EXHIBIT 1.1.1
UNDERWRITING AGREEMENT
TRADEQUEST , INC.
REGISTERED SB-2 PUBLIC OFFERING
OF
5,000,000 SHARES OF COMMON STOCK
$4.50 PER COMMON SHARE
AGREEMENT
THIS AGREEMENT (the "Agreement") is entered into as of the date set
forth on the signature page hereof by and between TradeQuest, Inc., a Delaware
corporation (the "COMPANY"), and Chicago Investment Group, Inc., (the "Agent").
The Company proposes to offer and sell solely a minimum of 2,500,000
shares of Common Stock or $11,250,000 (the "MINIMUM OFFERING AMOUNT") and up to
a maximum of 5,000,000 shares of Common Stock or $22,500,000 (the "MAXIMUM
OFFERING AMOUNT") for a purchase price of $4.50 per share (individually a
"SHARE" and collectively the "SHARES"), pursuant to a registration statement
filed (with the Securities and Exchange Commission) under the Securities Act of
1933, as amended (the "ACT") upon the terms and subject to the conditions as set
forth herein (the "OFFERING"). Three founders of the Company shall have the
option to sell up to an additional 300,000 Shares on the same terms as described
herein in the event the Offering is oversubscribed. All Shares are offered
subject to the right of the Company to reject any subscription for Shares in
whole or in part for any reason whatsoever or to sell to any prospective
investor less than the number of Shares subscribed for by such prospective
investor and subject to certain other conditions.
The Company has determined to use the services of the Agent, including
other securities dealers which may be engaged to sell the Offering by virtue of
an agreement with the Agent, as its exclusive agent to solicit subscriptions for
the Shares on a "best efforts" basis through the earlier of (a) December 1, 2001
(or such earlier date as is mutually agreed by parties to this Agreement); or
(b) the sale of all Shares offered, which period can be extended upon agreement
of the Company and the Agent to February 28, 2002 without notice to investors
(the "OFFERING PERIOD"). The Agent hereby agrees to act in such capacity and to
use its best efforts to find purchasers for the Shares in accordance with the
terms and conditions of this Agreement. Additionally, the Agent may offer the
Shares on a wholesale basis to other qualified broker/dealers who are members of
the NASD, if in the United States or an equivalent regulatory organization if
other than the United States (Selling Dealer or Co-Underwriter), on the offering
date and subsequent thereto, subject to the foregoing and on the conditions of a
Selling Dealer Agreement executed with the Agent. A Selling Dealer or a
Co-Underwriter may offer Shares to the public under the same terms and
conditions as are established herein and the laws and regulations of such
jurisdiction wherein such sale is transacted. The Company may offer Shares
directly to Investors and accept subscriptions, provided that no sales
commissions are paid on such transactions.
Accompanying this Agreement is a copy of the Company's Registration
Statement on Form SB-2 (including the Company's Prospectus relating to the
Offering) prepared for use in conjunction with the offer and sale of the Shares
(which document as may be amended from time to time is herein referred to as the
"Registration Statement").
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I REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to the Agent that:
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of Delaware, and has the power and
authority to carry on its business as conducted or proposed to be
conducted by it and to hold title to its property, which business and
property is described in the Registration Statement. The Company has
the corporate power and authority to execute and deliver this
Agreement, to conduct such business and to perform its obligations
hereunder and consummate the transactions contemplated by the Offering
and this Agreement.
(b) When (i) the Company has received payment for subscriptions in
accordance with the provisions of the Registration Statement, and (ii)
certificates evidencing the Shares have been issued to the respective
Subscribers therefor, the Shares will be validly issued, fully paid and
non-assessable.
(c) As of the date of the Registration Statement and to the best of the
Company's knowledge after due inquiry, the Registration Statement
(including the Prospectus) does not include any untrue statement of a
material fact or omit to state a material fact necessary in order to
make the statements therein, in light of the circumstances under which
they were made, not misleading.
(d) Except as disclosed in the Registration Statement, there are no
actions, suits, proceedings or investigations pending or, to the best
of the Company's knowledge, threatened against or affecting the Company
which could prevent or interfere with or adversely affect the execution
and delivery by the Company of this Agreement or the performance by the
Company of its obligations hereunder or the offering, issuance and sale
of the Shares, or which, individually or in the aggregate, would have a
material adverse effect on the value of the assets or the operation of
the business of the Company.
(e) Except as otherwise disclosed in the Registration Statement, all
requisite authorizations, approvals or orders from any court,
governmental or regulatory official or body necessary to permit the
Company to conduct its business as described in the Registration
Statement will have been obtained or are in the process of being
applied for prior to the Closing Date. All requisite authorizations,
approvals or orders from any court or any governmental or regulatory
official or body necessary for the consummation by the Company of the
transactions contemplated by this Agreement will have been obtained or
are in the process of being applied for prior to the Closing Date.
(f) This Agreement has been duly and validly authorized, executed and
delivered by the Company and constitutes the valid and binding
agreement of the Company, enforceable in accordance with its terms,
except that (i) such enforcement may be subject to the effect of any
applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance and other similar laws relating to or affecting
creditors' rights generally and general principals of equity
(regardless of whether such enforcement is considered in a proceeding
in equity or at law) and (ii) the indemnification provisions of this
Agreement may be held to violate public policy (under either federal or
state law) in the context of the offer or sale of securities.
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(g) The Company's execution and delivery of this Agreement, the
fulfillment of the terms set forth herein and the consummation of the
transactions contemplated herein will not conflict with or constitute a
breach of, or default under (i) the Company's articles of incorporation
or by-laws, (ii) any material agreement, indenture or instrument by
which the Company is bound (except to the extent such conflict, breach
or default would not have a material adverse effect on the value of the
assets or the operation of the business of the Company), or (iii) any
law, administrative regulation or court decree (except to the extent
such conflict, breach or default would not have a material adverse
effect on the value of the assets or the operation of the business of
the Company).
(h) All sales of securities made by the Company at any time since its
inception were issued pursuant to valid exemptions under applicable
federal and state securities laws and except for compensation paid to
the Agent, no commissions were paid and no advertising or other general
solicitation was made in connection with any of such sales.
(i) It is the Company's present intention to utilize the proceeds from
the sale of the Shares substantially in the manner set forth in the
Registration Statement. Further, the Company has no present intention
to make any material changes in its business as described in the
Registration Statement.
(j) The Company represents and warrants that the financial statements
of the Company contained in or attached to the Registration Statement
have been prepared in accordance with generally accepted accounting
principles consistently applied throughout the periods covered thereby,
and present fairly the financial position of the Company as of the date
indicated. In the opinion of management, all adjustments (consisting
only of normal recurring adjustments) have been made which are
considered necessary for a fair presentation of such information for
the periods presented. Except for the transactions contemplated by the
Registration Statement, there has been no material adverse change in
the condition of the Company, financial or otherwise, from that set
forth in the Registration Statement.
(k) On the date hereof, and at the Closing Date, the Company is not or
will not be an "investment company" or a company "controlled" by an
"investment company" within the meaning of the Investment Company Act
of 1940, as amended.
(l) Neither the Company nor any of its affiliates have received or are
entitled to receive, directly or indirectly, any compensation or other
benefit in connection with the Offering including, but not limited to,
any commission or similar fee, except as described in the Registration
Statement.
(m) The Company has not paid or awarded, and will not pay or award,
directly or indirectly, any commission or other compensation to any
person engaged to render investment advice to a potential purchaser of
the Shares as an inducement to advise the purchase of the Shares,
except as such commissions or other compensation may be paid or awarded
to the Agent in accordance with this Agreement in connection with the
sale of the Shares as described in the Registration Statement.
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(n) Any written or oral information provided to prospective purchasers
of Shares by authorized representatives of the Company other than the
Agent ("AUTHORIZED PERSONS") will not contain any untrue statement of a
material fact or, when taken together with the information set forth in
the Registration Statement, omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading.
(o) The sale of the Shares has been duly and validly authorized by the
Company. There are no outstanding options, warrants or other rights to
purchase or otherwise acquire any Shares of the Company or any security
convertible into such Shares, except as described in the Registration
Statement.
(q) None of the Company, any of its directors, officers, or beneficial
owners of 10% or more of any class of its equity securities, or any of
their respective affiliates, including the Company (or any other person
serving in a similar capacity):
(i) has been convicted within ten years prior to the date
hereof of any crime or offense involving the purchase or sale
of any security, involving the making of a false statement
with the Commission, or arising out of such person's conduct
as an underwriter, broker, dealer, municipal securities dealer
or investment adviser;
(ii) is subject to any order, judgment or decree of any court
of competent jurisdiction temporarily or preliminarily
enjoining or restraining, or is subject to any order,
judgment, or decree of any court of competent jurisdiction,
entered within five years prior to the date hereof,
permanently enjoining or restraining such person from engaging
in or continuing any conduct or practice in connection with
the purchase or sale of any security, involving the making of
a false filing with the Commission or arising out of the
conduct of the business of an underwriter, broker, dealer,
municipal securities dealer or investment adviser;
(iii) is subject to an order of the Commission entered
pursuant to section 15(b), 15B(a), or 15B(c) of the Securities
Exchange Act of 1934 ("Exchange Act"), or is subject to an
order of the Commission entered pursuant to section 203(e) or
(f) of the Investment Advisers Act of 1940;
(iv) is suspended or expelled from membership in, or suspended
or barred from association with a member of, an exchange
registered as a national securities exchange pursuant to
section 6 of the Exchange Act, an association registered as a
national securities association under section 15A of the
Exchange Act, or a Canadian securities exchange or association
for any act or omission constituting conduct inconsistent with
just and equitable principles of trade;
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(v) is subject to a United States Postal Service false
representation order entered within five years prior to the
date hereof; or is subject to a restraining order or
preliminary injunction entered under section 3007 of title 39,
United States Code, with respect to any conduct alleged to
constitute postal fraud;
(vi) has been or has been named as an underwriter of any
securities covered by any registration statement which is the
subject of any pending proceeding or examination under Section
8 of the Act, or is the subject of any refusal order or stop
order entered thereunder within five years prior to the date
hereof;
(vii) has taken or failed to take any other act or are subject
to any other order or proceedings, that would make unavailable
any limited offering exemption from registration or
qualification requirements of federal or state securities
laws;
(viii) has filed a registration statement that is the subject
of a currently effective stop order entered pursuant to any
state's securities law within five years prior to the date
hereof;
(ix) has been convicted within five years prior to the date
hereof of any felony or misdemeanor in connection with the
offer, purchase or sale of any security or any felony
involving fraud or deceit, including but not limited to
forgery, embezzlement, obtaining money under false pretenses,
larceny or conspiracy to defraud;
(x) is currently subject to any state administrative
enforcement order or judgment entered by that state's
securities administrator within five years prior to the date
hereof or is subject to any state's administrative enforcement
order or judgment in which fraud or deceit, including but not
limited to making untrue statements of material facts and
omitting to state material facts, was found and the order or
judgment was entered within five years prior to the date
hereof;
(xii) is subject to any state's administrative enforcement
order or judgment that prohibits, denies or revokes the use of
any exemption from registration in connection with the offer,
purchase or sale of securities; or
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(xiii) is currently subject to any order, judgment or decree
of any court of competent jurisdiction temporarily or
preliminarily restraining or enjoining, or is subject to any
order, judgment or decree of any court of competent
jurisdiction permanently restraining or enjoining, such party
from engaging in or continuing any conduct or practice in
connection with the purchase or sale of any security or
involving the making of any false filing with the state
entered within five years prior to the date hereof..
(r) Other than the Agent, the Company has not contracted with any
person to act as a finder or investment adviser in connection with
these transactions described herein and the Company agrees to indemnify
the Agent with respect to any claim for such a finder's fee in
connection with the Offering. No director or principal shareholder of
the Company is a member of a broker-dealer registered with the National
Association of Securities Dealers, Inc. (the "NASD") or an employee or
associated member of a broker-dealer registered with the NASD.
2. REPRESENTATIONS AND WARRANTIES OF THE AGENT. The Agent hereby
represents, warrants and agrees with the Company that:
(a) The Agent is a corporation duly organized, validly existing and in
good standing under the laws of the State of Illinois, with the
corporate power and authority to conduct its business, to execute and
deliver this Agreement, and to perform the obligations contemplated
herein.
(b) This Agreement has been duly and validly authorized, executed and
delivered by the Agent and constitutes the valid, binding and
enforceable agreement of the Agent, except to the extent that (i) such
enforcement may be subject to the effect of bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance and other similar
laws relating to or affecting the rights of creditors generally and
general principles of equity (regardless of whether such enforcement is
considered in a proceeding in equity or at law), and (ii) the
indemnification provisions of this Agreement may be held to violate
public policy (under either federal or state law) in the context of the
offer or sale of securities.
(c) The Agent's execution and delivery of this Agreement, and the
performance of its obligations hereunder, will not result in a breach
or violation of any of the terms and provisions of, or constitute a
default under, its articles of incorporation or bylaws, any agreement
or instrument to which it is a party or by which it is bound, or any
judgment, decree, order or, to its knowledge, any statute, rule or
regulation applicable to Agent.
(d) As of the date of the Registration Statement, the information
contained in the Registration Statement relating to the Agent, if any,
does not include any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
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(e) The Agent is (i) a broker-dealer duly registered pursuant to the
provisions of the Securities Exchange Act of 1934 (the "EXCHANGE ACT");
(ii) a member in good standing of the NASD; and (iii) duly registered
as a broker-dealer under the applicable statutes and regulations of
each state in which the Shares will be offered and sold, except such
states in which the Agent is exempt from registration or such
registration is not otherwise required. The Agent will maintain all its
registrations as well as those of each individual who participates in
the offer or sale of the Shares as the Agent's agent or registered
representative, in good standing throughout the term of the Offering
and the Agent will comply with all statutes and other requirements of
law applicable to it with respect to its brokerage activities within
those jurisdictions. To the extent required by applicable law, any
individual who participates in the offer or sale of the Shares as the
Agent's agent or registered representative will be duly registered as a
registered representative or principal of the Agent pursuant to the
provisions of the NASD rules.
(f) Neither Agent nor any of its directors or officers nor any
beneficial owner of 10% or more of any class of its equity securities,
nor any of their respective affiliates (nor any other person serving in
a similar capacity):
(i) has been convicted within ten years prior to the date
hereof of any crime or offense involving the purchase or sale of any
security, involving the making of a false statement with the
Commission, or arising out of such person's conduct as an underwriter,
broker, dealer, municipal securities dealer or investment adviser;
(ii) is subject to any order, judgment or decree of any court
of competent jurisdiction temporarily or preliminarily enjoining or
restraining, or is subject to any order, judgment, or decree of any
court of competent jurisdiction, entered within five years prior to the
date hereof, permanently enjoining or restraining such person from
engaging in or continuing any conduct or practice in connection with
the purchase or sale of any security, involving the making of a false
filing with the Commission or arising out of the conduct of the
business of an underwriter, broker, dealer, municipal securities dealer
or investment adviser;
(iii) is subject to an order of the Commission entered
pursuant to section 15(b), 15B(a), or 15B(c) of the Exchange Act, or is
subject to an order of the Commission entered pursuant to section
203(e) or (f) of the Investment Advisers Act of 1940;
(iv) is suspended or expelled from membership in, or suspended
or barred from association with a member of, an exchange registered as
a national securities exchange pursuant to section 6 of the Exchange
Act, an association registered as a national securities association
under section 15A of the Exchange Act, or a Canadian securities
exchange or association for any act or omission constituting conduct
inconsistent with just and equitable principles of trade;
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(v) is subject to a United States Postal Service false
representation order entered within five years prior to the date
hereof; or is subject to a restraining order or preliminary injunction
entered under section 3007 of title 39, United States Code, with
respect to any conduct alleged to constitute postal fraud;
(vi) has been or has been named as an underwriter of any
securities covered by any registration statement which is the subject
of any pending proceeding or examination under Section 8 of the Act, or
is the subject of any refusal order or stop order entered thereunder
within five years prior to the date hereof;
(vii) has taken or failed to take any other act or are subject
to any other order or proceedings, that would make unavailable any
limited offering exemption from registration or qualification
requirements of federal or state securities laws;
(viii) has filed a registration statement that is the subject
of a currently effective stop order entered pursuant to any state's
securities law within five years prior to the date hereof;
(ix) has been convicted within five years prior to the date
hereof of any felony or misdemeanor in connection with the offer,
purchase or sale of any security or any felony involving fraud or
deceit, including but not limited to forgery, embezzlement, obtaining
money under false pretenses, larceny or conspiracy to defraud;
(x) is currently subject to any state administrative
enforcement order or judgment entered by that state's securities
administrator within five years prior to the date hereof or is subject
to any state's administrative enforcement order or judgment in which
fraud or deceit, including but not limited to making untrue statements
of material facts and omitting to state material facts, was found and
the order or judgment was entered within five years prior to the date
hereof;
(xi) is subject to any state's administrative enforcement
order or judgment that prohibits, denies or revokes the use of any
exemption from registration in connection with the offer, purchase or
sale of securities; or
(xii) is currently subject to any order, judgment or decree of
any court of competent jurisdiction temporarily or preliminarily
restraining or enjoining, or is subject to any order, judgment or
decree of any court of competent jurisdiction permanently restraining
or enjoining, such party from engaging in or continuing any conduct or
practice in connection with the purchase or sale of any security or
involving the making of any false filing with the state entered within
five years prior to the date hereof.
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3. SALE OF THE SHARES BY THE AGENT. The Company and the Agent hereby
agree as follows:
(a) The Offering will be made within the United States to investors to
whom the Agent has furnished copies of the Prospectus and in reliance
upon the registrations or exemptions from registration under the State
securities laws for those States in which the Shares are to be offered.
(b) The Company hereby appoints the Agent, including Co-Underwriters or
Selling Dealers which have executed an Agreement with the Agent as set
forth above, as its exclusive selling agent to solicit prospective
purchasers of the Shares and as such to effect sales of the Shares, on
a best efforts basis, for the Company (in those jurisdictions specified
by the Company) during the period commencing with the date of the
Offering Memorandum and ending on the Closing Date. The Company may not
terminate the Agent's agency hereunder without the Agent's failure to
perform its obligations hereunder in all material respects, upon the
Agent's material breach of any of its representations and warranties
contained herein or upon the Agent's gross negligence or willful
misconduct. Subject to the terms and conditions and upon the basis of
the representations and warranties herein set forth, the Agent accepts
such appointment and agrees to use its best efforts to find prospective
purchasers for the Shares in accordance with the terms and conditions
of this Agreement.
(c) Until the Minimum Offering Amount is received each person desiring
to purchase Shares will be required to deliver payment by (i) check
payable to the order of "________ Bank, Chicago, Illinois (the "ESCROW
AGENT") Escrow Agent for TradeQuest, Inc." or (ii) by wire transfer, in
the amount of the aggregate purchase price of the Shares subscribed
for.
(d) In the case of on-site supervisory review, such checks must be
transmitted to the Escrow Agent by the end of the next business day
following receipt by the Agent and, in the case of off-site supervisory
review, checks must be transmitted to the Agent's final review office
("FINAL REVIEW OFFICE") by noon of the next business day following
receipt by the Agent; such checks must be further transmitted to the
Escrow Agent by the end of the next business day following receipt by
the Final Review Office.
(e) Until the Minimum Offering Amount is received and accepted, all
payments received and accepted from Purchasers, except as hereinafter
provided, will be deposited in an escrow account (the "ESCROW ACCOUNT")
with the Escrow Agent. However, mere deposit of a check or receipt of a
wire transfer will not constitute acceptance by the Company of a
Subscription Agreement. Such funds may be temporarily invested only in
investments permissible under Rule l5c2-4 of the Securities and
Exchange Commission (the "COMMISSION"). Prior to receipt of the Minimum
Offering Amount, the Company will have no right to obtain any funds
from the Escrow Agent. The right of the Company to receive funds,
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including any interest on the funds, when the Minimum Offering Amount
is received is subject to fulfillment of the conditions specified in
Section 8 hereof. Funds, including any interest on the funds, for
Shares purchased by Investors on or before the Minimum Offering Date
will be made available to the Company when the Minimum Offering Amount
is received.
(f) Prior to the Closing of the Offering, the Company shall from time
to time amend the Registration Statement in order to update the
information contained therein as follows, and the Agent shall cooperate
with the Company in connection with any amendments thereto. In such
event, the Company promptly will notify the Agent by telephone,
promptly confirmed in writing by telecopy, to suspend solicitation of
offers to purchase Shares, and, if so notified by the Company, the
Agent shall forthwith suspend such solicitation and cease using the
Registration Statement until such time as the Company advises that
solicitation may be resumed. If, in connection therewith, the Company
shall, with the cooperation of the Agent, decide to amend or supplement
the Registration Statement, the Company (i) will advise the Agent
promptly by telephone (with confirmation in writing by telecopy), (ii)
will prepare an amendment or supplement to the Registration Statement
that will correct such untrue statement or omission or will make such
other change as may be necessary, and (iii) will supply such amended or
supplemented Registration Statement to the Agent. If such amendment or
supplement is satisfactory in all respects to the Agent, the Agent will
resume the solicitation of offers to purchase Shares.
4. CLOSING DATE AND MINIMUM OFFERING DATE.
(a) The Company may hold an "Initial Closing" of the Offering at any
time after subscriptions for the Minimum Offering Amount have been
accepted and all the conditions to the right of the Company to obtain
funds as set forth in this Agreement, including Section 8 hereof, have
been satisfied. At the Initial Closing (i) the Company and the Agent
shall jointly notify the Escrow Agent to release the funds from the
Escrow; and (ii) the Company will issue the securities to the
Subscribers; and (iii) counsel for the Company shall deliver its
opinion to the Agent as provided by Section 8 hereof; and (iv) all
accepted subscription amounts will be delivered to the Company. The
Company may hold any number of additional "Interim Closings" from time
to time after the Initial Closing. The Offering will expire on the
earlier of (a) sale of all Shares offered or (b) December 1, 2001 (or
such earlier date as is mutually agreed by parties to this Agreement),
unless the Offering is extended to February 28, 2002 upon agreement of
the Company and the Agent, without notice to the investors. Pending
each closing, each prospective investor's payment accompanying the
Subscription Agreement will be deposited in a segregated escrow account
with the Escrow Agent.
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(b) "Minimum Offering Date" as used herein will mean the date, not
later than December 1, 2001 (or such earlier date as is mutually agreed
by parties to this Agreement) unless the Offering is extended to
February 28, 2002 as provided above, on which the Company will have
received and accepted subscriptions and payments for the Minimum
Offering Amount. In the event that subscriptions and payments for at
least the Minimum Offering Amount has not been received and accepted by
the Company and deposited with and collected by the Escrow Agent on or
prior to the Minimum Offering Date, this Agreement will terminate and
the Company will have no any further obligation or liability hereunder
to the Agent or any other Soliciting Dealer except as provided in
Section 5 below. In the event of such termination, all purchase
payments deposited with the Escrow Agent will be returned to the
subscribers and no selling commissions (as hereinafter described) will
be payable.
(c) As soon as is practicable after the Minimum Offering Date, the
Company will mail or otherwise furnish to the Agent written
notification that subscriptions and payments for an aggregate of at
least the Minimum Offering Amount has been received and accepted by the
Company and deposited with and collected by the Escrow Agent.
5. COMPENSATION.
For the services of the Agent in soliciting and
obtaining purchasers of the Shares, the Company agrees to pay the Agent
at the Closing (as hereinafter defined), (i) a selling commission equal
to ten percent (10%) of the aggregate proceeds received from the sale
of Shares (the "SELLING COMMISSION"), plus an amount equal to three
percent (3%) of the aggregate proceeds received from the sale of Shares
as a non-accountable expense allowance of which $25,000 has been paid
as of the date of this Agreement. In the event that the proposed
offering is terminated prior to the Initial Closing for any reason by
the Company other than a breach of the representations or warranties by
the Agent prior to the completion of the Offering, the Company agrees
to pay all accountable fees, costs and disbursements incurred and/or
due and payable by Agent and its legal counsel up to an amount which
shall not exceed $50,000. In the event that the proposed offering is
terminated subsequent to the Initial Closing for any reason by the
Company other than a breach of the representations or warranties by the
Agent prior to the completion of the Offering, the Company agrees to
pay 10% commission and 3% non-accountable expense allowance on all
subscriptions of Shares accepted by the Company, plus all accountable
fees, costs and disbursements incurred and/or due and payable by Agent
and its legal counsel up to an amount which shall not exceed $50,000.
In the event the Offering is terminated by Agent for any reason other
than a breach of the representations or warranties by the Company, each
party shall bear its own expenses relating to the Offering.
(a) Upon the Closing, the Company will sell to the Agent or its
designees at an aggregate price of one cent ($0.01) (the "WARRANT
PRICE") a warrant ("AGENT WARRANT") entitling the Agent to purchase an
aggregate number of shares of Common Stock equal to five percent (5%)
of the aggregate number of shares of Common Stock sold in the Offering.
The Agent Warrant is exercisable at any time after one year from the
initial closing of the Offering and shall expire, if not exercised,
three (3) years from the date of the initial closing (the "WARRANT
EXERCISE TERM"). The Warrant shall provide the holder with a right to
purchase each share of Common Stock at an exercise price equal to
$5.40, which exercise price shall be payable by giving the Agent the
option to pay the exercise price either (i) by reducing shares issuable
upon exercise by such number of Shares as the fair market value of
which is equal to the exercise price for the number of shares to be
exercised or (ii) by paying cash.
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(b) The Selling Commissions will be paid, and Agents Warrants issued,
at the time of each Closing, Interim Closing and Final Closing of the
sale of the Shares as follows: (i) on the Minimum Offering Date, the
Company will direct the Escrow Agent to remit to the Agent, from the
proceeds on the sale of Shares, the selling commissions payable with
respect to the Shares sold on or before the Minimum Offering Date and
the Company shall direct its Transfer Agent to issue Agents Warrants as
set forth above; and (ii) after the Minimum Offering Date, the Company
will direct the Escrow Agent to remit to the Agent, from the proceeds
from the sale of Shares, the selling commissions and non-accountable
expense allowance payable with respect to the Shares sold after the
Minimum Offering Date and before any respective Interim Closing Date
and the Company shall direct its Transfer Agent to issue Agents
Warrants as set forth above. For any subsequent Interim Closings, the
Company will direct the Escrow Agent to remit to the Agent, from the
proceeds from the sale of Shares, the selling commissions and
non-accountable expense allowance payable with respect to the Shares
sold after the previous Interim Closing Date and before the next
Interim Closing Date and the Company shall direct its Transfer Agent to
issue Agents Warrants as set forth above on such sales of Shares as are
then being paid selling commission. The payment of commission and
non-accountable expense allowance and the issuance of Agents Warrants
shall proceed as above until the Final Closing.
6. FURTHER AGREEMENTS OF THE COMPANY.
(a) The Company covenants and agrees that it will pay or cause to be
paid (i) all expenses, if any, in connection with the soliciting and
obtaining of purchasers of the Shares including reasonable travel
expenses in connection with investor presentations, (ii) all expenses
and fees in connection with the preparation, printing, filing, delivery
and shipping of the Registration Statement (including this Agreement
and all other exhibits to the Registration Statement and any amendments
or supplements thereto, and the Blue Sky Memorandum); and (iii) filing
fees required in connection for offering and sale by the Agent under
the securities or Blue Sky laws of the states and other jurisdictions
designated in the Blue Sky Memorandum; provided.
(b) If at any time when a Prospectus relating to the Shares is required
to be delivered under the Act, any event will have occurred as a result
of which, in the opinion of counsel for the Company, the Prospectus
includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading, or if it is necessary at any time to amend the
Prospectus to comply with the Act, the Company promptly will prepare an
appropriate supplement or amendment thereto, and will deliver to the
Agent such number of copies thereof as the Agent may reasonably
request.
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(c) For three years from the Closing Date, the Company will furnish
directly to or cause to be furnished to the Agent:
(i) On or prior to the date on which the same shall be sent to
shareholders, each communication required to be delivered or
otherwise furnished to the holders of Shares, including any
annual or interim financial statements or other reports of the
Company;
(ii) Promptly after receipt thereof, a copy of any notice or
communication mailed, telecopied or otherwise delivered to the
Company pursuant to any of the agreements relating to any
material matter regarding the sale of Shares;
(ii) Within sixty (60) days following the end of each quarter,
an unaudited balance sheet and income statement prepared as of
the end of such quarter (although the Company will attempt to
furnish such financial statements within forty-five (45) days
following the end of each quarter);
provided that the Agent may at any time notify the Company that copies
of any or all of such communications need no longer be sent to it.
(d) Company will furnish to the Agent promptly as soon as the same
shall be filed copies of all filings by the Company on Form SB-2, or
other such forms, or other disclosure documents, as may be filed
pursuant to the Securities and Exchange Act of 1934 and any such
equivalent filing with States or other political entities, for the
Offering.
(e) For three years from the Closing Date, neither the Company nor any
affiliate will utilize the names of subscribers for Shares obtained by
the Agent for the purpose of solicitation, or contact such persons in
connection with any other offering by the Company or an affiliate of
the Company or other security by the Company or an affiliate of the
Company, unless such person was originally introduced to the Agent by
the Company or an affiliate of the Company. Should the names of such
persons be utilized contrary to the foregoing, the Company shall pay to
the Agent an amount equal to six percent (6%) of the amount invested by
such persons in such other offering. This amount shall be due and
payable upon the date such person's proceeds are invested.
(f) The Company will cause a Blue Sky Memorandum to be prepared by its
counsel relating to the securities or "blue sky" laws of certain of the
states designated by the Agent, indicating whether or not the offering
of the Shares may be made in such states (assuming compliance with the
terms of the Blue Sky Memorandum and this Agreement) and advising
whether the appropriate blue sky action, if any, was taken in each of
13
such jurisdictions so as to permit the offering by the Agent of the
Shares to the persons resident in each jurisdiction indicated in such
Blue Sky Memorandum. In addition, subsequent to delivery of the initial
Blue Sky Memorandum, the Company will orally advise the Agent, as
information becomes available, of the status of clearance in such
jurisdictions designated by the Agent and in each additional
jurisdiction designated by the Agent and deliver to the Agent, as
promptly as possible, supplements to the Blue Sky Memorandum prepared
by its counsel containing written confirmation of clearance status in
such jurisdictions and additional jurisdictions. The initial Blue Sky
Memorandum, together with any supplements thereto, is hereinafter
referred to as the "BLUE SKY MEMORANDUM." The Company will provide the
Agent with copies of all correspondence relating to "blue sky" filings
with the state securities commissions, and copies of any permits
received from the state securities commissions, for the Offering.
(g) The Company agrees that it will furnish or make available to the
Agent or the Agent's counsel any and all documentation reasonably
requested in connection with the Agent's due diligence efforts
regarding information in the Registration Statement.
(h) The Company and all affiliates will not take any action in
connection with the Offering which would cause the Offering not to
comply with Section 5 of the Act.
(i) The Company will duly and timely file (i) with the Commission all
required reports under the Securities Exchange Act of 1934, as amended
and (ii) all reports required to be filed under applicable state
securities laws and regulations and by the regulatory agencies charged
with enforcement thereof.
(j) The Company will notify the Agent immediately upon receipt thereof
and confirm the notice in writing of the issuance by the Commission or
any state securities administrator of any stop order suspending the
effectiveness of any registration or qualification of the Shares for
sale or enjoining the sale of the Shares or of the initiation of any
proceeding for that purpose. The Company will make every reasonable
effort to prevent the issuance of any stop order and, if any stop order
shall be issued, to obtain the lifting of the stop order at the
earliest possible time.
(k) The Company covenants that it will furnish to the Agent for its
prior approval (as applicable), the form of each notice to be furnished
by the Company to the Escrow Agent under the terms of the escrow
agreement entered into among the Company, the Escrow Agent and the
Agent relating to the Escrow Account.
14
(l) For a period of two (2) years after the date of this Agreement, if
the Company decides to retain the services of an investment banking
firm, the Company will notify the Agent about any Business Transaction
(as hereinafter defined) and will consider the Agent's proposal to act
as the Company's agent for the Business Transaction. A "BUSINESS
TRANSACTION" means any merger involving the Company or any of its
subsidiaries, the acquisition by the Company or any of its subsidiaries
of any entity or the assets thereof and the acquisition of the Company
or any of its subsidiaries by another entity. The Company agrees to pay
the Agent compensation calculated in accordance with the Xxxxxx formula
if the Agent introduces an acquisition or merger candidate to the
Company and the acquisition or merger is consummated.
(m) Subject to the Minimum Offering Amount being raised by the Agent,
the Company and the Agent understand and agree that for a period of
three (3) years commencing on the date of the Initial Closing, (i) the
Agent may act, in the Company's sole discretion, as the managing
underwriter in connection with any private placement or public offering
("ADDITIONAL OFFERING") of the Common Stock, and (ii) if the Agent does
not act as the managing underwriter, the Agent shall act as either the
co-managing underwriter or an underwriter for such additional offering
depending upon the mutual agreement of the Agent and the Company.
7. FURTHER AGREEMENTS OF THE AGENT.
(a) The Agent hereby represents that it is currently, and will remain
throughout the offering of Shares, a member in good standing of the
NASD. The Agent agrees that it will not allow commissions to be paid to
any other broker-dealer, including foreign broker-dealers registered
pursuant to the Exchange Act, unless such broker/dealer has executed an
appropriate Agreement to sell the Shares and such Agreement contains
substantially the same terms and conditions as this agreement.
(b) The Agent agrees that it will accept subscriptions only from
investors who have received a copy of the Prospectus. The Agent will
not give any information or make any representation in connection with
the offering of the Shares other than those contained in the Prospectus
furnished by the Company. The Agent will use only additional material
which has been approved in writing by the Company prior to its first
use.
(c) The Agent agrees that if and when the Company supplies it with
copies of any supplement to the Prospectus, the Agent will affix such
copies of such supplement to copies of the Prospectus already in the
Agent's possession, and that thereafter the Agent will only distribute
Prospectuses containing such supplement and that the Agent will accept
subscriptions only from investors who have received a copy of the
Prospectus containing such supplement. The Agent further agrees to
comply with all instructions from the Company concerning the
destruction of out-dated Prospectuses and the use of supplemented or
amended Prospectuses
15
(d) The Agent agrees to solicit Subscribers only in the states and
other jurisdictions in which the Blue Sky Memorandum indicates that
such solicitation can be made in accordance with any limitations
described therein and in the states and jurisdictions in which the
Agent is licensed or qualified to make offers and sales of the Shares.
8 CONDITIONS TO THE RIGHT OF THE COMPANY TO OBTAIN FUNDS. The right
Of the Company to obtain funds from the Escrow Agent on the Minimum
Offering Date is subject to the accuracy of and compliance with the
representations and warranties of the Company contained in Section 1
hereof as of the date hereof and as of the Minimum Offering Date, to
the accuracy of the statements of the Company made pursuant to the
provisions hereof, and to the following further conditions:
(a) No stop order suspending the effectiveness of any qualification of
the Shares for sale or enjoining the sale of the Shares or of the
initiation of any proceeding for that purpose or any amendment or
supplement thereto will have been issued prior to the Minimum Offering
Date and will be in effect at that date, and no proceedings for the
issuance of such order will be pending or threatened at that date.
(b) On the Minimum Offering Date, there will have been furnished to the
Agent the opinion of the counsel for the Company, dated as of the
Minimum Offering Date, subject to such assumptions as such counsel will
deem necessary to render such opinion, substantially to the effect
that:
(i) the Company is a corporation organized under the laws of
the State of Delaware and is validly existing as a corporation under
such laws;
(ii) the sale of the Shares and the issuance of the Common
Stock has been duly authorized (and to the extent necessary reserved)
by all necessary corporate action on the part of the Company. When
subscriptions for the Shares have been accepted by the Company and
payment in full has been received, the Common Stock will be duly
authorized, validly issued, fully paid and non-assessable;
(iii) this Agreement has been duly and validly authorized,
executed and delivered, by and on behalf of the Company and constitutes
the valid and binding agreement, enforceable in accordance with its
terms, of the Company subject to any applicable bankruptcy, insolvency,
reorganization or other laws affecting the enforcement of creditors'
rights, and to principles of a court of equity with respect to
equitable remedies and defenses, from time to time in effect, and
except as the indemnity provisions contained herein may be
unenforceable for reasons of public policy under court decisions or
regulations of the Commission;
(iv) the terms and provisions of any agreements to which the
Company or the Company is a party which are exhibits to the
Registration Statement or are referred to therein, substantially
conform in all material respects to the descriptions thereof contained
in the Registration Statement;
16
(v) to the best of the Company's counsel's knowledge,
information and belief, after making reasonable inquiry, the
consummation of the transactions contemplated herein do not conflict
with or result in a breach of any of the terms, provisions or
conditions of any agreement or instrument to which the Company is a
party or by which the Company may be bound, or violate any order, rule
or regulation applicable to the Company of any court or governmental
body or administrative agency having jurisdiction over the Company;
(vi) to the best of the Company's counsel's knowledge,
information and belief, after making reasonable inquiry, there is no
litigation or governmental proceeding pending, threatened against or
involving the property or business of the Company, which would
materially and adversely affect the value of the assets or the
operation of the business of the Company;
(vii) the offer and sale of the Shares, the shares of Common
Stock has been properly registered under Section 5 of the Act;
(viii) based on such counsel's review and participation in
discussions in the course of the preparation of Registration Statement
concerning the contents thereof, and having independently verified or
assumed the responsibility for the accuracy, completeness or fairness
of the statements made in the Registration Statement, no facts have
come to the attention of such counsel which lead it to believe that the
Registration Statement (except as to the financial statements, prior
performance information and financial projections (if any) contained
therein, as to which such counsel need not express any opinion) at the
date thereof or at the date of such opinion contained any untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(c) The representations and warranties of the Company herein will be
true and correct in all material respects as of the Minimum Offering
Date, as if made as of the Minimum Offering Date, and all agreements
herein contained to be performed on the part of the Company at or prior
to the Minimum Offering Date will have been so performed.
(d) Upon receipt by the Company of such certificates and documents, the
Company will direct the Escrow Agent in writing to release to the
Company the funds in the Escrow Account.
(e) If any of the conditions specified in this Section 8 will not have
been fulfilled when and as required by this Agreement, this Agreement
and all Agent's obligations hereunder may be canceled at, or at any
time prior to, the Minimum Offering Date by Agent. Any such
cancellation will be without liability on the Agent's part. Notice of
such cancellation will be given to the Company at the address specified
in Section 12 hereof, in writing, or by telecopy or telephone confirmed
in writing.
17
9. INDEMNIFICATION.
(a) Subject to the provisions of paragraphs (b) through (e) of this
Section 9: the Company agrees to indemnify and hold harmless Agent and
each person who controls Agent within the meaning of the Act
(collectively, the "AGENT INDEMNIFIED PARTIES") against any losses,
claims, damages or liabilities, joint or several, to which such Agent
Indemnified Party may become subject under the Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon (i) any untrue
statement or alleged untrue statement of a material fact contained (A)
in the Registration Statement or any amendment or supplement thereof or
thereto, as applicable, or (B) in any Blue Sky application or other
document executed by the Company specifically for that purpose or based
upon written information furnished by the Company filed in any state or
other jurisdiction in order to qualify any or all of the Shares under
the securities laws thereof (any such application, document or
information being hereinafter called a "BLUE SKY APPLICATION"), or (ii)
the omission or alleged omission to state in the Registration Statement
or any amendment or supplement thereof or thereto, as applicable, or in
any Blue Sky Application a material fact required to be stated therein
or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; and will
reimburse the Agent Indemnified Parties for any legal or other expenses
reasonably incurred by such Agent Indemnified Party in connection with
investigating or defending any such claim, liability or action;
provided, however, that the Company will not be liable in any such case
to the extent that any such loss, claim, damage or liability (i) arises
out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in reliance upon and in conformity
with written information furnished to the Company by the Agent
specifically for use with reference to the Agent in the preparation of
the Registration Statement or any such Blue Sky Application or any such
amendments or supplements thereto or (ii) is primarily the result of
the Agent's willful misconduct or gross negligence. This indemnity
agreement will be in addition to any liability which the Company may
otherwise have.
(b) The Company agrees to indemnify and hold harmless the Agent
Indemnified Parties, in the manner and to the extent provided in
Paragraph (a) of this Section 9; provided, however, that no such
indemnification by the Company of the Agent Indemnified Parties will be
permitted under this Agreement against any liability, loss or damage
incurred by them in connection with any claim or settlement alleging
federal or state securities law violations, unless such lawsuits
alleging such claims are successfully defended and a court approves
indemnification of litigation costs, unless such lawsuits are dismissed
with prejudice on the merits, or unless such lawsuits are settled and a
court approves the settlement and the indemnification.
18
(c) The Agent agrees to indemnify and hold harmless the Company and
each person who controls the Company within the meaning of the Act
(collectively, the "COMPANY INDEMNIFIED PARTIES"), against any losses,
claims, damages or liabilities to which such respective Company
Indemnified Party may become subject under the Act or otherwise insofar
as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon (i) any untrue statement or
alleged untrue statement of a material fact contained (A) in the
Registration Statement or any amendment thereof (or supplement to the
Registration Statement) or (B) in any Blue Sky Application, or (ii) the
omission or alleged omission to state in the Registration Statement as
part thereof) or any amendment or supplement thereof or thereto, as
applicable or in any Blue Sky Application a material fact required to
be stated therein or necessary to make the statements therein in light
of the circumstances under which they were made not misleading; in each
case to the extent, but only to the extent, that such untrue statement
or alleged untrue statement or omission or alleged omission was made in
reliance upon and conformity with written information furnished to the
Company by the Agent specifically for use with reference to Agent in
the preparation of the Registration Statement or any such amendments
thereof or supplements thereto or any such Blue Sky Application or any
such amendments thereof or supplements thereto; or (ii) the Agent's
failure to comply with the provisions of Section 3 and Section 7 of
this Agreement; and will reimburse such Company Indemnified party for
any legal or other expenses reasonably incurred by the Company in
connection with investigating or defending any such loss, claim,
damage, liability or action. This indemnity agreement will be in
addition to any liability that Agent may otherwise have.
(d) Promptly after receipt by an indemnified party under this Section 9
of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against any
indemnifying party under this Section 9, notify in writing the
indemnifying party of the commencement thereof; and the omission so to
notify the indemnifying Party will relieve it from any liability under
this Section 9 as to the particular item for which indemnification is
then being sought, but not from any other liability that it may have to
any indemnified party. In no event shall the indemnifying party be
liable for the fees and expenses of more than one counsel for all
indemnified parties in connection with any one action or separate but
substantially similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances (other
than such local counsel as may be employed by counsel to the
indemnified parties to render legal advice with respect to the laws of,
or legal services in, states or jurisdictions other than those states
and jurisdictions in which counsel to the indemnified parties is
admitted to practice law.) In case any such action is brought against
any indemnified party, and it notifies an indemnifying party of the
commencement thereof, the indemnifying party will be entitled to
participate therein, and, to the extent that it may wish, jointly with
any other indemnifying party, similarly notified, to assume the defense
thereof, the indemnifying party will not be liable to such indemnified
19
party under this Section 9 for any legal or other expenses subsequently
incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation. Any such
indemnifying party will not be liable to any such indemnified party on
account of any settlement of any claim or action effected without the
consent of such indemnifying party.
10. EFFECTIVE DATE. Provided that at least one counterpart of this
Agreement will then have been executed and delivered, this Agreement will become
effective upon delivery by the Company of telecopies, correspondence or other
notification to the Agent indicating the Registration Statement is released for
distribution.
11. SURVIVAL OF INDEMNITIES, WARRANTIES AND REPRESENTATIONS. The
respective indemnity agreements of the Company and Agent contained in Section 9
hereof, and the representations and warranties of the Company and Agent set
forth herein, will remain operative and in full force and effect, regardless of
any termination or cancellation of this Agreement or any investigation made by
or on behalf of the Company or Agent, or any controlling person referred to in
Section 9, and will survive the delivery of and payment for the Shares, and any
successor of the Agent or the Company or of any such controlling person or any
legal representative of any such controlling person, as the case may be, will be
entitled to the benefit of the respective indemnity agreements.
12. NOTICES. Except as is otherwise provided in this Agreement, (a)
whenever notice is required by the Provisions of this Agreement or otherwise to
be given to the Company, such notice will be in writing addressed to the Company
at 000 Xxxxx Xxx Xxxxxx, Xxxxxxxxx, Xxxxxxxxxx 00000 Attention: Xxxx Xxxxxxxx,
Chairman; and (b) whenever notice is required by the provisions of this
Agreement or otherwise to be given to Agent, such notice will be in writing
addressed to the Agent at 00 X. XxXxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx 00000,
Attention: Xxxxxxx Xxxxx. Any notice referred to herein may be given in writing
or by telecopy or telephone and if by telecopy or telephone will be immediately
confirmed in writing. Notice (unless actual) will be effective upon mailing or
telecopy transmission, as the case may be.
13. PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This Agreement is made
solely for the benefit of Agent, the Company and the controlling persons
referred to in Section 9 hereof, and their respective successors and assigns,
and no other person will acquire or have any right by virtue or this Agreement,
and the term "successors and assigns," as used in this Agreement, will not
include any Purchaser.
14. GOVERNING LAW. This Agreement is to be governed by and construed
in accordance with the laws of the State of Illinois, without regard to
principles of conflicts of law.
20
15. FURTHER CONDITIONS. Until the Minimum Offering Date, this
Agreement may be terminated by the Agent at its option by giving notice to the
Company, if (a) the Company shall have become a party to any litigation which,
in the opinion of counsel to the Agent, could have a material adverse effect on
the value of the assets or operation of the business of the Company, (b) there
shall have been, since the respective dates as of which information is in the
Registration Statement, any material adverse change in the condition, financial
or otherwise, of the Company, which change in the Agent's reasonable judgment
shall render it inadvisable to proceed with the delivery of the Shares, (c)
there shall have been any important change in market levels, major catastrophe,
substantial change in national, international or world affairs, national
calamity, postal strike, act of God or other event or occurrence which, in the
Agent's reasonable judgment, will materially disrupt the financial markets of
the United States, or (d) a general banking moratorium shall have been declared
by federal or state authorities.
16. COUNTERPARTS. This Agreement may be executed simultaneously in
two or more counterparts, any one of which need not contain the signatures of
more than one party, but all such counterparts taken together shall constitute
one and the same Agreement.
17. ENTIRE AGREEMENT. This Agreement sets forth the entire agreement
of the Agent and the Company with respect to the subject matter hereof and
terminates and supersedes all prior agreements and understandings between or
among the Agent and the Company with respect to the subject matter hereof.
18. HEADINGS. The descriptive headings in this Agreement have been
inserted for convenience only and do not constitute a part of this Agreement.
21
IN WITNESS whereof, the parties have signed this Agreement as of this
___th day of ________, 2001.
TRADEQUEST, INC.
By:/s/ Xxxx Xxxxxxxx
-------------------------
Xxxx Xxxxxxxx, Chairman
By: /s/ Xxxxxx Xxxx
-------------------------
Xxxxxx Xxxx, President
CHICAGO INVESTMENT GROUP, INC.
Investment Banking Division Endorsement
By:/s/ Xxxxxxx Key Xxxxxxxx
------------------------------
Xxxxxxx Key Xxxxxxxx
Managing Director
Investment Banking division
FINAL APPROVAL
By:/s/ Xxxxxxx Xxxxx
-----------------------------
Xxxxxxx Xxxxx, President
and Chief Executive Officer
22
