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EXHIBIT 10.28
MULTIMEDIA GAMES, INC.
PLACEMENT AGENCY AGREEMENT
July 24, 1996
▇▇▇▇▇, ▇▇▇▇▇▇▇ Securities, Inc.
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Gentlemen:
Multimedia Games, Inc, a Texas corporation (the "Company"), proposes to
offer for sale (the "Offering") in a private offering pursuant to Section 4(2)
of the Securities Act of 1933, as amended (the "Act"), and/or Rule 506 of
Regulation D promulgated thereunder, up to 70 units (the "Units"), each Unit
consisting of (i) 16,667 shares of Common Stock, $.01 par value (the "Common
Stock") and (ii) warrants to purchase 16,667 shares of Common Stock (the
"Warrants"). The Units will be offered at a purchase price of $50,000 each.
The Offering will be made on a "best efforts, all or none" basis as to 50 Units
(the "Minimum Offering") and on a "best efforts" basis as to an additional 20
Units (the "Maximum Offering"). Unless the Minimum Offering is sold, no Units
will be sold and all subscriptions will be returned to subscribers without
interest or deductions. The Company also proposes to offer for sale (the
"Bridge Offering") on a "best efforts, all or none" basis 16 Units at $50,000
per Unit (the "Bridge Units"). Each Bridge Unit will be comprised of a one (1)
year 10 1/2% $50,000 promissory note (the "Bridge Note") and a warrant to
purchase 22,500 shares of Common Stock (the "Bridge Warrant") The terms of the
Bridge Offering are set forth in Section "2" hereof. This letter agreement
shall confirm our agreement that ▇▇▇▇▇, ▇▇▇▇▇▇▇ Securities, Inc. will act as
our exclusive placement agent in connection with the Bridge Offering and
Offering.
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The Company shall prepare and deliver to the Placement Agent copies of a
disclosure statement with respect to the Offering (the "Disclosure Statement")
and a disclosure statement with respect to the Bridge Offering (the "Bridge
Disclosure Statement"). The Disclosure Statement and Bridge Disclosure
Statement shall relate to, among other things, the Company, the Units, the
Bridge Units and the terms of sale thereof. The Disclosure Statement and
Bridge Disclosure Statement shall include exhibits and supplements or
amendments in accordance with this Agreement.
1. Appointment of Placement Agent.
On the basis of the representations and warranties contained herein, and
subject to the terms and conditions set forth herein, the Company hereby
appoints ▇▇▇▇▇, ▇▇▇▇▇▇▇ Securities, Inc. as its placement agent (the "Placement
Agent") and grants to you the exclusive right to offer, as its agent, the Units
and Bridge Units which are the subject of the Offering and Bridge Offering
pursuant to the terms of this Agreement. On the basis of such representations
and warranties, and subject to such conditions, you hereby accept such
appointment and agree to use your reasonable best efforts to secure
subscriptions to purchase the Units and Bridge Units which are subject to the
Offering and Bridge Offering. The agency created hereby is not terminable by
the Company except in accordance with the terms of this Agreement or upon
breach of this Agreement by the Placement Agent.
2. Bridge Offering.
The Placement Agent shall assist the Company in arranging interim
financing prior to the Offering through the sale of 16 Units in the Bridge
Offering in the aggregate principal amount of $800,000 to "Accredited
Investors" as defined under Regulation D of the Act. The sale of Bridge Units
shall be on a "best efforts, all or none" basis and shall be sold in reliance
upon an exemption from registration pursuant to Section 4(2) of the Act and/or
Rule 506 of Regulation D. The Bridge Offering shall
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commence on the date hereof and continue for a 15-day period and may be
extended for an additional 15-day period by the Placement Agent. All funds
received in the Bridge Offering shall be held in escrow at a bank located in
New York City pending the sale of all of the Bridge Units being offered in the
Bridge Offering. The Bridge Units will be offered at $50,000 each. Each
Bridge Unit will consist of one (1) Bridge Note and a five (5) year Bridge
Warrant exercisable at $8.00 per share to purchase 22,500 shares of Common
Stock. The Bridge Units, Bridge Notes and Bridge Warrants will conform to the
description thereof, in form and substance, as set forth in the Bridge
Disclosure Statement.
The Placement Agent shall receive a commission of 5% of the gross
proceeds from the sale of the Bridge Units in the Bridge Offering for its
services as Placement Agent. The Placement Agent shall also be entitled to a
non-accountable expense allowance equal to 12 of the gross proceeds from the
sale of the Bride Units in the Bridge Offering. Concurrent with, and as a
condition precedent to the closing of the Bridge Offering, the Company will
sell to the Placement Agent (or its designated affiliates) warrants ("Bridge
Placement Warrants") to purchase 173,310 shares of the Company's Common Stock
exercisable at $8.00 per share subject to adjustment. The Bridge Placement
Warrants will be substantially the same with respect to the terms and
conditions thereof as the Bridge Warrants.
The Bridge Offering shall be conducted substantially on the same terms
as the Offering including, without limitation, preparation and delivery of the
Bridge Disclosure Statement, representations, warranties and covenants of the
Company, closing conditions, closing documents, and compliance with federal and
state securities laws. The Company shall also be responsible for all fees and
expenses of the Bridge Offering including "blue sky" filing and legal fees,
duplicating, mailing and other expenses, excluding fees of the Placement
Agent's legal counsel. The term "Disclosure Statement" as hereinafter set
forth in this Agreement,
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where applicable with respect to the Bridge Offering, shall also be deemed to
mean the "Bridge Disclosure Statement".
3. The Offering.
(a) The Offering shall consist of up to 70 Units at a purchase
price of $50,000 per Unit. The Offering shall be made on a "best
efforts, all or none" basis as to 50 Units (as previously defined, the
"Minimum offering") and on a "best efforts" basis as to an additional 20
Units (as previously defined, "Maximum Offering"). The Warrants
contained in the Units will conform to the description thereof , in form
and substance, as set forth in the Disclosure Statement. Unless the
Minimum Offering is sold, no Units will be sold and all subscriptions
will be returned to subscribers without interest or deduction.
(b) The Offering shall commence upon the delivery to the
Placement Agent of definitive copies of the Disclosure Statement. The
delivery of the Disclosure Statement shall occur not later than 30 days
after the closing of the Bridge Offering, and shall expire at 5:00 p.m.,
New York time, on a date which is 60 days after delivery of the
Disclosure Statement. The Offering may be extended for an additional 30
days by the Placement Agent. Such period, as same may be so
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extended, shall hereinafter be referred to as the "Offering Period."
(c) Each prospective investor ("Prospective Investor") who
desires to purchase Units shall deliver to the Placement Agent two
copies of a subscription agreement (a "Subscription Agreement"), in the
form annexed to the Disclosure Statement, two copies of an investor
questionnaire (the "Investor Questionnaire"), and immediately available
funds in the amount necessary to purchase the number of Units such
Prospective Investor desires to purchase. The Placement Agent shall not
have any obligation to independently verify the accuracy or completeness
of any information contained in any Subscription Agreement or the
authenticity, sufficiency, or validity of any check delivered by any
Prospective Investor in payment for the Units.
(d) The Placement Agent and the Company shall establish an
escrow account (the "Escrow Account") with an independent bank (the
"Escrow Agent") in New York City. The Placement Agent shall deliver
each check received from a Prospective Investor to the Escrow Agent for
deposit in the Escrow Account and shall deliver an executed copy of the
Subscription Agreement and Investor Questionnaire received from
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such Prospective Investor to the Company. The Company shall notify the
Placement Agent promptly of the acceptance or rejection of any
subscription to purchase Units.
(e) If subscriptions for the Minimum Offering are not received
from Prospective Investors prior to the expiration of the offering
Period and accepted by the Company, the Offering shall be canceled, all
funds received and held in the Escrow Account shall be refunded in full
without interest or deduction and this Agreement and the agency created
hereby shall be terminated without any further obligation on the part of
either party, except as provided in Section 16 hereof.
(f) The Placement Agent may engage other broker/dealers selected
by the Placement Agent to assist it in the Offering (each such
broker/dealer being hereinafter referred to as a "Selling Group Member")
and you may allow such Selling Group Member such part of the
compensation and payment of expenses payable to you under Section 6
hereof as you shall determine. Any such Selling Group Member shall be a
member in good standing of the National Association of Securities
Dealers, Inc. (the "NASD"). Each Selling Group Member shall be required
to agree in writing
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to comply with the provisions of this Section 3. The Company hereby
agrees to make such representations and warranties to, and covenants and
agreements with, any Selling Group Member (including an agreement to
indemnify such Selling Group Member on terms substantially similar to
Section 15 hereof) as provided herein.
4. Interim Closings/Final Closing.
(a) Subject to consummation of the conditions set forth in
Section 10 hereof, if subscriptions for the Minimum Offering have been
received in escrow prior to the expiration of the Offering Period and
accepted by the Company, a closing under this Agreement (the "Initial
Closing") shall be held at the offices of the Placement Agent, or such
other place in New York City as the parties may agree, as soon as
practicable (but not later than five (5) business days) following the
date upon which the Placement Agent and the Company confirm in writing
to each other that subscriptions for the Minimum Offering have been
accepted or at such other place, time, or date as the Company and you
shall agree upon. The date upon which the Initial Closing is held shall
hereinafter be referred to as the "Initial Closing Date.
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(b) At any time prior to the expiration of the Offering
Period following the Initial Closing and after receipt in escrow
and acceptance by the Company of subscriptions for the sale of
additional Units ("Interim Closing Amount") up to the Maximum
Offering, one or more closings (each an "Interim Closing") shall
take place in the manner herein set forth with respect to the
Initial Closing with respect to increments of $200,000. In the
event that the Offering Period expires prior to receipt in escrow
and acceptance by the Company of an Interim Closing Amount, a
final closing shall be held at such time regardless of the amount
then held in escrow. The final Interim Closing to be held in
accordance herewith shall be deemed the "Final Closing" and the
date thereof shall be the "Final Closing Date". References
herein to a "Closing" shall mean the Initial Closing, any Interim
Closing or the Final Closing, as the context requires, and the
date thereof shall be referred to as a "Closing Date."
5. Representations and Warranties of the Placement Agent.
The Placement Agent represents and warrants to the Company as follows:
(a) The Placement Agent is duly organized and validly existing
and in
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good standing under the laws of its State of formation.
(b) The Placement Agent is, and at the time of each Closing will
be, a member in good standing of the NASD.
(c) Sales of the Bridge Units and Units in the Bridge Offering
and offering respectively by the Placement Agent will only be made in
such jurisdictions in which the Placement Agent or a Selling Group
Member is a registered broker-dealer or where an applicable exemption
from such registration exists.
(d) Offers and sales of the Bridge Units and Units in the Bridge
Offering and Offering by the Placement Agent will be made only in
accordance with this Placement Agreement and in compliance with the
provisions of Rule 506 of Regulation D (it being understood and agreed
that the Placement Agent shall be entitled to rely upon the information
and statements provided by the Prospective Investor in the Subscription
Agreement and Investor Questionnaires), and the Placement Agent will
furnish to each Prospective Investor a copy of the Bridge Disclosure
Statement and/or the Disclosure Statement, as the case may be, prior to
accepting any subscription for the Bridge Units and Units.
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6. Compensation.
The Company shall pay to the Placement Agent the following compensation
in connection with the Offering:
(a) If subscriptions for the Minimum offering are received in
escrow prior to the expiration of the Offering Period and accepted by
the Company, you shall be entitled, on each Closing Date, as
compensation for your services rendered in the Offering as Placement
Agent under this Agreement, to selling commissions equal to 10% of the
gross proceeds received by the Company from the sale of the Units
effected at each Closing and 3% of the gross proceeds from the sale of
the Units effected at each Closing in payment for a non-accountable
expense allowance. Such amounts shall be paid directly to you by the
Escrow Agent from the Escrow Account.
(b) In addition to the compensation payable to the Placement
Agent set forth in (a) above, the Company shall sell to the Placement
Agent, for nominal consideration, at the Initial Closing of the Minimum
Offering, five (5) year warrants ("Offering Placement Warrants") to
purchase 350,000 shares of its Common Stock at an initial exercise price
of $8.00 per share. The Offering Placement Warrants will conform to the
description thereof, in
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form and substance, as set forth in the Disclosure Statement.
7. Representations and Warranties of the Company.
(a) The Company represents and warrants to, and agrees with, the
Placement Agent that:
(i) Assuming the accuracy of the representations and
warranties of the Prospective Investors set forth in the
Subscription Agreement and Investor Questionnaire and the
representations and warranties of the Placement Agent set forth
herein, the Bridge Disclosure Statement and Disclosure Statement
(from the date of the Disclosure Statement) (a) shall contain,
and at all times during the period from the date hereof to the
Final Closing Date, will contain all information required to be
contained therein, pursuant to Rules 502 and 506 of Regulation D
and all applicable federal and/or state securities and "blue sky"
laws, and (b) do not, and during such period will not, contain
any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make
the statements therein in light of the circumstances made therein
not misleading. Each contract, agreement, instrument, lease,
license, or other document required to be described in the Bridge
Disclosure Statement and Disclosure Statement shall be, and have
been, accurately described therein.
(ii) The Bridge Disclosure Statement and the Disclosure
Statement or information provided by the Company to Prospective
Investors shall not contain any untrue statement of a material
fact or omit to state any material fact required to be stated
therein or necessary to make the
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statements therein in light of circumstances made therein not
misleading.
(iii) The Company has not, directly or indirectly,
solicited any offer to sell or buy any Bridge Units or Units or
any other securities of the Company during the 12 month period
ending on the date hereof except as may be indicated in Schedule
A hereto and has no present intention to solicit any offer to
sell or buy any Bridge Units or Units or any other securities of
the Company other than pursuant to this Agreement.
(iv) The Company (the term "Company" includes all
subsidiary corporations as used in this Section "7") is, and at
all times during the period from the date hereof to the Final
Closing Date will be, a corporation duly organized, validly
existing, and in good standing under the laws of its respective
state of incorporation, with full corporate power and authority,
and all necessary consents, authorizations, approvals, orders,
licenses, certificates,, and permits and declarations of and
from, and has made filings with, all federal, state, Indian and
local authorities, to own, lease, license, and use its properties
and assets and to conduct its business as presently conducted as
described in the Bridge Disclosure Statement and Disclosure
Statement. As of the date hereof, the Company is, and at all
times during the period from the date hereof to and including the
Final Closing Date, duly qualified to do business and is in good
standing in every jurisdiction in which its ownership, leasing,
licensing, or use of property and assets or the conduct of its
business makes such qualification necessary except where the
failure to be so qualified would not have a material adverse
effect on the Company's business.
(v) The Company has, as of the date hereof, and shall
have at each Closing (except as effected by the
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transactions contemplated hereby and except as disclosed in the
Bridge Disclosure Statement) an authorized capitalization
consisting of 10,000,000 shares of Common Stock, $.Ol par value,
of which 2,734,200 shares are issued and outstanding. Each
issued and outstanding share of Common Stock is duly authorized,
validly issued, fully paid, and non-assessable, without any
personal liability attaching to the ownership thereof solely by
being such a holder, and has not been issued and is not owned or
held in violation of any preemptive rights of stockholders.
There is no commitment, plan, or arrangement to issue, and no
outstanding option, warrant, or other right calling for the
issuance of, any share of capital stock of the Company or any
security or other instrument which by its terms is convertible
into, exercisable for, or exchangeable for capital stock of the
Company, except as indicated in the Bridge Disclosure Statement
and Disclosure Statement. There is outstanding no other security
or other instrument which by its terms is convertible into or
exchangeable for any class of capital stock of the Company,
except as may be properly described in the Bridge Disclosure
Statement and Disclosure Statement.
(vi) The audited financial statements for the fiscal year
ended September 30, 1995 and all other financial statements (the
"Financial Statements") of the Company included in the Bridge
Disclosure Statement, and to be included in the Disclosure
Statement, fairly and accurately (and will fairly and accurately
with respect to the Disclosure Statement) present in accordance
with generally accepted accounting principles the financial
position, the results of operations, and other information with
respect to the Company purported to be shown therein at the
respective dates and for the respective periods to which they
apply. The Financial Statements have been prepared (and will be
prepared with respect to the Disclosure Statement) in accordance
with generally accepted
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accounting principles consistently applied throughout the periods
involved, are correct and complete, and are in accordance with
the books and records of the Company. There has at no time been
a material adverse change in the financial condition, results of
operations, business, properties, assets, liabilities, or future
prospects of the Company from the latest information set forth in
the Bridge Disclosure Statement and Disclosure Statement, (which
Disclosure Statement will contain the Company's Balance Sheet and
Profit and Loss Statement as at and for a period not earlier than
June 30, 1996), except as may be properly described in the Bridge
Disclosure Statement and the Disclosure Statement as having
occurred or as may occur.
(vii) As of the date hereof there is no, and as of each
Closing Date there shall not be any, litigation, arbitration,
claim, governmental or other proceeding (formal or informal), or
investigation pending or to the Company's knowledge threatened,
with respect to the company, or its respective operations,
businesses, properties, or assets, except as properly described
in the Bridge Disclosure Statement or Disclosure Statement or
such as individually or in the aggregate do not now have and will
not in the future have a material adverse effect upon the
operations, business, properties, or assets of the Company. The
Company is not, nor as of each Closing Date shall be, in
violation of, or in default with respect to, any law, rule,
regulation, order, judgment, or decree, except as properly
described in the Bridge Disclosure Statement or Disclosure
Statement or such as individually or in the aggregate do not have
and will not in the future have a material adverse effect upon
the operations, business, properties, or assets of the Company;
nor is the Company required to take any action in order to avoid
any such violation or default.
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(viii) As of the date hereof, the Company has, and at all
times during the period from the date hereof to and including the
Final Closing Date, shall have, good and marketable title in fee
simple absolute to all real properties and good title to all
other properties and assets which the Bridge Disclosure Statement
and Disclosure Statement indicates are owned by it, free and
clear of all liens, charges, pledges, mortgages, security
interests, and encumbrances (collectively, the "Liens"), except
as may be described in the Bridge Disclosure Statement and
Disclosure Statement and which Liens, individually or in the
aggregate, do not have and will not in the future have a material
adverse effect upon the operations, business, properties or
assets of the Company.
(ix) As of the date hereof, the Company is not, and at
all times during the period from the date hereof to and including
the Final Closing Date, shall not be, in violation or breach of,
or in default with respect to complying with any material
provision of any contract, agreement, instrument, lease, license,
permit, consent, law, rule, regulation, arrangement, and each
such contract, agreement, consent, instrument, lease, license,
arrangement, and understanding is in full force and effect and is
a legal, valid, and binding obligation of the parties thereto
enforceable as to them in accordance with its terms. The Company
enjoys peaceful and undisturbed possession under all leases,
permits and licenses under which it is operating as of the date
hereof. As of the date hereof, the Company is not a party to or
bound by any contract, agreement, instrument, lease, license,
permit, consent, arrangement, or understanding, or subject to any
charter or other restriction, which has had or may in the future
have a material adverse effect on the financial condition,
results of operations, business, properties, assets, liabilities,
or future prospects of the Company. The Company is not in
violation or breach of, or in default
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with respect to, any term of its Certificate of Incorporation as
amended or its By-Laws.
(x) To its best knowledge, the Company has not infringed,
is not infringing, nor has received notice of infringement with
respect to the Intangibles of others. The term "Intangibles"
shall mean any patent, trademark, tradename service ▇▇▇▇,
copyright, franchise, or application therefor or other intangible
property or asset. To the best knowledge of the Company, none of
the Intangibles presently owned or held by the Company,
materially infringe upon any right of any other person or entity.
The Company (i) owns or has the right to use, free and clear of
all liens, charges, claims, encumbrances, pledges, security
interests, defects or other restrictions of any kind whatsoever,
sufficient patents, trademarks, service marks, trade names,
copyrights, licenses and rights with respect to the foregoing, to
conduct its business as presently conducted except as set forth
in the Bridge Disclosure Statement and Disclosure Statement, and
(ii) except as set forth in the Bridge Disclosure Statement and
Disclosure Statement, is not obligated or under any material
liability whatsoever to make any payments by way of royalties,
fees or otherwise to any owner or licensee of, or other claimant
to, any patent, trademark, service ▇▇▇▇, trade name, copyright,
know-how, technology or other intangible asset, with respect to
the use thereof or in connection with the conduct of its business
as now conducted or otherwise.
(xi) The Company has all requisite corporate power and
authority to execute, deliver, and perform this Agreement and to
consummate the transactions contemplated hereby. All necessary
corporate proceedings of the Company have been duly taken to
authorize the execution, delivery, and performance by the Company
of this Agreement and the consummation of the transactions
contemplated hereby. This
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Agreement has been duly authorized, executed, and delivered by
the Company, is a legal, valid, and binding obligation of the
Company, and is enforceable as to the Company in accordance with
its terms. Assuming the accuracy of the representations and
warranties of the Prospective Investors set forth in the
Subscription Agreements and Purchaser Questionnaires and the
representations and warranties of the Placement Agent set forth
herein, no consent, authorization, approval, order, license,
certificate, or permit of or from, or registration,
qualification, declaration, or filing with, any federal, state,
local, foreign, or other governmental authority or any court or
other tribunal is required by the Company for the execution,
delivery, or performance by the Company of this Agreement, the
consummation of the transactions contemplated hereby and thereby,
except the filing of a Notice of Sales of Securities on Form D
pursuant to Regulation D, and such consents, authorizations,
approvals, registrations, and qualifications as may be required
under all applicable federal and/or securities or "blue sky" laws
in connection with the issuance., sale, and delivery of the Units
pursuant to this Agreement. No consent of any party to any
material contract, agreement, obligation, note, indenture,
instrument, lease, license, arrangement, or understanding to
which the Company is a party, or to which any of its properties
or assets are subject, is required for the execution, delivery,
or performance of this Agreement, and the consummation of the
transactions contemplated hereby and thereby, and such execution,
delivery and performance will not violate, result in a breach of,
conflict with, or (with or without the giving of notice or the
passage of time or both) entitle any party to terminate or call a
default under any such contract, obligation, note, indenture,
agreement, instrument, lease, license, arrangement, or
understanding, violate or result in a breach of any term of the
certificate of incorporation or by-laws of the Company, or
assuming the accuracy of the
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representations and warranties of the Prospective Investors set
forth in the Subscription Agreements and Investor Questionnaires
and the representations and warranties of the Placement Agent set
forth herein, violate, result in a breach of, or conflict with
any law, rule, regulation, order, judgment, or decree binding on
the Company or to which any of its operations, businesses,
properties, or assets are subject.
(xii) All of the securities to be issued by the Company
in the Bridge Offering and Offering to the Prospective Investors
and the Placement Agent shall conform to all statements relating
thereto as contained in the Bridge Disclosure Statement and
Disclosure Statement. The securities, when issued and delivered
to the Prospective Investors pursuant to the terms of this
Agreement shall be duly authorized, validly issued, fully paid
and nonassessable, without any personal liability attaching to
the ownership thereof solely by being such holder and shall not
have been issued in violation of any preemptive rights of
stockholders.
(xiii) Except and to the extent described in or referred
to in Schedule B to the Bridge Disclosure Statement (i) no
holders of any securities of the Company or of any options,
warrants or other convertible securities of the Company have the
right to include or demand any securities issued by the Company
be included in any registration statement to be filed by the
Company or to require the Company to file a registration
statement under the Act., and (ii) no person or entity holds any
anti-dilution rights with respect to any securities of the
Company.
(xiv) Neither the Company nor any of its officers,
directors,, or affiliates, has engaged or will engage, directly
or indirectly, in any act or activity that may
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jeopardize the status of the offering and sale of the Bridge
Units or Units as an exempt transaction under the Act or under
all applicable federal and/or state securities or "blue sky" laws
of any jurisdiction in which the Units may be offered or sold.
8. Covenants of the Company.
The Company covenants that it will:
(a) Notify you immediately, and confirm such notice in writing,
(i) when any event shall have occurred during the period commencing on
the date hereof and ending on the Final Closing Date, as a result of
which the Bridge Disclosure Statement or Disclosure Statement would
include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading, and (ii) of the receipt of any notification with
respect to the modification, rescission, withdrawal, or suspension of
the qualification or registration of the Bridge Units or Units, or of an
exemption from such registration or qualification, in any jurisdiction.
The Company will use its best efforts to prevent the issuance of any
such modification, rescission,, withdrawal, or suspension and if you so
request, to obtain the lifting thereof as promptly as possible.
(b) Not make any supplement or amendment to the Bridge
Disclosure Statement or Disclosure Statement unless such supplement or
amendment complies with the requirements of the Act and Regulation D and
the applicable federal and/or state securities and "blue sky" laws and
unless you shall have approved of such supplement or amendment in
writing. If, at any time during the period commencing on the date
hereof and ending on the Final Closing Date, any event shall have
occurred as a result of which the Bridge Disclosure Statement or
Disclosure
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Statement contains any untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to
make the statements therein not misleading, or if, in the opinion of
counsel to the Company or counsel to the Placement Agent, it is
necessary at any time to supplement or amend the Bridge Disclosure
Statement or Disclosure Statement to comply with the Act, Regulation D,
or any applicable securities or "blue sky" laws, the Company will
promptly prepare an appropriate supplement or amendment (in form and
substance satisfactory to you) which will correct such statement or
omission or which will effect such compliance.
(c) Deliver without charge to the Placement Agent such number of
copies of the Bridge Disclosure Statement or Disclosure Statement and
any supplement or amendment thereto as may reasonably be requested by
the Placement Agent.
(d) Not, directly or indirectly, solicit any offer to buy from,
or offer to sell to any person any Bridge Units or Units, except through
the Placement Agent.
(e) Use its best efforts to qualify or register the Bridge Units
and Units for offering and sale under, or establish an exemption from
such qualification or registration under, the securities or "blue sky"
laws of such jurisdictions as you may reasonably request; provided,
however, that the Company will not be obligated to qualify to do
business as a dealer in securities in any jurisdiction in which it is
not so qualified. The Company will not consummate any sale of the
Bridge Units and Units in any jurisdiction or in any manner in which
such sale may not be lawfully made; in this regard the Company shall be
entitled to rely on the Placement Agent's representations herein, and
the representations of Prospective Investors in the Subscription
Agreement and Purchaser Questionnaire and on the Blue Sky qualifications
effected by the Placement Agent's counsel.
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(f) At all times during the period commencing on the date hereof
and ending on the Final Closing Date, provide to each Prospective
Investor or his Purchaser Representative (as defined in Regulation D),
if any, on request, such information (in addition to that contained in
the Bridge Disclosure Statement or Disclosure Statement) concerning the
Bridge Offering and Offering, the Company and any other relevant
matters, as it possesses or can acquire without unreasonable effort or
expense, and to extend to each Prospective Investor or his Purchaser
Representative, if any, the opportunity to ask questions of, and receive
answers from an officer of the Company concerning the terms and
conditions of the Bridge Offering and Offering and the business of the
Company and to obtain any other additional information, to the extent it
possesses the same or can acquire it without unreasonable effort or
expense, as such Prospective Investor or Purchaser Representative may
consider necessary in making an informed investment decision or in order
to verify the accuracy of the information furnished to such Prospective
Investor or Purchaser Representative, as the case may be.
(g) Provide to each Prospective Investor or his Purchaser
Representative any information required to be delivered by Rule 502(b)
of Regulation D.
(h) Disclose to each Prospective Investor, in writing, any
material relationship between such Prospective Investor's Purchaser
Representative, if any, or its affiliates, on the one hand, and the
Company or its affiliates, on the other hand, which, to the knowledge of
the Company, then exists or is understood to be contemplated or has
existed at any time during the previous two years and any compensation
received or to be received as a result of such relationship.
(i) Before accepting any subscription to purchase Bridge Units
or Units from, or making any sale to, any Prospective Investor, have
reasonable grounds to believe and will believe (after making reasonable
inquiry as required under the
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Subscription Agreements and Investor Questionnaires) that (A) such
Prospective Investor meets the suitability requirements for investing in
the Bridge Units or Units as set forth respectively in the Bridge
Disclosure Statement or Disclosure Statement, and (B) such Prospective
Investor is an Accredited Investor (as defined in Regulation D).
(j) Notify you promptly of the acceptance or rejection of any
subscription. The Company shall not (i) accept subscriptions from, or
make sales of the Bridge Units or Units to, any Prospective Investors
who are not, to the Company's knowledge, accredited investors, or (ii)
unreasonably reject any subscription for the Bridge Units or Units.
(k) File five copies of a Notice of Sales of Securities on Form
D with the Securities and Exchange Commission (the "Commission") no
later than 15 days after the first sale of the Bridge Units or Units and
file a final notice on Form D with the Commission no later than 30 days
after the last sale of the Bridge Units or Units. The Company shall
file promptly such amendments to such Notice on Form D as shall become
necessary and, as requested by you, shall also comply with any filing
requirement imposed by the laws of any state or jurisdiction in which
offers and sales are made. The Company shall furnish you with copies of
all such filings.
(1) Not, directly or indirectly, engage in any act or activity
which may jeopardize the status of the Offering and sale of the Bridge
Units or Units as exempt transactions under the Act or under the
securities or "blue sky" laws of any jurisdiction in which the Bridge
Offering or Offering may be made. Without limiting the generality of
the foregoing, and notwithstanding anything contained herein to the
contrary, the Company shall not, directly or indirectly, engage in any
offering of securities which, if integrated with the Offering in the
manner prescribed by Rule 502(a) of Regulation D and applicable releases
of the Commission, may jeopardize the status
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of the offering and sale of the Units as exempt transactions under
Regulation D.
(m) Apply the net proceeds from the sale of the Bridge Units and
Units as set forth in the Bridge Disclosure Statement or Disclosure
Statement.
(n) Not, during the period commencing on the date hereof and
ending on the Final Closing Date, issue any press release or other
communication, or hold any press conference with respect to the Company,
its financial condition, results of operations, business, properties,
assets, or liabilities, Bridge Offering or the Offering, without your
prior written consent, except as required by applicable securities laws.
(o) During the period commencing on the date hereof and ending
on the Final Closing Date, the Company shall not, without prior notice
to and consent of the Placement Agent subject to Schedule B of the
Disclosure Statement: (A) issue any securities or incur any liability or
obligation, for borrowed money; (B) enter into any transaction not in
the ordinary course of business; or (C) declare or pay any dividend on
its capital stock except for the regular quarterly dividend on its
outstanding preferred stock.
(p) Not, under any Stock Option Plan now or hereafter in effect,
grant options for the issuance by the Company in any one year, on an
aggregate basis, to purchase more than (i) 200,000 shares of the
Company's Common Stock during the one (1) year period commencing from
the date hereof and (ii) 100,000 shares of the Company's Common Stock
for each of the next three (3) years thereafter.
(q) Not during the 12-month period following the Final Closing
Date, except with respect to outstanding warrants or options or warrants
issued in connection with the Bridge Offering or Offering, offer for
sale or sell any shares of its
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Common Stock or any securities convertible into or exchangeable for
shares of its Common Stock without the prior written consent of the
Placement Agent; provided, however, that the Company may offer for sale,
sell or grant options, rights or warrants in connection with its shares
of Common Stock at a price in excess of $8.00. Further, in connection
with any future issuance of its Common Stock, during the aforesaid 12-
month period, the Company shall not grant registration rights to any
party which requires the Company to file a Registration Statement with
the Commission, which Registration Statement shall include therein more
than 25% of the shares of the Company's Common Stock issued by the
Company in any one transaction; except, however, for 70,000 shares of
the Company's Common Stock which is disclosed in Part II of Schedule B
to the Bridge Disclosure Statement.
9. Payment of Expenses.
The Company hereby agrees to pay all fees, charges, and expenses
incident to the performance by the Company and the Placement Agent of its
obligations hereunder, including, without limitation, all fees, charges, and
expenses in connection with: (i) the preparation, printing, filing,
distribution, and mailing of the Bridge Disclosure Statement. Disclosure
Statement, the Subscription Agreements, the Investor Questionnaire, and all
other documents relating to the Bridge, the Offering, the purchase, sale, and
delivery of the Bridge Units and Units, and any supplements or amendments
thereto, including the cost of all copies thereof; (ii) the preparation and
reproduction of this Agreement; (iii) the issuance, sale, and delivery of the
Bridge Units and Units and securities contained therein, including any issuance
taxes payable thereon and the fees of any transfer agent or registrar; (iv) the
registration or qualification of the Bridge Units and Units or the securing of
an exemption therefrom under state or foreign "blue sky" or securities laws,
including without limitation, filing fees payable in the jurisdictions in which
such registration or qualification or exemption therefrom is sought,
disbursements in connection therewith, the costs of preparing preliminary,
supplemental, and final "Blue Sky Surveys" relating to
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the offer and sale of the Units, and the "Blue Sky" fees of counsel for the
Placement Agent in connection therewith in an amount equal to $5000 in
connection with the Bridge Offering and $5000 in connection with the Offering,
all of which shall be paid prior to commencement of each of the Bridge Offering
and Offering; and (v) filing fees payable to governmental agencies, if any;
(vi) the retention of the Escrow Agent, including the fees and expenses of the
Escrow Agent for serving as such and the fees and expenses of its counsel, if
any. Notwithstanding the foregoing, the parties agree that the Company shall
not be responsible for payment of the non-"Blue Sky" legal fees of counsel to
the Placement Agent.
10. Conditions of Placement Agent's Obligations.
The obligations of the Placement Agent pursuant to this Agreement shall
be subject, at its option, to the continuing accuracy of the representations
and warranties of the Company contained herein and in each certificate and
document contemplated under this Agreement to be delivered to the Placement
Agent, as of the date hereof and as of each Closing Date of the Bridge Offering
and Offering, with respect to the performance by the Company of its obligations
hereunder, and to the following conditions:
(a) At each Closing, the Placement Agent shall have received the
favorable opinion of Hall, Estill, Hardwick, Gable, Golden & ▇▇▇▇▇▇,
legal counsel for the Company, dated each Closing Date, addressed to the
Placement Agent, and in form and substance satisfactory to legal counsel
for the Placement Agent to the effect that:
(i) the Company and each of its subsidiary corporations
are duly organized, validly existing, and in good standing under
the laws of the respective states of incorporation, with full
corporate power and authority to own, lease, license, and use its
properties and assets and to conduct its business in the manner
described in the Bridge Disclosure Statement and Disclosure
Statement and is
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duly qualified to do business and is in good standing as a
foreign corporation (where such certificate of foreign
qualification is on file with the appropriate state agency) in
every jurisdiction in which its ownership, leasing, licensing, or
use of property and assets or the conduct of its business makes
such qualification necessary (except where the failure to so
qualify would not have a material adverse effect upon the Company
or its business);
(ii) the Company has, as of the date hereof, an
authorized capitalization as set forth in the Bridge Disclosure
Statement and Disclosure Statement. Each issued and outstanding
share of Common Stock and Preferred Stock is duly authorized,
validly issued, fully paid, and nonassessable, with no personal
liability attaching to the ownership thereof solely by being such
a holder and has not been issued and is not owned or held in
violation of any preemptive right of stockholders. To Counsel's
knowledge there is no commitment, plan, or arrangement to issue,
and no outstanding option, warrant, security, or other right
calling for the issuance of, any share of capital stock of the
Company or any security or other instrument which by its terms is
convertible into, exercisable for, or exchangeable for capital
stock of the Company, except as may be properly described in the
Bridge Disclosure Statement, the Disclosure Statement or in this
Agreement. To Counsel's knowledge there is outstanding no
security or other instrument which by its terms is convertible
into or exchangeable for capital stock of the Company, except as
may be properly described in the Bridge Disclosure Statement and
Disclosure Statement or in a schedule hereto;
(iii) To Counsel's knowledge there is no litigation,
arbitration, claim, governmental or other proceeding (formal or
informal), or investigation pending or threatened with respect to
the Company or any of its operations, businesses, properties, or
assets except as may
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be properly described in the Bridge Disclosure Statement or
Disclosure Statement, in this Agreement or in a schedule hereto;
(iv) counsel has not received written or oral notice that
the Company is in violation or breach of, or in default with
respect to, complying with any provision of any contract,
agreement, instrument, lease, license, permit, law, regulation,
arrangement, or understanding;
(v) the Company has all requisite corporate power and
authority to execute, deliver, and perform this Agreement, and to
consummate the transactions contemplated hereby. All necessary
corporate proceedings of the Company have been taken to authorize
the execution, delivery, and performance by the Company of this
Agreement, and the consummation of the transactions contemplated
hereby. This Agreement has been duly authorized, executed, and
delivered by the Company, is the legal, valid, and binding
obligation of the Company, and is enforceable against the Company
in accordance with its terms, except as such enforceability may
be limited by applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application now or hereafter
in effect relating to or affecting the enforcement of creditors'
right generally and the application of general equitable
principles in any action, legal or equitable and then except, as
to those provisions relating to indemnity or contribution, such
opinion shall be limited as effected by any Federal or state
securities laws regarding indemnity and/or contribution;
(vi) the Bridge Units and Units conform to all statements
relating thereto contained in the Bridge Disclosure Statement and
Disclosure Statement. The Bridge Units and Units and the
securities contained therein, are duly authorized, validly
issued, fully paid (including all
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shares issued upon warrants described therein when paid for), and
nonassessable, with no personal liability attaching to the
ownership or any of the components thereof (other than the
contractual obligations of such holders contained in the Notes
and Warrants) and to such counsel's knowledge shall not have been
issued in violation of any preemptive rights of stockholders;
(vii) the Bridge Disclosure Statement and Disclosure
Statement (except that no opinion need be expressed as to the
financial statements, related schedules, or other financial data
contained therein) comply as to form in all material respects
with requirements of the Act and the regulations thereunder
applicable to offerings made pursuant to Rule 506 of Regulation D
and to the best knowledge of such counsel, any contract,
agreement, instrument, lease, license, or document described in
the Bridge Disclosure Statement and Disclosure Statement has been
accurately described therein;
(viii) such counsel's opinion shall also include a
statement to the effect that it has participated in conferences
with officers and other representatives of the Company and
representatives of the independent public accountants of the
Company at which the contents of the Bridge Disclosure Statement
and Disclosure Statement were discussed and, on the basis of the
foregoing, nothing has come to such counsel's attention that
causes it to believe that the Bridge Offering and Offering as
supplemented or amended at all times up to and including the date
of such opinion, contained an untrue statement of a material fact
or omitted to state a material fact required to be stated therein
or necessary to make the statements therein, in light of
circumstances under which they were made, not misleading (it
being understood that such counsel expresses no opinion or belief
with respect to the financial
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information included in the Bridge Disclosure Statement or
Disclosure Statement);
(ix) assuming that (i) a proper Form D is filed in
accordance with Rule 503 of Regulation D, (ii) that the offer and
the sale of the Bridge Units by the Placement Agent was made in
compliance with Rule 506 of Regulation D and that the Placement
Agent's representations and warranties set forth herein are true
and correct, and (iii) that the representations of the
Prospective Investors in the Subscription Agreements and
Investors Questionnaire signed by them are true and correct
(which facts will not be independently verified by such counsel),
the sale of the Bridge Units in the Bridge Offering and sale of
the Units in the Offering is exempt from registration under the
Securities Act of 1933 and is in compliance with Rule 506 of
Regulation D;
(x) neither the execution and delivery of this Agreement,
the Bridge Notes and Bridge Warrants contained in the Bridge
Units and the Common Stock and Warrants contained in the Units,
nor compliance with the terms hereof or thereof will (i) conflict
with, result in a breach of, or constitute a default under the
Certificate of Incorporation or By-Laws of the Company, or, to
the best of such counsel's knowledge, any material contract,
instrument, obligation, agreement or document to which the
Company is a party, or by which the assets or properties of the
Company are bound; or (ii) to the best knowledge of such counsel,
have any material adverse effect on any permit, certification,
registration, approval, consent, license or franchise necessary
for the Company to own or lease and operate any of its properties
and to conduct its business or the ability of the Company to make
use thereof as described in the Bridge Disclosure Statement or
Disclosure Statement;
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(xi) counsel has not been advised in writing or otherwise
that there are any licenses, permits, certificates,
registrations, approvals or consents of any governmental agency,
commission, board, instrumentality or department that are
required to be obtained by the Company in order to conduct its
business as conducted at the date hereof which have not been so
obtained and where the failure to so obtain would have a material
adverse effect on the Company's business or the business of any
subsidiary;
(xii) To the knowledge of counsel the issuance of the
Bridge Units in the Bridge Offering or the Units in the Offering
will not give any holder of any of the Company's outstanding
Common Stock, options, warrants, convertible securities or rights
to purchase shares of the Company's Common Stock or Preferred
Stock, the right to purchase any additional shares of Common
Stock.
In rendering such opinion, counsel for the Company may
rely (A) as to matters of fact, to the extent they deem proper,
on certificates of officers of the Company; and (B) to the extent
they deem proper, upon written statements or certificates of
officers of departments of various jurisdictions having custody
of documents respecting the corporate existence or good standing
of the Company, provided that copies of any such statements or
certificates shall be delivered to counsel for the Placement
Agent.
(b) on or prior to the Closing of the Bridge offering and
Initial Closing of the Offering the Placement Agent shall have been
furnished such information, documents, certificates, and opinions as it
may reasonably require for the purpose of enabling it to review the
matters referred to in Section 7, and in order to evidence the accuracy,
completeness, or satisfaction of any of the representations, warranties,
covenants,
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agreements, or conditions herein contained, or as it may otherwise
reasonably request.
(c) Upon Closing of the Bridge Offering and each Closing Date of
the Offering, the Placement Agent shall have received a certificate of
the chief executive officer and of the chief financial officer of the
Company, dated the applicable Closing Date to the effect that, as of the
date of this Agreement and as each Closing Date the representations and
warranties of the Company contained herein and therein were and are
accurate, and that as of each Closing Date the obligations to be
performed by the Company hereunder on or prior thereto have been fully
performed.
(d) All proceedings taken in connection with the issuance, sale,
and delivery of the Bridge Units and Units shall be satisfactory in form
and substance to you and your counsel.
(e) There shall not have occurred after the date hereof, at any
time prior to each Closing Date: (A) any domestic or international
event, act, or occurrence which has materially disrupted, or in your
opinion will in the immediate future materially disrupt the securities
markets; (B) a general suspension of, or a general limitation on prices
for, trading in securities on the Nasdaq SmallCap Market or the over-
the-counter market; (C) any banking moratorium declared by a state or
federal authority; (D) any material interruption in the mail service or
other means of communication within the United States; (E) any adverse
change in the business, properties, assets, results of operations, or
financial condition of the Company; or (F) any change in the market for
securities in general or in political, financial, or economic conditions
which, in your judgment, makes it inadvisable to proceed with the
offering, sale, and delivery of the Units.
Any certificate or other document signed by any officer of the
Company and delivered to you or to your counsel at the
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Closing of the Bridge Offering or each Closing Date of the Offering
shall be deemed a representation and warranty by the Company hereunder
as to the statements made therein. If any condition to your obligations
hereunder has not been fulfilled as and when required to be so
fulfilled, you may terminate this Agreement or, if you so elect, in
writing waive any such conditions which have not been fulfilled or
extend the time for their fulfillment. In the event that you elect to
terminate this Agreement, you shall notify the Company of such election
in writing. Upon such termination, neither party shall have any
further liability or obligation to the other except as provided in
Section 11 hereof.
(f) At the Closing of the Bridge Offering and each Closing of
the Offering, the Placement Agent shall have received the favorable
opinion of counsel satisfactory to counsel to the Placement Agent as to
the compliance by the Company with all federal, state, Indian and local
laws, rules and regulations, or any license, permit, certification,
approval or consent, in each case relating to the Company's services as
described in the Bridge Disclosure Statement and Disclosure Statement.
(g) On or before the Closing of the Bridge Offering, the Company
shall provide the Placement Agent with enforceable agreements (the
"Lock-Up Agreements") from each of the Company's officers, directors,
and shareholders owning 1% or more of the Company's outstanding Common
Stock and all holders of the Company's outstanding warrants, options and
other convertible securities requiring the issuance of more than 1% of
the Company's outstanding Common Stock, as of the date hereof, which
Lock-Up Agreements shall provide that the party executing the Lock-Up
Agreements shall not, for a period of 12 months from the later of (i)
Closing of the Bridge Offering or (ii) Final Closing of the Offering,
(and except where a different period is provided for therein with the
permission of the Placement Agent), directly or indirectly, issue, offer
to sell, grant an option for the sale of, assign, transfer, pledge,
hypothecate or
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otherwise encumber or dispose of any shares of the Company's Common
Stock or securities convertible into, exercisable or exchangeable for or
evidencing any right to purchase or subscribe for any shares of Common
Stock (either pursuant to Rule 144 of the Rules and Regulations or
otherwise) or dispose of any beneficial interest therein without the
written consent of the Placement Agent. The Lock-Up Agreements shall
terminate if the Minimum Offering is not consummated and such failure to
consummate the Minimum Offering was not caused by the act or omission of
the Company. Notwithstanding the foregoing, a Lock-Up Agreement shall
not be required from those parties indicated on Schedule B to this
Agreement.
(h) The Company shall execute and deliver a Registration Rights
Agreement, in form acceptable to the Placement Agent, with respect to
the Bridge Warrants; shares of Common Stock underlying the Bridge
Warrants; securities issuable upon conversion of Bridge Notes; Warrants
and the shares of Common Stock underlying the Warrants; Bridge Placement
Warrants and the shares of common stock underlying the Bridge Placement
Warrants; and Offering Placement Warrants and the shares of Common Stock
underlying the Offering Placement Warrants.
(i) The Placement Agent shall have received from the Company a
modification to a certain placement agent agreement dated January 29,
1996 by and between the Company and G-V Capital Corp., in the form as
set forth on Schedule C annexed hereto.
11. Conditions of Company's Obligations.
The obligations of the Company pursuant to this Agreement shall be
subject, in its discretion, to the performance by the Placement Agent in all
material respects of its obligations hereunder.
12. Break-Up Fee.
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The Company agrees that if the Bridge Offering or Offering contemplated
hereunder is not consummated because of a breach by the Company of any
covenant, representation or warranty contained in the Placement Agreement then,
in that event, the Company shall be liable for the Placement Agent's expenses,
including counsel fees, and, in addition, shall pay to the Placement Agent as
liquidated damages an amount equal to $50,000 with respect to the Bridge
offering and $100,000 with respect to the Offering.
13. Right of First Refusal.
Upon the Closing of the Bridge Offering, the Company will deliver an
agreement to the effect that the Placement Agent shall thereafter have an
irrevocable right of first refusal for a period of two (2) years from such
Closing to purchase for its account or to sell for the account of the Company,
or any subsidiary of or successor to the Company, or any of its stockholders
owning at least one (1%) percent or more of the Common Stock of the Company or
a party holding the Company's convertible securities which require the issuance
by the Company of at least 1% or more of the Common Stock of the Company on the
date hereof (the "Principal Stockholders") any securities of the Company or any
such subsidiary or successor of the Company, that the Company or any such
subsidiary or successor or any of its Principal Stockholders may seek to sell
through an underwriter, placement agent or broker/dealer whether pursuant to
registration under the Act or otherwise. The Company, any such subsidiary or
successor and its Principal Stockholders will consult with the Placement Agent
with regard to any such offering and will offer the Placement Agent the
opportunity to purchase or sell any such securities on terms not less favorable
to the Company, any such subsidiary or successor or its Principal Stockholders
than it or they can secure elsewhere. If the Placement Agent fails to accept
such offer within 15 business days after the mailing of a notice containing
such offer by registered mail addressed to the Placement Agent (three (3)
business days in the event the offer covers a sale under Rule 144 or Rule
144(k)), then the Placement Agent shall have no further claim or right with
respect to the financing or stock sale
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proposal contained in such notice. If, however, the terms of such proposal are
subsequently modified in any material respect, the preferential right referred
to herein shall apply to such modified proposal as if the original proposal had
not been made. The Placement Agent's failure to exercise its preferential
right with respect to any particular proposal shall not affect its preferential
rights relative to future proposals. The Company represents and warrants that
there are presently no other rights of first refusal for future financing now
outstanding. The agreement to be furnished to the Placement Agent under this
Section shall terminate if the Minimum Offering is not consummated.
14. Warrant Solicitation Fee.
Commencing on the date hereof, upon the exercise of any Bridge Warrant
or Warrant, the exercise of which was solicited by the Placement Agent in
accordance with the applicable rules and regulations of the NASD prevailing at
the time of such solicitation, the Company shall pay to the Placement Agent a
fee of 4% of the aggregate exercise price of such Bridge Warrant or Warrant
within five (5) business days of such exercise. The Company further agrees
that it will not solicit the exercise of any Bridge Warrant or Warrant other
than through the Placement Agent, unless the Placement Agent cannot legally
solicit the exercise of the Bridge Warrants or Warrants at the time of such
solicitation.
15. Solicitation Prohibition.
The Company agrees that, for a period of two (2) years from the date
hereof, it shall not solicit any offer to buy from or offer to sell to any
person introduced to the Company by the Placement Agent in connection with the
Offering, directly or indirectly, any securities of the Company or of any other
entity, or provide the name of any such person to any other securities broker
or dealer or selling agent. In the event that the Company or any of its
affiliates, directly or indirectly, solicits, offers to buy from or offers to
sell to any such person any such securities, or provides
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the name of any such person to any other securities broker or dealer or selling
agent, and such person purchases such securities or purchases securities from
any other securities broker or dealer or selling agent, the Company shall pay
to the Placement Agent an amount equal to 10% of the aggregate purchase price
of the securities so purchased by such person.
16. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless the
Placement Agent, its officers, directors, partners, employees, agents,
and counsel, and each person, if any, who controls the Placement Agent
within the meaning of Section 15 of the Act or Section 20(a) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
against any and all loss, liability, claim, damage, and expense
whatsoever (which shall include, for all purposes of this Section 15,
but not be limited to, attorneys' fees and any and all expense
whatsoever incurred in investigating, preparing, or defending against
any litigation, commenced or threatened, or any claim whatsoever and any
and all amounts paid in settlement of any claim or litigation) as and
when incurred arising out of, based upon, or in connection with (i) any
untrue statement or alleged untrue statement of a material fact
contained in the Disclosure Statement or in any document delivered or
written statement made pursuant to Section 8 (g) , or (B) in any
application or other document or communication (it being understood that
neither the Company nor any officer, director or employee shall provide
any information to any Prospective Investor which is not contained in
the Disclosure Statement) (in this Section 15 collectively called an
"application") executed by or on behalf of the Company or based upon
written information furnished by or on behalf of the Company filed in
any jurisdiction in order to register or qualify the Units under the
"blue sky" or securities laws thereof or in order to secure an exemption
from such registration or qualification or filed with the Commission; or
any omission or alleged omission to state a material fact
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required to be stated therein or necessary to make the statements
therein not misleading, unless such statement or omission was made in
reliance upon and in conformity with written information furnished to
the Company as stated in Section 15(b) with respect to the Placement
Agent expressly for inclusion in the Bridge Disclosure Statement or
Disclosure Statement or in any application, as the case may be; or (ii)
any breach of any representation, warranty, covenant, or agreement of
the Company contained in this Agreement. The foregoing agreement to
indemnify shall be in addition to any liability the Company may
otherwise have, including liabilities arising under this Agreement.
If any action is brought against the Placement Agent or any of
its officers, directors, partners, employees, agent, or counsel, or any
controlling persons of the Placement Agent (an "indemnified party"), in
respect of which indemnify may be sought against the Company pursuant to
the foregoing paragraph, such indemnified party or parties shall
promptly notify the Company (the "indemnifying party") in writing of the
institution of such action (but the failure so to notify shall not
relieve the indemnifying party from any liability it may have other than
pursuant to this Section 15(a)) and the indemnifying party shall
promptly assume the defense of such action, including the employment of
counsel (reasonably satisfactory to such indemnified party or parties)
and payment of expenses. Such indemnified party shall have the right to
employ its own counsel in any such case, but the fees and expense of
such counsel shall be at the expense of such indemnified party unless
the employment of such counsel shall have been authorized in writing by
the indemnifying party in connection with the defense of such action or
the indemnifying party shall not have promptly employed counsel
satisfactory to such indemnified party or parties to have charge of the
defense of such action or such indemnified party or parties shall have
reasonably concluded that there may be one or more legal defenses
available to it or them or to other indemnified parties which are
different from or
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additional to those available to one or more of the indemnifying
parties, in any of which events such fees and expenses of one such
counsel shall be borne by the indemnifying party and the indemnifying
party shall not have the right to direct the defense of such action on
behalf of the indemnified party or parties. Anything in this paragraph
to the contrary notwithstanding, the indemnifying party shall not be
liable for any settlement of any such claim or action effected without
its written consent. The Company agrees promptly to notify the
Placement Agent of the commencement of any litigation or proceedings
against the Company or any of its officers or directors in connection
with the sale of the Units, the Disclosure Statement, or any
application.
(b) The Placement Agent agrees to indemnify and hold harmless
the Company, its officers, directors, employees, agents, and counsel,
and each other person, if any, who controls the Company within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act,
to the same extent as the foregoing indemnity from the Company to the
Placement Agent in Section 15(a), with respect to any and all loss,
liability, claim, damage, and expense whatsoever (which shall include,
for all purposes of this Section 15, but not be limited to, attorneys'
fees and any and all expense whatsoever incurred in investigating,
preparing, or defending against any litigation, commenced or threatened,
or any claim whatsoever and any and all amounts paid in settlement of
any claim or litigation) as and when incurred arising out of, based
upon, or in connection with (i) statements or omissions, if any, made in
the Bridge Disclosure Statement or Disclosure Statement in reliance upon
and in conformity with written information furnished to the Company as
stated in this Section 15(b) with respect to the Placement Agent
expressly for inclusion in the Bridge Disclosure Statement or Disclosure
Statement, and (ii) the failure of the Placement Agent to comply with
the provisions of section 2(c) hereof or with the "blue sky" or
securities laws of the jurisdictions in which the Placement Agent
solicits offers to
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buy or offers to sell any Units or any breach of any representation,
warranty, covenant or agreement of the Placement Agent contained in this
Agreement. The foregoing agreement to indemnify shall be in addition to
any liability the Placement Agent may otherwise have, including
liabilities arising under this Agreement. If any action shall be
brought against the Company or any other person so indemnified based on
the Bridge Disclosure Statement or Disclosure Statement and in respect
of which indemnity may be sought against the Placement Agent pursuant to
this Section 15(b), the Placement Agent shall have the rights and duties
given to the indemnifying party, and the Company and each other person
so indemnified shall have the rights and duties given to the indemnified
parties, by the provisions of Section 15(a).
(c) To provide for just and equitable contribution, if (i) an
indemnified party makes a claim for indemnification pursuant to Sections
15(a) and 15(b) but it is found in a final judicial determination, not
subject to further appeal, that such indemnification may not be enforced
in such case, even though this Agreement expressly provides for
indemnification in such case, or (ii) any indemnified or indemnifying
party seeks contribution under the Act, the Exchange Act, or otherwise,
then the Company (including for this purpose any contribution made by or
on behalf of any officer, director, employee, agent, or counsel of the
Company, or any controlling person of the Company), on the one hand, and
the Placement Agent (including for this purpose any contribution by or
on behalf of an indemnified party), on the other hand, shall contribute
to the losses, liabilities, claims, damages, and expenses whatsoever to
which any of them may be subject, in such proportions as are appropriate
to reflect the relative benefits received by the Company, on the one
hand, and the Placement Agent, on the other hand; provided, however,
that if applicable law does not permit such allocation, then other
relevant equitable considerations such as the relative fault of the
Company and the Placement Agent in connection with the facts which
resulted in such
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losses, liabilities, claims, damages, and expenses shall also be
considered. The relative benefits received by the Company, on the one
hand, and the Placement Agent, on the other hand, shall be deemed to be
in the same proportion as (x) the total proceeds from the Bridge
Offering or Offering, as the case may be, (net of compensation payable
to the Placement Agent pursuant to Section 2 or Section 6, as the case
may be, hereof but before deducting expenses) received by the Company,
and (y) the compensation received by the Placement Agent pursuant to
Section 2 or Section 6 hereof.
The relative fault, in the case of an untrue statement, alleged
untrue statement, omission, or alleged omission, shall be determined by,
among other things, whether such statement, alleged statement, omission,
or alleged omission relates to information supplied by the Company or by
the Placement Agent, and the parties' relative intent, knowledge, access
to information, and opportunity to correct or prevent such statement,
alleged statement, omission, or alleged omission. The Company and the
Placement Agent agree that it would be unjust and inequitable if the
respective obligations of the Company and the Placement Agent for
contribution were determined by pro rata or per capita allocation of the
aggregate losses, liabilities, claims, damages, and expenses or by any
other method of allocation that does not reflect the equitable
considerations referred to in this Section 18(c). In no case shall the
Placement Agent by responsible for a portion of the contribution
obligation in excess of the compensation received by it pursuant to
Section 2 with respect to the Bridge offering and Section 6 with respect
to the offering. No person guilty of a fraudulent misrepresentation
shall be entitled to contribution from any person who is not guilty of
such fraudulent misrepresentation. For purposes of this Section 18(c),
each person, if any, who controls the Placement Agent within the meaning
of Section 15 of the Act or Section 20(a) of the Exchange Act and each
officer, director, partners, employee, agent, and counsel of the
Placement Agent, shall have the same
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rights to contribution as the Placement Agent, and each person, if any,
who controls the Company within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act and each officer, director, employee,
agent, and counsel of the Company, shall have the same rights to
contribution as the Company, subject in each case to the provisions of
this Section 15 (c). Anything in this Section 15(c) to the contrary
notwithstanding, no party shall be liable for contribution with respect
to the settlement of any claim or action effected without its written
consent. This Section 15(c) is intended to supersede any right to
contribution under the Act, the Exchange Act, or otherwise.
17. Representations and Agreements to Survive Delivery.
All representations, warranties, covenants, and agreements contained in
this Agreement shall be deemed to be representations, warranties, covenants,
and agreements as of the date hereof and at each Closing Date of the Bridge
Offering and the Offering and, such representations, warranties, covenants,,
and agreements, including the indemnification and contribution agreements
contained in this Agreement, shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of the Placement
Agent or any indemnified person, or by or on behalf of the Company or any
person or entity which is entitled to be indemnified under Section 15, and
shall survive termination of this Agreement and the issuance, sale, and
delivery of the Bridge Units or Units. In addition, notwithstanding any
election hereunder or any termination of this Agreement, and whether or not the
terms of this Agreement are otherwise carried out, the provisions of Sections
9, 12, 14, 15 and 16 shall survive termination of this Agreement and shall not
be affected in any way by such election or termination or failure to carry out
the terms of this Agreement or any part thereof.
18. Notices.
All communications hereunder, except as may be otherwise specifically
provided herein, shall be in writing and, if sent to the
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Placement Agent, shall be mailed, delivered, or telexed and confirmed by
letter, to ▇▇▇▇▇, ▇▇▇▇▇▇▇ Securities, Inc., ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇, attention ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, with a copy to ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, ▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇,
Esq.; or if sent to the Company, shall be mailed, delivered or telexed and
confirmed by letter, to Multimedia Games, Inc., ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: President, with a copy to Hall, Estill, Hardwick,
Gable, Golden & ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇, Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq. All notices hereunder shall be
effective upon receipt by the party to which it is addressed.
The parties hereto acknowledge and agree that the Placement Agent shall
have the right and option to act as agent for the holders of any Units, Bridge
Unit Warrants or the securities contained therein in providing any notice to
the Company, including without limitation, any notice required to exercise any
registration rights granted herein.
19. Parties.
This Agreement shall inure solely to the benefit of, and shall be
binding upon, the Placement Agent and the Company and the persons and entities
referred to in Section 15 who are entitled to indemnification or contribution,
and their respective successors, legal representatives, and assigns (which
shall not include any purchaser, as such, of Units), and no other person shall
have or be construed to have any legal or equitable right remedy, or claim
under or in respect of or by virtue of this Agreement or any provision herein
contained.
20. Construction.
This Agreement shall be construed in accordance with the laws of the
State of New York, without giving effect to conflict of laws. Any action at
law or equity under this Agreement shall be brought in
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federal or state courts located within the State of New York, except that any
action in equity may be brought by any of the parties hereto in any court
having the appropriate in personam jurisdiction in the matter.
21. Counterparts.
This Agreement may be executed in counterparts, each of which shall
constitute an original and all of which, when taken together, shall constitute
one agreement.
If the foregoing correctly sets forth the understanding between us,
please so indicate in the space provided below for that purpose, whereupon this
letter shall constitute a binding agreement among us.
Very truly yours,
MULTIMEDIA GAMES, INC.
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
Accepted as of the date
first above written:
▇▇▇▇▇, ▇▇▇▇▇▇▇ SECURITIES, INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
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SCHEDULE A
Securities Sold Within Last 12 Months
Number
Name Event Date of Shares
-----------------------------------------------------------------------------
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Exercise Warrants Jun-95 66,000
▇▇▇▇▇▇ ▇▇▇▇▇ Exercise Warrants Jun-95 6,667
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Private Placement Aug-95 27,273
I.M. Tassos Consulting Aug-95 1,000
▇▇▇▇▇ Pay-Per-View Exercise Warrant Jun-95 175,000
▇▇▇▇▇ Pay-Per-View Private Placement Jun-95 100,000
First Capital Financial Exercise Warrants Aug-95 13,000
Gro-Vest Offering Private Placement Feb-96 589,375
▇▇▇▇▇▇ ▇▇▇▇▇▇ Exercise Warrant Feb-96 291,545
Various Exercise Warrant Mar-96 13,332
---------
Total Issue Since 6-1-95 1,283,192
Outstanding Prior to 6-1-95 1,451,008
-----------------------------------------------------------------------------
Total Outstanding Currently 2,734,200
=========
* All scheduled parties are Accredited Investors as such term is defined
under Rule 506 of Regulation D of the Securities Act of 1933.
----------------------------------- -----------------------------------
(Initials) (Initials)
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SCHEDULE B
Individuals Not Under Lock-Up
Name Number Shares
Cede & Co. (1) 546,961
GLM, Inc. 45,000
SCA Promotions 108,497
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 108,497
Krugman ▇▇▇▇▇▇▇▇ 29,205
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (2) 83,523
American Gaming 62,500
Communities Foundation of
Texas, Inc. 37,900
Officers & Directors (3)
---------------
(1) Nominee for shares publicly held.
(2) Shares issuable upon exercise of outstanding warrants.
(3) Six (6) months from the final closing date of the Offering, officers and
directors of the Company may each sell up to 10,000 shares of the
Company's Common Stock or an aggregate of 90,000 shares.
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SCHEDULE C
Modification to Placement Agent Agreement
dated January 29, 1996 by and between Multimedia
Games, Inc. and G-V Capital Corp.
July 24, 1996
Multimedia Games, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Gentlemen:
We have been advised that Multimedia Games, Inc. (the "Company") has
entered into a Placement Agency Agreement (the "WM Agreement") with ▇▇▇▇▇,
▇▇▇▇▇▇▇ Securities, Inc. ("WM") on the date hereof pursuant to which WM will
act as Placement Agent with respect to the sale of certain securities offerings
contemplated in the WM Agreement and for other good and valuable consideration,
the receipt whereof is hereby acknowledged by the Company and the undersigned,
the parties hereto agree that:
1. Section 3(y) of a certain placement agent agreement dated January
29, 1996 between the Company and the undersigned (the "G-V Agreement") is
herewith deleted and of no further force or effect.
2. The undersigned agrees that it will not release the restrictions
contained in Section 3(z) of the G-V Agreement without the consent of WM.
3. This agreement amends the G-V Agreement and shall become
effective upon consummation of a certain "Bridge Offering" contemplated in the
WM Agreement.
4. Upon the G-V Agreement being amended as described herein, such
amendments may not be further amended or modified without the consent of WM.
5. WM may bring any action at law or in equity to enforce this
agreement.
Very truly yours,
G-V Capital Corp.
By:
---------------------------------------
AGREED AND CONSENTED TO:
Multimedia Games, Inc.
By:
------------------------------
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