eCLICKMD, INC.
PLACEMENT AGENCY AGREEMENT
As of April 29, 2002
Gryphon Financial Securities Corp.
000 Xxxxx Xxxxxx (Xxxxx 0000)
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
This Placement Agency Agreement (the "Agency Agreement") confirms the
retention by eClickMD, Inc., a Nevada corporation (the "Company"), of Gryphon
Financial Securities Corp., a Delaware corporation (the "Placement Agent"), to
act as the exclusive placement agent, on a reasonable best efforts basis, in
connection with the private placement (the "Offering") of units (each a "Unit,"
and collectively, the "Units"), each Unit consisting of (i) a $50,000 aggregate
principal amount senior subordinated convertible promissory note of the Company
bearing interest at the rate of 7.5% per annum (the "Notes"), (ii) 25,000 shares
(the "Shares") of common stock, par value $.001 per share of the Company (the
"Common Stock"), and (iii) a five (5) year warrant (each a "Warrant," and
collectively, the "Warrants") to purchase 25,000 shares of Common Stock (the
"Warrant Shares"), at an exercise price of $0.75 per share, on the terms set
forth below.
In the Offering, the Placement Agent will sell on a reasonable best
efforts basis a minimum of $100,000 of Units (the "Minimum Offering") and up to
a maximum of $500,000 of Units (the "Maximum Offering"). The Units will be
offered pursuant to those terms and conditions set forth herein. The Minimum
Offering will be made on a "best efforts-all or none" basis and the balance of
the Offering will be made on a "best efforts" basis. The Placement Agent reserve
the right to sell up to an additional $250,000 of Units (the "Over-Allotment
Securities"). The Units will be offered in accordance with Regulation D
promulgated by the Securities and Exchange Commission (the "SEC"). The Units,
the Notes, the Shares, the Warrants, the Warrant Shares and the shares of Common
Stock issuable upon conversion of the Notes (the "Conversion Shares") are
sometimes hereinafter collectively referred to as the "Securities."
As set forth in the Notes, the Notes shall bear interest at the rate of
7.5% per annum payable with respect to each Note upon the earliest to occur of
the conversion date, the date of prepayment or the maturity date (whichever
occurs first), in cash and/or shares of Common Stock at the Company's option.
The Notes shall mature on the earlier to occur of (i) one hundred eighty (180)
days from the date of each Note, (ii) the date the Company sells an aggregate of
$1,000,000 of gross proceeds of its debt and/or equity securities, excluding
securities sold in this Offering and (iii) certain other events described in the
Note (the "Maturity Date"). The
Placement Agent (or its written designee) may, in its sole discretion, extend
the Maturity Date upon written request of the Company for up to ninety (90) days
from the Maturity Date. Outstanding principal and accrued but unpaid interest on
the Notes shall be convertible into Conversion Shares at the holder's sole
option in whole or in part and from time to time upon the earlier to occur of
(i) the day immediately following the Maturity Date, and (ii) an event of
default under the Note. The Notes shall be convertible into Conversion Shares at
a conversion price equal to the lower of (i) the product obtained by multiplying
(I) one hundred fifty (150%) percent, and (II) the average closing bid price of
the Common Stock on the Bulletin Board (or such other market that the Common
Stock is traded upon or quoted on) for the five (5) consecutive trading days
prior to the date of the respective Note being converted and (ii) $1.25. The
Note also shall contain anti-dilution provisions and shall contain negative and
affirmative covenants and events of default.
The (i) SEC Documents (as defined in Section 2(j) below, and (ii) the
Subscription Agreement between each prospective investor subscribing to purchase
Units pursuant to the Offering (each a "Subscriber") and the Company (the
"Subscription Agreement"), are together referred to herein as the "Offering
Documents," and together with the (iii) Escrow Agreement (as defined in Section
1(e) below), and (iv) the Agent Registration Agreement (as defined below), (v)
the Registration Rights Agreement among each Subscriber and the Company (the
"Registration Rights Agreement"), (vi) the Notes, (vii) the Warrants, (viii)
this Agency Agreement, (ix) the Agent Warrants (as defined below) and (x) the
exhibits, schedules and appendices which are part of the Subscription Agreement,
the Registration Rights Agreement, the Notes, the Warrants, and the Agency
Agreement, are sometimes hereinafter collectively referred to as the
"Transaction Documents."
The Company will prepare and deliver to the Placement Agent a reasonable
number of copies of the Transaction Documents in form and substance satisfactory
to the Placement Agent and its counsel.
Each Subscriber will be required to deliver, among other things, a
Subscription Agreement and a confidential investor questionnaire ("Investor
Questionnaire") in the form to be provided to offerees. Capitalized terms used
herein, unless otherwise defined or unless the context otherwise indicates,
shall have the same meanings provided in the Transaction Documents.
1. Appointment of Placement Agent; Escrow Agent.
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(a) Gryphon Financial Securities Corp. is hereby appointed exclusive
placement agent of the Company (subject to Gryphon's right to have selected
dealers ("Selected Dealers") in good standing with the National Association of
Securities Dealers ("NASD") participate in the Offering) during the offering
periods for the Offering herein specified for the purposes of assisting the
Company in finding qualified Subscribers in the Offering.
(b) Subject to the performance by the Company in all material
respects of its obligations to be performed under this Agency Agreement and to
the completeness and accuracy of all representations and warranties of the
Company contained in this Agency Agreement, the Placement Agent hereby accepts
such agency and agrees to use its reasonable best efforts to
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assist the Company in finding qualified Subscribers. It is understood that the
Placement Agent has no commitment to sell Units. Gryphon's agency hereunder is
not terminable by the Company except upon termination of the Offering Period.
(c) Subscriptions for Units shall be evidenced by the execution by
Subscribers of a Subscription Agreement. No Subscription Agreement shall be
effective unless and until it is accepted by the Company. The Placement Agent
shall not have any obligation to independently verify the accuracy or
completeness of any information contained in any Subscription Agreement or the
authenticity, sufficiency, or validity of any check delivered by any prospective
investor in payment for Units.
(d) The Placement Agent and/or affiliates of the Placement Agent may
purchase Units and any such purchases shall be counted toward the Minimum Amount
and Maximum Offering.
(e) Pursuant to the terms of an escrow agreement (the "Escrow
Agreement"), by and between the Company, the Placement Agent and American Stock
Transfer & Trust Company, as escrow agent (the "Escrow Agent") for the Offering,
all proceeds representing the purchase price for the purchase of Units in the
Offering shall be sent directly to and held in escrow by the Escrow Agent
pursuant to the terms of the Escrow Agreement pending each Closing (as defined
below).
2. Representations and Warranties of the Company. The Company represents
and warrants to the Placement Agent and each Selected Dealer, if any, as
follows:
(a) Organization and Qualification. The Company and each of its
Subsidiaries (the "Subsidiaries") which, for purposes of this Agency Agreement
means any entity in which the Company, directly and/or indirectly, owns capital
stock and holds a majority or similar interest, are duly organized and validly
existing in good standing under the laws of the jurisdiction in which they were
organized, and have the requisite power and authorization to own their
properties and to carry on their business as now being conducted. Each of the
Company and its Subsidiaries is duly qualified as a foreign corporation to do
business and is in good standing in every jurisdiction in which its ownership of
property or the nature of the business conducted by it makes such qualification
necessary, except to the extent that the failure to be so qualified or be in
good standing would not have a Material Adverse Effect. As used in this Agency
Agreement, "Material Adverse Effect" means any material adverse effect on the
business, properties, assets, operations, results of operations or financial
condition of the Company and its Subsidiaries, if any, taken as a whole, or on
the transactions contemplated hereby, or by the other Transaction Documents or
the agreements and instruments to be entered into in connection herewith or
therewith, or on the authority or ability of the Company to perform its
obligations under the Transaction Documents. A complete list of all Subsidiaries
of the Company with substantive business activities is set forth in Schedule
2(a).
(b) Authorization; Enforcement; Validity. The Company has the
requisite corporate power and authority to enter into and perform its
obligations under this Agency Agreement and other Transaction Documents, to
perform its obligations under the Transaction Documents, and to issue the
Securities (as well as the Agent Warrants, all underlying securities
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and the Agent Shares, as defined below) in accordance with the terms of the
Transaction Documents. The execution and delivery of the Transaction Documents
by the Company and the consummation by the Company of the transactions
contemplated by the Transaction Documents, including without limitation the
issuance of the Securities (as well as the Agent Warrants. all underlying
securities and the Agent Shares), have been duly authorized by the Company's
Board of Directors and no further consent or authorization is required by the
Company, its Board of Directors or its stockholders. The Transaction Documents
have been duly executed and delivered by the Company, and constitute valid and
binding obligations of the Company enforceable against the Company in accordance
with their terms, except as such enforceability may be limited by general
principles of equity or applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation or similar laws relating to, or affecting generally, the
enforcement of creditors' rights and remedies.
(c) Capitalization. As of the Initial Closing as defined below, the
authorized, issued and outstanding securities of the Company will be as set
forth in Schedule 2(c) (which, other than any securities issued in any Closing
of this Offering, shall not change prior to the Termination Date). All of such
outstanding securities have been duly authorized, validly issued, fully paid and
non-assessable. Except as disclosed in Schedule 2(c), (i) no shares of the
Company's capital stock are subject to preemptive rights under law or any other
similar rights or any liens or encumbrances suffered or permitted by the
Company; (ii) there are no outstanding debt securities issued by the Company;
(iii) there are no outstanding options, warrants, scrip, rights to subscribe to,
calls or commitments of any character whatsoever relating to, or securities or
rights convertible into or exchangeable for, any shares of capital stock of the
Company or any of its Subsidiaries, or contracts, commitments, understandings or
arrangements by which the Company or any of its Subsidiaries is or may become
bound to issue additional shares of capital stock of the Company or any of its
Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into or exchangeable for, any shares of capital stock of the Company
or any of its Subsidiaries; (iv) there are no agreements or arrangements under
which the Company or any of its Subsidiaries is obligated to register the sale
of any of their securities under the 1933 Act; (v) there are no outstanding
securities of the Company or any of its Subsidiaries which contain any
redemption or similar provisions, and there are no contracts, commitments,
understandings or arrangements by which the Company or any of its Subsidiaries
is or may become bound to redeem a security of the Company or any of its
Subsidiaries; (vi) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the Securities (and the Agent Warrants and all underlying securities and the
Agent Shares) as described in the Transaction Documents; and (vii) the Company
does not have any stock appreciation rights or "phantom stock" plans or
agreements or any similar plan or agreement. All prior sales of securities of
the Company were either registered under the 1933 Act and applicable state
securities laws or exempt from such registration, and no security holder has any
rescission rights with respect thereto.
(d) Issuance of Securities; Reservation. The issuance, sale and
delivery of the Securities, the Agent Warrants, the shares of Common Stock
issuable upon exercise of the Agent Warrants and the Agent Shares have been duly
authorized by all requisite corporate action by the Company and, upon issuance,
shall be (a) duly authorized, validly issued, fully paid and non-assessable, (b)
free from all taxes, liens and charges with respect to the issue thereof except
as
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consented to by an investor, and (c) entitled to the rights set forth in the
Notes, the Agent Warrants and the Warrants. Prior to the Initial Closing, such
number of shares of Common Stock as the Placement Agent shall specify will be
duly authorized and reserved for issuance upon conversion of the Notes and
exercise of the Warrants and the Agent Warrants and issuance of the Agent
Shares. In the event the number of shares of Common Stock issuable upon
conversion or exercise of the Notes, the Agent Warrants and/or the Warrants
exceed the number of authorized shares of Common Stock, the Company shall
immediately use its best efforts to seek stockholder approval of and file a
Certificate of Amendment to the Company's Certificate of Incorporation to
increase the authorized number of shares of Common Stock accordingly. Upon
conversion of the Notes and/or exercise of the Warrants and Agent Warrants, the
Conversion Shares, the Warrant Shares and the shares of Common Stock issuable
upon exercise of the Agent Warrants will be duly authorized, validly issued,
fully paid and non-assessable and free from all taxes, liens and charges with
respect to the issue thereof, with the holders being entitled to all rights
accorded to a holder of Common Stock. Assuming (i) the accuracy of the
information provided by the respective Subscribers in the Subscription Agreement
and Investor Questionnaires, (ii) that all of the offerees and Subscribers are
"accredited investors" as such term is defined in Rule 501 of Regulation D, and
(iii) that the Placement Agent has not engaged, nor will engage, in connection
with the Offering, in any form of general solicitation or general advertising
within the meaning of Rule 502(c) of Regulation D, the offer and sale of the
Notes and the Warrants pursuant to the terms of this Agency Agreement are and
will be exempt from the registration requirements of the 1933 Act and the rules
and regulations promulgated thereunder. The Company is not disqualified from the
exemption under Regulation D by virtue of the disqualification contained in Rule
507 thereof or otherwise.
(e) No Conflicts. Except as set forth in Schedule 2(e), the
execution, delivery and performance of the Transaction Documents by the Company,
the consummation by the Company of the transactions contemplated by the
Transaction Documents, and the performance by the Company of its obligations
under the Agreement, the Notes, the Warrants and the Agent Warrants, including
without limitation, the reservation for issuance and the issuance of the
Securities, will not (a) result in a violation of the Company's Certificate of
Incorporation, any certificate of designations, preferences and rights of any
outstanding series of preferred stock of the Company, or the Company's By-Laws,
(b) conflict with, or constitute a default or an event which with notice or
lapse of time or both would become a default under, or give to others any rights
of termination, amendment, acceleration or cancellation of, any material
agreement, loan and/or similar agreement, lease, license or instrument
(including without limitation, any document filed as an exhibit to any of the
Company's SEC Documents (as defined below)), or (c) result in a violation of any
law, rule, regulation, order, judgment or decree (including federal and state
securities laws and regulations and the rules and regulations of the NASD )
applicable to the Company or any of its Subsidiaries or by which any property or
asset of the Company or any of its Subsidiaries is bound or affected.
(f) Consents. Except as contemplated by this Agency Agreement and
filings required pursuant to applicable federal and state securities laws and
blue sky laws, which filings, the Company covenants to complete within the
required statutory period, the Company is not required to obtain any consent,
authorization or order of, or make any filing or registration with, any court or
governmental agency or any regulatory or self-regulatory agency in order for it
to execute, deliver or perform any of its obligations under or contemplated by
the Transaction
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Documents. Except as otherwise provided in the Transaction Documents, all
consents, authorizations, orders, filings and registrations which the Company is
required to obtain pursuant to the preceding sentence have been obtained or
effected on or prior to the date hereof. The Company and its Subsidiaries are
unaware of any facts or circumstances which might prevent the Company from
obtaining or effecting any of the foregoing.
(g) No General Solicitation. None of the Company, its Subsidiaries,
any of their affiliates, and any person acting on their behalf, has engaged in
any form of general solicitation or general advertising (within the meaning of
Regulation D under the 0000 Xxx) in connection with the offer or sale of the
Securities.
(h) No Integrated Offering. None of the Company, its Subsidiaries,
any of their affiliates, and any person acting on their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of any of
the Securities under the 1933 Act or cause this Offering of the Securities to be
integrated with prior offerings by the Company for purposes of the 1933 Act or
any applicable stockholder approval provisions, including without limitation,
under the rules and regulations of any exchange or automated quotation system on
which any of the securities of the Company are listed or designated. None of the
Company, its Subsidiaries, their affiliates and any person acting on their
behalf will take any action or steps referred to in the preceding sentence that
would require registration of any of the Securities under the 1933 Act or cause
the Offering of the Securities to be integrated with other offerings.
(i) Application of Takeover Protections; Rights Agreement. The
Company and its board of directors have taken all necessary action, if any, in
order to render inapplicable any control share acquisition, business
combination, poison pill (including any distribution under a rights agreement)
or other similar anti-takeover provision under the Company's Amended and
Restated Articles of Incorporation or the laws of the state of its incorporation
which is or could become applicable to the Subscriber as a result of the
transactions contemplated by this Agency Agreement, including without
limitation, the Company's issuance of the Securities (including the Agent
Warrants and all underlying securities and the Agent Shares) and the
Subscriber's ownership of the Securities. The Company has not adopted a
shareholder rights plan or similar arrangement relating to accumulations of
beneficial ownership of Common Stock or a change in control of the Company.
(j) SEC Documents; Financial Statements. Since December 31, 2001,
the Company has filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "1934 Act")
(all of the foregoing filed prior to the date hereof and all exhibits included
therein and financial statements and schedules thereto and documents
incorporated by reference therein being hereinafter referred to as the "SEC
Documents"). As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the 1934 Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time they were filed with the SEC,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. As of their respective dates, the
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financial statements of the Company included in the SEC Documents complied as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto. Such financial
statements have been prepared in accordance with generally accepted accounting
principles, consistently applied, during the periods involved (except (a) as may
be otherwise indicated in such financial statements or the notes thereto, or (b)
in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments that will not be material).
(k) Conduct of Business; Regulatory Permits. Except as set forth on
Schedule 2(k), since December 31, 2001 the Company has not (a) incurred any
debts, obligations or liabilities, absolute, accrued, contingent or otherwise,
whether due or to become due, except current liabilities incurred in the usual
and ordinary course of business, having a Material Adverse Effect, (b) made or
suffered any changes in its contingent obligations by way of guaranty,
endorsement (other than the endorsement of checks for deposit in the usual and
ordinary course of business), indemnity, warranty or otherwise, (c) discharged
or satisfied any liens other than those securing, or paid any obligation or
liability other than, current liabilities shown on the balance sheet dated as at
December 31, 2001 and forming part of the SEC Documents, and current liabilities
incurred since the December 31, 2001, in each case in the usual and ordinary
course of business, (d) mortgaged, pledged or subjected to lien any of its
assets, tangible or intangible, (e) sold, transferred or leased any of its
assets except in the usual and ordinary course of business, (f) cancelled or
compromised any debt or claim, or waived or released any right, of material
value, (g) suffered any physical damage, destruction or loss (whether or not
covered by insurance) adversely affecting the properties or business of the
Company, (h) entered into any transaction other than in the usual and ordinary
course of business except for this Agency Agreement and the related agreements
referred to herein, (i) encountered any labor difficulties or labor union
organizing activities, (j) made or granted any wage or salary increase or
entered into any employment agreement, (k) issued or sold any shares of capital
stock or other securities or granted any options with respect thereto, or
modified any equity security of the Company, (l) declared or paid any dividends
on or made any other distributions with respect to, or purchased or redeemed,
any of its outstanding equity securities, (m) suffered or experienced any change
in, or condition affecting, its condition (financial or otherwise), properties,
assets, liabilities, business operations or results of operations other than
changes, events or conditions in the usual and ordinary course of its business,
having (either by itself or in conjunction with all such other changes, events
and conditions) a Material Adverse Effect, (n) made any change in the accounting
principles, methods or practices followed by it or depreciation or amortization
policies or rates theretofore adopted, or (o) entered into any agreement, or
otherwise obligated itself, to do any of the foregoing. Neither the Company nor
any of its Subsidiaries is in violation of any judgment, decree or order or any
statute, ordinance, rule or regulation applicable to the Company or its
Subsidiaries, and neither the Company nor any of its Subsidiaries will conduct
its business in violation of any of the foregoing, except for possible
violations which would not, individually or in the aggregate, have a Material
Adverse Effect. The Company and its Subsidiaries possess all certificates,
authorizations and permits issued by the appropriate federal, state or foreign
regulatory authorities necessary to conduct their respective businesses, except
where the failure to possess such certificates, authorizations or
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permits would not have, individually or in the aggregate, a Material Adverse
Effect, and neither the Company nor any such Subsidiary has received any notice
of proceedings relating to the revocation or modification of any such
certificate, authorization or permit.
(l) Foreign Corrupt Practices. Neither the Company, nor any of its
Subsidiaries, nor any director, officer, agent, employee or other person acting
on behalf of the Company or any of its Subsidiaries has, in the course of its
actions for, or on behalf of, the Company, (a) used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expenses relating
to political activity; made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate funds, (b)
violated or is in violation of any provision of the U.S. Foreign Corrupt
Practices Act of 1977, as amended, or (c) made any unlawful bribe, rebate,
payoff, influence payment, kickback or other unlawful payment to any foreign or
domestic government official or employee.
(m) Absence of Litigation. Except as set forth in Schedule 2(m),
there is no action, suit, proceeding, inquiry or investigation before or by the
NASD, any court, public board, government agency, self-regulatory organization
or body, or arbitrator pending or, to the knowledge of the Company, threatened
against the Company, the Common Stock or any of the Company's Subsidiaries or
any of the Company's or the Company's Subsidiaries' officers or directors in
their capacities as such.
(n) Tax Status. Except as disclosed in Schedule 2(n), the Company
and each of its Subsidiaries has made or filed all federal and state income and
all other tax returns, reports and declarations required by any jurisdiction to
which it is subject, except when the failure to do so would not have a material
adverse effect, and has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on such
returns, reports and declarations or otherwise due and payable, except those
being contested in good faith and has set aside on its books reserves in
accordance with GAAP reasonably adequate for the payment of all taxes for
periods subsequent to the periods to which such returns, reports or declarations
apply. There are no unpaid taxes in any material amount claimed to be due by the
taxing authority of any jurisdiction, and the officers of the Company know of no
basis for any such claim.
(o) Securities Law Compliance. The offer, offer for sale, and sale
of the Units has not been registered with the SEC. The Units are to be offered,
offered for sale and sold in reliance upon the exemptions from the registration
requirements of Section 5 of the 1933 Act. The Company will conduct the Offering
in compliance with the requirements of Regulation D under the 1933 Act, and the
Company will file all appropriate notices of offering with the SEC. The
Transaction Documents do not and will not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances in which they were made, not
misleading. If at any time prior to the completion of the Offering or other
termination of this Agreement any event shall occur as a result of which it
might become necessary to amend or supplement the Transaction Documents so that
they do not include any untrue statement of any material fact or omit to state
any material fact necessary in order to make the statements therein, in light of
the circumstances then existing, not misleading, the Company will promptly
notify the Placement Agent and will supply the Placement Agent with amendments
or supplements correcting such statement or omission. The Company will also
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provide the Placement Agent for delivery to all offerees and purchasers and
their representatives, if any, any information, documents and instruments, which
the Placement Agent deems reasonably necessary to comply with applicable state
and federal law.
(p) Title. Except as set forth in or contemplated by Schedule 2(p),
the Company has good and marketable title to all material properties and
tangible assets owned by it, free and clear of all liens, charges, encumbrances
or restrictions, except as such as are not significant or important in relation
to the Company's business; all of the material leases and subleases under which
the Company is the lessor or sublessor of properties or assets or under which
the Company holds properties or assets as lessee or sublessee are in full force
and effect, and the Company is not in default in any material respect with
respect to any of the terms or provisions of any of such leases or subleases,
and to the Company's knowledge no material claim has been asserted by anyone
adverse to rights of the Company as lessor, sublessor, lessee or sublessee under
any of the leases or subleases mentioned above, or affecting or questioning the
right of the Company to continued possession of the leased or subleased premises
or assets under any such lease or sublease. The Company owns, leases or licenses
all such properties as are necessary to its operations as described in the
Transaction Documents.
(q) Intellectual Property Rights. The Company and its Subsidiaries
own or possess adequate rights or licenses to use all trademarks, trade names,
service marks, service xxxx registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights necessary to conduct their respective
businesses as now conducted the lack of which can reasonably be expected to have
a material adverse effect. Except as set forth on Schedule 2(q), to the
Company's knowledge, none of the Company's trademarks, trade names, service
marks, service xxxx registrations, service names, patents, patent rights,
copyrights, inventions, licenses, approvals, government authorizations, trade
secrets or other intellectual property rights have expired or terminated, or are
expected to expire or terminate within two years from the date of this Agency
Agreement, except where such expiration or termination would not have either
individually or in the aggregate a Material Adverse Effect. The Company and its
Subsidiaries do not have any knowledge of any infringement by the Company or its
Subsidiaries of trademarks, trade name rights, patents, patent rights,
copyrights, inventions, licenses, service names, service marks, service xxxx
registrations, trade secrets or other similar rights of others, or of any such
development of similar or identical trade secrets or technical information by
others and, except as set forth on Schedule 2(q), no claim, action or proceeding
has been made or brought against, or to the Company's knowledge, has been
threatened against, the Company or its Subsidiaries regarding trademarks, trade
name rights, patents, patent rights, inventions, copyrights, licenses, service
names, service marks, service xxxx registrations, trade secrets or other
infringement, except where such infringement, claim, action or proceeding would
not reasonably be expected to have either individually or in the aggregate a
Material Adverse Effect. Except as set forth on Schedule 2(q), the Company and
its Subsidiaries are unaware of any facts or circumstances which might give rise
to any of the foregoing. The Company and its Subsidiaries have taken reasonable
security measures to protect the secrecy, confidentiality and value of all of
their intellectual properties except where the failure to do so would not have
either individually or in the aggregate a Material Adverse Effect.
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(r) Registration Rights. Except with respect to holders of the Units
and, except as set forth in Schedule 2(r), no person has any right to cause the
Company to effect the registration under the 1933 Act of any securities of the
Company.
(s) Brokers. Neither the Company nor any of its officers, directors,
employees or stockholders has employed any broker or finder in connection with
the transactions contemplated by the Agency Agreement other than the Placement
Agent.
(t) Right of First Refusal. No person, firm or other business entity
is a party to any agreement, contract or understanding, written or oral
entitling such party to a right of first refusal with respect to offerings of
securities by the Company.
(u) Disclosure. None of the representations and warranties of the
Company appearing in this Agency Agreement or any information appearing in any
Exhibit or Schedule hereto or in any of the Transaction Documents or Offering
Documents (other than information received by the Company from third-party
sources or statements which are described as "belief" or "expectation" of the
Company or similarly qualified, which information the Company believes as of the
date hereof and as of each such Closing Date to the best of its knowledge to be
true and accurate and not contain any untrue statement of material fact),
contains, or on any Closing Date will contain, any untrue statement of a
material fact or omits, or on any Closing Date will omit, to state any material
fact required to be stated herein or therein in order for the statements herein
or therein, in light of the circumstances under which they were made, not to be
misleading.
(v) Certain Officers. As of the date hereof, Xxxxxx Xxxxxx Xxxx,
Xxxxx Xxxxxx, Xxxxxx Xxxxxxx and Xxxx Burly (the "Key Executives") are employed
by the Company on a full-time basis, and, to the Company's knowledge, none of
the Key Executives is planning to cease being employed by the Company on a
full-time basis in their current capacity and the Company is not aware of any
circumstances related to the employment of the Key Executives, apart from
circumstances related to the operations of the Company as a whole, that could
result in cessation of full-time employment of any of the Key Executives in
their current capacities.
3. Closing and Fees.
----------------
(a) Closing and Termination of Offering. Provided the Minimum
Offering shall have been subscribed for, all conditions to closing set forth in
Section 3 of this Agreement and Article V and Article VI of the Subscription
Agreement have been satisfied or waived and neither the Company nor the
Placement Agent have notified the other that they do not intend to effect the
closing of the Minimum Offering, a closing (the "Initial Closing") shall take
place at the offices of counsel to the Placement Agent, Gusrae, Xxxxxx & Bruno,
PLLC, 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 within three (3) business days
thereafter (but in no event later than five (5) business days following the
Termination Date), which closing date may be accelerated or adjourned by
agreement between the Company and the Placement Agent. At the Initial Closing,
payment for the Units issued and sold by the Company shall be made against
delivery of the Notes, Shares and Warrants. The Company and the Placement Agent
may consummate subsequent closings of the Offering, upon mutual agreement only,
each of which shall be subject to satisfaction or waiver of the conditions to
closing set forth in Article V and Article VI of the
-10-
Subscription Agreement and in Section 3 of this Agreement, and each of which
shall be deemed a "Closing" hereunder. The date of the last closing of the
Offering is hereinafter referred to as the "Final Closing" and the date of any
Closing hereunder is hereinafter referred to as a "Closing Date." The offering
period for the Offering (the "Offering Period") shall commence on the day the
Transaction Documents are first made available to the Placement Agent by the
Company for delivery in connection with the Offering for sale of the Units and
shall continue until the earlier to occur of: (i) the sale of the Maximum
Offering (including the Over-Allotment Securities); and (ii) June 18, 2002
provided, however, that if the Initial Closing occurs on or prior to June 18,
2002, the Offering Period automatically shall be extended until August 18, 2002.
The day that the Offering Period terminates is hereinafter referred to as the
"Termination Date."
(b) Conditions to Placement Agent's Obligations. The obligations of
the Placement Agent hereunder will be subject to the accuracy in all material
respects of the representations and warranties of the Company herein contained
as of the date hereof and as of each Closing Date of the Offering, to the
performance by the Company of its obligations hereunder and to the following
additional conditions:
(i) Due Qualification or Exemption.
------------------------------
(A) The Offering will become qualified or be exempt from
qualification under the securities or "blue sky" laws of the several states
pursuant to Section 4(d) below not later than the Initial Closing Date, and
(B) At any Closing Date no stop order suspending the
sale of the Notes and Warrants shall have been issued and no proceedings by any
governmental authority, self regulatory organization or any securities exchange
for that purpose shall have been initiated or threatened in writing;
(ii) No Material Misstatements. Neither the blue sky
qualification materials nor the Transaction Documents, nor any supplement
thereto, will contain any untrue statement of a fact which in the reasonable
opinion of the Placement Agent is material, or omits to state a fact, which in
the reasonable opinion of the Placement Agent is material and is required to be
stated therein, or is necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
(iii) Compliance with Agreements. The Company will have
complied in all material respects with all agreements and all conditions on its
part to be performed or satisfied hereunder at or prior to each Closing;
(iv) Corporate Action. Prior to the Initial Closing, the
Company has or will have taken all necessary corporate action, including,
without limitation, obtaining the approval of its Board of Directors and
stockholders, for the execution and delivery of this Agency Agreement, the
performance by the Company of its obligations hereunder and the Offering
contemplated hereby;
-11-
(v) Opinion of Company Counsel. At each Closing, the Placement
Agent shall receive the opinion of Xxxxx Xxxxxxx, Esq., counsel to the Company,
addressed to the Placement Agent and the Subscribers substantially to the effect
that:
(A) The Company is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Nevada.
(B) The Company has the requisite corporate power and
authority to execute, deliver and perform its obligations under the Transaction
Documents including the issuance of the Agent Shares, the Notes, the Shares, the
Agent Warrants and the Warrants in accordance with the terms thereof. The
execution and delivery of the Transaction Documents as by the Company, the
performance of the obligations of the Company thereunder and the consummation by
it of the transactions contemplated therein have been duly authorized by the
Company's Board of Directors.
(C) The issuance and sale of the Units, the Notes, the
Agent Shares, the Shares, the Agent Warrants and the Warrants has been duly
authorized, and when issued and paid for, the Units, the Shares, the Notes, the
Agent Warrants, the Warrants and the Agent Shares will be validly issued, fully
paid and non-assessable and free of all liens, encumbrances and preemptive
rights with respect to the issue thereof. The Conversion Shares, the Warrant
Shares and the Common Stock issuable upon exercise of the Agent Warrants, are
duly authorized and reserved for issuance, and when issued and paid for, the
Conversion Shares, the Warrant Shares and all securities underlying the Agent
Warrants, will be validly issued, fully paid and non-assessable and free of all
taxes, liens, charges and preemptive rights with respect to the issue thereof.
(D) Based in part upon, and subject to the accuracy as
to factual matters of, the Subscribers' representations in Article II of the
Subscription Agreement, the Units may be issued to the Subscribers pursuant to
the Transaction Documents without registration under the 1933 Act.
(E) No authorization, approval, consent, filing or other
order of any federal or state governmental body, regulatory agency, or to our
knowledge, any court, is required to be obtained by the Company for the issuance
and sale of the Units, the Notes, the Agent Shares, the Agent Warrants, the
Shares and the Warrants as contemplated by the Transaction Documents, except as
have been made or will be made by the Company.
(F) To his knowledge, there is no action, suit,
proceeding, inquiry or investigation before or by any court, public board or
body or any governmental agency or self-regulatory organization pending or
threatened against the Company or any of its subsidiaries or any of the
properties of the Company or any of its subsidiaries which might reasonably be
expected to prevent or materially adversely affect the transactions contemplated
by the Transaction Documents.
(G) The execution, delivery and performance by the
Company of the Transaction Documents, the consummation by the Company of the
transactions contemplated thereby and the compliance by the Company with the
terms thereof does not
-12-
violate, conflict with or constitute a default under the Company's Articles of
Incorporation, the Notes, the By-Laws or to our knowledge any other material
contract, agreement arrangement by which the Company is bound.
(H) 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 Schedule 2(c) hereto.
(I) To such counsel's knowledge, other than as set forth
in Schedule 2(c) or any other Schedule hereto (i) there are no outstanding
warrants, options, agreements, convertible securities, preemptive rights (or
similar rights including, but not limited to, rights of first refusal), or other
commitments pursuant to which the Company (and/or any of its subsidiaries) is,
or may become, obligated to issue any shares of its capital stock or other
securities of the Company, and (ii) no person has any anti-dilution rights
and/or rights of first refusal. All of the issued shares of capital stock of the
Company have been duly and validly authorized and issued, are fully paid and
non-assessable and to such counsel's knowledge have not been issued in violation
of the preemptive rights of any securityholder of the Company. The offers and
sales of such securities were either registered under the 1933 Act and
applicable state securities laws or exempt from such registration requirements
and no person to our knowledge has any matured and/or unmatured rescission
rights.
(J) Nothing has come to the attention of such counsel to
cause it to have reason to believe that any such documents contained any untrue
statement of a material fact required to be stated therein or omitted to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading (except for the financial statements, notes
thereto and other financial information and statistical data contained therein,
as to which such counsel need express no opinion).
(K) To the knowledge of such counsel, there have been no
claims asserted against the Company and/or any of its subsidiaries relating to
the potential infringement of or conflict with any patents, trademarks,
copyrights or trade secrets of others.
(vi) Representations and Warranties. The representations and
warranties of the Company set forth in Section 2 hereof shall be true and
correct as of the date when made and as of the Closing as though made at that
time (except for representations and warranties that reference a specific date
which shall have been true and correct in all material respects as of such
date), and the Company shall have performed, satisfied and complied in all
respects with the covenants, agreements and conditions required by the
Transaction Documents to be performed, satisfied or complied with by the Company
at or prior to the Closing, except where the failure of such representations and
warranties to be true and correct as stated above, and except for such
nonperformance, failure to satisfy or comply as would not, individually or in
the aggregate, have a Material Adverse Effect.
(vii) Closing Documents. At the Closing, the Company shall
have delivered to the Subscriber the following: (A) a certificate of the Chief
Executive Officer stating that (I) the condition set forth in Section 3(b) has
been satisfied, (II) except as expressly set forth in any Schedule or Exhibit to
the Subscription Agreement or this Agency Agreement, since
-13-
December 31, 2001 there has been no event, condition or circumstance that has
had or could reasonably be expected to have a Material Adverse Effect, and (III)
the Company has complied with its covenants and agreements set forth in the
Transaction Documents, and (B) a certificate of the Secretary of the Company
containing: (I) true and complete copies, as of the Closing Date, of the
Certificate of Incorporation and By-laws of the Company and of the certificates
of designations of all series of preferred stock of the Company, (II) true and
complete copies of the resolutions of the Board of Directors of the Company
approving the Transaction Documents and all documents and matters incident
thereto, and (III) a certification of authenticity of the signatures of the
officers of the Company who have executed and delivered the documentation for
this Offering.
(viii) No Adverse Changes. There shall not have occurred, at
any time prior to the applicable closing (i) a general suspension of, or a
general limitation on prices for, trading in securities on the New York Stock
Exchange, the Nasdaq, the Amex Stock Exchange, or in the over-the-counter
market; (ii) any outbreak of major hostilities or other national or
international calamity; (iii) any banking moratorium declared by Federal or New
York authorities; (iv) any material adverse change in the business, properties,
assets, results of operations, or financial condition of the Company which
materially impairs the investment quality of the Notes and Warrants; or (v) any
material adverse change in the market for securities in general or in political,
financial, or economic conditions which, in the Placement Agent's reasonable
judgment, makes it inadvisable to proceed with the Offering.
(ix) Due Diligence Investigation Complete. The Placement Agent
shall have concluded its due diligence investigation of the Company to the
Placement Agent's satisfaction, including, without limitation, an investigation
of the Company's financial statements, projections, business prospects, capital
structure, and other contractual arrangements.
(x) Conditions of Subscription Agreement. All of the
conditions to closing set forth in Section 6 of the Subscription Agreement shall
have been satisfied.
(xi) Escrow Agreement. The Escrow Agreement shall have been
duly executed by the parties thereto.
(c) Placement Fee and Expenses.
(i) Offering. Simultaneously with payment for and delivery of
the Shares, Notes and Warrants at each Closing, the Company shall:
(A) pay to the Placement Agent a cash fee equal to seven
(7%) percent of the aggregate purchase price of the aggregate purchase price of
all Units sold (the "Cash Fee") (which amount shall be paid directly from the
Escrow Account at the particular Closing);
(B) reimburse the Placement Agent for its actual
out-of-pocket expenses incurred in connection with the Offering (which amount
shall be paid directly from the Escrow Account at the particular Closing),
including, without limitation, the Placement Agent's due diligence expenses,
travel and mailing expenses and the fees and expenses of its legal counsel,
which legal fees shall not exceed $12,500 plus expenses;
-14-
(C) pay all reasonable and approved expenses in
connection with the qualification of the Securities under the blue sky laws of
the states which the Placement Agent shall designate, including filing fees
(which filing fees must be paid prior to filing), legal fees and disbursements
of Placement Agent's counsel in connection with such blue sky matters (which
amount shall be paid directly from the Escrow Account at the particular
Closing). The reimbursement and payment obligations of the Company set forth in
clauses (A), (B) and (C) are hereinafter sometimes referred to as the "Placement
Agent Expenses;" and
(D) issue to the Placement Agent and/or its designees
(i) one (1) share of Common Stock (the "Agent Shares") for each $5 of Units
sold; and (ii) five (5) year warrants (the "Agent Warrants") to purchase on a
pro-rata basis based upon the aggregate gross proceeds of Units sold at each
Closing out of an aggregate of $500,000 of Units offered in the Offering, 75,000
shares of Common Stock at an initial exercise price of $0.75 per share. The
shares of Common Stock issuable upon exercise of the Agent Warrants shall have
the same registration rights as purchasers of Units in the Offering.
(ii) Interest. In the event that for any reason the Company
shall fail to pay to the Placement Agent all or any portion of the fees payable
hereunder when due, interest shall accrue and be payable on the unpaid cash
balance due hereunder from the date when first due through and including the
date when actually collected by the Placement Agent, at a rate equal to four
percent above the prime rate of Citibank, N.A., in New York, New York, computed
on a daily basis and adjusted as announced from time to time.
(d) Bring-Down Opinions and Certificates. If there is more than one
Closing, then at each such Closing there shall be delivered to the Placement
Agent updated opinions and certificates as described in Section 3(b)(v) and
Section 3(b)(vii) above, respectively.
4. Covenants of the Company.
------------------------
(a) Use of Proceeds. The net proceeds of the Offering will be used
by the Company substantially as set forth in Schedule 4(a) of the Subscription
Agreement.
(b) Expenses of Offering, Other Payments and Option.
-----------------------------------------------
(i) The Company shall be responsible for, and shall bear all
reasonable and approved expenses directly incurred in connection with, the
Offering including, but not limited to (i) legal fees of the Company's counsel
relating to the costs of preparing the Transaction Documents and all amendments,
supplements and exhibits thereto delivering all Securities, and (ii) the
Placement Agent Expenses.
(ii) The Placement Agent shall have no liability to the
Company for any reason should the Placement Agent choose not to proceed with the
Offering contemplated hereby.
(iii) If the Minimum Offering does not close by June 18, 2002,
this Agreement shall terminate other than its indemnification obligations
pursuant to Section 5 and its finders fee obligations pursuant to Section 4(i).
-15-
(c) Notification. The Company shall notify the Placement Agent
immediately, and 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 or the Termination Date as a result of which the Transaction Documents
would include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, and (ii) of the receipt of any notification with respect
to the modification, rescission, withdrawal or suspension of the qualification
or registration of the Units or of any exemption from such registration or
qualification, in any jurisdiction. The Company will use its 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 and the Placement Agent so requests, to obtain the lifting
thereof as promptly as possible.
(d) Form D and Blue Sky. The Company shall file a Form D with
respect to the Notes and Warrants as required under Regulation D under the 1933
Act and, upon request, provide a copy thereof to the Placement Agent promptly
after such filing. The Company shall, on or before the Closing, take such action
as the Company shall reasonably determine is necessary in order to obtain an
exemption for or to qualify the Units and the securities included therein for
sale to the Subscriber pursuant to this Agency Agreement under applicable
securities or "Blue Sky" laws of the states of the United States, and shall
provide evidence of any such action so taken to the Placement Agent on or prior
to the Closing. The Company shall make all filings and reports relating to the
offer and sale of the Securities required under applicable securities or "Blue
Sky" laws of the states of the United States following the Closing.
(e) Press Releases, Etc. The Company shall provide two (2) business
days prior written notice of any proposed press release or other communication,
or any press conference with respect to any material development concerning the
Company, its financial condition, results of operations, business, properties,
assets, or liabilities; provided, however, the Company may issue any press
release without such prior notice if in the reasonable opinion of counsel to the
Company issuance before such notice can be provided is required for compliance
with any governmental agency or exchange on which the Company's securities are
listed. Furthermore, the Company shall not at any time include information with
respect to the use of the Placement Agent's name in any press release,
advertisement or on any website maintained by the Company without the prior
written consent of the Placement Agent. Other than the last sentence of this
Section 4(e), the Company's obligations pursuant to this Section 4(e) shall
terminate on the Termination Date.
(f) Restrictions on Issuances of Securities. During the period
commencing on the date hereof and ending on the later of (i) the Final Closing
or (ii) the Termination Date, provided the Placement Agent shall not have
breached any material covenant, representation or warranty contained in this
Agency Agreement and the Placement Agent is actively conducting the Offering,
the Company will not, without the prior express written consent of the Placement
Agent, issue additional shares of Common Stock and/or other equity securities of
the Company, other than pursuant to the exercise of options, warrants or rights
outstanding on the date hereof, or issue or grant any warrants, options or other
securities of the Company or any debt and/or obligations convertible, redeemable
or exchangeable for any equity securities of the Company.
-16-
(g) Reports; Communications. For a period of three (3) years from
the Initial Closing date (a) within forty-five (45) days after the end of each
fiscal quarter, the Company shall (i) send to the Placement Agent (x) a letter
setting forth the results of operations for the fiscal quarter and management's
analysis thereof (which delivery obligation shall be satisfied by timely filing
with the SEC the applicable quarterly report on Form 10-QSB) and (y) a schedule
of all securities issuances by the Company, including the issuances of shares
pursuant to the cashless exercise provisions of any options or warrants, and
(ii) present an update on the affairs of the Company at the offices of the
Placement Agent for the Subscribers and employees of the Placement Agent,
ensuring that such update complies with Regulation FD under the 1933 Act and/or
the 1934 Act. In addition, within ninety (90) days after the end of each fiscal
year, the Company shall send to the Subscribers a stockholders letter in form
and substance reasonably satisfactory to the Placement Agent setting forth the
results of operations for the fiscal year and management's analysis thereof
(which delivery obligation shall be satisfied by timely filing with the SEC the
applicable annual report on Form 10-KSB).
(h) Transmittal Letters. Within five (5) days after each closing of
the Offering, the Placement Agent shall receive copies of all letters from the
Company to the Subscribers transmitting the securities sold in the Offering and
shall receive a letter from the Company confirming transmittal of the securities
to the Subsidiaries.
(i) Finder's Fee.
------------
(i) The Company hereby irrevocably agrees that notwithstanding
anything to the contrary provided herein or elsewhere, and in addition to any
other fee earned and/or received by the Placement Agent pursuant to this
Agreement or elsewhere, and regardless of whether the Company sells any
securities though the Placement Agent in the Offering, in the event that at any
time and/or from time to time for a period commencing on the date hereof and
terminating on the date three (3) years from the later to occur of (i) the date
of this Agreement; and (ii) the Termination Date (collectively, the "Fee Event
Period"), one or more persons that the Placement Agent (and/or its affiliates)
has directly and/or indirectly introduced to the Company (collectively, an
"Investor") purchase (and/or arranges a purchase), any (debt and/or equity)
securities of the Company and/or its affiliates either through a direct
investment in exchange for assets, through a merger, or an acquisition, exchange
offer or otherwise (a "Transaction"), then the Company shall (i) pay to the
Placement Agent (and/or its designees) for each Transaction during the Fee Event
Period, a cash fee equal to eight (8%) percent of the gross proceeds received in
each such Transaction, and (ii) issue to the Placement Agent, warrants to
purchase in the aggregate twelve (12%) percent of the identical securities
issued to investors in each such Transaction at the lowest price paid by
Investors in the Transaction, and with the most favorable registration rights as
any investors in any such Transaction received (the cash and warrants to be paid
by the Company to the Placement Agent pursuant to this Section 4(i) shall be
collectively referred to as the "Fee");
(ii) In the event that for any reason the Company shall fail
to pay to the Placement Agent all or any portion of the finder's fee payable
hereunder when due, interest shall accrue and be payable on the unpaid cash
balance due hereunder from the date when first due through and including the
date when actually collected by the Placement Agent, at a rate equal to
-17-
four (4%) percent above the prime rate of Citibank, N.A., in New York, New York,
computed on a daily basis and adjusted as announced from time to time.
(iii) The Company expressly agrees that the Placement Agent
shall be given ten (10) business days' prior written notice of the exact time
and place of closing of a Transaction and shall be supplied with all transaction
documents (including closing documents) used in the Transaction. Each notice
shall provide a detailed description of the Transaction, the investors
(including names and addresses) and the determination of the compensation to be
paid to the Placement Agent. The Company also expressly agrees that the
Placement Agent shall have the right to attend all closing(s) of a Transaction.
5. Indemnification.
---------------
(a) The Company agrees to indemnify and hold harmless the Placement
Agent and each selected dealer, if any, and their respective stockholders,
directors, officers, agents and controlling persons (an "Indemnified Party")
against any and all loss, liability, claim, damage and expense whatsoever (and
all actions in respect thereof), and to reimburse the Placement Agent for
reasonable legal fees and related expenses as incurred (including, but not
limited to the costs of investigating, preparing or defending any such action or
claim whether or not in connection with litigation in which the Placement Agent
is a party and the costs of giving testimony or furnishing documents in response
to a subpoena or otherwise), caused by or arising out of (i) any untrue
statement or alleged untrue statement of a material fact contained in the
Transaction Documents or the omission or alleged omission therefrom of a
material fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading (provided, however,
that the Company shall not be liable in any such case to the extent that any
such loss, liability, claim, damage or expense arises out of or is based upon
any untrue statement of a material fact or alleged untrue statement or a
material fact provided by the Placement Agent in writing to the Company
specifically for use in the Transaction Documents), (ii) any violation by the
Company of the federal securities laws or the securities laws of any states, or
otherwise arising out of the Placement Agent's engagement hereunder, except in
respect of any matters as to which the Placement Agent shall have been
adjudicated to have acted with gross negligence, or (iii) any breach by the
Company of any of its representations, warranties or covenants contained in this
Agency Agreement.
(b) Promptly after receipt by an Indemnified Party under this
Section of notice of the commencement of any action, the indemnified party will,
if a claim in respect thereof is to be made against the Company under this
Section, notify in writing the Company of the commencement thereof; but the
omission so to notify the Company will not relieve it from any liability which
it may have to the Indemnified Party otherwise than under this Section except to
the extent the defense of the claim is prejudiced. In case any such action is
brought against an Indemnified Party, and it notifies the Company of the
commencement thereof, the Company will be entitled to participate in, and, to
the extent that it may wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, subject to the provisions herein
stated, with counsel reasonably satisfactory to the Indemnified Party, and after
notice from the Company to the Indemnified Party of its election so to assume
the defense thereof, the Company will not be liable to the Indemnified Party
under this Section for any legal or other expenses subsequently incurred by the
Indemnified Party in connection with the defense thereof
-18-
other than reasonable costs of investigation (provided the Company has been
advised in writing that such investigation is being undertaken). The Indemnified
Party shall have the right to employ separate counsel in any such action and to
participate in the defense thereof, but the fees and expenses of such counsel
shall not be at the expense of the Company if the Company has assumed the
defense of the action with counsel reasonably satisfactory to the Indemnified
Party; provided that the fees and expenses of such counsel shall be at the
expense of the Company if (i) the employment of such counsel has been
specifically authorized in writing by the Company (which it shall have no
obligation to do) or (ii) the named parties to any such action (including any
impleaded parties) include both the Indemnified Party or Parties and the Company
and, in the reasonable judgment of counsel for the Indemnified Party, it is
advisable for the Indemnified Party or Parties to be represented by separate
counsel due to material conflict of interest (in which case the Company shall
not have the right to assume the defense of such action on behalf of an
Indemnified Party or Parties), it being understood, however, that the Company
shall not, in connection with any one such action or separate but substantially
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys for all the Indemnified
Parties. No settlement by an Indemnified Party of any action against an
Indemnified Party shall be made without the Company's consent which shall not be
unreasonably withheld. No settlement of any action against an Indemnified Party
by the Company shall be made unless such an Indemnified Party is fully and
completely released in connection therewith.
6. Contribution. To provide for just and equitable contribution, if (i) an
Indemnified Party makes a claim for indemnification pursuant to Section 5 but it
is found in a final judicial determination, not subject to further appeal, that
such indemnification may not be enforced in such case, even though this Agency
Agreement expressly provides for indemnification in such case, or (ii) any
indemnified or indemnifying party seeks contribution under the 1933 Act, the
1934 Act, or otherwise, then the Company (including for this purpose any
contribution made by or on behalf of any officer, director, employee or agent
for the Company, or any controlling person of the Company), on the one hand, and
the Placement Agent and any Selected Dealers (including for this purpose any
contribution by or on behalf of an indemnified party), on the other hand, shall
contribute to the losses, liabilities, claims, damages, and expenses whatsoever
to which any of them may be subject, in such proportions as are appropriate to
reflect the relative benefits received by the Company, on the one hand, and the
Placement Agent and the Selected Dealers, on the other hand; provided, however,
that if applicable law does not permit such allocation, then other relevant
equitable considerations such as the relative fault of the Company and the
Placement Agent and the Selected Dealers in connection with the facts which
resulted in such losses, liabilities, claims, damages, and expenses shall also
be considered. In no case shall the Placement Agent or a Selected Dealer be
responsible for a portion of the contribution obligation in excess of the
compensation received by it or the Selected Dealer Agreement, as the case may
be. No person guilty of a fraudulent misrepresentation shall be entitled to
contribution from any person who is not guilty of such fraudulent
misrepresentation. For purposes of this Section 6, each person, if any, who
controls the Placement Agent or a Selected Dealer within the meaning of Section
15 of the 1933 Act or Section 20(a) of the 1934 Act and each officer, director,
shareholder, employee and agent of the Placement Agent or a Selected Dealer,
shall have the same rights to contribution as the Placement Agent or the
Selected Dealer, and each person, if any who controls the Company within the
meaning of Section 15 of the 1933 Act or Section 20(a) of the 1934 Act and each
officer, director, employee and agent of the Company,
-19-
shall have the same rights to contribution as the Company, subject in each case
to the provisions of this Section 6. Anything in this Section 6 to the contrary
notwithstanding, no party shall be liable for contribution with respect to the
settlement of any claim or action effected without its written consent. This
Section 6 is intended to supersede any right to contribution under the 1933 Act,
the 1934 Act, or otherwise.
7. Miscellaneous.
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(a) Survival. Any termination of the Offering without consummation
thereof shall be without obligation on the part of any party except that the
Finder's Fee provisions set forth in Section 4(i) hereof, the indemnification
provided in Section 5 hereof and the contribution provided in Section 6 hereof
shall survive any termination and shall survive the Final Closing for a period
of three (3) years.
(b) Representations, Warranties and Covenants to Survive Delivery.
The respective representations, warranties, indemnities, agreements, covenants
and other statements as of the date hereof shall survive execution of this
Agency Agreement and delivery of the Units and the termination of this Agency
Agreement for a period of three (3) years after such respective event.
(c) No Other Beneficiaries. This Agency Agreement is intended for
the sole and exclusive benefit of the parties hereto and their respective
successors and controlling persons, and no other person, firm or corporation
shall have any third-party beneficiary or other rights hereunder.
(d) Governing Law; Resolution of Disputes. This Agreement shall be
governed by and construed in accordance with the internal laws of the State of
New York without regard to the conflicts of laws principles thereof. The parties
hereto hereby irrevocably agree that any suite or proceeding arising directly
and/or indirectly pursuant to or under this Agreement, shall be brought solely
in a federal or state court located in the City, County and State of New York.
By its execution hereof, the parties hereby covenant and irrevocably submit to
the in personam jurisdiction of the federal and state courts located inn the
City, County and State of New York and agree that any process in any such action
may be served upon any of them personally, or by certified mail or registered
mail upon them or their agent, return receipt requested, with the same full
force and effect as if personally served upon them in New York City. The parties
hereto waive any claim that any such jurisdiction is not a convenient forum for
any such suit or proceeding and any defense or lack of in personam jurisdiction
with respect thereto. In the event of any such action or proceeding, the party
prevailing therein shall be entitled to payment from the other party hereto of
its reasonable counsel fees and disbursements in an amount judicially
determined.
(e) Counterparts. This Agency Agreement may be signed in
counterparts with the same effect as if both parties had signed one and the same
instrument.
(f) Notices. Any communications specifically required hereunder to
be in writing, if sent to the Placement Agent, will be sent by overnight courier
providing a receipt of delivery or by certified or registered mail to it at
Gryphon Financial Securities Corp., 000 Xxxxx
-00-
Xxxxxx (Xxxxx 0000), Xxx Xxxx, Xxx Xxxx 00000, Attention: Xx. Xxxxxx Zubchevich,
with a copy to Gusrae, Xxxxxx & Bruno, PLLC, 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000, Attention: Xxxxxxxx X. Xxxxxxx, Esq., and if sent to the Company, will be
sent by overnight courier providing a receipt of delivery or by certified or
registered mail to it at 0000 Xxxxxxx Xxxx, Xxxxx 000, Xxxxxx, Xxxxx 00000,
Attention: Xxxxxx X. Xxxx, CEO, with a copy to Xxxxx Xxxxxxx, Esq., 1065 Xxxxx
Ferry Road, White Plains, New York.
(g) Entire Agreement. This Agency Agreement constitutes the entire
agreement of the parties with respect to the matters herein referred and
supersedes all prior agreements and understandings, written and oral, between
the parties with respect to the subject matter hereof. Neither this Agency
Agreement nor any term hereof may be changed, waived or terminated orally,
except by an instrument in writing signed by the party against which enforcement
of the change, waiver or termination is sought.
(h) Termination by Placement Agent. This Agency Agreement is subject
to termination by notice given by the Placement Agent to the Company, if (i)
after the execution and delivery of this Agency Agreement and prior to the
Initial Closing (A) trading generally shall have been suspended or materially
limited on or by, as the case may be, any of the New York Stock Exchange, the
American Stock Exchange, the National Association of Securities Dealers, Inc.,
the Chicago Board of Options Exchange, the Chicago Mercantile Exchange or the
Chicago Board of Trade, (B) trading of any securities of the Company shall have
been suspended on any exchange or in any over-the-counter market, (C) a general
moratorium on commercial banking activities in New York shall have been declared
by either Federal or New York State authorities or (D) there shall have occurred
any outbreak or escalation of hostilities or any change in financial markets or
any calamity or crises that, in the Placement Agent's judgement, is material and
adverse and (ii) in the case of any of the events specified in Section
7(h)(i)(A) through Section 7(h)(i)(D), such event, singly or together with any
other such event, makes it, in the Placement Agent's reasonable judgement,
impracticable to offer the Preferred Units on the terms and in the manner
contemplated herein.
(i) No Shorting by Placement Agent. The Placement Agent agrees that
from the date of this Agreement until the earlier to occur of either (i) the
termination of this Agreement or (ii) the Termination Date, it will not sell
short nor advise their clients to sell short any publicly traded security of the
Company.
(j) No General Solicitation. The Placement Agent represents and
warrants that neither the Placement Agent nor its affiliates or any person
expressly acting on their behalf, has engaged, or will engage, in any form of
general solicitation or general advertising (within the meaning of Regulation D
under the 0000 Xxx) in connection with the offer or sale of the Notes and
Warrants.
-21-
If you find the foregoing is in accordance with our understanding, kindly
sign and return to us a counterpart hereof, whereupon this instrument along with
all counterparts will become a binding agreement between us.
Very truly yours,
eCLICKMD, INC.
By:
---------------------------------
Name:
Title:
AGREED:
GRYPHON FINANCIAL SECURITIES CORP.
By:
---------------------------------------
Name:
Title:
LIST OF SCHEDULES
-----------------
Schedule 2(a) - Subsidiaries
Schedule 2(b) - Authorization; Enforcement; Validity
Schedule 2(c) - Capitalization, Etc.
Schedule 2(e) - Conflicts, Etc.
Schedule 2(k) - Conduct
Schedule 2(m) - Litigation, Etc.
Schedule 2(n) - Taxes
Schedule 2(p) - Title, Etc.
Schedule 2 (q) - Intellectual Property
Schedule 2(r) - Registration Rights
Schedule 2(t) - Right of First Refusal
Schedule 2(u) - Interim Financial Statements
Schedule 3(b)(xvii) - Schedule of Insider Lock-Ups
Schedule 4(a) - Use of Proceeds
