PLACEMENT AGENCY AGREEMENT
June 18, 2004
Casimir Capital LP
100 Broadway
New York, NY 10005-4512
Ladies and Gentlemen:
Wireless Frontier Internet, Inc., a Delaware corporation (the "Company"),
hereby confirms its agreement (the "Agreement") with Casimir Capital LP (the
"Placement Agent"), as follows (unless the context otherwise requires, as used
herein, the "Company" refers to Wireless Frontier Internet, Inc. and each of its
subsidiaries, if any):
1. Offering.
(a) The Company intends to offer (the "Offering") for sale through the Placement
Agent as exclusive agent for the Company, investment units ("Units"), each Unit
comprised of (i) one (1) share (the "Shares") of Common Stock, par value $0.001
per share, of the Company (the "Common Stock") and (ii) a 5-year warrant (the
"Warrants") to purchase one-half of one share of Common Stock (the Warrants,
together with the Shares, the "Securities"). The minimum subscription for Units
shall be $100,000, however, the Company and the Placement Agent may, in their
discretion, accept less than the minimum subscription amount. The purchase price
per Unit shall be equal to $0.20. The exercise price of the Warrants shall be
the same as the purchase price per Unit, subject to full ratchet antidilution
for the first year and to weighted-average antidilution for two years
thereafter. The total amount of gross proceeds from the sale of Units in the
Offering shall be a minimum of $3,000,000 (the "Minimum Amount") and a maximum
of $5,000,000 (the "Maximum Amount"). All Unit prices, share prices, exercise
prices and conversion prices should be proportionally adjusted to reflect stock
splits, stock dividends, recapitalizations and the like.
(b) The Units will be offered on a reasonable efforts basis for a period of 60
days from the date that the Memorandum (as defined in Section 1(d)) is first
sent to prospective investors (the "Commencement Date"), which period may be
extended by the Placement Agent for up to an additional 30 days (the "Offering
Period"). The date on which the Offering shall terminate shall be referred to as
the "Termination Date."
(c) The minimum subscription for Units shall be $100,000, however, the Company
and the Placement Agent may, in their discretion, accept less than the minimum
subscription amount; provided, however, that the Placement Agent shall not
tender to the Company and the Company shall not accept subscriptions from, or
sell Units to, any persons or entities that do not qualify as (or are not
reasonably believed to be) "accredited investors," as such term is defined in
Rule 501 of Regulation D ("Regulation D") promulgated under Section 4(2) of the
Securities Act of 1933, as amended (the "Act").
(d) The offering of the Units will be made by the Placement Agent on behalf of
the Company solely pursuant to the Memorandum, which at all times will be in
form and substance reasonably acceptable to the Placement Agent, the Company and
their respective counsel and contain such legends and other information as the
Placement Agent, the Company and their respective counsel may, from time to
time, deem reasonably necessary and desirable to be set forth therein.
"Memorandum" as used in this Agreement means the Company's Confidential Private
Placement Memorandum, inclusive of all exhibits, and any and all amendments,
supplements and appendices thereto. Unless otherwise defined, each term used in
this Agreement will have the same meaning as shall be set forth in the
Memorandum.
2. Representations and Warranties.
(a) All references to the "Company" in Section 2(a)(i) through 2(a)(xvi) shall
be deemed to include the Company's subsidiaries, as applicable, except as
otherwise set forth therein. Except as set forth under the corresponding section
of the Disclosure Schedules attached hereto, the Company hereby represents and
warrants to, and agrees with, the Placement Agent that:
(i) The Company will not engage in any form of general solicitation or
general advertising which is prohibited by Regulation D, or applicable
state securities or blue sky laws in connection with the Offering. Neither
the Company nor, to its knowledge, its affiliates has been subject to any
order, judgment or decree of any court or governmental authority of
competent jurisdiction temporarily, preliminarily or permanently enjoining
such person for failing to comply with Section 503 of Regulation D.
Subject to the accuracy of the Placement Agent's representations and
warranties in Section 2(b) below, the Units will be offered and sold
pursuant to the registration exemption provided by Regulation D and
Section 4(2) and/or Section 4(6) of the Act as a transaction not involving
a public offering and the requirements of any other applicable state
securities laws and the respective rules and regulations thereunder in
those United States jurisdictions in which the Placement Agent notifies
the Company that the Units are being offered for sale. The Memorandum will
describe all material aspects, including attendant risks, of an investment
in the Company. The Company has not taken nor will it take any action that
conflicts with the conditions and requirements of, or that would make
unavailable with respect to the Offering, the exemption(s) from
registration available pursuant to Regulation D or Section 4(2) and/or
Section 4(6) of the Act and knows of no reason why any such exemption
would be otherwise unavailable to it.
(ii) The Memorandum will not, and as of the date of the Memorandum, does
not, include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading. To its knowledge, none of the written statements,
documents or certificates prepared or supplied by the Company with respect
to the transactions contemplated hereby contains or will contain an untrue
statement of a material fact or omits a material fact necessary to make
the statements contained therein not misleading. There is no fact that the
Company has not disclosed to the Placement Agent and its counsel in
writing and of which the Company is aware that materially and adversely
affects or could materially and adversely affect the business, prospects,
financial condition, operations, assets or affairs of the Company or any
of its subsidiaries.
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(iii) The Company is a corporation duly organized, validly existing and in
good standing under the laws of Delaware. The Company has no subsidiaries
and does not have an equity interest in any other firm, partnership,
association or other entity. The Company owns all of the outstanding
capital stock of its subsidiaries. As of the First Closing, the Company
will be duly qualified to transact business as a foreign corporation and
is in good standing under the laws of each jurisdiction where the location
of its properties or the conduct of its business makes such qualification
necessary, except where the failure to be so qualified would not have a
material adverse effect on the Company or its business.
(iv) The Company has all requisite corporate power and authority to
conduct its business as presently conducted and as proposed to be
conducted (to the extent described in the Memorandum), to enter into and
perform its obligations under this Agreement and the other agreements
contemplated hereby and by the Memorandum, and the Securities
(collectively, the "Transaction Documents") and to issue, sell and deliver
the Units, the Securities and the shares of Common Stock issuable upon
exercise of the Warrants (the "Conversion Shares"). The execution and
delivery of each of the Transaction Documents has been duly authorized by
all necessary corporate action on the part of the Company. This Agreement
has been duly executed and delivered and constitutes, and each of the
other Transaction Documents, upon due execution and delivery, will
constitute, valid and binding obligations of the Company, enforceable
against the Company in accordance with their respective terms.
(v) None of the execution and delivery of, or performance by the Company
under, any of the Transaction Documents or the consummation of the
transactions herein or therein contemplated conflicts with or violates, or
will result in the creation or imposition of, any lien, charge or other
encumbrance upon any of the material assets of the Company under any
agreement or other instrument to which the Company is a party or by which
the Company or its material assets may be bound, any term of the charter
or by-laws of the Company, or any license, permit, judgment, decree,
order, statute, rule or regulation applicable to the Company or any of its
material assets.
(vi) The Company will have the authorized and outstanding capital stock
set forth under the heading "Description of the Units and Capital Stock"
in the Memorandum. All outstanding shares of capital stock of the Company
are duly authorized, validly issued and outstanding, fully paid and
nonassessable. Except as set forth in the Memorandum: (i) there are no
outstanding options, stock subscription agreements, warrants or other
rights permitting or requiring the Company or others to purchase or
acquire any shares of capital stock, or other equity securities of the
Company, or to pay any dividend or make any other distribution in respect
thereof; (ii) there are no securities issued or outstanding that are
convertible into or exchangeable for any of the foregoing and, to the
knowledge of the Company, other contracts, commitments or understandings,
whether or not in writing, to issue or grant any such option, warrant,
right or convertible or exchangeable security; (iii) no shares of stock or
other securities of the Company are reserved for issuance for any purpose;
(iv) there are no voting trusts or, to the knowledge or the Company, other
contracts, commitments, understandings, arrangements or restrictions of
any kind with respect to the ownership, voting or transfer of shares of
stock or other securities of the Company, including without limitation,
any preemptive rights, rights of first refusal, proxies or similar rights;
and (v) no person holds a right to require the Company to register any
securities of the Company under the Act or to participate in any such
registration. The issued and outstanding shares of capital stock of the
Company conform in all material respects to all statements in relation
thereto contained in the Memorandum and the Memorandum describes all
material terms and conditions thereof. All issuances by the Company of its
securities were at the time of their issuance either (A) exempt from
registration under the Act and any applicable state securities laws or (B)
appropriately registered.
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(vii) The Shares, the Warrant Securities, the Conversion Shares and the
Agent's Warrants (as defined in Section 3(e) hereof) have been duly
authorized and, when issued and delivered against payment therefor as
provided in the Transaction Documents, will be validly issued, fully paid
and nonassessable and will be free and clear of all liens, charges,
restrictions, claims and encumbrances imposed by or through the Company
other than as provided in the Transaction Documents. No holder of any of
the Securities, the Conversion Shares or the Agent's Securities (as
defined in Section 3(e) hereof) will be subject to personal liability
solely by reason of being such a holder and, except as set forth in the
Memorandum, none of the Securities, the Conversion Shares or the Agent's
Securities is subject to preemptive or similar rights of any
securityholder of the Company, nor will the issuance of such securities
trigger an adjustment under the antidilution or exercise rights of any
holders of any outstanding shares of capital stock, options, warrants or
other rights to acquire any securities of the Company. A sufficient number
of authorized but unissued shares of Common Stock have been reserved for
issuance upon exercise of the Warrants and the exercise of the Agent's
Warrants.
(viii) No consent, authorization or filing of or with any court or
governmental authority is required in connection with the issuance of the
Securities, the Conversion Shares or the Agent's Securities (as defined in
Section 3(e) hereof) or the consummation of the transactions contemplated
herein or in the other Transaction Documents, except for (a) the filing
with the SEC of a registration statement providing for registration of the
Shares, the Conversion Shares and the Agent's Shares, (b) the filing with
the SEC of a Form D pursuant to Regulation D, (c) other required filings
with the SEC, if any, and (d) applicable "blue sky" or state securities
commissions relating specifically to the Offering (all of which will be
duly made on a timely basis).
(ix) Except as set forth in the Memorandum, the financial statements,
together with the related notes thereto, of the Company included or
incorporated by reference in the Memorandum are true and complete and
present fairly, in all material respects, the financial position of the
Company as of the respective dates specified and the results of its
operations and changes in financial position for the respective periods
covered thereby. Such financial statements and related notes were prepared
in accordance with U.S. generally accepted accounting principles ("GAAP")
applied on a consistent basis throughout the periods indicated and except
that the unaudited financial statements omit full notes, and except for
normal year-end adjustments. Except as set forth in such financial
statements or in the Memorandum, the Company has no material liabilities
of any kind, whether accrued, absolute, contingent or otherwise or entered
into any material transactions or commitments. The Company does not know
of any facts, circumstances or conditions (or any state of facts,
circumstances or conditions which management of the Company has concluded
could give rise thereto) that could materially adversely affect its
business, operations, earnings or prospects that have not been fully
disclosed in the Memorandum.
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(x) The conduct of business by the Company as presently conducted is not
subject to continuing oversight, supervision, regulation or examination by
any governmental official or body of the United States or any other
jurisdiction wherein the Company conducts its business, except as
described in the Memorandum or except such regulation as is applicable to
commercial enterprises generally. Except as set forth in the Memorandum,
all material licenses, permits, approvals, government authorizations,
leases, contracts and agreements referred to in the Memorandum, along with
all other material licenses, permits, approvals, leases, governmental
authorizations or contracts to which the Company is a party, have been
obtained and are valid and in full force and effect and neither the
Company nor, to the knowledge of the Company, any other party is in
default thereunder, and to the knowledge of the Company, no event has
occurred which with the passage of time or the giving of notice, or both,
would constitute a default thereunder except for a default which would not
have a material adverse effect on the Company. Except as described in the
Memorandum, all material licenses, permits, approvals or governmental
authorizations necessary to permit the Company to conduct its business
have been obtained and are outstanding and to the knowledge of the
Company, will be outstanding on each Closing Date (as defined below), and
the Company is in all material respects complying therewith. There are no
proceedings pending, or to the knowledge of the Company threatened,
seeking to cancel, terminate or limit such licenses, approvals or permits.
(xi) Except as disclosed in the Memorandum, no default by the Company or,
to the best knowledge of the Company, any other party exists in the due
performance under any material agreement to which the Company is a party
or to which any of its material assets is subject (collectively, the
"Company Agreements"). The Company Agreements disclosed in the Memorandum
are the only material agreements to which the Company is bound or by which
its assets are subject, are accurately and fairly described in the
Memorandum and are in full force and effect in accordance with their
respective terms.
(xii) Except as set forth in the Memorandum, there are no actions,
proceedings, claims or investigations, before or by any court or
governmental authority pending or, to the best knowledge of the Company,
threatened, against the Company, or involving its assets or, to the
knowledge of the Company, involving any of its officers or directors
which, if determined adversely to the Company or such officer or director,
could result in any material adverse change in the condition (financial or
otherwise) or prospects of the Company or adversely affect the
transactions contemplated by this Agreement or the other Transaction
Documents or the enforceability thereof.
(xiii) The Company is not in violation of: (a) its charter or by-laws; (b)
any indenture, mortgage, deed of trust, note or other agreement or
instrument to which the Company is a party or by which it is or may be
bound or to which any of its material assets may be subject; (c) any
statute, rule or regulation currently applicable to the Company; or (d)
any judgment, decree or order applicable to the Company, which violation
or violations individually, or in the aggregate, would result in any
material adverse change in the condition (financial or otherwise) or
prospects of the Company.
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(xiv) Except as set forth in the Memorandum, since the date of the interim
financial statements incorporated by reference in the Memorandum, there
has been no: (a) material adverse change in the business condition
(financial or otherwise) or prospects of the Company; (b) transaction
otherwise than in the ordinary course of business; (c) issuance of any
securities (debt or equity) or any rights to acquire any such securities;
(d) damage, loss or destruction, whether or not covered by insurance, with
respect to any material asset or property of the Company; or (e) agreement
to permit any of the foregoing.
(xv) The execution and delivery of this Agreement has been duly authorized
by all necessary corporate action on the part of the Company. This
Agreement has been duly executed and delivered and constitutes a valid and
binding obligation of the Company, enforceable against the Company in
accordance with its terms.
(xvi) The Company is not obligated to pay, and has not obligated the
Placement Agent to pay, a finder's or origination fee in connection with
the Offering. The Company has not offered for sale or solicited offers to
purchase the Units except for negotiations with the Placement Agent.
Except as set forth in the Memorandum, as of the commencement of the
Offering, no other person has any right to participate in any offer, sale
or distribution of the Company's securities to which the Placement Agent's
rights, described herein, shall apply.
(xvii) Except as set forth in the Memorandum or in the SEC Reports (as
defined below), the Company does not own any real property in fee simple,
and the Company has good and marketable title to all property (personal,
tangible and intangible) owned by it, free and clear of all security
interests, liens and encumbrances.
(xviii) Except for rights to its name, the Company has no intellectual
property rights of any nature, including, but not limited to, patents,
trademarks, copyrights and service marks. The Company has not infringed
upon the rights of others with respect to any intellectual property
rights.
(xix) The Company has filed, on a timely basis, each Federal, state, local
and foreign tax return which is required to be filed by it, or has
requested an extension therefor and has paid all taxes and all related
assessments, penalties and interest to the extent that the same have
become due.
(xx) The Company has filed (i) all reports required to be filed by it
under the Securities Act; (ii) all annual reports on Form 10-KSB and all
quarterly reports on Form 10-QSB required to be filed by it under the
Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, in
order for it to satisfy its filing requirements under the Exchange Act for
the periods to which each such report relates, in each case commencing
with the fiscal quarter ended September 30, 2003 (or such shorter period
as the Company was required by law to file such material); (iii) an annual
report on Form 10-KSB, covering the fiscal years ended December 31, 1998,
1999, 2000, 2001 and 2002, which was filed with the SEC on May 28, 2004;
(iv) a quarterly report on Form 10-QSB, covering the fiscal quarters ended
March 31, June 30 and September 30, 1999, which was filed with the SEC on
May 28, 2004; (v) a quarterly report on Form 10-QSB, covering the fiscal
quarters ended March 31, June 30 and September 30, 2000, which was filed
with the SEC on May 28, 2004; (vi) a quarterly report on Form 10-QSB,
covering the fiscal quarters ended March 31, June 30 and September 30,
2001, which was filed with the SEC on May 28, 2004; (vii) a quarterly
report on Form 10-QSB, covering the fiscal quarters ended March 31, June
30 and September 30, 2002, which was filed with the SEC on May 28, 2004;
and (viii) a quarterly report on Form 10-QSB, covering the fiscal quarters
ended March 31 and June 30, 2002, which was filed with the SEC on May 28,
2004 (the foregoing materials, as amended, where applicable, being
collectively referred to herein as the "SEC Reports"). The Company has
made available to the Placement Agent a copy of all SEC Reports filed
within the 10 days preceding the date hereof. As of their respective
dates, the SEC Reports complied in all material respects with the
requirements of the Securities Act and the Exchange Act and the rules and
regulations of the SEC promulgated thereunder, and none of the SEC Reports
(as amended, where applicable) relating to the periods completed in the 24
months preceding the date hereof contained any untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
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(b) The Placement Agent hereby represents and warrants to, and agrees with, the
Company that:
(i) The Placement Agent is licensed and registered as a broker-dealer
under the Securities Exchange Act of 1934, as amended (the "1934 Act"),
and the rules and regulations promulgated thereunder and to the extent
legally required, the securities laws in effect in any state or other
jurisdiction in which Units are offered by the Placement Agent and the
rules, regulations and orders of any securities administrator existing or
adopted thereunder.
(ii) The Placement Agent has not offered or sold, and will not offer or
sell, any Units except to those that it reasonably believes to be
"accredited investors" as such term is defined in Regulation D and that,
in connection with each such sale, it has taken or will take reasonable
steps to ensure that the purchaser of such Units is aware that such sale
is being made in reliance on Section 4(2) of the Act.
(iii) The execution and delivery of this Agreement has been duly
authorized by all necessary corporate action on the part of the Placement
Agent. This Agreement has been duly executed and delivered and constitutes
a valid and binding obligation of the Placement Agent, enforceable against
the Placement Agent in accordance with its terms.
(iv) Neither the Placement Agent nor any person acting on its behalf has
made or will made offers or sales of the Units by means of any form of
general solicitation or general advertising within the meaning of
Regulation D, or applicable state securities laws or blue sky laws in
connection with the Offering.
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3. Placement Agent Appointment and Compensation.
(a) In accordance with the terms hereof, the Company hereby appoints the
Placement Agent and its selected dealers, as its exclusive agent in connection
with the Offering. The Company acknowledges that the Placement Agent may use
selected dealers and sub agents to fulfill its agency hereunder; provided that
such dealers and sub agents are compensated solely by the Placement Agent;
provided, further, that the Placement Agent shall ensure that such selected
dealers and sub agents are provided with a copy of this Agreement and agree to
be bound by the terms hereof to the same extent as if they were parties hereto.
The Placement Agent shall, in any event, be responsible for any breach of this
Agreement by any such dealers or sub agents. Except as expressly stated herein,
the Company has not and will not make, or permit to be made, any offers or sales
of the Units other than through the Placement Agent without the Placement
Agent's prior written consent. The Placement Agent has no obligation to purchase
any of the Units. The agency of the Placement Agent hereunder shall continue
until the earlier of the Termination Date or the Final Closing (as defined
below).
(b) The Company will cause to be delivered to the Placement Agent copies of the
Memorandum and has consented, and hereby consents, to the use of such copies for
the purposes permitted by the Act and applicable securities laws, and hereby
authorizes the Placement Agent and its agents, employees and selected dealers to
use the Memorandum in connection with the sale of the Units until the
Termination Date, and no other person or entity is or will be authorized to give
any information or make any representations other than those contained in the
Memorandum or to use any offering materials other than those contained in the
Memorandum in connection with the sale of the Units. The Company will provide at
its own expense such quantities of the Memorandum and other documents and
instruments relating to the Offering as the Placement Agent may reasonably
request.
(c) Subject to Section 13 hereof, the Company will cooperate with the Placement
Agent by making available to its representatives such information as may be
requested in making a reasonable investigation of the Company and its affairs
and shall provide access to such employees as shall be reasonably requested in
connection with the performance of the Placement Agent's obligations hereunder.
(d) The Company shall pay to the Placement Agent a placement fee (the "Placement
Agent's Fee") equal to ten percent (10%) of the aggregate gross proceeds in each
closing of the sale of the Units (each, a "Closing") and a cash fee equal to
four percent (4%) of the gross proceeds upon each exercise (other than a
cashless exercise) of the Warrants. In addition, the Company shall pay all
expenses set forth in Section 5(i) hereof. The Placement Agent's Fee and the
expenses set forth in Section 5(i) hereof will be deducted from the gross
proceeds of the Units sold at each Closing, as set forth in Section 4 hereof.
The Placement Agent shall direct all such amounts to be paid directly from the
escrow account established pursuant to Section 4(b) hereof.
(e) As additional compensation hereunder, at each Closing, the Company shall
sell to the Placement Agent or its designees, for nominal consideration,
warrants to purchase the number of shares of Common Stock equal to ten percent
(10%) of the Shares and shares of Common Stock underlying the Warrants sold in
each Closing (the "Agent's Warrants"), at an exercise price equal to the
exercise price of the Warrants sold at such Closing. The shares of Common Stock
underlying the Agent's Warrants shall be referred to collectively herein as the
"Agent's Shares" and, together with the Agent's Warrants, as the "Agent's
Securities". The Agent's Warrants shall be exercisable until five years after
their date of issuance. The holders of the Agent's Securities shall have
registration rights equivalent to those granted to the holders of Units. The
form of the Agent's Warrants shall be substantially similar to the Warrants,
except that the Agent's Warrants shall contain cashless exercise provisions for
the entire term of the Agent's Warrant.
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(f) Within 30 days following the final Closing of the Offering, the Placement
Agent will deliver to the Company a list of all parties that it contacted in
connection with the Offering other than those that invested in the Offering
(each such party a "Placement Agent Party"). In the event any investor in the
Offering, whose investment shall be evidenced by the execution and delivery by
such investor to the Company of a subscription agreement (or other similar
agreement), or any other Placement Agent Party invests in the Company at any
time within eighteen (18) months from the later of the Termination Date or the
final Closing (the "Final Closing") of the Offering, the Company shall pay to
the Placement Agent cash and warrant compensation with respect to such
investment or consideration equal to that which is set forth herein with respect
to the Offering.
(g) At or prior to the Commencement Date, the Company shall engage the Placement
Agent as its non-exclusive financial advisor and pay the Placement Agent a
monthly advisory fee equal to $4,000 per month for a period of twelve months
(12) months from the later of the Termination Date or the Final Closing. At or
prior to the Commencement Date, the parties shall enter into a financial
advisory agreement in form and substance reasonably satisfactory to the
Placement Agent and the Company embodying such terms customarily included in
such agreements.
(h) For a period of twelve (12) months from the date hereof, if the Company
agrees in principle with a third party for such third party to act as placement
agent or financial advisor to the Company in connection with any proposed
offering by the Company of its securities (each, a "Subsequent Offering"), the
Company (provided this Agreement shall not have been terminated by the Placement
Agent without cause or by the Company with cause) shall, prior to entering into
any binding arrangement with such third party, provide the Placement Agent with
a summary of the material terms of any such proposed arrangement (the "Third
Party Offer"). For a period of ten (10) business days following delivery of such
notice (the "Right to Match Period"), the Placement Agent shall have the right
to match the terms of the Third Party Offer. If the Placement Agent matches the
terms of the Third Party Offer within the Right to Match Period, the Company
shall retain the Placement Agent, in place of such third party, to act as
exclusive placement agent or financial advisor to the Company in connection with
the Subsequent Offering. If the Placement Agent is unable to match the terms of
the Third Party Offer within the Right to Match Period, the Company shall have
the right to retain such third party to act as placement agent or financial
advisor in connection with the Subsequent Offering.
4. Subscription and Closing Procedures.
(a) Each prospective purchaser will be required to complete and execute one
original signature page for the Subscription Agreement in the form annexed to
the Memorandum and the accredited investor certification attached thereto, which
will be forwarded or delivered to the Placement Agent at the Placement Agent's
offices at the address set forth in Section 11 hereof, together with the
subscriber's check or good funds in the full amount of the purchase price per
Unit for the number of Units desired to be purchased.
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(b) All funds for subscriptions received from the Offering will be promptly
forwarded by the Placement Agent or the Company, if received by it, to and
deposited in an escrow account (the "Escrow Account") with Independence Bank,
acting as escrow agent (the "Escrow Agent") established for the purpose of
holding subscription funds prior to a Closing. All such funds for subscriptions
will be held in the Escrow Account pursuant to the terms of the escrow agreement
with respect thereto among the Company, the Placement Agent and the Escrow
Agent. The Company will pay all fees related to the establishment and
maintenance of the Escrow Account. The Placement Agent can reject any
subscriptions for any reason. Subject to the receipt of such subscriptions for
the Minimum Amount, the Company will either accept or reject the Subscription
Agreements in a timely fashion and at each Closing will countersign the
Subscription Agreements and provide copies of such agreements to the Placement
Agent. The Company will give written notice to the Placement Agent of its
acceptance or rejection of each subscription. The Company, or the Placement
Agent on the Company's behalf, will promptly return to subscribers incomplete,
improperly completed, improperly executed and rejected subscriptions and give
written notice thereof to the Placement Agent upon such return.
(c) If subscriptions for at least the Minimum Amount have been accepted prior to
the Termination Date, the funds therefor have been collected by the Escrow Agent
and all of the conditions set forth elsewhere in this Agreement are fulfilled, a
closing shall be held promptly with respect to that portion of the Units sold
(the "First Closing"). Thereafter, the remaining Units will continue to be
offered and sold in accordance with the terms hereof until the Termination Date.
Additional Closings may from time to time be conducted at times mutually
agreeable with respect to the additional Units sold, with the Final Closing to
occur within ten (10) days after the earlier of the Termination Date or the sale
of all Units offered. Delivery of payment for the accepted subscriptions from
the funds held in the Escrow Account will be made at each Closing at the
Placement Agent's offices against delivery by the Company of the Securities
comprising the Units at the address set forth in Section 11 hereof (or at such
other place as may be mutually agreed upon between the Company and the Placement
Agent), net of amounts due to the Placement Agent and Blue Sky counsel pursuant
to Section 5(i) hereof as of such Closing. Executed Securities and the Agent's
Warrants will be in such authorized denominations and issued in such names as
the Placement Agent may request on or before the second full business day prior
to the date of each Closing ("Closing Date"), and will be made available to the
Placement Agent for review and packaging at the Placement Agent's office at
least one full business day prior thereto.
(d) If Subscription Agreements for the Minimum Amount have not been received and
accepted by the Company on or before the Termination Date for any reason, the
Offering will be terminated, no Units will be sold, and the Escrow Agent will,
at the request of the Placement Agent, cause all monies received from
subscribers for the Units to be promptly returned to such subscribers without
interest, penalty, expense or deduction.
5. Further Covenants. The Company hereby covenants and agrees that:
(a) The Company agrees that it shall modify or supplement the Memorandum during
the course of the Offering to ensure that the Memorandum does not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances in which they were made, not misleading, and shall, at its
sole cost, prepare and furnish to the Placement Agent copies of appropriate
amendments and/or supplements in such quantities as the Placement Agent may
reasonably request. The Company will not at any time, whether before or after
the Final Closing, prepare or use any amendment or supplement to the Memorandum
of which the Placement Agent will not previously have been advised and furnished
with a copy, or to which the Placement Agent or its counsel will have reasonably
objected in writing or orally (confirmed in writing within 24 hours), or which
is not in compliance with the Act, the Regulations and other applicable
securities laws.
10
(b) Except with the prior written consent of the Placement Agent, which consent
shall not be unreasonably withheld, the Company shall not, at any time prior to
the Final Closing, take any action that would cause any of the representations
and warranties made by it in this Agreement not to be complete and correct in
all material respects on and as of each Closing Date with the same force and
effect as if such representations and warranties had been made on and as of each
such date.
(c) As soon as practicable following notification thereof, the Company will
advise the Placement Agent and its counsel, and confirm the advice in writing,
of any order preventing or suspending the use of the Memorandum, or the
suspension of the qualification or registration of the Units for offering or the
suspension of any exemption for such qualification or registration of the Units
for offering in any jurisdiction, or of the institution or threatened
institution of any proceedings for any of such purposes, and the Company will
use its reasonable best efforts to prevent the issuance of any such order,
judgment or decree, and, if issued, to obtain as soon as reasonably practicable
the lifting thereof.
(d) The Company shall comply in all material respects with the Act, the rules
and regulations of the Securities and Exchange Commission (the "SEC"), the 1934
Act, and the rules and regulations thereunder in each case applicable to the
offer and sale of the Units, and all applicable state securities laws and the
rules and regulations thereunder in the states in which the Placement Agent's
Blue Sky counsel has advised the Placement Agent that the Units are qualified or
registered for sale or exempt from such qualification or registration (except to
the extent that such qualification or registration would require the Company to
be qualified to do business in such state or states), so as to permit the
continuance of the sales of the Units, and will file with the SEC, and shall
promptly thereafter forward to the Placement Agent, any and all reports on Form
D as are required.
(e) The Company shall use its reasonable best efforts to qualify the Units for
sale (or seek exemption therefrom) under the securities laws of such
jurisdictions in the United States as the Placement Agent shall designate, and
the Company will (through Blue Sky counsel) make such applications and furnish
information as may be required for such purposes. The Company will, from time to
time, prepare and file such statements and reports as are or may be required to
continue such qualifications in effect for so long a period as the Placement
Agent may reasonably request.
(f) The Company shall place a legend on the certificates representing the
Securities issued to subscribers stating that the securities evidenced thereby
have not been registered under the Act or applicable state securities laws,
setting forth or referring to the applicable restrictions on transferability and
sale of such securities under the Act and applicable state laws.
11
(g) During the Offering Period, the Company shall make available for review by
prospective purchasers of the Units during normal business hours at the
Company's offices, upon their request, copies of the Company Agreements to the
extent that such disclosure shall not violate any obligation on the part of the
Company to maintain the confidentiality thereof and shall afford each
prospective purchaser of Units the opportunity to ask questions of and receive
answers from an officer of the Company concerning the terms and conditions of
the Offering and the opportunity to obtain such other additional information
necessary to verify the accuracy of the Memorandum to the extent it possesses
such information or can acquire it without unreasonable expense.
(h) Except with the prior written consent of the Placement Agent, which consent
shall not be unreasonably withheld, or as set forth in the Memorandum with
respect to the issuance of Units, the Company shall not, at any time prior to
the earlier of the Final Closing or the Termination Date, engage in or commit to
engage in any transaction outside the ordinary course of business, including,
without limitation, the incurrence of material indebtedness; materially change
its business or operations as shall be described in the Memorandum; dispose of
any material assets or make any material acquisition; or issue, agree to issue
or set aside for issuance any securities (debt or equity) or any right to
acquire such securities, except as shall be contemplated by the Memorandum.
Notwithstanding the preceding sentence, the Company may issue (i) compensatory
option grants to employees and consultants in the ordinary course of business
pursuant to option plans presently in effect, (ii) shares of its Common Stock
upon exercise of outstanding options or warrants or conversion of outstanding
convertible securities and (iii) securities included in the Units sold in the
Offering and the Agent's Warrants.
(i) Whether or not the Offering is consummated, or this Agreement is terminated,
the Company hereby agrees to pay all of its fees, costs and expenses incident
hereto and to the Offering, including, without limitation, those in connection
with (i) preparing, distributing and binding the Memorandum and any and all
amendments and/or supplements thereto, fees for bound volumes and any and all
agreements, contracts and other documents related hereto and thereto; (ii) the
authorization, issuance, transfer and delivery of the Securities, Conversion
Shares, and the Agent's Securities, including, without limitation, fees and
expenses of any transfer agent or registrar; (iii) the fees and expenses of the
Escrow Agent (subject to Section 4(b) hereof); (iv) all fees and expenses of
legal, accounting and other advisers to the Company; (v) all filing fees, costs
and legal fees and expenses for Blue Sky services and related filings with
respect to Blue Sky exemptions and qualifications, including legal fees of
$3,000 for the first ten states and $450 per state thereafter, $3,000 of which
shall be paid to the Placement Agent's counsel upon execution of this Agreement
for legal fees in connection with obtaining Blue Sky exemptions (the "Blue Sky
Fees"); and (vi) subject to Section 9 hereof, a nonaccountable expense allowance
("Placement Agent Expenses") relating to expenses incurred by the Placement
Agent in connection with the Offering (including, without limitation, travel and
related expenses and fees and expenses of legal, accounting and other advisers
to the Placement Agent) equal to 3% of the gross proceeds from the sale of
Units. A good faith advance of $25,000 to cover up front expenses to be incurred
by the Placement Agent has been paid by the Company on March 16, 2004. Such
amount shall be credited at the First Closing against the 3% nonaccountable
expense allowance.
(j) Until the Termination Date, neither the Company nor any person or entity
acting on its behalf will negotiate or enter into any agreement with any other
placement agent or underwriter with respect to a private or public offering of
the Company's or any subsidiary's debt or equity securities. Neither the Company
nor anyone acting on its behalf will, until the Termination Date, without the
prior written consent of the Placement Agent, offer for sale to, or solicit
offers to subscribe for Units or other securities of the Company from, or
otherwise approach or negotiate in respect thereof with, any other person.
12
(k) At each Closing Date, (i) the independent auditors for the Company shall
have provided a "comfort letter" concerning the Company's financial statements
in the form customarily provided by Terance Kelley, CPA in connection with
securities offerings by its audit clients and (ii) the chief executive officer
and chief financial officer of the Company shall have provided representations
and warranties relating to the Company's most recent quarterly and year-to-date
unaudited financial statements and internal financial controls, similar to those
to be included in the Company's 2003 annual report on Form 10-KSB under the 1934
Act, and as required by the Sarbanes-Oxley Act of 2002.
(l) The Company hereby agrees to file a registration statement on Form SB-2 or
other appropriate registration document under the Act for resale of the Shares,
the Conversion Shares and the Agent's Shares, as soon as possible, but not later
than 30 days following the Final Closing. The Company shall cause such
registration statement to become effective within the earlier of (i) the fifth
trading day following the date on which the Company is notified by the SEC that
such registration statement will not be reviewed or is no longer subject to
further review and comments, (ii) one hundred twenty (120) days after the Final
Closing or (iii) ninety (90) days from the date of the filing of such
registration statement. If the registration statement has not been filed, or
does not become effective within the respective periods set forth in the
preceeding sentence, the Company shall pay to each investor in the Offering as
liquidated damages and not as a penalty, an amount in cash equal to 2% of the
aggregate purchase price paid by such investor in the Offering per month, until
such registration statement has been filed or has been declared effective, as
applicable. If the Company fails to pay any liquidated damages pursuant to this
Section in full within seven days after the date payable, the Company will pay
interest thereon at a rate of 10% per annum (or such lesser maximum amount that
is permitted to be paid by applicable law) to the holder, accruing daily from
the date such liquidated damages are due until such amounts, plus all such
interest thereon, are paid in full. The liquidated damages pursuant to the terms
hereof shall apply on a pro-rate basis for any portion of a month prior to the
filing or effectiveness of the registration statement required hereunder, as
applicable.
(m) Effective immediately following the First Closing, the Company hereby grants
the Placement Agent the right to designate a nonvoting observer to the Company's
Board of Directors (the "Observer"). Such status as an observer shall include
advance written notice of and the right to attend all meetings of the Board of
Directors of the Company and to obtain copies of all minutes from, and notices
regarding, such meetings, as well as copies of all correspondence to members of
the Board of Directors. If reasonably requested by the Company, the Observer
will execute a non-disclosure agreement in a customary form.
(n) The Company hereby agrees to use its best efforts to (A) no later than
November 30, 2004, (x) add an additional member to the Board of Directors such
that the Board of Directors shall be composed of a total of seven (7) members
and (y) appoint two (2) "independent directors" (as defined in New Nasdaq Rule
4200(a)(15)) to fill the vacancy created by such addition to the Board of
Directors and other vacancies; and (B) at any time after November 30, 2004, but
not later than February 28, 2005, designate an audit committee of the Board of
Directors and appoint two (2) new members to the Board of Directors to replace
two (2) existing directors, which audit committee shall be in compliance with
the requirements of Nasdaq (as if the Company were subject to those
requirements) or, if the Company's Common Stock is then traded on the American
Stock Exchange ("Amex"), in compliance with the requirements of Amex. The
Company shall use its reasonable best efforts to maintain compliance with the
provisions of this Section 5(n) until the end of the Effectiveness Period (as
defined in the Registration Rights Agreement).
13
(o) Within three (3) days following the date of the First Closing, the Company
shall instruct its transfer agent that in no event shall such transfer agent be
permitted to issue any certificates evidencing newly-issued shares of Common
Stock, unless the issuances of shares of Common Stock evidenced by such
certificates shall have been first approved by the Board of Directors of the
Company, and the transfer agent shall have obtained a written certification from
both the Chief Executive Officer and the Chief Financial Officer of the Company
to such effect.
(p) As soon as reasonably practicable following the Final Closing, the Company
hereby agrees, in consultation with the Placement Agent, to use its reasonable
best efforts to cause its stockholders to approve and effect either a reverse
stock split or increase in the number of authorized shares of Common Stock.
6. Conditions of Placement Agent's Obligations. The obligations of the Placement
Agent hereunder are subject to the fulfillment, at or before each Closing, of
the following additional conditions:
(a) Each of the representations and warranties of the Company contained in this
Agreement which are qualified as to materiality shall have been true and
correct, and the representations and warranties of the Company which are not
qualified to materiality shall have been true and correct in all material
respects, in each case, as of the date of this Agreement and as of each Closing
Date as though made on and as of each Closing Date, except to the extent any
such representation or warranty expressly speaks of a particular date, in which
case it shall be true and correct as of such date.
(b) The Company shall have performed and complied in all material respects with
all agreements, covenants and conditions required to be performed and complied
with by it hereunder at or before each Closing.
(c) No order suspending the use of the Memorandum or enjoining the offering or
sale of the Units shall have been issued, and no proceedings for that purpose or
a similar purpose shall have been initiated or pending, or, to the best of the
Company's knowledge, are contemplated or threatened.
(d) As of immediately prior to the First Closing, the Company will have a
capitalization of (i) 100,000,000 shares of Common Stock authorized, of which
45,077,386 shares shall be issued and outstanding, (ii) options to purchase
16,628,790 shares of Common Stock shall be issued and outstanding; and (iii)
warrants to purchase 7,429,166 shares of Common Stock shall be issued and
outstanding.
14
(e) The Placement Agent shall have received certificates of the chief financial
officer of the Company, dated as of the applicable Closing Date, certifying on
behalf of the Company as to the fulfillment of the conditions set forth in
subparagraphs (a), (b), (c) and (d) above.
(f) The Company shall have delivered to the Placement Agent (i) a currently
dated good standing certificate from the Secretary of State of Delaware and each
jurisdiction in which the Company is qualified to do business as a foreign
corporation, and (ii) certified resolutions of the Company's Board of Directors
approving this Agreement and the other Transaction Documents, and the
transactions and agreements contemplated by this Agreement and the other
Transaction Documents.
(g) On or prior to the date hereof and at each Closing, the chief executive
officer and chief financial officer of the Company shall have provided a
certificate to the Placement Agent confirming on behalf of the Company that
there have been no undisclosed material and adverse changes in the business
condition (financial or otherwise) or prospects of the Company from the date of
the latest financial statements included in the Memorandum, the absence of
undisclosed liabilities and such other matters relating to the financial
condition and prospects of the Company that the Placement Agent may reasonably
request.
(h) At each Closing, the Company shall have (i) paid to the Placement Agent the
Placement Agent's Fee in respect of all Units sold at such Closing, (ii) paid
all fees, costs and expenses set forth in Section 5(i) hereof, and (iii)
executed and delivered to the Placement Agent the Agent's Warrants in an amount
proportional to the Units sold at such Closing.
(i) There shall have been delivered to the Placement Agent a signed opinion of
outside counsel to the Company, dated as of each Closing Date, in substantially
the form attached hereto as Exhibit A.
7. Indemnification.
(a) The Company will (i) indemnify and hold harmless the Placement Agent, its
selected dealers and their respective officers, directors, employees and each
person, if any, who controls the Placement Agent within the meaning of the Act
and such selected dealers (each an "Indemnitee") against, and pay or reimburse
each Indemnitee for, any and all losses, claims, damages, liabilities or
expenses whatsoever (or actions or proceedings or investigations in respect
thereof), joint or several (which will, for all purposes of this Agreement,
include, but not be limited to, all reasonable costs of defense and
investigation and all reasonable attorneys' fees, including appeals)
(collectively, a "Claim"), to which any Indemnitee may become subject, under the
Act or otherwise, in connection with the offer and sale of the Units, whether
such losses, claims, damages, liabilities or expenses shall result from any
claim of any Indemnitee or any third party; and (ii) reimburse each Indemnitee
for any legal or other expenses reasonably incurred in connection with
investigating or defending against any such loss, claim, action, proceeding or
investigation; provided, however, that the Company will not be liable in any
such case to the extent that any such claim, damage or liability results
directly and primarily from (A) an untrue statement or alleged untrue statement
of a material fact made in the Memorandum, or an omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in reliance upon and in conformity with
written information furnished to the Company by the Placement Agent or any such
controlling persons specifically for use in the preparation thereof, or (B) any
violations by the Placement Agent of the Act or state securities laws which does
not result from a violation thereof or a breach hereafter by the Company or any
of its affiliates. In addition to the foregoing agreement to indemnify and
reimburse, the Company will indemnify and hold harmless each Indemnitee against
any and all Claims to which any Indemnitee may become subject insofar as such
costs, expenses, losses, claims, damages or liabilities arise out of or are
based upon the claim of any person or entity that he or it is entitled to
broker's or finder's fees from any Indemnitee in connection with the Offering.
Notwithstanding the foregoing, in no event shall this Section 7(a) apply with
respect to any Claim that is finally judicially determined to have resulted
primarily from the gross negligence or willful misconduct of any Indemnitee.
15
(b) The Placement Agent will indemnify and hold harmless the Company, its
officers, directors, employees and each person, if any, who controls the Company
within the meaning of the Act against, and pay or reimburse any such person for,
any and all losses, claims, damages or liabilities or expenses whatsoever (or
actions, proceedings or investigations in respect thereof) to which the Company
or any such person may become subject under the Act or otherwise, whether such
losses, claims, damages, liabilities or expenses (or actions, proceedings or
investigations in respect thereof) shall result from any claim of the Company,
any of its officers, directors, employees, agents, any person who controls the
Company within the meaning of the Act or any third party, insofar as such
losses, claims, damages or liabilities are based upon any untrue statement or
alleged untrue statement of any material fact contained in the Memorandum but
only with reference to information contained in the Memorandum relating to the
Placement Agent, or an omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, if made or omitted in reliance upon and in conformity with
written information furnished to the Company by the Placement Agent or any such
controlling persons, specifically for use in the preparation thereof. The
Placement Agent will reimburse the Company or any such person for any legal or
other expenses reasonably incurred in connection with investigating or defending
against any such loss, claim, damage, liability or action, proceeding or
investigation to which such indemnity obligation applies. Notwithstanding the
foregoing, in no event shall the Placement Agent's indemnification obligation
hereunder exceed the amount of the Placement Agent's Fees actually received by
it.
(c) Promptly after receipt by an indemnified party under this Section 7 of
notice of the commencement of any action, claim, proceeding or investigation
("Action"), such indemnified party, if a claim in respect thereof is to be made
against the indemnifying party under this Section 7, will notify the
indemnifying party of the commencement thereof, but the omission to so notify
the indemnifying party will not relieve it from any liability which it may have
to any indemnified party under this Section 7 unless the indemnifying party has
been substantially prejudiced by such omission. The indemnifying party will be
entitled to participate in, and, to the extent that it may wish, jointly with
any other indemnifying party, to assume the defense thereof subject to the
provisions herein stated, with counsel reasonably satisfactory to such
indemnified party. The indemnified party will have the right to employ separate
counsel in any such Action and to participate in the defense thereof, but the
fees and expenses of such counsel will not be at the expense of the indemnifying
party if the indemnifying party has assumed the defense of the Action with
counsel reasonably satisfactory to the indemnified party; provided, however,
that if the indemnified party shall be requested by the indemnifying party to
participate in the defense thereof or shall have concluded in good faith and
specifically notified the indemnifying party either that there may be specific
defenses available to it which are different from or additional to those
available to the indemnifying party or that such Action involves or could have a
material adverse effect upon it with respect to matters beyond the scope of the
indemnity agreements contained in this Agreement, then the counsel representing
it, to the extent made necessary by such defenses, shall have the right to
direct such defenses of such Action on its behalf and in such case the
reasonable fees and expenses of such counsel in connection with any such
participation or defenses shall be paid by the indemnifying party. No settlement
of any Action against an indemnified party will be made without the consent of
the indemnifying party and the indemnified party, which consent shall not be
unreasonably withheld or delayed in light of all factors of importance to such
party and no indemnifying party shall be liable to indemnify any person for any
settlement of any such claim effected without such indemnifying party's consent.
16
8. Contribution. To provide for just and equitable contribution, if (i) an
indemnified party makes a claim for indemnification pursuant to Section 7 hereof
and it is finally determined, by a judgment, order or decree not subject to
further appeal that such claims for indemnification may not be enforced, even
though this Agreement expressly provides for indemnification in such case; or
(ii) any indemnified or indemnifying party seeks contribution under the Act, the
1934 Act, or otherwise, then each indemnifying party shall contribute to such
amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company on the one hand and the Placement Agent on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or expenses (or actions in respect thereof), 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
shall be deemed to be in the same proportion as the total net proceeds from the
Offering (before deducting expenses) received by the Company bear to the total
commissions and fees received by the Placement Agent. The relative fault, in the
case of an untrue statement, alleged untrue statement, omission or alleged
omission will be determined by, among other things, whether such statement,
alleged statement, omission or alleged omission relates to information supplied
by the Company or by the Placement Agent, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement, alleged statement, omission or alleged omission. The Company and the
Placement Agent agree that it would be unjust and inequitable if the respective
obligations of the Company and the Placement Agent for contribution were
determined by pro rata allocation of the aggregate losses, liabilities, claims,
damages and expenses or by any other method or allocation that does not reflect
the equitable considerations referred to in this Section 8. No person guilty of
a fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
will be entitled to contribution from any person who is not guilty of such
fraudulent misrepresentation. For purposes of this Section 8, each person, if
any, who controls the Placement Agent within the meaning of the Act will have
the same rights to contribution as the Placement Agent, and each person, if any,
who controls the Company within the meaning of the Act will have the same rights
to contribution as the Company, subject in each case to the provisions of this
Section 8. Anything in this Section 8 to the contrary notwithstanding, no party
will be liable for contribution with respect to the settlement of any claim or
action effected without its written consent. This Section 8 is intended to
supersede, to the extent permitted by law, any right to contribution under the
Act, the 1934 Act or otherwise available.
17
9. Termination.
(a) (I) The Offering may be terminated by the Placement Agent at any time prior
to the expiration of the Offering Period in the event that (i) any of the
representations or warranties of the Company contained herein shall have been
false or misleading in any material respect when made or deemed made, (ii) the
Company shall have failed to perform in any material respect any of its
obligations hereunder, (iii) the Company shall have determined for any reason
not to continue with the Offering or (iv) the Placement Agent shall determine in
its sole discretion, reasonably exercised, that it is reasonably likely that any
of the conditions to Closing set forth herein will not, or cannot, be satisfied.
In the event of any such termination occasioned by or arising out of or in
connection with the matters set forth in clauses (i)-(iii) above, or occasioned
by or arising out of or in connection with a matter set forth in clause (iv)
above due to any breach or failure hereunder on the part of the Company, the
Placement Agent shall be entitled to receive, an amount equal to the sum of: (A)
any Placement Agent's Fees to which the Placement Agent is entitled pursuant to
Section 3(d) hereof earned through the Termination Date, (B) an amount equal to
three percent (3%) of the purchase price per Unit of all Units sold in the
Offering (deeming, for this purpose, all Units offered as having been sold),
less any amounts theretofore paid in respect of Placement Agent Expenses, and
all unpaid Blue Sky Fees and other expenses set forth in Section 5(i) hereof and
(C) all amounts that may become payable pursuant to Section 3(f) hereof. If the
Offering is not completed because the Placement Agent prevents its completion
(except where the Placement Agent does so because of a breach by the Company of
a covenant, representation or warranty contained herein or in the Memorandum
which the Company fails to cure within ten (10) business days of receipt of
written notice from the Company) or the Company terminates the Offering because
of failure of the Commencement Date to occur within 10 days from the date
hereof, the Placement Agent shall retain the $25,000 previously paid to the
Placement Agent. Notwithstanding the foregoing, in the event the Company
completes one or more public or private offerings of its securities within one
year after the Company prevents the completion of the Offering (except where the
Company does so because of a breach by the Placement Agent of a covenant,
representation or warranty contained herein which the Placement Agent fails to
cure within ten (10) business days of receipt of written notice from the
Placement Agent), the Company shall also pay the Placement Agent an investment
banking fee (an "Investment Banking Fee") equal to five percent (5%) of the
total consideration received by the Company in connection with such sales of
securities; provided, that the Company's obligation to pay the Placement Agent
the Investment Banking Fee shall terminate and be of no further force or effect
upon the date of the First Closing.
(II) This Offering may be terminated by the Placement Agent by notice to the
Company at any time if, in the sole judgment of the Placement Agent reasonably
exercised, the Offering or the sale or the payment for or the delivery of the
Units is rendered impracticable or inadvisable because (i) additional material
governmental restrictions not in force and effect on the date hereof shall have
been imposed upon trading in securities generally, or minimum or maximum prices
shall have been generally established on the New York Stock Exchange, or trading
in securities generally on such exchange shall have been suspended or a general
banking moratorium shall have been established by federal or New York State
authorities, (ii) a war, major hostilities, terrorist or similar activity, act
of God or other calamity shall have occurred or, if existing, shall have been
substantially escalated, or (iii) of a material adverse change in the condition
(financial or otherwise) of the Company, its business or business prospects.
(b) This Offering may be terminated by the Company at any time prior to the
Termination Date in the event that the Placement Agent shall have failed to
perform any of its material obligations hereunder. In the event of any
termination by the Company pursuant to this paragraph, the Placement Agent shall
be entitled to receive all amounts as may be due under any indemnity or
contribution obligation provided herein or any other Transaction Document, at
law or otherwise. On such Termination Date, the Company shall pay all unpaid
Blue Sky Fees and other expenses set forth in Section 5(i) hereof.
18
(c) Upon any such termination, the Escrow Agent will, at the request of the
Placement Agent, cause all money received in respect of subscriptions for Units
not sold to be promptly returned to such subscribers without interest, penalty,
expense or deduction. Any interest earned thereon shall be applied first to the
payment of amounts, if any, due to the Escrow Agent and next to the payment of
any amounts payable to the Placement Agent hereunder which remain unpaid.
10. Survival.
(a) The obligations of the parties to pay any costs and expenses hereunder and
to provide indemnification and contribution as provided herein shall survive any
termination hereunder.
(b) The respective indemnities, agreements, representations, warranties and
other statements of the Company set forth in or made pursuant to this Agreement
will remain in full force and effect, regardless of any investigation made by or
on behalf of, and regardless of any access to information by, the Company or the
Placement Agent, or any of their officers or directors or any controlling person
thereof, and will survive the sale of the Units.
11. Notices. All communications hereunder will be in writing and, except as
otherwise expressly provided herein or after notice by one party to the other of
a change of address, if sent to the Placement Agent, will be mailed, delivered
or telefaxed and confirmed to Casimir Capital LP, 100 Broadway, New York, New
York 10005-4512, Attention: Richard Sands, Telefax number 212-798-1399, with a
copy to Feldman Weinstein LLP, 420 Lexington Avenue, New York, New York 10170,
Attention: David N. Feldman, Esq., Telefax number (212) 997-4242, and if sent to
the Company, will be mailed, delivered or telefaxed and confirmed to Wireless
Frontier Internet, Inc. 104 West Callaghan Street, Fort Stockton, Texas 79735,
Attention: Chief Financial Officer, Telefax number (432) 336-0441, with a copy
to Kramer Levin Naftalis & Frankel LLP, 919 Third Avenue, New York, New York
10022, Attention: Ernest S. Wechsler, Esq., Telefax number (212) 715-8000.
12. APPLICABLE LAW, COSTS, ETC. THIS AGREEMENT WILL BE GOVERNED BY, CONSTRUED
AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE. Each party agrees
that all legal proceedings concerning the interpretations, enforcement and
defense of the transactions contemplated by this Agreement and shall be
commenced exclusively in the state and federal courts sitting in The City of New
York, Borough of Manhattan. Each party hereto hereby irrevocably submits to the
exclusive jurisdiction of the state and federal courts sitting in The City of
New York, New York, Borough of Manhattan for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein, and hereby irrevocably waives, and agrees not to assert in
any suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of any such court, that such suit, action or proceeding is
improper. Each party hereto (including its affiliates, agents, officers,
directors and employees) hereby irrevocably waives, to the fullest extent
permitted by applicable law, any and all right to trial by jury in any legal
proceeding arising out of or relating to this Agreement or the transactions
contemplated hereby. If either party shall commence an action or proceeding to
enforce any provision of this Agreement, then the prevailing party in such
action or proceeding shall be reimbursed by the other party for its attorneys
fees and other costs and expenses incurred with the investigation, preparation
and prosecution of such action or proceeding.
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13. Confidentiality. The Company hereby agrees to hold confidential the
identities of the purchasers in the Offering and shall not disclose their names
and addresses without the prior written consent of the Placement Agent, unless
required by law. The Company hereby consents to the granting of an injunction
against it by any court of competent jurisdiction to enjoin it from violating
the foregoing confidentiality provisions. The Company hereby agrees that the
Placement Agent will not have an adequate remedy at law in the event that the
Company breaches these confidentiality provisions contained herein, and that the
Placement Agent will suffer irreparable damage and injury as a result of any
such breach. Resort to such equitable relief shall not, however, be construed to
be a waiver of any other rights or remedies which the Placement Agent may have.
14. Miscellaneous. No provision of this Agreement may be amended or modified, or
any provision hereof waived, except, in the case of an amendment or
modification, by an instrument in writing signed by the Company and the
Placement agent, and in the case of a waiver, by an instrument signed in writing
by the party against whom such waiver is sought. Unless expressly so provided,
no party to this Agreement will be liable for the performance of any other
party's obligations hereunder. Any party hereto may waive compliance by the
other with any of the terms, provisions and conditions set forth herein;
provided, however, that any such waiver shall be in writing specifically setting
forth those provisions waived thereby. No such waiver shall be deemed to
constitute or imply waiver of any other term, provision or condition of this
Agreement. This Agreement contains the entire agreement between the parties
hereto and is intended to supersede any and all prior agreements between the
parties relating to the same subject matter. This Agreement shall be binding
upon and inure to the benefit of the parties and their successors and permitted
assigns. Neither party may assign this Agreement or any rights or obligations
hereunder without the prior written consent of the other party. This Agreement
may be executed in counterparts, each of which shall be deemed an original and
all of which shall constitute a single agreement. If any provision of this
Agreement is held to be invalid or unenforceable in any respect, the validity
and enforceability of the remaining terms and provisions of this Agreement shall
not in any way be affected or impaired thereby and the parties will attempt to
agree upon a valid and enforceable provision that is a reasonable substitute
therefore, and upon so agreeing, shall incorporate such substitute provision in
this Agreement.
[SIGNATURE PAGE FOLLOWS]
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If the foregoing is in accordance with your understanding of our agreement,
kindly sign and return this Agreement, whereupon it will become a binding
agreement between the Company and the Placement Agent in accordance with its
terms.
Very truly yours,
WIRELESS FRONTIER INTERNET, INC.
By: /s/ Alex Gonzalez
-------------------------------------
Name: Alex Gonzalez
Title: Chief Executive Officer
Accepted and agreed to this 18th day
of June, 2004.
CASIMIR CAPITAL LP.
By: /s/ Richard F. Sands
-------------------------------------
Name: Richard F. Sands
Title: President and
Chief Executive Officer
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