EXHIBIT 7.4
MEDIA PURCHASE AGREEMENT
THIS MEDIA PURCHASE AGREEMENT ("Agreement") is made this 20th day of
September, 1996 (and shall be effective upon closing of the private placement
scheduled on or before October 15, 1995) by and among IMSCO Technologies, Inc.,
a publicly-owned Delaware corporation with principal offices at 00 Xxxxxxxx
Xxxxx, Xxxxx Xxxxxxx, XX 00000, and its subsidiaries and affiliates
(collectively referred to herein as the "Company"); Source Corp. ("Source") and
ADEX ("ADEX"), affiliated companies of GRO Enterprises ("GRO"), each
privately-owned Illinois corporations, with principal offices at 00 Xxxx 000
00xx Xxxxxx, Xxxxxxxx Xxxxxxx, Xxxxxxxx 00000 (hereinafter sometimes
collectively referred to as "SC"); and Proxhill Marketing, Ltd., a
privately-owned Colorado corporation with principal offices at 0000 Xxxx
Xxxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxxx, Xxxxxxxx 00000 ("Proxhill"). The Company,
SC and Proxhill are hereinafter collectively referred to as the "Parties". The
capitalized terms in this Agreement shall have the meaning ascribed thereto in
Article I "Definitions."
W I T N E S E T H:
WHEREAS, the Company, its subsidiaries and affiliates, is engaged in the
business of, but not limited to, the research, development and production of
products involving and utilizing electrostatic and polymer technology and
related products and services; and
WHEREAS, the Company desires to obtain Media (as more fully described in
Article I) for itself, its subsidiaries and affiliates, for promotion of, but
not limited to, its products and/or services; and
WHEREAS, Proxhill is engaged in the business of providing Media services,
including the purchasing, selling, loaning, trading and reselling of Media and
Media-related services to and for emerging and mid-sized growth companies and in
connection therewith issues Prepaid Purchase Orders (as more fully described in
Article I); and
WHEREAS, SC is engaged in the business of offering Media and other
services, including the purchasing, selling, trading and reselling of Media, the
performance of Media Research, Media Plan preparation and Media Plan Execution
(all as more fully described in Article I) from conventional and unconventional
sources to and for participating individuals, firms, and entities located
throughout the United States; and
WHEREAS, the Company desires to acquire a specified amount of Prepaid
Purchase Orders from Proxhill relating to Media Sources or Media Vendors with
which the Company has not theretofore established a prior media business
relationship; and
WHEREAS, Proxhill is willing to issue to the Company a Prepaid Purchase
Order entitling the Company to purchase Media as agreed and approved by Proxhill
and SC on the terms and subject to the conditions hereinafter set forth; and
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WHEREAS, SC is willing to honor the Prepaid Purchase Order and recognize,
accept, and utilize the same as payment for a portion of the transactions
enumerated herein and which otherwise would be paid by the Company by means of
cash.
NOW, THEREFORE, in consideration of the mutual benefits to be derived
hereby and the representations, warranties, covenants, and agreements herein
contained, the Parties hereby incorporate the foregoing recitals into this
Agreement by reference and hereby covenant and agree as follows:
ARTICLE I
DEFINITIONS
I. When used herein, the following terms shall have the meaning ascribed hereto
in this Article:
1.1 "Ad" shall mean the unit of advertising used to deliver the Company's
message, including (i) time duration specifications for radio, television,
and cable television Media Sources; and (ii) size and physical or
mechanical specifications of non-electronic Media Sources (e.g.,
newspapers, magazines, billboards, flyers, etc).
1.2 "Ad Placement" shall mean the insertion of an Ad in a given Media Source
to enable it to appear and/or become published on a specified date and
time.
1.3 "Affiliate" shall have the meaning ascribed thereto under the rules and
regulations adopted by the Securities and Exchange Commission (the "SEC")
under the Securities Act of 1933, as amended (the "33 Act") and the
Securities Exchange Act of 1934 (the "34 Act").
1.4 "Aid and Assistance" shall mean customer support services offered by SC to
the Company in connection with any transaction made the subject of this
Agreement in conformity with those historically rendered by SC's customer
service department. These services shall include, but not be limited to,
telephone and fax cooperation and support in planning and executing Media
transactions, furnishing of quotes in a timely manner, furnishing
information concerning competitive rates and terms and generally affording
the Company the benefit of the expertise, knowledge and experience of SC's
staff.
1.5 "Campaign" shall mean the sum of all Schedules comprising a designated
portion of the Media Plan as defined by time and/or budget and/or Media
Source and/or thematic parameters.
1.6 "Closing" shall mean the date on which this Agreement shall be executed by
the Parties hereto, and as otherwise provided herein.
1.7 "Commercials" shall mean 10, 15, 30, 60, 90 or 120 second advertisements
for use on
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television and/or radio that promote the products of the Company and which
shall be produced by the Company or by SC for and on behalf of the Company
at the Company's expense.
1.8 "Communication(s)" shall mean oral or written establishment of a prior,
current, or subsequent communication or contact with a Media Vendor or
Media Source wherein it was or is understood that the Company would use
that vendor as a Media provider or conduit for a given period of time or
for a given project other than the project made the subject of this
Agreement.
1.9 "Cost Per Point" shall mean the estimated amount of Dollars required to
deliver one rating point (or one percent) of the designated demographic
audience within a given spot, television or radio market, as established
by a Recognized Industry Source.
1.10 "Cost Per Thousand" shall mean the cost for every 1,000 units of audience
exposed to a Media vehicle.
1.11 "Insertion" shall mean an individual publication or broadcast of an Ad in
or by a Media Source.
1.12 "Make Good" shall mean the re-scheduling of an Insertion that was
pre-empted during the contracted schedule, within a pre-determined, agreed
upon period of time following the preemption. That period of time will be
stated as part of the proposed Media Campaign or Plan.
1.13 "Market Research" shall mean the identification of the particular market
and/or markets as well as the identification of the particular
demographics within each such market that the Company desires to reach
with any Media Plan hereunder.
1.14 "Media" shall mean 10, 15, 30, 60, 90, 120-second, or infomercial length
if available, advertising spot time on television and/or radio stations or
cable systems, 10, 15, 30, 60, 90 120-second, or infomercial length if
available, spot time on syndicated or non-syndicated programs and shows
broadcast on television and/or radio stations, advertising space on
outdoor or indoor billboards, advertising space in local, regional or
national magazines, newspapers or other publications of mass appeal, and
time and/or space on or in such cross-promotional combination of the
foregoing as shall be available from SC's sources.
1.15 "Media Plan" shall mean the written proposal prepared by SC on the basis
of the Media Research (hereinafter defined) and submitted to the Company
for approval. The Media Plan will detail the terms and objectives of a
given advertising Campaign (as described herein), or series of Campaigns,
which will include creative advertising services, based on the budget and
duration parameters stated to SC by the Company. The Media Plan will
delineate: (i) the Media Sources, dates and times of Ad Placement and
price per Insertion; (ii) the number and nature of Ads that shall be
required to be produced for Insertion; (iii) delivery of Target
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Demographic(s); (iv) such other and further information consistent with
industry practices.
1.16 "Media Plan Execution" shall mean the implementation of the Media Plan by
SC within the time and financial parameters set forth in such Media Plan.
1.17 "Media Research" shall mean the identification by SC of the proper Media
to effectively reach the Company's target markets and audiences, based on
the goals and objectives of the Company's Media Program.
1.18 "Media Research Report" shall mean the written report prepared by SC's
media department and submitted to the Company that details the parameters
of Media Research required to fulfill any Media Plan covered by this
Agreement.
1.19 "Media Source" shall mean the individual vehicle used for Insertion such
as but not limited to radio and television station(s), cable system(s),
newspaper publisher(s), magazine publisher(s), billboard vendor(s), media
time/space broker(s), or syndicator(s), etc.
1.20 "Media Vendor" shall mean a specific company, contact, representative, or
affiliate that can provide written verification of media placement and/or
purchase for Media.
1.21 "Prepaid Purchase Order" or "Media Credit" shall mean a written form of
Media voucher issued by Proxhill that SC has agreed to honor and which
shall be accepted as payment in full and entitle the Company to acquire
Media for the promotion of its products and services and the Company's
other projects.
1.22 "Placement" (including words used in this Agreement, such as "Place" and
"Placed" or any other form thereof) with regard to Schedules, Campaigns,
and Media Plans, shall mean the process of requesting and/or ordering,
and/or negotiating, and/or confirming Insertions with a Media Source.
1.23 "Recognized Industry Source (Standard)" shall mean nationally recognized
media rate authorities (such as the Media Market Guide published by
Bethlehem Publishing Company, Incorporated, X.X. Xxx 000, Xxxxxxxxx, Xxx
Xxxxxxxxx, 00000-0000) which have established fair, estimated Media Costs
Per Point and/or Costs Per Thousand, for standard demographic audiences,
within designated market areas. Cost Per Point and/or Cost Per Thousand
estimates may vary to a greater or lesser extent from the estimates
provided by a Recognized Industry Standard Source, due to current and
immediate market conditions. However, combined markets Cost Per Point
and/or Cost Per Thousand estimates provided by a Recognized Industry
Standard Source should be realizable.
1.24 "Schedule" shall mean the number and time parameters of Insertions placed
with a Media Source.
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1.25 "Successful Underwriting" shall mean any benefit or value conferred upon
the Company after arranging a bridge or similar loan, or a public, or
private placement financing of the Company.
1.26 "Target Demographics" shall mean the specific grouping of persons
according to (i) age; and/or (ii) gender; and/or (iii) income; and/or (iv)
geographic location; and/or (v) lifestyle; and/or (vi) psychographic
profile, as stipulated by the Company for the purpose of defining the type
of person to whom the Company would like to advertise and/or market its
products and/or services.
1.27 "Transaction Fee" shall mean the cash fee that the Company shall pay under
the terms and conditions as described in Article II of this Agreement.
1.28 "Warrants" if applicable, shall mean the right granted to Proxhill by the
Company to purchase the common stock of the Company under the terms and
conditions stated herein.
ARTICLE II
SALE AND PURCHASE
2.1 Sale and Purchase. Upon the terms and subject to the conditions
hereinafter set forth, and by virtue of their respective execution of this
Agreement, Proxhill hereby sells to the Company and the Company hereby purchases
and accepts from Proxhill a Prepaid Purchase Order for $1,500,000 worth of Media
as more fully described in Article III. At the Closing, Proxhill shall deliver
to the Company a duly executed Prepaid Purchase Order containing a notarized
signature of an executive officer of Proxhill granting the Company's right to
purchase Media under the terms of this Agreement.
2.2 Stock Issuance. As consideration herein, and at the Closing of this
transaction, the Company shall issue to Proxhill or its designees 1,136,364
Shares of the Company's common stock priced at $1.32 per Share.
2.3 Payment of Transaction Fee. The Company shall pay a $150,000 cash
Transaction Fee, equal to ten (10%) of the value of the media financing
transaction, to First Capital Investments, Inc. as agent for Proxhill, plus
Warrants to purchase 126,364 shares of the Company's stock, for five (5) years,
at 110% of the price paid by the initial investors for the stock of the Company
($1.45). The Warrants or documentation representing such Warrants shall be
issued at Closing, and the Cash portion of the Transaction Fee may be paid as
the media is utilized by the Company.
ARTICLE III
TERMS AND CONDITIONS
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3.1 Payment of Compensation. All Media transactions pursuant to this
Agreement shall be paid from the Prepaid Purchase Order, (as more fully
described in Article III, Section 3.3.). The Company, by virtue of its execution
of this Agreement, hereby acknowledges that its timely payment of the
compensation as set forth above is one of the fundamental and material
requirements for the operation of the Media Plan, and affect the ability of
Proxhill and SC to implement the intent of the Parties as enumerated in this
Agreement. Accordingly, and in the event the Company does not tender the
securities when due, such a course of action or failure to act shall be
construed as and be deemed to be a fundamental and material breach of this
Agreement, entitling Proxhill and SC to suspend further implementation of this
Agreement on three (3) business days advance written notice to the Company.
Thereafter, the Company shall have ten (10) business days to cure any default.
In the event of termination as a result of the failure of the Company to make a
payment within the provisions of this Agreement, Proxhill shall be entitled to
retain any Shares and/or Warrants and if applicable, any payments previously
tendered as liquidated damages.
3.2 Deposit of Prepaid Purchase Order for Media. As soon as practicable
following the Closing, but in no event later than five days thereafter, the
Company shall deliver the Prepaid Purchase Order to SC; and SC hereby agrees to
accept the Prepaid Purchase Order and hold the same for and on behalf of the
Company. In this regard, the Company hereby acknowledges, accepts and agrees
that the Prepaid Purchase Order shall only be deposited and credit may only be
executed with SC. The only exception shall be the substitution of an alternate
Media Vendor as hereinafter provided in Article III, Section 3.7 of this
Agreement. When the Company consummates a Media transaction under and pursuant
to this Agreement, SC shall debit the Prepaid Purchase Order with the amount of
Media utilized by the Company and shall confirm the same to the Company in
writing, with a copy to Proxhill. SC hereby specifically covenants and agrees
that any Media Plan implemented for and on behalf of the Company hereunder will
equal or be less than the Cost Per Point and/or Cost Per Thousand criteria for
the same target demographics of any specific market as established by a
Recognized Industry Source (as more fully described in Article I) and as
selected by Proxhill or in cases where there is no industry standard or
Recognized Industry Source, published rates. In addition, SC shall furnish the
Company with a monthly statement reflecting the amount of Media still held by SC
for and on behalf of the Company and shall send a copy thereof to Proxhill. Upon
the expiration of this Agreement, SC shall return the Prepaid Purchase Order to
Proxhill along with a final statement of unused Media, if any, via overnight
delivery service for cancellation.
3.3 Use of Prepaid Purchase Order For Media. Within twenty (20) business
days from the date of this Agreement, SC shall initiate a Media Research Report
by sending one or more experienced and qualified Media specialists to the
Company's facilities, at the Company's expense, as outlined in Article III,
Section 3.3, to initiate the process of preparing an initial Media Plan
utilizing the Prepaid Purchase Order to purchase Media (the "Initial Media
Plan") in markets designated by the Company. With respect to all Media Plans
after the Initial Media Plan, the Company shall advise SC at least ninety (90)
calendar days prior to the Company's intended use thereof. In the event the
Company requests Media that is to be purchased and executed prior to the ninety
(90) calendar days to the intended use thereof, the Company understands that SC
is under no obligation to obtain the Media for the Company under the terms of
this Agreement, but may elect,
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at SC's sole option, to obtain the requested Media on a best efforts basis for
the Company. The Company hereby acknowledges and accepts that the Prepaid
Purchase Order may only be utilized by it to purchase Media pursuant to a Media
Plan. All the Company Media Plans submitted pursuant to this Agreement shall be
of a minimum duration of one month; and all Media shall be acquired by SC on a
subject-to-availability basis. SC shall submit any and all Media Plans to the
Company for approval not less than 45 calendar days prior to the proposed
commencement date, with a copy to Proxhill. The Company shall promptly review
SC's Media Plan and communicate either its written approval or its written
objections or suggestions to SC within five (5) business days from its receipt
thereof. The failure of the Company to respond to SC as herein indicated shall
be deemed to be a disapproval of the submitted Media Plan. No Media Plan shall
proceed without the Company's written approval.
In the event that the Company desires or instructs SC to amend an approved
Media Plan, and depending upon the nature and extent of the commitments made to
date, SC may, at its sole discretion, deem the approved Media Plan null and void
and of no further force or effect. In such event, SC shall prepare and submit a
new Media Plan. Any funds or Media Credit held by SC on behalf of the Company
shall be used by SC for subsequent Media Plans.
All Media Plans will be prepared pursuant to the terms and conditions of
this Agreement, and the Parties agree that the Media Credits shall be dedicated
solely for the purchase of Media under this Agreement. The duration, terms and
conditions of the Media may be extended or modified only with the written
consent of the Company, Proxhill and SC.
The Company understands and agrees that, if the Company, its affiliates or
representatives have had prior Communications with a given Media Source or Media
Vendor, then that Media Source or Media Vendor requested by the Company shall be
excluded and shall not be subject to the terms and conditions of this Agreement.
Recognizing that every media purchasing service (such as SC) has its
specific resources to secure and purchase media, which is generally governed
under contractual arrangements and/or purchasing mechanisms, Media will be
purchased exclusively on a subject-to-availability basis. If for any reason SC
cannot provide the specific Media requested, or confirmation of its
availability, within ten (10) business days from the request thereof, then the
Company will be notified in writing from SC of the lack of availability and that
specific Media will not be governed by the terms of this Agreement, and the
Company is free to negotiate or utilize any service of its own choosing.
3.4 Services. During the term of this Agreement, in addition to those
services to be rendered by Proxhill and SC as set forth above, and so long as
the Company shall own Media Credit and shall furnish its Market Research to SC
(if any), SC shall provide the Company with Aid and Assistance in the
consummation of transactions involving Media. These services, which shall be
offered at no cost to the Company, (other than the expenses as set forth in
Article III, Section 3.5), shall include the conduct of further Media Research,
the preparation and submission to the Company of written Media Plans and aid and
assistance in implementing the Media Plans. In addition, SC
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shall: (i) furnish the Company and Proxhill with monthly statements summarizing
any and all Media activity during the preceding 30 calendar days as well as
current Prepaid Purchase Order balances; (ii) assign a customer service
representative to the Company to coordinate and expedite Media related
transactions.
3.5 Fees and Expenses. Proxhill shall be responsible for any transaction
fee payable to SC, and for all out-of-pocket disbursements incurred by SC on the
Company's behalf in connection with the consummation of any transaction under
this Agreement. All such expenses shall be billed monthly and paid monthly by
Proxhill. SC shall not incur any expense in excess of $100.00 without prior
written consent.
3.6 Termination. This Agreement shall expire at the end of sixty (60)
months from the effective date herein, or upon the depletion of the Prepaid
Purchase Order, whichever occurs first.
3.7 Transfer. The Parties hereby agree that in the event that SC is not
providing adequate pricing and/or delivery of the Media as defined in this
Agreement, and SC has not remedied the situation after having been given
reasonable opportunity to do so, the Company will notify Proxhill and SC in
writing within ten business days providing a full description of the issues
giving rise to its complaint. If SC cannot rectify the situation within 21
business days to the Company's reasonable satisfaction, Proxhill will use its
best efforts to transfer the remaining, unused portion of the Prepaid Purchase
Order within sixty (60) days to another Media Vendor selected by Proxhill. No
additional commission or cash fee will be charged to the Company for the
transfer.
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY
The Company hereby makes the following representations and warranties to
and covenants with Proxhill and SC as follows:
4.1 Valid Corporate Existence; Qualification. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, and if applicable, its securities were issued under said
laws. The Company has the corporate power to carry on its business as now
conducted and to own its assets. The Company is qualified to conduct business in
all foreign jurisdictions in which failure to qualify would have a material
adverse effect on the Company and its assets, properties or business, and there
has not been any claim by any jurisdiction to the effect that the Company is
required to qualify or otherwise be authorized to do business as a foreign
corporation therein.
4.2 Consents. No consents of governmental and other regulatory agencies,
foreign or domestic, or of other parties are required to be received by or on
the part of the Company to enable it to enter into and carry out this Agreement
in all material respects.
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4.3 Corporate Authority, Binding Nature of Agreement. The Company, through
its Chief Executive Officer, has the corporate power to enter into this
Agreement and to carry out its obligations hereunder. The execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by the Board of Directors of the Company and no other
corporate proceedings on the part of the Company are necessary to authorize the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby. This Agreement constitutes the valid and
binding obligations of the Company and is enforceable in accordance with its
terms. The Company shall cooperate fully with Proxhill and SC in supplying any
information necessary for Proxhill and SC complete their responsibilities
pursuant to this Agreement.
4.4 Authorized Shares. As of the date of this Agreement, the Company has,
and will reserve for issuance, a sufficient number of Shares so as to be able to
comply with the terms and conditions of this Agreement.
4.5 Reporting Status. As of the date of this Agreement, the Company is
current in all applicable reporting obligations with all governing bodies
including but not limited to, those required by the 34 Act. The Company will
remain current in these obligations during the term of this Agreement.
4.6 Cooperation with Registration of Securities. Upon the closing of the
media financing contemplated herein, which shall occur simultaneously with any
private placement financing, the Company agrees that, at its own expense, it
will use its best efforts to diligently and expeditiously file an S-3
registration, and maintain an open registration for the term of this Agreement,
under the rules and regulations of the Securities and Exchange Commission
("SEC") of the securities issued pursuant to the financing. Upon completion of
said S-3 registration, Proxhill agrees to a lock-up of said shares issued
pursuant to the closing of any private placement or media financing, until
January 15, 1997.
The Company will release one-third (1/3) of the private placement shares
(267,000 shares) and one-third (1/3) of the media shares (400,000 shares) at any
time between the completion of the S-3 registration and January 15, 1997 if the
Company's stock trades at an average closing bid price of at least $3.00 per
share for a period of ten (10) consecutive days. If the Company's stock fails to
reach said trading price by January 15, 1997, then such shares will not be
released until January 15, 1997.
After the release of the initial one-third (1/3) of the private placement
shares and one-third (1/3) of the media shares as set forth above, whether or
not the Company has become effective under any subsequent registration statement
for the purpose of raising capital, including but not limited to any capital
formation or value conferred in excess of $5,000,000 including private or public
financing, joint venture or licensing, then Proxhill agrees to a lock-up of the
shares for six (6) months from the date of such registration, but in no event
later than July 15, 1997.
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Upon the release of any securities after the expiration of any lock-up
period set forth herein, Proxhill agrees that after the release of the initial
one-third (1/3) shares, the shareholder will release the remaining shares at no
greater rate than that formula permitted under the liquidation provisions of SEC
Rule 144, as amended.
Thereafter, upon request by Proxhill or its investors, the Company will
timely cooperate with, approve, cause its counsel to execute and deliver
opinions and execute as necessary, any registration statements and documents
customarily utilized in connection therewith (including any and all amendments
thereto including post-effective amendments), standby or other underwriting or
selling agreements, instructions to its transfer agent, sales or transfer
documentation reasonably requested by Proxhill or its investors that shall be
necessary or required to implement Proxhill's or its investor's sale, transfer,
pledge or hypothecation of the shares under SEC rules and regulations, the
securities or "blue sky" laws of the various states or the rules of any other
governing body having jurisdiction thereover, and including but not limited to
any private sale requested, as long as such sale does not contravene the lock-up
provisions as stated herein.
In connection with the preparation and filing of any Registration
Statement required under this Article, the Company covenants and agrees not to
request or demand the inclusion of any other securities of the Company therein,
whether on a "piggy back" basis or otherwise, without the prior written consent
of Proxhill.
4.7 Permits and Licenses. The Company has, to the best of its knowledge,
all permits, licenses, orders and approvals of all federal, state, local and
foreign governmental or regulatory bodies required to carry on its business as
presently conducted; all such permits, licenses, orders, franchises and
approvals are in full force and effect, and to the knowledge of the Company,
after reasonable inquiry, no suspension or cancellation of any of such permits,
licenses, etc. is threatened; and to its knowledge the Company is in compliance
in all material respects with all requirements, standards and procedures of the
federal state, local and foreign procedures of the federal, state, local and
foreign governmental bodies which issued such permits, licenses, orders,
franchises and approvals.
4.8 No Breach. To the best knowledge of the Company, and its legal counsel
and accountants, neither the execution and delivery of this Agreement nor
compliance by the Company with any of the provisions hereof nor the consummation
of the transactions contemplated hereby, will, to the best of its knowledge: (i)
violate or conflict with any provision of the Articles of Incorporation or
By-laws of the Company; (ii) violate or, alone or with notice of the passage of
time, result in the material breach or termination of, or otherwise give any
contracting party the right to terminate, or declare a default under, the terms
of any Agreement or other document or undertaking, oral or written, to which the
Company is a party or by which any of its properties or assets may be bound
(except for such violations, conflicts, breaches or defaults as to which
required waivers or consents by other parties have been, or will, prior to the
execution of this Agreement, be, obtained); (iii) result in the creation of any
lien, security interest, charge or encumbrances upon the Shares and Warrants or
any of the properties or assets of the Company pursuant to the terms of any such
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Agreement or instrument; (iv) violate any judgment, order, injunction, decree or
award against, or binding upon the Company or upon its properties or assets; or
(v) violate any law or regulation of any jurisdiction relating to the Company,
its securities, assets or properties, the violation of which would have a
material adverse effect on the Company or the Shares and/or Warrants.
4.9 Finders. Neither the Company, its officers, directors, nor any of
their affiliates have engaged, consented to, or authorized any broker, finder,
investment banker or other third party other than First Capital Investments,
Inc. to act on its or their behalf, directly or indirectly, as a broker or
finder in connection with the transactions contemplated by this Agreement. The
Company shall indemnify and hold Proxhill and SC harmless from liability,
including attorneys fees, arising out of any claim to compensation as a broker
or finder by an individual, firm or entity engaged by the Company, and the
Company takes full responsibility for compensation, if any, to said entity.
4.10 Issuance of the Shares and Warrants, Affiliations. The Shares and
Warrants, when issued to Proxhill, will be duly and validly issued, fully paid,
and non-assessable with no personal liability attached to the ownership thereof.
No executive officer, director, shareholder or affiliate of the Company is
affiliated with Proxhill or SC as an executive officer or director. The Shares
and Warrants represent less that 5% of the Company's issued and outstanding
common stock capitalization as of the date of this Agreement.
4.11 Litigation. The Company is not aware of any pending or threatened
litigation that would prohibit it from entering into this Agreement, issuing the
Shares and Warrants, or otherwise implementing the terms and conditions of this
Agreement.
ARTICLE V
REPRESENTATIONS, WARRANTIES AND COVENANTS OF SC
SC hereby makes the following representations and warranties to Proxhill and the
Company:
5.1 Valid Corporate Existence; Qualification. ADEX, Source and GRO are
corporations duly organized, validly existing and in good standing under the
laws of the State of Illinois. Each has the corporate power to carry on its
business as now conducted and to own its assets. Each is qualified to conduct
business in all foreign jurisdictions in which failure to qualify would have a
material adverse effect on ADEX, Source and GRO and their assets, properties or
business, and there has not been any claim by any jurisdiction to the effect
that ADEX, Source and GRO is required to qualify or otherwise by authorized to
do business as a foreign corporation therein.
5.2 Corporate Authority, Binding Nature of Agreement. ADEX, Source and GRO
through their respective Presidents, have the corporate power to enter into this
Agreement and to carry out their respective obligations hereunder. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by the Board of Directors of each
entity and no other corporate proceedings on the part of any such entity are
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necessary to authorize the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby. This Agreement constitutes
the valid and binding obligation of ADEX, Source and GRO and is enforceable in
accordance with its terms.
5.3 Permits and Licenses. ADEX, Source and GRO have all permits, licenses,
orders and approvals of all federal, state, local and foreign governmental or
regulatory bodies required, to the best of their respective knowledge, to carry
on their respective business as presently conducted; all such permits, licenses,
orders, franchises and approvals are in full force and effect, and to the
knowledge of ADEX, Source and GRO, after reasonable inquiry, no suspension or
cancellation of any of such permits, licenses, etc. is threatened; and ADEX,
Source and GRO are in compliance in all material respects with all requirements,
standards and procedures of the federal state, local and foreign procedures of
the federal, state, local and foreign governmental bodies which issued such
permits, licenses, orders, franchises and approvals.
5.4 Consents. No consents of governmental and other regulatory agencies,
foreign or domestic, or of other parties are required to be received by or on
the part of ADEX, Source and GRO to enable each of them to enter into and carry
out this Agreement in all material respects.
5.5 Litigation; Compliance with Law. ADEX, Source and GRO hereby jointly
and severally warrant that they are not aware of any litigation, pending, that
would prohibit them from entering into this Agreement, or otherwise implementing
the terms and conditions of this Agreement.
5.6 No Breach. To the best of their respective knowledge, neither the
execution and delivery of this Agreement nor compliance by ADEX, Source and GRO
with any of the provisions hereof nor the consummation of the transactions
contemplated hereby, will: (i) violate or, alone or with notice of the passage
of time, result in the material breach or termination of, or otherwise give any
contracting party the right to terminate, or declare a default under, the terms
of any agreement or other document or undertaking, oral or written to which
ADEX, Source and GRO is a party or by which any of their properties or assets
may be bound (except for such violations, conflicts, breaches or defaults as to
which required waivers or consents by other parties have been, or will, prior to
the execution of this Agreement, be, obtained); (ii) result in the creation of
any lien, security interest, charge or encumbrance upon any of the properties or
assets of ADEX, Source and GRO pursuant to the terms of any such Agreement or
instrument; (iii) violate any judgment, order, injunction, decree or award
against, or binding upon ADEX, Source and GRO or upon their properties or
assets; or (iv) violate any law or regulation of any jurisdiction relating to
ADEX, Source and GRO, their assets or properties, the violation of which would
have a material adverse effect on ADEX, Source and GRO.
5.7 Brokers. Neither SC, Adex, Source and GRO nor any of their respective
affiliates have engaged, consented to or authorized any broker, finder,
investment banker or other third party to act on its behalf, directly or
indirectly, as a broker or finder in connection with the transactions
contemplated by this Agreement.
5.8 Recognition. ADEX, Source and GRO hereby agree and covenant that they
will
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accept the Prepaid Purchase Order for the Media portion of any transaction
sought to be consummated by the Company hereunder. ADEX, Source and GRO shall
treat and accept the Prepaid Purchase Order in accordance with this Agreement
regardless of whether or not Proxhill is in existence when the Prepaid Purchase
Order is sought to be utilized by the company.
5.9 Pricing. ADEX, Source and GRO hereby specifically covenant and agree
that any Media Plan implemented for and on behalf of the Company hereunder will
equal or be less than the Cost Per Point and/or Cost Per Thousand criteria for
the targeted demographics of any given market as established by a Recognized
Industry Standard Source or, in the event where there is no industry standard or
Recognized Industry Source, published rates.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PROXHILL
Proxhill hereby makes the following representations and warranties to SC and the
Company:
6.1 Valid Corporate Existence; Qualification. Proxhill is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Colorado. Proxhill has the corporate power to carry on its business as
now conducted and to own its assets. Proxhill is qualified to conduct business
in all foreign jurisdictions in which failure to qualify would have a material
adverse effect on Proxhill and its assets, properties or business, and there has
not been any claim by any jurisdiction to the effect that Proxhill is required
to qualify or otherwise be authorized to do business as a foreign corporation
therein.
6.2 Corporate Authority, Binding Nature of Agreement. Proxhill through its
President has the corporate power to enter into this Agreement and to carry out
its obligations hereunder. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by the Board of Directors of Proxhill and no other corporate proceedings on the
part of Proxhill are necessary to authorize the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby. This
Agreement constitutes the valid and binding obligations of Proxhill and is
enforceable in accordance with its terms.
6.3 Consents. No consents of governmental and other regulatory agencies,
foreign or domestic, or of other parties are required to be received by or on
the part of Proxhill to enable it to enter into and carry out this Agreement in
all material respects.
6.4 Permits and Licenses. Proxhill has, to the best of its knowledge, all
permits, licenses, orders and approvals of all federal, state, local and foreign
governmental or regulatory bodies required to carry on its business as presently
conducted; all such permits, licenses, orders, franchises and approvals are in
full force and effect, and to the knowledge of Proxhill, after reasonable
inquiry, no suspension or cancellation of any of such permits, licenses, etc. is
threatened;
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and to its knowledge Proxhill is in compliance in all material respects with all
requirements, standards and procedures of the federal state, local and foreign
procedures of the federal, state, local and foreign governmental bodies which
issued such permits, licenses, orders, franchises and approvals.
6.5 Binding Nature of Agreement. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have been
duly reviewed and approved by Proxhill and no other proceedings on the part of
Proxhill are necessary to authorize the execution and delivery of this Agreement
and the consummation of the transactions contemplated herein.
6.6 Litigation; Compliance with Law. Proxhill hereby warrants that it is
not aware of any litigation, pending, that would prohibit it from entering into
this Agreement, issuing the Prepaid Purchase Order, or otherwise implementing
the terms and conditions of this Agreement.
6.7 No Breach. To the best of its knowledge, neither the execution and
delivery of this Agreement nor compliance by Proxhill with any of the provisions
hereof nor the consummation of the transactions contemplated hereby, will: (i)
violate or, alone or with notice or the passage of time, result in the material
breach or termination of, or otherwise give any contracting party the right to
terminate, or declare a default under, the terms of any Agreement or other
document or undertaking, oral or written to which Proxhill is a party or by
which any of its properties or assets may be bound (except for such violations,
conflicts, breaches or defaults as to which required waivers or consents by
other parties have been, or will, prior to the execution of this Agreement, be,
obtained); (ii) result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of Proxhill pursuant to the
terms of any such Agreement or instrument; (iii) violate any judgment, order,
injunction, decree or award against, or binding upon Proxhill or upon its
properties or assets; or (iv) violate any law or regulation of any jurisdiction
relating to Proxhill, its assets or properties, the violation of which would
have a material adverse effect on Proxhill.
6.8 Brokers. Neither Proxhill nor any of its affiliates have engaged,
consented to or authorized any broker, finder, investment banker or other third
party to act on its behalf, directly or indirectly, as a broker or finder in
connection with the transactions contemplated by this Agreement.
6.9 Issuance of Credits. Proxhill has the full right and authority to
issue the Prepaid Purchase Order to the Company hereunder and the same when
issued, will be duly and validly issued.
6.10 Restricted Securities. Proxhill has been advised by counsel, and by
virtue of its execution of this Agreement, hereby accepts and acknowledges that
the Shares and Warrants will not be registered under the 33 Act; and that in
executing this Agreement and issuing the Shares and Warrants to Proxhill, the
Company will be relying upon an exemption from registration based upon the
investment representations of Proxhill. In this regard, Proxhill hereby
represents and warrants to and covenants with the Company that it will be
acquiring the Shares and Warrants for investment purposes and without a view
towards the distribution or resale thereof and any sale of the Shares and
Warrants will be accomplished only in accordance with the 33 Act or the rules
and regulations of the
14
SEC adopted thereunder. Proxhill acknowledges that a standard form of stop
transfer order will be placed against the Shares and Warrants on the books and
records of the Company's transfer agent and that a legend reading substantially
as follows has been placed on all certificates representing the Shares and
Warrants:
"The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended (the "Act"). They may not be
sold, assigned or transferred in the absence of an effective registration
statement, receipt of a "no action" letter from the SEC or an opinion of
counsel satisfactory to the Company that registration is not required
under the Act."
6.11 No Inducement. Proxhill has not relied upon or been induced by any
statements, representations or warranties (whether expressed, implied in fact or
implied by law) of any kind, nature or description, concerning the chances or
probability of the Shares and Warrants to either increase or decrease in value
made by the Company, its agents, servants or employees; and has entered into
this Agreement and is agreeing to accept the Shares and Warrants based solely
upon its independent findings and conclusions concerning the Company and its
financial condition and not upon any representation, statements or warrants of
the Company or any obligations to make any such representations.
ARTICLE VII
REGISTRATION RIGHTS PROVISIONS
7.1 Cooperation. IMSCO agrees to cooperate with Proxhill in any
registration and transfer of securities Proxhill requires and deems necessary or
advisable to transfer or liquidate for its own business purposes, including but
not limited to all S-3 registration rights as described in Article IV, Section
4.6.
7.2 Filing fees. Also pursuant to Article IV, Section 4.6, IMSCO shall pay
all applicable filing fees and will retain competent legal counsel to prepare
all registration and blue sky applications, documents and memorandums as
necessary for the securities being offered in jurisdictions as designated by
Proxhill, including without limitation, (i) all filing fees with the SEC; (ii)
fees and expenses of compliance with securities or blue sky laws (including fees
and disbursements of counsel in connection with blue sky qualifications of the
Shares and Warrants); (iii) printing expenses; (iv) the fees and expenses
incurred in connection with the listing of the Shares and Warrants; (v) fees and
expenses of counsel (limited to one counsel for all selling shareholders whose
fee shall be limited to $15,000 for any one registration) and independent
certified public accountants for the Company (including the expenses of any
comfort letters), including costs associated with registrations requested by
Proxhill, and (vi) any registration statement that is requested by Proxhill that
must be executed by the Company on its own behalf or for Proxhill. The Company
agrees to provide full cooperation in a timely manner for any registration
statement for or by Proxhill.
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ARTICLE VIII
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
8.1 Survival. The Parties agree that their respective representations,
warranties, covenants and agreements contained in this Agreement shall survive
and extend until the complete utilization of the Prepaid Purchase Order or the
termination of this Agreement, whichever is the later.
8.2 Indemnification. Each of the Parties agrees to save, defend and
indemnify the other Parties against and hold them harmless from any and all
liabilities, of every kind, nature and description, fixed or contingent
(including, without limitations, counsel fees and expenses in connection with
any action, claim or proceeding relating to such liabilities) arising out of any
transaction or event commencing or occurring on or prior to the date hereof
related to the Prepaid Purchase Order or by reason of any breach or failure of
observance or performance of any representation, warranty, covenant, agreement
or commitment made by each party hereunder or as a result of any such
representation, warranty, covenant, agreement or commitment being untrue or
incorrect in any respect.
8.3 Defense of Claims. A party entitled to indemnification hereunder (an
"Indemnified Party") agrees to notify each party required to indemnify hereunder
(an "Indemnifying Party") with reasonable promptness of any claim asserted
against it in respect to which any Indemnifying Party may be liable under this
Agreement, which notification shall be accompanied by a written statement
setting forth the basis of such claim and the manner of calculation thereof. An
Indemnifying Party shall have the right to defend any such claim at its own
expense and with counsel of its choice; provided, however, that such counsel
shall have been approved by the Indemnified Party prior to engagement, which
approval shall not be unreasonably withheld or delayed; and provided further,
that the Indemnified Party may participate in such defense, if it so chooses,
with its own counsel and at its own expense.
8.4 Rights Without Prejudice. The rights of the Parties under this Article
are without prejudice to any other right or remedies that it may have by reason
of this Agreement or as otherwise provided by law.
ARTICLE IX
MISCELLANEOUS PROVISIONS
9.1 Expenses. Each of the Parties shall bear its own expenses in
connection herewith, including attorneys' and accountants fees, except for the
expenses other wise specified herein.
9.2 Assignment. This Agreement shall not be assigned without the prior
written consent of the Company, SC, and Proxhill.
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9.3 Non-Disclosure, Confidential Information. For a period of twenty-four
(24) months following the execution date of this Agreement, Proxhill and the
Company, their subsidiaries, representatives and agents hereby acknowledge and
agree that in the process of negotiating, entering into, and executing this and
any subsequent transaction(s), the Parties will be exposed to certain trade
secrets, and confidential knowledge which the Parties consider as their
confidential, proprietary, trade secret information, the confidentiality of
which is fundamental to the business operations of the respective Parties. Each
party to this Agreement acknowledges and agrees that such party and its
representatives will hold in a fiduciary capacity and in strict confidence all
information, knowledge, data and documents received from the other Parties and,
if the transactions herein contemplated shall not be consummated, each party
will continue to hold such information and documents in strict confidence and
will return to such other Parties all such documents (including the schedules
and exhibits attached to this Agreement) then in such receiving party's
possession without retaining copies thereof; provided, however, that each
party's obligations under this Article to maintain such confidentiality shall
not apply to any information or documents that are in the public domain at the
time furnished by the others or that become in the public domain thereafter
through any means other than as a result of any act of the receiving party or of
its agents, officers, directors or stockholders which constitutes a breach of
this Agreement, or that are required by applicable law to be disclosed. The
Parties agree that the remedy-at-law in any breach of the provisions of this
Article will be inadequate and/or difficult to calculate, and therefore in
addition to those remedies, each party will be entitled to injunctive relief to
compel the breaching party to perform or refrain from action required or
prohibited hereunder.
Each party also acknowledges and agrees that they shall not divulge to
others, nor allow any of its employees, representatives, confidants, associates,
or agents to divulge, by written, oral, electronic or by any other means
whatsoever, any trade secret or confidential knowledge, pertaining to the
business and affairs of the other party, obtained by a party as a result of its
engagement hereunder, unless authorized in writing, by the other party.
In the event either party breaches this portion of the Agreement, the
damages incurred will be difficult to calculate and determine in sufficiently
definite terms. Therefore, both Proxhill and the Company acknowledge and agree
that in the event of a breach, the non-breaching party will be entitled, in
addition to its equitable and other legal remedies, the sum of $1,000,000,
whichever is greater, as liquidated damages.
9.4 Publicity. The Parties agree that no publicity, releases or other
public announcement concerning the transactions contemplated by this Agreement
shall be issued by either party without the advance approval of both the form
and substance of the same by the other party and its counsel, which approval, in
the case of any publicity, release or other public announcement required by
applicable law, shall not be unreasonably withheld or delayed; provided this
Article shall not serve to prevent a delay of disclosure which, in the opinion
of counsel for the disclosing party is advisable under applicable state or
federal law.
9.5 Entire Agreement. This Agreement including all of the exhibits to be
attached hereto
17
constitutes the entire Agreement of the Parties with respect to the subject
matter hereof. The representations, warranties, covenants and agreements set
forth in this Agreement and in any schedules or exhibits delivered pursuant
hereto constitute all the representations, warranties, covenants and agreements
of the Parties and upon which the Parties have relied and except as may be
specifically provided herein, no change, modification, amendment, addition or
termination of this Agreement or any part thereof shall be valid unless in
writing and signed by or on behalf of the party to be charged therewith.
9.6 Notices. Any and all notices or other communications or deliveries
required or permitted to be given or made pursuant to any of the provisions of
this Agreement shall be deemed to have been duly given or made for all purposes
if sent by certified or registered mail, return receipt requested, and postage
prepaid, Federal Express, Express Mail, hand delivered or sent by telegraph or
telex with confirmation as follows:
If to SC, at:
18 West 000 00xx Xxxxxx
Xxxxxxxx Xxxxxxx, XX 00000
Office # (000) 000-0000
Fax # (000) 000-0000
Attn.: Xxxxx Xxxxxxxxx
If to the Company, at:
00 Xxxxxxxx Xxxxx,
Xxxxx Xxxxxxx, XX 00000
Office # 000-000-0000
Fax # 000-000-0000
Attn.: Xxx Xxxx
If to Proxhill, at its agent, First Capital Investments, Inc., at:
0000 Xxxx Xxxxxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Office # (000) 000-0000
Fax # (000) 000-0000
Attn.: Xxxx X. Xxxxxx
or at such other address as any party may specify by notice given to other party
in accordance with this Article. The date of giving of any such notice shall be
the date of the actual receipt thereof.
9.7 Waiver. No waiver of the provisions hereof shall be effective unless
in writing and signed by the party to be charged with such waiver. No waiver
shall be deemed a continuing waiver or waiver in respect of any subsequent
breach or default, either of similar or different nature, unless expressly so
stated in writing.
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9.8 Laws of the State of Colorado. This Agreement shall be deemed to have
been made and delivered in and governed by and interpreted under and construed
in all respects in accordance with the laws of the State of Colorado,
irrespective of the place of domicile or residence of any party. In the event of
controversy arising out of the interpretation, construction, performance or
breach of this Agreement, the Parties hereby agree and consent to the
jurisdiction and venue of the District Court of Arapahoe County, or the United
States District Court within the State of Colorado, and further agree and
consent that personal service of process in any such action or proceeding
outside of the State of Colorado and Arapahoe County shall be tantamount to
service in person within Arapahoe County Colorado, and shall confer personal
jurisdiction and venue upon either of said courts.
9.9 Injunctive Relief. Solely by virtue of their respective execution of
this Agreement and in consideration for the mutual covenants of each other, SC,
Proxhill and the Company hereby agree, consent and acknowledge that, in the
event of a material breach and/or violation or any of the other material terms,
conditions and restrictions imposed hereunder, the Parties will be without
adequate remedy-at-law and shall, therefore, be entitled to immediately redress
any material breach of this Agreement by temporary or permanent injunctive or
mandatory relief obtained in an action or proceeding instituted in the District
Court of the State of Colorado, or the United States District Court for the
District of Colorado without the necessity of proving damages and in addition
and without prejudice to any other remedies which they may have at law or in
equity. For the purposes of this Agreement, the Parties hereby agree and consent
that upon a material breach of this Agreement, any party may present a conformed
copy of this Agreement to the aforesaid courts and shall thereby be able to
obtain a permanent injunction enforcing this Agreement or barring, enjoining or
otherwise prohibiting the other from circumventing the express written intent of
the Parties as enumerated in this Agreement. The jurisdictional, venue and
service provisions of this Agreement shall be applicable hereto. Additionally,
in any action commenced to enforce the terms of this Agreement, the prevailing
party in any such action shall be entitled to recover its related costs and
reasonable attorneys fees associated with such action.
9.10 Headings. The headings or captions under articles of this Agreement
are for convenience and reference only and do not in any way modify, interpret
or construe the intent of the Parties or effect any of the provisions of this
Agreement.
9.11 Facsimile signatures / Counterparts. This Agreement may be executed
in counterparts by facsimile, each of which so executed shall be deemed an
original and constitute one and the same agreement.
(The remainder of this page intentionally left blank)
19
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
date first above written by the undersigned duly authorized person.
GRO ENTERPRISES:
By:____________________________________
By: Xxxxx Xxxxxxxxx, Secretary
SOURCE CORP.:
By:____________________________________
By: Xxxxx Xxxxxxxxx, President
ADEX CORP.:
By:____________________________________
By: Xxxxx Xxxxxx, Vice President
IMSCO TECHNOLOGIES, INC.:
By:____________________________________
By: Xxx Xxxx, President
PROXHILL MARKETING, LTD:
By:____________________________________
By: Xxxx X. Xxxxxx, President
FIRST CAPITAL INVESTMENTS, INC.:
(With respect to Article II, Section 2.3)
By:____________________________________
Xxxx X. Xxxxxx, President
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