1
EXHIBIT 10.78
$3,000,000
Ride, Inc.
5% Cumulative Convertible Preferred Stock and
Common Stock Purchase Warrants
PLACEMENT AGENCY AGREEMENT
December 18, 1997
Xxxxxx Capital Group, Ltd.
As Placement Agent
00 Xxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxx, Xxxxxxxxxx 00000
Ladies and Gentlemen:
This letter confirms the agreement (this "Agreement") of Ride, Inc., a
Washington corporation (the "Company"), to retain Xxxxxx Capital Group, Ltd., a
California corporation (the "Placement Agent"), as the Company's exclusive agent
through December 31, 1997 (the "Engagement Period") to identify for the Company
prospective purchasers (collectively, the "Purchasers" and each individually, a
"Purchaser") in a placement (the "Placement") of three million dollars
($3,000,000) aggregate stated value of 5% Cumulative Convertible Preferred Stock
(the "Preferred Stock") convertible into shares of the Company's common stock,
no par value per share (the "Common Stock"), and warrants (the "Warrants")
exercisable into shares of Common Stock. The Preferred Stock and Warrants are
collectively referred to herein as the "Securities."
Terms of the Placement are set forth in the subscription documents,
including the certificate of designation relating to the Preferred Stock,
registration rights agreement, subscription agreement and other documentation
issued in connection with the Placement.
The Placement Agent will act on a best efforts basis and will have no
obligation to purchase any of the Securities offered by the Company in the
Placement. During the Engagement Period, the Placement Agent shall have the
exclusive right to make all offers and to arrange for all sales of securities by
the Company, including without limitation the exclusive right to identify buyers
for the Securities. The Engagement Period shall be automatically extended for a
reasonable period of time if, during the Engagement Period, sales relating to
commitments from Purchasers are not consummated during the Engagement Period due
to delays in the preparation of final documentation.
-1-
2
The Placement is intended to be exempt from the registration
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
pursuant to Regulation D ("Regulation D") of the rules and regulations of the
Securities and Exchange Commission (the "SEC") promulgated under the Securities
Act.
In order to effectuate the Closing (as defined in Section 1 hereof), the
Company, the Placement Agent and a bank reasonably acceptable to both parties
(the "Escrow Agent") shall enter into an escrow agreement (the "Escrow
Agreement").
The engagement described herein shall be in accordance with applicable
laws and pursuant to the following procedures, terms and conditions:
1. Representations and Warranties of the Company. The representations
and warranties of the Company set forth in the subscription agreements to be
entered into between the Company and each Purchaser (the "Securities Purchase
Agreements") are hereby incorporated by reference as of the date of consummation
of the sale of the Securities (the "Closing") and all such representations and
warranties are hereby deemed made by the Company directly to the Placement Agent
as though set forth in full herein.
2. Covenants of the Company.
(a) The covenants of the Company set forth in the Securities
Purchase Agreements are hereby incorporated by reference as of the Closing and
all such covenants are hereby deemed made by the Company directly to the
Placement Agent as though set forth in full herein.
(b) Neither the Company nor any affiliate of the Company (as
defined in Rule 501(b) of Regulation D) will sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
the Securities Act) which will be integrated with the sale of the Securities or
the shares of Common Stock issuable upon conversion of the Preferred Stock or
exercise of the Warrants (the "Underlying Common Shares") in a manner which
would require the registration under the Securities Act of the Securities or the
Underlying Common Shares.
(c) Any and all filings and documents required to be filed in
connection with or as a result of the Placement pursuant to federal and state
securities laws are the responsibility of the Company and will be filed by the
Company.
(d) Any press release to be issued by the Company announcing or
referring to the Placement shall be subject to the prior review of the Placement
Agent, and each such press release shall, at the request of the Placement Agent,
identify Xxxxxx Capital Group, Ltd. as the placement agent.
-2-
3
3. Covenants of the Placement Agent. On the basis of, and in reliance
on, the representations, warranties and covenants of the Purchasers set forth in
the Securities Purchase Agreements, the Placement Agent hereby covenants with
the Company as follows:
(a) The Placement Agent will take no action, nor fail to take any
action, if such action or failure to take such action would have the effect that
the offer or sale of the Securities would not be exempt from the registration
requirements of the Securities Act pursuant to Regulation D.
(b) No action is being taken or is contemplated by the Placement
Agent that would permit a public offering of the Securities in any jurisdiction
where, or in any other circumstance in which, action for those purposes is
required (other than in jurisdictions where such action has been duly taken).
The Placement Agent will comply with applicable laws and regulations in any
jurisdiction in which it may offer, sell or deliver the Securities and will not,
directly or indirectly, offer, sell or deliver the Securities or distribute or
publish any prospectus, circular, advertisement or other offering material in
relation to the Securities in or from any country or jurisdiction except under
circumstances that will result in compliance with any applicable laws and
regulations, and all offers, sales and deliveries of the Securities by it will
be made on the foregoing terms.
4. Compensation of the Placement Agent; Expenses; Warrants.
(a) The Company agrees to pay the Placement Agent, directly from
the escrowed funds at the Closing, a fee of five and one-quarter percent
(5-1/4%) of the gross proceeds from the sale of the Securities (the "Agency
Fee"). In addition, the Company agrees to pay, directly from the escrowed funds
at the Closing, an expense allowance of nine thousand dollars ($9,000.00) to the
Placement Agent as reimbursement for the Placement Agent's actual out-of-pocket
expenses (the "Expense Reimbursement"). The Company will pay all of its expenses
incurred in connection with the Placement and will also pay the reasonable
accountable attorney fees and costs incurred by one investor.
(b) In addition to the Agency Fee and the Expense Reimbursement,
the Placement Agent will receive at the Closing warrants to purchase 83,720
shares of Common Stock, said warrants to be exercisable for a three-year period
at an exercise price of $2.6875 per share.
5. Closing. The Closing may be held at such place or places as shall be
specified by the Placement Agent and reasonably agreed to by the Company.
Certificates evidencing the Securities in the names of the respective Purchasers
and in the respective denominations aggregating all of the Securities sold at
the Closing shall be delivered by the Company to the Escrow Agent.
-3-
4
6. Conditions to Closing. The Company and the Placement Agent agree that
the issuance and sale of the Securities and all obligations of the Placement
Agent provided herein shall be subject to the receipt by the Placement Agent of
(i) a legal opinion of the Company's securities counsel, indicating that the
Placement Agent is entitled to rely thereon, in the form required to be
delivered to the Purchasers pursuant to the Securities Purchase Agreements and
(ii) an escrow agreement duly executed by the Company in a form reasonably
satisfactory to the Placement Agent.
7. Indemnification.
(a) The Company will indemnify and hold harmless the Placement
Agent and each of its partners, directors, officers, associates, affiliates ,
subsidiaries, divisions, employees, consultants, attorneys and agents, and each
person, if any, controlling either the Placement Agent or any of its affiliates
within the meaning of either Section 15 of the Securities Act or Section 20 of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), from and
against any and all losses, claims, damages, liabilities, costs or expenses (and
any legal or other expenses incurred by the Placement Agent in investigating or
defending the same or in giving testimony or furnishing documents in response to
a request of any government agency or to a subpoena) in any way relating to or
in any way arising out of (i) the activities of the Placement Agent contemplated
by this Agreement or in connection with the Placement, (ii) the inaccuracy of
any representation or warranty, or the breach of any covenant, contained herein,
or (iii) any offering documents or offering materials, and will reimburse, as
incurred, the Placement Agent and each such controlling or other person for any
legal or other expenses incurred by the Placement Agent or such controlling or
other person in connection with investigating, defending or appearing as a
third-party witness in connection with any such loss, claim, damage, liability
or action. Such indemnity shall not, however, cover any such loss, claim,
damage, liability, cost or a breach by the Placement Agent of its obligations in
Section 3 hereof (a "Non-Indemnity Event") or (ii) the willful misconduct of any
person seeking indemnification hereunder.
(b) The Placement Agent will indemnify and hold harmless the
Company and each person, if any, controlling the Company within the meaning of
either Section 15 of the Securities Act or Section 20 of the Exchange Act, to
the same extent set forth in subsection (a) above, but only to the extent that
any loss, claim, damage, liability, cost or expense arises out of or is based
upon a Non-Indemnity Event.
(c) If any action, proceeding or investigation is commenced by a
third party as to which the indemnified party hereunder proposes to demand
indemnification under this Agreement, it will notify the indemnifying party with
reasonable promptness. The indemnified party shall have the right to retain
counsel of its own choice (which choice shall be reasonably satisfactory to the
indemnifying party) to represent it and such counsel shall, to the extent
consistent with its professional responsibilities, cooperate with the
indemnifying party and any counsel designated by the indemnifying party. The
indemnifying party will not be l0iable under this Agreement for any
-4-
5
settlement of any claim against the indemnifying party made without the
indemnifying party's written consent, which consent shall not be unreasonably
withheld. Notwithstanding anything to the contrary contained in the foregoing
subsection (b) or the following subsection (d), the Placement Agent shall not be
obligated to pay, and will not pay, any amount in respect of its obligation to
indemnify or contribute greater than the Agency Fee (as defined in Section 4
hereof).
(d) In order to provide for just and equitable contribution, if a
claim for indemnification pursuant to this Section 7 is made but it is found in
a final judgment by a court of competent jurisdiction (not subject to further
appeal) that such indemnification may not be enforced in such case, even though
the express provisions hereof provided for indemnification in such case, then
the Company, on the one hand, and the Placement Agent, on the other hand, shall
contribute to the losses, claims, damages, liabilities or costs to which the
indemnified persons may be subject in accordance with the relative benefits
received from the Placement of the Securities by the Company, on the one hand,
and the Placement Agent, on the other hand, and also the relative fault of the
Company, on the one hand, and the Placement Agent, on the other hand, in
connection with the statements, acts or omissions which resulted in such losses,
claims, damages, liabilities or costs, and the relevant equitable considerations
shall also be considered. No person found liable for a fraudulent
misrepresentation shall be entitled to contribution from any person who is not
also found liable for such fraudulent misrepresentation.
8. Non-Circumvention; Right of First Refusal.
(a) Non-Circumvention. The Company hereby agrees that it will not
enter into any agreement, transaction or arrangement with any of the
institutions (including their agents, principals and affiliates and the accounts
and funds which they manage or advise) which the Placement Agent has identified
to the Company as prospective purchasers of the Securities (collectively, the
"Xxxxxx Contacts"), regardless of whether a transaction is consummated with such
prospective purchasers, unless such agreement, transaction or arrangement is
effected through or with the written consent of the Placement Agent. Within five
business days after the expiration of the Engagement Period, the Placement Agent
will provide the Company with a list of the Xxxxxx Contacts, which list and
names the Company agrees to hold strictly confidential; the list will contain no
more than five names unless the Company and RCG agree in writing to a larger
number.
(b) Right of First Refusal. For a period of one year from the
Closing, if the Company desires to sell or offer to sell any equity securities
of the Company or securities convertible or exercisable into or exchangeable for
equity securities of the Company (other than in an underwritten public offering
or in connection with employee stock option plans, a corporate acquisition or
merger, joint venture or other corporate partnering arrangement or a takeover
defense) (a "Subsequent Transaction"), the Company will offer the Placement
Agent in writing the right to act as the Company's exclusive agent to identify
prospective purchasers for such securities. The Company shall set forth all
terms of the Subsequent Transaction in the written offer to the
-5-
6
Placement Agent and the Placement Agent will have five business days from the
date of the offer to accept or reject it. If accepted, the Placement Agent will
then have 15 business days from the execution of an engagement letter between
the Placement Agent and the Company relating to the Subsequent Transaction to
consummate the closing of said transaction. If the Subsequent Transaction does
not close by the end of that 15-business day period, the Company will then be
permitted to engage others to assist it in offering such securities on identical
terms. If the Company chooses to offer or sell securities in the Subsequent
Transaction on terms which differ in any way from those set forth in the written
offer to the Placement Agent, then the Company must offer the Placement Agent in
writing the right to act as the Company's exclusive agent in the Subsequent
Transaction on the modified terms. The right of first refusal set forth in this
Section 8 shall be of no force and effect unless there is a closing.
9. Survival. The respective indemnities of the Company and the Placement
Agent and the representations, warranties and agreements of the Company set
forth in or made pursuant to this Agreement will remain in full force and
effect, regardless of any termination or cancellation of this Agreement or any
investigation made by or on behalf of the Placement Agent, the Company or any
person referred to in Section 7 hereof, and shall survive any termination of
this Agreement and/or issuance of the Securities, and any successor or assign of
the Placement Agent and/or its designees, the Company or any such person or any
legal representative of such person shall be entitled to the benefit of the
respective indemnities, agreements, warranties and representations.
10. Termination. Reserved.
11. General Provisions.
(a) Parties. This Agreement shall inure solely to the benefit of,
and shall be binding upon, the Placement Agent, the Company, the controlling and
other persons referred to in Section 7 hereof, and their respective successors,
legal representatives, heirs, designees and assigns, and no other person shall
have or be construed to have any legal or equitable right, remedy or claim under
or in respect of or by virtue of this Agreement or any provision herein
contained.
(b) Amendment. No amendment or modification hereto, or waiver of
the terms hereof, shall be valid unless in a writing executed by each of the
parties hereto or by the party or parties to be bound.
(c) Notices. All notices, requests and other communications under
this Agreement shall be in writing and shall be deemed to have been delivered 48
hours after having been mailed in a general or branch post office and enclosed
in a registered or certified postpaid envelope; 24 hours after having been sent
by overnight courier; when delivered to a telegraph company or when scanned
graphically or otherwise by telegraphic communications equipment of the sending
party and
-6-
7
accompanied by a substantially contemporaneous telephone call; and, in each
case, addressed to the respective parties at the addresses stated below or to
such other changed addresses as the parties may have fixed by notice; provided,
however, that any notice of change of address shall be effective only upon
receipt.
To the Placement Agent: Xxxxxx Capital Group, Ltd.
00 Xxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx
Telephone: 000-000-0000
Facsimile: 000-000-0000
with a copy to: Weinstock, Manion, Xxxxxxx, et al.
0000 Xxxxxxx Xxxx Xxxx, Xxxxx 000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Telephone: 000-000-0000
Facsimile: 000-000-0000
To the Company: Ride, Inc.
0000 000xx Xxxxxx Xxxxxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attention: G. Xxxxx Xxxxxxx
Telephone: 000-000-0000
Facsimile: 000-000-0000
with a copy to: Summit Law Group
0000 Xxxxxxxx Xxxxxx Xxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx Xxxxxxxx, Esq.
Telephone: 000-000-0000
Facsimile: 000-000-0000
(d) Severability. If any provision of this Agreement, other than
Section 4, Section 7 and Section 8, is found to be unenforceable, invalid or
illegal, and cannot be modified to the satisfaction of the Placement Agent, such
provision shall be deemed deleted from this Agreement and the remainder of this
Agreement shall not be affected or impaired thereby.
(e) Attorneys' Fees. If any action, including, without limitation,
arbitration, should arise among the parties hereto to enforce or interpret the
provisions of this Agreement, the
-7-
8
prevailing party in such action shall be reimbursed for all reasonable expenses
incurred in connection with such action, including reasonable attorneys' fees
and costs.
(f) Integration. This Agreement expresses the entire agreement and
understanding of the parties hereto with respect to the matters set forth herein
and supersedes all prior written and oral agreements and understandings among
the parties hereto with respect to the matters set forth herein.
(g) Governing Law. This Agreement shall be construed and enforced
in accordance with the laws of the State of California without regard to its
principles of conflicts of laws.
(h) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall constitute an original, but all of which shall
together constitute one and the same agreement. Facsimile signatures are
considered to be originals and shall have the same effect.
(i) Further Assurances. The parties agree to execute any and all
such further agreements, instruments or documents, and to take any and all such
further action, as may be necessary or desirable to carry into effect the
purpose and intent of this Agreement.
(j) Headings. The headings in this Agreement are for convenience
of reference only and are in no way intended to describe, interpret, define,
modify, add to, or limit the scope, extent or intent of, this Agreement or any
provision hereof.
[ signature page follows ]
If the foregoing correctly sets forth the understandings among the
Placement Agent and the Company, please so indicate in the space provided below
for that purpose, whereupon this letter shall constitute a binding agreement
among us.
-8-
9
Very truly yours,
RIDE, INC.
By:
-----------------------------------------
Name: G. Xxxxx Xxxxxxx
Title: Senior Vice President and CFO
ACCEPTED AND AGREED TO AS OF
THE DATE FIRST WRITTEN ABOVE:
XXXXXX CAPITAL GROUP, LTD.
By:
------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: President
-9-
