PLACEMENT AGENCY AGREEMENT
August
24, 2007
Xxxxxxx
Xxxxx Ventures, Inc.
000
Xxxxxxx Xxxxxx
00xx
Xxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Ladies
and Gentlemen:
UFood
Franchise Company, a Nevada corporation (the “Company”), hereby confirms its
agreement (the “Agreement”) with Xxxxxxx Xxxxx Ventures, Inc., a Delaware
corporation (the “Placement Agent”), as follows:
1. Offering.
(a) The
Company will offer (the “Offering”) for sale through the Placement Agent, as
exclusive agent for the Company, and its selected dealers, a minimum of
$1,000,000 (the “Minimum Amount”), and a maximum of $2,000,000 (the “Maximum
Amount”), of principal
amount of 9% Convertible Promissory Notes due 180 days from the issuance date
(each, a “Note” and collectively, the “Notes”). The Notes shall have the rights
and privileges described in the Disclosure Materials (as defined in Section
1(d)
hereof).
(b) Placement
of the Notes by the Placement Agent will be made on a reasonable efforts,
“all-or-none” basis with respect to the Minimum Amount and on a “reasonable
efforts” basis as to amounts in excess of the Minimum Amount. The Notes will be
offered to potential subscribers, which, subject to compliance with the
requirements for other subscribers, may include related parties of the Placement
Agent or the Company, commencing on the date of the Transmittal Letter (as
hereinafter defined) for a period of 31 days, unless the Company and the
Placement Agent mutually agree to extend the Offering for up to an additional
30
days (the “Offering Period”). The date on which the Offering shall terminate
shall be referred to as the “Termination Date.” A Final Closing (as hereinafter
defined) may be held up to ten days after the Termination Date.
(c) The
Placement Agent shall not tender to the Company and the Company shall not accept
subscriptions from, or sell Notes to, any persons or entities that do not
qualify as “accredited investors,” as such term is defined in Rule 501 of
Regulation D (“Regulation D”) promulgated under Section 4(2) of the Securities
Act of 1933, as amended (the “Act”), and/or investors that are not “U.S.
persons” as defined in Regulation S (“Regulation S”) as promulgated by the
Securities and Exchange Commission (“SEC”).
(d) The
offering of the Notes will be made by the Placement Agent on behalf of the
Company solely pursuant to the Disclosure Materials which at all times will
be
in form and substance reasonably acceptable to the Placement Agent, the Company
and their respective counsel and contain such legends and other information
as
the Placement Agent, the Company and their respective counsel may, from time
to
time, deem necessary and desirable to be set forth therein. “Disclosure
Materials” as used in this Agreement means the Company’s Confidential
Transmittal Letter, dated August 24, 2007 (the “Transmittal Letter”), inclusive
of the Securities Purchase Agreement and the Form of 9% Convertible Promissory
Note and all other exhibits annexed thereto, and any and all amendments,
supplements and appendices thereto that the Placement Agent will, with the
Company’s prior approval, use on the Company’s behalf to sell the Notes. Unless
otherwise defined, each capitalized term used in this Agreement will have the
same meaning as shall be set forth in the Disclosure Materials.
(e) The
Placement Agent shall comply with all applicable broker-dealer registration
requirements, applicable federal and state securities laws and all National
Association of Securities Dealers, Inc. (“NASD) regulations with respect to the
Offering and conduct the Offering in accordance with Regulation D and/or
Regulation S. In connection with the Offering, the Placement Agent will offer
the Notes only in those jurisdictions (states of the United States and foreign)
in which the Notes have been qualified or registered for sale under the
securities laws of such jurisdiction, or an exemption from such qualification
or
registration is available, and will deliver to each potential investor contacted
by it, prior to accepting any subscription from such investor, the Disclosing
Materials. A copy of each subscription document shall be promptly transmitted
to
the Company or its counsel. All information and statements relating to the
Placement Agent provided in writing by the Placement Agent for inclusion in
the
Disclosing Materials will be true and correct in all material respects as of
the
date provided and such statements and information will not be misleading in
any
material respect.
2.
Representations
and Warranties.
For the
benefit of the Placement Agent, the Company hereby incorporates by reference
all
of its representations and warranties as set forth in Section 3 of the
Securities Purchase Agreement with the same force and effect as if specifically
set forth herein.
3. Placement
Agent Appointment and Compensation.
(a) The
Company hereby appoints the Placement Agent as its exclusive agent in connection
with the Offering. The Company acknowledges that the Placement Agent may use
selected dealers and sub-agents to fulfill its agency hereunder provided that
such dealers and sub-agents are compensated solely by the Placement
Agent.
The
Company has not and will not make, or permit to be made, any offers or sales
of
the Notes other than through the Placement Agent without the Placement Agent’s
prior written consent.
The
Placement Agent has no obligation to purchase any of the Notes. The agency
of
the Placement Agent hereunder shall continue until the earlier of the
Termination Date or the Final Closing (as defined in Section 4(c)
hereof).
(b) The
Company will cause to be delivered to the Placement Agent copies of the
Disclosure Materials and has consented, and hereby consents, to the use of
such
copies for the purposes permitted by the Act and applicable securities laws,
and
hereby authorizes the Placement Agent and its agents, employees and selected
dealers to use the Disclosure Materials in connection with the sale of the
Notes
until the earlier of the Termination Date or the Final Closing (unless advised
that the Disclosure Materials may no longer be used, or has been updated or
supplemented), and no other person or entity is or will be authorized to give
any information or make any representations other than those contained in the
Disclosure Materials or to use any offering materials other than those contained
in the Disclosure Materials in connection with the sale of the Notes. The
Company will provide at its own expense such quantities of the Disclosure
Materials and other documents and instruments relating to the Offering as the
Placement Agent may reasonably request.
2
(c) The
Company will cooperate with the Placement Agent by making available to its
representatives such information as may be reasonably requested in making a
reasonable investigation of the Company and its affairs and shall provide access
to such employees as shall be reasonably requested. Prior to the First Closing
(as defined in Section 4(c) hereof), if requested by the Placement Agent, the
Company shall provide, at its own expense, credit or similar reports on such
key
management persons as the Placement Agent shall reasonably request.
(d) Out
of
the proceeds received by it at each Closing (as hereinafter defined), the
Company shall pay to the Placement Agent, at each Closing, a cash placement
fee
equal to ten percent (10%) of the principal amount of Notes purchased by each
investor (an “Investor”) whose subscription is accepted by the Company (the
“Placement Agent’s Fee”). In addition, the Company shall pay all expenses set
forth in Section 5(i) hereof. The Placement Agent’s Fee and the expenses set
forth in Section 5(i) hereof will be deducted from the gross proceeds from
the
sale of the Notes at each Closing. The Placement Agent may direct all such
amounts to be paid directly from the escrow account established pursuant to
Section 4(b) hereof.
(e) As
additional compensation hereunder, at each Closing, the Company shall sell
to
the Placement Agent or its designees, for nominal consideration, warrants
(collectively, the “Agent’s Warrants”) to purchase shares of the Company’s
Common Stock equal to twenty percent (20%) of the shares into which the Notes
sold at such Closing are convertible. The exercise price for the Agent’s
Warrants shall be $1.00 per share. For
clarification purposes, assuming $2 million of Notes are sold at a Closing,
the
Placement Agent shall be entitled to the following Agent’s Warrants:
Total
Gross Principal Amount of Notes Sold:
$2,000,000
20%
of the Shares Underlying the Notes Sold:
800,000
Result:
Placement Agent earns Agent’s Warrant to
purchase
800,000
shares
of Common Stock at an
exercise price of $1.00 per share.
The
Agent’s Warrants shall be exercisable for seven years. Except as provided in
this Agreement, the Agent’s Warrants shall have the same terms, including
anti-dilution and
registration rights, as the warrants issuable to investors
upon the
conversion of the Notes.
In any
event, the Agent’s Warrants shall also contain a cashless exercise provision.
(f) The
Company shall also pay the Placement Agent’s Fee and issue Agent’s Warrants to
the Placement Agent with respect to, and based on, any investment by any third
party contacted by the Placement Agent in connection with the Offering (other
than any
third-party with whom the Company can demonstrate it had a pre-existing
relationship prior to the date of such contact) that
participates in any private placement offering (a “Post-Closing Investor”) which
occurs at any time within one (1) year from the latter of the Final Closing
(other than those parties that participate in the proposed PPO (as defined
in
the Transmittal Letter) in which the Placement Agent is otherwise compensated).
3
(g) At
the
First Closing, the Company shall enter into a non-exclusive Finder's Agreement
(the "Finder's Agreement") with the Placement Agent providing that, during
the
five year period after the earlier of the Termination Date or the Final Closing,
in the event the Placement Agent introduces the Company to a third party (and
such introduction is confirmed in writing to the Company by the Placement Agent)
who may be interested in engaging in a merger, acquisition, joint venture or
any
other business combination with
the
Company, which may include the purchase of some or all of the stock or assets
of
the
Company, the Placement Agent will be paid a finder's fee (the "Finder's Fee")
according to the following table:
|
(a)
|
7%
of the first $1,000,000 or portion thereof of the consideration paid
in
such transaction; plus
|
|
(b)
|
6%
of the next $1,000,000 or portion thereof of the consideration paid
in
such transaction; plus
|
|
(c)
|
5%
of the next $5,000,000 or portion thereof of the consideration paid
in
such transaction; plus
|
|
(d)
|
4%
of the next $1,000,000 or portion thereof of the consideration paid
in
such transaction; plus
|
|
(e)
|
3%
of the next $1,000,000 or portion thereof of the consideration paid
in
such transaction; plus
|
| (f) |
2.5%
of any consideration paid in such transaction in excess of
$9,000,000.
|
Notwithstanding
the foregoing, a Finder's Fee shall not be applicable to (i) any transaction
involving Xxxxxxx Xxxxx and
its
Affiliates (as hereinafter defined) as a principal,
(ii)
any transaction involving a third-party with whom the Company can demonstrate
it
had a pre-existing relationship prior to the date of any proposed introduction
or (iii) the proposed merger with UFood. Any such Finder's Fee due to the
Placement Agent will be paid in cash at the closing of the particular
consummated transaction for which the Finder's Fee is due. For purposes hereof,
“Affiliate”
means,
with respect to any person or entity, another person or entity that, directly
or
indirectly, controls that person or entity. “Control”
or
“controls”
for
purposes hereof means that a person or entity has the power, direct or indirect,
to conduct or govern the policies of another person or entity. Affiliates
shall not include portfolio companies of Xxxxxxx Xxxxx, or other companies
in
which Xxxxxxx Xxxxx has an existing investment unless the element of Control
exists.
4. Subscription
and Closing Procedures.
(a) Each
prospective purchaser will be required to complete and execute the Buyer
Counterpart Signature Page to the Securities Purchase Agreement and the other
questionnaires annexed to the Securities Purchase Agreement which will be
forwarded or delivered to the Placement Agent at the Placement Agent’s offices
at the address set forth in Section 11 hereof, together with the subscriber’s
check or good funds in the full amount of the principal amount of Notes desired
to be purchased.
4
(b) All
funds
for subscriptions received from the Offering will be promptly forwarded by
the
Placement Agent or the Company, if received by it, to and deposited into
non-interest bearing escrow account (the “Escrow Account”) established for such
purpose with Signature Bank (the “Escrow Agent”). All such funds for
subscriptions will be held in the Escrow Account pursuant to the terms of an
escrow agreement among the Company, the Placement Agent and the Escrow Agent,
such agreement to be in form and substance satisfactory to the Company and
the
Placement Agent. The Company will pay all fees related to the establishment
and
maintenance of the Escrow Account, regardless of whether a closing occurs
hereunder. Subject to the receipt of such subscriptions for the Minimum Amount
and the Company’s right to accept or reject subscriptions, in whole or in part,
in its sole discretion, the Company will either accept or reject the
subscription documents in a timely fashion and at each Closing will provide
duplicate copies of such subscription documents to the Placement Agent. The
Company will give written notice to the Placement Agent of its acceptance or
rejection of each subscription. The Company, or the Placement Agent on the
Company’s behalf, will promptly return to subscribers incomplete, improperly
completed, improperly executed and rejected subscriptions and give written
notice thereof to the Placement Agent upon such return and directions to the
Escrow Agent to return any subscription funds received.
(c) If
subscriptions for at least the Minimum Amount have been accepted prior to the
Termination Date, the funds therefor have been collected by the Escrow Agent
and
all of the conditions set forth elsewhere in this Agreement and the Securities
Purchase Agreement have been fulfilled, a closing shall
be
held promptly with respect to the Notes sold (the “First Closing”). Thereafter,
the remaining Notes will continue to be offered and sold until the Termination
Date. Additional closings (each a “Closing”) may from time to time be conducted
at times mutually agreeable by the Company and the Placement Agent with respect
to additional Notes sold with the final closing (the “Final Closing”) to occur
within 10 days after the earlier of the Termination Date or the sale of all
Notes offered. Delivery of payment for the accepted subscriptions for Notes
from
the funds held in the Escrow Account will be made by wire transfer from the
Escrow Agent to the Company at each Closing at the Placement Agent’s offices
against delivery of the Notes by the Company at the address set forth in Section
11 hereof (or at such other place as may be mutually agreed upon between the
Company and the Placement Agent), net of amounts due to the Placement Agent
and
Blue Sky counsel pursuant to Section 5(i) hereof as of such Closing. Executed
certificates for the Notes and the Agent’s Warrants will be in such authorized
denominations and registered in such names as the Placement Agent may request
on
or before the second full business day prior to the date of each Closing
(“Closing Date”), and will be made available to the Placement Agent for review
and packaging at the Placement Agent’s office at least one full business day
prior thereto.
(d) If
subscription documents for the Minimum Amount have not been received and
accepted by the Company on or before the Termination Date for any reason, the
Offering will be terminated, no Notes will be sold, and the Escrow Agent will,
at the request of the Placement Agent, cause all monies received from
subscribers for the Notes to be promptly returned to such subscribers without
interest, deduction or offset.
5
5. Further
Covenants.
The
Company hereby covenants and agrees that:
(a) Except
with the prior written consent of the Placement Agent (which consent shall
not
be unreasonably withheld), the Company shall not, at any time prior to the
Final
Closing, take any action that would cause any of the representations and
warranties made by it in this Agreement not to be materially complete and
correct on and as of each Closing Date with the same force and effect as if
such
representations and warranties had been made on and as of each such Closing
Date
(except for representations and warranties that speak as of a specific
date).
(b) If,
at
any time prior to the Final Closing, any event shall occur that does or may
materially affect the Company or as a result of which it might become necessary
to amend or supplement the Disclosure Materials so that the representations
and
warranties herein remain true, or in case it shall, in the reasonable opinion
of
counsel to the Placement Agent, be necessary to amend or supplement the
Disclosure Materials to comply with Regulation D, Regulation S or any other
applicable securities laws or regulations, the Company will promptly notify
the
Placement Agent and shall, at its sole cost, prepare and furnish to the
Placement Agent copies of appropriate amendments and/or supplements in such
quantities as the Placement Agent may reasonably request. The Company will
not
at any time, whether before or after the Final Closing, prepare or use any
amendment or supplement to the Disclosure Materials of which the Placement
Agent
will not previously have been advised and furnished with a copy, or to which
the
Placement Agent or its counsel will have reasonably objected in writing or
orally (confirmed in writing within 24 hours), or which is not in compliance
in
all material respects with the Act and other applicable securities laws or
regulations. As soon as the Company is advised thereof, the Company will advise
the Placement Agent and its counsel, and confirm the advice in writing, of
any
order preventing or suspending the use of the Disclosure Materials, or the
suspension of the qualification or registration of the Notes for offering or
the
suspension of any exemption for such qualification or registration of the Notes
for offering in any jurisdiction, or of the institution or threatened
institution of any proceedings for any of such purposes, and the Company will
use its commercially reasonable efforts to prevent the issuance of any such
order, judgment or decree, and, if issued, to obtain as soon as reasonably
possible the lifting thereof.
(c) The
Company shall comply with the Act, the Securities and Exchange Act of 1934,
as
amended (the “1934 Act”), and the rules and regulations thereunder, all
applicable state securities laws and the rules and regulations thereunder in
the
states in which the Notes are to be offered and in which the Placement Agent’s
Blue Sky counsel has advised the Placement Agent that the Notes are qualified
or
registered for sale or exempt from such qualification or registration, so as
to
permit the continuance of the sales of the Notes, and will file with the SEC,
and shall promptly thereafter forward to the Placement Agent, any and all
reports on Form D as are required.
(d) The
Company shall use its reasonable best efforts to qualify the Notes for sale
(or
seek exemption therefrom) under the securities laws of such jurisdictions in
the
United States as may be mutually agreed to by the Company and the Placement
Agent, and the Company will make such applications and furnish information
as
may be required for such purposes, provided that in no event shall the Company
be obligated to qualify to do business in any jurisdiction where it is not
now
so qualified or to take any action which would subject it to general service
of
process in any jurisdiction where it is not now subject, and provided further
the Company shall not be required to produce any new disclosure document other
than the Disclosure Materials. The Company will, from time to time, prepare
and
file such statements and reports as are or may be required to continue such
qualifications in effect for so long a period as the Placement Agent may
reasonably request.
6
(e) The
Company shall place a legend on the certificates representing the Notes, the
Agent’s Warrants, the warrants issuable upon conversion of the Notes (the
“Investor Warrants”) and any shares issuable upon conversion of the Notes, the
Investor Warrants or the Agent’s Warrants issued to subscribers and the
Placement Agent stating that the securities evidenced thereby have not been
registered under the Act or applicable state securities laws and setting forth
or referring to the applicable restrictions on transferability and sale of
such
securities under the Act and applicable state securities laws.
(f) The
Company shall apply the net proceeds from the sale of the Notes to make a bridge
loan to KnowFat Franchise Company, Inc. in the principal amount equal to the
gross proceeds of the Offering as described under “Use of Proceeds” in the
Disclosure Materials.
(g) During
the Offering Period, the Company shall afford each prospective purchaser of
Notes the opportunity to ask questions of and receive answers from an officer
of
the Company concerning the terms and conditions of the Offering and the
opportunity to obtain such other additional information necessary to verify
the
accuracy of the Disclosure Materials to the extent it possesses such information
or can acquire it without unreasonable expense or effort.
(h) Except
with the prior written consent of the Placement Agent (which consent shall
not
be unreasonably withheld) or as set forth in the Disclosure Materials, the
Company shall not, at any time prior to the earlier of the Final Closing or
the
Termination Date, engage in or commit to engage in any transaction outside
the
ordinary course of business, including without limitation the incurrence of
material indebtedness, materially change its business or operations as described
in the Disclosure Materials, or issue, agree to issue or set aside for issuance
any securities (debt or equity) or any rights to acquire any such securities
except as shall be contemplated by the Disclosure Materials.
(i) Whether
or not the transactions contemplated hereby are consummated, or this Agreement
is terminated, the Company hereby agrees to pay all fees, costs and expenses
incident hereto and to the Offering, including, without limitation, those in
connection with (i)
preparing, printing, duplicating, filing, distributing and binding the
Disclosure Materials and any and all amendments and/or supplements thereto
and
any and all agreements, contracts and other documents related hereto and
thereto; (ii)
the
creation, authorization, issuance, transfer and delivery of the Notes and the
Agent’s Warrants, including, without limitation, fees and expenses of any
transfer agent or registrar; (iii)
the
fees and expenses of the Escrow Agent; (iv)
all
reasonable fees and expenses of legal, accounting and other advisers to the
Company; (v)
all
reasonable filing fees, costs and legal fees and expenses for Blue Sky services
and related filings with respect to Blue Sky exemptions and qualifications
(the
“Blue Sky Fees”); and (vi) reimbursement of all out-of-pocket expenses
(including, without limitation, reasonable legal fees and expenses, mailing,
telephone, travel, due diligence and similar expenses of the Placement Agent)
incurred by the Placement Agent in connection with the Offering, which expenses
shall not exceed $75,000
in the
aggregate without the prior written approval of the Company.
7
(j) Until
the
earlier of the Final Closing Date and the Termination Date, neither the Company
nor any person or entity acting on its behalf will negotiate or enter into
any
agreement with any other placement agent or underwriter with respect to a
private or public offering of the Company’s or any subsidiary’s debt or equity
securities. Neither the Company nor anyone acting on its behalf will, until
the
earlier of the Final Closing Date and the Termination Date, without the prior
written consent of the Placement Agent, offer for sale to, or solicit offers
to
subscribe for Notes or other securities of the Company from, or otherwise
approach or negotiate in respect thereof with, any other person.
6. Conditions
of Placement Agent’s Obligations.
The
obligations of the Placement Agent hereunder are subject to the fulfillment,
at
or before each Closing, of the following additional conditions, each of which
may be waived in writing by the Placement Agent:
(a) Each
of
the representations and warranties of the Company shall be true and correct
in
all material respects when made on the date hereof and on and as of each Closing
Date as though made on and as of each Closing Date (except for representations
and warranties that speak as of a specific date).
(b) The
Company shall have performed and complied in all material respects with all
agreements, covenants and conditions required to be performed and complied
with
by it under the Disclosure Materials at or before each Closing.
(c) No
order
suspending the use of the Disclosure Materials or enjoining the offering or
sale
of the Notes shall have been issued, and no proceedings for that purpose or
a
similar purpose shall have been initiated and pending, or, to the best of the
Company’s knowledge, are contemplated or threatened.
(d) At
the
First Closing the Company shall have an outstanding capitalization as described
in the Disclosure Materials. All shares of capital stock currently outstanding
are, and all shares which may be issued at the Closing will be upon issuance,
duly authorized, validly issued, fully paid, and non-assessable. At each
Closing, no securities (other than the warrants issued to the Placement Agent
in
connection with the Offering) will be issuable upon the exercise of warrants
or
options, without the written authorization of the Placement Agent, except (i)
those warrants and options as set forth in the Disclosure Materials and (ii)
those issued in prior Closings of the sale of Notes pursuant to the
Offering.
(e) The
Placement Agent shall have received certificates of the Chief Executive Officer
of the Company, dated as of each Closing Date, certifying on behalf of the
Company, in such detail as Placement Agent may reasonably request, as to the
fulfillment of the conditions set forth in subparagraphs (a), (b), (c) and
(d)
above.
8
(f) The
Company shall have delivered to the Placement Agent (i)
a
currently dated good standing certificate from the Secretary of State of Nevada
and each jurisdiction in which the Company is qualified to do business as a
foreign corporation (if any), and (ii)
certified resolutions of the Company’s Board of Directors approving this
Agreement and the other Disclosure Materials , and the transactions and
agreements contemplated by this Agreement and the other Disclosure Materials
.
(g) At
each
Closing, an authorized officer of the Company shall have provided a certificate
to the Placement Agent confirming on behalf of the Company that there have
been
no undisclosed material and adverse changes in the business condition (financial
or otherwise) of the Company from the date of the Disclosure Materials, the
absence of undisclosed liabilities (other than liabilities arising in the
ordinary course of business) and such other matters relating to the financial
condition of the Company that the Placement Agent may reasonably
request.
(h) At
each
Closing, the Company shall have (i)
paid to
the Placement Agent the Placement Agent’s Fee in respect of all Notes sold at
such Closing, (ii)
paid
all fees, costs and expenses set forth in Section 5(i) hereof, and (iii)
executed and delivered to the Placement Agent the Agent’s Warrants in an amount
proportional to the Notes sold at such Closing.
(i) There
shall have been delivered to the Placement Agent a signed opinion of counsel
to
the Company (“Company Counsel”), dated as of each Closing Date, in the form
agreed upon prior to the Closing.
(j) All
proceedings taken at or prior to each Closing in connection with the
authorization, issuance and sale of the Notes and the Agent’s Warrants will be
reasonably satisfactory in form and substance to the Placement Agent and its
counsel, and such counsel shall have been furnished with all such documents,
certificates and opinions as they may reasonably request upon reasonable prior
notice in connection with the transactions contemplated hereby.
6A.
Mutual
Condition.
The
obligations of the Placement Agent and the Company hereunder are subject to
the
execution by the investors of the Securities Purchase Agreement and related
questionnaires in form and substance reasonably acceptable to the Placement
Agent and the Company.
9
7. Indemnification.
(a) The
Company will (i)
indemnify and hold harmless the Placement Agent, its selected dealers and their
respective officers, directors, employees, attorneys and each person, if any,
who controls the Placement Agent within the meaning of the Act and such selected
dealers (each an “Indemnitee”) against, and pay or reimburse each Indemnitee
for, any and all losses, claims, damages, liabilities or expenses whatsoever
(or
actions or proceedings or investigations in respect thereof), joint or several
(which will, for all purposes of this Agreement, include, but not be limited
to,
all reasonable costs of defense and investigation and all reasonable attorneys’
fees, including appeals), to which any Indemnitee may become subject, under
the
Act or otherwise, in connection with the offer and sale of the Notes, whether
such losses, claims, damages, liabilities or expenses shall result from any
claim of any Indemnitee or any third party; and (ii)
reimburse each Indemnitee for any legal or other expenses reasonably incurred
in
connection with investigating or defending against any such loss, claim, action,
proceeding or investigation; provided,
however,
that
the Company will not be liable in any such case to the extent that any such
claim, damage or liability is
found
by a court of competent jurisdiction in a final judgment to have resulted
primarily from
(A)
an untrue statement or alleged untrue statement of a material fact made in
the
Disclosure Materials, or an omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in reliance upon and in conformity with written
information furnished to the Company by the
Placement Agent
or any
such controlling persons specifically for use in the preparation thereof, (B)
any violations by the Placement
Agent of
the Act
or state securities laws which does not result from a violation thereof or
a
breach hereof by the Company or any of its affiliates, (C) any violation of
Blue
Sky filing requirements or (D) fraud, willful misconduct or gross negligence
of
the Placement
Agent.
In
addition to the foregoing agreement to indemnify and reimburse, the Company
will
indemnify and hold harmless each Indemnitee against any and all losses, claims,
damages, liabilities or expenses whatsoever (or actions or proceedings or
investigations in respect thereof), joint or several (which shall for all
purposes of this Agreement, include, but not be limited to, all reasonable
costs
of defense and investigation and all reasonable attorneys’ fees, including
appeals) to which any Indemnitee may become subject insofar as such costs,
expenses, losses, claims, damages or liabilities arise out of or are based
upon
the claim of any person or entity that he or it is entitled to broker’s or
finder’s fees from any Indemnitee in connection with the Offering.
(b) The
Placement Agent will indemnify and hold harmless the Company, its officers,
directors, employees, attorneys and each person, if any, who controls the
Company within the meaning of the Act against, and pay or reimburse any such
person for, any and all losses, claims, damages or liabilities or expenses
whatsoever (or actions, proceedings or investigations in respect thereof),
joint
or several, to which the Company or any such person may become subject under
the
Act or otherwise, whether such losses, claims, damages, liabilities or expenses
(or actions, proceedings or investigations in respect thereof) shall result
from
any claim of the Company, any of its officers, directors, employees, agents,
any
person who controls the Company within the meaning of the Act or any third
party, insofar as such losses, claims, damages or liabilities are based upon
any
untrue statement or alleged untrue statement of any material fact contained
in
the Disclosure Materials but only with reference to information contained in
the
Disclosure Materials relating to the Placement Agent, or an omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, if made or omitted
in
reliance upon and in conformity with written information furnished to the
Company by the Placement Agent or any such controlling persons, specifically
for
use in the preparation thereof. The Placement Agent will reimburse the Company
or any such person for any legal or other expenses reasonably incurred in
connection with investigating or defending against any such loss, claim, damage,
liability or action, proceeding or investigation to which such indemnity
obligation applies, including appeals. Notwithstanding the foregoing, in no
event shall the Placement Agent’s indemnification obligation hereunder exceed
the amount of the fees payable to it hereunder.
10
(c) Promptly
after receipt by an indemnified party under this Section 7 of notice of the
commencement of any action, claim, proceeding or investigation (“Action”), such
indemnified party, if a claim in respect thereof is to be made against the
indemnifying party under this Section 7, will notify the indemnifying party
of
the commencement thereof, but the omission to so notify the indemnifying party
will not relieve it from any liability which it may have to any indemnified
party under this Section 7 unless the indemnifying party has been substantially
prejudiced by such omission. The indemnifying party will be entitled to
participate in, and, to the extent that it may wish, jointly with any other
indemnifying party, to assume the defense thereof subject to the provisions
herein stated, with counsel reasonably satisfactory to such indemnified party.
The indemnified party will have the right to employ separate counsel in any
such
Action and to participate in the defense thereof, but the fees and expenses
of
such counsel will not be at the expense of the indemnifying party if the
indemnifying party has assumed the defense of the Action with counsel reasonably
satisfactory to the indemnified party; provided, however,
that if
the indemnified party shall be requested by the indemnifying party to
participate in the defense thereof or shall have concluded in good faith and
specifically notified the indemnifying party either that there may be specific
defenses available to it which are different from or additional to those
available to the indemnifying party or that such Action involves or could have
a
material adverse effect upon it with respect to matters beyond the scope of
the
indemnity agreements contained in this Agreement, then the counsel representing
it, to the extent made necessary by such defenses, shall have the right to
direct such defenses of such Action on its behalf and in such case the
reasonable fees and expenses of such counsel in connection with any such
participation or defenses shall be paid by the indemnifying party. No settlement
of any Action against an indemnified party will be made without the consent
of
the indemnifying party and the indemnified party, which consent shall not be
unreasonably withheld or delayed in light of all factors of importance to such
party and no indemnifying party shall be liable to indemnify any person for
any
settlement of any such claim effected without such indemnifying party’s
consent.
8. Contribution.
To
provide for just and equitable contribution, if (i)
an
indemnified party makes a claim for indemnification pursuant to Section 7 hereof
and it is finally determined, by a judgment, order or decree not subject to
further appeal that such claims for indemnification may not be enforced, even
though this Agreement expressly provides for indemnification in such case;
or
(ii)
any
indemnified or indemnifying party seeks contribution under the Act, the 1934
Act, or otherwise, then each indemnifying party shall contribute to such amount
paid or payable by such indemnified party in such proportion as is appropriate
to reflect not only such relative benefits but also the relative fault of the
Company on the one hand and the Placement Agent on the other in connection
with
the statements or omissions which resulted in such losses, claims, damages,
liabilities or expenses (or actions in respect thereof), as well as any other
relevant equitable considerations. The relative benefits received by the Company
on the one hand and the Placement Agent on the other shall be deemed to be
in
the same proportion as the total net proceeds from the Offering (before
deducting expenses) received by the Company bear to the total commissions and
fees received by the Placement Agent. The relative fault, in the case of an
untrue statement, alleged untrue statement, omission or alleged omission will
be
determined by, among other things, whether such statement, alleged statement,
omission or alleged omission relates to information supplied by the Company
or
by the Placement Agent, and the parties’ relative intent, knowledge, access to
information and opportunity to correct or prevent such statement, alleged
statement, omission or alleged omission. The Company and the Placement Agent
agree that it would be unjust and inequitable if the respective obligations
of
the Company and the Placement Agent for contribution were determined by
pro rata
allocation of the aggregate losses, liabilities, claims, damages and expenses
or
by any other method or allocation that does not reflect the equitable
considerations referred to in this Section 8. No person guilty of a fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) will be
entitled to contribution from any person who is not guilty of such fraudulent
misrepresentation. For purposes of this Section 8, each person, if any, who
controls the Placement Agent within the meaning of the Act will have the same
rights to contribution as the Placement Agent, and each person, if any, who
controls the Company within the meaning of the Act will have the same rights
to
contribution as the Company, subject in each case to the provisions of this
Section 8. Anything in this Section 8 to the contrary notwithstanding, no party
will be liable for contribution with respect to the settlement of any claim
or
action effected without its written consent. This Section 8 is intended to
supersede, to the extent permitted by law, any right to contribution under
the
Act, the 1934 Act or otherwise available.
11
9. Termination.
(a) The
Offering may be terminated by the Placement Agent at any time prior to the
expiration of the Offering Period in the event that (i)
any of
the representations or warranties of the Company contained herein shall prove
to
have been false or misleading in any material respect when made or deemed made,
(ii)
the
Company shall have failed to perform any of its material obligations hereunder,
(iii)
the
Company shall have determined for any reason not to continue with the Offering
or (iv)
the
Placement Agent shall determine in its sole discretion that it is reasonably
likely that any of the conditions to Closing set forth herein will not, or
cannot, be satisfied. In the event of any such termination occasioned by or
arising out of or in connection with the matters set forth in clauses (i)-(iii)
above, or occasioned by or arising out of or in connection with a matter set
forth in clause (iv) above due to any breach hereunder on the part of the
Company, the Placement Agent shall be entitled to receive, in addition to other
rights and remedies it may have hereunder, at law or otherwise, an amount equal
to the sum of: (A) all Placement Agent’s Fees earned through the Termination
Date, provided
that,
in no
event shall the Company’s obligation for such
fees
exceed
the amount of proceeds actually received by it in the Offering,
(B) reimbursement
for all reasonable costs and expenses incurred by the Placement Agent through
the date of such termination; provided,
however,
that
such costs and expenses shall not exceed the sum of $75,000, and
all
unpaid Blue Sky Fees and other expenses set forth in Section 5(i)
hereof,
(C)
all
amounts that may become payable in
respect of Post-Closing Investors pursuant
to Section 3(f)
hereof, and (D) all amounts that may become payable pursuant to Section 3(g)
hereof. In addition to the sum of the amounts in clauses (A)-(D) in the previous
sentence, in the event that (a) the Company is sold (in a stock or asset sale),
merged or otherwise acquired or combined, or (b) the Company enters into a
letter of intent or agreement with respect to the foregoing, or (c) the Company
completes a public or private offering of its securities, in each case within
six months after the Offering is terminated because the Company has breached
any
representation, warranty or covenant made by it herein or because the Company
has determined prior to the Expiration Date (if applicable) not to proceed
with
the Offering, the Company shall pay to the Placement Agent an investment banking
fee equal to three percent (3%) of the total consideration received by the
Company and/or its stockholders in connection with such sale, merger,
acquisition or sale of securities.
(b) This
Offering may be terminated by the Company at any time prior to the Termination
Date in the event that (i)
the
Placement Agent shall have failed to perform any of its material obligations
hereunder or (ii)
there
shall occur any event described in Section 9(a) hereof not occasioned by or
arising out of or in connection with any breach or failure hereunder on the
part
of the Company. It is understood and agreed that the foregoing termination
right
is not available to the Company prior to the initial Closing in the event the
Placement Agent is using its good faith efforts to market the Offering.
12
(c) Upon
any
such termination, the Company and the Placement Agent shall cooperate to ensure
that all money in the Escrow Account received in respect of subscriptions for
Notes not accepted by the Company are promptly returned to such subscribers
without interest or offset.
10. Survival.
(a) The
obligations of the parties to pay any costs and expenses hereunder and to
provide indemnification and contribution as provided herein shall survive any
termination hereunder.
(b) The
respective indemnities, agreements, representations, warranties and other
statements of the Company set forth in or made pursuant to this Agreement will
remain in full force and effect, regardless of any investigation made by or
on
behalf of, and regardless of any access to information by, the Company or the
Placement Agent, or any of their officers or directors or any controlling person
thereof, and will survive the sale of the Notes.
11. Notices.
All
communications hereunder will be in writing and, except as otherwise expressly
provided herein or after notice by one party to the other of a change of
address, if sent to the Placement Agent, will be mailed, delivered or faxed
and
confirmed to Xxxxxxx Xxxxx Ventures, Inc., 000 Xxxxxxx Xxxxxx, 00xx Xxxxx,
Xxx
Xxxx, Xxx Xxxx 00000, Attention: Xxxxxxx X. Xxxxxxxxx, fax number (000)
000-0000, with a copy to Xxxxxxx Xxxxxx LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx
Xxxx 00000, Attention: Xxxxxxxx X. Xxxxxxx, Esq., fax number (000) 000-0000,
and
if sent to the Company, will be mailed or delivered and confirmed to UFood
Franchise Company, 00000-00xx
Xxxxxx,
Xxxxxx, Xxxxxxx Xxxxxxxx X0X 0X0, Xxxxxx Attention: Xxxxx Xxxx, Chief Executive
Officer, with a copy to Gottbetter & Partners, LLP, 000 Xxxxxxx Xxx.,
00xx
Xxxxx,
Xxx Xxxx, XX 00000-0000, Attention: Xxxx Xxxxxxxxxx, Esq., fax number (000)
000-0000.
12.
ARBITRATION,
CHOICE OF LAW; COSTS.
THE PARTIES HERETO AGREE TO SUBMIT ALL CONTROVERSIES TO ARBITRATION IN
ACCORDANCE WITH THE PROVISIONS SET FORTH BELOW AND UNDERSTAND THAT (A)
ARBITRATION IS FINAL AND BINDING ON THE PARTIES, (B) THE PARTIES ARE WAIVING
THEIR RIGHTS TO SEEK REMEDIES IN COURT, INCLUDING THE RIGHT TO A JURY TRIAL,
(C)
PRE-ARBITRATION DISCOVERY IS GENERALLY MORE LIMITED AND DIFFERENT FROM COURT
PROCEEDINGS, (D) THE ARBITRATOR'S AWARD IS NOT REQUIRED TO INCLUDE FACTUAL
FINDINGS OR LEGAL REASONING AND ANY PARTY'S RIGHT TO APPEAL OR TO SEEK
MODIFICATION OF RULES BY ARBITRATORS IS STRICTLY LIMITED, (E) THE PANEL OF
NASD
ARBITRATORS WILL TYPICALLY INCLUDE A MINORITY OF ARBITRATORS WHO WERE OR ARE
AFFILIATED WITH THE SECURITIES INDUSTRY, AND (F) ALL CONTROVERSIES WHICH MAY
ARISE BETWEEN THE PARTIES CONCERNING THIS AGREEMENT SHALL BE DETERMINED BY
ARBITRATION PURSUANT TO THE RULES THEN PERTAINING TO THE NASD. JUDGMENT ON
ANY
AWARD OF ANY SUCH ARBITRATION MAY BE ENTERED IN THE SUPREME COURT OF THE STATE
OF NEW YORK, COUNTY OF NEW YORK OR IN ANY OTHER COURT HAVING JURISDICTION OVER
THE PERSON OR PERSONS AGAINST WHOM SUCH AWARD IS RENDERED. THE PARTIES AGREE
THAT THE DETERMINATION OF THE ARBITRATORS SHALL BE BINDING AND CONCLUSIVE UPON
THEM. THE PREVAILING PARTY, AS DETERMINED BY SUCH ARBITRATORS, IN A LEGAL
PROCEEDING SHALL BE ENTITLED TO COLLECT ANY COSTS, DISBURSEMENTS AND REASONABLE
ATTORNEY'S FEES FROM THE OTHER PARTY.
13
13. Confidentiality.
(a) The
Company hereby agrees to hold confidential the identities of the purchasers
in
the Offering and shall not disclose their names and addresses without the prior
written consent of the Placement Agent, unless required by law. Notwithstanding
the foregoing, the Company shall not be deemed to be in violation of this
Section 13 by virtue of revealing the identities of such purchasers to the
Company’s transfer agent and professional advisors or in connection with any
registration statement.
(b) The
Placement Agent acknowledges that the securities laws prohibit the Company
and
the Placement Agent from disclosing material, non-public information to selected
persons unless the Company discloses such information publicly or discloses
such
information on a confidential basis. The Placement Agent hereby agrees with
the
Company (i) to maintain in confidence any material, non-public information
disclosed to the Placement Agent with respect to the Company, (ii) to use such
information only in connection with the provisions of services to the Company
hereunder, and (iii) to comply with applicable securities laws with respect
to
such information. The Placement Agent agrees to keep confidential during the
Offering Period, and for one
(1)
year
after
the expiration or any termination, of this Agreement, all material nonpublic
information provided to it by the Company or its advisors, except as required
by
law. Notwithstanding any provision herein to the contrary, the Placement Agent
may disclose nonpublic information to its affiliates, agents and advisors
whenever it determines that such disclosure is necessary to provide the services
contemplated hereunder, provided that it advises such persons of the obligation
to maintain the confidentiality of such information.
(c) Each
party hereby consents to the granting of an injunction against it by any court
of competent jurisdiction to enjoin it from violating the foregoing
confidentiality provisions. Each party hereby agrees that the other party will
not have an adequate remedy at law in the event that the breaching party
breaches these confidentiality provisions contained herein, and that the
non-breaching party will suffer irreparable damage and injury as a result of
any
such breach. Resort to such equitable relief shall not, however, be construed
to
be a waiver of any other rights or remedies which the non-breaching party may
have.
14. Miscellaneous.
No
provision of this Agreement may be changed or terminated except by a writing
signed by the party or parties to be charged therewith. Unless expressly so
provided, no party to this Agreement will be liable for the performance of
any
other party’s obligations hereunder. Any party hereto may waive compliance by
the other with any of the terms, provisions and conditions set forth herein;
provided,
however,
that
any such waiver shall be in writing specifically setting forth those provisions
waived thereby. No such waiver shall be deemed to constitute or imply waiver
of
any other term, provision or condition of this Agreement. If any provision
of
this Agreement is determined to be invalid or unenforceable in any respect,
such
determination shall not affect in any other respect, and the remainder of this
Agreement shall remain in full force and effect.
14
15. Entire
Agreement.
This
Agreement together with any other agreement referred to herein contains the
entire agreement between the parties hereto and is intended to supersede any
and
all prior agreements between the parties with respect to the subject matter
hereof.
16. Counterparts;
Facsimile Signatures.
This
Agreement may be executed in any number of counterparts, each of which shall
be
deemed to be an original, and all of which together shall constitute one and
the
same document. This Agreement may be executed by facsimile
signatures.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
15
If
the
foregoing is in accordance with your understanding of our agreement, kindly
sign
and return this Agreement, whereupon it will become a binding agreement between
the Company and the Placement Agent in accordance with its terms.
|
Very
truly yours,
|
|
|
UFOOD
FRANCHISE COMPANY
|
|
|
By:
|
|
|
|
Name:
Xxxxx Xxxx
|
|
Title:
Chief Executive Officer
|
|
|
Accepted
and agreed to as of the
24th
day of August, 2007.
|
|
|
XXXXXXX
XXXXX VENTURES, INC.
|
|
|
By:
|
|
|
Name:
Xxxxxxx X. Xxxxxxxxx
|
|
|
Title:
President
|
|
The
undersigned agrees to be a primary obligor with respect to any sections
contained herein with respect to the Company’s obligation to pay or reimburse
expenses to the Placement Agent including, without limitation Section 5(i)
and
9(a) hereto. The undersigned also agrees to the provisions of Sections 3(f)
and
3(g) contained herein.
|
By:
|
|
|
Name:
|
|
|
Title:
|
|
