UNDERWRITING AGREEMENT
EXHIBIT 1.1
Zion Oil & Gas
0000 Xxxxxx Xxxx, Xxxxx 000, Xxxxxx, Xxxxx 00000 Phone 000.000.0000 Fax 000.000.0000
February 6, 2004
Network 1 Financial Securities, Inc.
0 Xxxxxx Xxxxxx, Xxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxxxx 00000
Re: Amended and Restated Underwriting Agreement
Gentlemen:
This agreement amends and restates that certain underwriting agreement dated November 3, 2003 (the "Initial Agreement"), the Amended and Restated Underwriting Agreement dated January 6, 2004, the Amended and Restated Underwriting Agreement dated January 28, 2004, and the Amended and Restated Underwriting Agreement dated February 3, 2004 between Zion Oil & Gas, Inc. (the "Company"), a Delaware corporation, and you (the "Underwriter").
The Company proposes to issue and sell through you and other broker-dealers ("Placement Agents") up to 7,000,000 shares of the Company's $.01 par value common stock for $5.00 per share (the "Shares"). The offering of the Shares is further described in the Registration Statement on Form SB-2 filed with the Securities and Exchange Commission (the "Commission").
1. Representations and Warranties of the Company. In order to induce you to enter into this Agreement, the Company represents and warrants as follows:
(a) The Company has filed a Registration Statement (No. 333-107042) on Form SB-2 relating to the Shares with the Commission pursuant to the Securities Act of 1933, as amended (the "Act"). As used in this Agreement, the term "Registration Statement" means the Registration Statement, including the Prospectus, the exhibits, and all amendments including any amendments after the effective date of the Registration Statement. The term "Prospectus" means the prospectus filed as a part of Part I of the Registration Statement, including all pre-effective and post-effective amendments and supplements thereto.
(b) The Registration Statement and all other documents previously filed or filed after the date hereof with the Commission conform and will comply with all of the requirements of the Act in all material respects. Neither the Registration Statement, the Prospectus nor the other material filed or to be filed with the Commission contains nor will contain any untrue statements of material facts nor are there or will there be any omissions of material facts required to be stated therein or that are necessary to make the statements therein not misleading, except that this warranty does not apply to any statements or omissions made in reliance upon and in conformity with information furnished in writing to the Company by and with respect to you expressly for use in the Registration Statement or Prospectus or any amendment or supplement thereto.
(c) The Company has obtained a CUSIP number for its common stock (989696 10 9) and the Company has used its best efforts to qualify the Shares for offering in every state, territory or possession of the United States (including the District of Columbia, hereinafter referred to as a "State") in which it plans to offer the Shares for sale. The materials filed or to be filed with any State do not and will not contain any untrue statements of material fact nor are there or will there be any omissions of material facts required to be stated therein or that are necessary to make the statements therein not misleading.
(d) The outstanding capital stock of the Company has been duly and validly authorized, issued and is fully paid and non-assessable and conforms to all statements made in the Registration Statement and Prospectus with respect thereto. The Shares have been duly and validly authorized and, when issued and delivered against payment as provided in this Agreement, will be validly issued, fully paid and non-assessable. The Shares, upon issue, will not be subject to the preemptive rights of any shareholders of the Company and will conform to all statements in the Registration Statement and Prospectus.
(e) The Company has been legally incorporated and is now, and always during the period of the offering will be, a validly existing corporation under the laws of the State of Delaware, lawfully qualified to conduct the business for which is was organized and which it proposes to conduct. The Company will always during the period of the offering be qualified to conduct business as a foreign corporation in each jurisdiction where the nature of its business requires such qualification.
(f) The Company's certificate of incorporation provides for the authorization of 20,000,000 shares of common stock ($.01 par value). There are no outstanding options, warrants or other rights to purchase securities of the Company except as described in the Registration Statement.
(g) The Company has no subsidiaries nor contemplates acquiring subsidiaries or engaging in mergers with or the acquisition of any companies.
(h) The financial statements, together with related schedules and notes, included in the Prospectus present fairly the financial condition of the Company and are reported upon by independent public accountants according to generally accepted accounting principles and as required by the rules and regulations of the Commission.
(i) The Company's securities are not subject to preemptive rights.
(j) The Company has the legal right and authority to enter into this Underwriting Agreement, to effect the proposed sale of the Shares, and to effect all other transactions contemplated by this Agreement.
(k) The Company is eligible to use Form SB-2 for the offering of the Shares.
(l) The Company possesses adequate certificates and permits issued by the appropriate federal, State and local regulatory authorities necessary to conduct its business and to retain possession of its properties. The Company has not received any notice of any proceeding relating to the revocation or modification of any of these certificates or permits.
(m) The Company has filed all tax returns required to be filed and is not in default in the payment of any taxes that have become due pursuant to any law or any assessment.
(n) All of the contracts, leases, licenses, permits and agreements under which the Company operates as described in the Registration Statement are in full force and effect. The Company is not in default under any of the material terms or provisions of any such contracts, leases, licenses, permits or agreements.
(o) All original documents and other information relating to the Company's business has and will continue to be made available upon request to the Placement Agents and their counsel at the offices of the Company, and copies of any such documents will be furnished upon request to the Underwriter or its counsel.
(p) The Company has appointed Registrar and Transfer Company, Cranford, NJ, as the Company's transfer agent. The Company will continue to retain a transfer agent reasonably satisfactory to the Underwriter for so long as the Company is subject to the reporting requirements under Section 12(g) or Section 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Company will make arrangements to have available at the office of the transfer agent sufficient quantities of the Company's common stock certificates as may be needed for the quick and efficient transfer of the Shares.
(q) The Company will use the proceeds from the sale of the Shares as set forth in the Registration Statement and Prospectus.
(r) There are no contracts or other documents required to be described in the Registration Statement or to be filed as exhibits to the Registration Statement that have not been described or filed as required.
All of the above representations and warranties shall survive the performance or termination of this Agreement.
2. Representations and Warranties of the Underwriter. The Underwriter represents and warrants as follows:
(a) It is registered as a broker-dealer with the Commission, and is registered to the extent registration is required with the appropriate governmental agency in each State in which it offers or sells the Shares, and is a member of the National Association of Securities Dealers, Inc. ("NASD") and will use its best efforts to maintain such registrations, qualifications and memberships throughout the term of the offering.
(b) To the knowledge of the Underwriter, no action or proceeding is pending against the Underwriter or any of its officers or directors concerning the Underwriter's activities as a broker or dealer that would affect the Company's offering of the Shares.
(c) The Underwriter will offer the Shares only in those states and in the quantities that are identified in the Blue Sky Memoranda from the Company's counsel to the Underwriter that the offering of the Shares has been qualified for sale under the applicable State statutes and regulations. The Underwriter, however, may offer the Shares in other states if (i) the transaction is exempt from the registration requirements in that State, (ii) the Company's counsel has received notice ten days prior to the proposed sale, and (iii) the Company's counsel does not object within such ten-day period.
(d) The Underwriter, in connection with the offer and sale of the Shares and in the performance of its duties and obligations under this Agreement, agrees to use its best efforts to comply with all applicable federal laws; the laws of the states or other jurisdictions in which the Shares are offered and sold; and the Rules and current written interpretations and policies of the NASD.
(e) The Underwriter is a corporation duly organized, validly existing and in good standing under the laws of the State of Texas with all requisite power and authority to enter into this Agreement and to carry out its obligations hereunder.
(f) This Agreement has been duly authorized, executed and delivered by the Underwriter and is a valid agreement on the part of the Underwriter.
(g) Neither the execution of this Agreement nor the consummation of the transactions contemplated hereby will result in any breach of any of the terms or conditions of, or constitute a default under, the articles of incorporation or bylaws of the Underwriter or any indenture, agreement or other instrument to which the Underwriter is a party or violate any order directed to the Underwriter of any court or any federal or State regulatory body or administrative agency having jurisdiction over the Underwriter or its affiliates.
(h) No person acting by, through or under the Underwriter will be entitled to receive from the Underwriter or from the Company finder's fees or similar payments.
(i) The Underwriter will, reasonably promptly after the closing date, supply the Company with all information required from the Underwriter for the completion of Form SR (Application of Proceeds) and such additional information as the Company may reasonably request to be supplied to the securities commissions of such States in which the Shares have been qualified for sale.
All of the above representations and warranties shall survive the performance or termination of this Agreement.
3. Employment of the Underwriter. In reliance upon the representations and warranties and subject to the terms and conditions of this Agreement:
(a) The Company employs the Underwriter as its agent to sell for the Company's account the Shares, on a cash basis only, at a price of $5.00 per Share. The Underwriter agrees to use its best efforts, as agent for the Company, to sell the Shares subject to the terms and conditions set forth in this Agreement. It is understood between the parties that there is no firm commitment by the Underwriter to purchase any or all of the Shares.
(b) The obligation of the Underwriter to offer the Shares is subject to receipt by it of written advice from the Commission that the Registration Statement is effective, is subject to the Shares being qualified for offering under applicable laws in the States as may be reasonably designated, is subject to the absence of any prohibitory action by any governmental body, agency or official, and is subject to the terms and conditions contained in this Agreement and in the Registration Statement.
(c) The Company and the Underwriter agree that unless a minimum of 1,300,000 of the Shares to be offered are sold on or before May 31, 2004 (which period may be extended by the Company for an additional period of ninety days), the agency between the Company and the Underwriter will terminate. In such an event, the full proceeds that have been paid for the Shares shall be returned to the purchasers within ten (10) business days. Prior to the sale of all of the Shares to be offered, all proceeds received from the sale of the Shares will be deposited into an interest bearing escrow account entitled "Zion Oil & Gas, Inc. Escrow Account" with Commerce Bank/Delaware, National Association, Cherry Hill, NJ (the "Escrow Account").
(d) The Underwriter, the Company and Commerce Bank/Delaware, National Association, will, prior to the beginning of the offering of the Shares, enter into a fund escrow agreement ("Escrow Agreement"). The parties mutually agree to faithfully perform their obligations under the Escrow Agreement. The Underwriter will, in accordance with Rule 15(c)2-4 of the Exchange Act, promptly, upon receipt of any and all checks, drafts, and money orders received from prospective purchasers of the shares/units, deliver same to the Escrow Agent for deposit in the Escrow Account by noon of the next business day following the receipt, together with a written account of each purchaser which sets forth, among other things, the name and address of the purchaser, the number of securities purchased and the amount paid therefor. Any checks received which are made payable to any party other than the Escrow Agent, shall be returned to the purchaser who submitted the check and not accepted. The Underwriter will promptly deliver a copy of each subscription agreement received to the executive offices of the Company, to the attention of the Company's Vice President of Finance. In accordance with the requirements of Rules 15c2-4 and 10b-9 of the Exchange Act, in the event that the minimum offering amount is not met, the funds paid into the Escrow Account shall be promptly returned to each individual subscriber by the Escrow Agent, and not returned to the Underwriter or the Company for delivery to such subscribers. Any pro rata interest on the escrowed funds shall not be paid to the Underwriter, but shall be paid to the subscribers on a pro rata basis.
(e) Subject to the sale by the Company of a minimum of 1,300,000 of the Shares to be offered, the Company agrees to pay to the Underwriter immediately upon the release to the Company of the investors' funds deposited into the Escrow Account:
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(i) |
a commission equal to six percent (6%) of the public offering price for the Shares sold by the Underwriter; |
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(ii) |
a non-accountable expense allowance to the Underwriter for legal, accounting, and other miscellaneous expenses in connection with the offering on all shares sold to the public, computed as follows:
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(iii) |
five-year warrants to purchase the Company's common stock equal to five percent (5%) of the shares sold in the offering at an exercise price of $7.35, or forty-seven percent (47%) above the offering price, not exercisable for one (1) year after the effective date of the offering, nor shall such warrants be sold, transferred, assigned, pledged or hypothecated by any person, for a period of one year following the effective date of the offering, but such warrants may be transferred to any broker-dealer participating in the offering and to the bona fide officers or partners thereof and may be so transferred or exercised if all securities so transferred or received remain subject to the one-year restriction; and, |
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(iv) |
$60,000 at the first closing of the offering and the release of the initial investor funds from the Escrow Account pursuant to a two (2) year investment banking/consulting agreement, in the form substantially similar to that attached hereto as Annex A, to be entered into by and between the Company and the Underwriter, effective on and conditional upon the initial closing of the offering. |
(f) The Company shall pay the Underwriter a retainer of $25,000 payable in the following manner: (i) $15,000 at the signing of the Initial Agreement and (ii) $10,000 no later than sixty (60) days after the signing of the Initial Agreement; which retainer amounts shall be credited against the amounts payable to the Underwriter pursuant to clause (e)(ii) of this Section 3 upon the initial closing of the offering.
(g) The Company shall be responsible for all of its selling expenses incident to the offering (other than underwriters' commissions and other compensation set forth in paragraph (e) of this Section 3) which are customarily incurred, paid, or borne by or on behalf of issuers in connection with the sale of securities, even though such expenses are paid through the Underwriter. Such selling expenses include, but are not limited to, the following:
- the cost of preparing, printing, and filing registration applications, registration statements, prospectuses, offering circulars, and other documents used in registering securities, including any registration fees and other expenses associated therewith;
- the amount of any attorney's fees and expenses (except those charged by an underwriter's counsel) incurred or paid in connection with the offering;
- the amount of any accountant's or auditor's fees and expenses incurred or paid in connection with the offering;
- the amount of the fees and charges of any transfer agents, registrars, indenture trustees, escrow agents, depositories, engineers, appraisers, or other professional or technical experts;
- the cost of authorizing, preparing, and printing certificates for securities and other documents relating thereto, including taxes and stamps;
- the amount of all printing, advertising, traveling expenses, and other expenses in connection with meetings and presentations by the Company for informational or promotional purposes incurred or paid by the Company in connection with the offering of the Company's securities (such expenses shall not include expenses incurred by the Underwriter for its selling efforts in connection with a "road show" or other promotional device); and
- any other internal Company costs (including staffing or other additional administrative costs, such as the need to hire personnel to handle information requests, press inquiries, or the cost of equipment and supplies not required by the Company but for the offering) directly or indirectly borne by the Company in respect of the offering of its securities.
4. Further Agreements of the Company. The Company further agrees with the Underwriter as follows:
(a) The Company will use its best efforts to qualify the sale of the Shares in such States as shall be reasonably requested by the Underwriter.
(b) The Company will deliver to the Underwriter as many copies of the preliminary Prospectus as the Underwriter may reasonably request during the period following Amendment No. 1 to the Registration Statement. The Company will deliver to the Underwriter as many copies of the final Prospectus as the Underwriter may reasonably request during the period of the offering and for ninety (90) days after the effective date.
(c) The Company agrees to notify the Underwriter immediately during the period of the offering and within the ninety (90) day period after the effective date of any event that materially affects the Company or its securities and that should be set forth in an amendment or supplement to the Prospectus in order to make the statements made therein not misleading. Similarly, the Company agrees to as soon as possible thereafter prepare and furnish to the Underwriter as many copies of an amended Prospectus or a supplement to the Prospectus in order that the Prospectus as amended or supplemented will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or that is necessary in order to make the statements made therein not misleading.
(d) The Company will file with the Commission the required reports on Form SR and will file with the appropriate State securities commissioners any sales and other reports required by the rules and regulations of such agencies and will supply copies to the Underwriter, if requested.
(e) The Company will notify the Underwriter a reasonable amount of time in advance of any additional issuance of shares following a successful closing, for a period of two years following the final closing.
(f) The Underwriter shall have no right of first refusal on any secondary offering of Shares (a "Secondary Offering").
5. Indemnification.
(a) The Company agrees to indemnify, defend and hold harmless the Underwriter from and against any and all losses, claims, damages, liabilities and expenses (including reasonable legal or other expenses) incurred by the Underwriter in connection with defending or investigating any such or liabilities that the Underwriter may incur under the federal or State securities laws and regulations, State statutes or at common law or otherwise, but only to the extent that such losses, claims, damages, liabilities and expenses shall arise out of or be based upon a violation or alleged violation of the federal or State securities laws or regulations, a State statute or the common law resulting
from any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or in any application or other papers filed with the various State securities authorities ("Blue Sky Applications") or shall arise out of or be based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading.
(b) The foregoing indemnity of the Company in favor of the Underwriter shall not be deemed to protect the Underwriter against any liability to which the Underwriter would otherwise be subject by reason of willful misfeasance, bad faith or gross negligence in the performance of the Underwriter's duties, or by reason of the Underwriter's reckless disregard of the Underwriter's obligations and duties under the Act or this Agreement.
(c) The Underwriter agrees to give the Company an opportunity to participate in the defense or preparation of the defense of any action brought against the Underwriter to enforce any such claim or liability and the Company shall have the right so to participate. The agreement of the Company under the foregoing indemnity is expressly conditioned upon notice of any such action having been sent by the Underwriter to the Company in writing, addressed as provided in this Agreement, promptly after the receipt of a written notice of such action against the Underwriter. Such notice shall be accompanied by copies of papers served or filed in connection with such action or by a statement of the nature of the action to the extent known to the Underwriter.
6. Termination.
(a) Subject to paragraph (c) of this Section, this agreement may be terminated by either party by written notice sent to the other party at the address shown in this Agreement without cause at any time prior to the earlier of (i) the time the Shares are released for sale to the public, or (ii) 11:30 a.m., Washington D.C. time, on the first business day following the date on which the Registration Statement becomes effective.
(b) An attempt to assign any rights and obligations under this Agreement shall constitute automatic termination of this Agreement.
7. Notices. All notices shall be deemed to have been duly given if mailed, or if communicated by telegraph, facsimile, electronic mail or telephone and subsequently immediately confirmed in writing:
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To the Company: |
Zion Oil & Gas, Inc. |
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0000 Xxxxxx Xxxx, Xxxxx 000 |
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Xxxxxx, Xxxxx 00000 |
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Attention: Xxxxxx X. Xxxxxxx, President |
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To the Underwriter: |
Network 1 Financial Securities, Inc. |
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The Galleria, Xxxxxxxxx Xxxxx |
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0 Xxxxxx Xxxxxx |
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Xxx Xxxx, XX 00000-0000 |
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Attention: Xxxx Xxxxxxx, Vice President |
8. Binding Effect. This Agreement shall inure to the benefit of and be binding upon the Company and the Underwriter and their successors. Nothing expressed in this Agreement is intended to give any person other than the persons mentioned in the preceding sentence any legal or equitable right, remedy or claim under this Agreement.
9. Arbitration. The Company and the Underwriter agree that in the event a dispute arises between the Underwriter and the Company or any of its officers, directors, employees, agents, attorneys or accountants, arising out of, in connection with or as a result of the execution of this Agreement or as a result of any subscription tendered by any purchaser of the Shares, such dispute shall be resolved through arbitration rather than litigation. The parties agree to submit such disputes for resolution to the NASD within five (5) days after receiving a written request from any of the aforesaid parties to do so. The failure by the Company or Underwriter to submit any dispute to arbitration as requested may result in the commencement of an arbitration proceeding against such party. The parties further agree that any hearing scheduled after an arbitration proceeding is initiated by any of the aforesaid parties shall take place in Monmouth County, New Jersey. The parties acknowledge that the result of the arbitration proceeding shall be final and binding on all of the parties to the proceeding, and by agreeing to arbitration the parties are waiving their respective rights to seek remedies in Court.
10. Miscellaneous Provisions.
(a) This Agreement shall be construed in accordance with the laws of the State of New Jersey.
(b) The representations and warranties made in this Agreement shall survive the termination of this Agreement and shall continue in full force and effect.
(c) This Agreement is made solely for the benefit of the Company and its officers, directors and controlling persons within the meaning of Section 15 of the Act and of the Underwriter and its officers, directors and controlling persons within the meaning of Section 15 of the Act, and their respective successors, heirs and personal representatives, and no other person shall acquire or have any right under or by virtue of this Agreement. The term "successor" as used in this Agreement shall not include any purchaser, as such, of the Shares.
If this Agreement correctly sets forth our understanding, please indicate your acceptance in the space provided below for that purpose.
Sincerely,
Zion Oil & Gas, Inc.
By:_ s/ X X Xxxxxxx
Xxxxxx X. Xxxxxxx, President
Confirmed and accepted as of the date
of this Agreement:
Network 1 Financial Securities, Inc.
By: s/Xxxxxxx Xxxx
Xxxxxxx Xxxx, President
ANNEX A
[Letterhead of Network 1 Financial Securities, Inc.]
_______, 2004
Xx. Xxxxxx X. Xxxxxxx
ZION OIL & GAS, INC.
0000 Xxxxxx Xxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Dear Xx. Xxxxxxx:
This letter amends and restates the financial and strategic advisory/consulting services agreement by and between Zion Oil & Gas, Inc. ("Zion") and Network 1 Financial Services, Inc. ("Network 1") on [DATE]. This Agreement confirms the terms and conditions pursuant to which Zion has engaged Network 1 to act as financial and strategic advisor in connection with certain business, corporate governance and financial structural matters with respect to which Network 1 has been specifically been requested to render services by Zion (each, a "Transaction" and, collectively, the "Transactions").
1. Services to be Rendered.
(a) In connection with this engagement, Network 1's duties shall consist solely of:
- analyzing the financing and revenue model for certain Transactions generated by Zion to date or generated during the period of this engagement and making recommendations on the viability of the model;
- assisting in preparing proposals and negotiating definitive documentation for Transactions, in so far as such negotiation directly relates to the governance and financial matters;
- assisting in determining the most appropriate corporate governance and financing structures for Zion; and
- identifying and contacting potential new sources of financing for Zion, including but not limited to managing the process for the arrangement of the financing required by Zion and assisting with the negotiation of term sheets, commitment letters, fee letters, credit agreements and other investment and loan documents.
(b) In connection with its services hereunder, Network 1 shall act as an independent contractor and any duties of Network 1 arising out of this engagement shall be owed solely to Zion.
(c) Zion acknowledges that Network 1 is not, and does not hold itself out to be, an advisor as to legal, taxation, accounting or regulatory matters in any jurisdiction in connection with Transactions and, accordingly, Network 1 shall have no responsibility or liability to Zion with respect to any action, omission, recommendation or comment made by Network 1 in relation to any such matter. Zion shall be responsible for making its own independent investigation and appraisal of the risks, benefits and suitability of the transactions contemplated by this letter agreement to and for Zion, Zion shall consult with its own legal, tax and accounting advisors with regard to the consequences of Transactions, and Network 1 makes no representation concerning any of the foregoing and shall bear no responsibility or liability to Zion with respect thereto.
(d) Zion and Network 1 acknowledge that, in the event that Zion requests that Network 1 perform any services not expressly provided for in Section 1(a), the provision of such additional services shall be subject to the mutual agreement of Zion and Network 1 as to the scope of such additional services and the compensation therefor.
2. Term of Engagement.
(a) The term of this letter agreement shall extend from the date hereof, which date shall be the date of the initial closing of the initial public offering of Zion as contemplated by that certain Amended and Restated Underwriting Agreement, dated February 2, 2004, by and between Zion and Network 1, through the earlier of (i) consummation or abandonment of the Transactions and (ii) the date which is two years after the date hereof (subject to extension by mutual agreement of the parties), provided that it is understood that Network 1's and Zion's obligations hereunder may be terminated, with or without cause, (1) by Network 1 at any time upon thirty (30) days' prior written notice, without liability or continuing obligation and (2) by Zion at any time upon thirty (30) days' prior written notice, provided further that (x) the provisions of this letter agreement relating to keeping information confidential, the payment of fees and expenses, indemnification and contribution, exclusivity pursuant to Section 6 (to the extent provided for in such Section 6), governing law and submission to jurisdiction will survive any termination or expiration of this letter agreement and (y) following any termination of this letter agreement by Zion, Zion shall reimburse Network 1 for its out-of-pocket expenses incurred hereunder.
3. Fees and Expenses.
(a) Zion agrees to pay to Network 1 a one-time fee ("the Fee") in an amount equal to US$60,000.00. The Fee will be payable to Network 1 upon the entry into effect of this agreement on the date of the first closing of Zion's initial public offering and upon the release to Zion of the initial investor funds from an escrow account established in connection with the initial public offering. Network 1 will from time to time, but not less than quarterly, present Zion with an invoice setting forth the Transaction services that were rendered for the period covered by such invoice. If Network 1does not, by the end of the term of this agreement, provide Zion with $60,000 worth of Transaction services, as determined and invoiced by Network 1in good faith, Network 1shall reimburse Zion for the outstanding balance of the Fee. Said Fee shall not include reasonable disbursements and expenses of Network 1 incurred in connection with the Transaction services.
(b) If, within twelve (12) months after the final closing of Zion's initial public offering, Zion obtains new sources of financing, either capital contributions or loans, through the efforts of Network 1, as set forth in Section 1(a)(iv) above, Zion will, upon the closing of such financing transactions, pay Network 1 such additional "finders" or placement fees as mutually agreed upon.
(c) In the event that Zion requests and Network 1 agrees to provide additional services not expressly provided for in this letter agreement, it is understood that Network 1 shall be paid additional fees and other compensation to be agreed upon.
4. Indemnification.
(a) Zion agrees to indemnify and hold harmless Network 1, its affiliates and their respective officers, directors, employees, agents and controlling persons (each an "Indemnified Person") from and against any and all losses, claims, damages, liabilities and, except to the extent limited by other provisions herein, expenses, joint or several, to which any such Indemnified Person may become subject arising out of or in connection with the involvement of any Indemnified person in the transactions contemplated by this letter agreement to the extent that Zion was notified by Network 1 of such Indemnified Person's involvement therein upon the commencement thereof, or any claim, litigation, investigation or proceedings relating to the foregoing ("Proceedings") regardless of whether any of such Indemnified Persons is a party thereto, and to reimburse such Indemnified Persons for any legal or other expenses as they are incurred in connection with investigating or defending any of the foregoing, provided that the foregoing indemnification will not, as to any Indemnified Person, apply to losses, claims, damages, liabilities or expenses to the extent that they are finally judicially determined to have resulted from the gross negligence or willful misconduct
of, or breach of this letter agreement by, such Indemnified Person. Neither party hereto shall be responsible or have any liability to any other party for any indirect, special or consequential damages arising out of or in connection with this letter agreement or the transactions contemplated hereby, even if advised of the possibility thereof. Zion also agrees that no Indemnified Person shall have any liability (whether direct or indirect, in contract or tort or otherwise) to Zion arising out of or in connection with Transactions except for any losses, claims, damages, liabilities and expenses incurred by Zion that are finally judicially determined to have resulted from the gross negligence or willful misconduct of, or breach of this letter agreement by, such Indemnified Person, provided that Zion was notified in
advance of the fact that the Indemnified Person was to render services to Zion in connection with a Transaction . If for any reason (other than a reason provided for herein) the foregoing indemnification is unavailable to any Indemnified Person or insufficient to hold it harmless, then Zion shall contribute to the amount paid or payable by such Indemnified Person as a result of such loss, claim, damage, liability or expense in such proportion as is appropriate to reflect not only the relative benefits received by Zion on the one hand and such Indemnified Person on the other hand but also the relative fault of Zion and such Indemnified Person, as well as any relevant equitable considerations. It is hereby agreed that the relative benefits to Zion on the one hand and all Indemnified Persons on the other hand shall be deemed to be in the same proportion as (i) the total value received or proposed to be received by Zion pursuant to Transactions (whether or not consummated and net of expenses incurred) bears to (ii) the fee paid or proposed to be paid to Network 1 in connection with Transactions. The indemnity, reimbursement and contribution obligations of Zion under these paragraphs shall be in addition to any liability which Zion may otherwise have to an Indemnified Person and shall be binding upon and inure to the benefit of any successors and assigns of Zion and any Indemnified Person.
(b) Promptly after receipt by an Indemnified Person of notice of the commencement of any Proceedings, such Indemnified Person will, if a claim in respect thereof is to be made against Zion, notify Zion in writing of the commencement thereof; provided that (i) the omission so to notify Zion will not relieve it from any liability which it may have hereunder except to the extent it has been materially prejudiced by such failure and (ii) the omission so to notify Zion will not relieve it from any liability which it may have to an Indemnified Person otherwise than on account of this indemnity agreement. In case any such Proceedings are brought against any Indemnified Person and it notifies Zion of the commencement thereof, Zion will be entitled to participate therein and, to the extent that it may elect by written notice delivered to the Indemnified Person, to assume the defense thereof with counsel reasonably satisfactory to such Indemnified Person; provided that if the defendants in any such Proceedings include both the Indemnified Person and Zion and the Indemnified Person shall have reasonably concluded based on advice of counsel that there may be legal defenses available to it which are different from or additional to those available to Zion and shall have so notified Zion, then the Indemnified Person shall thereafter have the right to select separate counsel to assert such legal defenses and to otherwise participate in the defense of such Proceedings on behalf of such Indemnified Person. Upon receipt of notice from Zion to such Indemnified Person of its election so to assume the defense of such Proceedings and approval by the Indemnified Person of counsel, Zion will not be liable to such Indemnified Person for expenses incurred by the Indemnified Person in connection with the defense thereof (other than reasonable costs of investigation) unless (i) the Indemnified Person shall have employed separate counsel in connection with the assertion of legal defenses in accordance with the proviso to the immediately preceding sentence (it being understood, however, that Zion shall not be liable for the expenses of more than one separate counsel (in addition to any local counsel), approved by Network 1, representing the Indemnified Persons who are parties to such Proceedings), (ii) Zion shall not have employed counsel reasonably satisfactory to the Indemnified Person to represent the Indemnified Person within a reasonable time after notice of commencement of the Proceedings or (iii) Zion has authorized in writing the employment of counsel for the Indemnified Person.
(c) Zion shall not be liable for any settlement of any Proceedings effected without its written consent (which consent shall not be unreasonably withheld), but if settled with its written consent, Zion agrees to indemnify and hold harmless each Indemnified Person from and against any and all losses, claims, damages, liabilities and expenses by reason of such settlement. Zion shall not, without the prior written consent of an Indemnified Person (which consent shall not be unreasonably withheld), effect any settlement of any pending or threatened Proceedings in respect of which indemnity could have been sought hereunder by such Indemnified Person unless such settlement includes an unconditional release of such Indemnified Person in form and substance reasonably satisfactory to such Indemnified Person from all liability on claims that are the subject matter of such Proceedings.
5. Disclosure and Confidentiality.
(a) Zion agrees to furnish Network 1 with all financial and other information (the "Information") which Network 1 may reasonably request in connection with Transactions. Zion represents that (i) to the best of its knowledge, the Information that has been or will be made available to Network 1 or its affiliates by Zion (directly or indirectly) is or will be, when furnished, correct in all material respects and does not and will not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein, in the light of the circumstances under which they were made, not materially misleading, (ii) all historical financial statements provided to Network 1 by Zion (directly or indirectly) will be prepared (except as otherwise disclosed to Network 1) in accordance with generally accepted accounting principals and practices then in effect in the relevant jurisdiction and will present fairly the financial condition and operations of the entities and businesses covered thereby, and (iii) any projections, financial or otherwise, provided to Network 1 by Zion (directly or indirectly) will be prepared in
good faith with a reasonable basis for the assumptions and the conclusions reached therein and on a basis consistent with the historical financial data of the entities and businesses covered thereby.
(b) Zion agrees that it will notify Network 1 promptly (i) of any material adverse change, or any development that is likely to lead to any material adverse change, in the Information and (ii) of any statement contained in any historical financial data provided to Network 1 which is not materially accurate or which is incomplete or misleading in any material respect. Zion acknowledges that Network 1 may rely, absent manifest error, without independent verification, upon the accuracy and completeness of the Information as such Information may be supplemented pursuant to the preceding sentence (provided by Zion or any of its representatives), and that Network 1 does not assume any responsibility therefor.
(c) Zion recognizes and confirms that Network 1, in acting pursuant to this engagement, will be using information in public reports and other information provided by others, including information provided by Zion and its affiliates, if any, and their auditors, attorneys or agents, and that Network 1 does not assume responsibility for, and may rely without any obligation or independent verification upon, the accuracy and completeness of any such information. Network 1 agrees that it will not, without the prior written consent of Zion, disclose to any third party (other than Network 1's affiliates, if any, and its and their respective employees, legal counsel, independent auditors, and other experts or agents who have a need to know such information and who are advised of, and who are obligated to maintain, the confidential nature of such information) any confidential information provided at any time by Zion to Network 1 in connection with this engagement, except to the extent (i) such disclosure is required by applicable law, regulation or legal process, (ii) such information becomes publicly known other than as a result of the breach by Network 1 of its obligations set forth in this paragraph, (iii) such disclosure is requested or required by any regulatory authority having jurisdiction over Network 1, (iv) such information is received by Network 1 or any of its affiliates from a source other than Zion, provided such source is not known to Network 1 or such affiliate to be subject to an obligation of confidentiality with respect thereto, and/or (v) such information is already known to Network 1 at the time of its disclosure by Zion in connection with the Transactions.
(d) Zion agrees that it will not, without the prior written consent of Network 1, disclose, directly or indirectly, to any third party (other than Zion's affiliates and its and their respective employees, legal counsel, independent auditors, and other experts or agents who have a need to know such information and who are advised of, and who are obligated to maintain, the confidential nature of such information), this letter agreement or any of its terms or substance or the existence of this engagement (other than the mere existence of this letter agreement), except to the extent (i) such disclosure is required by applicable law, regulation or legal process, (ii) such information becomes publicly known other than as a result of the breach of the obligations set forth in this paragraph or (iii) such disclosure is requested or required by any regulatory authority having jurisdiction over Zion.
(e) Network 1 agrees that, upon the scheduled or other termination of this letter agreement, it shall, to the extent permitted by applicable law, destroy any written confidential information furnished by Zion to Network 1 pursuant to this letter agreement, the disclosure of which is not permitted hereunder.
(f) Zion acknowledges that Network 1 and its affiliates may have and may in the future have relationships with parties other that Zion who may have conflicting interests with respect to Zion. Although Network 1 in the course of such other relationships may acquire information about Zion and other persons with interests in respect of the Transactions, Network 1 shall have no obligation to disclose such information to Zion or to use such information on behalf of Zion. Zion acknowledges that Network 1 may have relationships with certain third party financing sources pursuant to which Network 1 may be offered compensation from such third party to the extent that such third party participates at Network 1's invitation in the financing for the Transactions.
6. Payments.
Zion agrees that all amounts payable to Network 1 hereunder pursuant to Section 3 shall (unless otherwise agreed to in advance by Network 1) be paid via wire transfer to the depository institution selected by Network 1 in immediately available United States dollars, without setoff or deduction of any kind.
7. Consent to Jurisdiction.
Zion and Network 1 hereby irrevocably consent to the exclusive jurisdiction of any New Jersey State or United States federal court sitting in Monmouth County over any action or proceeding arising out of or relating to this letter agreement, and Zion and Network 1 hereby irrevocably agree that all claims in respect of such action or
proceeding may be heard in such New Jersey State or federal court. Zion and Network 1 irrevocably consent to the service of any and all process in any such action or proceeding by the mailing of copies of such process to it at its address set forth herein. Zion and Network 1 agree that a final and non-appealable judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Zion and Network 1 further waive any objection to venue in the State of New Jersey and any objection to any action or proceeding in such state on the basis of forum non conveniens. Zion and Network 1 hereto further agree that any action or proceeding brought hereunder shall be brought only in the New Jersey state or United States federal courts sitting in Monmouth County. Zion and Network 1 further agree that nothing herein shall affect either party's right to effect service of process in any other manner permitted by law or to bring a suit, action or proceeding for enforcement of a judgment in any other court or jurisdiction in accordance with applicable law.
8. Publicity.
If information relating to the Transactions is publicly disclosed, Network 1 shall have the right, at its own expense and with the prior written consent of Zion (such consent not to be unreasonably withheld), to place advertisements in financial and other publications describing its services hereunder and to otherwise publicize its role in Transactions.
9. Notices.
All notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (including by facsimile), and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made when delivered, or three (3) business days after being deposited in the mail, return receipt requested, or in the case of facsimile notice, when received, addressed as follows:
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Network 1: |
NETWORK 1 FINANCIAL SERVICES, INC |
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The Galleria, Penthouse Suite |
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0 Xxxxxx Xxxxxx, Xxxxxxxx 0 |
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Xxx Xxxx, XX 00000-0000 |
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Attn: Mr. Xxxxxxx Xxxx, President |
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with a copy to: |
Xxxxx & Xxxxx, PC |
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000 Xxxxx Xxxxx |
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Xxxxxxxxxxxxx, Xxx Xxxxxx 00000 |
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Attn: Xxxxxxxx Xxxxx, Esq. |
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Zion: |
ZION OIL & GAS, INC. |
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0000 Xxxxxx Xxxx, Xxxxx 000 |
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Xxxxxx, Xxxxx 00000 |
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Attn: Xx. Xxxxxx X. Xxxxxxx |
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10. Miscellaneous.
(a) Network 1 may perform its obligations hereunder either directly or through its affiliates, and the provisions hereof shall apply equally to Network 1 and any such affiliates.
(b) This letter agreement (i) has been duly executed and delivered on behalf of Zion and Network 1 and constitutes the legal, valid, binding and enforceable obligation of each such party, except to the extent that enforceability may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors' rights generally or by general equitable principles or public policy considerations; (ii) sets forth the entire understanding of the parties relating to the subject matter hereof and supersedes and cancels any prior communications, understandings and agreements between the parties; (iii) may not be amended, modified or assigned except in a written instrument executed by each of the parties; (iv) may be signed in counterparts (including by telecopy), each of which shall constitute an original and which together shall constitute one and the same agreement; (v) is solely for the benefit of Zion and Network 1, and no other person (except for Indemnified Persons to the extent set forth in Section (4) shall acquire or have any rights under or by virtue of this letter agreement; and (vi) shall be governed by and construed in accordance with the laws of the State of New Jersey, without regard to principles of conflicts of law.
(c) If any term, provision, covenant or restriction contained in this letter agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable or against public policy, the remainder of the terms, provisions, covenants and restrictions contained herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated. Zion and Network 1 shall endeavor in good faith negotiations to replace the invalid, void or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, void or unenforceable provisions.
If the foregoing terms meet with your approval, please indicate your acceptance by signing and returning the attached copy of this letter agreement to us.
Very truly yours,
NETWORK 1 FINANCIAL SERVICES, INC.
By:
Name: Xxxxxxx Xxxx
Title: President
Agreed to and accepted by:
ZION OIL & GAS, INC.
By: ___________________________
Name: Xxxxxx X. Xxxxxxx
Title: President
