AGENCY AGREEMENT
__________ ____, 1999
Xx. Xxxxx X. Xxxxxx, President
Global Financial Group, Inc.
000 Xxxxxxxxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxxxxxx, XX 00000
Gentlemen:
Proformance Research Organization, Inc. ("Company"), a Delaware
corporation, proposes to issue and sell through you ("Agent") 1,000,000 shares
of the Company's $0.0001 par value common stock for $5.00 per share ("Shares").
The offering of the Shares is further described in the Small Business Company
Registration Statement ("Registration Statement") filed on Form SB-2 with the
United States Securities and Exchange Commission ("Commission").
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. In order to induce
the Agent to enter into this Agreement, the Company represents and warrants as
follows:
a) The Company has filed a Registration Statement
(No. 333-61533) on Form SB-2 relating to the Shares with the Commission
pursuant to the Securities Act of 1933 ("Act"), as amended, and the
Registration Statement was declared effective on ________________, 19___.
The Company has furnished to the Agent and to its legal counsel two signed
and ten conformed copies of the Registration Statement together with all
amendments and exhibits. As used in this Agreement, the term
"Registration Statement" means the Registration Statement, including the
Prospectus, the exhibits and the financial statements and all amendments
including any amendments after the effective date of the Registration
Statement. The term "Prospectus" means the Prospectus filed as a part of
Part II of the Registration Statement, including all pre-effective and
post-effective amendments and supplements thereto.
b) The Registration Statement and all other documents previously
filed or filed after the date hereof with the Commission conform and will
conform with all of the requirements of the Act in all material respects.
Neither the Registration Statement, the Prospectus nor the other material
filed or to be filed with the Commission contains nor will contain any
untrue statements of material fact nor are there or will there be any
omissions of material facts required to be stated therein or that are
necessary to make the statements therein not misleading, except that this
warranty does not apply to any statements or omissions made in reliance
upon and in conformity with information furnished in writing to the
Company by and with respect to you, or any dealer through you, expressly
for use in the Registration Statement or Prospectus or any amendment or
supplement thereto.
c) The Company has obtained a CUSIP number for its common stock
and the Company has used its best efforts to qualify the Shares for
offering in every state reasonably designated by the Agent. The materials
previously filed or filed after the date hereof with any state do not and
will not contain any untrue statements of material fact nor are there or
will there be any omissions of material facts required to be stated
therein or that are necessary to make the statements therein not
misleading.
d) The outstanding capital stock of the Company has been duly and
validly authorized, issued and is fully paid and non-assessable and
conforms to all statements made in the Registration Statement and
Prospectus with respect thereto. The Shares, Warrants (as defined in
paragraph 6 hereof) have been duly and validly authorized and, when issued
and delivered against payment as provided in this Agreement, will be
validly issued, fully paid and non-assessable. The Shares and Warrant
Shares, upon issuance, will not be subject to the preemptive rights of any
shareholders of the Company. The Warrants, when sold and delivered, will
constitute valid and binding obligations of the Company enforceable in
accordance with their terms. A sufficient number of shares of common
stock have been reserved for issuance upon exercise of the Warrants. The
Shares, Warrant Shares and Warrants will conform to all statements in the
Registration Statement and Prospectus. Upon delivery of and payment for
the Warrants to be sold by the Company as set forth in this Agreement, the
Agent and its designees will receive good and marketable title thereto,
free and clear of all liens, encumbrances, charges and claims except those
created by, through or under the Agent and except restrictions on transfer
arising under federal and state securities laws and their rules and
regulations. The Company will have on the Effective Date (as defined in
paragraph 1.h) hereof) of the Registration Statement and at the time of
delivery of such Warrants full legal right and power and all authorization
and approval required by law to sell, transfer and deliver such Warrants
in the manner provided hereunder.
e) The Company has been legally incorporated and is now, and
always during the period of the offering will be, a validly existing
corporation under the laws of the State of Delaware, lawfully qualified to
conduct the business for which it was organized and which it proposes to
conduct. The Company will always during the period of the offering be
qualified to conduct business as a foreign corporation in each
jurisdiction where the nature of its business requires such qualification.
f) The Company has an authorized capitalization of 20,000,000
shares of common stock ($0.0001 par value) and 1,000,000 shares of
Preferred Stock ($0.0001 par value). If the Shares are sold, the Shares
will represent at least 18.69% of the Company's shares of common stock
outstanding after the public offering. Common stock underlying outstanding
options and warrants and convertible debt except the Warrants will be
deemed to be outstanding for purposes of determining the number of shares
of the Company's common stock outstanding after the public offering.
There are no outstanding options, warrants or other rights to purchase
securities of the Company, however characterized, except as disclosed in
the Registration Statement. With respect to the offer to sell, sale,
offer to purchase or purchase of any of its securities, the Company has
not made any intentional or reckless violations of the anti-fraud
provisions of the federal securities laws, rules or regulations
promulgated thereunder or the laws, rules or regulations of any
jurisdiction wherein such securities transactions or solicitations
occurred.
g) During the period of the offering of the Shares and for one
(1) year from the
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date the Commission declares the Registration Statement to be effective
("Effective Date"), the Company will not sell any securities, except any
shares issued upon the exercise of any options or warrants outstanding
or conversion of outstanding convertible debt on the Effective Date and
except the Warrants) without the Agent's prior written consent, which
will not be unreasonably withheld.
h) The Company has caused each of its officers and directors
and has used its best efforts to cause each of its shareholders to
enter into an agreement with the Company pursuant to the terms of which
each such person has agreed not to sell any shares owned directly or
indirectly by such person for a period of twelve (12) months from the
date of Completion of the Offering without the Agent's prior written
consent, which will not be unreasonably withheld. The Company has
obtained such an agreement from shareholders owning at least 92% of the
Company's outstanding common stock. As of the date of the Offering, the
Company represents and warrants that there are no more than 100,000
shares of common stock that are eligible to be traded in the secondary
market upon Completion of the Offering. The balance of the issued and
outstanding shares as of the date hereof are restricted securities and
subject to the provisions of Rule 144 with respect to secondary market
trading. No such shares are eligible for unrestricted sale prior to
March 1, 1999.
i) Except as set forth in the Registration Statement and
Prospectus, the Company has no subsidiaries nor contemplates acquiring
subsidiaries or engaging in mergers with or the acquisition of any
companies.
j) The financial statements, together with related schedules and
notes, included in the Registration Statement and Prospectus present
fairly the financial condition of the Company and are reported upon by
independent public accountants according to generally accepted accounting
principles and as required by the rules and regulations of the Commission.
k) Except as disclosed in the Registration Statement and the
Prospectus, the Company does not have any contingent liabilities,
obligations or claims nor has it received threats of claims or regulatory
action. Further, except as disclosed in the Registration Statement and
the Prospectus, subsequent to the date information is given in the
Registration Statement and definitive Prospectus, and prior to the close
of the offering: (i) there shall not be any material adverse change in
the management or condition, financial or otherwise, of the Company or in
its business taken as a whole; (ii) there shall not have been any material
transaction entered into by the Company other than transactions in the
ordinary course of business; (iii) the Company shall not have incurred any
material obligations, contingent or otherwise, which are not disclosed in
the Registration Statement and the Prospectus; (iv) there shall not have
been nor will there be any change in the capital or long-term debt (except
current payments) of the Company; and (v) the Company has not and will not
have paid or declared any dividends or other distributions on its common
shares.
l) The Company's securities, however characterized, are not
subject to preemptive rights.
m) The Company will have the legal right and authority to enter
into this Underwriting Agreement upon its execution, to effect the
proposed sale of the Shares, to execute the Warrants and to effect all
other transactions contemplated by this Agreement.
n) The Company knows of no person who rendered any services in
connection with the introduction of the Company to the Agent. No broker's
or other finder's fees are due and payable by the Company and none will be
paid by it.
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o) The Company is eligible to use Form SB-2 for the offering of
the Shares.
p) The Company and its affiliates are not currently offering any
securities nor has the Company or its affiliates offered or sold any
securities except as required to be described in the Registration
Statement.
q) The Company will not file any amendment or supplement to the
Registration Statement, Prospectus or exhibits if the Agent and its
counsel have not been previously furnished a copy, or if the Agent or its
counsel have objected in writing to the filing of the amendment or
supplement.
r) The Company possesses adequate certificates or permits issued
by the appropriate federal, state and local regulatory authorities
necessary to conduct its business and to retain possession of its
properties. The Company has not received any notice of any proceeding
relating to the revocation or modification of any of these certificates or
permits.
s) The Company has filed all tax returns required to be filed and
is not in default in the payment of any taxes which have become due
pursuant to any law or any assessment.
t) The Company has marketable title to all properties including
intellectual properties described in the Registration Statement as owned
by it. The properties are free and clear of all liens, charges,
encumbrances or restrictions, however characterized, except as described
in the Registration Statement. All of the contracts, leases, subleases,
patents, copyrights, licenses and agreements, however characterized, under
which the Company holds its properties as described in the Registration
Statement are in full force and effect. The Company is not in default
under any of the material terms or provisions of any contracts, leases,
subleases, patents, copyrights, licenses or agreements under which the
Company holds its properties. There are no known claims against the
Company concerning the Company's rights under the leases, subleases,
patents, copyrights, licenses and agreements and concerning its right to
continued possession of its properties.
u) All original documents and other information relating to the
Company's affairs has and will continue to be made available upon request
to the Agent and to its counsel at the Agent's office or at the office of
the Agent's counsel and copies of any such documents will be furnished
upon request to the Agent and to its counsel. Included within the
documents made available have been at least the Articles of Incorporation
and any Amendments, Minutes of all of the meetings of the Incorporators,
Directors and Shareholders, all financial statements and copies of all
contracts, leases, patents, copyrights, licenses or agreements to which
the Company is a party or in which the Company has an interest.
v) The Company has appointed Corporate Stock Transfer,
000-00xx Xxxxxx, Xxxxx 0000, Xxxxxx, Xxxxxxxx 00000-0000, as the
Company's transfer agent. The Company will continue to retain a
transfer agent reasonably satisfactory to the Agent for so long as the
Company is subject to the reporting requirements under Section 12(g) or
Section 15(d) of the Securities Exchange Act of 1934 and so long as the
Agent is a principal market-maker in shares of the Company's common
stock. The Company will make arrangements to have available at the
office of the transfer agent sufficient quantities of the Company's
common stock certificates as may be needed for the quick and efficient
transfer of the Shares.
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w) The Company will use the proceeds from the sale of the Shares
as set forth in the Registration Statement and Prospectus.
x) There are no contracts or other documents required to be
described in the Registration Statement or to be filed as exhibits to the
Registration Statement which have not been described or filed as required.
y) Except as set forth in the Registration Statement and
Prospectus, the Company is not in material default under any of the
contracts, leases, licenses or agreements to which it is a party. The
proposed offering of the Shares will not cause the Company to become in
material default under any of its contracts, leases, subleases,
patents, copyrights, licenses or agreements nor will it create a
conflict between the Company and any of the contracting parties to the
contracts, leases and other agreements. Further, the Company is not in
material default in the performance of any obligation, agreement or
condition contained in any debenture or loan agreement of the Company.
The execution and delivery of this Agreement will not conflict with or
result in a breach of any of the material terms, conditions or
provisions of, or constitute a material default under, the Articles of
Incorporation or By-Laws of the Company, as amended, or any note,
indenture, mortgage, deed of trust or other agreement or instrument to
which the Company is a party or by which it or any of its property is
bound, or any existing law, order, rule, regulation, writ, injunction,
or decree of any government, governmental instrumentality, agency or
body, arbitration tribunal or court, domestic or foreign, having
jurisdiction over the Company or its property. The consent, approval,
authorization or order of any court or governmental instrumentality,
agency or body is not required for the consummation of the transactions
herein contemplated except such as may be required under the Act, under
the Blue Sky or securities laws of any state or jurisdiction, or the
rules of the NASD (as defined in paragraph 2.a) hereof).
There are no contracts or other documents which are required
to be filed as exhibits to the Registration Statement by the Act or its
rules and regulations which have not been so filed. Each contract to
which the Company is a party has been duly and validly executed, is in
full force and effect in all material respects in accordance with its
respective terms, and no contracts have been assigned by the Company,
except as disclosed in the Registration Statement and Prospectus. The
Company knows of no present situation, condition or fact which would
prevent compliance with the terms of such contracts. Except for
amendments or modifications of contracts in the ordinary course of
business and except as disclosed in the Registration Statement and
Prospectus, the Company has no intention of exercising any right which
would cancel any of its obligations under any contract, and has no
knowledge that any other party to any contract, in which the Company has
an interest, has any intention not to render full performance under such
contract.
z) The Company has not made any representation, whether oral or
in writing, to anyone, whether an existing shareholder or not, that any of
the Shares will be reserved for or directed to them during the proposed
public offering.
aa) The Company has caused each of its current shareholders to
agree in writing with respect to shares acquired by them prior to the
Effective Date that they have acquired the shares for investment purposes
only and they acknowledge that they hold "restricted securities" as
defined in Rule 144.
bb) Except as disclosed in the Registration Statement and
Prospectus, there is and prior to the close of the offering of the Shares
to the public there will be, no action, suit or proceeding before any
court or governmental agency, authority or body pending, or
5
to the knowledge of the Company, threatened which might result in
judgments against the Company not adequately covered by insurance or which
collectively might result in any material adverse change in the condition
(financial or otherwise), the business or the prospects of the Company, or
would materially affect the properties or assets of the Company.
All of the above representations and warranties shall survive the
performance or termination of this Agreement.
2. REPRESENTATIONS AND WARRANTIES OF THE AGENT. The Agent represents
and warrants as follows:
a) It is registered as a broker-dealer with the Commission, in
good standing with the Minnesota Division of Securities and is registered,
to the extent registration is required, with the appropriate governmental
agency in each state in which it offers or sells the shares and is a
member of the National Association of Securities Dealers, Inc. ("NASD")
and will use its best efforts to maintain such registrations,
qualifications and memberships throughout the term of the offering.
b) To the knowledge of the Agent, no action or proceeding is
pending against the Agent or any of its officers or directors concerning
the Agent's activities as a broker or dealer that would affect the
Company's offering of the Shares.
c) The Agent will offer the Shares only in those states and in
the quantities that are identified in the Blue Sky Memorandum from the
Company's counsel to the Agent that the offering of the Shares has been
qualified for sale under the applicable state statutes and regulations.
The Agent, however, may offer the Shares in other states if (i) the
transaction is exempt from the registration requirements in that state,
(ii) the Company's counsel has received notice ten (10) days prior to the
proposed sale, and (iii) the Company's counsel does not object within said
10-day period.
d) The Agent, in connection with the offer and sale of the Shares
and in the performance of its duties and obligations under this Agreement,
agrees to use its best efforts to comply with all applicable federal laws;
the laws of the states or other jurisdictions in which the Shares are
offered and sold; and the rules and regulations of the NASD.
e) The Agent is a corporation duly organized, validly existing
and in good standing under the laws of the State of Colorado with all
requisite power and authority to enter into this Agreement and to carry
out its obligations hereunder.
f) This Agreement has been duly authorized, executed and
delivered by the Agent and is a valid agreement on the part of the Agent.
g) Neither the execution of this Agreement nor the consummation
of the transactions contemplated hereby will result in any breach of any
of the terms or conditions of, or constitute a default under, the Articles
of Incorporation or By-Laws of the Agent or any indenture, agreement or
other instrument to which the Agent is a party or violate any order
directed to the Agent of any court or any federal or state regulatory body
or administrative agency having jurisdiction over the Agent or its
affiliates.
6
h) The Agent knows of no person who rendered any services in
connection with the introduction of the Company to the Agent. No person
acting by, through or under the Agent will be entitled to receive from the
Agent or from the Company any finder's fees or similar payments.
i) The written information provided by the Agent for inclusion in
the Registration Statement and Prospectus consists of certain information
on the front and back Prospectus cover pages, and that set forth under
"Plan of Distribution" in the Prospectus.
j) The Agent will, reasonably promptly after the closing date,
supply the Company with all information required from the Agent for
compliance with Rule 463 under the Act and such additional information
as the Company may reasonably request to be supplied to the securities
commissions of such states in which the Shares have been qualified for
sale.
All of the above representations and warranties shall survive the
performance or termination of this Agreement.
3. EMPLOYMENT OF THE AGENT. In reliance upon the representations and
warranties and subject to the terms and conditions of this Agreement:
a) The Company employs the Agent as its exclusive agent to sell
for the Company's account the Shares, on a cash basis only, at a price of
$5.00 per Share. The Agent agrees to use its best efforts, as agent for
the Company, to sell the Shares subject to the terms and conditions set
forth in this Agreement. It is understood between the parties that there
is no firm commitment by the Agent to purchase any or all of the Shares.
b) The obligation of the Agent to offer the Shares is subject to
receipt by it of written advice from the Commission that the Registration
Statement is effective, is subject to the Shares being qualified for
offering under applicable laws in the states as may be reasonably
designated by the Agent, is subject to the absence of any prohibitory
action by any governmental body, agency or official, and is subject to the
terms and conditions contained in this Agreement and in the Registration
Statement covering the offering to which this Agreement relates.
c) The Company and the Agent agree that, unless all of the Shares
to be offered are sold within ninety (90) days after the Effective Date
(which period may be extended for an additional period not to exceed
ninety (90) days by mutual agreement between the Company and the Agent),
the agency between the Company and the Agent will terminate. If the
agency between the Company and the Agent terminates, the full proceeds
which have been paid for the Shares shall be returned to the purchasers.
Prior to the sale of all of the Shares to be offered, all proceeds
received from the sale of the Shares will be deposited in an escrow
account entitled "Proformance Research Organization Escrow Account" with
Bank Windsor, 000 Xxxxxxxxx Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxx 00000.
d) The Company, the Agent and Bank Windsor will, prior to the
beginning of the offering of the Shares, enter into a fund escrow
agreement in form satisfactory to the parties. The parties mutually agree
to faithfully perform their obligations under the fund escrow agreement.
All checks related to the purchase of Shares offered herein shall be made
payable to the Fund Escrow Agent, Bank Windsor. Agent shall transmit
all checks for the purchase of Shares directly to the Fund Escrow Agent,
Bank Windsor, by noon of the next business day after receipt in accordance
with Rule 15(c)2-4 of the Securities Exchange Act of 1934, as amended.
e) The Agent shall have the right to associate with other agents
and dealers as it may determine and shall have the right to grant to such
persons such concessions out of
7
the commissions to be received by the Agent as the Agent may determine,
under and pursuant to a Participating Dealer Agreement in the form
filed as an exhibit to the Registration Statement.
f) Subject to the sale of all of the Shares, the Company
agrees to pay to the Agent an underwriting commission computed at the
rate of $.50 (10% of the public offering price) for each of the Shares
sold by the Agent at the public offering price of $5.00 per Share.
Agent shall not be entitled to be paid an underwriting commission on
shares sold to Weiner, Inc. pursuant to a July 15, 1998 Common Stock
Purchase, as Amended ("Weiner Subscription Agreement"). This
commission shall be payable in certified funds upon the release of the
funds which have been deposited in the escrow account.
g) The Company hereby grants to the Agent an Option (the
"Option") for a period of thirty (30) days after Closing to sell at
a purchase price of $5.00 per Share up to 150,000 additional Shares
in order to cover over-allotments. The Company agrees to pay to the
Agent an underwriting commission computed at the rate of $.50 (10% of
the public offering price) for each of the Option Shares sold by the
Agent at the public offering price of $5.00 per Share.
4. EXPENSES OF THE AGENT.
a) Subject to the sale of all of the Shares (including those
directed by Company) and subject to the provisions of paragraph 13.b)
hereof, the Company shall reimburse the Agent for its expenses on a
non-accountable basis in an amount of $150,000.00. THE AGENT
ACKNOWLEDGES THAT IT HAS RECEIVED $5,000 CASH OF THE NON-ACCOUNTABLE
EXPENSE ALLOWANCE. SUBJECT TO THE PROVISIONS OF PARAGRAPH 13.b)
HEREOF, THE REMAINING NON-ACCOUNTABLE EXPENSE ALLOWANCE IS DUE ON THE
RELEASE OF THE FUNDS IN THE ESCROW ACCOUNT TO THE COMPANY.
b) Except as stated in paragraph 13.b) of this Agreement, the
Agent agrees that, out of its non-accountable expense allowance, the Agent
will pay all costs incurred or to be incurred by the Agent or by its
personnel in connection with the offering of the Shares, except those to
be paid by the Company as described in paragraph 5 hereof.
Notwithstanding the foregoing, in the event that Agent is not entitled to
receive any non-accountable expense allowance, Company shall reimburse
Agent for its accountable attorneys' fees, costs and expenses not to
exceed $25,000.
c) In the event the offering is terminated, the Company shall
pay Agent solely for its actual accountable out-of-pocket expenses.
5. EXPENSES OF THE COMPANY. The Company agrees that it will pay the
following fees and expenses:
a) All fees and expenses of its legal counsel who will be engaged
to prepare certain information, documents and papers for filing with the
Commission and with state or local securities authorities;
b) All fees and expenses of its accountants incurred in
connection with the offering of the Shares and the preparation of all
documents and filings made as part of the offering;
c) All costs in issuing and delivering the Shares;
d) All costs of printing and delivering to the Agent and dealers
as many copies of the Registration Statement and amendments, preliminary
Prospectus and definitive Prospectus as reasonably requested by the Agent;
e) All of the Company's mailing, telephone, travel, clerical and
other office costs incurred or to be incurred in connection with the
offering of the Shares;
f) All fees and costs which may be imposed by the Commission, the
various state or local securities authorities and the NASD for review of
the offering of the Shares;
8
g) All other expenses incurred by the Company in performance of
its obligations under this Agreement.
6. WARRANTS.
a) Subject to the sale of all of the Shares, the Company
agrees to sell to the Agent warrants to purchase common stock
("Warrants") for a purchase price of $.01 per Warrant entitling the
Agent to purchase One Hundred Thousand (100,000) Shares of the
Company's common stock ("Warrant Shares"). Each Warrant shall entitle
the holder to purchase one share of the Company's common stock.
b) The Warrants may not be exercised for a period of
twenty-four (24) months following the Effective Date. However, if the
Company plans to merge, reorganize or take any other action that would
terminate the Warrants, the Warrants will be exercisable immediately
prior to such action. The Company will provide the Agent with notice of
any tender offer being made for the Company's shares as soon as
practicable after the Company becomes aware of such tender offer. The
Warrants will be exercisable for a period of three (3) years, such period
to begin twenty-four (24) months after the Effective Date. If the
Warrants are not exercised during their term, they will by their terms
automatically expire. The purchase price of the shares underlying the
Warrants will be $7.50 per share during the period that the Warrants are
exercisable. The Company will set aside and at all times have available
a sufficient number of shares of its common stock to be issued upon the
exercise of the Warrants. The shares underlying the Warrants are
hereinafter called "Warrant Shares" which term shall include all shares
of common stock that have been issued upon the exercise of the Warrants
and all unissued shares of common stock underlying the Warrants. The
Warrants may not be sold, transferred, assigned or hypothecated for a
period of twenty-four (24) months after the Effective Date except to
officers of the Agent, except as a result of the death of any such
officer and except to successors to the Agent's business.
c) The Warrants will be evidenced by certificates issued by the
Company and delivered to the Agent, which shall contain such terms and
conditions as are required by the Agent, including anti-dilution
provisions reasonably acceptable to the Agent relating to stock splits,
stock dividends and other like matters. The Warrants shall provide the
holder with a cashless exercise right on terms and conditions agreeable to
Agent. Any transfer of the Warrants by the Agent to any person must be
made in compliance with the Act.
d) The Agent agrees that the Warrants and any certificates
representing the Warrant Shares will bear the following legend:
"The securities represented by this Certificate may not be
offered for sale, sold or otherwise transferred except
pursuant to an effective registration statement under the
Securities Act of 1933 (the "Act"), or pursuant to an
exemption from registration under the Act, the availability of
which is to be established to the satisfaction of the
Company."
e) Upon written request of the holder(s) of at least twenty-five
percent (25%) of the Warrant Shares, whether issued or not, made at any
time within the period beginning two (2) years and ending five (5) years
after the Effective Date, the Company will file, no more than once, a
registration statement or Regulation A Registration Statement under the
Act, registering or qualifying the Warrants and Warrant Shares. The
Company will use its
9
best efforts to qualify or register the Warrants and Warrant Shares for
sale in at least the same states as the Shares were registered or
qualified. The Company must file a registration statement if all
Warrants and Warrant Shares cannot be sold under a Regulation A
Registration Statement because of the limited exemption. If Warrants
are registered or qualified, the Company agrees to take whatever actions
are necessary so that during the next twelve (12) months after the
Effective Date of such registration or qualification, a current
registration statement or Regulation A Registration Statement relating
to the Warrant Shares will be effective with the Commission. The
Company agrees to use its best efforts to cause the registration
statement or Regulation A Registration Statement to become effective.
All expenses of such registration or qualification including, but not
limited to, legal, accounting and printing fees, will be borne by the
Company.
f) The Company agrees that, if at any time within the period
beginning two (2) years and ending five (5) years after the Effective
Date, it should file a registration statement with the Commission pursuant
to the Act or file a Regulation A Registration Statement under the Act,
regardless of whether some of the holder(s) of the Warrants and Warrant
Shares have availed itself (themselves) of the right provided in paragraph
6.e) above, the Company, at its own expense, will offer the holder(s) the
opportunity to register or qualify the Warrant and Warrant Shares, limited
in the case of a Regulation A offering to the amount of the available
exemption. The Company's obligations pursuant to this paragraph 6.f)
shall only be in effect if the holders of at least twenty-five percent
(25%) of the Warrant Shares accept the Company's offer. This paragraph is
not applicable to a registration statement filed by the Company with the
Commission on Form S-14 or Form S-8, or any other inappropriate form.
g) In addition, the Company will cooperate, within the period
beginning two (2) years and ending five (5) years after the Effective
Date, with the then holder(s) of at least twenty-five percent (25%) of the
Warrant Shares in preparing and signing any registration statement or
Regulation A Registration Statement, in addition to the registration
statements and Regulation A Registration Statements discussed above,
required in order to sell or transfer the Warrants or Warrant Shares and
will supply all information required, but such additional registration
statement or Registration Statement shall be at the then holder(s)' cost
and expense.
h) The Company will not be required to pay any underwriting
commissions, discounts or similar expenses relating to the Warrants and/or
Warrant Shares that are registered or qualified pursuant to paragraph
6.e), f) or g) of this Agreement.
7. THREAT OF REGULATORY ACTION. The Company and the Agent agree to
advise each other immediately and confirm in writing the receipt of any threat
of or the initiation of any steps or procedures which would impair or prevent
the right to offer the Shares or the issuance of any "suspension orders" or
other prohibitions preventing or impairing the proposed offering of the Shares.
In the case of the happening of any such event, neither the Company nor the
Agent will acquiesce in such steps, procedures or suspension orders if such
acquiescence would adversely affect the other party and, in such event, each
party agrees to actively defend any such actions or orders unless both parties
agree in writing to acquiesce in such actions or orders or unless counsel for
each party advises the parties that the probability of successfully defending
against such actions or orders is remote.
8. FURTHER AGREEMENTS OF THE COMPANY. The Company further agrees with
the Agent as follows:
10
a) The Company will advise the Agent as soon as the Company is
advised of any comments by the Commission, of any request made by the
Commission for an amendment to the Registration Statement or Prospectus or
for supplemental information, and of any order or of the institution of
any adverse proceedings with respect to the offering of the Shares. The
Company will immediately deliver to the Agent copies of any papers
involved.
b) The Company will use its best efforts to qualify the sale of
the Shares in such states as shall be reasonably designated by the Agent.
The officers, directors, promoters and shareholders of the Company will
comply with applicable state escrow requirements, including those
pertaining to the escrow of shares, provided that the period of escrow
shall not exceed two (2) years from the Effective Date and provided that
the period of escrow shall only be based upon the passage of time.
c) The Company will provide the Agent and its counsel with copies
of all applications for the registration of Shares filed with the various
state authorities and will provide the Agent and its counsel with copies
of all comments and orders received from these authorities.
d) The Company will deliver to the Agent and to other broker-
dealers as directed by the Agent as many copies of preliminary Prospectus
as the Agent may reasonably request during the period following the filing
of Amendment No. 1 to the Registration Statement (unless the Registration
Statement is not reviewed by the Commission, in which event such copies
shall be made available by the Company as reasonably requested by the
Agent) and the Effective Date. The Company will deliver to the Agent and
to other broker-dealers as requested by the Agent as many copies of the
definitive Prospectus as the Agent may reasonably request during the
period of the offering and for ninety (90) days after the Effective Date.
e) The Company will furnish the Agent for so long as the
Company's common stock is registered under the Securities Exchange Act of
1934 and for so long as the Agent is a principal market-maker in such
common stock with:
(i) Within ninety (90) days after the close of each fiscal
year of the Company, a financial report of the Company and its
subsidiaries, if any, on a consolidated basis, such report to
include such information in such form as the Company shall be
required to include in reports for that fiscal year to be filed with
the Commission and such report to be certified by independent public
accountants;
(ii) Within sixty (60) days after the end of each quarterly
fiscal period of the Company other than the last quarterly fiscal
period in any fiscal year, copies in printable form of the financial
statements of the Company and its subsidiaries, if any, on a
consolidated basis, for that period and as of the end of that
period, which financial statements shall include a narrative
discussion of such financial statements and of the business
conducted by the Company and its subsidiaries, if any, during such
fiscal quarter and such information in such form as the Company
shall be required to include in reports for that period to be filed
with the Commission, all subject to year-end adjustment, signed by
the principal financial or accounting officer of the Company;
(iii) As soon as is available, a copy of each report of the
Company
11
mailed to shareholders or filed with the Commission;
(iv) Copies of all news, press or public information
releases when made;
(v) Upon request in writing from the Agent, such other
information as may reasonably be requested concerning the
properties, business and affairs of the Company and its
subsidiaries, if any.
f) The Company agrees to notify the Agent immediately within the
90-day period after the Effective Date of any event that materially
affects the Company or its securities and that should be set forth in an
amendment or supplement to the Prospectus in order to make the statements
made therein not misleading. Similarly, the Company agrees to as soon as
possible thereafter prepare and furnish to the Agent as many copies of the
Agent may request of an amended Prospectus or a supplement to the
Prospectus in order that the Prospectus as amended or supplemented will
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or that is necessary in order
to make the statements made therein not misleading.
g) The Company will file with the Commission the required reports
on FORM SR and will file with the appropriate state securities
commissioners any sales and other reports required by the rules and
regulations of such agencies and will supply copies to the Agent.
h) Within thirty (30) days after successful termination of the
offering of the Shares, the Company will make a filing under Section 12(g)
of the Securities Exchange Act of 1934, as amended, on Form 8-A with
respect to its common stock and will use its best efforts to cause it to
become effective. The Company agrees to deliver a copy of the Form 8-A to
the Agent and to its counsel when filed.
i) Except with the Agent's approval, the Company agrees that the
Company will not do the following until (i) the completion of the offering
of the Shares, or (ii) the termination of this Agreement, or (iii) ninety
(90) days after the Effective Date, whichever occurs later:
(1) Undertake or authorize any change in its capital
structure or authorize, issue or permit any public or private
offering of additional securities;
(2) Authorize, create, issue or sell any funded
obligations, notes or other evidences of indebtedness, except in the
ordinary course of business and within twelve (12) months of their
creation;
(3) Consolidate or merge with or into any other
corporation; or
(4) Crate any mortgage or any lien upon any of its
properties or assets except in the ordinary course of its business.
j) For so long as the Company's common stock is registered under
the Securities Exchange Act of 1934, as amended, the Company will hold an
annual meeting of shareholders for the election of directors within 180
days after the end of the Company's fiscal year, and within 180 days after
the end of each of the Company's fiscal years, will provide the Company's
shareholders with the audited financial statements of the Company as of
the end of the fiscal year just completed prior thereto. Such financial
statements shall be those required by Rule 14a-3 under the Securities
Exchange Act of 1934, as amended,
12
and shall be included in an annual report meeting the requirements of
the Rule. Further, the Company agrees to make available to the Agent
and the Company's shareholders in printable form within sixty (60) days
after the end of each fiscal quarter of the Company (other than the last
fiscal quarter in any fiscal year) reasonably itemized financial
statements of the Company and its subsidiaries, if any, for the fiscal
quarter just ended and a narrative discussion of such financial
statements and the business conducted by the Company and its
subsidiaries, if any, during such quarter.
k) As soon as practical, but in any event not later than fifteen
(15) months after the Effective Date, the Company will make generally
available to its securities holders, according to Section 11(a) of the
Act, an earnings statement of the Company in reasonable detail covering a
period of at least twelve (12) months beginning after the Effective Date
and will advise the Agent in writing that such statement has been made
available.
l) The Company agrees to have the Shares listed on NASDAQ on the
first day of trading in the Shares, if eligible. The Company and the
Agent will agree upon the NASDAQ symbol to be used.
m) Within thirty (30) days after the successful termination of
the offering of the Shares, the Company agrees to submit information about
the Company to be included in various securities manuals, including
Xxxxx'x OVER-THE-COUNTER MANUAL and Standard & Poor's, STANDARD
CORPORATION RECORDS to facilitate secondary trading in the Shares.
n) The Company will qualify the Shares for secondary trading
in Arizona, California, Colorado, Florida, Hawaii, Illinois, Iowa,
Minnesota, Nevada, New Jersey, New York, North Carolina, Ohio, South
Carolina, Washington, D.C., as soon as possible.
o) The Company agrees to cause the stock certificates of all of
the current shareholders of the Company and of any future officers or
directors of the Company to be clearly legended as being restricted
against transfer without compliance with the Act and to cause the
Company's transfer agent to put stop transfer instructions against such
stock certificates.
p) The officers and directors of the Company at the time of
filing of the Company's Registration Statement and at the Effective Date
of the Company's Registration Statement must be reasonably acceptable to
the Agent.
9. COMPANY'S INDEMNIFICATION.
13
a) The Company agrees to indemnify, defend and hold harmless
the Agent from and against any and all losses, claims, damages,
liabilities and expenses (including reasonable legal or other expenses)
incurred by the Agent in connection with defending or investigating any
such claims or liabilities, whether or not resulting in any liability
to the Agent, which the Agent may incur under the federal or state
securities laws and regulations thereunder, state statutes or at common
law or otherwise, but only to the extent that such losses, claims,
damages, liabilities and expenses shall arise out of or be based upon a
violation or alleged violation of the federal or state securities laws
or regulations promulgated thereunder, a state statute or the common
law resulting from any untrue statement or alleged untrue statement of
a material fact contained in the Registration Statement or in any
application or other papers filed with the various state securities
authorities (hereinafter collectively called "Blue Sky Applications")
or shall arise out of or be based upon any omission or alleged omission
to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, provided,
however, that this indemnity agreement shall not apply to any such
losses, claims, damages, liabilities or expenses arising out of or
based upon any such violation based upon a statement or omission made
in reliance upon written information furnished for use in the
Registration Statement or in a Blue Sky Application by the Agent.
b) The foregoing indemnity of the Company in favor of the Agent
shall not be deemed to protect the Agent against any liability to which
the Agent would otherwise be subject by reason of willful misfeasance, bad
faith or gross negligence in the performance of the Agent's duties, or by
reason of the Agent's reckless disregard of the Agent's obligations and
duties under the Act or this Agreement.
c) The Agent agrees to give the Company an opportunity to
participate in the defense or preparation of the defense of any action
brought against the Agent to enforce any such claim or liability and the
Company shall have the right so to participate. The agreement of the
Company under the foregoing indemnity is expressly conditioned upon notice
of any such action having been sent by the Agent to the Company, by letter
or telegram (addressed as provided in this Agreement), promptly after the
receipt of written notice of such action against the Agent such notice
either being accompanied by copies of papers served or filed in connection
with such action or by a statement of the nature of the action to the
extent known to Agent. Failure to notify the Company as herein provided
shall not relieve it from any liability which it may have to the Agent
other than on account of the indemnity agreement contained in this
paragraph 9.
10. AGENT'S INDEMNIFICATION.
a) The Agent likewise agrees to indemnify, defend and hold
harmless the Company against any and all losses, claims, damages, expenses
and liabilities to which the Company may become subject, arising out of or
based upon any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement or in any Blue Sky
Application or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, resulting from the use of written
information furnished to the Company by the Agent for use in the
preparation of the Registration Statement or in any Blue Sky Application.
14
b) The Company agrees to give the Agent an opportunity to
participate in the defense or preparation of the defense of any action
brought against the Company to enforce any such claim or liability and the
Agent shall have the right to so participate. The Agent's liability under
the foregoing indemnity is expressly conditioned upon notice of any such
action having been sent by the Company to the Agent by letter or telegram
(addressed as provided for in this Agreement), promptly after the receipt
by the Company of written notice of such action against the Company, such
notice either being accompanied by copies of papers served or filed in
connection with such action or by a statement of the nature of the action
to the extent known to the Company. Failure to notify the Agent as herein
provided shall not relieve the Agent from any liability which the Agent
may have to the Company other than on account of the indemnity agreement
contained in this paragraph 10.
c) The provisions of paragraphs 9 and 10 shall not in any way
prejudice any right or rights which the Agent may have against the Company
or the Company may have against the Agent under any statute, including the
Act, at common law or otherwise.
d) The indemnity agreements contained in paragraph 9 and 10 shall
survive the termination of this Agreement and shall inure to the benefit
of the Company, the Agent, their respective successors and the persons
specified in paragraph 16 below, and their respective heirs, personal
representatives and successors and shall be valid irrespective of any
investigation made by or on behalf of the Agent or the Company.
11. CONTRIBUTION. If the indemnification provided for in paragraphs 9
and 10 is unavailable to or insufficient to hold harmless an indemnified party
under paragraphs 9 and 10 in respect of any losses, claims, damages, expenses or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall in lieu of indemnifying such indemnified party
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, expenses or liabilities (or actions in respect
thereof) in such proportion as is appropriate to reflect not only (a) the
relative benefits received by the Company on the one hand the Agent on the other
from the offering of the Shares, but also (ii) the relative fault of the Company
and the Agent in connection with the statements or omissions which resulted in
such losses, claims, damages, expenses or liabilities (or action in respect
thereof), as well as any other relevant equitable considerations. The relative
benefits received by the Company on the one hand and the Agent on the other
shall be deemed to be in the same proportion as the total net proceeds from the
offering of the Shares (before deducting expenses other than the non-accountable
expense allowance payable by the Company to the Agent) received by the Company
bear to the total underwriting commissions and expense allowance received by the
Agent in each case as set forth in the table on the cover page of the
Prospectus. The relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or the Agent and their parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the Agent agree that it would not be
just and equitable if contribution pursuant to this paragraph 11 were determined
by pro-rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to above in this paragraph 11.
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages, expenses or liabilities (or actions in respect thereof)
referred to above in this paragraph 11 shall be deemed to include any legal or
other expenses to which such indemnified party would be entitled if paragraphs 9
and 10 were applied. Notwithstanding the provisions of this paragraph 11, the
Agent shall not be required to contribute any amount in excess of the amount by
which the total price with the Shares underwritten by it and distributed to the
public exceeds the amount of any damages which the Agent has otherwise been
required to pay by reason of such untrue or alleged untrue statement or
15
omission or alleged omission plus the Agent's proportionate share of such
legal or other expenses; and any punitive or exemplary damages if the untrue
or alleged untrue statement of a material fact relates to information supplied
by or statements made by the Agent. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11 of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation.
12. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE AGENT. All
obligations of the Agent under this Agreement are subject to the following
conditions precedent:
a) Counsel for the Agent shall have completed a review of the
form and content of the Registration Statement and Prospectus, of the
organization and present legal status of the Company and of the legality
and validity of the authorization and issuance of the issued and
outstanding stock of the Company and of the Shares.
b) The Company shall have performed all of its obligations under
this Agreement. All of the statements, representations and warranties
contained in this Agreement shall be complete and true.
c) From the date of this Agreement until the completion of the
offering, no material adverse changes shall have occurred in the business,
properties and assets of the Company other than changes occurring in the
ordinary course of business.
d) From the date of this Agreement until the completion of the
offering, no claims or litigation shall have been instituted or threatened
against the Company for substantial amounts or which would materially
adversely affect the Company, its business or its property and no
reasonable basis exists for such claims or threats. Further, no
proceeding shall have been instituted or threatened against the Company
before any regulatory body wherein an unfavorable ruling would have a
material adverse effect on the Company.
e) From the date of this Agreement until the completion of the
offering of the Shares, no material adverse change shall have occurred in
the operation financial condition, management or credit of the Company or
in any conditions affecting the prospects of its business.
f) From the date of this Agreement until the completion of the
offering, the Company shall not have sustained any loss on account of
fire, flood, accident or calamity of such character as materially
adversely affects its business or property, regardless of whether or not
the loss has been insured.
g) The Agent shall have received from the independent public
accountants for the Company two letters addressed to the Agent, one dated
the Effective Date and one dated the date of the release of the funds from
the Escrow Account to the Company, to the effect that:
(i) With respect to the Company, they are independent
public accountants within the meaning of the Act and the published
rules and regulations.
(ii) In their opinion, the financial statements and
supporting schedules and notes examined by them of the Company at
all dates and for all periods referred to in their opinion included
in the definitive Prospectus comply as to form in all
16
material respects with the applicable accounting requirements of
the Act and the published rules and regulations.
(iii) Upon the basis of a reading of the related available
interim financial statements and the financial data and accounting
records of the Company, inquiries of officers of the Company
responsible for financial and accounting matters, a reading of the
minute books of the Company and other specified procedures and
inquiries satisfactory to the Agent, if any, nothing has come to
their attention which causes them to believe that during the period
from the last audited balance sheet included in the Registration
Statement to a specified date not more than five (5) days prior to
the date of such letter (a) there has been any change in the capital
shares or other securities of the Company or any payment or
declaration of any dividend or other distribution in respect thereof
or exchange therefor from that shown in its audited balance sheets
or in the debt of the Company from that shown or contemplated under
"Capitalization" in the Registration Statement or definitive
Prospectus (other than as set forth in or contemplated by the
Registration Statement or definitive Prospectus); (b) there have
been any material decreases in net current assets or net assets as
compared with amounts shown in the last audited balance sheet
included in the definitive Prospectus (other than in the ordinary
course of business), except in all instances the changes disclosed
in or contemplated by the Registration Statement and definitive
Prospectus; and (c) on the basis of their examinations referred to
in their opinion, report and consent included in the Registration
Statement and definitive Prospectus and the indicated procedures and
discussions referred to above, nothing has come to their attention
which, in their judgment, would cause them to believe or indicate
that the financial statements and schedules set forth in the
Registration Statement and definitive Prospectus do not present
fairly the financial position and results of operations of the
Company, for the periods indicated, in conformity with generally
accepted accounting principles applied on a consistent basis, and
are not in all material respects a fair presentation of the
information purported to be shown.
h) On the date of the release of the funds in the Escrow Account
to the Company, the Agent shall have received from the president or vice
president of the Company and the treasurer of the Company certificates
dated as of such date, in form satisfactory to the Agent to the effect
that:
(i) The representations and warranties of the Company
contained in paragraph 1 of this Agreement are complete and true.
(ii) All of the conditions precedent in paragraphs 12.b)-
12.f) of this Agreement have been performed and the representations
of these conditions precedent are true.
(iii) No stop order or other proceedings have been instituted
or threatened by the Commission or any state authority which would
adversely affect the offering of the Shares.
(iv) This Agreement and the Warrants have been duly
authorized and executed and constitute valid agreements of the
Company, and with respect to the Warrants, are binding agreements
and are enforceable according to their terms.
(v) The respective signers have each carefully examined the
Registration
17
Statement and definitive Prospectus and any amendments and
supplements, and to the best of their knowledge, the Registration
Statement and definitive Prospectus and any amendments and
supplements contain all statements required to be stated therein.
All statements contained there are true and correct. Neither the
Registration Statement, definitive Prospectus or any amendment,
supplement or sticker thereto includes any untrue statement of a
material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading. Since the Effective Date of the Registration Statement,
there has occurred no event required to be stated therein or
necessary to make the statements therein not misleading, and since
the Effective Date of the Registration Statement, there has occurred
no event required to be set forth in an amended or supplemented
Prospectus which has not been so set forth.
i) On the Effective Date and on the closing date, the Agent shall
have received from the Company's legal counsel Blue Sky Memorandum setting
forth the states in which the Shares may be sold and the number of Shares
that may be sold in each such state.
j) On the date the funds in the Escrow Account are released to
the Company, the Agent shall have received a written opinion from the
Company's counsel Xxxx Xxxx Xxxx Xxxxxxxxxx & Xxxxxxxxx, P.C. stating
that:
(i) The Company has filed a Registration Statement on Form
SB-2 relating to the Shares with the Commission pursuant to the Act,
the Registration Statement has become effective under the Act and
the Registration Statement, Prospectus and all other documents filed
with the Commission comply as to form with all requirements of the
Act in all material respects (except for the financial statements
and other financial data included therein, as to which counsel need
express no opinion).
(ii) Counsel is unaware of any contracts or documents
required to be described in the Registration Statement or in the
Prospectus or to be filed as exhibits to the Registration Statement
which have not been described or filed as required.
(iii) Counsel is unaware of any contracts or documents that
have not been disclosed in the Prospectus that are material to the
representations in the Prospectus and that would require disclosure
in order to make statements made not misleading.
(iv) To the best knowledge of counsel and after reasonable
investigation, the Company is not in default of any of the contracts,
leases or agreements to which it is a party, which default has not
been disclosed in the Registration Statement and Prospectus, and the
proposed offering of Shares will not cause the Company to become in
default of any of its contracts, leases or agreements nor will it
create a conflict between the Company and any of the contracting
parties to the contracts, leases and other agreements.
(v) To the best knowledge of counsel and after reasonable
investigation, and except as described in the Registration
Statement, the Company has marketable title to all properties
described in the Registration Statement as owned by it; the
properties are free and clear of all liens, charges, encumbrances or
restrictions; all of the leases, subleases and other agreements
under which the Company holds its properties are in full force and
effect; the Company is not in default under any of
18
the material terms or provisions of any of the leases, subleases
or other agreements; and there are no claims against the Company
concerning its rights under the leases, subleases and other
agreements and concerning its right to continued possession of its
properties.
(vi) This Agreement and the Warrants issued to the Agent or
its designates have been duly authorized and executed by the Company
and constitute valid agreements of the Company except that no
opinion need be expressed as to the validity of the indemnification
provisions insofar as they are or may be held to be violative of
public policy (under either state or federal law), the availability
of specific performance or other equitable remedies, the effects of
bankruptcy, insolvency, moratorium and all other similar laws and
decisions affecting the rights of creditors generally and as to
whether or not this Agreement may be an illusory contract.
(vii) To the best knowledge of counsel and after reasonable
investigation, no claim or litigation has been instituted or
threatened against the Company.
(viii) To the best knowledge of counsel and after reasonable
investigation, no stop order or other proceedings have been
instituted or threatened by the Commission or any state or local
authority which would adversely affect the offering of the Shares.
(ix) To the best knowledge of counsel and after reasonable
investigation, all documents and contracts relating to the Company's
affairs have been furnished to the Agent's counsel.
(x) To the best knowledge of counsel and after reasonable
investigation, the Company possesses adequate licenses,
certificates, authorizations or permits issued by the appropriate
federal, state and local regulatory authorities necessary to conduct
its business as described in the Registration Statement and to
retain possession of its properties. Counsel is unaware of any
notice of any proceeding relating to the revocation or modification
of any of these certificates or permits having been received by the
Company.
(xi) To the best knowledge of counsel and after reasonable
investigation, neither the Company nor its affiliates is currently
offering any securities for sale except as described in the
Registration Statement.
(xii) No preemptive rights exist with respect to the
Company's securities.
(xiii) Counsel is unaware of any subsidiaries of the Company,
which have not been disclosed in the Registration Statement and
Prospectus.
(xiv) Counsel has participated in the preparation of the
Registration Statement, and Prospectus an no facts have come to the
attention of such counsel to lead counsel to believe that either the
Registration Statement or the Prospectus or any amendment or
supplement thereto (except for the financial statements and other
financial data included therein, as to which such counsel need
express no opinion) contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading.
19
(xv) The Company has an authorized capitalization of
20,000,000 shares of common stock ($0.0001 par value) and 1,000,000
shares of preferred stock ($0.0001 par value), up to 1,000,000 of
which are designated Series C Convertible Preferred Stock. There
are no outstanding options, warrants or other rights to purchase
shares of the Company's common stock known to counsel other than as
described in the Registration Statement.
(xvi) The Company has been incorporated and is a validly
existing corporation under the laws of the State of Delaware and has
full corporate power and authority under such laws to own its
properties and to conduct its business as described in the
Registration Statement. To the best of counsel's knowledge,
information and belief, the Company is qualified to conduct business
as a foreign corporation in each jurisdiction where the nature of
its business activities requires such qualification except where
failure to so qualify would not have a material adverse effect upon
the business or financial condition of the Company.
(xvii) The Company's shares of common stock that are issued
and outstanding are fully paid and non-assessable, and the Shares
and Warrant Shares, when issued and paid for in accordance with
their terms, will be fully paid and non-assessable. The Shares
conform to the description thereof contained in the Registration
Statement. The Company has authorized the issuance of the Shares,
Warrants and Warrant Shares on the terms and conditions herein set
forth. A sufficient number of common shares have been duly reserved
for issuance upon exercise of the Warrants.
13. TERMINATION.
a) This Agreement may be terminated by the Agent by notice to the
Company in the event that the Company shall have failed or been unable to
comply with any of the terms, conditions or provisions of this Agreement
on the part of the Company to be performed, complied with or fulfilled
within the respective times herein provided for, unless compliance
therewith or performance or satisfaction thereof shall have been expressly
waived by the Agent in writing.
b) This Agreement may be terminated by the Agent by notice to the
Company if the Agent believes, in its sole judgment, that any adverse
changes have occurred in the financial condition or obligations of the
Company or if the Company shall have sustained a loss by strike, fire,
flood, accident or other calamity of such a character as, in the sole
judgment of the Agent, may interfere materially with the conduct of the
Company's business and operations regardless of whether or not such loss
shall have been insured.
c) This Agreement may be terminated by the Agent by notice to the
Company at any time if, in the sole judgment of the Agent, payment for and
delivery of the Shares is rendered impracticable or inadvisable because
(i) additional material governmental restrictions not in force and effect
on the date hereof shall have been imposed upon the trading in securities
generally, or minimum or maximum prices shall have been generally
established on the New York or American Stock Exchange, or trading in
securities generally on either such Exchange shall have been suspended, or
a general moratorium shall have been established by federal or state
authorities; or (ii) a war or other national calamity shall have occurred;
or (iii) substantial and material changes in the condition of the market
(either generally or with reference to the sale of the Shares to be
offered hereby) beyond normal fluctuations are such that it would be
undesirable, impracticable or inadvisable in the sole
20
judgment of the Agent to proceed with this Agreement or with the public
offering; or (iv) of any matter materially adversely affecting the
Company.
d) In the event any action or proceeding shall be instituted or
threatened against the Agent, either in any court of compete jurisdiction,
before the Commission or any state securities commission concerning its
activities as a broker or dealer that would prevent the Agent from acting
as such, at any time prior to the Effective Date hereunder, or in any
court pursuant to any federal, state, local or municipal statute, a
petition in bankruptcy or insolvency or for reorganization or for the
appointment of a receiver or trustee of the Agent's assets or if the Agent
makes an assignment for the benefit of creditors, the Company shall have
the right on three (3) days written notice to the Agent to terminate this
Agreement without any liability to the Agent of any kind except for the
payment of expenses as provided in paragraphs 4.a) and 5 herein.
e) Any termination of this Agreement pursuant to this paragraph
13 shall be without liability of any character (including, but not limited
to, loss of anticipated profits or consequential damages) on the part of
any party thereto, except that in such event (i) the Agent shall provide
the Company with a statement of its accountable expenses, which shall
include but are not limited to the Agent's counsel fees, consultants'
fees, entertainment expenses, travel expenses, postage expenses, office
costs, advertising costs, clerical costs, due diligence meeting expenses,
duplication expenses, long distance telephone expenses and general and
administrative expenses incurred in connection with the proposed offering;
and (ii) if such accountable expenses are more than the amount of the non-
accountable expense payments the Company has made to the Agent, the Agent
shall bear such excess, or if such accountable expenses are less than the
amount of the non-accountable expense payments the Agent has received from
the Company, the Agent shall return the difference to the Company.
14. NOTICES. All notices shall be in writing and shall be delivered at
or mailed to the following addresses or sent by telegram to the following
addresses with written confirmation thereafter:
To the Company: Xxxxxxx X. Xxxxx, President & CEO
Proformance Research Organization
0000 X. 00xx Xxxxxx, Xxxxx 000
Xxxxxx, XX 00000
With Copy to: Xxx X. Xxxxxxxxx, Esq.
Xxxx, Dill, Carr, Xxxxxxxxxx &
Xxxxxxxxx, P.C.
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000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xx 00000
To the Agent: Xxxxx X. Xxxxxx, President
Global Financial Group, Inc.
000 Xxxxxxxxxx Xxx. Xx., Xxxxx 0000
Xxxxxxxxxxx, XX 00000
With Copy to: Xxxxxx X. Xxxx, Esq.
Abdo & Abdo, P.A.
000 Xxxxxxxxx Xxxx
000 Xxxxxxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
15. BINDING EFFECT. This Agreement shall inure to the benefit of and be
binding upon the Company and the Agent (including the participating dealers as
provided in paragraphs 9 and 10) and their successors. Nothing expressed in
this Agreement is intended to give any person other than the persons mentioned
in the preceding sentence any legal or equitable right, remedy or claim under
this Agreement. However, the representations, warranties and indemnity and
defense obligations of the Company included in this Agreement also inure to the
benefit of any person who controls the Agent and participating dealers within
the meaning of Section 15 of the Act and the representations, warranties,
indemnities and defense obligations of the Agent and participating dealers inure
to the benefit of each officer who signs the Registration Statement, each
director of the Company and each person who controls the Company within the
meaning of Section 15 of the Act.
16. MISCELLANEOUS PROVISIONS.
a) Time shall be of the essence of this Agreement.
b) This Agreement shall be construed according to the laws of the
State of Minnesota.
c) The representations and warranties made in this Agreements
shall survive the termination of this Agreement and shall continue in full
force and effect regardless of any investigation made by the party relying
upon any such representation or warranty.
d) This Agreement is made solely for the benefit of the Company
and its officers, directors and controlling persons within the meaning of
Section 15 of the Act and of the Agent and its officers, directors and
controlling persons within the meaning of Section 15 of the Act, and their
respective successors, heirs and personal representatives, and no other
person shall acquire or have any right under or by virtue of this
Agreement. The term "successor" as used in this Agreement shall not
include any purchaser, as such, of the Shares.
e) The Agent will provide upon closing a list of all names and
addresses of all participating dealers and shall provide the Company with
such changes of the address or name of such participating dealers as occur
and of which the Agent is notified. Further, the Agent shall use its best
efforts to maintain the current name and address of all participating
dealers during the term of this Agreement.
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If this Agreement correctly sets forth our understanding, please indicate
your acceptance in the space provided below for that purpose.
Very truly yours,
PROFORMANCE RESEARCH ORGANIZATION, INC.
By_____________________________________
Xxxxxxx X. Xxxxx,
President & CEO
Confirmed and accepted as of
the date of this Agreement:
GLOBAL FINANCIAL GROUP, INC.
By___________________________________
Xxxxx X. Xxxxxx, President
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