PLACEMENT AGENT AGREEMENT June 28, 2006
Exhibit
1.02
June
28,
2006
Board
of
Directors
Daybreak
Oil & Gas, Inc.
▇▇▇
▇.
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Gentlemen:
Bathgate
Capital Partners LLC (the
"Placement Agent"), hereby confirms its agreement with you (the "Company")
as
follows:
SECTION
1
Description
of Securities
The
Company proposes to offer and sell
to qualified investors Units (“Units”) of the Company's securities at an
offering price of $3.00 per Unit, and on terms as set forth
herein. Each Unit is comprised of the one share of the Company’s
convertible preferred stock (“Preferred Stock”) and two warrants (“Warrant”) to
purchase a share of Common Stock. As used in this Agreement, the term
"Memorandum" refers to a Private Placement Memorandum dated June 28,
2006.
SECTION
2
Representations
and Warranties of the Company
In
order to induce the Placement Agent
to enter into this Agreement, the Company hereby represents and warrants to
and
agrees with the Placement Agent as follows:
2.01. Private
Placement Memorandum. The Memorandum with respect to the Units
and all exhibits thereto, copies of which have heretofore been delivered by
the
Company to the Placement Agent, has been carefully prepared by the Company
in
conformity with Regulation D ("Regulation D") promulgated pursuant to the
Securities Act of 1933, as amended (the "Act"), and with comparable provisions
of the securities laws of such states as may be reasonably requested by the
Placement Agent. The Memorandum refers to certain of the Company’s
filing with the Securities and Exchange Commission (“SEC”) under the Securities
and Exchange Act of 1934, as amended (the “Exchange Act”) (hereinafter referred
to as the “SEC Filings”). The Memorandum and the SEC Filings do not
include any untrue statement of a material fact or omit to state a material
fact
required to be stated therein or necessary to make the statements therein,
in
light of the circumstances under which they were made, not misleading; provided,
however, the Company does not make any representations or warranties as to
information contained in or omitted from the Memorandum in reliance upon written
information furnished on behalf of the Placement Agent specifically for use
therein. Any additional written information authorized by the Company
to be provided to prospective purchasers shall not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
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2.02. Financial
Statements. DeCoria, Maichel & ▇▇▇▇▇▇, ▇.▇.., who has audited
and/or reviewed the financial statements in the SEC Filings, is an independent
certified public accountant. The financial statements of the Company,
together with related Schedules and Notes as set forth in the
SEC Filings, present fairly the financial position and the results of
operations of the Company at the represented dates and for the represented
periods to which they apply; such financial statements have been prepared in
accordance with generally accepted accounting principles which have been
consistently applied throughout the periods concerned except as otherwise stated
therein.
2.03. No
Material Adverse Change. Except as may be reflected in or
contemplated by the Memorandum, subsequent to the dates as of which information
is given in the Memorandum, and prior to the Closing Date (as defined
hereinafter), (i) there shall not be any material adverse change in the
business, properties, options to lease, leases, financial condition, management,
or otherwise of the Company or in the Company's business taken as a whole,
(ii)
there shall not have been any material transaction entered into by the Company
other than transactions in the ordinary course of business; (iii) the Company
shall not have incurred any material obligations, contingent or otherwise,
which
are not disclosed in the Memorandum; (iv) there shall not have been nor will
there be any change in the capital stock or adverse change in the short-term
or
long-term debt (except current payments) of the Company; and (v) the Company
has
not and will not have paid or declared any dividends or other
distributions.
2.04. No
Defaults. The Company is not in default in the performance of any
obligation, agreement or condition contained in any debenture, note or other
evidence of indebtedness or any indenture or loan agreement of the Company,
other than as set forth in the Memorandum. The execution and delivery
of this Agreement and the consummation of the transactions herein contemplated,
and compliance with the terms of this Agreement will not conflict with or result
in a breach of any of the terms, conditions or provisions of, or constitute
a
default under, the articles of incorporation or bylaws of the Company, or any
note, indenture, mortgage, deed of trust, or other agreement or instrument
to
which the Company is a party or by which it or any of its property is bound,
or
any existing law, order, rule, regulation, writ, injunction, or decree or any
government, governmental instrumentality, agency or body, arbitrator, tribunal
or court, domestic or foreign, having jurisdiction over the Company or its
property. The consent, approval, authorization, or order of any court
or governmental instrumentality, agency or body is not required for the
consummation of the transactions herein contemplated except such as may be
required under the Act or under the securities laws of any state or
jurisdiction.
2.05. Organization
and Standing. The Company is, and at the Closing Date will be,
duly organized and validly existing in good standing as a corporation under
the
laws of its state of Washington and with full power and authority to own its
property and conduct its business, present and proposed, as described or
referred to in the Memorandum; the Company has full power and authority to
enter
into this Agreement and to issue the securities comprising the Unit; and the
Company is duly qualified and in good standing as a foreign corporation in
all
jurisdictions in which the character of the property owned or leased or the
nature of the business transacted by it makes such qualification
necessary. The Company has paid all fees required by the jurisdiction
of organization and any jurisdiction in which it is qualified as a foreign
corporation.
2.06. Capitalization. Prior
to the Closing Date, the capitalization of the Company shall be as described
in
the Memorandum.
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June
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2.07. Legality
of Units The Units and the Shares have been duly and validly
authorized and, when issued or sold and delivered against payment therefor
as
provided in this Agreement, will be validly issued, fully paid and
nonassessable. The Warrants, when paid for and issued, will be valid,
binding and legally enforceable obligation of the Company. The
securities comprising the Units will conform in all material respects to all
statements with regard thereto in the Memorandum. A sufficient number
of shares of Common Stock of the Company has been reserved for issuance upon
exercise of the Warrants and the Placement Agent’s Warrants.
2.08. Prior
Sales. No securities of the Company have been sold by the Company
or by, or on behalf of, or for the benefit of, any person or persons
controlling, controlled by, or under common control with the Company at any
time
prior to the date hereof, except as set out in the Memorandum. No
prior securities sales by the Company or any affiliate are required to be
integrated with the proposed sale of the Units such that the availability of
Regulation D or any other claimed exemption from the registration requirements
of the Act would be made unavailable to the offer and sale of the
Units.
2.09. Litigation. There
is and at the Closing Date there will be no action, suit or proceeding before
any court or governmental agency, authority or body pending or to the knowledge
of the Company threatened which might result in judgments against the Company,
or its officers, directors, employees or agents which the Company is obligated
to indemnify, not adequately covered by insurance and which collectively might
result in any material adverse change in the condition (financial or otherwise),
the business or the prospects of the Company or would materially affect the
properties or assets of the Company.
2.10. Finder. No
person has acted as a finder in connection with the transactions contemplated
herein, and the Company will indemnify the Placement Agent with respect to
any
claim for finder's fees in connection herewith. The Company further
represents that it has no management or financial consulting or advisory
agreement with anyone except as set forth in the Memorandum. The
Company additionally represents that no officer, director, or 5% or greater
shareholder of the Company is, directly or indirectly, associated with a
National Association of Securities Dealers, Inc. member broker-dealer, other
than such persons as the Company has advised the Placement Agent in writing
are
so associated.
2.11. Contracts. Each
contract to which the Company is a party and to which reference is made in
the
Memorandum and/or the SEC Filings has been duly and validly executed, is in
full
force and effect in all material respects in accordance with their respective
terms, and none of such contracts has been assigned by the Company; and the
Company knows of no present situation or condition or fact which would prevent
compliance with the terms of such contracts, as amended to
date. Except for amendments or modifications of such contracts in the
ordinary course of business, the Company has no intention of exercising any
right which it may have to cancel any of its obligations under any of such
contracts, and has no knowledge that any other party to any of such contracts
has any intention not to render full performance under such
contracts.
2.12. Tax
Returns. The Company has filed all federal, state and municipal
tax returns which are required to be filed, and has paid all taxes shown on
such
returns and on all assessments received by it to the extent such taxes have
become due. All other taxes with respect to which the Company is
obligated have been paid or adequate accruals have been set up to cover any
such
unpaid taxes, including all federal and state withholding and FICA
payments.
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June
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2.13. Property. Except
as otherwise set forth in the Memorandum and the SEC Filings, the Company has
good title, free and clear of all liens, encumbrances and defects, except liens
for current taxes not due and payable, to all property and assets that are
described in the Memorandum and the SEC Filings as being owned by the Company,
subject only to such exceptions as are not material and do not adversely affect
the present or prospective business of the Company. All of the
claims, options to lease, leases and subleases material to the business of
the
Company under which the Company holds or uses any real or personal property,
including those described or referred to in the Memorandum and the SEC Filings,
are in full force and effect, and the Company is not in default in respect
of
any of the terms or provisions of any such claims, options to lease, leases
or
subleases, and no claim of any sort has been asserted by anyone adverse to
the
Company's rights under any such claims, options to lease, leases or subleases
or
affecting or questioning the Company's rights to the continued possession of
the
claimed, optioned, leased or subleased property covered by such claim, options
to lease, lease or sublease.
2.14. Authority. The
execution and delivery by the Company of this Agreement has been duly
authorized, and this Agreement is the valid, binding and legally enforceable
obligation of the Company.
2.15. Use
of Proceeds. The Company will apply the proceeds from the sale of
the Units to the purposes set forth in the Memorandum. The Company
will also establish procedures to ensure proper application and stewardship
of
such proceeds.
2.16. No
Limitations on Payment of Dividends. Except as otherwise set
forth in the Memorandum, there are no limitations, either contractual or
otherwise, nor will the Company enter into any agreement with any other party,
which prevents or limits the Company's ability to declare or pay dividends
on
its Common Stock.
SECTION
3
Issue,
Sale and Delivery of the Units
3.01. Placement
Agent Appointment. The Company hereby appoints the Placement
Agent as its exclusive agent until July 10, 2006, which period may be extended
to July 18, 2006, by mutual consent of the Company and the Placement Agent
(the
"Escrow Date"), to solicit purchasers for 730,000 Units on a "best efforts,
all-or-none" basis and thereafter to solicit purchasers for an additional
1,2750,000 Units on a "best efforts" basis until the offering is terminated
as
provided herein; and the Placement Agent, on the basis of the representations
and warranties herein contained, but subject to the terms and conditions herein
set forth, accepts such appointment and agrees to use its best efforts to find
purchasers for the Units at the price of $3.00 per Unit, provided that the
Company reserves the right to reject in good faith any prospective investor
("Investor") and no commission shall be payable to the Placement Agent in
respect of any proposed sale to any rejected Investor. No other
person will be or has been authorized to solicit purchasers for the Units,
except those persons selected by the Placement Agent. Each Investor
must subscribe for at least 10,000 Units ($30,000), and must certify to the
Company that such investor is an "Accredited Investor" as defined in Rule 501(a)
of Regulation D. Notwithstanding the above, the Company and the
Placement Agent may mutually agree to accept a subscription for fewer than
10,000 Units.
3.02. Escrow
Account. It is hereby agreed between the Company and the
Placement Agent that unless 730,000 Units ("Escrow Units") are sold and paid
for
by Investors by the Escrow Date, this Agreement shall automatically be
terminated and the entire proceeds received from the sale of the Units shall
be
returned to the Investors, without deduction therefrom or interest
thereon.
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If
the
Escrow Units are sold by the Escrow Date, the Company and the Placement Agent
may continue the offering until all of the Units are sold or until they agree
to
terminate the offering. The proceeds from the sale of at least the
first 730,000 Units ($2,190,000) shall be promptly deposited in an escrow
account ("Escrow Account") entitled “Daybreak Oil and Gas, Inc. Escrow Account"
with AMG Guaranty Trust, N.A. (the "Escrow Agent"). The agreement
establishing the Escrow Account ("Escrow Agreement") shall be in form and
content satisfactory to counsel for the Placement Agent and the
Company. The proceeds from any sale of Units after the First Closing
(hereinafter defined) may continue to be deposited to the Escrow
Account. If the Escrow Account is not used for such purpose, the
Company promptly shall pay the commission provided in Section 3.05 and the
non-accountable expense allowance as provided in Section 3.07 to the Placement
Agent.
3.03. Subscription
Agreement. Each Investor desiring to purchase Units will be
required to complete and execute a Subscription Agreement and, if applicable,
other offering documents. The Placement Agent shall have the right to
review such documents for each Investor and to reject the tender of any Investor
that it deems not acceptable. All documents concerning any Investor
the Placement Agent has not rejected will be promptly forwarded to the Company
at the address set forth below. The Company, upon receipt of the
documents, will determine within three (3) business days whether it wishes
to
accept the Investor. Payment for the Units subscribed for in the
Subscription Agreements that have been accepted by the Company is to be
delivered to the Company on the Closing Date (as hereinafter
defined).
3.04. Subscription
Acceptance. The acceptance of subscriptions for Units tendered by
Investors will be conditional upon (i) the tendering of Subscriptions for at
least 650,000 Units ("Minimum Subscriptions") by the Escrow Date, and (ii)
the
receipt, on the Closing Date, of the net proceeds from subscribers for the
Minimum Subscriptions ("Minimum Payments") less commissions due the Placement
Agent as provided hereinafter. If subscriptions are received for more
than 2,000,000 Units, the Company may (a) accept subscriptions for up to an
additional 400,000 Units, and/or (b) accept one subscription over another and/or
(c) allocate available Units among subscribers as it deems
appropriate.
3.05. Compensation
of Placement Agent. In consideration for the Placement Agent's
execution of this Agreement, and for the performance of its obligations
hereunder, the Company agrees to pay the Placement Agent a commission of ten
percent (10%) of the gross proceeds received from the sale of the Units;
provided, in the event Minimum Subscriptions are not received or Minimum
Payments are not made and the offering is terminated, the Placement Agent shall
not receive any commission. Any commissions payable to the Placement
Agent under this paragraph shall be payable on the Closing Date or as otherwise
provided herein.
3.06. Non-Accountable
Expense Allowance. The Placement Agent shall receive a
non-accountable expense allowance equal three percent (3%) ($.09 per Unit)
of
the gross proceeds from Units sold and paid for, payable at each
Closing.
3.07. Payment. Payment
for Units sold shall be made by the Escrow Agent to the Company at such place
as
may be agreed on among the Company and the Placement Agent, at such a time
and
on such a date, as shall be fixed by agreement between the parties, which in
no
case shall be later than eight (8) days after the Sales Termination
Date. The delivery of the Units against payment therefore is defined
as the "Closing" and the time and date thereof are defined as the "Closing
Date." The first Closing Date will be held when the Minimum Payments
are received ("First Closing").
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It
is
anticipated that there may be additional Closings as additional funds are
received, and the final Closing will be referred to as the "Final
Closing." The Final Closing could also be the First Closing in the
event that no Units are sold after the First Closing. As soon as
practicable after each Closing Date, the Company shall deliver by mail to each
Investor a certificate for the securities underlying the Units that have been
purchased and which contains a legend conforming to the requirements of Rule
502(d)(3) under the Act.
3.08. Obligations
of Placement Agent. The Company agrees that the obligations of
the Placement Agent under this Agreement: (i) shall not preclude the Placement
Agent from contemporaneously participating in the offering or underwriting
of
securities of other issuers; (ii) shall not impose any obligation on the
Placement Agent to require its registered representatives to offer or to sell
the Units, (iii) shall require the Placement Agent to make an effort to find
purchasers for the Units only to the extent the Placement Agent is motivated
to
do so by the compensation and other provisions of this Agreement, (iv) shall
not
otherwise limit or prevent the Placement Agent from carrying on its customary
business as a securities broker-dealer, and (v) shall not require the Placement
Agent to engage in any conduct which violates any law or industry standard
of
conduct applicable to the Placement Agent.
3.09. Representations
and Warranties. The parties hereto each represent that as of each
Closing Date the representations and warranties herein contained and the
statements contained in all the certificates heretofore or simultaneously
delivered by any party to another, pursuant to this Agreement, shall in all
material respects be true and correct.
3.10. Form
D. The Placement Agent agrees that it will timely supply the
Company from time to time with all information required from the Placement
Agent
for the completion of Form D to be filed with the Securities and Exchange
Commission and such additional information as the Company may reasonably request
to be supplied to the securities authorities of such states in which the Units
have been qualified for sale or are exempt from qualification or
registration. A copy of all such filings shall be delivered to the
Placement Agent and counsel for the Placement Agent promptly prior to their
being filed.
SECTION
4
Offering
of the Units on Behalf of the Company
4.01. Agent. In
offering the Units for sale, the Placement Agent shall offer the Units solely
as
an agent for the Company, and such offer shall be made upon the terms and
subject to the conditions set forth herein and in the Memorandum. The
Placement Agent shall commence making such offers as an agent for the Company
as
soon after the date of the Memorandum (the "Offering Date") as it in its sole
discretion may deem advisable; provided, however, that if the Placement Agent
does not commence such offering within ten (10) business days after the Offering
Date, it shall promptly advise the Company.
4.02. Selected
Dealers. The Placement Agent may offer and sell the Units for the
account of the Company through registered broker-dealers selected by it
("Selected Dealers") and pursuant to a form of Selected Dealer Agreement between
the Placement Agent and the Selected Dealers, pursuant to which the Placement
Agent may allow such concession (out of its commissions) as it may
determine. Such Agreement shall provide that the Selected Dealers are
acting as agents of the Company. On such sale or allotment by the
Placement Agent of any of the Units to Selected Dealers, the Placement Agent
shall require the Selected Dealer selling any such Units to agree to offer
and
sell the same on the terms and conditions of offering set forth in the
Memorandum and in this Agreement.
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SECTION
5
Memorandum
5.01. Delivery
and Form of Memorandum. The Company will procure, at its expense,
as many copies of the Memorandum as the Placement Agent may reasonably require
for the purposes contemplated by this Agreement and shall deliver said copies
of
the Memorandum within two (2) business days after execution of this Agreement
at
addresses, and in the quantity at each address, as specified by the Placement
Agent. Each Memorandum shall be of a size and format as determined by
the Placement Agent and shall be suitable for mailing and other
distribution.
5.02. Amendment
of Memorandum. If during the offering any event occurs or any
event known to the Company relating to or affecting the Company shall occur
as a
result of which the Memorandum as then amended or supplemented would include
an
untrue statement of a material fact, or omits to state any material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, or if it is necessary at any time after
the Offering Date to amend or supplement the Memorandum to comply with the
Act,
the Company will immediately notify the Placement Agent thereof and the Company
will prepare such further amendment to the Memorandum or supplemental or amended
Memorandum or Memoranda as may be required and furnish and deliver to the
Placement Agent, all at the cost of the Company, a reasonable number of copies
of the supplemental or amended Memorandum which as so amended or supplemented
will not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the Memorandum not misleading in the
light of the circumstances existing at the time it is delivered.
5.03. Use
of Memorandum. The Company authorizes the Placement Agent and the
Selected Dealers, if any, in connection with the offer and sale of the Units
and
all dealers to whom any of the Units may be sold by the Placement Agent or
by
any Selected Dealer, to use the Memorandum as from time to time amended or
supplemented, in connection with the offering and sale of the Units and in
accordance with the provisions of the Act, the Rules and Regulations thereunder
and applicable state securities laws.
SECTION
6
Covenants
of the Company
The
Company covenants and agrees with
the Placement Agent that:
6.01. Notification
of Changes. After the date hereof, the Company will not at any
time, whether before or after the date of the Memorandum, make any amendment
or
supplement to the Memorandum of which amendment or supplement the Placement
Agent shall not have previously been advised and a copy of which shall not
have
previously been furnished to the Placement Agent a reasonable time period prior
to the proposed date of such amendment or supplement, or which the Placement
Agent or counsel for the Placement Agent shall have reasonably objected to
in
writing solely on the grounds that it is not in compliance with the Act or
the
Rules and Regulations or with other federal or state laws.
6.02. Proceeding. The
Company will promptly advise the Placement Agent, and will confirm such advice
in writing, upon the happening of any event which, in the judgment of the
Company, makes any material statement in the Memorandum untrue or which requires
the making of any changes in the Memorandum in order to make the statements
therein not misleading, and upon the refusal of any state
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securities
administrator or similar official to qualify, or the suspension of the
qualification of the Units for offering or sale in any jurisdiction where the
Units are not exempt from qualification or registration, or of the institution
of any proceedings for the suspension of any exemption or for any other
purposes. The Company will use every reasonable effort to prevent any
such refusal to qualify or any such suspension and to obtain as soon as possible
the lifting of any such order, the reversal of any such refusal, and the
termination of any such suspension.
6.03. Blue
Sky Filings. As a condition of closing, the Company will take
whatever action is necessary in connection with filing or maintaining any
appropriate exemption from qualification or registration under the applicable
laws of such states as may be selected by the Placement Agent and agreed to
by
the Company, and continue such qualifications and exemptions in effect so long
as required for the purposes of the offer and sale of the Units.
6.04. Agreement
to Provide Information. The Company, at its own expense, will
prepare and give and will continue to give such financial statements and other
information to and as may be required by the Commission or the governmental
authorities of states in which the Units may be registered, qualified or exempt
from qualification or registration.
6.05. Costs
of Offering. The Company will pay, whether or not the
transactions contemplated hereunder are consummated or this Agreement is
terminated, all costs and expenses incident to the performance of its
obligations under this Agreement, including all expenses incident to the
authorization and issuance of the Units, any taxes incident to the initial sale
of the Units hereunder, the fees and expenses of the Company's counsel and
accountants, the costs and expenses incident to the preparation and printing
of
the Memorandum and any amendments or supplements thereto, the cost of preparing
and printing all exhibits to the Memorandum, the cost of furnishing to the
Placement Agent copies of the Memorandum as herein provided, and the cost of
any
filing with the Commission or pursuant to state securities laws, including
all
filing fees.
6.06. Use
of Proceeds. The Company will apply the proceeds from the sale of
the Units to the purposes set forth in the Memorandum.
6.07. Due
Diligence. Prior to the First Closing, the Company will cooperate
with the Placement Agent in such investigation as the Placement Agent may make
or cause to be made of the properties, business, management and operations
of
the Company in connection with the offering of the Units, and the Company will
make available to the Placement Agent in connection therewith such information
in its possession as the Placement Agent may reasonably request.
6.08. Documentation. Prior
to the First Closing, the Company will deliver to the Placement Agent true
and
correct copies of the articles and bylaws of the Company and of the minutes
of
all meetings of the directors and shareholders of the Company held since January
1, 2002; true and correct copies of all material contracts to which the Company
is a party; and such other documents and information as is reasonably requested
by the Placement Agent. To the extent such documents had previously
been provided, only amendments or updates need be furnished.
6.09. Management
Cooperation. The Company shall provide the Placement Agent, at
any time, an opportunity to meet with and question management of the Company
and
authorize management of the Company to speak at such meetings as the Placement
Agent reasonably requests.
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6.10. Information
to Investors. The Company shall make available to each Investor
at a reasonable time prior to his purchase of the Units the opportunity to
ask
questions and receive answers concerning the terms and conditions of the
offering, and to obtain any additional information that the Company has or
that
it can acquire without unreasonable effort or expense that is necessary to
verify the accuracy of information furnished to the Investors.
6.11. Compliance
with Conditions Precedent. The Company will use all reasonable
efforts to comply or cause to be complied with the conditions precedent to
the
several obligations of the Placement Agent specified in this
Agreement.
6.12. Reports. The
Company agrees to file with the Commission, and states where required, all
reports on Form D in accordance with the provisions of Regulation D promulgated
under the Act and to promptly provide copies of such reports to the Placement
Agent and its counsel.
SECTION
7
Indemnification
7.01. Indemnification
by Company. The Company agrees to indemnify, defend and hold
harmless the Placement Agent, its agents, managers, members, representatives,
guarantors, sureties and each person who controls the Placement Agent within
the
meaning of either Section 15 of the Act or Section 20 of the Securities Exchange
Act of 1934 ("Indemnified Persons") from and against any and all losses, claims,
damages, liabilities or expenses, joint or several, (including reasonable legal
or other expenses incurred by each such person in connection with defending
or
investigating any such claims or liabilities, whether or not resulting in any
liability to such Indemnified Persons) which they or any of them may incur
under
the Act, or any state securities law and the Rules and Regulations or the rules
and regulations under any state securities laws or any other statute or at
common law or otherwise and to reimburse such Indemnified Persons for any legal
or other expense (including the cost of any investigation and preparation)
incurred by any of them in connection with any litigation, whether or not
resulting in any liability, but only insofar as such losses, claims, damages,
liabilities and expenses arise out of or are based upon any untrue statement
or
alleged untrue statement of a material fact contained in the Memorandum, the
SEC
Filings, or any amendment or supplement thereto, or any authorized sales
literature or any application or other document filed with the Commission or
in
any state or other jurisdiction in order to obtain and exemption from the
securities registration requirements for the Units under the securities laws
thereof, or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or the failure to comply with the security registration requirement
of the Act or any applicable state law; provided, however, that the indemnity
agreement contained in this Section 7.01 shall not apply to amounts paid in
settlement of any such litigation if such settlements are effected without
the
consent of the Company, nor shall it apply to any Indemnified Persons in respect
of any such losses, claims, damages, liabilities or actions arising out of
or
based upon any such untrue statement or alleged untrue statement, or any such
omission or alleged omission, if such statement or omission was made in reliance
upon information furnished in writing to the Company by such Indemnified Persons
specifically for use in connection with the preparation of the Memorandum or
any
such amendment or supplement thereto. This indemnity agreement is in
addition to any other liability that the Company may otherwise have to the
Indemnified Persons.
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7.02. Notification
to Company. The Indemnified Persons agree to notify the Company
promptly of the commencement of any litigation or proceeding against the
Indemnified Persons, of which it may be advised, in connection with the offer
and sale of any of the Units of the Company, and to furnish to the Company
at
its request copies of all pleadings therein and permit the Company to be an
observer therein and apprise it of all the developments therein. In
case of commencement of any action in which indemnity may be sought from the
Company on account of the indemnity agreement contained in Section 7.01, the
Indemnified Persons within ten (10) days after the receipt of written notice
of
the commencement of any action against the Indemnified Persons shall notify
the
Company in writing of the commencement thereof. The failure to notify
the indemnifying party shall not relieve it of any liability that it may have
to
an Indemnified Party, except to the extent that the indemnifying party did
not
otherwise have knowledge of the commencement of the action and the indemnifying
party’s ability to defend against the action was prejudiced by such
failure. Such failure shall not relieve the indemnifying party from
any other liability that it may have to the Indemnified Party. In
case any such action shall be brought against the Indemnified Persons of which
the Indemnified Persons shall have notified the Company of the commencement
thereof, the Company shall be entitled to participate in (and to the extent
that
it shall wish, to direct) the defense thereto at its own expense, but such
defense shall be conducted by counsel of recognized standing and reasonably
satisfactory to the Indemnified Persons in such litigation. After
notice that the Company elects to direct the defense, the Company will not
be
liable for any legal or other expenses incurred by the Indemnified Persons
without the prior written consent of the Company. The Company shall
not be liable for amounts paid in settlement of any litigation if such
settlement was effected without its consent.
7.03. Indemnification
by Placement Agent. The Placement Agent agrees to indemnify and
hold harmless the Company, its agents, officers, directors, representatives,
guarantors, sureties and each person who controls the Company within the meaning
of either Section 15 of the Act or Section 20 of the Securities Exchange Act
of
1934 from and against any and all losses, claims, damages, liabilities or
expenses, joint or several, (including reasonable legal or other expenses
incurred by each such person in connection with defending or investigating
any
such claims or liabilities, whether or not resulting in any liability to such
person) which they or any of them may incur under the Act, or any state
securities law and the Rules and Regulations or the rules and regulations under
any state securities laws or any other statute or at common law or otherwise
and
to reimburse persons indemnified as above for any legal or other expense
(including the cost of any investigation and preparation) incurred by any of
them in connection with any litigation, whether or not resulting in any
liability, but only insofar as such losses, claims, damages, liabilities and
litigation arise out of or are based upon any statement in or omission from
the
Memorandum or any amendment or supplement thereto, or any application or other
document filed with the Commission or in any state or other jurisdiction in
order to qualify the Units under the securities laws thereof, or any information
furnished pursuant to Section 3.10 hereof, if such statements or omissions
were
made in reliance upon information furnished in writing to the Company by the
Placement Agent or on its behalf specifically for use in connection with the
preparation of the Memorandum or amendment or supplement thereto or application
or document filed. This indemnity agreement is in addition to any
other liability which the Placement Agent may otherwise have to the Company
and
other indemnified persons.
7.04. Notification
to Placement Agent. The Company and other Indemnified Persons
agree to notify the Placement Agent promptly of commencement of any litigation
or proceedings against the Placement Agent or other Indemnified Persons, in
connection with the offer and sale of any of the Units and to furnish to the
Placement Agent, at its request, copies of all pleadings therein and permit
the
Placement Agent to be an observer therein and apprise the Placement Agent of
all
developments therein, all at the Company's expense. In case of
commencement of any action in which indemnity may be sought from the Placement
Agent on account of the indemnity agreement contained in Section 7.03,
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the
Company or other Indemnified Persons shall notify the Placement Agent of the
commencement thereof in writing within ten (10) days after the receipt of
written notice of the commencement of any action against the Company or against
any other person indemnified, shall notify the Placement Agent in writing of
such notification. The failure to notify the indemnifying party shall
not relieve it of any liability that it may have to an Indemnified Party, except
to the extent that the indemnifying party did not otherwise have knowledge
of
the commencement of the action and the indemnifying party’s ability to defend
against the action was prejudiced by such failure. Such failure shall
not relieve the indemnifying party from any other liability that it may have
to
the Indemnified Party. . In case any such action shall be
brought against the Company or any other person indemnified of which the Company
shall have notified the Placement Agent of the commencement thereof, the
Placement Agent shall be entitled to participate in (and to the extent that
it
shall wish, to direct) the defense thereto at its own expense, but such defense
shall be conducted by counsel of recognized standing and reasonably satisfactory
to the Company or other persons indemnified in such litigation. After
notice that the Placement Agent elects to direct the defense, the Placement
Agent will not be liable for any legal or other expenses incurred by the
indemnified party without the prior written consent of the Placement
Agent. The Placement Agent shall not be liable for amounts paid in
settlement of any litigation if such settlement was effected without its
consent.
7.05. Indemnification
of Selected Dealers. The Company agrees to indemnify Selected
Dealers, if any, and its agents, officers, directors, representatives,
guarantors and sureties on substantially the same terms and conditions as it
indemnifies the Placement Agent and Indemnified Persons pursuant to Section
7.01
provided that each such Selected Dealer agrees in writing with the Placement
Agent to indemnify the Company and its agents, officers, directors,
representatives, guarantors and sureties on substantially the same terms and
conditions as the Placement Agent indemnifies the Company in Section
7.03. The Company hereby authorizes the Placement Agent to enter into
agreements with Selected Dealers providing for such indemnity by the
Company.
7.06. Contribution. If
the indemnification provided for in Sections 7.01, 7.03 and 7.05 is unavailable
to an indemnified party in respect of any losses, claims, damages or liabilities
referred to therein, then each indemnifying party under either such paragraph,
in lieu of indemnifying such indemnified party thereunder, shall contribute
to
the amount paid or payable by such indemnified party as a result of such losses,
claims, damages or liabilities: (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company on the
one
hand and by the Placement Agent or Selected Dealer on the other from the
offering and sale of the Units, or (ii) if the allocation provided by clause
(i)
above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause (i) above but
also the relative fault of the Company on the one hand and of the Placement
Agent or Selected Dealer on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities, as
well
as any other relevant equitable considerations. The relative benefits
received by the Company on the one hand and the Placement Agent or Selected
Dealer on the other shall be deemed to be in the same proportion as the total
net proceeds from the offering (before deducting expenses) received by the
Company bears to the total commissions received by the Placement Agent or
Selected Dealer, as in each case set forth in the Memorandum. The
relative fault of the Company and of the Placement Agent or Selected Dealer
shall be determined by reference to, among other things, whether the untrue
or
alleged untrue statement of a material fact or the omission to state a material
fact relates to information supplied by the Company or by the Placement Agent
or
Selected Dealer and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission.
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The
Company and the Placement Agent
agree that it would not be just and equitable if contribution pursuant to this
Section 7 were determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable considerations referred
to in the immediately preceding paragraph. The amount paid or payable
by an indemnified party as a result of the losses, claims, damages and
liabilities referred to in the immediately preceding paragraph shall be deemed
to include, subject to the limitations set forth above, any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding
the provisions of this Section 7, the Placement Agent shall not be required
to
contribute any amount in excess of the amount by which the total price at which
the Units sold by it and distributed exceeds the amount of any damages which
such Placement Agent otherwise has been required to pay by reason of such untrue
or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution hereunder from any person
who was not guilty of such fraudulent misrepresentation.
7.07. Limitation
of Legal Expenses. Notwithstanding anything herein to the
contrary, the indemnification for legal expenses included in Sections 7.01,
7.03
And 7.05 shall be limited to the legal expenses of one law firm, except in
the
event of a bona fide conflict of interest, in which event such legal expenses
shall be limited to the legal expenses of two law firms.
SECTION
8
Effectiveness
of Agreement
8.01. This
Agreement shall become effective upon execution by all parties
hereto.
SECTION
9
Conditions
of the Placement Agent's Obligations
The
Placement Agent's obligations to
act as agent of the Company hereunder shall be subject to the accuracy of the
representations and warranties on the part of the Company herein contained,
to
the performance by the Company of all its agreements herein contained, to the
fulfillment of or compliance by the Company with all covenants and conditions
hereof, and to the following additional conditions:
9.01. No
Material Changes. Except as contemplated herein or as set forth
in the Memorandum, during the period subsequent to the date of the last balance
sheet included in the Memorandum the Company: (a) shall have
conducted its business in the usual and ordinary manner as the same was being
conducted on the date of the last balance sheet included in the Memorandum,
and
(b) except in the ordinary course of its business, the Company shall not have
incurred any material liabilities, claims or obligations (direct or contingent)
or disposed of any material portion of its assets, or entered into any material
transaction or suffered or experienced any materially adverse change in its
condition, financial or otherwise. The capitalization and short term
debt of the Company shall be substantially the same as at the date of the latest
balance sheet included in the Memorandum, without considering the proceeds
from
the sale of the Units, other than as may be set forth in the Memorandum, and
except as the financial statements of the Company reflect the result of
continued losses from operations consistent with prior periods.
9.02. Authorization. The
authorization for the issuance of the securities comprising the Units and the
use of the Memorandum and all corporate proceedings and other legal matters
incident thereto and to this Agreement shall be reasonably satisfactory in
all
respects to counsel to the Placement Agent.
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9.03. Opinion. The
Company shall have furnished to the Placement Agent the opinion, dated each
Closing Date and addressed to the Placement Agent, from counsel to the Company,
to the effect that based upon a review by them of the Memorandum, the Company's
certificate of incorporation, bylaws, and relevant corporate proceedings and
contracts, and examination of such statutes they deem necessary and such other
investigation by such counsel as they deem necessary to express such
opinion:
(a) The
Company has been duly incorporated and validly exists as a corporation in good
standing under the laws of the State of Washington and has the corporate power
and authority to own its properties and to carry on its business as described
in
the Memorandum.
(b) The
Company is duly qualified and in good standing as a foreign corporation
authorized to do business in all jurisdictions in which the character of the
properties owned or held under lease or the nature of the business conducted
requires such qualification and in which the failure to qualify would have
a
materially adverse effect on the business of the Company.
(c) On
the basis of a review of the contents of the Memorandum and related matters,
and
based upon the advice of the Company, but without independent verification
by
such counsel of the accuracy, completeness or fairness of the statements
contained in the Memorandum thereto, and without expressing any opinion as
to
the financial statements or other financial data contained
therein: (i) nothing has come to such counsel's attention which leads
them to believe that the Memorandum, as amended or supplemented by any
amendments or supplements thereto made by the Company prior to completion of
the
Offering, does not comply as to form in all material respects with the
requirements of applicable laws; (ii) they do not know of any contract or other
document required to be described in or filed as an exhibit to the Memorandum
which is not so described or filed; and (iii) to the best of their knowledge,
no
order suspending the Offering has been issued and no proceedings for that
purpose have been instituted or are pending or contemplated by any applicable
regulatory authority.
(d) The
authorized and outstanding capital stock of the Company is as set forth in
the
Memorandum; the Units, Shares Warrants, and Placement Agent's Warrants conform
in all material respects to the statements concerning them in the Memorandum;
the outstanding common stock of the Company contains no preemptive rights;
the
Units, Shares, Warrants and Placement Agent's Warrants have been, and the shares
of Common Stock issuable upon exercise of the Warrants and Placement Agent's
Warrants, will be, duly and validly authorized and, upon issuance thereof and
payment therefore in accordance with this Agreement, validly issued, fully
paid
and nonassessable, and will not be subject to the preemptive rights of any
shareholder of the Company.
(e) The
Warrants and Placement Agent's Warrants have been duly and validly authorized
and, when accepted and delivered by the Company, will be valid and binding
obligations of the Company, enforceable in accordance with their respective
terms.
(f) A
sufficient number of shares of Common Stock have been duly reserved for issuance
upon the exercise of the Warrants and the Placement Agent's
Warrants.
(g) The
issuance and sale of the Units, the Shares, the Warrants, and the Placement
Agent's Warrants, the consummation of the transactions herein contemplated,
and
the compliance
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with
the
terms of this Agreement will not conflict with or result in a breach of any
of
the terms, conditions, or provisions of or constitute a default under the
certificate of incorporation or bylaws of the Company; nor, to their knowledge,
will they conflict with or result in a breach of any of the terms, conditions,
or provisions of any note, indenture, mortgage, deed of trust, or other
agreement or instrument to which the Company is a party or by which the Company
or any of its property is bound; or any existing law (provided this paragraph
shall not relate to federal or state securities laws), order, rule, regulation,
writ, injunction, or decree known to such counsel of any government,
governmental instrumentality, agency, body, arbitration tribunal, or court,
domestic or foreign, having jurisdiction over the Company or its
property.
(h) This
Agreement has been duly authorized and executed by the Company and is a valid
and binding agreement of the Company.
As
to all factual matters, including
without limitation the issuance of stock certificates and receipt of payment
therefor, the states in which the Company transacts business and the adoption
of
resolutions reflected by the Company's minute book, such counsel may rely on
the
certificate of an appropriate officer of the Company. Counsel's
opinion as to the validity and enforceability of any and all contracts and
agreements referenced herein may exclude any opinion as to the validity or
enforceability of any indemnification or contribution provisions thereof, or
as
the validity or enforceability of any such contract or agreement may be limited
by bankruptcy or other laws relating to or affecting creditors' rights generally
and by equitable principles.
9.04. Officers'
Certificate. The Company shall furnish to the Placement Agent a
certificate signed by the President and Chief Financial Officer of the Company,
dated as of each Closing Date, to the effect that:
(a) The
representations and warranties of the Company in this Agreement are true and
correct in all material respects at and as of the date of the certificate,
and
the Company has complied in all material respects with all the agreements and
has satisfied in all material respects all the conditions on its part to be
performed or satisfied at or prior to the date of the certificate.
(b) Each
has carefully examined the Memorandum and any amendments and supplements thereto
and the SEC Filings referred to in the Memorandum, and to the best of their
knowledge the Memorandum and any amendments and supplements thereto, and/or
the
SEC Filings, contain all statements required to be stated therein, and all
statements contained therein are true and correct, and neither the Memorandum
nor any amendment or supplement thereto, nor the SEC Filings, include any untrue
statement of a material fact or omits to state any material fact required to
be
stated therein or necessary to make the statements therein not misleading and,
during the Offering, the Memorandum will be amended or supplemented to include
all information necessary to be included in the Memorandum so that it does
not
become inaccurate or misleading.
(c) No
order prohibiting the offer or sale of the Units has been issued and, to the
best of the knowledge of the respective signers, no proceeding for that purpose
has been initiated or is threatened by the Commission or any applicable
state.
(d) Except
as set forth in the Memorandum, since the respective dates of the periods for
which information is given in the Memorandum and prior to the date of the
certificate,
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(i)
there
has not been any materially adverse change, financial or otherwise, in the
affairs or condition of the Company, and (ii) the Company has not incurred
any
material liabilities, direct or contingent, or entered into any material
transactions, otherwise than in the ordinary course of business.
(e) Subsequent
to the date of the Memorandum, no dividends or distribution whatever have been
declared and/or paid on or with respect to the Common Stock of the
Company.
9.05. State
Qualification or Exemption. The Company shall use its best
efforts to secure an exemption from registration or qualification in those
states in which the Units are sold, and the offer and sale of the Units shall
not be subject to any stop order or other proceeding on the Closing
Date.
9.06. Satisfactory
Form of Documents. All opinions, letters, certificates and
evidence mentioned above or elsewhere in this Agreement shall be deemed to
be in
compliance with the provisions hereof only if they are in form and substance
satisfactory to counsel to the Placement Agent, whose approval shall not be
unreasonably withheld.
9.07. Adverse
Events. Between the date hereof and each Closing Date, the
Company shall not have sustained any loss on account of fire, explosion, flood,
accident, calamity or any other cause, of such character as materially adversely
affects its business or property considered as an entity, whether or not such
loss is covered by insurance.
9.08. Litigation. Between
the date hereof and each Closing Date, there shall be no litigation instituted
or threatened against the Company and there shall be no proceeding instituted
or
threatened against the Company before or by any federal or state commission,
regulatory body or administrative agency or other governmental body, domestic
or
foreign, wherein an unfavorable ruling, decision or finding would materially
adversely affect the business, franchises, licenses, operations or financial
condition or income of the Company.
9.09. Certificates. Any
certificate signed by an officer of the Company and delivered to the Placement
Agent shall be deemed a representation and warranty by the Company to the
Placement Agent as to the statements made therein.
SECTION
10
Termination
10.01. Failure
to Comply with Agreement. This Agreement may be terminated by
either party hereto by notice to the other party in the event that such party
shall have failed or been unable to comply with any of the terms, conditions
or
provisions of this Agreement required by the Company or the Placement Agent
to
be performed, complied with or fulfilled by it within the respective times
herein provided for, unless compliance therewith or performance or satisfaction
thereof shall have been expressly waived by the non-defaulting party in
writing.
10.02. Government
Restrictions. This Agreement may be terminated by either party by
notice to the other party at any time if, in the judgment of either party,
payment for and delivery of the Units are rendered impracticable or inadvisable
because: (i) additional material governmental restrictions not in
force and effect on the date hereof shall have been imposed upon the trading
in
securities generally, or
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minimum
or maximum prices shall have been generally established on the New York Stock
Exchange, the Chicago Board of Trade or the Commodity Futures Trading
Commission, or trading in securities generally on such Exchange, Board, or
Commission shall have been suspended, or a general moratorium shall have been
established by federal or state authorities; or (ii) a war or other national
calamity shall have occurred; or (iii) the condition of any matter affecting
the
Company or any other circumstance is such that it would be undesirable,
impracticable or inadvisable in the judgment of the Placement Agent to proceed
with this Agreement or with the sale of the Units.
10.03. Liability
on Termination. Any termination of this Agreement pursuant to
this Section 10 shall be without liability of any character (including, but
not
limited to, loss of anticipated profits or consequential damages on the part
of
any party thereto); except that the Company and the Placement Agent shall be
obligated to pay, respectively, all losses, claims, damages or liabilities,
joint or several, under Section 7.01 in the case of the Company, Section 7.03
in
the case of the Placement Agent and Section 7.06 as to all parties.
SECTION
11
Placement
Agent's Representations and Warranties
The
Placement Agent represents and
warrants to and agrees with the Company that:
11.01. Registration. The
Placement Agent is registered as a broker-dealer with the Securities and
Exchange Commission, and is a member in good standing of the National
Association of Securities Dealers, Inc. ("NASD"). The Placement Agent
is registered or otherwise qualified to sell the Units in each state in which
the Placement Agent sells such Units or is exempt from such registration or
qualification.
11.02. Ability
to Act as Agent. There is not now pending or, to the knowledge of
the Placement Agent, threatened against the Placement Agent any action or
proceeding of which the Placement Agent has been advised, either in any court
of
competent jurisdiction, before the NASD, the Securities and Exchange Commission
or any state securities commission concerning the Placement Agent's activities
as a broker or dealer, nor has the Placement Agent been named as a "cause"
in
any action or proceeding, any of which may be expected to have a material
adverse effect upon the Placement Agent's ability to act as agent to the Company
as contemplated herein.
11.03. Right
to Terminate Agreement. In the event any action or proceeding of
the type referred to in Section 11.02 above (except for actions referred to
in
the Memorandum) shall be instituted or, to the knowledge of the Placement Agent,
threatened against the Placement Agent at any time prior to the effective date
hereunder, or in the event there shall be filed by or against the Placement
Agent in any court pursuant to any federal, state, local or municipal statute,
a
petition in bankruptcy or insolvency or for reorganization or for the
appointment of a receiver or trustee of its assets or if the Placement Agent
makes an assignment for the benefit of creditors, the Company shall have the
right on three (3) days' written notice to the Placement Agent to terminate
this
Agreement without any liability to the Placement Agent of any kind.
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SECTION
12
Placement
Agent's Warrants
12.01. Warrants. If
at least 650,000 Units are sold, the Company shall sell to the Placement Agent,
for a total of $100, warrants to purchase shares of Common Stock ("Placement
Agent's Warrants") on the basis of three warrants for each 10 Units sold in
the
Offering. Each Placement Agent's Warrant will entitle the holder to
purchase one share of Common Stock, exercisable at $1.00 per
share. The Placement Agent's Warrants will be exercisable for a
period of seven (7) years after their issuance; and if the Placement Agent's
Warrants are not exercised during this term, they shall, by their terms,
automatically expire. The Company shall set aside and at all times
have available a sufficient number of shares of its Common Stock to be issued
upon the exercise of the Placement Agent's Warrants.
12.02. Registration
Rights. The Company understands and agrees that if, at any time
during the eight-year period commencing the Closing Date, it should file a
Registration Statement with the Commission pursuant to the Act, for a public
offering of securities, either for the account of the Company or for the account
of any other person, the Company at its own expense, will offer to holders
of
Placement Agent's Warrants or shares of common stock previously issued upon
the
exercise thereof, the opportunity to register or qualify for public offering
the
Placement Agent's Warrants and shares of common stock underlying the Placement
Agent's Warrants or the shares so issued. This paragraph is not
applicable to a Registration Statement filed with the Securities and Exchange
Commission on Forms S-4 or S-8 or any other inappropriate forms; nor does it
apply to the public offering contemplated in the Memorandum with regard to
the
registration of the Warrant Shares.
In
addition to the rights above
provided, the Placement Agent’s Warrant will be subject to the Registration
Rights Agreement that is Exhibit B of the Memorandum.
12.03. Other
Provisions. The Placement Agent’s Warrant shall also contain
customary anti-dilution provisions and a cashless exercise
provision.
SECTION
13
Notice
Except
as otherwise expressly provided
in this Agreement:
13.01. Notice
to Company. Whenever notice is required by the provisions of this
Agreement to be given to the Company, such notice shall be in writing addressed
to the Company as provided below:
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60▇
▇.
▇▇▇▇ ▇▇▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: President
13.02. Notice
to Placement Agent. Whenever notice is required by the provisions
of this Agreement to be given to the Placement Agent, such notice shall be
given
in writing addressed to the Placement Agent as follows:
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Bathgate
Capital Partners
LLC
53▇▇
▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇
▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇
▇▇▇▇▇
Attn: ▇▇▇▇▇
▇. ▇.
▇▇▇▇▇▇, Senior Managing Partners
SECTION
14
Miscellaneous
14.01. Benefits. This
Agreement is made solely for the benefit of the Placement Agent, the Company,
their respective agents, officers, directors, managers, members,
representatives, guarantors, sureties and any controlling person referred to
in
Section 15 of the Act or Section 20 of the Securities Exchange Act of 1934,
and
their respective successors and assigns, and no other person shall acquire
or
have any right under or by virtue of this Agreement. The term
"successor" or the term "successors and assigns" as used in this Agreement
shall
not include any purchasers, as such, of any of the Units.
14.02. Survival. The
respective indemnities, agreements, representations, warranties, covenants
and
other statements of the Company or the Company's officers, as set forth in
or
made pursuant to this Agreement and the indemnity agreements of the Company
and
the Placement Agent contained in Section 7 hereof shall survive and remain
in
full force and effect, regardless of (i) any investigation made by or on behalf
of the Company or the Placement Agent or any affiliated persons thereof or
any
controlling person of the Company or of the Placement Agent, (ii) delivery
of or
payment for the Units and (iii) the Closing Date, and any successor of the
Company, the Placement Agent and Selected Dealers, or any controlling person,
or
other person indemnified by section 7, as the case may be, shall be entitled
to
the benefits hereof.
14.03. Governing
Law. The laws of the State of Colorado hereof will govern the
validity, interpretation, and construction of this Agreement and of each
part. The parties agree that any dispute that arises between them
relating to this Agreement or otherwise shall be submitted for resolution in
conformity with the Securities Arbitration Rules of the American Arbitration
Association. The parties agree that the situs of an arbitration
hearing before the arbitrators shall be in Denver, Colorado, and each party
shall request such situs.
14.04. Counterparts. This
Agreement may be executed in any number of counterparts, each of which will
constitute an original.
Please
confirm that the foregoing
correctly sets forth the Agreement between you and the Placement
Agent.
| Very truly yours, | |||
| BATHGATE CAPITAL PARTNERS LLC | |||
|
By:
|
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ | ||
| ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Senior Managing Partner | |||
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We
hereby confirm as of the date hereof
that the above letter sets forth the Agreement between the Placement Agent
and
us.
| DAYBREAK OIL AND GAS, INC. | |||
| July 3, 2007 | |||
|
Date
|
By:
|
/s/ ▇▇▇▇ ▇. ▇▇▇ | |
| ▇▇▇▇ ▇. ▇▇▇, CEO | |||