EXHIBIT 10
October 8, 2003
Nova Oil, Inc.
00000 Xxxxx Xxxxx Xxxx
Xxxxxxx, Xxxxxxxxxx 00000-9377
Re: Nova Oil, Inc.
Gentlemen:
This letter will set forth certain terms and conditions under and upon
which Public Securities, Inc. ("Placement Agent") will participate in the
distribution of the Offering.(1) The Common Stock to be offered for sale
(2,000,000 shares @ $0.10 per share [the "Offering"]) shall be filed as an
exemption with the States of Washington, Idaho, Montana, Nevada, New Jersey, and
New York pursuant to an exemption under Rule 506, Regulation D, of the
Securities Act of 1933, as amended. The Placement Agent shall be provided with
sufficient copies of the proposed Offering Documents and all exhibits thereto
necessary for their review and approval, as well as Due Diligence information
requested by the Placement Agent.
The Company shall bear, and be responsible for the following cost and
expenses of the Offering:
(i) the costs of preparing, printing, delivering and
filing with applicable State Securities Agencies and
the Securities and Exchange Commission; and the costs
of printing and delivering all such documents (and
all syndication documents) to the Placement Agent in
such reasonable quantities as may be requested by the
Placement Agent;
(ii) costs of printing and delivering certificates
representing the Common Stock;
(iii) costs and expenses, including legal fees, for
exempting or qualifying the Common Stock for offer
and sale under the securities or "blue sky" laws of
the various states in which the Placement Agent
intends to offer and sell the Common Stock;
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(1) The Offering is defined as the offer and sale by Nova Oil, Inc., a
Nevada Corporation ("Company"), of a minimum of 10,000 shares ("Minimum
Offering") and a maximum of 2,000,000 shares ("Maximum Offering") of common
stock of the Company, par value $0.001 per share ("Common Stock"), and will
terminate on December 31, 2003, provided; however, that the Offering may be
terminated at any time prior thereto at the discretion of the Company. All funds
received from subscribers for Common Stock will be held in impound by Inland
Northwest Bank ("Impound Agent").
Nova Oil, Inc.
October 8, 2003
Page 2
(iv) NASD filing fees (if applicable);
(v) fees and expenses of the Transfer Agent and Registrar
of the Company's Common Stock; and,
(vi) any other usual and customary expenses in connection
with the foregoing.
Notwithstanding any other provision hereof to the contrary, in the
event that the offering is terminated for any reason prior to the Closing of the
offering, the Company will pay or reimburse the Placement Agent for the actual
itemized out-of-pocket expenses incurred by it in connection with investigating,
preparing to market and marketing of the Common Stock, including fees and
expenses of its counsel (in accordance with the provisions of NASD Conduct Rule
2710 (c) (6)(B)(iv)).
Subject to the terms and conditions set forth herein, in consideration
of your performance of your obligations thereunder, the Company agrees that,
provided the Minimum Offering is sold, Public Securities shall receive (i)
selling commissions in an amount equal to 10% of the aggregate purchase price of
the Common Stock sold in the offering, (ii) a nonaccountable expense allowance
equal to 2% of the aggregate purchase price of the Common Stock sold in the
offering, (iii) an accountable expense allowance equal to 1% of the aggregate
purchase price of the Common Stock sold in the offering, and (iv) Warrants to
purchase from the Company 1 share for every 10 shares sold in the offering or up
to a maximum of 200,000 shares of Common Stock. The Warrants are exercisable at
a per share price of $0.14. The Placement Agent will pay the Company one hundred
dollars ($100) consideration for the right to purchase the Warrants. The
Placement Agent's Warrants will be exercisable for a period commencing 1 year
from the termination of the Offering and prior to the expiration of 5 years from
the termination. The Company agrees and grants to Public Securities, "piggyback"
registration rights for the warrants and the underlying common stock.
The aggregate commissions and expense allowance payable in connection
with the sale of Common Stock will be disbursed to Placement Agent upon the
termination of the Offering.
The Company shall indemnify and hold the Placement Agent harmless
against any and all liabilities, claims and lawsuits, including any and all
awards, fines, levies, and/or judgments to which they may become subject under
the Securities Act of 1933, as amended, the Securities Exchange act of 1934, as
amended, or any other federal or state statue, at common law or otherwise,
insofar as said liabilities, claims and lawsuits (including awards, fines,
levies, and/or judgments) arise out of or are in connection with the Private
Placement Memorandum and related exhibits filed under such Acts or other
statutes. In addition, the Company shall also indemnify and hold the Placement
Agent harmless against any and all costs and expenses, including reasonable
counsel fees, incurred or relating to the foregoing.
Nova Oil, Inc.
October 8, 2003
Page 3
The Placement Agent shall indemnify and hold the Company harmless
against any and all liabilities, claims and lawsuits, including any and all
awards, fines, levies, and/or judgments to which it may become subject under the
Securities Act of 1933, as amended, the Securities Exchange act of 1934, as
amended, or any other federal or state statue, at common law or otherwise,
insofar as said liabilities, claims and lawsuits (including awards, fines,
levies, and/or judgments) which (A) are related to or arise out of or in
connection with (i) actions taken or omitted to be taken (including any untrue
statements of material fact made or any statements of material fact omitted to
be made) by Placement Agent or its affiliates, or (ii) actions taken or omitted
to be taken by an Indemnified Person with the consent or in conformity with the
actions or omissions of Placement Agent or its affiliates or (B) are otherwise
related to or arise out of Placement Agent's activities on behalf of the
Company. In addition, the Placement Agent shall also indemnify and hold the
Company harmless against any and all costs and expenses, including reasonable
counsel fees, incurred or relating to the foregoing.
The Indemnified entity shall give the Indemnifying entity prompt notice
of any such liability, claim or lawsuit which it contends is the subject matter
of the Indemnifying entity's obligation and the Indemnifying entity thereupon
shall be granted the right to take any and all necessary and proper action, at
its sole cost and expense, with respect to such liability, claim or lawsuit,
including the right to settle, compromise and dispose of such liability, claim
or lawsuit, excepting therefrom any and all proceedings or hearing before any
regularly bodies and/or authorities. Indemnifying entity shall not be liable for
any settlement of any litigation or proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment
against an Indemnified Person, the Indemnifying entity agrees to indemnify the
Indemnified Person from and against any loss or liability by reasons of such
settlement or judgment.
This Agreement shall be terminated, and the Placement Agent will have
no further liability in the event of:
(a) An occurrence of material adverse changes in the Company's
business, business prospects, earnings, properties or condition, financial or
otherwise;
(b) The market for securities in general or for the Common Stock
in particular, or political, financial or economic conditions, shall have
materially changed from those reasonably foreseeable as of the date hereof so as
to render it impracticable in the Placement Agent's sole judgement to make the
offering; or there shall have been a material adverse change in market levels
for securities in general (or those of companies similar to the Company in
particular), or financial or economic conditions, which render it inadvisable to
proceed;
Nova Oil, Inc.
October 8, 2003
Page 4
(c) Any action, suit or proceeding, at law or equity, shall have
been initiated or threatened against the Company by a private litigator or by
any federal, state or other commission, board or agency wherein any unfavorable
result or detection could materially adversely affect the business, property,
financial condition or income or earnings of the Company;
(d) The Company shall have failed to comply with any of its
commitments herein or shall be in breach of any of its representations contained
herein or therein.
The Company agrees and acknowledges that the Placement Agent shall be
the sole determinant as to the presence of any such conditions, events,
occurrences and provisions.
In the event that the proposed Offering is withdrawn for reasons other
than the occurrence of termination date, the Company agrees, acknowledges and
undertakes to remain responsible for payment of: (a) fees, costs and
disbursements of its own accountants, auditors and attorneys; (b) fees, costs
and disbursements incurred and/or due and payable to the Placement Agent and its
legal counsel pursuant to this Letter, which the Company also agrees are deemed
non-refundable; (c) all expenses incident to the preparation and filings of
exemption requests under the "blue sky" laws of the various states; (d) the fees
for the transfer agent of the Company's Common Stock upon the issuance of the
securities; and (e) all expenses of printing the offering documents covering the
Common Stock and all other documents or instruments.
The Placement agent agrees and undertakes to secure approval by the
NASD of the underwriting terms and conditions of the proposed Offering.
The Company represents and warrants that no person was or is entitled,
directly or indirectly, to compensation from the Company or any of its
affiliates for services rendered as a "finder" in connection with the proposed
Offering.
This Agreement shall be construed and enforced in accordance with the
internal laws of the Sate of Washington, and the parties agree to submit
themselves to the jurisdiction of the courts of the State of Washington which
shall be the sole tribunal in which any parties may institute and maintain a
legal proceeding against the other party arising from or out of any dispute with
respect to or in connection with this Agreement or the transactions contemplated
hereby. In the event any party initiates a legal proceeding in a jurisdiction
other than in the courts of the state of Washington, the other party may assert
as a complete defense and as a basis for dismissal of such legal proceeding that
the legal proceeding was not initiated and maintained in the courts of the state
of Washington accordance with the provisions of this paragraph.
This letter was prepared by Xxxxxxx X. Xxxxxxxxx P.S. ("Cleveland").
Both the Company and the Placement Agent, their respective officers and
directors are aware that Cleveland has represented Placement Agent and the
Company in numerous
Nova Oil, Inc.
October 8, 2003
Page 5
matters over a number of years. As such, Cleveland is in a potential conflicting
situation as to his representation of Placement Agent and Company. This letter
will also constitute notification to Placement Agent and Company of any
potential, apparent, or actual conflicts of interest. Since Cleveland has
represented and continues to represent Placement Agent and Company, a potential,
actual and apparent conflict of interest may exist. Placement Agent and Company
waive any conflicts of interest that may arise out or are connected to this
agreement or Cleveland's representation. The signature of Placement Agent and
Company acknowledges their understanding of the representation of Placement
Agent and Company by Xxxxxxx X. Xxxxxxxxx, their waiver and hold harmless
agreement for any conflict of interest. Placement Agent and Company, together
with their officers, directors, and shareholders acknowledge notice of and their
right to seek independent counsel.
If the foregoing is acceptable to you, please sign and return two copies of this
letter, retaining the original and one copy for you records.
Very truly yours,
PUBLIC SECURITIES, INC.
By: /s/XXXXXXX X. XXXX
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Xxxxxxx X. Xxxx
Accepted and agreed to as of the day and year first above written.
NOVA OIL, INC.
By: /s/XXXX X. XXXXXXXXXX
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Xxxx X. Xxxxxxxxxx, President
