ENTERTAINMENT BOULEVARD INC.
Up to 4,000 Shares
8.0% Mandatorily Convertible Preferred Stock
PLACEMENT AGENCY AGREEMENT
September 3, 1999
Xxxx Xxxx XxXxxxx Clearing Corporation
As Placement Agent
Xxx Xxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Gentlemen:
This letter confirms our agreement (this "Agreement") to retain Xxxx
Xxxx XxXxxxx Clearing Corporation, or its affiliates, assigns or designees,
as: (1) our exclusive agent (the "Placement Agent") to introduce
Entertainment Boulevard Inc. (the "Corporation") to certain investors
(collectively, the "Investors") as prospective purchasers of up to $2.0
million of its shares of its 8.0% Mandatorily Convertible Series A Preferred
Stock, stated value $1,000 per share (the "Initial Securities"), convertible
into shares of common stock, par value $0.001 per share (the "Common Stock"),
of the Corporation, and an aggregate of not more than $2.0 million of
additional shares (the "Additional Securities") in a private placement (the
"Placement") as will be more fully described herein and in the confidential
disclosure documents prepared by the Corporation and provided to the
Placement Agent for use in connection with the proposed Placement, including,
without limitation, the most recent Business Plan provided to the Placement
Agent (said disclosure documents as amended and supplemented from time to
time hereafter being hereinafter collectively referred to as the "Business
Plan" and incorporated herein by this reference) and (2) the Corporation's
financial advisor to provide the investment banking services described more
specifically in Section 11 herein. The Additional Securities, together with
the Initial Securities are hereinafter referred to as the "Securities." The
Placement Agent will have no obligation to purchase any of the Securities
offered by the Corporation in the Placement. The Placement Agent agrees that
the Initial Securities will be sold on or before September 7, 1999, and that
the $2.0 million of the Additional Securities will be sold within 10 days of
the date the Registration Statement has been declared effective.
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The Placement is intended to be exempt from the registration
requirements of the Securities Act of 1933, as amended (the "Securities
Act"), pursuant to Section 4(2) under the Securities Act and Regulation D
("Regulation D") of the Rules and Regulations of the Securities and Exchange
Commission ("SEC") promulgated under the Securities Act (the "Rules and
Regulations").
The engagement described herein shall be in accordance with applicable
laws and pursuant to the following procedures and terms and conditions:
1. AGREEMENT TO ACT AS PLACEMENT AGENT. On the basis of the
representations, warranties and agreements of the Corporation herein
contained and subject to all the terms and conditions of this Agreement, the
Placement Agent agrees to act as the Corporation's exclusive placement agent.
Upon any sale of Securities, the Corporation shall (i) pay to the Placement
Agent 10% of the proceeds received by the Corporation from the sale of such
Securities, (ii) provide the Placement Agent a non-accountable expense
allowance equal to 2% of the proceeds received by the Corporation from the
sale of such Securities and (iii) issue to the Placement Agent or its assign
or designee pursuant to a Warrant Agreement dated the date hereof by and
between the Corporation and you (the "Placement Agent's Warrant Agreement") a
5-year warrant to purchase 250,000 shares of the Corporation's Common Stock
at a purchase price of $2.00 per share (the "Placement Agent Warrants").
Except as provided herein or unless otherwise mutually agreed by the parties
in writing, during the term of this Agreement, the Placement Agent shall
receive the fees described herein, regardless of whether the Investor was
introduced to the Corporation by the Placement Agent. The shares of Common
Stock issuable upon exercise of the Placement Agent Warrants are hereinafter
referred to as the "Warrant Shares" and the Placement Agent Warrants and
Warrant Shares are together referred to as the "Agent's Securities." The
Corporation agrees to register the Warrant Shares pursuant to the terms of
that certain Registration Rights Agreement dated the date hereof between the
Corporation and you (the "Registration Rights Agreement").
2. REPRESENTATIONS AND WARRANTIES OF THE CORPORATION. The
Corporation hereby represents and warrants to, and agrees with, the Placement
Agent, as of the date hereof and as of the date of the consummation of the
sale of the Securities (the "Closing"), that:
(a) The Business Plan does not and will 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 were made, not misleading;
provided, however, that the representations and warranties in this subsection
shall not apply to statements or omissions made in reliance upon and in
conformity with written information furnished to the Corporation by or on
behalf of the Placement Agent expressly for use in the Business Plan or any
amendment or supplement thereto. The Corporation has not distributed any
offering material in connection with the offering or sale of the Securities
other than the Business Plan. The Corporation confirms that it has not
provided the Investors or their agents or counsel with any information that
constitutes or might constitute material non-public information.
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(b) There has been no notification with respect to the
suspension of the qualification of the Securities for sale in any
jurisdiction or initiation or, to the knowledge of the Corporation, threat of
any proceeding for such purpose.
(c) The financial statements and the related notes included
in the Business Plan present fairly, in all material respects, the financial
condition of the Corporation as of the dates thereof and the results of its
operations and cash flows at the dates and for the periods covered thereby in
conformity with generally accepted accounting principles ("GAAP"). No other
financial statements or schedules of the Corporation or any other entity are
required by the Securities Act or the Rules and Regulations to be included in
the Business Plan. Singer Lewak Xxxxxxxxx & Xxxxxxxxx, LLP (the
"Accountants"), who have reported on such financial statements and schedules,
are independent accountants with respect to the Corporation as required by
the Securities Act and the Rules and Regulations. The financial statements
of the Corporation and the related notes and schedules included in the
Business Plan have been prepared in conformity with the requirements of the
Securities Act and the Rules and Regulations and present fairly the
information shown therein.
(d) The Corporation maintains a system of internal
accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorization; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets; (iii) access
to assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets is
compared with existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
(e) The Corporation is a corporation, duly organized,
validly existing and in good standing under the laws of the State of Nevada,
with full corporate power and authority to own and use its properties and
assets and to carry on its business as currently conducted. The Corporation
has no subsidiaries other than International Net Broadcasting, LLC, a
wholly-owned subsidiary (the "SUBSIDIARY"). The Subsidiary is a limited
liability company, duly organized, validly existing and in good standing
under the laws of the State of California, with full corporate power and
authority to own and use its properties and assets and to carry on its
business as currently conducted. Each of the Corporation and the Subsidiary
is duly qualified to do business and is in good standing as a foreign
corporation or limited liability company, as the case may be, in each
jurisdiction in which the nature of the business conducted or property owned
by it makes such qualification necessary, except where the failure to be so
qualified or in good standing, as the case may be, would not, individually or
in the aggregate, (x) adversely affect the legality, validity or
enforceability of the Securities or any of the other Transaction Documents
(as defined below), (y) have or result in a material adverse effect on the
results of operations, assets, prospects (insofar as such prospects may
reasonably be foreseen) or financial condition of the Corporation and the
Subsidiary, taken as a whole or (z) adversely impair the Corporation's
ability to perform fully on a timely basis its obligations under any
Transaction Document, including, without limitation, the Corporation's
obligations under Section 3.7 of the Securities Purchase Agreement between
the Corporation and the purchasers of Securities (the "Securities Purchase
Agreement") (any of (x), (y) or (z), being a "MATERIAL ADVERSE EFFECT").
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(f) Since the date as of which information is given in the
Business Plan, except as otherwise stated therein, (i) there has been no
material adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of the Corporation and the
Subsidiary, taken as a whole, whether or not arising in the ordinary course
of business, (ii) there have been no transactions entered into by the
Corporation or the Subsidiary, other than those in the ordinary course of
business, which are material with respect to the Corporation, and the
Subsidiary, taken as a whole, (iii) there has been no dividend or
distribution of any kind declared, paid or made either by the Corporation or
the Subsidiary on any class of its respective securities, and (iv) neither
the Corporation nor the Subsidiary has incurred any liabilities or
obligations, either direct or contingent, other than in the ordinary course
of business.
(g) The Corporation has the requisite corporate power and
authority to enter into and to consummate the transactions contemplated by
this Agreement and the other Transaction Documents (as defined) and otherwise
to carry out its obligations hereunder and thereunder. This Agreement, the
Secured Bridge Note, the Loan and Security Agreement, the Securities Purchase
Agreement, the Certificate of Designation, the Registration Rights Agreements
and the Placement Agent's Warrant Agreement are collectively referred to as
the "TRANSACTION DOCUMENTS." The execution and delivery of each of the
Transaction Documents by the Corporation and the consummation by it of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary action on the part of the Corporation and no further action is
required by the Corporation. Each of the Transaction Documents has been duly
executed by the Corporation and when delivered in accordance with the terms
hereof will constitute the legal, valid and binding obligation of the
Corporation, enforceable against the Corporation in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating
to, or affecting generally the enforcement of, creditors' rights and remedies
or by other equitable principles of general application. Neither the
Corporation nor the Subsidiary is in violation of any of the provisions of
its respective articles of incorporation, bylaws or other organizational
documents. Prior to the Closing the Certificate of Designation has been
filed with the Secretary of State of the State of Nevada and will be in full
force and effect, enforceable against the Corporation in accordance with the
provisions thereof.
(h) Each of the Corporation and the Subsidiary has filed all
federal, state, local and foreign tax returns that are required to be filed
or has requested extensions thereof and have paid all taxes and all
assessments to the extent that the same have become due. No tax assessment
or deficiency has been made or proposed against the Corporation or the
Subsidiary nor has the Corporation or the Subsidiary received any notice of
any proposed assessment or deficiency. The charges, accruals and reserves
shown as the financial statements included in the Business Plan, in respect
of taxes for all fiscal periods to date are adequate based on current law.
There is no material unpaid assessment or proposal by any taxing authority
for additional taxes for which the Corporation does not have adequate
reserves for any fiscal year.
(i) On the date hereof, the authorized capital of the
Corporation consists of (i) 50,000,000 shares of Common Stock, $0.001 par
value and (ii) 1,000,000 shares of preferred
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stock, $0.01 par value, 10,000 of which will be designated 8.0% Mandatorily
Convertible Series A Preferred Stock, $0.01 par value. SCHEDULE 2.1(c) of
the Securities Purchase Agreement sets forth the shares issued and
outstanding of the Corporation as of the date hereof. SCHEDULE 2.1(c)(i) of
the Securities Purchase Agreement sets forth the options, warrants and
convertible securities of the Corporation (the "DERIVATIVE SECURITIES") which
are outstanding on the date hereof, including in each case (i) the name and
class of such Derivative Securities, (ii) the issue date of such Derivative
Securities, (iii) the number of shares of Common Stock of the Corporation
into which such Derivative Securities are convertible as of the date hereof,
(iv) the conversion or exercise price or prices of such Derivative Securities
as of the date hereof and (v) the expiration date of any conversion or
exercise rights held by the owners of such Derivative Securities. All issued
and outstanding shares of capital stock of the Corporation and the Subsidiary
have been duly authorized and validly issued and are fully paid and
non-assessable. No shares of the capital stock of the Corporation are
entitled to preemptive or similar rights, nor is any holder of the capital
stock of the Corporation entitled to preemptive or similar rights arising out
of any agreement or understanding with the Corporation by virtue of any of
the Transaction Documents. To the best knowledge of the Corporation except
as disclosed on SCHEDULE 2.1(c)(v) of the Securities Purchase Agreement, no
Person or group of related Persons beneficially owns (as determined pursuant
to Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT")) or has the right to acquire by agreement with
or by obligation binding upon the Corporation beneficial ownership of in
excess of 5% of the Common Stock. A "PERSON" means an individual or
corporation, partnership, trust, incorporated or unincorporated association,
joint venture, limited liability company, joint stock company, government (or
an agency or subdivision thereof) or other entity of any kind. The Common
Stock is quoted on the OTC Bulletin Board ("OTCBB"). The issuance and sale
of the Placement Agent Warrants have been duly authorized by the Corporation,
and the Placement Agent Warrants, when issued in accordance with the terms of
this Agreement and the Placement Agent's Warrant Agreement will (i) be duly
and validly issued, (ii) constitute valid and legally binding obligations of
the Corporation, enforceable against and in accordance with their terms and
entitled to the benefits of the Placement Agent's Warrant Agreement and (iii)
be exercisable for the Warrant Shares in accordance with their terms.
(j) The shares of Common Stock into which the Securities are
convertible have been duly authorized, and when issued and paid for in
accordance with the terms hereof, shall be validly issued, fully paid and
nonassessable, free and clear of all liens, encumbrances, and rights of first
refusal of any kind (collectively, "LIENS"). The Corporation has, and at the
Closing will have, and at all times while the Securities are outstanding will
maintain an adequate reserve of duly authorized shares of Common Stock as may
be necessary to enable it to perform its obligations under this Agreement,
the Placement Agent's Warrant Agreement and the Registration Rights
Agreement. The Warrant Shares have been duly authorized and reserved for
issuance upon exercise of the Placement Agent Warrants and, when issued and
paid for upon such exercise in accordance with the terms thereof, will be
duly and validly issued, fully paid and nonassessable and will not be subject
to preemptive or similar rights. The holders of the Placement Agent Warrants
will not be subject to personal liability by reason of being such holders.
(k) Except as set forth in the Business Plan or the
Securities Purchase
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Agreement, the execution, delivery and performance of this Agreement, the
Placement Agent's Warrant Agreement and the Registration Rights Agreement by
the Corporation and the Subsidiary and the consummation by the Corporation
and the Subsidiary of the transactions contemplated hereby and thereby, do
not and will not (i) conflict with or violate any provision of its articles
of incorporation, bylaws or other organizational documents (each as amended
through the date hereof) or (ii) subject to obtaining the consents referred
to in Section 2(u) of this Agreement, conflict with, or constitute a default
(or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument
(evidencing a Corporation or Subsidiary debt or otherwise) to which the
Corporation or the Subsidiary is a party or by which any property or asset of
the Corporation or the Subsidiary is bound or affected, (iii) result in a
violation of any law, rule, regulation, order, judgment, injunction, decree
or other restriction of any court or governmental authority to which the
Corporation or the Subsidiary is subject (including Federal and state
securities laws and regulations), or by which any material property or asset
of the Corporation or the Subsidiary is bound or affected, or (iv) result in
the creation of imposition of a Lien upon any of the Securities or any of the
assets of the Corporation or the Subsidiary, except in the case of each of
clauses (ii) and (iii), such conflicts, defaults, terminations, amendments,
accelerations, cancellations and violations as would not, individually or in
the aggregate, have or result in a Material Adverse Effect. The business of
the Corporation and the Subsidiary is not being conducted in violation of any
law, ordinance or regulation of any governmental authority except for any
such violation as would not individually or in the aggregate, have or result
in a Material Adverse Effect.
(l) The Corporation is not, and is not controlled by or
under common control with an affiliate of, an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
(m) Except as specifically set forth in SCHEDULE 2.1(g) of
the Securities Purchase Agreement, there is no action, suit, notice of
violation, proceeding or investigation pending or, to the knowledge of the
Corporation, threatened against or affecting the Corporation or the
Subsidiary or any of their respective properties before or by any court,
governmental or administrative agency or regulatory authority (federal,
state, county, local or foreign) which (i) adversely affects or challenges
the legality, validity or enforceability of any of the Transaction Documents
or the Securities or (ii) could reasonably be expected to, individually or in
the aggregate, have a Material Adverse Effect.
(n) Except as set forth in the Business Plan or the
Securities Purchase Agreement, there are no (i) hazardous substances,
hazardous materials, toxic substances or waste materials (collectively,
"Hazardous Materials"), the existence of which is in violation of any
environmental law or regulation, on any of the properties owned or leased by
the Corporation or the Subsidiary, or (ii) spills, releases, discharges or
disposal of Hazardous Materials that have occurred or are presently occurring
from such properties. Except as described in the Business Plan, each of the
Corporation and the Subsidiary is in compliance with all applicable local,
state and federal environmental laws, regulations, ordinances and
administrative and judicial orders relating to the generation, recycling,
reuse, sale, storage, handling, transport and disposal of any Hazardous
Materials, which alone is, or in the
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aggregate are, likely to have a Material Adverse Effect on the Corporation
and the Subsidiary, taken as a whole.
(o) Except as set forth in the Business Plan or the
Securities Purchase Agreement, the business, operations and facilities of the
Corporation and the Subsidiary have been and are being conducted in
compliance in all material respects with all applicable laws, ordinances,
rules, regulations, licenses, permits, approvals, plans, authorizations or
requirements relating to occupational safety and health, or pollution, or
protection of health or the environment (including, without limitation, those
relating to emissions, discharges, releases or threatened releases of
pollutants, contaminants or hazardous or toxic substances, materials or
wastes into ambient air, surface water, groundwater or land, or relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of chemical substances, pollutants, contaminants or
Hazardous Materials), of any governmental department, commission, board,
bureau, agency or instrumentality of the United States, any state or
political subdivision thereof, or any foreign jurisdiction, and all
applicable judicial or administrative agencies or regulatory decrees, awards,
judgments and orders relating thereto; and neither the Corporation nor the
Subsidiary has received any notice from any governmental instrumentality or
any third party alleging any violation thereof or liability thereunder
(including, without limitation, liability for costs of investigating or
remediating sites containing hazardous substances and/or damages to natural
resources).
(p) The Corporation and the Subsidiary possess all
franchises, certificates, licenses, authorizations and permits or similar
authority necessary to conduct their respective businesses except where the
failure to possess such permits would not, individually or in the aggregate,
have a Material Adverse Effect ("MATERIAL PERMITS"), and neither the
Corporation nor the Subsidiary has received any notice of proceedings
relating to the revocation or modification of any Material Permit.
(q) Except as disclosed in SCHEDULE 2.1(t) of the Securities
Purchase Agreement, the Corporation and the Subsidiary have good and
marketable title in fee simple to all real property and personal property
owned by them which is material to the business of the Corporation or the
Subsidiary, in each case free and clear of all Liens, except for liens,
claims or encumbrances that do not materially affect the value of such
property and do not interfere with the use made and proposed to be made of
such property by the Corporation or the Subsidiary. Any real property and
facilities held under lease by the Corporation or the Subsidiary are held by
them under valid, subsisting and enforceable leases with such exceptions as
are not material and do not interfere with the use made and proposed to be
made of such property and buildings by the Corporation or the Subsidiary or
third party.
(r) Except as disclosed in SCHEDULE 2.1(w) of the Securities
Purchase Agreement, the Corporation and the Subsidiary maintain property and
casualty, general liability, workers' compensation, environmental hazard,
personal injury and other similar types of insurance with financially sound
and reputable insurers that is adequate, consistent with industry standards.
Neither the Corporation nor the Subsidiary has received notice from, and has
any knowledge of any threat by, any insurer (that has issued any insurance
policy to the Corporation or the Subsidiary) that such insurer intends to
deny coverage under or cancel,
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discontinue or not renew any insurance policy presently in force.
(s) The Securities are senior in right of payment, whether
upon liquidation, dissolution or otherwise to all other existing equity
securities of the Corporation.
(t) Except as described on SCHEDULE 2.1(s) of the Securities
Purchase Agreement, (i) the Corporation has not granted or agreed to grant to
any Person any rights (including "piggy-back" registration rights) to have
any securities of the Corporation registered with the SEC or any other
governmental authority which has not been satisfied and (ii) no Person,
including, but not limited to, current or former shareholders of the
Corporation, underwriters, brokers or agents, has any right of first refusal,
preemptive right, right of participation, or any similar right to participate
in the transactions contemplated by this Agreement, the Placement Agent's
Warrant Agreement and the Registration Rights Agreement.
(u) Except as specifically set forth in SCHEDULE 2.1(f) of
the Securities Purchase Agreement, neither the Corporation nor the Subsidiary
is required to obtain any consent, waiver, authorization or order of, give
any notice to, or make any filing or registration with, any court or other
federal, state, local or other governmental authority or other Person in
connection with the execution, delivery and performance by the Corporation of
the Transaction Documents, other than (i) the filing of the Registration
Statement with the SEC, which shall be filed in accordance with and in the
time periods set forth in the Registration Rights Agreement, (ii) the
approval of the Board of Directors and the filing of the Certificate of
Designation with respect to the Preferred Stock with the Secretary of State
of the State of Nevada, which filing and approvals with respect to the
Preferred Stock shall be effected prior to the Closing, and (iii) any
filings, notices or registrations under applicable federal and state
securities laws (together with the consents, waivers, authorizations, orders,
notices and filings referred to in SCHEDULE 2.1(f) of the Securities Purchase
Agreement, the "REQUIRED APPROVALS").
(v) Any certificate signed by any officer of the Corporation
and delivered to the Placement Agent, or to counsel for the Placement Agent,
shall be deemed a representation and warranty by the Corporation to the
Placement Agent as to the matters covered thereby.
(w) The Corporation and all Persons acting on its behalf
have not made, and will not make, offers or sales of the Securities or any
securities that might be integrated with offers and sales of the Securities,
except to "accredited investors" (as defined in Regulation D ("REGULATION D")
under the Securities Act without any general solicitation or advertising and
otherwise in compliance with the conditions of Regulation D.
(x) Neither the Corporation, nor any Person acting on its or
their behalf, has directly or indirectly made any offers or sales in any
security or solicited any offers to buy any securities under circumstances
that would cause the offering of the Securities pursuant to this Agreement to
be integrated with prior offerings by the Corporation for purposes of the
Securities Act or any applicable shareholder approval provisions.
(y) Neither the Corporation nor, to the Corporation's
knowledge, any employee or agent of the Corporation has made any payment of
funds of the Corporation or received or retained any funds in violation of
any law, rule or regulation of a character required
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to be disclosed in the Business Plan.
(z) The Common Stock is currently quoted on the OTCBB.
(aa) The Corporation is not involved in any material labor
dispute nor is any such dispute known by the Corporation to be threatened.
(bb) Except as disclosed in or specifically contemplated by
the Business Plan or the Securities Purchase Agreement, (i) neither the
Corporation nor the Subsidiary owns or has obtained valid and enforceable
licenses or options for the inventions, patent applications, patents,
trademarks (both registered and unregistered), tradenames, copyrights and
trade secrets necessary for the conduct of the Corporation's or the
Subsidiary's business as currently conducted and as the Business Plan
indicates the Corporation and the Subsidiary contemplate conducting
(collectively, the "Intellectual Property"); and (ii) to the Corporation's
knowledge (for each of the following subsections (a) through (e)): (a) there
are no third parties who have any ownership rights to any Intellectual
Property that is owned by, or has been licensed to, the Corporation or the
Subsidiary for the products and services described in the Business Plan that
would preclude the Corporation or the Subsidiary from conducting its
businesses as currently conducted and as the Business Plan indicates the
Corporation and the Subsidiary contemplate conducting, except for the
ownership rights of the owners of the Intellectual Property licensed or
optioned by the Corporation or the Subsidiary; (b) there are currently no
sales of any products that would constitute an infringement by third parties
of any Intellectual Property owned, licensed or optioned by the Corporation
or the Subsidiary; (c) there is no pending or threatened action, suit,
proceeding or claim by others challenging the rights of the Corporation or
the Subsidiary in or to any Intellectual Property owned, licensed or optioned
by the Corporation or the Subsidiary; (d) there is no pending or threatened
action, suit, proceeding or claim by others challenging the validity or scope
of any Intellectual Property owned, licensed or optioned by the Corporation
or the Subsidiary, other than non-material claims; and (e) there is no
pending or threatened action, suit, proceeding or claim by others that the
Corporation or the Subsidiary infringe or otherwise violate any patent,
trademark, copyright, trade secret or other proprietary right of others,
other than non-material claims.
(cc) The Corporation has initiated a review and assessment of
all areas within its and the Subsidiary's business and operations that could
be adversely affected by the "Year 2000 Problem" (that is, the risk that
computer applications used by the Corporation or the Subsidiary may be unable
to recognize and perform properly date-sensitive functions involving certain
dates prior to and any date after December 31, 1999). Based on the
foregoing, except as set forth on SCHEDULE 2.1(z) of the Securities Purchase
Agreement, the Corporation believes that the computer applications that are
currently material to its or the Subsidiary's business and operations are
reasonably expected to be able to perform properly date-sensitive functions
for all dates before and after January 1, 2000, except to the extent that a
failure to do so would not reasonably be expected to have a Material Adverse
Effect.
(dd) The Corporation has delivered to the Placement Agent an
agreement in the form of Attachment A hereto to the effect that it will not,
for 180 days after the date the Registration Statement has been declared
effective, without the prior written consent of the Placement Agent, offer to
sell, sell, contract to sell, grant any option to purchase or otherwise
9
dispose (or announce any offer, sale, grant of any option to purchase or
other disposition) of, whether directly or indirectly or through any change
in allocation of economic risk relating to the shares, any shares of capital
stock of the Corporation or securities convertible into, or exchangeable or
exercisable for, shares of capital stock of the Corporation, except with
respect to the issuance of shares of Common Stock upon the exercise of stock
options and warrants outstanding as of the date hereof the and the issuance
of Common Stock or stock options under any benefit plan of the Corporation.
(ee) The Corporation and the Subsidiary is in compliance in
all material respects with all presently applicable provisions of the
Employee Retirement Income Security Act of 1974, as amended, including the
regulations and published interpretations thereunder ("ERISA"); no
"reportable event" (as defined in ERISA) has occurred with respect to any
"pension plan" (as defined in ERISA) for which the Corporation or the
Subsidiary would have any liability; neither the Corporation nor the
Subsidiary has incurred and expects to incur liability under (i) Title IV of
ERISA with respect to termination of, or withdrawal from, any "pension plan"
or (ii) Sections 412 or 4971 of the Internal Revenue Code of 1986, as
amended, including the regulations and published interpretations thereunder
(the "CODE"); and each "pension plan" for which the Corporation or the
Subsidiary would have any liability that is intended to be qualified under
Section 401(a) of the Code is so qualified in all material respects and
nothing has occurred, whether by action or by failure to act, which would
cause the loss of such qualification.
(ff) The Corporation and its directors, officers or
controlling persons have not taken, directly or indirectly, any action
intended, or which might reasonably be expected, to cause or result, under
the Securities Act or otherwise, in, or which has constituted, stabilization
or manipulation of the price of any security of the Corporation to facilitate
the sale or resale of the Securities.
3. COVENANTS. The Corporation covenants and agrees with the
Placement Agent as follows:
(a) The Corporation shall (i) not later than the fifth
Business Day following the Closing make all necessary notices and filings
with the OTCBB (as well as any other national securities exchange or market
on which the Common Stock is then traded or listed) with respect to a
sufficient number of shares of Common Stock and Warrant Shares to cover the
maximum number of Securities and Warrant Shares then issuable and (ii)
provide to the Investors evidence of such notices and filings, and the
Corporation shall maintain the listing of its Common Stock on such market.
As used herein, "Business Day" means any day except Saturday, Sunday and any
day which shall be a legal holiday or a day on which banking institutions in
the State of New York generally are authorized or required by law or other
government actions to close.
(b) The Corporation shall at all times have taken the steps
necessary to authorize and reserve a sufficient number of shares of
authorized but unissued Common Stock and Warrant Shares as required to permit
the conversion of all of the Securities and exercise of the Placement Agent
Warrants. The Corporation will immediately take any such steps as may
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be necessary in the future to increase such number of authorized but unissued
shares of Common Stock and Warrant Shares in the event of a Conversion Price
adjustment (as defined in the Certificate of Designation), stock split, stock
dividend or any other event which increases the number of shares of Common
Stock for which the Securities may be converted or into which the Placement
Agent Warrants may be exercised. Any and all shares of Common Stock issued
upon conversion of the Securities, or Warrant Shares issued upon exercise of
the Placement Agent Warrants, shall be validly issued and outstanding, fully
paid and non-assessable.
(c) The Corporation will apply the net proceeds from the
sale of the Securities in accordance with the description set forth in
Section 3.12 of the Securities Purchase Agreement.
(d) The Corporation shall take all steps necessary to
fulfill all registration or qualification requirements of any state or
political subdivision of the United States in which the Securities are to be
offered, sold or converted into shares of Common Stock.
(e) If at any time following the date of the Business Plan,
any event occurs as a result of which the Business Plan, as then amended or
supplemented, would include any 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,
or if for any other reason it is necessary at any time to amend or supplement
the Business Plan to comply with the Securities Act or the Rules and
Regulations, the Corporation will promptly notify the Placement Agent thereof
and will prepare and deliver to the registered holders of the Securities and
the Placement Agent, at the Corporation's expense, an amendment to the
Business Plan that corrects such statement or omission or effects such
compliance.
(f) While any of the Securities remain outstanding, the
Corporation shall not and shall cause the Subsidiary not to, without the
consent of the holders of all of the Securities then outstanding, issue any
series of preferred stock or other securities with rights senior (in respect
of liquidations, dividends, preferences and similar rights) to those of the
Securities.
(g) The Corporation will not at any time, without the
approval of a majority of the holders of the Initial Securities, issue any
equity or equity-linked securities, in violation of the terms of Attachment
A.
(h) The Corporation will not at any time, directly or
indirectly, take any action intended, or which might reasonably be expected,
to cause or result in, or which will constitute, stabilization of the price
of the Securities to facilitate the sale or resale of any of the Securities.
(i) The Corporation will furnish to the Placement Agent for
a period of five years, without charge, (i) copies of financial statements
and related notes and schedules, (ii) supplementary financial information and
interim financial statements, and (iii) other periodic and special reports as
are required to be filed by the Securities Act or Rules and Regulations.
(j) The Corporation shall use its best efforts to get
approved for listing on
11
The Nasdaq Small-Cap Market after the Closing.
(k) The Corporation shall use its best efforts to file, and
thereafter promptly have declared effective, with the SEC either (1) a
Registration Statement on Form 10 (the "Form 10"), within sixty business days
after the Closing (or earlier, if necessary, to comply with the new OTCBB
Eligibility Rule) or (2) a Registration Statement on Form S-1 (or other
applicable form) as more fully described in the Registration Rights Agreement
and a Registration Statement on Form 8-A, within sixty business days after
the Closing (or earlier, if necessary, to comply with the new OTCBB
Eligibility Rule) which shall comply as to form and substance with all
applicable rules and regulations. This provision shall in no way be
construed to limit the rights and obligations of the parties under the
Registration Rights Agreement.
(l) For a period of two years after the Closing, the
Investors shall have the right to approve the appointment of any new or
replacement member to the Board of Directors, such approval not to be
unreasonably withheld. The Corporation agrees to take all corporate action
necessary to effect the foregoing concurrent with the Closing, including,
without limitation, amending the Corporation's Bylaws, in accordance with the
corporate laws of the State of Nevada.
(m) For a period of two years after the Closing, Xxxx Xxxx
XxXxxxx Clearing Corporation, its assigns or designees shall have the right
to appoint a designee to serve on the Board of Directors. The Corporation
agrees to take all corporate action necessary to cause the foregoing designee
to be elected to the Board of Directors concurrent with the Closing,
including, without limitation, amending the Corporation's Bylaws and the
election of the foregoing designee, in accordance with the corporate laws of
the State of Nevada.
(n) The Corporation and the Subsidiary shall have each of
its new employees, hired after the Closing, execute an Employee Inventions
and Confidentiality Agreement in the form provided to outside general counsel
of the Corporation, a copy of which is attached as EXHIBIT D to the
Securities Purchase Agreement.
(o) The Corporation shall adopt a Year 2000 Plan to address
the Year 2000 Problem, as described in Section 2.1(z) of the Securities
Purchase Agreement, within 90 days of the Closing.
(p) The Corporation shall adopt an adequate insurance policy
for its directors and officers within 60 days of the Closing.
(q) The Corporation shall deliver to the Placement Agent at
Closing a commitment letter or binder in respect of the proposed insurance
policy.
4. REGISTRATION RIGHTS.
(a) The Corporation shall file and use its best efforts to
cause to be declared effective by the SEC not later than 120 days from the
Closing (the "Required Registration Date"), a registration statement on Form
S-1 (or other applicable form) under the Securities
12
Act, or any successor or alternate form thereto (the "Registration
Statement") to register under the Securities Act the shares of Common Stock
of the Corporation into which the Securities are convertible and the
Placement Agent Warrants (the "Shelf Registration"). The Corporation shall
take all other actions necessary to keep such Shelf Registration continuously
effective such date as is the earlier of (x) the date when all Registrable
Securities covered by such Registration Statement have been sold or (y) the
date on which the Registrable Securities may be sold without any restriction
pursuant to Rule 144(k) as determined by the counsel to the Corporation
pursuant to a written opinion letter, addressed to the Corporation's transfer
agent to such effect. If an additional Registration Statement is required to
be filed because the actual number of shares of Common Stock into which the
Securities are convertible exceeds the number of shares of Common Stock
initially registered in respect of the Underlying Shares (as defined in the
Securities Purchase Agreement) based upon the computation on the Closing, the
Corporation shall have fifteen (15) Business Days to file such additional
Registration Statement, and the Corporation shall use its best efforts to
cause such additional Registration Statement to be declared effective by the
SEC as soon as possible, but in no event later than 120 days after Closing.
The Corporation shall bear all costs and expenses of such Shelf Registration.
The Corporation shall notify the Placement Agent promptly of the issuance by
the SEC of any stop order suspending the effectiveness of the Registration
Statement or the initiation of any proceedings for that purpose or the threat
thereof. If at any time the SEC shall issue any order suspending the
effectiveness of the Registration Statement, the Corporation will make every
effort to obtain the withdrawal of such order at the earliest possible
moment.
(b) If at any time following the effective date of the
Registration Statement, any event occurs as a result of which the
Registration Statement, as then amended or supplemented, would include any
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, or if for any other
reason it is necessary at any time to amend or supplement the Registration
Statement to comply with the Securities Act or the Rules and Regulations, the
Corporation will promptly notify the Placement Agent thereof and will prepare
and file with the SEC, at the Corporation's expense, an amendment to the
Registration Statement that corrects such statement or omission or effects
such compliance.
(c) The Corporation shall furnish the Placement Agent copies
of all filings and correspondence with the SEC concerning the Shelf
Registration.
(d) In the event the Registration Statement has not been
declared effective by the Required Registration Date, the Corporation shall
promptly remit in cash to each of the purchasers of the Securities an amount
equal to 2% per month or part thereof of the amount paid by each of such
purchasers for the first thirty days following the Required Registration Date
and thereafter an amount equal to 3% per month or part thereof until such
time as the Registration Statement is declared effective.
5. COVENANTS OF THE PLACEMENT AGENT. The Placement Agent
covenants and agrees that it will take no action, nor fail to take any
action, if such action or failure to take such action would have the effect
that the offer or sale of the Securities would not be exempt from the
registration requirements of the Securities Act, pursuant to Regulation D, or
the registration or
13
qualification requirements of any state or political subdivision of the
United States in which the Securities are to be offered or sold pursuant to
Regulation D.
6. CLOSING. The payment of the purchase for, and delivery of
certificates for, the Initial Securities shall be made at the offices of
Stroock & Stroock & Xxxxx LLP, or at such other place as shall be agreed upon
by you and the Corporation, on the third business day following satisfaction
of the closing conditions described herein, unless earlier agreed to (such
date, the "Closing Date"). The payment for, and delivery of certificates for,
any Additional Securities shall be made at the offices of Stroock & Stroock &
Xxxxx LLP, or at such other place as shall be agreed upon by you and the
Corporation on or before the 10th day following effectiveness of the
Registration Statement. The obligation of the Investors to purchase such
Additional Securities shall be conditioned, among other things, upon the
satisfaction of the closing conditions set forth herein and the accuracy of
the representations and warranties of the Corporation contained herein. For
purposes of this Agreement, "Closing Date" shall refer to the Closing Date
for the Initial Securities and any subsequent closing date for the Additional
Securities.
7. CONDITIONS TO CLOSING. The Corporation and the Placement Agent
agree that the issuance and sale of the Securities (whether Initial
Securities or Additional Securities) and all obligations of the Placement
Agent provided herein shall be subject to the truthfulness and accuracy of
the representations and warranties contained herein as of the date hereof and
as at the Closing Date, to the truthfulness and accuracy of the statements of
officers and directors of the Corporation made pursuant to the provisions
hereof, to the performance by the Corporation of its obligations hereunder to
be performed at or prior to the Closing and to the following further
conditions:
(a) The Placement Agent shall have received from Xxxxxxx,
Xxxxxxxx, Xxxx, Xxxxxxxx & Xxxxxxxx, counsel to the Corporation, a legal
opinion addressed to the Placement Agent, which will be in form and substance
reasonably satisfactory to the Placement Agent and its counsel.
(b) The Placement Agent and its counsel shall have been
furnished such other documents and opinions as they reasonably may require
for the purpose of enabling them to assess the accuracy, completeness or
satisfaction of the representations, warranties or conditions herein
contained.
(c) As of the Closing: (i) in the sole opinion of the
Placement Agent, there shall have been no material adverse change in the
affairs of the Corporation and the Subsidiary, taken as a whole, financial or
otherwise, from and as of the latest dates as of which such condition is set
forth in the Business Plan, except as referred to therein; (ii) there shall
have been no material transaction entered into by the Corporation or the
Subsidiary from the latest date as of which the financial condition of the
Corporation and the Subsidiary is set forth in the Business Plan other than
transactions referred to or contemplated therein and transactions in the
ordinary course of business; (iii) except as set forth in the Business Plan,
the Corporation and
14
the Subsidiary shall not have been in material default (nor shall an event
have occurred which, with notice or lapse of time or both, would constitute a
material default) under any provision of any material agreement or instrument
to which either the Corporation or the Subsidiary is a party or by which its
properties are subject or bound; and (iv) except as set forth in the Business
Plan, no action, suit or proceeding at law or in equity or before or by any
federal or state commission, board or other administrative agency, shall be
pending, threatened or, to the best knowledge of the Corporation,
contemplated against the Corporation and the Subsidiary or affecting its
properties wherein an unfavorable decision, ruling or finding would
materially and adversely affect the business, operations, financial condition
or income of the Corporation and the Subsidiary.
(d) The Placement Agent shall have received a certificate of
the Chief Executive Officer of the Corporation, dated as of each Closing, to
the effect that (i) there has been no material adverse change in the
condition, financial or otherwise, or affairs of the Corporation from the
latest date such condition is set forth in the Business Plan except as
referred to therein, and (ii) each of the conditions set forth in this
Section 7 has been satisfied.
(e) On or prior to the Closing Date, the Placement Agent
shall have furnished to the Corporation a certificate to the effect that the
offer and sale of the Securities shall be in compliance with Regulation D
under the Securities Act.
(f) The representations and warranties of the Corporation
contained herein shall be true and correct in all material respects at the
Closing Date, as if made on such date, and all covenants and agreements
herein contained to be performed on the part of the Corporation and the
Placement Agent and all conditions herein contained to be fulfilled or
complied with by the Corporation at or prior to the Closing Date shall have
been duly performed, fulfilled or complied with.
(g) The Corporation shall have furnished to the Placement
Agent such certificates, in addition to those specifically mentioned herein,
as the Placement Agent may have reasonably requested as to the accuracy and
completeness at the Closing of any statement in the Business Plan as to the
accuracy at the Closing Date of the representations and warranties of the
Corporation as to the performance by the Corporation of its obligations
hereunder, or as to the fulfillment of the conditions concurrent and
precedent to the obligations hereunder of the Placement Agent.
(h) On or prior to the Closing Date, the Corporation shall
have duly reserved the number of shares of Common Stock and Warrant Shares
required by this Agreement, the Placement Agent's Warrant Agreement and the
Registration Rights Agreement to be reserved for issuance upon conversion of
the Securities and upon exercise of the Placement Agent Warrants.
(i) The trading in the Common Stock shall not have been
suspended by the SEC or the OTCBB which suspension shall remain in effect.
15
(j) The Corporation shall have no knowledge of any action or
proceeding, pending or threatened, that may result in the delisting of the
Common Stock from the OTCBB and the Corporation shall have made all necessary
notices and filings with the OTCBB.
(k) The Corporation shall have duly executed and delivered
to the Placement Agent, the Placement Agent's Warrant Agreement and the
Registration Rights Agreement.
(l) On or prior to the Closing, the Corporation shall have
delivered to the Investors interim financial statements reflecting the
financial condition of the Corporation and the Subsidiary at May 31, 1999.
(m) On or prior to the Closing, the Corporation shall have
delivered to the Investors the results of UCC searches conducted in Nevada
and California for the Corporation and the Subsidiary.
(n) On or prior to the Closing, the Corporation shall have
agreed to appoint a designee of Xxxx Xxxx XxXxxxx Clearing Corporation (or a
Xxxx Xxxx assign or designee) to the Board of Directors and to have secured
the necessary approvals for the election of the foregoing designee, in
accordance with the corporate laws of the State of Nevada.
All such opinions, certificates, letters and documents shall be
in compliance with the provisions hereof only if they are reasonably
satisfactory in form and substance to the Placement Agent and counsel for the
Placement Agent. Any certificates signed by an officer of the Corporation
and delivered to the Placement Agent or to counsel for the Placement Agent
shall be deemed a representation and warranty by the Corporation to the
Placement Agent as to the statements made therein. If any condition to the
Placement Agent's obligations hereunder to be fulfilled prior to or at the
Closing is not so fulfilled, the Placement Agent may terminate this Agreement
or, if the Placement Agent so elects, may waive any such conditions which
have not been fulfilled or may extend the time of their fulfillment.
8. INDEMNIFICATION. The Corporation hereby agrees as follows:
(a) The Corporation will indemnify and hold harmless the
Placement Agent and each of its partners, directors, officers, associates,
affiliates, subsidiaries, employees, consultants, attorneys and agents, and
each person, if any, controlling either the Placement Agent or any of its
affiliates within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act, from and against any and all losses, claims,
damages, liabilities, costs or expenses (and any legal or other expenses
incurred by the Placement Agent in investigating or defending the same or in
giving testimony or furnishing documents in response to a request of any
government agency or to a subpoena) in any way relating to or in any way
arising out of the activities of the Placement Agent contemplated by this
letter, or in connection with the offering or sale of the Securities to be
sold by the Corporation as contemplated hereunder. Such indemnity agreement
shall not, however, cover any such loss, claim, damage, liability, cost or
expense which is held in a final judgment of a court (not subject to further
appeal) to have arisen out of either (i) the gross negligence or willful
misconduct of the Placement Agent or (ii) a breach of Section 5 hereof by the
Placement
16
Agent.
(b) The Placement Agent will indemnify and hold harmless the
Corporation, each person, if any, who controls the Corporation within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act, and each director of the Corporation to the same extent as the foregoing
indemnity from the Corporation to the Placement Agent, but only insofar as
losses, claims, liabilities, expenses or damages arise out of either (i) the
gross negligence or willful misconduct of the Placement Agent or (ii) a
breach of Section 5 hereof by the Placement Agent.
(c) If any action, proceeding or investigation is commenced
by a third party as to which the indemnified party hereunder proposes to
demand indemnification under this Agreement, it will notify the indemnifying
party with reasonable promptness. The indemnified party shall have the right
to retain counsel of its own choice (which choice shall be reasonably
satisfactory to the indemnifying party) to represent it and such counsel
shall, to the extent consistent with its professional responsibilities,
cooperate with the indemnifying party and any counsel designated by the
indemnifying party. The indemnifying party will not be liable under this
Agreement for any settlement of any claim against the indemnifying party made
without the indemnifying party's written consent, which shall not be
unreasonably withheld.
(d) In order to provide for just and equitable contribution,
if a claim for indemnification pursuant to this Section 8 is made but it is
found in a final judgment by a court of competent jurisdiction (not subject
to further appeal) that such indemnification may not be enforced in such
case, even though the express provisions hereof provided for indemnification
in such case, then the Corporation, on the one hand, and the Placement Agent,
on the other hand, shall contribute to the losses, claims, damages,
liabilities or costs to which the indemnified persons may be subject in
accordance with the relative benefits received from the offering and sale of
the Securities by the Corporation, on the one hand, and the Placement Agent,
on the other hand, and also the relative fault of the Corporation, on the one
hand, and the Placement Agent, on the other hand, in connection with the
statements, acts or omissions which resulted in such losses, claims, damages,
liabilities or costs, and the relevant equitable considerations shall also be
considered. No person found liable for a fraudulent misrepresentation shall
be entitled to contribution from any person who is not also found liable for
such fraudulent misrepresentation. Notwithstanding the foregoing, the
Placement Agent shall not be obligated to contribute any amount hereunder
that exceeds the proceeds received by the Placement Agent from the offering
and sale of the Securities.
9. SURVIVAL. The respective indemnities of the Corporation and
the Placement Agent and the representations and warranties of the Corporation
set forth in or made pursuant to this Agreement will remain in full force and
effect, regardless of any termination or cancellation of this Agreement or
any investigation made by or on behalf of the Placement Agent, the
Corporation or any person referred to in Section 8 hereof, and shall survive
any termination of this Agreement and/or issuance of the Securities, and any
successor or assign of the Placement Agent and/or its designee(s), the
Corporation, or any such person or any legal representative of such person
shall be entitled to the benefit of the respective indemnities, agreements,
warranties and representations.
17
10. TERMINATION. The Corporation has the right to terminate this
Agreement, prior to the Closing, by written notice to the Placement Agent 10
days prior to such termination and payment of the Placement Agent's
nonaccountable expense reimbursement on an assumed successful Placement of
$4,000,000 of gross proceeds from the sale of the Securities less such
amounts that have been previously paid or advanced by the Corporation with
respect to such nonaccountable expense reimbursement. The Placement Agent
shall have the right to terminate this Agreement at any time prior to the
Closing, by written notice to the Corporation, if any domestic or
international event or act or occurrence has materially disrupted, or in the
Placement Agent's sole opinion will in the immediate future materially
disrupt, securities markets; or if the United States shall have become
involved in a war or major hostilities; or if a banking moratorium has been
declared by any governmental authority; or if a moratorium in foreign
exchange trading by major international banks or persons has been declared;
or if the Corporation shall have sustained a material loss by fire, flood,
accident, hurricane, earthquake, theft, sabotage or other calamity or
malicious act which is not covered by insurance and in the Placement Agent's
sole opinion, will make it inadvisable to proceed with the delivery of the
Securities; or if there shall have been such material adverse change in the
condition or prospects of the Corporation or the market for its securities as
in the Placement Agent's sole judgment would make it inadvisable to proceed
with the offering, sale and delivery of the Securities.
Anything herein to the contrary notwithstanding, the liability of the
Corporation to the Placement Agent will be as set forth in Sections 1, 8, 9
and 10 hereof, and upon demand the Corporation will pay the Placement Agent
the full amount so owing.
11. INVESTMENT BANKING SERVICES.
(a) The Corporation is engaging you as its financial advisor
to provide investment banking services for a period of 24 months from the
date hereof for purposes of advising the Corporation in connection with
raising additional financing through private or public financings, assisting
the Corporation in its discussions and negotiations of strategic alliances,
joint ventures or similar transactions or evaluating offers received in
respect of any such transactions, acting as lead manager for any underwritten
public offering, acting as exclusive placement agent or advisor in connection
with any private offering of securities of the Corporation and acting as
financial advisor in connection with any sale or other transfer by the
Corporation, directly or indirectly, of a majority or controlling portion of
its capital stock or assets to another entity, any purchase or other transfer
by another entity, directly or indirectly, of a majority or controlling
portion of the capital stock or assets of the Corporation, and any merger or
consolidation of the Corporation with another entity. The Corporation
agrees, in respect of its engagement of you described in the prior sentence,
that you shall be the Corporation's exclusive agent, advisor or sole
underwriter in connection with any offering of convertible preferred
securities and that in connection with any other offering of equity
securities, the Corporation hereby grants you a right of first refusal to
serve as its exclusive advisor, agent or underwriter, which right must be
expressly waived by you in writing within 15 days of receipt of the
Corporation's written offer to you. Both the Placement Agent and the
18
Corporation agree that if a nationally-recognized financial advisor (as so
determined in the Placement Agent's reasonable judgment) is successfully
retained by the Corporation for an acquisition or merger as described herein,
the Placement Agent will waive its rights under this Section 11.
(b) If during the term of this engagement securities are
sold by the Corporation using an agent, advisor or underwriter other than the
Placement Agent (subject to the terms of Section 11(a) herein), then the
Corporation shall pay the Placement Agent, at the time of each such sale, an
amount equal to $100,000 and 100,000 shares of the Corporation's common
stock, plus expenses.
(c) If during the term of this engagement one or more
acquisitions occur, in which the party or parties to an acquisition were
identified by the Placement Agent or where the Placement Agent rendered
advice concerning the acquisition, then the Corporation shall pay the
Placement Agent, for its services hereunder, a cash fee at the closing of
each such acquisition equal to the percentages set forth below of the
Aggregate Consideration (as defined below) payable in connection with each
such acquisition:
Aggregate Consideration Percentages
----------------------- -----------
On the first $1,000,000 5.0%
Plus on the next $1,000,000 4.0%
Plus on the next $1,000,000 3.0%
Plus on the next $1,000,000 2.0%
Plus on the amount over $4,000,000 1.0%
(d) For purposes of this engagement, the term "Aggregate
Consideration" with respect to a particular acquisition means the aggregate
gross value of all cash, securities or other property paid directly or
indirectly to the Corporation (including all amounts paid or distributed by
the Corporation to the holders of capital stock of the Corporation and all
amounts paid, distributed or issued to the holders of options, warrants,
stock appreciation rights or similar rights or securities in the Corporation
in connection with the acquisition).
12. GENERAL PROVISIONS.
(a) PARTIES. This Agreement shall inure solely to the
benefit of, and shall be binding upon, the Placement Agent, the Corporation,
the controlling and other persons referred to in Section 9 hereof, and their
respective successors, legal representatives, heirs, designees and assigns,
and no other person shall have or be construed to have any legal or equitable
right, remedy or claim under or in respect of or by virtue of this Agreement
or any provision herein contained.
(b) AMENDMENT. No amendment or modification hereto, or
waiver of the terms hereof, shall be valid unless in a writing executed by
each of the parties hereto or by the party or parties to be bound.
19
(c) NOTICES. All notices, requests and other communications
under this Agreement shall be in writing and shall be deemed to have been
delivered 48 hours after having been mailed in a general or branch post
office and enclosed in a registered or certified postpaid envelope; 24 hours
after having been sent by overnight courier; when delivered to a telegraph
company or when scanned graphically or otherwise by telegraphic
communications equipment of the sending party and accompanied by a
substantially contemporaneous telephone call; and, in each case, addressed to
the respective parties at the addresses stated below or to such other changed
addresses as the parties may have fixed by notice; provided, however, that
any notice of change of address shall be effective only upon receipt.
To the Placement
Agent: Xxxx Xxxx XxXxxxx Clearing Corporation
Xxx Xxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to: Stroock & Stroock & Xxxxx LLP
000 Xxxxxx Xxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxx X. Xxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
To the Corporation: Entertainment Boulevard Inc.
0000 Xxx Xxx Xxxxxx
Xxxxx 000
Xxxxxx Xxx Xxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx Xxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to: Xxxxxxx, Xxxxxxxx, Xxxx, Chizever & Xxxxxxxx
0000 Xxxxxxxx Xxxxxxxxx, Xxxxxxxxx Xxxxx
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(d) SEVERABILITY. If any provision herein, or the
application thereof to any circumstance, is found to be unenforceable,
invalid or illegal, such provision shall be deemed deleted from this
Agreement or not applicable to such circumstance, as the case may be, and the
remainder of this Agreement shall not be affected or impaired thereby.
20
(e) ATTORNEYS' FEES. If any action, including, without
limitation, arbitration, should arise among the parties hereto to enforce or
interpret the provisions of this Agreement, the prevailing party in such
action shall be reimbursed for all reasonable expenses incurred in connection
with such action, including reasonable attorneys' fees.
(f) INTEGRATION. This Agreement expresses the entire
agreement and understanding of the parties hereto with respect to the matters
set forth herein and supersedes all prior agreements, arrangements and
understandings among the parties hereto with respect to the matters set forth
herein.
(g) GOVERNING LAW. This Agreement shall be construed and
enforced in accordance with the laws of the State of New York without regard
to the principles of conflicts of laws.
(h) CAPTIONS. The section headings contained herein are
inserted only for convenience and shall not affect the construction or
meaning of any of the terms hereof.
(i) COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of
which shall together constitute one and the same agreement.
(j) WAIVERS. No waiver of any term, provision or condition
of this Agreement, in any one or more instances, shall be deemed to be or
construed as a further waiver of any such term, provision or condition or as
a waiver of any other term, provision or condition.
(k) PRONOUNS AND NUMBER. When the context so requires, the
masculine shall include the feminine and neuter, the singular shall include
the plural and conversely.
(l) CERTAIN TERMS. As used herein, the term "person" means
any individual or natural person, or any corporation, trust, business trust,
governmental agency or body or any other legal entity, whether acting for
himself, herself or itself or in a fiduciary or other capacity; the terms
"hereof," "herein," "hereby" and "hereunder" refer to this Agreement in its
entirety (and not solely to the particular provisions in which they may
appear) and to the documents incorporated herein by reference.
(m) SURVIVAL OF REPRESENTATIONS. All representations and
warranties set forth in this Agreement shall survive the execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby.
(n) FURTHER ASSURANCES. The parties hereto agree to execute
any and all such further agreements, instruments or documents, and to take
any and all such further action, as may be necessary or desirable to carry
into effect the purpose and intent of this Agreement.
21
If the foregoing correctly sets forth the understandings among the
Placement Agent and the Corporation, please so indicate in the space provided
below for that purpose, whereupon this letter shall constitute a binding
agreement among us.
Very truly yours,
ENTERTAINMENT BOULEVARD INC.
By: /s/ Xxxxxxx Xxxxx
---------------------------
Name: Xxxxxxx Xxxxx
Title: President
READ, ACCEPTED AND AGREED TO AS
OF THE DATE FIRST WRITTEN ABOVE:
XXXX XXXX XXXXXXX CLEARING CORPORATION
By: /s/ Xxxxxxx Xxxxxxxxx
--------------------------
Name: Xxxxxxx Xxxxxxxxx
Title:
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ATTACHMENT A
LOCK UP LETTER
Xxxx Xxxx XxXxxxx Clearing Corporation
As Placement Agent
Xxx Xxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Ladies and Gentlemen:
Reference is made to a Placement Agency Agreement (the "Placement
Agency Agreement"), which will be executed between Entertainment Boulevard
Inc., a Nevada corporation (the "Corporation"), and Xxxx Xxxx XxXxxxx
Clearing Corporation (the "Placement Agent").
In consideration of the Placement Agency Agreement, the Corporation
hereby agrees not to, without the prior written consent of the Placement
Agent, offer, sell or otherwise dispose of any shares, directly or
indirectly, or transfer any of the economic risk of ownership, of its common
stock, par value $0.001 per share (the "Common Stock"), owned by the
undersigned until such time as the Registration Statement (as defined in the
Registration Rights Agreement) is declared effective, except with respect to
the issuance of shares of Common Stock upon the exercise of stock options and
warrants outstanding as of the date hereof and the issuance of Common Stock
or stock options under any benefit plan of the Corporation.
It is understood that, if the Corporation notifies you that it does
not intend to proceed with the issuance and sale of Securities (as defined in
the Placement Agency Agreement) pursuant to the Placement Agency Agreement,
if the Placement Agency Agreement does not become effective, or if the
Placement Agency Agreement (other than the provisions thereof which survive
termination) shall terminate or be terminated prior to payment for and
delivery of the Securities, the undersigned will be released from his
obligations under this letter agreement.
Dated: September , 1999
Very truly yours,
ENTERTAINMENT BOULEVARD INC.
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Name:
Title:
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