EXHIBIT 1.1
HEARTLAND COMMUNICATIONS & MANAGEMENT, INC.
MANAGING PLACEMENT AGENT AGREEMENT
December ___, 1997
Northridge Capital Corporation
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ -- ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Gentlemen:
Heartland Communications & Management, Inc. ("HCMI") hereby confirms its
agreement with Northridge Capital Corporation (the "Selling Agent") as
described as follows:
Section 1. Introduction. HCMI desires to retain the Selling Agent as
its best efforts managing placement agent in connection with the offering by
HCMI of up to 2,500,000 shares of common stock, $.001 par value per share
(the "Shares"), in connection with its proposed $12,500,000 public offering
(the "Offering"). Specifically, the Selling Agent will act as managing
placement agent on a best efforts basis for the sale of the Shares in the
Offering. By and through this Agreement, HCMI confirms the retention of the
Selling Agent to assist in such capacity during the Offering.
The Form S-1 Registration Statement was filed July 26, 1996 with, and
must be approved by, the Securities and Exchange Commission (the "SEC") which
Registration Statement (and the related Prospectus) , as amended, must be
declared effective by the SEC pursuant to the Securities Act of 1933 (the
"Securities Act"). Copies of the Prospectus, as authorized for use and
declared effective by the SEC, will be delivered to the Selling Agent
promptly after the SEC Order of Effectiveness issues.
Unless otherwise defined herein, capitalized terms used herein shall have
the same meanings ascribed to them in the Prospectus.
Section 2. Selling Agent.
(a) Appointment as Selling Agent. HCMI hereby appoints the Selling
Agent as its managing placement agent to offer and sell the Shares on a best
efforts basis pursuant to the Prospectus and any amendments or supplements
thereto, and in compliance with the terms and conditions thereof and of this
Agreement. Specifically, HCMI will offer exclusively through the Selling
Agent, on a best-efforts basis, and/or selected dealers chosen by the Selling
Agent, a minimum of four hundred thousand (2,500,000) Shares and a maximum of
two million five hundred thousand (2,500,000) Shares at five dollars ($5) per
share. (Such commitment is subject to receipt of a fairness opinion
described in Section 15, "Termination," and the Registration Statement being
1
declared effective by the SEC.) Subject to the $12,500,000 maximum during
the Initial and Continuous Offering Period as defined in the Prospectus (up
to 18 months from the Effective Date (defined below) of the Registration
Statement and associated Prospectus), unless earlier terminated by HCMI, the
Selling Agent will use its best efforts to sell the Shares at the $5.00 per
share Selling Price. All subscriptions for Shares will be deposited with
▇▇▇▇▇▇ ▇▇▇▇▇ Bank and maintained in the name of Heartland Communications &
Management, Inc. -- Escrow Account (hereafter the "Escrow Account") until
such subscriptions are accepted at the end of the Initial Offering Period and
during the Continuous Offering Period. Funds in such Escrow Account will be
held during the Initial Offering Period until the minimum subscription of
$2,000,000 is accepted (at which time the funds will be released to HCMI as
more fully described in the Prospectus). If the $2,000,000 minimum is
achieved during the Initial Offering Period, the Offering will continue at
the election of HCMI and with the consent of the Selling Agent for up to 18
months from the date of the Prospectus (the "Continuous Offering Period").
HCMI authorizes the Selling Agent and the Selling Agent agrees to
use its best efforts to offer and sell the Shares pursuant to the
Registration Statement and Prospectus and in compliance with the terms and
conditions thereof and of this Agreement. The Selling Agent may appoint
registered broker-dealers (the "Additional Selling Agents") to offer and sell
Shares. Commencing on the effective date (the "Effective Date") of the
Registration Statement, the Selling Agent and the Additional Selling Agents
(if any) will attempt to sell the Shares, at a price equal to $5.00 per
share, for a period (such period, including any extension thereof as
hereinafter provided, being herein called the "Initial Offering Period") of
two (2) months from the Effective Date (or for a period of up to seven (7)
additional months if extended by HCMI, unless all Shares having an aggregate
Selling Price of $12,500,000 registered with the SEC have previously been
subscribed for).
If at least 400,000 Shares have been subscribed for and accepted
during the Initial Offering Period, HCMI may, with the consent of the Selling
Agent, continue to offer Shares at the $5.00 per share Selling Price during
the balance (the "Continuous Offering Period") of this up to eighteen (18)
month Offering Period. The offering will terminate (i) if subscriptions for
at least 400,000 shares have not been received within the Initial Offering
Period as defined or (ii) at any time by written notice by HCMI to the
Selling Agent, provided the Selling Agent is compensated for all sales
accepted by HCMI.
The Selling Agent may designate as an Additional Selling Agent (i )
any person who is a member of the National Association of Securities Dealers,
Inc. (the "NASD") or (ii) any foreign person who is not a member of the NASD
and who agrees that it will make no offer or sale of Shares within the United
States, its territories or possessions or to persons who are U.S. citizens or
residents, and in making offers and sales of Shares, will comply with the
Rules of Fair Practice of the NASD including, but not limited to Sections 8,
24, 25 and 36 of Article III to the NASD By-Laws, provided, that any such
person as a condition to selection as an Additional Selling Agent, shall
enter into a Selected Dealer Agreement substantially in the form attached as
Exhibit A.
(b) Undertakings. The Selling Agent will use its best efforts to
find eligible persons to purchase the Shares on the terms stated herein and
in the Prospectus and any amendments or supplements thereto. It is
understood that the Selling Agent has no commitment with regard to the sale
of the Shares. The Selling Agent represents that it will comply fully with
all applicable laws
2
and the rules of the NASD, the SEC and of state securities administrators of
the several states and various other jurisdictions in which it offers to sell
Shares.
During this Offering Period, the Selling Agent will promptly upon
receipt deliver all cash and checks received from subscribers for Shares to
the Escrow Agent for deposit in the HCMI Escrow Account. Such cash or
checks will be accompanied by one executed copy of the Subscription Agreement
and Power of Attorney for each subscription obtained, properly completed and
executed in the form of Exhibit A to the Prospectus (the "Subscription
Documents"). Promptly after receipt of the Subscription Documents by the
Selling Agent, an interim receipt will be mailed by the Selling Agent to each
subscriber for the amount deposited. All subscription checks received during
this Offering Period will be held in the Escrow Account until accepted at the
Initial and each Subsequent Closing.
Counsel for the Selling Agent shall make all required filings with
the National Association of Securities Dealers, Inc. (the "NASD"). All
corporate proceedings undertaken by HCMI and other legal matters which relate
to the Offering and other related transactions shall be satisfactory in all
material respects to counsel for the Placement Agent. The Registration
Statement and all amendments thereto shall be approved by counsel to the
Selling Agent prior to filing with the SEC (which approval shall not be
unreasonably withheld).
Section 3. Retention of the Selling Agent; Compensation; Sale and
Delivery of the Shares. Subject to the terms and conditions herein set
forth, HCMI hereby engages the Selling Agent to (a) act as the Selling Agent
in connection with the Offering and (b) to use its best efforts to solicit
subscriptions and purchase orders for the Shares. The Selling Agent is a
registered broker-dealer and is a member of the National Association of
Securities Dealers, Inc. (the "NASD").
The obligations of the Selling Agent pursuant to this Agreement shall
continue through completion or termination of the Offering, but in no event
shall extend later than eighteen (18) months from the Effective Date of the
Registration Statement. All fees due to the Selling Agent, but unpaid, will
be payable at that time.
The Selling Agent and any broker-dealer group assembled and managed by
the Selling Agent shall transmit promptly all checks directly to the Escrow
Agent after receipt by the Selling Agent or such Additional Selling
Agent/broker-dealer. If all conditions precedent to the consummation of the
Offering are satisfied, the Escrow Agent agrees to issue or have issued the
Shares sold in the Offering on the Initial Closing Date (as hereinafter
defined) against payment to HCMI; provided, however, that the Initial (any
Subsequent) Closing may not occur until the conditions specified in Section 8
hereof shall have been complied with to the reasonable satisfaction of the
Selling Agent and its counsel. The release of Shares against payment
therefor shall be made on the date and at the place acceptable to HCMI and
the Selling Agent. The date upon which HCMI shall release and deliver the
Shares sold in the Offering in accordance with the terms hereof relating to
the Initial Offering Period is herein referred to as the "Initial Closing
Date." HCMI shall release and deliver the Shares sold during the Continuous
Offering Period at each Subsequent Closing Date (typically at month-end or,
if earlier, when subscriptions for at least $250,000 are accepted).
The Selling Agent shall receive the following for its services hereunder
at each closing:
3
(i) a selling commission of 8% of the gross subscriptions on all Shares
sold (the parties hereto acknowledging that compensation payable to
any member of the selling group shall be determined between the
Selling Agent and each Additional Selling Agent/ selected dealer
pursuant to individual Selected Dealer Agreement(s));
(ii) warrants as outlined in Section 4 below; and
(iii) reimbursement for its expenses on a non-accountable basis in the
amount of two percent (2 %) of gross proceeds of the Offering.
Except as provided above, all out-of-pocket expenses incurred by the Selling
Agent in connection with the Offering, including travel, communications,
postage and legal fees and expenses, will be absorbed by the Selling Agent.
Nonetheless, the Company has agreed to pay a $50,000 due diligence fee on or
before December ____, 1997 (but in no case later than when the Registration
Statement is declared effective.)
Other than as described as above, HCMI will pay all costs and expenses
incident to the offering, sale and delivery of the Shares including, but not
limited to, all fees and expenses of filing with regulatory agencies and the
NASD; all Blue Sky fees and expenses; all auditing and accounting fees; all
promotion (including those associated with "road shows" and related travel
and entertainment) and printing costs, including costs of printing the
Registration Statement and the placement agent documents, Blue Sky memoranda
and as many Prospectuses as HCMI and the Selling Agent deem reasonably
necessary; and, with the exclusion of ▇▇▇▇▇▇▇▇ Evaluation Advisors, Inc., the
cost and expenses of any other firm or professional service organization it
may employ in connection with the advisory services set forth herein.
Section 4. Warrants. Upon termination of the Offering, HCMI will sell
to the Selling Agent Common Stock Purchase Warrants (the "Warrants") for an
aggregate purchase price of one hundred dollars ($100), entitling the Selling
Agent to purchase one share of HCMI's common stock for each ten Shares of
common stock which have been sold in the Offering (i.e. for the minimum
offering of 400,000 Shares, 40,000 warrants will be issued and, for the
maximum offering of 2,500,000 Shares, 250,000 warrants will be issued). The
Warrants shall be nonexercisable for a period of twenty-four (24) months
following the date of the definitive Prospectus. However, if HCMI merges or
reorganizes in such a way as to terminate the Warrants, the Warrants may be
exercised immediately prior to such action. The Warrants will be exercisable
for a period of four (4) years, such period to commence twelve (12) months
after the date of the definitive Prospectus and if the Warrants are not
exercised during this term, they shall by their terms automatically expire.
The exercise price of the Warrants shall be one hundred and sixty five
percent (165%) of the per share offering price (for example, a $8.25 exercise
price if the public offering price is $5). HCMI will set aside and at all
times have available sufficient number of Shares of its common stock to be
issued upon the exercise of the Warrants to be sold to the Selling Agent.
The Warrants will not be transferable to anyone for a period of twelve (12)
months after the date of the definitive Prospectus, except to officers of the
Selling Agent.
In the event that the outstanding shares of common stock of HCMI are at
any time increased or decreased or changed into or exchanged for a different
number or kind of share or other security of HCMI or of another corporation
through reorganization, merger, consolidation, liquidation,
4
recapitalization, stock split, combination of shares or stock dividends
payable with respect to such common stock, appropriate adjustments in the
number and kind of such securities then subject to this Warrant shall be made
effective as of the date of such occurrence so that the Selling Agent's
position upon exercise will be the same as it would have been had it owned,
immediately prior to the occurrence of such events, the common stock subject
to this Warrant. Such adjustment shall be made successively whenever any
event listed above shall occur and HCMI will notify the Selling Agent of each
such adjustment. Any fraction of a share resulting from any adjustment shall
be eliminated and the price per share of the remaining shares subject to this
Warrant adjusted accordingly.
Subject to the other provisions of this Warrant, the rights represented
by this warrant may be exercised by (i) surrender of this Warrant at the
principal executive office of HCMI (or such other office or agency of HCMI,
as it may designate by notice in writing to HCMI appearing on the books of
HCMI); (ii) payment to HCMI of the exercise price for the number of shares
specified together with applicable stock transfer taxes, if any; and (iii)
delivery to HCMI of a statement by the Selling Agent (in a form acceptable to
HCMI and its counsel) that such shares are being acquired by the Selling
Agent for investment and not with a view to their distribution or resale. In
lieu of any cash payment required for the exercise of this Warrant, unless
otherwise prohibited by law, the Selling Agent shall have the right at any
time and from time to time to exercise this Warrant in full or in part (i) by
receiving from HCMI the number of shares of common stock otherwise issuable
upon such exercise less the number of shares of common stock having an
aggregate Current Market Price on the date of exercise equal to the exercise
price per share multiplied by the number of shares for which this Warrant is
being exercised and/or by delivering to HCMI the number of shares of common
stock having an aggregate Current Market Price on the date of exercise equal
to the exercise price multiplied by the number of shares of common stock for
which this Warrant is being exercised. The term "Current Market Price" shall
mean (a) if the common stock is traded on the NASDAQ National Market ("NNM")
or on a national securities exchange, the per share closing price of the
common stock on the date of exercise of the Warrant or (b) if the common
stock is traded in the over-the-counter market and not in the NNM or a
national securities exchange, the average of the per share closing bid prices
of the common stock on the thirty (30) consecutive trading days immediately
preceding the date in question, as reported by the NASDAQ Small Cap Market
(or an equivalent generally accepted reporting service if quotations are not
reported on the NASDAQ Small Cap Market). The closing price referred to in
clause (a) above shall be the last reported sale price or, in case no such
reported sale takes place on such day, the average of the reported closing
bid and asked prices, in either case in the NNM or on the principal stock
exchange on which the common stock is then listed. For purposes of clause
(b) above, if trading in the common stock is not reported by the NASDAQ Small
Cap Market, the bid price referred to in said clause shall be the lowest bid
price as reported in the NASDAQ Electronic Bulletin Board or, if not reported
thereon, as reported in the "pink sheets" published by National Quotation
Bureau, Incorporated and, if such Common Stock is not so reported, shall be
the price of a share of common stock determined in good faith by HCMI's Board
of Directors.
Section 5. Representations and Warranties of HCMI. HCMI represents and
warrants to the Selling Agent that:
5
(a) The Registration Statement must be approved and the related
Prospectus must be authorized for use and declared effective by the SEC
before the Offering may commence. On such date and at all times subsequent
thereto, no order has been issued by the SEC or any other state or federal
regulatory authority preventing or suspending the use of the Prospectus, and
HCMI does not have any knowledge that any action by or before any such
government entity revoking such approval or authorization is pending or
threatened.
(b) The Prospectus and any marketing materials to be used in
connection with the Offering authorized by HCMI for use in the Offering do
not and will not, at any relevant time hereto, contain any misstatements or
untrue statement of a material factor or omit to state any 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;
provided, however, that representations or warranties in this Section 4(b)
shall not apply to statements or omissions made in reliance upon and in
conformity with written information furnished to HCMI by the Selling Agent
expressly regarding the Selling Agent for use in the Prospectus.
(c) The offer and sale of the Shares will be conducted in
accordance with all applicable laws, regulations, decisions and orders,
including all terms, conditions, requirements and provisions precedent to the
Offering imposed upon HCMI by the SEC or any other regulatory authority. To
the best of HCMI's knowledge, no person has sought to obtain review of the
final action of the SEC in approving the Registration Statement or the
Prospectus and all prior sales of Shares were properly exempt from
registration pursuant to Regulation D under the Securities Act of 1933.
(d) The Registration Statement, including the Prospectus contained
in the Registration Statement (including any amendments or supplements
thereto), comply in all material respects with the applicable regulations.
(e) HCMI is organized and validly exists as a Delaware corporation
with full power and authority to conduct its business as described in the
Prospectus.
(f) HCMI has all such power, authority, authorizations, approvals
and orders necessary to enter into this Agreement, to carry out the
provisions and conditions hereof and to issue and sell the Shares to be sold
as provided herein. The execution, delivery and performance of this
Agreement have been duly and validly authorized by all necessary corporate
action on the part of HCMI. This Agreement is the valid, legal and binding
agreement of HCMI enforceable in accordance with its terms subject to
bankruptcy, insolvency, reorganization, moratorium or other laws affecting
creditors' rights generally and the exercise of judicial discretion in
accordance with general principles applicable to equitable and similar
remedies (regardless of whether such enforceability is considered in a
proceeding at law or equity, and except as to those provisions which may be
limited by public policy).
(g) There is no litigation or pending governmental proceeding or,
to the knowledge of HCMI, threatened against, or involving the properties of
HCMI which individually or in the aggregate might materially and adversely
affect the Offering, the performance of this
6
Agreement or the condition (financial or otherwise), operations, business,
assets or properties of HCMI.
(h) The financial statements which will constitute part of the
Prospectus will fairly present the financial condition, results of
operations, changes in stockholders' equity and cash flows of HCMI at the
dates thereof and for the respective periods covered thereby and comply as to
form in all material respects with generally accepted accounting principles.
Such financial statements will be prepared in accordance with generally
accepted accounting principles consistently applied through the periods
involved, presenting fairly in all material respects the information required
to be stated therein.
(i) Except as may otherwise be stated in the Prospectus as declared
effective: (i) there has been no material adverse change, financial or
otherwise, in the condition of HCMI or in the earnings, capital or properties
of such company whether or not arising in the ordinary course of business;
(ii) there has been no material increase in any long-term debt of HCMI, nor
has HCMI issued any securities or incurred any liability or obligation for
borrowing other than in the ordinary course of business; and (iii) there have
been no material transactions entered into by HCMI except with respect to
those transactions entered into in the ordinary course of business. The
capitalization, liabilities, assets, properties and business of HCMI will
conform in all material respects to the descriptions thereof contained in the
Prospectus.
(j) HCMI is not presently in breach of, or in default (nor has an
event occurred which with notice or lapse of time or both would constitute a
default) under any indenture, mortgage, deed of trust, note, bank loan or
credit agreement or any other instrument or agreement to which HCMI is a
party or by which any of its properties may be bound or affected, except for
such breaches or defaults as will not have a material adverse effect on the
business, operations or financial condition of HCMI.
(k) Neither the execution and delivery of this Agreement, the
incurrence of the obligations herein set forth, nor the consummation of the
transactions herein contemplated will conflict with or constitute a breach of
or default under, or result in the creation or imposition of any lien, charge
or other encumbrance upon any of the properties or assets of HCMI pursuant
to: (i) HCMI's articles of incorporation; (ii) any contract, lease, loan
agreement, mortgage, note, indenture or other instrument to which HCMI is a
party or by which it may be bound, or to which any of the properties or
assets of HCMI are subject; or (iii) any applicable law, administrative
regulation or administrative or court decree, except for such conflicts,
breaches, defaults, liens, charges or other encumbrances which, with respect
to (ii) and (iii) above, will not have a material adverse effect on the
business, operations or financial condition of HCMI.
(l) Upon consummation of the Offering, the authorized, issued and
outstanding equity capital of HCMI will be, in all material respects, as set
forth in the Prospectus under the caption "Capitalization"; the Shares of
HCMI have been duly authorized by all necessary action of HCMI, and shall,
upon issuance thereof and payment therefor, be validly issued, fully paid and
nonassessable and shall conform to the description thereof contained in the
Prospectus and good title thereto shall be transferred by HCMI, free and
clear of all claims, encumbrances, security interests and liens whatsoever;
and the issuance of the Shares is not subject to preemptive rights.
7
(m) No approval or consent of any regulatory or supervisory or
other public authority is required in connection with the execution and
delivery of this Agreement or the issuance of the Shares by HCMI, except for
the approval of the SEC, issuance of the "fairness letter" from the NASD and
any necessary qualification or registration under the securities laws of the
various states in which the Shares are offered and the expiration of any
statutory waiting periods.
(n) Appropriate arrangements have been made for placing the funds
received from subscriptions for Shares in the Escrow Account at ▇▇▇▇▇▇ ▇▇▇▇▇
Bank until the Initial and any Subsequent Closing Dates, with provision for
refund to the purchasers in the event that the Offering is not completed for
whatever reason or for delivery to HCMI at the Initial Closing Date.
(o) Prior to the Offering, HCMI has not: (i) except as to the
preferred stock by HCC, had any material dealings within the 12 months prior
to the date hereof with any member of the NASD, or any person related to or
associated with such member, other than discussions and meetings related to
the proposed Offering and routine business activities; and (ii) engaged any
intermediary between the Selling Agent and HCMI in connection with the
Offering of the Shares and no person is being compensated in any manner for
such service.
Section 6. Covenants of HCMI. HCMI covenants and agrees that:
(a) HCMI shall deliver to the Selling Agent, from time to time,
such number of copies of the Prospectus as the Selling Agent may reasonably
request. HCMI authorizes the Selling Agent to use the Prospectus in
connection with the sale of the Shares.
(b) HCMI will not at any time file any amendment or supplement to
the Registration Statement or the Prospectus without so notifying the Selling
Agent before any such filing and without first providing the Selling Agent
and its counsel adequate time to review and comment on such amendment or
supplement prior to filing.
(c) HCMI will use its best efforts to cause any amendment or
supplement to the Registration Statement to be approved by the SEC and will
promptly upon receipt of any information concerning the events listed below
notify the Selling Agent and confirm the notice in writing: (i) when such
amendment or supplement has been approved; (ii) of the receipt of any
comments from the SEC or any other governmental entity for any amendment or
supplement to the Registration Statement or for additional information; (iii)
of the issuance by the SEC any other governmental entity of any order or
other action suspending the Offering or the use of the Prospectus; or (iv) of
the occurrence of any event mentioned in paragraph (d) below.
(d) If, during the period when the Prospectus is used in connection
with the offer and sale of the Shares, any event relating to or affecting
HCMI shall occur as a result of which it is necessary, in the reasonable
opinion of counsel for the Selling Agent and in the reasonable opinion of
counsel for HCMI, to amend or supplement the Prospectus in order to make the
Prospectus not false or misleading in light of the circumstances existing at
the time it is delivered to an offeree or a purchaser of the Shares, HCMI
shall, at its expense, forthwith prepare and furnish to the Selling Agent a
reasonable number of copies of amendment(s) or supplement(s) to the
Prospectus which shall amend or supplement the Prospectus so that, as amended
or supplemented, the Prospectus shall
8
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 light of
the circumstances existing at the time the Prospectus is delivered to an
offeree or a purchaser of the Shares, not misleading. For the purposes of
this subsection, HCMI shall furnish such information with respect to itself
as the Selling Agent from time to time reasonably may request.
(e) HCMI will comply in all material respects with any and all
terms, conditions, requirements and provisions with respect to the Offering
and the transactions contemplated thereby imposed by the SEC. During the
periods when the Prospectus is required to be delivered, HCMI will comply, at
its own expense, with all requirements imposed by the SEC, in each case as
from time to time in force, in accordance with the provisions hereof and the
Prospectus.
(f) HCMI shall take all reasonably necessary action to qualify or
register the Shares for offer and sale under the securities laws of such
jurisdictions as the Selling Agent and HCMI may mutually agree upon;
provided, however, that HCMI shall not be obligated to qualify as a foreign
corporation to do business under the laws of any such jurisdiction. In each
jurisdiction where such qualification or registration shall be affected,
HCMI, unless the Selling Agent agrees that such action is not necessary or
advisable in connection with the distribution of the Shares, shall file and
make such statements or reports as are, or reasonably may be, required by the
laws of each such jurisdiction.
(g) For a period of three (3) years from the date of this
Agreement, HCMI shall furnish to the Selling Agent, as soon as available, a
copy of its annual report to shareholders and, if HCMI is registered under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), reports
prepared pursuant to the Exchange Act (including, but not limited to, reports
on Forms ▇▇-▇, ▇▇-▇, ▇-▇ and/or 8); and HCMI will furnish to the Selling
Agent: (i) as soon as available, a copy of each report or definitive proxy
statement of HCMI filed pursuant to the Exchange Act or mailed to
shareholders; (ii) concurrently, a copy of any Schedule 13D filing made with
the SEC with regard to HCMI's stock; and (iii) from time to time, such other
public information concerning HCMI as the Selling Agent may reasonably
request.
(h) HCMI intends to use the net proceeds from the sale of the
Shares in the manner set forth in the Prospectus under the caption
"Application of Proceeds."
(i) HCMI will conduct its business in compliance in all material
respects with all material applicable federal and state laws, rules,
regulations, decisions, directives and orders including all decisions,
directives and orders of the SEC.
(j) HCMI shall not deliver the Shares until it has satisfied or
caused to be satisfied in all material respects each and every condition set
forth in Section 9 hereof, unless such condition is waived in writing by the
Selling Agent.
(k) No person has acted as a finder or investment advisor in
connection with the transactions contemplated herein and will indemnify the
Selling Agent with respect to any claim for any finder's fee in connection
with the Offering.
9
(l) No officer or director of HCMI is a member of the NASD or an
employee or associated member of the NASD.
(m) HCMI covenants that it has not promised or represented to any
person that any part of the Shares will be directed or otherwise made
available to them in connection with the proposed public offering.
(n) HCMI covenants that it has disclosed to the Selling Agent all
potential conflicts of interest involving HCMI officers, directors, principal
shareholders and/or employees and has disclosed all material conflicts of
interest in the Prospectus.
(o) All documents and other information relating to HCMI's affairs
will be made available upon request to the Selling Agent and its attorneys at
the Selling Agent's office or at the office of the Selling Agent's attorney
and copies of any such documents will be furnished upon request to the
Selling Agent or its attorneys.
(p) HCMI will provide the Selling Agent with unaudited monthly
financial data concerning HCMI from now until termination of the Offering.
(q) If required under applicable securities laws, HCMI will prepare
and file a Registration Statement with the SEC under the Securities and
Exchange Act of 1934, as amended, as soon as required. HCMI agrees that for
at least five (5) years after its common stock is registered under the
Securities and Exchange Act of 1934, HCMI will issue to its shareholders,
within forty-five (45) days after the end of HCMI's first three fiscal
quarters, quarterly reports containing unaudited financial information. HCMI
and the Selling Agent shall, upon HCMI becoming eligible and provided that at
least $12,000,000 has been achieved in the Offering, mutually agree upon on
an exchange or NASDAQ listing. HCMI will within one hundred twenty (120) days
from completion of the Offering apply for "listing" in Moody's
Over-the-Counter manual and maintain such "listing" on a current basis. HCMI
shall obtain a CUSIP number for its certificate and shall engage a transfer
agent acceptable to the Selling Agent.
(r) The properties owned or held under option by HCMI, the capital
structure of HCMI immediately preceding the Offering, the contemplated
dilution to the public investor , executive compensation and HCMI's business
plan shall be acceptable to the Selling Agent (whose concurrence shall not be
unreasonably withheld).
(s) Any employee (including officers' and/or directors') incentive
plan of whatever nature, presently contemplated, shall be fully disclosed in
the Registration Statement and subject to the approval of the Selling Agent.
(t) Upon the initial closing of the Offering, HCMI shall proceed to
expeditiously nominate to its Board of Directors two (2) nominees of the
Selling Agent, whose backgrounds and experience shall be reasonably
satisfactory to HCMI, to be placed upon HCMI's Board of Directors, not to
exceed nine (9) persons. HCMI shall exercise all available rights to
facilitate the election of the Selling Agent nominees. HCMI shall continue
to nominate such Selling Agent nominees until HCMI has shown operating
profits on an audited basis for two (2) consecutive years.
10
(u) The statements contained in the Registration Statement, as
amended from time to time, will be in form and content satisfactory to the
Selling Agent and to the Selling Agent's counsel, and will have been prepared
and reported on by independent certified public accountants satisfactory to
the Selling Agent.
(v) The Registration Statement and any amendments thereto will be
submitted to the Selling Agent and to the Selling Agent's counsel as soon as
possible.
(w) HCMI covenants that the content of any oral comments and copies
of all comment letters from regulatory bodies shall immediately be supplied
to the Selling Agent and its counsel.
(x) HCMI shall not obtain an effective date from the SEC or allow
the Registration Statement (or any amendment) to become effective without
prior approval of the Selling Agent.
(y) During the period of the proposed Offering and for one (1)
year from the date of the definitive Prospectus, HCMI will not sell, directly
or indirectly (such as through options), any equity or long-term debt
securities without the Selling Agent's prior written consent (which may not
be unreasonably withheld). The foregoing limitation shall not, however,
preclude HCMI from obtaining bridge financing to fund specific activities
discussed in the draft Prospectus occasioned by any delays in the SEC filing
and the opportunity costs of not proceeding in a timely enough fashion, so
long as mutually agreeable to the parties, and subject to any applicable
regulatory approval.
(z) Prior to the effective date of the Registration Statement, HCMI
will cause each of its officers and directors and shareholders who own over
five percent (5%) of HCMI's Shares outstanding prior to the effective date of
the Registration Statement to enter into an undertaking to the Selling Agent
pursuant to the terms of which each such person will agree not to sell any
Shares owned directly or indirectly by him for twelve (12) months from the
date of the definitive Prospectus without the Selling Agent's prior written
consent.
(aa) All investor leads resulting from the Offering shall be
referred to the Selling Agent.
(bb) HCMI's officers, directors and promoters will comply with the
applicable blue sky requirements, including those pertaining to the escrow of
Shares, provided such escrow shall in no event extend beyond a period of
eighteen (18) months from the Effective Date of the Registration Statement.
(cc) Subscriptions in escrow will be accepted or rejected by HCMI
within 48 hours of deposit into escrow.
(dd) As soon as practicable, HCMI shall make generally available to
its security holders and to the Selling Agent an earnings statement which
will comply with the provisions of Section 11(a) of the 1933 Act and Rule
158(a) under the Act.
11
(ee) HCMI will furnish to the Selling Agent copies of all reports to
shareholders or filing with the SEC and NASD or stock exchanges or material
press releases.
(ff) HCMI will maintain, as necessary, a transfer agent and a
registrar function (or engage a transfer agent and registrar) for the Shares.
(gg) HCMI will not make any material amendments to any employment
agreements with its executives for a period of two years after the effective
date of the Registration Statement without the concurrence of the Selling
Agent (which shall not be unreasonably withheld).
(hh) HCMI shall, as soon as practicable, take all necessary and
appropriate actions to be included in Standard & Poor's and ▇▇▇▇▇'▇ Investor
Services, Inc. manuals.
(ii) Until termination of the offering, HCMI shall not, without the
prior written consent of the Selling Agent, issue any press release, other
than trade releases issued in the ordinary course of HCMI's operations.
Section 7. Selling Agent Representations and Warranties. The Selling
Agent represents and warrants to HCMI that:
(a) All references and information concerning the Selling Agent to
be included in the Prospectus and supplied by the Selling Agent will be
accurate in all material respects and, as to the Selling Agent, will not
contain any misleading or untrue statement of a material fact or omit to
state a material fact which is required to be made or is necessary to prevent
the statements therein from being misleading.
(b) The Selling Agent is a corporation duly organized and validly
existing under the laws of the state of its incorporation, is a member in
good standing of the NASD and has full power and authority to act as
marketing agent in the manner contemplated by this Agreement and as described
in the Prospectus.
(c) The Selling Agent is in good standing and in compliance with
all applicable broker-dealer registration requirements in any jurisdiction
where the parties agree the Shares will be sold by it; and any use or
distribution of the Prospectus or any other written communications prepared
to accompany the Prospectus by the Selling Agent will comply with the terms
and conditions set forth in the Prospectus, with the procedures set forth in
this Agreement and with the Securities Act of 1933, as amended (the
"Securities Act"), the Exchange Act, all applicable state securities laws and
the rules and regulations promulgated under all such acts and laws and all
applicable rules and regulations of the NASD.
(d) The Selling Agent has and will maintain all required
governmental and regulatory approvals and licenses to perform its obligations
under this Agreement and to act as described in the Prospectus, and the
performance of its obligations under this Agreement and its acting as
described in the Prospectus will not violate or result in a material breach
of any provisions of either of its Articles of Incorporation or By-laws, or
any agreement, order, law or regulation binding upon it.
12
(e) This Agreement has been duly and validly authorized, executed
and delivered on behalf of the Selling Agent, and is a valid and binding
agreement of the Selling Agent enforceable in accordance with its terms.
Section 8. Payment of Expenses. HCMI shall bear all costs and expenses
incident to the issuance, offer, sale and delivery of the Shares, including
all expenses and fees incident to the filing of the Registration Statement
with the SEC and the NASD, the costs and counsel fees of qualification under
state securities laws, fees and disbursements of HCMI counsel and
accountants, fees and expenses of the valuation firm for the fairness
opinion, costs for preparing and printing the Registration Statement and cost
of printing as many copies of the underwriting documents and Prospectuses and
related exhibits as the Selling Agent may deem necessary, including all
amendments and supplements to the Registration Statement. In the unlikely
event that blue sky work is undertaken by counsel to the Selling Agent, it
shall be separately billed to HCMI and shall be the financial obligation of
HCMI. All other fees of Selling Agent's counsel shall be paid directly by
the Selling Agent. Other than those specifically provided in Section 3, the
Selling Agent will absorb all actual accountable out-of-pocket expenses
arising out of, in connection with, and otherwise incident to, the Offering,
including those related to any and all travel, communications, postage and
legal fees and expenses.
Section 9. Conditions of the Selling Agent's Obligations. The
obligations of the Selling Agent as provided herein shall be subject to the
accuracy of the representations and warranties contained herein as of the
date hereof and as of the Initial and any Subsequent Closing Date, to the
accuracy of the statements of officers and directors of HCMI made pursuant to
the provisions hereof, to the performance by HCMI of its obligations
hereunder and to the following conditions:
(a) At the Initial and any subsequent Closing Date, HCMI will have
completed the conditions precedent to, and shall have conducted the Offering
in all material respects in accordance with the Registration Statement and
all applicable laws, regulations, decisions and orders, including any and all
terms, conditions, requirements and provisions precedent to the Offering
imposed upon it by the SEC.
(b) At the Initial and any subsequent Closing Date, no order or
other action suspending the approval of the Registration Statement or the
consummation of the Offering shall have been issued or proceedings therefore
initiated or, to the knowledge of any of the parties, threatened by the SEC
or any state authority.
(c) At the Initial and any subsequent Closing Date, the Selling
Agent shall receive a favorable opinion of ▇▇▇▇▇▇, ▇▇▇▇ & Associates,
securities counsel for HCMI, dated the Initial Closing Date, addressed to the
Selling Agent to the effect that:
(i) HCMI is organized and validly existing as a Delaware
corporation with full power and authority to own its properties and conduct
its business as described in the Prospectus. HCMI's articles of
incorporation comply in all material respects with Delaware law.
(ii) HCMI has obtained all licenses, permits and other
governmental authorizations currently required for the conduct of its
business, except for those licenses, permits
13
and authorizations which the failure to obtain would not have a material
adverse effect on the business, operations or financial condition of HCMI.
(iii) The issuance and sale of the Shares have been duly
and validly authorized by all necessary corporate action on the part of HCMI;
and the Shares, when issued in accordance with the terms of the Prospectus
and this Agreement, will be validly issued, fully paid, nonassessable and
free of preemptive rights.
(iv) The Shares conform to the description thereof contained in
the Prospectus, and the Shares comply as to form in all material respects
with applicable legal requirements.
(v) No further approval, authorization, consent or other order
of any federal board or body besides the SEC is required in connection with
the execution and delivery of this Agreement, the issuance and sale of the
Shares and consummation of the Offering except for any necessary
qualification or registration under the securities laws of the various states
in which the Shares are to be offered.
(vi) The execution and delivery of this Agreement have been
duly and validly authorized by all necessary action on the part of HCMI; and
this Agreement is a valid and binding obligation of HCMI, enforceable in
accordance with its terms except that the enforceability of the obligations
of HCMI may be subject to bankruptcy, insolvency, reorganization, moratorium
or other laws affecting creditors' rights generally or the rights of
creditors of a saving bank, the accounts of which are insured by the FDIC
(including laws concerning fraudulent conveyance or fraudulent obligations)
and the exercise of judicial discretion in accordance with general principles
applicable to equitable and similar remedies (regardless of whether such
enforceability is considered in a proceeding at law or equity) and except as
to those provisions which may be limited by public policy, including
provisions relating to the right of a party to obtain reimbursement of its
attorneys' fees and litigation costs from another party, as to which such
counsel need express no opinion, and except as to those provisions relating
to indemnity or contribution for liabilities arising under the Securities
Act, as to which such counsel need express no opinion.
(vii) There are no material, legal or governmental
proceedings pending or threatened against HCMI; such counsel does not know of
any statutes or regulations required to be described or disclosed in the
Prospectus which are not so described or disclosed; and the description in
the Prospectus of such statutes and regulations are accurate summaries
thereof and fairly present the information required to be shown.
(viii) The statements in the Prospectus, insofar as they
constitute statements of law or legal conclusions, have been prepared or
reviewed by them and are materially correct.
(ix) Based on certificates of officers and such investigation
and verification as deemed appropriate, HCMI is presently not in breach of,
or in default (nor has an event occurred which with notice or lapse of time
or both would constitute a default) under any indenture, mortgage, deed of
trust, note, bank loan or credit agreement or any other instrument or
agreement to which HCMI is a party or by which any of its properties may be
bound or affected, except for such breaches
14
or defaults as will not have a material adverse effect on the business,
operations or financial condition of HCMI; and HCMI is not in violation of
any term or provision of its articles of incorporation or any judgment,
government authorization, injunction, license, permit, decree, order,
statute, rule, writ or regulation, except for such violations as will not
have a material adverse effect on the business, operations or financial
condition of HCMI.
(x) Neither the execution and delivery of this Agreement nor
the incurrence of the obligations herein set forth will conflict with HCMI's
articles of incorporation; (ii) constitute a breach of or default under, or
result in the creation or imposition of any lien, charge or other encumbrance
upon any of the properties or assets of HCMI pursuant to any contract, lease,
loan agreement, mortgage, note, indenture or other instrument known to such
counsel to which HCMI is a party or by which it may be bound, or to which any
of the properties or assets of HCMI are subject; or (iii) conflict with any
applicable law, administrative regulation or administrative or court decree,
except for such conflicts, breaches, defaults, liens, charges or other
encumbrances which, with respect to (ii) and (iii) above, will not have a
material adverse effect on the business, operations or financial condition of
HCMI.
(xi) At the time that the Registration Statement became
effective, the Registration Statement (as amended or supplemented) -- other
than the financial statements, notes to financial statements, financial
tables or other financial and statistical data as to which counsel need
express no opinion -- complied as to form in all material respects with
pertinent regulations. Based on conferences with and certificates of officers
of HCMI, discussions with customers and vendors and other appropriate due
diligence measures, all material documents and exhibits relating to HCMI
required to be filed with the Registration Statement (as amended or
supplemented) have been so filed. The description in the Registration
Statement and the Prospectus of such documents and exhibits is accurate in
all material respects and fairly presents the information required to be
shown. Nothing has come to such counsel's attention that caused counsel to
believe that, at the date hereof, the Registration Statement or the
Prospectus contained an untrue statement of a material fact relating to HCMI
or omitted to state a material fact relating to HCMI required to be stated
therein or necessary to make the statements therein not misleading, in light
of the circumstances under which they were made.
(d) Counsel for the Selling Agent shall have been furnished such
documents and opinions as they reasonably may require for the purpose of
enabling them to review or pass upon the matters required by the Selling
Agent, and for the purpose of evidencing the accuracy, completeness or
satisfaction of any of the representations, warranties or conditions herein
contained, including, but not limited to, resolutions of the Board of
Directors of HCMI regarding the authorization of this Agreement and the
transactions contemplated hereby.
(e) At the Initial and any subsequent Closing Date, the Selling
Agent shall receive a certificate of the President and of the chief financial
or accounting officer of HCMI, dated the Initial Closing Date, to the effect
that: (i) they have carefully examined the Prospectus and, in their opinion,
at the time the Prospectus became authorized for final use, it did 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 light of the
circumstances under which they were made, not misleading; (ii) since the date
the Prospectus became authorized for final use, no event has occurred which,
in their opinion, should
15
have been set forth in an amendment or supplement to the Prospectus which has
not been so set forth, including specifically, but without limitation, any
material adverse change in the condition, financial or otherwise, or in the
earnings, capital or properties of HCMI and, the conditions set forth in this
Section 8 have been satisfied; (iii) no order has been issued by the SEC to
suspend the Offering or the authorization for final use of the Prospectus and
no action for such purposes has been instituted or, to the best of their
knowledge, threatened by such regulatory agencies; (iv) to the best of their
knowledge, no person has sought to obtain review of the final action of the
SEC approving the Registration Statement; and (v) all of the representations
and warranties contained in Section 4 of this Agreement are true and correct,
with the same force and effect as though expressly made on the Initial
Closing Date.
(f) At or prior to the Initial Closing Date, the Selling Agent
shall receive: (i) a copy of the letter from the SEC declaring the
Registration Statement effective; and (ii) a certified copy of HCMI's
articles of incorporation.
(g) Concurrent with SEC effectiveness, the Selling Agent shall
receive a letter from BDO ▇▇▇▇▇▇▇,, LLP, certified public accountants, dated
the date hereof and addressed to the Selling Agent: (i) confirming that BDO
▇▇▇▇▇▇▇ is a firm of independent public accountants within the meaning of 12
C.F.R. Section 571.2(c)(3) under the Securities Act and no information
concerning its relationship with or interests in HCMI is required to be
disclosed in the Registration Statement, and stating in effect that in its
opinion on the consolidated financial statements of HCMI for the years ended
December 31, 1995, as included in the Prospectus and covered by their
respective opinions included therein, comply as to form in all material
respects with generally accepted accounting principles; (ii) stating in
effect that, consistent with SAS 72 and after reading the latest available
unaudited interim financial statements of HCMI, a reading of the minutes of
the meetings of the Board of Directors and consultations with officers of
HCMI responsible for financial and accounting matters, nothing came to its
attention which caused it to believe that: (a) the unaudited financial
statements included in the Prospectus, fail to comply as to form in any
material respect with generally accepted accounting principles; (b) such
unaudited financial statements are not in conformity with generally accepted
accounting principles applied on a basis substantially consistent with that
of the audited financial statements included in the Prospectus; or (c) during
the period from the date of the latest unaudited consolidated financial
statements included in the Prospectus to a specified date not more than five
business days prior to the date hereof, there was any material increase in
borrowing by HCMI.
(h) At the Initial Closing Date, BDO ▇▇▇▇▇▇▇, LLP will deliver to
the Selling Agent a letter in form and substance satisfactory to counsel for
the Selling Agent dated the Initial Closing Date, confirming the statements
made by them in the letter delivered by them pursuant to the preceding
subsection as of a specified date not more than three (3) business days prior
to the Initial Closing Date.
(i) At or prior to the Initial Closing Date, counsel to the Selling
Agent shall have been furnished with such documents and opinions as they may
reasonably require for the purpose of enabling them to evidence the accuracy
or completeness of any of the representations or warranties, or the
fulfillment of any of the conditions, herein contained; and all proceedings
taken
16
by HCMI in connection with the Offering and the sale of the Shares as herein
contemplated shall be reasonably satisfactory in form and substance to the
Selling Agent and its counsel.
(j) HCMI shall not have sustained, since the date of the latest
audited financial statements, any material loss or interference with its
business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or governmental
action, order or decree, otherwise than as set forth or contemplated in such
statements, there shall not have been any material change in the consolidated
long-term debt of HCMI or any change or any development involving a
prospective material change in or affecting the general business affairs,
management, financial position, stockholders' equity, cash flow or results of
operations of HCMI, otherwise than as set forth or contemplated in such
statements, the effect of which, in any such case described above, is in the
reasonable judgment of the Selling Agent sufficiently material and adverse as
to make it impracticable or inadvisable to proceed with the Offering or the
delivery of the Shares on the terms and in the manner contemplated in the
Prospectus.
All such opinions, certificates, letters and documents shall be in
compliance with the provisions hereof only if they are satisfactory, in their
reasonable opinion, to the Selling Agent and its counsel. Any certificates
signed by an officer or director of HCMI and delivered to the Selling Agent
or to counsel for the Selling Agent shall be deemed a representation and
warranty by HCMI to the Selling Agent as to the statements made therein. If
any condition to the Selling Agent's obligations hereunder to be fulfilled
prior to or at the Initial Closing Date is not so fulfilled, the Selling
Agent may terminate this Agreement or, if the Selling Agent so elects, may
waive any such conditions which have not been fulfilled or may extend the
time of their fulfillment.
Section 10. No Right of First Refusal. No right of first refusal
attaches to this offering.
Section 11. Registration Rights. HCMI agrees that if, at any time it
should file a Registration Statement with the SEC pursuant to the Securities
Act, HCMI, will offer, at its own expense, to the Selling Agent and its
warrantholders the opportunity to register or qualify the warrants or shares
of common stock issued upon exercise of the warrants as described in Section
4 hereof. This registration right is not applicable to a Registration
Statement filed by HCMI on Form S-8 or Form S-4.
Within the period commencing twelve (12) months and ending five (5) years
after the date of the definitive Prospectus, HCMI agrees that (upon written
request of the then holder(s) of at least 80% of the total warrants and/or
common stock issued upon the exercise of the Warrants which were originally
issued to the Selling Agent), it will file, no more than once, a Registration
Statement and all necessary amendments thereto, under the Securities Act,
registering the Shares of common stock underlying the Warrants. HCMI agrees
to use its best efforts to cause the above filing to become effective. All
expenses of such registration or qualification, including, but not limited
to, legal, accounting and printing fees, will be borne by HCMI (up to
$25,000). HCMI shall not be responsible for the cost of any separate counsel
to review the Registration Statement on behalf of or to advise the selling
shareholders.
In addition to the rights above provided, HCMI will cooperate with the
then holder(s) of the Warrants and common stock issued upon the exercise of
the Warrants in preparing and signing any
17
Registration Statement, in addition to the Registration Statement discussed
above, required in order to sell or transfer the Shares of common stock
issued upon the exercise of the Warrants and will supply all information
required therefor, but such additional Registration Statement shall be at the
then holder(s) cost and expense.
Section 12. Indemnification.
(a) HCMI agrees to indemnify and hold harmless the Selling Agent
and any of its directors, officers, employees, agents (including counsel) and
affiliates who act on behalf of HCMI and in connection with the services
called for under this Agreement, from and against any and all loss, cost,
damage, claim liability or expense of any kind, including reasonable
attorneys' fees and other expenses incurred in investigating, preparing to
defend and defending any claim or claims; provided however, that any payments
provided for in this Section 12 shall not be paid or payable by HCMI if the
Selling Agent or any of its directors, officers, employees, agents or
affiliates are found by a court to have been grossly negligent or to have
acted in bad faith in performing the services which are the subject of this
letter agreement. This indemnity shall be in addition to any liability HCMI
may have to the Selling Agent otherwise. If any action is brought against the
Selling Agent which HCMI is obligated hereby to indemnify, then the Selling
Agent promptly shall notify HCMI in writing of such action. HCMI agrees
promptly to notify the Selling Agent of the commencement of any litigation or
proceedings against it or any of its officers or directors in connection with
the sale of the Shares or in connection with the Prospectus.
(b) The Selling Agent agrees to indemnify and hold harmless HCMI,
its directors and executive officers and each person, if any, who has control
within the meaning of Section 15 of the Act or Section 20(a) of the Exchange
Act, to the same extent as the foregoing indemnity from HCMI to the Selling
Agent, but only with respect to any untrue or alleged untrue statement of a
material fact or the omission or alleged omission of a material fact required
to be stated or necessary to make not misleading any statements contained in
the Prospectus in reliance upon, and in conformity with, written information
furnished to HCMI with respect to the Selling Agent by or on the behalf of
the Selling Agent expressly for use in the Prospectus or any materially
misleading unwritten statement made to a purchaser of the Shares by any
director or officer or any person employed by the Selling Agent. If any
action is brought against HCMI or any other person the Selling Agent is
obligated hereby to indemnify, then such person promptly shall notify the
Selling Agent in writing of such action. The Selling Agent agrees promptly
to notify HCMI of the commencement of any litigation or proceedings against
the Selling Agent or any of its directors, officers or employees in
connection with the sale of the Shares or in connection with the Prospectus.
(c) Each indemnified party shall give prompt written notice to each
indemnifying party of any action, proceeding, claim (whether commenced or
threatened), or suit instituted against it in respect of which indemnity may
be sought hereunder, but failure to notify an indemnifying party promptly
shall not relieve it from any liability which it may have on account of this
Section 12 or otherwise. An indemnifying party may participate at its own
expense in the defense of such action. In addition, if it so elects within a
reasonable time after receipt of such notice, an indemnifying party, jointly
with any other indemnifying parties receiving such notice, may assume the
defense of such action with counsel chosen by it and approved by the
indemnified parties that are defendants in such action, unless such
indemnified parties reasonably object to such assumption on the ground that
there
18
may be legal defenses available to them that are different from or in
addition to those available to such indemnifying party. If an indemnifying
party assumes the defense of such action, the indemnifying party shall not be
liable for any fees and expenses of counsel for the indemnified parties
incurred thereafter in connection with such action, proceeding or claim,
other than reasonable costs of investigation. In no event shall the
indemnifying parties be liable for the fees and expenses of more than one
separate firm of attorneys (and any special counsel that said firm may
retain) for each indemnified party in connection with any one action,
proceeding or claim or separate but similar or related actions, proceedings
or claims in the same jurisdiction arising out of the same general
allegations or circumstances.
Section 13. Contribution. In order to provide for just and equitable
contribution in circumstances in which the indemnity agreement provided for
in Section 12 above is for any reason held to be unavailable to the Selling
Agent, HCMI shall agree to contribute to the aggregate losses, liabilities,
claims, damages, and expenses of the nature contemplated by Section 12 of
this Agreement incurred by HCMI or the Selling Agent (i) in such proportion
as is appropriate to reflect the relative benefits received by HCMI and the
Selling Agent from the Offering of the Shares 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 HCMI in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or judgments, as well as any other relevant
equitable considerations. The relative benefits received by HCMI and the
Selling Agent shall be deemed to be in the same proportions as the total
proceeds from the Offering (before deducting expenses) received by HCMI to
the total marketing and commission fees received by the Selling Agent under
this Agreement. The relative fault of HCMI and the Selling Agent shall be
determined by 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 HCMI or by the Selling Agent and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
HCMI and the Selling Agent agree that it would not be just and equitable
if contribution pursuant to this Section 13 were determined by pro rata
allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an indemnified party as a result of
the losses, claims, damages, liabilities or judgments referred to in the
immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or defending any
such action or claim. Notwithstanding the provisions of this Section 13, the
Selling Agent shall not be required to contribute any amount in excess of the
amount by which fees owed the Selling Agent pursuant to this Agreement
exceeds the amount of any damages which the Selling Agent has otherwise been
required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent
misrepresentation shall be entitled to contribution from any person who is
not guilty of such fraudulent misrepresentation.
Section 14. Survival of Agreements, Representations and Indemnities.
The respective indemnities of HCMI and the Selling Agent set forth in or made
pursuant to this Agreement shall remain in full force and effect, regardless
of any termination or cancellation of this Agreement or any
19
investigation made by or on behalf of any of the parties hereto and the
warranties of HCMI set forth in or made pursuant to this Agreement shall
remain in full force and effect, regardless of any termination or
cancellation of this Agreement or any investigation made by or on behalf of
any of the parties hereto or any controlling person, and shall survive the
termination date of this Agreement. Any legal representative, successor or
assign of the Selling Agent or HCMI, and any such controlling person shall be
entitled to the benefit of the respective agreements, indemnities, warranties
and representations.
Section 15. Termination.
(a) The Selling Agent and HCMI shall each have the right to
terminate this Agreement at any time prior to the Initial Closing Date if any
domestic or international event or act or occurrence has materially
disrupted, or in such party's good faith opinion will in the immediate future
materially disrupt, the securities markets; or if trading on the New York
Stock Exchange shall have been suspended for more than 24 hours, or minimum
or maximum prices for trading shall have been fixed, or maximum ranges for
prices for securities shall have been required, on the New York Stock
Exchange, by the New York Stock Exchange or by the order of the Securities
and Exchange Commission or any other governmental authority having
jurisdiction; or if the United States shall have become engaged or continues
to be engaged in a war or major hostilities if the effect of such war or
hostilities, in such party's reasonable judgment, makes it impracticable or
inadvisable to proceed with the offering; of the Shares on the terms and in
the manner contemplated by the Prospectus; or if a banking moratorium has
been declared by a state or federal authority; or if a moratorium in foreign
exchange trading by major international banks or persons has been declared;
or if HCMI shall have sustained a material loss by fire, flood, accident,
hurricane, earthquake, threat, sabotage or other calamity or malicious act,
whether or not covered by insurance, which in such party's good faith
opinion, will make it inadvisable to proceed with the Offering, or if there
shall have been such material adverse change in the condition or prospects of
HCMI or the prospective market for the HCMI's securities as in such party's
good faith opinion would make it inadvisable to proceed with the offering,
sale or delivery of the Shares; or if in such party's good faith opinion the
price for the Shares is not reasonable or equitable under then prevailing
market conditions; or if any other party has breached in any material respect
the representations, warranties or covenants contained in the Agreement.
(b) Selling Agent reserves the right in its uncontrolled discretion
to determine whether the Offering can be successfully marketed through a
placement agent group and may, without any obligation to HCMI, for any
reason, including, without limiting the generality of the foregoing, market
conditions (both those relating to securities and commodities generally and
those relating to HCMI's stock) and the reaction of prospective members of
the selling group to the proposed offering, decline to proceed further with
the Offering. If Selling Agent has terminated its services, any commitment
relating to compensation (other than legal fees), advisor agreements,
warrants and other executory rights shall become null and void.
(c) Should HCMI be unable to obtain blue sky clearance without
significant suitability restrictions in the major proposed marketing
jurisdictions, or NASD clearance or SEC effectiveness is not obtained on or
before, March 31, 1998, the Selling Agent may elect to terminate the Offering.
20
(d) Should a mutually agreeable valuation firm independent of HCMI
be unable to issue a fairness opinion confirming that the five dollar ($5)
per share price to the public shareholders is fair, the Selling Agent may
elect to terminate the Offering.
(e) If any party elects to terminate this Agreement as provided in
this Section 15, the other parties shall be notified promptly by the party
terminating this Agreement by telephone or telegram, confirmed by letter.
Section 16. Notices. All communications hereunder, except as herein
otherwise specifically provided, shall be in writing and if sent to the
Selling Agent shall be mailed, delivered or telegraphed and confirmed to
Northridge Capital Corporation (with a copy to its counsel, Attn: ▇▇▇▇ ▇▇▇▇▇,
Esq., ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ -- ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇).
Section 17. Parties. HCMI shall be entitled to act and rely on any
request, notice, consent, waiver or agreement purportedly given on behalf of
the Selling Agent when the same shall have been given by the undersigned.
The Selling Agent shall be entitled to act and rely on any request, notice,
consent, waiver or agreement purportedly given on behalf of HCMI, when the
same shall have been given by any officer. This Agreement shall inure solely
to the benefit of, and shall be binding upon, the Selling Agent and HCMI.
Section 18. Closings. The initial closing for the sale of the Shares
shall take place on a business day to be agreed upon by the parties hereto at
the offices of ▇▇▇▇▇▇, ▇▇▇▇ & Associates or such other location as mutually
agreed upon by the Selling Agent and HCMI (the "Initial Closing Date").
Subsequent closings will occur during the Continuous Offering Period on the
date that $250,000 in subscriptions are accepted or at each month-end,
whichever first occurs (each constituting a "Subsequent Closing Date"). At
each closing, HCMI shall deliver to the Selling Agent in next day funds the
commissions due and owing to the Selling Agent as set forth herein and the
opinions and certificates required hereby and other documents deemed
reasonably necessary by the Selling Agent shall be executed and delivered to
effect the sale of the Shares as contemplated hereby and pursuant to the
terms of the Prospectus.
Section 19. Partial Invalidity. In the event that any term, provision
or covenant herein or the Registration Statement thereof to any circumstance
or situation shall be invalid or unenforceable, in whole or in part, the
remainder hereof and the Registration Statement of said term, provision or
covenant to any other circumstance or situation shall not be affected
thereby, and each term, provision or covenant herein shall be valid and
enforceable to the full extent permitted by law.
Section 20. Construction. This Agreement shall be construed in
accordance with the laws of the State of Georgia.
Section 21. Counterparts. This Agreement may be executed in separate
counterparts, each of which when so executed and delivered shall be an
original, but all of which together shall constitute but one and the same
instrument.
21
Section 22. Entire Agreement. This Agreement shall constitute the
entire agreement of the parties and shall supersede any and all prior or
contemporaneous understandings or arrangements with regard to the subject
matter hereof.
If the foregoing correctly sets forth the understanding between the
Selling Agent and HCMI, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement
between us.
Very truly yours,
______________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
President and Chief Executive Officer
Heartland Communications & Management, Inc.
Accepted as of the date first written above
NORTHRIDGE CAPITAL CORPORATION
By:
▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, President
22