NEOSURG TECHNOLOGIES, INC.
2,400,000 Shares
Common Stock
AGENCY AGREEMENT
October ___, 2000
Investors Trading Corp.
d/b/a Oxford Financial Group
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Gentlemen:
Neosurg Technologies, Inc. (the "Company") hereby confirms its agreement
with Investors Trading Corp., d/b/a Oxford Financial Group (the "Agent") as
follows:
Section 1. The Offering. The Company is offering up to 2,400,000 shares
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of its Common Stock, no par value per share (the "Shares"), in an offering (the
"Offering") to the general public. There will be an aggregate of 13,248,524
shares of Common Stock and Non-Trading Common Stock outstanding prior to the
Offering, and there is no active public market in the Common Stock. The shares
of Common Stock are to be offered at the price per share (the "Purchase Price")
set forth on the cover page of the Prospectus (as hereinafter defined). The
Purchase Price may be changed by the Company after consultation with, and the
consent of, the Agent, subject to such declaration of effectiveness of an
amendment to the Prospectus by the Securities and Exchange Commission (the
"SEC") as may be required. The Offering will commence on October __, 2000, and
subscriptions will be accepted until 4:00 p.m., C.S.T., on December 15, 2000,
subject to the Company's right to extend the subscription period until March 31,
2001, or terminate the Offering at any time (the "Expiration Date"). All
purchases in the Offering will be subject to certain minimum and maximum
purchase limitations and other terms and conditions, including the right of the
Company, in its sole discretion, to reject orders in whole or in part.
Subject to the foregoing, the Agent shall have the right, in its sole
discretion, to permit investors to submit irrevocable orders together with
legally binding commitments for payment for Shares for which they subscribe at
any time prior to the Expiration Date. Persons may subscribe for the Shares
offered by completing, signing and delivering or mailing a subscription order
form and certification form, substantially in the form attached as an exhibit to
the Registration Statement (as defined hereinafter) together with payment in
full for the number of Shares for which such person is subscribing by cashier's
check, draft or wire transfer, payable in next day funds to First Community Bank
as escrow agent (the "Escrow Agent"). All subscription funds will be deposited
into a separate, interest-bearing account (the "Escrow Account") with the Escrow
Agent until a Closing Date at which such funds are released to the Company or
the Expiration Date. No funds deposited into the Escrow Account(s) shall be
released or disbursed to the Company until all of the conditions set forth in
Section 11 of this Agreement shall have been fulfilled to the satisfaction of
the Agent and its counsel. In accordance with Rule 15(c) of the Securities
Exchange Act of 1934, as amended, any funds received by the Agent as payment for
the Shares will be forwarded to the Escrow Agent by noon of the day following
receipt. The Company, the Agent and the Escrow Agent will, prior to the
beginning of the offering of the Shares, enter into an Escrow Agreement in a
form satisfactory to the parties. The parties mutually agree to faithfully
perform their obligations under the Escrow Agreement. The Company and Agent
hereby acknowledge and agree that only personnel employed by the Agent, and such
other personnel as are assigned for specific purposes or services contemplated
by this Agreement to be performed by the Agent, will be involved in providing
the services described herein.
Concurrently with, or as soon as practicable after the execution of the
Agreement, the Company will deliver to the Agent copies of the Prospectus to be
used in the Offering. Concurrently with or as soon as practicable after the
execution of the Agreement, but in any event prior to the commencement of the
Offering, the Company will cause to be delivered to the Agent a Blue Sky survey
setting forth the jurisdictions in which the Shares may be offered and sold and
the number of Shares that may be offered and sold in each such jurisdiction.
The Company agrees and acknowledges that the Agent may utilize its broker
network in the Offering to distribute the Shares, on a "best efforts" basis, and
other broker/dealers which are members of the National Association of Securities
Dealers, Inc. (the "NASD") pursuant to the terms and conditions of a Selected
Dealers' Agreement between the Agent and such broker/dealers, the form of which
is attached hereto as Exhibit "A". The Agent hereby agrees that prior to
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utilizing its other broker/dealers, the Agent will consult with the Company
regarding its determination and will not take any action in this regard which is
not approved in writing by the Company.
The Company has filed with the SEC a registration statement on Form SB-2
(File No. 333-31264) containing a prospectus relating to the Offering for the
registration of the Shares under the Securities Act of 1933 (the "1933 Act"),
and has filed such amendments thereof and such amended prospectuses as may have
been required to the date hereof. Such Registration Statement, including any
documents incorporated by reference therein and all financial schedules and
exhibits thereto, as amended, including post-effective amendments, is herein
called the "Registration Statement." The prospectus, as amended, on file with
the SEC at the time the Registration Statement initially became effective is
hereinafter called the "Prospectus," except that if any prospectus is filed by
the Company pursuant to Rule 430A or Rule 424(b) or (c) of the rules and
regulations of the SEC under the 1933 Act (the "1933 Act Regulations") differing
from the prospectus on file at the time the Registration Statement initially
becomes effective, the term "Prospectus" shall refer to the prospectus filed
pursuant to Rule 430A or Rule 424(b) or (c) from and after the time said
prospectus is filed with the SEC.
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Section 2. Appointment of the Agent. Subject to the terms and conditions
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of this Agreement, the Company hereby appoints the Agent as its marketing agent,
to utilize its best efforts to (i) assist the Company in establishing the
transaction structure, reviewing the Prospectus, and preparing marketing
materials in connection with the Offering; (ii) as financial advisor and
marketing agent, manage the placement of the Company's Common Stock pursuant to
the Offering; (iii) to the extent necessary, respond to non-routine questions of
a financial or investment nature; and (iv) solicit subscriptions for the Shares
and advise the Company in connection with the Offering. On the basis of the
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the Agent accepts such appointment and
agrees to consult with and advise the Company as to the matters set forth herein
and in the letter agreement ("Letter Agreement"), dated July 26, 2000, between
the Company and the Agent, a copy of which is attached hereto as Exhibit "B."
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The Agent agrees to use its best efforts, as agent for the Company, to sell the
shares subject to the terms and conditions set forth in this Agreement. It is
acknowledged by the Company that the Agent shall not be required to purchase any
Shares and shall not be obligated to take any action which is inconsistent with
applicable laws, regulations, decisions or orders.
The obligations of the Agent pursuant to this Agreement shall terminate
upon the completion or termination or abandonment of the Offering, but in no
event later than March 31, 2001. All fees or expenses due to the Agent but
unpaid will be payable to the Agent in next day funds at the earlier of the
Closing Date (as hereinafter defined) or the Expiration Date. In the event the
Offering is extended beyond the Expiration Date, the Company and the Agent may
mutually agree to renew this Agreement under mutually acceptable terms.
In the event the Company is unable to sell a minimum of 592,592 Shares
within the period herein provided, this Agreement shall terminate, and the
Company shall refund to any persons who have subscribed for any of the shares of
Common Stock the full amount which it may have received from them plus accrued
interest as set forth in the Prospectus; and none of the parties to this
Agreement shall have any obligation to the other parties hereunder, except as
set forth in this Section 2 and in Sections 3(a) and (e), 9, 10, 12, 24, 26 and
27 hereof. In the event of over-subscription in the Offering, the Shares will
be allocated by the Agent in accordance with the terms of the Prospectus.
In the event the Offering is terminated for any reason not attributable to
the action or inaction of the Agent, it shall be paid the fees due to the date
of such termination, abandonment or amendment pursuant to Section 3(a) below and
reimbursement for reasonable legal fees and out-of-pocket expenses incurred in
connection with the provision of services contemplated by Section 10 of this
Agreement upon such termination, abandonment or amendment within five days of
such event.
Section 3. Fees. In addition to the expenses specified in Sections 9 and
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10 hereof, as compensation for the Agent's services under this Agreement, the
Company will pay the following fees to the Agent:
(a) A non-refundable initial financial advisory fee of $25,000 was
paid on the execution of the Letter Agreement.
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(b) A commission equal to 5.0% of the aggregate actual purchase
price of the securities sold in the Offering to purchasers identified in writing
by the Company within ten (10) days after the date hereof.
(c) A commission equal to 6.75% of the aggregate actual purchase
price of the securities sold in the Offering other than those sold in accordance
with (b) above.
(d) In the event the parties hereto mutually agree to employ an
assisting broker program, then to any registered broker or dealer employed by
the Agent or a selected dealer approved by the Agent, an assisting broker's fee
equal to 6.75% (which includes a negotiated sales commission to the Agent) of
the aggregate actual purchase price of the securities sold in such manner. Such
fees shall be in lieu of the fees described in subparagraphs (b) and (c) above.
Fees with respect to purchases affected through assisting brokers other than the
Agent shall be transmitted by the Agent to such selected broker-dealer. The
decision to utilize assisting brokers will be made by the Company with consent
of the Agent.
(e) Full payment of the Agent's actual and accountable expenses,
advisory fees and compensation shall be made in next day funds on the Closing
Date. In the event the Offering is terminated before Closing, the Company shall
reimburse the Agent for its out of pocket accountable expenses actually incurred
by the Agent or person associated with the Agent as provided for in Section 10
hereof. Agent shall use reasonable efforts to see that it and any other
assisting brokers will comply with Rules 2730 (Securities Taken in Trade), 2740
(Services in Distribution), 2420 (Dealing with Non-Members)and 2750
(Transactions with Related Persons) of the National Association of Securities
Dealers ("NASD") Conduct Rules.
In the event of an oversubscription or other event which causes the
Offering to continue beyond the original expiration date or a resolicitation of
subscribers so as to significantly increase the legal services rendered by
counsel for the Agent, the parties agree to renegotiate the expense cap on legal
fees applicable to the Agent.
Section 4. Closing. Upon the subscription of at least 592,592 shares of
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the Common Stock, the Company may hold a closing of the sale of those shares and
continue to sell the remaining Common Stock in the Offering as provided herein,
with subsequent closings to occur from time to time thereafter as requested by
the Company, provided that each closing must be for the minimum of 450,000
shares of Common Stock upon the completion of the Offering. All of the
conditions set forth in Section 11 of this Agreement shall have been fulfilled
to the satisfaction of the Agent and its counsel at each such closing. In each
closing, the Company agrees on such Closing Date to issue the Shares which have
been subscribed for against payment therefor from the aforesaid Escrow Account
maintained for the benefit of the subscribers with the Escrow Agent and to
deliver certificates evidencing ownership of such Shares in such authorized
denominations and registered in such names as indicated on the Stock Order Forms
directly to the purchasers thereof as promptly as practicable after such Closing
Date. Each a closing shall be held at the offices of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ & ▇▇▇▇▇, L.L.P. in Houston, Texas, or at such other place as shall be
agreed upon between the Company and the Agent, as of the close of business on
the business days to be selected by the Agent, which business day shall be no
less than two business days following the giving of prior notice to the Company
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and no more than five business days after the Shares have been sold or at such
other time as shall be agreed upon between the Company and the Agent. The
Company shall notify the Agent by telephone, confirmed in writing, when funds
shall have been received for the Shares. At the closing, the Company shall
deliver to the Agent in next day funds the commissions, fees and expenses due
and owing to the Agent as set forth in Sections 3, 9 and 10 hereof, and the
certificates required hereby and other documents deemed reasonably necessary by
the Agent shall be executed and delivered to effect the sale of the Shares as
contemplated hereby and pursuant to the terms of the Prospectus. The hour and
date upon which the Company shall release for delivery the Shares (in one or
more transactions), in accordance with the terms hereof, are referred to herein
as the "Closing Date."
Section 5. Representations and Warranties of Company. In order to induce
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the Agent to enter into this Agreement, the Company represents and warrants to,
and agrees with, the Agent that:
(a) The Company has all such power, authority, authorizations,
approvals and orders as may be required to enter into this Agreement, to carry
out the provisions and conditions hereof and to issue and sell the Shares as
provided herein and as described in the Prospectus. The consummation of the
Offering, the execution, delivery and performance of this Agreement and the
consummation of the transactions herein contemplated have been duly and validly
authorized by all necessary corporate action on the part of the Company. This
Agreement has been duly executed and delivered by the Company and is legal,
valid and binding on it, enforceable in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, moratorium,
reorganization or similar laws relating to or affecting the enforcement of
creditors' rights and to general equity principles, and except as the
obligations of the Company under the indemnification and contribution provisions
hereof may be limited by public policy under certain circumstances.
(b) A Registration Statement on Form SB-2 (Registration No.
333-31264) with respect to the Shares has been prepared by the Company in
conformity with the requirements of the Act and the SEC Rules and Regulations,
has been filed with the SEC and has been declared effective by the SEC. At the
time the Registration Statement became effective, and at all times subsequent
thereto up to the Expiration Date, the Registration Statement and the
Prospectus, including any amendments or supplements thereto, contained and will
contain all statements that are required to be stated therein in accordance with
the Act and the SEC Rules and Regulations and conformed and will conform in all
material respects to the requirements of the Act and the SEC Rules and
Regulations. The Registration Statement, the Prospectus, any Blue Sky
application or any Sales Information (as such term is defined in Section 12
hereof), including any amendments or supplements thereto, did not contain or
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided, however, that none of the representations and warranties
in this subsection shall apply to statements in or omissions from any
preliminary Prospectus, the Prospectus, the Registration Statement or any
amendment or supplement made in reliance upon and in conformity with information
furnished to the Company in writing by the Agent expressly for use therein.
Without limiting the generality of the foregoing, all fees, whether of finder's,
originators, underwriters or otherwise required to be disclosed in the
Prospectus have been disclosed; all legal or governmental proceedings pending or
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threatened involving the Company and required to be disclosed in the Prospectus
have been disclosed; and all contracts, agreements or other documents of a
character required to be described or referred to therein have been disclosed in
the Prospectus. All contracts, agreements and other documents described or
referred to in the Prospectus, to which the Company is a party, or by which it
or its properties are bound or committed are, unless otherwise disclosed
therein, in full force and effect; the descriptions thereof or references
thereto are correct in all material respects; and no default exists in the due
performance or observance of any obligations, agreements or other document so
described or referred to therein, unless otherwise disclosed therein. As of
each Closing Date, the Company will have satisfied the conditions precedent to
the consummation of the Offering in accordance with all applicable laws,
regulations, decisions and orders.
(c) Neither the SEC nor any state authority nor any court or other
govern-mental agency or body has, by order or otherwise, prevented or suspended
the use of the Prospectus or the offer or sale of the Shares, nor to the best
knowledge of the Company, is any such action threatened.
(d) ▇▇▇▇ & Associates, LLP, which has expressed its opinion with
respect to certain of the financial statements and schedules filed as part of
the Prospectus and included in the Registration Statement, is, with respect to
the Company, "independent" within the meaning of the Code of Professional Ethics
of the American Institute of Certified Public Accountants.
(e) The financial statements and schedule(s) of the Company and
notes related thereto included in the Registration Statement and which are part
of the Prospectus present fairly the financial condition of the Company as of
the dates indicated and the results of its operations for the periods specified
and comply as to form in all material respects with the applicable accounting
requirements. Such financial statements have been prepared in conformity with
generally accepted accounting principles applied on a consistent basis during
the periods involved. The tables and any other financial and numerical data in
the Prospectus fairly present in all material respects the information purported
to be shown thereby at the respective dates thereof and for the respective
periods covered thereby and were prepared on a basis consistent with the audited
financial statements of the Company.
(f) Since the respective dates as of which information is given in
the Prospectus, except as may otherwise be stated therein, (i) there has not
been any material adverse change in the condition of the Company, financial or
otherwise, or in the results of operations, earnings, affairs or business
prospects of the Company, whether or not arising from transactions in the
ordinary course of business; (ii) there have not been any material trans-actions
entered into by the Company, other than those in the ordinary course of
business; (iii) there has not been any material increase in the long-term debt
of the Company; (iv) there has not been any material adverse change in the
aggregate dollar amount of the Company's surplus or reserves; (v) there has been
no material adverse change in the Company's relationship with its insurance
carriers; (vi) there has been no material change in management of the Company;
and (vii) there has been no material increase in the Company's liability for
borrowed money.
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(g) The Company is duly incorporated and validly existing as a
corporation in good standing under the laws of the State of Texas, with full
corporate power and authority to own its properties and conduct its business as
described in the Prospectus. The Company has obtained all licenses, permits and
other governmental authorizations currently required for the conduct of its
business, except where the failure to do so would not individually or in the
aggregate have a material adverse effect on the business, prospects, results of
operation or general affairs of the Company; all such licenses, permits and
other governmental authorizations are in full force and effect, and the Company
is in all material respects complying therewith. The Company is not required to
qualify as a foreign corporation in any other jurisdiction in which the failure
to qualify would have a material adverse impact on the conduct of the Company's
business as described in the Prospectus.
(h) The authorized, issued and outstanding equity capital of the
Company is as set forth in the Prospectus under the caption "Description of
Capital Stock"; no shares of Common Stock or Preferred Stock or other equity
securities have been or will be issued and outstanding prior to the Expiration
Date; the Shares offered in the Offering have been duly and validly authorized
for issuance and, when issued and delivered by the Company pursuant to the terms
in the Prospectus against payment of the consideration as set forth in the
Prospectus, will be duly and validly issued and fully paid and nonassessable;
and the Common Stock conforms to the description thereof contained in the
Prospectus. There are no pre-emptive rights or other rights to subscribe for or
to purchase, or, except as set forth in the Articles of Incorporation and Bylaws
of the Company, any restriction upon the voting or transfer of, any shares of
Common Stock pursuant to the Company's Articles of Incorporation, Bylaws or
other governing documents or any agreement or other instrument to which the
Company is a party or by which it is bound. Neither the filing of the
Registration Statement nor the offering or sale of the Shares as contemplated by
this Agreement gives rise to any rights, other than those which have been waived
or satisfied, for or relating to the registration of any shares of Common Stock.
The certificates used to evidence the Shares are in due and proper form.
(i) The Company has no subsidiaries.
(j) The Company is not in violation of its Articles of
Incorporation, Bylaws or other corporate governing documents. The Company is
not in violation of or in default, and no event has occurred which with notice
of lapse of time, or both, would constitute default on the part of the Company
in the performance or observance of any obligation, agreement, covenant or
condition contained in any contract, lease, loan agreement, mortgage, note,
indenture or other material instrument to which it is a party or by which it or
its assets are bound, which default in any individual case or in the aggregate
would have a material adverse effect on the business, prospects, general
affairs, operations or financial condition of the Company, and the execution and
delivery of this Agreement, the incurrence of the obligations herein set forth
and the consummation of the transactions herein contemplated will not conflict
with or constitute a breach of, or default under, or result in the creation of
any material lien, charge or encumbrance upon any of the assets of the Company
pursuant to the Articles of Incorporation or Bylaws of the Company or any
material obligation, agreement, contract, franchise, license, lease, indenture,
note, mortgage loan agreement or other material instrument to which it is a
party or in which it has a beneficial interest in, or by which it may be bound,
or materially violate or conflict with any law, administrative regulation or
administrative or court decree. No consent, approval, authorization or other
order of any court, regulatory body, administrative agency or other governmental
body is required for the execution and delivery of this Agreement or the
consummation of the transactions contemplated by this Agreement, except such as
has been obtained and except for approval of the SEC, compliance with the Act,
the state securities laws ("Blue Sky Laws") applicable to the Offering of the
Shares and the clearance of such offering with the NASD and the American Stock
Exchange ("ASE").
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(k) The Company has good and marketable title to all its
properties and assets material to its business and to those properties and
assets described in the Prospectus as owned by it, free and clear of all liens,
charges, encumbrances or restrictions, except such as are described in the
Prospectus or are individually or in the aggregate not materially significant or
important in relation to the business of the Company; and all of the leases and
subleases material to the business of the Company under which the Company holds
properties, including those described in the Prospectus, are valid and binding
leases and subleases in full force and effect.
(l) The Company is not subject to, nor in violation of, any
directive from the State of Texas or any other governmental authority to make
any material change in the method of conducting its business or affairs; the
Company has conducted and is conducting its business to comply in all material
respects with all applicable statutes and regulations and, except as set forth
in the Prospectus, there is, to the knowledge of the Company, no charge,
investigation, action, suit or proceeding before or by any court, regulatory
authority or governmental agency or body pending or threatened which may
materially and adversely affect the performance of this Agreement or the
consummation of the transactions herein contemplated or which may result in any
material adverse change in the condition (financial or otherwise), business,
operations general affairs or prospects of the Company, or which would
materially affect any of its properties and assets. The Company is in
compliance in all material respects with the applicable financial recordkeeping
and reporting requirements of the Currency and Foreign Transactions Reporting
Act of 1970, as amended, and the rules and regulations thereunder.
(m) (i) The Company owns or possesses valid and enforceable
licenses for all inventions, patents, patent applications, trademarks
(registered or unregistered), trademark applications, tradenames, copyrights,
manufacturing processes, formulae, trade secrets, know-how, and other intangible
property and assets necessary to the conduct of its business now conducted as
described in the Prospectus (collectively, "Intellectual Property") and the
Company does not know of any facts which would form a reasonable basis for a
claim that the Company does not own or possess valid and enforceable licenses
for all Intellectual Property necessary to the conduct of its business or the
conduct of the business proposed to be conducted by it as described in the
Prospectus; (ii) the Company has no knowledge that it lacks or will be unable to
obtain any rights or licenses to use any of the Intellectual Property; (iii) the
Company does not know of any third parties who have or will be able to establish
rights to any of the Intellectual Property; (iv) to the Company's knowledge,
there is no infringement by third parties of any of the Intellectual Property;
(v) there is no pending or, to the Company's knowledge, threatened action, suit,
proceeding or claim by others challenging the Company's rights of title or other
interest in or to any Intellectual Property, and the Company does not know of
any facts which would form a reasonable basis for any such claim; (vi) except as
disclosed in the Prospectus, there is no pending, or, to the Company's
knowledge, threatened action, suit, proceeding or claim by others challenging
the validity and scope of any Intellectual Property, and the Company does not
know of any facts which would form a reasonable basis for any such claim; (vii)
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there is no pending or, to the Company's knowledge, threatened action, suit,
proceeding or claim by others that the Company or any of its products or
processes infringe or otherwise violate any patent, trademark, copyright, trade
secret or other proprietary right of others, and the Company is unaware of any
facts which would form a reasonable basis for any such claim; (viii) except as
disclosed in the Prospectus, to the Company's knowledge, there are no grounds
for an interference proceeding before the United States Patent and Trademark
Office in relation to any of the patents or patent applications currently owned
by the Company; (ix) to the Company's knowledge, there are no facts which would
bar the grant of a patent from each of the patent applications within the
Intellectual Property; (x) there is no pending or, to the Company's knowledge,
threatened action, suit, proceeding or claim by any current or former employee,
consultant or agent of the Company or any of its subsidiaries seeking either
ownership rights to any invention or compensation from the Company for any
invention made by such employee, consultant or agent in the course of his/her
employment with the Company, nor, to the Company's knowledge, can any such
action, suit, proceeding or claim, if instituted, be sustained; and (xi) there
is no act or omission by the Company or its agents or representatives of which
the Company has knowledge that may render any patent or patent application
within the Intellectual Property unpatentable, unenforceable or invalid. The
Prospectus fairly and accurately describes in all material respects the
Company's rights with respect to the Intellectual Property.
(n) To the best of the Company's knowledge, the issued patents
owned by, or licensed to, the Company and described in the Registration
Statement and Prospectus are valid and enforceable patents. Except as described
in the Registration Statement and Prospectus and in the agreements referred to
therein, no other entity or individual has any right or claim in any of such
issued patents. The patent applications owned by, or licensed to, the Company
and described in the Registration Statement and Prospectus have been properly
prepared and filed and are being diligently pursued on behalf of the Company,
and each of such patent applications is owned or controlled by the Company, and
no other entity or individual has any right or claim in any of the patent
applications or any patent to be issued therefrom, except as described in the
Registration Statement and Prospectus and in the agreements referred to therein.
To the best of the Company's knowledge, each patent application owned by or
licensed to the Company and described in the Registration Statement and
Prospectus discloses patentable subject matter.
(o) All documents delivered or to be delivered by the Company or
its representatives in connection with the issuance and sale of the Shares or in
connection with the Agent's exercise of due diligence, except for those
documents which were prepared by parties other than the Company or its
representatives, to the knowledge of the Company, were on the dates on which
they were delivered or dated, or will be on the dates on which they are to be
delivered, true, complete and correct in all material respects.
(p) The Company has filed all required federal, state and foreign
income, sales and franchise tax returns and has paid all taxes shown as due and
payable thereon except where permitted to be extended; the Company has no
knowledge of any tax deficiency which has been asserted or threatened against it
which could materially and adversely affect the business or operations or
properties of the Company.
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(q) Appropriate arrangements have been made for placing the funds
received from subscriptions for shares in special interest-bearing accounts with
the Escrow Agent until all shares are sold and paid for, with provision for
refund to the purchasers in the event that the closing of the Shares is not
completed for whatever reason or for delivery to the Company if at least the
minimum number of Shares are sold.
(r) The Company has complied or will comply in all material
respects with each and every undertaking or commitment made by it under the Blue
Sky laws, including, without limitation, each and every undertaking or
commitment made in connection with the Offering. The Company has obtained a
CUSIP number for its Common Stock and the Company has used its best efforts to
qualify the Shares for offering in every state reasonably designated by the
Agent. The materials previously filed or filed after the date hereof with any
state do not and will not contain any untrue statements of material fact nor are
there or will there be any omissions of material facts required to be stated
therein or that are necessary to make the statements therein not misleading.
(s) No relationship, direct or indirect, exists between the
Company, on the one hand, and the directors or officers of the Company, on the
other hand, which is required to be described in the Prospectus and which is not
so described.
(t) The Company has not: (i) placed any securities within the last
18 months by or through any member of the NASD or person related to or
associated with such a member; (ii) had any material dealings with any member of
the NASD or any person related to or associated with such member, other than
discussions and meetings relating to the proposed Offering and routine purchases
and sales of U.S. Government and agency securities, publicly traded equity,
securities and other assets; (iii) entered into a financial or management
consulting agreement except as described in the Prospectus, this Agreement and
the engagement letter with the Agent attached hereto as Exhibit "B"; or (iv)
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engaged any intermediary between the Agent and the Company in connection with
the offering of Common Stock, and no person is being compensated in any manner
for such service.
Any certificate signed by any officers of the Company and delivered to the
Agent or to the Agent's counsel shall be deemed a representation and warranty of
the Company to the Agent as to the matters covered thereby. Any certificate
delivered by the Company to their counsel for purposes of enabling such counsel
to render the opinions referred to in Section 11(e) will also be furnished to
the Agent and its counsel and shall be deemed to be additional representations
and warranties by the Company to the Agent as to the matters covered thereby and
the Agent and its counsel are entitled to rely thereon.
Section 6. Representations and Warranties of the Agent.
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(a) The Agent is a corporation is validly existing and in good
standing under the laws of the State of Texas with full power and authority to
provide the services to be furnished to the Company hereunder.
10
(b) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by all necessary action on the part of the Agent, and this Agreement
has been duly and validly executed and delivered by the Agent and is a legal,
valid and binding agreement of the Agent, enforceable in accordance with its
terms except as the enforceability thereof may be limited by bankruptcy,
insolvency, moratorium, reorganization or similar laws relating to or affecting
the enforcement of creditors' rights generally or the rights of creditors, or by
general equity principles, regardless of whether such enforceability is
considered in a proceeding in equity or at law.
(c) Each of the Agent and its employees, agents and
representatives who shall perform any of the serivces hereunder shall be duly
authorized and empowered, and shall have all licenses, approvals and permits
necessary to perform such services.
(d) The execution and delivery of this Agreement by the Agent, the
consummation of the transactions contemplated hereby and compliance with the
terms and provisions hereof will not conflict with, or result in a breach of,
any of the terms, provisions or conditions of, or constitute a default (or an
event which with notice or lapse of time or both would constitute a default)
under, the articles of incorporation of the Agent or any material agreement,
indenture or other instrument to which the Agent is a party or by which it or
its property is bound.
(e) No approval of any regulatory or supervisory or other public
authority is required in connection with the Agent's execution and delivery of
this Agreement or the performance of its terms, except as may have been
received.
(f) There is no suit or proceeding or charge or action before or
by any court, regulatory authority or government agency or body or, to the
knowledge of the Agent, pending or threatened, which might materially adversely
affect the Agent's performance of this Agreement.
Section 7. Agreements of the Company. The Company hereby agrees with the
--------------------------------------
Agent that:
(a) The Company will use its best efforts to cause the
Registration Statement to be declared effective by the SEC. The Company will
notify the Agent immediately and confirm the notice in writing thereto (i) of
any request by or the receipt of any comments from the SEC with respect to the
transactions contemplated by this Agreement; (ii) of any request by or any
comments or other communications received from the SEC and any request by the
SEC for any amendment or supplement to the Registration Statement or the
Prospectus, or for additional information with respect to the transactions
contemplated therein or by the Offering; and (iii) of the issuance by the SEC or
any court or governmental agency or body of any stop order or other order
suspending or enjoining the effectiveness or approval of the Registration
Statement, the Prospectus or the Offering or of the institution of any
proceedings for that purpose or of any notification of the suspension of
qualification of the Shares in any jurisdiction or the initiation or threatening
of any proceeding for that purpose or the threat of any such action. The
Company will make every reasonable effort to prevent the issuance by the SEC and
any court or governmental agency or body of any stop order or other such order,
or request for amendment or additional information or the commencement of any
proceeding and, if any such order, request or proceeding shall at any time be
issued or commenced, to obtain the lifting thereof, to respond thereto or to
obtain the termination thereof at the earliest possible moment.
11
(b) The Company will deliver to the Agent, without charge, from
time to time such number of copies of the Prospectus and related documents (as
amended or supplemented), as the Agent may reasonably request. The Company
authorizes the Agent, subject to all requirements of applicable law, to use the
Prospectus (as the same may be amended or supplemented) in connection with the
sale of the Shares.
(c) The Company will deliver to the Agent at least two complete
copies (including exhibits) of its Registration Statement on Form SB-2 as
originally filed with the SEC and of each amendment thereto.
(d) The Company will comply, at its own expense, with all
requirements imposed upon it by the SEC and by the Act, the Exchange Act and the
SEC Rules and Regulations, including, without limitation, Rules 10b-5 and 10b-6
under the Exchange Act, in each case as from time to time in effect, so far as
necessary to permit the continuance of offers, sales or dealings in Shares
during such period in accordance with the provisions hereof and the Prospectus.
(e) If, at any time during the period when the Prospectus is
required by law to be delivered, any event occurs as a result of which, in the
opinion of counsel to the Company or the Agent, the Prospectus, including any
amendments or supplements, would contain an untrue statement of a material fact,
or would omit to state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, or if it is necessary in the opinion
of counsel to the Company or the Agent at any time to amend or supplement the
Prospectus, including any amendments or supplements to comply with the Act and
all other laws, the Company, as appropriate, will promptly advise the Agent
thereof and will promptly prepare and file with the SEC and any other authority
with jurisdiction an amendment or supplement.
(f) The Company will not acquire any shares of Common Stock or
Preferred Stock prior to the Expiration Date.
12
(g) During the period of three years after the date of the
Prospectus, the Company will furnish to the Agent (i) as soon as practicable
(but in no event earlier than required to be filed with the SEC) after the end
of each fiscal year, the annual report of the Company containing the balance
sheet of the Company as of the close of such fiscal year and corresponding
statements of income, stockholders' equity and changes in financial position for
the year then ended, such financial statements to be certified by independent
public accountants; (ii) as soon as practicable (but in no event earlier than
required to be filed with the SEC) after the end of each fiscal quarter (other
than the last quarter of each fiscal year), an unaudited balance sheet and
statements of income, stockholders' equity and changes in financial position of
the Company as at the end of and for such quarter; (iii) as soon as available, a
copy of each proxy statement, financial statement and periodic and special
reports of the Company mailed to holders of any class of its securities
registered under Section 12 of the Exchange Act; (iv) as soon as practicable
after the filing thereof, of each report or other statement or document filed by
the Company with the SEC or other regulatory agency or with any national
securities exchange or quotation system on which any securities of the Company
may be listed or quoted; and (v) from time to time, such other information
concerning the Company as the Agent may reasonably request.
(h) The Company will comply or cause to be complied with the
conditions to the obligations specified in Section 11 hereof.
(i) The Company shall promptly prepare and file with the SEC, from
time to time, such reports as may be required to be filed by the SEC Rules and
Regulations, includ-ing, without limitation, reports with respect to the sale of
the Shares and the application of the proceeds thereof as may be required in
accordance with Rule 463 under the Act.
(j) The Company shall comply in all material respects with the
undertaking given by the Company in connection with the qualification of the
Shares for offering and sale under the Blue Sky Laws.
(k) The Company shall use the net proceeds from the sale of the
Shares in the manner set forth in the Prospectus under the caption "Use of
Proceeds."
(l) The Company will not, during the period of the Offering and
for a period of one year after the date hereof, without the prior written
consent of the Agent, which shall not be unreasonably withheld, offer for sale,
sell or issue, contract to sell or otherwise dispose of, any shares of, or any
securities convertible into or exercisable for, -or sell or grant any options,
rights or warrants for the purchase of, Common Stock (such instruments being
collectively referred to in this subsection(l) as "Rights"); provided, however,
that the Company may (i) issue options to purchase Common Stock (and issue
shares of Common Stock upon the exercise thereof) to employees so long as the
exercise price of such options is no less than the fair market value (as
determined by the last sales price per share, or, if there have been no sales,
the average of the closing bid and asked price per share, or, if there have been
no such quotes, an amount established in good faith by the board of directors of
the Company) per share of Common Stock on the date of grant and the aggregate
amount of all options issued during such period does not exceed 10% of the
issued and outstanding shares of Common Stock of the Company on the Expiration
Date, and (ii) at any time after six months from the date hereof, issue Common
Stock or Rights at a price, exercise price or conversion price, as applicable,
of $6.75 per share or more.
13
(m) Other than as permitted by applicable law, the Company will
not distribute any Prospectus or other offering material in connection with the
subject offering and sale of the Shares.
(n) To the extent required by law or applicable rules and
regulations, the Company will promptly take all steps necessary to register its
class of Common Stock under Section 12(g) of the Exchange Act to ensure that it
maintains the registration of the Common Stock under Section 12(g) of the
Exchange Act. The Company shall maintain the effectiveness of such registration
for not less than three years.
(o) The Company will qualify the Shares under the Blue Sky laws of
such jurisdictions as the Agent may reasonably request to make such
applications, file such consents to service of process or other documents and
furnish such other information as may be reasonably requested for that purpose
and to comply with such laws so as to permit the continuance of sales and
dealings in which jurisdictions for as long a period as the Agent may reasonably
request. The Company will notify the Agent immediately upon notice of, and
confirm in writing, the suspension of qualification of the Shares or the threat
of such action in any jurisdiction. In each jurisdiction where any of the
Shares shall have been qualified as provided above, the Company will make and
file such statements and reports as are required by, or in the future may be
required by, the laws of such jurisdiction.
(p) The Company agrees to cause the stock certificates of all of
the current shareholders of the Company and of any future officers or directors
of the Company to be clearly legended as being restricted against transfer
without compliance with the Act and to cause the Company's transfer agent to put
stop transfer instructions against such stock certificates.
(q) At each of the Closing Dates, the Company will have completed
the Offering in all material respects as described in the Prospectus and in
accordance with all applicable laws, regulations, decisions and orders of the
SEC and state securities authorities.
(r) The Company will maintain appropriate arrangements with the
Escrow Agent for depositing all funds received from persons mailing
subscriptions for or orders to purchase Shares in the Offering in an account
bearing interest at the rate, if any, described in the Prospectus until the
Expiration Date and satisfaction of all conditions precedent to the release of
the Company's obligation to refund payments received from persons subscribing
for or ordering Shares in the Offering as described in the Prospectus or until
refunds of such funds have been made to the persons entitled thereto as
described in the Prospectus.
(s) The Company will use its best efforts to (i) encourage and
assist a specialist or market maker to establish and maintain a market for the
Shares, and (ii) obtain approval for and maintain quotation of the shares on the
ASE or the Small-Cap Market of the NASDAQ system effective on or prior to the
Expiration Date. The Company will take such actions and furnish such
information as are reasonably requested by the Agent in order for the Agent to
ensure compliance with the NASD "Interpretation With Respect to Free Riding and
Withholding."
14
(t) The Company will conduct its business in compliance in all
material respects with all applicable federal and state laws, rules,
regulations, decisions, directives and orders, including all decisions,
directives and orders of the SEC.
(u) The Company shall not deliver the Shares until it has
satisfied or caused to be satisfied in all material respects each and every
condition set forth in Section 11 hereof unless such condition is waived in
writing by the Agent.
Section 8. Covenants of the Agent. The Agent hereby covenants with the
-------------------------------------
Company as follows:
(a) During the period when the Prospectus is used, the Agent will
comply, in all material respects and at its own expense, with all requirements
imposed upon it, to the extent applicable, by the 1933 Act and the 1934 Act and
the rules and regulations promulgated thereunder and state blue sky laws and
regulations applicable to the Agent; it will distribute the Prospectuses or
offering materials in connection with the sales of the Shares only in accordance
with the 1933 Act, state Blue Sky laws and the rules and regulations promulgated
thereunder. The Agent will not knowingly take, or mot to take, any action in
connection with offers and sales of Shares which would cause the Offering not to
be made in compliance with such laws or regulations; the Agent will not offer
the Shares for sale in any state unless and until the Company shall have advised
the Agent that the Shares have been registered or qualified under the state
securities laws applicable thereto.
The Agent shall make no representations concerning the Company or the
Offering, except as set forth in the Prospectus. The Placement Agent will not
▇▇▇ any offering or selling materials other than materials furnished or approved
by the Company and acceptable to the Agent.
(b) The Agent shall assist the Escrow Agent in maintaining
arrangements for the deposit of funds and the making of refunds, as appropriate.
Section 9. Payment of Expenses of the Company. Subject to the provisions
-----------------------------------------------
of Section 10 below, whether or not the transactions contemplated hereunder are
consummated or this Agreement becomes effective or is terminated for any reason,
the Company will pay all costs and expenses incident to the performance of its
obligations hereunder, including, without limiting the generality of the
foregoing:
(a) All fees and expenses of the accountants and counsel of the
Company, all costs and expenses incurred in connection with the preparation,
printing, filing and distribution, including costs of shipping and mailing, of
the Registration Statement and the Prospectus and all amendments and supplements
thereto and other documents in connection with the transactions contemplated by
this Agreement and the Prospectus (including all exhibits and financial
statements) (and all agreements and supplements provided for therein and in this
Agreement and the preliminary and supplemental Blue Sky Survey).
15
(b) All registration fees and expenses, including, without
limitation, legal fees and disbursements of the Company's counsel incurred in
connection with qualifying or registering all or any part of the Shares for
offer and sale under the Blue Sky Laws.
(c) All fees and expenses of the transfer agent and any special
agents appointed for the transfer of the Shares, preparation, printing, issuance
and delivery of the certificates representing Shares, all stock issue and
transfer taxes, if any, with respect to the sale and delivery of the Shares and
all fees of the NASD.
The Company shall reimburse the Agent pursuant to the procedures set forth
in Section 10 for any expense provided in (a) through (c) above which, in the
first instance, was paid by the Agent.
Section 10. Reimbursement of Agent's Expenses. Except for the
--------------------------------------------------
reimbursement provided herein, the Agent will pay its own costs and expenses
incurred in connection with the performance of this Agreement and the
transactions contemplated hereunder, including the fees and disbursements of its
counsel, marketing expenses and due diligence expenses. The Company shall
reimburse the Agent for (i) the fees and disbursements of its counsel (up to a
maximum of $50,000.00 for legal fees, including out-of-pocket expenses for
travel and other disbursements of counsel), and (ii) its reasonable expenses in
an amount not to exceed $15,000 (exclusive of legal fees and expenses of Agent's
counsel) which shall be paid within five days of receipt by the Company of an
itemized ▇▇▇▇ summarizing such expenses since the date of the last ▇▇▇▇, if any,
to the date of the current ▇▇▇▇. To the extent not previously paid, full payment
of the Agent's expenses shall be made in next day funds on each Closing Date
provided that the Company shall have received an itemized ▇▇▇▇ summarizing any
unreimbursed expenses at least two days before each Closing Date or on such
later date if the Company shall have received an itemized ▇▇▇▇ summarizing any
unreimbursed expenses at least two days before such date or, if the Offering is
not completed and is abandoned or terminated for any reason, within five days of
receipt by the Company of a reasonable accounting from the Agent of its
expenses.
Section 11. Conditions to the Obligations of the Agent and the Release of
---------------------------------------------------------------------------
Shares. The issuance and sale of the Shares, the delivery of certificates in
------
respect thereof, and the obligations of the Agent hereunder shall be subject to
the accuracy in all material respects of the representations and warranties on
the part of the Company herein set forth as of the date hereof and as of each
Closing Date, to the accuracy in all material respects of the statements of the
officers of the Company made pursuant to the provisions hereof, and to the
performance in all material respects of the Company's obligations hereunder.
The issuance and sale of the Shares, the delivery of certificates in
respect thereof, and the obligations of the Agent on each Closing Date shall
also be subject to the following additional conditions (which are solely for the
Agent's benefit), unless waived in writing by the Agent:
(a) The Registration Statement shall have been declared effective
by the SEC; prior to the Closing Date, no stop order or such other order
suspending the offering or the effectiveness of the Registration Statement or
the effectiveness of the Prospectus shall have been issued or proceedings
therefor instituted, initiated or threatened by the SEC or any court or
governmental agency or body and any request of the SEC or any other governmental
agency or body for inclusion of additional information in the Registration
Statement, or otherwise, shall have been complied with. The NASD, upon review
of the terms of this Agreement, shall not have objected to the Agent's
performance of its obligations hereunder or the terms set forth.
16
(b) The Agent shall not have advised the Company in writing that
the Registration Statement or the Prospectus or any amendment or supplement
thereto contains an untrue statement of fact, which is material or omits to
state a fact which is material and is required to be stated therein or necessary
to make the statements therein not misleading.
(c) The Agent shall have received on the Closing Date certificates
on behalf of the Company, dated as of the Closing Date, signed by the president
and the chief financial officer (or officer performing similar function) of the
Company, in form and substance reasonably satisfactory to the Agent's counsel,
to the effect that (i) the signers of each of such certificates have carefully
examined the Registration Statement and the Prospectus and that, in their
opinion, at the time the Registration Statement and the Prospectus became
effective, neither the Registration Statement nor the Prospectus contained any
untrue statement of a material fact or omitted to state any material fact
required to or stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; (ii) since the respective effective or approval dates of the
Registration Statement and the Prospectus, no event has occurred which should
have been set forth in an amendment of or supplement to the Registration
Statement or the Prospectus which has not been so set forth, including
specifically, but without limitation, any material adverse change in the
condition, financial or otherwise, or in the earnings, capital, properties,
prospects or affairs of the Company, and the conditions set forth in this
Section 11 have been satisfied; (iii) and to the further effect that the Company
has performed all agreements and has satisfied all conditions on its part to be
performed or satisfied at or prior to the Closing Date and will comply with all
obligations to be satisfied by them after the Offering; (iv) that all the
representations and warranties contained in Section 5 hereof are true and
correct on and as of the Closing Date, with the same force and effect as though
expressly made on the Closing Date; (v) no stop order suspending the
effectiveness of the Registration Statement has been initiated or threatened by
the SEC or any state authority; and (vi) no order suspending the Offering or the
effectiveness of the Prospectus has been issued and no proceedings for that
purpose have been initiated or to the best of their knowledge threatened by the
SEC or any state authority.
(d) The Shares shall have been qualified or are exempt from
qualification under the Blue Sky Laws of such states as shall have been
identified by the Company. The Company shall have obtained approval for and
shall have in place an arrangement for the quotation of the Shares on the ASE or
Small-Cap Market of the NASDAQ system.
(e) The Agent shall have received on the Closing Date an opinion
of ▇▇▇▇▇▇▇, Bosien and Young, P.C., counsel for the Company, dated as of the
Closing Date, addressed to the Agent, substantially to the effect as set forth
in Exhibit "C" hereto.
------------
17
(f) At the time this Agreement is executed and also on the Closing
Date, there shall be delivered to the Agent a letter addressed to the Agent,
from ▇▇▇▇ & Associates, LLP, independent accountant, the first one to be dated
as of the date hereof and the second one to be dated the Closing Date,
substantially identical in form and substance to the unsigned form of letter
heretofore submitted to and approved by the Agent, and which shall contain
information as of a date within five business days of the date of such letter.
(g) Such further certificates, documents and opinions as the Agent
may reasonably request from the Company (including certificates of officers of
the Company) shall have been furnished by the Company.
(h) The Agent's counsel shall have been furnished with such
documents and opinions as they may reasonably require for the purpose of
enabling them to pass upon the sale of the Shares as herein contemplated and
related proceedings and in order to evidence the accuracy or completeness of any
of the representations or warranties or the fulfillment of any of the conditions
herein contained; and all proceedings taken by the Company in connection with
the sale of the Shares as herein contemplated shall be reasonably satisfactory
in form and substance to the Agent and its counsel; provided, any objection by
such counsel to the foregoing shall be made by written advice to this effect
from the Agent accompanied by a written opinion of counsel setting forth such
objections.
(i) The representations and warranties of the Company contained
herein shall be true and correct on the date of this Agreement and on and as of
the Closing Date; the Company shall have performed all covenants and agreements
contained herein to be performed on its part at or prior to such Closing Date.
(j) The Company shall have not have sustained, since the date of
the latest financial state-ments included in the Registration Statement, any
material loss or interference with its business, or suffered any material labor
dispute or any court or legislative or other governmental action, order or
decree, that is not set forth in the Prospectus. Since the respective dates as
of which information is given in the Registration Statement and the Prospectus,
there shall not have been any change in the long-term debt of the Company, or
any change, or any development involving a prospective change, in or affecting
the general affairs, management, financial position, stockholders' equity or
results of operations of the Company, otherwise than as set forth or
contemplated in the Registration Statement and Prospectus, the effect of which,
in any such case described above is sufficiently material and adverse as to make
it impracticable or inadvisable to proceed with the Offering or the delivery of
the Shares on the terms and in the manner contemplated in the Prospectus.
18
(k) Prior to and at the Closing Date: (i) there shall have been no
material adverse change in the condition, financial or otherwise, or in the
earnings, the business affairs or business prospects of the Company from that as
of the latest dates as of which such condition is set forth in the Prospectus,
except as referred to therein; (ii) there shall have been no material
transaction entered into by the Company from the latest date as of which the
financial condition of the Company is set forth in the Prospectus other than
transactions referred to or contemplated therein; (iii) the Company shall not
have been in default (nor shall an event have occurred which, with notice or
lapse of time or both, would constitute a default) under any provision of any
agreement or instrument relating to any outstanding indebtedness which default
would have a material adverse effect on the Company; (iv) no action, suit or
proceedings, at law or in equity or before or by any federal or state
commission, board or other administrative agency, shall be pending or, to the
knowledge of the Company, threatened against the Company or affecting any of its
properties wherein an unfavorable decision, ruling or finding would materially
and adversely affect the business, operations, financial condition or income of
the Company; and (v) the Shares shall have been qualified or registered for
offering and sale under the securities or Blue Sky Laws of the jurisdictions in
which the purchasers reside or are domiciled.
(l) At or prior to the Closing Date, the Agent shall receive (i) a
copy of the order from the SEC declaring the Registration Statement effective,
and (ii) a certificate of good standing from the State of Texas evidencing the
good standing and existence of the Company.
(m) Subsequent to the date hereof, there shall not have occurred
any of the following: (i) a suspension or limitation in trading in securities
generally on the New York Stock Exchange or American Stock Exchange or in the
over-the-counter market, or quotations halted generally on the NASDAQ system, or
minimum or maximum prices for trading have been fixed, or maximum ranges for
prices for securities have been required by either of such exchanges or the NASD
or by order of the SEC or any other governmental authority; or (ii) the
engagement by the United States in hostilities which have resulted in the
declaration, on or after the date hereof, of a national emergency or war if the
effect of any such event specified in this clause (iii) makes it impracticable
or inadvisable to proceed with the Offering or the delivery of the shares on the
terms and in the manner contemplated in the Registration Statement.
(n) On the Effective Date and on the Closing Date, the Agent shall
have received from the Company's legal counsel a Blue Sky Survey setting forth
the states in which the Shares may be sold and the number of Shares that may be
sold in each such state.
If any of the material conditions specified in this Section 11 shall not
have been fulfilled when and as required by this Agreement, this Agreement and
all of the Agent's obligations hereunder may be canceled by the Agent by
notifying the Company of such cancellation in writing or by telegram at any time
at or prior to the Closing Date, and any such cancellation shall be without
liability of any party to any other party except as otherwise provided in
Sections 3, 9, 10 and 12 hereof. Notwithstanding the above, if this Agreement
is canceled pursuant to this paragraph, the Company agrees to reimburse the
Agent for all of the Agent's expenses (including without limitation the fees and
expenses of the Agent's counsel) subject to the applicable provisions of
Sections 3 and 10 hereof.
19
Section 12. Indemnification and Contribution.
------------------------------------------------
(a) The Company hereby agrees (i) to indemnify and hold harmless
the Agent, each of its directors, officers, other employees and agents and any
person who controls the Agent within the meaning of Section 15 or Section 20(a)
of the Exchange Act (the Agent and each person being indemnified hereinafter
called an "Indemnified Party") against any and all losses, claims, damages or
liabilities, joint or several, to which an Indemnified Party may become subject,
under the Act, the Exchange Act or other federal or state statutory law or
regulation, at common law or otherwise; (ii) to reimburse promptly such
Indemnified Party for reasonable legal or other expenses incurred by such
Indemnified Party in connection with investigating any claims or preparing for
or defending any actions, commenced or threatened, whether or not resulting in
any liability; and (iii) to reimburse promptly such Indemnified Party for any
amount paid in settlement of any claim or action, commenced or threatened, if
such settlement is effected with the written consent of the Company; insofar as
such losses, claims, damages, liabilities, expenses, actions or settlements,
referred to above, arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement, Prospectus or any amendments or supplements thereto, or in any
application filed under any Blue Sky Law, or in any other document,
advertisement, oral statement or communication ("Sales Information") prepared,
made or executed by the Company in connection with or in contemplation of the
transactions contemplated by this Agreement, or in the information furnished or
otherwise made available to the Agent by the Company, or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, or arise
from any theory of liability whatsoever relating to or arising from or based
upon the Registration Statement, Prospectus or Sales Information or other
documentation distributed in connection with the Offering or are based on any
oral misstatements made by the Company or its agents, or arise out of any action
or omission to act by the Company, its officers, directors, employees or agents,
which action is willful or negligent. The Company will not be liable in any
such case to the extent that any such loss, claim, damage, liability or expense
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in the Registration Statement, the
Prospectus or any amendment or supplement thereto or in any Blue Sky Application
in reliance upon and in conformity with written information furnished to the
Company by or on behalf of the Agent specifically for use therein. The Company
will not, however, be responsible for claims, liabilities, losses, damages or
expenses to the extent they result primarily from actions taken or omitted to be
taken by the Agent in bad faith or from the Agent's negligence. In the event
that the Company advances any amounts alleged to be due under this Section 12(a)
to the Indemnified Party and it is determined by a court of competent
jurisdiction that the Indemnified Party is not entitled to indemnification
hereunder, then the Indemnified Party shall repay, without interest, any amounts
so advanced to the Company, as the case may be. The indemnification obligations
of the Company as provided above are in addition to any liabilities the Company
may have under other agreements, under common law or otherwise. The obligation
of indemnity provided for hereunder is effective immediately in respect of all
events prior to or after the date hereof and shall survive any expiration,
termination or other cessation of this Agreement.
20
(b) The Agent agrees (i) to indemnify and hold harmless the
Company, each of its directors and officers and each person who controls the
Company within the meaning of the Act (the Company and each person being
indemnified hereinafter called an "Indemnified Party") against any and all
losses, claims, damages or liabilities, joint or several, to which an
Indemnified Party may become subject, under the Act, the Exchange Act, or other
federal or state statutory law or regulations, at common law or otherwise; (ii)
to reimburse promptly such Indemnified Party for reasonable legal or other
expenses incurred by such Indemnified Party in connection with investigating any
claims or preparing for or defending any actions, commenced or threatened,
whether or not resulting in any liability; and (iii) to reimburse promptly such
Indemnified Party for any amount paid in settlement of any claims or actions,
commenced or threatened, if such settlement is effected with the written consent
of the Agent; insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon any untrue or alleged untrue
statement of any material fact contained in the Registration Statement, the
Prospectus or any amendment or supplement thereto, or any Blue Sky Application,
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading or arise out of any action or omission to act
by the Agent, its officers, directors, employees or agents, which action is
willful or negligent, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in the Registration Statement, the Prospectus, or any
amendment or supplement thereto, or in any Blue Sky Application, in reliance
upon and in conformity with written information furnished to the Company by the
Agent specifically for use in the preparation thereof. The Agent will not,
however, be responsible for claims, liabilities, losses, damages or expenses to
the extent they result primarily from actions taken or omitted to be taken by
the Company in bad faith or from the Company's negligence. In the event that
the Agent advances any amounts alleged to be due under this Section 12(b) to an
Indemnified Party and it is determined by a court of competent jurisdiction that
the Indemnified Party is not entitled to indemnification hereunder, then the
Indemnified Party shall repay, without interest, any amounts so advanced to the
Agent. The indemnification obligations of the Agent as provided above are in
addition to any liabilities the Agent may have under other agreements, under
common law or otherwise. The obligation of indemnity provided for hereunder is
effective immediately in respect of all events prior to or after the date hereof
and shall survive any expiration, termination or other cessation of this
Agreement.
(c) Promptly after receipt by an Indemnified Party under this
Section of notice of the commencement of any action, such Indemnified Party
shall, if a claim in respect thereof is to be made against an indemnifying party
under this Section, notify the indemnifying party in writing of the commencement
thereof. In no case shall an indemnifying party be liable under this Agreement
with respect to any loss, claim, damage, liability, expense, action or
settlement unless the indemnifying party shall have been notified in writing by
the Indemnified Party seeking indemnification, of the assertion or filing of the
claim or action giving rise to such loss, claim, damage, liability, expense,
action or settlement promptly after such Indemnified Party shall have been
advised of, or otherwise shall have received information as to, the assertion or
filing of such claim or action. In case any such action is brought against any
Indemnified Party, and such Indemnified Party notifies an indemnifying party of
the commencement thereof, the indemnifying party will be entitled to participate
in, and, to the extent that it or he may wish, jointly with all other
Indemnifying Parties, similarly notified, to assume the defense thereof, with
21
counsel reasonably satisfactory to such Indemnified Party; provided, however, if
the defendants in any such action include both the Indemnified Party and the
indemnifying party and the Indemnified Party shall have reasonably concluded,
based upon advice of its counsel, that there may be legal defenses available to
it or he and/or any other Indemnified Party which are different from or
additional to those available to the indemnifying party, the Indemnified Party
shall have the right to select separate counsel to assume such legal defenses
and to otherwise participate in the defense of such action on behalf of such
Indemnified Party. Upon receipt of notice from the indemnifying party to such
Indemnified Party of its election so to assume the defense of such action and
approval by the Indemnified Party of counsel, the indemnifying party will not be
liable to such Indemnified Party under this Section for any legal or other
expenses subsequently incurred by such Indemnified Party in connection with
defense thereof unless:
(i) the Indemnified Party shall have employed such counsel in
connection with the assumption of legal defenses in accordance with the proviso
to the next preceding sentence (it being understood, however, that the
indemnifying party shall not be liable for the expenses of more than one
separate counsel);
(ii) the indemnifying party shall not have employed counsel
reasonably satisfactory to the Indemnified Party to represent the Indemnified
Party within a reasonable time after notice or commencement of the action; or
(iii) the indemnifying party has authorized the employment of
counsel at the expense of the indemnifying party.
(d) If the indemnification provided for in this Section is
unavailable to an Indemnified Party in respect of any losses, claims, damages or
liabilities referred to therein, then each indemnifying party, in lieu of
indemnifying such Indemnified Party, shall, subject to the limitations
hereinafter set forth, contribute to the amount paid or payable by such
Indemnified Party as a result of such losses, claims, damages or liabilities:
(i) in such proportion as is appropriate to reflect the
relative benefits received by the Company and the Agent from the offering of the
Shares; or
(ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the Company and the Agent in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities, as well
as any other relevant equitable considerations.
The respective relative benefits received by the Company and the Agent
shall be deemed to be in such proportion so that the Agent is responsible for
the portion of the losses, claims, damages or liabilities represented by the
percentage that the per share fee to be paid to the Agent in connection with the
solicitation of subscriptions described in Section 3 hereof bears to the actual
Purchase Price per share of the Shares, and Company and its officers and
directors and controlling persons, in the aggregate, jointly and severally are
responsible for the remaining portion. The relative fault of the Company and
22
the Agent shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission to state a
material fact relates to information supplied by the Company or by the Agent and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The amount paid or payable by
a party as a result of the losses, claims, damages and liabilities referred to
above shall be deemed to include, subject to the limitations set forth in
paragraph (d) of this Section, any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending any action
or claim.
The Company and the Agent agree that it would not be just and equitable if
contribution pursuant to this Section were determined by pro rata or per capita
allocation or by any other method or allocation which does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section, no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation.
Section 13. Effective Date. This Agreement shall become effective on
-----------------------------
October ___, 2000.
Section 14. Termination. Without limiting the right to terminate this
-------------------------
Agreement pursuant to any other provision hereof:
(a) This Agreement may be terminated by the Agent or the Company
prior to the Expiration Date if, in the Agent's reasonable judgment:
(i) additional material governmental restric-tions, not
enforce and effect on the date hereof, shall have been imposed upon trading in
securities general or a suspension or limitation in trading in securities
generally has occurred on the New York Stock Exchange or American Stock Exchange
or in the over-the-counter market, or quotations halted generally on the NASDAQ
System, or minimum or maximum prices for trading have been fixed, or maximum
ranges for prices for securities have been required by either of such exchanges
or the NASD or by order of the SEC or any other governmental authority; or the
engagement or continued engagement by the United States in major hostilities or
the declaration of a national emergency or war or a material decline in the
price of equity or debt securities if the effect of such hostilities, national
emergency or war or decline, in the Agent's judgment, make it impracticable or
inadvisable to proceed with the Offering or the delivery of shares on the terms
and in the manner contemplated in the Registration Statement and the Prospectus;
(ii) any event shall have occurred or shall exist which makes
untrue or incorrect in any material respect any statement or information
contained in the Registration Statement or the Prospectus or which is not
reflected in the Registration statement or the Prospectus but should be
reflected therein in order to make the statements or information contained
therein not misleading in any material respect (unless the Registration
Statement or the Prospectus, as appropriate, is amended or supplemented
appropriately in a timely manner);
23
(iii) the Company shall have sustained a loss by fire, flood,
accident or other calamity which is material to the property, business or
financial condition of the Company whether or not such loss shall have been
insured, or there shall have been, since the respective dates as of which
information is given in the Prospectus, any material adverse change in the
business, condition or prospects of the Company whether or not arising in the
ordinary course of business, or in the market for the securities of the Company,
which shall render it inadvisable to proceed with the delivery of the Shares.
(b) This Agreement may be terminated by a party upon written
notice to the other party at any time at or prior to the Expiration Date if any
of the Conditions specified in Section 11 hereby shall not have been fulfilled
when and as required by this Agreement or if the services to be performed by the
Agent have not been completed by March 31, 2001.
Any termination pursuant to this Section 14 shall be without liability on
the part of the Agent to the Company or on the part of the Company to the Agent
(except for the expenses to be paid or reimbursed by the Company pursuant to
Section 3 or Section 10 hereof and except as to indemnification to the extent
provided in Section 12 hereof).
In the event that the Offering is not consummated for any reason,
including, but not limited to, the termination of this Agreement or the
inability of the Company to sell the Shares during the Offering, this Agreement
shall terminate and the Company shall refund to any persons who have subscribed
for any of the Shares the full amount which it may have received from them,
together with interest at the rate stated in the Prospectus. Upon termination
of this Agreement, neither party shall have any other obligation to the other
except as otherwise provided for pursuant to Sections 3, 10 and 12 hereof and as
provided in Sections 24 and 27.
Section 15. Representation and Indemnities to Survive Delivery. The
---------------------------------------------------------------------
respective indemnities, agreements, representations, warranties and other
statements of the Company and its directors and officers, and of the Agent set
forth in or made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation made by or on behalf of the Agent or the
Company or any of their respective partners, officers, agents or directors or
any controlling person, as the case may be, and will survive delivery of any
payment for the Shares sold hereunder.
Section 16. Notice. All communications hereunder will be in writing and,
--------------------
if sent to the Agent will be mailed, delivered or telegraphed and confirmed to
the Agent c/o Oxford Financial Group, ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇, with a copy to ▇▇▇▇ ▇. Selman, Selman, ▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C., ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇; if sent to the Company will
be mailed, delivered or telegraphed and confirmed to the Company at Neosurg
Technologies, Inc., ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇,
with a copy to ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ of ▇▇▇▇▇▇▇, Bosien & Young, P.C., 1500 ▇▇▇▇▇▇▇
Tower, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇.
24
Section 17. Successors. This Agreement will inure to the benefit of and be
----------------------
binding upon the parties hereto and their respective successors, personal
representatives and assigns, and to the benefit of the officers and directors
and controlling persons referred to in Section 12, and no other person will have
any right or obligation hereunder. The term "successors" shall not include any
purchaser of the Shares merely by reason of such purchase.
Section 18. Partial Unenforceability. If any section, paragraph or
---------------------------------------
provision of this Agreement is for any reason determined to be invalid or
unenforceable, such determination shall not affect the validity or
enforceability of any other section, paragraph or provision hereof.
Section 19. Applicable Law. This Agreement shall be governed by and
-----------------------------
construed in accordance with the internal laws of the State of Texas.
Section 20. Entire Agreement. This Agreement, including schedules and
-------------------------------
exhibits hereto, which are integral parts hereof and incorporated as though set
forth in full, constitutes the entire agreement between the parties pertaining
to the subject matter hereof superseding any and all prior or contemporaneous
oral or prior written agreements, proposals, letters of intent and
understandings, and cannot be modified, changed, waived or terminated except by
a writing which expressly states that it is an amendment, modification or
waiver, refers to this Agreement and is signed by the party to be charged. No
course of conduct or dealing shall be construed to modify, amend or otherwise
affect any of the provisions hereof.
Section 21. Headings. Headings on the Sections in this Agreement are for
----------------------
reference purposes only and shall not be deemed to have any substantive effect.
Section 22. Delivery by Telecopier. This Agreement shall become effective
-----------------------------------
upon execution and delivery hereof by all the parties hereto; delivery of this
Agreement may be made by telecopier to the parties with original copies promptly
to follow by overnight courier.
Section 23. Construction. This Agreement has been negotiated by the
--------------------------
parties and their respective counsel. This Agreement will be fairly interpreted
in accordance with its terms and without any strict construction in favor of or
against either party.
Section 24. Attorneys Fees. If any action at law or in equity, including
----------------------------
an action for declaratory relief, is brought to enforce or interpret the
provisions of this Agreement, the prevailing party shall be entitled to recover
reasonable attorneys fees from the other party, which fees may be set by the
court in the trial of such action or may be enforced in a separate action
brought for that purpose, and which fees shall be in addition to any other
relief which may be awarded.
Section 25. Exhibits. Each and all of the Exhibits referred to herein and
---------------------
attached hereto are hereby incorporated into this Agreement for all purposes as
fully as if set forth herein. The Exhibits include Exhibits "A" through "C."
------------ ----
25
Section 26. Arbitration. Any controversy or claim arising out of this
-------------------------
letter of intent or the Agency Agreement, or the breach thereof, shall be
settled by arbitration in accordance with the rules of the American Arbitration
Association, and judgment upon the award rendered by the arbitration may be
entered in any court having jurisdiction thereof. The place for such
arbitration shall be in Houston, Texas. The arbitration agreement set forth
herein shall not limit a court from granting a temporary restraining order or
preliminary injunction in order to preserve the status quo of the parties
pending arbitration. Further, the arbitrator(s) shall have power to enter such
orders by way of interim award, and they shall be enforceable in court.
Section 27. Right of First Refusal.
---------------------------------------
(a) For a period of one year from the date of the definitive
Prospectus, the Company and its officers and directors agree to consult with the
Agent in respect of any prospective or actual public or private offering of
securities of the Company (as such term is defined in this subsection (a) for
cash other than to employees. For the purposes of this Section 27, the term,
"securities of the Company" shall be deemed to include any debt or equity
securities of the Company other than debt securities secured by chattel
mortgages or equipment or property of the Company, the maturity date of which is
less than two years, and which are offered by the Company for sale or sold by
the Company only to commercial banks, insurance companies, recognized finance
companies or pension trusts. Also specifically excluded are public offerings
and/or private offerings of the Company's shares in exchange for properties,
assets or stock of other individuals or corporations. The Company shall not be
required to consult with the Agent concerning any borrowings from banks and
institutional lenders or concerning financing under any equipment leasing or
similar arrangements.
(b) For a period of one year from the date of the definitive
Prospectus, the Company will not enter into an agreement for any public or
private offering for cash (other than to employees) of any securities of the
Company as defined in (a) to or through any person, firm or corporation other
than the Agent unless and until the Company shall have first negotiated for the
sale of the Company's securities with or offered to sell its securities to the
Agent. The Company shall notify the Agent in writing of the Company's intention
to offer its securities in a covered offering and the terms (including the price
to the Agent or other method of determining the underwriting discount or fee)
and conditions of the proposed offering. The Agent shall then have 30 days from
the date it receives such written notice from the Company to decide whether it
wishes to participate as manager, co-manager, or otherwise, as determined by the
Agent, in the proposed offering. If the Agent determines that it does not wish
to participate in the proposed offering, then it shall so notify the Company of
its intention in writing within such 30-day period. The Company may within a
period of 30 days from the date of receipt of such notice then enter into a
letter of intent for the public sale or, as appropriate, a contract for the
private sale, of any of it securities through any other person, firm or
corporation on the same general terms and conditions as those which were
tendered to the Agent. Provided, however, as to a public offering, if a
definitive underwriting agreement with a firm commitment is not executed by the
Company with such third party within 90 days thereafter, all the rights of the
Agent hereunder shall be reinstated. Nothing in this Agreement shall be
construed as granting the continuation of such preferential right on the part of
the Agent beyond such one-year period. The Company shall not be required to
consult with the Agent concerning any borrowings from banks and institutional
lenders or concerning financing under any equipment leasing or similar
arrangements.
26
If the foregoing is in accordance with the Agent's understanding of our
agreement, please sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement between the Company and the Agent,
all in accordance with its terms.
Very truly yours,
NEOSURG TECHNOLOGIES, INC.
By:________________________________
▇▇▇▇ O'Heeron, President
The foregoing Agreement is hereby
confirmed and accepted as of the date
first above written.
INVESTOR TRADING CORP. d/b/a
OXFORD FINANCIAL GROUP ("Agent")
By:
Name: ___________________________
Title:
27