EXHIBIT 10
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PLACEMENT AGENCY AGREEMENT
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As of July 17, 2006
Brookstreet Securities Corporation
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Ladies and Gentlemen:
Nascent Wine Company, Inc., a Nevada corporation (the
"Company"), proposes to offer for sale to "accredited investors," in a private
placement (the "Offering"), up to 25,000,000 shares (the "Shares") of the
Company's common stock, par value $.001 per share (the "Common Stock"), with an
aggregate value of $10,000,000. The Shares will be offered pursuant to those
terms and conditions acceptable to you as reflected in the engagement letter,
dated June 1, 2006, as amended or supplemented (the "Engagement Letter"). The
Shares will be offered on a "best efforts - all or none" basis as to the first
5,000,000 Shares offered (the "Minimum Offering") and on a "best efforts" basis
as to the 20,000,000 Shares offered and sold thereafter (the "Maximum
Offering"), pursuant to the Engagement Letter 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 Company has also
granted to Brookstreet Securities Corporation (the "Placement Agent") an option,
subject to the closing of the Maximum Offering, to be exercised within 60 days
after the final Closing (as such term is defined in Section 4(a) hereof), to
sell up to 3,750,000 additional Shares solely to cover over-subscriptions (the
"Over-subscription Shares"), if any.
Giving consideration to present market conditions, and
assuming no adverse changes in the business or prospects of the Company, it is
contemplated that, upon the sale of $10,000,000 in shares of Common Stock, the
existing shareholders of the Company will retain approximately 66% of the
Company's outstanding shares of Common Stock. The Placement Agent may form a
selling group of selected dealers to offer and sell the Shares in the Offering.
The Offering will be accomplished pursuant to a confidential
private placement memorandum (the "Private Placement Memorandum"). The Private
Placement Memorandum, as it may be amended or supplemented from time to time,
the form of proposed subscription agreement between the Company and each
subscriber (the "Subscription Agreement") and the other exhibits which are part
of the Private Placement Memorandum and/or the 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 Shares (a
"Subscriber") will be required to deliver, among other things, a Subscription
Agreement and a confidential subscriber questionnaire (a "Questionnaire") in the
form to be provided to offerees.
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1. APPOINTMENT OF PLACEMENT AGENT.
(a) You are hereby appointed exclusive Placement
Agent, for the purposes of assisting the Company in finding qualified
Subscribers pursuant to the Offering of the Company, for a term commencing as of
July 17, 2006, the date of the Private Placement Memorandum, and expiring 90
days from that date; PROVIDED, HOWEVER, that the expiration date of the term
(the "Termination Date") may be extended for two successive 30-day periods
thereafter by the Company or the Placement Agent. The Company shall not solicit
any other broker-dealers to participate in the Offering and the Company will not
sell any Shares directly to the public without the Placement Agent's prior
consent.
(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, the Placement Agent 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 Shares. The agency of the
Placement Agent hereunder is not terminable by the Company except upon
termination of the Offering Period.
(c) Subscriptions for Shares 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.
Until the Closing, all subscription funds received shall be held as described in
the Subscription Agreement and in Section 4(b) hereof. 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 Shares.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to the Placement Agent 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 "private offerings" to
"accredited investors." The Offering Documents, when read together as of their
respective dates, 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 Termination Date 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
the Placement Agent and will supply the Placement Agent 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, and is duly licensed or qualified
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to do business as a foreign corporation in each 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 qualified would not have a
material adverse effect on the business, financial condition or prospects of the
Company.
(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 shareholder of the Company. All prior sales of securities of the Company
were either registered under the Securities Act and applicable state securities
laws or exempt from such registration.
(d) WARRANTS, PREEMPTIVE RIGHTS, ETC. Except for the
warrants to purchase shares of Common Stock to be issued to the Placement Agent
or its designees in consideration for acting as Placement Agent hereunder (the
"Agent's Warrants") and except as set forth in the Offering Documents, there are
not, nor will there be immediately after the Closing, 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 Offering Documents.
(e) SUBSIDIARIES AND INVESTMENTS. Except as stated in
the Offering Documents, the Company has no subsidiaries and the Company does not
own, directly or indirectly, any capital stock or other equity ownership or
proprietary interests in any other corporation, company, association, trust,
partnership, joint venture or other entity.
(f) FINANCIAL STATEMENTS. The financial information
contained in the Offering Documents is accurate in all material respects (such
financial statements included as part of the Offering Documents are 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) NATIONAL SECURITY LEGISLATION. Neither the sale
of the Shares hereunder nor its use of the proceeds thereof will violate the
Trading with the Enemy Act, as amended, or any of the foreign assets control
regulations of the United States Treasury Department (31 CFR, Subtitle B,
Chapter V, as amended) or any enabling legislation or executive order relating
thereto. Without limiting the foregoing, neither the Company nor any of its
subsidiaries (a) is a person whose property or interests in property are blocked
pursuant to Section 1 of Executive Order 13224 of September 23, 2001 Blocking
Property and Prohibiting Transactions With Persons Who Commit, Threaten to
Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)) or (b) engages in any
dealings or transactions, or be otherwise associated, with any such person. The
Company and its subsidiaries are in compliance with the USA Patriot Act of 2001
(signed into law October 26, 2001).
(h) ABSENCE OF CHANGES. Except as set forth in the
Offering Documents, 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 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
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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 litigation which if
adversely determined would have a material adverse affect, whether or not in the
ordinary course of business.
(i) TITLE. Except as set forth in the Offering
Documents, 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.
(j) PATENTS, TRADEMARKS, ETC. 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 the Offering Documents (collectively,
"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 could form the basis of any claim, asserted by any person to the effect
that the sale or use of any product or service 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.
(k) SOFTWARE. The current software of the Company
(the "Software") is original and capable of copyright protection in the United
States, and the Company has complete rights to the ownership of such Software,
including possession of, or ready access to, the source code for such Software
in its most recent version. No part of any such Software is an imitation or copy
of, or infringes upon, the software of any other person or entity, or violates
or infringes upon any common law or statutory rights of any other person or
entity, including, without limitation, rights relating to defamation,
contractual rights, copyrights, trade secrets, and rights of privacy or
publicity. The Company has not sold, assigned, licensed, distributed or in any
other way disposed of or encumbered the Software, other than in the ordinary
course of its business. The Software, to the extent any part of it is licensed
from any third-party licensor or constitutes "off-the-shelf" software, is held
by the Company legitimately. The Company warrants that, to the best of the
Company's knowledge, the Software is free from any significant software defect
or programming or documentation error, operates and runs in a reasonable and
efficient business manner, and conforms to its stated specifications. The
Company has no knowledge of the existence of any bugs or viruses with respect to
the Software which would have a material adverse effect on the condition
(financial or otherwise), earnings, operations, business or business prospects
of the Company.
(l) 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
therefor known to the Company), the adverse outcome of which could materially
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adversely affect the Company's business. 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 which could materially adversely affect the
Company's business or prospects.
(m) NONDEFAULTS; NONCONTRAVENTION. 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 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 or its By-laws, (ii) under any indenture, mortgage, deed of trust,
material contract, material purchase order or other material agreement or
instrument to which the Company is a party or by which it or its property is
bound or affected or (iii) with respect to any material order, writ, injunction
or decree of any court or 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
on the business of the Company.
(n) 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 are not currently being 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.
(o) 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 materially adverse effect on the business or operations of
the Company. The Company has all licenses and permits and other governmental
certificates, authorizations 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
on the business of the Company. 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, to the knowledge of the Company, threatened to revoke or limit
any thereof.
(p) AUTHORIZATION OF AGREEMENT, ETC. This Agreement
has been duly executed and delivered by the Company and the execution, delivery
and performance by the Company of this Agreement and the Subscription Agreement
and other Offering Documents have been duly authorized by all requisite
corporate action by the Company and constitute the legal, valid and binding
obligations of the Company, enforceable in accordance with their respective
terms.
(q) AUTHORIZATION OF SHARES. The issuance, sale and
delivery of the Shares and the Agent's Warrants have been duly authorized by all
requisite corporate action of the Company and, when so issued, paid for and
delivered, will be validly issued, fully paid and nonassessable and, will not be
subject to preemptive or any other similar rights of the shareholders of the
Company or others which rights shall not have been waived prior to the Closing.
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(r) AUTHORIZATION OF RESERVED SHARES. The issuance,
sale and delivery by the Company of the shares of Common Stock reserved for
issuance upon exercise of the Agent's Warrants (the "Reserved Shares") have been
duly authorized by all requisite corporate action of the Company. The Reserved
Shares have been duly reserved for issuance upon 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 shareholders of the
Company or others which rights shall not have been waived prior to the Closing.
(s) EXEMPTION FROM REGISTRATION. Assuming (i) the
accuracy of the information provided by the respective Subscribers in the
Subscription Documents and the other Offering Documents and (ii) that the
Placement Agent has complied in all material respects with the provisions of
Rule 502(c) of Regulation D promulgated under the Securities Act, the offer and
sale of the Shares 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.
(t) REGISTRATION RIGHTS. Except with respect to
holders of the Shares, the Agent's Warrants and the Company's warrants issued as
of the date hereof, no person has any right to cause the Company to effect the
registration under the Securities Act of any securities of the Company.
(u) BROKERS. Neither the Company nor any of its
officers, directors, employees or shareholders has employed any broker or finder
in connection with the transactions contemplated by this Agreement other than
the Placement Agent.
(v) TITLE TO SHARES. When certificates representing
the Common Stock and/or Reserved Shares shall have been duly delivered to the
purchasers and payment shall have been made therefor (assuming such purchasers
are bona fide purchasers within the meaning of the Uniform Commercial Code), the
several purchasers shall have marketable title to the Common Stock and/or
Reserved Shares free and clear of all liens, encumbrances and claims whatsoever
(with the exception of claims arising from 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 transfer taxes, if any, in respect of the
original issuance thereof.
(w) RIGHT OF FIRST REFUSAL. 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
offer or sale of any equity or debt securities by the Company.
(x) SOLVENCY. The Company's assets currently exceed
its liabilities.
3. REPRESENTATIONS AND WARRANTIES OF THE PLACEMENT AGENT. The
Placement Agent represents and warrants to the Company as follows:
(a) This Agreement has been duly authorized, executed
and delivered by the Placement Agent and is a valid and binding agreement on its
part, enforceable against the Placement Agent in accordance with its terms.
(b) The Placement Agent is duly registered pursuant
to the provisions of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as a broker-dealer and is a member in good standing of the
National Association of Securities Dealers, Inc. and is duly registered as a
broker-dealer in those states in which it is required to be so registered in
order to carry out the Offering contemplated hereby.
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4. CLOSING; ESCROW; PLACEMENT AND FEES.
(a) CLOSING. Provided the Offering shall have been
subscribed for and funds representing the sale of at least 5,000,000 Shares
shall have cleared, a closing (the "Closing") shall take place at the offices of
counsel to the Placement Agent, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP, at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
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which is on or before the Termination Date (which date may be accelerated or
adjourned by agreement between the Company and the Placement Agent). At the
Closing, payment for the Shares issued and sold by the Company shall be made
against delivery of stock certificates representing such Shares. In addition,
one or more subsequent closings (if applicable; and the date of each and any
subsequent closing and such subsequent closing shall also be referred to as a
"Closing Date" and a "Closing," respectively) may be scheduled at the discretion
of the Company and the Placement Agent.
(b) ESCROW ACCOUNT. Funds received from the sale of
the Shares will be deposited by the Placement Agent with a chartered banking
institution as escrow agent (the "Escrow Agent"), and held by the Escrow Agent
in trust for the investors until the Placement Agent is required to deliver the
funds to the Company or return the funds to the investors upon termination of
the Offering or upon instruction from the Company. All funds returned to
investors will be with interest.
(c) 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 5(g) not later than the Closing Date, and (B) at the Closing Date no
stop order suspending the sale of the Shares shall have been issued, and no
proceeding for that purpose shall have been initiated or threatened.
(ii) NO MATERIAL MISSTATEMENTS. The
Placement Agent will not have notified the Company that the Blue Sky
qualification materials or the Engagement Letter, or any supplement thereto,
contains an untrue statement of a fact which in its opinion is material, or
omits to state a fact which in its opinion 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, including with respect to the
Merger, in all material respects at or prior to the Closing Date.
(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 COMPANY COUNSEL. At each
Closing, and dated as of the date thereof, the Placement Agent shall receive the
opinion of counsel to the Company substantially to the effect that:
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(A) the Company is a corporation
duly organized, validly existing and in good standing
under the laws of the State of Nevada, has all
requisite power and authority to own or 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 and is
duly qualified or licensed to do business as a
foreign corporation and is in good standing in each
other jurisdiction to such counsel's knowledge, in
which the ownership or leasing of its properties or
conduct of its business requires such qualification,
except where the failure to be so qualified or
licensed would not have a material adverse effect on
the business, financial condition or prospects of the
Company;
(B) each of this Agreement, the
Subscription Agreement, the other Offering Documents
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 and except that the enforcement of the
indemnification and contribution provisions thereof
may be limited or denied based on federal or
applicable state securities laws and public policies
underlying such laws;
(C) the authorized 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 Agent's Warrants, there are no
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 other than as set forth in the Offering
Documents. All of the issued and outstanding shares
of capital stock of the Company have been duly and
validly authorized and issued, are fully paid and
non-assessable and have not been issued in violation
of the preemptive rights of any security holder of
the Company under Nevada law. The Shares have been
duly authorized and, when issued and delivered in
accordance with the terms of the Subscription
Agreement and this Agreement, the Common Stock will
be validly issued, fully paid and non-assessable and
no personal liability will attach to the ownership
thereof and such stock will not be issued in
violation of or subject to any preemptive or other
similar rights. The Reserved Shares have been duly
reserved for issuance, and when issued in accordance
with the terms of the Agent's Warrants, will be
validly issued, fully paid and non-assessable and
such Reserved Shares will not be issued in violation
of or subject to any preemptive or any other similar
rights and no personal liability will attach to the
ownership thereof. The Shares conform in all material
respects to all statements relating thereto contained
in the Offering Documents;
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(D) the issuance and sale of the
Shares is exempt from registration under the
Securities Act and the Regulations pursuant to
Regulation D promulgated under the Securities Act
subject to the following assumptions:
(I) Other than the
Company, no party to the transaction contemplated by
this Agreement, the Subscription Agreement and
Questionnaire executed by each Subscriber (the
"Subscription Documents"), or any documents relating
thereto, is subject to any statute, rule or
regulation, or to any impediment to which contracting
parties are generally not subject, that requires the
Company or such party to obtain the consent of, or to
make a declaration or filing with, any governmental
authority.
(II) All terms, provisions
and conditions of, or relating to, the offer and sale
of the Shares are correctly and completely reflected
in the Private Placement Memorandum which such
counsel has no reason to doubt as of the date of the
Private Placement Memorandum .
(III) All offers and sales
of the Shares have been or will be made in a manner
complying with the terms of the Private Placement
Memorandum and all applicable state securities laws
and similar laws. Without limiting the generality of
the preceding sentence, counsel shall assume (i) the
accuracy of the factual representations and
warranties of the Company and the Placement Agent
contained in this Agreement and the full and complete
performance of all covenants of the Company and the
Placement Agent as set forth in this Agreement, (ii)
that offers and sales of the Shares have been made
only to "accredited investors," as that term is
defined under the Securities Act; and (iii) the
accuracy and completeness of the representations and
warranties and information provided by the
Subscribers in the Subscription Documents.
(IV) Neither the Company,
the Placement Agent nor any person or entity acting
on the Company's behalf has offered or sold the
Shares by any form of general solicitation or general
advertising, including, but not limited to, (i) any
advertisement, article, notice or other communication
published in any newspaper, magazine or similar media
or broadcast over television or radio, (ii) any
seminar or meeting whose attendees have been invited
by any general solicitation or general advertising,
or (iii) electronic mail transmitted over the
Internet.
(V) The Subscribers are
not "underwriters" within the meaning of Section
2(11) of the Securities Act.
(VI) A Notice of Sales of
Securities Pursuant to Regulation D or Section 4(6)
("Form D"), including any required amendments to such
Form D, has been or will be filed with the U.S.
Securities and Exchange Commission in accordance with
the requirements of Rule 503 of Regulation D.
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(E) neither the execution and
delivery of this Agreement, nor compliance with the
terms hereof, nor the consummation of the
transactions herein contemplated, has, nor will,
conflict with, result in a breach of, or constitute a
default under the Articles of Incorporation or
By-laws of the Company, or any material contract,
instrument or document to which the Company is a
party, or by 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
which breach, default or violation could have a
material adverse effect on the business, financial
condition or prospects of the Company;
(F) to the best of counsel's
knowledge, there are no claims, actions, suits,
investigations or proceedings (formal or informal)
before or by any arbitrator, court, governmental
authority or instrumentality pending or threatened
against or affecting the Company or involving the
properties of the Company which might materially
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 to the best of counsel's knowledge, the Company
is not in violation or default with respect to any
law, rule, regulation, judgment, order or decree
which might materially 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; nor is the Company required to take any
action in order to avoid any violation or default;
and
(G) such counsel has participated
in meetings and discussions in connection with the
preparation of the Private Placement Memorandum,
Subscription Agreement, and other Offering Documents
and after due inquiry the course of such review and
discussions, no facts have come the attention of such
counsel to cause them to have reason to believe that
the Private Placement Memorandum, Subscription
Agreement and other Offering Documents, as of their
respective dates and taken together, on the Closing
Date, 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, in light
of the circumstances under which they were made, 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) OFFICERS' CERTIFICATE. The Placement
Agent shall receive a certificate of the Company, signed by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, its
Chief Executive Officer, and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, its Chief Financial Officer,
certifying 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 and that the Company has
performed in all material respects all agreements and covenants and complied in
all material respects with all conditions contained in this Agreement and the
Offering Documents to be so performed at such Closing.
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(vii) SECRETARY'S CERTIFICATE. The Placement
Agent shall receive the certificate of the Secretary of the Company, certifying
as to (i) the Articles of Incorporation of the Company and any amendments
thereto, (ii) the By-laws of the Company, and (iii) resolutions of the Board of
Directors of the Company authorizing the execution and delivery of this
Agreement, the Common Stock and the other Offering Documents.
(viii) LOCK-UP AGREEMENTS. The Placement
Agent shall receive agreements from each of the executive officers, directors
and other existing significant stockholders of the Company to the effect that
each such stockholder shall not publicly sell, assign or transfer any of their
securities of the Company, or of Pubco following the Merger, for a period
extending to the later of 180 days after the effective date of the registration
statement covering the resale of the Shares sold in the Offering.
(d) PLACEMENT FEE AND EXPENSES. Upon execution of the
Engagement Letter, the Company paid to the Placement Agent a non-refundable fee
of $25,000 for investment banking services. Simultaneously with payment for and
delivery of the Shares at each Closing as provided in Section 4(a) above, the
Company shall at such Closing pay to the Placement Agent (i) a retail sales
commission equal to eight percent (8%) of the gross proceeds (the "Placement
Agent Fee") of the Shares and any Over-subscription Shares sold and (ii) a
marketing allowance equal to two percent (2%) of the gross proceeds of the
Shares and any Over-subscription Shares sold. The Company will, at each Closing,
issue and sell, for $.001 per Agent Warrant, to the Placement Agent or its
designees Agent's Warrants to purchase such number of shares of Common Stock
equal to 20% of the number of shares sold in the Offering and having a per share
exercise price equal to the price per Share in the Offering. The Agent's
Warrants will be exercisable from the date of issuance until three years
thereafter. The Agent's Warrants will be in such form (including provisions
providing "cashless" exercise and anti-dilution protection) as is customarily
received by the Placement Agent in similar transactions. The Reserved Shares
underlying the Agent's Warrants will have identical registration rights to the
Shares being sold in the Offering. The Placement Agent shall be entitled to
solicit the services of other broker-dealers which are registered with the
National Association of Securities Dealers, Inc. (the "Selling Group") and may
reallow all or any part of its compensation and warrants with respect to sales
by members of the Selling Group. Simultaneously with each Closing of the
Offering or on the Termination Date, the Company shall pay the Placement Agent a
non-accountable expense allowance equal to three percent (3%) of the gross
proceeds of the Shares and any Over-subscription Shares sold.
(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 subsections
(v) and (vi) of Section 4(c) 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 reasonable 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, the American Stock Exchange or in the Nasdaq Stock
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, financial condition or prospects 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 or the sale and delivery of the
Shares.
11
(g) FINANCIAL STATEMENTS AND DUE DILIGENCE. There
shall not have occurred, at any time prior to the Closing or, if applicable, any
additional Closing, any change in the financial condition of the Company or its
operating results as disclosed in the Company's financial statements or in the
Private Placement Memorandum, so as to make them not consistent with information
previously provided or to constitute a material adverse change in the financial
condition or results of operations of the Company, or a material misstatement of
fact in the Private Placement Memorandum or an omission to state a material
statement of fact necessary to be stated therein in order to make the statements
made therein, in light of the circumstances under which they are made, not
misleading, which, in the Placement Agent's reasonable judgment, makes it
inadvisable to proceed with the Offering or the sale and delivery of the Shares.
Prior to the Closing or, if applicable, any additional Closing, the Company will
supply counsel to the Placement Agent with all necessary financial documents,
corporate records, material contracts and other information as counsel may
reasonably request to fulfill the Placement Agent's due diligence obligations.
5. COVENANTS OF THE COMPANY.
(a) USE OF PROCEEDS. The net proceeds of the Offering
will be used by the Company as set forth in the Private Placement Memorandum.
The Company shall not use any of the proceeds from the Offering to repay any
indebtedness to any executive officers, directors or principal shareholders of
the Company. The Company shall establish a reserve of at least 8% of the gross
proceeds of the Offering (up to a maximum of $250,000) to retain an effective
investor relations firm to perform financial relationship management services
and to generate after-market interest in the Company's stock.
(b) EXPENSES OF OFFERING. The Company shall be
responsible for, and shall bear all expenses directly incurred in connection
with, the proposed Offering including, but not limited to, the preparation of
the Private Placement Memorandum, due diligence, costs and counsel fees for
"Blue Sky" filings under state securities laws, the fees and reimbursements of
counsel and the accountants for the Company, the reasonable fees and
reimbursements of counsel for the Placement Agent (which, at a minimum, will be
paid at each Closing from the proceeds thereof), the cost of printing the
Private Placement Memorandum, fees of the Company's bank escrow agent, and all
such other expenses directly attributable to the Offering. The Company shall
also reimburse the Placement Agent for out-of-pocket marketing and/or
broker-dealer due diligence expenses, including, for example, telephone charges,
copy charges, air travel (full-fare coach rates), hotel (Hilton/Marriott level),
and other standard expenses; PROVIDED, HOWEVER, that these expenses must have a
verbal pre-approval from the Company if an individual expense is expected to
exceed $1,000. Expenses are due and payable within 15 days after submission of
receipts to the Company.
(c) INFORMATION. During the Offering, the Company
shall afford each prospective purchaser of Shares the opportunity to ask
questions of and receive answers from an officer of the Company concerning the
terms and conditions of the Offering and the opportunity to obtain such other
additional information necessary to verify the accuracy of the Private Placement
Memorandum to the extent it possesses such information or can acquire it without
unreasonable expense.
(d) TERMINATION FEE. If the Offering shall not be
consummated by the Termination Date, the Company and the Placement Agent shall
be released from any and all commitments and obligations hereunder; PROVIDED,
HOWEVER, that if the Company is unable or unwilling to assist with or to
complete, or otherwise determines not to proceed with, the Offering or if the
Company prevents the completion of the Offering prior to closing, because the
12
Company breaches any representation, covenant or warranty contained herein or
for any other reason, or the Company, or all or substantially all of its stock,
debt or assets, is sold, merged or otherwise acquired, directly or indirectly,
or enters into a letter of intent or completes a public or private offering of
its securities, directly or through another broker-dealer from the date of
execution of this Agreement, the Company will, nevertheless, reimburse the
Placement Agent for its out-of-pocket expenses incurred in connection with the
Offering, including without limitation the reasonable fees and expenses of the
Placement Agent's counsel for services rendered through such date, together with
$100,000 to compensate the Placement Agent for the efforts of its investment
bankers and staff in connection with the Offering.
(e) RESERVATION OF CAPITAL STOCK. The Company shall
reserve and keep available the maximum number of its authorized but unissued
shares of Common Stock which are issuable upon exercise of the Agent's Warrants.
(f) NOTIFICATION. The Company shall notify the
Placement Agent immediately, and in writing, (i) when any event shall have
occurred during the period commencing on the date hereof and ending on the later
of the final 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 (ii) of the receipt of any notification
with respect to the modification, rescission, withdrawal or suspension of the
qualification or registration of the Shares, 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 the Placement Agent so requests, to obtain the
lifting thereof as promptly as possible.
(g) BLUE SKY. The Company will use its best efforts
to qualify or register the Shares 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 the Placement Agent 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; and PROVIDED,
FURTHER, that the Company shall not for any such purpose be required to qualify
generally to do business as a foreign corporation in any jurisdiction where, but
for the requirements of this subsection (f), it would not be obligated to be so
qualified, to subject itself to taxation in any such jurisdiction, or to consent
to general service of process in any such jurisdiction (except pursuant to the
Uniform Consent to Service of Process on Form U-1 or such other similar form as
may be required in any jurisdiction). The Company will not consummate any sale
of Shares in any jurisdiction in which it is not so qualified or in any manner
in which such sale may not be lawfully made. The appropriate documents shall be
prepared and filed by counsel for the Placement Agent with the Commission and in
every state of residence of every Subscriber as required by law to ensure the
Offering complies with any available exemptions from registration. The legal
fees of $500 per state plus filing fees and other costs and expenses for
qualifying the Offering in all states shall be borne by the Company.
Additionally, the Company will promptly after the initial closing of the
Offering file all necessary reports, at its expense, to publish all information
so as to have available "current public information" in Standard & Poor's
Corporation Records or Mergent's Manual, for state "blue sky" exemption
purposes.
(h) FORM D FILING. The Company shall file five copies
of a Notice of Sales of Securities on Form D with the Commission no later than
15 days after the first sale of the Shares. 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.
13
(i) REGISTRATION RIGHTS. The Company shall file a
"shelf" registration statement with the Commission covering all of the Shares
sold in the Offering and the Reserved Shares no later than sixty (60) days after
the final closing of the Offering and use its best efforts to have such
registration statement declared effective by the Commission as soon as possible
and, in any event, within one hundred fifty (150) days after the final Closing
date. The Company will be obligated to maintain the effectiveness of the
registration statement from the effective date through twelve (12) months
thereafter. The expenses of the foregoing registration rights (other than
underwriting discounts and selling commissions relating to sales by the
Subscribers and fees and disbursements of any special counsel for such
Subscribers in the event the Subscribers use counsel other than the Company's
regular counsel) shall be borne by the Company. The above-described registration
rights of the Subscribers shall be subject to such reasonable and customary
restrictions and limitations as may be agreed upon by the parties and provided
for in a registration rights agreement or subscription agreement. All such
registration rights will terminate two (2) years after the initial closing of
the Offering.
(j) PRESS RELEASES, ETC. The Company shall not,
during the period commencing on the date hereof and ending on the later of the
final 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 written consent of the Placement
Agent, which consent shall not be unreasonably withheld, or unless otherwise
required by law.
(k) RESTRICTIONS ON ISSUANCE OF SECURITIES. Prior to
the Closing Date, the Company will not, without the prior written consent of the
Placement Agent, issue additional shares of capital stock or grant any warrants,
options or other securities of the Company, except upon exercise of options and
warrants outstanding as of the date of this Agreement. Additionally, the Company
will not, without the prior written consent of the Placement Agent, issue any
additional shares between the date of the Private Placement Memorandum and the
expiration of two hundred seventy (270) days thereafter if such issuance would
cause any provision made in the Private Placement Memorandum to be materially
misleading or would otherwise subject the Placement Agent or the Selling Group
to any reasonable likelihood of liability under the Securities Act, and except
(i) upon exercise of options and warrants outstanding as of the date of this
Agreement, (ii) upon exercise of the Agent's Warrants or (iii) with respect to
the exercise of outstanding stock options and warrants and any shares to be
issued in connection with the acquisition of additional food service operations
by the Company as described in the Private Placement Memorandum.
(l) KEY-MAN LIFE INSURANCE. The Company shall obtain
and maintain in force, for a period of at least two (2) years following the
initial closing of the Offering, term life insurance payable to the Company upon
the life of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, in an amount of not less than $1,000,000.
(m) RECORDS AND REPORTS. The Company shall, for a
period of not less than five (5) years following the initial closing of the
Offering, keep its books and records up-to-date and provide annual reports to
shareholders containing audited financial statements.
(n) REPRESENTATION ON THE BOARD OF DIRECTORS. The
Company and the principal shareholders of the Company shall use their best
efforts to cause to be elected to the Company's Board of Directors one person
acceptable to the Company and who is designated, from time to time, by the
Placement Agent on behalf of the Subscribers. The Company shall reimburse such
representative for his or her reasonable out-of-pocket expenses incurred in
connection with attending meetings of the Company's Board of Directors. The
Placement Agent's right to designate a representative on the Company's Board of
Directors shall terminate two (2) years after the initial closing of the
Offering.
14
(o) FEE TAIL. The Company shall pay to the Placement
Agent the Placement Agent Fee with respect to, and based on, any investment by
any party (a "Post-Closing Investor") introduced to the Company by Placement
Agent which invests in the Company at any time prior to the date twelve (12)
months after the later to occur of the Termination Date or the final Closing.
(p) RIGHT OF FIRST REFUSAL. For two (2) years
following the initial closing of the Offering, the Placement Agent will have a
right of first refusal to act as the Company's investment banker with respect to
future private and public financings (to the extent the Company contemplates
engaging an investment banker for any such transaction). Such right of first
refusal shall mean that the Placement Agent will have the right to act as the
Company's investment banker in any such financing if the Placement Agent is
prepared to proceed with such transaction on terms that are then comparable to
those being offered by other investment banking firms to similarly situated
companies.
6. COVENANTS OF THE PLACEMENT AGENT.
(a) The Placement Agent shall offer and sell the
Shares only to "accredited investors," as that term is defined in Rule 501(a)
promulgated under the Securities Act.
(b) The Placement Agent agrees not to engage in any
activities in connection with the offer of the Shares in any state (i) in which
the Shares are not qualified for sale or exempt from qualification under the
applicable securities or Blue Sky laws thereof, (ii) in which the Placement
Agent may not lawfully so engage, or (iii) in which it is not a registered
broker-dealer.
(c) The Placement Agent will use its best efforts to
offer the Shares in compliance with the requirements of Regulation D.
7. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless
the Placement Agent and its officers, directors, employees and agents, and each
person, if any, who controls the Placement Agent as follows:
(i) against any and all loss, liability,
claim, damage and expense whatsoever, and to reimburse the Placement Agent for
reasonable legal fees and related expenses as incurred, arising out of any
untrue 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;
(ii) against any and all loss, liability,
claim, damage and expense whatsoever, and to reimburse the Placement Agent for
reasonable legal fees and related expenses as incurred, 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, if such settlement is effected with
the written consent of the Company (which consent will not be unreasonably
withheld or delayed); and
(iii) against any and all expense whatsoever
incurred in investigating, preparing or defending against any litigation,
commenced or threatened, or any claim whatsoever, and to reimburse the Placement
Agent and its officers, directors, employees and agents, and each person, if
any, who controls the Placement Agent, for reasonable legal and related expenses
as incurred, 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; PROVIDED, HOWEVER, that the foregoing
15
indemnification provided in paragraphs (i), (ii) and (iii) of this Section 7(a)
shall not apply to any loss, liability, claim, damage or expense arising out of
any information with respect to the Placement Agent contained in the Offering
Documents in reliance upon written information furnished by the Placement Agent.
(b) The Company agrees to indemnify and hold harmless
the Placement Agent and its officers, directors, employees and 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 a breach of any of the representations,
warranties or agreements set forth in Section 2 hereof.
(c) The Placement Agent agrees to indemnify and hold
harmless the Company, each director, officer, employee or agent of the Company,
and each other 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 to the
same extent as the foregoing indemnity from the Company to the Placement Agent
in Sections 7(a) and 7(b) above, but only with respect to statements or
omissions, if any, made in the Private Placement Memorandum, or any amendment or
supplement thereto, or in any application, in reliance upon and in conformity
with written information furnished to the Company as stated in this Section 7(c)
with respect to the Placement Agent expressly for inclusion in the Private
Placement Memorandum, or any amendment or supplement thereto, or in any
application, as the case may be; PROVIDED, HOWEVER, that the obligation of the
Placement Agent to provide indemnity under the provisions of this Section 7(c)
shall be limited to the amount which represents the product of the number of
Shares sold by the Placement Agent in the Offering and the placement fee per
share set forth in Section 4(d) of this Agreement. If any action shall be
brought against the Company or any other person so indemnified based on the
Private Placement Memorandum, or any amendment or supplement thereto, or in any
application, and in respect of which indemnity may be sought against the
Placement Agent pursuant to this Section 7(c), the Placement Agent shall have
the rights and duties given to the Company, and the Company and each other
person so indemnified shall have the rights and duties given to the indemnified
parties, by the provisions of Sections 7(a) and 7(b) above.
(d) Promptly after receipt by a person entitled to
indemnification pursuant to the foregoing subsection (a), (b) or (c) (an
"indemnified party") under this Section 7 of notice of the commencement of any
action, the indemnified party will, if a claim in respect thereof is to be made
against the other party (an "indemnifying party") under this Section 7, notify
in writing the indemnifying party of the commencement thereof; but the omission
so to notify the indemnifying party will not relieve it from any liability which
it may have to the indemnified party otherwise than under this Section 7. In
case any such action is brought against an indemnified party, and it notifies
the indemnifying party of the commencement thereof, the indemnifying party 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 indemnifying party to the
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to the indemnified party under this
Section 7 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
indemnifying party if the indemnifying party 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
indemnifying party if (i) the employment of such counsel has been specifically
16
authorized in writing by the indemnifying party 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 indemnifying party 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 indemnifying party 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 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.
8. CONTRIBUTION. To provide for just and equitable
contribution, if (i) an indemnified party makes a claim for indemnification
pursuant to Section 7 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 indemnifying party
(including for this purpose any contribution made by or on behalf of any
officer, director, employee or agent for the indemnifying party, or any
controlling person of the indemnifying party), on the one hand, and the
indemnified party (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 indemnifying party, on the one hand, and the
indemnified party, 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 indemnifying party and the indemnified party
in connection with the facts which resulted in such losses, liabilities, claims,
damages, and expenses shall also be considered. In no case shall the indemnified
party be responsible for a portion of the contribution obligation in excess of
the compensation received by it pursuant to Section 4 hereof. No person guilty
of a fraudulent misrepresentation shall be entitled to contribution from any
person who is not guilty of such fraudulent misrepresentation. For purposes of
this Section 8, each person, if any, who controls the indemnified party 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
indemnified party, shall have the same rights to contribution as the indemnified
party, and each person, if any, who controls the indemnifying party 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 indemnifying party, shall
have the same rights to contribution as the indemnifying party, subject in each
case to the provisions of this Section 8. Anything in this Section 8 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 8 is intended to supersede any right to contribution under the
Securities Act, the Exchange Act, or otherwise.
9. CONFIDENTIALITY. In the course of its services under this
Agreement, each party will have access to Confidential Information (as defined
below) concerning the other party. The parties agree that all Confidential
Information will be treated by the receiving party as confidential in all
respects. The parties hereby agree that they and their dealers, affiliates and
representatives shall, as appropriate: (i) use the Confidential Information
solely for the purposes of the engagement hereunder; and (ii) not disclose any
Confidential Information to any other party except to those of their
representatives who need to know such information for the purposes of the
engagement hereunder and who have been advised of such confidentiality
restrictions. The term "Confidential Information" shall mean all information,
whether written or oral, which is or has been disclosed by one party or its
affiliates, agents or representatives to the other party or any of its
representatives in connection with the Offering and the transactions
17
contemplated hereby, which is not in the public domain, but shall not include:
(i) information which is publicly disclosed other than by the recipient party in
violation of this Agreement; (ii) information which is obtained by the recipient
party from a third party that (x) has not violated, or obtained such information
in violation of, any obligation to the disclosing party or its affiliates with
respect to such information and (y) does not require the recipient party to
refrain from disclosing such information; and (iii) information which is
required to be disclosed by the recipient party or its outside counsel under
compulsion of law (whether by oral question, interrogatory, subpoena, civil
investigative demand or otherwise) or by order of any court or governmental or
regulatory body to whose supervisory authority the recipient party is subject;
PROVIDED THAT, in such circumstance, the recipient party will give the
disclosing party prior written notice of such disclosure and cooperate with the
disclosing party to minimize the scope of any such disclosure. The parties'
obligation under this Section 9 shall continue after the date of expiration,
termination or completion of this Agreement or the Placement Agent's engagement
hereunder.
10. MISCELLANEOUS.
(a) SURVIVAL. Any termination of the Offering without
consummation thereof shall be without obligation on the part of any party except
the payment of certain fees and expenses pursuant to Sections 5(b), 5(c) and
5(d) hereof, the indemnification provisions provided in Section 7 hereof, the
contribution provided in Section 8 hereof and the confidentiality provisions
provided in Section 9 hereof shall survive any termination and that specifically
the provisions contained in Section 7 regarding indemnification and Section 8
regarding contribution shall survive the final 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
termination of this Agreement.
(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.
This Agreement may not be assigned without the prior written consent of the
parties hereto.
(d) GOVERNING LAW. This Agreement shall be governed
by and construed in accordance with the law of the State of California without
regard to conflict of law provisions.
(e) ARBITRATION. Any and all disputes, controversies
or claims arising out of or relating to this Agreement, or the breach,
termination or invalidity thereof, shall be finally and exclusively settled by
arbitration in accordance with the Rules of the New York Stock Exchange Inc.
Such arbitration shall be commenced within one year after the party requesting
arbitration obtains knowledge of the cause of action forming the basis of the
controversy or claim accrued. The arbitration shall be conducted in Los Angeles,
California before three arbitrators, all of whom shall be from the securities
industry. Judgment upon the award rendered by the arbitrators may be entered in
any court having jurisdiction thereof.
(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) 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 Brookstreet Securities Corporation, ▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇. ▇▇▇▇
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▇▇▇▇▇▇, Director, Mergers & Acquisitions, with a copy to Brookstreet Securities
Corporation Compliance Department, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ - ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, Attention: ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, and ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP,
MetLife Building, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.; and if sent to the Company, will be mailed,
delivered or telegraphed and confirmed to it at Nascent Wine Company, Inc.,
▇▇▇▇-▇ ▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, Chief Executive Officer.
(h) ENTIRE AGREEMENT. This Agreement constitutes the
entire agreement of the parties with respect to the matters herein referred and
supersedes all prior letters of intent, 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.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE FOLLOWS.]
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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,
NASCENT WINE COMPANY, INC.
By: ___________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Chief Executive Officer
AGREED:
BROOKSTREET SECURITIES CORPORATION
By:________________________
Name:
Title:
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