FORM OF UNDERWRITING AGREEMENT January 23rd, 2012
[Exhibit 10.2]
FORM OF UNDERWRITING AGREEMENT
January 23rd, 2012
XX Xxxx Financial Services Inc.
0000 Xxxxx XX.
Xxxxxxx, XX 00000
Re: Sale of up to 2,500,000 preferred “A” shares of American Realty Funds Corporation
Dear Sirs:
Section 1. Introduction.
American Realty Funds Corporation (the “Company”), a Tennessee corporation, has authorized capital consisting of 100,000,000 (one hundred million) shares of common stock (the “Common Stock”), 10,000,000,000 (ten billion) shares of series A preferred stock (“Series A Preferred Stock”), and 90,000,000,000 (ninety billion) shares of non-designated preferred stock (“Preferred Stock”). As of the date hereof, a maximum of 10,098,713 shares of Common Stock have been issued and are outstanding. No shares of Series A Preferred Stock, and no shares of Preferred Stock, have been issued and are outstanding, The Company proposes to issue and sell up to 2,500,000 shares of Series A Preferred Stock (the “Shares”) at a price of $10.00 per share (the “Offering”), in accordance with the terms set forth in the Registration Statement.
The Company wishes to confirm your engagement as non-exclusive agents of the Company in connection with the issuance and sale of the Shares on a best-efforts basis. The term “Underwriter” refers to XX Xxxx Financial Services Inc.
The Company agrees with Underwriter as follows:
Section 2. Representations, Warranties and Agreements of the Company.
The Company represents and warrants to, and agrees with, Underwriter that:
(a) A registration statement on Form S-1 (File No. ________), with respect to the Shares, including a prospectus subject to completion, has been filed by the Company with the Securities and Exchange Commission (the “Commission”) under the Securities Act of 1933, as amended (the “Act “), and one or more amendments to that registration statement may have been so filed. Copies of such registration statement and of each amendment heretofore filed by the Company with the Commission have been delivered to Underwriter. After the execution of this agreement, the Company will file with the Commission either (i) if the registration statement, as it may have been amended, has been declared by the Commission to be effective under the Act, a
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prospectus in the form most recently included in that registration statement (or, if an amendment thereto shall have been filed, in such amendment), with such changes or insertions as are required by Rule 430A under the Act or permitted by Rule 424(b) under the Act and as have been provided to and approved by Underwriter prior to the execution of this agreement, or (ii) if that registration statement, as it may have been amended, has not been declared by the Commission to be effective under the Act, an amendment to that registration statement, including a form of prospectus, a copy of which amendment has been furnished to and approved by Underwriter prior to the execution of this agreement.
(b) The Commission has not issued any order preventing or suspending the use of any Preliminary Prospectus. When each Preliminary Prospectus and each amendment and each supplement thereto was filed with the Commission it (i) contained all statements required to be stated therein, in accordance with, and complied with the requirements of, the Act and the rules and regulations of the Commission thereunder and (ii) did not include any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. When the Registration Statement was or is declared effective (“Effective Date”), it (i) contained or will contain all statements required to be stated therein in accordance with, and complied or will comply with the requirements of, the Act and the rules and regulations of the Commission thereunder and (ii) did not or will not include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading. When the Prospectus and each amendment or supplement thereto is filed with the Commission pursuant to Rule 424(b) (or, if the Prospectus or such amendment or supplement is not required so to be filed, when the Registration Statement containing such Prospectus or amendment or supplement thereto was or is declared effective) and on each Closing Date (as such term is hereinafter defined), the Prospectus, as amended or supplemented at any such time, (i) contained or will contain all statements required to be stated therein in accordance with, and complied or will comply with the requirements of, the Act and the rules and regulations of the Commission thereunder and (ii) did not or will not include any statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The foregoing provisions of this paragraph (b) do not apply to statements or omissions made in any Preliminary Prospectus, the Registration Statement or the Prospectus or any amendment or supplement thereto in reliance upon and in conformity with written information furnished to the Company by Underwriter specifically for use therein.
(c) Since the respective dates as of which information is given in the Registration Statement and in the Prospectus, except as otherwise stated therein, (i) there has been no material adverse change in the condition, financial or otherwise, earnings, business or prospects of the Company considered as a whole, whether or not arising in the ordinary course of business, and (ii) there have been no material transactions entered into by the Company other than those in the ordinary course of business.
(d) The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Tennessee with power and authority to own, lease and operate its properties and conduct its business as described in the Registration Statement and
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Prospectus and is duly qualified to do business as a foreign corporation and is in good standing in all other jurisdictions in which the nature of its business or the character or location of its properties requires such qualification, except where failure to so qualify will not materially affect the business, properties or financial condition of the Company. The Company has no directly or indirectly held subsidiary except as disclosed in the Registration Statement. The Company has all power, authority, authorizations, approvals, consents, orders, licenses, certificates and permits needed to enter into, deliver and perform this agreement and to issue and sell the Shares.
(e) The Company is not (i) in violation of its Articles of Incorporation or bylaws, as the case may be, or other organizational documents, or (ii) in default in the performance or observance of any obligation, agreement, covenant or condition contained in any material contract, indenture, mortgage, loan agreement, note, lease or other agreement or instrument to which it is a party or by which it or its properties may be bound, except in the case of (ii) above, where such default would not, individually or in the aggregate, result in a material adverse change in (A) the condition, financial or otherwise, earnings, business or prospects of the Company taken as a whole, or (B) the ability of the Company to enter into, perform and effect the transactions contemplated hereby; no consent, approval, authorization, order, registration, filing or qualification of or with any court or governmental authority or agency is required for the issue and sale of the Shares as contemplated herein or the consummation by the Company of the transactions contemplated by this agreement, except such as may be required under the Act and the Rules and Regulations or state securities or Blue Sky laws in connection with the distribution of the Shares by Underwriter; and the issue and sale of the Shares as contemplated herein, the execution and delivery of this agreement and the consummation of the transactions contemplated hereby will not conflict with or constitute a breach of, or default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company pursuant to, any contract, indenture, mortgage, loan agreement, note, lease or other agreement or instrument to which the Company is a party or by which it may be bound or to which any of the property or assets of the Company is subject, nor will any such action result in any violation of the provisions of the charter or code of regulation of the Company or any law, administrative regulation or administrative or court decree or order applicable to the Company.
(f) The Company possesses all certificates, authorities or permits issued by the appropriate state, federal or foreign regulatory agencies or bodies necessary to conduct the business now operated by it, and the Company has not received any notice of proceedings relating to the revocation or modification of any such certificate, authority or permit which, individually or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would materially and adversely affect the condition, financial or otherwise, earnings, business or prospects of the Company considered as a whole.
(g) Except as set forth in the Prospectus, as amended or supplemented, there is no action, suit or proceeding before or by any court or governmental agency or body, domestic or foreign, now pending, or, to the knowledge of the Company, contemplated or threatened against the Company, which might result in any material adverse change in the condition, financial or otherwise, earnings, business or prospects of the Company considered as a whole, or might materially and adversely affect the properties or assets thereof or might adversely affect the lawful issuance and offering of the Shares in the manner contemplated by the Prospectus; and
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there are no material contracts or other documents which are required to be described in the Registration Statement or the Prospectus or filed as exhibits to the Registration Statement by the Act or by the Rules and Regulations which have not been so described or have not been so filed.
(h) The Company has good and marketable title in fee simple to all real property and good and marketable title to all personal property owned by it, in each case free and clear of all liens, encumbrances and defects except (i) such as are referred to in the Prospectus, or (ii) such as do not materially and adversely affect the value of such property to the Company, and do not materially interfere with the use made and proposed to be made of such property by the Company; and any real property and buildings held under lease by the Company are held by it under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made by the Company.
(i) The Company has an authorized capitalization as set forth in the Prospectus and the Shares and the Warrant Securities have been duly authorized and, when issued and delivered in accordance with the terms of this agreement, will be validly issued, fully paid and non-assessable and will conform to the description of them contained in the Prospectus. The issuance and sale of the Shares is not subject to pre-emptive or other similar rights or to restrictions on transfer (other than those imposed by the Act, the Rules and Regulations or state securities or Blue Sky laws). There are no outstanding options, warrants or other rights calling for the issuance of, and no binding commitment to issue, any share of stock of the Company or any security convertible into or exchangeable for stock of the Company, except for stock options and warrants described in the Registration Statement (the “Stock Options”). The Common Stock, the Preferred Stock, the Shares and the Stock Options conform to all statements in relation thereto contained in the Registration Statement and the Prospectus.
(j) This agreement has been duly authorized, executed and delivered by the Company and is the legal, valid and binding agreement and obligation of the Company, except (i) as enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other laws relating to or affecting enforcement of creditors rights or by general equity principles, including requirements of reasonableness and good faith in the exercise of rights and remedies, whether applied by a court of equity or a court of law in an action at law or in equity, or by the discretionary nature of specific performance, injunctive relief, and other equitable remedies, including the appointment of a receiver and (ii) with respect to provisions relating to indemnification and contribution, to the extent they are held by a court of competent jurisdiction to be void or unenforceable as against public policy or limited by applicable laws or the policies embodied in them.
(k) Neither the Company nor any of its officers, directors or holders of five percent or more of any class of its capital stock or any of their respective affiliates is a member of, or is associated or affiliated with a member of, the Financial Industry Regulatory Authority, Inc. (“FINRA”), except as described in the Registration Statement and the Prospectus.
(l) There are no contracts, agreements or understandings between the Company and any person granting such person the right to require the Company to file a registration statement under the Act with respect to any securities of the Company owned or to be owned by such
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person or to require the Company to include such securities under the Registration Statement, except as described in the Registration Statement.
(m) The financial statements of the Company included in the Registration Statement and the Prospectus (and, if the Prospectus is not in existence, the most recent Preliminary Prospectus) fairly present the financial position of the Company as of the dates indicated and the results of operations of the Company for the periods specified. Such financial statements have been prepared in accordance with accounting principles generally accepted in effect in the United States of America, consistently applied, except to the extent that certain footnote disclosures regarding unaudited interim periods may have been omitted in accordance with the applicable rules of the Commission under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The financial data set forth under the caption “Summary Financial Information” in the Prospectus (and, if the Prospectus is not in existence, the most recent Preliminary Prospectus) fairly present, on the basis stated in the Prospectus (or such Preliminary Prospectus), the information included therein.
(n) XxXxxxxxx & Xxxxx, LLP has audited the financial statements of the Company as of June 30, 2011, and they have delivered their report with respect to the financial statements included in the Registration Statement and the Prospectus (and, if the Prospectus is not in existence, the most recent Preliminary Prospectus), and are independent public accountants with respect to the Company as required by the Act and the applicable rules and regulations thereunder.
(o) Neither the Company nor, to the Company's knowledge, any director, officer, agent, employee or other person associated with the Company, acting on behalf of the Company, has used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expense relating to political activity; made any direct or indirect unlawful payment to any foreign
or domestic government official or employee from corporate funds; violated or is in violation of any provision of the Foreign Corrupt Practices Act of 1977; or made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment.
(p) Neither the Company nor any of its affiliates has taken, nor will they take, directly or indirectly, any action designed to cause or result in, or which has constituted or which might reasonably be expected to constitute, the stabilization or manipulation of the price of the Shares in order to facilitate the sale or resale of any of the Shares as contemplated by the Rules and Regulations.
(q) No transaction has occurred between or among the Company and any of its officers, directors, organizers or any affiliate or affiliates of any such officer, director, organizer or shareholder, that is required to be described in and is not described in the Prospectus.
(r) The Company is not and will not, upon completion of the Offering, be an “investment company,” or a company “controlled” by an “investment company,” within the meaning of the Investment Company Act of 1940, as amended.
(s) Intentionally left blank.
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Section 3. Engagement of Underwriter and Closing.
On the basis of the representations, warranties and agreements herein contained, but subject to the terms and conditions herein set forth, the parties have agreed as follows:
(a) The Company hereby engages Underwriter as non-exclusive agents to sell for the Company's account up to 2,500,000 Shares.
(b) Underwriter agrees to use its best efforts as agent, promptly after the Effective Date, to offer and obtain purchase subscriptions for all of the Shares subject to the terms, provisions and conditions set forth below. Underwriter is not under any obligation to purchase or take down any of the Shares on its own behalf or on behalf of others.
(c) Subscriber checks received from investors in this Offering by Underwriter shall be deposited in an escrow account with _______________________________, such account having terms and provisions complying with Rules 10b-9 and 15c2-4 under the Exchange Act.
(d) Underwriter may effect sales of Shares through dealers selected by Underwriter at such concessions from the compensation payable to Underwriter as it may determine.
(e) At each Closing (as defined below), Underwriter shall be entitled to a commission equal to $1.00 for each Share subscribed through Underwriter in the Offering during the preceding Offering Period. At each Closing (as defined below), the Company shall also deliver to Underwriter reimbursement of certain of Underwriter's expenses described below. Underwriter may decrease its commission fee described above at any time at its sole discretion.
(f) Subject to the satisfaction of the conditions set forth in Section 6 of this agreement, partial and final closings will be held at the offices of Underwriter on five (5) days notice by the Company or Underwriter.
(g) Notwithstanding any other provisions, it is expressly agreed that the Company may terminate this engagement at any time upon giving ten (10) working days written notice of termination. Any sales of securities made by Underwriter prior to the termination notice shall be subject to the payment to Underwriter of commissions and expenses as agreed, even if the closing of such sales occurs after the termination date.
Section 4. Offering by Underwriter.
After the Effective Date and until the close of business on the day preceding the date of the Final Closing (the “Termination Date”), Underwriter will, as Company's agent, offer the Shares for sale to the public on the terms and conditions as set forth in the Prospectus.
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Section 5. Covenants of the Company.
The Company covenants and agrees with Underwriter that:
(a) The Company will advise Underwriter promptly of any proposal to amend or supplement the Registration Statement as filed, or the related Prospectus, prior to each Closing Date, and will not effect such amendment or supplement without Underwriter’s consent which will not be unreasonably withheld; the Company will also advise Underwriter promptly of the effectiveness of the Registration Statement (if the Effective Time is subsequent to the execution and delivery of this agreement), of any amendment or supplement to the Registration Statement or the Prospectus, and of receipt of notification of the institution by the Commission of any stop order proceedings in respect of the Registration Statement or of any order preventing or suspending the use of any prospectus relating to the Shares, of the suspension of the qualification of the Shares for offering or sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose, or of any request by the Commission to amend or supplement the Registration Statement or Prospectus or for additional information and will use its best efforts to prevent the issuance of any such stop order or of any order preventing or suspending the use of any prospectus relating to the Shares or suspending any such qualification and to obtain as soon as possible its lifting, if issued.
(b) If, at any time when a prospectus relating to the Shares is required to be delivered under the Act, any event occurs as a result of which the Prospectus as then amended or supplemented would, in the judgment of Underwriter, include an untrue statement of a material fact, or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, or if it is necessary at any time to amend or supplement the Prospectus to comply with the Act, or any other law, the Company promptly will prepare and file with the Commission an amendment or supplement which will correct such statement or omission or an amendment which will effect such compliance and will notify Underwriter and, upon Underwriter's request prepare and furnish without charge to Underwriter and to any dealer in securities as many copies as Underwriter may from time to time reasonably request, of an amended Prospectus or a supplement to the Prospectus complying with Section 8(a) of the Act which will correct such statement or omission or effect such compliance.
(c) The Company will deliver to Underwriter as many signed and conformed copies of the Registration Statement (as originally filed) and of each amendment thereto (including exhibits filed therewith and documents incorporated therein by reference) as Underwriter may reasonably request and will also deliver to Underwriter a conformed copy of the Registration Statement and each amendment thereto (including documents incorporated therein by reference).
(d) The Company will take such action as Underwriter may reasonably request to qualify the Shares for offering and sale under the applicable securities laws of such states and other jurisdictions of the United States as Underwriter may designate, and will maintain such qualifications in effect for as long as may be required for the distribution of the Shares. The Company will file such statements and reports as may be required by the laws of each jurisdiction in which the Shares have been qualified as above provided.
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(e) During the period of twelve (12) months hereafter, the Company will furnish to Underwriter as soon as practicable after the end of its fiscal year, a copy of its annual report to shareholders for such year, and the Company will furnish to Underwriter (i) as soon as available, a copy of each report or definitive proxy statement of the Company filed with the Commission under the Exchange Act, or mailed to shareholders, and (ii) from time to time, such other information concerning the Company as Underwriter may reasonably request.
(f) The Company, during the period when the Prospectus relating to the Shares is required to be delivered under the Act, will file promptly all documents required to be filed with the Commission pursuant to Sections 13, 14 or 15 of the Exchange Act.
(g) The Company currently has, and will continue to use its best efforts to maintain, the listing of its Common Stock on the Over The Counter Bulletin Board.
Section 6. Conditions to Transfer of Funds.
Underwriter’s consent to the transfer of funds to the Company upon Underwriter's receipt of such funds from investors, will be subject to the accuracy of the representations and warranties on the part of the Company herein as of the date hereof and as of such date of transfer with the same force and effect as if made as of that date, to the performance by the Company of its obligations hereunder and to the following additional conditions precedent:
(a) If the Effective Date is not prior to the execution and delivery of this agreement, the Effective Date shall have occurred not later than 5:00 p.m., Eastern Time, on such later date as shall have been consented to by Underwriter. Prior to each Closing, no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been instituted or threatened, or to the knowledge of the Company or Underwriter, shall be contemplated by the Commission; and the Company shall have complied with all requests for additional information on the part of the Commission to your reasonable satisfaction.
(b) Underwriter shall not have advised the Company that the Registration Statement or Prospectus, or any amendment or supplement thereto, contains any untrue statement of fact or omits to state any fact which, you concluded, is material and in the case of an omission is required to be stated therein or is necessary to make the statements therein not misleading.
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(f) Intentionally left blank.
(g) Intentionally left blank.
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(h) Intentionally left blank.
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(j) No order suspending the sale of the Shares prior to such Closing Date, in any jurisdiction shall have been issued on such Closing Date, and no proceedings for that purpose shall have been instituted or, to Underwriter's knowledge or that of the Company, shall be contemplated.
(k) The FINRA, upon review of the terms of the public offering of the Shares, shall have favorably passed upon the terms of the Offering as to compensation and as to Underwriter's participation in the same.
If any condition to be fulfilled prior to or at such Closing Date is not so fulfilled, Underwriter may terminate this agreement or, if Underwriter so elects, waive any such condition which has not been fulfilled or extend the time of its fulfillment.
Section 7. Payment of Expenses.
The Company will pay all costs, expenses, fees, disbursements and taxes incident to (i) the preparation by the Company, printing, filing and distribution of the Registration Statement (including financial statements and exhibits), the Prospectus; and all amendments and supplements to any of them prior to or during the period specified in Section 5(b), (ii) the preparation, printing (including word processing and duplication costs) and delivery of this agreement, preliminary and supplemental blue sky memoranda, and all other agreements, memoranda, correspondence and other documents printed and delivered in connection with the offering of the Shares, (iii) the registration with the Commission, and the issuance by the Company, of the Shares, (iv) the registration or qualification of the Shares for offer and sale under the securities or Blue Sky laws of the several states (including the reasonable fees and disbursements of the counsel relating to such registration or qualification), (v) filings and clearance with the FINRA in connection with the offering, (vi) fees and expenses, if any, incurred in connection with the inclusion of the Shares on the Over The Counter Bulletin Board, (vii) the fees and expenses of the Registrar and Transfer Agent for the Shares, and (viii) the performance by the Company of its other obligations under this agreement, and all other costs and expenses incident to the performance of its obligations hereunder in this Section 7. The Company shall also reimburse Underwriter from time to time upon Underwriter's request for all properly documented reasonable expenses incurred by Underwriter in connection with the performance of its services hereunder, not to exceed three-quarters of one percent (.75%) of the amount of funds raised by Underwriter. Generally, these expenses will represent travel, document procurement and delivery and related matters, but will also include the fees and expenses of Underwriter’s attorneys and other professional advisors should their advice be required. Such expenses are to be paid on a current basis within 10 days of receipt of the statement from Underwriter.
If this agreement is terminated by Underwriter in accordance with the provisions of Section 10(a) hereof, the Company shall not then be under any liability to Underwriter except as
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provided in Sections 7 and 8 hereof, but, if for any other reason the Shares are not delivered by or on behalf of the Company as provided herein, the Company shall reimburse Underwriter for all of its out-of-pocket expenses reasonably incurred in connection with marketing and preparing for the purchase, sale and delivery of the Shares, including the reasonable fees and disbursements of counsel for Underwriter but the Company shall then be under no further liability to Underwriter except as provided in Sections 7 and 8 hereof.
Section 8. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless Underwriter and each person, if any, who controls Underwriter within the meaning of the Act or the Exchange Act, from and against any and all losses, claims, damages and liabilities (or actions in respect thereof) (including, without limiting the foregoing, the reasonable legal and other expenses incurred in connection with investigating or defending any action, suit or proceeding or any claim asserted, as such expenses are incurred) arising out of or based on any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or the Prospectus, or caused by 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, except insofar as such losses, claims, damages, liabilities or expenses are caused by any such untrue statement or omission or alleged untrue statement or omission based upon the information furnished to the Company in writing by Underwriter in the Prospectus concerning the terms of the offering by Underwriter; provided, however, that the Company shall not be liable to Underwriter under this subsection (a) for any such loss, claim, damage or liability arising from the Prospectus to the extent that such loss, claim, damage or liability results from the fact that Underwriter sold Shares to a person to whom there was not sent or given, at or prior to the written confirmation of such sale, a copy of the Prospectus as then amended or supplemented, in any case where (i) such delivery of the Prospectus as then amended or supplemented to such person is required by the Act, (ii) the Company has previously furnished sufficient copies thereof to Underwriter at such time as is sufficient to permit such delivery prior to such confirmation, and (iii) the loss, claim, damage or liability of Underwriter results from an untrue statement or omission of a material fact contained in the Prospectus which was corrected in the Prospectus as amended or supplemented. This indemnity agreement will be in addition to any liability which the Company may otherwise have.
(b) Underwriter agrees to indemnify and hold harmless the Company, the directors of the Company, the officers of the Company who sign the Registration Statement and each person, if any, who controls the Company within the meaning of the Act or the Exchange Act from and against any and all losses, claims, damages and liabilities (or actions in respect thereof) caused by any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or the Prospectus, or caused by 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, but only with reference to the information furnished to the Company by Underwriter in writing. This indemnity agreement will be in addition to any liability which Underwriter may otherwise have.
(c) In case any action or proceeding (including any governmental or regulatory investigation or proceeding) shall be instituted involving any person in respect of which
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indemnity may be sought pursuant to any of the two preceding paragraphs, such person (hereinafter called the indemnified party) shall promptly notify the person against whom such indemnity may be sought (hereinafter called the indemnifying party) in writing; provided, however, the omission to so notify the indemnifying party shall relieve the indemnifying party from liability under the two preceding paragraphs only to the extent prejudiced thereby. The indemnifying party, upon request of the indemnified party, shall assume the defense thereof, including the employment of counsel reasonably satisfactory to the indemnified party to represent the indemnified party and any others that the indemnifying party may designate and shall pay the fees and disbursements of such counsel related to such proceeding. In any such action or proceeding any indemnified party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel, or (ii) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood that the indemnifying party shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for (i) the reasonable fees and expenses of more than one separate firm (in addition to any local counsel) for Underwriter and all persons, if any, who control Underwriter within the meaning of the Act or the Exchange Act, and (ii) the reasonable fees and expenses of more than one separate firm (in addition to any local counsel) for the Company, its directors, its officers who sign the Registration Statement and each person, if any, who controls the Company within the meaning of the Act or the Exchange Act, and that all such fees and expenses shall be reimbursed as they are incurred. In the case of any such separate firm for Underwriter and such control persons of Underwriter, such firm shall be designated in writing by Underwriter. In the case of any such separate firm for the Company, and such directors, officers and control persons of the Company, such firm shall be designated in writing by the Company. The Company shall not, without the prior written consent of any indemnified party, effect any settlement of any pending or threatened proceeding in respect of which any such indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding.
(d) If the indemnification provided for in this Section 8 is insufficient or unavailable to an indemnified party in respect of any losses, claims, damages or liabilities (or actions in respect thereof) referred to therein, then each indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities and expenses (i) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and Underwriter on the other from the offering of the Shares, or (ii) if the allocation provided by clause (i) above is not permitted by applicable law or if the indemnified party shall have failed to the prejudice of the indemnifying party to give the notice required by Section 8(c), in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company on the one hand and Underwriter on the other in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative
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benefits received by the Company on the one hand and Underwriter on the other shall be deemed to be in the same proportions as the total net proceeds from the Offering (before deducting expenses) received by the Company bear to the total commissions received by Underwriter. The relative fault of the Company on the one hand and Underwriter on the other 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 by Underwriter and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.
(e) The Company and Underwriter agree that it would not be just and equitable if contribution pursuant to Section 8(d) were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to in the immediately preceding paragraph shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of Section 8(d), in no event shall Underwriter be required to contribute any amount in excess of the amount by which the total price at which the Shares underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 12(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.
Section 9. Representations Warranties and Agreements to Survive Delivery.
All representations, warranties and agreements contained in this agreement, including indemnity and contribution agreements, shall remain operative and in full force and effect, regardless of any termination of this Agreement, or any investigation, or any statement as to the results thereof, made by or on behalf of Underwriter or any person controlling Underwriter or by or on behalf of the Company, its officers or directors or controlling persons and shall survive acceptance of and payment for Shares hereunder.
If this agreement is terminated pursuant to Section 10 or if for any reason the sale of Shares by Underwriter is not consummated, the Company shall remain responsible for the reasonable expenses to be paid or reimbursed by it pursuant to Section 7 and the respective obligations of the Company and Underwriter pursuant to Section 8 shall remain in effect.
Section 10. Termination.
(a) By Underwriter. This agreement may be terminated for any reason at any time prior to the delivery and payment of the Shares on any Closing Date, by Underwriter upon the giving of written notice of such termination to the Company. Underwriter shall be relieved of any obligation to close if prior to such time (i) there has been, since the respective dates as of which information is given in the Registration Statement and the Prospectus, (A) any material adverse
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change in the condition, financial or otherwise, earnings, business or prospects of the Company considered as a whole, whether or not arising in the ordinary course of business or as described in the Prospectus, or (B) any material transaction entered into by the Company other than in the ordinary course of business, (ii) there has occurred any outbreak or escalation of hostilities or other calamity or crisis or material change in existing national or international financial, political, economic or securities market conditions, the effect of which is such as to make it, in the judgment of Underwriter, impracticable or inadvisable to market the Shares in the manner contemplated in the Prospectus or Subscriptions for purchase of the Shares, or (iii) trading generally on the Over The Counter Bulletin Board has been suspended, or minimum or maximum prices for trading have been fixed, or maximum ranges for prices for securities have been required, by the Over The Counter Bulletin Board or by order of the Commission or any other governmental authority. This agreement may also be terminated as provided in Section 6. In the event of any such termination, the provisions of Sections 7 through 14 shall remain in effect.
(b) By the Company. Notwithstanding any other provisions in this agreement, it is expressly agreed that the Company may terminate this agreement at any time upon giving ten (10) working days written notice of termination. Any sales of securities made by Underwriter prior to the termination notice shall be subject to the commissions as agreed, even if the closing of such sales occurs after the termination date.
Section 11. Notices.
All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given if mailed or transmitted via email. Notices to Underwriter shall be directed to Underwriter c/o XX Xxxx Financial Services Inc., 0000 Xxxxx Xxxxxx, Xxxxxxx XX 00000, Attention: Xxxx Xxxxxx, xxxxxxx@xxxxxxxxxxxxxxxx.xxx, and notices to the Company shall be directed to it at 000 X. Xxxxxx Xxx, Xxx Xxxx, Xxxxxxxx 00000, attention Xxxxxxx Xxxxx, xxxxxx@xxxxxxxxxxxxxxxx.xxx.
Section 12. Parties.
This agreement shall inure to the benefit of and be binding upon the Company, its directors and officers who signed the Registration Statement, Underwriter, any controlling persons referred to herein and their respective successors and assigns. Nothing expressed or mentioned in this agreement is intended or shall be construed to give any other person, firm or corporation any legal or equitable right, remedy or claim under or in respect of this agreement or any provision herein contained. No purchaser of Shares from Underwriter shall be deemed to be a successor by reason merely of such purchase.
Section 13. Governing Law.
This agreement shall be governed by, and construed in accordance with, the laws of the State of Michigan without application to its principles of conflicts of laws.
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Section 14. Counterparts.
This agreement may be executed in two or more counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.
If the foregoing is in accordance with your understanding of our agreement, please sign this agreement and return to us two (2) counterparts hereof.
Very truly yours,
AMERICAN REALTY FUNDS CORPORATION
By:__________________________________
Xxxxxxx X. Xxxxx, authorized representative
Confirmed and accepted, as of the date first above written:
XX XXXX FINANCIAL SERVICES INC.
By:__________________________________
Xxxx X. Xxxxxx, authorized representative
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