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EXHIBIT 10.28
KARTS INTERNATIONAL INCORPORATED
November 8, 1996
Argent Securities, Inc.
0000 Xxxxxxxxx Xxxx, X.X.
Suite 450
Atlanta, Georgia 30326
Gentlemen:
Karts International Incorporated, a corporation organized and existing
under the laws of the state of Nevada (the "COMPANY"), hereby confirms its
agreement with you (the "PLACEMENT AGENT") as follows:
1. Description of Transaction. The Company will offer for sale (the
"OFFERING") to a limited number of persons meeting certain criteria for
"accredited investor" status (as more fully described in the Confidential
Private Placement Memorandum dated October 28, 1996, and any exhibits annexed
thereto (collectively, the "MEMORANDUM")), an aggregate of twenty-five (25)
units ("UNITS"), each Unit at a price of $25,000. Each Unit consists of one
share of the Company's convertible Preferred Stock ("Preferred Stock") and
10,000 redeemable common stock purchase warrants (the "WARRANTS"). The Company
anticipates filing a registration statement with the Securities and Exchange
Commission ("COMMISSION") pursuant to which it will conduct a public offering
of its stock (the "PUBLIC OFFERING"). The minimum investment is one Unit or
Twenty-Five Thousand Dollars ($25,000) subject to exception in the discretion
of the Placement Agent and the Company on a case-by-case basis. The Units are
more fully described in the Memorandum. Capitalized words not defined herein
shall have the meaning set forth in the Memorandum.
2. Appointment of the Placement Agent. The Company hereby appoints the
Placement Agent as its exclusive agent to offer and sell the Units on a "best
efforts -- all or none" basis, as set forth in Section 3(d) below. The
Placement Agent, on the basis of the representations, warranties, covenants and
agreements of the Company, and subject to the conditions contained herein,
accepts such appointment and agrees to use its best efforts to sell the Units.
It is understood that the Placement Agent has no commitment to sell the Units
other than to use its best efforts.
3. Purchase. Sale and Delivery of the Units. On the basis of the
representations and warranties contained herein, and subject to the terms and
conditions set forth herein, the parties agree that:
(a) Regulation D Offering. Neither the offer nor the sale of the
Units has been or will be registered with the Securities and Exchange
Commission. The Units will be offered and sold in reliance upon the
exemption from registration provided by Regulation D ("Reg
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D") adopted under the Securities Act of 1933, as amended (the "Act"), and
will only be sold to "accredited investors" as such term is defined under
Reg D; the Units will be offered for sale only in states in which the
Units have been qualified or registered for sale or are exempt from such
qualification or registration; and the Company will provide to the
Placement Agent for delivery to all offerees and purchasers and their
representatives, if any, any information, documents and instruments which
the Placement Agent and the Company deem necessary to comply with the
rules, regulations and judicial and administrative interpretations
respecting compliance with applicable state and federal statutes and
regulations.
(b) Subscription for the Units. Subscription for the Units shall
occur by execution and delivery by the subscriber (the "Subscriber") of a
Subscription Agreement Questionnaire and Investment Representation (the
"Subscription Agreement") in the form annexed to the Memorandum together
with such other documents and instruments as are set forth in the
Memorandum.
(c) Segregation of Funds. Each Subscriber for the Units shall
tender a check payable to "Karts International Incorporated, Escrow
Account" or wire transfer funds in respect of the amount of the Units
subscribed for, which funds shall be held in an interest bearing special
bank account (the "Escrow Account") in Fidelity National Bank or such
other commercial bank as the Placement Agent shall determine (the "Bank")
until the conclusion of the Offering as set forth in the Memorandum. All
fees charged by the Bank in connection with the Bank's performance of the
functions specified in this Section 3(c), if any, shall be paid by the
Company out of the proceeds of the Offering.
(d) Closing: Termination of Offering. The "Closing" shall occur
at such time as the Offering is completed, but not later than November 29,
1996 (unless otherwise extended for an additional 30 day period by the
Company and the Placement Agent ("Termination Date")). The Company shall
deliver to the Placement Agent on the Closing Date on behalf of the
Subscribers, the Units pursuant to Paragraph 1 of this Agreement against
payment therefor, after deducting the amounts set forth in Paragraph 4. If
on or before the Termination Date, the Offering is not subscribed for, the
Offering shall be terminated and all amounts contained in the Escrow
Account will be returned to the Subscribers with interest and without
deduction. In the event of such termination of the Offering of the Units,
all terms of this Agreement shall be automatically terminated and neither
party shall have any further obligation to the other party under this
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Agreement other than the Company's obligation to pay expenses as set forth
herein.
4. Compensation of Placement Agent. As compensation for its services
rendered as Placement Agent under this Agreement, and subject to the occurrence
of the sale of all of the Units as provided herein, the Placement Agent shall
receive the following:
(a) A sales commission equal to eight percent (8%) of the aggregate
gross proceeds of the Offering payable by deducting the sales commission
from the gross proceeds on the Closing Date. "Gross Proceeds" is defined
as the total price paid by Subscribers for the Units.
(b) A one-time investment banking fee equal to four percent (4%) of
the gross proceeds of the Offering.
(c) On the Closing Date, the Placement Agent will deduct from the
payment for the Units three (3%) percent of the gross proceeds of the
Units (less such monies as have been previously paid by the Company to the
Placement Agent), as payment for the Placement Agent's non-accountable
expense allowance relating to the transactions contemplated hereby.
5. Representations and Warranties of the Company. The Company represents
and warrants to, and agrees with, the Placement Agent that:
(a) Memorandum. The Company has prepared a Memorandum and its related
exhibits, which may be supplemented from time to time, which contains
information, accurate as of the date specified therein, of the kind
specified by applicable statutes and regulations, including without
limitation:
(i) Terms of the Offering;
(ii) A description of the Units;
(iii) A description of the business conducted by the Company;
(iv) The financial condition of the Company;
(v) Past activities of the Company;
(vi) Commissions and compensation to be paid to the Placement
Agent in connection with this Offering;
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(vii) Disclosure in each instance of material contracts,
agreements or other business arrangements, which affect or are related to
the business conducted and to be conducted by the Company;
(viii) Information regarding the Company, its management,
material obligations, liabilities, any pending or threatened lawsuits or
proceedings, and recent material adverse changes in its financial
condition; and
(ix) Any appropriate legends and such other information or
material as the Placement Agent may deem necessary or desirable to be
included therein.
The Memorandum, including all exhibits thereto, as of its date and at all
times subsequent thereto up to and including the Termination Date does not and
will not 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, in light of the circumstances in which they were made, not misleading.
(b) Additional Information. The Company has provided, and shall
provide to the Placement Agent, such information, documents and
instruments as may be required under Sections 4(2) and 4(6) of the Act and
Reg D for an offer made to accredited investors.
(c) Organization; Good Standing. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
state of Nevada, with full power and authority, corporate and other, and
with all licenses, permits, certifications, registrations, approvals,
consents and franchises to own or lease and operate its properties and to
conduct its business as described in the Memorandum.
(d) Governmental Authority. Except for the filing of the Form D under
the Act and other than as may be required under applicable state
securities or Blue Sky laws, no authorization, approval, consent, order,
registration, license or permit of any court or governmental agency or
body, is required for the valid authorization, issuance sale and delivery
of the Units to Subscribers to the Placement Agent and the consummation by
the Company of the transactions contemplated by this Agreement.
(e) Corporate Authorization. The Company has full power and
authority, corporate and other, to (i) execute, deliver and perform this
Agreement, (ii) offer and sell the Units, and (iii) consummate the
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transactions contemplated hereby and thereby. The execution, delivery and
performance of this Agreement, the offer and sale of the Units, the
consummation by the Company of the transactions herein and therein
contemplated and the compliance by the Company with the terms of this
Agreement, and the Units, have been duly authorized by all necessary
corporate action, and each of this Agreement and, the Units has been duly
executed and delivered by the Company. Each of this Agreement and the
offer and sale of the Units is the valid and binding obligation of the
Company, enforceable in accordance with their respective terms, subject,
as to enforcement of remedies, to applicable bankruptcy, insolvency,
reorganization, moratorium and other laws affecting the rights of
creditors generally and the discretion of courts in granting equitable
remedies and except that enforceability of the indemnification provisions
and the contribution provisions set forth herein may be limited by the
federal securities laws of the United States or state securities laws or
public policy underlying such laws. The execution, delivery and
performance of this Agreement, and the offer and sale of the Units by the
Company, and the consummation by the Company of the transactions herein
and therein contemplated in the manner described by the Memorandum and the
compliance by the Company with the terms of this Agreement, and the Units,
do not, and will not, with or without the giving of notice or the lapse of
time, or both, (a) result in any violation of the Articles of
Incorporation or Bylaws of the Company, (b) result in a breach of or
conflict with any of the terms or provisions of, or constitute a default
under, or result in the modification or termination of, or result in the
creation or imposition of any lien, security interest, charge or
encumbrance upon any of the properties or assets of the Company pursuant
to, any indenture, mortgage, note, contract, commitment or other agreement
or instrument to which the Company is a party or by which the Company or
any of its properties or assets are or may be bound or affected; (c)
violate any existing applicable law, rule, regulation, judgment, order or
decree of any governmental agency or court, domestic or foreign, having
jurisdiction over the Company or any of its properties or its business; or
(d) have any material adverse effect on any permit, certification,
registration, approval, consent, license or franchise necessary for the
Company to own or lease and operate any of its properties and to conduct
its business or the ability of the Company to make use thereof.
(f) Capitalization. The Company had, at the date or dates indicated
in the Memorandum and in its financial statements attached as an exhibit
to the Memorandum, a duly authorized and outstanding capitalization as set
forth therein. The outstanding shares of the Company's common stock, par
value $0.001 per share ("COMMON
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STOCK"), and preferred stock when issued shall have been duly authorized
and validly issued. All such outstanding shares of Common Stock and
Preferred Stock, when and if issued, are fully paid and nonassessable.
None of such outstanding shares of Common Stock and Preferred Stock, when
and if issued, have been issued in violation of the preemptive rights of
any security holder of the Company. The offers and sales of such
outstanding shares of Common Stock and Preferred Stock, when and if
issued, were at all relevant times either registered under the Act and the
applicable state securities or Blue Sky laws, or exempt from such
registration requirements. The authorized shares of outstanding Common
Stock and Preferred Stock conform to the description thereof contained in
the Memorandum. Except as described in the Memorandum, no holder of any of
the Company's securities has any rights, "demand," "piggyback" or
otherwise, to have such securities registered. Except as set forth in the
Memorandum, on the Termination Date there will be no outstanding options
or warrants for the purchase of, or other outstanding rights to purchase,
Common Stock, Preferred Stock or securities convertible into Common Stock
or Preferred Stock.
(g) Authorization of the Units, the Preferred Stock, and the
Warrants. The issuance and sale of the Units, the Preferred Stock, and the
Warrants have been duly authorized, and when the Units, the Preferred
Stock, and the Warrants have been issued and duly delivered against
payment therefor as contemplated by this Agreement, the Units, the
Preferred Stock, and the Warrants will be validly issued, fully paid and
nonassessable. The Units, the Preferred Stock, and the Warrants will not
be subject to preemptive rights of any security holder of the Company.
Except as set forth in the Memorandum, on the Termination Date, there will
be no outstanding warrants or options for the purchase of, or other
outstanding rights to purchase Common Stock or Preferred Stock or
securities convertible into Common Stock or Preferred Stock. The Units,
the Preferred Stock, and the Warrants conform to the description thereof
contained in the Memorandum, and such description conforms to the terms
set forth in the Memorandum and Articles of Incorporation of the Company.
(h) Noncontravention. The Company is not in violation of, or in
default under, (i) any term or provision of its Articles of Incorporation,
as amended; (ii) any material term or provision or any financial covenants
of any indenture, mortgage, contract, commitment or other agreement or
instrument to which it is a party or by which it or any of its properties
or business is or may be bound or affected; or (iii) any existing material
applicable law, rule, regulation, judgment, order or decree of any
governmental agency or court, domestic or
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foreign, having jurisdiction over the Company or any of its properties or
businesses. The Company owns, possesses or has obtained all material
governmental and other licenses, permits, certifications, registrations,
approvals or consents and other authorizations necessary to own or lease,
as the case may be, and to operate its properties and to conduct its
business or operations as currently conducted and all such governmental
and other licenses, permits, certifications, registrations, approvals,
consents and other authorizations are outstanding and in good standing,
and there are no proceedings pending or, to the best of the Company's
knowledge, threatened, nor is there any basis therefor, seeking to cancel,
terminate or limit such licenses, permits, certifications, registrations,
approvals or consents or authorizations.
(i) Litigation. Except as set forth in the Memorandum, there are no
claims, actions, suits, proceedings, arbitrations, investigations or
inquiries before any governmental agency, court or tribunal, domestic or
foreign, or before any private arbitration tribunal, pending, or, to the
best of the Company's knowledge, threatened, against the Company or
involving the properties or business of the Company, which, if determined
adversely to the Company, would, individually or in the aggregate, result
in any material adverse change in the financial position, shareholders'
equity, results of operations, properties, business, management or affairs
of the Company, or which question the validity of the capital stock of the
Company, or this Agreement, or of any action taken or to be taken by the
Company pursuant to, or in connection with, this Agreement; nor, to the
best of the Company's knowledge, is there any basis for any such claim,
action, suit, proceeding, arbitration, investigation or inquiry. There are
no outstanding orders, judgments or decrees of any court, governmental
agency or other tribunal specifically naming the Company and enjoining the
Company from taking, or requiring the Company to take, any action, or to
which the Company or its properties or business is bound or subject.
(j) Financial Statements. The financial statements and schedules and
notes thereto included in the Memorandum are complete, correct and present
fairly the financial position of the Company as of the dates thereof, and
the results of operations and changes in financial position of the Company
for the periods indicated therein, all in conformity with generally
accepted accounting principles applied on a consistent basis throughout
the periods involved except as otherwise stated in the Memorandum.
(k) Liabilities. Except as and to the extent reflected or reserved
against in the financial statements of the Company included in the
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Memorandum, the Company as of July 31, 1996, had no material liabilities,
debts, obligations or claims asserted against it, whether accrued,
absolute, contingent or otherwise, and whether due or to become due,
including, but not limited to, liabilities on account of taxes, other
governmental charges or lawsuits brought subsequent to such date but
before the date hereof. Subsequent to July 31, 1996, the Company has not
incurred liabilities or debts or obligations of any nature whatsoever
other than those incurred in the ordinary course of its business, loans
from shareholders as described in the Company's financial statements and
those pertaining to the Offering.
(l) Taxes. The Company has filed with the appropriate federal, state
and local governmental agencies, and all foreign countries and political
subdivisions thereof, all tax returns which are required to be filed
(whether relating to income, sales, franchise, withholding, real or
personal property or other types of taxes) or has duly obtained extensions
of time for the filing thereof, and has paid in full all taxes which have
become due pursuant to such returns or claimed to be due by any taxing
authority or otherwise due and owing; and the provisions for taxes
payable, if any, shown on the consolidated financial statements contained
in 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 consolidated financial statements. Each of the
tax returns heretofore filed by the Company correctly and accurately
reflects the amount of its tax liability thereunder. The Company has
withheld, collected and paid all other levies, assessments, license fees
and taxes to the extent required and, with respect to payments, to the
extent that the same have become due and payable. 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 against the
Company.
(m) Conduct of Business. Since the respective dates as of which
information is given in the Memorandum, the Company has not (i) incurred
any obligation or liability (absolute or contingent) except obligations
and liabilities incurred in the ordinary course of the operation of
business of the Company as carried on at and prior to such date and those
pertaining to the Offering; (ii) canceled, without payment in full, any
notes, loans or other obligations receivable or other debts or claims held
by it other than in the ordinary course of
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business; (iii) sold, assigned, transferred, abandoned, mortgaged, pledged
or subjected to lien any of its properties, tangible or intangible, or
rights under any contract, permit, license, franchise or other agreement
other than sales or other dispositions of goods or services in the
ordinary course of business at customary terms and prices; (iv) increased
compensation payable to any of its officers, directors or other employees
(including in the term "compensation," salaries, fringe benefits,
pensions, profit participations and payments or benefits of any kind
whatsoever) other than in the ordinary course of business; (v) entered
into any line of business other than that conducted by it on such date or
entered into any transaction not in the ordinary course of its business;
(vi) conducted any line of business in any manner except by transactions
customary in the operation of its business as conducted on such date; or
(vii) declared, made or paid or set aside for payment any cash or non-cash
distribution on any shares of its capital stock.
(n) Properties. The Company has good and marketable title in fee
simple to all real and personal property (tangible and intangible) owned
by it, free and clear of all security interests, charges, mortgages,
liens, encumbrances and defects, except such as are described in the
Memorandum or such as do not materially affect the value or
transferability of such property and do not interfere with the use of such
property made, or proposed to be made, by the Company. The leases,
licenses or other contracts or instruments under which the Company leases,
holds or is entitled to use any property, real or personal, are valid,
subsisting and enforceable only with such exceptions as are not material
and do not interfere with the use of such property made, or proposed to be
made, by the Company, and all rentals, royalties or other payments
accruing thereunder which became due prior to the date of this Agreement
have been duly paid, and neither the Company nor, to the best of the
Company's knowledge, any other party is in default thereunder and, to the
best of the Company's knowledge, no event has occurred which, with the
passage of time or the giving of notice, or both, would constitute a
default thereunder. The Company has not received notice of any violation
of any applicable law, ordinance, regulation, order or requirement
relating to its owned or leased properties. 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.
(o) Contracts. Except as set forth in the Memorandum, each contract
or other instrument (however characterized or described) to which the
Company is a party or by which its properties or businesses is
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or may be bound or affected and to which reference is made in the
Memorandum has been duly and validly executed, is in full force and effect
in all material respects and is enforceable against the parties thereto in
accordance with its terms, and none of such contracts or instruments has
been assigned by the Company and neither the Company nor, to the best of
the Company's knowledge, any other party is in default thereunder and, to
the best of the Company's knowledge, no event has occurred which, with the
lapse of time or the giving of notice, or both, would constitute a default
thereunder.
None of the material provisions of such contracts or instruments
violates any existing applicable law, rule, regulation, judgment/order or
decree of any governmental agency or court having jurisdiction over the
Company or any of its assets or businesses.
(p) Employment Agreements. The employment, confidentiality and
non-competition agreements between the Company and certain of its
officers, described in the Memorandum are binding and enforceable
obligations upon the respective parties thereto in accordance with their
respective terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, moratorium or other similar laws or
arrangements affecting creditors' rights generally and subject to
principles of equity.
(q) Benefit Plans. Except as set forth in the Memorandum, the Company
has no employee benefit plans (including, without limitation, profit
sharing and welfare benefit plans) or deferred compensation arrangements.
(r) Contributions. The Company has not, directly or indirectly, at
any time (i) made any contributions to any candidate for political office,
or failed to disclose fully any such contribution in violation of law or
(ii) made any payment to any state, federal or foreign governmental
officer 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) Reg D Qualification; Offering Documents. The offer and sale of
the Units by the Company has satisfied and on the Closing Date will have
satisfied, all of the requirements of Reg D and the Company is not
disqualified from the exemption under Rule 506 contained in Reg D by
virtue of the disqualification contained in Rule 507. The
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Memorandum does not contain an untrue statement of a material fact, or
omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(t) Finder's Fee. The Company has not incurred any liability for any
finder's fees or similar payments in connection with the transactions
herein contemplated.
(u) Intangibles. The Company owns or possesses adequate and
enforceable rights to use all patents, patent applications, trademarks,
service marks, copyrights, rights, trade secrets, confidential
information, processes and formulations used or proposed to be used in the
conduct of its business as described in the Memorandum (collectively the
"Intangibles"); to the best of the Company's knowledge the Company has not
infringed and is not infringing upon the rights of others with respect to
the Intangibles, and the Company has not received any notice that it has
or may have infringed or is infringing upon the rights of others with
respect to the Intangibles; and the Company has not received any notice of
conflict with the asserted rights of others with respect to the
Intangibles which could, singly or in the aggregate, materially adversely
affect its business as presently conducted or prospects, financial
condition or results of operations and the Company knows of no basis
therefor; and, to the best of the Company's knowledge, no others have
infringed upon the Intangibles.
(v) Labor Relations. To the best of the Company's knowledge, no labor
problem exists with the Company's employees or is imminent which could
adversely affect the Company.
(w) No Adverse Change. Since the respective dates as of which
information is given in the Memorandum and the Company's latest financial
statements, the Company has not incurred any material liability or
obligation, direct or contingent, or entered into any material
transaction, whether or not in the ordinary course of business, and has
not sustained any material loss or interference with its business from
fire, storm, explosion, flood or other casualty, whether or not covered by
insurance, or from any labor dispute or court or governmental action,
order or decree; and since the respective dates as of which information is
given in the Memorandum, there have not been, and prior to the Closing
Date there will not be, any changes in the capital stock or any material
increases in the long-term debt of the Company or any material adverse
change in or affecting the general affairs, management, financial
condition, shareholders' equity, results of
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operations or prospects of the Company, otherwise than as set forth or
contemplated in the Memorandum.
(x) Regulatory Matters. Except as set forth in the Memorandum, the
Company (i) is in all material respects in compliance with the provisions
of all federal, state, local and foreign laws, rules and regulations; (ii)
has all authorizations, approvals, consents, orders, registrations,
licenses or permits of any domestic and foreign court or governmental
agency or body relating to matters which are necessary or required to
conduct its business; and (iii) has had no material liabilities, debts,
obligations or claims asserted against it, whether accrued, absolute,
contingent or otherwise, and whether due or to become due, on account of
regulatory matters. All information contained in the Memorandum with
respect to regulatory authorities, federal, state and foreign laws, and
rules and regulations is accurate, complete and true in all material
respects and does not 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 were made, not misleading.
Any certificate signed by an officer of the Company and delivered to
the Placement Agent, or to counsel for the Placement Agent, shall be
deemed to be a representation and warranty by the Company to the Placement
Agent as to the matters covered thereby.
6. Covenants.
(a) Memorandum. The Company will furnish the Placement Agent, without
charge, as many copies of the Memorandum (and any amended or supplemental
Memorandum) as the Placement Agent may reasonably request. If any event
occurs as the result of which the Memorandum, as then amended or
supplemented, would include an untrue statement of a material fact, or
omit to state a material fact necessary in order to make the statements
made in light of the circumstances in which they were made not misleading,
or if it shall be necessary to amend or supplement the Memorandum to
comply with applicable law, the Company will forthwith notify the
Placement Agent thereof, and furnish to the Placement Agent in such
quantities as may be reasonably requested, an amendment or amended or
supplemented Memorandum which corrects such statements or omissions or
causes the Memorandum to comply with applicable law. Except as may be
necessary to comply with applicable federal and state securities laws, no
copies of the Memorandum., or any exhibit thereto, or any material
prepared by the Company in connection with the Offering will be given
without the prior written permission of the Placement Agent, by the
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Company or its counsel or by any principal or agent of the Company to any
person not a party to this Agreement, unless such person is a director or
principal shareholder of, or directly employed by, the Company.
(b) State Securities Registration. The Company will provide Placement
Agent's counsel with all information which such counsel determines to be
necessary and otherwise cooperate with such counsel in order to qualify or
register the Units for sale under the securities laws of the states in
which offers or sales will be made or to take any necessary action and
shall have Company counsel file any necessary forms which are required to
obtain an exemption from such qualification or registration in such
jurisdictions. The Company will promptly advise the Placement Agent:
(i) If any securities regulator of any state shall make a
request or suggestion of or to the Company for any amendment to the
Memorandum or any registration materials or for any additional
information, including the nature and substance thereof; and
(ii) Of the issuance of a stop order suspending the
qualification of the Units for sale in any state, including the
initiation or threatening of any proceeding for such purpose, and the
Company will use reasonable commercial efforts to prevent the
issuance of such a stop order, or if such an order shall be issued,
to obtain the withdrawal thereof at the earliest practicable date.
The Company will provide the Placement Agent for delivery to all offerees
and purchasers and their representatives any additional information,
documents and instruments which the Placement Agent shall deem necessary
to comply with the rules, regulations and judicial and administrative
interpretations in those states and jurisdictions where the Units are to
be offered for sale or sold. The Company will file all post-offering
forms, documents or materials and take all other actions required by
states in which the Units have been offered or sold. The Placement Agent
will not make offers or sales of the Units in any jurisdiction in which
the Units have not been qualified or registered, or are not exempt from
such qualification or registration.
(c) Use of Proceeds. The Company will not use any portion of the
proceeds derived from the proposed Offering to repay any indebtedness,
other than as set forth in the Memorandum.
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(d) Reg D Compliance. The Company will comply in all respects with
the terms and conditions of Reg D and applicable state securities laws
with respect to the Offering and the sale of the Units only to "accredited
investors" as set forth in the Memorandum.
(e) Restriction on Issuance of Securities. Except as set forth in the
Memorandum, during the period commencing on the date hereof and
terminating 90 days after the termination of the proposed Offering, the
Company will not, without the prior written consent of the Placement
Agent, issue additional shares of Common Stock or issue or grant warrants,
options or other securities of the Company for the purchase of,
exchangeable for or convertible into shares of Common Stock.
(f) No Anti-Dilution Adjustment. The issuance of the Units will not
give any holder of any of the Company's outstanding options, warrants, or
other convertible securities or rights to purchase shares of the Company's
Stock, the right to purchase any additional shares of Common Stock and/or
the right to purchase shares at a reduced price.
(g) Financial Statements. Until the earlier of (i) one (1) year from
the date hereof or (ii) the consummation of the Public Offering, the
Company will deliver to the Placement Agent no later than the 20th day of
each month financial statements with a comparison to the budget for the
current month and explanatory notes of any deviation from the budget of
more than 10% or a single item of more than $50,000.
(h) No Encumbrances. Until the earlier of (i) one (1) year from the
date hereof or (ii) the consummation of the Public Offering, the Company
will not further pledge any of its assets or further encumber its
properties, without the Placement Agent's prior written approval, which
approval will not be unreasonably withheld.
(i) Restricted Activities. Without the Placement Agent's prior
written approval, which approval will not be unreasonably withheld, the
Company shall not do any of the following, until the earlier of (i) one
(1) year from the date hereof or (ii) the consummation of the Public
Offering:
(i) Incur any additional indebtedness for borrowed money,
exclusive of borrowing under this agreement, or incur any additional
indebtedness which by its terms matures more than 12 months from the date
of creation thereof.
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(ii) Enter into any merger or consolidation where the Company
is not the survivor, or sell or lease all or substantially all of its
assets.
(iii) Guarantee, endorse, or otherwise become surety for
any obligation of others, except by endorsement of negotiable instruments
for deposit or collection in the ordinary course of business.
(iv) Sell receivables with or without recourse.
7. Conditions to Placement Agent's Obligations. The obligations of the
Placement Agent hereunder will be subject to the accuracy of the
representations and warranties of the Company herein contained as of the date
hereof and as of each Closing Date, to the performance by the Company of its
obligations hereunder and to the following additional conditions:
(a) Due Qualification or Exemption. (i) The Offering contemplated by
this Agreement will become qualified or be exempt from qualification under
the securities laws of the several states pursuant to Section 6(b) above
not later than the Termination Date, and (ii) at the Termination Date no
stop order suspending the sale of the Units shall have been issued, and no
proceeding for that purpose shall have been initiated or threatened;
(b) No Material Misstatements. The Placement Agent will not have
notified the Company that the Blue Sky qualification materials or the
Memorandum, or any supplement thereto, contains an untrue statement of a
fact which in its opinion is material, or omits to state a fact, which in
its opinion is material and is required to be stated therein, or is
necessary to make the statements therein not misleading;
(c) Compliance with Agreements. The Company will have complied with
all agreements and-satisfied all conditions on its part to be performed or
satisfied hereunder at or prior to the Closing Date;
(d) Corporate Action. The Company will have taken all necessary
corporate action, including, without limitation, obtaining the approval of
the Company's board of directors, for the execution and delivery of this
Agreement, the performance by the Company of its obligations hereunder and
the commencement of the Offering contemplated hereby;
(e) Certificate of President. At the Termination Date, the Company
will have delivered a certificate of its President to the effect
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set forth in the preamble and subparagraphs (b), (c) and (d) of this
Section 7;
(f) Opinion of Counsel. On the Termination Date, the Placement Agent
will have received from Xxxxxx Xxxxxxx, Esquire ("Company Counsel") a
signed opinion, dated as of such Closing Date, reasonably satisfactory to
Placement Agent's counsel, to the effect that:
(i) The Company is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Nevada,
with full power and authority, corporate and other, and, to the best
of Company Counsel's knowledge, after due investigation, to own or
lease and operate its properties and to conduct its business as
described in the Memorandum.
(ii) The Company has full power and authority, corporate and
other, to execute, deliver and perform this Agreement and the Units
and to consummate the transactions contemplated hereby and thereby.
(iii) The execution, delivery and performance of this Agreement
and the Units, by the Company, the consummation by the Company of the
transactions herein and therein contemplated and the compliance by
the Company with the terms of this Agreement and the Units do not,
and will not, with or without the giving of notice or the lapse of
time, or both, result in a violation of the Articles of Incorporation
of the Company.
(iv) All corporate action required to be taken for the
authorization, issuance and sale of the Units has been duly, validly
and sufficiently taken. The Units are not subject to preemptive
rights of any security holder of the Company. The certificates
representing the Units, the Notes, and the Common Stock are in proper
legal form.
(v) Upon delivery of the Units to the Subscribers against full
payment therefor as provided in this Agreement, the Subscribers will
acquire good title to the Units and clear of all liens, encumbrances,
equities, security interests and claims, other than such liens,
encumbrances, equities, security interests or claims placed on the
securities by the Subscriber therefor.
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(vi) Company Counsel has inspected the questionnaires delivered
to and completed by Subscribers in connection with their proposed
investment in the Units.
(vii) Company Counsel has participated in reviews and
discussions in connection with the preparation of the Memorandum, and
in the course of such reviews and discussions, no facts came to its
attention which lead it to believe that the Memorandum (except as to
the financial statements as to which Company Counsel need not express
an opinion), on the Termination Date, contained any untrue statement
of a material fact, or omitted 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 were made, not
misleading.
(viii) To the best of Company Counsel's knowledge, after due
investigation, the issuance of the Units in the Offering will not
give any holder of the Company's outstanding options, warrants or
other convertible securities or rights to purchase shares of the
Company's Common Stock the right to purchase shares at a reduced
price.
In rendering its opinion, Company Counsel may rely upon (1)
opinions of counsel acceptable to Placement Agent's counsel with
respect to matters relating to the laws of any and all foreign
jurisdictions, and (2) the certificates of government officials and
officers of the Company as to matters of fact; provided that Company
Counsel shall state that they have no reason to believe, and do not
believe, that they are not justified in relying upon such opinions or
such certificates of government officials and officers of the Company
as to matters of fact, as the case may be.
8. Conditions of the Company's Obligations. The obligations of the Company
hereunder will be subject to the accuracy of the representations and warranties
of the Placement Agent contained herein as of the date hereof and as of the
Closing Date, to the performance by the Placement Agent of its obligations
hereunder and to the following additional conditions:
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(a) Approval of Subscribers. The Company shall have approved, which
approval shall not be unreasonably withheld, each purchaser of the Units;
(b) Absence of Certain Events. No stop order suspending the sale of
Units has been issued, and no proceeding for that purpose will have been
initiated or threatened;
(c) No Material Misstatements. The Company will not have notified the
Placement Agent that the Blue Sky qualification materials, or the
Memorandum, or any amendment or supplement thereto, contains an untrue
statement of a fact, which in its opinion is material, or omits to state a
fact, which in its opinion is material and is required to be stated
therein or is necessary to make the statements therein not misleading, in
each case only with respect to information contained therein concerning
the Placement Agent; and
(d) Blue Sky List. The Placement Agent will have delivered to the
Company a list of states in which the financing may be made.
9. Expenses of Sale. The Company will pay or cause to be paid all costs
and expenses incident to the Units, whether or not the Offering contemplated
hereby is consummated, including, without limitation, the fees, disbursements
and expenses of (a) its counsel and accountants, (b) preparing, printing, or
otherwise reproducing, and mailing, the Memorandum, and other appropriate
documents, and any amendments or supplements thereto (all in such quantities as
the Placement Agent may require), (c) registering or qualifying the Units for
offer and sale in the applicable states, as specified by the Placement Agent,
or obtaining exemptions therefrom, and the fees, expenses and disbursements of
Company Counsel in connection therewith, (d) all taxes, if any, on the issuance
of the Units, and (e) all other expenses relating to the Offering of the Units,
except the Placement Agent will pay all of its expenses including its counsel.
10. Indemnification and Contribution.
(a) Indemnification by the Company. The Company agrees to indemnify
and hold harmless the Placement Agent and each person, if any, who
controls the Placement Agent within the meaning of the Act or the Exchange
Act against any losses, claims, damages or liabilities, joint or several,
to which the Placement Agent or such controlling person may become
subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon (i) any untrue statement or alleged untrue statement of a
material fact contained (A) in the Memorandum, or (B) in any blue sky
application or other document executed by the
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Company specifically for that purpose or based upon written information
furnished by the Company filed in any state or other jurisdiction in order
to qualify any or all of the Units under the securities laws thereof (any
such application, document or information being hereinafter called a "Blue
Sky Application"), (ii) the omission or alleged omission to state in the
Memorandum or in any Blue Sky Application a material fact required to be
stated therein or necessary to make the statements therein not misleading,
or (iii) any untrue statement or alleged untrue statement of a material
fact contained in the Memorandum or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary
in order to make the statements therein, in the light of the circumstances
under which they were made, not misleading; and will reimburse the
Placement Agent and each such controlling person for any legal or other
expenses reasonably incurred by the Placement Agent or such controlling
person in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the Company will not
be liable in any such case to the extent that any such loss, claim, damage
or liability arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in reliance upon and
in conformity with written information furnished to the Company by the
Placement Agent specifically for use with reference to the Placement Agent
in the preparation of the Memorandum or any such Blue Sky Application.
(b) Indemnification by the Placement Agent. The Placement Agent
agrees to indemnify and hold harmless the Company and each person, if any,
who controls the Company within the meaning of the Act and the Exchange
Act against any losses, claims, damages or liabilities, joint or several,
to which the Company or such controlling person may become subject, under
the Act or otherwise insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon
(i) any untrue statement or alleged untrue statement of a material fact
contained (A) in the Memorandum, or (B) in any Blue Sky Application, or
(ii) the omission or alleged omission to state in the Memorandum or in any
Blue Sky Application a material fact required to be stated therein or
necessary to make the statements therein not misleading, or (iii) any
untrue statement or alleged untrue statement of a material fact contained
in the Memorandum, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading; 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 reliance upon and in conformity with
written
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information furnished to the Company by the Placement Agent specifically
for use with reference to the Placement Agent in the preparation of the
Memorandum or any such Blue Sky Application.
(c) Procedure. Promptly after receipt by an indemnified party under
this Section 10 of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made
against any indemnifying party under this Section 10, notify in writing
the indemnifying party of the commencement thereof; and the omission so to
notify the indemnifying party will relieve it from any liability under
this Section 10 as to the particular item for which indemnification is
then being sought, but not from any other liability which it may have to
any indemnified party. In case any such action is brought against any
indemnified party, and it notifies an indemnifying party of the
commencement thereof, the indemnifying party will be entitled to
participate therein, and to the extent that it may wish, jointly with any
other indemnifying party, similarly notified, to assume the defense
thereof, with counsel who shall be to the reasonable satisfaction of 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 to such indemnified party under this
Section 10 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than
reasonable costs of investigation; provided, however, that if, in the
reasonable judgment of the indemnified party, it is advisable for the
indemnified party to be represented by separate counsel, the indemnified
party shall have the right to employ a single counsel to represent the
indemnified parties who may be subject to liability arising out of any
claim in respect of which indemnity may be sought by the indemnified
parties thereof against the indemnifying party, in which event the fees
and expenses of such separate counsel shall be borne by the indemnifying
party. Any such indemnifying party shall not be liable to any such
indemnified party on account of any settlement of any claim or action
effected without the consent of such indemnifying party which consent
shall not be unreasonably withheld.
(d) Contribution. If the indemnification provided for in this Section
10 is unavailable to any indemnified party in respect to any losses,
claims, damages, liabilities or expenses referred to therein, then the
indemnifying party, in lieu of indemnifying such indemnified party, will
contribute to the amount paid or payable by such indemnified party, as a
result of such losses, claims, damages, liabilities or expenses (i) in
such proportion as is appropriate to reflect the relative benefits
received by the Company on the one hand, and the
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Placement Agent on the other hand, from the Offering of the Units, or (ii)
if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only
the relative benefits referred to in clause (i) above but also the
relative fault of the Company on the one hand, and of the Placement Agent
on the other hand, in connection with the statements or omissions which
resulted in such losses, claims, damages, liabilities or expenses as well
as any other relevant equitable considerations. The relative benefits
received by the Company on the one hand, and the Placement Agent on the
other hand, shall be deemed to be in the same proportion as the total
proceeds from the Offering (net of sales commissions, but before deducting
expenses) received by the Company, bear to the commissions received by the
Placement Agent. The relative fault of the Company on the one hand, and
the Placement Agent on the other hand, will be determined with reference
to, among other things, whether the untrue or alleged untrue statement of
a material fact or the omission to state a material fact relates to
information supplied by the Company, and its relative intent, knowledge,
access to information and opportunity to correct or prevent such statement
or omission. The amount payable by a party as a result of the losses,
claims, damages, liabilities or expenses referred to above will be deemed
to include any legal or other fees or expenses reasonably incurred by such
party in connection with investigating or defending any action or claim.
(e) Equitable Considerations. The Company and the Placement Agent
agree that it would not be just and equitable if contribution pursuant to
this Section 10 were determined by pro rata allocation or by any other
method of allocation which does not take into account the equitable
considerations referred to in the immediately preceding paragraph.
11. Representations and Agreements to Survive Delivery. All
representations, warranties and agreements of the Company and of the Placement
Agent herein will survive the delivery and execution hereof and the closing
hereunder, and shall remain operative and in full force and effect regardless
of any investigation made by or on behalf of the Placement Agent or any person
who controls the Placement Agent within the meaning of the Act or by the
Company or any person who controls the Company within the meaning of the Act,
and will survive delivery of the securities constituting the Units hereunder
and any termination of this Agreement.
12. Termination by Placement Agent. The Placement Agent will have the
right to terminate this Agreement by giving written notice as herein specified,
at any time, at or prior to the Closing Date:
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under the circumstances in order to accomplish the intents and purposes of this
Agreement and to carry out its provisions.
17. Validity. In case any term of this Agreement will be held invalid,
illegal or unenforceable, in whole or in part, the validity of any of the other
terms of this Agreement will not in any way be affected thereby.
18. Waiver of Breach. The failure of any party hereto to insist upon
strict performance of any of the covenants and agreements herein contained, or
to exercise any option or right herein conferred in any one or more instances,
will not be construed to be a waiver or relinquishment of any such option or
right, or of any other covenants or agreements, and the same will be and remain
in full force and effect.
19. Entire Agreement. This Agreement contains the entire agreement and
understanding of the parties with respect to the entire subject matter hereof,
and there are no representations, inducements, promises or agreements, oral or
otherwise, not embodied herein. Any and all prior discussions, negotiations,
commitments and understanding relating thereto, are superseded hereby. There
are no conditions precedent to the effectiveness of this Agreement other than
as stated herein, and there are no related collateral agreements existing
between the parties that are not referred to herein.
20. Counterparts. This Agreement may be executed in counterparts and each
of such counterparts will for all purposes be deemed to be an original, and
such counterparts will together constitute one and the same instrument.
21. Law. This Agreement will be deemed to have been made and delivered in
Atlanta, Georgia and will be governed as to validity, interpretation,
construction, effect and in all other respects by the internal laws of the
State of Georgia. The Company (a) agrees that any legal suit, action or
proceeding arising out of or relating to this letter will be instituted
exclusively in the Superior Court for Xxxxxx County, Georgia, or in the United
States District Court for the Northern District of Georgia, (b) waives any
objection which the Company may have now or hereafter to the venue of any such
suit, action or proceeding, and (c) irrevocably consents to the jurisdiction of
the Superior Court for Xxxxxx County, Georgia and the United States District
Court for the Northern District of Georgia in any such suit, action or
proceeding. The Company further agrees to accept and acknowledge service of any
and all process which may be served in any such suit, action or proceeding in
the Superior Court for Xxxxxx County, Georgia or in the United States District
Court for the Northern District of Georgia and agrees that service of process
upon the Company mailed by certified mail to the Company's address will be
deemed in every respect effective service of process upon the Company, in any
suit, action or proceeding.
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If the foregoing correctly sets forth our understanding, please so indicate in
the space provided below for that purpose, whereupon this letter will
constitute a binding agreement between us.
KARTS INTERNATIONAL INCORPORATED
By: /s/ X. XXXX XXXXXXXX
------------------------------
Name: X. Xxxx Xxxxxxxx
Title: President
CONFIRMED AND ACCEPTED:
ARGENT SECURITIES, INC.
By: /s/ X. XXXXXXXX XXXXXX
----------------------------
Name: X. Xxxxxxxx Xxxxxx
Title: Chairman
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