or Section 20(a) of the Exchange Act shall have the same rights
to contribution as that party to this Placement Agreement.
12. MISCELLANEOUS
(a) The agreements set forth in this Agreement have been made and
are made solely for the benefit of the Company, the Placement Agent, and the
respective affiliates, heirs, personal representatives and successors and
permitted assigns thereof, and except as expressly provided herein nothing
expressed or mentioned herein is intended or shall be construed to give any
other person, firm or corporation any legal or equitable right, remedy or claim
under or in respect of this Agreement or any representation, warranty or
agreement herein contained. The term "successors and assigns" as used herein
shall not include any purchaser of any Units merely because of such purchase.
This Agreement is not assignable in the absence of the written consent of the
non-assigning party.
(b) As used herein, the words "include" or "including" shall be
interpreted to mean "including, without limitation."
(c) Neither party will be liable to the other by reason of any
failure in performances of this Agreement if the failure arises out of the
unavailability of third party communication facilities or energy sources or acts
of God, acts of governmental authority, fires, strikes, delays in
transportation, riots or war, or any cause beyond the reasonable control of such
party.
(d) Any notice or other communication required or appropriate
under the provisions of this Agreement shall be given in writing (and may be
delivered by facsimile transmission, with confirmation of receipt) addressed as
follows: (i) if to the Company, at the address set forth on the first page of
this Agreement, Attention: Xxxxxxxx X. Xxxxxxx; with a copy to Premier P.E.T.
Imaging International, Inc., 0000 Xxxxxx Xxxx, Xxxxx 000X, Xxxx Xxxxx, Xxxxxxx
00000, Attention: Xxxxxx X. Xxxxxxx, Chief Financial Officer and Xxxxxx X.
Xxxxxxx, Esq., 00 Xxxx Xxxxx Xxxx, Xxxxxxx, Xxx Xxxx 00000 and (ii) if to the
The Sagemark Companies, Ltd.
October 14, 2004
Page 32 of 35
Placement Agent, Xxxxxx Xxxxxxx & Company, Inc., 00 Xxxxxx Xxxx, 00xx Xxxxx, Xxx
Xxxx, XX 00000, Attention: Xx. Xxxxxx Xxxxxxx; with a copy to Ellenoff Xxxxxxxx
& Schole LLP, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxxx
X. Xxxxxxxx, Esq., or at such other address as any party may designate to the
others in accordance with this Section 12(c).
(e) This Agreement shall be governed and construed in accordance
with the laws of the State of New York, without giving effect to conflicts of
law provisions thereof (other than Section 5-1401 of the New York General
Obligations Law).
(f) Any legal suit, action or proceeding arising out of or
relating to this Agreement or the transactions contemplated hereby shall be
instituted exclusively in New York Supreme Court, County of New York, or in the
United States District Court for the Southern District of New York. The parties
hereto hereby: (i) waive any objection which they may now have or hereafter have
to the venue of any such suit, action or proceeding, and (ii) irrevocably
consent to the jurisdiction of the New York Supreme Court, County of New York,
and the United States District Court for the Southern District of New York in
any such suit, action or proceeding. The parties further agree to accept and
acknowledge service of any and all process which may be served in any such suit,
action or proceeding in the New York Supreme Court, County of New York, or in
the United States District Court for the Southern District of New York and agree
that service of process upon a party mailed by certified mail to such party's
address shall be deemed in every respect effective service of process upon such
party in any such suit, action or proceeding.
(g) This Agreement constitutes the entire agreement between the
parties hereto with respect to the Placement and the subject matter hereof and
supercedes any and all prior agreements (including that certain letter of intent
between the parties hereto dated September 15, 2004), and may be amended or
modified only by a duly authorized writing signed by such parties. This
Agreement may be executed in any number of counterparts and by facsimile, each
of which shall be deemed an original and all of which shall constitute a single
instrument.
[Signature Page Follows]
The Sagemark Companies, Ltd.
October 14, 2004
Page 33 of 35
This Placement Agency Agreement is executed and shall be effective as
of October 14, 2004
Very truly yours,
XXXXXX XXXXXXX & COMPANY, INC.
By: /s/ XXXXXX XXXXXXX
-------------------------------------
Name: Xxxxxx Xxxxxxx
Title: Chief Executive Officer
ACCEPTED AND AGREED TO:
THE SAGEMARK COMPANIES, LTD
By: /s/ XXXXXXXX X. XXXXXXX
---------------------------------
Name: Xxxxxxxx X. Xxxxxxx
Title: President and Chief Executive Officer
[Signature Page to Placement Agency Agreement]
The Sagemark Companies, Ltd.
October 14, 2004
Page 34 of 35
SCHEDULE A
----------
Registration Rights
-------------------
Holder Rights
------ ------
Pamels Corp. (402,892 shares) Demand registration right and
Xxxx X. Xxxxxxxxx Revocable Trust "piggyback" registration rights
(140,734 shares)
Xxxx Capital, Inc. (275,977 shares)
Bocara Corporation (525,977 shares)
Mercury Capital Corp. (75,420 shares)
Xxxx Capital, Inc. (100,000 warrant shares) Demand and "piggyback" registration rights
Xxxx Capital, Inc. (125,000 warrant shares) Demand and "piggyback" registration rights
Xxxx Capital, Inc. (150,000 warrant shares) Demand and "piggyback" registration rights
Xxxxxxxx X. Xxxxxxx (shares under Demand and "piggyback" registration rights
Incentive Warrants if and when issued
under Employment Agreement)
Xx. Xxxxxxx X. Xxxxxxxx (100,000 warrant Demand and "piggyback" registration rights
shares)
Xxxxxx X. Xxxxxx (12,500 warrant shares) Demand and "piggyback" registration rights
Xxxxxx X. Xxxxxx (50,000 warrant shares) Demand and "piggyback" registration rights
Xxxxxx X. Xxxxxxx (12,500 warrant shares) Demand and "piggyback" registration rights
Xxxxxxxx X. Xxxxxxx (33,333 shares) Demand and "piggyback" registration rights
Xx. Xxxxxxx X. Xxxxxxxx (33,333 shares)
Xxxxxx X. Xxxxxxx (33,334 shares)
X. Xxxxx (66,667 shares)
Chevra of Ludukfer (66,667 shares)
Seven J's Corp. (55,000 shares)
Marlin Spike Investments (33,333)
The Sagemark Companies, Ltd.
October 14, 2004
Page 35 of 35
Xxxx Xxxxxx (12,000 shares) Demand and "piggyback" registration rights
Xxxxxxx X. Xxxxxxxx (12,000 shares)
Xxxxxx Xxxxx (20,000 shares)
Xxxxxx Xxxx (60,000 shares)
Xxxxxxx & Xxxxxx Xxxxxx (24,000 shares)
Xxxxxx Wallowick (12,000 shares)
Xxxx & Xxxxx Xxxxxxx (4,000 shares)
Xxxxx Xxxxx Marital Trust (4,000 shares)
Xxxxxx & Xxxxxx Xxxxxxxxxxx (12,000 shares)
Xxxxxxx & Xxxxx Xxxx (4,000 shares)
Xxxxxx Xxxxx-Xxxxxxxxx (12,000 shares)
Xxxxxx Xxxxxxx (12,000 shares)
Xxxxx Investment Ltd. (24,000 shares)
401K PSP FBO Xxxxxxxx Xxxxxx (24,000
shares)
Xxxxxxx Xxxxxxxxx-Xxxxx (24,000 shares)
Xxxxxx X. Xxxxxxxx (40,000 shares)
Xxxxxxxx X. Xxxxxxx (50,000 shares) Demand and "piggyback" registration rights
Xxxxxxxx X. Xxxxxxx (130,000 shares) Demand and "piggyback" registration rights
Xxxxxxx X. Xxxxxxxx (50,000 shares) Demand and "piggyback" registration rights
X. Xxxxx Corp. (40,000 shares) Demand and "piggyback" registration rights
X. Xxxxx Corp. (40,000 shares) Demand and "piggyback" registration rights
Rights to Profits and Future Acquisitions
and Rights to Purchase Securities of the Company
The Agreements between the Company, Premier P.E.T. Imaging
International, Inc. and the Xxxxx Xxxxx Grantor Trust, Xxxxx Xxxxxxxx Grantor
Trust, and the Xxxxxxx Xxxxxxxxx Grantor Trust provide for the rights set forth
above.
