Capitol Communities Corporation
&
Capitol Development of Arkansas, Inc.
As the Obligated Parties
PLACEMENT AGENT AGREEMENT
August 1, 2003
Noble International Investments, Inc.
0000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxx Xxxxx, XX 00000
Ladies and Gentlemen:
This agreement ("Agreement") confirms the terms on which Capitol
Communities Corporation, a Nevada Corporation, and Capitol Development of
Arkansas, Inc., an Arkansas Corporation (the "Obligated Parties") have engaged
Noble International Investments, Inc. (the "Placement Agent") in connection with
the proposed offering and sale by the Obligated Parties (the "Offering") of
Promissory Notes in the aggregate principal amount of $3,000,000 (the
"Securities") in a private placement.
1. Exclusive Engagement. The Obligated Parties have engaged the
Placement Agent to act as sole placement agent for the "all or none" basis
Offering. The Obligated Parties acknowledge and agree that Placement Agent
reserves the right not to participate in the Offering and that Placement Agent's
engagement hereunder is not an agreement by Placement Agent or any of its
affiliates to underwrite or purchase any of the Obligated Partys' securities
(including the Securities) or otherwise provide any financing. During the period
of Placement Agent's engagement under this Agreement (as specified in Section 12
hereof), the Obligated Parties will not, and will cause its affiliates not to,
initiate, solicit or enter into any discussions, negotiations or agreements
involving the issuance, offering or sale of the Securities (or any other
securities of the Obligated Parties) to any third parties, except through
Placement Agent. Furthermore, the Obligated Parties shall not be obligated to
Placement Agent under this Section 1, in the case of any consolidation of the
Obligated Parties with, or merger of the Obligated Parties into, any other
entity, any merger of another entity into the Obligated Parties, any
reclassification, conversion, exchange or cancellation of outstanding securities
of the Obligated Parties, or any issuance of securities by the Obligated Parties
under a stock option or pension plan to employees and consultants, and as
provided in Section 12. In the event that the Obligated Parties receive any
inquiry concerning the issuance, purchase or sale of the Securities (or any
other securities of the Obligated Parties) during such period, the Obligated
Parties will promptly inform Placement Agent in writing of the terms of such
inquiry and the identity of the party making the inquiry. Except for any
investment in the Obligated Parties's pension plan or an exchange with
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shareholder's, employee/consultant stock plans or an exchange of stock for
acquisitions.
2. The Offering. The Securities will not be registered with the United
States Securities and Exchange Commission (the "SEC") or any state securities
authority but will be offered pursuant to the exemption from registration
provided by Section 4(2) of the Securities Act of 1933, as amended (the "Act"),
or under Rule 506 of Regulation D promulgated under Act ("Regulation D") and
applicable state securities laws. The Securities in the Offering will be sold
only to accredited investors and up to 35 non-accredited (sophisticated)
investors (as that term is defined in Regulation D) pursuant to a private
offering memorandum to be prepared by the Obligated Parties (the "Offering
Memorandum").
3. Subscription Procedure. Each subscriber in the Offering (a
"Subscriber") will be required to complete and execute a Subscription Agreement
and a Purchaser's Questionnaire in the form attached to the Offering Memorandum
(the "Subscription Documents"). The Subscribers will be instructed to deliver
directly to the Placement Agent the completed Subscription Documents together
with a check made payable to (or verification of wire transfer to) Capitol
Communities and Capitol Development of Arkansas Escrow Account with First
Southern Bancorp for the number of Securities desired to be purchased. After the
Placement Agent reviews the Subscription Documents, the Placement Agent will
forward a copy of the Subscription Documents that are properly completed by
accredited investors and up to 35 non-accredited investors to the Obligated
Parties. The Obligated Parties shall decide as promptly as practicable after
they receive Subscription Documents from the Placement Agent (but in no event
later than 3 business days after receipt of such documents) whether or not to
accept the subscription.
If the Obligated Parties elect not to accept a subscription, they will
notify the Placement Agent in writing and that Subscriber's check or fed fund
wire will be returned to the Subscriber by the Placement Agent.
If the Obligated Parties elect to accept a subscription, an authorized
officer of the Obligated Parties will immediately counter-sign the Subscription
Documents (a "Subscription Acceptance") and forward a copy thereof to the
Placement Agent upon receipt of which the Placement Agent will forward that
Subscriber's check to the escrow account (the "Escrow Account") or if that
Subscriber's funds were transmitted to the Escrow Account by wire, the parties
may independently verify that such wire was received by First Southern Bancorp.
All checks and wire transfers that are deposited into the Escrow Account will
hereinafter be referred to as "Offering Proceeds."
4. Closing. The completion of the purchase and sale of the Securities
shall take place on September 15, 2003 or sooner if mutually agreed (the
"Closing"). No later than 7 business days after Closing, the Obligated Parties
shall deliver to each Subscriber whose subscription has been accepted by the
Obligated Parties (hereinafter referred to as an "Investor"), via overnight
courier, one or more certificates or instruments representing the number of
Securities purchased by the Investor, registered in the name of the Investor,
and a copy of that Investor's Subscription Documents counter-signed by the
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Obligated Parties.
5. Disbursement of Offering Proceeds. The Obligated Parties and the
Placement Agent agree that Offering Proceeds will be disbursed from the Escrow
Account to cover the unpaid but earned Placement Agent's Fees and the Expense
Allowance (as defined herein). The Obligated Parties shall receive funds from
the Escrow Account to satisfy their obligations for the terms and conditions of
the Securities and for the Use of Proceeds (as defined herein).
6. Terms of Engagement.
Section 6.1 Fees. As compensation for acting as Placement Agent for the
Offering, the Placement Agent will be entitled to receive a commission equal to
two percent (2%) of the aggregate offering price of all Securities sold in the
Offering (the "Placement Agent's Fee") plus two percent (2%) of the aggregate
offering price of all Securities sold in the Offering (the "Expense Allowance"),
plus the Obligated Parties shall forward to the Placement Agent a refundable
retainer of $20,000.00, which shall be refunded within five days, if there is no
Closing or used by the Obligated Parties to fulfill its obligation pursuant to
Section 6.3 of this Agreement, at the sole option of the Obligated Parties. The
Expense Allowance is intended to cover the Placement Agent's expenses incurred
in connection with the Offering. The Placement Agent shall not be required to
make an accounting to the Obligated Parties with respect to said Expense
Allowance.
Section 6.2 Future Financings. As additional compensation to the
Placement Agent for its services hereunder, the Obligated Parties agrees that
the Placement Agent shall be the sole lead underwriter or sole placement agent
of any public or private offering, respectively, of equity securities (or
securities convertible or exercisable into equity securities) by the Obligated
Parties during the period specified below. The Obligated Party's obligation to
appoint the Placement Agent for any of the additional services in this paragraph
shall terminate at the earlier of (a) 36 months after the Closing of the
Offering (if the Offering is completed), (b) when the Placement Agent shall
decline in writing to provide any of the additional services described in this
paragraph, or (c) if the Offering is not completed and this agreement is
terminated, then on the date of such termination. It is understood that the
Placement Agent's Fee, the Expense Allowance and any other benefit (financial or
otherwise) received by the Placement Agent as a result of the transactions
contemplated by this Agreement do not compensate the Placement Agent for any of
the additional services described in this paragraph, and that the Placement
Agent's performance of such services shall be subject to execution and
negotiation of separate agreements setting forth the terms and conditions of
such services (including without limitation indemnification and contribution
provisions) and the compensation payable therefor. This engagement does not
constitute a commitment by the Placement Agent or any of its affiliates to
provide any such financing or to underwrite, place or purchase any securities or
an agreement by the Placement Agent or any such affiliate to provide such a
commitment.
Section 6.3 Consulting Agreement. (a) Simultaneous with the Closing of
the Offering, the Obligated Parties shall enter into a consulting agreement with
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the Placement Agent, pursuant to which the Placement Agent will provide
financial consulting services to the Obligated Parties for a period of six (6)
months after the final Closing Date at a monthly fee of $10,000 payable in
advance at the Closing of the Offering. (b) On Closing of the Offering, the
Obligated Parties shall issue to the Placement Agent and/or its affiliates
1,000,000 shares of the Obligated Party's common stock with registration rights.
Section 6.4 Market. Notwithstanding anything to the contrary contained
herein, the Placement Agent shall not be obligated to make a market in the
Obligated Party's Common Stock or publish research reports on the Obligated
Parties.
Section 6.5 Matters Relating to Engagement. The Obligated Parties
acknowledges that the Placement Agent has been retained solely to provide the
services set forth in this Agreement. In rendering such services, Noble shall
act as an independent contractor, and any duties of Noble arising out of its
engagement hereunder shall be owed solely to the Obligated Parties. The
Obligated Parties further acknowledges that Noble may perform certain of the
services described herein through one or more of its affiliates. The Obligated
Parties acknowledges and agree that Noble is not, and does not hold itself out
to be, an advisor as to legal, tax, accounting or regulatory matters in any
jurisdiction. The Obligated Parties shall consult with its own advisors
concerning such matters and shall be responsible for making its own independent
investigation and appraisal of the risks, benefits and suitability of the
transactions contemplated by this letter agreement, and Noble shall have no
responsibility or liability to the Obligated Parties with respect thereto.
7. Representations and Warranties of the Obligated Parties. The
Obligated Parties represent and warrant to and agree with Placement Agent that:
Section 7.1 Organization of the Obligated Parties. The Obligated
Parties is are corporations duly organized and validly existing in good standing
under the laws of the State of Nevada and Arkansas and have all requisite
corporate power and authority to own, lease and operate their properties and to
carry on their business as now being conducted (and as proposed to be conducted)
and as described in the SEC Documents (as defined herein). Except as set forth
in the SEC Documents, the Obligated Parties doe not have any additional
subsidiaries and the Obligated Parties doe not own, directly or indirectly, more
than fifty percent (50%) of or control, directly or indirectly, any other
business entity. The Obligated Parties are duly qualified as foreign
corporations to do business and are in good standing in every jurisdiction in
which the nature of the business conducted or property owned or leased by them
make such qualifications necessary.
Section 7.2 Authority. (a) The Obligated Parties have the requisite
legal right and corporate power and authority to enter into and perform their
obligations under this Agreement and the transactions and agreements
contemplated by this Agreement (including without limitation the issuance of the
Securities and the securities issuable on conversion of the Securities); (b) the
execution and delivery of this Agreement and the execution, performance and
consummation by the Obligated Parties of the transactions and agreements
contemplated hereby and thereby have been duly authorized by all necessary
4
corporate action and no further consent or authorization of the Obligated
Parties or their Board of Directors or shareholders are required; and (c) this
Agreement and transactions and agreements contemplated herein have been (or upon
execution will be) duly executed, and delivered by the Obligated Parties and
constitute valid and binding obligations of the Obligated Parties enforceable
against the Obligated Parties in accordance with their terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency, or similar
laws relating to, or affecting generally the enforcement of, creditors' rights
and remedies or by other equitable principles of general application.
Section 7.3 Registration and Reporting. The Obligated Party's Common
Stock is registered pursuant to Section 12(b) or 12(g) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and the Obligated Parties
are in full compliance with all reporting requirements of the Exchange Act and
have filed all documents and reports required to be filed thereunder
(collectively, the "SEC Documents") that the Obligated Parties have been
required to file with the Commission pursuant to the Exchange Act. The SEC
Documents including any amendments hereto, when they were filed with the
Commission, conformed in all material respects to the requirements of the
Exchange Act, as applicable, and the rules, regulations and instructions of the
Commission thereunder.
Section 7.4 SEC Documents. As of their respective dates, the SEC
Documents complied in all material respects with the requirements of the Act
and/or the Exchange Act, as the case may be, and rules and regulations of the
SEC promulgated thereunder and other federal, state and local laws, rules and
regulations applicable to such SEC Documents, and none of the SEC Documents
contained any untrue statement of a material fact or omitted to state a 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. The
financial statements (together with the related schedules and notes thereto) of
the Obligated Parties included in the SEC Documents comply as to form with
applicable accounting requirements and the published rules and regulations of
the SEC and other applicable rules and regulations with respect thereto. Such
financial statements were prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods involved
(except as may be otherwise indicated in such financial statements or the notes
thereto or in the case of unaudited interim statements, to the extent they may
not include footnotes or may be condensed or summary statements) and fairly
present in all material respects the financial position of the Obligated Parties
as of the dates thereof and the results of operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments).
Section 7.5 Valid Issuances. All of the Obligated Party's outstanding
securities were issued in full compliance with all federal, state and local
laws. None of the Obligated Party's outstanding securities entitle the holders
thereof to pre-emptive rights.
Section 7.6 Consents. The Obligated Parties are not required under
federal, state or local law, rule or regulation to obtain any consent,
authorization or order of, or make any filing or registration with, any court or
5
governmental agency in order for it to execute, deliver or perform any of their
obligations under this Agreement or issue and sell the Securities in accordance
with the terms hereof (other than any SEC, NASD or state securities filings that
may be required to be made by the Obligated Parties subsequent to any Closing.
Section 7.7 No Conflicts. The execution, delivery and performance of
this Agreement by the Obligated Parties and the consummation by the Obligated
Parties of the transactions contemplated hereby does not and will not (i) result
in a violation of the Obligated Parties's Articles of Incorporation or By-Laws
or (ii) conflict with, or constitute a default (or an event that 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 material
obligation, agreement, covenant or condition contained in any material bond,
debenture, note or other evidence of indebtedness or in any material contract,
indenture, mortgage, loan agreement, joint venture or other agreement or
instrument or any "lock-up" or similar provision of any underwriting or similar
agreement to which the Obligated Parties is a party or by which it is bound or
affected, or (iii) result in a violation of any federal, state, local or foreign
law, rule, regulation, order, judgment or decree (including federal and state
securities laws and regulations) applicable to the Obligated Parties or by which
any property or asset of the Obligated Parties is bound or affected nor is the
Obligated Parties otherwise in violation of, conflict with or in default under
any of the foregoing. The business of the Obligated Parties is not being
conducted in violation of any law, ordinance or regulation of any governmental
entity.
Section 7.8 Disclosure. The Obligated Parties has no liabilities or
obligations (contingent or otherwise) and there are no circumstances or events
affecting the Obligated Parties (directly or indirectly) which are required to
be disclosed in the SEC Documents (including the financial statements filed
therewith and the notes and schedules attached to such financial statements)
which are not disclosed in the SEC Documents. No event or circumstance has
occurred or exists with respect to the Obligated Parties or its businesses,
properties, prospects, operations or financial condition, that, under applicable
law, rule or regulation, requires public disclosure or announcement by the
Obligated Parties but which has not been so publicly disclosed or announced.
Section 7.9 Litigation and Other Proceedings. Except as may be
accurately set forth in the SEC Documents, there are no lawsuits or proceedings
pending or threatened against the Obligated Parties or its executive officers,
nor has the Obligated Parties received any written or oral notice of any such
action, suit, proceeding or investigation. Except as set forth in the SEC
Documents, no judgment, order, writ, injunction or decree or award has been
issued by, or to the best knowledge of the Obligated Parties after diligent
investigation, requested of any court, arbitrator, governmental agency or
individual.
Section 7.10 No Misleading or Untrue Communication. Neither the
Obligated Parties, nor any affiliate or agent of the Obligated Parties in
connection with the transactions contemplated by this Agreement, has made, nor
will make, at any time, any oral communication in connection with the offer or
sale of the Securities which contained or will contain any untrue statement of a
material fact or omitted or will omit to state any material fact necessary in
order to make such statements, in the light of the circumstances under which
they were made, not misleading.
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Section 7.11 No Material Non-Public Information. The Obligated Parties
is not in possession of, nor has the Obligated Parties or its agents disclosed
to the Investors, any material non-public information that (i) if disclosed,
would, or could reasonably be expected to have, an effect on the market price of
the Common Stock or (ii) according to applicable law, rule or regulation, should
have been disclosed publicly by the Obligated Parties prior to the date hereof
but which has not been so disclosed.
Section 7.12 Patents, Copyrights, etc. The Obligated Parties owns or
possesses the requisite licenses or rights to use all patents, patent
applications, patent rights, inventions, know-how, trade secrets, trademarks,
trademark applications, service marks, service names, trade names and copyrights
("Intellectual Property") necessary to enable it to conduct its business as now
operated (and as contemplated to be operated in the future). There is no claim
or action by any person pertaining to, or proceeding pending, or threatened,
which challenges the right of the Obligated Parties with respect to any
Intellectual Property necessary to enable it to conduct its business as now
operated and as presently contemplated to be operated in the future. The
Obligated Party's current and intended products, services and processes
(including the use by the Obligated Parties of their Intellectual Property) do
not infringe on any intellectual property or other rights held by any person;
and the Obligated Parties are unaware of any facts or circumstances which might
give rise to any of the foregoing. The Obligated Parties have taken all
necessary security measures to protect the secrecy, confidentiality and value of
their Intellectual Property.
Section 7.13 Tax Status. The Obligated Parties have filed all federal,
state and foreign income and all other tax returns, reports and declarations
required by any jurisdiction to which it is subject and have paid all taxes and
other governmental assessments and charges and have set aside on their books
provisions reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or declarations apply.
There are no unpaid taxes claimed to be due by the taxing authority of any
jurisdiction, and the officers of the Obligated Parties after diligent
investigation know of no basis for any such claim. The Obligated Parties have
not executed a waiver with respect to the statute of limitations relating to the
assessment or collection of any foreign, federal, state or local tax. None of
the Obligated Parties's tax returns are presently being audited by any taxing
authority.
Section 7.14 Certain Transactions. None of the Obligated Party's
officers, directors, employees, affiliates, advisors or independent contractors
are or have been a party to, or involved in, any transaction, agreement (verbal
or otherwise) or arrangement with the Obligated Parties or any third party with
whom the Obligated Parties conduct business (other than for services as
officers, directors, employees, affiliates, advisors or independent
contractors), which require the Obligated Parties to directly or indirectly make
payments in cash or in kind to such parties, except as disclosed. There are no
outstanding loans, advances (except normal advances for business expenses in the
ordinary course of business) or guarantees of indebtedness by the Obligated
Parties to or for the benefit of any of the officers or directors of the
Obligated Parties or any of the members of the families of any of them, except
as disclosed. The Obligated Parties have not at any time during the last five
7
years made any unlawful contribution to any candidate for foreign office, or
failed to disclose fully any contribution in violation of law, or made any
payment to any federal or state governmental officer or official, or other
person charged with similar public or quasi-public duties, other than payments
required or permitted by the laws of the United States of any jurisdiction
thereof.
Section 7.15 No Brokers. The Obligated Parties have taken no action,
which would give rise to any claim by any person for brokerage commissions,
finder's fees or similar payments relating to this Agreement or the transactions
contemplated hereby, except for the Placement Agent's Fee and the Expense
Allowance.
Section 7.16 Environmental Matters.
(a) With respect to the Obligated Parties or any predecessor
of the Obligated Parties, there are no past or present violations of
Environmental Laws (as defined below), releases of any material into the
environment, actions, activities, circumstances, conditions, events, incidents,
or contractual obligations which may give rise to any common law environmental
liability or any liability under the Environmental Laws and neither the
Obligated Parties nor any of the aforementioned parties have received any notice
with respect to any of the foregoing, nor is any action pending or threatened in
connection with any of the foregoing. The term "Environmental Laws" means all
federal, state, local or foreign laws relating to pollution or protection of
human health or the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata, emissions,
discharges, releases or threatened releases of chemicals, pollutants,
contaminants, or toxic or hazardous substances or wastes (collectively,
"Hazardous Materials") into the environment, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials, as well as all authorizations,
codes, decrees, demands or demand letters, injunctions, judgments, licenses,
notices or notice letters, orders, permits, plans or regulations issued,
entered, promulgated or approved thereunder.
(b) Other than those that are or were stored, used or disposed
of in compliance with applicable law, no Hazardous Materials are contained on or
about any real property currently owned, leased or used by the Obligated
Parties, and no Hazardous Materials were released on or about any real property
previously owned, leased or used by the Obligated Parties during the period the
property was owned, leased or used by the Obligated Parties, except in the
normal course of the Obligated Parties's business.
(c) There are no underground storage tanks on or under any
real property owned, leased or used by the Obligated Parties that are not in
compliance with applicable law.
Section 7.17 Permits; Compliance. The Obligated Parties are in
possession of all franchises, grants, authorizations, licenses, permits,
easements, variances, exemptions, consents, certificates, approvals and orders
necessary to own, lease and operate its properties and to carry on their
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business as they are now being conducted (collectively, the "Obligated Parties
Permits"), and there is no action pending or threatened regarding suspension or
cancellation of any of the Obligated Parties Permits. The Obligated Parties are
not in conflict with, or in default or violation of, any of the Obligated
Parties Permits. The Obligated Parties have not received any notification with
respect to possible conflicts, defaults or violations of applicable laws.
Section 7.18 Title to Property. The Obligated Parties have good and
marketable title in fee simple to all real property and good and marketable
title to all personal property owned by them which is material to the business
of the Obligated Parties, in each case free and clear of all liens, encumbrances
and defects. Any real property and facilities held under lease by the Obligated
Parties are held by them under valid, subsisting and enforceable leases.
Section 7.19 Insurance. The Obligated Parties are insured by insurers
of recognized financial responsibility against such losses and risks and in such
mounts as are prudent and customary in the businesses in which the Obligated
Parties are engaged. The Obligated Parties have not been notified and have no
reason to believe that they will not be able to renew their existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue their business at a cost
materially similar to the premium currently being paid by the Obligated Parties
for such insurance.
Section 7.20 Internal Accounting Controls. The Obligated Parties
maintains a system of internal accounting controls sufficient to provide
reasonable assurance that (a) transactions are executed in accordance with
management's general or specific authorizations, (b) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain asset accountability,
(c) access to assets are permitted only in accordance with management's general
or specific authorization and (d) the recorded accountability for assets are
compared with the existing assets at reasonable intervals and appropriate
actions are taken with respect to any differences.
Section 7.21 Foreign Corrupt Practices. Neither the Obligated Parties
nor any director, officer, agent, employee or other person acting on behalf of
the Obligated Parties have, in the course of their actions for, or on behalf of,
the Obligated Parties, used any corporate funds for any unlawful contribution,
gift, entertainment or other unlawful expenses relating to political activity;
made any direct or indirect unlawful payment to any foreign or domestic
government official or employee from corporate funds; violated or is in
violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977; or
made any bribe, rebate, payoff, influence payment, kickback or other unlawful
payment to any foreign or domestic government official or employee.
Section 7.22 Employees. No labor disturbance by the employees of the
Obligated Parties exist or are imminent; no collective bargaining agreement
exists with any of the Obligated Party's employees and no such agreement is
imminent.
Section 7.23 Investment Company. The Obligated Parties are not an
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"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
Section 7.24 Market Activity. Neither the Obligated Parties, nor its
affiliates, have taken or will take, directly or indirectly, any action designed
to, or that might be reasonably expected to, cause or result in manipulation of
the price of the Common Stock.
8. Covenants of the Obligated Parties. The Obligated Parties covenant
and agree with the Placement Agent as follows:
Section 8.1 Compliance with Laws. The sale and issuance of the
Securities shall be made in accordance with the provisions and requirements of
the Act, Regulation D and any applicable state and local law. Neither the
Obligated Parties nor any of their affiliates will take any action in connection
with the Offering; which would cause the Offering not to comply with Section
4(2) of the Act or Rule 506 of Regulation D promulgated thereunder. The
Obligated Parties will make a timely filing of Form D (and all necessary
amendments) pursuant to the requirements of Regulation D. The Obligated Parties
shall exercise reasonable care to assure that the Investors are not underwriters
within the meaning of Section 2(11) of the Act and shall take all actions
required by Rule 502(d) of Regulation D. The Obligated Parties, in its sole
discretion, will not accept a subscription from an Investor if the Obligated
Parties have reason to believe that material information supplied by or material
representations or warranties made by such Investor are not fully accurate. The
Obligated Parties shall reasonably believe, immediately prior to making any
sale, that an Investor is an accredited investor or one of a possible 35
non-accredited investors, and either alone or with their purchaser
representative, has such knowledge and experience in financial and business
matters that such Investor is capable of evaluating the merits and risks of a
purchase of the Securities and otherwise meets the suitability standards set
forth in the Offering Memorandum. The Obligated Parties shall keep the Offering
Memorandum confidential and shall not distribute it or any other materials
related to the transaction contemplated hereby, or otherwise advertise to or
solicit purchasers of the Securities, without the express written consent of the
Placement Agent. Neither the Obligated Parties nor any of its affiliates nor any
distributor, independent contractor or any person acting on its or their behalf
(i) have conducted or will conduct any general solicitation (as that term is
used in Regulation D) or general advertising with respect to any of the
Securities, or (ii) have made any offers or sales of any security or solicited
any offers to buy any security under any circumstances that would prevent the
issuance of the Securities from qualifying from an exemption from registration
under the Act.
Section 8.2 Offering Memorandum. The Offering Memorandum, the
appendices and exhibits (including any SEC Document) attached thereto,
information incorporated by reference therein and the financial statements of
the Obligated Parties and the related notes thereto included therein, and all
amendments and supplements thereto in the form delivered to the Investors prior
to the Closing will be prepared in compliance with, and include the disclosure
required by, the Act and the rules and regulations promulgated thereunder, and
will not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make any statements
therein, in the light of the circumstances under which they are made, not
10
misleading. Each SEC Document included within the Offering Memorandum will be a
true and complete copy of or excerpt from such document as filed by the
Obligated Parties with the SEC.
Section 8.3 Delivery and Amendment of Offering Memorandum. Up to and
through the final Closing Date if any event shall occur as a result of which the
Offering Memorandum or any exhibits thereto would include any untrue statement
of a material fact or omit to state any material fact necessary in order to make
the statements therein, in the light of the circumstances under which they were
made, when such Offering Memorandum was delivered, not misleading or for any
other reason it shall be necessary to amend or supplement the Offering
Memorandum or to file under the Exchange Act any document incorporated by
reference in the Offering Memorandum in order to comply with the Act or the
Exchange Act, the Obligated Parties shall immediately notify the Placement Agent
in writing to suspend offers for sale and solicitations of purchases of the
Securities. If the Obligated Parties shall determine to amend or supplement the
Offering Memorandum, the Obligated Parties will so advise the Placement Agent
and will promptly prepare an amendment or supplement to the Offering Memorandum
(or in the case of a document required under the Exchange Act, prepare and file
such document with the SEC) that will correct such statement or omission or
effect such compliance and will advise the Placement Agent when it may resume
offers for sale, and solicitations of purchases, of the Securities. The
Obligated Parties will immediately thereafter deliver to the Placement Agent
without charge as many copies of the supplemented or amended Offering Memorandum
as the Placement Agent may reasonably request for the purposes contemplated by
this Agreement.
Section 8.4 Use of Proceeds. The Obligated Parties will apply the net
proceeds from the sale of the Securities in the manner set forth under the
caption "Use of Proceeds" in the Offering Memorandum.
Section 8.5 Offering Expenses. The Obligated Parties will pay all
expenses, fees and taxes in connection with (a) the preparation and printing of
copies of the Offering Memorandum and all amendments and supplements thereto,
including in each case all documents incorporated by reference therein (b) the
delivery of the Securities, (c) the furnishing of the notes referred to herein.
Section 8.8 Information Rights. For a period of three (3) years from
the Closing, if requested by the Placement Agent, the Obligated Parties will
deliver to the Placement Agent (a) a copy of each unaudited quarterly financial
statement and together with any other documents or reports which may be issued
by the Obligated Parties to the public, including, without limitation, reports
on Forms 8-K, 10-K and 10-Q and exhibits thereto, (b) reports or communications
(financial or other) of the Obligated Parties mailed to its security holders,
(c) every press release and every news item and article in respect of the
Obligated Parties or its affairs which was released by the Obligated Parties,
(d) and distribute the Obligated Parties's shareholders annual financial
statements prepared by an independent auditor in conformity with generally
accepted accounting principles, consistently applied, which clearly set forth
the financial position of the Obligated Parties, (e) a duplicate list of
shareholders of the Obligated Parties at such time as requested by the Placement
Agent together with monthly DTC transfer sheets, and (f) any other information
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with respect to the Obligated Parties, its properties, or its business as the
Placement Agent may reasonably request; provided, however, that the Obligated
Parties shall not disclose (in any manner) to the Placement Agent any document
or information which contains material non-public information regarding the
Obligated Parties unless prior to the disclosure of such information the
Obligated Parties identifies such information as being material non-public
information and provides the Placement Agent with the opportunity in writing to
accept or refuse to accept such non-public information for review.
Section 8.10 Public Information. The Obligated Parties shall comply in
all respects with their reporting and filing obligations under the Exchange Act,
and will not take any action or file any document (whether or not permitted by
said Act or the rules thereunder) to terminate or suspend their reporting and
filing obligations under the Exchange Act. The Obligated Parties will deliver or
make available to the Subscribers true and complete copies of the SEC Documents
filed prior to any Closing Date. The Obligated Parties will not disclose to the
Subscribers any information that, according to applicable law, rule or
regulation, should have been disclosed publicly prior to the date of such
disclosure to the Subscribers by the Obligated Parties, but which have not been
publically disclosed.
Section 8.12 Restrictions. For a period of three (3) years from the
final Closing Date, except for the Obligated Party's Series A Preferred Stock,
the Obligated Parties shall not (a) redeem any of their securities outstanding
as of the final Closing Date, or (b) pay any dividends or make any other cash
distribution in respect of their securities in excess of the amount of the
Obligated Parties's current or retained earnings, or (c) issue any shares of
preferred stock without the prior written consent of the Placement Agent. The
Placement Agent shall either approve or disapprove any such contemplated
securities redemption, dividend, distribution or issuance within five (5)
business days after the Placement Agent receives written notice of the proposed
action.
9. Conditions to Placement Agent's Obligations. The obligations of the
Placement Agent hereunder shall be subject, in its sole discretion, to the
following conditions:
Section 9.1 Representations, Warranties and Covenants. All
representations, warranties covenants and other statements of the Obligated
Parties herein (including without limitation those contained in Section 7 and 8
hereof) and in the Offering Memorandum shall on all Closing Dates be true and
correct and the Obligated Parties shall have performed all of their obligations
hereunder.
Section 9.2 Disclosure. Except as disclosed in the Offering Memorandum,
subsequent to the respective dates as of which information is given in the
Offering Memorandum through and on any Closing Date, there shall not have been
(a) any material adverse change in the business, financial condition,
operations, assets, properties or prospects described or referred to in the
Offering Memorandum, or the results of operations, condition (financial or
otherwise) earnings, operations, business or business prospects, of the
Obligated Parties, (b) any transaction that is material to the Obligated
Parties, except transactions in the ordinary course of business and except as
described in the Offering Memorandum, (c) any obligation that is material to the
Obligated Parties, direct or contingent, incurred by the Obligated Parties,
except obligations incurred in the ordinary course of business, (d) any change
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in the capital stock or outstanding indebtedness of the Obligated Parties, which
is material to the Obligated Parties, except for the exercise of stock options
disclosed as outstanding, or (e) any dividend or distribution of any kind
declared, paid or made on the capital stock of the Obligated Parties.
9.3 Legal Opinion on Subscription Date. The Obligated Party's
independent counsel shall deliver to the Placement Agent on the Closing an
opinion substantially in the form of Exhibit A.
10. Indemnification.
(a) The Obligated Parties agree to indemnify, defend and hold harmless
the Placement Agent and any person who controls the Placement Agent within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act and all
employees of the Placement Agent (the "Placement Agent Affiliates") from and
against any loss, expense, liability or claim (including the reasonable cost of
investigation) which, jointly or severally, any such Placement Agent Affiliates
controlling person may incur insofar as such loss, expense, liability or claim
arises out of (i) any breach by the Obligated Parties of any representation,
warranty or covenant contained herein or in any of the agreements referenced
herein, (ii) Placement Agent's service as Placement Agent hereunder, except as
provided under section 10(b), (iii) or based upon any untrue statement or
alleged untrue statement of a material fact contained in the Offering Memorandum
or Registration Statement, (iv) based upon any omission or alleged omission to
state a material fact required to be stated in either such Offering Memorandum
or Registration Statement necessary to make the statements made therein not
misleading, or (v) any cause of action, suit or claim, derivative or otherwise,
by any stockholder of the Obligated Parties based on a breach or alleged breach
by the Obligated Parties or any of their officers or directors of their
fiduciary or other obligations to the stockholders of the Obligated Parties,
except insofar as any such loss, expense, liability or claim based upon any
untrue statement of a material fact contained in and in conformity with
information furnished in writing by the Placement Agent or any Placement Agent
Affiliates to the Obligated Parties expressly for use with reference to such
Placement Agent in such Offering Memorandum.
If any action is brought against the Placement Agent or any Placement
Agent Affiliate in respect of which indemnity may be sought against the
Obligated Parties pursuant to the foregoing paragraph, the Placement Agent shall
notify the Obligated Parties in writing of the institution of such action and
the Obligated Parties shall assume the defense of such action, including the
employment of counsel and payment of all expenses related to such action
including without limitation attorney and paralegal fees. The Placement Agent
and any Placement Agent Affiliate shall have the right to employ their own
counsel in any such case at the sole expense of the Obligated Parties if the
Obligated Parties shall not have employed counsel to have charge of the defense
of such action or such indemnified party or the Placement Agent or such
Placement Agent Affiliate shall have reasonably concluded that there may be
defenses available to it or them which are different from or additional to those
available to the Obligated Parties (in which case the Obligated Parties shall
not have the right to direct the defense of such action on behalf of the
indemnified party or parties), in any of which events such and expenses shall be
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borne by the Obligated Parties and paid as incurred. Anything in this paragraph
to the contrary notwithstanding, the Obligated Parties shall not be liable for
any settlement of any such claim or action effected without its written consent.
(b) The Placement Agent agrees to indemnify, defend and hold the
Obligated Parties harmless from and against any loss, expense, liability or
claim (including the reasonable cost of investigation) which, jointly or
severally, the Obligated Parties incurs insofar as such loss, expense, liability
or claim (i) arises out of or is based upon any untrue statement of a material
fact contained in and in conformity with information furnished in writing by the
Placement Agent to the Obligated Parties expressly for use with reference to the
Placement Agent in the Offering Memorandum or Registration Statement, or (ii)
arises out of or is based upon the gross negligence or willful misconduct of the
Placement Agent with respect to this Agreement.
If any action is brought against the Obligated Parties or any of the
Obligated Parties Affiliates or any such person in respect of which indemnity
may be sought against the Placement Agent pursuant to the foregoing paragraph,
the Obligated Parties shall promptly notify the Placement Agent in writing of
the institution of such action and the Placement Agent shall assume the defense
of such action, including the employment of counsel and payment of expenses. The
Obligated Parties shall have the right to employ its own counsel in any such
case, but the fees and expenses of such counsel shall be at the expense of the
Obligated Parties unless (i) the employment of such counsel shall have been
authorized in writing by the Placement Agent in connection with the defense of
such action, (ii) or the Placement Agent shall not have employed counsel to have
charge of the defense of such action, (iii) or such indemnified party or the
Obligated Parties shall have reasonably concluded that there may be defenses
available to it or them which are different from or additional to those
available to the Placement Agent (in which case the Placement Agent shall not
have the right to direct the defense of such action on behalf of the indemnified
party or parties), in any of which events such reasonable fees and expenses
shall be borne by the Placement Agent and paid as incurred. Anything in this
paragraph to the contrary notwithstanding, the Placement Agent shall not be
liable for any settlement of any such claim or action effected without the
written consent of the Placement Agent.
(c) If the indemnification provided for in this Section 10 is
unavailable to an indemnified party under subsections (a) and (b) of this
Section 10 with respect of any losses, expenses, liabilities or claims referred
to therein, then each applicable indemnifying party, in lieu of indemnifying
such indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, expenses, liabilities or claims
(i) in such proportion as is appropriate to reflect the relative benefits
received by the Obligated Parties on the one hand and the Placement Agent on the
other hand from the offering of the Securities 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 Obligated Parties on
the one hand and of the Placement Agent on the other in connection with the
statements or omissions which resulted in such losses, expenses, liabilities or
claims, as well as any other relevant equitable considerations. The relative
fault of the Obligated Parties on the one hand and of the Placement Agent on the
other shall be determined by reference to, among other things, whether the
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untrue statement or alleged untrue statement of a material fact or omission or
alleged omission relates to information supplied by the Obligated Parties or by
the Placement Agent and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The amount paid or payable by a party as a result of the losses, expenses,
liabilities and claims referred to above shall be deemed to include any legal or
other fees or expenses reasonably incurred by such party in connection with
investigating or defending any claim or action.
(d) The Obligated Parties 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 that does
not take account of the equitable considerations referred to in subsection (c)
above. No person guilty of fraudulent misrepresentation shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
(e) The indemnity and contribution agreements contained in this Section
10 and the covenants, warranties and representations of the Obligated Parties
contained in this Agreement shall remain in full force and effect regardless of
any investigation made by or on behalf of the Placement Agent or any Placement
Agent Affiliate, or by or on behalf of the Obligated Parties, shall survive any
termination of this Agreement or the issuance and delivery of the Securities and
shall not be deemed to be exclusive remedies with respect to a breach of this
Agreement. The Obligated Parties and the Placement Agent agree promptly to
notify the other of the commencement of any litigation or proceeding against it
and, in the case of the Obligated Parties, and in the case of the Placement
Agent, any Placement Agent Affiliate, in connection with the issuance and sale
of the Securities, or in connection with the Offering Memorandum or Registration
Statement. The contribution provisions contained in this Section 10 are in
addition to any other rights or remedies which either party hereto may have with
respect to the other or hereunder.
11. Survival of Certain Provisions. The indemnity and other agreements
contained in Section 10 hereof and the representations and warranties and other
statements of the Obligated Parties set forth in this Agreement or made by the
Obligated Parties pursuant to this Agreement (including without limitation those
contained in Section 7 and 8 hereof) shall remain in full force and effect,
regardless of (a) any termination of this Agreement or any of the agreements
referred to herein, (b) any investigation made by or on behalf of the Placement
Agent or any of its controlling persons or by or on behalf of the Obligated
Parties or any of its officers, directors or controlling persons and (c)
acceptance of delivery of and payment for Securities.
12. Effective Time; Termination.
(a) This Agreement shall become effective on the date hereof.
(b) The Placement Agent shall have the right to terminate this
Agreement by giving notice as hereinafter specified at any time. Any such
termination shall be without liability of any party to any other party except as
provided in Sections 4 and 7 hereof, except that the Obligated Parties shall
remain obligated to pay costs and expenses to the extent provided in Section 6.1
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of this Agreement.
(c) In the event that the Closing shall not have occurred on or before
September 15, 2003, this Agreement shall terminate at the close of business on
such date. Any such termination shall be without liability of any party to any
other party except as provided in Section 10 hereof.
(d) In the event of any termination of this Agreement for any reason,
if a private placement of securities is consummated within one year following
such termination by the Obligated Parties with a party that the Placement Agent
introduced regarding the Obligated Parties pursuant to and as part of its
engagement by the Obligated Parties, the Placement Agent shall be entitled to
receive the Placement Agent's Fee and the Expense Allowance Placement Agent's
Common Stock and all other amounts provided for in this Agreement, as if this
Agreement had not been terminated.
(e) Notwithstanding any provision of this agreement the Obligated
Parties shall have the right to terminate the Placement Agent's services upon
payment in full of the Securities upon written notice to the Placement Agent.
13. Notice. Except as otherwise specifically provided herein, all
statements, requests, notices and advice hereunder shall be in writing, or by
telephone or telegram if subsequently confirmed in writing, and, if to the
Placement Agent, shall be sufficient in all respects if delivered or sent to the
Placement Agent at the address set forth in the Offering Memorandum, and, if to
the Obligated Parties, shall be sufficient in all respects if delivered or sent
to the Obligated Parties at the address of its principal place of business set
forth in the Offering Memorandum. Notice shall be deemed given upon the date of
delivery or the date such notice is sent via nationally recognized overnight
courier.
14. Successors and Assigns. This Agreement shall inure solely to the
benefit of the Obligated Parties and the Placement Agent and, to the extent
provided in Section 14 hereof, to any person or entity named in such Section. No
other person, partnership, association or corporation shall acquire or have any
right under or by virtue of this Agreement. The term "successors" shall not
include any purchaser of any Securities merely because of such purchase. The
respective rights and obligations of the Obligated Parties and the Placement
Agent hereunder may not be assigned, transferred or contracted to another.
15. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Florida without regard to
conflicts of law principles.
16. Entire Agreement. This Agreement is the complete and entire
agreement among the parties with respect to the offer and sale of the Securities
and supersedes all prior written and oral communications with respect thereto,
specifically including any engagement letter with respect to the matters
addressed herein between the Obligated Parties and the Placement Agent. This
Agreement may be amended only in a writing signed by both parties hereto.
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17. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Please confirm that the foregoing correctly sets forth the agreement
between us by signing in the space provided below for that purpose.
Very truly yours,
CAPITOL COMMUNITIES CORP.
By: /s/ Xxxxxxx X. Xxxx
Its: President
AGREED AND ACCEPTED:
NOBLE INTERNATIONAL INVESTMENTS, INC.
By: Xxxx Xxxxx
----------------------------------
Its: President
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