PLACEMENT AGENCY AGREEMENT
[DATE]
[NAME AND ADDRESS OF COMPANY]
Dear Sirs:
[NAME OF COMPANY], a corporation (the "Company"), hereby confirms its
agreement with CIG Securities, Inc. (the "Placement Agent") as follows:
1. Introductory. The Company proposes to offer for sale through the
Placement Agent, as exclusive agent for the Company, shares of common stock, par
value $. per share (the "Shares"), on a "best efforts" basis (the "Offering")
during the period commencing on the date of the Memorandum (as hereinafter
defined) and ending on [DATE], unless extended by mutual agreement of the
Company and the Placement Agent until [DATE] (the "Offering Period"). The
minimum subscription will be Shares or $ unless otherwise permitted by the
Placement Agent.
Subscriptions for the Shares will be accepted by the Company at a price
of $ per Share (the "Offering Price"); provided, however, that the Placement
Agent may offer, and the Company may sell, Shares only to persons or entities
who qualify as an accredited investor ("Accredited Investor") as such term is
defined in Rule 501 of Regulation D promulgated under the Securities Act of
1933, as amended (the "Act"). Investors will be required to subscribe for the
Shares by executing the subscription documents (the "Subscription Agreement")
set forth as an exhibit in the Company's Confidential Private Offering
Memorandum, dated ("Offering Materials"). The offering of the Shares will be
made by the Company through the Placement Agent pursuant to the Memorandum, in
form and substance mutually acceptable to the Placement Agent (and its counsel)
and the Company (and its counsel) and shall contain such legends and other
information as the Placement Agent and its counsel deem necessary and desirable
to set forth in the Memorandum.
"Memorandum" as used in this Agreement means the Company's Confidential
Private Offering Memorandum dated [DATE] relating to the Offering, and all
amendments, supplements, exhibits and appendices to such Memorandum, taken as a
whole. Unless otherwise defined, each term used in this Agreement will have the
same meaning as that set forth in the Memorandum.
2. Representations and Warranties. The Company hereby represents and
warrants to the Placement Agent that:
(a) The Memorandum has been prepared by the Company in
conformity with the requirements of Regulation D, the Act and the requirements
of all other rules and
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regulations (the "Regulations") of the Securities and Exchange Commission (the
"SEC") relating to the private offering (as defined in Regulation D ("Regulation
D") as promulgated under Section 4(2) of the Act). The Company has used its best
efforts to ensure that the offer and sale of the Shares by the Company has
satisfied, and on the Closing Date will have satisfied, in all material
respects, all of the requirements of Regulation D; the Shares are not
disqualified from the exemption under Rule 506 contained in Regulation D, except
that no representation or warrant is made hereunder by the Company as to any
disqualifications based upon Rule 262(b) and (c) of Regulation A as it may be
applied to the Placement Agent. The Memorandum (i) describes the material
aspects of an investment in the Company and (ii) does not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading. If any time prior to
the Termination Date (as hereinafter defined) or other termination of this
Agreement any event shall occur as a result of which it is necessary to amend or
supplement the Memorandum so that it does 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 the light of the circumstances then existing, not
misleading, the Company will promptly notify you and will supply you with
amendments or supplements correcting such statement or omission. Except as
otherwise provided, no representations or warranties of the Company will apply
to statements or omissions made in reliance upon and in conformity with written
information furnished to the Company by the Placement Agent expressly for use in
the Memorandum or any amendment or supplement thereto. The cover or inside cover
page of the Memorandum contains the legend required by Rule 502(d) of the
Regulations.
(b) The Company will afford each prospective purchaser of
Shares and his purchaser representative, if any, the opportunity to ask
questions of and receive answers from it concerning the terms and conditions of
the Offering and the opportunity to obtain additional information necessary to
verify the accuracy of the Memorandum to the extent it possesses such
information or can acquire it without unreasonable expense.
(c) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the State of , and
has all requisite power and authority to own or lease and operate its properties
and to conduct its businesses as presently and proposed-to be conducted as
described in the Memorandum. The Company is duly qualified to transact business
as a foreign corporation and is in good standing under the laws of each
jurisdiction wherein the location of its properties or the character of its
operations make such qualification necessary, except where the failure to be so
qualified would not have a material adverse effect on the Company. The Company
has all necessary material, authorizations, approvals, licenses, permits,
franchises and orders (the "Authorizations") of and from all governmental
officials and bodies to own or lease and operate its respective properties and
to conduct its respective businesses as presently and proposed to be conducted
as described in the Memorandum, except for
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those Authorizations the failure of which to obtain would not have a material
adverse effect on the Company, and the Company has the requisite power and
authority to enter into this Agreement, to carry out the provisions and
conditions hereof, and to issue and sell the Shares as provided herein and in
the Memorandum. The conduct of business by the Company as presently and proposed
to be conducted (as described in the Memorandum) is not subject to continuing
oversight or supervision by any governmental official or body of the United
States or any other jurisdiction wherein the Company conducts or proposes to
conduct such business, except as described in the Memorandum.
(d) This Agreement has been duly authorized, executed and
delivered on behalf of the Company and is the valid and binding obligation of
the Company, enforceable in accordance with its terms, subject only to the
effect, if any, of bankruptcy laws or similar laws relating to the insolvency of
debtors and to principles of equity and except as the Company's indemnification
and/or contribution obligations under this Agreement may be limited under
Federal or applicable state securities laws.
(e) The execution and delivery of, and the compliance with,
this Agreement by the Company and the consummation by the Company of the
transactions herein contemplated will not, with or without the giving of notice
or the lapse of time, or both: (i) result in a material conflict with or breach
of any of the material terms or provisions of, or constitute a default under, or
result in the modification or termination of, or require consent under, or
result in the creation or imposition of any lien, security interest, charge or
encumbrance upon any of the material properties or assets of the Company
pursuant to the terms of, any agreement or instrument to which the Company is a
party or by which the Company may be bound or to which any of the property or
assets of the Company is subject, or (ii) violate the Company's articles of
incorporation or by-laws, or (iii) have any material effect on any material
license, permit, judgment, decree, order, statute, rule or regulation applicable
to the Company or any of its properties or businesses.
(f) The financial statements of the Company are attached as an
Exhibit to the Memorandum present fairly the financial position of the Company
as of the respective dates specified and the results of its operations and
changes in financial position for the respective periods covered thereby. Such
financial statements have been prepared in accordance with generally accepted
accounting principles consistently applied through the periods involved.
(g) There has been no material adverse change since [DATE OF
LAST FINANCIALS] in the financial position or results of operations of the
Company or in its business, affairs, other than as set forth in the Memorandum
and the capitalization, properties, business and management of the Company
conform in all material respects to the descriptions thereof contained in the
Memorandum. The Company has no material liabilities of any kind, contingent or
otherwise, except as set forth in the Memorandum.
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(h) No material default exists in the due performance or
observance of any term, covenant or condition of the material contracts,
agreements or documents referred to in the Memorandum to which the Company is a
party or by which the Company is bound or to which any of its property is
subject (collectively, the "Company Agreements") other than as described in the
Memorandum; the Company Agreements are accurately and fairly described in the
Memorandum; the Company Agreements are in full force and effect in accordance
with their respective terms; and no other party to any thereof has instituted
or, to the best of the Company's knowledge, threatened any action or proceeding
wherein the Company would or might be alleged to be in default thereunder. The
Company is not a party to any contract or instrument materially affecting its
financial condition, business, management, properties or prospects, other than
those referred to in the Memorandum.
(i) The authorized capital stock of the Company consists of
_________ shares of Common Stock, of which __________ shares were outstanding on
the date of the Memorandum, all of which have been duly authorized and are
validly issued and fully paid and non-assessable[ EXPAND TO INCLUDE ANY OTHER
CLASSES OF STOCK]. None of the outstanding shares of Common Stock or options to
purchase shares of Common Stock have been issued in violation of the preemptive
rights of any shareholder of the Company. Except as disclosed within the
Memorandum, there are no outstanding options, warrants or other rights calling
for issuances by the Company of, and no commitments, plans or arrangements of
the Company to issue any shares of capital stock of the Company or any
securities convertible into or exchangeable for such capital stock. Except as
set forth in the Memorandum, no holder of any of the Company's securities has
any rights, "demand," "piggy-back" or otherwise, to have such securities
registered under the Act.
(j) The Shares have been duly authorized, and when duly
delivered and paid for pursuant to the terms of the Memorandum and this
Agreement will be validly issued, fully paid and non-assessable. No holder of
the Shares will be subject to personal liability by reason of being such a
holder, and none of the Shares are subject to the preemptive rights of any
stockholder of the Company. The Shares conform to all statements in relation
thereto contained in the Memorandum.
(k) No authorization, approval, consent, order, registration,
license or permit of any court or governmental agency or body, other than under
the Act, the Regulations and the rules and regulations of the state securities
laws of the states in which offers or sales will be made, is required for the
valid authorization, issuance, sale and delivery of the Shares in accordance
herewith or the consummation by the Company of the transactions contemplated by
this Agreement.
(l) The Company is not in violation of its articles of
incorporation or by-laws or any applicable statute, rule, regulation or
ordinance, except as may be set forth in the Memorandum, nor is the Company in
default under any order, writ, judgment,
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injunction or decree of any court, government agency or arbitration tribunal
applicable to the Company.
(m) Subsequent to the respective dates as of which information
is given in the Memorandum, and prior the Termination Date, except as may
otherwise be indicated or contemplated therein, the Company will not have
entered into any transaction otherwise than in the ordinary course of business,
or issued any securities, or entered into any material transaction, unless the
Memorandum is amended or supplemented to reflect same, such changes to have been
approved by the Placement Agent and its counsel, which approval shall not be
unreasonably withheld or delayed.
(n) There is no litigation or governmental proceeding pending,
or to the best of the Company's knowledge, threatened against the Company or
involving its properties or business which, individually or in the aggregate,
could be reasonably expected to materially and adversely affect the value of the
assets or the business of the Company, except as described in the Memorandum. To
the best knowledge of the Company, there is no basis for any such action, suit,
proceeding, arbitration, claim or inquiry, except as set forth in the
Memorandum. There are no outstanding orders, judgments or decrees of any court,
governmental agency or other tribunal naming the Company and enjoining the
Company from taking, or requiring the Company to take, any action, or to which
the Company, its properties or businesses are bound or subject.
(o) Except as set forth in the Memorandum, the Company owns,
or possesses adequate rights to use, all patents, trademarks, service marks and
other rights necessary for the conduct of its business as described in the
Memorandum (collectively, the "Intangibles"). Except as set forth in the
Memorandum, the Company has not and is not infringing on the rights of others
with respect to the Intangibles and neither the Company, nor any officer or
director of the Company has received any notice of conflict with the asserted
rights of others with respect to the Intangibles in any respect which would
materially adversely affect the business of the Company and knows no basis
therefor.
(p) The Company has either good and marketable title to, or
valid and enforceable leasehold interests in, all items of real property and
personal property which are stated in the Memorandum to be owned or leased by
it, in each case free and clear of all liens, encumbrances, claims, security
interests, subleases and defects, other than those referred to in the Memorandum
and those which do not have a material adverse effect upon the operations of the
Company. The Company has the right to operate all of its facilities in its
present locations and the operation of such facilities does not violate the
material provisions of any lease with respect thereto which the Company is a
party. The Company is not in violation of any applicable law, ordinance,
regulation, order or requirement relating to its owned or leased properties
except for violations which, individually or in the aggregate, do not have a
material adverse effect, and has not
5
received any notice of an alleged violation. The Company has adequately insured
its properties against loss or damage by fire or other casualty and maintains,
in adequate amounts, such other insurance as is usually maintained by companies
engaged in the same or similar businesses located in its geographical area.
(q) The Company has filed with the appropriate federal, state
and local governmental agencies, and all foreign countries and political
subdivisions thereof, all tax returns, including franchise tax returns, which
are required to be filed or has duly obtained extensions of time for the filing
thereof and has paid all taxes shown on such return and all assessments receive
by it to the extent that the same have become due; and the provisions for income
taxes payable, if any, shown on the financial statements included as part of the
Memorandum are sufficient for all accrued and unpaid foreign and domestic taxes,
whether or not disputed, and for all periods to and including the dates of such
financial statements. Except as disclosed in writing to the Placement Agent, the
Company has not executed or filed with any taxing authority, foreign or
domestic, any agreement extending the period for assessment or collection of any
income taxes and is not a party to any pending action or proceeding by any
foreign or domestic governmental agency for assessment or collection of taxes;
and no claims for assessment or collection of taxes have been asserted by the
Company.
(r) The Company has not, directly or indirectly, at any time
(i) made any contributions to any candidate for political office in violation of
law or failed to disclose fully any such contribution, or (ii) made any payment
to any state, federal or foreign governmental office or official, or other
person charged with similar public or quasi-public duties, other than payments
or contributions required or allowed by applicable law. The Company's internal
accounting controls and procedures are sufficient to cause the Company to comply
in all material respects with the Foreign Corrupt Practices Act of 1977, as
amended.
(s) The Company represents that no director, executive
officer, or key employee of the Company has been convicted or any felony,
experienced a personal bankruptcy, or been an officer, director, or key employee
of any company that during their tenure with such company experienced any
bankruptcy, or had any trustee, receiver, or conservator appointed with respect
to its business or assets.
3. Purchase, Sale and Delivery of the Shares. On the basis of the
representations and warranties contained herein, and subject to the terms and
conditions set forth:
(a) The Company hereby appoints the Placement Agent as its
exclusive agent in connection with the offer and sale of up to Shares pursuant
to the terms of the Memorandum. The Placement Agent has no obligation to
purchase any or all of the Shares.
6
(b) The Shares will be offered at the Offering Price and upon
the terms and conditions set forth in the Memorandum. The Placement Agent and
the Company agree to use their best efforts to assure that any sale of Shares is
made pursuant to the exemption from the registration requirements of the Act
provided by Section 4(2) thereof, including, but not limited to, Rule 506 of
Regulation D of the Act, and the requirements of the state securities laws and
the respective rules and regulations thereunder in those jurisdictions in which
the Shares are offered and sold.
(c) As compensation for acting as the exclusive agent of the
Company, the Placement Agent will be entitled to receive a commission equal to
eight percent (8%) of the aggregate offering price of all Shares sold in the
Offering (the "Placement Agent's Fee").
(d) Each prospective subscriber desiring to purchase Shares
will be required to complete and execute an original of the Subscription
Agreement, in the form attached as Exhibit B to the Memorandum, which
Subscription Agreement will be forwarded or delivered to [INSERT NAME OF BANK],
as Escrow Agent, together with (i) the subscriber's check in the full amount of
the investor's subscription made payable to [INSERT NAME OF ESCROW ACCOUNT] for
the number of Shares desired to be purchased; and (ii) an Investor's
Questionnaire in the form included as an exhibit to the Memorandum. The
"Termination Date" will be the expiration date of the Offering fixed in the
Memorandum as the same may be extended as provided therein. Subscriptions for
Shares must be received and accepted by the Company on or before such
Termination Date.
(e) All cash proceeds and subscription documents received from
the offering of the Shares will be promptly forwarded by the Placement Agent to
the Escrow Agent, with copies delivered to the Company. As promptly as
practicable after receipt of subscription documents, the Company will decide
whether or not to accept the Subscription Agreements of the subscribers named
therein. If the Company elects not to accept a Subscription Agreement, it will
notify the Placement Agent and the Escrow Agent and the subscription proceeds of
such subscriber will be returned to him without interest or deduction. If the
Company elects to accept a particular Subscription Agreement, it will evidence
its acceptance thereof by signing same and forwarding copies to the Escrow Agent
and the Placement Agent. Immediately thereafter, the Placement Agent and the
Company shall jointly execute and deliver instructions to the Escrow Agent for
payment of the Placement Agent's Commission to the Placement Agent and the
payment of the remaining amount of such subscription to the Company, all as more
fully set forth in the Escrow Agreement which is an exhibit to the Memorandum.
(f) The Shares will be delivered against payment therefor from
the funds received by the Company.
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4. Further Covenants. The Company hereby covenants and agrees that:
(a) The Company will not at any time, whether before or after
Termination Date, prepare or use any amendment or supplement to the Memorandum
of which the Placement Agent will not previously have been advised and furnished
with a copy, or to which the Placement Agent or its counsel will have objected
in writing or orally (confirmed in writing within 24 hours), or which is not in
compliance with the Act and the Regulations. As soon as the Company is advised
thereof, the Company will advise the Placement Agent and its counsel, and
confirm the advice in writing, of any order preventing or suspending the use of
the Memorandum, or the suspension of or the qualification or registration of the
Shares for offering or of any exemption for such qualification or registration
of the Shares for offering in any jurisdiction, or of the institution or
threatened institution of any proceedings for any of such purposes, and the
Company will use its best efforts to prevent the issuance of any such order and,
if issued, to obtain as soon as possible the lifting thereof.
(b) The Company has caused to be delivered to the Placement
Agent copies of the Memorandum, has consented, and hereby consents, to the use
of such copies for the purposes contemplated hereby permitted by the Act and
applicable state securities laws, and has authorized, and hereby authorizes, the
Placement Agent to use the Memorandum in connection with the sale of the Shares
until the Termination Date, in each case subject to the limitations contained
therein and herein, and no person is or will be authorized to give any
information or make any representations other than those contained in the
Memorandum or to use any offering materials other than those contained in the
Memorandum in connection with the sale of the Shares. In the event of the
happening, at any time within such period, of any event to which the Company has
knowledge and which materially adversely affects, or may affect, the Company,
and which should in the opinion of the Placement Agent's counsel be set forth in
an amendment or supplement to the Memorandum in order to make the statement
therein not misleading, in light of the circumstances existing at the time the
Memorandum is required to be delivered to a purchaser of the Shares, or in case
it shall, in the opinion of counsel to the Placement Agent, be necessary to
amend or supplement the Memorandum to comply with any Federal or state
securities laws or with the Regulations or the rules and regulations of any
state in which the Memorandum is made available to a prospective subscriber, the
Company will forthwith prepare and furnish to the Placement Agent copies of such
amended Memorandum or of such supplement to be attached to the Memorandum in
such quantities as the Placement Agent may reasonably request, in order that the
Memorandum, as so amended or supplemented, will not contain any untrue statement
of a material fact or omit to state any material fact necessary in order to make
the statements in the Memorandum, in light of the circumstances under which they
were made, not misleading. The preparation, distribution and furnishing of any
such amendment to the Memorandum or any such supplement to be attached to the
Memorandum will be without expense to the Placement Agent.
8
(c) The Company will comply with the Act, the Regulations
(including, without limitation, Rule 506) so as to permit the continuance of the
sales of the Shares, and will file with the SEC, and will promptly thereafter
forward to the Placement Agent any and all reports on Form D as are required.
(d) During the Offering Period, the Company will make
available for review by prospective purchasers of the Shares, upon their
request, all material contracts or other documents described or listed in the
Memorandum.
(e) The Company will use its best efforts to qualify the
Shares for sale under the securities laws of the States of [INSERT STATE NAMES],
and the Company will make such applications and furnish information as may be
reasonably required for such purposes, provided that the Company will not be
required to qualify as a foreign corporation in any jurisdiction. The Company
will, from time to time, prepare and file such statements and reports as are or
may be required to continue such qualifications, in effect for so long a period
as the Placement Agent may reasonably request.
(f) The Company will deliver to the Placement Agent from time
to time and without charge, until the Termination Date, as many copies of the
Memorandum as the Placement Agent may reasonably request.
(g) The Company will apply the net proceeds from the sale of
the Shares substantially for the purposes set forth under "Use of Proceeds" in
the Memorandum.
(h) For a period of three years from the Termination Date, the
Company will deliver to the Placement Agent (i) within 45 days from the end of
the applicable fiscal quarter, a copy of each unaudited quarterly financial
statement which shall have been prepared in accordance with generally accepted
accounting principles consistently applied, and, if applicable, any other
documents or reports which may be issued by the Company to the public,
including, without limitation, reports on Forms 8-K, 10-K and 10-Q and exhibits
thereto, (ii) reports or communications (financial or other) of the Company
mailed to its security holders, and (iii) every press release and every material
news item and article in respect of the Company or its affairs which was
released by the Company. Further, for a period of three years from the
Termination Date, the Company will (i) within 90 days of the end of the fiscal
year furnish to the Placement Agent and distribute the Company's stockholders
annual financial statements prepared by an independent auditor in conformity
with generally accepted accounting principles, consistently applied, which
clearly set forth the financial position of the Company and (ii) furnish to the
Placement Agent a duplicate list of stockholders of the Company at such time as
reasonably requested by the Placement Agent together with monthly DTC transfer
sheets, if applicable.
(i) The Company will pay all expenses incurred in connection
with the preparation and printing of all necessary offering documents and
instruments related to the
9
Offering and the issuance of the Shares, and the underlying shares of Common
Stock and will also pay its own expenses for accounting fees, legal fees,
transfer agent fees and other costs involved with the Offering. The Company will
furnish at its expense such quantities of the offering documents and instruments
as the Placement Agent may reasonably request.
(j) The Company will provide to the Placement Agent, for
delivery to all offerees and subscribers and their representatives, any
additional information, documents and instruments which the Placement Agent or
its counsel reasonably deems necessary to comply with the Act and the
Regulations and the securities laws and the rules and regulations thereunder of
those states in which the Shares are to be offered and sold.
(k) The Company will comply with all registration, filing and
reporting requirements of the Act or the Securities Exchange Act of 1934 (the
"Exchange Act") which may from time to time be applicable to the Company.
(l) For a period of three years from the Termination Date, the
Placement Agent shall have the right of first refusal (the "Right of First
Refusal") to act as underwriter or agent for any and all public or private
offerings of securities (excluding all lease financing, bank financing or
institutionally placed property debt), of the Company, or any successor to or
subsidiary of the Company or other entity in which the Company either has a
controlling equity interest or is generally authorized to enter into contracts
or otherwise act on behalf of, (collectively referred to herein as the
"Company") by the Company (the "Subsequent Company Offering"). In addition, the
Company will use its best efforts to cause all officers, directors and holders
of five percent or more of the Company's equity securities (the "Principal
Stockholders") to agree in writing that the Placement Agent shall have such
Right of First Refusal with respect to any secondary offering of the Company's
securities by the Principal Stockholders made during the three year period
following the Termination Date. Accordingly, if during such period the Company
intends to make a Subsequent Company Offering, the Company shall notify the
Placement Agent in writing of such intention and of the proposed terms of the
offering. The Company shall thereafter promptly furnish the Placement Agent with
such information concerning the business, condition and prospects of the Company
as the Placement Agent may reasonably request. If within 15 business days of the
receipt of such notice of intention and statement of terms, the Placement Agent
does not accept in writing such offer to act as underwriter or agent with
respect to such offering upon the terms proposed, the Company and each of the
Principal Stockholders shall be free to negotiate terms with other underwriters
with respect to such offering and to effect such offering on such proposed terms
within six months after the end of such 15 business days. Before the Company and
each of the Principal Stockholders and/or shall accept any modified proposal
from such underwriter, the Placement Agent's preferential right shall be
reinstated and the same procedure with respect to such modified proposal as
provided above shall be adopted. The failure of the Placement Agent to exercise
its Right of First Refusal in any particular instance shall not
10
affect in any way such right with respect to any other Subsequent Company
Offering or Secondary Offering. [OPTIONAL - SEE LOI] Notwithstanding the
foregoing, (i) should an investment banking firm which is generally recognized
to be of a higher tier than the Placement Agent agree to the Subsequent Company
Offering resulting in aggregate gross proceeds of $15,000,000 or more, and (ii)
the Placement Agent is permitted by such investment banking firm to participate
in the Subsequent Company Offering to the extent of at least 10%, then the Right
of First Refusal granted herein shall not apply to the Subsequent Company
Offering or any related offering.
(m) Within 90 days after the Termination Date, the Company
shall elect a minimum of two "outside" persons (excluding affiliates of the
Company and family members of the Company's existing directors, officers and
principal shareholders) to the Company's Board of Directors, which such
individuals shall be reasonably acceptable to the Placement Agent. Within 90
days of the Termination Date, the Board of Directors of the Company shall create
an audit committee consisting of a majority of outside directors, which such
audit committee will generally supervise the financial affairs of the Company.
(n) For a period of five years from the Termination Date,
unless waived by the Placement Agent, the Placement Agent shall have a right to
designate an individual to attend all meetings of the Company's Board of
Directors or committees thereof. The Company shall provide the Placement Agent
with notice of all Board or committee meetings contemporaneously with
notification to the members of the Board of Directors, as well as copies of any
draft written consents of the Board of Directors or other documents or materials
which may be provided to the Board of Directors. All information received by
such representative at such meetings shall be kept confidential, shall not be
disclosed by the representative to any third party, and shall be dealt with in
full compliance with federal and state securities laws.
(o) [IF APPLICABLE] For a period of five years from the
Termination Date, the Company shall use its best efforts to maintain its current
listing on the OTC Bulletin Board, including taking such actions as are
necessary to comply with any newly enacted listing standards.
(p) For a period of one year from the Termination Date, the
Company will not, without the Placement Agent's prior written consent, redeem
any securities outstanding at the Termination Date nor declare or pay any
dividends or make any other cash distribution in respect of its securities in
excess of the amount of the Company's then current retained earnings as
reflected on its most recent balance sheet. sell any securities, grant warrants
or options to acquire any securities except pursuant to its existing Stock
Option Plans or conversions of convertible securities or the exercise of
outstanding options or Warrants. The Company shall advise the Placement Agent in
writing at least five business days in advance of its intent to either redeem
any outstanding securities or declare and pay dividends.
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5. Conditions of Placement Agent's Obligations. The obligations of the
Placement Agent hereunder are subject (as of the date hereof and on the
Termination Date) to the accuracy of and compliance with the representations and
warranties of the Company herein, to the performance by the Company of its
obligations hereunder, and to the following additional conditions:
(a) On or prior to the Termination Date, no order suspending
the use of the Memorandum or enjoining the offering or sale of the Shares will
have been issued and no proceedings for that purpose or a similar purpose will
have been initiated or will be pending or, to the knowledge of the Placement
Agent or the Company, will be contemplated; and any request on the part of the
SEC or any securities authority of a state wherein the Shares are being offered
for additional information will have been complied with to the satisfaction of
counsel for the Placement Agent.
(b) On the date of the Memorandum and the Termination Date (i)
the Memorandum and any amendments or supplements thereto will contain all
material statements which are required to be stated therein in accordance with
the Act and the Regulations and will conform in all material respects to the
requirements of the Act and the Regulations, and neither the Memorandum nor any
amendment or supplement thereto will contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, in light of the
circumstances under which they were made; (ii) since the respective dates as of
which information is given in the Memorandum, there will not have been any
material adverse change in the financial condition, results of operations or
affairs of the Company from that set forth or contemplated in the Memorandum,
except changes which the Memorandum indicates might occur after the date
thereof; (iii) since the date of the Memorandum, there shall have been no
material transaction, contract or agreement entered into by the Company, other
than in the ordinary course of business, which would be required to be set forth
in the Memorandum, other than as set forth therein; and (iv) no action, suit or
proceeding at law or in equity will be pending or, to the best of the knowledge
of the Company, threatened against the Company which would be required to be set
forth in the Memorandum, other than as set forth therein, and no proceedings
will be pending or, to the best of the knowledge of the Company, threatened
against the Company before or by any Federal, state or other tribunal or agency
wherein an unfavorable decision, ruling or finding would materially adversely
affect the business, properties, financial condition or results of operations of
the Company, other than as set forth in the Memorandum.
(c) The Placement Agent will have received from the Company's
counsel a signed opinion reasonably satisfactory to the Placement Agent and the
Placement Agent's counsel.
6. Indemnification.
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(a) The Company will (i) indemnify and hold harmless the
Placement Agent and each person, if any, who controls the Placement Agent within
the meaning of the Act against any losses, claims, damages or liabilities, joint
or several (which will, for all purposes of this Agreement, include, but not be
limited to, all costs of defense and investigation and all reasonable attorneys'
fees, including appeals), to which either the Placement Agent or such
controlling persons may become subject, under the Act or otherwise, in
connection with the offer and sale of the Shares; and (ii) reimburse the
Placement Agent and such controlling persons for any legal or other expenses
reasonably incurred in connection with investigating or defending against any
such loss, claim, action, proceeding or investigation; provided, however, that
the Company will not be liable in any such case to the extent that any such
loss, claim, damage, liability or expense arises out of or is based upon (A) an
untrue statement or alleged untrue statement or an omission or alleged omission
made in the Memorandum in reliance upon and in conformity with written
information furnished to the Company by the Placement Agent or any such
controlling persons specifically for use in the preparation thereof, or (B) any
violations by the Placement Agent of the Act or state securities laws which does
not result from a violation thereof by the Company or any of its affiliates. In
addition to the foregoing agreement to indemnify and reimburse, the Company will
indemnify and hold harmless the Placement Agent against any costs, expenses,
losses, claims, damages or liabilities (or actions or proceedings in respect
thereof), joint or several (which shall for all purposes of this Agreement,
include, but not be limited to, all costs of defense and investigation and all
reasonable attorneys' fees including appeals) to which the Placement Agent may
become subject insofar as such costs, expenses, losses, claims, damages or
liabilities arise out of or are based upon the claim of any person or entity
that he or it is entitled to broker's or finder's fees from the Placement Agent
in connection with the offering. The foregoing indemnity agreements will be in
addition to any liability which the Company may otherwise have.
(b) The Placement Agent will indemnify and hold harmless the
Company and each person, if any, who controls the Company within the meaning of
the Act against any losses, claims, damages or liabilities to which the Company
or any such person may become subject under the Act or otherwise insofar as such
losses, claims, damages, or liabilities (or actions, proceedings or
investigations in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in the
Memorandum, or arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statement therein not misleading (provided, however, that
the indemnity of the Placement Agent will apply in each case to the extent, but
only to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in the Memorandum in reliance upon and in
conformity with written information furnished to the Company by the Placement
Agent, specifically for use in the preparation thereof; and will reimburse the
Company or any such person for any legal or other expenses reasonably incurred
in connection with investigating or defending against any such loss,
13
claim, damage, liability or action, proceeding or investigation to which such
indemnity obligation applies. In addition to the foregoing agreement to
indemnify and reimburse, the Placement Agent agrees to (i) indemnify and hold
harmless the Company and each person, if any, who controls the Company against
any losses, claims, damages or liabilities resulting solely from a violation by
the Placement Agent of the Act or state securities laws; and (ii) reimburse the
Company and such controlling persons for any legal or other expense reasonably
incurred in connection with investigating and defending against any such loss,
claim, action, proceeding or investigation to which such indemnity obligation
applies. The foregoing indemnity agreements will be in addition to any liability
which the Placement Agent may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section 6 of notice of the commencement of any action, proceeding or
investigation, such indemnified party, if a claim in respect thereof is to be
made against the indemnifying party under this Section 6, will notify the
indemnifying party of the commencement thereof; but the omission so to notify
the indemnifying party will not relieve it from any liability which it may have
to any indemnified party under this Section 6 unless the indemnifying party has
been substantially prejudiced by such omission. In case any such action is
brought against any indemnified party and it notifies the indemnifying party of
the commencement thereof, the indemnifying party will be entitled to participate
in, and, to the extent that it may wish, jointly with any other indemnifying
party, to assume the defense thereof, subject to the provisions herein stated,
with counsel reasonably satisfactory to such indemnified party, and after notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party will not be liable under this
Section 6 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation. The indemnified party will 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 will not be at the expense of the
indemnifying party if the indemnifying party has assumed the defense of the
action with counsel reasonably satisfactory to the indemnified party. No
settlement of any action against an indemnified party will be made without the
consent of the indemnifying party and the indemnified party which shall not be
unreasonably withheld or delayed in light of all factors of importance to such
party.
7. Contribution. To provide for just and equitable contribution, if
(i) an indemnified party makes a claim for indemnification pursuant to Section 6
hereof (subject to the limitations thereof) and it is finally determined, by a
judgment, order or decree not subject to further appeal, that such claims for
indemnification may not be enforced, even though this Agreement expressly
provides for indemnification in such case; or (ii) any indemnified or
indemnifying party seeks contribution under the Act, the Exchange Act, or
otherwise, then the Company (including, for this purpose, any contribution made
by or on behalf of any controlling person of the Company), as one entity, will
contribute to the losses, liabilities, claims, damages and expenses whatsoever
to which any of them may
14
be subject, so that the Placement Agent is responsible for 10% thereof and the
Company is responsible for the remaining portion; provided, however, that if
applicable law does not permit such allocation, then, if applicable law permits,
other relevant equitable considerations such as the relative fault of the
Company and the Placement Agent in connection with the facts which resulted in
such losses, liabilities, claims, damages and expenses shall also be considered.
The relative fault, in the case of an untrue statement, alleged untrue
statement, omission or alleged omission, will be determined by, among other
things, whether such statement, alleged statement, omission or alleged omission
relates to information supplied by the Company or by the Placement Agent, and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement, alleged statement, omission or alleged
omission. The Company and the Placement Agent agree that it would be unjust and
inequitable if the respective obligations of the Company and the Placement Agent
for contribution were determined by pro rata or per capita allocation of the
aggregate losses, liabilities, claims, damages and expenses or by any other
method or allocation that does not reflect the equitable considerations referred
to in this Section 7. No person guilty of a fraudulent misrepresentation (within
the meaning of Section II(f) of the Act) will be entitled to contribution from
any person who is not guilty of such fraudulent misrepresentation. For purposes
of this Section 7, each person, if any, who controls the Placement Agent within
the meaning of the Act will have the same rights to contribution as the
Placement Agent, and each person, if any, who controls the Company within the
meaning of the Act will have the same rights to contribution as the Company,
subject in each case to the provisions of this Section 7. Anything in this
Section 7 to the contrary notwithstanding, no party will be liable for
contribution with respect to the settlement of any claim or action effected
without its written consent. This Section 7 is intended to supersede, to the
extent permitted by law, any right to contribution under the Act, the Exchange
Act or otherwise available.
8. Termination.
(a) This Agreement, except for Sections 6, 7, 10, 11, 12 and
13 hereof, may be terminated by the Placement Agent at any time prior to the
Termination Date, in which case the Placement Agent's obligations and rights
hereunder will forthwith cease (except for Section 6, 7, 10, 11, 12 and 13
hereof), if, in the Placement Agent's sole and absolute judgment, it is
impracticable to sell the Shares by reason of (i) the Company having sustained a
material loss, whether or not insured, by reason of fire, earthquake, flood,
accident or other calamity, or from any labor dispute or court or government
action, order or decree, which in any such case may have a material adverse
effect upon the Company, (ii) trading in securities on the New York Stock
Exchange or the American Stock Exchange having been suspended or limited or
minimum prices having been established on either of such Exchanges, (iii)
material governmental restrictions having been imposed on trading in securities
generally (not in force and effect on the date hereof), (iv) a banking
moratorium having been declared by Federal or New York state authorities, (v) a
major catastrophe, national calamity, act of God or other event which in the
Placement Agent's
15
judgment materially disrupts the financial markets having occurred, (vi) an
outbreak of major international hostilities or other national or international
calamity having occurred, (vii) the passage by the Congress of the United States
or by any state legislative body, of any act or measure, or the adoption or
proposed adoption of any orders, rules, legislation or regulations by any
governmental body or any authoritative accounting institute or board, or any
governmental executive, which is believed by the Placement Agent to be likely to
have a material adverse impact on the business, prospects, financial condition
or financial statements of the Company or the market for the Shares, or (viii)
any material adverse change having occurred since the respective dates as of
which information is given in the Memorandum in the condition of the Company,
financial or otherwise, or in the earnings, management, affairs or business or
prospects of the Company, whether or not arising in the ordinary course of
business.
(b) If any of the conditions provided for in Section 5 have
not been fulfilled as of the date such condition was required to be fulfilled,
and if such condition has not been waived by the Placement Agent, this Agreement
may be canceled by notice by the Placement Agent to the Company, except for
Sections 6, 7, 10, 11, 12 and 13 hereof, in which case the Placement Agent's
obligations and rights hereunder will forthwith cease (except for Sections 6, 7,
10, 11, 12 and 13 hereof).
9. Representations, Warranties and Agreements to Survive Delivery. The
respective indemnities, agreements, representations, warranties and other
statements of the Company set forth in or made pursuant to this Agreement will
remain in full force and effect, regardless of any investigation made by or on
behalf of, and regardless of any access to information by, the Company or the
Placement Agent, or any of their officers or Directors or any controlling person
thereof, and will survive the sale of the Shares.
10. Notices. All communications hereunder will be in writing and,
except as otherwise expressly provided herein or after notice by one party to
the other of a change of address, if sent to the Placement Agent, will be
mailed, delivered, or telegraphed and confirmed to [INSERT NEW ADDRESS], with a
copy to Atlas, Xxxxxxxx, Trop & Borkson, P.A., 000 Xxxx Xxx Xxxx Xxxxxxxxx,
Xxxxx 0000, Xxxx Xxxxxxxxxx, Xxxxxxx 00000, Attention:
Xxxxxxx X. Xxxxxx, Esq.
11. Parties in Interest. The Agreement herein set forth is made solely
for the benefit of the Placement Agent, the Company, any person controlling
either of them, and their respective executors, administrators, successors and
assigns; and no other person will acquire or have any rights under or by virtue
of this Agreement. The term "successors and assigns" will not include any
purchaser, as such purchaser, of the Shares.
12. Applicable Law, etc. This Agreement will be governed by, construed
and enforced in accordance with the laws of the State of Illinois applicable to
contracts made and to be performed wholly performed within such State. Any
action or proceeding in
16
connection with this Agreement may be brought in a court of record of the State
of Illinois in and for Lake County or in the United States District Court for
the [WHAT DISTRICT?] District of Illinois, the Company hereby consenting to the
jurisdiction thereof. Service of process may be made upon the Company by mailing
a copy thereof to it, by certified or registered mail, at its address to be used
for the giving of notices under this Agreement.
13. Modifications. No provision of this Agreement may be changed or
terminated except by writing a signed by the party or parties to be charged
therewith.
14. Nature of Liability. Unless expressly so provided, no party to this
Agreement will be liable for the performance of any other party's obligations
hereunder.
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return this Agreement, whereupon it will become a
binding agreement between the Company and the Placement Agent in accordance with
its terms.
Very truly yours,
CIG Securities, Inc.
By:________________________________
Xxxxx X. Xxxxx, President
ACCEPTED AND AGREED AS OF
THE________DAY OF___________, 1999
[NAME OF COMPANY]
By:___________________________________
[NAME], President
17
