CHINA MOBILITY SOLUTOINS, INC. Private Placement of Units PLACEMENT AGENCY AGREEMENT Dated as of June 30, 2005
EXHIBIT
10.8
CHINA
MOBILITY SOLUTOINS, INC.
Private
Placement of Units
Dated
as
of June 30, 2005
▇▇▇▇▇▇
Associates L.P.
▇▇
▇▇▇▇▇▇▇▇ ▇
▇▇▇
▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn:
President
Ladies
and Gentlemen:
China
Mobility Solutions, Inc., a Florida corporation (the “Company”) proposes to
offer for sale (the “Offering”) in a private offering pursuant to
Section 4(2) of the Securities Act of 1933, as amended (the “Act”), and/or
Regulation D promulgated thereunder, an aggregate of $2,000,000 of units
(“Units”) (plus $1,000,000 of additional Units to cover over-subscriptions).
Each Unit consists of a $25,000 principal amount of 6% convertible debentures
(the “Debentures”), Class A Common Stock Purchase Warrants (the “Class A
Warrants”) and Class B Common Stock Purchase Warrants (the “Class B Warrants”
and together with the Class A Warrants, the “Warrants”). The Units, Debentures,
Class A Warrants and Class B Warrants are sometimes referred to herein as the
“Securities.” The Units are being offered on a “best efforts all or none” basis
as to the entire $2,000,000 of Units (the “Offering Amount”) during an offering
period commencing on the date hereof and expiring 60 days thereafter, unless
extended by the Company and the Placement Agent for up to an additional sixty
(30) days (such period, as same may be extended, being hereinafter referred
to
as the "Offering Period"). The maximum number of Units offered hereby may be
increased by an additional $1,000,000 of Units upon agreement of the Company
and
the Placement Agent to cover over-subscriptions. Offers and sales of the
Securities shall be to Accredited Investors (as defined in Regulation D). This
agreement shall confirm our agreement concerning ▇▇▇▇▇▇ Associates L.P. acting
as our exclusive placement agent (the APlacement
Agent@
or
AMeyers@)
in
connection with the offer and sale of the Securities.
l.
Appointment of
Placement Agent.
On
the
basis of the representations and warranties contained herein, and subject to
the
terms and conditions set forth herein, the Company hereby appoints ▇▇▇▇▇▇
Associates L.P. as its Placement Agent and grants to it the exclusive right
to
offer, as its agent, the Securities pursuant to the terms of this Agreement.
The
Company expressly acknowledges and agrees that ▇▇▇▇▇▇=
obligations hereunder are not on a firm commitment basis and that the execution
of this Agreement does not constitute a commitment by ▇▇▇▇▇▇ to purchase the
Securities and does not ensure the successful placement of the Securities or
any
portion thereof. Further, ▇▇▇▇▇▇=
obligation to use its best efforts to assist the Company in the Offering is
subject to the completion of a due diligence review of the Company, the industry
and the market for such securities generally, as well as general market
conditions. On the basis of such representations and warranties, and subject
to
such conditions, ▇▇▇▇▇▇ hereby accepts such an appointment and agrees to use
its
reasonable best efforts to secure subscriptions to purchase $2,000,000 of Units
(plus $1,000,000 of additional Units to cover over-subscriptions).
2. Terms
of
the Offering.
(a)
The
Company shall prepare and deliver to the Placement Agent copies of a
Confidential Disclosure Statement (the “Disclosure Statement”), relating to,
among other things, the Company, the Securities and the terms of the sale of
the
Securities. The Disclosure Statement, including all exhibits and appendices
thereto and documents delivered therewith, are referred to herein as the
“Offering Documents” and shall include any supplements or amendments in
accordance with this Agreement. The Company shall utilize the services of
securities counsel with experience in private placement offerings and the rules
and regulations of the Securities and Exchange Commission (“SEC”) in drafting
the Offering Documents.
(b)
The
Offering shall consist of $2,000,000 of Units (plus $1,000,000 of additional
Units to cover over-subscriptions). The terms of the Offering and Securities
are
further described in the Offering Documents which are incorporated herein.
The
actual composition of the Units and terms of the Debentures and Warrants, and
the price of the Units are subject to further review and negotiation, market
conditions and the market for the Company's Common Stock and the completion
of
due diligence. In the event a subscription is not accepted, such rejected
subscription funds will be returned to the subscriber without interest or
deductions.
(c)
The
Units are being offered on a “best efforts all or none” basis as to the entire
$2,000,000 of Units (plus $1,000,000 of additional Units to cover
over-subscriptions). The Offering shall commence on the date that the Company
delivers to the Placement Agent the Offering Documents that have been completed
to the reasonable satisfaction of the Placement Agent and its counsel, and
shall
expire at 5:00 p.m., New York time, on a date which is 60 days thereafter and
may be extended for up to an additional 30-day period at the discretion of
the
Company and Placement Agent. Such period, as same may be so extended, shall
hereinafter be referred to as the “Offering Period.”
(d)
Each
prospective investor (“Prospective Investor”) who desires to purchase the
Securities shall deliver to the Placement Agent a fully executed subscription
agreement and questionnaire (“Subscription Agreement”), in the form annexed to
the Disclosure Statement and immediately available funds in the amount necessary
to purchase the number of Securities such Prospective Investor desires to
purchase. Neither the Company nor the Placement Agent shall have any obligation
to independently verify the accuracy or completeness of any information
contained in any Subscription Agreement or the authenticity, sufficiency, or
validity of any check delivered by any Prospective Investor in payment for
Securities.
(e)
The
Placement Agent shall deliver each subscription funds received from a
Prospective Investor to the Company for deposit in a segregated escrow account
at an independent banking institution and shall deliver the executed copies
of
the Subscription Agreement received from such Prospective Investor to the
Company. All funds shall be held in the segregated account pending acceptance
of
the subscription. The Company shall notify the Placement Agent promptly of
the
acceptance or rejection or any subscription.
-1-
(f)
▇▇▇▇▇▇ may engage other persons selected by ▇▇▇▇▇▇ to assist ▇▇▇▇▇▇ in the
Offering (each such broker/dealers being hereinafter referred to as a "Selling
Group Member") and ▇▇▇▇▇▇ may allow such Selling Group Member such part of
the
compensation and payment of expenses payable to ▇▇▇▇▇▇ under Section 5 hereof
as
▇▇▇▇▇▇ shall determine. Any such Selling Group Member shall be a member firm
in
good standing as a broker-dealer under the rules of the NASD. Each Selling
Group
Member shall be required to agree in writing to comply with the provisions
of
this Section 2. 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 12 hereof) as provided herein.
3.
Closings: Release of Funds.
(a)
The
date that the initial subscriptions in the Offering Amount are accepted by
the
Company and funds are released from the escrow account shall be deemed the
“Closing.” At least one (1) day prior to the release of funds, the Company and
the Placement Agent shall send written notice to each other, which notice shall
state the amount of funds to be released, the name and address of each
subscriber whose subscription has been accepted, and the amount of each
subscription.
(b) At
any
time prior to the expiration of the Offering Period following the Closing and
after acceptance by the Company of subscriptions for the sale of additional
Units of up to $1,000,000, one or more closings (each an “Subsequent Closing”)
shall take place in the manner herein set forth with respect to the Closing.
The
final Subsequent Closing to be held in accordance herewith shall be deemed
the
“Final Closing” and the date thereof shall be the “Final Closing Date.”
References herein to a AClosing”
shall mean the Closing, any Subsequent Closing or the Final Closing, as the
context requires, and the date thereof shall be referred to as a “Closing
Date.”
4. Representations
and Warranties of the Placement Agent.
The
Placement Agent represents and warrants to the Company as follows:
(a) The
Placement Agent is duly incorporated and validly existing and in good standing
under the laws of its State of incorporation.
(b) The
Placement Agent is, and at the time of each Closing will be, a member in good
standing of the NASD.
(c) Sales
of
Securities by the Placement Agent will only be made in such jurisdictions in
which the Placement Agent or a Selling Group Member is a registered
broker-dealer or where an applicable exemption from such registration
exists.
(d) Offers
and sales of Securities by the Placement Agent will be made only in accordance
with this Placement Agreement and in compliance with the provisions of Rule
506
of Regulation D (it being understood and agreed that the Placement Agent shall
be entitled to rely upon the information and statements provided by the
Prospective Investor in the Subscription Agreement and Investor Questionnaires),
and the Placement Agent will furnish to each investor a copy of the Offering
Documents prior to accepting any subscription for the Securities.
5.
Compensation.
(a)
The
Placement Agent shall be entitled, on each Closing Date, as compensation for
▇▇▇▇▇▇’ services as Placement Agent under this Agreement, to selling commissions
equal to10 % of the gross proceeds received by the Company from the sale of
the
Units effected at each Closing. In addition, the Placement Agent shall be
entitled to 3% of the gross proceeds from the sale of the Units effected at
each
Closing in payment for a non-accountable expense allowance, of which $25,000
has
previously been paid.
(b) Concurrent
with, and as a condition to, each closing of the Offering, the Company shall
sell to the Placement Agent (or its designated affiliates) common stock purchase
warrants (the “Agent Warrants”), at a price of $.001 per warrant, to purchase a
number of shares of Common Stock equal to 25% of the shares of Common Stock
issuable upon conversion of the Debentures and issuable upon exercise of the
Warrants sold in the Offering. Such Agent Warrants will expire five years after
the effective date of the registration statement contemplated by the Offering
and will be exercisable at 125% of the initial conversion price of the
Debentures issued to investors in the Offering, subject to adjustment to prevent
dilution. The Agent Warrants may be exercised as to all or a lesser number
of
shares, will not be redeemable and will contain provisions for the piggy-back
and demand registration of the resale of the underlying shares at the Company's
expense and for adjustment in the number of such shares and the exercise price
to prevent dilution. The Company covenants and agrees that with respect to
registration under the Act of the Securities underlying the Placement Agent
Warrants, the Placement Agent shall be entitled to the same registration rights
as provided to subscribers in the Offering.
6.
Representations and Warranties of the Company.
(a)
The
Company represents and warrants to, and agrees with, the Placement Agent that
as
of the date hereof and as of each Closing Date (except as affected by the
Offering):
-2-
(i)
Assuming the accuracy of the representations and warranties of the Prospective
Investors set forth in the Subscription Agreement and Purchase Questionnaire
and
the representations and warranties of the Placement Agent set forth herein,
the
Offering Documents (a) contain, and at all times during the period from the
date
hereof to and including each Closing Date, will contain all information required
to be contained therein, if any, pursuant to Rules 502 and 506 of Regulation
D
and all applicable federal and/or state securities and “blue sky” laws, and (b)
do not, and during such period will not, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein in light of the circumstances made
therein not misleading. Each contract, agreement, instrument, lease, license,
or
other document required to be described in the Offering Documents shall be,
and
have been, accurately described therein.
(ii)
No
Offering Documents or information (it being understood that neither the Company
nor any of its officers or directors or employees shall provide any written
information to any Prospective Investor which is not contained in the Offering
Documents) provided by the Company to Prospective Investors pursuant to Section
7(f) hereof shall contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make
the
statements therein in light of circumstances made therein not
misleading.
(iii)
The
Company has not, directly or indirectly, solicited any offer to buy or offered
to sell any Securities or any other securities of the Company during the
twelve-month period ending on the date hereof except as may be properly
described in the Offering Documents, and has no present intention to solicit
any
offer to buy or to offer to sell any of the Securities, any Common Stock or
any
other securities of the Company other than pursuant to this Agreement.
(iv)
The
Company is, and at all times during the period from the date hereof to and
including each Closing Date will be, a corporation duly organized, validly
existing, and in good standing under the laws of the State of Florida, with
full
corporate power and authority, and has obtained all necessary consents,
authorizations, approvals, orders, licenses, certificates, and permits and
declarations of and from, and has made filings with, all federal, state and
local authorities, to own, lease, license, and use its properties and assets
and
to conduct its business as presently conducted as described in the Offering
Documents and/or in any such case where the failure to have any of the foregoing
would not have a material adverse effect on the Company's presently conducted
business. As of the date hereof, the Company is, and at all times during the
period from the date hereof to and including each Closing Date, duly qualified
to do business and is in good standing in every jurisdiction in which its
ownership, leasing, licensing, or use of property and assets or the conduct
of
its business makes such qualification necessary except where the failure to
be
so qualified would not have a material adverse effect on the Company's
business.
(v)
The
Offering Documents, including the documents filed with the SEC included therein,
does not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, all in light of the circumstances under which they
were
made. Each statute, regulation, legal and governmental proceeding, contract,
agreement, instrument, lease, license, or other document described in the
Offering Documents has been accurately described therein in all material
respects.
-3-
(vi)
No
document provided by the Company to Prospective Investors pursuant to Section
6(a)(vii) hereof, and no oral information provided by the Company to Prospective
Investors, will contain any untrue statement of a material fact or omit to
state
any material fact required to be stated therein or necessary to make the
statements therein not misleading. Contracts to which the Company or any of
its
Controlled Subsidiaries (as defined below) is a party provided by the Company
to
Prospective Investors shall not be deemed to contain any untrue statement of
a
material fact or to omit to state any material fact if the contract so provided
is a true, correct and complete copy of such contract, as amended or modified
through the date it is so provided.
(vii)
All
prior offerings of the Company=s
securities complied in all respects with the Securities Act, the Exchange Act
and rules and regulations promulgated thereunder, all applicable Blue Sky laws
and all applicable securities laws and regulations of any foreign country in
which such securities were offered or sold.
(viii)
The Company and its Controlled Subsidiaries, if any, are (A) corporations duly
organized, validly existing and in good standing under the laws of the state
of
their incorporation, each have full power and authority to own or lease all
of
the assets owned or leased by each of them and to conduct business as described
in the Offering Documents and (B) are duly qualified to do business and in
good
standing as a foreign corporation in all jurisdictions in which the nature
of
the activities conducted or the character of the assets owned or leased makes
such qualification necessary. Complete and correct copies of the articles of
incorporation and of the by-laws of the Company and its Controlled Subsidiaries
as in effect on the date hereof have been delivered to ▇▇▇▇▇▇, and no changes
therein will be made on or subsequent to the date hereof and prior to the Final
Closing Date except as may be required pursuant to this Agreement. The term
“Controlled Subsidiaries” means any corporation or other organization in which
the Company owns, directly or indirectly, an equity or other ownership interest
equal to or greater than 50 percent.
(ix)
Since the dates as of which information is given in the Offering Documents,
other than as set forth therein, (A) there has not been any material adverse
change or any development involving a prospective material adverse change in
the
general affairs, business, prospects, properties, management, condition
(financial or otherwise) or results of operations of the Company or its
Controlled Subsidiaries, whether or not arising from transactions in the
ordinary course of business, (B) except in the ordinary course of business,
neither the Company nor its Controlled Subsidiaries has incurred, and neither
the Company nor its Controlled Subsidiaries will have incurred, any material
liabilities or obligations, direct or indirect, or have entered into any
material transaction, (C) the Company has not and will not have paid or declared
any dividends or other distributions on its capital stock and (D) there has
not
been any change in the capital stock of the Company or any material change
in
the short-term or long-term debt of the Company or its Controlled Subsidiaries.
(x)
▇▇▇▇
& Company, Chartered Accountant=s,
whose
report on the Company=s
audited
financial statements and review of the company=s
unaudited interim financial statements that are included in the SEC filings
included as part of the Offering Documents, are independent public accountants
with respect to the Company and its Controlled Subsidiaries as required by
the
Securities Act and the rules and regulations thereunder.
(xi)
The
Company’s consolidated financial statements, together with related notes and
schedules of the Company and its Controlled Subsidiaries, included as part
of
the Offering Documents comply in all respects with the requirements of the
Securities Act and the rules and regulations thereunder and present fairly
the
financial position of the Company and its Controlled Subsidiaries on the
respective dates indicated and its statement of operations for the respective
periods covered thereby. Any condensed financial information appearing in the
Offering Documents is fairly stated in all material respects in relation to
the
financial statements of the Company and its Controlled Subsidiaries from which
they have been derived. Such financial statements, and related notes and
schedules, have been prepared in conformity with generally accepted accounting
principles applied on a consistent basis through the entire period
involved.
-4-
(xii) Except
as
described in the Offering Documents, there is no action, suit, investigation
or
proceeding pending or threatened before or by any Federal or state court,
commission, regulatory body, administrative agency or other governmental body,
domestic or foreign, or arbitrator to which the Company or its Controlled
Subsidiaries is or may become a party or of which any property of the Company
or
its Controlled Subsidiaries is subject or affected that (A) might affect the
consummation of the transactions contemplated under this Agreement, including
the issuance or validity of the Units offered hereby, or the Common Stock
issuable upon exercise of the Warrants, or (B) might have a material adverse
effect on the condition (financial or otherwise), sales, properties, earnings,
net worth, prospects, results of operations or businesses of the Company and
its
Controlled Subsidiaries, taken as a whole (“Material Adverse Effect”), or any of
its principal officers. All pending legal or governmental proceedings to which
the Company or its Controlled Subsidiaries is a party or of which any of their
respective properties are subject or affected which are not described in the
Offering Documents, including ordinary routine litigation incidental to the
business, would not have a Material Adverse Effect. No labor dispute with the
employees of the Company exists or is threatened or imminent that could have
a
Material Adverse Effect.
(xiii) The
Company and its Controlled Subsidiaries have all approvals, licenses,
franchises, authorizations and permits (collectively, “permits”) necessary under
all applicable statutes, codes, rules, regulations, orders and decrees of
governments or governmental bodies (collectively, “laws”), which are material to
the ownership, lease or use of their respective properties or the conduct of
their respective businesses as described in the Offering Documents. Neither
the
Company nor its Controlled Subsidiaries has received notice of any proceedings
relating to the revocation or modification of any such permits which, singly
or
in the aggregate, would have a Material Adverse Effect, and each of the Company
and its Controlled Subsidiaries is in all material respects in compliance with
such permits and laws.
-5-
(xiv)
The
Company and its Controlled Subsidiaries own or are licensed to use all patents,
patent applications, inventions, trademarks, trade names, applications for
registration of trademarks, copyrights, know-how, trade secrets, licenses and
rights in any thereof (“Proprietary Rights”) which are material to the
businesses of the Company and its Controlled Subsidiaries as now conducted
and
as proposed to be conducted, in each case as described in the Offering
Documents. The Company and its Controlled Subsidiaries do not have any knowledge
of, and the Company and its Controlled Subsidiaries have not given or received
any notice of any pending conflict with or infringement of, the rights of others
with respect to any Proprietary Rights or with respect to any license of
Proprietary Rights. No action, suit, arbitration, or legal, administrative
or
other proceeding, or domestic or foreign governmental investigation is pending
or, to the best of the Company's knowledge, threatened, which involves any
Proprietary Rights. Neither the Company nor its Controlled Subsidiaries is
subject to any judgment, order, writ, injunction or decree of any court or
any
Federal, state, local, foreign or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, or any
arbitrator, or has entered into or is a party to any contract which restricts
or
impairs the use of any such Proprietary Rights in a manner which would have
a
material adverse effect on the use of any of the Proprietary Rights. No
Proprietary Rights used by the Company or its Controlled Subsidiaries and no
services or products sold by the Company or its Controlled Subsidiaries,
conflict with or infringe upon, to the knowledge of the Company and its
Controlled Subsidiaries, any proprietary rights available to any third party.
Neither the Company nor its Controlled Subsidiaries has received written notice
of any pending conflict with or infringement upon such third party proprietary
rights. Neither the Company nor its Controlled Subsidiaries has entered into
any
consent, indemnification, forbearance to ▇▇▇ or settlement agreement with
respect to Proprietary Rights other than in the ordinary course of business.
To
the best knowledge of the Company, no claims have been asserted by any person
with respect to the validity of or the Company's or its Controlled Subsidiaries'
ownership of or right to use the Proprietary Rights and, to the best knowledge
of the Company, there is no reasonable basis for any such claim. The Proprietary
Rights are valid and enforceable and no registration relating thereto has
lapsed, expired or been abandoned or canceled or is the subject of cancellation
or other adversarial proceedings which would have a Material Adverse Effect,
and
all applications therefore are pending and are in good standing. The Company
and
its Controlled Subsidiaries have complied, in all material respects, with their
respective contractual obligations relating to the protection of the Proprietary
Rights used pursuant to licenses. To the best knowledge of the Company, no
person is infringing on or violating the Proprietary Rights owned or used by
the
Company or its Controlled Subsidiaries.
(xv)
The
Company has an authorized, issued and outstanding capitalization as set forth
in
the Offering Documents; all of the issued shares of capital stock of the Company
have been duly authorized and validly issued, are fully paid and nonassessable
and conform to the descriptions thereof contained in the Offering Documents;
and
none of the issued shares of capital stock of the Company has been issued in
violation of any preemptive or similar right. Except as described in the
Offering Documents, there are no outstanding (A) securities or obligations
of
the Company convertible into or exchangeable for any shares of capital stock
of
the Company, (B) warrants, rights or options to subscribe for or purchase from
the Company any such capital stock or any such convertible or exchangeable
securities or obligations or (C) obligations for the Company to issue such
shares, any such convertible or exchangeable securities or obligations, or
any
such warrants, rights or obligations.
(xvi) Except
as
described in the Offering Documents, there are no contracts, agreements or
understandings between the Company and any person granting such person the
right
to require the Company to file a registration statement under the Securities
Act
with respect to any securities of the Company owned or to be owned by such
person or to require the Company to include such securities in the securities
being registered pursuant to any registration statement filed by the Company
under the Act.
(xvii) The
Units
to be issued and sold to Prospective Investors as provided in the Subscription
Agreement have been duly authorized and when issued and delivered against
payment therefor, will be validly issued, fully paid and nonassessable and
will
conform to the description thereof in the Offering Documents. The Debentures
are
convertible into Common Stock and the shares of Common Stock issuable upon
conversion of the Debentures have been duly authorized and when issued and
delivered upon conversion thereof will be validly issued, fully paid and
nonassessable and will conform to the description thereof in the Offering
Documents; and there are no preemptive or other rights to subscribe for or
to
purchase, nor any restriction upon the voting or transfer of, any shares of
the
Common Stock issuable upon conversion of the Debentures or otherwise pursuant
to
the Debentures under the Company's articles of incorporation or by-laws or
any
agreement or other outstanding instrument to which the Company is a party or
is
otherwise known to the Company. The Company has reserved sufficient shares
of
Common Stock to be issued upon conversion of, or otherwise pursuant to, the
Debentures. The Warrants are exercisable for Common Stock and the shares of
Common Stock issuable upon exercise of the Warrants have been duly authorized
and when issued and delivered upon exercise and due payment therefor will be
validly issued, fully paid and nonassessable and will conform to the description
thereof in the Offering Documents; and there are no preemptive or other rights
to subscribe for or to purchase, nor any restriction upon the voting or transfer
of, any shares of the Common Stock issuable upon exercise of the Warrants
pursuant to the Company's articles of incorporation or by-laws or any agreement
or other outstanding instrument to which the Company is a party or is otherwise
known to the Company. The Company has reserved sufficient shares of Common
Stock
to be issued upon exercise of the Warrants.
-6-
(xviii) The
Agent=s
Warrant
has been duly authorized and, when issued and delivered against payment
therefor, will be validly issued, fully paid and nonassessable; the
Agent=s
Warrant
is exercisable for Common Stock in accordance with the terms of the Agent
Warrant Agreement and at the price therein provided; the shares of Common Stock
issuable upon the exercise of the Agent=s
Warrant
have been duly authorized and reserved for issuance upon such exercise and
such
shares, when issued upon such exercise in accordance with the terms of the
Agent
Warrant Agreement, will be duly authorized, validly issued, fully paid and
nonassessable; and there are no preemptive or other rights to subscribe for
or
to purchase, nor any restriction upon the voting or transfer of, any shares
of
the Common Stock issuable upon exercise of the Agent=s
Warrants pursuant to the Company's articles of incorporation or by-laws or
any
agreement or other outstanding instrument to which the Company is a party or
is
otherwise known to the Company.
(xix) All
offers and sales of securities of the Company issued prior to the date hereof
were at all relevant times duly registered or exempt from the registration
requirements of the Securities Act or issued in compliance with the Exchange
Act
and the rules and regulations thereunder and were duly registered or the subject
of an available exemption from the registration requirements of the applicable
state securities or Blue Sky laws and all applicable securities laws and
regulations of any foreign country in which such securities were offered or
sold.
(xx) Neither
the Company nor its Controlled Subsidiaries are (A) in violation of its articles
of incorporation or by-laws, (B) in violation of any statute, law, rule, code,
administrative regulation, ordinance, judgment, order or decree of any
government, governmental instrumentality, court, domestic or foreign, or
arbitration panel or other body applicable to it where such violation would
have
a Material Adverse Effect or (C) in default in the performance or observance
of
any obligation, agreement, covenant or condition contained in any indenture,
mortgage, deed of trust, voting agreement, voting trust agreement, loan
agreement, bond, debenture, note or other evidence of indebtedness, lease,
sublease, license agreement, contract or other agreement or instrument to which
it is a party or by which it or any of its respective properties are bound
or
affected (“Contracts”), where such defaults, singly or in the aggregate, would
have a Material Adverse Effect. To the knowledge of the Company, no other party
under any Contract is in default in any material respect thereunder which
affects the Company.
(xxi) The
Company has all requisite power and authority to execute, deliver and perform
its obligations under this Agreement, the Debenture Purchase and Warrant
Agreement, the Registration Rights Agreement, the Debentures, and the Class
A
and Class B Warrant Agreements and the Agent=s
Warrant. This Agreement, the Debenture Purchase and Warrant Agreement, the
Registration Rights Agreement, the Debentures, and the Class A and Class B
Warrant Agreements and the Agent=s
Warrant
have been duly and validly authorized, executed and delivered by the Company,
and each such agreement constitutes a legal, valid and binding agreement of
the
Company enforceable against the Company in accordance with its respective terms,
except as rights to indemnity and contribution hereunder and thereunder may
be
limited by the securities laws of the United States and except as such
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws or equitable principles affecting the enforcement of creditors'
rights generally;
-7-
(xxii) The
issuance of the Units, including the Debentures, the Warrants, the
Agent=s
Warrant, the Common Stock issuable pursuant to the Debentures, Warrants and
Agent’s Warrant, and the execution, delivery and performance of this Agreement,
the Debenture Purchase and Warrant Agreement, the Registration Rights Agreement,
the Debentures, the Class A and Class B Warrant Agreements and the
Agent=s
Warrant, and the consummation of the transactions contemplated hereby and
thereby, do not and will not conflict with or result in a material breach or
violation of any of the terms or provisions of, or constitute a material default
under, or give rise to rights of termination under, or result in the
acceleration of any obligation under, or result in the creation or imposition
of
any lien, charge or encumbrance upon any property or assets of the Company
or
any of its Controlled Subsidiaries pursuant to the terms of any indenture,
mortgage, deed of trust, voting agreement, voting trust agreement, loan
agreement, bond, debenture, note or other evidence of indebtedness or result
in
a material breach or violation of any of the terms or provisions of, or
constitute a material default under any lease, sublease, contract or other
agreement or instrument to which the Company or any of its Controlled
Subsidiaries are, a party or by which the Company, its Controlled Subsidiaries,
or any of the Company=s
or its
Controlled Subsidiaries=
respective properties or assets are bound or affected, nor will such action
result in any violation of the provisions of the articles of incorporation
or
by-laws of the Company or its Controlled Subsidiaries or a material violation
of
any applicable statute, law, rule, code, administrative regulation, ordinance,
judgment, order or decree of any government, governmental instrumentality or
court, domestic or foreign, or arbitration panel or other body, having
jurisdiction over the Company, its Controlled Subsidiaries, or any of the
Company=s
or its
Controlled Subsidiaries=
respective properties or obligations.
(xxiii) No
consent, approval, authorization, license or order of or from, or registration,
qualification, declaration or filing with, federal, state, local, foreign or
other governmental authority or any person or court, administrative agency,
or
other body is required for the consummation of the transactions contemplated
in
this Agreement, or the Offering Documents, except as may have been made or
may
be required obtained under the NASD, any state securities or Blue Sky laws
or
pursuant to Regulation D.
(xxiv) The
Company is in compliance in all material respects with all applicable federal,
state and local environmental laws and regulations, including, without
limitation, those applicable to emissions to the environment, waste management
and waste disposal (collectively, the “Environmental Laws”), except for any
noncompliance as may be described in the Offering Documents, and to the best
of
the Company's knowledge, there are no circumstances that would prevent,
interfere with, or materially increase the cost of such compliance in the
future. Except as set forth in the Offering Documents, there is no claim under
any Environmental Law, including common law (“Environmental Claim”), pending or,
to the knowledge of the Company, threatened against or affecting the Company
or
its Controlled Subsidiaries and, to the best of the Company's knowledge, there
are no past or present actions, activities, circumstances, events or incidents,
including, without limitation, releases of any material into the environment,
that could form the basis of any Environmental Claim against or affecting the
Company or its Controlled Subsidiaries.
(xxv) Each
of
the Company and its Controlled Subsidiaries has good and marketable title to
all
property owned by it, in each case free and clear of all liens, charges,
encumbrances or restrictions except as described in the Offering Documents
or
such as do not materially affect the value of such property and do not interfere
with the use made and proposed to be made of such property by the Company.
Except as described in the Offering Documents, all material Contracts to which
the Company or its Controlled Subsidiaries is a party or by which the Company
or
its Controlled Subsidiaries or any of their respective properties or assets
are
bound are valid, subsisting and enforceable and are in full force and
effect.
(xxvi) The
Company and its Controlled Subsidiaries (A) has paid all federal, state, local
and foreign taxes for which it is liable and has furnished all information
returns it is required to furnish pursuant to the Internal Revenue Code of
1986,
as amended, (B) has established adequate reserves for such taxes which are
not
due and payable and (C) does not have any tax deficiency or claims outstanding,
proposed or assessed against it.
(xxvii) The
Company and its Controlled Subsidiaries maintains insurance of the types and
in
amounts which it deems adequate for its business, all of which are in full
force
and effect.
(xxviii)
Other than set forth herein, there are no claims, payments, issuances,
arrangements or understandings, whether oral or written, for services in the
nature of a finder's or origination fee with respect to the sale of the
Units.
-8-
(xxix) Neither
the Company nor its Controlled Subsidiaries, nor to the best of the
Company=s
knowledge any of the Company=s
officers, employees, agents or any other person acting on behalf of, at the
direction of or for the benefit of the Company has, directly or indirectly,
given or agreed to give any money, gift or similar benefit (other than legal
price concessions to customers in the ordinary course of business) to any
customer, supplier, employee or agent of a customer or supplier, or official
or
employee of any governmental agency (domestic or foreign) or instrumentality
of
any government (domestic or foreign) or any political party or candidate for
office (domestic or foreign) or other person who was, is, or may be in a
position to help or hinder the business of the Company (or assist the Company
in
connection with any actual or proposed transaction) which (a) might subject
the
Company or any other such person to any damage or penalty in any civil, criminal
or governmental litigation or proceeding (domestic or foreign), (b) if not
given
in the past, might have had a Material Adverse Effect or (c) if not continued
in
the future, might result in a Material Adverse Effect. The Company's internal
accounting controls are sufficient to cause the Company to comply with the
Foreign Corrupt Practices Act of 1977, as amended.
(xxx) During
the past five years, none of the current officers or directors of the Company
have been:
(a) The
subject of a petition under the federal bankruptcy laws or any state insolvency
law filed by or against them, or by a receiver, fiscal agent or similar officer
appointed by a court for their business or property, or any partnership in
which
any or them was a general partner at or within two years before the time of
such
filing, or any corporation or business association of which any of them was
an
executive officer at or within two years before the time of such
filing;
(b) Convicted
in a criminal proceeding or a named subject of a pending criminal proceeding
(excluding traffic violations and other minor offenses);
(c) The
subject of any order, judgment, or decree not subsequently reversed, suspended
or vacated, of any court of competent jurisdiction, permanently or temporarily
enjoining any of them from, or otherwise limiting, any of the following
activities:
(d) (i) acting
as
a futures commission merchant, introducing broker, commodity trading advisor,
commodity pool operator, floor broker, leverage transaction merchant, any other
person regulated by the Commodity Futures Trading Commission, or an associated
person of any of the foregoing, or as an investment adviser, underwriter, broker
or dealer in securities, or as an affiliated person, director or employee of
any
investment company, bank, savings and loan association or insurance company,
or
engaging in or continuing any conduct or practice in connection with any such
activity;
(ii)
engaging
in any type of business practice; or
(iii) engaging
in any activity in connection with the purchase or sale of any security or
commodity or in connection with any violation of federal or state securities
law
or federal commodity laws.
(iv) the
subject of any order, judgment or decree, not subsequently reversed, suspended
or vacated of any federal or state authority barring, suspending or otherwise
limiting for more than sixty (60) days their right to engage in any activity
described in paragraph (3)(i) above, or be associated with persons engaged
in
any such activity;
-9-
(v) found
by
any court of competent jurisdiction in a civil action or by the Securities
and
Exchange Commission to have violated any federal or state securities law, and
the judgment in such civil action or finding by the Commission has not been
subsequently reversed, suspended or vacated; or
(vi) found
by
a court of competent jurisdiction in a civil action or by the Commodity Futures
Trading Commission to have violated any federal commodities law, and the
judgment in such civil action or finding by the Commodity Futures Trading
Commission has not been subsequently reversed, suspended or
vacated.
(vii) found
by
a court or an administrative agency to have or is alleged to have violated
any
Canadian or foreign securities laws.
(xxvii) Neither
the Company nor, to the knowledge of the Company, any of its affiliates has,
directly or through any agent, sold, offered for sale or solicited offers to
buy
nor will any of the foregoing directly buy any security of the Company, as
defined in the Securities Act, which is or will be integrated with the sale
of
the Units in a manner that would require the registration, pursuant to the
Securities Act, of the Offering.
(xv)
During the period commencing on the date hereof and ending on the Final Closing
Date, the Company shall not, without prior notice to and consent of the
Placement Agent: (A) issue any securities or incur any liability or obligation,
primary or contingent, for borrowed money; (B) enter into any transaction not
in
the ordinary course of business; or (C) declare or pay any dividend on its
capital stock,
(xvi)
Neither the Company nor any of its officers, directors, or affiliates, has
engaged or will engage, directly or indirectly, in any act or activity that
may
jeopardize the status of the offering and sale of the Securities as an exempt
transaction under the Act or under all applicable federal and/or state
securities or "blue sky" laws of any jurisdiction in which the Securities may
be
offered or sold.
7. Covenants
of the Company.
The
Company covenants that it will:
(a)
Notify ▇▇▇▇▇▇ immediately, and confirm such notice in writing, (i) when any
event shall have occurred during the period commencing on the date hereof and
ending on the Final Closing Date, as a result of which the Offering Documents
would include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and (ii) of the receipt of any notification with respect to the
modification, rescission, withdrawal, or suspension of the qualification or
registration of the Securities, or of an exemption from such registration or
qualification, in any jurisdiction. The Company will use its best efforts to
prevent the issuance of any such modification, rescission, withdrawal, or
suspension and if ▇▇▇▇▇▇ so request, to obtain the lifting thereof as promptly
as possible.
-10-
(b)
Not
make any supplement or amendment to the Offering Documents unless such
supplement or amendment complies with the requirements of the Act and Regulation
D and the applicable federal and/or state securities and "blue sky" laws and
unless ▇▇▇▇▇▇ shall have approved of such supplement or amendment in writing.
If, at any time during the period commencing on the date hereof and ending
on
the Final Closing Date, any event shall have occurred as a result of which
the
Offering Documents contains any untrue statement of a material fact or omits
to
state any material fact required to be stated therein or necessary to make
the
statements therein not misleading, or if, in the opinion of counsel to the
Company or counsel to the Placement Agent, it is necessary at any time to
supplement or amend the Offering Documents to comply with the Act, Regulation
D,
or any applicable securities or "blue sky" laws, the Company will promptly
prepare an appropriate supplement or amendment (in form and substance
satisfactory to ▇▇▇▇▇▇) which will correct such statement or omission or which
will effect such compliance.
(c)
Deliver without charge to the Placement Agent such number of copies of the
Offering Documents and any supplement or amendment thereto as may reasonably
be
requested by the Placement Agent.
(d)
Not,
directly or indirectly, solicit any offer to buy from, or offer to sell to
any
person any Securities, except through the Placement Agent.
(e)
Use
its best efforts to qualify the Securities for offering and sale under, or
establish an exemption from such qualification or registration under, the
securities or "blue sky" laws of the jurisdictions as may be required by the
Placement Agent; provided, however, that the Company will not be obligated
to
qualify to do business as a dealer in securities in any jurisdiction in which
it
is not so qualified. The Company will not consummate any sale of Securities
in
any jurisdiction or in any manner in which such sale may not be lawfully made;
in this regard the Company shall be entitled to rely on the Placement Agent's
representations herein, and the representations of Prospective Investors in
the
Subscription Agreement and on the Blue Sky qualifications affected by the
Placement Agent's counsel.
(f)
At
all times during the period commencing on the date hereof and ending on the
Final Closing Date, provide to each Prospective Investor or his Purchaser
Representative (as defined in Regulation D), if any, on request, such
information (in addition to that contained in the Offering Documents) concerning
the Offering, the Company and any other relevant matters, as it possesses or
can
acquire without unreasonable effort or expense, and to extend to each
Prospective Investor or his Purchaser Representative, if any, the opportunity
to
ask questions of, and receive answers from, the President or other Executive
Officers of the Company concerning the terms and conditions of the Offering
and
the business of the Company and to obtain any other additional information,
to
the extent it possesses the same or can acquire it without reasonable effort
or
expense, as such Prospective Investor or Purchaser Representative may consider
necessary in making an informed investment decision or in order to verify the
accuracy of the information furnished to such Prospective Investor or Purchaser
Representative, as the case may be.
(g)
Provide to each Prospective Investor or his Purchase Representative any
information required to be delivered by Rule 502(b) of Regulation D.
(h)
Disclose to each Prospective Investor, in writing, any material relationship
between such Prospective Investor's Purchaser Representative, if any, or its
affiliates, on the one hand, and the Company or its affiliates, on the other
hand, which, to the knowledge of the Company, then exists or is understood
to be
contemplated or has existed at any time during the previous two years and any
compensation received or to be received as a result of such
relationship.
(i)
Before accepting any subscription to purchase Securities from, or making any
sale to, any Prospective Investor, have reasonable grounds to believe (relying
upon the information provided pursuant to the Subscription Agreements that
(A)
such Prospective Investor meets the suitability requirements for investing
in
the Securities set forth in the Offering Documents, or (B) such Prospective
Investor is an accredited investor (as defined in Regulation D).
-11-
(j)
Notify ▇▇▇▇▇▇ promptly of the acceptance or rejection of any subscription.
The
Company shall not (i) accept subscriptions from, or make sales of Securities
to,
any Prospective Investors who are not, to the Company's knowledge, accredited
investors, or (ii) unreasonably reject any subscription for
Securities.
(k)
Cooperate with Placement Agent's counsel to file five copies of a Notice of
Sales of Securities on Form D with the Securities and Exchange Commission (the
"Commission") no later than 15 days after the first sale of the Securities,
and/or such documents or certificates as are required by any particular state
“blue sky” law. The Company shall file promptly such amendments to such Notice
on Form D as shall become necessary and, as requested by ▇▇▇▇▇▇, shall also
comply with any filing requirement imposed by the laws of any state or
jurisdiction in which offers and sales are made. The Company shall furnish
▇▇▇▇▇▇ with copies of all such filings.
(l)
Not,
directly or indirectly, engage in any act or activity which may jeopardize
the
status of the offering and sale of the Securities as exempt transactions under
the Act or under the securities or “blue sky” laws of any jurisdiction in which
the Offering maybe made. Without limiting the generality of the foregoing,
and
notwithstanding anything contained herein to the contrary, the Company shall
not, directly or indirectly, engage in any offering of securities which, if
integrated with the Offering in the manner prescribed by Rule 502(a) of
Regulation D and applicable releases of the Commission, may jeopardize the
status of the offering and sale of the Securities as exempt transactions under
Regulation D.
(m)
Apply
the net proceeds from the sale of the Securities as set forth in the Disclosure
Statement.
(n)
Not,
during the period commencing on the date hereof and ending on the Final Closing
Date, issue any press release or other communication, or hold any press
conference with respect to the Company, its financial condition, results of
operations, business, properties, assets, or liabilities, or the Offering,
without ▇▇▇▇▇▇ prior written consent, except as required by applicable
securities laws and except as may be related to the marketing and sale of its
products in the normal course of business.
(o)
Provide each Prospective Investor with a full executed registration rights
agreement which agreement will provide that the Company shall file a
registration statement (the “Registration Statement”) with the SEC within 30
days of the Final Closing of the Offering to provide for the resale of the
shares of Common Stock issuable pursuant to the Debentures, Warrants and Agent
Warrants. The Company shall use its best efforts to obtain an order of
effectiveness from the SEC declaring the registration statement effective as
soon as reasonably possible, but in no event later than 90 days from the filing
date and to maintain the effectiveness of such registration statement
until
the
date which is the earlier of (i) two years after the effective date of such
registration statement, (ii) at such time as all of the shares registered
thereunder have been publicly sold, or (iii) at such time as all of such shares
may be sold pursuant to Rule 144(k). The
agreement shall also provide that the failure to file the registration statement
as contemplated herein or otherwise comply with its obligations thereunder
shall
result in a two- percent (2%) per month, pro-rated daily, penalty on the
subscription price payable in cash or through the issuance by the Company to
each investor of additional shares of Common Stock and an additional two (2%)
percent penalty for each 30 days period thereafter.
(p)
The
Company shall use its best efforts (which shall include, but shall not be
limited to, the solicitation of proxies, if necessary) to elect a designee
of
the Placement Agent to the Company's Board of Directors for a period equal
to
five years from the date the Offering is completed, and to provide to the
Placement Agent within 45 days from the end of each quarter for a period of
five
years a monthly balance sheet and statement of operations.
8.
Payment of Expenses.
The
Company shall pay all fees, charges, expenses and disbursements relating to
the
Offering, including, without limitation, all fees, charges, expenses and
disbursements in connection with (a) the preparation, printing, filing,
distribution and mailing of the Confidential Offering Memorandum and any
supplement and amendment thereto and all other documents relating to the
Offering and the purchase, sale and delivery of the Securities, including the
cost of all copies thereof; (b) the issuance, sale, transfer and delivery of
the
Securities, including any transfer or other taxes payable thereon and the fees
of any transfer agent or registrar; (c) the registration or qualification of
the
Securities for offer and sale under the securities laws of such states and
other
jurisdictions as ▇▇▇▇▇▇ may designate (including, without limitation, all filing
and registration fees and the reasonable "blue sky" fees and disbursements
of
▇▇▇▇▇▇'▇ counsel); (d) placement agent counsel fees; and (e) printing, mailing,
travel and lodging expenses and other out-of-pocket expenses incurred by ▇▇▇▇▇▇
in connection with this Offering; provided, that all out-of-expenses in excess
of $1,000 shall be subject to the prior approval of the Company, which approval
shall not be unreasonably withheld. Upon ▇▇▇▇▇▇'▇ request, the Company shall
provide funds to pay all such fees, charges, expenses and disbursements in
advance.
9. Conditions
of Placement Agent's Obligations.
The
obligations of the Placement Agent pursuant to this Agreement shall be subject,
in its discretion, to the continuing accuracy of the representations and
warranties of the Company contained herein and in each certificate and document
contemplated under this Agreement to be delivered to the Placement Agent, as
of
the date hereof and as of each Closing Date, with respect to the performance
by
the Company of its obligations hereunder, and to the following
conditions:
(a)
At
the Closing and the Final Closing, the Placement Agent shall have received
the
favorable opinion of ▇▇▇▇▇▇▇▇ & ▇▇▇▇, LLP, counsel for the Company, dated
each Closing Date, addressed to the Placement Agent and the investors, and
in
form and scope satisfactory to counsel for the Placement Agent, to the effect
that:
(i)
the
Company is a corporation duly organized, validly existing, and in good standing
under the laws of the State of Florida, with full corporate power and authority
to own, lease, license, and use its properties and assets and to conduct its
business in the manner described in the Offering Documents and is duly qualified
to do business and is in good standing as a foreign corporation in every
jurisdiction in which its ownership, leasing, licensing, or use of property
and
assets or the conduct of its business makes such qualification necessary (except
where the failure to so qualify would not have a material adverse effect upon
the Company or its business);
-12-
(ii)
the
Company has, as of the date hereof, an authorized, and, to such counsel's
knowledge, outstanding capitalization as set forth in the Disclosure Statement.
Each issued and outstanding share of Common Stock is validly authorized, validly
issued, fully paid, and nonassessable, with no personal liability attaching
to
the ownership thereof solely by being such a holder to such counsel's knowledge
or as set forth on a schedule hereto has not been issued and is not owned or
held in violation of any preemptive right of stockholders. To the best knowledge
of such counsel, there is no commitment, plan, or arrangement to issue, and
no
outstanding option, warrant, or other right calling for the issuance of, any
share of capital stock of the Company or any security or other instrument which
by its terms is convertible into, exercisable for, or exchangeable for capital
stock of the Company, except as may be properly described in the Offering
Documents, in this Agreement or in a schedule hereto. To the best knowledge
of
such counsel, there is outstanding no security or other instrument which by
its
terms is convertible into or exchangeable for capital stock of the Company,
except as may be properly described in the Offering Documents or in a schedule
hereto;
(iii)
such counsel has no knowledge of any litigation, arbitration, claim,
governmental or other proceeding (formal or informal), or investigation pending
or threatened with respect to the Company or any of its operations, businesses,
properties, or assets except as may be properly described in the Offering
Documents, in this Agreement or in a schedule hereto or such as individually
or
in the aggregate do not now have and will not in the future have a material
adverse effect upon the operations, business, properties, or assets of the
Company or which could materially adversely affect the transactions or other
acts contemplated by this Agreement or the validity or enforceability of this
Agreement;
(iv)
such
counsel has no knowledge that the Company is in violation or breach of, or
in
default with respect to, complying with any provision of any contract,
agreement, instrument, lease, license, arrangement, or understanding known
to
such counsel and which is material to the business of the Company;
(v)
the
Company has all requisite corporate power and authority to execute, deliver,
and
perform this Agreement, and to consummate the transactions contemplated hereby.
All necessary corporate proceedings of the Company have been taken to authorize
the execution, delivery, and performance by the Company of this Agreement,
and
the consummation of the transactions contemplated hereby. This Agreement has
been duly authorized, executed, and delivered by the Company, is the legal,
valid, and binding obligation of the Company, and is enforceable against the
Company in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application now or hereafter in effect relating to or
affecting the enforcement of creditors' right generally and the application
of
general equitable principles in any action, legal or equitable and then except,
as to those provisions relating to indemnity or contribution, such opinion
shall
be limited as effected by any Federal or state securities laws regarding
indemnity and/or contribution;
(vi)
the
Securities conform to all statements relating thereto contained in the Offering
Documents. The Securities, shall be validly authorized, validly issued, fully
paid, and nonassessable, with no personal liability attaching to the ownership
thereof and to such counsel's knowledge or as set forth in a schedule annexed
hereto shall not have been issued in violation of any preemptive rights of
stockholders;
(vii)
assuming the accuracy of the representations and warranties of the Proposed
Investors set forth in the Subscription Agreements and Investor Questionnaires
and the representations and warranties of the Placement Agent set forth herein,
the Offering Documents (except that no opinion need be expressed as to the
financial statements, related schedules, or other financial data contained
therein) comply as to form in all material respects with requirements of Rule
506 of Regulation D. To the best knowledge of such counsel, any contract,
agreement, instrument, lease, license, or document described in the Offering
Documents has been accurately described therein;
(viii)
such counsel has no knowledge of any modification, rescission, suspension,
or
withdrawal of registration or qualification of the Securities, or of an
exemption from such registration or qualification, or the institution or threat
of proceedings for that purpose;
(ix)
assuming that (a) a proper Form D is filed in accordance with Rule 503 of
Regulation D, (b) that the offer and the sale of the Securities by the Placement
Agent was made in compliance with Rule 506 of Regulation D and that the
Placement Agent's representations and warranties set forth herein are true
and
correct, and (c) that the representations of the Prospective Investors in the
Subscription Agreements signed by them are true and correct (which facts will
not be independently verified by such counsel), the sale of Securities in the
Offering is exempt from registration under the Securities Act of 1933 and is
in
compliance with Regulation D;
(x)
neither the execution and delivery of this Agreement, the certificates
representing the Securities, nor compliance with the terms hereof or thereof
will (i) conflict with, result in a breach of, or constitute a default under
the
Articles or Certificate of Incorporation or By-Laws of the Company, or, to
the
best of such counsel's knowledge, any material contract, instrument, agreement
or document to which the Company is a party, or by which the assets or
properties of the Company are bound; or (ii) to the best knowledge of such
counsel, have any material adverse effect on any permit, certification,
registration, approval, consent, license or franchise (other than Excluded
Laws)
necessary for the Company to own or lease and operate any of its properties
and
to conduct its business or the ability of the Company to make use thereof as
described in the Offering Documents;
-13-
(xi)
such
counsel has no knowledge, except as disclosed in the Offering Documents, that
the issuance of the Securities in the Offering will give any holder of any
of
the Company's outstanding options, warrants or other convertible securities
or
rights to purchase Securities of the Company's Common Stock or Preferred Stock,
the right to purchase any additional shares of Common Stock and/or the right
to
purchase shares at a reduced price.
In
rendering such opinion, counsel for the Company may rely (A) as to matters
of
fact, on certificates of responsible officers of the Company; and (B) to the
extent they deem proper, upon written statements or certificates of officers
of
departments of various jurisdictions having custody of documents respecting
the
corporate existence or good standing of the Company, provided that copies of
any
such statements or certificates shall be delivered to counsel for the Placement
Agent.
(b)
On or
prior to the Closing Date the Placement Agent shall have been furnished such
information, documents, certificates, and opinions as it may reasonably require
for the purpose of enabling it to review the matters referred to in Section
6,
and in order to evidence the accuracy, completeness, or satisfaction of any
of
the representations, warranties, covenants, agreements, or conditions herein
contained, or as it may otherwise reasonably request.
(c)
At
the Closing and the each additional Closing, the Placement Agent shall have
received one or more certificates of the chief executive officer and of the
chief financial officer of the Company, dated the applicable Closing Date to
the
effect that, as of the date of this Agreement and as of the applicable Closing
Date the representations and warranties of the Company contained herein were
and
are accurate, and that as of the Closing Date the obligations to be performed
by
the Company hereunder on or prior thereto have been fully performed. In
addition, the parties shall deliver such other certificates or closing documents
as are within the industry norm. Notwithstanding the foregoing, the Company
hereby represents and warrants that at each Closing, the representations and
warranties contained herein shall be true and correct in all
respects.
(d)
All
proceedings taken in connection with the issuance, sale, and delivery of the
Securities shall be satisfactory in form and substance to ▇▇▇▇▇▇ and ▇▇▇▇▇▇
counsel.
(e)
There
shall not have occurred after the date hereof, at any time prior to each
Closing: (A) any domestic or international event, act, or occurrence which
has
materially disrupted, or in ▇▇▇▇▇▇ opinion will in the immediate future
materially disrupt the securities markets; (B) a general suspension of, or
a
general limitation on prices for, trading in securities on the Nasdaq SmallCap
Market, American Stock Exchange or the over-the-counter market; (C) any banking
moratorium declared by a state or federal authority; (D) any material
interruption in the mail service or other means of communication within the
United States; (E) any material adverse change in the business, properties,
assets, results of operations, or financial condition of the Company; or (F)
any
change in the market for securities in general or in political, financial,
or
economic conditions which, in ▇▇▇▇▇▇ judgment, makes it inadvisable to proceed
with the offering, sale, and delivery of the Securities.
(f)
The
Company shall have executed and delivered to ▇▇▇▇▇▇ the Investment Banking
Agreement as required under Section 13 hereunder and any required Agent Warrants
as provided herein.
Any
certificate or other document signed by any officer of the Company and delivered
to ▇▇▇▇▇▇ or to ▇▇▇▇▇▇=
counsel
at a Closing shall be deemed a representation and warranty by the Company
hereunder as to the statements made therein. If any condition to ▇▇▇▇▇▇
obligations hereunder has not been fulfilled as and when required to be so
fulfilled, ▇▇▇▇▇▇ may terminate this Agreement or, if ▇▇▇▇▇▇ so elect, in
writing waive any such conditions which have not been fulfilled or extend the
time for their fulfillment. In the event that ▇▇▇▇▇▇ elect to terminate this
Agreement, ▇▇▇▇▇▇ shall notify the Company of such election in writing. Upon
such termination, neither party shall have any further liability or obligation
to the other except as provided in Section 11 hereof.
10. Conditions
of Company's Obligations.
The
obligations of the Company pursuant to this Agreement shall be subject, in
its
discretion, to the performance by the Placement Agent in all material respects
of its obligations hereunder.
11. Termination.
(a)
This
Agreement is effective upon the date hereof and shall remain in effect until
(i)
the completion of the Offering, or (ii) the earlier termination as herein
provided. If no Units are sold pursuant to the Offering within 90 days of the
completion of the Confidential Offering Memorandum and/or Offering Documents
and
related documentation, the Company may terminate this Agreement upon 10 days’
prior written notice to the Placement Agent. The Placement Agent may terminate
the agency created hereby for any reason upon written notice to the Company.
Notwithstanding
the foregoing, in the event the Company elects to terminate the agency at any
time within 60 days of the completion of the Confidential Offering Memorandum
and/or Offering Documents (90 days upon the mutual agreement of the Company
and
Placement Agent), the Company shall pay the Placement Agent $200,000 with five
days of such termination.
-14-
(b)
Neither party shall have any liability or continuing obligation to the other
upon termination of this Agreement in accordance with paragraph 11 except that,
regardless of which party elects to terminate, (i) the Company agrees to
reimburse the Placement Agent for, or otherwise pay and bear, the expenses
and
fees to be paid and borne by the Company as provided for in paragraph 8 above
and to reimburse the Placement Agent for the full amount of its actual
out-of-pocket expenses (which shall include, without limitation, the fees and
disbursements of the Placement Agent's counsel, travel and lodging expenses,
mailing, printing and reproduction expenses, and any expenses reasonably
incurred by the Placement Agent in conducting its due diligence) less amounts
previously paid to the Placement Agent in reimbursement for such expenses and
the advance against expenses delivered upon the execution of this Agreement,
and
(ii) the provisions of paragraph 14 and the Indemnification Provisions in
paragraph 12 shall remain in full force and effect; provided further, that
in
the event the Company terminates this agreement, except as otherwise provided
herein, prior to the consummation of the Offering, and within 90 days from
the
date of such termination, consummates any financing, merger, acquisition or
like
transaction introduced to, or considered by, the Company, during the term
hereof, the Placement Agent shall be entitled to receive an amount equal to
10%
of the aggregate amount of such financing or $300,000 in the event of a merger
or acquisition or similar transaction. In the event the Placement Agent arranges
the sale of any securities under this Agreement, paragraphs 4, 5, 6, 7, 8,
12,
13, 14, 15, 16 and 17 shall survive the termination of this
Agreement.
(c)
In
the
event the Company elects not to proceed with the Offering for any reason, in
that event, in addition to the other obligations contained herein, the Company
shall pay to the Placement Agent, as liquidated damages and not as a penalty,
the sum of $150,000.
12.
Indemnification and Contribution.
(a)
The
Company agrees to indemnify and hold harmless the Placement Agent, its officers,
directors, partners, employees, agents, and counsel, and each person, if any,
who controls the Placement Agent within the meaning of Section 15 of the Act
or
Section 20(a) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), against any and all loss, liability, claim, damage, and expense
whatsoever (which shall include, for all purposes of this Section 12, but not
be
limited to, attorneys' fees and any and all expense whatsoever incurred in
investigating, preparing, or defending against any litigation, commenced or
threatened, or any claim whatsoever and any and all amounts paid in settlement
of any claim or litigation) as and when incurred arising out of, based upon,
or
in connection with (i) any untrue statement or alleged untrue statement of
a
material fact contained in the Offering Documents or in any document delivered
or written statement made pursuant to Section 7(f), or (B) in any application
or
other document or communication (it being understood that neither the Company
nor any officer, director or employee shall provide any information to any
Prospective Investor which is not contained in the Offering Documents) (in
this
Section 12 collectively called an "application") executed by or on behalf of
the
Company or based upon written information furnished by or on behalf of the
Company filed in any jurisdiction in order to register or qualify the Securities
under the "blue sky" or securities laws thereof or in order to secure an
exemption from such registration or qualification or filed with the Commission;
or any omission or alleged omission to state a material fact required to be
stated therein or necessary to make the statements therein not misleading,
unless such statement or omission was made in reliance upon and in conformity
with written information furnished to the Company as stated in Section 12(b)
with respect to the Placement Agent expressly for inclusion in the Offering
Documents or in any application, as the case may be; or (ii) any breach of
any
representation, warranty, covenant, or agreement of the Company contained in
this Agreement. The foregoing agreement to indemnify shall be in addition to
any
liability the Company may otherwise have, including liabilities arising under
this Agreement.
If
any
action is brought against the Placement Agent or any of its officers, directors,
partners, employees, agent, or counsel, or any controlling persons of the
Placement Agent (an "indemnified party"), in respect of which indemnify may
be
sought against the Company pursuant to the foregoing paragraph, such indemnified
party or parties shall promptly notify the Company (the "indemnifying party")
in
writing of the institution of such action (but the failure so to notify shall
not relieve the indemnifying party from any liability it may have other than
pursuant to this Section 12(a)) and the indemnifying party shall promptly assume
the defense of such action, including the employment of counsel (reasonably
satisfactory to such indemnified party or parties) and payment of expenses.
Such
indemnified party shall have the right to employ its own counsel in any such
case, but the fees and expense 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 in connection with the defense
of such action or the indemnifying party shall not have promptly employed
counsel satisfactory to such indemnified party or parties to have charge of
the
defense of such action or such indemnified party or parties shall have
reasonably concluded that there may be one or more legal defenses available
to
it or them or to other indemnified parties which are different from or
additional to those available to one or more of the indemnifying parties, in
any
of which events such fees and expenses of one such counsel shall be borne by
the
indemnifying party and the indemnifying party shall not have the right to direct
the defense of such action on behalf of the indemnified party or parties.
Anything in this paragraph to the contrary notwithstanding, the indemnifying
party shall not be liable for any settlement of any such claim or action
effected without its written consent. The Company agrees promptly to notify
the
Placement Agent of the commencement of any litigation or proceedings against
the
Company or any of its officers or directors in connection with the sale of
the
Securities, the Offering Documents, or any application.
(b)
The
Placement Agent agrees to indemnify and hold harmless the Company, its officers,
directors, employees, agents, and counsel, and each other person, if any, who
controls the Company 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
the Company to the Placement Agent in Section 12(a), with respect to any and
all
loss, liability, claim, damage, and expense whatsoever (which shall include,
for
all purposes of this Section 12, but not be limited to, attorneys' fees and
any
and all expense whatsoever incurred in investigating, preparing, or defending
against any litigation, commenced or threatened, or any claim whatsoever and
any
and all amounts paid in settlement of any claim or litigation) as and when
incurred arising out of, based upon, or in connection with (i) statements or
omissions, if any, made in the Offering Documents in reliance upon and in
conformity with written information furnished to the Company as stated in this
Section 12 with respect to the Placement Agent expressly for inclusion in the
Offering Documents, and (ii) the failure of the Placement Agent to comply with
the provisions of Section 2(c) hereof or with the "blue sky" or securities
laws
of the jurisdictions in which the Placement Agent solicits offers to buy or
offers to sell any Securities or any breach of any representation, warranty,
covenant or agreement of the Placement Agent contained in this Agreement. The
foregoing agreement to indemnify shall be in addition to any liability the
Placement Agent may otherwise have, including liabilities arising under this
Agreement. If any action shall be brought against the Company or any other
person so indemnified based on the Offering Documents and in respect of which
indemnity may be sought against the Placement Agent pursuant to this Section
12,
the Placement Agent shall have the rights and duties given to the indemnifying
party, and the Company and each other person so indemnified shall have the
rights and duties given to the indemnified parties, by the provisions of Section
12(a) hereof.
-15-
(c)
To
provide for just and equitable contribution, if (i) an indemnified party makes
a
claim for indemnification pursuant to Section 12(a) or 12(b) hereof but it
is
found in a final judicial determination, not subject to further appeal, that
such indemnification may not be enforced in such case, even though this
Agreement expressly provides for indemnification in such case, or (ii) any
indemnified or indemnifying party seeks contribution under the Act, the Exchange
Act, or otherwise, then the Company (including for this purpose any contribution
made by or on behalf of any officer, director, employee, agent, or counsel
of
the Company, or any controlling person of the Company), on the one hand, and
the
Placement Agent (including for this purpose any contribution by or on behalf
of
an indemnified party), on the other hand, shall contribute to the losses,
liabilities, claims, damages, and expenses whatsoever to which any of them
may
be subject, in such proportions as are appropriate to reflect the relative
benefits received by the Company, on the one hand, and the Placement Agent,
on
the other hand; provided, however, that if applicable law does not permit such
allocation, then other relevant equitable considerations such as the relative
fault of the Company and the Placement Agent in connection with the facts which
resulted in such losses, liabilities, claims, damages, and expenses shall also
be considered. The relative benefits received by the Company, on the one hand,
and the Placement Agent, on the other hand, shall be deemed to be in the same
proportion as (x) the total proceeds from the Offering (net of compensation
payable to the Placement Agent pursuant to Section 5(a) hereof but before
deducting expenses) received by the Company, and (y) the compensation received
by the Placement Agent pursuant to Section 5(a) hereof.
The
relative fault, in the case of an untrue statement, alleged untrue statement,
omission, or alleged omission, shall be determined by, among other things,
whether such statement, alleged statement, omission, or alleged omission relates
to information supplied by the Company or by the Placement Agent, and the
parties' relative intent, knowledge, access to information, and opportunity
to
correct or prevent such statement, alleged statement, omission, or alleged
omission. The Company and the Placement Agent agree that it would be unjust
and
inequitable if the respective obligations of the Company and the Placement
Agent
for contribution were determined by pro rata or per capita allocation of the
aggregate losses, liabilities, claims, damages, and expenses or by any other
method of allocation that does not reflect the equitable considerations referred
to in this Section 19(c). In no case shall the Placement Agent by responsible
for a portion of the contribution obligation in excess of the compensation
received by it pursuant to Section 5(a) hereof. No person guilty of a fraudulent
misrepresentation shall be entitled to contribution from any person who is
not
guilty of such fraudulent misrepresentation. For purposes of this Section 12(c),
each person, if any, who controls the Placement Agent within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act and each officer,
director, partners, employee, agent, and counsel of the Placement Agent, shall
have the same rights to contribution as the Placement Agent, and each person,
if
any, who controls the Company within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act and each officer, director, employee, agent,
and counsel of the Company, shall have the same rights to contribution as the
Company, subject in each case to the provisions of this Section 12(c). Anything
in this Section 12(c) to the contrary notwithstanding, no party shall be liable
for contribution with respect to the settlement of any claim or action effected
without its written consent. This Section 12(c) is intended to supersede any
right to contribution under the Act, the Exchange Act, or
otherwise.
13. Investment
Banking Agreement and Right of First Refusal
(a) Upon
the
closing of any financing arranged by the Placement Agent (the "Closing"), the
Company will deemed to have engaged, and will enter into a separate agreement
(the "Investment Banking Agreement") with the Placement Agent, pursuant to
which
(i) the Company shall employ the Placement Agent as its Investment Banker and
Financial Consultant for a period of 12 months at a monthly retainer of $5,000,
upon the closing of an additional $1,000,000 of the Offering, the retainer
will
increase to $7,500; and (ii) pay the Placement Agent a fee of five (5%) percent
of the first $5,000,000, two and one-half (2-1/2%) percent of the amount over
$5,000,000 but less than $10,000,000, and 1% of the amount over $10,000,000
of
the consideration paid or received by the Company (or by any subsidiary or
affiliated entity of the Company) in any transaction (including mergers and
acquisitions,) consummated by the Company or any subsidiary or affiliated entity
of the Company, which were introduced to the Company by the Placement Agent.
The
Investment Banking Agreement shall be renewable upon the written consent of
the
Company and ▇▇▇▇▇▇.
(b) At
the
Closing, the Placement Agent will be granted an irrevocable right of first
refusal for a period ending 24 months from the effective date of the
Registration Statement filed by the Company with respect to this Offering for
all future public offerings or private financings (whether debt and/or equity)
to purchase for its account or to sell for the account of the Company, or any
subsidiary of or successor to the Company, any securities of the Company or
any
such subsidiary or successor of the Company that the Company or any such
subsidiary or successor may seek to sell through an underwriter, placement
agent
or broker dealer whether pursuant to registration under the Securities Act
or
otherwise. This right of first refusal does not include commercial bank
financing arrangements entered into by the Company. If the Placement Agent
fails
to accept such offer within 20 business days after the mailing of a notice
containing such offer by registered mail addressed to the Placement Agent (5
business days in the event the offer covers a sale under Rule 144), then the
Placement Agent shall have no further claim or right with respect to the
financing proposal contained in such notice. If, however, the terms of such
proposal are subsequently modified in any material respect, the preferential
right referred to herein shall apply to such modified proposal as if the
original proposal had not been made. The Placement Agent's failure to exercise
its preferential right with respect to any particular proposal shall not affect
its preferential rights relative to future proposals.
-16-
14. Non-Solicitation.
The
Company agrees that, for a period of three years from the date hereof, it shall
not solicit any offer to buy from or offer to sell any person introduced to
the
Company by the Placement Agent in connection with the Offering, directly or
indirectly, any securities of the Company or of any other entity, or provide
the
name of any such person to any other securities broker or dealer or selling
agent. In the event that the Company or any of its affiliates, directly or
indirectly, solicits, offers to buy from or offers to sell to any such person
any such securities, or provides the name of any such person to any other
securities broker or dealer or selling agent, and such person purchases such
securities or purchases securities from any other securities broker or dealer
or
selling agent, the Company shall pay to the Placement Agent an amount equal
to
10% of the aggregate purchase price of the securities so purchased by such
person.
15.
Right
of
Participation.
For
a
period of twelve months from the Effective Date of the Registration Statement,
the Company will not, directly or indirectly, effect a subsequent financing
of
its securities (whether structured as debt or equity), unless in each such
case
the Company shall have first offered to sell to the investors in the Offering
(the “Investors”) the securities being offered in such subsequent financing (the
securities being offered to the Investors being referred to herein as the
“Offered
Securities”).
The
Company shall offer to sell to each Investor (A) such Investor’s pro rata share
of the Offered Securities (the “Basic
Amount”),
and
(B) such additional portion of the Offered Securities as such Investor shall
indicate it will purchase should the other Investors subscribe for less than
their Basic Amounts (the “Undersubscription
Amount”),
at a
price and on such other terms as shall have been specified by the Company in
writing delivered to such Investor (the “Offer”),
which
Offer by its terms shall remain open and irrevocable for a period of not less
than three (3) business days from such Investor’s receipt of the terms of the
Offer in writing (the “Offer
Period”).
16. Representations
and Agreements to Survive Delivery.
All
representations, warranties, covenants, and agreements contained in this
Agreement shall be deemed to be representations, warranties, covenants, and
agreements at the Closing Date and, such representations, warranties, covenants,
and agreements, including the indemnification and contribution agreements
contained in Section 12, shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of the Placement Agent
or
any indemnified person, or by or on behalf of the Company or any person or
entity which is entitled to be indemnified under Section 12(b), and shall
survive termination of this Agreement or the issuance, sale, and delivery of
the
Securities. In addition, notwithstanding any election hereunder or any
termination of this Agreement, and whether or not the terms of this Agreement
are otherwise carried out, the provisions of Sections 6, 7(a), 7(c), 10 and
12
shall survive termination of this Agreement and shall not be affected in any
way
by such election or termination or failure to carry out the terms of this
Agreement or any part thereof.
17.
Notices.
All
communications hereunder, except as may be otherwise specifically provided
herein, shall be in writing and, if sent to the Placement Agent, shall be mailed
by certified mail, hand delivered, or sent by overnight courier service, to
▇▇▇▇▇▇ Associates L.P. ▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ Attention: ▇▇▇▇▇
▇▇▇▇▇▇, with a copy to ▇▇▇▇▇▇▇▇▇ & DiGioia LLP, ▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.; or if sent to
the
Company, China Mobility Solutions, Inc., ▇▇▇-▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇,
▇.▇. ▇▇▇▇▇▇ ▇▇▇ ▇▇▇, Attention: Xiao-Qing (▇▇▇▇▇▇) Du, with a copy to ▇▇▇▇▇▇
▇▇▇▇▇▇▇, Esq, ▇▇▇▇▇▇▇▇ & ▇▇▇▇, LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇. All notices hereunder shall be effective upon receipt
by
the party to which it is addressed.
18.
Parties.
This
Agreement shall inure solely to the benefit of, and shall be binding upon,
the
Placement Agent and the Company and the persons and entities referred to in
Section 10 who are entitled to indemnification or contribution, and their
respective successors, legal representatives, and assigns (which shall not
include any purchaser, as such, of Securities), and no other person shall have
or be construed to have any legal or equitable right remedy, or claim under
or
in respect of or by virtue of this Agreement or any provision herein
contained.
19.
Construction.
This
Agreement shall be construed in accordance with the laws of the State of New
York, without giving effect to conflict of laws. Any or all actions or
proceedings which may be brought by the Company or ▇▇▇▇▇▇ under this Agreement
shall be brought in the federal or state courts having a situs within the State
of New York, New York County, and the Company and ▇▇▇▇▇▇ each hereby consent
to
the jurisdiction of any local, state, or federal court located within the State
of New York, New York County and waive all objections to venue.
[remainder
of page intentionally left blank]
-17-
20.
Counterparts.
This
Agreement may be
executed in counterparts, each of which shall constitute an original and all
of
which, when taken together, shall constitute one agreement.
If
the
foregoing correctly sets forth the understanding between us, please so indicate
in the space provided below for that purpose, whereupon this letter shall
constitute a binding agreement among us.
Very
truly yours,
CHINA
MOBILITY SOLUTIONS, INC
By:
________________________________
Name:
Xiao-Qing (▇▇▇▇▇▇) Du, President
Title:
President & Chief Executive Officer
Accepted
as of the date
first
above written:
▇▇▇▇▇▇
Associates L.P.
By: ___________________________
Name:
▇▇▇▇▇ ▇▇▇▇▇▇
Title:
President
-18-