EXHIBIT 10.3
CAPITAL SOLUTIONS I, INC
PLACEMENT AGENT AGREEMENT
Dated as of: August 26, 2004
Newbridge Securities Corporation
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Ladies and Gentlemen:
The undersigned, Capital Solutions I, Inc, a Delaware corporation (the
"Company"), hereby agrees with Newbridge Securities Corporation (the "Placement
Agent") and Cornell Capital Partners, LP, a Delaware Limited Partnership (the
"Investor"), as follows:
1. Offering. The Company hereby engages the Placement Agent to act as
its exclusive placement agent in connection with the Standby Equity Distribution
Agreement dated the date hereof (the "Standby Equity Distribution Agreement"),
pursuant to which the Company shall issue and sell to the Investor, from time to
time, and the Investor shall purchase from the Company (the "Offering") up to
Six Million Dollars ($6,000,000) of the Company's common stock (the "Commitment
Amount"), par value $.0000001 per share (the "Common Stock"), at price per share
equal to the Purchase Price, as that term is defined in the Standby Equity
Distribution Agreement. The Placement Agent services shall consist of reviewing
the terms of the Standby Equity Distribution Agreement and advising the Company
with respect to those terms.
All capitalized terms used herein and not otherwise defined herein
shall have the same meaning ascribed to them as in the Standby Equity
Distribution Agreement. The Investor will be granted certain registration rights
with respect to the Common Stock as more fully set forth in the Registration
Rights Agreement between the Company and the Investor dated the date hereof (the
"Registration Rights Agreement"). The documents to be executed and delivered in
connection with the Offering, this Agreement, the Standby Equity Distribution
Agreement, the Registration Rights Agreement, and the Escrow Agreement dated the
date hereof (the "Escrow Agreement"), are referred to sometimes hereinafter
collectively as the "Offering Materials." The Company's Common Stock purchased
by the Investor hereunder is sometimes referred to hereinafter as the
"Securities." The Placement Agent shall not be obligated to sell any Securities.
2. Compensation.
A. Upon the execution of this Agreement, the Company shall issue
to the Placement Agent or its designee shares of the Company's Common Stock in
an amount equal to Ten Thousand Dollars ($10,000) divided by the Closing Bid
Price of the Company's Common Stock on the date hereof (the "Placement Agent's
Shares"). The Placement Agent shall be entitled to "piggy-back" registration
rights, which shall be triggered upon registration of any
shares of Common Stock by the Investor with respect to the Placement Agent's
Shares pursuant to the Registration Rights Agreement dated the date hereof.
3. Representations, Warranties and Covenants of the Placement Agent.
A. The Placement Agent represents, warrants and covenants as
follows:
(i) The Placement Agent has the necessary power to
enter into this Agreement and to consummate the transactions contemplated
hereby.
(ii) The execution and delivery by the Placement Agent
of this Agreement and the consummation of the transactions contemplated herein
does not and will not result in any violation of, or be in conflict with, or
constitute a default under, any agreement or instrument to which the Placement
Agent is a party or by which the Placement Agent or its properties are bound, or
any judgment, decree, order or, to the Placement Agent's knowledge, any statute,
rule or regulation applicable to the Placement Agent. This Agreement when
executed and delivered by the Placement Agent, will constitute the legal, valid
and binding obligations of the Placement Agent, enforceable in accordance with
their respective terms, except to the extent that (a) the enforceability hereof
or thereof may be limited by bankruptcy, insolvency, reorganization, moratorium
or similar laws from time to time in effect and affecting the rights of
creditors generally, (b) the enforceability hereof or thereof is subject to
general principles of equity, or (c) the indemnification provisions hereof or
thereof may be held to be in violation of public policy.
(iii)Upon receipt and execution of this Agreement, the
Placement Agent will promptly forward copies of this Agreement to the Company or
its counsel and the Investor or its counsel.
(iv) The Placement Agent will not take any action that
it reasonably believes would cause the Offering to violate the provisions of the
Securities Act of 1933, as amended (the "1933 Act"), the Securities Exchange Act
of 1934 (the "1934 Act"), the respective rules and regulations promulgated
thereunder or applicable "Blue Sky" laws of any state or jurisdiction.
(v) The Placement Agent is a member of the National
Association of Securities Dealers, Inc., and is a broker-dealer registered as
such under the 1934 Act and under the securities laws of the states in which the
Securities will be offered or sold by the Placement Agent unless an exemption
for such state registration is available to the Placement Agent. The Placement
Agent is in material compliance with the rules and regulations applicable to the
Placement Agent generally and applicable to the Placement Agent's participation
in the Offering.
4. Representations and Warranties of the Company.
A. The Company represents and warrants as follows:
(i) The execution, delivery and performance of each of
this Agreement, the Standby Equity Distribution Agreement, the Escrow Agreement,
and the
Registration Rights Agreement has been or will be duly and validly authorized by
the Company and is, or with respect to this Agreement, the Standby Equity
Distribution Agreement, the Escrow Agreement, and the Registration Rights
Agreement will be, a valid and binding agreement of the Company, enforceable in
accordance with its respective terms, except to the extent that (a) the
enforceability hereof or thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws from time to time in effect and
affecting the rights of creditors generally, (b) the enforceability hereof or
thereof is subject to general principles of equity or (c) the indemnification
provisions hereof or thereof may be held to be in violation of public policy.
The Securities to be issued pursuant to the transactions contemplated by this
Agreement and the Standby Equity Distribution Agreement have been duly
authorized and, when issued and paid for in accordance with this Agreement and
the Standby Equity Distribution Agreement, will be valid and binding obligations
of the Company, enforceable in accordance with their respective terms, except to
the extent that (1) the enforceability thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws from time to time in
effect and affecting the rights of creditors generally, and (2) the
enforceability thereof is subject to general principles of equity. All corporate
action required to be taken for the authorization, issuance and sale of the
Securities has been duly and validly taken by the Company.
(ii) The Company has a duly authorized, issued and
outstanding capitalization as set forth in the Standby Equity Distribution
Agreement. The Company is not a party to or bound by any instrument, agreement
or other arrangement providing for it to issue any capital stock, rights,
warrants, options or other securities, except for this Agreement, the agreements
described herein and as described in the Offering Materials and the agreements
and documents referenced therein (including, but not limited to the SEC
Documents). All issued and outstanding securities of the Company, have been duly
authorized and validly issued and are fully paid and non-assessable; the holders
thereof have no rights of rescission or preemptive rights with respect thereto
and are not subject to personal liability solely by reason of being security
holders other than as described in the Offering Materials and the agreements and
documents referenced therein (including, but not limited to the SEC Documents);
and none of such securities were issued in violation of the preemptive rights of
any holders of any security of the Company.
(iii) The Common Stock to be issued in accordance with
this Agreement and the Standby Equity Distribution Agreement has been duly
authorized and, when issued and paid for in accordance with this Agreement and
the Standby Equity Distribution Agreement, the certificates/instruments
representing such Common Stock will be validly issued, fully-paid and
non-assessable; the holders thereof will not be subject to personal liability
solely by reason of being such holders; such Securities are not and will not be
subject to the preemptive rights of any holder of any security of the Company.
(iv) The Company has good and marketable title to, or
valid and enforceable leasehold estates in, all items of real and personal
property necessary to conduct its business (including, without limitation, any
real or personal property stated in the Offering Materials to be owned or leased
by the Company), free and clear of all liens, encumbrances, claims, security
interests and defects of any material nature whatsoever, other than those set
forth in the Offering Materials and liens for taxes not yet due and payable.
(v) There is no material litigation or governmental
proceeding pending or, to the best of the Company's knowledge, threatened
against, or involving the properties or business of the Company, except as set
forth in the Offering Materials and the agreements and documents referenced
therein (including, but not limited to the SEC Documents).
(vi) The Company is duly organized and is validly
existing as a corporation in good standing under the laws of the State of
Delaware. Except as set forth in the Offering Materials and the agreements and
documents referenced therein (including, but not limited to the SEC Documents),
the Company does not own or control, directly or indirectly, an interest in any
other corporation, partnership, trust, joint venture or other business entity.
The Company is duly qualified or licensed and in good standing as a foreign
corporation in each jurisdiction in which the character of its operations
requires such qualification or licensing and where failure to so qualify would
have a material adverse effect on the Company. The Company has all requisite
corporate power and authority, and all material and necessary authorizations,
approvals, orders, licenses, certificates and permits of and from all
governmental regulatory officials and bodies (domestic and foreign) to conduct
its businesses (and proposed business) as described in the Offering Materials
and the agreements and documents referenced therein (including, but not limited
to the SEC Documents) except where the failure to have such authorizations,
approvals, orders, licenses, certificates and permits would not have a material
adverse effect on the Company or the transactions contemplated by the Agreement.
Any disclosures in the Offering Materials concerning the effects of foreign,
federal, state and local regulation on the Company's businesses as currently
conducted and as contemplated are correct in all material respects and do not
omit to state a material fact. The Company has all corporate power and authority
to enter into this Agreement, the Standby Equity Distribution Agreement, the
Registration Rights Agreement, and the Escrow Agreement, to carry out the
provisions and conditions hereof and thereof. All consents, authorizations,
approvals and orders required in connection herewith and therewith have been
obtained except where the failure to have such consents, authorizations,
approvals and orders would not have a material adverse effect on the Company or
the transactions contemplated by the Agreement. No consent, authorization or
order of, and no filing with, any court, government agency or other body is
required by the Company for the issuance of the Securities or execution and
delivery of the Offering Materials except for applicable federal and state
securities laws, except where the failure to have such consents, authorizations
or order of, or filing would not have a material adverse effect on the Company
or the transactions contemplated by the Agreement. Other than as disclosed in
the SEC Documents, the Company, during the two (2) years prior to the date of
this Agreement has not incurred any liability arising under or as a result of
the application of any of the provisions of the 1933 Act, the 1934 Act or the
rules and regulations thereunder.
(vii) There has been no material adverse change in the
condition or business of the Company, financial or otherwise, from the latest
dates as of which such condition or business , respectively, are set forth in
the Offering Materials (including, but not limited to, the SEC Documents), and
the outstanding debt, the property and the business of the Company conform in
all material respects to the descriptions thereof contained in the Offering
Materials.
(viii) Except as set forth in the Offering Materials and
the agreements and documents referenced therein (including, but not limited to
the SEC Documents), the Company is not in breach of, or in default under, any
term or provision of any material indenture, mortgage, deed of trust, lease,
note, loan or any other material agreement or instrument evidencing an
obligation for borrowed money, or any other material agreement or instrument to
which it is a party or by which it or any of its properties may be bound or
affected. The Company is not in violation of any provision of its charter or
by-laws or in violation of any franchise, license, permit, judgment, decree or
order, or in violation of any material statute, rule or regulation except as
described in the Offering Materials and the agreements and documents referenced
therein (including, but not limited to the SEC Documents). Neither the execution
and delivery of the Offering Materials nor the issuance and sale or delivery of
the Securities, nor the consummation of any of the transactions contemplated in
the Offering Materials nor the compliance by the Company with the terms and
provisions hereof or thereof, has conflicted with or will conflict with, or has
resulted in or will result in a breach of, any of the terms and provisions of,
or has constituted or will constitute a default under, or has resulted in or
will result in the creation or imposition of any lien, charge or encumbrance
upon any property or assets of the Company or pursuant to the terms of any
indenture, mortgage, deed of trust, note, loan or any other agreement or
instrument evidencing an obligation for borrowed money, or any other agreement
or instrument to which the Company may be bound or to which any of the property
or assets of the Company is subject except (a) where such default, lien, charge
or encumbrance would not have a material adverse effect on the Company and (b)
as described in the Offering Materials and the agreements and documents
referenced therein (including, but not limited to the SEC Documents); nor will
such action result in any material violation of the provisions of the charter or
the by-laws of the Company or, assuming the due performance by the Placement
Agent of its obligations hereunder, any material statute or any material order,
rule or regulation applicable to the Company of any court or of any foreign,
federal, state or other regulatory authority or other government body having
jurisdiction over the Company.
(ix) There are no claims for services in the nature of
a finder's or origination fee with respect to the sale of the Common Stock or
any other arrangements, agreements or understandings that may affect the
Placement Agent's compensation.
(x) The Company owns or possesses, free and clear of
all liens or encumbrances and rights thereto or therein by third parties, the
requisite licenses or other rights to use all trademarks, service marks,
copyrights, service names, trade names, patents, patent applications and
licenses necessary to conduct its business (including, without limitation, any
such licenses or rights described in the Offering Materials as being owned or
possessed by the Company) except for any liens, encumbrances or rights as would
not have a material adverse effect on the Company and, except as set forth in
the Offering Materials and the agreements and documents referenced therein
(including, but not limited to the SEC Documents), there is no claim or action
by any person pertaining to, or proceeding, pending or threatened, which
challenges the exclusive rights of the Company with respect to any trademarks,
service marks, copyrights, service names, trade names, patents, patent
applications and licenses used in the conduct of the Company's businesses
(including, without limitation, any such licenses or rights described in the
Offering Materials as being owned or possessed by the Company) except any
claim or action that would not have a material adverse effect on the Company;
the Company's current products, services or processes do not infringe or will
not infringe on the patents currently held by any third party.
(xi) Except as described in the Offering Materials and
the agreements and documents referenced therein (including, but not limited to
the SEC Documents), the Company is not under any obligation to pay royalties or
fees of any kind whatsoever to any third party with respect to any trademarks,
service marks, copyrights, service names, trade names, patents, patent
applications, licenses or technology it has developed, uses, employs or intends
to use or employ, other than to their respective licensors.
(xii) To the Company's best knowledge, neither the
Offering Materials nor any amendment or supplement thereto nor any documents
prepared by the Company in connection with the Offering will 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 light of the
circumstances under which they were made, not misleading. To the Company's best
knowledge, all statements of material facts in the Offering Materials are true
and correct as of the date of the Offering Materials.
(xiii) All material taxes which are due and payable from
the Company have been paid in full or adequate provision has been made for such
taxes on the books of the Company, except for those taxes disputed in good faith
by the Company.
(xiv) None of the Company nor any of its officers,
directors, employees or agents, nor any other person acting on behalf of the
Company, has, directly or indirectly, given or agreed to give any money, gift or
similar benefit (other than legal price concessions to customers in the ordinary
course of business) to any customer, supplier, employee or agent of a customer
or supplier, or official or employee of any governmental agency or
instrumentality of any government (domestic or foreign) or any political party
or candidate for office (domestic or foreign) or other person who is or may be
in a position to help or hinder the business of the Company (or assist it in
connection with any actual or proposed transaction) which (A) might subject the
Company to any damage or penalty in any civil, criminal or governmental
litigation or proceeding, or (B) if not given in the past, might have had a
materially adverse effect on the assets, business or operations of the Company
as reflected in any of the financial statements contained in the Offering
Materials, or (C) if not continued in the future, might adversely affect the
assets, business, operations or prospects of the Company in the future.
Notwithstanding the foregoing, nothing in this Agreement shall prevent the
Company from issuing shares of Common Stock to its officers, directors or
affiliates for compensation or remuneration, or to other entities in connection
with acquisitions or other transactions after the date hereof.
5. Representations, Warranties and Covenants of the Investor.
A. The Investor represents, warrants and covenants as follows:
(i) The Investor has the necessary power to enter into
this Agreement and to consummate the transactions contemplated hereby.
(ii) The execution and delivery by the Investor of
this Agreement and the consummation of the transactions contemplated herein will
not result in any violation of, or be in conflict with, or constitute a default
under, any agreement or instrument to which the Investor is a party or by which
the Investor or its properties are bound, or any judgment, decree, order or, to
the Investor's knowledge, any statute, rule or regulation applicable to the
Investor. This Agreement when executed and delivered by the Investor, will
constitute the legal, valid and binding obligations of the Investor, enforceable
in accordance with their respective terms, except to the extent that (a) the
enforceability hereof or thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws from time to time in effect and
affecting the rights of creditors generally, (b) the enforceability hereof or
thereof is subject to general principles of equity, or (c) the indemnification
provisions hereof or thereof may be held to be in violation of public policy.
(iii) The Investor will promptly forward copies of any
and all due diligence questionnaires compiled by the Investor to the Placement
Agent.
(iv) The Investor is an Accredited Investor (as
defined under the 1933 Act).
(v) The Investor is acquiring the Securities for the
Inventor's own account as principal, not as a nominee or agent, for investment
purposes only, and not with a view to, or for, resale, distribution or
fractionalization thereof in whole or in part and no other person has a direct
or indirect beneficial interest in such Securities. Further, the Investor does
not have any contract, undertaking, agreement or arrangement with any person to
sell, transfer or grant participations to such person or to any third person,
with respect to any of the Securities.
(vi) The Investor acknowledges the Investor's
understanding that the offering and sale of the Securities is intended to be
exempt from registration under the 1933 Act by virtue of Section 3(b) of the
1933 Act and/or the provisions of Regulation D promulgated thereunder
("Regulation D"). In furtherance thereof, the Investor represents and warrants
as follows:
(a) The Investor has the financial ability to
bear the economic risk of the Investor's investment, has adequate means for
providing for the Inventor's current needs and personal contingencies and has no
need for liquidity with respect to the Investor's investment in the Company; and
(b) The Investor has such knowledge and
experience in financial and business matters as to be capable of evaluating the
merits and risks of the prospective investment. The Inventor also represents it
has not been organized for the purpose of acquiring the Securities.
(vii) The Investor has been given the opportunity for a
reasonable time prior to the date hereof to ask questions of, and receive
answers from, the Company or its representatives concerning the terms and
conditions of the Offering, and other matters pertaining to this investment, and
has been given the opportunity for a reasonable time prior to the date hereof to
obtain such additional information in connection with the Company in
order for the Investor to evaluate the merits and risks of purchase of the
Securities, to the extent the Company possesses such information or can acquire
it without unreasonable effort or expense. The Investor is not relying on the
Placement Agent or any of its affiliates with respect to the accuracy or
completeness of the Offering Materials or for any economic considerations
involved in this investment.
6. Certain Covenants and Agreements of the Company.
The Company covenants and agrees at its expense and without any expense
to the Placement Agent as follows:
A. To advise the Placement Agent and the Investor of any
material adverse change in the Company's financial condition, prospects or
business or of any development materially affecting the Company or rendering
untrue or misleading any material statement in the Offering Materials occurring
at any time promptly after the Company is either informed or becomes aware
thereof.
B. To use its commercially reasonable efforts to cause the
Common Stock issuable in connection with the Standby Equity Distribution
Agreement to be qualified or registered for sale on terms consistent with those
stated in the Registration Rights Agreement and under the securities laws of
such jurisdictions as the Placement Agent and the Investor shall reasonably
request. Qualification, registration and exemption charges and fees shall be at
the sole cost and expense of the Company.
C. Upon written request, to provide and continue to provide the
Placement Agent and the Investor copies of all quarterly reports on Form 10-QSB
and annual reports on Form 10-KSB prepared by or on behalf of the Company and
filed with the Securities and Exchange Commission, other reports prepared by or
on behalf of the Company for public disclosure and all documents delivered to
the Company's stockholders.
D. To deliver, during the registration period of the Standby
Equity Distribution Agreement, to the Investor upon the Investor's request a
copy of all documents, reports and information furnished to its stockholders at
the time that such documents, reports and information are furnished to its
stockholders.
E. To comply with the terms of the Offering Materials.
F. To ensure that any transactions between or among the Company,
or any of its officers, directors and affiliates be on terms and conditions that
are no less favorable to the Company, than the terms and conditions that would
be available in an "arm's length" transaction with an independent third party.
7. Indemnification and Limitation of Liability.
A. The Company hereby agrees that it will indemnify and hold the
Placement Agent and each officer, director, shareholder, employee or
representative of the Placement Agent and each person controlling, controlled by
or under common control with the Placement Agent within the meaning of Section
15 of the 1933 Act or Section 20 of the 1934 Act or the SEC's
rules and regulations promulgated thereunder harmless from and against any and
all loss, claim, damage, liability, cost or expense whatsoever (including, but
not limited to, any and all reasonable legal fees and other expenses and
disbursements incurred in connection with investigating, preparing to defend or
defending any action, suit or proceeding, including any inquiry or
investigation, commenced or threatened, or any claim whatsoever or in appearing
or preparing for appearance as a witness in any action, suit or proceeding,
including any inquiry, investigation or pretrial proceeding such as a
deposition) to which the Placement Agent or such indemnified person of the
Placement Agent may become subject under the 1933 Act, the 1934 Act and the
rules and regulations thereunder, or any other federal or state law or
regulation, common law or otherwise, arising out of or based upon (i) any untrue
statement or alleged untrue statement of a material fact contained in (a)
Section 4 of this Agreement, (b) the Offering Materials (except those written
statements or statements approved of in writing relating to the Placement Agent
given by the Placement Agent for inclusion therein), (c) any application or
other document or written communication executed by the Company or based upon
written information furnished by the Company filed in any jurisdiction in order
to qualify the Common Stock under the securities laws thereof, or any state
securities commission or agency; (ii) the omission or alleged omission from
documents described in clauses (a), (b) or (c) above of a material fact required
to be stated therein or necessary to make the statements therein not misleading;
or (iii) the breach of any representation, warranty, covenant or agreement made
by the Company in this Agreement. The Company further agrees that upon demand by
an indemnified person, at any time or from time to time, it will promptly
reimburse such indemnified person for any loss, claim, damage, liability, cost
or expense actually and reasonably paid by the indemnified person as to which
the Company has indemnified such person pursuant hereto. Notwithstanding the
foregoing provisions of this Paragraph 7(A), any such payment or reimbursement
by the Company of fees, expenses or disbursements incurred by an indemnified
person in any proceeding in which a final judgment by a court of competent
jurisdiction (after all appeals or the expiration of time to appeal) is entered
against the Placement Agent or such indemnified person based upon specific
finding of fact that the Placement Agent or such indemnified person's gross
negligence or willful misfeasance will be promptly repaid to the Company.
B. The Placement Agent hereby agrees that it will indemnify and
hold the Company and each officer, director, shareholder, employee or
representative of the Company, and each person controlling, controlled by or
under common control with the Company within the meaning of Section 15 of the
1933 Act or Section 20 of the 1934 Act and the rules and regulations thereunder,
harmless from and against any and all loss, claim, damage, liability, cost or
expense whatsoever (including, but not limited to, any and all reasonable legal
fees and other expenses and disbursements incurred in connection with
investigating, preparing to defend or defending any action, suit or proceeding,
including any inquiry or investigation, commenced or threatened, or any claim
whatsoever or in appearing or preparing for appearance as a witness in any
action, suit or proceeding, including any inquiry, investigation or pretrial
proceeding such as a deposition) to which the Company or such indemnified person
of the Company may become subject under the 1933 Act, the 1934 Act and the rules
and regulations thereunder, or any other federal or state law or regulation,
common law or otherwise, arising out of or based upon (i) the material breach of
any representation, warranty, covenant or agreement made by the Placement Agent
in this Agreement, or (ii) any false or misleading information or material
misstatements
provided to the Company in writing by one of the Placement Agent's indemnified
persons specifically for inclusion in the Offering Materials.
C. The Investor hereby agrees that it will indemnify and hold
the Placement Agent and each officer, director, shareholder, employee or
representative of the Placement Agent, and each person controlling, controlled
by or under common control with the Placement Agent within the meaning of
Section 15 of the 1933 Act or Section 20 of the 1934 Act and the rules and
regulations thereunder, harmless from and against any and all loss, claim,
damage, liability, cost or expense whatsoever (including, but not limited to,
any and all reasonable legal fees and other expenses and disbursements incurred
in connection with investigating, preparing to defend or defending any action,
suit or proceeding, including any inquiry or investigation, commenced or
threatened, or any claim whatsoever or in appearing or preparing for appearance
as a witness in any action, suit or proceeding, including any inquiry,
investigation or pretrial proceeding such as a deposition) to which the
Placement Agent or such indemnified person of the Placement Agent may become
subject under the 1933 Act, the 1934 Act and the rules and regulations
thereunder, or any other federal or state law or regulation, common law or
otherwise, arising out of or based upon (i) the conduct of the Investor or its
officers, employees or representatives in its acting as the Investor for the
Offering, (ii) the material breach of any representation, warranty, covenant or
agreement made by the Investor in the Offering Materials, or (iii) any false or
misleading information provided to the Placement Agent by one of the Investor's
indemnified persons.
D. The Placement Agent hereby agrees that it will indemnify and
hold the Investor and each officer, director, shareholder, employee or
representative of the Investor, and each person controlling, controlled by or
under common control with the Investor within the meaning of Section 15 of the
1933 Act or Section 20 of the 1934 Act and the rules and regulations thereunder,
harmless from and against any and all loss, claim, damage, liability, cost or
expense whatsoever (including, but not limited to, any and all reasonable legal
fees and other expenses and disbursements incurred in connection with
investigating, preparing to defend or defending any action, suit or proceeding,
including any inquiry or investigation, commenced or threatened, or any claim
whatsoever or in appearing or preparing for appearance as a witness in any
action, suit or proceeding, including any inquiry, investigation or pretrial
proceeding such as a deposition) to which the Investor or such indemnified
person of the Investor may become subject under the 1933 Act, the 1934 Act and
the rules and regulations thereunder, or any other federal or state law or
regulation, common law or otherwise, arising out of or based upon the material
breach of any representation, warranty, covenant or agreement made by the
Placement Agent in this Agreement.
E. Promptly after receipt by an indemnified party of notice of
commencement of any action covered by Section 7(A), (B), (C) or (D), the party
to be indemnified shall, within five (5) business days, notify the indemnifying
party of the commencement thereof; the omission by one (1) indemnified party to
so notify the indemnifying party shall not relieve the indemnifying party of its
obligation to indemnify any other indemnified party that has given such notice
and shall not relieve the indemnifying party of any liability outside of this
indemnification if not materially prejudiced thereby. In the event that any
action is brought against the indemnified party, the indemnifying party will be
entitled to participate therein and, to the extent it may desire, to assume and
control the defense thereof with counsel chosen by it which is reasonably
acceptable to the indemnified party. After notice from the indemnifying party to
such indemnified party of its election to so assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under such
Section 7(A), (B), (C), or (D) for any legal or other expenses subsequently
incurred by such indemnified party in connection with the defense thereof, but
the indemnified party may, at its own expense, participate in such defense by
counsel chosen by it, without, however, impairing the indemnifying party's
control of the defense. Subject to the proviso of this sentence and
notwithstanding any other statement to the contrary contained herein, the
indemnified party or parties shall have the right to choose its or their own
counsel and control the defense of any action, all at the expense of the
indemnifying party if (i) the employment of such counsel shall have been
authorized in writing by the indemnifying party in connection with the defense
of such action at the expense of the indemnifying party, or (ii) the
indemnifying party shall not have employed counsel reasonably satisfactory to
such indemnified party to have charge of the defense of such action within a
reasonable time after notice of commencement of the action, or (iii) such
indemnified party or parties shall have reasonably concluded that there may be
defenses available to it or them which are different from or additional to those
available to one or all of the indemnifying parties (in which case the
indemnifying parties shall not have the right to direct the defense of such
action on behalf of the indemnified party or parties), in any of which events
such fees and expenses of one additional counsel shall be borne by the
indemnifying party; provided, however, that the indemnifying party shall not, in
connection with any one action or separate but substantially similar or related
actions in the same jurisdiction arising out of the same general allegations or
circumstance, be liable for the reasonable fees and expenses of more than one
separate firm of attorneys at any time for all such indemnified parties. No
settlement of any action or proceeding against an indemnified party shall be
made without the consent of the indemnifying party.
F. In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in Section 7(A) or 7(B)
is due in accordance with its terms but is for any reason held by a court to be
unavailable on grounds of policy or otherwise, the Company and the Placement
Agent shall contribute to the aggregate losses, claims, damages and liabilities
(including legal or other expenses reasonably incurred in connection with the
investigation or defense of same) which the other may incur in such proportion
so that the Placement Agent shall be responsible for such percent of the
aggregate of such losses, claims, damages and liabilities as shall equal the
percentage of the gross proceeds paid to the Placement Agent and the Company
shall be responsible for the balance; provided, however, that no person guilty
of fraudulent misrepresentation within the meaning of Section 11(f) of the 1933
Act shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 7(F), any person
controlling, controlled by or under common control with the Placement Agent, or
any partner, director, officer, employee, representative or any agent of any
thereof, shall have the same rights to contribution as the Placement Agent and
each person controlling, controlled by or under common control with the Company
within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act
and each officer of the Company and each director of the Company shall have the
same rights to contribution as the Company. Any party entitled to contribution
will, promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect of which a claim for contribution may
be made against the other party under this Section 7(D), notify such party from
whom contribution may be sought, but the omission to so notify such party shall
not relieve the party from whom contribution may be sought from any obligation
they may have
hereunder or otherwise if the party from whom contribution may be sought is not
materially prejudiced thereby.
G. The indemnity and contribution agreements contained in this
Section 7 shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any indemnified person or any termination
of this Agreement.
H. The Company hereby waives, to the fullest extent permitted by
law, any right to or claim of any punitive, exemplary, incidental, indirect,
special, consequential or other damages (including, without limitation, loss of
profits) against the Placement Agent and each officer, director, shareholder,
employee or representative of the placement agent and each person controlling,
controlled by or under common control with the Placement Agent within the
meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act and the
rules and regulations thereunder arising out of any cause whatsoever (whether
such cause be based in contract, negligence, strict liability, other tort or
otherwise). Notwithstanding anything to the contrary contained herein, the
aggregate liability of the Placement Agent and each officer, director,
shareholder, employee or representative of the Placement Agent and each person
controlling, controlled by or under common control with the Placement Agent
within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act
or the rules and regulations shall not exceed the compensation received by the
Placement Agent pursuant to Section 2 hereof. This limitation of liability shall
apply regardless of the cause of action, whether contract, tort (including,
without limitation, negligence) or breach of statute or any other legal or
equitable obligation.
8. Payment of Expenses.
The Company hereby agrees to bear all of the expenses in connection
with the Offering, including, but not limited to the following: filing fees,
printing and duplicating costs, advertisements, postage and mailing expenses
with respect to the transmission of Offering Materials, registrar and transfer
agent fees, escrow agent fees and expenses, fees of the Company's counsel and
accountants, issue and transfer taxes, if any. Notwithstanding the foregoing,
the Company shall have no obligation to pay the expenses of the Investor or
Placement Agent other than as explicitly set forth in Offering Materials. For
the avoidance of doubt, this Section 8 does not impose upon the Company any
additional obligation to reimburse the Investor for expenses incurred in
connection with the Offering.
9. Conditions to Closing.
The Closing shall be held at the offices of the Investor or its
counsel. The obligations of the Placement Agent hereunder shall be subject to
the continuing accuracy in all material respects of the representations and
warranties of the Company and the Investor contained herein as of the date
hereof and as of the date of each Closing (each, a "Closing Date") with respect
to the Company or the Investor, as the case may be, as if it had been made on
and as of such Closing Date; the accuracy on and of each Closing Date of the
statements of the officers of the Company made pursuant to the provisions
hereof; and the performance by the Company and the Investor on and as of each
Closing Date of its covenants and obligations hereunder and to the following
further conditions:
A. The Investor and the Placement Agent shall receive a copy of
the opinion of counsel to the Company referenced in Article IV of the Standby
Equity Distribution Agreement.
B. At or prior to the Closing, the Investor and the Placement
Agent shall have been furnished such documents, certificates and opinions as it
may reasonably require for the purpose of enabling them to review or pass upon
the matters referred to in this Agreement and the Offering Materials, or in
order to evidence the accuracy, completeness or satisfaction of any of the
representations, warranties or conditions herein contained.
C. At and prior to each Closing, as applicable, (i) there shall
have been no material adverse change nor development involving a prospective
change in the condition or prospects or the business activities, financial or
otherwise, of the Company from the latest dates as of which such condition is
set forth in the Offering Materials; (ii) there shall have been no transaction,
not in the ordinary course of business except the transactions pursuant to the
Securities Purchase Agreement entered into by the Company on the date hereof
which has not been disclosed in the Offering Materials or to the Placement Agent
in writing; (iii) except as set forth in the Offering Materials and the
agreements and documents referenced therein (including, but not limited to the
SEC Documents), the Company shall not be in default under any provision of any
instrument relating to any outstanding indebtedness in excess of Five Thousand
Dollars ($5,000) for which a waiver or extension has not been otherwise
received; (iv) except as set forth in the Offering Materials there shall not
have been any material change in the indebtedness (long or short term) or
liabilities or obligations of the Company (contingent or otherwise) and trade
payable debt; (v) no material amount of the assets of the Company shall have
been pledged or mortgaged, except as indicated in the Offering Materials; and
(v) no action, suit or proceeding, at law or in equity, against the Company or
affecting any of its properties or businesses shall be pending or threatened
before or by any court or federal or state commission, board or other
administrative agency, domestic or foreign, wherein an unfavorable decision,
ruling or finding could materially adversely affect the properties or businesses
or financial condition or income of the Company, except as set forth in the
Offering Materials. Notwithstanding the foregoing, nothing in this Agreement
shall prevent the Company from issuing shares of Common Stock to its officers,
directors or affiliates for compensation or remuneration, or to other entities
in connection with acquisitions or other transactions after the date hereof.
D. If requested at Closing the Investor and the Placement Agent
shall receive a certificate of the Company signed by an executive officer and
chief financial officer, dated as of the applicable Closing, to the effect that
the conditions set forth in subparagraph (C) above have been satisfied and that,
as of the applicable Closing Date, the representations and warranties of the
Company set forth herein are true and correct in all material respects.
E. The Placement Agent shall have no obligation to insure that
(x) any check, note, draft or other means of payment for the Common Stock will
be honored, paid or enforceable against the Investor in accordance with its
terms, or (y) subject to the performance of the Placement Agent's obligations
and the accuracy of the Placement Agent's representations and warranties
hereunder, (1) the Offering is exempt from the registration requirements of the
1933 Act or any applicable state "Blue Sky" law or (2) the Investor is an
Accredited Investor.
10. Termination.
This Agreement shall be co-terminus with, and terminate upon the same
terms and conditions as those set forth in, the Standby Equity Distribution
Agreement. The rights of the Investor and the obligations of the Company under
the Registration Rights Agreement, and the rights of the Placement Agent and the
obligations of the Company shall survive the termination of this Agreement
unabridged.
11. Miscellaneous.
A. This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original, but all which shall be deemed
to be one and the same instrument.
B. Any notice required or permitted to be given hereunder shall
be given in writing and shall be deemed effective when deposited in the United
States mail, postage prepaid, or when received if personally delivered or faxed
(upon confirmation of receipt received by the sending party), addressed as
follows to such other address of which written notice is given to the others):
If to Placement Agent, to: Newbridge Securities Corporation
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Company, to: Capital Solutions I, Inc.
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Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇.▇.
▇▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Investor: Cornell Capital Partners, LP
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▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Portfolio Manager
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With Copies to: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ - ▇▇▇▇▇ ▇
▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP
C. This Agreement shall be governed by and construed in all
respects under the laws of the State of Delaware, without reference to its
conflict of laws rules or principles. Any suit, action, proceeding or litigation
arising out of or relating to this Agreement shall be brought and prosecuted in
such federal or state court or courts located within the State of New Jersey as
provided by law. The parties hereby irrevocably and unconditionally consent to
the jurisdiction of each such court or courts located within the State of New
Jersey and to service of process by registered or certified mail, return receipt
requested, or by any other manner provided by applicable law, and hereby
irrevocably and unconditionally waive any right to claim that any suit, action,
proceeding or litigation so commenced has been commenced in an inconvenient
forum.
D. This Agreement and the other agreements referenced herein
contain the entire understanding between the parties hereto and may not be
modified or amended except by a writing duly signed by the party against whom
enforcement of the modification or amendment is sought.
E. If any provision of this Agreement shall be held to be
invalid or unenforceable, such invalidity or unenforceability shall not affect
any other provision of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of August 26, 2004.
COMPANY:
CAPITAL SOLUTIONS I, INC.
By: /s/ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chief Executive Officer
PLACEMENT AGENT:
NEWBRIDGE SECURITIES CORPORATION
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇
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Name: ▇▇▇ ▇. ▇▇▇▇▇
Title: President
INVESTOR:
CORNELL CAPITAL PARTNERS, LP
By: Yorkville Advisors, LLC
Its: General Partner
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
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Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Portfolio Manager