C3D Inc.
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December 1, 1999
Sands Brothers & Co., Ltd.
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Gentlemen:
The undersigned, C3D Inc., a corporation organized under the laws of
the state of Florida (together with any of its subsidiaries, affiliates,
successors or assigns the "Company"), proposes to offer for sale to certain
"accredited investors, through Sands Brothers & Co., Ltd., in accordance with
the terms and conditions specified in the letter agreement dated October 25,
1999 between the parties hereto (the "Letter Agreement"), as exclusive placement
agent ("Sands Brothers" or the "Placement Agent") on a best efforts basis, a
minimum of $4,000,000 (the "Minimum Amount") and a maximum of $25,000,000 (the
"Maximum Amount") of (a) the Company's capital stock (whether Common Stock or
Preferred Stock convertible into Common Stock) (collectively, the "Capital
Stock"), at a price (or conversion price, should convertible Preferred Stock be
offered) equal to a 30% discount to the average of the bid price for the 30 day
period prior to the Closing (the "Minimum Offering Price") with respect to the
Minimum Amount, and with respect to an amount in excess of the Minimum Amount
and up to the Maximum Amount, at the Minimum Offering Price but in no event less
than $12.00 per share and/or (b) any other similar form of debt financing
transactions (hereinafter, collectively "Other Financing"). The Capital Stock
and Other Financing instruments (the "Securities") to be offered pursuant to the
Offering Documents (as hereinafter defined) and Other Financing transactions to
be consummated are sometimes hereinafter referred to collectively as the
"Financing" or the "Offering."
The closing of the Financing shall not occur until the Company has, in
any combination, received and accepted subscriptions for the purchase of
Securities and/or consummated Other Financing transactions in amounts equal to
the Minimum Amount (the "Closing").
The Capital Stock and/or Other Financing (collectively, the
"Securities") will be offered pursuant to those terms and conditions acceptable
to you and your counsel as reflected in a definitive form of Confidential
Private Placement Memorandum of the Company (which shall contain the Company's
audited financial statements and substantially the same descriptive information
contained in the Company's Form 10 as filed with the Securities and Exchange
Commission) and/or "long form" subscription agreement for institutional
investors only (together with the exhibits and any
supplements thereto, the "Memorandum"). The Securities will be offered pursuant
to the Memorandum in accordance with Regulation D promulgated under the
Securities Act of 1933, as amended (the "Securities Act").
Each prospective investor subscribing to purchase Securities
("Subscriber") will be required to deliver, among other things, a subscription
agreement ("Subscription Agreement") and an investment suitability questionnaire
("Questionnaire") in the forms to be provided, representing and warranting,
among other things, that such Subscriber is an "accredited investor" as such
term is defined in Regulation D.
The Memorandum and the form of proposed Subscription Agreement between
the Company and each Subscriber and the exhibits which are part of the
Memorandum (including, without limitation, the Registration Rights Agreement
between the Company and each of the Subscribers with respect to certain
registration rights under the Securities Act (the "Registration Rights
Agreement")) and/or the Subscription Agreement are referred to herein
collectively as the "Offering Documents."
The Securities will be offered for minimum subscription amounts of $
100,000 on a "best efforts" basis, exclusively by Sands Brothers, subject to
conditions during the Period; provided, however, that the Company and the
Placement Agent may, in their discretion, accept subscriptions for a lesser
amount from a Subscriber.
The Company will prepare and deliver to the Placement Agent a
reasonable number of copies of the Offering Documents in form and substance
satisfactory to the Placement Agent and its counsel, which Offering Documents
shall include reviewed financial statements for such periods as may be required.
Capitalized terms used herein, unless otherwise defined or unless the
context otherwise indicates, shall have the same meanings provided in the
Memorandum.
1. Appointment of Placement Agent. You are hereby appointed exclusive
Placement Agent of the Company during the offering period herein specified (the
"Offering Period") for the purposes of assisting the Company on a "best efforts"
basis in finding qualified Subscribers for the purchase of Securities and to
identify potential sources to engage in Other Financing transactions with the
Company in connection with the Offering. The Offering Period shall commence on
the date of delivery and acceptance by the Placement Agent of the Memorandum
generated and reviewed by Company counsel and Placement Agent's counsel,
respectively, the Company's Form 10 as filed with the Securities and Exchange
Commission (the "Commission"), including the financial statements contained
therein, and the due diligence list attached hereto as Exhibit D ("Commencement
Date"). The Minimum Amount must be sold within 45 days after the Commencement
Date. If the Minimum Amount is sold during such time period, then the Offering
shall continue until the earlier to occur of: (i) the sale of the Maximum
Amount; or (ii) 12 months from the completion of the sale of the Minimum Amount.
If the Minimum Amount is not sold during the time period set forth herein, the
Offering will be terminated and all funds received from Subscribers and held in
a special non-interest
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bearing escrow account (the "Account") at Republic National Bank, New York, New
York (the "Bank") will be returned, without deduction or accrued interest
thereon. It is anticipated that the Placement Agent will sell $7.5 million of
Securities within 90 days after the Commencement Date, $11 million of Securities
within 150 days after the Commencement Date, and $14.5 million of Securities
within 210 days after the Commencement Date, provided, however, in the event
that $7.5 million of Securities are not sold within 150 days after the
Commencement Date, this Agreement shall be subject to renegotiation by the
parties hereto. You hereby accept such agency and agree to assist the Company in
finding qualified Subscribers for the purchase of the Securities in connection
with the Offering and to identify potential sources to engage in Other Financing
transactions with the Company in connection with the Offering. Unless specified
otherwise herein writing, your agency hereunder is not terminable by the Company
except upon termination of the Offering.
As part of the Placement Agent's exclusive representation of the
Company with respect to the Offering, the Placement Agent shall assist the
Company in identifying potential investors and sources of Other Financing and
shall on behalf of the Company, contact such potential investors and other
potential investors as the Company may designate. In addition, the Placement
Agent shall assist the Company in structuring, negotiating and effecting the
Offering. The Company agrees that, during the course of the engagement
hereunder, in the event that it, or any of its management or affiliates, shall
initiate any negotiations with third parties with respect to the Offering and to
the extent any of such persons receives an inquiry or offer from any third
parties concerning the Offering or any other financing related to the Company,
they will reasonably promptly inform the Placement Agent as to the name of such
person and the date of such initial contact. Sands Brothers has been appointed
pursuant to the Letter Agreement to negotiate the best terms available for each
Potential Investment and Potential Joint Venture (as each term is defined
therein) but in the event that such a proposal is reasonably considered to be of
strategic importance, the Company shall retain the sole right to determine
whether any such Potential Investment or Potential Joint Venture is to be
consummated.
2. Representations and Warranties of the Company. The Company
represents and warrants as follows:
(a) Securities Law Compliance. The Offering Documents, upon delivery,
will conform in all material respects with the requirements of the Securities
Act and Regulation D promulgated thereunder and with the requirements of all
other published rules and regulations of the United States Securities and
Exchange Commission (the "Commission") currently in effect relating to "private
offerings" and/or "accredited investors" of the type contemplated by the
Company. The Offering Documents will not contain an untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; except that no representation or warranty is made with
respect to statements or omissions made in the Offering Documents in reliance
upon and in conformity with written information furnished to the Company with
respect to the Placement Agent (or any person who may be deemed to be affiliated
therewith or an associated person thereof ) or on behalf of the Placement Agent
for use in the Offering Documents or any amendment thereof or supplement
thereto. The Offering Documents will not be amended or supplemented and no
amendment or supplement thereto will be made without the prior consent of the
Placement Agent, which consent will not be unreasonably withheld.
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(b) Organization. The Company is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation and has all requisite corporate power and authority to own and
lease its properties, to carry on its business as currently conducted and as
proposed to be conducted. The Company is duly qualified to do business in the
states or jurisdictions set forth on Schedule 2(b). To the best of the Company's
knowledge after due inquiry, except as set forth in Schedule 2(b), there is no
jurisdiction in which the conduct of the Company's business or ownership or
leasing of its properties requires it to be qualified to do business as a
foreign corporation, except where such qualifications have been obtained or the
failure to be so qualified would not have a material adverse effect on the
business, financial condition or prospects of the Company. The Company has all
requisite power and authority to execute and deliver this Agreement and to carry
out the transactions contemplated by this Agreement.
(c) Capitalization.
(i) The authorized, issued and outstanding capital stock of
the Company prior to the consummation of the Closing of the transactions
contemplated by the Offering is set forth on Schedule 2 (c)(i) hereto. Each such
share is validly issued, fully paid and nonassessable. Except as set forth on
Schedule 2 (c)(i), there are no other classes of capital stock or other
securities authorized by the Company.
(ii) The authorized, issued and outstanding capital stock of
the Company immediately upon the consummation of the Closing shall be as set
forth on Schedule 2 (c)(ii) hereto, such Schedule to be recalculated by the
Company to reflect the sale of Securities at the Closing.
(iii) The Company has no obligation (contingent or otherwise)
to pay any dividend or make any other distribution in respect of any of its
capital stock. The Company is not a party to, and, to the Company's knowledge
after due inquiry, except as set forth on Schedule 2(c) (iii) hereto, there
exist no voting trusts or agreements, stockholders' agreements, pledge
agreements, buy-sell agreements, rights of first refusal or proxies relating to
any securities of the Company (whether or not the Company is a party thereto).
All of the outstanding securities of the Company were issued, in all material
respects, in compliance with all applicable federal and state securities laws
since June 1, 1999, and to the best knowledge of the Company with respect to the
period prior to June 1, 1999. The Company has no obligation (contingent or
otherwise) to repurchase, redeem or otherwise acquire any shares of its capital
stock.
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(iv) The stockholders of record and the holders of
subscriptions, warrants, options, preemptive rights, convertible securities and
other rights (contingent or otherwise) to purchase or otherwise acquire equity
securities of the Company, and the number of shares of capital stock of the
Company and the number of such subscriptions, warrants, options, preemptive
rights, convertible securities and other such rights held by each, with respect
to, but only with respect to each individual director and executive officer of
the Company and each stockholder owning 5% or more of the capital stock of the
Company, are as set forth in Schedule 2(c)(iv) hereto. The designations, powers,
preferences, rights, privileges, qualifications, limitations and restrictions in
respect of each class and series of authorized capital stock of the Company are
as set forth in the Articles of Incorporation and all such designations, powers,
preferences, rights, privileges, qualifications, limitations and restrictions
are valid, binding and enforceable in accordance with all applicable laws
(subject, as to enforcement, to the discretion of the courts in awarding
equitable relief and to applicable bankruptcy, reorganization, insolvency,
moratorium and similar laws affecting the rights of creditors generally). Except
as disclosed in Schedule 2(c)(iv), no subscription, warrant, option, preemptive
right, convertible security, agreement or other right (contingent or otherwise)
to purchase or otherwise acquire equity securities of the Company is authorized
or outstanding; and, except as disclosed in Schedule 2(c)(iv) hereto, there is
no commitment by the Company to issue shares, subscriptions, warrants, options,
preemptive rights, convertible securities or other such rights or to distribute
to holders of any of its equity securities any evidence of indebtedness or asset
other than the Placement Agent Warrants ("Placement Agent Warrants"). An
appropriate number of shares of the Capital Stock have been reserved for
issuance upon the conversion or exercise, as the case may be, of any of the
securities referred to in this Section. The Company has no obligation
(contingent or otherwise) to repurchase, redeem or otherwise acquire any shares
of its capital stock.
(d) Subsidiaries and Investments. Except as set forth in Schedule 2(d)
hereto, the Company does not own, directly or indirectly, any capital stock, or
other equity ownership or proprietary interest, in any other corporation,
association, trust, partnership, joint venture or other entity.
(e) Financial Statements. The audited consolidated balance sheet of the
Company as of December 31, 1998 (the "1998 Balance Sheet") and the related
consolidated statements of operations, shareholders' equity and statements of
cash flow for the fiscal year ended December 31, 1998 and the audited
consolidated balance sheet of the Company as of June 30, 1999 (the "Balance
Sheet Date"), and the related unaudited consolidated statements of operations,
shareholders' equity and statements of cash flow for the six month period ending
June 30, 1999 (collectively, the "Financial Statements"), have heretofore been
delivered to the Placement Agent. Except as may be otherwise indicated therein,
the Financial Statements have been prepared in conformity with Generally
Accepted Accounting Principles consistently applied and present fairly the
financial position and results of operations of the Company as of the dates and
for the periods indicated. Except as may be otherwise indicated herein, the
Financial Statements of the Company as of the dates indicated, and for the
periods then ended, present fairly the financial position and results of
operations of the Company (and its Subsidiaries) as of the dates and for the
periods indicated.
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(f) Access to Corporate Documents. The minute books of the Company have
been made available to the Placement Agent and contain a complete summary of all
meetings and actions of the directors and stockholders of the Company, since the
time of its respective incorporation and reflect all transactions referred to in
such minutes accurately in all respects.
(g) Patents, Trademarks and Copyrights, Etc. Except as set forth in
Schedule 2(g) hereto, the Company owns or is licensed or otherwise entitled to
use all patents, trademarks, trade names, service marks, copyrights, technology,
know-how, processes and other intellectual property used in the conduct of its
business as currently conducted and as proposed to be conducted. The Company has
received no notice of any claims, have no knowledge of any threatened claims,
and knows of no facts which would form the basis of any claim, asserted by any
person, to the effect that the sale or use of any product or process now used or
offered by the Company infringes on any patents or infringes upon the use of any
such trademarks, trade names, service marks, copyrights, technology, know-how,
processes or other intellectual property of another person or challenges or
questions the validity or effectiveness of any such license or agreement. The
sale and use of any such products and processes by the Company, and the use of
any such patents, trademarks, trade names, service marks, copyrights,
technology, know-how, processes or other intellectual property by the Company,
does not, to the Company's knowledge, after due inquiry, infringe on the rights
of any person.
(h) Litigation. There is no action, suit, investigation, customer
complaint, claim or proceeding at law or in equity by or before any arbitrator,
governmental instrumentality or other agency now pending nor, to the best of the
Company's knowledge, threatened against or affecting the Company, nor, to the
best of the Company's knowledge, does there exist any basis therefor. The
Company is not subject to any judgment, order, writ, injunction or decree of any
federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign. The Company agrees to
promptly notify the Placement Agent of the commencement of any litigation or
proceedings against the Company or any of its respective officers or directors
in connection with the sale of the transaction contemplated in the Offering
Documents.
(i) Non-Defaults; Non-Contravention. Except as set forth in Schedule
2(i) hereto, the Company is not in default in the performance or observance of
any obligation (i) under its Articles of Incorporation, as amended, or its
By-laws, or any indenture, mortgage, contract, purchase order or other agreement
or instrument to which the Company is a party or by which it or any of its
property is bound or affected; or (ii) with respect to any order, writ,
injunction or decree of any court of any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign and there exists no condition, event or act which
constitutes, nor which after notice, the lapse of time or both, would
constitute, a default under any of the foregoing.
(j) Taxes. The Company has filed all federal, state, local and foreign
tax returns which are required to be filed by it, except where such failure to
so file would not have a material adverse
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impact on the Company, and all such returns are true and correct in all material
respects. The Company has paid all taxes pursuant to such returns or pursuant to
any assessments received by them and have withheld all amounts which they are
obligated to withhold from amounts owing to any employee, creditor or third
party, except where such failure to pay or withhold would not have a material
adverse impact on the Company. The tax returns of the Company have never been
audited by any state, local or federal authorities. The Company has not waived
any statute of limitations with respect to taxes or agreed to any extension of
time with respect to any tax assessment or deficiency. All tax elections have
been made by the Company in accordance with generally accepted practices. No
deficiency assessment with respect to or proposed adjustment of the Company's
federal, state, county or local taxes is pending or, to the best of the
Company's knowledge, threatened. There is no tax lien, whether imposed by any
federal, state, county or local taxing authority, outstanding against the
assets, properties or business of the Company. Neither the Company nor, to the
Company's knowledge, its respective present or former shareholders has ever
filed an election pursuant to Section 1362 of the Internal Revenue Code of 1986,
as amended (the "Code"), that the Company be taxed as an S corporation.
(k) Agreements. Except as set forth in Schedule 2(k) hereto, the
Company is not a party to any written or oral contract, agreement, arrangement
or understanding which is material to the business of the Company or which is
material to, and which a prudent investor would need to review in order to make
an informed investment decision with respect to the purchase of the Securities
offered pursuant to the Offering Documents. Each material contract of the
Company is valid and binding on the Company, the Company has not received notice
that any such contract is not binding on any party thereto. The Company has
performed in all material respects all obligations to have been performed on
such contracts through the date hereof, and the Company is not in default in any
material respect under any such contract. Each material contract of the Company
is valid and binding on the Company and the Company has not received notice that
any such contract is not binding on any party thereto.
(l) Compliance with Laws; Environmental Matters, Licenses, Etc. The
Company has received no notice of any violation of, or noncompliance with, any
federal, state, local or foreign laws, ordinances, regulations or orders
(including, without limitation, those relating to environmental protection,
occupational safety and health and other labor laws, ERISA, federal drug laws,
federal securities laws, equal employment opportunity, consumer protection,
credit reporting, "truth-in- lending," and warranties and trade practices)
applicable to its business, the violation of, or noncompliance with which, would
have a material adverse effect on the Company's business or operations, and the
Company knows of no facts or set of circumstances which would give rise to such
a notice. Except as set forth in Schedule 2(l), the Company has all licenses and
permits and other governmental certificates, authorizations and permits and
approvals (collectively, "Licenses") required by every federal, state and local
government or regulatory body for the operation of their business and the use of
their properties, except where the failure to possess such a License would not
have a material adverse effect on the business, properties, financial condition
or results of operations
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of the Company. The Licenses are in full force and effect and, to the Company's
knowledge, no violations are or have been recorded in respect of any License and
no proceeding is pending or threatened to revoke or limit any thereof. The
Company has not received any written opinion or memorandum from legal counsel
providing that it has taken any action which has resulted in, or is reasonably
likely to result in, the Company incurring any liability which may be material
to its business, prospects, financial condition, operations, property or
affairs. The Company shall comply with all applicable laws, rules, regulations
and orders, the noncompliance with which could materially adversely affect its
business or condition, financial or otherwise.
(m) Authorization of Agreement, Etc. Each of this Agreement and all
other agreements or documents required to be executed and delivered by the
Company in connection with the Offering (collectively the "Ancillary Documents")
has been or will be duly executed and delivered by the Company and the
execution, delivery and performance by the Company of this Agreement and the
Ancillary Documents has been duly authorized by all requisite corporate action
by the Company; and, assuming due authorization, execution and delivery by the
Placement Agent, each constitutes, or will constitute, the legal, valid and
binding obligation of the Company, enforceable in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, usury or other similar laws affecting the enforcement of
creditors' rights generally. The execution, delivery and performance of this
Agreement and the issuance, sale and delivery of the Securities, and the
issuance and delivery of the Securities upon exercise of the Placement Agent
Warrants (the "Reserved Shares"), will not (i) violate any provision of law or
statute or any order of any court or other agency of government binding on the
Company; or (ii) conflict with or result in any breach of any of the terms,
conditions or provisions of, or constitute (with due notice or lapse of time or
both) a default under, or result in the creation of any lien, security interest,
charge or encumbrance upon any of the properties or assets of the Company under
the Articles of Incorporation, as amended, or By-Laws of the Company or any
indenture, mortgage, lease agreement or other agreement or instrument to which
the Company is a party or by which it or any of its property is bound or
affected, except for such conflict, breach or default as to which requisite
waivers or consents shall have been obtained by the Company and delivered to the
Subscribers by the time of Closing.
(n) Authorization of Securities and Placement Agent Warrants. The
issuance, sale and delivery of the Securities and the Placement Agent Warrants
have been duly authorized by all requisite corporate action of the Company, and
when so issued, sold and delivered, (i) the Securities and Reserved Shares will
be validly issued and outstanding, duly executed and delivered, fully paid and
nonassessable, free and clear of all liens, charges, claims, encumbrances,
restrictions or preemptive or any other similar rights and the Company shall
have paid all taxes, if any, in respect of the issuance thereof; (ii) the
Placement Agent Warrants will be validly issued and outstanding, duly executed,
issued and delivered, fully paid and nonassessable, free and clear of all liens,
charges, claims, encumbrances, restrictions or preemptive or any other similar
rights and the Company shall have paid all taxes, if any, in respect of the
issuance thereof; and (iii) neither the Securities, nor the Placement Agent
Warrants will be subject to preemptive or any other similar rights of the
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shareholders of the Company or others which rights shall not have been waived
prior to the time of acceptance by the Company of the first Subscriber's
Subscription Agreement. The offer and sale of the Securities is exempt from the
registration requirements of the Securities Act and the rules and regulations
promulgated thereunder and the Securities will be issued in compliance with all
applicable federal securities laws.
(o) Authorization of Reserved Shares. The issuance, sale and delivery
by the Company of the Reserved Shares have been duly authorized by all requisite
corporate action of the Company, and the Reserved Shares have been duly reserved
for issuance upon exercise of all or any of the Securities and the Placement
Agent Warrants and when so issued, sold and delivered, the Reserved Shares will
be validly issued and outstanding, duly executed, issued and delivered, fully
paid and nonassessable, free and clear of all liens, charges, claims,
encumbrances, restrictions or preemptive or any other similar rights and the
Company shall have paid all taxes, if any, in respect of the issuance thereof
and the Reserved Shares will not be subject to any preemptive or any other
similar rights of the shareholders of the Company or others which rights shall
not have been waived prior to the time of acceptance by the Company of the first
Subscriber's Subscription Agreement.
(p) Related Transactions. Except as set forth on Schedule 2(p) hereto,
no current director, officer or employee of the Company, nor any affiliate of
any such person, is presently, or since the inception of the Company has been,
directly or indirectly, through his, her or its affiliation with any other
person or entity, a party to any loan from the Company.
(q) Registration Rights. Except as set forth on Schedule 2(c) hereto
and except as may exist with respect to the holders of the Securities and the
Placement Agent Warrants, (i) no person or entity has any right to cause the
Company to effect the registration under the Securities Act of any securities of
the Company and (ii) no person or entity holds any anti-dilution or "piggy back"
rights with respect to any securities of the Company.
(r) Brokers. The Company has not, or any of its respective officers,
directors, employees or shareholders, employed any broker or finder in
connection with the transactions contemplated by this Agreement, other than
Sands Brothers.
(s) No Consents. Except for federal or state securities law filings, no
permit, consent, approval, authorization, order or filing with any court or
governmental authority is required to consummate the transactions contemplated
by this Agreement.
(t) Information. The Company shall provide the holders of the
Securities with the information, if any, specified in the Memorandum.
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(u) Change in Nature of Business. The Company shall not, without the
prior approval of a majority of their Board of Directors, make any material
change in the nature of its business as the same shall be set forth in the
Memorandum.
(v) Title to Securities. When certificates representing the Securities
shall have been duly delivered to the Subscribers, payment therefor will become
due, and to the extent such payment shall have been made therefor, the several
Subscribers shall have title to the Securities free and clear of all liens,
encumbrances and claims whatsoever, and the Company shall have paid all taxes,
if any, in respect of the issuance thereof.
(w) Foreign Corrupt Practices Act. None of the Company, nor to their
knowledge any of their respective officers, employees, agents or any other
person acting on behalf 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 to 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 on the assets,
business or operations of the Company; or (c) if not continued in the future,
might adversely affect the assets, business, operations or prospects of the
Company, taken as a whole. The Company believes that its international
accounting controls are sufficient to cause the Company to comply with the
Foreign Corrupt Practices Act of 1977, as amended.
(x) Corporate Representations. Any certificate signed by the Chairman
or Chief Executive Officer of the Company and delivered to the Placement Agent
or to the Placement Agent's counsel pursuant to this Agreement, shall be deemed
a representation and warranty by the Company to the Placement Agent as to the
matters covered thereby.
(y) Escrow Arrangements. Pursuant to paragraph 3(e)(i) hereof, if the
Closing does not take place before the termination of the Offering Period, the
Company will instruct the Bank to return the funds to the Subscribers without
any deduction or interest thereon.
(z) Confidential Arrangements. The Company agrees to take reasonable
precautions in protecting the confidentiality, privacy and security of the
business contacts identified by the Placement Agent by taking appropriate
administrative and managerial action, and to use its best efforts to prevent
disclosure of such property information to any all persons and entities. The
Company agrees that, without the expressed written consent of the Placement
Agent, it will not
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initiate, respond or otherwise abide any contract with any person, company,
institution, professional association, nor other entity to which it has been
introduced or with whom it has become acquainted through the Placement Agent, in
the course of the Offering. The Company agrees to hold completely confidential
the name, address, telephone, telex, facsimile number, account or other business
number of such contact as may be introduced by the Placement Agent, except to
the extent such information is required to be disclosed pursuant to applicable
law or has been disclosed to a third party through no fault of the Company. The
above restrictions apply to any subsequent follow up, repeated or extended or
renegotiation transactions related to the Offering regardless of the results of
the Offering.
(AA) Disclosure. Neither this Agreement nor any other document,
certificate or written statement to be furnished to the Subscribers by or on
behalf of the Company in connection with the transactions contemplated hereby,
including the Offering Documents, contains or will contain any untrue statement
of a material fact or omits or will omit to state a material fact necessary in
order to make the statements contained herein and therein not misleading. There
is no fact known to the Company which, in its reasonable judgement, materially
adversely affects the business operations, affairs, prospects, conditions,
properties or assets of the Company (hereinafter "Material Facts") which has not
been set forth in this Agreement, the Company's Form 10 (defined hereinafter) or
which will not be set forth in the Offering Documents. To the extent Material
Facts become known to the Company subsequent to the date hereof, such facts will
be set forth in the Memorandum and/or in the other documents, certificates or
statements furnished to the Subscribers by or on behalf of the Company pursuant
hereto.
(BB) Exchange Act Compliance. The Company has filed a Form 10 (the
"Form 10") under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). To the best of the Company's knowledge, the Form 10 complied in all
material respects with the requirements of the Exchange Act and the rules and
regulations of the Commission promulgated thereunder, and when filed, did not
contain 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 light of the circumstances under which they were made, not
misleading. The financial statements of the Company included in the Form 10
comply in all material respects with applicable accounting requirements and the
rules and regulations of the Commission with respect thereto as in effect at the
time of filing. The Company last filed audited financial statements with the
Commission in connection with the filing of the Form 10, and has not received
any comments from the Commission in respect thereof as of the date hereof.
(CC) Year 2000 Compliance. The Company has taken appropriate steps to
avoid any disruption in its software caused by Year 2000 problems. The Company
is not currently aware of any Year 2000 compliance problems relating to its
software system that would have a material adverse effect on its businesses,
results of operations and financial condition. To date, the Company has not
incurred any material costs in identifying or evaluating Year 2000 compliance
issues. The Company does not anticipate that such costs relating to Year 2000
Compliance will be material.
11
3. Representations, Warranties and Covenants of the Placement Agent.
The Placement Agent represents, warrants and covenants as follows:
(a) Authorization of Agreement, Etc. This Agreement has been duly and
validly authorized, executed and delivered by or on behalf of the Placement
Agent, and the Agreement (assuming due authorization, execution and delivery by
the Company) constitute the legal, valid and binding obligation of the Placement
Agent, enforceable in accordance with the terms, except that enforceability may
be limited by bankruptcy, insolvency, reorganization, usury or other similar
laws affecting the enforcement of creditors' rights generally.
(b) Compliance with Offering Documents. The Placement Agent will offer
the Securities in accordance with the Offering Documents and will deliver the
Offering Documents to each Subscriber before accepting a signed copy of the
Subscription Agreement or payment for any Securities.
(c) Compliance with Laws of Jurisdictions. The Placement Agent will
offer the Securities only in those jurisdictions in which it is permitted to
sell the Securities pursuant to the laws of said jurisdiction, and the Placement
Agent may arrange for the Securities to be offered by a broker/dealer or
offshore or domestic facilitator(s).
(d) Registration as Broker-Dealer; Member of NASD. The Placement Agent
is registered as a broker-dealer with the Securities and Exchange Commission and
is registered as a broker-dealer in all states in which it shall offer the
Securities for sale and is a member in good standing of NASD.
(e) Escrow Arrangements.
(i) The Placement Agent will promptly deposit funds received
from Subscribers in the Account with the Bank and hold the funds in accordance
with the terms of this Agreement and hold the Offering Documents for the benefit
of the Subscribers and the Company. The Bank shall release funds from such
Account only upon receipt of instruction executed by each of the Placement Agent
and the Company. If the Closing does not take place before the termination of
the Offering Period, the Placement Agent will instruct the Bank to return the
funds to the Subscribers without any deduction or interest thereon.
(ii) In the event the Placement Agent has deposited funds from
any Subscriber into the Account and the Company exercises its right to reject
such Subscriber's funds (except where such rejection is based on a Subscriber
being a competitor of the Company), in whole or in part, the Placement Agent
shall be entitled to payment by the Company of a sum equal to the fees and
12
expenses due by the terms of this Agreement and entitled to issuance by the
Company of the Placement Agent Warrants that the Placement Agent would have
received pursuant to sub-paragraphs 4(d), 4(e) and 4(f) of this Agreement,
respectively.
4. Closing; Placement and Fees.
(a) Closing. The initial Closing of the Financing shall take place at
the offices of the Placement Agent, ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, at
a time and date agreed upon between the Placement Agent and the Company upon the
receipt of Subscription Agreements and related documents in form and substance
satisfactory to the Company and the Placement Agent and delivery of documents
evidencing that Subscribers' funds in an amount at least equal to or in excess
of the Minimum Amount is available in the Account with the Bank (the "Closing
Date"). At the initial and subsequent Closing(s), payment for the Securities
shall be made against delivery of certificates representing the Securities sold.
All proceeds received from the sale of the Securities sold after the initial
Closing date will continue to be deposited in the Account maintained with the
Bank until the occurrence of additional Closing(s).
(b) Procedures at Closing. At each Closing:
(i) The Placement Agent on behalf of itself and the
Subscribers shall receive the opinion of Blank Rome ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
("Company Counsel"), substantially in the form attached hereto as Exhibit A.
(ii) Counsel for the Placement Agent and Company Counsel shall
receive certificates from the Company, signed by the President or a Vice
President thereof, certifying (A) that the representations and warranties
contained in Section 2 hereof are true and accurate at the Closing with the same
effect as though expressly made at the Closing; and (B) that attached thereto is
(1) a true and correct copy of resolutions adopted by the Company's Board of
Directors authorizing (i) the execution, delivery and performance of this
Agreement and the Ancillary Documents, and (ii) the issuance of the Securities
and the Placement Agent Warrants and certifying that such resolutions have not
been modified, rescinded or amended and are in full force and effect; and (2) a
true and correct copy of a resolution adopted by the Company's Board of
Directors, authorizing the execution, delivery and performance of each document
to which it is a party, and that such resolutions have not been modified,
rescinded or amended and are in full force and effect.
(iii) There shall be delivered on behalf of each Subscriber
one copy of the Subscription Agreement signed by each Subscriber and one copy of
the Questionnaire signed by each Subscriber.
13
(iv) The Placement Agent shall have received a certificate of
good standing of the Company, dated as of a recent date, from the Secretary of
State of the jurisdiction of its incorporation.
(v) At the Closing the Placement Agent shall instruct the Bank
to pay to the Company out of the funds on deposit in the Account, as such funds
are received from Subscribers whose Subscriptions have been accepted.
(c) Blue Sky. Where appropriate, counsel for the Placement Agent shall
prepare a summary blue sky survey stating the extent to which and the conditions
upon which offers and sales of the Securities may be made in certain
jurisdictions. Blue Sky applications shall be made in such states and
jurisdictions as shall be requested by the Placement Agent. It is understood
that such survey may be based on or rely upon (i) the representations of each
Subscriber set forth in the Subscription Agreement delivered by such Subscriber;
(ii) the representations, warranties and agreements of the Company and its
Subsidiary set forth herein; (iii) the representations and warranties of the
Placement Agent set forth herein; and (iv) the representations of the Company
set forth in the certificate to be delivered at the Closing pursuant to
paragraph 4(b)(iii) hereof. Upon execution and delivery of this Agreement, the
Company shall deliver to counsel for the Placement Agent $5,000 on account of
blue sky legal fees and the Company shall pay required filing fees as and when
required by such counsel.
(d) Placement Fee and Expenses. At each Closing, the Company shall pay
to the Placement Agent a commission equal to (i) with respect to the sale of the
Minimum Amount, ten (10%) percent of the aggregate proceeds derived from the
sale of the Minimum Amount and (ii) eight (8%) percent thereafter from the sale
of up to the Maximum Amount. In addition, the Company shall pay the Placement
Agent a non-accountable and non-refundable expense allowance equal to three (3%)
percent of the aggregate proceeds derived from the Financing. From the proceeds
of the Closing, the Company shall pay all Placement Agent's expenses in
connection with the proposed Offering, including, but not limited to, reasonable
counsel expenses and fees of counsel to the Company and of counsel to the
Placement Agent, disbursements and fees, reasonable accountant expenses,
disbursements and fees, filing fees, reasonable business and investigatory
expenses, printing costs, postage and mailing expenses with respect to the
transmission of the Offering and Ancillary Documents, registrar and transfer
agent fees, issue and transfer taxes, if any, and counsel fees of the Placement
Agent in connection with the qualification of the Securities under the
securities or blue sky laws of the states which the Placement Agent shall
designate. Upon execution and delivery of this agreement, the Company shall pay
Placement Agent's counsel fees of $5,000 to initiate blue sky filings. The
Company also shall pay for the costs of placing "tombstone advertisements" in
any publications which may be selected by the Placement Agent and approved in
writing by the Company, all costs and expenses in connection with the
establishment and maintenance of the Account referred to in paragraph 1 of this
Agreement, and all other costs and expenses incident to the
14
performance of its obligations hereunder which are not otherwise specifically
provided for in this paragraph 4(d), including the cost of transaction
memorabilia determined at the reasonable discretion of the Placement Agent.
(e) Issuance of Placement Agent Warrants. At each Closing as provided
in paragraph 4(a) above, the Company shall issue to the Placement Agent or its
designee(s), subject to the ratable adjustment of the shares underlying the
Placement Agent Warrants (hereinafter defined) and the exercise price thereof in
the event of any Company dividend, stock split or reclassification declared
after the date hereof, (i) with respect to the sale of the Minimum Amount,
warrants to purchase 350,000 shares of the Company's Common Stock ("Initial
Placement Agent Warrants") and (ii) 200,000 warrants for each $1,000,000 of all
Securities sold in the Financing ("the Additional Placement Agent Warrants")
(collectively referred to as the "Placement Agent Warrants"). The Initial
Placement Agent Warrants shall be exercisable for five (5) years, commencing
upon the date of their issuance, at a price of $11.00 per share of Common Stock.
The Additional Placement Agent Warrants shall be exercisable for five (5) years,
commencing upon the date of their issuance, at a price equal to a 40% discount
to the average of the bid price of the Common Stock for the 60 day period prior
any Closing, but in no event less than of $15.00 per share. The Placement Agent
Warrants shall be in the form attached hereto as Exhibit B, and will be governed
by the terms of the Warrant Agreement attached hereto as Exhibit C. The
certificates representing the Placement Agent Warrants will be in such
denominations and such names as the Placement Agent may request prior to each
closing. The Placement Agent Warrants may not be assigned by Sands Brothers,
except to Sands Brothers' employees, without the written consent of the Company.
All issuance of Placement agent warrants will be done in full compliance with
applicable law.
(f) Due Diligence Fees. As a material inducement to Sands Brothers to
commence its due diligence investigation of the Company and in addition to any
other compensation set forth herein, the Company shall pay Sands Brothers a
non-accountable and non-refundable fee of One Hundred Thousand ($100,000)
Dollars, payable at closing from the proceeds of the Financing.
(g) Placement Agent's Decision Not to Proceed, If the Placement Agent
decides not to proceed with the Offering because of a breach by the Company or
by its Subsidiaries of its/their representations, warranties, or covenants in
this Agreement, or as a result of material adverse changes in the affairs of the
Company or of its Subsidiaries, the Company shall pay Sands Brothers the sum of
One Hundred and Fifty Thousand ($150,000) Dollars.
5. Covenants of the Company.
(a) Amendments and Supplements. The Company covenants and agrees that,
until the Offering contemplated by the Offering Documents has been completed or
terminated, if there shall occur any event relating to or affecting, among other
things, the Company, or the proposed operations
15
of the Company as described in the Offering Documents, as a result of which it
is necessary, in the opinion of the Placement Agent and its counsel or Company
Counsel, to amend or supplement the Offering Documents in order that the
Offering Documents will not contain an untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not misleading,
the Company shall promptly prepare and furnish to the Placement Agent a
reasonable number of copies of an appropriate amendment of or supplement to the
Offering Documents, in form and substance satisfactory to the Placement Agent
and its counsel.
(b) Use of Proceeds. The net proceeds of the Offering of the Securities
will be used by the Company, as more fully described in the Memorandum, for the
purposes to be set forth in the Memorandum.
(c) Expenses of Offering. The Company shall be responsible for, and
shall bear all expenses directly and necessarily incurred in connection with the
proposed financing, including, but not limited to, the costs of preparing,
printing and filing the Offering and Ancillary Documents to be used in
connection with the Offering contemplated hereby and all amendments and
supplements thereto; preparing, printing and delivering exhibits to the Offering
and Ancillary Documents; preparing, printing and delivering all Placement Agent
and selling documents, including, but not limited to, this Agreement and the
blue sky memorandum, the Share certificates, blue sky fees, filing fees and the
fees and disbursements of the Placement Agent's counsel and the other fees and
expenses set forth above.
(d) Reservation of Securities. The Company will reserve and keep
available the maximum number of its authorized but unissued Reserved Shares
which are issuable upon exercise of the Placement Agent Warrants.
(e) Early Termination by the Company. Anything contained herein to the
contrary notwithstanding, in the event that, following the date of this
Agreement until the termination of the Offering Period, the Company desires to
terminate this Agreement for any reason (which for purposes of this Agreement
shall include, but not be limited to, Sands Brothers being ready, willing and
able to proceed with the transactions contemplated hereunder, but the Company
being unwilling to proceed for any reason), Sands Brothers has the right, but
not the obligation, to agree to such early termination upon the payment by the
Company to Sands Brothers of a sum equal to the placement fees and expenses
(including its counsel fees and expenses) and Placement Agent Warrants it would
have received under Sections 4(d), 4(e) and 4(f) hereunder had the Maximum
Amount been sold.
(f) No Closing. Anything set forth herein to the contrary
notwithstanding, in no event shall Sands Brothers be responsible for any of the
Company's fees, costs or expenses and the Company shall pay all expenses of the
Offering and the preparation of the Offering and Ancillary Documents. The
Company shall reimburse Sands Brothers for any out-of-pocket expenses
16
(including, but not limited to, reasonable counsel fees and expenses) which
Sands Brothers may incur in connection with the enforcement of its rights
hereunder.
(g) Ratification and Confirmation of Letter Agreement. The Company
hereby confirms and ratifies the Letter Agreement including, without limitation,
(i) the retention of Sands Brothers as its exclusive investment banker and
financial consultant for a period of three (3) years following the completion of
the Financing, at an annual fee of Forty Eight Thousand ($48,000) Dollars
(exclusive of any accountable out-of-pocket expenses), payable quarterly in
advance in installments of Twelve Thousand ($12,000) Dollars, with the first
payment to be made upon the sale of the Minimum Amount by deduction of the
proceeds therefrom, pursuant to Section 7 thereof, provided, however, that in
the event that $25,000,000 million of Securities have not been sold within one
year after the Commencement Date, Sands Brothers' status as investment banker
and financial consultant to the Company, thereunder and hereunder, shall cease
to be exclusive (ii) the granting of the right of first refusal to Sands
Brothers pursuant to Section 8 thereof as described in Exhibit E hereto, (iv)
the granting of the right to designate a board member or observer to the board
of directors of the Company pursuant to Section 9 thereof after the Closing
Date, and (v) the expense reimbursement and indemnification provisions thereof.
Such ratification and confirmation shall survive any termination of the
Offering.
(i) Financing Sources. The Company will provide to the
Placement Agent a list of each of its present financing sources, with such list
to be amended for a period of one year from the date of termination of the
Offering if, and when, the Company is approached by, or has any contact with,
any potential financing sources ("Company Sources").
(j) Placement Agent Sources. For a period of two years from the date of
this Agreement, the Placement Agent shall keep a list of the names of all its
sources of potential financing ("Placement Agent Sources" and together with the
Company Sources collectively, the "Sources") for the Company, which list shall
be furnished to the Company and amended from time to time by the Placement Agent
at its discretion. The Company agrees, in the event it directly or indirectly
receives financing in any form or nature whatsoever from any Source, that it
will fully compensate the Placement Agent under the terms and conditions of this
Agreement to the same extent as if the Placement Agent itself had obtained such
financing from such Source.
(k) No Finder's Fee. The Company represents and warrants to the
Placement Agent that it is not obligated to pay a finders' fee to any one in
connection with the introduction of the Company to Sands Brothers.
6. Indemnification.
(a) Indemnification by the Company. The Company agrees to indemnify and
hold harmless the Placement Agent and its agents, shareholders, officers and
directors, and each person,
17
if any, who controls the Placement Agent, within the meaning of the Securities
Act against any and all losses, damages or liabilities, joint or several, to
which they or any of them may become subject under the Securities Act, the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or other
federal or states statutory law or regulation, at common law or otherwise, as
follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever arising out of any untrue statement or alleged untrue statement of a
fact contained in the Offering Documents or the omission or alleged omission
therefrom of a fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading, unless
such untrue statement or omission was made in the Offering or Ancillary
Documents in reliance upon and in conformity with information furnished in
writing to the Company in connection therewith by the Placement Agent expressly
for use therein;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever to the extent of the aggregate amount paid in settlement of any
litigation, commenced or threatened, or any claim whatsoever based upon any such
untrue statement or omission or any such alleged untrue statement or omission;
and
(iii) against any and all expense whatsoever incurred in investigating,
preparing or defending against any litigation, commenced or threatened, or any
claim whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, to the extent that any such expense is not
paid under clause (i) or (ii) above.
(b) Indemnification by the Placement Agent. The Placement Agent agrees
to indemnify and hold harmless the Company and its agents, shareholders,
officers and directors and each person, if any, who controls the Company within
the meaning of the Securities Act against any and all losses, damages or
liabilities, joint or several, to which they or any of them may become subject
under the Securities Act, the Exchange Act, or other federal or states statutory
law or regulation, at common law or otherwise, insofar as losses, claims,
damages, or liabilities (or actions in respect thereof) arise out of or based
upon any untrue statement or alleged untrue statement of a material fact
contained in the Memorandum or any amendment or supplement thereof or supplement
thereto, or arise out of or based upon the omission or the alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and in each case to the extent, by only
to the extent, that the same was made therein in reliance upon and in conformity
with written information furnished to the Company by or on behalf of the
Placement Agent (or any person who may be deemed to be affiliated therewith or
an associated person thereof) specifically for use in the preparation of the
Memorandum, and agrees to reimburse each such indemnified party for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action. This indemnity
provision shall be in addition to any liability that the Placement Agent may
otherwise have.
18
(c) Indemnity under Securities Laws. The Company agrees to indemnify
and hold harmless the Placement Agent and its agents, and each person, if any,
who controls the Placement Agent, to the same extent as the foregoing indemnity,
against any and all loss, liability, claim, damage and expense whatsoever
directly arising out of the exercise by any person of any right under the
Securities Act or the Exchange Act or the securities or blue sky laws of any
state on account of violations of the representations, warranties or agreements
set forth herein.
(d) If any action is brought against an indemnified party or any of its
officers, directors, stockholders, employees, agents, advisors, consultants and
counsel or any controlling persons of the indemnifying party (each, an
"Indemnified Party" and collectively, "Indemnified Parties"), in respect of
which indemnity may be sought against the indemnifying party pursuant to
Sections 6(a), 6(b) or 6(c) hereof, each such Indemnified Party shall promptly
notify the indemnifying party (the "Indemnifying Party") in writing of the
institution of such action (but the failure to so notify shall not relieve the
Indemnifying Party from any liability it may have under this Section 6 unless
such failure results in the imposition of a default judgment which cannot be
reopened) and the Indemnifying Party shall promptly assume the defense of such
action, including the employment of counsel reasonably satisfactory to each such
Indemnified Party and payment of expenses. Each such 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 each 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 have not have promptly employed counsel reasonably
satisfactory to each such Indemnified Party to have charge of the defense of
such action or each such Indemnified Party 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 and it would be inappropriate for the
same counsel to represent both parties due to actual or potential differing
interests between them, in any of which events such fees and expenses 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 each Indemnified Party.
Anything in this Section 6(c) 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, which consent shall not be unreasonably
withheld. The Company agrees to promptly 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 or the
Memorandum.
(e) Contribution. In order to provide for just and equitable
contribution in any case in which (i) an indemnified party makes a claim for
indemnification pursuant to this Section 6, but it is judicially determined (by
the entry of a final judgment or decree by a court of competent jurisdiction and
the expiration of time to appeal or the denial of the last right of appeal) that
such
19
indemnification may not be enforced in such case; notwithstanding the fact that
the express provisions of this Section 6 provide for indemnification in such
case; or (ii) contribution under the Securities Act may be required on the part
of any indemnified party, then each indemnifying party shall contribute to the
amount paid as a result of such losses, claims, damages, expenses or liabilities
(or actions in respect thereof) (A) in such proportion as is appropriate to
reflect the relative benefits received by each of the contributing parties, on
the one hand, and the party to be indemnified on the other hand, from the
Offering of the Securities; or (B) if the allocation provided by clause (A)
above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause (i) above but
also the relative fault of each of the contributing parties, on the one hand,
and the party to be indemnified on the other hand, in connection with the
statements or omissions that resulted in such losses, claims, damages, expenses
or liabilities, as well as any other relevant equitable considerations. In any
case where the Company is a contributing party and the Placement Agent is the
indemnified party, the relative benefits received by the Company on the one
hand, and the Placement Agent, on the other, shall be deemed to be in the same
proportion as the total net proceeds from the Offering of the Securities (before
deducting expenses) bear to the total Placement Agent commissions received by
the Placement Agent hereunder, in each case as set forth in the table on the
cover page of the Memorandum. Relative fault shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
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 untrue statement or omission. The amount paid or
payable by an indemnified party as a result of the losses, claims, damages,
expenses or liabilities (or actions in respect thereof) referred to above in
this subsection (c), shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating,
preparing or defending any such action or claim. Notwithstanding the provisions
of this subsection (c), the Placement Agent shall not be required to contribute
any amount in excess of the Placement Agent commissions applicable to the
Securities placed by the Placement Agent hereunder. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. For purposes of this Section 6,
each person, if any, who controls the Company within the meaning of the
Securities Act, each officer of the Company who has signed the Memorandum, and
each director of the Company shall have the same rights to contribution as the
Company, subject in each case to this subsection (c). Any party entitled to
contribution will, promptly after receipt of notice of commencement of any
action, suit or proceeding against such party in respect to which a claim for
contribution may be made against another party or parties under this subsection
(c), notify such party or parties from whom contribution may be sought, but the
omission so to notify such party or parties shall not relieve the party or
parties from whom contribution may be sought from any obligation it or they may
have hereunder or otherwise than under this subsection (c), or to the extent
that such party or parties were not adversely affected by such omission. The
contribution agreement set forth
20
above shall be in addition to any liabilities which any indemnifying party may
have at common law or otherwise.
7. Miscellaneous.
(a) General. The Company shall supply Sands Brothers' with such
financial statements, contracts and other corporate records and documents as may
be reasonably requested of it. In addition, Sands Brothers shall be fully
informed by the Company of any events which might have a material affect on the
financial condition of the Company. If, in the opinion of Sands Brothers, the
condition of the Company, financial or otherwise, and its prospects are affected
in a material and/or adverse manner and do no fulfill the expectation of Sands
Brothers, it shall have the sole discretion to review and determine its
continued interest in the Offering.
(b) Representations, Warranties and Covenants to Survive Delivery. The
respective representations, warranties, indemnities, agreements, covenants and
other statements of the Company, and where appropriate, its respective principal
stockholders, shall survive execution of this Agreement and delivery of the
Securities and the termination of this Agreement. Notwithstanding anything
provided herein to the contrary, the provisions of Sections 4(d), 4(e) and
4(f)hereof shall survive the termination of the Offering Period and shall remain
in full force and effect with respect to all Sources who invest, or commit to
invest, in the Company at any time during the two year period commencing the day
that the Offering Period terminates. Additionally, the Placement Agent shall be
entitled to also retain its non-accountable and non-refundable expense allowance
to the extent it has been paid prior to the date of termination.
(c) No Other Beneficiaries. This Agreement is intended for the sole and
exclusive benefit of the parties hereto and their respective successors and
controlling persons, and no other person, firm or corporation shall have any
third-party beneficiary or other rights hereunder.
(d) Governing Law. This Agreement shall be governed by and construed in
accordance with the law of the State of New York. The parties hereby agree: (i)
in any legal proceeding brought in connection with this Agreement or the
transactions contemplated hereby, to irrevocably submit to the nonexclusive in
personam jurisdiction of (A) any state or federal court of competent
jurisdiction sitting in the State of New York, County of New York; or (B) in the
event that any party is a defendant in any legal proceeding in which it seeks to
join the other as a third party defendant, then, any state or federal court in
which such proceeding has properly been brought, and consents to suit therein;
and (ii) to waive any objection they may now or hereafter have to the venue of
such proceeding in any such court or that such proceeding was brought in an
inconvenient court.
21
(e) Notices. All notices, requests, demands and other communications
which are required or may be given under this Agreement shall be in writing and
shall be deemed to have been duly given when delivered personally, receipt
acknowledged, or five (5) days after being sent by registered or certified mail,
return receipt requested, postage prepaid. All notices shall be made to the
parties at the addresses designated above, or at such other or different
addresses which a party may subsequently provide with notice thereof, and to
their respective legal counsel, as follows:
(i) If to the Placement Agent, to:
Sands Brothers & Co., Ltd.
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇
Managing Director
- with a copy to -
▇▇▇▇▇▇▇ Krooks ▇▇▇▇ & Ball P.C.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
or to such other person or address as the Placement Agent shall furnish the
Company in writing.
(ii) If to the Company, to:
C3D Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇-▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇
President and Chief Executive Officer
- with a copy to -
Blank Rome Comisky & ▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
22
or to such other person or address as the Company shall furnish the Placement
Agent in writing.
(f) Counterparts. This Agreement may be signed in counterparts with the
same effect as if both parties had signed one and the same instrument.
(g) Reimbursement. Notwithstanding the non-occurrence of a Closing, or
any other condition, in no event shall the Placement Agent be responsible for
any of the Company's fees, costs or expenses; however, the Company shall
reimburse the Placement Agent for any out-of-pocket expenses (including, but not
limited to, reasonable counsel fees and expense) which the Placement Agent may
incur in connection with the enforcement of its rights hereunder provided that
the Placement Agent prevails.
(h) Form of Signature. The parties hereto agree to accept a facsimile
transmission copy of their respective signatures as evidence of their respective
actual signatures to this Agreement; provided however, that each party who
produces a facsimile signature agrees, by the express terms hereof, to place,
immediately after transmission of his or her signature by fax, a true and
correct original copy of his or her signature in overnight mail to the address
of the other party.
(i) Modification. This Agreement (i) may only be modified by a written
instrument which is executed by both parties thereto, (ii) constitutes the
entire agreement between the parties, and (iii) shall be binding upon and inure
to the benefit of both parties hereto and their respective successor and
assignees.
(j) Non-Circumvention. Each of the Company and the Placement Agent each
agree that no effort shall be made to circumvent the terms and conditions of
this Agreement or gain a fee, commission, remuneration, consideration or benefit
whatsoever. With respect to any attempt at circumvention of this Agreement, the
injured party is entitled to seek any and all legal remedies, fees or
compensation equal to those received or committed or agreed to be paid pursuant
to the terms of this Agreement as the same are due and payable to the
circumvented party under the terms of this Agreement.
(k) Good Faith. Each of the Company and the Placement Agent understand
that this Agreement is a reciprocal and mutual one and both warrant, covenant,
and promise that it will act in good faith toward each other in the performance
of this Agreement and in other matters.
(l) Further Services. The Placement Agent shall, if requested by the
Company, testify in, and shall prepare and assist in the preparation of
testimony for, any judicial or administrative proceeding in respect of the
services performed by the Placement Agent hereunder. With respect
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thereto, the Company shall pay, in addition to the fees and expenses payable to
the Placement Agent hereunder, for the time required to expend by the Placement
Agent at its standard hourly rates as then in effect, together with reasonable
out-of-pocket expenses, but not limited to, fees and expenses of its legal
counsel.
(m) Waiver of Breach. The waiver by either the Placement Agent or the
Company of any provision of this Agreement shall not be construed as a waiver of
any subsequent breach hereof.
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If you find the foregoing is in accordance with our understanding,
kindly sign and return to us a counterpart hereof, whereupon this instrument
along with all counterparts will become a binding agreement between us.
Very truly yours,
C3D Inc.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: President & Chief Executive Officer
Agreed:
SANDS BROTHERS & CO., LTD.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Managing Director
25
LIST OF SCHEDULES
SCHEDULE 2(b) Organization
SCHEDULE 2(c) Capitalization
SCHEDULE 2(i) Non Defaults; Non Contravention
SCHEDULE 2(g) Patents, Trademarks and Copyrights
SCHEDULE 2(k) Agreements
SCHEDULE 2(p) Related Transactions
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EXHIBITS
Exhibit A - Form of Legal Opinion
Exhibit B - Placement Agent Warran
Exhibit C - Placement Agent Warrant Agreement
Exhibit D - Due Diligence List
Exhibit E - Right of First Refusal
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