GEEKS ON CALL HOLDINGS, INC. (a Delaware corporation) Private Placement of Units Constituting of Common Stock and Warrants to Purchase Common Stock $2,000,000 Minimum $6,000,000 Maximum PLACEMENT AGREEMENT August 8, 2008
EXHIBIT
10.22
(a
Delaware corporation)
Private
Placement of Units Constituting of Common Stock
and
Warrants to Purchase Common Stock
$2,000,000
Minimum
$6,000,000
Maximum
August
8, 2008
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& ▇▇▇▇▇▇▇▇▇, Incorporated
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▇▇▇▇ ▇▇▇▇▇▇
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▇▇▇▇▇▇▇▇,
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Ladies
and Gentlemen:
The
undersigned, Geeks On Call Holdings, Inc., a Delaware corporation (the
“Company”), hereby confirms its agreement with you, acting as placement agent
(the “Placement Agent”) as follows:
1. Introduction.
This
Agreement sets forth the understandings and agreements between the Company
and
you whereby, subject to the terms and conditions herein contained, you will
offer to sell, on a “best efforts basis” on behalf of the Company (the
“Offering”), a minimum of $2,000,000 (the “Minimum Offering”) and a maximum of
$6,000,000 of Units (the “Units”) (subject to the increases described in Section
4(a) below), at a price of $20,000 per Unit. Each Unit will be comprised of
the
number of shares funded by the issue price per share of the Company’s common
stock, $0.001 par value per share (“Common Stock”), and a warrant to purchase
one-half of one share of Common Stock (each, a “Warrant”) for each share of
Common Stock purchased, on the terms more fully described in that certain
Private Placement Memorandum including the exhibits thereto which is attached
hereto as Exhibit A (the “PPM”). “PPM” means, with respect to any date or time
referred to in this Agreement, the Private Placement Memorandum, as then amended
or supplemented and including exhibits thereto and any documents incorporated
therein by reference, which has as of that date or time been delivered to the
Placement Agent. The Common Stock and the Warrants are hereinafter collectively
referred to herein as “Securities”. Capitalized terms used herein and not
otherwise defined herein shall have the meanings ascribed to them in the PPM.
For the purposes of this Agreement, unless the context otherwise requires,
the
term “Company” shall be deemed to also include each of the Company’s
subsidiaries.
2. Representations
and Warranties of the Company.
The
Company makes the following representations and warranties to you as of the
date
hereof, unless specifically indicated below.
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(a) PPM.
The
Company has prepared the PPM. The PPM, as of its date, did 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 light of
the
circumstances under which they were made, not misleading; provided, however,
that this representation and warranty shall not apply to any untrue statement
of
a material fact contained in the PPM, or an amendment or supplement thereto,
or
the omission to state a material fact necessary to make the statements therein
not misleading, to the extent that such untrue statement or omission was made
in
the PPM, or an amendment or supplement thereto, in reliance upon and in
conformity with written information furnished to the Company by you expressly
for use therein. On each Closing Date (as hereinafter defined), the PPM will
not
contain any untrue statement of a material fact or omit to state a material
fact
required to be stated therein or necessary in order to make the statements
therein not misleading.
(b) Organization
and Qualification.
The
Company has been duly incorporated and is validly existing as a corporation
in
good standing under the laws of the State of Delaware, with power and corporate
authority to own its properties and conduct its business as described in the
PPM. Each of the Company’s subsidiaries has been duly formed and is validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, with power and authority to own or lease its properties and
conduct its business as described in the PPM. The Company and each of its
subsidiaries are duly qualified to transact business and in good standing in
all
jurisdictions in which the conduct of their business requires such
qualifications, except for such jurisdictions where the failure to so qualify
or
be in good standing would not, individually or in the aggregate, result in
any
material adverse effect, or any development involving a prospective material
adverse change or effect, in or on the business, prospects, financial position,
stockholders’ equity or results of operations of the Company (a “Material
Adverse Effect”).
(c) Validity
of Units.
The
Company has authorized the issuance and sale of the Units as described in the
PPM. With the exception of applicable federal and state securities filings
to be
made by the Company, all action required to be taken by the Company as a
condition to the Offering and sale of the Units to qualified accredited
investors (as such term is defined in Rule 501 under the Securities Act of
1933,
as amended (the “Securities Act.”)) has been, or prior to the applicable Closing
Date, will have been taken. The Units conform to the description thereof
contained in the PPM.
(d) Capitalization.
The
authorized, issued and outstanding capital stock of the Company as of the date
of the PPM is as set forth in the PPM under the heading “Capitalization”. All of
the issued and outstanding equity securities have been duly authorized, validly
issued, fully paid and are non-assessable, and, except as more fully described
in the PPM, no holder of such shares has any preemptive
rights to purchase any capital stock securities of the Company. Except as
disclosed in the PPM, there is no outstanding option, warrant or other right
calling for the issuance of, and no commitment, plan or arrangement to issue,
any shares of capital stock of the Company or any security convertible into
or
exchangeable for capital stock of the Company. Upon issuance, the shares of
Common Stock issued in the Offering will be validly issued, fully paid and
non-assessable. Upon issuance, the shares of Common Stock underlying the
Warrants (the “Warrant Shares”) will be validly issued, fully paid and
non-assessable.
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(e) Full
Power.
The
Company has full power and authority to enter into this Agreement and to issue
and deliver the Units, the Common Stock, the Warrants, and the Warrant Shares
as
provided herein and in the PPM and to consummate the transactions contemplated
herein. This Agreement has been duly authorized, executed and delivered by
the
Company and is a valid and binding agreement of the Company, enforceable in
accordance with its terms, except to the extent that enforceability may be
limited by (i) bankruptcy, insolvency, moratorium, liquidation, reorganization,
or similar laws affecting creditors’ rights generally, regardless of whether
such enforceability is considered in equity or at law, (ii) general equity
principles and (iii) limitations imposed by federal and state securities laws
or
the public policy underlying such laws regarding the enforceability of
indemnification or contribution provisions.
(f) Disclosed
Agreements.
All
agreements between or among the Company and third parties expressly referenced
in the PPM and as disclosed to the SEC under the Securities Exchange Act of
1934, as amended (the “Exchange Act”) are legal, valid, and binding obligations
of the Company, enforceable in accordance with their respective terms, except
to
the extent enforceability may be limited by (i) bankruptcy, insolvency,
moratorium, liquidation, reorganization, or similar laws affecting creditors’
rights generally, regardless of whether such enforceability is considered in
equity or at law and (ii) general equity principles.
(g) Enforceability
of Warrants.
Upon
issuance, each of the Warrants will have been duly authorized, validly executed,
and delivered on behalf of the Company, and will constitute a legal, valid,
and
binding obligation of the Company enforceable in accordance with its terms,
except to the extent enforceability may be limited by (i) bankruptcy,
insolvency, moratorium, liquidation, reorganization, or similar laws affecting
creditors’ rights generally, regardless of whether such enforceability is
considered in equity or at law, and (ii) general equity principles.
(h) Consents.
Each
consent, approval, authorization, order, license, certificate, permit,
registration, designation or filing by or with any governmental agency or body
or any other third party necessary for the valid authorization, issuance, sale,
and delivery of the Units, the Common Stock, the Warrants, and the Warrant
Shares, the execution, delivery and performance of this Agreement and the
consummation by the Company of the transactions contemplated hereby and by
the
PPM has been, or prior to the applicable Closing Date will have been, made
or
obtained and is, or prior to the applicable Closing Date will be, in full force
and effect, except for securities filings required to be made in accordance
with
applicable law.
(i) Litigation.
There
is no pending or, to the knowledge of the Company, threatened or contemplated,
action, suit, proceeding, inquiry, or investigation before or by any court
or
any federal, state, or local governmental authority or agency to which the
Company may be a party, or to which any of the properties or rights of the
Company may be subject, that is not described in the PPM and that might (i)
result in a Material Adverse Effect or (ii) adversely affect the consummation
of
the transactions contemplated by this Agreement.
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(j) Financial
Statements and Current Reports.
Since
February 13, 2008, the Company has filed all reports, schedules, forms,
statements and other documents required to be filed by it with the SEC pursuant
to the reporting requirements of the Exchange Act (all of the foregoing filed
prior to the date hereof and all exhibits included therein and financial
statements, notes and schedules thereto and documents incorporated by reference
therein being hereinafter referred to as the “SEC Documents”). As of their
respective filing dates, the SEC Documents complied in all material respects
with the requirements of the Exchange Act and the rules and regulations of
the
SEC promulgated thereunder applicable to the SEC Documents, and none of the
SEC
Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required to
be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. As of
their respective filing dates, the financial statements of the Company included
in the SEC Documents complied as to form in all material respects with
applicable accounting requirements and the published rules and regulations
of
the SEC with respect thereto. Such financial statements have been prepared
in
accordance with generally accepted accounting principles, consistently applied,
during the periods involved (except (i) as may be otherwise indicated in such
financial statements or the notes thereto, or (ii) in the case of unaudited
interim statements, to the extent they may exclude footnotes or may be condensed
or summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case
of
unaudited statements, to normal year-end audit adjustments).
(k) Disclosed
Liabilities.
The
Company has not sustained any material loss or interference with its business
from fire, explosion, flood, hurricane, accident, or other calamity, whether
or
not covered by insurance, or from any labor dispute or arbitration, court or
governmental action, order, or decree, otherwise than as set forth or
contemplated in the PPM. Since the respective dates as of which information
is
given in the PPM, and except as otherwise stated in the PPM, there has not
been
(i) any material change in the capital stock, long-term debt, obligations
under capital leases, or short-term borrowings of the Company, (ii) any
event that would constitute a Material Adverse Effect, (iii) any liability
or obligation, direct or contingent, incurred or undertaken by the Company
that
is material to the business or condition (financial or other) of the Company,
except for liabilities or obligations incurred in the ordinary course of
business, (iv) any declaration or payment of any dividend or distribution
of any kind on or with respect to the capital stock of the Company, or
(v) any transaction that is material to the Company, except transactions in
the ordinary course of business.
(l) Required
Licenses and Permits.
The
Company owns, possesses, has obtained or in the ordinary course of business
will
obtain, and has made available for your review (or will make available for
your
review as requested),all material permits, licenses, franchises, certificates,
consents, orders, approvals, and other authorizations of governmental or
regulatory authorities as are necessary to own or lease, as the case may be,
and
to operate its properties and to carry on its business as presently conducted,
or as contemplated in the PPM to be conducted (collectively, the “Permits”), and
the Company has not received any notice of proceedings relating to revocation
or
modification of any such Permits.
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(m) Internal
Accounting Measures.
The
Company has established and maintains disclosure controls and procedures (as
such term is defined in Rules 13a-15 and 15d-15 under the Exchange Act), which
are effective in all material respects to perform the functions for which they
were established. There (i) are not any significant deficiencies in the design
or operation of internal controls which could affect the Company’s ability to
record, process, summarize, and report financial data in a manner that would
reasonably be expected to have a Material Adverse Effect and (ii) has not been
any fraud, whether or not material, that involves management or other employees
who have a significant role in the Company’s internal controls. Since the date
of the most recent evaluation of the Company’s disclosure controls and
procedures, there have been no material changes in internal controls or in
other
factors that could significantly affect internal controls, including any
corrective actions with regard to significant deficiencies and material
weaknesses. The Company is in compliance with all applicable provisions of
the
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002, except where non-compliance would not reasonably
be
expected to have a Material Adverse Effect.
(n) Taxes.
The
Company has timely filed all required federal and state tax returns (taking
into
account any applicable extensions) and paid all taxes that have become due.
No
tax deficiency has been asserted against the Company. The Company does not
know
of tax deficiencies that are likely to be asserted against the Company that,
if
determined adversely to the Company, would reasonably be expected, either
individually or in the aggregate, to have a Material Adverse Effect. All tax
liabilities are adequately provided for on the books of the
Company.
(o) Compliance
with Instruments.
The
execution, delivery and performance of this Agreement, the compliance with
the
terms and provisions hereof, and the consummation of the transactions
contemplated herein and in the PPM by the Company do not and will not violate
or
constitute a breach of, or default under (i) the governing documents of the
Company or any of its subsidiaries; (ii) any of the terms, provisions, or
conditions of any material instrument, agreement, or indenture to which the
Company is a party or by which it is bound or by which its business, assets,
investments or properties may be affected; or (iii) any order, statute, rule,
or
regulation of any court or any federal, state or local governmental authority
or
agency having jurisdiction over the Company. To the knowledge of the Company,
the execution, delivery and performance of this Agreement, the compliance with
the terms and provisions hereof, and the consummation of the transactions
contemplated herein do not and will not result in the creation or imposition
of
any lien, charge, claim, or encumbrance upon any property or asset of the
Company.
(p) Insurance.
The
Company maintains insurance (issued by insurers of recognized financial
responsibility) of the types and in the amounts generally deemed adequate by
management for its business, all of which insurance is in full force and
effect.
(q) Work
Force.
To the
knowledge of the Company, no general labor problem exists or is imminent with
the employees of the Company which would reasonably be expected to have a
Material Adverse Effect.
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(r) Investment
Company Act.
The
Company is not an “investment company” or an entity that “controls” or is
“controlled by” an “investment company,” as such terms are defined under the
Investment Company Act of 1940, as amended.
3. Representations
and Warranties of Placement Agent.
You, as
Placement Agent, represent and warrant to the Company that:
(a) Organization.
You
have been duly incorporated and are validly existing as a corporation in good
standing under the laws of the Commonwealth of Virginia with power and corporate
authority to enter into this Agreement and to provide the services to be
furnished to the Company hereunder.
(b) Broker-Dealer
Registration.
You are
a member, in good standing, of the Financial Industry Regulatory Authority
(“FINRA”), are duly registered as a broker-dealer under the Exchange Act, and
under the laws of each state in which you propose to offer the Units, except
where such registration would not be required by law, and you and your
employees, agents and representatives who shall perform any of the services
required to be performed by you hereunder have all licenses, approvals and
permits necessary to perform such services.
(c) Authorization.
This
Agreement has been duly authorized, validly executed and delivered by you and
is
a valid and binding agreement of the Placement Agent, enforceable in accordance
with its terms, except to the extent that enforceability may be limited by
(i)
bankruptcy, insolvency, moratorium, liquidation, reorganization, or similar
laws
affecting creditors’ rights generally, regardless of whether such enforceability
is considered in equity or at law, (ii) general equity principles, and (iii)
limitations imposed by federal and state securities laws or the public policy
underlying such laws regarding the enforceability of indemnification or
contribution provisions.
(d) Distribution
of PPM Supplements.
Until
the termination of this Agreement, if any event affecting the PPM, the Company
or you shall occur which, in the opinion of counsel to the Company, should
be
set forth in a supplement to the PPM, you agree to distribute each supplement
of
the PPM to each person who has previously received a copy of the PPM from you
and you further agree to include such supplement in all future deliveries of
the
PPM. Neither you nor any person associated with you has provided or shall
provide to any investor any information regarding the Company which is not
included in the PPM.
(e) “Accredited
Investors”.
You
represent that prior to offering the Units to an investor, you have had and
shall have reasonable grounds to believe, on the basis of information obtained
from the investor, that the investor is an “accredited investor” (as such term
is defined in Rule 501 under the Securities Act).
(f) No
General Advertising or General Solicitation.
You
represent that you have not engaged and will not engage in general advertising
or general solicitation within the meaning of Rule 502(c) under the Securities
Act, or otherwise have engaged or will engage in any activities which would
render unavailable to the Company an exemption from (i) the registration
requirements of the Securities Act, pursuant to Section 3(b) or 4(2) thereof
or
Regulation D thereunder, and (ii) the securities laws of any state or
other jurisdiction in which the Units are offered or sold.
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(g)
Offering
Documents and Communications.
You
have not and will not make an offer of Units (or of any securities, the offering
of which may be integrated with the Offering) on the basis of any communications
or documents relating to the Company or the Units except the PPM and the
exhibits thereto and documents described or referred to therein (including
the
subscription materials). Without limiting the generality of the foregoing,
you
have not and will not make any representation as to any rate of return on
investment that an offeree may obtain from the ownership of the Securities
other
than as set forth in the PPM. You will deliver a copy of the PPM to each
prospective investor solicited by you prior to such offeree’s execution of the
subscription documents or, in the case of amendments or supplements to the
PPM
(other than those amendments and supplements approved in writing by the Company
but designated in writing as not subject to this requirement), prior to such
offeree’s execution of an acknowledgment of receipt of such amendment or
supplement and reconfirmation of intent to subscribe.
(h) No
“Underwriters”.
You
will exercise reasonable care to determine that prospective Investors are not
“underwriters” within the meaning of Section 2(11) of the Securities Act, and in
that connection will obtain from each investor purchasing Securities in the
Offering duly executed subscription documents, in the forms attached to the
PPM
or otherwise provided to you by the Company and approved by you and your
counsel.
(i) Absence
of Proceedings.
No
action or proceeding against the Placement Agent before the SEC, FINRA, any
state securities commission, or any state or federal court is pending or, to
the
Placement Agent’s knowledge, threatened concerning the Placement Agent’s
activities as a registered and licensed broker-dealer which could reasonably
be
expected to limit the ability of the Placement Agent to perform its obligations
under this Agreement.
4. Sale
of Units.
(a) Exclusive
Agency.
The
Company hereby appoints you as its exclusive agent to offer for sale, and hereby
agrees to sell during the Offering Period (as defined in Section 4.(c)), a
minimum of $2,000,000 and a maximum of $6,000,000 of Units on the terms more
fully described in the PPM. It is understood and agreed that you may increase
the maximum size of the Offering at any time and from time to time by 15% at
your sole discretion to cover any over-allotments. In addition, the Company
and
you may increase the maximum size of the Offering upon mutual consent based
upon
the market conditions prevailing at the time and any such change would be
documented in an amendment to this Agreement. You may engage other
brokers/dealers and syndicators selected by you to assist you in the Offering
(each such broker/dealer and syndicator being hereinafter referred to as a
“Selling Group Member”), subject to the conditions set forth herein and such
Selling Group Member’s agreement to make such representations and warranties to,
and covenants and agreements with, the Company (including an agreement to
indemnify the Company on terms substantially similar to Section 8 below) as
provided herein. You may allow such Selling Group Member such part of the
compensation and payment of expenses payable to you under Section 4.(e) below
as
you shall determine, provided that the Company shall have no obligation to
pay
any fee or other consideration to you or any Selling Group Member other than
as
provided in Section 4.(e) below. Any such broker/dealer shall be a member firm
in good standing as a broker-dealer under the rules of FINRA. The Company hereby
agrees to make such representations and warranties to, and covenants and
agreements with, any Selling Group Member (including an agreement to indemnify
such Selling Group Member on terms substantially similar to Section 8 below)
as
provided herein. On the basis of the representations and warranties herein
contained, but subject to the terms and conditions herein set forth, you accept
such appointment and agree to use your best efforts as agent to offer the Units
for sale for the account of the Company, on a cash basis only. Nothing contained
herein shall be construed in any way as precluding or restricting your right
to
sell or offer for sale securities issued by any other person, including
securities similar to, or competing with, the Units. It is understood between
the parties that there is no firm commitment by you to purchase any or all
of
the Units.
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(b) Obligation
to Offer Units.
Your
obligation to offer the Units is subject to the absence of any prohibitory
action by any governmental body, agency, or official, and is subject to the
terms and conditions contained in this Agreement and in the PPM.
(c) Offering
Termination Date.
The
“Offering Period” shall commence on the day that the PPM is first made available
to prospective investors in connection with the offering for sale of the Units
and shall continue until the “Offering Termination Date,” which shall be the
earlier of (i) the date $6,000,000 in aggregate principal amount of the Units
have been sold, (ii) October 11, 2008, unless extended by mutual agreement
to a
date no later than December 31, 2008, or (iii) an earlier termination date
as
determined pursuant to Section 10 hereof.
(d) Closing
Date.
The
Company and you agree that the Offering may close in several tranches (each
a
“Closing”) following the satisfaction of the Minimum Offering. As and when any
Closing is effected, each of which shall be on a date (each, a “Closing Date”)
(i) on or before the Offering Termination Date when proceeds from the Units
sold
are received and accepted and (ii) at such time and place as determined by
agreement between the Company, you and prospective investors (which
determination shall be subject to the satisfaction on such date of the
conditions contained herein), the funds received from investors will be
delivered by [SunTrust Bank] (the “Escrow Agent”) to the Company, by wire
transfer of immediately available funds, except for the placement fees payable
to you pursuant to the provisions of Section 4.(e) of this Agreement which
shall
be delivered by the Escrow Agent to you.
(e) Placement
Fee.
In
consideration for your execution of this Agreement and for the performance
of
your obligations hereunder, the Company and you agree as follows:
(i) The
Company has paid to you a non-refundable advisory fee of $5,000.
(ii) On
each
Closing Date, the Company shall pay you, as provided in Section
4.(d) above, a placement fee computed at the rate of 10.0% of the purchase
price
of the Units sold by you, provided, however, such amount shall be reduced to
4.0% of the purchase price of Units sold by you to certain existing shareholders
of the Company, identified on Exhibit B hereto, who have an a right to
participate in the Offering (collectively, the “Participating Shareholders”).
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(iii) During
the term of the Warrants and upon the exercise of a Warrant, the Company shall
pay you a warrant fee (“Warrant Fee”) equal to 2.5% of the exercise price of the
exercised Warrants (other than Placement Agent Warrants (as hereinafter
defined)), provided, however, such amount shall be reduced to 1.0% of the
exercise price of Warrants exercised by Participating Shareholders. Such fee
shall be payable within five business days of receipt by the Company of the
exercise price from a holder of the Warrants. The Warrant Fee shall be payable
in accordance with the applicable rules of FINRA and the form of Warrants
issuable to investors shall include an appropriate disclosure regarding payment
of the Warrant Fee upon terms acceptable to the Placement Agent.
(iv)
The
Company will issue to you warrants (the “Placement Agent Warrants”), to purchase
a number of shares of Common Stock equal to 8.0% of the number of shares of
Common Stock issued in
the
Offering (provided however, that such percentage shall be reduced to 3.20%
with
respect to the shares of Common Stock issued to Participating Shareholders
in
the Offering). The Placement Agent Warrants shall have the terms provided for
in
the form of Placement Agent Warrant attached hereto as Exhibit C.
(f) Delivery
of Units.
Delivery of the securities underlying the Units on each Closing Date shall
be
made at such place as shall be agreed upon by the Company and you prior to
each
Closing Date.
(g) No
Registration. The
Offering will be made pursuant to the PPM. The Securities will not be registered
under the Securities Act, but will be issued in reliance on the private offering
exemption available under Section 3(b) or 4(2) of the Securities Act and the
Rules and Regulations (as defined below) promulgated thereunder, including
Regulation D. You understand that all subscriptions for Units are subject to
acceptance by the Company in its sole discretion. The Company reserves the
right
in its discretion to accept or reject any or all subscriptions for Units, in
whole or in part, regardless whether any funds have been deposited into an
escrow account. Any subscription monies received by you from investors will
be
handled in accordance with Rule 15c2-4 under the Exchange Act, whether or not
you are subject to the Exchange Act, and as otherwise may be prescribed by
the
terms of the PPM. As used herein, the term “Rules and Regulations” means the
applicable rules and regulations promulgated under the Securities Act and the
Exchange Act.
(h) Solicitation
Prohibition.
The
Company agrees that, for a period of 12 months from the final Closing Date
of
the Offering, it shall not directly or indirectly, solicit offers to buy or
sell
any securities of the Company or any other entity from or to any Source(s)
(as
defined below) contacted by you who purchases Units in connection with the
Offering, or provide the name of any such person to any securities broker or
dealer or selling agent. In the event that the Company directly or indirectly
solicits, offers to buy from or offers to sell to any Sources any securities
of
the Company or provides the names of any Sources to any securities broker or
dealer or selling agent, and such Source purchases securities from any other
securities broker, dealer or selling agent, the Company shall pay to you a
cash
fee in an amount equal to 10% of the aggregate purchase price of the securities
so purchased by such Source. As used herein, “Source” shall mean (i) any
corporation, company, institution, partnership, individual that is directly
or
indirectly contacted by you for the purpose of investing in the Offering and
(ii) named in a written list provided by you to the Company prior to the final
Closing. The provisions of this Subsection (h) shall survive termination of
this
Agreement.
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(i) Advertising.
After
the final Closing, the Placement Agent shall have the right to place “tombstone”
advertisements in newspapers and journals, at the Placement Agent’s own expense,
describing its services to the Company under this Agreement, provided that
each
such advertisement is subject to prior approval by the Company which will not
be
unreasonably withheld.
5.
Expenses.
(a)
Company
Expenses.
The
Company will pay all expenses incident to the performance of its obligations
under this Agreement, including, without limitation, (i) the cost of obtaining
regulatory approvals, if any; (ii) the cost of preparation of this Agreement
and
such other documents as may be required in connection with the offering, sale
and delivery of the Units; (iii) the cost of preparing, including printing
and
distributing, the PPM; (iv) the costs of blue sky qualification of the Units
pursuant to Section 6.(a)(v) hereof; and (v) all fees and disbursements of
the
Company’s counsel, accountants, agents and other advisors. In the event the
Placement Agent incurs prior to the Offering Termination Date any such fees
and
expenses on behalf of the Company, the Company will reimburse the Placement
Agent for such reasonably incurred and documented fees and expenses whether
or
not the transactions contemplated hereby are consummated.
(b)
Placement
Agent Expenses.
In
addition to the expenses to be borne by the Company under paragraph (a) above,
the Company shall reimburse the Placement Agent upon request made from time
to
time, but no less often than monthly, for its reasonable and documented
out-of-pocket expenses, including, without limitation, legal fees and expenses
not to exceed $35,000 without the Company’s prior approval, which approval will
not be unreasonably withheld, for accountable legal expenses incurred prior
to
the Offering Termination Date in connection with its engagement hereunder
regardless of whether the Offering is consummated, and further including,
without limitation, promotional and travel expenses (but excluding charter
air
travel).
6. Covenants.
(a) Covenants
of the Company.
The
Company covenants with you as follows:
(i) Notices.
The
Company promptly will notify you, and confirm such notice in writing, (A) of
any
fact that would make materially inaccurate any representation or warranty by
the
Company and (B) of any change in facts on which your obligation to perform
under
this Agreement is dependent.
10
(ii) Delivery
of PPM.
The
Company will deliver to you at its expense, from time to time, such number
of
copies of the PPM and supplements and amendments thereto, if any, as you may
reasonably request; it being agreed that you will not provide the PPM to any
third party after the Offering Termination Date, except as required by
law.
(iii) Application
of Net Proceeds.
The
Company will apply the net proceeds received from the sale of the Units in
all
material respects as set forth in the PPM.
(iv) Cooperation
with Your Due Diligence.
At all
times prior to the Offering Termination Date, the Company will cooperate with
you in such investigation as you may make or cause to be made of all the
business and operations of the Company in connection with the sale of the Units,
and will make available to you in connection therewith such information in
its
possession as you may reasonably request, all of which you agree to safeguard
as
the confidential information of the Company and to refrain from using for any
purpose adverse to interests of the Company.
(v) Blue
Sky Qualification.
The
Company, in good faith and in cooperation with you, will use commercially
reasonable efforts to establish an exemption of the Units from registration
or
qualification for offering in sale under the “blue sky” or securities laws in
such jurisdictions as you from time to time may reasonably designate.
(b) Your
Covenants.
You
covenant with the Company as follows:
(i) You
have
not provided and will not provide to the purchasers of Units any written or
oral
information regarding the business of the Company, including any representations
regarding the Company’s financial condition or financial prospects, other than
such information as is contained in the PPM.
(ii)
Pursuant
to its appointment in this Agreement, the Placement Agent will use its best
efforts as agent for the Company in the Offering in a manner intended to be
in
compliance with the offering procedures set forth in the PPM.
(iii) Any
subscription monies received by the Placement Agent from investors will be
handled in accordance with the requirements of Rule 15c2-4 under the Exchange
Act, whether or not you are subject to the Exchange Act, and as otherwise may
be
prescribed by the terms of the PPM.
(iv) The
Placement Agent will promptly (and in any event not later than the next business
day after it becomes aware of such information or occurrence) notify the Company
(and confirm any oral notice in writing) of the issuance by any court, state
securities administrator or other agency of competent jurisdiction of any stop
order preventing or suspending the use of the PPM or the sale of the Units,
or
the suspension of qualification of the Units for offering or sale in any
jurisdiction, or the initiation or contemplation of any proceeding for such
purposes.
11
(v)
The
Placement Agent will maintain in confidence any confidential or proprietary
information (“Confidential Information”), whether oral or written or in
electronic or any other format, including financial, commercial, market, or
customer data, business techniques or strategies, and/or know-how (in whatever
format such information may exist or shall exist), whether disclosed by the
Company or the Company’s agents to the Placement Agent or the Placement Agent’s
agents or learned or observed by the Placement Agent or the Placement Agent’s
agents as a consequence of the evaluation of or by reason of being allowed
to
view the Company’s records, products, processes, or facilities; provided,
however,
that
“Confidential Information” shall not include any information that is generally
available to the public, is otherwise in the public domain, becomes publicly
known through no breach of this Agreement, is already known or becomes known
to
the Placement Agent through sources not known by the Placement Agent to be
under
a legal obligation not to disclose the information or is approved for release
by
written authorization of an officer of the Company. Confidential
Information shall be protected with the same degree of care as the Placement
Agent uses in the protection of its own confidential and proprietary
information, but in no case with any lesser degree than reasonable care. The
Placement Agent shall not disclose Confidential Information to any third party,
except as necessary to fulfill its obligations under this Agreement. The
Placement Agent shall use Confidential Information only for the purpose of
fulfilling its obligations under this Agreement, and shall not exploit
Confidential Information for its own benefit or for the benefit of another.
(vii) The
Placement Agent will use its best efforts to maintain its broker-dealer
registration and license as a selling agent in each of the jurisdictions in
which it acts as agent for the Company in the Offering for a period ending
at
the Offering Termination Date.
7. Conditions
of Obligations.
Your
obligations hereunder shall be subject to the following terms and conditions
(and subject to the Company’s satisfaction thereof in your reasonable
discretion):
(a)
Conditions
of Your Obligations.
(i) Closing
Date Matters.
On each
Closing Date, (x) to the Company’s knowledge, there shall be no prohibitory
action by any governmental body, agency or official suspending or prohibiting,
or threatening to suspend or prohibit, use of the PPM in connection with the
Offering; (y) the Company shall have complied in all material respects with
all agreements and satisfied all conditions on its part to be performed or
satisfied on or prior to the Closing Date and (z) the representations and
warranties of the Company set forth in Section 2 of this Agreement shall be
accurate in all material respects as though expressly made at and as of the
Closing Date. On each Closing Date, you shall have received a certificate
executed by the Chief Executive Officer of the Company, dated as of such Closing
Date, to such effect.
12
(ii) Corporate
Documents.
The
Company has not amended and will not amend the Company’s governing documents in
a manner such that after such amendment, the Company’s governing documents would
not be appropriate in order to carry out the intent of this
Agreement.
(iii)
Additional
Information.
On each
Closing Date, you shall have been furnished with all such documents,
certificates and opinions as you may reasonably request and all proceedings
taken by the Company at or prior to such Closing Date in connection with the
authorization, issuance and sale of the Units as contemplated in this Agreement,
shall be satisfactory in form and substance to you and to your counsel. The
Company will furnish you with such number of conformed copies of such
certificates, opinions, letters and documents as you shall reasonably request.
Any certificate signed by any officer, partner, or other official of the Company
and delivered to you or your counsel shall be deemed a representation and
warranty by the Company to you as to the statements made therein.
(iv) The
Company shall have executed and delivered copies of the Escrow Agreement in
the
form attached as Exhibit D
and the
Shareholders Agreement in the form attached as Exhibit E.
If
any of
the conditions specified in this Section 7.(a) shall not have been fulfilled
when and as required by this Agreement to be fulfilled, this Agreement may
be
terminated by you on written notice to the Company at any time at or prior
to a
Closing Date, and such termination shall be without liability of any party
to
any other party, except as specifically provided for herein. Notwithstanding
any
such termination, the provisions of Section 7 shall remain in
effect.
(b) Conditions
of the Company’s Obligations. The
obligations of the Company to sell and deliver the Units required to be
delivered as and when specified in this Agreement are subject to the conditions
that at the Closing Date, (i) to the Company’s knowledge, there shall be no
prohibitory action by any governmental body, agency or official suspending
or
prohibiting, or threatening to suspend or prohibit, use of the PPM in connection
with the Offering and (ii) the Escrow Agent shall have tendered to the Company
payment for the Units.
8. Indemnification
and Contribution.
(a) Indemnification
by the Company.
The
Company will indemnify and hold you harmless against any losses, claims,
damages, or liabilities, joint or several, to which you may become subject
under
the Securities Act, the Exchange Act, or otherwise, insofar as such losses,
claims, damages, or liabilities (or actions in respect thereof) arise out of
or
are based upon any breach of any representation, warranty or covenant of the
Company herein contained or any untrue statement or alleged untrue statement
of
a material fact contained in the PPM, or any amendment or supplement thereto,
or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse you for any documented
legal or other expenses reasonably incurred by you in connection with
investigating or defending any such loss, claim, damage, liability, or action;
provided, however, that the Company shall 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 (A) an untrue statement or alleged untrue statement or omission or alleged
omission made in the PPM, or any such amendment or supplement thereto,
(i) in reliance upon and in conformity with written information furnished
to the Company by you expressly for use therein or (ii) that was corrected
in an amendment or supplement to the PPM that the Company made available to
you
and that you failed to timely deliver to the person asserting a claim giving
rise to such liability, (B) the breach by you of any representation or warranty
made by you herein, (C) any violation of any federal or state securities law
in
the conduct of the Offering or (D) your gross negligence, misconduct or bad
faith. In addition to its other obligations under this Section 8.(a), the
Company agrees that, as an interim measure during the pendency of any such
claim, action, investigation, inquiry, or other proceeding arising out of or
based upon any statement or omission, or any alleged statement or omission,
described in this Section 8.(a), it will reimburse you on a monthly basis for
all documented legal and other expenses reasonably incurred in connection with
investigating or defending any such claim, action, investigation, inquiry,
or
other proceeding, notwithstanding the absence of a judicial determination as
to
the propriety and enforceability of the Company’s obligation to reimburse you
for such expenses and the possibility that such payments might later be held
to
have been improper by a court of competent jurisdiction. Any such interim
reimbursement payments that are not made to you within 30 days of a request
for
reimbursement shall bear interest at the prime rate (or reference rate or other
commercial lending rate for borrowers of the highest credit standing) published
from time to time by The
Wall Street Journal
(the
“Prime Rate”) from the date of such request. This indemnity agreement shall be
in addition to any liabilities that the Company may otherwise have. The Company
will not, without your prior written consent, settle or compromise or consent
to
the entry of any judgment in any pending or threatened action or claim or
related cause of action or portion of such cause of action in respect of which
indemnification may be sought hereunder (whether or not you are a party to
such
action or claim), unless such settlement, compromise, or consent includes an
unconditional release of you from all liability arising out of such action
or
claim (or related cause of action or portion thereof).
13
The
indemnity agreement in this Section 8.(a) shall extend upon the same terms
and
conditions to, and shall inure to the benefit of, each person, if any, who
controls you within the meaning of the Securities Act or the Exchange Act to
the
same extent as such agreement applies to you.
(b) Indemnification
by You.
You
will indemnify and hold harmless the Company against any losses, claims,
damages, or liabilities, joint or several, to which the Company may become
subject, under the Securities Act, the Exchange 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 breach of any representation, warranty,
or covenant by you herein contained, (ii) any untrue statement or alleged untrue
statement of a material fact contained in the PPM, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent,
that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in the PPM, or any such amendment or supplement thereto,
in
reliance upon and in conformity with written information furnished to the
Company by you expressly for use therein, or any failure on your part to timely
deliver an amendment or supplement to the PPM that the Company made available
to
you and that corrected any statement or omission in the PPM which forms the
basis for a claim against the Company, (iii) any violation of any federal or
state securities law in the conduct of the Offering, or (iv) your gross
negligence, willful misconduct or bad faith. You will reimburse the Company
for
any documented legal or other expenses reasonably incurred by you in connection
with investigating or defending any such loss, claim, damage, liability, or
action. In addition to your other obligations under this Section 8.(b), you
agree that, as an interim measure during the pendency of any such claim, action,
investigation, inquiry, or other proceeding arising out of or based upon any
statement, action or omission, or any alleged statement, action or omission,
described in this Section 8.(b), you will reimburse the Company on a monthly
basis for all documented legal and other expenses reasonably incurred in
connection with investigating or defending any such claim, action,
investigation, inquiry, or other proceeding, notwithstanding the absence of
a
judicial determination as to the propriety and enforceability of their
obligation to reimburse the Company for such expenses and the possibility that
such payments might later be held to have been improper by a court of competent
jurisdiction. Any such interim reimbursement payments that are not made to
the
Company within 30 days of a request for reimbursement shall bear interest at
the
Prime Rate from the date of such request. This indemnity agreement shall be
in
addition to any liabilities that you may otherwise have. You will not, without
the Company’s prior written consent, settle or compromise or consent to the
entry of any judgment in any pending or threatened action or claim or related
cause of action or portion of such cause of action in respect of which
indemnification may be sought hereunder (whether or not the Company is a party
to such action or claim), unless such settlement, compromise or consent includes
an unconditional release of the Company from all liability arising out of such
action or claim (or related cause of action or portion thereof).
14
The
indemnity agreement in this Section 8.(b) shall extend upon the same terms
and
conditions to, and shall inure to the benefit of, each officer and director
of
the Company and each person, if any, who controls the Company within the meaning
of the Securities Act or the Exchange Act to the same extent as such agreement
applies to the Company.
(c) Notices
of Claims; Employment of Counsel.
Any
party that proposes to assert the right to be indemnified under this Section
8
promptly shall notify in writing each party against which a claim is to be
made
under this Section 8 of the institution of such action but the omission so
to
notify such indemnifying party of any such action shall not relieve it from
any
liability it may have to any indemnified party except (i) to the extent
that the omission to notify shall have caused or increased the indemnifying
party’s liability, and (ii) that the indemnifying party shall be relieved
of its indemnity obligation for expenses of the indemnified party incurred
before the indemnifying party is notified. Such indemnifying party or parties
shall assume the defense of such action, including the employment of counsel
(satisfactory to the indemnified party) and payment of fees and expenses. An
indemnified party shall have the right to employ its own counsel in any such
case, but the fees and expenses of such counsel shall be at the expense of
such
indemnified party unless the employment of such counsel shall have been
authorized in writing by the indemnifying party or parties in connection with
the defense of such action or the indemnifying party or parties shall not have
employed counsel to have charge of the defense of such action or such
indemnified party or parties reasonably shall have concluded that there may
be
defenses available to it or them that are different from or additional to those
available to such indemnifying party or parties (in which case such indemnifying
party or parties shall not have the right to direct the defense of such action
on behalf of the indemnified party or parties), in any of which events such
fees
and expenses shall be borne by such indemnifying party or parties. Anything
in
this paragraph to the contrary notwithstanding, an indemnifying party shall
not
be liable for any settlement of any such claim or action effected without its
written consent.
15
(d) Arbitration.
It is
agreed that any controversy arising out of the operation of the interim
reimbursement arrangements set forth in Sections 8.(a) and 8.(b) hereof,
including the amounts of any requested reimbursement payments, the method of
determining such amounts and the basis on which such amounts shall be
apportioned among the indemnifying parties, shall be settled by arbitration
conducted pursuant to the Code of Arbitration Procedure of the FINRA. Any such
arbitration must be commenced by service of a written demand for arbitration
or
a written notice of intention to arbitrate, therein electing the arbitration
tribunal. In the event the party demanding arbitration does not make such
designation of an arbitration tribunal in such demand or notice, then the party
responding to said demand or notice is authorized to do so. Any such arbitration
will be limited to the operation of the interim reimbursement provisions
contained in Sections 8.(a) and 8.(b) hereof and will not resolve the ultimate
propriety or enforceability of the obligation to indemnify for expenses that
is
created by the provisions of Sections 8.(a) and 8.(b).
(e) Contribution.
If the
indemnification provided for in Section 8.(a) or 8.(b) is unavailable or
insufficient to hold harmless an indemnified party in respect of any losses,
claims, damages, or liabilities (or actions in respect thereof) referred to
therein, then the Company on the one hand and you on the other shall contribute
to the amount paid or payable as a result of such losses, claims, damages,
or
liabilities (or actions in respect thereof) in such proportion as is appropriate
to reflect the relative benefits received by the Company on the one hand and
you
on the other from the Offering. If, however, the allocation provided by the
immediately preceding sentence is not permitted by applicable law, then the
Company and you shall contribute to such amount paid or payable in such
proportion as is appropriate to reflect not only such relative benefits but
also
the relative fault of the Company on the one hand and you on the other in
connection with the statements, omissions, breaches or violations that resulted
in such losses, claims, damages, or liabilities (or actions in respect thereof),
as well as any other relevant equitable considerations. The relative benefits
received by the Company on the one hand and you on the other shall be deemed
to
be in the same proportion as the total net proceeds from the Offering (before
deducting expenses) received by the Company bear to the total placement fees
received by you in each case as set forth in the table on the cover page of
the
PPM. The relative fault shall be determined by reference to, among other things,
whether the untrue or allegedly untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company on the one hand or to information with respect to you
and furnished by you respectively, in writing specifically for inclusion in
the
PPM on the other and the parties’ relative intent, knowledge, access to
information, and opportunity to correct or prevent such statement or omission.
The Company and you agree that it would not be just and equitable if
contribution pursuant to this Section 8.(e) were determined by pro rata
allocation or by any other method of allocation that does not take account
of
the equitable considerations referred to above in this Section 8.(e). The amount
paid or payable as a result of the losses, claims, damages or liabilities (or
actions in respect thereof) referred to above in this Section 8.(e) shall be
deemed to include any documented legal or other expenses reasonably incurred
by
any such party in connection with investigating or defending any such action
or
claim. No person guilty of fraudulent misrepresentation (within the meaning
of
Section 11(f) of the Securities Act) with respect to the transactions giving
rise to the right of contribution provided in this Section 8.(e) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 8.(e), each person, if any,
who
controls you within the meaning of Section 15 of the Securities Act shall have
the same rights to contribution as you, and each director and officer of the
Company and each person, if any, who controls the Company within the meaning
of
Section 15 of the Securities Act shall have the same rights to contribution
as
the Company.
16
9. Representations
and Agreements to Survive.
Except
as the context otherwise requires, all representations, warranties, covenants
and agreements contained in this Agreement shall remain operative and in full
force and effect regardless of any investigation made by you, or on your behalf,
or by any controlling person, or by or on behalf of the Company, and shall
survive until the fifth anniversary of the Offering Termination Date or the
termination of this Agreement pursuant to Section 10 hereof.
10. Termination
of Agreement.
(a) You
shall
have the right to terminate this Agreement by written notice to the Company
at
any time prior to the Closing Date (i) if any representation or warranty of
the Company hereunder shall be found to have been incorrect or misleading in
any
material respect when made or the Company shall fail, refuse, or be unable
to
perform any of its agreements hereunder or to fulfill any condition of its
obligations hereunder or (ii) if there shall have been since the respective
dates as of which information is given in the PPM a Material Adverse Effect.
(b) The
Company shall have the right to terminate this Agreement by written notice
to
you.
(c) If
this
Agreement is terminated pursuant to this Section 10, such termination shall
be
without liability of any party to any other party except as provided in Section
5, and provided further that Section 6(b)(v) and Section 8 hereof shall
survive such termination and remain in full force and effect.
11. Notices.
(a) Method
and Location of Notices.
All
communications hereunder, except as herein otherwise specifically provided,
shall be in writing and shall be sent by overnight courier, hand-delivered
or
telecopied and confirmed as follows:
17
To
the
Company:
▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Chief Executive Officer
Telecopier
No.: (▇▇▇) ▇▇▇-▇▇▇▇
with
a
copy to:
▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ LLP
▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇▇ ▇▇▇▇▇▇▇, Esquire
Telecopier
No.: (▇▇▇) ▇▇▇-▇▇▇▇
To
You:
▇▇▇▇▇▇▇▇
& ▇▇▇▇▇▇▇▇▇, Incorporated
▇▇▇
▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇▇▇ ▇▇▇▇▇▇
Telecopier
No.: (▇▇▇) ▇▇▇-▇▇▇▇
with
a
copy to:
▇▇▇▇▇▇▇
& ▇▇▇▇▇▇▇
Three
▇▇▇▇▇ Center, 12th
Floor
▇▇▇▇
▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Telecopier
No.: (▇▇▇) ▇▇▇-▇▇▇▇
(b) Time
of Notices.
Notice
shall be deemed to be given by you to the Company or by the Company to you
when
it is sent by overnight courier, hand-delivered or telecopied as provided in
Section 11.(a).
12. Parties.
This
Agreement shall inure solely to the benefit of and shall be binding upon you,
your controlling persons referred to in Section 8 and the Company, its
directors, its officers and its controlling persons referred to in Section
8,
and their respective successors, legal representatives and assigns. No other
person shall have or be construed to have a legal or equitable right, remedy
or
claim under or in respect of or by virtue of this Agreement or any provision
herein contained.
13. Governing
Law.
This
Agreement shall be governed by and construed in accordance with the laws of
the
Commonwealth of Virginia.
18
14. Descriptive
Headings.
The
descriptive headings of the several sections and paragraphs of this Agreement
are inserted for convenience only and do not constitute a part of this
Agreement.
l5. Counterparts.
This
Agreement may be executed in one or more counterparts, and if executed in more
than one counterpart, the executed counterparts shall together constitute a
single instrument.
19
If
the
foregoing correctly sets forth the understanding between you and the Company,
please so indicate in the space provided below for that purpose, whereupon
this
letter shall constitute a binding agreement between us.
Very
truly yours,
By:_____________________________
▇▇▇▇▇▇▇
▇. ▇▇▇▇, Chief Executive Officer
Confirmed
and accepted as of
the
date
first above written:
▇▇▇▇▇▇▇▇
& STRUDWICK, INCORPORATED
By:
___________________________________
▇▇▇▇▇▇
▇▇▇▇▇▇
Senior
Vice President
20