Exhibit 10.3
GLOBALINK, INC.
AGENCY AGREEMENT
October 15, 1997
▇.▇. ▇▇▇▇▇▇▇▇ & Co., Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇▇ ▇▇▇▇, ▇.▇. ▇▇▇▇▇-▇▇▇▇
Gentlemen:
Globalink, Inc., a Delaware corporation ("Company"), proposes
to offer for sale in a private placement ("Offering"), units ("Units")
aggregating a minimum of $750,000 and a maximum of $1,000,000 of gross proceeds
to the Company. Each Unit consists of one share of common stock, $.01 par value
("Common Stock"), and one Common Stock Purchase Warrant ("Warrant"). The
per-Unit offering price ("Offering Price") will be the lower of $1.375 or 85% of
the average of the closing bid price of the Common Stock on the ten consecutive
business days ending three business days prior to the initial closing of the
Offering ("Closing"). Each Warrant will entitle the holder thereof to purchase
one share of Common Stock during the five-year period commencing on the Closing,
at an exercise price equal to 127.27% of the per-Unit Offering Price. The
Warrant will be issued in the form of Exhibit A ("Warrant Certificate") to the
Offering Documents (as hereinafter defined). No fractional Units will be issued;
instead, the Company will round up to the nearest whole number of Units, at no
additional cost to the investor. The Units will be offered on a "best efforts,
$750,000 minimum, $1,000,000 maximum" basis, in accordance with Section 4(2)
and/or 3(b) of the Securities Act of 1933, as amended ("Securities Act"), and
Rules 501-506 of Regulation D ("Reg D") promulgated thereunder, only to
"accredited investors," as defined in Reg D. The minimum subscription amount
will be $100,000, but subscriptions for amounts less than $100,000 may be
accepted at the discretion of the Placement Agent (as defined hereinafter) and
the Company.
The Units, Common Stock and Warrants have the terms and
conditions reflected in the Company's Confidential Private Placement Memorandum
dated October 15, 1997 to be delivered to each subscriber of Units ("PPM"). The
PPM, together with all exhibits thereto, including, but not limited to, the form
of Common Stock Purchase Warrant, form of Subscription Agreement to be executed
by each purchaser and the Company, the Company's Annual Report on Form 10-KSB
for the year ended December 31, 1996, the Company's Quarterly Report on Form
10-QSB for the quarter ended June 30, 1997 and the Company's Forms 8-K filed on
March 21, 1997 and April 7, 1997, will be referred to herein as the "Offering
Documents. "▇.▇. ▇▇▇▇▇▇▇▇ & Co., Inc. is sometimes referred to herein as "MHM"
or the "Placement Agent."
1
1. Appointment of Placement Agent; The Offering Period.
1.1 Appointment of Placement Agent. You are hereby appointed exclusive
Placement Agent of the Company during the offering period herein specified
("Offering Period") for the purpose of assisting the Company in placing the
Units with purchasers who are qualified accredited investors ("Subscribers").
You hereby accept such agency and agree to assist the Company in placing Units
with the Subscribers. Your agency hereunder is not terminable by the Company
except upon termination of the Offering or breach by you of your material
obligations hereunder.
2
1.2 Offering Period. The Offering Period shall commence on the day the
Offering Documents are first made available to you by the Company and shall
continue until October 31, 1997; provided, however, that the Offering Period may
be extended for an additional period through November 30, 1997 by the mutual
decision of the Company and the Placement Agent, without notice to any
Subscriber. If, at any time during the Offering Period, subscriptions for not
less than $750,000 have been received and accepted by the Company (and funds in
payment therefor have cleared the banking system), then, upon the mutual consent
of the Company and the Placement Agent, a Closing shall take place with respect
to such accepted subscriptions. If subscriptions for at least $1,000,000 are not
received and accepted (and funds in payment therefor cleared) prior to the end
of the Offering Period (including any extension thereof), the Offering will be
terminated and all funds received from Subscribers will be returned, without
interest and without any deduction. The day that the Offering Period terminates
is hereinafter referred to as the "Termination Date."
1.3 Offering Documents. The Company will provide the Placement Agent
with a sufficient number of copies of the Offering Documents for delivery to
potential Subscribers and such other information, documents and instruments
which the Placement Agent may reasonably request in order to comply with the
rules, regulations and judicial and administrative interpretations respecting
compliance with applicable state and federal statutes related to the Offering.
1.4 Segregation of Funds. Each subscriber for Units shall tender to the
Placement Agent a check payable to "▇.▇. ▇▇▇▇▇▇▇▇ & Co., Inc. -- Globalink
Special Account" in the amount of the investment subscribed for, which funds
shall be held by the Placement Agent in a segregated non-interest bearing bank
account in accordance with Rules 10b-9 and 15c2-4 promulgated under the
Securities Exchange Act of 1934 ("Exchange Act"), as set forth in the Offering
Documents.
1.5 No Firm Commitment. The Company understands and acknowledges that
the undertaking by the Placement Agent pursuant to this Agreement is not a "firm
commitment" offering, and the Placement Agent is not obligated in any way to
purchase or sell the Units offered hereby.
2. Representations and Warranties of the Company. The Company hereby
represents and warrants as follows:
2.1 Due Incorporation and Qualification. The Company has been duly
incorporated, is validly existing and is in good standing under the laws of its
state of incorporation and is duly qualified as a foreign corporation for the
transaction of business and is in good standing in each jurisdiction in which
the ownership or leasing of its properties or the conduct of its business
requires such quali fication, except where the failure to so qualify would not
have a material adverse effect on the business of the Company and its
subsidiaries ("Subsidiaries") taken as a whole. The Company has all requisite
corporate power and authority necessary to own or hold its properties and
conduct its business as described in the Offering Documents.
2.2 Authorized Capital. The Company is authorized to issue (i)
20,000,000 shares of Common Stock, of which 8,432,962 shares are currently
issued and outstanding and (ii) 250,000 shares of preferred stock, of which
26,771 shares of Series A-2 8% convertible redeemable preferred are currently
issued and outstanding ("Preferred Stock"). All of the outstanding securities of
the Company have been duly and validly authorized and issued and are fully paid
and non-assessable. None of the holders of such securities is subject to
personal liability solely by reason of being such a holder. The offers and sales
of such outstanding securities were at all relevant times either registered
under the Securities Act and the applicable state securities or Blue Sky laws or
exempt from such registration. The Company has reserved for issuance a
sufficient number of shares of Common Stock to be issued to the Subscribers and
upon the exercise of the Warrants as set forth in the Warrant Certificate
("Warrant Shares") and to be issued pursuant to the Placement Agent Options (as
herein defined) and the Warrants underlying the Placement Agent Options.
3
2.3 No Preemptive Rights; Options; Registration Rights. Except as set
forth on Schedule 2.3, there are no preemptive or other rights to subscribe for
or purchase, or any restriction upon the voting or transfer of, any shares of
Common Stock or other securities of the Company, under the Certificate of
Incorporation or By-Laws of the Company or under any agreement or other
outstanding instrument to which the Company is a party or by which it is bound.
Except as set forth on Schedule 2.3, the Company does not have outstanding any
option, warrant, convertible security, or other right permitting or requiring it
to issue, or otherwise to purchase or convert any obligation into, shares of
Common Stock or other securities of the Company and the Company has not agreed
to issue or sell any shares of Common Stock or other securities of the Company.
Except as set forth on Schedule 2.3, no holder of any of the Company's
securities has any rights, "demand," piggyback" or otherwise, to have such
securities registered or to demand the filing of a registration statement.
2.4 Financial Statements. The financial statements of the Company
included in the Offering Documents ("Financials") fairly present the financial
position and results of operations of the Company at the dates thereof and for
the periods covered thereby, subject, in the case of interim periods, to
year-end adjustments and normal recurring accruals. The Company has no material
liabilities or obligations, contingent, direct, indirect or otherwise except (i)
as set forth in the latest balance sheet included in the Financials (the date of
such Financials being referred to as the "Balance Sheet Date"), (ii) those
incurred in the ordinary course of business since the Balance Sheet Date and
(iii) as set forth on Schedule 2.4. Schedule 2.4 also sets forth all outstanding
amounts due to or from any officers, directors or shareholders of the Company,
or to any of their respective affiliates, including, but not limited to, accrued
salaries, loans, etc.
2.5 No Material Adverse Changes. Except as otherwise stated in the
Offering Documents, since the Balance Sheet Date, there has not been any change
in the condition, financial or otherwise, of the Company which could materially
adversely affect its ability to conduct its operations as described in the
Offering Documents.
2.6 Subsidiaries. Except for the Subsidiaries set forth in Schedule
2.6, the Company has no subsidiaries and has no interest in, shares of capital
stock of or right to acquire an interest in or shares of capital stock of any
other corporation, limited liability company, partnership or other entity. The
Company owns the outstanding capital stock of the subsidiaries as set forth in
Schedule 2.6 free and clear of all liens, charges and encumbrances of any kind
whatsoever, and there are no outstanding rights to acquire, or directly or
indirectly control the vote or transfer of, any of the capital stock of the
Subsidiaries.
2.7 Taxes. The Company has filed all federal tax returns and all state
and municipal and local tax returns (whether relating to income, sales,
franchise, withholding, real or personal property or other types of taxes)
required to be filed under the laws of the United States and applicable states,
and has paid in full all taxes which have become due pursuant to such returns or
claimed to be due by any taxing authority or otherwise due and owing; provided,
however, that the Company has not paid any tax, assessment, charge, levy or
license fee that it is contesting in good faith and by proper proceedings and
adequate reserves for the accrual of same are maintained if required by
generally accepted accounting principles. Each of the tax returns heretofore
filed by the Company correctly and accurately reflects the amount of its tax
liability thereunder. The Company has withheld, collected and paid all levies,
assessments, license fees and taxes to the extent required. As used herein,
"tax" or "taxes" include all taxes, charges, fees, levies or other assessments
imposed by any Federal, state, local, or foreign taxing authority, including,
without limitation, income, premium, recapture, credit, excise, property, sales,
use, occupation, service, service use, leasing, leasing use, value added,
transfer, payroll, employment, license, stamp, franchise or similar taxes
(including any interest earned thereon or penalties or additions attributable
thereto).
4
2.8 Finder's Fees; Other Underwriters. The Company is not obligated to
pay a finder's fee to anyone in connection with the introduction of the Company
to the Placement Agent or the con summation of the Offering contemplated
hereunder. The Company does not owe any monies or other obligations to any NASD
member, associate or affiliate.
2.9 No Pending Actions. Except as set forth in the Offering Documents,
there are no actions, suits, proceedings, claims or hearings of any kind or
nature existing or pending (or, to the best knowledge of the Company,
threatened) or, to the best knowledge of the Company, any investigations or
inquiries, before or by any court, or other governmental authority, tribunal or
instrumentality (or, to the Company's best knowledge, any state of facts which
would give rise thereto), pending or threatened against the Company, or
involving the properties of the Company, which might result in any material
adverse change in the business, properties, financial position or results of
operations of the Company, or which might adversely affect the transactions or
other acts contemplated by this Agreement or the validity or enforceability of
this Agreement.
2.10 Private Offering Exemption; Offering Documents. The Offering
Documents conform in all material respects with the requirements of Section 4(2)
and/or 3(b) of the Securities Act and Rules 501-506 of Reg D and with the
requirements of all other applicable rules and regulations of the Securities and
Exchange Commission ("Commission") currently in effect relating to "private
offerings." The Offering Documents contain all material statements which are
required to be stated therein in accordance with such requirements and do not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading. The
Warrants and Placement Agent Options conform to the descriptions thereof
contained in the Offering Documents. When any exhibit to the PPM that was
required to be filed with the Commission, was filed with the Commission pursuant
to the Exchange Act or the Regulations promulgated thereunder or other
applicable law, such exhibit complied in all material respects with the
applicable provisions of the Exchange Act and the Regulations promulgated
thereunder or other applicable law and did not contain an untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. Assuming that (i) a
proper Form D is filed in accordance with Rule 503 of Reg D, (ii) the offer and
the sale of the Units by the Placement Agent was made in compliance with Rule
502(c) of Reg D and/or Section 4(2) of the Securities Act, and (iii) the
representations of the Subscribers in the Subscription Agreements signed by them
are true and correct (which facts will not be independently verified by the
Company) the sale of Units in the Offering is exempt from registration under the
Securities Act and is in compliance with Reg D.
2.11 Due Authorization; Consents. The Company has full right, power and
authority to enter into this Agreement and the Warrants, the Subscription
Agreements, the Placement Agent Options and the Merger & Acquisition Agreement
to be entered into between the Company and the Subscribers and the Placement
Agent, as the case may be, (collectively the "Offering Agreements") and to
perform all of its obligations hereunder and thereunder. The execution and
delivery of this Agreement and the Offering Agreements has been duly authorized
by all necessary corporate action and no further corporate action or approval is
or will be required for their respective execution, delivery and performance.
This Agreement constitutes, and the Offering Agreements upon execution and
delivery will constitute, valid and binding obligations of the Company,
enforceable in accordance with their respective terms (except (i) as the
enforceability thereof may be limited by bankruptcy or other laws now or
hereafter in effect relating to or affecting creditors' rights generally, (ii)
that the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion of
the court before which any proceedings therefor may be brought, and (iii) that
the enforceability of the indemnification and contribution provisions of the
respective agreements may be limited by the federal and state securities laws
and public policy), and no consent, approval, authorization, order of, or filing
with, any court or governmental authority or any other third
5
party is required to consummate the transactions contemplated by this Agreement
or the Offering Documents, except that the offer and sale of the Units in
certain jurisdictions may be subject to the provisions of the securities or Blue
Sky laws of such jurisdictions and final action may have to be taken with
respect to the listing of the Common Stock underlying the Units, the Warrant
Shares and the Common Stock underlying the Placement Agent Options and the
Warrants underlying the Placement Agent Options.
2.12 Non-Contravention. The Company's execution and delivery of this
Agreement and the Offering Agreements and the incurrence of the obligations
herein and therein set forth, and the consummation of the transactions
contemplated herein and therein will not (i) conflict with, or constitute a
breach of, or a default under, the Certificate of Incorporation or By-Laws of
the Company, or any contract, lease or other agreement or instrument to which
the Company is a party or in which the Company has a beneficial interest or by
which the Company is bound; (ii) violate any existing applicable law, rule or
regulation, or any judgment, order or decree of any governmental agency or
court, domestic or foreign, having jurisdiction over the Company or any of its
properties or business (collectively, "Laws"), except where such violation(s)
would not have a material adverse effect, singly or in the aggregate, on the
Company; or (iii) have any material adverse effect on any permit, certification,
registration, approval, consent, license or franchise (collectively, "Permits")
necessary for the Company to own or lease and operate any of its properties or
to conduct its business.
2.13 Shares and Warrants. The shares of Common Stock included in the
Units, the Warrant Shares and the shares of Common Stock underlying the
Placement Agent Options and the Warrants issuable thereunder have been duly and
validly authorized and, when issued and delivered in accordance with the terms
of the Subscription Agreements, the Warrants and Placement Agent Options, as the
case may be, will be duly and validly issued, fully paid and non-assessable. The
holders of the shares of Common Stock included in the Units and Warrant Shares
and the shares of Common Stock underlying the Placement Agent Options and the
Warrants issuable thereunder will not be subject to personal liability by reason
of being such holders and will not be subject to the preemptive rights of any
holders of any security of the Company or similar contractual rights granted by
the Company. All corporate action required to be taken for the authorization,
issuance and sale of the Common Stock, included in the Units, the Warrant Shares
and the shares of Common Stock underlying the Placement Agent Options and the
Warrants issuable thereunder have been duly and validly taken.
2.14 No Right to Purchase. The issuance of the Units in the Offering
and the Placement Agent Options and the Common Stock upon exercise of the
Warrants, the Placement Agent Options and the Warrants issuable thereunder will
not give any holder of any of the Company's outstanding shares of Common Stock,
options, warrants or other convertible securities or rights to purchase
securities of the Company (i) the right to purchase any additional shares of
Common Stock or any other securities of the Company, or (ii) the right to
purchase any securities at a reduced price.
2.15 No Regulatory Problems. The Company (i) has not filed a
registration statement which is the subject of any pending proceeding or
examination under Section 8 of the Securities Act, and is not and has not been
the subject of any refusal order or stop order thereunder; (ii) is not subject
to any pending proceeding under Rule 258 of the Securities Act or any similar
rule adopted under Section 3(b) of the Securities Act, or to an order entered
thereunder; (iii) has not been convicted of any felony or misdemeanor in
connection with the purchase or sale of any security or involving the making of
any false filing with the Commission; (iv) is not subject to any order,
judgment, or decree of any court of competent jurisdiction temporarily or
preliminarily restraining or enjoining, or subject to any order, judgment, or
decree of any court of competent jurisdiction permanently restraining or
enjoining, the Company from engaging in or continuing any conduct or practice in
connection with the purchase or sale of any security or involving the making of
any false filing with the Commission; and (v) is not subject to a United States
Postal Service false representation order entered under Section
6
3005 of ▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ Code or a temporary restraining order or
preliminary injunction entered under Section 3007 of Title 39, United States
Code, with respect to conduct alleged to have violated Section 3005 of ▇▇▇▇▇ ▇▇,
▇▇▇▇▇▇ ▇▇▇▇▇▇ Code. None of the Company's directors, officers, or beneficial
owners of 10 percent or more of any class of its equity securities (i) has been
convicted of any felony or misdemeanor in connection with the purchase or sale
of any security, involving the making of a false filing with the Commission, or
arising out of the conduct of the business of an underwriter, broker, dealer,
municipal securities dealer, or investment advisor; (ii) is subject to any
order, judgment or decree of any court of competent jurisdiction temporarily or
preliminarily enjoining or restraining, or is subject to any order, judgment or
decree of any court of competent jurisdiction permanently enjoining or
restraining, such person from engaging in or continuing any conduct or practice
in connection with the purchase or sale of any security, or involving the making
of a false filing with the Commission, or arising out of the conduct of the
business of an underwriter, broker, dealer, municipal securities dealer, or
investment adviser; (iii) is subject to an order of the Commission entered
pursuant to Section 15(b), 15B(a) or 15B(c) of the Exchange Act, or is subject
to an order of the Commission entered pursuant to Section 203(e) or (f) of the
Investment Advisers Act of 1940; (iv) is suspended or expelled from membership
in, or suspended or barred from association with a member of, an exchange
registered as a national securities exchange pursuant to Section 6 of the
Exchange Act, an association registered as a national securities association
under Section 15A of the Exchange Act, or a Canadian securities exchange or
association for any act or omission to act constituting conduct inconsistent
with just and equitable principles of trade; or (v) is subject to a United
States Postal Service false representation order entered under Section 3005 of
Title 39, United States Code, or is subject to a restraining order or
preliminary injunction entered under Section 3007 of Title 39, United States
Code, with respect to conduct alleged to have violated Section 3005 of ▇▇▇▇▇ ▇▇,
▇▇▇▇▇▇ ▇▇▇▇▇▇ Code.
2.16 No Defaults. The Company is not in default in the performance and
observance of any term, covenant or condition of any license, contract,
indenture, mortgage, deed of trust, note, loan or credit agreement, or any other
agreement or instrument evidencing an obligation for borrowed money, or any
other agreement or instrument to which the Company is a party or by which the
Company may be bound or to which any of the properties or assets of the Company
is subject (collectively "Contracts"), except defaults which (singly or in the
aggregate) would not have a material adverse effect on the Company. Schedule
2.21 attached hereto lists all material Contracts that the Company is subject
to. The Company is not in violation of any term or provision of its Certificate
of Incorporation or By-Laws.
2.17 Conduct of Business; Compliance with Law. The Company has all
requisite corporate power and authority, and has all necessary Permits, to own
or lease its properties and conduct its business as described in the Offering
Documents. The Company has been operating its business in compliance with all
such Permits. The disclosures in the Offering Documents concerning the effects
of federal, state and local regulation on the Company's business as currently
contemplated are correct in all material respects and do not omit to state a
material fact. The Company is in compliance with all Laws except where
noncompliance, singly or in the aggregate, would not have a material adverse
effect on the Company.
2.18 Title to Property; Insurance. The Company has good and marketable
title to, or valid and enforceable leasehold estates in, all items of real and
personal property (tangible and intangible) owned or leased by it, free and
clear of all liens, encumbrances, claims, security interests, defects and
restrictions of any material nature whatsoever. The Company has adequately
insured its properties against loss or damage by fire or other casualty and
maintains, in adequate amounts.
2.19 Intangibles. The Company owns or possesses the requisite licenses
or rights to use all trademarks, service marks, service names, trade names,
patents and patent applications, copyrights and other rights (collectively,
"Intangibles") used by the Company in its business or relating
7
to products or services sold by the Company, and all such Intangibles are listed
on Schedule 2.19. The Company's Intangibles which have been registered in the
United States Patent and Trademark Office have been fully maintained and are in
full force and effect. There is no claim or action by any person pertaining to,
or proceeding pending or, to the Company's knowledge, threatened and the Company
has not received any notice of conflict with, the asserted rights of others
which challenges the exclusive right of the Company with respect to any
Intangibles used in the conduct of the Company's business except as described in
the Offering Documents. The Intangibles and the Company's current products,
services and processes do not infringe on any intangibles held by any third
party. To the best of the Company's knowledge, no others have infringed upon the
Intangibles of the Company.
2.20 [Intentionally Omitted]
2.21 [Intentionally Omitted]
2.22 Exchange Act Reports. The Company has filed all forms, reports,
statements and other documents required to be filed with the Securities and
Exchange Commission and has heretofore made available to the Placement Agent, in
the same form filed with the Commission, together with any amendments thereto,
copies of its (i) Annual Report on Form 10-KSB for fiscal 1996 and all Quarterly
Reports on Form 10-QSB filed since January 1, 1997, (ii) all proxy statements
relating to meetings of stockholders (whether annual or special) since January
1, 1996, (iii) all reports on Form 8-K since January 1, 1997, and (iv) all other
reports or registration statements filed by the Company since January 1, 1997
(collectively, the "Company Reports"). As of their respective filing dates, the
Company Reports (i) complied as to form in all material respects with the
requirements of the 1934 Act and the Securities Act and (ii) did not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading.
2.23 Subsidiaries. The representations and warranties made by the
Company in this Agreement shall also apply and be true with respect to each
wholly and partially owned subsidiary, individually and taken as a whole with
the Company and all subsidiaries, as if each representation and warranty
contained herein made specific referenced to the subsidiary each time the term
"Company" was used.
3. Representations and Warranties of the Placement Agent. The Placement
Agent represents and warrants as follows:
3.1 Due Incorporation. The Placement Agent is duly incorporated and
validly existing and in good standing under the laws of its state of
incorporation and is duly qualified as a foreign corporation for the transaction
of business and is in good standing in each jurisdiction where the failure to be
so qualified would not have a materially adverse effect on the business of the
Placement Agent.
3.2 Broker/Dealer Registration. The Placement Agent is registered
as a broker-dealer under Section 15 of the Exchange Act.
3.3 Good Standing. The Placement Agent is a member in good
standing of the NASD.
3.4 Sale In Certain Jurisdictions. Sales of Units by the Placement
Agent will be made only in such jurisdictions in which (i) the Placement Agent
is a registered broker-dealer or where an applicable exemption from such
registration exists and (ii) the Offering and sale of Units is registered under,
or is exempt from, applicable registration requirements.
8
3.5 Compliance with Laws. Offers and sales of Units by the Placement
Agent will be made in compliance with the provisions of Rule 502(c) of Reg D
and/or Section 4(2) of the Securities Act, and the Placement Agent will furnish
to each subscriber a copy of the Offering Documents prior to accepting any
payments for Units.
4. Closing.
4.1 Closing. At any time prior to the Termination Date and after the
receipt (and clearance) of subscriptions for not less than $750,000 and not more
than $1,000,000 of the Units which are accepted by the Company and the clearance
of the funds representing the sale of such Units, upon the mutual consent of the
Company and the Placement Agent that there should be a Closing, a Closing shall
take place at the offices of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇ ("GM&M"), ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇. At the Closing, payment for the Units issued and
sold by the Company (by certified check payable to the order of, or by wire
transfer to, the Company), less the amount deductible by the Placement Agent
pursuant to Section 4.4 hereof, shall be made against delivery of certificates
representing the shares of Common Stock and the Warrants included in the Units.
4.2 Deliveries at Closing. At the Closing, and as a condition to
such Closing, the Company shall deliver or cause to be delivered to the
Placement Agent:
4.2.1 Opinions of Counsel. The opinion of The ▇▇▇▇▇▇▇▇▇▇ Law
Firm, dated as of the date of the Closing, to the effect that:
(i) The Company and each of the Subsidiaries has
been duly organized and is validly existing as a corporation or other entity and
is in good standing under the laws of its state of organization and is duly
qualified and in good standing in each jurisdiction in which it owns or leases
any real property or the character of its operations requires such
qualification, except where the failure to so qualify would not have a material
adverse effect on the business of the Company and the Subsidiaries taken as a
whole.
(ii) Based on a review of the Certificate of
Incorporation of the Company, and its corporate minute book and stock records,
the Company is authorized to issue (i) 20,000,000 shares of Common Stock, of
which 8,432,962 shares are currently issued and outstanding, and (ii) 250,000
shares of Preferred Stock, of which 26,771 shares of Series A-2 8% convertible
redeemable preferred are currently issued and outstanding. All issued and
outstanding securities of the Company have been duly authorized and validly
issued and are fully paid and non-assessable; the holders thereof have no rights
of rescission with respect thereto, and are not subject to personal liability by
reason of being such holders; and none of such securities was issued in
violation of the statutory preemptive rights of any holders of any security of
the Company or, to the knowledge of such counsel, similar contractual rights
granted by the Company. The options and warrants to purchase shares of Common
Stock outstanding immediately before the Closing constitute the valid and
binding obligations of the Company, enforceable in accordance with their terms.
The offers and sales of Common Stock and options and warrants to purchase shares
of Common Stock outstanding immediately before the Closing were at all relevant
times either registered under the Securities Act and the applicable state
securities laws or Blue Sky Laws or are exempt from the registration
requirements thereof.
(iii) The Company and each of the Subsidiaries has
all requisite corporate power or other authority, and has all necessary Permits
of and from all governmental or regulatory officials and bodies to own or lease
its properties and conduct its business as described in the PPM, and, to the
knowledge of such counsel, is and has been doing business in compliance with all
Permits, except where the failure to obtain or comply with any Permit, singly or
in the aggregate would not have a material adverse effect on the Company or any
Subsidiary.
9
(iv) Except as set forth on Schedule 2.3 to this
Agreement, there are no statutory preemptive or other rights to subscribe for or
purchase, or any restriction upon the voting or transfer of, any shares of
Common Stock of the Company, or to such counsel's knowledge any other rights to
subscribe or purchase from the Company any shares of Common Stock, or any such
right or restriction under the Certificate of Incorporation or By-Laws of the
Company or, to the best of such counsel's knowledge, under any agreement or
other outstanding instrument to which the Company is a party or by which it is
bound. To the best of such counsel's knowledge, except as set forth in Schedule
2.3, (A) no holders of any securities of the Company or of any options, warrants
or securities of the Company exercisable for or convertible or exchangeable into
securities of the Company have the right to require the Company to register any
such securities of the Company under the Securities Act or to include any such
securities in a registration statement to be filed by the Company; and (B) the
issuance of the Units in the Offering and the issuance of the Warrant Shares
upon the exercise of the Warrants, the issuance of the Placement Agent Options
or the issuance of the Common Stock or Warrants included therein or the Common
Stock issuable upon exercise of such Warrants will not give any holder of any of
the Company's outstanding options, warrants or other convertible securities or
rights to purchase shares of the Company's Common Stock, the right to purchase
or be issued any additional shares of Common Stock and/or the right to purchase
shares at a reduced price.
(v) In the course of the preparation of the
Offering Documents, such counsel has participated in discussions with officers
of the Company. Nothing has come to such counsel's attention which has caused
such counsel to believe that the Offering Documents contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading (except that such
counsel need not express any opinion as to the Financial Statements and other
financial or statistical data contained in the Offering Documents). The
statements in the Offering Documents have been reviewed by such counsel, and
insofar as they refer to statements of law, descriptions of statutes, licenses,
rules or regulations or legal conclusions, are correct in all material respects.
No statute or regulation or legal or governmental proceeding required to be
described in the Offering Documents is not described as required, nor are any
contracts or documents of a character required to be described in the Offering
Documents not so described or filed as required. Assuming that (a) a proper Form
D is filed in accordance with Rule 503 of Reg D, (b) the offer and the sale of
the Units by the Placement Agent was made in compliance with Rule 502(c) of Reg
D and (c) the representations of the Subscribers in the Subscription Agreements
signed by them are true and correct (which facts have not been independently
verified by counsel), the sale of the Units is exempt from registration under
the Securities Act and is in compliance with Reg D.
(vi) The certificates representing the Common
Stock, the Warrants and the Placement Agent Options are in proper legal form.
The Common Stock, Warrants and Placement Agent Options conform in all respects
to the descriptions thereof contained in the PPM.
(vii) To such counsel's knowledge, the Company has
good and marketable title to, or valid and enforceable leasehold estates in, all
items of real and personal property (tangible and intangible) stated in the
Offering Documents to be owned or leased by it, free and clear of all liens,
encumbrances, claims, security interests, defects and restrictions of any
material nature whatsoever, other than those referred to in the Offering
Documents and liens for taxes not yet due and payable.
(viii) The Company has all corporate power and
authority to engage in and consummate the Offering and to execute and deliver
the Offering Agreements and to carry out the provisions and conditions thereof,
and all consents, authorizations, approvals and orders required in connection
therewith have been obtained. No consents, approvals, authorizations or orders
of, and no filing with, any court or governmental agency or body (other than
such as may be required under
10
applicable Blue Sky laws and the requirements for listing the Common Stock
issuable in the Offering and upon exercise of the Warrants, Placement Agent
Options and the Warrants underlying the Placement Agent Options) is required for
the valid authorization, issuance, sale and delivery of the Common Stock and
Warrants, the Placement Agent Options or the Common Stock issuable upon exercise
of the Warrants, Placement Agent Options or Warrants underlying the Placement
Agent Options, and the consummation of the transactions and agreements
contemplated by the Offering Documents and the Offering Agreements.
(ix) The Common Stock and Warrants included in
the Units have been duly authorized and validly issued and the Common Stock
included in the Units is, and Warrant Shares when issued and paid for will be,
validly issued, fully paid and non-assessable, and the holders thereof are not
and will not be subject to personal liability by reason of being such holders.
The Placement Agent Options have been duly authorized and validly issued, and
the Common Stock and Warrants issuable upon exercise of the Placement Agent
Options and the Common Stock issuable upon exercise of the Warrants, when issued
and paid for, will be validly issued, fully paid and non-assessable, and the
holders thereof will not be subject to personal liability by reason of being
such holders. All corporate action required to be taken for the authorization,
issuance and sale of the Units, Common Stock, Warrants and Warrant Shares and
Placement Agent Options has been duly and validly taken. The Company has
reserved for issuance a sufficient number of shares of Common Stock to be issued
upon exercise of the Warrants. This Agreement, the Subscription Agreements and
the other Offering Documents and Offering Agreements have been duly and validly
authorized, executed and delivered by the Company, will constitute valid and
binding obligations of the Company, enforceable against the Company in
accordance with their respective terms.
(x) To the best of counsel's knowledge, the
execution, delivery and performance by the Company of the Offering Documents and
the Offering Agreements, the issuance and sale of the Common Stock, Warrants,
Warrant Shares and Placement Agent Options, the consummation of the transactions
contemplated hereby and thereby and the compliance by the Company with the terms
and provisions hereof and thereof, do not and will not, with or without the
giving of notice or the lapse of time, or both, (A) conflict with, or result in
a breach of any of the terms or provisions of, or constitute a default under, or
result in the creation or modification of any lien, security interest, charge or
encumbrance upon any of the properties or assets of the Company pursuant to the
terms of, any material mortgage, deed of trust, note, indenture, loan, contract,
commitment or other material agreement or instrument to which the Company is a
party or by which the Company or any of its properties or assets may be bound,
(B) result in any violation of the provisions of the Certificate of
Incorporation or the By-Laws of the Company, (C) violate any Law, except where
such violation would not have a material adverse effect upon the Company, or (D)
have a material effect on any Permit.
(xi) To the best of such counsel's knowledge, no
default exists in the due performance and observance of any term, covenant or
condition of any material license, contract, indenture, mortgage, deed of trust,
note, loan or credit agreement, or any other material agreement or instrument
evidencing an obligation for borrowed money, or any other material agreement or
instrument to which the Company or a Subsidiary is a party or by which the
Company or a Subsidiary may be bound or to which any of its properties or assets
is subject, except such defaults which, singly or in the aggregate, would not
have a material adverse effect on the Company or any Subsidiary. Neither the
Company nor any Subsidiary is in violation of any term or provisions of its
Certificate of Incorporation or By-Laws. To the best of such counsel's
knowledge, neither the Company nor any Subsidiary is in violation of any Law,
except where such violation would not have a material adverse effect on the
Company or any Subsidiary.
(xii) To the best of such counsel's knowledge, the
Company and each Subsidiary owns or possesses, free and clear of all liens or
encumbrances and rights thereto or
11
therein by third parties, the requisite licenses or other rights to use all
intangibles and other rights necessary to conduct its business (including,
without limitation, any such licenses or rights described in the PPM as being
licensed to or owned or possessed by the Company or a Subsidiary) and, to the
best of such counsel's knowledge, there is no claim or action by any person
pertaining to, or proceeding, pending or threatened which challenges the
exclusive rights of the Company or a Subsidiary with respect to any intangibles
used in the conduct of its business (including without limitation any such
licenses or rights described in the PPM as being owned or possessed by the
Company or a Subsidiary). To the best of such counsel's knowledge, the Company's
current products, services and processes do not infringe on any Intangible held
by third persons.
(xiii) To the best of such counsel's knowledge,
except as described in the PPM, there are no claims, actions, suits, hearings,
investigations, inquiries or proceedings of any kind or nature, before or by any
court, governmental authority, tribunal or instrumentality, domestic or foreign,
pending or threatened against or affecting the Company or a Subsidiary or
involving the properties of the Company or a Subsidiary which may result in any
material adverse change in the business, properties or financial condition of
the Company or a Subsidiary, or which may adversely affect the transactions or
other acts contemplated by this Agreement or the validity or enforceability of
this Agreement.
4.2.2 Officers' Certificate. A certificate of the Company,
signed by two executive officers thereof, stating (i) that the representations
and warranties contained in Section 2 hereof are true and accurate at the
Closing as applied to the Company with the same effect as though expressly made
at the Closing, and (ii) that the Company has complied with all covenants and
agreements required to be complied with as of the Closing.
4.2.3 Investor Documents. Subscription Agreements signed
by the Company and each of the Subscribers.
4.2.4 Certificates. The certificates representing the
Common Stock and the Warrants included in the Units.
4.2.5 Consents. Consents of any parties required to
consummate this Offering and the transactions contemplated thereby.
4.2.6 Placement Agent Options. At the Closing, the Company
shall issue to the Placement Agent and its designees, five-year options
("Placement Agent Options") to purchase a number of Units equal to 10% of the
Units sold in the Offering, exercisable at a purchase price equal to 110% of the
per-Unit Offering Price, at any time until the fifth anniversary of the Closing.
The Units purchasable under the Placement Agent Options will be identical to the
Units sold to the Subscribers. The Placement Agent Option will contain
registration rights with respect to the shares underlying the Placement Agent
Options and Warrants issuable upon exercise of the Placement Agent Options
identical to the registration rights granted to the Subscribers in the Offering.
4.2.7 Merger and Acquisition Agreement. On the Closing Date,
the Company will enter into a Merger and Acquisition Agreement with the
Placement Agent providing for a finder's fee to be paid to the Placement Agent
if the Company participates in any merger, consolidation, or other transaction
in which the Placement Agent introduced the Company to the other party for a
period of five years from the Closing Date.
4.2.8 Insider Agreements. The Company shall deliver to the
Placement Agent executed originals of the Insider Agreements, pursuant to
Section 5.6 hereof signed by the Company's officers, directors (which agreements
are also effective against any family member or affiliate of any of the
foregoing persons).
12
4.2.9 Transfer Sheets. The Company shall deliver to the
Placement Agent copy of letters to Depository Trust Company and the Company's
transfer agent requesting that the Placement Agent be provided copies of the
Company's daily stock transfer sheet and lists of the beneficial and record
holders of the Company's securities, at the Company's sole cost and expense.
4.2.10 American Stock Exchange. Copy of acceptance letter
for quotation of additional shares of Common Stock to be issued at the Closing
by the American Stock Exchange ("AMEX").
4.2.11 Other Documents. Such other closing documents as
shall be reasonably requested by the Placement Agent or GM&M.
4.3 Conditions. The obligations of the Placement Agent under this
Agreement shall be subject to the following conditions:
(i) All representations and warranties of the
Company set forth in this Agreement are true and accurate as of the date of the
Closing; and
(ii) The Company has complied with all covenants
and agreements required to be complied with as of the date of the Closing.
4.4 Placement Agent's Fees and Expenses. At the Closing, the Company
shall pay to the Placement Agent a commission equal to 10% of the aggregate
purchase price of the Units sold in the Offering. In order to reimburse the
Placement Agent for its expenses incurred in connection with the Offering, at
the Closing, the Company also shall pay to the Placement Agent a non-accountable
expense allowance equal to 3% of the aggregate purchase price of the Units (less
$10,000 paid on account) sold in the Offering. On or before the Closing, the
Company shall also pay the fees and disbursements of GM&M referred to in Section
5.2 below in connection with the qualification of the Units under the securities
or Blue Sky laws of the states which the Placement Agent shall designate and the
other expenses of the offering that are referred to in Section 5.2 below. All
the foregoing amounts are payable directly to the parties who are owed same by
deduction from the aggregate pur chase price of the Units sold.
5. Covenants. The Company covenants and agrees that:
5.1 Amendments to Offering Documents. Until the Offering has been
completed or terminated, if there shall occur any event relating to or
affecting, among other things, the Company or any affiliate, or the proposed
operations of the Company as described in the Offering Documents, as a result of
which it is necessary, in the reasonable opinion of GM&M or counsel for the
Company, to amend or supplement the Offering Documents in order that the
Offering Documents will not contain an untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not misleading,
the Company shall immediately prepare and furnish to the Placement Agent a
reasonable number of copies of an appropriate amendment of or supplement to the
Offering Documents, in form and substance satisfactory to GM&M.
5.2 Expenses of Offering. The Company shall be responsible for, and
shall pay, all fees, disbursements and expenses incurred in connection with the
Offering, including, but not limited to, the Company's legal and accounting fees
and disbursements, the costs of preparing, printing, mailing, delivering and,
where necessary, filing the Offering Documents, including all amendments and
supplements thereto, this Agreement, the Subscription Agreement, Warrants and
Placement Agent Options and related documents, all in quantities as the
Placement Agent may reasonably require; preparation of four transaction
"bibles"; the reasonable costs of up to $10,000 of any "due diligence
13
meetings" or investigations conducted by the Company including the fees of a
consultant to render a due diligence report to the Placement Agent on the
Company; preparation and printing of stock and warrant certificates; and the
fees and disbursements of GM&M in connection with blue sky matters (which fees
(excluding disbursements) shall be approximately $10,000), plus "blue sky"
filing fees to be paid in the various states (as such fees become due) and
transfer taxes and transfer and warrant agent fees.
5.3 Further Assurances. The Company will take such actions as may be
reasonably required or desirable to carry out the provisions of this Agreement
and the transactions contemplated hereby. The Company further agrees to take
promptly, or cause to be taken, all actions and to do promptly, or cause to be
done, all other things necessary, proper or advisable to prepare the
registration statement necessary to file with the Commission in connection with
the proposed initial public offering and have such registration statement
declared effective by the Commission.
5.4 Capitalization. The Company will not change its current
capitalization or issue any shares of capital stock or any options, warrants or
other securities convertible into or exchangeable for shares of Common Stock,
other than as contemplated in the Letter of Intent, without the consent of the
Placement Agent prior to the earlier of the abandonment or consummation of the
Offering.
5.5 Restriction on Sales of Securities. The Company shall cause each of
the Company's officers and directors to execute an agreement which provides that
during the three year period following the Closing, the Placement Agent shall
have the right to purchase for its account or to sell for the account of such
persons (including any family member or affiliate of any of the foregoing
persons (collectively, "Insiders"), any securities sold by the Insiders on the
open market, including sales pursuant to Rule 144 under the Securities Act and
each Insider will agree to consult with the Placement Agent with regard to any
such sales and will offer the Placement Agent the exclusive opportunity to
purchase or sell such securities on terms at least as favorable to the Insiders
as they can secure elsewhere.
5.6 Right of First Refusal. The Company hereby grants to the Placement
Agent a thirty-day right of first refusal to underwrite or place any public or
private sale of debt or equity securities ("Future Offering") of the Company or
any subsidiary or successor of the Company, during the three-year period
following the Closing. If the Placement Agent fails to accept in writing any
proposal for such Future Offering within 30 days after receipt of a written
notice from the Company containing such proposal, then the Placement Agent shall
have no claim or right with respect to such Future Offering. If, thereafter, the
terms of the Future Offering are modified in any material respect, the Company
shall adopt the same procedure as with respect to the original proposal.
5.7 Designee to the Board of Directors. For a period of three (3) years
from the Closing, the Placement Agent shall have the right to designate a person
to serve on the Company's Board of Directors. The Company will appoint such
designee to the Board promptly after the Placement Agent designates such person
and shall recommend and use its best efforts to have such designee elected at
each annual or other meeting held after such appointment during the three-year
period, at which directors of the Company are to be elected. Alternatively, the
Placement Agent shall have the right to designate and send a representative (who
need not be the same individual from meeting to meeting) to observe each meeting
of the Board of Directors. Such designee shall receive no more or less
compensation than is paid to other non-management directors of the Company and
such designee and representative shall be entitled to receive reimbursement for
all reasonable costs incurred in attending such meetings, including, but not
limited to, food, lodging and transportation.
5.8 Accuracy of Representations and Warranties. The Company hereby
agrees that prior to the Termination Date it will not enter into any transaction
or take any action, and will use its best efforts to prevent the occurrence of
any event, which could result in any of its representations,
14
warranties or covenants contained in this Agreement or any of the Offering
Documents not to be true and correct, or not to be performed as contemplated, at
and as of the time immediately after the occurrence of such transaction or
event.
5.9 Warrant Solicitation and Warrant Solicitation Fee.
5.9.1 Engagement. The Company hereby engages the Placement
Agent, on a non-exclusive basis, as its agent for the solicitation of the
exercise of the Warrants. The Company, at its cost, will (i) assist the
Placement Agent with respect to such solicitation, if requested by the Placement
Agent and (ii) provide the Placement Agent, and direct the Company's transfer
and warrant agents to deliver to the Placement Agent, lists of the record, and
to the extent known, beneficial owners of the Warrants. The Company shall
instruct the transfer and warrant agents to cooperate with the Placement Agent
in every respect in connection with the Placement Agent's solicitation
activities, including, but not limited to, providing to the Placement Agent, at
the Company's cost, a list of record and beneficial holders of the Warrant and
providing disclosure documents, where necessary, to holders of the Warrants at
the time of exercise of the Warrants.
5.9.2 Procedure. In each instance in which a Warrant is
exercised, the Company shall promptly give written notice of such exercise to
the Placement Agent. If, upon the exercise of any Warrant, (i) the market price
of the Company's Common Stock is greater than the Warrant exercise price, (ii)
disclosure of compensation arrangements was made at the time of offering and of
exercise (as required by applicable law, rule or regulation), (iii) the exercise
of the Warrant was solicited by the Placement Agent, (iv) the Warrant was not
held in a discretionary account, and (v) the solicitation of the exercise of the
Warrant was not in violation of Regulation M (as such rule or any successor rule
may be in effect as of such time of exercise) promulgated under the Exchange
Act, then the Company shall, upon exercise of the Warrant, pay from the proceeds
received upon exercise of the Warrant a fee of 5% of the Warrant exercise price
to the Placement Agent, provided that the Placement Agent delivers to the
Company a certificate that the conditions set forth in the preceding clauses
(iii), (iv) and (v) have been satisfied. The Placement Agent may, at any time
during business hours, examine the records of the Company, including its ledger
of original Warrant certificates returned to the Company upon exercise of
Warrants.
5.10 Listing of Securities. The Company shall apply for listing, and
obtain such listing, for the shares of Common Stock issuable as part of the
Units, upon exercise of the Warrants, the Placement Agent Options and the
Warrants underlying the Placement Agent Options on AMEX, at or prior to the
Closing and maintain such listing until the seventh anniversary of the date of
Closing. At the request of the Placement Agent, the Company shall apply for
quotation of its Common Stock on the Nasdaq Stock Market prior to the filing of
the Registration Statement described in Section 6 hereof, if the filing
qualifications of the Nasdaq Stock Market are met.
5.11 Affiliate Transactions. The Company hereby agrees that for a
period of two years from the Closing, it shall not lend money to or enter into
any other similar transaction with any Insider.
5.12 Regulation S Filing. The Company shall not commence any offer of
securities of the Company pursuant to Regulation S of the Securities Act or any
successor regulation during the two year period following the Closing.
6. Registration Rights; Subscriber Lockup.
6.1 Registration Rights. As additional consideration for this Agreement
and the transactions contemplated hereby, the Company agrees with the Placement
Agent and will agree with each Subscriber, as the case may be, to register for
resale under a Registration Statement ("Registration Statement") pursuant to the
Securities Act and the Blue Sky or state securities laws of
15
states reasonably selected by the Placement Agent, the Common Stock comprising
the Units and the Common Stock underlying the Warrants, the Placement Agent
Options and the Warrants underlying the Placement Agent Option ("Registrable
Securities"). The Company agrees that upon the written demand of at least 51% of
the holders of the Registrable Securities ("Majority Holders") it will file a
Registration Statement and use its best efforts to have it declared effective
within 60 days after the demand of the Majority Holders. The Company shall keep
the Registration Statement effective and current until all the securities
registered thereunder are sold or can be sold freely under an appropriate
exemption from the securities laws of the United States and the states, without
limitation. The Company shall bear all the expenses and pay all the fees it
incurs in connection with the preparation, filing and modification or amendment
of the Registration Statement, The Company agrees with the Placement Agent and
the Subscribers that it will provide copies of the Registration Statement
(including each amendment and supplement) to GM&M and the Placement Agent at
least 5 days prior to its planned filing date with the Commission. The
registration rights granted in respect of the Registrable Securities shall inure
to the benefit of each pledgee, assignee, transferee or purchaser of the
Registrable Securities and each successor and heir of the Subscribers, Placement
Agent and the holders of the Placement Agent Options.
6.2 Lockup by Subscribers. Notwithstanding the foregoing, each
Subscription Agreement will provide that each Subscriber will not sell any of
the securities of the Company purchased in the Offering or any of the Warrant
Shares for a period of one year after the Closing, without the prior written
consent of the Placement Agent.
7. Indemnification and Contribution.
7.1 Indemnification by the Company. The Company agrees to indemnify and
hold harmless the Placement Agent and each person, if any, who controls the
Placement Agent within the meaning of the Securities Act and/or the Exchange Act
against any losses, claims, damages or liabilities, joint or several, to which
the Placement Agent or such controlling person may become subject, under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon (i)
any untrue statement or alleged untrue statement of a material fact contained
(A) in the Offering Documents, or (B) in any blue sky application or other
document executed by the Company specifically for blue sky purposes or based
upon any other written information furnished by the Company or on its behalf to
any state or other jurisdiction in order to qualify any or all of the Units
under the securities laws thereof (any such application, document or information
being hereinafter called a "Blue Sky Application"), (ii) any breach by the
Company of any of its representations, warranties or covenants contained herein
or in any of the Offering Agreements, or (iii) the omission or alleged omission
by the Company to state in the Offering Documents or in any Blue Sky Application
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading; and will reimburse the Placement Agent and each such controlling
person for any legal or other expenses reasonably incurred by the Placement
Agent or such controlling person in connection with investigating or defending
any such loss, claim, damage, liability or action, whether arising out of an
action between the Placement Agent and the Company or the Placement Agent and a
third party; provided, however, that the Company will not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon (i) an untrue statement or alleged untrue statement or omission
or alleged omission made in reliance upon and in conformity with written
information regarding the Placement Agent which is furnished to the Company by
the Placement Agent specifically for inclusion in the Offering Documents or any
such Blue Sky Application or (ii) any breach by the Placement Agent of the
representations, warranties or covenants contained herein (collectively, (i) and
(ii) above are referred to as the "Non-Indemnity Events").
7.2 Indemnification by the Placement Agent. The Placement Agent
agrees to indemnify and hold harmless the Company and each person, if any, who
controls the Company within the
16
meaning of the Securities Act and/or the Exchange Act against any losses,
claims, damages or liabilities, joint or several, to which the Company or such
controlling person may become subject, under the Securities Act or otherwise
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any Non-Indemnity Event; and will
reimburse the Company and each such controlling person for any legal or other
expenses reasonably incurred by the Company or such controlling person in
connection with investigating or defending any such loss, claim, damage,
liability or action provided that such loss, claim, damage or liability is found
ultimately to arise out of or be based upon any Non-Indemnity Event.
7.3 Procedure. Promptly after receipt by an indemnified party under
this Section 6 of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against any indemnifying
party under this Section 7, notify in writing the indemnifying party of the
commencement thereof; and the omission so to notify the indemnifying party will
relieve the indemnifying party from any liability under this Section 7 as to the
particular item for which indemnification is then being sought, but not from any
other liability which it may have to any indemnified party. In case any such
action is brought against any indemnified party, and it notifies an indemnifying
party of the commencement thereof, the indemnifying party will be entitled to
participate therein, and to the extent that it may wish, jointly with any other
indemnifying party, similarly notified, to assume the defense thereof, with
counsel who shall be to the reasonable satisfaction of such indemnified party,
and after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party under this Section 7 for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation. Any such
indemnifying party shall not be liable to any such indemnified party on account
of any settlement of any claim or action effected without the consent of such
indemnifying party.
7.4 Contribution. If the indemnification provided for in this Section 7
is unavailable to any indemnified party in respect to any losses, claims,
damages, liabilities or expenses referred to therein, then the indemnifying
party, in lieu of indemnifying such indemnified party, will contribute to the
amount paid or payable by such indemnified party, as a result of such losses,
claims, damages, liabilities or expenses (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company on the one
hand, and the Placement Agent, on the other hand, from the Offering, or (ii) if
the allocation provided by clause (i) above is not permitted by applicable law,
in such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above, but also the relative fault of the Company, on
the one hand, and of the Placement Agent, on the other hand, in connection with
the statements or omissions which resulted in such losses, claims, damages,
liabilities or expenses as well as any other relevant equitable considerations.
The relative benefits received by the Company, on the one hand, and the
Placement Agent, on the other hand, shall be deemed to be in the same proportion
as the total proceeds from the Offering (net of sales commis sions and the
non-accountable expense allowance, but before deducting other expenses) received
by the Company bear to the commissions and non-accountable expense allowance
received by the Placement Agent. The relative fault of the Company, on the one
hand, and the Placement Agent, on the other hand, will be determined with
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission to state a material fact relates to
information supplied by the Company, and its relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or omission.
7.5 Equitable Considerations. The Company and the Placement Agent agree
that it would not be just and equitable if contribution pursuant to this Section
7 were determined by pro rata allocation or by any other method of allocation
which does not take into account the equitable considerations referred to in the
immediately preceding paragraph.
17
7.6 Attorneys' Fees. The amount payable by a party under this Section 7
as a result of the losses, claims, damages, liabilities or expenses referred to
above will be deemed to include any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending any action
or claim.
8. Termination by Placement Agent. The Placement Agent shall have the right to
terminate this Agreement at any time prior to the Closing if (i) the Placement
Agent determines that market conditions would preclude a successful offering;
(ii) a material adverse change not yet reported by the Company in its public
filings has occurred in the financial condition, business or prospects of the
Company; or (iii) the Company has breached any of its material representations,
warranties or obligations hereunder, or failed to expeditiously proceed with the
Offering. If the Placement Agent elects not to proceed with the Offering as a
result of the condition enumerated in clause (i) above, the Placement Agent
shall be entitled to retain the deposit of $10,000 previously paid to it
("Deposit"), but the Company shall not be liable to MHM for any other expenses.
If the Placement Agent elects not to proceed with the Offering as a result of
any of the conditions enumerated in any of clauses (ii) or (iii) above, or if
the Company elects not to proceed with the Offering for any reason, then (a) the
Company shall reimburse the Placement Agent in full for its reasonable
out-of-pocket expenses (including, without limitation its reasonable legal fees
and disbursements) up to an aggregate of $25,000, against which the Deposit
shall be applied as a credit and (b) if the Company subsequently engages in any
public offering, private placement or other capital raising transaction
involving the sale of its securities, or in any sale or exchange of all or
substantially all of its assets or outstanding shares of capital stock
(including by way of merger), or in any similar transaction within 12 months
following the termination of the Offering, then the Company shall pay the
Placement Agent a fee of $200,000. The provisions of Sections 7 and 8 of this
Agreement shall survive the termination of this Agreement for any reason.
9. Notices. Any notice hereunder shall be in writing and shall be
effective when delivered in person or by facsimile transmission, or mailed by
certified mail, postage prepaid, return receipt requested, to the appropriate
party or parties, at the following addresses: if to the Placement Agent, to ▇.▇.
▇▇▇▇▇▇▇▇ & Co., Inc., ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇,
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (Fax No. ▇▇▇-▇▇▇-▇▇▇▇); with a copy to ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ & ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, Esq. (Fax No. 212/▇▇▇-▇▇▇▇); if to the Company, to Globalink, Inc.,
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇. ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, ▇▇., President (Fax No. 703/▇▇▇-▇▇▇▇); with a copy to The ▇▇▇▇▇▇▇▇▇▇
Law Firm, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, Attention:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Esq. (Fax No. ▇▇▇ ▇▇▇-▇▇▇▇); or, in each case, to such other
address as the parties may hereinafter designated by like notice.
10. Parties. This Agreement will inure to the benefit of and be binding upon the
parties hereto and their respective successors and assigns. Neither party may
assign this Agreement or its obligations hereunder without the prior written
consent of the other party. This Agreement is intended to be, and is, for the
sole and exclusive benefit of the parties hereto and the persons described in
Section 7.1 and 7.2 hereof and their respective successors and assigns, and for
the benefit of no other person, and no other person will have any legal or
equitable right, remedy or claim under, or in respect of this Agreement.
11. Amendment and/or Modification. Neither this Agreement, nor any term or
provision hereof, may be changed, waived, discharged, amended, modified or
terminated orally, or in any manner other than by an instrument in writing
signed by each of the parties hereto.
12. Further Assurances. Each party to this Agreement will perform any and
all acts and execute any and all documents as may be necessary and proper under
the circumstances in order to accomplish the intents and purposes of this
Agreement and to carry out its provisions.
18
13. Validity. In case any term of this Agreement will be held invalid,
illegal or unenforceable, in whole or in part, the validity of any of the other
terms of this Agreement will not in any way be affected thereby.
14. Waiver of Breach. The failure of any party hereto to insist upon strict
performance of any of the covenants and agreements herein contained, or to
exercise any option or right herein conferred in any one or more instances, will
not be construed to be a waiver or relinquishment of any such option or right,
or of any other covenants or agreements, and the same will be and remain in full
force and effect.
15. Entire Agreement. This Agreement contains the entire agreement and
understanding of the parties with respect to the subject matter hereof and
thereof, respectively, and there are no representations, inducements, promises
or agreements, oral or otherwise, not embodied in this Agreement. Any and all
prior discussions, negotiations, commitments and understanding relating to the
subject matter of these agreements are superseded by them.
16. Counterparts. This Agreement may be executed in counterparts and each
of such counterparts will for all purposes be deemed to be an original, and such
counterparts will together constitute one and the same instrument.
17. Law. This Agreement will be deemed to have been made and delivered in New
York City and will be governed as to validity, interpretation, construction,
effect and in all other respects by the internal law of the State of New York.
The Company (i) agrees that any legal suit, action or proceeding arising out of
or relating to this Agreement shall be instituted exclusively in New York State
Supreme Court, County of New York, or in the United States District Court for
the Southern District of New York, (ii) waives any objection to the venue of any
such suit, action or proceeding, and the right to assert that such forum is an
inconvenient forum, and (iii) irrevocably consents to the jurisdiction of the
New York State Supreme Court, County of New York, and the United States District
Court for the Southern District of New York in any such suit, action or
proceeding. The Company further agrees to accept and acknowledge service of any
and all process which may be served in any such suit, action or proceeding in
the New York State Supreme Court, County of New York, or in the United States
District Court for the Southern District of New York and agrees that service of
process upon it mailed by certified mail to its address shall be deemed in every
respect effective service of process upon it in any such suit, action or
proceeding.
18. Representations, Warranties and Covenants to Survive Delivery. The
respective representations, indemnities, agreements, covenants, warranties and
other statements of the Company and the Placement Agent shall survive execution
of this Agreement and delivery of the Units and/or the termination of this
Agreement prior thereto.
19
If you find the foregoing is in accordance with our
understanding, kindly sign and return to us a counterpart hereof, whereupon this
instrument along with all counterparts will become a binding agreement between
us.
Very truly yours,
GLOBALINK, INC.
By:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
Chief Executive Officer
AGREED:
▇.▇. ▇▇▇▇▇▇▇▇ & CO., INC.
By:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
President
20
