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Exhibit 10.16
AGENCY AGREEMENT
THIS AGENCY AGREEMENT is dated for purposes of reference as of March
21, 1997, and is entered into between MICROTEL INTERNATIONAL, INC., a Delaware
corporation (the "Issuer"), on the one hand, and YORKTON SECURITIES INC., an
Ontario corporation (the "Agent"), on the other hand, with respect to the
following facts:
A. The Issuer proposes to make a private placement (the "Private
Placement") of units ("Units"), each comprised of one share (individually, a
"Share," and collectively, the "Shares") of the Issuer's common stock, par
value of 1/3 cent per share ("Common Stock"), and one-quarter of a detachable
non-transferable redeemable Common Stock purchase warrant (each whole warrant,
individually, a "Warrant," and collectively, the "Warrants"). The Issuer
desires to raise minimum gross proceeds of $5,000,000 and maximum gross
proceeds of $10,000,000 through the Private Placement. All dollar amounts set
forth in this Agreement are denominated in U.S. dollars. The Units, Shares,
Warrants and Warrant Shares are sometimes collectively referred to in this
Agreement as the "Securities."
B. On the terms and subject to the conditions of this Agreement,
the Issuer wishes to appoint the Agent to act as its exclusive agent for
purposes of placing the Units in the Private Placement and the Agent is willing
to accept such appointment.
In consideration of the mutual promises contained in this Agreement,
the parties agree as follows:
1. Appointment of Agent.
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1.1 On the terms and subject to the conditions of this Agreement,
the Issuer appoints the Agent as its exclusive agent for purposes of placing
the Units in the Private Placement, and the Agent accepts the appointment and
agrees to use its best efforts to find and introduce to the Issuer potential
investors to purchase the Units. For control purposes, all subscribers in the
Private Placement (the "Subscribers") shall be deemed the Agent's clients.
1.2 The Agent may associate with other qualified securities
dealers and may allow members of any such selling group such part of Agent's
commission, fees or expense reimbursement as Agent may determine; provided,
however, that each selling group member must agree in writing to comply with
the requirements of Regulation S in connection with the Private Placement.
1.3 The Private Placement shall be made on the terms and subject
to the conditions stated in this Agreement and in the subscription agreements
between the Issuer and each of the Subscribers (the "Subscription Agreements"),
each of which is dated for reference purposes March 21, 1997.
2. Terms of the Private Placement.
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2.1 The Agent shall use its best efforts to raise for the benefit
of the Issuer, pursuant to the Private Placement, minimum gross proceeds of
$5,000,000 ("Minimum Proceeds") and
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maximum gross proceeds of $10,000,000 ("Maximum Proceeds"). The closing of the
Private Placement (the "Closing") shall be governed by the terms of Section 8
of this Agreement. As provided in Section 8, there may be more than one
Closing of the Private Placement. The Private Placement will terminate on the
earlier of (i) the date on which the Maximum Proceeds are received by the
Issuer, and (ii) April 18, 1997, unless extended by the mutual agreement of the
Issuer and the Placement Agent (such date, as same may be extended, is referred
to herein as the "Termination Date"). In the event that the Issuer does not
receive the Minimum Proceeds by the Termination Date, the Private Placement
will be terminated and all subscription funds will be returned by the Agent to
the Subscribers without interest thereon or deduction therefrom.
2.2 The price per Unit issued in the Private Placement (the "Price
Per Unit") shall, for purposes of the First Closing, be $2.50, and shall, for
purposes of the Second Closing, be equated to 80% of the average closing bid
price of the Issuer's Common Stock as reported by the Nasdaq SmallCap Market
for the 10 trading days immediately preceding the date (the "Contract Date") on
which the Agent contracts with the Subscribers to purchase the Units (the
"Average Reported Price"), provided, however, that in no event will the Price
Per Unit for purposes of the Second Closing be less than $2.50 nor more than
$3.50. The Agent shall notify the Issuer of the Contract Date for each Closing
and shall confirm with the Issuer the proper calculation of the Price Per Unit
as provided in the previous sentence.
2.3 The number of Units issuable to each Subscriber shall be
determined by dividing the total purchase price paid by such Subscriber by the
applicable Price Per Unit. No fractional Units shall be issued in the Private
Placement. Any fractional Units shall be rounded down to the nearest whole
Unit.
2.4 Each whole Warrant will entitle the holder to purchase one
additional share of Common Stock (individually, a "Warrant Share," and
collectively, the "Warrant Shares") at an exercise price ("Exercise Price")
which, for purposes of the First Closing, shall be $3.45 and, for purposes of
the Second Closing, shall be equated to a 30% premium to the Average Reported
Price, subject to adjustments as provided in the form of the Warrants attached
to the Issuer's Confidential Private Offering Memorandum dated March 21, 1997
(the "Offering Memorandum"). The Warrants will be exercisable until 5:00 p.m.
Pacific time on the date of the third anniversary of the First Closing of the
Private Placement. The Warrants will be redeemable by the Issuer at a price of
$.05 per Warrant, provided that (i) the Warrant Shares have been registered for
resale pursuant to the Securities Act, (ii) written notice of the redemption
(the "Redemption Notice") is delivered by the Issuer to the holders not less
than 30 days prior to the date of redemption (the "Redemption Date"), and (iii)
the last sale price of the Common Stock on the Nasdaq SmallCap Market or
National Market System, or on a national securities exchange in the United
States, for ten consecutive trading days is equal to or exceeds 150% of the
Exercise Price of the Warrants (as adjusted). Following delivery of the
Redemption Notice, the holders may continue to exercise the Warrants in whole
or in part until the last business day prior to the Redemption Date.
2.5 Each of the Securities will be issued with a restrictive
legend substantially as provided in the form of the Subscription Agreement and
the form of the Warrants attached as exhibits to the Offering Memorandum.
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2.6 The Issuer will grant to Subscribers the registration rights
set forth in Section 9 of the Subscription Agreements.
2.7 The Agent shall obtain from each Subscriber a fully completed
and executed Subscription Agreement, together with payment in full for the
Units subscribed for thereunder.
3. Representations and Warranties of the Issuer.
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The Issuer hereby represents and warrants as of the date of this
Agreement and at each Closing (with the understanding that the Agent will be
relying upon such representations and warranties in entering into this
Agreement) that, except as otherwise disclosed in the Offering Documents (as
such term is defined in Section 7.2 of the Subscription Agreements) or in
Schedule A attached hereto:
3.1 Organization. The Issuer has been duly incorporated and is
validly existing in good standing as a corporation under the laws of the State
of Delaware. On March 26, 1997, XIT Acquisition Inc., a wholly-owned
subsidiary of the Issuer ("Sub"), merged with and into XIT Corporation (the
"Merger"), whereby XIT Corporation became a wholly-owned subsidiary of the
Issuer and XIT Corporation's subsidiaries became indirectly owned subsidiaries
of the Issuer. All of the Issuer's subsidiaries (which term, as used in this
Agreement, includes both wholly-owned and indirectly-owned subsidiaries) have
been duly organized and are validly existing in good standing under the laws of
the respective jurisdictions in which they have been organized.
3.2 Good Standing. The Issuer and its subsidiaries are duly
qualified to do business as foreign corporations in good standing in those
jurisdictions which require such qualification except to the extent that
failure to so qualify would not have a material adverse effect on the Issuer's
business, financial condition or results of operations.
3.3 Authority. The Issuer has corporate power and authority to
enter into this Agreement and perform its obligations hereunder, and the Issuer
and its subsidiaries have corporate power and authority to own their respective
properties and assets and to carry on their respective businesses as described
in the Offering Documents. All corporate action on the part of the Issuer, its
directors and stockholders necessary for the authorization, execution, delivery
and performance of this Agreement by the Issuer and the performance of all of
the Issuer's obligations hereunder has been duly taken.
3.4 Enforceability. This Agreement and the Subscription
Agreements, when executed and delivered by the Issuer, will, if duly
authorized, executed and delivered by the other respective parties to such
agreements, be valid and binding obligations of the Issuer, enforceable against
the Issuer in accordance with their terms, except to the extent that rights to
indemnity and contribution thereunder may be limited by federal or state
securities laws or the public policy underlying such laws and except as the
foregoing may be limited by bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium or other similar laws affecting the rights of
creditors generally and by general principles of equity. The Warrants and the
Agent's Warrants (as defined in Section 9.5) will, when executed and delivered
by the Issuer, be binding obligations of the Issuer, enforceable against the
Issuer in accordance with their terms, except as the foregoing may be limited
by
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bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or
other similar laws affecting the rights of creditors generally and by general
principles of equity.
3.5 No Violation. The execution and delivery of this Agreement
and the consummation of the transactions or performance of the obligations
contemplated by this Agreement do not and will not result in a breach of any
term of, or constitute a default under, the Issuer's charter or bylaws, any
statute, any indenture, mortgage, or other agreement or instrument to which the
Issuer or any of its subsidiaries is or are a party or by which any of them is
or are bound, or any order, writ, judgment or decree.
3.6 Actions and Claims. To the best of the Issuer's knowledge,
there are no actions or proceedings of any kind whatsoever outstanding,
pending, contemplated or threatened relating to the bankruptcy or insolvency of
the Issuer or any of its subsidiaries. To the best of its knowledge, there are
no other claims, actions, suits, judgments, investigations or proceedings of
any kind whatsoever outstanding, pending or threatened against or affecting the
Issuer, its subsidiaries, or the directors, officers or promoters of the Issuer
or its subsidiaries, at law or in equity or before or by any federal, state,
municipal or other governmental department, commission, board, bureau or agency
of any kind whatsoever which could materially affect its business or financial
condition and, to the best of its knowledge, there is no basis therefor.
3.7 Disclosure. The Offering Documents do not contain any untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements made therein, in light of the circumstances under
which they have been made, not misleading.
3.8 Authorized and Validly Issued Securities. The issued and
outstanding capital stock of the Issuer as of the dates set forth in the
Offering Documents is as disclosed in the Offering Documents, and the issued
and outstanding shares of Common Stock of the Issuer are fully paid and
non-assessable. The Issuer has sufficient authorized and unissued shares of
Common Stock to provide for the issuance and delivery of the Shares, the
Warrant Shares and the Agent's Warrant Shares. The Issuer's authorized capital
stock includes 25,000,000 shares of Common Stock with a par value of 1/3 cent
per share and 10,000,000 shares of Preferred Stock with a par value of $.01 per
share. The Shares, when issued in the manner contemplated by the provisions of
the Subscription Agreements, will be duly authorized and validly issued and
will be fully paid and non-assessable. The Warrant Shares, when issued in the
manner contemplated by the Warrants, will be duly authorized and validly issued
and will be fully paid and non-assessable. The Agent's Warrants Shares (as
defined in Section 9.5), when issued in the manner contemplated by the Agent's
Warrants, will be duly authorized and validly issued and will be fully paid and
non-assessable.
3.9 Convertible Securities. Other than (i) the Warrants which are
issuable under the Subscription Agreements, (ii) the Agent's Warrants which are
issuable under this Agreement, and (iii) an aggregate of 330,368 stock options
awarded to Barry Reifler and Henry Mourad in connection with the continuation
of their employment with the Issuer following the Merger, no securities
convertible or exchangeable into Common Stock of the Issuer or agreements,
warrants, options, rights or privileges for the purchase or other acquisition
of any unissued securities of the Issuer are outstanding.
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3.10 Intellectual Property Rights. The Issuer or its subsidiaries
own, possess or have access to adequate rights to use all material patents,
patent rights, inventions, trademarks, service marks, trade names, copyrights
and proprietary rights necessary for the conduct of their businesses as
described in the Offering Documents; and the Issuer has no knowledge of any
infringement of or conflict with rights of others, or any claims thereof, with
respect to any patents, patent rights, inventions, trademarks, service marks,
trade names, copyrights or other proprietary rights, the effect of which
infringement, conflict or claims would be materially adverse to the Issuer.
3.11 Financial Statements. The financial statements included in
the Offering Documents (the "Financial Statements") are true and correct in all
material respects and present fairly and accurately the financial position and
results of the operations of the Issuer and its subsidiaries and of XIT
Corporation and its subsidiaries for the periods shown therein, and the
Financial Statements have been prepared in accordance with accounting
principles generally accepted in the United States applied on a consistent
basis except for normal year-end adjustments.
3.12 Change in Circumstances. Since September 30, 1996, there has
not been any adverse material change of any kind whatsoever in the financial
position or condition of the Issuer (or of XIT Corporation prior to the Merger)
or of any of the Issuer's subsidiaries, or any damage, loss or other change of
circumstances of any kind whatsoever materially affecting the business or
assets of the Issuer or of any of its subsidiaries or the right or capacity of
the Issuer or of any of its subsidiaries to carry on their businesses.
3.13 Defaults. Since September 30, 1996, neither the Issuer nor
any of its subsidiaries has defaulted, or is currently in default (i) with
respect to the payment of interest or principal on any material indebtedness of
the Issuer or its subsidiaries, or (ii) under any material contract to which
the Issuer or any of its subsidiaries is a party.
3.14 Stop Orders. No order prohibiting the sale of the Issuer's
securities has been issued against the Issuer or, to Issuer's knowledge, its
directors, officers or promoters, and no proceedings for this purpose have been
instituted, are pending, or, to its knowledge, are contemplated or threatened.
3.15 Transfer Agent. American Securities Transfer, Inc., having
its principal office in Lakewood, Colorado, has been duly appointed as the
transfer agent for the Issuer's Common Stock.
3.16 Reporting Company. The Issuer has a class of securities
registered pursuant to Section 12(b) or 12(g) of the United States Securities
Exchange Act of 1934, as amended (the "Exchange Act") or is required to file
reports pursuant to Section 15(d) of the Exchange Act.
3.17 Exchange Act Reports. At the commencement of the Private
Placement, the Issuer had filed all the material required to be filed pursuant
to Section 13(a) or 15(d) of the Exchange Act for a period of at least the
twelve months immediately prior thereto, and the Issuer has since remained, and
continues to remain, current in satisfying such filing obligations.
3.18 No Directed Selling Efforts. The Issuer, its affiliates, and
persons acting on behalf of the foregoing have not made and will not make any
Directed Selling Efforts in the United
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States with respect to the Securities or the Agent's Warrants or Agent's
Warrant Shares. For purposes of this Agreement, "Directed Selling Efforts"
include any activity undertaken for the purpose of, or that could reasonably be
expected to have the effect of, conditioning the market in the United States
for the the subject securities, including, but not limited to, the placement of
an advertisement in a publication with a general circulation in the United
States that refers to the offering of the subject securities, the mailing of
promotional materials to persons located in the United States or the holding of
promotional meetings or seminars in the United States.
3.19 Compliance with Regulation S. Assuming that the
representations and warranties of the Subscribers in their respective
Subscription Agreements, and of the Agent in this Agreement, are correct, the
offer and sale of the Shares and the Warrants in the Private Placement is not
subject to the registration or prospectus delivery requirements of the
Securities Act by virtue of compliance with Rule 903 (including Rule 903(c)(2))
of Regulation S promulgated under the Securities Act. Assuming that (A) the
representations and warranties of the Subscribers in their respective
Subscription Agreements, and of the Agent in this Agreement, are correct, (B)
the Warrants are exercised in accordance with all of their terms, and (C) the
representations and warranties in the Notice of Exercise attached to the
Warrants are true and correct when each Notice of Exercise is signed and
delivered to the Issuer, the offer and sale of the Warrant Shares is not
subject to the registration or prospectus delivery requirements of the
Securities Act by virtue of compliance with Rule 903 (including Rule 903(c)(2))
of Regulation S promulgated under the Securities Act. Assuming that the
representations and warranties of the Agent in this Agreement are correct, the
offer and sale of the Agent's Warrants is not subject to the registration or
prospectus delivery requirements of the Securities Act by virtue of compliance
with Rule 903 (including Rule 903(c)(2)) of Regulation S promulgated under the
Securities Act. Assuming that (A) the representations and warranties of the
Agent in this Agreement are correct, (B) the Agent's Warrants are exercised in
accordance with all of their terms, and (C) the representations and warranties
in the Notice of Exercise attached to the Agent's Warrants are true and correct
when the Notice of Exercise is signed and delivered to the Issuer, the offer
and sale of the Agent's Warrant Shares is not subject to the registration or
prospectus delivery requirements of the Securities Act by virtue of compliance
with Rule 903 (including Rule 903(c)(2)) of Regulation S promulgated under the
Securities Act.
3.20 Placement Authorized. The terms of the Private Placement as
set forth in the Offering Memorandum, and the form of the Offering Memorandum
and exhibits thereto, have been duly authorized by all necessary corporate
action on the part of the Issuer.
3.21 Franchises. The Issuer and its subsidiaries hold all
franchises, approvals, grants, authorizations, licenses, permits, easements,
consents, certificates and orders ("franchises") from all federal, state and
other governmental agencies, except to the extent that the failure to have any
such franchise or franchises would not have a material adverse effect on the
business, properties, financial condition or results of operations of the
Issuer and its subsidiaries on a consolidated basis; and the Issuer and its
subsidiaries have not received any notice of proceedings relating to the
revocation or modification of any franchise or franchises which, singly or in
the aggregate, if the subject of any unfavorable decision, ruling or finding,
would have a material adverse effect on the business, properties, financial
condition or results of operations of the Issuer and its subsidiaries on a
consolidated basis.
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3.22 Taxes. The Issuer and its subsidiaries have filed all tax
returns required to be filed by them and have paid all taxes shown as due
thereon; the Issuer or its subsidiaries have not been notified, either orally
or in writing, that any taxing authority is conducting or intends to conduct an
audit of any tax return or report filed by the Issuer or its subsidiaries
concerning their business or properties; and the Issuer has no knowledge of any
tax deficiency which has been asserted or threatened against the Issuer or its
subsidiaries; provided, however, that the foregoing representations and
warranties exclude matters which are immaterial in respect to, or have had and
will have no material adverse effect on the business, properties, financial
condition or results of operations of the Issuer and its subsidiaries on a
consolidated basis.
3.23 Dividends and Distributions. Except as described below, the
Issuer has not, directly or indirectly, declared or paid any dividend or
declared or made any other distribution on or of any of its Common Stock or
Preferred Stock or other securities of any class, nor does the Issuer currently
have any agreement or obligation, whether directly or indirectly, to redeem,
purchase or otherwise acquire any such Common Stock, Preferred Stock or other
securities of any class. The Issuer entered into an April 18, 1995 agreement
with F. Jack Gorry, former President of the Issuer, to issue, register and
tender to Mr. Gorry 130,000 shares of the Issuer's Common Stock (the "Gorry
Shares"), and subsequently entered into an Agreement of Settlement and Mutual
Release dated June 28, 1996 (the "Settlement Agreement"), which provided for
the Issuer to pay $1,700 per month to Mr. Gorry until the sooner of December 1,
1996 or the lifting of the restrictions on the Gorry Shares, plus payment of
certain attorney's fees. The Settlement Agreement also provided that, if the
Gorry Shares have a market value less than $170,000 on the date trading
restrictions on the Gorry Shares are lifted, the Issuer will pay Mr. Gorry the
difference in value within ten days, and, if the Gorry Shares are not freely
transferable by November 30, 1996, the Issuer will pay liquidated damages of
$170,000 to Mr. Gorry by December 10, 1996 and Mr. Gorry will surrender to the
Issuer the stock certificate representing the Gorry Shares. On November 30,
1996 the parties amended the Settlement Agreement (the "Amendment") to provide
for an additional payment to Mr. Gorry of $17,500, continued payments to Mr.
Gorry of $1,700 per month until the sooner of July 1, 1997 or the lifting of
restrictions on the Gorry Shares, and the payment of certain additional
attorney's fees. The Amendment also changed the deadline for lifting of
restrictions from November 30, 1996 to June 30, 1997 and the deadline for
payment of liquidated damages from December 10, 1996 to July 10, 1997.
3.24 Exclusive Agent; No Finder. Other than the Agent and its
agents, there is no person, firm or corporation acting or purporting to act at
the request of the Issuer who is entitled to any brokerage or finder's fee in
connection with sales of Units to the Agent's clients.
3.25 Labor Relations. To the Issuer's knowledge, labor relations
with employees of the Issuer and its subsidiaries are good and no labor
disturbance or stoppage by the employees of the Issuer or its subsidiaries
exists or is imminent which might be expected to materially and adversely
affect the conduct of the business of the Issuer.
3.26 Insurance. The Issuer and its subsidiaries maintain
insurance, which is in full force and effect, of the types and in the amounts
which the Issuer believes are adequate for its business and in line with
insurance maintained by similar companies and businesses, including but not
limited to, insuring all personal property owned or leased by the Issuer
against theft, damage, destruction, acts of vandalism, public liability and all
other risks customarily insured against.
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3.27 No Price Manipulation or Stabilization. Since January 1,
1997, the Issuer has not taken, directly or indirectly, any action designed to
constitute or which has constituted or which might reasonably be expected to
cause or result in, the stabilization or manipulation of the price of any
security issued by the Issuer.
3.28 No Significant Proposed Transactions. The Issuer has not
agreed, or agreed in principle, to merge with or acquire any other business,
division or unit thereof or to sell the Issuer's business or any significant
part of the Issuer's assets otherwise than through transactions occurring in
the ordinary course of the Issuer's business.
3.29 Books and Records. The Issuer and its subsidiaries make and
keep accurate books and records and maintain internal accounting controls which
provide reasonable assurance that (a) transactions are executed in accordance
with management's authorization, (b) transactions are recorded as necessary to
permit preparation of financial statements and to maintain accountability for
assets, (c) access to assets is permitted only in accordance with management's
authorization and, (d) reported assets are compared with existing assets at
reasonable intervals.
4. Representations and Warranties of Agent.
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The Agent represents and warrants to and for the benefit of the Issuer
that:
4.1 The Agent is a corporation duly organized, validly existing
and in good standing under the laws of the Province of Ontario. The Agent has
the requisite corporate power to carry on its business as presently conducted,
and to enter into and carry out the provisions of this Agreement and the
transactions contemplated hereby.
4.2 All corporate action on the part of the Agent, its directors
and shareholders necessary for the authorization, execution, delivery and
performance of this Agreement by the Agent and the performance of all of the
Agent's obligations hereunder has been taken. This Agreement, when executed
and delivered by the Agent, will, if duly authorized, executed and delivered by
the Issuer, be a valid and binding obligation of the Agent, enforceable against
the Agent in accordance with its terms, except to the extent that rights to
indemnity and contribution hereunder may be limited by federal or state
securities laws or the public policy underlying such laws and except as the
foregoing may be limited by bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium or other similar laws affecting the rights of
creditors generally and by general principles of equity.
4.3 The execution and delivery of this Agreement and the
consummation of the transactions contemplated in this Agreement do not and will
not conflict with and do not and will not result in a breach of any of the
terms of the Agent's incorporating documents or any agreement or instrument to
which the Issuer is a party.
5. Covenants of the Issuer.
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The Issuer covenants and agrees with the Agent that:
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5.1 The Issuer shall furnish the Agent with copies of the Offering
Documents, and all amendments and supplements thereto, in each case as soon as
available and in such quantities as the Agent may reasonably request for its
use in connection with the Private Placement.
5.2 The Issuer covenants to comply with all applicable
requirements of Regulation S under the Securities Act in connection with the
Private Placement.
5.3 The Issuer will deliver to the Agent and to its legal counsel
at the time of each Closing a certificate (the "Officer's Certificate")
addressed to the Agent and dated the Closing Date for such Closing, signed by
the Chief Executive Officer or Chief Financial Officer of the Issuer, to the
effect that (i) there has not been, since the respective dates as of which
information is given in the Offering Documents, any material adverse change
(whether financial or otherwise) in the business, affairs, operations, assets,
liabilities (contingent or otherwise) or capital of the Issuer on a
consolidated basis; (ii) all of the representations and warranties contained in
Section 3 hereof are true and correct with the same force and effect as though
expressly made at and as of such Closing, after giving effect to the
transactions contemplated hereby (and subject to the disclosures made on
Schedule A to this Agreement); and (iii) the Issuer has performed and complied
in all material respects with all agreements, covenants, terms and conditions
required to be performed, complied with and satisfied by it up to the time of
such Closing.
5.4 At the time of each Closing, the Issuer will deliver all
required Legal Opinions (as defined in Section 8.7) to the Agent and its
counsel.
5.5 From and including the date that this Agreement is executed
through and including the Closing Date for each Closing, the Issuer will do all
such acts and things reasonably necessary to ensure that all of the
representations and warranties of the Issuer contained in this Agreement or any
Officer's Certificate delivered by the Issuer pursuant to this Agreement remain
true and correct.
5.6 From and including the date that this Agreement is executed
through and including the Closing Date for each Closing, the Issuer will not do
any act or thing that would render any representation or warranty of the Issuer
contained in this Agreement or any Officer's Certificate delivered by the
Issuer pursuant to this Agreement untrue or incorrect.
5.7 Prior to each Closing, the Issuer will allow the Agent to
conduct all due diligence which the Agent may reasonably require.
5.8 At all times during the Exercise Period of the Warrants (as
defined in the Warrants), the Issuer shall have authorized and reserved, for
the exclusive purpose of issuance and delivery upon exercise of the Warrants, a
sufficient number of shares of its Common Stock to provide for the exercise of
the Warrants in accordance with their terms. In addition, at all times during
the Exercise Period of the Agent's Warrants (as defined in the Agent's
Warrants), the Issuer shall have authorized and reserved, for the exclusive
purpose of issuance and delivery upon exercise of the Agent's Warrants, a
sufficient number of shares of its Common Stock to provide for the exercise of
the Agent's Warrants in accordance with their terms.
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5.9 The Issuer will duly and punctually perform all of the
obligations to be performed by it under this Agreement, the Subscription
Agreements, the Warrants and the Agent's Warrants.
5.10 The Issuer will use its best efforts to maintain the quotation
of the Issuer's Common Stock on Nasdaq on either the SmallCap Market or the
National Market System, or to obtain and maintain the listing of the Issuer's
Common Stock for trading on a United States national securities exchange, as
such term is defined in Section 6 of the Exchange Act and rules and regulations
promulgated thereunder.
5.11 Prior to or promptly after each Closing, the Issuer will take
all actions necessary for the Shares issued in such Closing to be quoted for
trading on the Nasdaq SmallCap Market. Promptly after the first exercise of
any Warrants or Agent's Warrants issued in the Private Placement, the Issuer
will take all actions necessary for all of the Warrant Shares and Agent's
Warrant Shares which are issuable as a result of the Private Placement to be
quoted for trading on the Nasdaq SmallCap Market or quoted or listed on such
other automated quotation system or national securities exchange which, at that
time, is the principal market for trading of the Issuer's Common Stock.
5.12 For at least one year after the last Closing of the Private
Placement, the Issuer will engage and adequately compensate a public relations
firm to disseminate news and other corporate information to the North American
stock brokerage community in conformity with applicable laws and regulations.
6. Covenants of the Agent.
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The Agent covenants and agrees with the Issuer that:
6.1 The Agent will comply with all applicable laws of each
jurisdiction in which it offers the Units for sale on behalf of the Issuer;
provided, however, that the Issuer shall be solely responsible for making any
required filings and obtaining any required permits in respect thereto.
6.2 The Agent will comply with all applicable requirements of
Regulation S under the Securities Act in connection with the Private Placement.
6.3 The Agent will duly and punctually perform all of its
obligations under this Agreement and the Subscription Agreements.
7. Conditions Precedent.
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The following are conditions precedent to the obligations of the Agent
to complete the transactions contemplated in this Agreement:
7.1 All actions required to be taken by or on behalf of the
Issuer, including the adopting of all requisite resolutions of directors of the
Issuer, will have been taken so as to validly offer, sell, allot, issue and
deliver the Units to the Subscribers.
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7.2 No order prohibiting the offer, sale, allotment, issuance or
delivery of the Units will have been issued and no proceedings for such
purpose, to the knowledge of the Issuer, will be pending or threatened.
7.3 The Issuer will have delivered, at the time of each Closing,
all Legal Opinions (as hereinafter defined) and Officer's Certificates required
under this Agreement.
7.4 The Issuer will, as of the time of each Closing, have complied
with all of its covenants and agreements contained in this Agreement.
7.5 The Agent will have been entirely satisfied with the results
of its due diligence investigations.
7.6 Except as otherwise disclosed in writing by the Issuer to the
Agent, the representations and warranties of the Issuer contained in this
Agreement will, as of the time of each Closing, be true and correct as if such
representations and warranties had been made as of the time of such Closing.
8. Closing.
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8.1 The first Closing ("First Closing") of the Private Placement
may be held only on condition that the Minimum Proceeds have been received by
the Agent from the Subscribers and the Merger of XIT Corporation into the
Issuer has been completed. The Issuer hereby represents and warrants that, as
of the date of execution of this Agreement, the Merger has already been
completed.
8.2 Provided that all of the conditions to the First Closing have
been satisfied or waived in accordance with the terms of this Agreement and the
Subscription Agreements, the First Closing shall take place on April 1, 1997 at
9:00 a.m. (Pacific time) or on such other date or at such other time as the
Issuer and the Agent shall mutually agree. If an amount less than the Maximum
Proceeds is received by the Issuer in the First Closing, the Issuer and the
Agent may agree to hold a second Closing (the "Second Closing") on or before
the Termination Date for all or any part of the balance of the Maximum Proceeds
not received by the Issuer in the First Closing. The date of each such Closing
is referred to in this Agreement as a "Closing Date." Prior to each Closing,
all subscription funds received by the Agent will be held by the Agent in trust
for the benefit of the Subscribers.
8.3 Each Closing will be held at the offices of the Issuer located
at 4290 Brickell Street in Ontario, California, and/or such other place or
places as may be mutually acceptable to the Issuer and the Agent.
8.4 Prior to each Closing, the Agent will deliver or cause to be
delivered to the Issuer the Subscription Agreements executed by the
Subscribers.
8.5 Prior to each Closing, the Issuer will deliver to the Agent or
its counsel a certificate of good standing from each jurisdiction where the
Issuer and its subsidiaries are incorporated and are qualified or required to
be qualified to do business as foreign corporations;
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provided, however, that this obligation shall apply with respect to non-U.S.
subsidiaries of the Issuer only to the extent that such certificates (or their
legal equivalent) are reasonably available to the Issuer under the
circumstances.
8.6 The Issuer will cause the definitive instruments representing
the Shares, the Warrants and Agent's Warrants (the "Certificates") to be issued
at each Closing to be executed and made available for inspection by the Agent
or its counsel prior to such Closing.
8.7 At each Closing, the Issuer shall (i) upon its acceptance of
the Subscription Agreements, execute and deliver the Subscription Agreements to
the Agent, and (ii) deliver to the Agent the Officer's Certificate described in
Section 5.3 and such opinions of the Issuer's legal counsel as the Agent
reasonably requires ("Legal Opinions"); following which the Agent will deliver,
or cause to be delivered to the Issuer, by wire transfer or account transfer in
immediately available funds, an amount equal to the Net Proceeds of the Private
Placement (as hereinafter defined) for such Closing. The Issuer will provide
the Agent with its wire or account transfer instructions prior to each Closing.
8.8 Upon receipt of confirmation of the wire or account transfer
of the Net Proceeds of the Private Placement for each Closing, the Issuer shall
deliver the Certificates to the Agent or its counsel, and the Agent shall
arrange for the prompt distribution to the Subscribers of the certificates
representing the Shares and Warrants.
9. Agent's Fee and Expenses.
------------------------
9.1 Immediately prior to each Closing and the release of proceeds
from the sale of Units to the Issuer, the Issuer and Agent shall identify all
Units being sold as to which the Agent is entitled to a fee, with the gross
proceeds of the sale of such Units being referred to herein as the "Gross
Proceeds of the Private Placement."
9.2 On the Closing Date for each Closing the Issuer will pay to
the Agent, in consideration of the services performed by the Agent under this
Agreement, a cash fee of seven percent (7%) of the Gross Proceeds of the
Private Placement (the "Placement Fee") for such Closing. The Placement Fee
shall be in addition to the reimbursement of the Agent's Expenses provided for
in Section 9.3 of this Agreement.
9.3 On the Closing Date for each Closing, the Issuer shall
reimburse in full all of the Agent's legal and out-of-pocket expenses related
to the Private Placement in an amount not to exceed two percent (2%) of the
Gross Proceeds of the Private Placement for such Closing, net of any amounts
previously advanced by the Issuer to the Agent for such purpose (the "Agent's
Expenses"). The Agent shall, as soon as practicable after each Closing,
provide the Issuer with an itemized accounting of the Agent's Expenses for such
Closing.
9.4 With respect to each Closing, the Gross Proceeds of the
Private Placement, less the amount of the Placement Fee and the amount of the
Agent's Expenses, shall constitute the "Net Proceeds of the Private Placement"
for purposes of this Agreement.
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9.5 On the Closing Date for each Closing, the Issuer shall also
grant and deliver to the Agent, as additional consideration hereunder,
non-transferable warrants to purchase such number of shares of Common Stock as
equals 7% of the number of Shares issued to Subscribers at such Closing (the
"Agent's Warrants"). The Agent's Warrants shall be exercisable for a period of
three years from such Closing Date at an exercise price equal to the lesser of
the Average Reported Price and $3.50. The Agent's Warrants shall be in
substantially the same form as that of the Warrants issued to Subscribers at
the Closing, including standard anti-dilution adjustments. With respect to the
shares of Common Stock purchasable upon exercise of the Agent's Warrants (the
"Agent's Warrant Shares"), the Issuer hereby grants to the Agent the same
registration rights provided to Subscribers under Section 9 of the Subscription
Agreements, and the provisions of Section 9 of the Subscription Agreements
(except for Section 9.12) are incorporated herein by this reference
(substituting the word "Issuer" for the word "Company" wherever it appears, the
word "Agent" for the word "Subscriber" wherever it appears, the words "Agent's
Warrants" for the word "Warrants" wherever it appears, and the words "Agent's
Warrant Shares" for the word "Shares" wherever it appears). In connection with
the offer and sale of the Agent's Warrants and the Agent's Warrant Shares to
the Agent, the Agent hereby makes the Subscriber representations and warranties
to the Issuer which are set forth in Sections 7.7, 7.8 and 7.9 of the
Subscription Agreements (substituting the words "Agent's Warrants and Agent's
Warrant Shares" for the word "Units" wherever it appears), all of which
provisions (as thus modified) are incorporated herein by this reference.
9.6 The Issuer will pay its own expenses incident to the
transactions contemplated by this Agreement. The expenses of the Issuer
include, but are not limited to (i) fees and disbursements of counsel for the
Issuer; (ii) costs of the preparation, review, printing or photocopying, and
delivery of the Offering Documents, Subscription Agreements and each amendment
or supplement thereto; and (iii) Issuer's fees and expenses which may be
incurred pursuant to the registration rights provisions referred to in Section
9.5 of this Agreement.
10. Indemnification.
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10.1 The Issuer hereby covenants and agrees to protect, indemnify
and hold harmless the Agent and its directors, officers, employees, solicitors,
attorneys and agents, but specifically excluding any investor in the Private
Placement (individually, an "Indemnified Party" and, collectively, the
"Indemnified Parties") from and against all losses, claims, costs, expenses,
obligations, damages, recoveries, forfeitures or liabilities, including
interest, penalties and reasonable attorneys' fees, which they may suffer or
incur caused by or arising directly or indirectly by reason of:
10.1.1 any information or statement contained in the
Offering Documents or any other representation made by the Issuer to
the Agent or to a Subscriber or potential Subscriber in this Agreement
or the Subscription Agreements being or being alleged to be a material
misrepresentation;
10.1.2 the omission or alleged omission to state in the
Offering Documents a material fact required to be stated therein or
necessary to prevent any statement made therein from being false or
misleading in light of the circumstances under which it was made;
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10.1.3 the Issuer's failure to comply with any
requirement of securities laws or regulations of any jurisdiction
applicable to the Private Placement;
10.1.4 any order made or any inquiry, investigation
(whether formal or informal) or proceeding commenced or threatened by
any regulatory authority based upon an allegation that any untrue
statement of a material fact or alleged omission or any
misrepresentation or alleged misrepresentation of a material fact
exists in the Offering Documents or in any public statement or press
release by the Issuer which prevents or restricts the trading in or
distribution of the Units otherwise permitted;
10.1.5 the Issuer's failure to comply with any of its
obligations hereunder, through no fault of the Agent or Indemnified
Party, including any material breach of or default under any
representation, warranty, covenant or agreement of the Issuer
contained in this Agreement or any other document to be delivered
pursuant to this Agreement;
10.1.6 any order made by any court or regulatory
authority setting aside the sale or issuance of any of the Units,
Agent's Warrants, or underlying securities; or
10.1.7 the failure or inability of the Issuer to issue
and deliver in satisfactory form the instruments representing Units or
Agent's Warrants.
Provided, however, that the Issuer will not be liable in any such case to the
extent that any such loss, claim, damage, cost, expense, obligation, recovery,
forfeiture or liability arises out of or is based upon any untrue statement or
alleged untrue statement or omission made in the Offering Documents in reliance
upon and in conformity with information furnished to the Issuer by the Agent
expressly for use therein; and provided, further that such indemnity shall not
inure to the benefit of the Indemnified Parties to the extent that any loss,
claim, damage, cost, expense, obligation, recovery, forfeiture or liability
results from the fact that the Agent failed to send or give a copy of the
Offering Documents to any person at or prior to the confirmation of the sale of
the Units to such person or to the extent any Indemnified Party fails to comply
with the Securities Act in connection with the sale of the Units.
10.2 If any action or claim shall be asserted against an
Indemnified Party in respect of which indemnity may be sought from the Issuer
pursuant to the provisions hereof, or if any potential claim contemplated by
this Section shall come to the knowledge of an Indemnified Party, the
Indemnified Party shall promptly notify the Issuer in writing of the nature of
such action or claim (provided that any failure to so notify shall not affect
the Issuer's liability under this Section unless such delay has prejudiced the
defense of such claim). The Issuer will assume the defense of the action or
claim, including the employment of counsel and the payment of all expenses.
The Indemnified Parties will have the right to employ separate counsel at the
expense of the Issuer in the event of a conflict of interests between the
Issuer and such Indemnified Party or Parties; provided, however, that the
Indemnified Parties shall not unreasonably delay their exercise of this right.
Neither party shall effect any settlement of any such action or claim or make
any admission of liability without the written consent of the other party, such
consent not to be unreasonably withheld or delayed. The indemnity hereby
provided for shall remain in full force and effect and shall not be limited to
or affected by any other indemnity in respect of any matters specified in this
Agreement obtained by the Indemnified Party from any other person and will
continue in full force
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and effect until all possible liability of the Indemnified Parties arising out
of the transactions contemplated by this Agreement has been extinguished by the
operation of law.
10.3 To the extent that any Indemnified Party is not a party to
this Agreement, the Agent shall obtain and hold the right and benefit arising
under this Section on their behalf in trust for and on behalf of such
Indemnified Party.
10.4 The Issuer hereby consents to personal jurisdiction and
service and venue in any court in which any claim which is subject to
indemnification hereunder is brought against the Agent or any Indemnified Party
and to the assignment of the benefit of this Section to any Indemnified Party
for the purpose of enforcement; provided, that nothing herein shall limit the
Issuer's right or ability to contest the appropriate jurisdiction or forum for
the determination of any such claims.
11. Contribution.
------------
11.1 In the event that, for any reason, the indemnity provided for
in Section 10 hereof is held to be illegal or unenforceable, the Agent and the
Issuer shall contribute to the aggregate of all losses, claims, costs, damages,
expenses or liabilities of the nature provided for in Section 10, such that the
Agent shall be responsible for that portion thereof represented by the
percentage that the Placement Fee bears to the Gross Proceeds of the Private
Placement, and the Issuer shall be responsible for the balance.
11.2 Notwithstanding Section 11.1, a person who has committed a
fraudulent misrepresentation shall not be entitled to contribution from any
other party.
11.3 Any party entitled to contribution will, promptly after
receiving notice of commencement of any claim, action, suit or proceeding
against such party in respect of which a claim for contribution may be made
against another party under this Section, notify such party from whom
contribution may be sought; provided, however, that the omission of any party
to notify such other party or parties shall not relieve the party or parties
from whom contribution is sought from any obligation hereunder to the extent
such party or parties were not adversely affected by such omission.
11.4 The right to contribution provided in this Section shall be in
addition to, and not in derogation of, any other right to contribution which
the Agent may have by statute or otherwise by law.
12. Termination of Agent's Obligations.
----------------------------------
12.1 With respect to each Closing, the Agent may terminate its
obligations hereunder and the Subscribers' obligations under the Subscription
Agreements, by written notice to the Issuer, in the event that after the date
hereof and at or prior to the Closing Date for the such Closing:
12.1.1 any order prohibiting or restricting the
distribution of the Units is made, or proceedings are announced,
commenced or threatened for the making of any such order,
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by any securities commission or exchange or any other competent
authority and has not been rescinded, revoked or withdrawn;
12.1.2 any inquiry, action, suit or investigation
(whether formal or informal) or other proceeding in relation to the
Issuer or any of its respective directors or executive officers is
announced, commenced or threatened by any securities commission or
exchange or by any other competent authority if, in the opinion of the
Agent, the announcement, commencement or threatening thereof adversely
affects the distribution of the Units;
12.1.3 the Issuer is in material breach of, default
under, or non-compliance with any representation, warranty, term or
condition of this Agreement;
12.1.4 the Units cannot, in the opinion of the Agent, be
profitably marketed due to the state of the financial markets;
12.1.5 there shall have occurred any material change from
the disclosures set forth in the Offering Documents, as determined by
the Agent in its sole discretion, in the business, operations, capital
or condition (financial or otherwise) or the results of operations of
the Issuer and its subsidiaries (taken as a whole), or its properties,
assets, liabilities or obligations (absolute, accrued, contingent or
otherwise);
12.1.6 there should develop, occur or come into effect or
existence any event, action, state, condition or financial occurrence,
or any catastrophe, of national or international consequence, any
action, law or regulation, or any other occurrence of any nature
whatsoever, which, in the sole opinion of the Agent, seriously
adversely affects or involves, or may seriously adversely affect or
involve, the financial markets or the business, operations or affairs
of the Issuer and its subsidiaries (taken as a whole), the
distribution of the Units, or a Subscriber's decision to purchase the
Units, even if the Subscriber has already executed a Subscription
Agreement for all or a portion of the Units offered; or
12.1.7 the Agent is not satisfied with the results of its
due diligence investigations relating to the Issuer and its
subsidiaries.
12.2 The right of the Agent to terminate its obligations under this
Agreement is in addition to such other remedies as it has or may have in
respect of any default, act or failure to act of the Issuer in respect of any
of the matters contemplated by this Agreement.
13. Garnishing Orders.
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13.1 If at any time before the completion of any Closing of the
Private Placement the Agent receives a garnishing order or other form of
attachment purporting to attach or garnish a part or all of the sale price of
any of the Units, the Agent may pay the amount purportedly attached or
garnished into court.
13.2 Any payment by the Agent into court contemplated in this
Agreement is deemed to have been received by the Issuer as payment by the Agent
against the sale price of the Units to
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the extent of the amount paid, and the Issuer is bound to issue and deliver the
Units proportionately to the amount paid by the Agent.
13.3 The Agent is not bound to ascertain the validity of any
garnishing order or attachment, or whether in fact it attaches any monies held
by the Agent, and the Agent may act with impunity in responding to any
garnishing order or attachment by payment into court.
13.4 The Issuer shall release, indemnify and save harmless the
Agent in respect of all damages, costs, expenses or liabilities arising from
any acts of the Agent under this Section 13.
14. Notices.
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14.1 Any notice required or permitted under this Agreement shall be
given in writing and shall be deemed effectively given upon personal delivery
to the party to be notified by hand or by professional courier service, or by
telecopier via the telefax numbers indicated below. Any notice shall be
addressed to the party to be notified at the addresses indicated below:
In the case of the Issuer: MicroTel International, Inc.
4290 East Brickell Street
Ontario, California 91761, U.S.A.
Attention: Carmine T. Oliva
Telefax: (909) 391-4558
with a copy to: Gallagher, Briody & Butler
212 Carnegie Center, Suite 402
Princeton, New Jersey 08540, U.S.A.
Attention: Thomas P. Gallagher, Esq.
Telefax: (609) 452-6000
In the case of the Agent: Yorkton Securities Inc.
10th Floor, Bentall 4
1055 Dunsmuir Street
Vancouver, British Columbia
Canada V7X 1L4
Attention: Gordon Keep
Telefax: (604) 640-0512
with a copy to: Miller & Holguin
1801 Century Park East
Seventh Floor
Los Angeles, California 90067, U.S.A.
Attention: J. Brad Wiggins, Esq.
Telefax: (310) 557-2205
14.2 The Issuer and the Agent may change their respective addresses
for notice by notice given in the manner referred to in this Section, upon ten
(10) days' advance notice.
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15. Miscellaneous.
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15.1 Survival. The representations and warranties made in this
Agreement shall be true at the time of each Closing as though they were made at
the time of such Closing, and they shall survive the completion of the
transactions contemplated under this Agreement for one year thereafter. The
provisions of this Agreement which, by their terms, require performance by a
party to this Agreement subsequent to any Closing of the Private Placement
shall survive such Closing.
15.2 Further Assurances. The parties hereto shall execute and
deliver all such further documents and instruments and do all such acts and
things as a party may, either before or after each Closing of the Private
Placement, reasonably require in order to carry out the full intent and meaning
of this Agreement.
15.3 Successors and Assigns. This Agreement will inure to the
benefit of and be binding upon the Issuer, the Agent, and their respective
successors and representatives. This Agreement and its conditions and
provisions are intended to be and are for the sole and exclusive benefit of the
parties to it and their respective successors and representatives, and not for
the benefit of any other person, firm or corporation unless expressly stated
otherwise. This Agreement may not be assigned by any party hereto without the
prior written consent of both of the parties hereto.
15.4 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
15.5 Execution and Delivery. The parties hereto may rely on
delivery by facsimile machine of an executed copy of this Agreement, and
acceptance by any party of such facsimile copy shall be equally effective to
create a valid and binding agreement between the parties in accordance with the
terms hereof.
15.6 Governing Laws. This Agreement shall in all respects be
governed by and construed in accordance with the laws of the State of
California applicable to contracts between California residents entered into
and to be performed entirely within the State of California.
15.7 Titles. The titles of the sections and subsections of this
Agreement are for the convenience of reference only and are not to be
considered in construing this Agreement.
15.8 Entire Agreement. This Agreement constitutes the entire
agreement and understanding between the parties with respect to the subject
matters herein, and supersedes and replaces any prior agreements and
understandings, whether oral or written, between them with respect to such
matters. Each party to this Agreement acknowledges that no representation,
inducement, promise or agreement, whether written or oral, has been made by any
party, or anyone acting on behalf of any party, which is not embodied or
referenced herein, and that no other agreement, statement, or promise not
contained or referenced in this Agreement shall be valid or binding.
15.9 Amendment. Any modification of this Agreement will be
effective only if it is in writing and signed by all parties to this Agreement.
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15.10 Waiver. Any party to this Agreement may waive compliance by
the other with any of the terms, provisions and conditions set forth in this
Agreement; provided, however, that any such waiver must be in a writing
specifically setting forth the provisions thus waived and may not result in a
material change to any of the material terms of the Private Placement unless
such change is consented to by each Subscriber participating in the Private
Placement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year herein above first written.
MICROTEL INTERNATIONAL, INC.
By: /s/ Carmine T. Oliva
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Title: President/CEO
YORKTON SECURITIES INC.
By: /s/ Gordon B. Keep
- ---------------------- -------------------------------------
Title: V.P. Corporate Finance
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SCHEDULE A
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[None]
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