INTERNATIONAL SMART SOURCING, INC.
PLACEMENT AGENT'S AGREEMENT
June 12, 2000
Network 1 Financial Securities, Inc.
The Galleria, Penthouse
2 Bridge Avenue, Building 2
Red Bank, New Jersey 07701
Dear Ladies & Gentlemen:
The undersigned, International Smart Sourcing, Inc., a
Delaware corporation (the "Company"), proposes to offer for sale in a private
placement ("Offering"), a minimum of 100,000 Shares of Common Stock (the
"Minimum Offering") and a maximum of 500,000 Shares of Common Stock (the
"Maximum Offering"), $.001 par value ("Shares), at a purchase price of $3.00 per
share. The Shares will be offered on a best efforts, all or none, basis for the
Minimum Offering, and a best efforts basis thereafter, in accordance with
Section 4(2) and/or 3(b) of the Securities Act of 1933, as amended (the "Act"),
and the provisions of Regulation D and S promulgated thereunder. The Shares
shall be offered only to "Accredited Investors", as such term is defined under
Rule 501(a) of the Act, including without limitation entities within such
definition, without registration, pursuant to the exemption from registration
created by Regulation D under the Act. The Offering shall commence on the day
the Offering Documents are first made available to you by the Company and will
continue until the earlier to occur of (ii) the sale of the Maximum Offering or
(ii) August 31, 2000, unless extended by the Company for a period of up to
ninety (90) days from such date (the "Offering Period"). The first closing shall
occur five (5) business days after the acceptance by the Company of
subscriptions for the Minimum Offering in order to allow clearance of checks
("First Closing"). Subsequent closings shall occur at times mutually agreed upon
by the Company and the Placement Agent until the Maximum Offering is subscribed
for or the Offering is otherwise terminated, at the option of the Company.
The Company is subject to the informational requirements of
the Securities Exchange Act of 1934, as amended, and in accordance therewith,
files periodic reports, proxy and information statements and other information
with the Commission. Such reports, proxy and information statements and other
information will be referred to herein as the "Public Documents." The
Subscription Agreements and Questionnaires to be executed by each purchaser and
the Company (collectively, the "Subscription Agreements") will be referred to
herein as the "Offering Documents." Network 1 Financial Securities, Inc. is
sometimes referred to herein as "Network 1" or the "Placement Agent." As used
herein, unless otherwise indicated, the term "Company" shall mean International
Smart Sourcing, Inc., Inc. and any subsidiaries of International Smart Sourcing,
Inc., Inc. (each a "Subsidiary" and collectively, the "Subsidiaries"), both
separately and as a consolidated entity.
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The Company has agreed to include the Shares in any
registration statement (except a Form S-8) under the Securities Act of 1933, as
amended (the "Act"), the Company files with respect to its Securities for a
period of two years from the Final Closing and to use its best efforts to have
such registration statement declared effective by the Securities and Exchange
Commission (the "SEC"), as promptly as practicable.
1. APPOINTMENT OF PLACEMENT AGENT; THE OFFERING PERIOD.
1.1 APPOINTMENT OF PLACEMENT AGENT. You are hereby appointed
exclusive Placement Agent of the Company during the offering period herein
specified ("Offering Period") for the purpose of assisting the Company in
placing the Shares with purchasers who are qualified accredited investors
("Subscribers"). You hereby accept such agency and agree to assist the Company
in placing Shares with the Subscribers. Your agency hereunder is not terminable
by the Company except upon termination of the Offering or breach by you or your
material obligations hereunder.
1.2 OFFERING PERIOD. The Offering Period shall commence on the
day the Offering Documents are first made available to you by the Company and
will continue until the earlier to occur of (ii) the sale of the Maximum
Offering or (ii) August 31, 2000, unless extended by the Company for a period of
up to ninety (90) days from such date (the "Offering Period"). If, at any time
during the Offering Period, subscriptions for at least the Minimum Offering have
been received and accepted by the Company (and funds in payment therefor have
cleared), then, upon the mutual consent of the Company and the Placement Agent,
an initial closing ("Initial Closing") shall take place with respect to such
accepted subscriptions and the Company shall continue the Offering until all
Shares have been sold or the Termination Date, whichever occurs first. After the
Initial Closing, subsequent closings with respect to accepted subscriptions may
take place at any time during the Offering Period as may be mutually determined
by the Company and the Placement Agent (such subsequent closings and the Initial
Closing will each be referred to herein as a "Closing"). If subscriptions for at
least the Minimum Offering are not received and accepted (and funds in payment
therefor cleared) by the Termination Date, then the Offering will be terminated
and all funds received from Subscribers will be returned, without interest and
without any deduction.
1.3 OFFERING DOCUMENTS. The Company will provide the Placement
Agent with a sufficient number of copies of the Public and Offering Documents
for delivery to potential Subscribers and such other information, documents and
instruments which the Placement Agent deems reasonably necessary to act as
Placement Agent hereunder and to comply with the rules, regulations and judicial
and administrative interpretations respecting compliance with applicable state
and federal statutes related to the Offering.
1.4. SEGREGATION OF FUNDS. Each Subscriber of Shares shall
tender to the Placement Agent a check payable to the order of "Continental
Transfer and Trust Company--International Smart Sourcing, Inc., Inc. Escrow
Account" in the amount of the investment subscribed for, which funds shall be
held in escrow by Continental Transfer and Trust Company, as escrow agent, in
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accordance with Rules 10b-9 and 15c2-4 promulgated under the Securities Exchange
Act of 1934 ("Exchange Act"), as set forth in the Offering Documents.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
and warrants to the Placement Agent and the Subscribers as follows:
2.1 DISCLOSURE IN OFFERING DOCUMENTS.
2.1.1 PRIVATE OFFERING EXEMPTION; OFFERING DOCUMENTS. The
Offering Documents conform in all material respects with the requirements of
Section 4(2) and/or 3(b) of the Securities Act, Regulation S, and Rules 501-506
of Regulation D and with the requirements of all other applicable rules and
regulations of the Securities and Exchange Commission ("Commission") currently
in effect relating to transactions not involving a public offering The Public
and Offering Documents contain all material statements which are required to be
stated therein in accordance with such requirements and do 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 the light of
the circumstances under which they were made, not misleading. Assuming that (i)
a proper Form D is filed in accordance with Rule 503 of Regulation D, (ii) the
offer and the sale of the Shares by the Placement Agent was made in compliance
with Rule 502(c) of Regulation D, Regulation S, and/or Section 4(2) of the
Securities Act, and (iii) the representations of the Subscribers in the
Subscription Agreements signed by them are true and correct (which facts will
not be independently verified by the Company) the sale of Shares in the Offering
is exempt from registration under the Securities Act and is in compliance with
Regulation D and Regulation S.
2.1.2 DISCLOSURE OF CONTRACTS. The descriptions in the Public
Documents of all contracts, agreements, instruments, indentures, mortgages,
loans, leases, licenses, arrangements or undertakings of any nature, written or
oral, of the Company which involve future payments, performance or services,
development of products, or delivery of goods or materials to or by the Company
of an aggregate amount or value in excess of $50,000 or which otherwise are
material to the business or prospects of the Company (collectively, "Contracts")
are accurate in all material respects and present fairly the information
required to be disclosed therein and there are no contracts or other documents
required to be described in the Public Documents which have not been so
described. The Company has furnished the Placement Agent with true, correct and
complete copies (or where oral, written descriptions) of all Contracts,
including all exhibits, schedules, amendments, supplements, modifications and
waivers thereto. Each of the Contracts is in full force and effect, the Company
has performed in all material respects all of its obligations thereunder and is
not in default thereunder, and no party to a Contract has made a claim to the
effect that the Company has failed to perform any obligations thereunder. To the
knowledge of the Company, there is no plan, intention, or indication of any
contracting party to a Contract to cause termination, cancellation or
modification of such Contract or to reduce or otherwise change its activity
thereunder so as to adversely affect in any material respect the benefits
derived or expected to be derived therefrom by the Company. The Company does not
know of the occurrence of any event or the existence of any state of facts which
with notice or the passage of time or both could cause it to be in default. The
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Company is not a party to, or bound by, any warranty agreement with respect to
products sold or any contract, agreement, commitment or restriction which
obligates the Company to perform services or to produce products unprofitably.
None of the provisions of such contracts or instruments violates any existing
applicable law, rule, regulation, judgment, order or decree of any governmental
agency or court having jurisdiction over the Company, its assets or businesses.
2.2 CHANGES AFTER DATES IN OFFERING DOCUMENTS.
2.2.1 NO MATERIAL ADVERSE CHANGE. Except as otherwise stated
in the Public Documents, since the most recent Balance Sheet Date, (i) there has
been no material adverse change in the condition, financial or otherwise, or in
the results of operations, business or business prospects of the Company,
including, but not limited to a material loss or interference with its business
from fire, storm, explosion, flood or other casualty, whether or not covered by
insurance, or from any labor dispute or court or governmental action, order or
decree, whether or not arising in the ordinary course of business, (ii) the
Company has not become a party to, and neither the business nor the property of
the Company has become the subject of, any litigation which, if adversely
determined, would have a material adverse effect on the business, properties,
assets, condition (financial or otherwise) or prospects of the Company, whether
or not in the ordinary course of business (a "Material Adverse Effect"), and
(iii) there have been no transactions entered into by the Company, other than
those in the ordinary course of business, which are material with respect to the
condition, financial or otherwise, or to the results of operations, business or
business prospects of the Company.
2.2.2 RECENT SECURITIES TRANSACTIONS. ETC. Since the most
recent Balance Sheet date, and except as otherwise specifically stated in the
Public Documents, the Company has not (i) issued any securities or incurred any
liability or obligation, direct or contingent, for borrowed money; (ii) declared
or paid any dividend or made any other distribution on or in respect to its
capital stock; or (iii) issued any options, warrants or other rights to purchase
the capital stock of the Company, or any security or other instrument which by
its terms is convertible into, exercisable for or exchangeable for capital stock
of the Company.
2.3 NO PREEMPTIVE RIGHTS; OPTIONS; REGISTRATION RIGHTS. Except
as set forth in the Public Documents, there are no preemptive or other rights to
subscribe for or purchase, or any restriction upon the voting or transfer of,
any shares of Common Stock, or other securities of the Company, under the
Certificate of Incorporation or By-Laws of the Company of under any agreement or
other outstanding instrument to which the Company is a party or by which it is
bound. Except as set forth in the Public Documents, the Company does not have
outstanding any option, warrant, convertible security, or other right permitting
or requiring it to issue, or otherwise to purchase or convert any obligation
into, shares of Common Stock, or other securities of the Company and the Company
has not agreed to issue or sell any shares of Common Stock, or other securities
of the Company.
2.4 FINANCIAL STATEMENTS. The financial statements of the
Company, including any notes thereto and supporting schedules, included or
incorporated by reference in the Public Documents ("Financials"), fairly present
the financial position and results of operations of the Company at the dates
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thereof and for the periods covered thereby, subject, in the case of interim
periods, to year-end adjustments and normal recurring accruals. The Company has
no material liabilities or obligations, contingent, direct, indirect or
otherwise except (i) as set forth in the latest balance sheet included in the
Financials or the footnotes thereto (the date of such balance sheet referred to
as the "Balance Sheet Date"), (ii) those incurred in the ordinary course of
business since the Balance Sheet Date, and (iii) as set forth in the Public
Documents. The Public Documents also sets forth all outstanding amounts due to
any employees, officers, directors or stockholders of the Company, or to any of
their respective affiliates, including, but not limited to, accrued salaries,
loans, etc.
2.5 AUTHORIZED CAPITAL; OPTIONS; ETC. The Company had, at the
date or dates indicated in the Public Documents, such duly authorized, issued
and outstanding capitalization as set forth in the Public Documents. Except as
set forth in the Public Documents, there are no options, warrants, or other
rights to purchase or otherwise acquire any authorized but unissued shares of
capital stock of the Company or any security convertible into shares of capital
stock of the Company, or any contracts or commitments to issue or sell shares of
capital stock or any such options, warrants, rights or convertible securities.
2.6 VALID ISSUANCE OF SECURITIES: ETC.
2.6.1 OUTSTANDING SECURITIES. All issued and outstanding
securities of the Company have been duly authorized and validly issued and are
fully paid and non-assessable; the holders thereof have no rights of rescission
with respect thereto, and are not subject to personal liability by reason of
being such holders; and none of such securities were issued in violation of the
preemptive rights of any holders of any security of the Company or similar
contractual rights granted by the Company. All outstanding options and warrants
to purchase shares of capital stock constitute the valid and binding obligations
of the Company, enforceable in accordance with their terms. The authorized
capital stock and outstanding options and warrants conform to all statements
relating thereto contained in the Public Documents. The offers and sales of the
outstanding capital stock, options and warrants to purchase shares of capital
stock were at all relevant times either registered under the Act and the
applicable state securities or Blue Sky laws or exempt from such registration
requirements.
2.6.2 SHARES. The Shares have been duly and validly authorized
and, when issued and delivered in accordance with the terms of the Subscription
Agreements, will be duly and validly issued, fully paid and non-assessable. The
holders of the Shares will not be subject to personal liability by reason of
being such holders and will not be subject to the preemptive rights of any
holders of any security of the Company or similar contractual rights granted by
the Company. All corporate action required to be taken for the authorization,
issuance and sale of the Shares has been duly and validly taken.
2.7 REGISTRATION RIGHTS OF THIRD PARTIES. Except as set forth
in the Public and Offering Documents, no holders of any securities of the
Company or of any options or warrants of the Company exercisable for or
convertible or exchangeable into securities of the Company have the right to
require the Company to register any such securities of the Company under the Act
or to include any such securities in a registration statement to be filed by the
Company.
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2.8 DUE AUTHORIZATION. The Company has full right, power and
authority to enter into this Agreement and the Subscription Agreements, to issue
the Shares of Common Stock and to perform all of its obligations hereunder and
thereunder and to consummate the transactions contemplated by the Offering
Documents. This Agreement has been, and the Subscription Agreements, when
executed and delivered, will have been, duly and validly authorized by all
necessary corporate action and no further corporate action or approval is or
will be required for their respective execution, delivery and performance. This
Agreement constitutes and each Subscription Agreement (assuming the due
authorization, execution and delivery by each subscriber) to be entered into by
the Company with respect to the purchase and sale of the Shares (the
"Subscription Agreements") will constitute, when executed and delivered by the
Company, valid and binding obligations of the Company, enforceable against the
Company in accordance with their respective terms (except (i) as such
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws now or hereafter in effect relating to or affecting creditors'
rights generally, (ii) that the enforceability of the indemnification and
contribution provisions of the respective agreements may be limited by the
federal and state securities laws and public policy, and (iii) that the remedy
of specific performance and injunctive and other forms of equitable relief may
be subject to the equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought.
2.9 NO CONFLICTS. The Company's execution, delivery, and
performance of this Agreement and the Subscription Agreements, the consummation
by the Company of the transactions contemplated herein and therein and the
compliance by the Company with the provisions of this Agreement and the
Subscription Agreements have been duly authorized by all necessary corporate
action and do not and will not, with or without the giving of notice or the
lapse of time or both (i) result in a breach of, or conflict with any of the
terms and provisions of, or constitute a default under, or result in the
creation, modification, termination or imposition of any lien, charge or
encumbrance upon any property or assets of the Company pursuant to the terms of
any indenture, mortgage, deed of trust, note, loan or credit agreement or any
other agreement or instrument evidencing an obligation for borrowed money, or
any other agreement or instrument to which the Company is a party or by which
the Company may be bound or to which any of the property or assets of the
Company is subject; (ii) result in any violation of the provisions of the
Certificate of Incorporation or the By-laws of the Company; (iii) violate any
existing applicable law, rule, regulation, judgment, order or decree of any
governmental agency or court, domestic or foreign, having jurisdiction over the
Company or any of its properties or business; or (iv) have any material adverse
effect on any permit, license, certificate, registration, approval, consent,
license or franchise necessary for the Company to own or lease and operate any
of its properties or to conduct its business.
2.10 NO DEFAULTS. Except as described in the Public Documents,
no material default exists in the due performance and observance of any term,
covenant or condition of any permit, license, contract, indenture, mortgage,
deed of trust, note, loan or credit agreement, or any other agreement or
instrument evidencing an obligation for borrowed money, or any other agreement
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or instrument to which the Company is a party or by which the Company may be
bound or to which any of the properties or assets of the Company is subject. The
Company is not in violation of any material term or provision of its Certificate
of Incorporation or By-Laws or in material violation of any franchise, license,
permit, applicable law, rule, regulation, judgment or decree of any governmental
agency or court, domestic or foreign, having jurisdiction over the Company or
any of its properties or business, except as described in the Public Documents.
2.11 CORPORATE POWER; LICENSES; CONSENTS.
2.11.1 CONDUCT OF BUSINESS. The Company has all requisite
corporate power and authority, and has all necessary authorizations, approvals,
orders, licenses, certificates and permits of and from all governmental
regulatory officials, agencies, authorities and bodies to own or lease its
properties and conduct its business as described in the Public Documents. The
Company is and has been doing business in compliance with all such
authorizations, approvals, orders, licenses, certificates and permits and all
federal, state and local laws, rules and regulations. The disclosures in the
Public Documents concerning the effects of federal, state and local regulation
on the Company's business as currently conducted or contemplated to be conducted
are correct in all material respects and do not omit to state a material fact.
2.11.2 TRANSACTIONS CONTEMPLATED HEREIN; CONSENTS. The Company
has all corporate power and authority to enter into this Agreement, and the
Subscription Agreements to carry out the provisions and conditions hereof and
thereof, and all consents, authorizations, approvals and orders required in
connection therewith have been obtained. Except as set forth in the Public
Documents, no consent, approval, authorization, order of, or filing with, any
court, governmental agency, authority or other body is required to consummate
the transactions contemplated by this Agreement and the Subscription Agreements,
and the issuance of the Shares, except that the offer and sale of the Shares and
the Shares in certain jurisdictions may be subject to the provisions of the
securities or Blue Sky laws of such jurisdictions.
2.12 TITLE TO PROPERTY; INSURANCE. Except as set forth in the
Public Documents, the Company has good and marketable title to, or valid and
enforceable leasehold estates in, all items of real and personal property
(tangible and intangible) owned or leased by it, free and clear of all liens,
encumbrances, claims, security interests, defects and restrictions of any
material nature whatsoever. The Company has adequately insured its properties
against loss or damage by fire or other casualty and maintains such insurance in
adequate amounts which are adequate to protect its financial condition against
the risks involved in the conduct of its businesses.
2.13 NO PENDING ACTIONS. Except as set forth in the Public
Documents, there are no actions, suits, proceedings, claims, or hearings of any
kind or nature existing or pending (or, to the best knowledge of the Company,
threatened) or, to the best knowledge of the Company, any investigations or
inquiries, before or by any court, or other governmental authority, tribunal or
instrumentality (or, the Company's best knowledge, any state of facts which
would give rise thereto), pending or threatened against the Company, or
involving the properties of the Company, which might result in any material
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adverse change in the business, properties, financial position or results of
operations of the Company, or which might adversely affect the transactions or
other acts contemplated by this Agreement or the validity or enforceability of
this Agreement. Except as described in the Public Documents, there are no
outstanding orders, judgments or decrees of any court, governmental agency or
other tribunal naming the Company and enjoining the Company from taking, or
requiring the Company to take, any action, or to which the Company, its
properties or business, is bound or subject.
2.14 DUE INCORPORATION, QUALIFICATION AND GOOD STANDING. The
Company has been duly incorporated, is validly existing as a corporation and is
in good standing under the laws of its state of incorporation. The Company is
duly qualified and licensed and in good standing as a foreign corporation for
the transaction of business and is in good standing in each jurisdiction in
which the ownership or leasing of its properties or the conduct of its business
requires such qualification or licensing, except where the failure to qualify
would not have a Material Adverse Effect on the business of the Company. The
Company has all requisite corporate power and authority necessary to own or hold
its properties and conduct its business as described in the Public Documents.
2.15 TAXES. Except as set forth in the Public Documents, the
Company has filed all federal tax returns and all state and municipal and local
tax returns (whether relating to income, sales, franchise, withholding, real or
personal property or other types of taxes) required to be filed under the laws
of the United States and applicable states, and has paid in full all taxes which
have become due pursuant to such returns or claimed to be due by any taxing
authority or otherwise due and owing; provided, however, that the Company has
not paid any tax, assessment, charge, levy or license fee that it is contesting
in good faith and by proper proceedings and adequate reserves for the accrual of
same are maintained if required by generally accepted accounting principles.
Each of the tax returns heretofore filed by the Company correctly and accurately
reflects the amount of its tax liability thereunder. Except as set forth in the
Public Documents, the Company has withheld, collected and paid all levies,
assessments, license fees and taxes to the extent required. As used herein,
"tax" or "taxes" include all taxes, charges, fees, levies or other assessments
imposed by any Federal, state, local, or foreign taxing authority, including,
without limitation, income, premium, recapture, credit, excise, property, sales,
use, occupation, service, service use, leasing, leasing use, value added,
transfer, payroll, employment, license, stamp, franchise or similar taxes
(including any interest earned thereon or penalties or additions attributable
thereto). The term "returns" means all returns, declarations, reports,
statements, and other documents required to be filed in respect of taxes.
2.16 NO RIGHT TO PURCHASE. Except as set forth in the Public
Documents, the issuance of the Shares in the Offering will not give any holder
of any of the Company's outstanding shares of Common Stock, options, warrants or
other convertible securities or rights to purchase securities of the Company (i)
the right to purchase any additional shares of Common Stock, or any other
securities of the Company, or (ii) the right to purchase any securities at a
reduced price.
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2.17 TRANSACTIONS AFFECTING DISCLOSURE TO NASD.
2.17.1 FINDER'S FEES. The Company is not obligated to pay a
finder's fee to anyone in connection with the introduction of the Company to the
Placement Agent, or the consummation of the Offering contemplated hereunder.
2.17.2 PAYMENTS WITHIN TWELVE MONTHS. Within the twelve months
prior to the date hereof, except as set forth in the Offering Documents, the
Company has not paid or issued any monies, securities or other compensation to
any member of the National Association of Securities Dealers, Inc. ("NASD") or
to any affiliate or associate of such a member or to any other person in
consideration for such person raising funds for the Company or providing
consulting services to the Company. The Company does not owe any monies or other
obligations to any NASD member, affiliate or associate.
2.17.3 USE OF PROCEEDS. None of the net proceeds of the
Offering will be paid by the Company to any NASD member or its affiliate or
associates, except as specifically authorized herein.
2.18 FOREIGN CORRUPT PRACTICES ACT. Neither the Company nor
any of its officers, directors, employees, agents or any other person acting on
behalf of the Company has, directly or indirectly, given or agreed to give any
money, gift or similar benefit (other than legal price concessions to customers
in the ordinary course of business) to any customer, supplier, employee or agent
of a customer or supplier, or official or employee of any governmental agency or
instrumentality of any government (domestic or foreign) or any political party
or candidate for office (domestic or foreign) or any political party or
candidate for office (domestic or foreign) or other person who was, is, or may
be in a position to help or hinder the business of the Company (or assist it in
connection with any actual or proposed transaction) which (i) might subject the
Company to any damage or penalty in any civil, criminal or governmental
litigation or proceeding, (ii) if not given in the past, might have had a
materially adverse effect on the assets, business or operations of the Company
as reflected in any of the financial statements contained in the Public
Documents or (iii) if not continued in the future, might adversely affect the
assets, business, operations or prospects of the Company. The Company's internal
accounting controls and procedures are sufficient to cause the Company to comply
with the Foreign Corrupt Practices Act of 1977, as amended.
2.19 INTANGIBLES. The Company owns or possesses the requisite
licenses or rights to use all trademarks, service marks, service names, trade
names, patents and patent applications, copyrights and other rights
(collectively, "Intangibles") used by the Company in its business or relating to
products sold by the Company, and all such Intangibles are stated in the Public
Documents. The Company's Intangibles which have been registered in the United
States Patent and Trademark Office have been fully maintained and are in full
force and effect. There is no claim or action by any person pertaining to, or
proceeding pending or to the Company's knowledge, threatened and the Company has
not received any notice of conflict with the asserted rights of others which
challenges the exclusive right of the Company with respect to any Intangibles
used in the conduct of the Company's business except as described in the Public
Documents. To the best of Company's knowledge, the Intangibles and the Company's
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current products, services and processes do not infringe on any intangibles held
by any third party. To the best of the Company's knowledge, no others have
infringed upon the Intangibles of the Company.
2.20 RELATIONS WITH EMPLOYEES
2.20.1 EMPLOYEE MATTERS.The Company has generally enjoyed a
satisfactory employer-employee relationship with its employees and is in
compliance in all material respects with all federal, state and local laws and
regulations respecting the employment of its employees and employment practices,
terms and conditions of employment and wages and hours relating thereto. There
are no pending investigations involving the Company by the U.S. Department of
Labor, or any other governmental agency responsible for the enforcement of such
federal, state or local laws and employment laws and regulations. There is no
unfair labor practice charge or complaint against the Company pending before a
Labor Relations Board or any strike, picketing, boycott, dispute, slowdown or
stoppage pending or threatened against or involving the Company or any
predecessor entity. No questions concerning representation exist respecting the
employees of the Company and no collective bargaining agreement or modification
thereof is currently being negotiated by the Company. No grievance or
arbitration proceeding is pending under any expired or existing collective
bargaining agreements of the Company, if any.
2.20.2 EMPLOYEE BENEFIT PLANS. Except as disclosed in the
Public Documents, the Company neither maintains, sponsors nor contributes to,
nor is it required to contribute to, any program or arrangement that is an
"employee pension benefit plan, an employee welfare benefit plan," or a
"multi-employer plan" as such terms are defined in Sections 3(2), 3(1) and
3(37), respectively, of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") ("ERISA Plans"). Other than as disclosed in the Public
Documents, the Company does not, and has at no time, maintained or contributed
to a defined benefit plan, as defined in Section 3(35) of ERISA. Except as
disclosed in the Public Documents, if the Company does maintain or contribute to
a defined benefit plan, any termination of the plan on the date hereof would not
give rise to liability under Title IV of ERISA, and no ERISA Plan which is a
pension plan has incurred an accumulated funding deficiency" (as defined in
Section 302 of ERISA) and no ERISA Plan which is a "welfare plan" (as defined in
Section 3(1) of ERISA) has any unfunded liabilities. Except as disclosed in the
Public Documents, there are no unfunded benefits under any ERISA Plan which is
subject to the funding standards of ERISA. No ERISA Plan (or any trust created
thereunder) has engaged in a "prohibited transaction" within the meaning of
Section 406 of ERISA or Section 4975 of the Internal Revenue Code of 1986, as
amended (the "Code"), which could subject the Company to any tax or penalty on
prohibited transactions and which has not adequately been corrected. Each ERISA
Plan is in compliance with all material reporting, disclosure and other
requirements of the Code and ERISA as they relate to any such ERISA Plan.
Determination letters have been received from the Internal Revenue Service with
respect to each ERISA Plan which is intended to comply with Code Section 401(a),
stating that such ERISA Plan and the attendant trust are qualified thereunder
and nothing has occurred which would cause the loss of such qualification. Other
than claims for benefits in the ordinary course, there is no pending claim,
litigation, arbitration or any other legal proceeding involving any ERISA Plan
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which may result in material liability on the part of the Company or any ERISA
Plan under ERISA or any other law, nor, is there any reasonable basis for such a
claim. The Company has no bonus, incentive or deferred compensation plans which
constitute a continuing liability of the Company, except individual arrangements
of the Company with employees relating to their employment. There are no
employees of the Company who, in connection with their employment by the
Company, are receiving any pension or retirement payments or are entitled to
receive any unfunded pensions not covered by a pension plan to which the Company
is a party. For purposes of this Agreement, the Company and any entity, whether
incorporated or unincorporated, treated as a single employer with the Company
under Section 414(b), 414(c), 414(m), or 416(o) of the Code, shall be referred
to as the "Controlled Group" and any "employee benefit plan" (as defined in
Section 3(3) of ERISA) maintained or contributed to by any member of the
Controlled Group shall be referred to as a "Controlled Group Plan." For each
Controlled Group Plan that is a pension plan: (i) except as disclosed in the
Memorandum, all contributions required to be made under ERISA Section 302 and
Section 412 (whether or not waived) have been made, (ii) no reportable event
(within the meaning of ERISA Section 4043) has occurred at any time, and (iii)
no material liability under Title Iv of ERISA exists or is expected to be
incurred by any member of the Controlled Group. No member of the Controlled
Group has had, at any time, any obligation to contribute to any "multiemployer
plan." Each Controlled Group Plan which is a "group health plan" (as such term
is defined in Code Section 4980(g)) complies and has complied in each and every
case with the applicable requirements of the CONSOLIDATED OMNIBUS BUDGET
RECONCILIATION ACT OF 1985, as amended ("COBRA").
2.21 NO ANTI-DILUTION ADJUSTMENT. Except as set forth in the
Offering Documents, the issuance of any of the Securities will not give any
holder of any of the Company's outstanding options, warrants or other
convertible securities or rights to purchase shares of the Company's capital
stock, the right to purchase any additional shares of capital stock and/or the
right to purchase shares of Common Stock at a reduced price or a greater number
of shares of Common Stock.
2.22 ENVIRONMENTAL MATTERS. Except as set forth in the
Public Documents:
2.22.1 The Company has obtained all permits, licenses and
other authorizations that are required with respect to the operation of its
business under the Environmental Laws (as defined below) and, to the best
knowledge of the Company, is in compliance with all terms and conditions of such
required permits, licenses and authorizations;
2.22.2 The Company is in compliance with the Environmental
laws (including, without limitation, compliance with standards, schedules and
timetables therein);
2.22.3 No real property or facility owned, operated, leased,
or controlled by the Company or, to the knowledge of the Company, any
predecessor in interest of the Company, is listed or proposed for listing on the
National Priorities List or the Comprehensive Environmental Response,
Compensation, and Liability Information System, both promulgated under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended ("CERCLA"), or on any comparable state or local list established
11
pursuant to any Environmental Law, and the Company has not received any
notification or potential or actual liability or request for information under
CERCLA or any comparable state or local law, except that which would not have a
Material Adverse Effect;
2.22.4 THERE HAVE BEEN NO RELEASES (I.E., any past or present
releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, leaching, disposing or dumping, on-site or off-site) of
Hazardous Materials by the Company or, to the knowledge of the Company, any
predecessor in interest of the Company at, on, under, from or into any of the
real property owned, operated, leased, managed or controlled by the Company in
violation of any Environmental Laws or giving rise to liability under any
Environmental Law;
2.22.5 There are no polychlorinated biphenyls or asbestos
located in, at, on or under any facility or real property owned, leased,
managed, used or controlled by the Company in such amounts, conditions or
concentrations to require removal, remedial or corrective action, or to result
in liability under the Environmental Laws; to the knowledge of the Company,
there have been no releases (i.e., any past or present releasing, spilling,
leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, disposing or dumping, on-site or off-site), at, on, under, from or
into any real property in the vicinity of any real property owned, operated,
leased, managed, used or controlled by the Company or any predecessor in
interest that could reasonably be expected to result in liability by the Company
under the Environmental Laws; and
2.22.6 There is no civil, criminal or administrative action,
suit, demand, hearing, notice of violation or deficiency, investigation,
proceeding, notice or demand letter pending or, to the knowledge of the Company,
threatened against the Company under any Environmental Law.
2.22.7 For the purposes of this Agreement:
(A) "ENVIRONMENTAL LAWS" means the common law and all federal,
state, local and foreign laws or regulations, codes, orders, decrees, judgments
or injunctions issued, promulgated, approved or entered thereunder, now or as in
effect at the Closing, relating to pollution or protection of public or employee
health or the environment, including, without limitation, laws relating to (a)
emissions, discharges, releases or threatened releases of any Hazardous
Materials into the environment (including, without limitation, ambient air,
surface water, ground water, land surface or subsurface strata), (b) the
manufacture, processing, distribution, use, generation, treatment, storage,
disposal, transport or handling of Hazardous Materials, and (c) underground
storage tanks, and related piping, and emissions, discharges, releases or
threatened releases therefrom.
(B) "ENVIRONMENTAL LIABILITY" means, any damages incurred or
suffered (a) resulting from or arising out of any breach of or inaccuracy of any
representation of warranty contained in Section 2.20 hereof or (b) arising under
any Environmental Law and based on or resulting from (i) any facts or conditions
relating to the business or operations, or the real property, facilities or
assets owned, operated, leased, managed or controlled by the Company, any of its
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subsidiaries or former subsidiaries or any predecessors in interest of the
Company or any of its subsidiaries or former subsidiaries in existence on the
Closing Date, or (ii) any acts or omissions of the Company, any of its
subsidiaries or former subsidiaries, its representatives or any predecessors in
interest of the Company or any of its subsidiaries or former subsidiaries on or
prior to, the Closing Date.
(C) "HAZARDOUS MATERIALS" means any hazardous, toxic or
chemical substance, any pollutant or contaminant, any hazardous constituent or
any waste, including, without limitation, petroleum, including crude oil or any
fraction thereof, or any petroleum product, as defined under any Environmental
Law.
2.23 NO REGULATORY PROBLEMS. THE COMPANY (I) HAS NOT FILED a
registration statement which is the subject of any pending proceeding or
examination under Section 8 of the Securities Act, and is not and has not been
the subject of any refusal order or stop order thereunder; (ii) is not subject
to any pending proceeding under Rule 258 of the Securities Act or any similar
rule adopted under Section 3(b) of the Securities Act, or to an order entered
thereunder; (iii) has not been convicted of any felony or misdemeanor in
connection with the purchase or sale of any security or involving the making of
any false filing with the Commission; (iv) is not subject to any order,
judgment, or decree of any court of competent jurisdiction temporarily or
preliminarily restraining or enjoining, or any order, judgment, or decree of any
court of competent jurisdiction permanently restraining or enjoining, the
Company from engaging in or continuing any conduct or practice in connection
with the purchase or sale of any security or involving the making of any false
filing with the Commission; and (v) is not subject to a United States Postal
Service false representation order entered under Section 3005 of Title 39,
United States Code; or a temporary restraining order or preliminary injunction
entered under Section 3007 of Title 39, United States Code, with respect to
conduct alleged to have violated Section 3005 of Title 39, United States Code.
To the Company's knowledge, none of the Company's directors,
officers, or beneficial owners of five (5%) percent or more of any class of its
equity securities (i) has been convicted of any felony or misdemeanor in
connection with the purchase or sale of any security, involving the making of a
false filing with the Commission, or arising out of the conduct of the business
of an underwriter, broker, dealer, municipal securities dealer, or investment
advisor; (ii) is subject to any order, judgment, or decree of any court of
competent jurisdiction temporarily or preliminarily or restraining, or is
subject to any order, judgment, or decree of any court of competent
jurisdiction, permanently enjoining or restraining such person from engaging in
or continuing any conduct or practice in connection with the purchase or sale of
any security, or involving the making of a false filing with the Commission, or
arising out of the conduct of the business of an underwriter, broker, dealer,
municipal securities dealer, or investment adviser; (iii) is subject to an order
of the Commission entered pursuant to Section 15(b), 15B(a) or 15B(c) of the
Exchange Act, or is subject to an order of the Commission entered pursuant to
Section 203(e) or (f) of the Investment Advisers Act of 1940; (iv) is suspended
or expelled from membership in, or suspended or barred from association with a
member of, an exchange registered as a national securities exchange pursuant to
Section 6 of the Exchange Act, an association registered as a national
securities association under Section 15A of the Exchange Act, or a Canadian
13
securities exchange or association for any act or omission to act constituting
conduct inconsistent with just and equitable principles of trade; or (v) is
subject to a United States Postal Service false representation order entered
under Section 3005 of Title 39, United States Code, or is subject to a
restraining order or preliminary injunction entered under Section 3007 of Title
39, United States Code, with respect to conduct alleged to have violated Section
3005 of Title 39, United States Code.
2.24 SUBSIDIARIES. Except for the Subsidiaries set forth in
the Public Documents, the Company has no subsidiaries and has no interest in,
shares of capital stock of or right to acquire an interest in or shares of
capital stock of any other corporation, limited liability company, partnership
or other entity. The Company owns all of the outstanding capital stock of the
Subsidiaries free and clear of all liens, charges and encumbrances of any kind
whatsoever, and there are no outstanding rights to acquire, or directly or
indirectly control the vote or transfer of, any of the capital stock of the
Subsidiaries.
The representations and warranties made by the Company
in this Agreement shall, in the event that the Company has one or more
subsidiaries (a "subsidiary(ies)") also shall apply and be true with respect to
each subsidiary, individually and taken as a whole with the Company and all
other subsidiaries, as if each representation and warranty contained herein made
specific reference to the subsidiary each time the term "Company" was used.
2.25 STOCK COLLATERAL. None of the Company's obligations to
any third party are secured by any of the Company's outstanding securities.
2.26 REAFFIRMATION. All of the representations, warranties and
covenants of the Company set forth in this Agreement or in any letter or
certificate furnished to Placement Agent pursuant hereto, each of which is
incorporated herein by reference and made a part hereof, shall be true in all
material respects upon the execution of this Agreement, shall be deemed to be
repeated at and as of the Closing Date and all subsequent dates on which a
subsequent Closing hereunder takes place.
3. REPRESENTATIONS AND WARRANTIES OF THE PLACEMENT AGENT. The Placement
Agent represents and warrants as follows:
3.1 DUE INCORPORATION. The Placement Agent is duly
incorporated and validly existing and in good standing under the laws of its
state of incorporation and is duly qualified as a foreign corporation for the
transaction of business and is in good standing in each jurisdiction where the
failure to be so qualified would have a materially adverse effect on the
business of the Placement Agent.
3.2 BROKER/DEALER REGISTRATION. The Placement Agent is
registered as a broker-dealer under Section 15 of the Exchange Act.
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3.3 GOOD STANDING. The Placement Agent is a member in good
standing of the NASD.
3.4 SALE IN CERTAIN JURISDICTIONS. Sales of Shares by the
Placement Agent will be made only in such jurisdictions in which (i) the
Placement Agent is a registered broker-dealer or where an applicable exemption
from such registration exists and (ii) the Offering and sale of Shares is
registered under, or is exempt from, applicable registration requirements.
3.5 COMPLIANCE WITH LAWS. Offers and sales of Shares by the
Placement Agent will be made in compliance with the provisions of Rule 502(c) of
Regulation D, Regulation S, and/or Section 4(2) of the Securities Act, and the
Placement Agent will furnish to each investor a copy of the Offering Documents
prior to accepting any payments for Shares.
4. CLOSING.
At or prior to each closing, and as a condition of the
Placement Agent's obligations hereunder, the following shall have been
satisfied: (i) the Company shall have delivered to the Placement Agent at the
closing (a) a certificate of the Company, signed by two executive officers
thereof, stating (I) the Offering Documents meet the requirements hereof and
have been modified or supplemented as required by Paragraph 2 hereof and do not
contain any untrue statement of material fact or fail to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances in which they were made; (II) all
necessary corporate approvals have been obtained to enable the Company to issue
and deliver the Shares and the Placement Agent's Warrants in accordance with the
terms of the Offering; and (III) the representations and warranties contained
herein are true and correct as of the date of such closing as if, and to the
same effect, the warranties and representations were made on such date; (b) one
legal opinion of the Company's counsel, in form and substance reasonably
satisfactory to the Placement Agent and its counsel to be delivered at the Final
Closing; (c) Subscription Agreements signed by the Company and each of the
Subscribers; (d) Consents of any party required to consummate this Offering and
the transactions contemplated thereby; and (e) such other closing documents as
shall be reasonably requested by the Placement Agent and/or its counsel.
4.1 PLACEMENT AGENT'S FEES AND EXPENSESAt the First Closing, and at each
subsequent closing, the Company shall pay to the Placement Agent a commission
equal to ten (10%) percent of the aggregate purchase price of the Shares sold by
the Placement Agent and a non-accountable expense allowance equal to 3% of the
aggregate purchase price of the Shares sold by the Placement Agent. In addition,
the Placement Agent shall receive a Placement Agent's Warrant to purchase up to
10% of the number of Shares sold by the Placement Agent in the Offering at an
exercise price of $3.00 per Share (the "Placement Agent's Warrants"). The
Placement Agent's Warrants will be evidenced by a Share purchase warrant
containing "piggyback" registration provisions, anti-dilution provisions and
other terms and conditions customarily contained in Placement Agent Warrant
agreements. In addition, at the First Closing, the Company shall pay the fees of
Continental Stock Transfer and Trust Company referred to in Section 5.1 below.
15
All the foregoing amounts are payable directly to the parties who are owed same
by deduction from the aggregate purchase price of the Shares sold.
5. COVENANTS. The Company covenants and agrees that:
5.1 EXPENSES OF OFFERING AND OTHER EXPENSES. The Company shall
be responsible for, and shall pay, all fees, disbursements and expenses incurred
in connection with the Offering, including, but not limited to, the Company's
legal and accounting fees and disbursements, the costs of preparing, printing,
mailing and delivering, and filing, where necessary, the Offering Documents and
all amendments and supplements thereto (in such quantities as the Placement
Agent may require), the costs of any "due diligence" meeting held by the Company
as requested by the Placement Agent, and the fees of Continental Stock Transfer
& Trust Company pursuant to the escrow agreement between the Company and
Continental Stock Transfer & Trust Company relating to the Offering. State
exemption and blue sky filing fees will be paid by the Company as the same are
due.
5.2 FURTHER ASSURANCES. The Company will take such actions as
may be reasonably required or desirable to carry out the provisions of this
Agreement and the transaction contemplated hereby.
5.3 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The Company
hereby agrees that prior to the Termination Date or the Closing, as the case may
be, it will not enter into any transaction or take any action, and will use its
best efforts to prevent the occurrence of any event, which could result in any
of its representations, warranties or covenants contained in this Agreement or
any of the Offering Documents not to be true and correct, or not to be performed
as contemplated, at and as of the time immediately after the occurrence of such
transaction or event.
5.4 REGISTRATION RIGHTS. As additional consideration for this
Agreement and the transactions contemplated hereby, the Company agrees with the
Placement Agent and will agree with each Subscriber to register the Shares for
resale as set forth in each Subscriber's Subscription Agreement. All expenses of
registration (exclusive of underwriting discounts and commissions) shall be
borne by the Company.
6. INDEMNIFICATION AND CONTRIBUTION.
6.1 INDEMNIFICATION BY THE COMPANY. The Company agrees to
indemnify and hold harmless the Placement Agent and each person, if any, who
controls the Placement Agent within the meaning of the Securities Act and/or the
Exchange Act against any losses, claims, damages or liabilities, joint or
several, to which the Placement Agent or such controlling person may become
subject, under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon (i) any untrue statement or alleged untrue statement of a material fact
contained (A) in the Offering Documents, or (B) in any blue sky application or
other document executed by the Company specifically for blue sky purposes or
16
based upon any other written information furnished by the Company or on its
behalf to any state or other jurisdiction in order to qualify any or all of the
Shares under the securities laws thereof (any such application, document or
information being hereinafter called a "Blue Sky Application"), (ii) any breach
by the Company of any of its representations, warranties or covenants contained
herein or in any of the Offering Agreements, or (iii) the omission or alleged
omission by the Company to state in the Offering Documents or in any Blue Sky
Application 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; and will reimburse the Placement Agent and each such
controlling person for any legal or other expenses reasonably incurred by the
Placement Agent or such controlling person in connection with investigating or
defending any such loss, claim, damage, liability or action, whether arising out
of an action between the Placement Agent and a third party; provided, however,
that the Company will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon (i) an untrue
statement or alleged untrue statement or omission or alleged omission made in
reliance upon and in conformity with written information regarding the Placement
Agent which is furnished to the Company by the Placement Agent specifically for
inclusion in the Offering Documents or any such Blue Sky Application or (ii) any
breach by the Placement Agent of the representations, warranties or covenants
contained herein (together, (i) and (ii) above are referred to as the
"Non-indemnity Events").
6.2 INDEMNIFICATION BY THE PLACEMENT AGENT. The Placement
Agent agrees to indemnify and hold harmless the Company and each person, if any,
who controls the Company within the meaning of the Securities Act and/or the
Exchange Act against any losses, claims, damages or liabilities, joint or
several, to which the Company or such controlling person may become subject,
under the Securities Act or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon
any Non-Indemnity Event; and will reimburse the Company and each such
controlling person for any legal or other expenses reasonably incurred by the
Company or such controlling person in connection with investigating or defending
any such loss, claim, damage, liability or action provided that such loss,
claim, damage or liability is found ultimately to arise out of or be based upon
any Non-Indemnity Event.
6.3 PROCEDURE. Promptly after receipt by an indemnified party
under this Section 6 of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made against any
indemnifying party under this Section 6, notify in writing the indemnifying
party of the commencement thereof; and the omission so to notify the
indemnifying party will relieve the indemnifying party from any liability under
this Section 6 as to the particular item for which indemnification is then being
sought, but not from any other liability which it may have to any indemnified
party. In case any such action is brought against any indemnified party, and it
notifies an indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate therein, and to the extent that it may
wish, jointly with any other indemnifying party, similarly notified, to assume
the defense thereof, with counsel who shall be to the reasonable satisfaction of
such indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Section 6 for any legal or other expenses subsequently incurred by such
17
indemnified party in connection with the defense thereof other than reasonable
costs of investigation. Any such indemnifying party shall not be liable to any
such indemnified party on account of any settlement of any claim or action
effected without the consent of such indemnifying party.
6.4 CONTRIBUTION. If the indemnification provided for in this
Section 6 is unavailable to any indemnified party (other than as a result of the
failure to notify the indemnifying party as provided in Section 6.3 hereof) in
respect to any losses, claims, damages, liabilities or expenses referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party will contribute to the amount paid or payable by such indemnified party,
as a result of such losses, claims, damages, liabilities or expenses (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand, and the Placement Agent, on the other hand, from the
Offering, 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, on
the other hand, in connection with the statements or omissions which resulted in
such losses, claims, damages, liabilities or expenses as well as any other
relevant equitable considerations. The relative benefits received by the
Company, on the one hand, and the Placement Agent, on the other hand, shall be
deemed to be in the same proportion as the total proceeds from the Offering (net
of sales commissions and the non-accountable expenses allowance, but before
deducting other expenses) received by the Company bear to the commissions and
non-accountable expense allowance received by the Placement Agent. The relative
fault of the Company, on the one hand, and the Placement Agent, on the other
hand, will be determined with reference to, among other things, whether the
untrue or alleged untrue statement of a material fact of the omission to state a
material fact relates to information supplied by the Company, on the one hand,
and the Placement Agent, on the other hand, and their relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
6.5 EQUITABLE CONSIDERATIONS. The Company and the Placement
Agent agree that it would not be just and equitable if contribution pursuant to
this Section 6 were determined by pro rata allocation or by any method of
allocation which does not take into account the equitable consideration referred
to in the immediately preceding paragraph.
6.6 ATTORNEYS' FEES. The amount payable by a party under this
Section 6 as a result of the losses, claims, damages, liabilities or expenses
referred to above will be deemed to include any legal or other fees or expenses
reasonably incurred by such party in connection with investigating or defending
any action or claim (including, without limitation, fees and disbursements of
counsel incurred by an indemnified party in any action or proceeding between the
indemnifying party and indemnified party or between the indemnified party and
any third party or otherwise).
7. TERMINATION BY PLACEMENT AGENT. The Placement Agent will have the
right to terminate this Agreement by giving written notice as herein specified,
at any time, at or prior to the Closing: (a) if the Company shall have failed,
refused, or been unable to perform any of its obligations hereunder, or breached
any of its representations or warranties hereunder; or (b) if, in the Placement
18
Agent's opinion, there has occurred an event materially and adversely affecting
the value of the Shares. If the Placement Agent elects not to proceed with the
Offering as a result of the condition enumerated in clause (a) above, or the
Company elects not to proceed with the Offering for any reason other than the
Placement Agent's failure to proceed expeditiously with the Offering, the
Company shall reimburse the Placement Agent in full for its reasonable
out-of-pocket expenses (including, without limitation, its legal fees and
disbursements).
8. COMPETING CLAIMS. The Company acknowledges and agrees that the
Placement Agent will not proceed to perform hereunder until it receives
assurances, in form and substance satisfactory to the Placement Agent and their
counsel, that as of the first date that the Offering Documents is presented to
potential purchasers of Shares, there will be no claims or payments for services
in the nature of a finder's fee with respect to the Offering or any other
arrangements, agreements, payments, issuances or understandings that may affect
the Placement Agent's compensation hereunder. The Placement Agent shall
compensate any of its personnel who may have acted in such capacities as it
shall determine.
9. MISCELLANEOUS.
(A) GOVERNING LAW. This Agreement will be deemed to have been
made and delivered in the State of New Jersey and will be governed as to
validity, interpretation, construction, effect and in all other respects by the
internal law of the State of New Jersey, without regard to principles of
conflicts of law. The Company (i) agrees that any legal suit, action or
proceeding arising out of or relating to this Agreement shall be instituted
exclusively in the Supreme Court of New Jersey, or in the United States District
Court for the District of New Jersey, (ii) waives any objection to the venue of
any such suit, action or proceeding, and the right to assert that such forum is
an inconvenient forum, and (iii) irrevocably consents to the jurisdiction of the
Supreme Court of New Jersey, and the United States District Court for the
District of New Jersey in any such suit, action or proceeding. The Company
further agrees to accept and acknowledge service of any and all process which
may be served in any such suit, action or proceeding in the Supreme Court of New
Jersey or the United States District Court for the District of New Jersey and
agrees that service of process upon it mailed by certified mail to its address
shall be deemed in every respect effective service of process upon it in any
such suit, action or proceeding.
(B) COUNTERPARTS. This Agreement may be executed in any number
of counterparts each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
(C) NOTICES. Whenever notice is required to be given pursuant
to this Agreement, such notice shall be in writing and shall either be (i)
mailed by first class mail, postage, prepaid, addressed (a) if to the Placement
Agent, at the respective addresses set forth at the head of this Agreement and
(b) if to the Company, at 320 Broad Hollow Road, Farmingdale, New York, 11735,
or (ii) delivered personally or by express courier.
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(D) PARTIES. This Agreement will inure to the benefit of and
be binding upon the parties hereto and their respective successors and assigns.
Neither party may assign this Agreement or its obligations hereunder without the
prior written consent of the other party. This Agreement is intended to be, and
is, for the sole and exclusive benefit of the parties hereto and the persons
described in Section 6.1 and 6.2 hereof and their respective successors and
assigns, and for the benefit of no other person, and no other person will have
any legal or equitable right, remedy or claim under, or in respect of this
Agreement.
(E) AMENDMENT AND/OR MODIFICATION. Neither this Agreement, nor
any term or provision hereof, may not be changed, waived, discharged, amended,
modified or terminated orally, or in any manner other than by an instrument in
writing signed by each of the parties hereto.
(F) VALIDITY. In case any term of this Agreement will be held
invalid, illegal or unenforceable, in whole or in part, the validity of any of
the other terms of this Agreement will not in any way be affected thereby.
(G) WAIVER OF BREACH.The failure of any party hereto to insist
upon strict performance of any of the covenants and agreements herein contained,
or to exercise any option or right herein conferred in any one or more
instances, will not be construed to be a waiver or relinquishment of any such
option or right, or of any other covenants or agreements, and the same will be
and remain in full force and effect.
(H) FURTHER ASSURANCES. Each party to this Agreement will
perform any and all acts and execute any and all documents as may be necessary
and proper under the circumstances in order to accomplish the intents and
purposes of this Agreement and to carry out its provisions.
(I) ENTIRE AGREEMENT.This Agreement contains the entire
agreement and understanding of the parties with respect to the subject matter
hereof and thereof, respectively, and there are no representations, inducements,
promises or agreements, oral or otherwise, not embodied in this Agreement. Any
and all prior discussions, negotiations, commitments and understanding relating
to the subject matter of these agreements are superseded by them.
(J) REPRESENTATIONS, WARRANTIES TO SURVIVE DELIVERY. The
respective representations, indemnities, agreements, covenants, warranties and
other statements of the Company and the Placement Agent shall survive execution
of this Agreement and delivery of the Shares and/or termination of this
Agreement prior thereto.
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[SIGNATURE PAGES FOLLOW]
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Network 1 Financial Securities, Inc.
Private Placement Agent's Agreement
If you find the foregoing is in accordance with our
understanding, kindly sign and return to us a counterpart hereof, whereupon this
instrument along with all counterparts will become a binding agreement between
us.
Very truly yours,
INTERNATIONAL SMART SOURCING, INC.
BY: ______________________________
ANDREW FRANZONE
PRESIDENT
AGREED TO:
NETWORK 1 FINANCIAL SECURITIES, INC.
BY: _______________________________________
WILLIAM R. HUNT, JR.
PRESIDENT
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