MANAGING PLACEMENT AGENT (UNDERWRITING) AGREEMENT
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RH Investment Corporation
June ___, 2000
Page 30
1,000,000 SHARES
ROEX, INC.
MANAGING PLACEMENT AGENT AGREEMENT
June ____, 2000
RH Investment Corporation
15760 Ventura Boulevard
Suite 1732
Encino, CA 91436
Gentlemen:
Roex, Inc., a California corporation ("Company"), hereby confirms its agreement
with you, as Managing Placement Agent, as follows:
SECTION 1. Description of the Offering. The Company proposes to offer for sale
and sell to the public up to 1,000,000 shares of its common stock, par value
$.0001 per share ("Common Stock"), at the price of $6.00 per share ("Offering").
All funds received from subscribers will be held in escrow by the Santa Barbara
Bank and Trust, Santa Barbara, California ("Escrow Agent"), pursuant to an
agreement among you, the Company and the Escrow Agent ("Escrow Agreement"). The
Company will determine, in its sole discretion, to accept or reject
subscriptions for Common Stock within five days following receipt thereof. Funds
of an investor whose subscription is rejected will be promptly returned directly
to such person by the Escrow Agent, without interest thereon or deduction
therefrom, pursuant to the terms of the Escrow Agreement.
In the event that at least 500,000 shares of Common Stock have not been sold
within 90 days from the initial effective date of the Registration Statement (as
hereinafter defined) under the Securities Act of 1933, as amended ("Securities
Act"), which period may be extended for an additional 60 days by you, the
Offering will terminate and all funds received from subscribers will be promptly
returned in full by the Escrow Agent directly to subscribers, without interest
thereon or deduction therefrom, as provided in the Escrow Agreement. Provided
that at least 500,000 shares of Common Stock are sold within the foregoing
period, the Company may continue to offer the Common Stock for sale until (i)
1,000,000 shares are sold or (ii) December 31, 2000, whichever first occurs; the
Offering may be terminated at any time prior thereto at the discretion of the
Company.
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The Company reserves the right to refuse to sell shares of Common Stock to any
person at any time.
The Company, the Common Stock and the Offering are more fully described in the
Registration Statement (as hereinafter defined) and the Prospectus (as
hereinafter defined). All terms used in this Agreement, unless specifically
defined herein, shall have the meanings set forth in such Registration Statement
and Prospectus.
SECTION 2. Representations and Warranties of the Company. The Company represents
and warrants to, and agrees with you, that:
(a) The Company is duly organized and validly existing as a corporation in
good standing under the laws of the State of California. The Company
has the full power and authority and all necessary authorizations,
approvals, orders, licenses, certificates and permits of and from all
governmental and regulatory officials and bodies required to own its
properties and conduct its business as described in the Prospectus (as
herein defined); the Company is duly qualified to do business under
the laws of (and is in good standing as such in) each jurisdiction in
which it owns or leases property, has an office, or in which business
is conducted and such qualification is required, except where the
failure to so qualify would not have a material adverse effect on the
business, assets or financial condition of the Company, and no
proceeding has been instituted in any such jurisdiction revoking,
limiting or curtailing, or seeking to revoke, limit or curtail, such
power and authority or qualification.
(b) The Company does not own or control, directly or indirectly, any
corporation, association, partnership or other entity other than as
identified in the Registration Statement (as herein defined).
(c) The execution, delivery and performance by the Company of this
Agreement has been duly authorized by all necessary action and will
not (i) violate any provision of the Articles of Incorporation or
Bylaws of the Company (in each case as amended at the time of this
Agreement), (ii) result in the breach, or be in contravention, of any
provision of any agreement, franchise, license, indenture, mortgage,
deed of trust or other instrument to which the Company is a party or
by which the Company or its property may be bound or affected, or any
order, law, statute, rule or regulation applicable to the Company of
any court or regulatory body, administrative agency or other
governmental body having jurisdiction over the Company or any of its
property, or any order of any court or governmental agency or
authority entered in any proceeding to which the Company was or is now
a party or by which it is bound or (iii) result in the creation of any
lien, charge or encumbrance upon any property of the Company. No
consent, approval, authorization or other order of any court,
regulatory body, administrative agency or other governmental body is
required for the execution and delivery of this Agreement by the
Company, or the consummation by the Company of the transactions
contemplated hereby, other than under the Securities Act, the
Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated by the Securities and Exchange Commission
("Commission") thereunder (collectively, the "Exchange Act"), state
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securities laws and regulations (collectively, the "Blue Sky Laws")
applicable to the public offering of the Common Stock as described in
the Registration Statement and the Prospectus (as hereinafter
defined), and/or the rules of the National Association of Securities
Dealers, Inc. ("NASD"). This Agreement has been duly executed and
delivered by the Company and is a valid and binding agreement of the
Company, enforceable in accordance with its terms, except insofar as
rights to indemnity or contribution may be limited by applicable law
and subject to bankruptcy, insolvency or similar laws generally
affecting the rights of creditors and equitable principles affecting
the right to obtain specific enforcement or similar equitable relief.
(d) A registration statement on Form SB-2 (Registration File No.
333-92299) and an Amendment No. 1 with respect to the Common Stock has
been carefully prepared by the Company in conformity with the
requirements of the Securities Act and the rules and regulations
("Rules and Regulations") of the Commission thereunder, and has been
filed with the Commission; the Company has so prepared and has filed
or proposes to file prior to the effective date of such registration
statement or subsequent to such effective date pursuant to Rule 430A
under the Rules and Regulations, an additional amendment or amendments
to such registration statement. There have been delivered to you and
your counsel two signed copies of such registration statement, as
initially filed with the Commission and each amendment thereto,
together with copies of each exhibit filed therewith, and two
conformed copies of such registration statement, as initially filed
with the Commission and each amendment thereto (but without exhibits)
and of each related preliminary prospectus ("Preliminary Prospectus")
and of the proposed final form of prospectus. As used in this
Agreement, the term "Registration Statement" means such registration
statement, including exhibits, financial statements and schedules and
documents incorporated therein by reference, as finally amended and
revised at the time such registration statement becomes effective,
including the information, if any, deemed to be a part thereof
pursuant to Rule 430A of the Rules and Regulations, and the term
"Prospectus" means the related prospectus in the form first filed on
behalf of the Company with the Commission pursuant to Rule 424(b)
under the Securities Act. Any reference herein to any Registration
Statement, Preliminary Prospectus or the Prospectus shall be deemed to
refer to and include the documents and information, if any,
incorporated by reference therein. Any reference to any amendment or
supplement to any Registration Statement, Preliminary Prospectus or
Prospectus shall be deemed to refer to and include any documents filed
after such date under the Exchange Act and incorporated therein by
reference.
(e) Neither the Commission nor any state securities or "blue sky"
authorities has issued any order preventing or suspending the use of
any Preliminary Prospectus, and each Preliminary Prospectus has
conformed fully in all material respects with the requirements of the
Securities Act, the Rules and Regulations and the Blue Sky Laws and,
as of its date, has not included any untrue statement of a material
fact or omitted to state a fact required to be stated therein or
necessary to make the statements therein not misleading; when the
Registration Statement becomes effective, and at all times subsequent
thereto up to each Closing Date (as defined herein), the Registration
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Statement and the Prospectus, and any amendments or supplements
thereto, will contain all statements that are required to be stated
therein in accordance with the Securities Act, the Rules and
Regulations and the Blue Sky Laws and will in all material respects
conform to the requirements of the Securities Act, the Rules and
Regulations and the Blue Sky Laws, and neither the Registration
Statement nor the Prospectus, nor any amendment or supplement thereto,
will include any untrue statement of a material fact or omit to state
a fact required to be stated therein or necessary to make the
statements therein not misleading; provided, however, that the Company
makes no representation or warranty as to information contained in or
omitted from any Preliminary Prospectus, the Registration Statement,
the Prospectus, or any such amendment or supplement, in reliance upon
and in conformity with written information furnished to the Company by
you specifically for inclusion therein.
(f) There are no contracts or other documents, transactions or
relationships of or by and between the Company or any of the
respective officers or directors of the Company required to be
described in the Registration Statement or filed as exhibits to the
Registration Statement by the Securities Act or the Rules and
Regulations which have not been described or filed as required or
incorporated by reference as permitted by the Securities Act and the
Rules and Regulations.
(g) The Company has authorized capital stock as set forth in the
Prospectus. All outstanding shares of capital stock of the Company
have been duly authorized, validly and legally issued and are fully
paid and nonassessable; such shares have not been issued in violation
of or subject to any preemptive rights provided for by law or by the
Company's Articles of Incorporation or Bylaws. The Common Stock
conforms in all material respects to all statements with respect
thereto contained in the Prospectus, and such statements conform to
the provisions set forth in the Articles of Incorporation and Bylaws
of the Company.
(h) The shares of Common Stock sold in the Offering, upon receipt of full
payment therefor and delivery by the Company, will be duly authorized,
validly and legally issued, fully paid and nonassessable, and will not
have been issued in violation of or subject to any preemptive rights
provided for by law or by the Company's Articles of Incorporation or
Bylaws or be subject to any lien, claim, encumbrance, security
interest, preemptive rights or any other claim of any third party.
(i) Except as described in the Prospectus, there is not pending, or, to
the knowledge of the Company, threatened, any action, suit,
proceeding, inquiry or investigation to which the Company is a party,
or to which the property of the Company is subject, before or brought
by any court, governmental agency or body or arbitration tribunal,
which, if determined adversely to the Company, would result in any
material adverse change in the business, financial position, net
worth, results of operations or prospects of the Company, or
materially and adversely affect its property or assets.
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(j) The financial statements and the related notes included in the
Registration Statement, in any Preliminary Prospectus or in the
Prospectus present fairly the financial position, results of
operations and cash flows of the Company at the dates and for the
periods indicated and have been prepared in accordance with generally
accepted accounting principles, except as otherwise stated therein.
Stonefield, Josephson, Inc., who have audited certain financial
statements as set forth in their report included in the Registration
Statement and Prospectus and each Preliminary Prospectus, are
independent accountants as required by the Securities Act and the
Rules and Regulations.
(k) The Company is not in violation of its Articles of Incorporation and
Bylaws, or in default or breach under any court or administrative
order or decree, or in default with respect to any provision of any
lease, loan agreement, franchise, license, permit, agreement or other
contractual obligation to which the Company is a party or by which the
Company or any of its property is bound, and there does not exist any
state of facts which constitutes an event of default or breach under
such documents or which, upon notice or lapse of time or both, would
constitute such an event of default or breach except those, if any,
described in the Prospectus or such defaults or breaches which,
individually or in the aggregate, are not, and with notice or lapse of
time, or both, would not become, material to the Company. The Company
is not in violation or breach of any law, order, rule, regulation,
writ, injunction or decree of any governmental authority or
instrumentality or any court, domestic or foreign, which violation
would have a materially-adverse effect on its business as described in
the Prospectus.
(l) Neither the Company nor any of its affiliates, nor any director or
officer of the foregoing, have taken and will not take, directly or
indirectly, any action designed to or which has constituted or which
might reasonably be expected to cause or result, under the Exchange
Act or otherwise, in (i) a violation of Rule 10b-6 under the Exchange
Act or (ii) the manipulation of the price of the Common Stock
facilitate the sale or resale of such securities.
(m) The Company has good and marketable title to all the property and
assets reflected as owned by it in the Prospectus, subject to no lien,
mortgage, pledge, charge or encumbrance of any kind or nature
whatsoever, except those, if any, reflected in the Prospectus, or
which are not material to the Company and do not materially affect the
value of such property and do not materially interfere with the use
made or proposed to be made of such property; all properties held or
used by the Company under leases, licenses, franchises or other
agreements are held by it under valid, subsisting and enforceable
leases, licenses, franchises or other agreements (subject to
bankruptcy, reorganization, moratorium or similar laws affecting
creditors' rights generally).
(n) Since its inception, the Company has not sustained any material loss
or interference with its business or property from fire, flood,
hurricane, accident or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action,
order or decree; and subsequent to the respective dates as of which
information is given in the Registration Statement and Prospectus, the
Company has not incurred any material liabilities or obligations,
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direct or contingent, or entered into any material transactions, not
in the ordinary course of business, and there has not been any
material change in the capital stock or long-term debt of the Company,
or any material adverse change, or any development involving a
prospective material adverse change, in the business, financial
position, net worth, results of operations or prospects of the
Company, except in each case as described in or contemplated by the
Prospectus.
(o) The Company has filed all necessary federal, state and foreign income
and franchise tax returns and has paid all taxes shown as due thereon,
and has no knowledge of any tax deficiency which has been asserted or
threatened against the Company which would materially adversely affect
its business, operations or property.
(p) The Company keeps accurate books and records and maintains internal
accounting controls which provide reasonable assurance that (i)
transactions are executed in accordance with management's
authorization, (ii) transactions are recorded as necessary to permit
preparation of its financial statements and to maintain accountability
for its assets, (iii) access to its assets is permitted only in
accordance with management's authorization and (iv) the reported
accountability for its assets is compared with existing assets at
reasonable intervals.
(q) There are no holders of securities of the Company having rights to
registration thereof under the Securities Act or preferential rights
to purchase Common Stock or any other securities of the Company,
except as disclosed in the Registration Statement and the Prospectus.
(r) All documents delivered or to be delivered by the Company or its
representatives in connection with the issuance and sale of the Common
Stock were on the dates on which they were delivered or will be on the
dates on which they are to be delivered, in all material respects,
true, complete and correct.
(s) The Company owns, or possesses the requisite licenses or other rights
to use, all trademarks, service marks, service names and trade names
necessary to conduct its business as described in or contemplated by
the Prospectus; there is no claim or action by any person pertaining
to (or proceeding pending or threatened which challenges) the rights
of the Company with respect to any trademarks, service marks, service
names or trade names used in the conduct of its business as described
in or contemplated by the Prospectus; the products, services and
processes of the Company have not infringed and do not infringe upon
proprietary rights held or asserted by third parties which
infringement, if resolved adversely to the Company, could materially
affect its earnings, assets, affairs, business prospects or condition
(financial and other).
(t) The Company has not distributed and will not distribute prior to the
final Closing Date (as hereinafter defined), any offering material in
connection with the offer and sale of the Common Stock other than as
permitted by the Securities Act.
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(u) The Company has not (i) had any material dealings within the twelve
months prior to the date of this Agreement with any member of the
NASD, or any person related to or associated with such member, other
than discussions and meetings relating to the Offering, except as
disclosed in writing to you prior to the date hereof; (ii) entered
into a financial or management consulting agreement except as
contemplated hereunder; or (iii) engaged any intermediary between you
and the Company, and/or any of the affiliates of the Company, in
connection with the Offering, and no person has been or will be
compensated in any manner for such service.
(v) Each of the Company's directors, executive officers and 10%
shareholders shall have agreed in writing that, from the date hereof
through the final Closing Date (as hereinafter defined), and for a
period of 90 days thereafter, they will not, without your prior
written consent, sell, offer or contract to sell, or grant any option
to purchase, or otherwise dispose of, directly or indirectly, any
shares of Common Stock owned by them (or any securities convertible
into or exchangeable for any shares of Common Stock) except pursuant
to this Agreement.
Any certificate signed by any officer of the Company and delivered to you or to
your counsel shall be deemed a representation and warranty of the Company to you
as to the matters covered thereby and any certificate delivered by the Company
to its counsel for purposes of enabling such counsel to render any opinion
referred to in this Agreement will also be furnished to you and to your counsel
and shall be deemed to be additional representations and warranties to you by
the Company.
SECTION 3. Representations and Warranties of the Managing Placement Agent. You
hereby represent and warrant to, and agree with, the Company as follows:
(a) You are a corporation duly organized, validly existing under the laws
of the State of California, with all requisite power and authority to
enter into this Agreement and to carry out your obligations hereunder.
(b) This Agreement (i) has been duly authorized, executed and delivered by
you, (ii) constitutes your legal, valid and binding obligation, and
(iii) subject to applicable bankruptcy, insolvency and other laws
affecting the enforceability of creditors' rights generally, is
enforceable as to you in accordance with its terms, specific
performance hereof being limited by general principles of equity and
the enforceability of the indemnification provisions hereof.
(c) The execution, delivery and performance of this Agreement by you and
the consummation by you of the transactions contemplated hereby and by
the Prospectus will not conflict with or result in a breach or
violation by you of any of the terms or provisions of, or constitute a
default in any material respect under, (i) any indenture, mortgage,
deed of trust, loan agreement, lease or other agreement or instrument
to which you are a party or to which you or your property are subject,
(ii) your Articles of Incorporation or Bylaws or (iii) any statute,
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judgment, decree, order, rule or regulation applicable to you of any
court or governmental agency or body having jurisdiction over you,
your affiliates or your property.
(d) You are, and at all times through the final Closing Date (as herein
defined) shall remain, duly registered pursuant to the provisions of
the Exchange Act as a broker-dealer; you are, and at all times through
the final Closing Date shall remain, a member in good standing of the
NASD; you will not reallow discounts or pay commissions or other
compensation for participation in the distribution of the Offering to
any broker-dealer which is not a member of the NASD, including foreign
broker-dealers registered under the Exchange Act; you shall act as an
independent contractor, and nothing herein shall constitute you an
employee of the Company; you shall not make sales of Common Stock
discretionary accounts.
(e) In connection with the offer, offer for sale and sale of Common Stock,
you (and your representatives and agents) shall conform to and comply
with (i) the provisions of the Conduct Rules of the NASD, (ii)
applicable provisions of federal law, including without limitation the
Securities Act, the Rules and Regulations and the Exchange Act, and
(iii) the Blue Sky Laws applicable to the Offering, relating to, among
other things, the period during which and conditions under which the
Common Stock may be offered, offered for sale and sold; you shall not
distribute the Prospectus or otherwise commence the Offering without
prior written confirmation from the Company or its counsel that the
Offering may be commenced under applicable securities laws, rules and
regulations.
(f) Pursuant to your appointment made in Section 4 hereof, you will use
your best efforts to procure subscribers for Common Stock will conduct
the Offering in compliance with the provisions of the Securities Act,
the Rules and Regulations, the Exchange Act, applicable Blue Sky Laws
and the rules and regulations of the NASD; accordingly, as of each
Closing Date (as herein defined), you will have:
(1) not made any untrue statement of a material fact and not omitted
to state a material fact required to be stated or necessary to
make any statement made not misleading, to the extent, if any,
that representations are made by you concerning the Offering or
matters set forth in the Prospectus other than those set forth in
the Prospectus;
(2) prior to any sale of any Common Stock, reasonably believed that
an investment in the Common Stock was suitable for each
subscriber;
(3) promptly distributed any amendment or supplement to the
Prospectus provided to you pursuant to Section 5(b) of this
Agreement to persons who had previously received a Prospectus
from you and who you believed continued to be interested in
Common Stock and have included such amendment or supplement in
all deliveries of the Prospectus made after receipt of any such
amendment or supplement;
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(4) only used sales materials other than the Prospectus which have
been approved for use in the Offering by the Company, and
refrained from providing any such materials to any offeree unless
accompanied or preceded by the Prospectus;
(5) prior to the sale of any Common Stock, reasonably believed that
each subscriber met the investor standards and other requirements
set forth in the Prospectus and the Blue Sky Letters (as
hereinafter defined) and that an investment in the Common Stock
was suitable for such subscriber; you will have prepared and
maintained, for your benefit and the benefit of the Company, file
memoranda and other appropriate records substantiating the
foregoing and shall retain such records for the period required
under Exchange Act Rule 17a-4 or the laws of any state in which
you offer the Common Stock for sale, whichever is longer; and
(6) not made any representations on behalf of the Company other than
those contained in the Prospectus, nor shall you have acted as an
agent of the Company, or for the Company in any other capacity,
except as expressly set forth herein.
SECTION 4. Purchase Sale and Delivery of Common Stock. On the basis of the
covenants, representations, and warranties herein contained and subject to the
terms and conditions herein set forth:
(a) The Company hereby engages you as its exclusive agent to solicit
subscriptions for the Common Stock in accordance with the terms of the
Registration Statement, the Prospectus and this Agreement, and you
agree to use your best efforts to procure such subscriptions. You may,
however, discharge your responsibilities under this Agreement by
acting as a Managing Placement Agent and forming a group of securities
dealers ("Selected Placement Agents" ), including you, to procure
subscribers for the Common Stock. Any agreement between you and a
securities dealer pursuant to which such securities dealer becomes a
Selected Placement Agent shall require such dealer to represent and
warrant that it will conduct the Offering in the manner set forth
herein. The allocation of Common Stock among you and the Selected
Placement Agents shall be made by you.
(b) Subject to the terms and conditions set forth herein, in consideration
of your execution of this Agreement and performance of your
obligations hereunder, the Company agrees that, at each Closing (as
defined herein), you shall receive (i) selling commissions in an
amount equal to 10% of the aggregate purchase price of the Common
Stock sold by you (or any Selected Placement Agent) and (ii) a
nonaccountable expense allowance equal to 3% of the aggregate purchase
price of the Common Stock sold by you (or any Selected Placement
Agent). The aggregate commissions and expense allowance payable in
connection with the sale of Common Stock will be disbursed to you, as
provided herein and in Escrow Agreement; thereupon, you shall pay to
each of the other Selected Placement Agents, if any, in such amount
(which shall not exceed commissions and expense allowance in the
amounts of 10% and 3%, respectively, of the aggregate purchase price
of the Common Stock sold by such Agent), at such times and upon such
terms and conditions as shall have been agreed upon between you and
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such Selected Placement Agent, that portion of the aggregate
commissions to which such Selected Placement Agent is entitled.
(c) As additional consideration for your services rendered pursuant to
this Agreement, on the final Closing Date (as hereinafter defined),
the Company will sell to you or your designees, at a price of $0.01
per warrant ("Warrant Price"), warrants ("Underwriter's Warrants") to
purchase shares of Common Stock, under the following terms and
conditions:
(1) The aggregate number of shares of Common Stock subject to
Underwriter's Warrants will be equal to 10% of the shares of
Common Stock sold by you (or any Selected Placement Agent)
pursuant to this Agreement.
(2) The Underwriter's Warrants may not be sold, hypothecated,
exercised, assigned or transferred for a period of one year after
the initial effective date of the Registration Statement, except
to partners or officers of the Selected Placement Agents
(including the Managing Placement Agent).
(3) Underwriter's Warrants shall be exercisable during the 4-year
period commencing on the first anniversary of the final Closing
Date ("Warrant Exercise Term"), at any time and from time to
time, in whole or in part, during the said Warrant Exercise Term,
and shall grant to the holder the right to purchase one share of
Common Stock for each Underwriter's Warrant at a price per share
equal to 135% of the initial public offering price of the Common
Stock.
(4) The Underwriter's Warrants shall contain such other terms and
conditions as are satisfactory, in form and substance to you and
your counsel, including without limitation, adjustment and
exercise provisions.
(5) The Company agrees and undertakes, upon the expiration of a
12-month period after the final Closing Date, and at any time
during the 4-year period thereafter, one time only, to register
under the Securities Act all or any part of the Underwriter's
Warrants and/or the shares issuable upon the exercise thereof
("Underlying Shares"), upon the written request of holders of a
majority of such Warrants and Underlying Shares, at the Company's
sole cost and expense, including "blue sky" fees for counsel and
"blue sky" filing fees to qualify the Underwriter's Warrants and
Underlying Shares for sale in those jurisdictions requested by
you, at the time determined by you.
(6) The Company agrees and undertakes, during the four-year period
described in subsection 4(c)(3), above, that if the Company shall
seek to register any of its securities under the Securities Act,
each holder of the Underwriter's Warrants shall be notified and
shall be entitled to elect to have included in such proposed
registration, without cost or expense, any or all of his
Underwriter's Warrants or Underlying Shares ("Piggy-Back
Rights"). In the event of such a proposed registration, the
Company shall furnish the holders of Underwriter's Warrants with
no less than 30 days written notice prior to the proposed filing
of a registration statement. Such notice shall continue to be
given by the Company to such Warrantholders for each proposed
registration by the Company until such time as all Underwriter's
Warrants or Underlying Shares have been registered.
Warrantholders shall exercise Piggy-Back Rights by giving written
notice within 20 days of the receipt of the Company's notice of
intention to file a registration statement.
(d) Each subscriber for Common Stock must (i) complete and execute a
Subscription Agreement (in the form included as Exhibit A to the
Prospectus) and any other documents which may be required by you or
the Company in connection with such subscription (collectively,
"Subscription Documents") and (ii) tender payment in full for the
Common Stock subscribed for ("Subscription Payment"); checks
representing Subscription Payments should be made payable to "Santa
Barbara Bank And Trust, Escrow Agent"; you shall deliver Subscription
Payments received by you to the Escrow Agent,
_______________________________________________, Encino, California
91403, by 12:00, noon, on the business day following such receipt by
you, together with a schedule setting forth the amount of each such
Subscription Payment and the name, mailing address and state of
residence of the subscriber. Concurrently with your delivery of each
Subscription Payment to the Escrow Agent, you shall forward to the
Company executed originals of all related Subscription Documents,
retaining copies of all such Subscription Documents for your records.
(e) Within five days following receipt by it of executed Subscription
Documents, the Company shall determine to accept or reject each
subscription and shall notify you and the Escrow Agent orally (to be
confirmed in writing). If the Company elects to reject a subscription,
the related Subscription Payment shall, upon receipt by the Escrow
Agent of oral notice (to be confirmed in writing) from the Company of
such rejection, promptly be returned directly to the rejected
subscriber by the Escrow Agent, without interest thereon or deduction
therefrom.
(f) Subject to the terms hereof and of the Escrow Agreement, the first
disbursement of subscription proceeds (including disbursement of
amounts due to you hereunder) shall take place not less than 5 days
nor more than 15 days following the date upon which cleared funds
representing payment in full for at least 1,000 shares of Common Stock
(or such lesser amount as may be agreed to in writing by the parties
hereto, in their discretion) have been received by the Escrow Agent
under the terms of the Escrow Agreement; such initial disbursement is
referred to herein as the "Initial Closing," and the date thereof is
referred to as the "Initial Closing Date." Following the Initial
Closing, subscription proceeds shall be disbursed from time to time as
agreed among you, the Company and the Escrow Agent; each such further
disbursement of subscription proceeds is referred to herein as an
"Additional Closing," and the date thereof as an "Additional Closing
Date." The Initial Closing and Additional Closings are sometimes
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referred to herein as a "Closing" or "Closings"; and the Initial
Closing Date and Additional Closing Dates are sometimes referred to
herein as a "Closing Date" or "Closing Dates."
(g) Each Closing shall take place at the offices of the Escrow Agent, in
Encino, California, or, at your option, at such other place as you may
agree upon in writing with the Company.
(h) After the final Closing Date, you will not be considered to have any
continuing or future duty or obligation of any kind to the Company.
SECTION 5. Covenants of the Company. The Company covenants and agrees that:
(a) The Company will use its best efforts to cause the Registration
Statement to become effective at the earliest possible time and will
advise you promptly upon notification from the Commission of
effectiveness. The Company will advise you promptly of the issuance by
the Commission of any stop order suspending the effectiveness of the
Registration Statement or of the institution of any proceedings for
that purpose, or of any notification of the suspension of
qualification of the Common Stock for sale in any jurisdiction or the
initiation or threatening of any proceedings for that purpose, and
will also advise you promptly of any request of the Commission for
amendment or supplement to the Registration Statement (either before
or after it becomes effective), to any Preliminary Prospectus or to
the Prospectus, or for additional information, and will not file or
make any amendment or supplement to the Registration Statement (either
before or after it becomes effective), to any Preliminary Prospectus
or the Prospectus of which you have not been furnished with a copy
prior to such filing or to which you reasonably object; and the
Company will file promptly and will furnish to you at or prior to the
filing thereof copies of all reports and any definitive proxy or
information statements required to be filed by the Company with the
Commission pursuant to the Exchange Act subsequent to the date of the
Prospectus, and for so long as the delivery of a prospectus is
required in connection with the offer or sale of the Common Stock. If
at any time the Commission shall issue any stop order suspending the
effectiveness of the Registration Statement, the Company will make
every reasonable effort to obtain the withdrawal of such order at the
earliest possible time. The Company will file the Prospectus pursuant
to Rule 424(b) under the Securities Act, if required, not later than
the Commission's close of business on the second business day
following the execution and delivery of this Agreement or, if
applicable, such earlier time as may be required by Rule 430A of the
Commission.
(b) If at any time when a prospectus relating to the Common Stock is
required to be delivered under the Securities Act, any event occurs as
a result of which the Prospectus, including any amendments or
supplements, would include an 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 the light of the
circumstances under which they were made, not misleading, or if it is
necessary at any time to amend the Prospectus, including any
amendments or supplements, to comply with the Securities Act or the
Rules and Regulations, the Company will notify you and request you to
<PAGE>
suspend (and to advise the other Selected Placement Agents, if any, to
suspend) solicitation of offers to purchase Common Stock; and the
Company will promptly prepare and file with the Commission an
amendment or supplement which will correct such statement or omission
or an amendment which will effect such compliance; and, in case any
Selected Placement Agent (including you) is required to deliver a
Prospectus nine months or more after the effective date of the
Registration Statement, the Company upon request will prepare promptly
and deliver to you such prospectus or prospectuses as may be necessary
to permit compliance with the requirements of Section 10(a)(3) of the
Securities Act and applicable provisions of the Blue Sky Laws.
(c) The Company will not, prior to the final Closing Date, incur any
material liability or obligation, direct or contingent, or enter into
any material transaction other than in the ordinary course of
business, except as disclosed prior thereto in the Prospectus.
(d) The Company shall promptly prepare and file with the Commission such
reports as may be required to be filed under the Securities Act, the
Rules and Regulations, the Exchange Act or the Blue Sky Laws.
(e) Not later than 3 months after the end of the period referred to below,
the Company will make generally available to you and to the Company's
security holders an earnings statement (which need not be audited)
covering a period of at least 12 months beginning with its first
fiscal quarter occurring after the effective date of the Registration
Statement, which will satisfy the provisions of the last paragraph of
Section 11(a) of the Securities Act and Rule 158 promulgated
thereunder.
(f) The Company shall comply in all respects with the undertakings given
by it in connection with the qualification or registration of the
Common Stock under the Securities Act or the Blue Sky Laws.
(g) During such period as a prospectus is required by law to be delivered
in connection with sales by any Selected Placement Agent, the Company
will furnish to you at its expense, copies of the Registration
Statement, the Prospectus, any Preliminary Prospectus and all
amendments and supplements to any such documents in such quantities as
you may reasonably request, for the purposes contemplated by the
Securities Act and the Rules and Regulations.
(h) The Company shall promptly apply for and take such steps as may
reasonably be necessary, to obtain and maintain the quotation of a
Common Stock by the NASDAQ Small Cap Market and on the NASD OTC
Bulletin Board.
(i) During the period of 3 years following the date of this Agreement, as
soon as practicable after the end of each fiscal year, the Company
will furnish to you two copies, and to each of the other Selected
Placement Agents one copy, of the Annual Report of the Company
containing a balance sheet as of the close of such fiscal year and
corresponding statements of income, members' equity and cash flows for
<PAGE>
the fiscal year then ended, such financial statements to be under the
report of independent public accountants. During such period, the
Company will also furnish to you, if applicable, one copy of (i) each
report filed by the Company with the Commission, or with any exchange
or quotation source pursuant to the requirements of, or any agreement
with, such exchange or quotation source, as soon as practicable after
the filing thereof and (ii) each report of the Company mailed to its
shareholders, as soon as available.
(j) The Company will apply the net proceeds from the sale of the Common
Stock to be sold by it hereunder for the purposes set forth in the
Prospectus.
(k) The Company will not make any offer, sale, transfer, issuance or other
disposition of any of its securities, other than grants of options,
within 120 days following the final Closing Date, and will obtain the
undertaking of each executive officer (as defined under the Securities
Act), director and holder of 10% or more of the aggregate equity
ownership of the Company immediately prior to such date not to make
any such offer, sale or other disposition within such period,
otherwise than hereunder or with your written consent or pursuant to
bona fide gifts, provided, in the last case, that each donee agrees in
writing with you to be bound by the same restrictions on the offer,
sale and disposition of securities as are expressed in this Section
5(k).
(l) The Company shall at all times reserve and keep available such number
of authorized shares of Common Stock as are sufficient to permit the
exercise of all Underwriter's Warrants; all shares of Common Stock
issued upon the exercise of Underwriter's Warrants, upon receipt of
full payment therefor and delivery to the purchaser, will be duly
authorized, validly and legally issued, fully paid and nonassessable,
and such Common Stock will not have been issued in violation of or
subject to any preemptive rights provided for by law or by the
Company's corporate charter or Bylaws or be subject to any lien,
claim, encumbrance, security interest, preemptive rights or any other
claim of any third party.
(m) Prior to the final Closing Date, the Company will not issue, directly
or indirectly, without your prior written consent, a press release or
other communication or hold any press conference with respect to the
Company, its activities or the Offering.
(n) The Company will, promptly upon your request, prepare and file with
the Commission any amendments or supplements to the Registration
Statement or Prospectus, and take any other action, which, in your
opinion or the opinion of your counsel, may be reasonably necessary or
advisable in connection with the distribution of the Common Stock, and
will use its best efforts to cause the same to become effective as
promptly as practicable.
SECTION 6. Covenants of the Managing Placement Agent. You will use your best
efforts to procure subscribers for Common Stock and will conduct the Offering in
compliance with the provisions of the Securities Act, the Rules and Regulations,
the Exchange Act, applicable Blue Sky Laws and the rules and regulations of the
<PAGE>
NASD; accordingly, as of each Closing Date (as herein defined), you will have
(i) not made any untrue statement of a material fact and not omitted to state a
material fact required to be stated or necessary to make any statement made not
misleading, to the extent any representations are made by you concerning the
Offering or matters set forth in the Prospectus other than those which are set
forth in the Prospectus, and (ii) prior to any sale of Common Stock, reasonably
believed that an investment in the Common Stock was suitable for the subscriber.
SECTION 7. State Qualifications. The Company further represents and warrants to,
and agrees with, you as follows:
(a) The Company will take all necessary action to either qualify or
register the Common Stock for sale or exempt such securities from such
qualification or registration in such states as you and the Company
shall agree upon in writing.
(b) The Company or its counsel will provide you or your counsel with
copies, at the time they are filed, of all correspondence,
applications, forms, and other documents filed with each jurisdiction
where the Common Stock is to be registered or qualified or offered in
an exempt transaction.
(c) Upon receipt of notification by the Company of the qualification,
registration, or exemption of the Common Stock by an applicable
jurisdiction, the Company or its counsel will promptly notify you or
your counsel in writing of such action, which writing shall summarize
the conditions and other requirements imposed by such jurisdiction in
granting such qualification, registration or exemption, including
offeree qualification or suitability and broker-dealer and agent
registration requirements applicable to the conduct of the Offering
(collectively, the "Blue Sky Letters"); you shall not offer or sell
the Common Stock in any jurisdiction until receipt of such Blue Sky
Letters from the Company or its counsel.
(d) In each jurisdiction where the Common Stock has been registered or
qualified or is offered or sold in an exempt transaction as provided
above, the Company will make and file such statements, documents,
materials, and reports as are or may be required to be made or filed.
(e) The Company will promptly provide to you for delivery to all offerees
and purchasers of Common Stock any additional information, documents
or instruments which you, the Company and/or your respective counsel
deem necessary to comply with the rules, regulations, and judicial and
administrative interpretations respecting compliance with such
exemptions or qualifications and registrations in those jurisdictions
where the Common Stock is to be offered or sold.
<PAGE>
SECTION 8. Payment of Expenses.
(a) Whether or not the transactions contemplated hereunder are consummated
or this Agreement becomes effective or is terminated for any reason,
except as set forth below (and in addition to the nonaccountable
expense allowance provided for in Section 4(b) of this Agreement), the
Company will pay or cause to be paid all costs and expenses incurred
in connection with the Offering, including without limitation (i) the
Commission's registration fee, (ii) the expenses of printing and
distributing this Agreement, the Selected Dealer Agreements, the
Registration Statement, each Preliminary Prospectus, the Prospectus
(and any amendments or supplements thereto) and the Blue Sky
Memorandum (and any supplements thereto), (iii) fees and expenses of
accountants and counsel for the Company, (iv) expenses of
qualification of the Common Stock under state "blue sky" and
securities laws, including the fees and disbursements of counsel to
the Managing Placement Agent in connection therewith, (v) filing fees
paid or incurred by the Managing Placement Agent in connection with
filings with the NASD and (vi) the costs and charges of its transfer
agent and registrar.
(b) The Company and each Selected Placement Agent (including the Managing
Placement Agent) will bear its own travel, lodging and living expenses
incurred in connection with marketing, dealer and other meetings and
the cost of all advertising, publicity and selling or promotional
materials used in connection therewith.
(c) Notwithstanding any other provision hereof to the contrary, whether or
not this Agreement is terminated pursuant to Section 12 hereof or
otherwise, the Company will pay or reimburse the Managing Placement
Agent for the actual itemized out-of-pocket expenses incurred by it in
connection with investigating, preparing to market and marketing of
the Common Stock, including fees and expenses of its counsel (in
accordance with the provisions of NASD Conduct Rule 2710); provided,
however, that, without the consent of the Company, such reimbursement
for legal fees shall not exceed in the aggregate $12,500, and
reimbursement for other out-of-pocket expenses shall not exceed in the
aggregate $5,000.
SECTION 9. Conditions of the Obligations of the Managing Placement Agent. Your
obligations hereunder shall be subject to the condition that all of the
representations and warranties of the Company herein as of the date hereof and
as of each Closing Date are true and correct in all material respects and to the
accuracy of the statements of the officers of the Company made pursuant hereto,
to the performance by the Company of its obligations hereunder, and to the
following conditions:
(a) The Registration Statement shall have become effective not later than
1:00 P.M., Los Angeles, California, time, on the business day
following the date hereof, unless otherwise effective prior hereto
pursuant to Rule 430A of the Rules and Regulations or otherwise. The
Prospectus shall have been filed with the Commission pursuant to Rule
424(b) of the Rules and Regulations, if required, within the
applicable time period prescribed for such filing by the Rules and
Regulations and in accordance with Section 5(a) of this Agreement.
Prior to each Closing Date, no stop order suspending the effectiveness
of the Registration Statement shall have been instituted or shall be
pending or, to the knowledge of the Company or you, shall be
<PAGE>
contemplated by the Commission or any "blue sky" authority, and any
request of the Commission or any Blue Sky authority of any
jurisdiction for additional information (to be included in the
Registration Statement or Prospectus or otherwise) shall have been
complied with to your reasonable satisfaction.
(b) The Common Stock shall have been qualified or registered for sale
under the Blue Sky Laws of such states as shall have been agreed upon
between you and the Company, pursuant to and as provided in Section 7
of this Agreement.
(c) The legality and sufficiency of the authorization, issuance and sale
of the Common Stock pursuant to the Registration Statement, the
validity and form of the certificates representing the Common Stock,
the execution and delivery of this Agreement, and all proceedings and
other legal matters incident thereto, and the form of the Registration
Statement (except financial statements, if any, and other financial
data included in such Registration Statement) shall have been approved
by your counsel.
(d) You shall not have advised the Company that the Registration Statement
or Prospectus, or any amendment or supplement thereto, contains an
untrue statement of fact, or omits to state a fact which is material
and is required to be stated therein or necessary to make the
statements therein not misleading, unless, in the opinion of your
counsel, any such untrue statement or omission is not material.
(e) Since the dates as of which information is given in the Registration
Statement:
(1) the Company shall not have sustained any material loss or
interference with its business from any labor dispute, fire,
explosion, flood or other calamity (whether or not insured), or
from any court or governmental action, order or decree; and
(2) there shall not have been any change in the equity ownership,
short-term debt or long-term debt of the Company or a change, or
a development involving a prospective change, in or affecting the
ability of the Company to conduct its business (whether by reason
of any court, legislative, other governmental action, order,
decree, or otherwise), or in the general affairs, management,
financial position, members' equity or results of operations of
the Company, whether or not arising from transactions in the
ordinary course of business, in each case other than as set forth
in or contemplated by the Registration Statement and Prospectus,
the effect of which on the Company, in any such case described in
clause (1) or (2) of this Section 9(e), is, in your judgment
(exercising your sole discretion), so material and adverse as to
make it impracticable or inadvisable to proceed with the
distribution of the Offering or the delivery of the Common Stock
as contemplated by the Registration Statement and the Prospectus.
(f) There shall have been furnished to you on the Initial Closing Date and
the final Closing Date the written opinion of counsel to the Company,
addressed to you and dated as of such Closing Date, to the effect
that, as of each Closing which has then occurred:
<PAGE>
(1) the Company is duly organized and validly existing as a
corporation in good standing under the laws of the State of
California and possesses full power and authority to own its
property and conduct its business as described in the Prospectus;
(2) the Company is duly qualified to do business under the laws of
(and is in good standing as such in) each jurisdiction in which
it owns or leases property, has an office, or in which business
is conducted and such qualification is required, except where the
failure to so qualify would not have a material adverse effect on
the conduct of its business, its assets or its financial
condition;
(3) the Registration Statement has become effective under the
Securities Act and, to the best of the knowledge of such counsel,
no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceeding for that purpose has
been instituted or is pending before, or threatened by, the
Commission or any "blue sky" or securities authority; such
counsel has no reason to believe that either the Registration
Statement or the Prospectus, or any document incorporated by
reference therein, contains any untrue statement of a material
fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading (except for the financial statements and other
financial data included therein, as to which such counsel need
express no opinion); to the best knowledge of such counsel, all
descriptions in the Registration Statement and the Prospectus of
statutes, regulations and governmental proceedings are accurate
and fairly present the information disclosed in all material
respects, and such counsel does not know of any legal,
governmental or regulatory proceedings, pending or threatened,
required to be described in the Prospectus, nor of any contracts
or documents of a character required to be described in or filed
as exhibits to the Registration Statement, which are not so
described or filed;
(4) the Company has full power and authority to enter into and
perform this Agreement; this Agreement, and the performance of
the obligations of the Company hereunder, have been duly
authorized by all necessary action and this Agreement has been
duly executed and delivered by and on behalf of the Company, and
is a legal, valid and binding agreement of the Company,
enforceable in accordance with its terms, except that rights to
indemnity or contribution may be limited by applicable law and
enforceability of the agreement may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally; and no approval, authorization or
consent of any court, board, agency or instrumentality of the
United States or of any state or other jurisdiction is necessary
in connection with the execution and delivery of this Agreement,
or in connection with the issue or sale of the Common Stock by
the Company pursuant to this Agreement (other than under the
Securities Act, applicable Blue Sky Laws and the rules of the
NASD) or the consummation by the Company of any transaction
<PAGE>
contemplated by this Agreement;
(5) the shares of Common Stock to be sold in the Offering have been
duly authorized and, when issued and delivered by the Company,
against full payment therefor, will be legally and validly
issued, fully paid and nonassessable, to the best knowledge of
such counsel, such securities will not have been issued subject
to any lien, claim, encumbrance, security interest or any other
claim of any third party, except as described in the Prospectus;
and the Common Stock conforms as to legal matters in all material
respects to the description thereof set forth contained in the
Prospectus;
(6) to the best knowledge of such counsel, the execution and
performance of this Agreement will not contravene any of the
provisions of, or result in a default under, any agreement,
franchise, license, indenture, mortgage, deed of trust or other
instrument to which the Company is a party, or by which the
Company or its property is bound; or violate any of the
provisions of the Articles of Incorporation or Bylaws of the
Company (in each case, as amended at the date of such opinion),
or to the best knowledge of such counsel, violate any statute,
order, rule or regulation of any regulatory or governmental body
having jurisdiction over the Company;
(7) to the best knowledge of such counsel, except as described in the
Prospectus, there is not pending or threatened any action, suit,
proceeding, inquiry or investigation to which the Company is a
party, or to which the property of the Company is subject, before
or brought by any court, governmental agency or body or
arbitration tribunal, which, if determined adversely to the
Company, would result in any material adverse change in the
business, financial position, net worth, results of operations or
prospects of the Company, or materially and adversely affect its
properties or assets;
(8) to the best knowledge of such counsel, the Company owns or
possesses the requisite licenses or other rights to use, all
trademarks, service marks, service names and trade names
necessary to conduct its business as described in or contemplated
by the Prospectus; to the best knowledge of such counsel, there
is no claim or action by any person pertaining to (or proceeding
pending or threatened which challenges) the rights of the Company
with respect to any trademarks, service marks, service names or
trade names used in the conduct of its business as described in
or contemplated by the Prospectus; to the best knowledge of such
counsel, the products, services and processes of the Company have
not infringed and do not infringe upon proprietary rights held or
asserted by third parties which infringement, if resolved
adversely to the Company, could materially affect its earnings,
assets, affairs, business prospects or condition (financial and
other);
<PAGE>
(9) to the best knowledge of such counsel, the Company has good and
marketable title to all the property and assets reflected as
owned by it in the Prospectus, subject to no lien, mortgage,
pledge, charge or encumbrance of any kind or nature whatsoever
except those, if any, reflected in the Prospectus or which are
not material to the Company and do not materially affect the
value of such property and do not materially interfere with the
use made or proposed to be made of such property; to the best
knowledge of such counsel, all property held or used by the
Company under leases, licenses, franchises or other agreements
are held by it under valid, subsisting and enforceable leases,
licenses, franchises or other agreements, subject to bankruptcy,
insolvency or similar laws generally affecting the rights of
creditors and equitable principles affecting the right to obtain
specific enforcement or similar equitable relief;
(10) to the best knowledge of such counsel, there are no holders of
securities of the Company having rights to the registration of
such securities, and there are no options, warrants or other
rights to acquire any equity interest in the Company, or any
security convertible into such equity interest, except as
disclosed in the Prospectus;
(11) the statements in the Registration Statement and Prospectus,
insofar as they are descriptions of specific contracts,
agreements or other documents, and the statements appearing in
the Prospectus under the caption "Description of Securities,"
insofar as they refer to statements of law or legal conclusions,
are accurate and present fairly the information required to be
shown;
(12) to the best knowledge of such counsel, the Company is not in
violation of its Articles of Incorporation or Bylaws, or other
organizational or charter documents or in default (nor has an
event occurred which, with notice, lapse of time or both, would
constitute such a default) in the performance of any obligation,
agreement or condition contained in any bond, indenture,
mortgage, deed of trust, note, bank loan or credit agreement or
any other agreement or instrument to which the Company is a party
or by which the Company or any of its property may be bound or
affected, and to the best knowledge of such counsel, the Company
is not in violation of any franchise, license, permit, judgment,
decree, order, statute, rule or regulation, where such violation
or default could have a material adverse effect on the respective
business, property or operations of the Company;
(13) to the best knowledge of such counsel, there are no legal,
governmental or regulatory proceedings, pending or threatened,
required to be described in the Prospectus, which are not so
described;
(g) There shall have been furnished to you on the Initial Closing Date and
the final Closing Date the written opinion of the law firm of William
B. Barnett, special securities counsel to the Company, addressed to
you and dated as of such Closing Date, to the effect that, as of each
Closing which has then occurred:
<PAGE>
(1) the Registration Statement and Prospectus, and each amendment or
supplement thereto (except for the financial statements and other
financial data therein, as to which such counsel need express no
opinion), as of their respective effective or issue dates, comply
as to form in all material respects with the requirements of the
Securities Act and the Rules and Regulations and any required
filing of the Prospectus and any supplements thereto pursuant to
Rule 424(b) of the Rules and Regulations have been made in the
manner and within the time period required by such Rules and
Regulations; and
(2) to the best knowledge of such counsel, there are no contracts or
other documents required to be summarized or described in the
Registration Statement or to be filed as exhibits thereto which
are not so summarized, described or filed, nor does such counsel
know of any regulations required to be described or referred to
in the Registration Statement or Prospectus which are not
described or referred to in the Registration Statement or
Prospectus.
(h) If you shall so request in writing, you shall have received, on the
Initial Closing Date, a survey prepared by The Law Offices of William
B. Barnett, addressed to you and dated as of such Closing Date,
relating to "blue sky" laws of such jurisdictions upon which you and
the Company agree in writing ("Blue Sky Survey"); the Blue Sky Survey
will advise that the appropriate "blue sky" action, if any, was taken
in each of such jurisdictions so as to permit such offers and sales as
indicated in such Survey; the Blue Sky Survey may be based upon an
examination of the statutes and regulations, if any, of such
jurisdictions as reported in standard compilations and upon
interpretive advice obtained from representatives of certain
securities commissions.
(i) If you so request in writing, there shall have been furnished to you,
on each Closing Date an opinion of The Law Offices of William B.
Barnett, addressed to you and dated as of each such Closing Date, with
respect to the Common Stock, the Registration Statement and the
Prospectus, and other related matters as you may reasonably require,
and the Company shall have furnished to such counsel such documents
and shall have exhibited to them such papers and records as they
request for the purpose of enabling them to pass upon such matters.
(j) There shall have been furnished to you, on the Initial Closing Date
and the final Closing Date, a certificate of the principal executive
officer and the principal financial officer of the Company, dated as
of such Closing Date, to the effect that:
(1) the representations and warranties of the Company which are set
forth in Section 2 hereof are true and correct as of the date of
this Agreement and as of each Closing Date, as if again made on
and as of such Closing Date, and the Company has complied with
all the agreements and satisfied all the conditions on its part
to be performed or satisfied at or prior to such date;
<PAGE>
(2) to the best of their knowledge, the Commission has not issued an
order preventing or suspending the use of the Prospectus or any
Preliminary Prospectus filed as part of the Registration
Statement or any amendment thereto, no stop order suspending the
effectiveness of the Registration Statement or enjoining the use
of the Prospectus has been issued, and no proceedings for that
purpose have been instituted or are pending or contemplated under
the Securities Act;
(3) each of the respective signers of the certificate has carefully
examined the Registration Statement and the Prospectus and, in
his opinion and to the best of his knowledge, information and
belief, the Registration Statement and the Prospectus and any
amendments or supplements thereto contain all statements required
to be stated therein, and neither the Registration Statement nor
the Prospectus nor any amendment or supplement thereto includes
any untrue statement of material fact or omits to state any
material fact required to be stated therein or necessary to make
the statements therein not misleading, and, since the effective
date of the Registration Statement, there has occurred no event
required to be set forth in an amended or supplemented prospectus
which has not been so set forth; and
(4) since the effective date of the Registration Statement, there has
not been any material adverse change or, to their knowledge, a
development involving a prospective material adverse change in
the business, properties, financial condition or earnings of the
Company, whether or not arising from transactions in the ordinary
course of business, except as disclosed in said Registration
Statement theretofore amended including the proposed amendment
thereto delivered to you prior to or contemporaneously with the
execution of this Agreement or (but only if you expressly consent
thereto in writing) delivered to you thereafter; since such date
and except as so disclosed, or in the ordinary course of
business, the Company has not incurred any liability or
obligation, direct or indirect, or entered into any material
transaction; since such date and except as so disclosed there has
not been any material change in the equity ownership of the
Company or its short-term debt or long-term debt; since such date
and except as so disclosed, the Company has not incurred any
material contingent obligations, and no material litigation is
pending or, to their knowledge, threatened against the Company;
and, since such date and except as so disclosed, the Company has
not sustained a material loss or interference with its business
from any labor dispute, fire, explosion, flood or other calamity
(whether or not insured) or from any court or governmental
action, order or decree.
The delivery of the certificate provided for in this Section 9(k)
shall be and constitute a representation and warranty of the Company
as to the facts required in the immediately foregoing clauses (1),
(2), (3) and (4) of this Section 9(j) to be set forth in said
certificate.
(k) There shall have been furnished to you, on or before the initial
Closing Date, written agreements signed by the Company's directors,
its executive officers and each holder of 10% or more of its equity
<PAGE>
securities to the effect that such persons will not make any offer,
sale or other disposition of any equity interest in the Company for a
period of 180 days after the final Closing Date, except with the prior
written consent of the Managing Placement Agent or pursuant to bona
fide gifts, provided, in the last case, that each donee agrees in
writing with you to be bound by the same restrictions on the offer,
sale or disposition of equity interests in the Company as are set
forth in the agreements described in this Section 9(k).
All such opinions, certificates, letters and documents shall be in
compliance with the provisions hereof only if they are reasonably
satisfactory to you and your counsel. The Company shall promptly
furnish you with such manually signed or conformed copies of such
opinions, certificates, letters and other documents as you may
reasonably request from time to time. With respect to any Closing, by
written instrument delivered to the Company, you may from time to
time, in your sole discretion, waive any of the requirements imposed
upon the Company pursuant to this Section, including without
limitation the requirement that any opinion, certificate, survey or
other document be delivered to you at any Closing or as of any Closing
Date; any such waiver by you with respect to a Closing shall not in
any way be construed as such waiver with respect to any other Closing.
If any condition to your obligations hereunder to be satisfied prior
to or a Closing Date is not so satisfied, this Agreement at your
election will terminate upon notification to the Company without
liability on the part of any Selected Placement Agent (including you)
or the Company, except for the expenses or fees to be paid or
reimbursed by the Company pursuant to Sections 4 and 8 hereof and
except to the extent provided in Section 10 hereof.
SECTION 10. Indemnification.
(a) The Company agrees to indemnify and hold harmless you, each of your
officers, directors, employees and agents, and each person, if any,
who controls you within the meaning of the Securities Act or the
Exchange Act against any losses, claims, damages or liabilities, joint
or several, to which you or each such officer, director, employee,
agent or controlling person may become subject under the Securities
Act, the Exchange Act, Blue Sky Laws or other federal or state laws or
regulations, at common law or otherwise (including in settlement of
any litigation, if such settlement is effected with the written
consent of the Company), insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material
fact contained in or incorporated in the Registration Statement, any
Preliminary Prospectus, the Prospectus, or any amendment or supplement
thereto, or in any application filed under any Blue Sky Law or other
document executed by the Company specifically for that purpose or
based upon written information furnished by the Company and filed in
any state or other jurisdiction in order to qualify any or all of the
Common Stock under the securities laws thereof (any such document,
application or information being hereinafter referred to as a "Blue
Sky Application") or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading; the Company agrees to reimburse you and each such other
<PAGE>
indemnified person for any legal or other expenses incurred by them in
connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the Company will
not be liable in any such case to the extent that:
(1) any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in the Registration Statement,
any Preliminary Prospectus, the Prospectus or any amendment or
supplement thereto or in any Blue Sky Application in reliance
upon and in conformity with written information furnished to the
Company by you specifically for use therein (but in no event
shall the assistance in the drafting of all or any portion of the
Registration Statement, any Preliminary Prospectus, the
Prospectus, such amendment or supplement or such other document
of the type referred to in the preceding paragraph by you or your
counsel constitute such information); or
(2) if such statement or omission was contained or made in a
Preliminary Prospectus and corrected in the Prospectus and (i)
any such loss, claim, damage or liability suffered or incurred by
you (or any person who controls you) resulted from an action,
claim or suit by any person who purchased Common Stock from you
in the Offering, and (ii) you failed to deliver or provide a copy
of the Prospectus to such person at or prior to the confirmation
of the sale of such Common Stock in any case where such delivery
is required by the Securities Act unless such failure was due to
failure by the Company to provide copies of the Prospectus to you
as required by this Agreement.
The indemnification obligations of the Company as provided above (i)
extend upon the same terms and conditions to, and shall inure to the
benefit of, each Selected Placement Agent and each of its respective
officers, directors and each person, if any, who controls such
Selected Placement Agent within the meaning of the Securities Act or
the Exchange Act and (ii) are in addition to any liabilities the
Company may otherwise have under other agreements, under common law or
otherwise.
(b) You will indemnify and hold harmless the Company, each of the
directors, officers, employees and agents of the Company, and each
person, if any, who controls the Company within the meaning of the
Securities Act or the Exchange Act, against any losses, claims,
damages or liabilities to which the Company or any such director,
officer, employee, agent or controlling person may become subject
under the Securities Act, the Exchange Act, Blue Sky Laws or other
federal or state laws or regulations, at common law or otherwise
(including in settlement of any litigation, if such settlement is
effected with your written consent, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue or alleged untrue statement of any material
fact contained in the Registration Statement, any Preliminary
Prospectus, the Prospectus, or any amendment or supplement thereto, or
in any Blue Sky Application, or arise out of or are based upon the
<PAGE>
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 each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or
alleged omission was made in the Registration Statement, any
Preliminary Prospectus, the Prospectus, or any amendment or supplement
thereto, or in any Blue Sky Application, in reliance upon and in
conformity with any written information furnished to the Company by
you specifically for use therein (but in no event shall the assistance
in the drafting of all or any portion of the Registration Statement,
any Preliminary Prospectus, the Prospectus, such amendment or
supplement or such other document of the type referred above by you or
your counsel constitute such information). You agree to reimburse the
Company and each such other indemnified person for any legal or other
expenses incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action.
Your indemnification obligations as provided above (i) extend upon the
same terms and conditions to, and shall inure to the benefit of, the
Company and each of its respective officers, directors and each
person, if any, who controls the Company within the meaning of the
Securities Act or the Exchange Act and (ii) are in addition to any
liabilities which you may otherwise have under other agreements, under
common law or otherwise.
(c) Promptly after receipt by an indemnified party under this Section 10
of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against an
indemnifying party under this Section 10, notify the indemnifying
party in writing of the commencement thereof, but the omission to so
notify the indemnifying party will not relieve an indemnifying party
from any liability which it or he may have to any indemnified party
otherwise than under this Section 10. In case any such action is
brought against any indemnified party, and such indemnified party
notifies an indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate in, and to the
extent that it may wish, to assume the defense thereof, with counsel
reasonably satisfactory to such indemnified party; provided, however,
if the defendants in any such action include both the indemnified
party and the indemnifying party and the indemnified party shall have
reasonably concluded that there may be legal defenses available to it
or he and/or other indemnified parties which are different from or
additional to those available to the indemnifying party, the
indemnified party or parties shall have the right to select separate
counsel to assume such legal defenses and to otherwise participate in
the defense of such action on behalf of such indemnified party or
parties. Upon receipt of notice from the indemnifying party to such
indemnified party of its election to assume the defense of such action
and upon approval by the indemnified party of counsel to the
indemnifying party, the indemnifying party will not be liable to such
indemnified party under this Section 10 for any legal expenses
subsequently incurred by such indemnified party as a result of or in
connection with the defense of such action, unless:
(1) the indemnified party shall have employed such counsel in
connection with the assumption of legal defenses in accordance
with the proviso to the next preceding sentence (it being
understood, however, that the indemnifying party shall not be
<PAGE>
liable for the expenses of more than one separate counsel, in the
event that you and one or more of your directors, officers or
controlling persons are the indemnified parties);
(2) the indemnifying party shall not have employed counsel reasonably
satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after notice of
commencement of the action; or
(3) the indemnifying party has authorized the employment of
counsel at the expense of the indemnifying party.
(d) In order to provide for just and equitable contribution under the
Securities Act or the Exchange Act in any case in which (1) any person
who would be entitled to indemnification pursuant to this Section 10
if enforceable according to its terms makes a claim for
indemnification pursuant to this Section 10, but it is judicially
determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the
denial of the last right of appeal) that such indemnification may not
be enforced in such case notwithstanding the fact that the express
provisions of this Section 10 provide for indemnification in such
case, or (2) contribution under the Securities Act or the Exchange Act
may otherwise be required, you shall contribute to the aggregate
losses, claims, damages or liabilities incurred (which shall, for all
purposes of this Agreement, include, but not be limited to, all costs
of defense and investigation and all attorneys' fees) in either such
case (after contribution from others) an amount equal to the product
determined by multiplying the total amount of such losses, claims,
damages or liabilities by a fraction, the numerator of which equals
the fees paid to you under Section 4 plus the amount paid to you under
Section 8, and the denominator of which is equal to the aggregate
proceeds of the sale of Common Stock in the Offering (before deduction
of commissions or expenses), and the Company shall be responsible for
the balance of such losses, claims, damages or liabilities; provided,
that with respect to the rescission of the sale of any Common Stock,
your liability shall not exceed the compensation earned by you under
this Agreement with respect to the rescinded sale. If the foregoing
allocation is not permitted by law, there shall be considered, in
determining the amount of contribution to which the respective parties
are entitled, the relative benefits received by each party from the
sale of Common Stock (taking into account the portion of the proceeds
of the Offering realized by each), the parties' relative knowledge and
access to information concerning the matter with respect to which the
claim was asserted, the opportunity to correct and prevent any
statement or omission, and any other equitable considerations
appropriate in the circumstances. The Company and you agree that it
would not be equitable if the amount of such contribution were
determined by pro rata or pro capita allocation. Neither you nor any
person controlling you shall be obligated to make contribution
hereunder which in the aggregate exceeds the total purchase price of
Common Stock sold to subscribers procured by you, less the aggregate
amount of any damages which you and your controlling persons have
otherwise been required to pay in respect of the same or any
substantially similar claim. No person guilty of a fraudulent
misrepresentation (within the meaning of Section 11 of the Securities
<PAGE>
Act) shall be entitled to contribution from any person who is not
guilty of such fraudulent misrepresentation. The foregoing
contribution agreement shall in no way affect the contribution
liabilities of any persons having liability under Section 11 of the
Securities Act other than those identified in this Section 10 as being
entitled to indemnification. Any of the officers, directors or
controlling persons of a Selected Placement Agent (including you) and
any officers, directors or controlling persons of the Company shall be
entitled to contribution to the same extent as you or the Company.
SECTION 11. Effective Date. This Agreement shall become effective immediately
upon execution as to Sections 4, 8 and 10 and, as to all other provisions, at
9:00 A.M., Los Angeles, California, time, on the day following the date upon
which the Registration Statement becomes effective, unless such a day is a
Saturday, Sunday or holiday (in which event this Agreement shall become
effective at such hour on the business day next succeeding such Saturday, Sunday
or holiday); notwithstanding the foregoing, this Agreement shall nevertheless
become effective at such earlier time after the Registration Statement becomes
effective as you may determine on and by notice to the Company (which notice may
be oral, to be confirmed promptly in writing).
SECTION 12. Termination. Without limiting the right to terminate this Agreement
pursuant to any other provision hereof:
(a) This Agreement may be terminated by the Company by notice to you or by
you by notice to the Company at any time prior to the time this
Agreement shall become effective as to all its provisions, and any
such termination shall be without liability on the part of the Company
or you (except for the fees or expenses to be paid or reimbursed by
the Company pursuant to Sections 4 and 8 hereof or paid by the Company
pursuant to Section 10 hereof).
(b) This Agreement may also be terminated by you prior to the final
Closing Date if, in your judgment and discretion, the offer, offer for
sale, sale and delivery of the Common Stock is rendered impracticable
or inadvisable because:
(1) additional material governmental restrictions or limitations, not
in force 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, the
American Stock Exchange or over-the-counter, or trading in
securities generally shall have been suspended or limited on
either such exchange or over-the-counter or a general banking
moratorium shall have been established by federal or New York
authorities;
(2) an outbreak or escalation of hostilities or other national or
international calamity or any substantial change in political,
financial or economic conditions shall have occurred or shall
have accelerated to such extent as, in your judgment, to have a
material adverse effect on the general securities market or make
it impractical or inadvisable to proceed with the Offering;
<PAGE>
(3) any event shall have occurred or shall exist which makes untrue
or incorrect in any material respect any statement or information
contained in the Registration Statement or which is not reflected
in the Registration Statement but should be reflected therein in
order to make the statements or information contained therein not
misleading in any material respect;
(4) the Company shall have sustained a material loss, whether or not
insured, by reason of fire, earthquake, flood, accident or other
calamity or from any labor dispute or court or governmental
action or decree;
(5) the passage by the Congress of the United States or any state
legislative body of any act or measure, or the adoption or any
proposed adoption of any orders, rules, legislation or
regulations by any governmental body, any authoritative
accounting institute or board or any governmental executive which
is reasonably believed likely by the representative to have a
material impact on the business, financial condition or financial
statements of the Company, taken as a whole, or the market for
the Common Stock; or
(6) any material adverse change having occurred since the respective
dates as of which information is given in the Registration
Statement and the Prospectus in the condition (financial or
otherwise) of the Company, taken as a whole, or in the earnings,
affairs or business prospects of the Company, taken as a whole,
whether or not arising in the ordinary course of business.
Any termination pursuant to this Section 12(b) shall be without
liability on the part of any Selected Placement Agent (including you)
to the Company, or on the part of the Company to any Selected
Placement Agent (including you), except for expenses or fees to be
paid or reimbursed by the Company pursuant to Section 4 and 8 hereof
and except as to indemnification as provided in Section 10 hereof.
SECTION 13. Parties.
(a) This Agreement shall inure to the benefit of and be binding upon you,
the Company, and the respective successors and assigns of each.
(b) No purchaser of Common Stock from you shall be construed as a
successor or assign by reason merely of such purchase.
(c) Nothing expressed or mentioned in this Agreement is intended or shall
be construed to give any person or corporation, other than the parties
hereto and their respective successors and assigns and the controlling
persons, officers and directors and counsel referred to in this
Agreement, any legal or equitable right, remedy or claim under or in
respect to this Agreement or any provision herein contained.
<PAGE>
SECTION 14. Representations and Indemnities to Survive Delivery.
(a) All representations, warranties, covenants and agreements of the
Company and the Managing Placement Agent contained herein or in
certificates of officers delivered pursuant hereto, and the indemnity
agreement contained in Section 10 hereof, shall survive the delivery
and execution of this Agreement and the final Closing Date and shall
remain operative and in full force and effect regardless of any
investigation made by or on behalf of you or any person controlling
you, any Selected Placement Agent or any controlling person thereof,
the Company or any of its officers, directors, or controlling persons.
(b) The indemnification provisions of Section 10 hereof are in addition to
any and all remedies or rights which either of the parties hereto may
have, including the right to sue and recover damages for any breach of
any representation, warranty or covenant made or given by either of
the parties hereto to any other party.
SECTION 15. Notices. All communications hereunder will be in writing and will be
mailed, delivered, telegraphed or telecopied and confirmed as follows:
If to the Managing Placement Agent:
R.H. Investment Corporation
15760 Ventura Boulevard
Suite 1732
Encino, CA 91403
If to the Company:
Roex, Inc.
2801 Business Center Drive
Suite 185
Irvine, CA 92612
SECTION 16. Integration. This Agreement constitutes the entire agreement among
the parties hereto with respect to the subject matters hereof and supersedes all
prior agreements and understandings among the parties both written and oral.
SECTION 17. Partial Unenforceability. If any Section, paragraph or provision of
this Agreement is for any reason determined to be invalid or unenforceable, such
determination shall not affect the validity or enforceability of any other
Section, paragraph or provision hereof.
SECTION 18. Applicable Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of California.
<PAGE>
If the foregoing is in accordance with your understanding of our agreement,
kindly sign and return the enclosed duplicate hereof, whereupon it will become a
binding agreement between us in accordance with its terms.
Very truly yours,
ROEX, INC.
By:
--------------------------------------
Rodney H. Burreson, President
Accepted and agreed to as of the day and year first above written.
R.H. INVESTMENT CORPORATION
By:
--------------------------------------
Stuart S. Greenberg, Managing Director
