EXHIBIT 1
MANAGING PLACEMENT AGENT (UNDERWRITING) AGREEMENT
RH Investment Corporation
October ___, 2000
1,000,000 SHARES
ROEX, INC.
MANAGING PLACEMENT AGENT AGREEMENT
October____, 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 Wells Fargo
Bank, Encino, 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
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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.
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
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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 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. (3) 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
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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 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.
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(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.
(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
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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, 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.
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(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.
(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
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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
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subject, (ii) your Articles of Incorporation or Bylaws or
(iii) any statute, 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;
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(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;
(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.
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(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 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.
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(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 "Wells Fargo Bank, Escrow
Agent"; you shall deliver Subscription Payments received by
you to the Escrow Agent, at 15760 Ventura Boulevard, Encino,
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California 91436, 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 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
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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 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.
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(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 American Stock Exchange or NASDAQ
Small Cap Market or 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 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.
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<PAGE>
(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
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.
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<PAGE>
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.
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
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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
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Registration Statement shall have been instituted or shall be
pending or, to the knowledge of the Company or you, shall be
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
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<PAGE>
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:
(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
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<PAGE>
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
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;
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(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);
(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;
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(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:
(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
23
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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;
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(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
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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 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.
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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 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
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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 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
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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 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);
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(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
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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 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;
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(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;
(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.
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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.
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
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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.
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: /s/ Rodney H. Burreson
--------------------------------------
Rodney H. Burreson, President
Accepted and agreed to as of the day and year first above written.
R.H. INVESTMENT CORPORATION
By: /s/ Stuart S. Greenberg
--------------------------------------
Stuart S. Greenberg, Managing Director
34
