EXHIBIT 10.22
REGULATION S DISTRIBUTION AGREEMENT
THIS AGREEMENT is made this 31st day of October, 1996 by and between
SCIENTIFIC MEASUREMENT SYSTEMS, INC., a Texas corporation, whose main offices
are located at 0000 Xxxxxx Xxxxx, Xxxxxx, Xxxxx 00000, referred to as "SCMS");
and BERKSHIRE INTERNATIONAL FINANCE, INC., a Delaware corporation (hereinafter
referred to as "BERKSHIRE"), with principal executive offices located at 000
Xxxxx Xxxxxx, Xxxxx 000, Xxx Xxxx, XX 00000.
W I T N E S S E T H
WHEREAS, SCMS is a "reporting issuer" within the meaning of Rule 902(1) of
Regulation S, 17 CFR Section 240.901 et seq. promulgated under the Securities
Act of 1933 ("Regulation S") which files reports with the U.S. Securities and
Exchange Commission pursuant to the Securities Exchange Act of 1934 (the
"Exchange Act"), and whose stock is traded on the NASDAQ Small Cap under the
symbol "SCMS".
WHEREAS, BERKSHIRE is acting as a "distributor" within the meaning of Rule
902(c) of Regulation S; and
WHEREAS, BERKSHIRE desires to assist SCMS in obtaining equity capital
pursuant to an offering conducted in compliance with Regulation S upon the
terms and conditions set forth herein;
NOW THEREFORE, in consideration of the mutual promises herein contained,
the parties hereto agree as follows:
I. WARRANTIES AND COVENANTS
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1.01 BERKSHIRE shall use its "best efforts" to obtain subscriptions for
up to approximately $1,000,000 worth of SCMS Common Stock (the "Securities") in
an offering conducted pursuant to Rule 903 of Regulation S (the "Offering"). The
Offering will consist of approximately 1,600,000 shares of Common Stock offered
at a price of 30% below the closing bid price of the Company's common stock on
the day immediately prior to the execution of the attached Offshore Securities
Subscription Agreement by the Purchaser. Such subscriptions shall be in the form
of a Subscription Agreement (a copy of which is attached hereto) executed by a
prospective purchaser.
1.02 BERKSHIRE represents and warrants that all offers and sales of the
Securities shall be made only in accordance with the provisions of Rule 903 or
904 of Regulation S.
1.03 BERKSHIRE represents and warrants that all offers and sales of the
Securities will be made in an "offshore transaction," as defined in Rule 902(i)
of Regulation S.
1.04 BERKSHIRE represents and warrants that none of BERKSHIRE, any
affiliate of BERKSHIRE, or any person acting on behalf of any of them will
engage in any "directed selling efforts", as defined by Rule 902(b) of
Regulation S, in the United States with respect to the offer and sale of the
Securities.
1.05 BERKSHIRE represents and warrants that any offering materials or
documents (except press releases) used in connection with offers and sales of
Securities shall include statements to the effect that the Securities have not
been registered under the Securities Act of 1933 (the "Securities Act") and may
not be offered or sold in the United States or to U.S. persons (other than
distributors as that term is defined under Rule 902(c) of Regulation S) unless
the Securities are registered under the Securities Act, or an exemption from the
registration requirements of the Securities Act is available. Such statements
shall appear on all materials as provided under Rule 902(h)(2)(i), (ii), and
(iii) of Regulation S.
1.06 BERKSHIRE represents and warrants that no offer or sale will be made
to, or for the account or benefit of, a "U.S. person," as defined by Rule 902(o)
of Regulation S. BERKSHIRE further warrants and represents to SCMS that, to the
best of its knowledge, no Purchaser of any Securities sold pursuant to this
Agreement has entered into or intends to enter into any short sales of SCMS
common stock in any U.S. trading market.
1.07 BERKSHIRES shall advise SCMS of legends or restriction required by
foreign countries, if any, pertaining to the Securities which SCMS shall cause
to be placed on the certificates representing the Securities; and BERKSHIRE
shall take all steps necessary to ensure that any offers and sales made pursuant
to this Agreement comply with the laws and regulations of all foreign regulatory
and/or self-regulatory authorities.
1.08 SCMS and BERKSHIRE agree that the certificates for any Securities
sold pursuant to this Agreement shall include the following restrictive legend:
"These shares have been issued pursuant to Regulation S as an
exemption to the registration provisions under the Securities Act of 1933,
as amended. These shares cannot be transferred, offered or sold in the U.S.
or to U.S. persons (as defined in Regulation S) until after
__________________, 1996 (Forty-one days after issuance)."
1.09 SCMS shall maintain its status as a corporation in good standing and
as reporting issuer under the Exchange Act, operating in all material respects
in accordance with its most recent reports filed under the Exchange Act and
provided to BERKSHIRE.
1.10 BERKSHIRE acknowledges that it is not authorized to and will not give
any information or make any representation in connection with the offer or sale
of the Securities other than those which are contained in disclosure materials
approved by SCMS in advance. BERKSHIRE agrees that it is not an agent of SCMS
and that it is not authorized to and will not incur any obligation or enter into
any agreement on behalf of SCMS in any manner or respect.
1.11 SCMS shall promptly issue certificates representing the Securities
upon notice by Escrow Agent (as hereinafter defined) that the Subscription
Agreement has been executed by the Purchaser and accepted by SCMS.
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II. COMPENSATION
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2.01 SCMS hereby agrees to compensate BERKSHIRE 10% of the gross dollars
raised as a fee. As an additional fee, SCMS agrees to compensate BERKSHIRE by
granting them concurrent with the Closing and funding to SCMS of gross proceeds
of $1,000,000 pursuant to the Offering, 150,000 stock purchase warrants
exerciseable at $0.875. The warrants will be five years warrants with no call
provisions and piggyback registration rights and a one-time demand registration
after 12 months.
2.02 All subscriptions funds received by BERKSHIRE will be directed to the
Attorney Trust Account of Levy & Levy, P.A., Attn: Xxxxxxx X. Xxxx, Esq. as
Escrow Agent. Each time that SCMS delivers a certificate for Securities sold in
accordance with Regulation S, pursuant to a Subscription Agreement accepted by
SCMS, the sale proceeds will be immediately delivered to SCMS in a certified
check or wire, less the 10% fee to BERKSHIRE and a one-half of one percent
(0.005) escrow fee to Levy & Levy, P.A.
III. INDEMNIFICATION
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3.01 BERKSHIRE and SCMS agree to indemnify and hold harmless the Escrow
Agent from any and all claims, liabilities, losses, actions, suits, or
proceedings, at law or in equity, that it may incur or with which it may be
threatened by reason of its acting as Escrow Agent as described herein
(including but not limited to expenses reasonably incurred in investigating,
preparing or defending against any litigation, commenced or threatened, or any
claim whatsoever); provided, however, that the provisions of this paragraph
shall not apply in the event of any claim, liability, loss, action, suit, or
proceeding resulting from the breach of by the Escrow Agent of any provision of
this Agreement or from its gross negligence or willful misconduct.
3.02 SCMS agrees to indemnify and hold harmless BERKSHIRE, its directors
and each person, if any, who controls BERKSHIRE within the meaning of Section 15
of the Securities Act as follows:
a. Against any loss, liability, claim, damage and expense arising out
of (including but not limited to expenses reasonably incurred in investigating,
preparing or defending against any litigation, commenced or threatened, or any
claim whatsoever based upon) any untrue or alleged untrue statement of material
fact contained in the offering materials (as amended and supplemented) furnished
to BERKSHIRE by SCMS, or the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make the statements
therein not misleading unless such statement or omission was made in reliance
upon and in conformity with written information furnished to SCMS by BERKSHIRE
expressly for use in the offering materials or any amendment or supplement
thereof; and
b. Against any loss, liability, claim, damage and expense to the
extent of the aggregate amount paid in settlement of any litigation commenced or
threatened, or of any claim based upon any untrue statement or omission or any
alleged untrue statement or omission (including but not limited
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to expenses reasonably incurred in investigating, preparing or defending against
any such litigation or claim), if such settlement is effected with the written
consent of SCMS.
3.03 BERKSHIRE agrees to indemnify and hold harmless SCMS, its directors,
officers, employees, attorneys, accountants, agents and affiliates, and each
person, if any, who controls any of the foregoing persons within the meaning of
Section 15 of the Securities Act as follows:
a. Against any loss, liability, claim, damage or expense resulting
from or arising out of (including but not limited to expenses reasonably
incurred in investigating, preparing or defending against any litigation,
commenced or threatened, or any claim whatsoever based upon) (i) BERKSHIRE's
violation or alleged violation of Regulation S or any other applicable law, (ii)
any breach by BERKSHIRE of any of its representations, warranties, covenants or
agreements contained in this Agreement, or (iii) any untrue or alleged untrue
statement of a material fact contained in the offering materials (as amended and
supplemented) prepared by BERKSHIRE, or the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to make
the statements therein not misleading, except to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was made
in the offering materials upon and in conformity with written information
furnished to BERKSHIRE by SCMS specifically for use in the preparation thereof;
and
b. Against loss, liability, claim, damage or expense to the extent of
the aggregate amount paid in settlement of any litigation commenced or
threatened, or of any claim based upon any untrue statement or omission or any
alleged untrue statement or omission (including but not limited to expenses
reasonably incurred in investigating, preparing or defending against any such
litigation or claim), if such settlement is effected with the written consent of
BERKSHIRE.
IV. TERMINATION
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4.01 The Offering will terminate at 12:00 P.M. EST on the 5th day following
the signing of the Agreement for the first $500,000. The second $500,000
Offering will terminate on the 20th day following the signing of this Agreement,
unless extended by SCMS in writing.
V. MISCELLANEOUS
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5.01 This Agreement is binding on all parties, as well as on their
successors, assignees and representative, and constitutes the entire Agreement
between the parties. This Agreement may be modified or amended solely by a
written agreement executed by the parties hereto, and may be executed in
counterparts.
5.02 The parties shall resolve any dispute arising hereunder before an
arbitrator selected pursuant to the rules of the American Arbitration
Association and each party shall bear their own attorney's fees and costs of
such arbitration. Disputes under this Agreement as well as all of the terms and
conditions of this Agreement shall be governed in accordance with and by the
laws of the State of New York.
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VI. RESTRICTIVE CLAUSES
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6.01 SCMS agrees that it will not participate or engage in any Regulation
S Private Placement Transactions with any other distributor or foreign purchaser
other than through BERKSHIRE for a period of 90 days subsequent to the Closing
of the last Regulation S transaction by or through BERKSHIRE. For a period of
six months from the last Reg S Closing, SCMS agrees to grant BERKSHIRE the First
Right of Refusal on all Regulation S Transactions (BERKSHIRE would have 48 hours
to match any bona fide offer and have 5 additional business days to complete
same).
6.02 In the event SCMS engages in a non-Regulation S Private Placement
(Reg. D or 4(2) financing), for a period of three months after the last Reg S
Closing. SCMS hereby agrees not to sell any stock to a non-U.S. resident or any
one else who might qualify for a Regulation S transaction without:
(i) BERKSHIRE's written consent which shall not be unreasonably withheld; or
(ii) written representations and agreements from any non-U.S. resident purchaser
that such purchaser agrees to comply with the applicable provisions of
Regulation D under the Securities Act, and not to avail themselves of the 40-day
holding period of Regulation S.
6.03 The provisions of Section 6.01 and 6.02 do not apply unless and until
BERKSHIRE has completed the full $1,000,000 Offering and funded the net proceeds
thereof to SCMS.
VII. NOTICES
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7.01 All notices and communications regarding this Agreement shall be sent
to the following:
If to SCMS: Xxxx X. Xxxxxxxx, Chief Financial Officer
Scientific Measurement Systems, Inc.
0000 Xxxxxx Xxxxx
Xxxxxx, Xxxxx 00000
If to BERKSHIRE: Xxxx Xxxxxxxxxx, President
Berkshire International Finance, Inc.
000 Xxxxx Xxxxxx, Xxxxx 000
Xxx Xxxx, Xxx Xxxx 00000
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IN WITNESS WHEREOF, the parties thereto, intending to be legally bound, have
executed this Agreement.
BERKSHIRE INTERNATIONAL FINANCE, INC.
By: /s/ XXXX XXXXXXXXXX
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Xxxx Xxxxxxxxxx, President
SCIENTIFIC MEASUREMENT SYSTEMS, INC.
By: /s/ XXXX X. XXXXXXXX
---------------------------------
Xxxx X. Xxxxxxxx, Chief Financial
Officer
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