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EXHIBIT 4.2
iMALL, Inc.
AGENCY AGREEMENT
Commonwealth Associates
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
as of November 26, 1997
Gentlemen:
iMALL, INC. a Nevada corporation (the "Company"), proposes to offer
for sale to "accredited investors", in a private placement, up to 200 units
("Units"), each Unit consisting of 25,000 shares ("Shares") of the Company's
Series A 9% Convertible Preferred Stock ("Preferred Stock") and 62,500 common
stock purchase warrants ("Warrants"). Such offering and sale are referred to
herein as the "Offering." Each Warrant will be exercisable during the four-year
period commencing one year after the initial closing to purchase one share of
the Company's Common Stock, $.001 par value (the "Common Stock"), at an exercise
price of $.40 per share. A minimum of 50 Units ("Minimum Offering") and a
maximum of 200 Units ("Maximum Offering") will be sold in the offering at
$100,000 per Unit. The Units will be offered pursuant to those terms and
conditions acceptable to you as reflected in the Private Placement Memorandum
(the "Memorandum"). Of the ▇▇▇▇▇, ▇▇ will be offered on a "best efforts -
all-or-none" basis and the remaining 150 Units will be offered on a "best
efforts" basis. The Units are being offered pursuant to the Memorandum and
related documents in accordance with Section 4(2) of the Securities Act of 1933,
as amended (the "Securities Act") and Regulation D promulgated thereunder. The
Preferred Stock shall have the rights and preferences set forth in the form of
Certificate of Designation, Preferences and Rights (the "Designation").
Commonwealth Associates is sometimes referred to herein as the
"Placement Agent." The Memorandum (including the exhibits thereto), as it may be
amended from time to time, and the form of proposed subscription agreement
between the Company and each subscriber (the "Subscription Agreement") and the
exhibits which are part of the Memorandum and/or Subscription Agreement are
collectively referred to herein as the "Offering Documents."
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 counsel to the Placement Agent.
Each prospective investor subscribing to purchase Units
("Subscriber") will be required to deliver, among other things, a Subscription
Agreement and a confidential purchaser questionnaire ("Questionnaire") in the
form to be provided to offerees. Capitalized terms used herein, unless otherwise
defined or unless the context
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otherwise indicates, shall have the same meanings provided in the Offering
Documents.
1. Appointment of Placement Agent.
(a) You are hereby appointed exclusive Placement Agent
of the Company (subject to your right to have Selected Dealers, as defined in
Section 1(c) hereof, participate in the Offering) during the Offering Period
herein specified for the purposes of assisting the Company in finding qualified
Subscribers pursuant to the offering (the "Offering") described in the Offering
Documents. The Offering Period shall commence on the day (the "Commencement
Date") the Offering Documents are first made available to you by the Company for
delivery in connection with the offering for sale of the Units and shall
continue until the earlier to occur of (i) the sale of all of the Maximum
Offering or (ii) 60 days after the Commencement Date (unless extended for a
period of up to 60 days under circumstances specified in the Memorandum). If the
Minimum Offering is not sold prior to the end of the Offering Period, the
Offering will be terminated and all funds received from Subscribers will be
returned, without interest and without any deduction. The day that the Offering
Period terminates is hereinafter referred to as the "Termination Date."
(b) Subject to the performance by the Company of all of
its obligations to be performed under this Agreement and to the completeness and
accuracy of all representations and warranties of the Company contained in this
Agreement, Commonwealth Associates hereby accepts such agency and agrees to use
its best efforts to assist the Company in finding qualified subscribers pursuant
to the Offering described in the Offering Documents. It is understood that the
Placement Agent has no commitment to sell the Units. Your agency hereunder is
not terminable by the Company except upon termination of the Offering Period.
(c) You may engage other persons, selected by you in
your discretion, that are members of the National Association of Securities
Dealers, Inc., ("NASD") and that have executed a Selected Dealers Agreement
substantially in the form attached hereto as Schedule A, to assist you in the
Offering (each such person being hereinafter referred to as a "Selected Dealer")
and you may allow such persons such part of the compensation and payment of
expenses payable to you hereunder as you shall determine. Each Selected Dealer
shall be required to agree in writing to comply with the provisions of, and to
make the representations, warranties and covenants contained in, this Section 1.
(d) Subscriptions for Units shall be evidenced by the
execution by Subscribers of a Subscription Agreement. No Subscription Agreement
shall be effective unless and until it is accepted by the Company. Any
subscription may be rejected at the sole discretion of the Company or the
Placement Agent. Until the Closing, all subscription funds received shall be
held as described in the Subscription
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Agreement. The Placement Agent shall not 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 Units.
(e) The Placement Agent and its affiliates may purchase
Units sold in the Offering.
2. Representations and Warranties of the Company. The Company
represents and warrants to the Placement Agent and each Selected Dealer, if any,
as follows:
(a) Securities Law Compliance. The Offering Documents
conform in all respects with the requirements of Section 4(2) of the Securities
Act and Regulation D promulgated thereunder and with the requirements of all
other published rules and regulations of the Securities and Exchange Commission
(the "Commission") currently in effect relating to l@private offerings" to
"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 any material fact necessary in order to make the statements therein, in
light of the circumstances in which they were made, not misleading. If at any
time prior to the completion of the Offering or other termination of this
Agreement any event shall occur as a result of which it might become necessary
to amend or supplement the Offering Documents so that they do not include any
untrue statement of any material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances then existing, not misleading, the Company will promptly notify
you and will supply you with amendments or supplements correcting such statement
or omission. The Company will also provide the Placement Agent for delivery to
all offerees and purchasers and their representatives, if any, any information,
documents and instruments which the Placement Agent deems necessary to comply
with applicable state and federal law.
(b) Organization. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Nevada 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, to execute and deliver this Agreement and to carry out the
transactions contemplated by this Agreement, as appropriate, and is duly
licensed or qualified to do business as a foreign corporation in California,
Utah and in each other jurisdiction in which the conduct of its business or
ownership or leasing of its properties requires it to be so qualified, except
where the failure to be so licensed or qualified would not have a material
adverse effect on the business, financial condition or prospects of the Company
(a "Material Adverse Effect").
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(c) Capitalization. The authorized, issued and outstanding
capital stock of the Company prior to the consummation of the transactions
contemplated hereby is as set forth in the Offering Documents. All issued and
outstanding shares of the Company are validly issued, fully paid and
nonassessable and have not been issued in violation of the preemptive rights of
any stockholder of the Company. All prior sales of securities of the Company
were either registered under the Act and applicable state securities laws or
exempt from such registration, and no security holder has any rescission rights
with respect thereto.
(d) Warrants, Preemptive Rights, Etc. Except for the
warrants to purchase shares of the Company's Common Stock to be issued to you or
your designees in consideration for your acting as Placement Agent hereunder
(the "Agent's Warrants"), and except as set forth in or contemplated by the
Memorandum, there are not, nor will there be immediately after the Closing (as
hereinafter defined), any outstanding warrants, options, agreements, convertible
securities, preemptive rights to subscribe for or other commitments pursuant to
which the Company is, or may become, obligated to issue any shares of its
capital stock or other securities of the Company and this Offering will not
cause any anti-dilution adjustments to such securities or commitments except as
reflected in the Memorandum.
(e) Subsidiaries and Investments. Except as set forth in
Exhibit A, the Company has no other subsidiaries. The subsidiaries listed in
Exhibit A (the "Subsidiaries") are corporations duly organized and validly
existing under the laws of the States of Utah and California. The Company owns
all of the capital stock of the Subsidiaries free and clear of all liens,
security interests and encumbrances.
(f) Financial Statements. The financial information
contained in the Offering Documents is accurate in all material respects. The
Company's Form 10-QSB for the nine months ended September 30, 1997 contains the
Company's (i) Balance Sheets at September 30, 1997, (ii) Statements of
Operations for the year ended December 31, 1996 and for the three and nine
months ended September 30, 1997, and (iii) Statements of Cash Flows for each of
the year ended December 31, 1996 and the nine months ended September 30, 1997
(such financial statements attached to the Offering Documents hereinafter
referred to collectively as the "Financial Statements"). The Financial
Statements have been prepared in conformity with generally accepted accounting
principles consistently applied and show all material liabilities, absolute or
contingent, of the Company required to be recorded thereon and present fairly
the financial position and results of operations of the Company as of the dates
and for the periods indicated.
(g) Absence of Changes. Since the date of the Memorandum,
the Company has not incurred any liabilities or obligations, direct or
contingent, not in the ordinary course of business, or entered into any
transaction not in the ordinary course of business, which is material to the
business of the Company, and, except as
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set forth in Schedule G to this Agreement there has not been any change in the
capital stock of, or any incurrence of long-term debt by, the Company, or any
issuance of options, warrants or other rights to purchase the capital stock of
the Company, or any adverse change or any development involving, so far as the
Company can now reasonably foresee, a prospective adverse change in the
condition (financial or otherwise), net worth, results of operations, business,
key personnel or properties which would be material to the business or financial
condition of the Company, and the Company has not become a party to, and neither
the business nor the property of the Company has become the subject of, any
material litigation whether or not in the ordinary course of business.
(h) Except as set forth on Schedule H hereto, the Company
has good and marketable title to all properties and assets, owned by it, free
and clear of all liens, charges, encumbrances or restrictions, except such as
are not materially significant or important in relation to the Company's
business; all of the material leases and subleases under which the Company is
the lessor or sublessor of properties or assets or under which the Company holds
properties or assets as lessee or sublessee are in full force and effect, and
the Company is not in default in any material respect with respect to any of the
terms or provisions of any of such leases or subleases, and no material claim
has been asserted by anyone adverse to rights of the Company as lessor,
sublessor, lessee or sublessee under any of the leases or subleases mentioned
above, or affecting or questioning the right of the Company to continued
possession of the leased or subleased premises or assets under any such lease or
sublease. The Company owns or leases all such properties as are necessary to its
operations as now conducted and to be conducted, as presently planned.
(i) Proprietary Rights. Except as set forth in Schedule I
hereto, the Company owns or possesses adequate and enforceable rights to use all
patents, patent applications, trademarks, service marks, copyrights, trade
secrets, processes, formulations, technology or know-how used or proposed to be
used in the conduct of its business as described in or contemplated by the
Memorandum (the "Proprietary Rights"). The Company has not received any notice
of any claims, nor does it have any 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 or proposed to be used or offered by the Company
infringes on any patents or infringes upon the use of any such Proprietary
Rights of another person and, to the best of the Company's knowledge, no others
have infringed the Company's Proprietary Rights.
(j) Litigation. There is no material 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
or, to the knowledge of the Company, threatened against the Company (or basis
therefore known to the Company) the adverse outcome of which would have a
Material Adverse Effect. The
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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 which would have a
Material Adverse Effect.
(k) Non-Defaults: Non-Contravention. The Company is not in
violation of or default under, nor will the execution and delivery of this
Agreement or any of the Offering Documents, the Fund Escrow Agreement (as
defined herein), the Advisory Agreement (as defined herein) or the Agent's
Warrants (as defined herein) or consummation of the transactions contemplated
herein or therein result in a violation of or constitute a 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,
material purchase order or other agreement or instrument to which the Company is
a party or by which it or its property is bound or affected or (ii) with respect
to any material 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, could constitute a default under any of the foregoing, which in either
case would have a Material Adverse Effect.
(l) Taxes. The Company has filed all Federal, state, local
and foreign tax returns which are required to be filed by it 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 it or
which it is obligated to withhold from amounts owing to any employee, creditor
or third party. The Company has properly accrued all taxes required to be
accrued. 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.
(m) Compliance With Laws. Licenses. Etc. The Company has
not received notice of any violation of or noncompliance with any Federal,
state, local or foreign, laws, ordinances, regulations and orders applicable to
its business which has not been cured, the violation of, or noncompliance with
which, would have a Material Adverse Effect. 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 its business as currently
conducted and the use of its properties, except where the failure to be licensed
would not have a Material Adverse Effect. The Licenses are in full force and
effect and 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
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(n) Authorization of Agreement, Etc. This Agreement has
been duly and validly authorized, executed and delivered by the Company and the
execution, delivery and performance by the Company of this Agreement, the
Subscription Agreement, the Warrant Agreement, the Fund Escrow Agreement, the
Advisory Agreement and the M/A Agreement have been duly authorized by all
requisite corporate action by the Company and when delivered, constitute or will
constitute the legal, valid and binding obligations of the Company, enforceable
in accordance with their respective terms.
(o) Authorization of Shares and Warrants, Etc. The
issuance, sale and delivery of the Shares and Warrants and the Agent's Warrants
have been, or prior to issuance and delivery will be, duly authorized by all
requisite corporate action of the Company. When so issued, sold and delivered,
the Shares, the Warrants and the Agent's Warrants will be duly executed, issued
and delivered and will constitute valid and legal obligations of the Company
enforceable in accordance with their respective terms and, in each case, will
not be subject to preemptive or any other similar rights of the stockholders of
the Company or others which rights shall not have been waived prior to the
Initial Closing.
(p) Authorization of Reserved Shares. The issuance, sale
and delivery by the Company of the shares of Common Stock issuable upon
conversion of the Shares and the underlying Common Stock issuable upon the
exercise of the Warrants and the Agent's Warrants (collectively, 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
conversion of all or any of the Shares and exercise of the Agent's Warrants and
when so issued, sold, paid for and delivered, the Reserved Shares will be
validly issued and outstanding, fully paid and nonassessable, and not subject to
preemptive or any other similar rights of the stockholders of the Company or
others which rights shall not have been waived prior to the Initial Closing.
(q) Exemption from Registration. Assuming (i) the accuracy
of the information provided by the respective Subscribers in the Subscription
Documents and (ii) that the Placement Agent has complied in all material
respects with the provisions of Regulation D promulgated under the Securities
Act, the offer and sale of the Units pursuant to the terms of this Agreement are
exempt from the registration requirements of the Securities Act and the rules
and regulations promulgated thereunder (the "Regulations"). The Company is not
disqualified from the exemption under Regulation D by virtue of the
disqualifications contained in Rule 505(b)(2)(iii) or Rule 507 promulgated
thereunder.
(r) Registration Rights. Except with respect to holders of
the Units and the Agent's Warrants, and except as set forth in the Memorandum,
no person has any right to cause the Company to effect the registration under
the Securities Act of any securities of the Company. The Company shall grant
registration rights under the
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Securities Act of 1933, as amended to the investors in the Offering and/or their
transferees with respect to the Shares, including the Common Stock issuable upon
conversion of the Shares, and the Warrants, including the Common Stock issuable
upon exercise of the Warrants, purchased in the Offering as more fully described
in the Subscription Agreement between the Company and the investors. The Company
will also grant one demand registration commencing six months after the Closing,
which, at the discretion of the Company, may be filed on any applicable short
form registration statement that the Company is eligible to use, and unlimited
"piggyback" registrations to Commonwealth Associates with respect to its Agent's
Warrants and the Common Stock underlying such securities. The procedure to
implement these registration rights will be as described in the Agent's
Warrants.
(s) Brokers. Neither the Company nor any of its officers,
directors, employees or stockholders has employed any broker or finder in
connection with the transactions contemplated by this Agreement other than the
Placement Agent.
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(t) Title to Units. When certificates representing the
securities comprising the Units and/or the Reserved Shares shall have been duly
delivered to the purchasers and payment shall have been made therefor, the
several purchasers shall have good and marketable title to the Shares, Warrants
and/or the Reserved Shares free and clear of all liens, encumbrances and claims
whatsoever (with the exception of claims arising or through the acts of the
purchasers and except as arising from applicable Federal and state securities
laws), and the Company shall have paid all taxes, if any, in respect of the
original issuance thereof
(u) Right of First Refusal. Except for the right of first
refusal granted to the Placement Agent under Section 40) hereof, no person, firm
or other business entity is a party to any agreement, contract or understanding,
written or oral entitling such party to a right of first refusal with respect to
the Company.
(v) Securities Exchange Act Compliance. The Company has
filed with the Securities and Exchange Commission ("SEC") on a timely basis all
filings required of a company whose securities have been registered under the
Securities Exchange Act of 1934, as amended ("Exchange Act"). All information
contained in such filings is true, accurate and complete in all material
respects. The Company covenants to maintain the registration o its Common Stock
under the Exchange Act and to make all filings thereunder on a timely basis. For
the purpose of this paragraph, filings pursuant to Rule 12b-25 of the Exchange
Act shall be deemed timely.
(w) Non-Affiliated Directors. Within two months after the
Initial Closing, the Company's Board of Directors will have a majority (but not
less than four) directors who qualify under the criteria of the Nasdaq Stock
Market as independent directors, one of which may be a designee of Commonwealth.
Unless any of such individuals refuse to serve, the following shall be the four
appointees: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. Blue and ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇.
3. Closing; Placement and Fees.
(a) Closing. Provided the Minimum Offering shall have been
subscribed for and funds representing the sale thereof shall have cleared, a
closing (the "Initial Closing") shall take place at the offices of the Placement
Agent, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ within ten (10) days following the
Termination Date (which date (the "Closing Date") may be accelerated or
adjourned by agreement between the Company and the Placement Agent). At the
Initial Closing, payment for the Units issued and sold by the Company shall be
made against delivery of certificates representing the Shares and Warrants
comprising such Units. In addition, subsequent closings (if applicable) may be
scheduled at the discretion of the Company and Placement Agent, each of which
shall be deemed a "Closing" hereunder.
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(b) Conditions to Placement Agent's Obligations. The
obligations of the Placement Agent hereunder will be subject to the accuracy of
the representations and warranties of the Company herein contained as of the
date hereof and as of each Closing Date, to the performance by the Company of
its obligations hereunder and to the following additional conditions:
(i) Due Qualification or Exemption. (A) The offering
contemplated by this Agreement will become qualified or be exempt from
qualification under the securities laws of the several states pursuant to
paragraph 4(e) below not later than the Closing Date, and (B) at the Closing
Date no stop order suspending the sale of the Units shall have been issued, and
no proceeding for that purpose shall have been initiated or threatened;
(ii) No Material Misstatements. Neither the Blue Sky
qualification materials nor the Memorandum, nor any supplement thereto, will
contain an untrue statement of a fact which in the opinion of the Placement
Agent is material, or omits to state a fact, which in the opinion of the
Placement Agent is material and is required to be stated therein, or is
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading;
(iii) Compliance with Agreements. The Company will
have complied with all agreements and satisfied all conditions on its part to be
performed or satisfied hereunder at or prior to each Closing;
(iv) Corporate Action. The Company will have taken
all necessary corporate action, including, without limitation, obtaining the
approval of the Company's board of directors, for the execution and delivery of
this Agreement, the performance by the Company of its obligations hereunder and
the offering contemplated hereby;
(v) Opinion of Counsel. The Placement Agent shall
receive the opinion of Loeb & Loeb LLP, dated the Closing(s), substantially to
the effect that:
(A) the Company has been duly organized and is
validly existing and in good standing under the laws of the State of Nevada, has
all requisite power and authority necessary to own or hold its respective
properties and conduct its business and is duly qualified or licensed to do
business as a foreign corporation and is in good standing in the State of
California, Utah and in each other jurisdiction in which the ownership or
leasing of its properties or conduct of its business requires such
qualification, except where the failure to so qualify or be licensed would not
have a Material Adverse Effect;
(B) each of this Agreement, the Fund Escrow
Agreement, the Warrant Agreement, the Subscription Agreement, the Advisory
Agreement, the M/A
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Agreement and the Agent's Warrants has been duly and validly authorized,
executed and delivered by the Company, and is the valid and binding obligation
of the Company, enforceable against it in accordance with its terms, subject to
any applicable bankruptcy, insolvency or other laws affecting the rights of
creditors generally and to general equitable principles;
(C) the authorized, issued and outstanding
capital stock of the Company as of the date hereof (before giving effect to the
transactions contemplated by this Agreement) is as set forth in the Offering
Documents. Except for the Shares, the Warrants and the Agent's Warrants to be
issued as contemplated by this Agreement, to such counsel's knowledge, there are
no outstanding warrants, options, agreements, convertible securities, preemptive
rights or other commitments pursuant to which the Company is, or may become,
obligated to issue any shares of its capital stock or other securities of the
Company other than as set forth in the Memorandum. All of the issued shares of
capital stock of the Company issued in connection with the Company's acquisition
of Madison, York & Associates on January 16, 1997 and subsequent thereof have
been duly and validly authorized and issued, are fully paid and nonassessable
and have not been issued in violation of the preemptive rights of any security
holder of the Company. The offers and sales of such outstanding securities were
either registered under the Act and applicable state securities laws or exempt
from such registration requirements. The Shares and the Warrants included in the
Units and the Agent's Warrants have been duly authorized, validly issued, fully
paid and nonassessable and no personal liability will attach to the ownership
thereof The Reserved Shares have been, or prior to the issuance and delivery of
the Shares, the.Warrants and the Agent's Warrants will be, duly reserved, and
when issued in accordance with the terms of the Shares, the Warrants and the
Agent's Warrants will be validly issued, fully paid and nonassessable and not
subject to preemptive or any other similar rights and no personal liability will
attach to the ownership thereof,
(D) assuming (i) the accuracy of the
information provided by the Subscribers in the Subscription Documents and (ii)
that the Placement Agent has complied in all material respects with the
requirements of section 4(2) of the Securities Act (and the provisions of
Regulation D promulgated thereunder), the issuance and sale of the Units is
exempt from registration under the Securities Act and Regulation D promulgated
thereunder;
(E) neither the execution and delivery of this
Agreement, the Fund Escrow Agreement, the Warrant Agreement, the Subscription
Agreement, the Advisory Agreement, the M/A Agreement or the Agent's Warrants nor
compliance with the terms hereof or thereof, nor the consummation of the
transactions herein or therein contemplated, nor the issuance of the Shares, the
Warrants or the Agent's Warrants, has, nor will, conflict with, result in a
breach of, or constitute a default under the Articles of Incorporation, as
amended, or By-laws of the Company, or any material contract, instrument or
document to which the Company is a party, or by
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which it or any of its properties is bound or violate any applicable law, rule,
regulation, judgment, order or decree of any governmental agency or court having
jurisdiction over the Company or any of its properties or business;
(F) to the best of such counsel's knowledge
after due inquiry, there are no claims, actions, suits, investigations or
proceedings before or by any arbitrator, court, governmental authority or
instrumentality pending or, to the knowledge of such counsel, threatened,
against or affecting the Company or involving the properties of the Company
which might materially and adversely affect the business, properties or
financial condition of the Company or which might materially adversely affect
the transactions or other acts contemplated by this Agreement or the validity or
enforceability of this Agreement, except as set forth in or contemplated by the
Offering Documents; and
(G) such counsel has participated in the
preparation of the Offering Documents and nothing has come to the attention of
such counsel to cause them to have reason to believe that the Offering Documents
contained any untrue statement of a material fact required to be stated therein
or omitted to state any material fact required to be stated therein or necessary
to make the statements therein not misleading (except for the financial
statements, notes thereto and other financial information and statistical data
contained therein, as to which such counsel need express no opinion).
(vi) Opinion of Trademark and Copyright Counsel.
The Placement Agent shall receive the opinion of special trademark and copyright
counsel to the Company, dated the Closing(s), in form and substance satisfactory
to counsel for the Placement Agent, to the effect that:
(a) The Company holds a valid registered
trademark for "iMALL" (the "Trademark");
(b) Neither the Company nor its subsidiaries
has received any notice challenging the validity or enforceability of the
Trademark;
(c) there have been no claims asserted against
the Company relating to the potential infringement of or conflict with any
trademarks, copyrights or trade secrets of others.
(vii) Officers' Certificate. The Placement Agent shall
receive a certificate of the Company, signed by the President and Secretary
thereof, that the representations and warranties contained in Section 2 hereof
are true and accurate in all material respects at such Closing with the same
effect as though expressly made at such Closing.
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(viii) Fund Escrow Agreement. The Placement Agent shall
receive a copy of a duly executed escrow agreement in the form acceptable to the
Company and the Placement Agent regarding the deposit of funds pending the
Closing(s) with a bank or trust company acceptable to the Placement Agent (the
"Fund Escrow Agreement").
(ix) Lock-Up Agreements. On or prior to the Initial
Closing, the Placement Agent shall receive agreements from each of Messrs. ▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ to the
effect that (i) such individual shall not publicly sell, assign or transfer any
of their securities of the Company for a period of 12 months from the final
Closing of this offering without the prior written consent of the Placement
Agent.
(x) Transmittal Letters. The Placement Agent shall
receive copies of all letters from the Company to the investors transmitting the
Warrants and Shares and shall receive a letter from the Company confirming
transmittal of the securities to the investors.
(xi) Charter Amendment. On or prior to the Initial
Closing, the Company shall have obtained the necessary board of director and
shareholder approval of an amendment to the Company's articles of incorporation
authorizing the Preferred Stock and shall have filed such amendment with the
Secretary of State of the State of Nevada.
(c) Blue Sky. A summary blue sky survey shall be prepared
by counsel to the Placement Agent stating the extent to which and the conditions
upon which offers and sales of the Units may be made in certain jurisdictions.
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 set forth in Section 2 of this Agreement, (iii) the
representations and warranties of the Placement Agent, and (iv) the
representations of the Company set forth in the certificate to be delivered at
the Closing pursuant to paragraph (vii) of Section 3(b).
(d) Placement Fee and Expenses. Simultaneously with payment
for and delivery of the Units at each Closing as provided in paragraph 3(a)
above, the Company shall at such Closing pay to the Placement Agent (i) a
commission equal to 7% of the aggregate purchase price of the Units sold; (ii) a
structuring fee equal to 3% of the aggregate purchase price of the Units sold;
and (iii) an expense allowance of $200,000. The Company shall also pay all
expenses in connection with the qualification of the Units under the securities
or Blue Sky laws of the states which the Placement Agent shall designate. The
Company will, at each Closing, issue to you or your designees (which may include
any Selected Dealer or any officer of the Placement Agent or a Selected Dealer)
the Agent's Warrants in the form annexed
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hereto as Exhibit I to purchase 5,500,000 shares of Common Stock in case of the
Minimum Offering and increasing by 500,000 shares for each additional $1,000,000
raised up to a total of 10,500,000 shares in the case of the Maximum Offering,
at an exercise price of $.40 per share. The number of warrants to be issued to
the Placement Agent will be reduced on a pro rata basis for each $1.00 less than
the Maximum Offering raised. In the event that any of the Over allotment Units
(as defined herein) are sold in the Offering, the number of warrants to be
issued to the Placement Agent will be increased on a pro rata basis for each
$1.00 in excess of the Maximum Offering raised. The Agent's Warrants will be
exercisable for a period of five years from the Initial Closing. At the Initial
Closing, the Company shall enter into (i) a 12-month financial advisory
agreement (the "Advisory Agreement") with the Placement Agent under which it
will pay the Placement Agent $5,000 per month for 12 months and (ii) a two-year
agreement regarding mergers and acquisitions ("NVA Agreement") pursuant to which
it will pay the Placement Agent 5% of any consideration received in such a
transaction with a party introduced by the Placement Agent.
(e) Bring-Down Opinions and Certificates. If there is more
than one Closing, then at each such Closing there shall be delivered to the
Placement Agent updated opinions and certificates as described in (v), (vi) and
(vii) of Section 3(b) above, respectively.
(f) No Adverse Changes. There shall not have occurred, at
any time prior to the Closing or, if applicable, any additional Closing, (i) any
domestic or international event, act or occurrence which has materially
disrupted, or in the Placement Agent's opinion will in the immediate future
materially disrupt, the securities markets; (ii) a general suspension of, or a
general limitation on prices for, trading in securities on the New York Stock
Exchange or the American Stock Exchange or in the over-the-counter market; (iii)
any outbreak of major hostilities or other national or international calamity;
(iv) any banking moratorium declared by a state or federal authority; (v) any
moratorium declared in foreign exchange trading by major international banks or
other persons; (vi) any material interruption in the mail service or other means
of communication within the United States; (vii) any material adverse change in
the business, properties, assets, results of operations, or financial condition
of the Company; or (viii) any change in the market for securities in general or
in political, financial, or economic conditions which, in the Placement Agent's
reasonable judgment, makes it inadvisable to proceed with the offering, sale,
and delivery of the Units.
4. Covenants of the Company.
(a) Use of Proceeds. The net proceeds of the Offering will
be used by the Company substantially as set forth in the Memorandum. The Company
shall not use more than $650,000 of the proceeds from the Offering to repay any
indebtedness
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of the Company, including but not limited to indebtedness to any current
executive officers, directors or principal stockholders of the Company, other
than as set forth in the Memorandum.
(b) Break-Up Fee. If the Private Placement is not completed
for any reason except those specified in the next sentence, the Company shall be
liable for the Placement Agent's out of pocket expenses, not to exceed $200,000,
in addition to the other costs and expenses of the Offering set forth in Section
3(d). If the Placement Agent raises at least $5,000,000 in escrow and if, within
60 days from the printing of a final Memorandum, the Private Placement is not
completed because the Company prevents it or because of a breach by the Company
of any such covenants, representations or warranties, the Company shall, in
addition to the payments set forth above and in Section 3(d), pay the Placement
Agent $500,000. In such event, the Placement Agent shall receive 5,500,000
Warrants to purchase Common Stock with an exercise price of $.40 per share.
(c) Reservation of Common Stock. The Company shall reserve
and keep available that maximum number of its authorized but unissued shares of
Common Stock which are issuable upon conversion and/or exercise of the Shares
and the Warrants, including the shares underlying the Agent's Warrants.
(d) Notification. The Company shall notify the Placement
Agent immediately, and in writing, (A) when any event shall have occurred during
the period commencing on the date hereof and ending on the later of the last
Closing or the Termination 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 not misleading, and (B) of the receipt of any notification with respect
to the modification, rescission, withdrawal or suspension of the qualification
or registration of the Units, or of any 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 any such modification, rescission, withdrawal or suspension
is issued and you so request, to obtain the lifting thereof as promptly as
possible.
(e) Blue Sky. The Company will use its best efforts to
qualify or register the Units for offering and sale under, or establish an
exemption from such qualification or registration under, the securities or "blue
sky" laws of such jurisdictions as you may reasonably request; provided however,
that the Company will not be obligated to qualify as a dealer in securities in
any jurisdiction in which it is not so qualified. The Company will not
consummate any sale of Units in any jurisdiction in which it is not so qualified
or in any manner in which such sale may not be lawfully made.
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(f) Form D Filing. The Company shall 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
Units. The Company shall file promptly such amendments to such Notices on Form D
as shall become necessary and 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 the Placement Agent with copies of all such
filings.
(g) Press Releases, Etc. The Company shall not, during the
period commencing on the date hereof and ending on the later of the last Closing
and the Termination 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 the prior consent of the Placement Agent, which consent shall
not be unreasonably withheld.
(h) Form 10-QSB. The Company will provide to the Placement
Agent, promptly upon the filing thereof with the Commission (and in any event no
later than 5 days of such filing), a copy of its Annual Report in Form 10-KSB
for the year ended December 3 1, 1997.
(i) Restrictions on Issuance of Securities. Prior to the
Initial Closing Date, the Company will not, without the prior written consent of
the Placement Agent, issue additional shares of Common Stock or grant any
warrants, options or other securities of the Company.
(j) Absence of Changes. Subsequent to the date of the
Memorandum and prior to the Closing, the Company will not, without the prior
written consent of the Placement Agent, incur any liabilities or obligations,
direct or contingent, not in the ordinary course of business, or enter into any
transaction not in the ordinary course of business, which is material to the
business of the Company, and there will not be any change in the capital stock
of, or any incurrence of long-term debt by, the Company, or any issuance of
options, warrants or other rights to purchase the capital stock of the Company.
(k) Advisory Agreement. Prior to or on the Initial Closing,
the Company shall execute and deliver to the Placement Agent the Advisory
Agreement in the form previously delivered to the Company by the Placement
Agent.
(l) Key-Man Insurance. Prior to the Initial Closing, the
Company shall have obtained "key-man" life insurance policies in the amount of
at least $2,000,000 on each of the lives of Messrs. ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ and
▇▇▇▇▇▇▇▇▇. Such policies will be kept in for at least three years from the
Initial Closing Date or the term of the employment agreements with such
officers, whichever period is longer.
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(m) Executive Compensation. The compensation of the
executive officers of the Company shall not increase from the date of this
Agreement until 12 months from the Termination Date.
(n) Board Designee. The Company shall, for a period of
three years following the Initial Closing Date or such earlier date after the
second anniversary of the Initial Closing Date as the Preferred Stock has been
converted pursuant to the automatic conversion feature set forth in Section 6(B)
of the Designation, at the Placement Agent's option, nominate a designee of the
Placement Agent to the Company's Board of Directors or, at the option of the
Placement Agent appoint an observer selected by the Placement Agent to attend
all meetings of the Company's Board of Directors.
(o) Accounting Firm. The Company shall retain an accounting
firm acceptable to the Placement Agent promptly following the Initial Closing
Date and for a period of three years following the Initial Closing Date, shall
not effect a change in such accounting firm, without the prior written consent
of the Placement Agent, unless such new firm is a "big four" accounting firm.
(p) Reports. The Company will deliver to all purchasers in
this Offering (and/or their transferees), within 45 days after the close of each
of the Company's first three fiscal quarters, a quarterly report and
shareholders letter substantially similar in form and substance to a Form 10-QSB
under the Securities Exchange Act of 1934 and an abbreviated form of an annual
report within 90 days after its year end.
(q) M/A Agreement. Prior to or on the Initial Closing, the
Company shall execute and deliver to the Placement Agent the M/A Agreement in
the form previously delivered to the Company by the Placement Agent.
(r) Checks. For a period of one year following the Final
Closing, all checks, wires or money transfers issued by the Company for an
amount over $500 must bear two signatures, one of which must be that of ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇.
5. Indemnification.
(a) The Company agrees to indemnify and hold harmless the
Placement Agent and each Selected Dealer, if any, and their respective
shareholders, directors, officers, agents and controlling persons (an
"Indemnified Party") against. any and all loss, liability, claim, damage and
expense whatsoever (and all actions in respect thereof), and to reimburse the
Placement Agent for legal fees and related expenses as incurred (including, but
not limited to the costs of giving testimony or furnishing documents in response
to a subpoena or otherwise, and the costs of investigating, preparing or
defending any such action or claim whether or not in connection with litigation
in which the Placement Agent is a party), arising out of any untrue
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statement or alleged untrue statement of a material fact contained in the
Offering Documents or the omission or alleged omission therefrom of a material
fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading;
(b) The Company agrees to indemnify and hold harmless an
Indemnified Party 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 in Section
2 hereof.
(c) Promptly after receipt by a person entitled to
indemnification pursuant to the foregoing subsection (a) or (b) (an "indemnified
party") under this Section of notice of the commencement of any action, the
indemnified party will, if a claim in respect thereof is to be made against the
Company under this Section, notify in writing the Company of the commencement
thereof, but the omission so to notify the Company will not relieve it from any
liability which it may have to the indemnified party otherwise than under this
Section. In case any such action is brought against an indemnified party, and it
notifies the Company of the commencement thereof, the Company will be entitled
to participate in, and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, subject to
the provisions herein stated, with counsel reasonably satisfactory to the
indemnified party, and after notice from the Company to the indemnified party of
its election so to assume the defense thereof, the Company will not be liable to
the indemnified party under this Section for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation. The indemnified party
shall have the right to employ separate counsel in any such action and to
participate in the defense thereof, but the fees and expenses of such counsel
shall not be at the expense of the Company if the Company has assumed the
defense of the action with counsel reasonably satisfactory to the indemnified
party; provided that the fees and expenses of such counsel shall be at the
expense of the Company if (i) the employment of such counsel has been
specifically authorized in writing by the Company or (ii) the named parties to
any such action (including any impleaded parties) include both the indemnified
party or parties and the Company and, in the judgment of the indemnified party,
it is advisable for the indemnified party or parties to be represented by
separate counsel (in which case the Company shall not have the right to assume
the defense of such action on behalf of the indemnified party or parties, it
being understood, however, that the Company shall not, in connection with any
one such action or separate but substantially similar or related actions in the
same jurisdiction arising out of the same general allegations or circumstances,
be liable for the reasonable fees and expenses of more than one separate firm of
attorneys for the indemnified party or parties. No settlement of any action
against an indemnified
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party shall be made without the consent of the indemnified party, which shall
not be unreasonably withheld in light of all factors of importance to the
indemnified party.
6. Contribution.
To provide for just and equitable contribution, if (i) an
indemnified party makes a claim for indemnification pursuant to Section (5) 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 Securities 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 or agent
for the Company, or any controlling person of the Company), on the one hand, and
the Placement Agent and any Selected Dealers (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 and the Selected Dealers, 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 and the Selected Dealers in connection with the facts which
resulted in such losses, liabilities, claims, damages, and expenses shall also
be considered. In no case shall the Placement Agent or a Selected Dealer be
responsible for a portion of the contribution obligation in excess of the
compensation received by it pursuant to Section 3 hereof or the Selected Dealer
Agreement, as the case may be. 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 6,
each person, if any, who controls the Placement Agent or a Selected Dealer
within the meaning of Section 15 of the Securities Act or Section 20(a) of the
Exchange Act and each officer, director, stockholder, employee and agent of the
Placement Agent or a Selected Dealer, shall have the same rights to contribution
as the Placement Agent or the Selected Dealer, and each person, if any who
controls the Company within the meaning of Section 15 of the Securities Act or
Section 20(a) of the Exchange Act and each officer, director, employee and agent
of the Company, shall have the same rights to contribution as the Company,
subject in each case to the provisions of this Section 6. Anything in this
Section 6 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 6 is intended to supersede any right
to contribution under the Securities Act, the Exchange Act, or otherwise.
7. Miscellaneous.
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(a) Survival. Any termination of the Offering without
consummation thereof shall be without obligation on the part of any party except
that the indemnification provided in Section 5 hereof and the contribution
provided in Section 6 hereof shall survive any termination and shall survive the
Closing for a period of five years.
(b) Representations, Warranties and Covenants to Survive
Delivery. The respective representations, warranties, indemnities, agreements,
covenants and other statements of the Company as of the date hereof shall
survive execution of this Agreement and delivery of the Shares and the Warrants.
All of the Company's obligations for the payment of fees and expenses shall
survive termination of this Agreement, subject to the maximum amounts payable by
the Company provided in Section 4(b) hereof.
(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 without regard to
conflict of law provisions. The Placement Agent and the Company will attempt to
settle any claim or controversy arising out of this Agreement through
consultation and negotiation in good faith and a spirit of mutual cooperation.
Should such attempts fail, then the dispute will be mediated by a mutually
acceptable mediator to be chosen by the Placement Agent and the Company within
15 days after written notice from either party demanding mediation. Neither
party may unreasonably withhold consent to the selection of a mediator, and the
parties will share the costs of the mediation equally. Any dispute which the
parties cannot resolve through negotiation or mediation within six months of the
date of the initial demand for it by one of the parties may then be submitted to
the courts for resolution. The use of mediation will not be construed under the
doctrine of latches, waiver or estoppel to affect adversely the rights of either
party. Nothing in this paragraph will prevent either party from resorting to
judicial proceedings if (a) good faith efforts to resolve the dispute under
these procedures have been unsuccessful or (b) interim relief from a court if
necessary to prevent serious and irreparable injury.
(e) Counterparts. This Agreement may be signed in
counterparts with the same effect as if both parties had signed one and the same
instrument.
(f) Notices. Any communications specifically required
hereunder to be in writing, if sent to the Placement Agent, will be mailed,
delivered and confirmed to it at Commonwealth Associates, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Att: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, with a copy to Bachner, Tally,
▇▇▇▇▇▇▇ & Msher LLP, 380
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Madison Avenue, New York, New York 100 1 7, Att: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq. and if
sent to the Company, will be mailed, delivered or telegraphed and confirmed to
it at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
Att: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, with a copy to Loeb & Loeb LLP, ▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Att: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
Esq.
(g) Entire Agreement. This Agreement constitutes the entire
agreement of the parties with respect to the matters herein referred and
supersedes all prior agreements and understandings, written and oral, between
the parties with respect to the subject matter hereof Neither this Agreement nor
any term hereof may be changed, waived or terminated orally, but only by an
instrument in writing signed by the party against which enforcement of the
change, waiver or termination is sought.
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,
iMALL, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Title: Chief Executive Officer
Agreed:
COMMONWEALTH ASSOCIATES,
a New York limited partnership
By: COMMONWEALTH MANAGEMENT CO., INC.
a New York corporation,
its general partner
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇
Title: Chief Financial Officer
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