GEEKS ON CALL AMERICA, INC. PLACEMENT AGENT AGREEMENT
GEEKS
ON CALL AMERICA, INC.
|
Dated
as of October 22,
2007
|
First
Montauk Securities Corp.
Parkway
109 Office Center
▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Re:
Proposed Private Placement
Ladies
and Gentlemen:
This
agreement (this “Agreement”) sets forth the terms upon which First Montauk
Securities Corp. (the “Placement Agent”) shall be engaged by Geeks on Call
America, Inc., a Virginia corporation (the “Company”) to act as exclusive
placement agent in connection with the private offering (the “Offering”)
pursuant to Section 4(2) of the Securities Act of 1933, as amended (the “Act”),
and/or Regulation D promulgated thereunder, of units (the “Units”) of a
to-be-named publicly traded entity (“PubCo”), which is anticipated to become the
publicly-traded parent of the Company upon the Initial Closing of the Offering.
Each Unit consists of 5,000 shares of its Common Stock (the “Shares”) and (ii)
warrants (the “Warrants”) to purchase 2,500 Shares. The Common Stock and
Warrants to be offered and sold are sometimes referred to herein as the
“Securities”. The Offering is being conducted on a “best efforts, all or none”
basis for a minimum of $3,000,000 of gross proceeds (the “Minimum
Offering”)
and up
to $5,000,000 of gross proceeds. The maximum number of Units to be sold is
subject to an increase of up to $1,000,000 of gross proceeds (the
“Over-Allotment Amount.”) upon the agreement of the Company and the Placement
Agent (as defined below) for an aggregate maximum offering of $6,000,000 (as
so
increased, the “Maximum Offering.”). Offers and sales of the Securities shall be
made solely to Accredited Investors (as defined in Regulation D).
PubCo
will acquire by merger the business and capital stock of the Company
concurrently with the Initial Closing (as defined below) of the Offering. In
conjunction with such merger, PubCo will issue shares of its common stock,
warrants and options to the Company’s then-existing securityholders and to the
Prospective Investors (as defined below) in this Offering, as further described
in the Memorandum (as defined below). Upon the merger of a newly formed Delaware
subsidiary of PubCo and the Company, PubCo shall assume and reconfirm all
obligations, of the Company hereunder and where indicated, make additional
representation and warranties as provided herein in accordance with the
Assignment and Assumption Agreement attached hereto as Exhibit A.
l.
Appointment of Placement Agent.
On
the
basis of the representations and warranties contained herein, and subject to
the
terms and conditions set forth herein, the Company hereby appoints First Montauk
as its Placement Agent (and upon the Initial Closing, will be the exclusive
placement agent of PubCo, which will assume this Agreement pursuant to the
Assignment and Assumption Agreement) and grants to First Montauk the exclusive
right to offer, as its agent, the Securities through the Offering Period (as
defined below). The Company expressly acknowledges and agrees that First
Montauk’s obligations hereunder are not on a firm commitment basis and that the
execution of this Agreement does not constitute a commitment by First Montauk
to
purchase the Securities and does not ensure the successful placement of the
Securities or any portion thereof. Further, First Montauk’s obligation to use
its best efforts to assist the Company in the Offering is subject to the
completion of a due diligence review of the Company, PubCo the industry and
the
market for such securities generally, as well as general market conditions.
On
the basis of such representations and warranties, and subject to such
conditions, First Montauk hereby accepts such appointment and agrees to use
its
best efforts to secure subscriptions for the purchase of Securities up to the
Maximum Offering.
2. Terms
of
the Offering.
(a)
The
Company has prepared and delivered to the Placement Agent copies of a
Confidential Private Placement Memorandum dated as of October 22, 2007 (as
may
be amended from time to time, and including the exhibits thereto, the
“Memorandum”), relating to, among other things, the business of the Company, its
financial condition, the Securities and the terms of Offering.
(b)
Pursuant
to the Offering as further described in the Memorandum the Offering shall
consists of Units with an aggregate purchase price of up to $5,000,000,
exclusive of the over-allotment option for up to an additional $1,000,000 of
gross proceeds. The minimum subscription amount per prospective investor
(“Prospective Investor”) shall be $50,000. The Warrants will have a term of five
(5) years from the Initial Closing as determined in Section 3(a) below and
will
be exercisable at an exercise price of $3.00 per share and shall provide for
“Cashless Exercise” upon certain conditions. The investors shall be entitled to
such “registration rights”, anti-dilution protection, and other rights as are
described in the Offering Documents (as defined below).
(c)
The
Offering shall commence on the date hereof and shall expire on November 19,
2007; provided however, that if the Minimum Offering has not been deposited
into
escrow on or before November 19, 2007, the Company and Placement Agent may
agree
to extend the Offering until January 19, 2008. Such period, as the same may
be
so extended, shall hereinafter be referred to as the “Offering Period.”
(d)
Each
Prospective Investor who desires to purchase Securities shall deliver to the
Placement Agent a fully executed Subscription Agreement, Investor Questionnaire
, and such other agreements as are required to be signed in connection with
the
Offering (together with the Memorandum, Subscription Agreement, Investor
Questionnaire, and other exhibits thereto, the “Offering Documents”) along with
payment in the form of immediately available funds for the Units that such
Prospective Investor desires to purchase. Upon receipt of the executed Offering
Documents, the Placement Agent shall forward such documents to the Company
for
review, keeping a copy of such documents for its records. 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 Securities.
(e)
The
Placement Agent shall deliver all subscription funds received from a Prospective
Investor to Signature Bank as escrow agent for deposit in a segregated escrow
account pursuant to an escrow deposit agreement among the Company, Placement
Agent and Signature Bank, as escrow agent, and shall deliver the executed copies
of the Subscription Agreement received from such Prospective Investor to the
Company. All funds shall be held in the segregated non-interest-bearing escrow
account pending acceptance of the subscriptions aggregating to the Minimum
Offering and no funds shall be released without execution of a written notice
by
the Company and the Placement Agent. The Company shall notify the Placement
Agent promptly of the acceptance or rejection or any subscription.
(f)
Subject
to the approval of the Company and the conditions set forth herein, which
approval shall not be unreasonably withheld, First Montauk may engage other
persons selected by First Montauk to assist First Montauk in the Offering (each
such broker/dealers being hereinafter referred to as a “Selling Group Member”)
and First Montauk may allow such Selling Group Member such part of the
compensation and payment of expenses payable to First Montauk under Section
5
hereof as First Montauk shall determine. Any such Selling Group Member shall
be
a member firm in good standing as a broker-dealer under the rules of FINRA.
The
Company hereby agrees to make such representations and warranties to, and
covenants and agreements with, any Selling Group Member (including an agreement
to indemnify such Selling Group Member on terms substantially similar to Section
12 hereof) as provided herein.
2
3.
Closings: Release of Funds.
(a)
The
date
that cleared funds representing the Minimum Offering together with completed
subscription agreements are received by the parties (including the funds held
in
escrow), and Prospective Investors of the Minimum Offering reconfirm their
investment decision, pursuant to the procedures described in the Memorandum,
or
reasonably soon thereafter, the parties shall hold an initial closing for
acceptance of subscriptions by the Company and the release of funds from the
escrow account (the “Initial Closing”). At least one (1) day prior to the
release of funds, the Company and the Placement Agent shall send written notice
to each other, which notice shall state the amount of funds to be released,
the
name and address of each subscriber whose subscription has been accepted by
the
Company, and the amount of each subscription.
(b) At
any
time prior to the expiration of the Offering Period following the Initial
Closing and after acceptance by the Company of subscriptions for the sale of
additional Securities up to the Maximum Offering (or the Over Allotment Amount,
as the case may be), one or more closings (each an “Interim Closing”) shall take
place in the manner herein set forth with respect to the Initial Closing. The
final Interim Closing to be held in accordance herewith shall be deemed the
“Final Closing” and the date thereof shall be the ”Final Closing Date”.
References herein to a “Closing” shall mean the Initial Closing, any Interim
Closing or the Final Closing, as the context requires, and the date thereof
shall be referred to as a ”Closing Date”. Prior to each Closing, Placement Agent
will furnish to the Company appropriate records indicating the name and address
of each person subscribing in the Offering and a copy of the executed
Subscription Agreement for each subscriber. The Company shall have discretion
as
to whether or not to accept any Subscription Agreement; provided,
however, any rejection of a subscription shall be in good faith on the basis
of
a reasonable business purpose
4. Representations
and Warranties of the Placement Agent.
The
Placement Agent represents, warrants to and agrees with the Company as
follows:
(a) The
Placement Agent is duly incorporated and validly existing and in good standing
under the laws of the State of New York.
(b) The
Placement Agent is, and at the time of each Closing will be, duly registered
as
a broker/dealer pursuant to the Securities Exchange Act of 1934, as amended
(the
“Exchange Act”) and a member in good standing of FINRA, and each of the
Placement Agent’s representatives is, and at the time of each Closing will be,
registered as an agent or salesman of the Placement Agent and in good standing
with FINRA.
(c) Sales
of
Securities by the Placement Agent will only be made in such jurisdictions in
which the Placement Agent is a registered broker-dealer or where an applicable
exemption from such registration exists.
3
(d) Offers
and sales of Securities by the Placement Agent will be made only in accordance
with this Agreement and in compliance with the provisions of Rule 506 of
Regulation D (it being understood and agreed that the Placement Agent shall
be
entitled to rely upon the information and statements provided by the Prospective
Investors in the Subscription Agreement and Investor Questionnaires), and the
Placement Agent will furnish to each Prospective Investor a copy of the Offering
Documents prior to the receipt thereby of any Subscription Agreement from such
Prospective Investor.
(e) During
the course of the Offering, the Placement Agent and its representatives will
not
make any untrue statement of a material fact or omit to state a material fact
required to be stated, or necessary to make any statement made, by the Placement
Agent or its representatives, not misleading concerning the Offering or any
matters set forth in or contemplated by the Offering Documents (it being
understood that the statements made in the Offering Documents are deemed to
be
made by the Company and not the Placement Agent, except for information set
forth therein based upon written information provided by, or on behalf of,
the
Placement Agent or any of its representatives for inclusion
therein).
(f) Neither
the Placement Agent nor any of its representatives or affiliates, has engaged
or
will engage, directly or indirectly, in any act or activity that may jeopardize
the status of the Offering and sale of the Securities as an exempt transaction
under the Act or under all applicable federal and/or state securities or blue
sky laws of any jurisdiction in which the Securities may be offered or
sold.
5.
Placement Agent Compensation.
(a) The
Placement Agent shall be entitled, on each Closing Date, as compensation for
its
services as Placement Agent under this Agreement, to selling commissions equal
to 10% of the gross proceeds received by the Company from the sale of the Units.
All payments hereunder shall be effected at each Closing in immediately
available funds.
(b)
In
addition to the forgoing cash compensation, the Placement Agent will be entitled
to receive placement agent warrants to purchase a number of Shares in an amount
equal to 8% of the number of shares of Common Stock included in the Units sold
in the Offering and such Warrants shall have an exercise price equal to $3.00
per share (the “Agent Warrants”). The Agent Warrants shall be on the same terms
as the Investor Warrants and in the event that the Company shall not be in
material compliance with its registration obligations set forth on Exhibit
A of
the Subscription Agreement, there the Agent Warrants shall be exercisable on
a
“cashless exercise” basis on the same basis as available to investors. The
shares of Common Stock underlying the Agent Warrants shall be included in the
registration statement to be filed by the Company on behalf of the Prospective
Investors in the Offering 9 subject to cutback in the event that the SEC shall
determine that Rule 415 promulgated under the Act is applicable and that the
number of shares included in the registration statement so filed are required
to
be reduced. The Placement Agent shall have the right, at its option, to
request that the Agent Warrants be issued in the names of its officers,
employees and registered representatives.
(c)
The
Placement Agent shall also be entitled to receive, during the term of the
Warrants, a warrant solicitation fee (“Solicitation Fee”) equal to five percent
(5%) of the exercise price of the Warrants, which fee shall be payable within
five business days of receipt by the Company of the exercise price from a holder
of the Warrants. The Solicitation Fee shall be payable in accordance with the
applicable rules of FINRA and the form of warrants issuable to investors shall
disclose shall include appropriate disclosure regarding the payment of the
Solicitation Fee upon terms acceptable to the Placement Agent. The Company
shall
not hire any other broker dealer firm other than the Placement Agent to assist
it in connection with the solicitation of the exercise of the
Warrants.
4
6.
Representations and Warranties of the Company and PubCo. Each of the Company
and/or PubCo, as the case may be, represents and warrants to, and agrees with,
the Placement Agent that as of the date hereof and as of each Closing Date
(except as disclosed in the Memorandum or contemplated therein):
(a)
Assuming
the accuracy of the representations and warranties of the Prospective Investors
set forth in the Subscription Agreement and Investor Questionnaire and the
representations and warranties of the Placement Agent set forth herein, the
Offering Documents (including, without limitation, the Company Documents as
defined in clause (c) below) (i) contain at all times during the period from
the
date hereof to and including each Closing Date, all information required to
be
contained therein, if any, pursuant to a private offering to all “accredited
investors“ under Rule 506 of Regulation D and all applicable federal and/or
state securities and blue sky laws, and (ii) do not, and during such period
will
not, contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in the
light of the circumstances in which they were made, not misleading. Each
contract, agreement, instrument, lease, license, or other document required
to
be described in the Offering Documents shall be, and have been, accurately
described therein in all material respects.
(b)
The
Memorandum does not and shall not contain any untrue statement of a material
fact or omit to state any material fact necessary to make the statements made
therein, in the light of the circumstances in which they were made, not
misleading.
(c)
The
proposed authorized capital stock of PubCo is as set forth in the Memorandum
as
of the date set forth therein. All outstanding shares of capital stock of the
Company are duly authorized, validly issued, fully paid and non-assessable.
The
Securities, when issued in accordance with the terms of the Offering, will
be
validly issued, fully paid and nonassessable and not subject to preemptive
or
any other similar rights and no personal liability will attach to the ownership
thereof. The warrant shares, when issued in accordance with the terms of the
Warrants, will be validly issued, fully paid and nonassessable and not subject
to preemptive or any other similar rights and no personal liability will attach
to the ownership thereof.
(d) Each
statute, regulation, legal and governmental proceeding, contract, agreement,
instrument, lease, license, or other document required to be described in the
Memorandum has been accurately described therein in all material
respects.
(e) All
prior
offerings of the Company’s securities complied in all respects with the Act and
the rules and regulations promulgated thereunder and all applicable blue sky
laws. There are no existing claims, to the knowledge of the Company, which
would
require the Company to rescind or offer to rescind and outstanding securities
of
the Company.
(f) The
Company and each controlled subsidiary (as defined below) is (a) a corporation
duly organized, validly existing and in good standing under the laws of its
state of their incorporation, has full power and authority to own or lease
all
of the assets owned or leased by each of them and to conduct their respective
business as described in the Memorandum and (b) are duly qualified to do
business and in good standing as a foreign corporation in all jurisdictions
in
which the nature of the activities conducted or the character of the assets
owned or leased makes such qualification necessary, except where the failure
to
be so qualified would not have a material adverse effect on the Company’s
presently conducted business (taken as a whole with the business of the
Controlled Subsidiaries). Complete and correct copies of the certificate of
incorporation and of the by-laws of the Company and its Controlled Subsidiaries
as in effect on the date hereof have been delivered to First Montauk, and no
changes therein will be made on or subsequent to the date hereof and prior
to
the Final Closing Date except as may be disclosed in the Offering Documents
or
required pursuant to this Agreement. For purposes hereof, the term “Controlled
Subsidiaries” means any entity (whether a corporation, limited liability
company, partnership or joint venture entity) of which the Company owns 50%
or
more of the voting securities or has the right to elect a majority of the Board
of Directors (or similar group).
5
(g)
Since
the
dates as of which information is given in the Memorandum, other than as set
forth or contemplated therein, (A) there has not been any material adverse
change in the business, prospects, properties, management, financial condition
or results of operations of the Company or its Controlled Subsidiaries, (B)
the
Company has not and will not have paid or declared any dividends or other
distributions on its capital stock and (C) there has not been any change in
the
capital stock of the Company or any material change in the short-term or
long-term debt of the Company or its Controlled Subsidiaries.
(h) The
consolidated unaudited financial statements, together with related notes and
schedules of the Company and its Controlled Subsidiaries, included as part
of
the Offering Documents (including the financial statements contained in the
Company Documents), present fairly the financial position of the Company and
its
Controlled Subsidiaries in all material respects as of the respective dates
and
for the periods indicated therein. Except as stated in the Memorandum, the
unaudited statements contained in the Offering Documents are consistent with,
and have been prepared from the books and records kept by the Company in a
manner consistent with past practice and fairly and accurately represent the
financial condition of the Company.
(i) Except
as
described in the Memorandum, there is no action, suit, investigation or
proceeding pending or, to the Company’s knowledge, threatened before or by any
Federal or state court, commission, regulatory body, administrative agency
or
other governmental body, domestic or foreign, or arbitrator to which the Company
or its Controlled Subsidiaries is or may become a party or of which any property
of the Company or its Controlled Subsidiaries is subject or affected that (i)
might affect the consummation of the transactions contemplated under this
Agreement, including the issuance or validity of the Securities offered or
(ii)
would have a material adverse effect on the financial condition, properties,
results of operations or businesses of the Company and its Controlled
Subsidiaries, taken as a whole (“Material Adverse Effect”).
(j) The
Company has all approvals, licenses, franchises, authorizations and permits
(collectively, “permits”) necessary under all applicable statutes, codes, rules,
regulations, orders and decrees of governments or governmental bodies
(collectively, “laws”), which are material to the ownership, lease or use of
their respective properties or the conduct of their respective businesses as
described in the Memorandum. The Company has received no notice of any
proceedings relating to the revocation or modification of any such permits
which, singly or in the aggregate, would have a Material Adverse Effect, and
each of the Company and its Controlled Subsidiaries is in all material respects
in compliance with such permits and laws.
(k) The
Company owns or is licensed to use all patents, patent applications, inventions,
trademarks, trade names, applications for registration of trademarks,
copyrights, know-how, trade secrets, licenses and rights in any thereof
(“Proprietary Rights”) which are material to the business of the Company and its
Controlled Subsidiaries taken as a whole as now conducted and as proposed to
be
conducted, in each case as described in the Memorandum. Except as described
in
the Memorandum:
6
(i)
the
Company has no knowledge of any, and the Company has not given or received
any
notice of any pending conflict with or infringement of, the rights of others
with respect to any Proprietary Rights or with respect to any license of
Proprietary Rights;
(ii)
no
action, suit, arbitration, or legal, administrative or other proceeding, or
domestic or foreign governmental investigation is pending or, to the best of
the
Company’s knowledge, threatened, which involves any Proprietary Rights and would
have a Material Adverse Effect;
(iii)
the
Company is subject to no judgment, order, writ, injunction or decree of any
court or any Federal, state, local, foreign or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
or
any arbitrator, which restricts or impairs the use of any such Proprietary
Rights in a manner which would have a Material Adverse Effect on the use of
any
of the Proprietary Rights;
(iv)
no
Proprietary Rights used by the Company and no services or products sold by
the
Company, conflict with or infringe upon, to the knowledge of the Company, any
proprietary rights available to any third party;
(v)
the
Company has entered into no consent, indemnification, forbearance to ▇▇▇ or
settlement agreement with respect to Proprietary Rights other than in the
ordinary course of business;
(vi)
to
the best knowledge of the Company, no claims have been asserted by any person
with respect to the validity of or the Company’s ownership of or right to use
the Proprietary Rights and, to the best knowledge of the Company, there is
no
reasonable basis for any such claim;
(vii)
to
the best knowledge of the Company, the Proprietary Rights are valid and
enforceable and no registration relating thereto has lapsed, expired or been
abandoned or canceled or is the subject of cancellation or other adversarial
proceedings which would have a Material Adverse Effect, and any applications
therefore are pending and are in good standing;
(viii)
the Company and its Controlled Subsidiaries have complied, in all material
respects, with their respective contractual obligations relating to the
protection of the Proprietary Rights used pursuant to licenses; and
(ix)
to
the best knowledge of the Company, no person is infringing on or violating
the
Proprietary Rights owned or used by the Company or its Controlled
Subsidiaries.
(l)
Except
as
described in the Memorandum, there are no contracts, agreements or
understandings between the Company and any person granting such person the
right
to require the Company to file a registration statement under the Act with
respect to any securities of the Company owned or to be owned by such person
or
to require the Company to include such securities in the securities being
registered pursuant to any registration statement filed by the Company under
the
Act.
(m) All
offers and sales of securities of the Company issued during the three year
period prior to the date hereof were at all relevant times duly registered
or
exempt from the registration requirements of the Act and the rules and
regulations thereunder and were duly registered or the subject of an available
exemption from the registration requirements of the applicable state securities
or Blue Sky laws. The Company has not, directly or indirectly, solicited any
offer to buy or offered to sell any securities during the twelve-month period
ending on the date hereof which, to the knowledge of the Company, would be
integrated with the Offering.
7
(n) The
Company is not (i) in violation of its certificate of incorporation or bylaws,
(ii) to the best knowledge of the Company, in violation of any statute, law,
rule, code, administrative regulation, ordinance, judgment, order or decree
of
any government, governmental instrumentality, court, domestic or foreign, or
arbitration panel or other body applicable to it where such violation would
have
a Material Adverse Effect or (iii) to the best knowledge of the Company, in
default in the performance or observance of any obligation, agreement, covenant
or condition contained in any indenture, mortgage, deed of trust, voting
agreement, voting trust agreement, loan agreement, bond, debenture, note or
other evidence of indebtedness, lease, sublease, license agreement, contract
or
other agreement or instrument to which it is a party or by which it or any
of
its respective properties are bound or affected (“Contracts”), where such
defaults, singly or in the aggregate, would have a Material Adverse Effect.
To
the knowledge of the Company, no other party under any Contract is in default
in
any material respect thereunder which affects the Company.
(o) The
Company has all requisite power and authority to execute, deliver and perform
its obligations under this Agreement. This Agreement, has been or will be duly
and validly authorized, executed and delivered by the Company, and each such
agreement constitutes a legal, valid and binding agreement of the Company
enforceable against the Company in accordance with its respective terms, except
as rights to indemnity and contribution hereunder and thereunder may be limited
by the securities laws and public policy of the United States and except as
such
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws or equitable principles affecting the enforcement of creditors'
rights generally.
(p) [intentionally
omitted]
(q) No
consent, approval, authorization, license or order of or from, or registration,
qualification, declaration or filing with, federal, state, local, foreign or
other governmental authority or any person or court, administrative agency,
or
other body is required for the consummation of the transactions contemplated
in
this Agreement, or the Offering Documents, except as may have been made, are
required to be made prior to the Initial Closing, or may be required to be
obtained under any state securities or blue sky laws or pursuant to Regulation
D.
(r) The
Company is in compliance in all material respects with all applicable federal,
state and local environmental laws and regulations (collectively, the
“Environmental Laws”), except for any material noncompliance as may be described
in the Memorandum, and to the best of the Company’s knowledge, there are no
circumstances that would prevent, interfere with, or materially increase the
cost of such compliance in the future. Except as set forth in the Offering
Documents, there is no claim under any Environmental Law, including common
law
(“Environmental Claim”), pending or, to the knowledge of the Company, threatened
against or affecting the Company and, to the best of the Company’s knowledge,
there are no past or present actions, activities, circumstances, events or
incidents, including, without limitation, releases of any material into the
environment, that could form the basis of any Environmental Claim against or
affecting the Company.
(s) The
Company has good and marketable title to all property owned by it, in each
case
free and clear of all liens, charges, encumbrances or restrictions except as
described in the Offering Documents or such as do not materially affect the
value of such property and do not interfere with the use made and proposed
to be
made of such property by the Company. Except as described in the Offering
Documents, all material Contracts to which the Company is a party or by which
the Company or any of its properties or assets are bound are valid, subsisting
and enforceable and are in full force and effect.
8
(t) The
Company (A) has paid all federal, state, local and foreign taxes for which
it is
liable and has furnished all information returns it is required to furnish
pursuant to the Internal Revenue Code of 1986, as amended, (B) has established
adequate reserves for such taxes which are not due and payable and (C) does
not
have any tax deficiency or claims outstanding, proposed or assessed against
it.
(u) The
Company maintains insurance of the types and in amounts which it deems adequate
for its business taken as a whole, all of which are in full force and
effect.
(v) Other
than as set forth herein or in the Offering Documents, there are no claims,
payments, issuances, arrangements or understandings, whether oral or written,
for services in the nature of a finder's or origination fee with respect to
the
sale of the Securities.
(w) Neither
the Company, nor to the best of the Company’s knowledge any of the Company’s
officers, employees, agents or any other person acting on behalf of, at the
direction of or for the benefit of the Company has, directly or indirectly,
given or agreed to give any money, gift or similar benefit (other than legal
price concessions to customers in the ordinary course of business) to any
customer, supplier, employee or agent of a customer or supplier, or official
or
employee of any governmental agency (domestic or foreign) or instrumentality
of
any government (domestic or foreign) or any political party or candidate for
office (domestic or foreign) or other person who was, is, or may be in a
position to help or hinder the business of the Company (or assist the Company
in
connection with any actual or proposed transaction) which (a) might subject
the
Company or any other such person to any damage or penalty in any civil, criminal
or governmental litigation or proceeding (domestic or foreign), (b) if not
given
in the past, might have had a Material Adverse Effect or (c) if not continued
in
the future, might result in a Material Adverse Effect. The Company's internal
accounting controls are sufficient to cause the Company to comply with the
Foreign Corrupt Practices Act of 1977, as amended.
(x) To
the
best knowledge of the Company, during the past five years, none of the current
officers or directors of the Company have been:
(i) The
subject of a petition under the federal bankruptcy laws or any state insolvency
law filed by or against them, or by a receiver, fiscal agent or similar officer
appointed by a court for their business or property, or any partnership in
which
any or them was a general partner at or within two years before the time of
such
filing, or any corporation or business association of which any of them was
an
executive officer at or within two years before the time of such
filing;
(ii) Convicted
in a criminal proceeding or a named subject of a pending criminal proceeding
(excluding traffic violations and other minor offenses);
(iii) The
subject of any order, judgment, or decree not subsequently reversed, suspended
or vacated, of any court of competent jurisdiction, permanently or temporarily
enjoining any of them from, or otherwise limiting, any of the following
activities:
(iv) acting
as
a futures commission merchant, introducing broker, commodity trading advisor,
commodity pool operator, floor broker, leverage transaction merchant, any other
person regulated by the Commodity Futures Trading Commission, or an associated
person of any of the foregoing, or as an investment adviser, underwriter, broker
or dealer in securities, or as an affiliated person, director or employee of
any
investment company, bank, savings and loan association or insurance company,
or
engaging in or continuing any conduct or practice in connection with any such
activity;
9
(v)
engaging
in any type of business practice; or
(vi) engaging
in any activity in connection with the purchase or sale of any security or
commodity or in connection with any violation of federal or state securities
law
or federal commodity laws.
(vii) the
subject of any order, judgment or decree, not subsequently reversed, suspended
or vacated of any federal or state authority barring, suspending or otherwise
limiting for more than sixty (60) days their right to engage in any activity
described in paragraph (c)(i) above, or be associated with persons engaged
in
any such activity;
(viii) found
by
any court of competent jurisdiction in a civil action or by the Securities
and
Exchange Commission to have violated any federal or state securities law, and
the judgment in such civil action or finding by the Commission has not been
subsequently reversed, suspended or vacated; or
(ix) found
by
a court of competent jurisdiction in a civil action or by the Commodity Futures
Trading Commission to have violated any federal commodities law, and the
judgment in such civil action or finding by the Commodity Futures Trading
Commission has not been subsequently reversed, suspended or
vacated.
(x) found
by
a court or an administrative agency to have or is alleged to have violated
any
foreign securities laws.
(y) Neither
the Company nor, to the knowledge of the Company, any of its affiliates has,
directly or through any agent, sold, offered for sale or solicited offers to
buy
any security of the Company, nor will any of the foregoing directly buy any
security of the Company.
(z) Neither
the Company nor any of its officers, directors, or affiliates, has engaged
or
will engage, directly or indirectly, in any act or activity that may jeopardize
the status of the Offering and sale of the Securities as an exempt transaction
under the Act or under all applicable federal and/or state securities or blue
sky laws of any jurisdiction in which the Securities may be offered or sold.
(aa) The
Company maintains a system of internal accounting and other controls sufficient
to provide reasonable assurances that: (i) transactions are executed in
accordance with management’s general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of reliable
financial statements in conformity with United States generally accepted
accounting principles and to maintain accountability for assets, (iii) access
to
assets is permitted only in accordance with management’s general or specific
authorization, and (iv) the recorded accounting for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any material differences.
(bb) Neither
the Company nor any of its Subsidiaries has violated or is currently in
violation of any provisions of: (a) any federal or state environmental law,
(b)
Employee Retirement Income Security Act of 1974, as amended, including the
regulations and published interpretations thereunder (“ERISA”), (c) the Bank
Secrecy Act, as amended, (d) the Money Laundering Control Act of 1986, as
amended, (e) the Foreign Corrupt Practices Act, or (f) the Uniting and
Strengthening of America by Providing Appropriate Tools Required to Intercept
and Obstruct Terrorism (“USA Patriot Act”) Act of 2001, and the rules and
regulations promulgated under any such law, or any successor law, except for
such violations which, singly or in the aggregate, would not have a Material
Adverse Effect.
10
(cc) [intentionally
omitted]
(dd) No
later
than five (5) business days prior to the proposed consummation of the merger
between the Company and a newly formed subsidiary of PubCo, the Company and
PubCo shall deliver to the Prospective Investors a supplement to the Memorandum
(which may be in the form of a Current Report on Form 8-K), which supplement
shall contain: (i) a description of PubCo and the material terms of the proposed
merger with the Company; (ii) description of consideration to be issued in
connection with the merger; (iii) a pro forma capitalization chart reflecting
the consummation of the merger in reasonable detail; (iii) terms of any
employment or consulting arrangements entered into in connection with the
merger; and (iv) pro forma financial statements of PubCo and the
Company.
7. Covenants
of the Company.
The
Company, covenants that it will:
(a)
Notify First Montauk immediately, and confirm such notice in writing, (i) when
any event shall have occurred during the period commencing on the date hereof
and ending on the Final Closing Date, as a result of which the Offering
Documents would include any untrue statement of a material fact or omit to
state
any material fact necessary to make the statements made therein, in the light
of
the circumstances under which they were made, not misleading, and (ii) of the
receipt of any notification with respect to the modification, rescission,
withdrawal, or suspension of the qualification or registration of the
Securities, or of an exemption from such registration or qualification, in
any
jurisdiction. The Company will use its reasonable best efforts to prevent the
issuance of any such modification, rescission, withdrawal, or suspension, and
at
Placement Agent's request, to use reasonable best efforts to obtain the lifting
thereof as promptly as possible.
(b)
Not
make any supplement or amendment to the Offering Documents unless such
supplement or amendment complies with the requirements of the Act and Regulation
D and the applicable federal and/or state securities and blue sky laws and
unless the Placement Agent shall have approved of such supplement or amendment.
If, at any time during the period commencing on the date hereof and ending
on
the Final Closing Date, any event shall have occurred as a result of which
the
Offering Documents contain any untrue statement of a material fact or omit
to
state any material fact necessary to make the statements made therein, in the
light of the circumstances in which they were made, not misleading, or if,
in
the reasonable opinion of counsel to the Company or counsel to the Placement
Agent, it is necessary at any time to supplement or amend the Offering Documents
to comply with the Act, Regulation D, or any applicable securities or blue
sky
laws, the Company will promptly prepare an appropriate supplement or amendment
(in form and substance satisfactory to the Placement Agent) which will correct
such statement or omission or which will effect such compliance.
(c)
Deliver without charge to the Placement Agent such number of copies of the
Offering Documents and any supplement or amendment thereto as may reasonably
be
requested by the Placement Agent.
(d)
Not,
directly or indirectly, solicit any offer to buy from, or offer to sell to
any
person any Securities, or any other securities (whether debt or equity) of
the
Company except through the Placement Agent.
11
(e)
Use
its best efforts to establish an exemption from qualification and registration
under the securities or blue sky laws of the jurisdictions as may be required
by
the Placement Agent in connection with the offer and sale of the Securities
and
retain counsel in making any required filings; provided, however, that the
Company will not be obligated to qualify to do business or register as a dealer
in securities, or otherwise subject itself to general service of process, in
any
jurisdiction in which it is not so qualified. The Company shall cooperate with
counsel to the Placement Agent to make a Form 99 (if necessary) and State Notice
filing with the State of New York prior to the commencement of the Offering
and
timely file a Form D and such other required notice with all state blue sky
authorities and the SEC related to the Offering. PubCo and the Company shall
provide copies of all blue sky filings and the Form D as filed wit the SEC,
to
the Placement Agent within ten (10) days of each filing.
(f)
At
all times during the period commencing on the date hereof and ending on the
Final Closing Date, provide to each Prospective Investor or his Purchaser
Representative (as defined in Regulation D), if any, on request, such
information (in addition to that contained in the Offering Documents) concerning
the Offering, the Company and any other relevant matters, as it possesses or
can
acquire without unreasonable effort or expense, and to extend to each
Prospective Investor or his Purchaser Representative, if any, the opportunity
to
ask questions of, and receive answers from, the President or other executive
officers of the Company concerning the terms and conditions of the Offering
and
the business of the Company and to obtain any other additional information,
to
the extent it possesses the same or can acquire it with reasonable effort or
expense, and in conformity with existing laws and regulations of federal and
state and other regulatory bodies and agencies as such Prospective Investor
or
Purchaser Representative may consider necessary in making an informed investment
decision or in order to verify the accuracy of the information furnished to
such
Prospective Investor or Purchaser Representative, as the case may be.
Notwithstanding, anything in this Section 7(f) to the contrary, the Prospective
Investor and/or his Purchaser Representative, as the case may be, shall only
rely on such information in making an investment decision, to the extent it
has
been provided to them in the Offering Documents or otherwise provided by the
Company in writing.
(g) [intentionally
omitted]
(h)
Not,
directly or indirectly, engage in any act or activity which may jeopardize
the
status of the offering and sale of the Securities as exempt transactions under
the Act or under the securities or blue sky laws of any jurisdiction in which
the Offering maybe made. Without limiting the generality of the foregoing,
and
notwithstanding anything contained herein to the contrary, the Company shall
not, directly or indirectly, engage in any offering of securities which, if
integrated with the Offering in the manner prescribed by Rule 502(a) of
Regulation D and applicable releases of the Commission, may jeopardize the
status of the offering and sale of the Securities as exempt transactions under
Regulation D.
(i)
[intentionally omitted].
(j)
Not,
during the period commencing on the date hereof and ending on the Final Closing
Date, issue any press release or other communication, or hold any press
conference with respect to the Company, its financial condition, results of
operations, business, properties, assets, or liabilities, or the Offering,
without First Montauk’s prior written consent, not to be unreasonably withheld,
except as required by applicable securities laws and except as may be related
to
the marketing and sale of its products in the normal course of business. The
foregoing shall not prohibit the Company from holding informational meetings
with accredited investors who have a pre-existing relationship with the Company
during which the materials and information disseminated will be limited to
the
information contained in the Offering Documents or from making disclosures
required by law.
12
8.
Payment of Expenses. The Company hereby agrees to pay all fees, charges, and
expenses incident to the performance by the Company of its obligations
hereunder, including, without limitation, all fees, charges, and expenses in
connection with: (i) the preparation, printing, copying and mailing of the
Offering Documents; (ii) filing fees for all blue sky filings and the fees
of
counsel to the Placement Agent for the legal work for all such filings, at
the
rate of $400 per state.; (iii) the filing fees for the offer and sale under
the
securities laws of such states and other jurisdictions as Placement Agent may
designate; (iv) Placement Agent’s counsel fees for services rendered in
connection with the Offering, in an amount equal to $35,000, of which $10,000
has previously been paid prior to the date hereof; (v) the expense of the escrow
account which expenses shall equal $3,500 and be payable to the escrow agent
in
advance; (vi) the filing fees payable to FINRA for any filings made pursuant
to
FINRA Rule 2710 as well as the expenses of the Placement Agent’s counsel in the
amount of $10,000 for review of the registration statement to be filed after
the
Offering and the required filing under FINRA Rule 2710,which fees shall be
paid
prior to filing of the registration statement and (vii) a visit to the Company’s
facilities (to include travel and lodging expenses). To the extent that
Placement Agent wishes to incur any such costs or fees on the Company’s behalf,
with the exception of FINRA Rule 2710, blue sky filing fees, and counsel fees
as
provided for in the preceding sentence, all such expenses must be approved
by
Company prior to their incurrence.
9. Conditions
of Placement Agent’s Obligations.
The
obligations of the Placement Agent pursuant to this Agreement shall be subject,
in its discretion, to the continuing accuracy in all material respects of the
representations and warranties of the Company and PubCo contained herein and
in
each certificate and document contemplated under this Agreement to be delivered
to the Placement Agent, as of the date hereof and as of each Closing Date,
with
respect to the performance in all material respects by each of the Company
and
PubCo of their respective obligations hereunder, and to the following
conditions:
(a)
At
the Initial Closing and each additional Closing, the Placement Agent shall
have
received the favorable opinion ( or a bringdown opinion for subsequent closings)
of
▇▇▇▇▇▇ & ▇▇▇▇▇, LLP,
counsel
(which may rely upon other counsel for certain matters or an opinion of local
counsel may be delivered in lieu thereof) for the Company and PubCo, dated
each
Closing Date, addressed to the Placement Agent, and in form and scope reasonably
satisfactory to counsel for the Placement Agent, substantially to the effect
that:
(i)
Each
of the Company and PubCo is a corporation validly existing, and in good standing
under the laws of the State of its incorporation, with the requisite corporate
power to own and operate its properties and assets, and to carry on its business
as described in the Offering Documents.;
(ii)
Each
of the Company and PubCo has all requisite corporate power and authority to
execute, deliver, and perform this Agreement, and to consummate the transactions
contemplated hereby. All necessary corporate proceedings of the Company and
PubCo have been taken to authorize the execution, delivery, and performance
by
the Company of this Agreement, and the consummation of the transactions
contemplated hereby. This Agreement has been duly authorized, executed, and
delivered by the Company and PubCo, is the legal, valid, and binding obligation
of the Company and PubCo, and is enforceable against the Company and PubCo
in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium and other laws
of
general application now or hereafter in effect relating to or affecting the
enforcement of creditors' right generally and the application of general
equitable principles in any action, legal or equitable and then except, as
to
those provisions relating to indemnity or contribution, such opinion shall
be
limited as effected by any Federal or state securities laws regarding indemnity
and/or contribution;
13
(iii)
upon receipt of payment therefore in accordance with the Offering Documents,
the
Securities shall be validly authorized, validly issued, fully paid, and
nonassessable;
(iv)
assuming that (i) the Offering was made in the manner and by the means
contemplated by the Offering Documents and the Units were sold only to
accredited investors, (ii) a proper Form D is filed in accordance with Rule
503
of Regulation D, (iii) that the offer and sale of the Securities by the
Placement Agent was made in accordance with Regulation D and the Offering
Documents including, but not limited to, only accredited investors in compliance
with Rule 506 of Regulation D without any advertising and/or general
solicitation, (iv) the Placement Agent’s representations, warranties and
covenants set forth herein are true and correct, (v) the Company’s
representations, warranties and covenants set forth herein are true and correct,
and (vi) the representations of the Prospective Investors in the Subscription
Agreements and Investors Questionnaire signed by them are true and correct
(which facts will not be independently verified by such counsel), the sale
of
Securities in the Offering is exempt from registration under the
Act.
(v)
the
merger between PubCo, a wholly-owned subsidiary o PubCo and the Company has
been
duly authorized by each of the Company and PubCo and has been consummated in
accordance with its terms and in accordance with the laws of the States of
their
respective incorporation.
In
rendering such opinion, counsel for the Company may (A) base such opinions
on
such assumptions, qualifications, limitations and conditions as required by
the
opinion committee of such counsel, (B) rely as to matters of fact, on
certificates of responsible officers of the Company; (C) to the extent they
deem
proper, upon written statements or certificates of officers of departments
of
various jurisdictions having custody of documents respecting the corporate
existence or good standing of the Company, provided that copies of any such
statements or certificates shall be delivered to counsel for the Placement
Agent; and (D) rely upon such other opinions of other counsel to the Company
as
it deems necessary.
(b)
On or
prior to the Initial Closing the Placement Agent shall have been furnished
such
information, documents, certificates, and opinions as it may reasonably require
for the purpose of enabling it to review the matters referred to in Section
6,
and in order to evidence the accuracy, completeness, or satisfaction of any
of
the representations, warranties, covenants, agreements, or conditions herein
contained, or as it may otherwise reasonably request.
(c)
At
the Initial Closing and at each additional Closing, the Placement Agent shall
have received one or more certificates of the chief executive officer and of
the
chief financial officer of the Company, dated the applicable Closing Date to
the
effect that, as of the date of this Agreement and as of the applicable Closing
Date the representations and warranties of the Company contained herein were
and
are accurate, and that as of the Closing Date the obligations to be performed
by
the Company hereunder on or prior thereto have been fully performed. In
addition, the parties shall deliver such other certificates or closing documents
as are customarily used by the Placement Agent in offerings of this
nature.
(d)
All
proceedings taken in connection with the issuance, sale, and delivery of the
Securities shall be satisfactory in form and substance to First Montauk and
First Montauk’s counsel.
(e)
Concurrently with the Initial Closing, PubCo and the Placement Agent shall
enter
into the Assignment and Assumption Agreement substantially in the form of
Exhibit A
14
(f)
Any
certificate or other document signed by any officer of the Company and/or PubCo
and delivered to First Montauk or to First Montauk counsel at a Closing shall
be
deemed a representation and warranty by the Company and/or PubCo hereunder
as to
the statements made therein.
10. Conditions
of Obligations of the Company.
The
obligations of the Company pursuant to this Agreement shall be subject, in
its
discretion in good faith, to the performance by the Placement Agent in all
material respects of its obligations hereunder.
11. Termination.
If
subscriptions for the Offering are not received into escrow during the Offering
Period, or Placement Agent has committed a material breach of this Agreement,
the Company may terminate the Agreement and the agency relationship created
hereby upon prior written notice to First Montauk. First Montauk may terminate
this Agreement and the agency created hereby for any reason upon written notice
to the Company. In either case, neither party shall have any liability or
continuing obligation to the other except that, regardless of which party elects
to terminate, (i) the Company agrees to reimburse First Montauk for, or
otherwise pay and bear, the expenses and fees to be paid and borne by the
Company as provided for in Section 8 above to reimburse First Montauk for the
full amount of its actual out-of-pocket expenses (which shall include, without
limitation, the fees and disbursements of First Montauk’s counsel (up to the
limits set forth in Section 8), travel and lodging expenses, mailing, printing
and reproduction expenses, less amounts previously paid to First Montauk in
reimbursement for such expenses, such expenses not to exceed the sum of$250
individually without the approval of the Company and (ii) the provisions of
paragraph 8 and the Indemnification Provisions in Section 12 shall remain in
full force and effect. Upon any such termination, the Company agrees to cease
to
use any Offering materials that represent First Montauk as placement agent.
In
the event that any Securities are sold, Sections 5, 8, 12, 13 and 14 shall
survive the termination of this Agreement. Furthermore, notwithstanding anything
to the contrary in this Agreement, in the event that the Company refuses to
complete the Offering without any failure of the condition set forth in Section
10, then First Montauk shall be entitled to a fee of $150,000 which shall be
deemed liquidated damages, plus actual legal fees and expenses incurred by
First
Montauk and First Montauk shall have not other rights hereunder.
12. Indemnification
and Contribution.
(a)
The
Company agrees to indemnify and hold harmless the Placement Agent, its officers,
directors, partners, employees, agents, and counsel, and each person, if any,
who controls the Placement Agent within the meaning of Section 15 of the Act
or
Section 20(a) of the Exchange Act , against any and all loss, liability, claim,
damage, and expense whatsoever (which shall include, for all purposes of this
Section 12, but not be limited to, reasonable attorneys' fees and any and all
reasonable expense whatsoever incurred in investigating, preparing, or defending
against any litigation, commenced or threatened, or any claim whatsoever and
any
and all amounts paid in settlement of any claim or litigation) as and when
incurred arising out of, based upon, or in connection with (i) any untrue
statement or alleged untrue statement of a material fact contained in the
Offering Documents or in any document delivered or written statement made
pursuant to Section 7(f), or in any application or other document or
communication (it being understood that neither the Company nor any officer,
director or employee shall provide any information to any Prospective Investor
which is not contained or referred to in the Offering Documents) (in this
Section 12 collectively called an "application") executed by or on behalf of
the
Company and/or PubCo or based upon written information furnished by or on behalf
of the Company and/or PubCo filed in any jurisdiction in order to register
or
qualify the Securities under the blue sky or securities laws thereof or in
order
to secure an exemption from such registration or qualification or filed with
the
Commission; or any omission or alleged omission to state a material fact
necessary to make the statements made therein, in the light of the circumstances
in which they were made, not misleading, unless such statement or omission
was
made in reliance upon and in conformity with written information furnished
to
the Company as stated in Section 12(b) with respect to the Placement Agent
expressly for inclusion in the Offering Documents or in any application, as
the
case may be; and (ii) any breach of any representation, warranty, covenant,
or
agreement of the Company and/or PubCo contained in this Agreement.
The
foregoing agreement to indemnify shall be in addition to any liability the
Company and/or PubCo may otherwise have, including liabilities arising under
this Agreement.
15
If
any
action is brought against the Placement Agent or any of its officers, directors,
partners, employees, agent, or counsel, or any controlling persons of the
Placement Agent (an "indemnified party"), in respect of which indemnify may
be
sought against the Company and/or PubCo pursuant to the foregoing paragraph,
such indemnified party or parties shall promptly notify the Company (the
"indemnifying party") in writing of the institution of such action (but the
failure so to notify shall not relieve the indemnifying party from any liability
it may have unless the indemnifying party is prejudiced by such failure) and
the
indemnifying party shall promptly assume the defense of such action, including
the employment of counsel (reasonably satisfactory to such indemnified party
or
parties) and payment of expenses. Such indemnified party shall have the right
to
employ its own counsel in any such case, but the fees and expense of such
counsel shall be at the expense of such indemnified party unless the employment
of such counsel shall have been authorized in writing by the indemnifying party
in connection with the defense of such action, in which event such fees and
expenses shall be borne by the indemnifying party. Anything in this paragraph
to
the contrary notwithstanding, the indemnifying party shall not be liable for
any
settlement of any such claim or action effected without its written consent.
The
Company and/or PubCo agrees promptly to notify the Placement Agent of the
commencement of any litigation or proceedings against the Company or any of
its
officers or directors in connection with the sale of the Securities, the
Offering Documents, or any application.
(b)
The
Placement Agent agrees to indemnify and hold harmless the Company, PubCo, their
respective officers, directors, employees, agents, and counsel, and each other
person, if any, who controls the Company and/or PubCo within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act, to the same extent
as the foregoing indemnity from the Company to the Placement Agent in Section
12(a), with respect to any and all loss, liability, claim, damage, and expense
whatsoever (which shall include, for all purposes of this Section 12, but not
be
limited to, attorneys' fees and any and all expense whatsoever incurred in
investigating, preparing, or defending against any litigation, commenced or
threatened, or any claim whatsoever and any and all amounts paid in settlement
of any claim or litigation) as and when incurred arising out of, based upon,
or
in connection with (i) statements or omissions, if any, made in the Offering
Documents in reliance upon and in conformity with written information furnished
to the Company and/or
PubCo
by or on
behalf of Placement Agent expressly for inclusion in the Offering Documents;
(ii) the failure of the Placement Agent or its representatives to comply with
the provisions of Section 4(c) hereof or with the federal, blue sky or
securities laws of the jurisdictions in which the Placement Agent solicits
offers to buy or offers to sell any Securities; or (iii) any breach of any
representation, warranty, covenant or agreement of the Placement Agent contained
in this Agreement. If any action shall be brought against the Company and/or
PubCo or any other person indemnified under this Section 12(b) in respect of
which indemnity may be sought against the Placement Agent pursuant to this
Section 12, the Placement Agent shall have the rights and duties given to the
indemnifying party, and the Company and each other person so indemnified shall
have the rights and duties given to the indemnified parties, by the provisions
of Section 12(a) hereof.
16
(c)
To
provide for just and equitable contribution, if (i) an indemnified party makes
a
claim for indemnification pursuant to Section 12(a) or 12(b) hereof but it
is
found in a final judicial determination, not subject to further appeal, that
such indemnification may not be enforced in such case, even though this
Agreement expressly provides for indemnification in such case, or (ii) any
indemnified or indemnifying party seeks contribution under the Act, the Exchange
Act, or otherwise, then the Company and/or PubCo (including for this purpose
any
contribution made by or on behalf of any officer, director, employee, agent,
or
counsel of the Company and/or PubCo, or any controlling person of the Company
and/or PubCo), on the one hand, and the Placement Agent (including for this
purpose any contribution by or on behalf of an indemnified party), on the other
hand, shall contribute to the losses, liabilities, claims, damages, and expenses
whatsoever to which any of them may be subject, in such proportions as are
appropriate to reflect the relative benefits received by the Company and PubCo,
on the one hand, and the Placement Agent, on the other hand; provided, however,
that if applicable law does not permit such allocation, then other relevant
equitable considerations such as the relative fault of the Company and PubCo
on
the one hand and the Placement Agent on the other hand in connection with the
facts which resulted in such losses, liabilities, claims, damages, and expenses
shall also be considered. The relative benefits received by the Company, on
the
one hand, and the Placement Agent, on the other hand, shall be deemed to be
in
the same proportion as (x) the total proceeds from the Offering (net of
compensation payable to the Placement Agent pursuant to Section 5 hereof but
before deducting expenses) received by the Company and/or PubCo, and (y) the
compensation received by the Placement Agent pursuant to Section 5 (a) hereof.
The
relative fault, in the case of an untrue statement, alleged untrue statement,
omission, or alleged omission, shall be determined by, among other things,
whether such statement, alleged statement, omission, or alleged omission relates
to information supplied by the Company and/or PubCo or by the Placement Agent,
and the parties' relative intent, knowledge, access to information, and
opportunity to correct or prevent such statement, alleged statement, omission,
or alleged omission. Each of the Company, PubCo and the Placement Agent agree
that it would be unjust and inequitable if the respective obligations of the
Company and the Placement Agent for contribution were determined by pro rata
or
per capita allocation of the aggregate losses, liabilities, claims, damages,
and
expenses or by any other method of allocation that does not reflect the
equitable considerations referred to in this Section 12(c). In no case shall
the
Placement Agent be responsible for a portion of the contribution obligation
in
excess of the compensation received by it pursuant to Section 5 hereof. No
person guilty of a fraudulent misrepresentation shall be entitled to
contribution from any person who is not guilty of such fraudulent
misrepresentation. For purposes of this Section 12(c), each person, if any,
who
controls the Placement Agent within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act and each officer, director, partners,
employee, agent, and counsel of the Placement Agent, shall have the same rights
to contribution as the Placement Agent, and each person, if any, who controls
the Company and/or PubCo within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act and each officer, director, partner, employee, agent,
and counsel of the Company and/or PubCo, shall have the same rights to
contribution as the Company, subject in each case to the provisions of this
Section 12(c). Anything in this Section 12(c) to the contrary notwithstanding,
no party shall be liable for contribution with respect to the settlement of
any
claim or action effected without its written consent. This Section 12(c) is
intended to supersede any right to contribution under the Act, the Exchange
Act,
or otherwise.
13. Solicitation
Prohibition.
Each
of
the Company and PubCo agrees that, if it were to receive any additional capital
within 24 months from date of the Initial Closing, from (A) any investor in
the
Offering, or (B) from any Source contacted by the Placement Agent for the
purpose of investing in the Offering, the Company shall pay to First Montauk
a
cash fee in an amount equal to 10% of the amount raised at the closing of any
such financing and warrants to purchase shares of Common Stock equal to 8%
of
the equity (or securities convertible into equity) sold in such financings.
The
Company also agrees that, for a period of three years from the date hereof,
it
shall not, directly or indirectly, solicit offers to buy or sell any securities
of the Company or any other entity form or to any Source(s) contacted by Montauk
who purchases securities in connection with the Securities financing, or provide
the name of any such person to any other securities broker or dealer or selling
agent. Additionally, in the event the Company or any affiliates, directly or
indirectly, solicits offers to buy from or offers to sell to any Sources any
securities, or provides the names of any Sources to any other securities broker
or dealer or selling agent, and such Source purchases securities or purchases
securities from any other securities broker or selling agent, the Company shall
pay to the Placement Agent a cash fee in an amount equal to 10% of the aggregate
purchase price of the securities so purchased by such Source and the Company
shall pay to the Placement Agent an amount equal to 10% of the stock issued
to
such Source. As used herein, “Source” shall include, without limitation, any
corporation, company, institution, partnership, individual and all of the
Source’s affiliates that are directly or indirectly contacted by the Placement
Agent for the purpose of investing in the Offering. Prior to the Final Closing,
First Montauk will provide to the Company a list of all Sources. This provision
shall survive the termination of this Agreement.
17
14. Right
of
First Refusal.
The
Company hereby grants to the Placement Agent an irrevocable right of first
refusal for a period commencing on the date of the Initial Closing and ending
12
months from the effectiveness of the registration statement filed in connection
with the Securities sold in the Offering to purchase for its account or to
sell
for the account of the Company or any subsidiary of or successor to the Company
securities that the Company or any subsidiary or successor may seek to sell
through an underwriter, placement agent or broker-dealer whether pursuant to
registration under the Act or otherwise, or any securities sold directly by
the
Company. The Company and any subsidiary or successor will consult with the
Placement Agent with regard to any such offering and will offer to the Placement
Agent the exclusive opportunity to purchase or sell any such securities on
terms
not more favorable to the Company, any subsidiary or success than it or they
can
secure elsewhere as presented by a bona fide written offer from a registered
broker-dealer firm or investor. If the Placement Agent fails to accept such
offer within 15 business day after the mailing of a notice containing all of
the
material terms of such offer (including a copy of an executed term sheet or
letter of intent) by overnight courier, then the Placement Agent shall have
no
further claim or right, with the exception of any other rights detailed in
this
Agreement with respect to the financing proposal contained in such notice.
If
the terms of such offer are subsequently modified in any material respect,
the
preferential right referred to herein shall apply to such modified proposal
as
if the original proposal had not been made. The Placement Agent’s failure to
exercise its preferential right with respect to any particular proposal shall
not affect its preferential rights relative to future proposals. The Company
represents and warrants that there are presently no other rights of first
refusal for future financings now outstanding. In the event the Company requests
the Placement Agent waive the provisions of this Section 14, the Placement
Agent
shall agreement to such waiver provided the Company pays the Placement Agent
a
fee of $150,000 as a liquidated damages fee and the Placement Agent shall have
not further rights hereunder. This paragraph shall survive the termination
of
this Agreement.
15.
Representations
and Agreements to Survive Delivery.
All
representations, warranties, covenants, and agreements contained in this
Agreement shall be deemed to be representations, warranties, covenants, and
agreements at the Closing Date and, such representations, warranties, covenants,
and agreements, including the indemnification and contribution agreements
contained in Section 12, shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of the Placement Agent
or
any indemnified person, or by or on behalf of the Company or any person or
entity which is entitled to be indemnified under Section 12(b), and shall
survive termination of this Agreement or the issuance, sale, and delivery of
the
Securities. In addition, notwithstanding any election hereunder or any
termination of this Agreement, and whether or not the terms of this Agreement
are otherwise carried out, the provisions of Sections 5, 8, 11, 12, 13 and
14
shall survive termination of this Agreement and shall not be affected in any
way
by such election or termination or failure to carry out the terms of this
Agreement or any part thereof.
18
16.
Notices.
All
communications hereunder, except as may be otherwise specifically provided
herein, shall be in writing and, if sent to the Placement Agent, shall be mailed
by certified mail, hand delivered, or sent by overnight courier service, to
First Montauk Securities Corp., Parkway 109 Office Center, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, with a copy
to
Ellenoff ▇▇▇▇▇▇▇▇ & Schole LLP, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.; or if sent to
the
Company to Geeks On Call America, Inc., ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇
▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Chief Executive Officer, with a copy to
▇▇▇▇▇▇ and ▇▇▇▇▇, LLP, ▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇,
▇▇▇▇
▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq. All notices
hereunder shall be effective upon delivery to the party to which it is
addressed.
17.
Parties.
This
Agreement shall inure solely to the benefit of, and shall be binding upon,
the
Placement Agent and the Company and the persons and entities referred to in
Section 12 who are entitled to indemnification or contribution, and their
respective successors, legal representatives, and assigns (which shall not
include any purchaser, as such, of Securities), and no other person shall have
or be construed to have any legal or equitable right remedy, or claim under
or
in respect of or by virtue of this Agreement or any provision herein contained.
This Agreement supercedes and replaces in full the Engagement Agreement and
Term
Sheet dated as of September 12, 2007.
18.
Governing Law. Submission to Jurisdiction.
The
validity and interpretation of this Agreement shall be governed by the laws
of
the State of New York applicable to agreements made and to be fully performed
therein. Each of First Montauk and the Company (a) agrees that any legal suit,
action or proceeding arising out of or relating to this Agreement shall be
instituted exclusively in New York State Supreme Court, County of New York,
or
in the United States District Court for the Southern District of New York,
(b)
waives any objection which the Company may have now or hereafter to the venue
of
any such suit, action or proceeding, and (c) irrevocably consents to the
jurisdiction of the foregoing named courts in any such suit, action or
procedure. Each of the Company and First Montauk further agrees to accept and
acknowledge service of any and all process which may be served in any suit,
action or proceeding in the foregoing courts, and agrees that service of process
upon the Company or First Montauk mailed by certified mail to the address set
forth in Section 16 hereof shall be deemed in every respect effective service
of
process upon the Company in any such suit, action or proceeding. In the event
of
litigation between the parties arising hereunder, the prevailing party shall
be
entitled to costs and reasonable attorney's fees.
[remainder
of page intentionally left blank]
19
[signature
page to Placement Agent Agreement]
19.
Counterparts.
This
Agreement may be executed in counterparts, each of which shall constitute an
original and all of which, when taken together, shall constitute one agreement.
The parties hereto agree to accept a facsimile transmission copy of their
respective actual signatures as evidence of their actual signatures to this
Agreement.
20. No
Fiduciary Relationship.
The
Company acknowledges and agrees that: (i) the sale and issuance of the
Securities pursuant to this Agreement is an arm’s-length commercial transaction
between the Company and the Placement Agent; (ii) in connection therewith
and with the process leading to the Offering, the Placement Agent is acting
solely as a principal and not the agent or fiduciary of the Company; (iii)
the Placement Agent has not assumed an advisory or fiduciary responsibility
in
favor of the Company or any subscriber or investor with respect to the Offering
contemplated hereby or the process leading thereto, including any negotiation
related to the pricing of the Securities; and (iv) the Company has consulted
its
own legal and financial advisors to the extent it has deemed appropriate in
connection with this Agreement and the Offering
If
the
foregoing correctly sets forth the understanding between us, please so indicate
in the space provided below for that purpose, whereupon this letter shall
constitute a binding agreement among us.
|
Very
truly yours,
|
|
|
GEEKS
ON CALL AMERICA, INC.
|
|
|
By:
|
/s/
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
|
|
▇▇▇▇▇▇▇
▇. ▇▇▇▇
|
|
|
Chief Executive Officer
|
|
|
first
above written:
|
|
|
FIRST
MONTAUK SECURITIES CORP.
|
|
|
By:
|
/s/
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
|
|
Title:
President & CEO
|
|
20