EXHIBIT 10.5
XXXXXXX MEDIA INTERNATIONAL INC
PLACEMENT AGENT AGREEMENT
Dated as of: July ___, 2001
May Xxxxx Group, Inc.
Xxx Xxxxx Xxxxx Xxxxxx - Xxxxx 0000
Xxx Xxxx, Xxx Xxxx, 00000
Ladies and Gentlemen:
The undersigned, Xxxxxxx Media International Inc., (the "Company"),
hereby agrees with May Xxxxx Group, Inc. ("May Xxxxx") as follows:
1. Offering. The Company hereby engages May Xxxxx to act as its
exclusive placement agent in connection with the Securities Purchase Agreement
(as defined herein) for the issuance and sale by the Company (the "Offering") of
the Company's Series B Preferred Shares , par value $0.001 per share (the
"Series B Preferred Shares "), at a price per share equal to the Securities
Purchase Price, as that term is defined in the Securities Purchase Agreement
dated the date hereof between the Company and the Investor named therein ( the
"Securities Purchase Agreement"), for an aggregate price of One Million Dollars
($1,000,000). All capitalized terms used herein and not otherwise defined shall
have the same meaning ascribed to them as in the Securities Purchase Agreement.
The Investor will be granted certain registration rights with respect to the
Common Stock as more fully set forth in the Registration Rights Agreement
between the Company and the Investor dated the date hereof. The documents to be
executed and delivered in connection with the Offering, including, but not
limited, to this Agreement, the Securities Purchase Agreement, the Registration
Rights Agreement, the Escrow Agreement with First Union National Bank (the
"Escrow Agreement"), are referred to sometimes hereinafter collectively as the
"Offering Materials." The Company's Series B Preferred Shares and the Common
Stock issuable upon conversion thereof is sometimes referred to hereinafter as
the "Securities." May Xxxxx shall not be obligated to sell any Securities and
this Offering by May Xxxxx shall be solely on a "best efforts basis."
2. Information.
A. Upon the occurrence of each Closing, the funds received in
respect of the shares of Common Stock purchased by the Investor will be
disbursed in accordance with the terms of the Purchase Agreement, net of (i) the
commission payable to May Xxxxx, equal to eight percent (8%) of the gross
proceeds from the sale of Common Stock, and (ii) legal fees and other expenses
related thereto due to May Xxxxx'x counsel, Xxxxxx Xxxxxxxx LLP, an amount not
to exceed Fifteen Thousand Dollars ($15,000).
B. In addition to the foregoing compensation the Company shall
issue to the
May Xxxxx Group, Inc., a warrant to purchase four hundred thousand (400,000)
shares of the Company's Common Stock with an exercise price of one hundred and
ten percent (110%) of the Closing Bid Price of the Company's Common Stock on the
day of Closing. Such shares of Common Stock issuable upon conversion of the
Warrant shall have "piggy-back" and demand registration rights.
3. Representations, Warranties and Covenants of May Xxxxx.
A. May Xxxxx represents, warrants and covenants as follows:
(i) May Xxxxx has the necessary power to enter into this
Agreement and the Escrow Agreement and to consummate the transactions
contemplated hereby and thereby.
(ii) The execution and delivery by May Xxxxx of this Agreement ,
the Escrow Agreement and the consummation of the transactions contemplated
herein and therein will not result in any violation of, or be in conflict with,
or constitute a default under, any agreement or instrument to which May Xxxxx is
a party or by which May Xxxxx or its properties are bound, or any judgment,
decree, order or, to May Xxxxx'x knowledge, any statute, rule or regulation
applicable to May Xxxxx. This Agreement and the Escrow Agreement when executed
and delivered by May Xxxxx, xxxx constitute the legal, valid and binding
obligations of May Xxxxx, enforceable in accordance with their respective terms,
except to the extent that (a) the enforceability hereof or thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
from time to time in effect and affecting the rights of creditors generally, (b)
the enforceability hereof or thereof is subject to general principles of equity,
or (c) the indemnification provisions hereof or thereof may be held to be
violative of public policy.
(iii) Upon receipt of an executed Securities Purchase Agreement,
a Registration Rights Agreement and Escrow Agreement and the documents related
thereto, May Xxxxx will, through the Escrow Agent, promptly forward copies of
the Purchase Agreement, Registration Rights Agreement and Escrow Agreement and
the documents related thereto to the Company or its counsel.
(iv) May Xxxxx will not deliver any documents related to the
Offering to any person it does not reasonably believe to be an Accredited
Investor as defined in Rule 501 (a) (3) of Regulation D. May Xxxxx will arrange
for the securities to be sold exclusively to Accredited Investors in a Private
Placement transaction exempt from the Registration requirements of the 1933 Act.
(v) May Xxxxx will not intentionally take any action that it
reasonably believes would cause the Offering to violate the provisions of the
1933 Act, the 1934 Act, the respective rules and regulations promulgated there
under (the "Rules and Regulations") or applicable "Blue Sky" laws of any state
or jurisdiction.
(vi) May Xxxxx shall use all reasonable efforts to determine (a)
whether the Investors is an Accredited Investors and (b) that any information
furnished by the Investors is true and accurate. May Xxxxx shall have no
obligation to insure that (x) any check, note, draft or other means of payment
for the Common Stock will be honored, paid or enforceable against the Investors
in accordance with its terms, or (y) subject to the performance of May Xxxxx'x
obligations and the accuracy of May Xxxxx'x representations and warranties
hereunder, (1) the Offering is exempt from the registration requirements of the
1933 Act or any applicable state "Blue Sky" law or (2) the Investors is an
Accredited Investors .
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(vii) May Xxxxx is a member of the National Association of
Securities Dealers, Inc., and is a broker-dealer registered as such under the
1934 Act and under the securities laws of the states in which the Securities
will be offered or sold by May Xxxxx, unless an exemption for such state
registration is available to May Xxxxx. May Xxxxx is in compliance with all
material rules and regulations applicable to May Xxxxx generally and applicable
to May Xxxxx'x participation in the Offering. The Company and May Xxxxx
acknowledge and agree that in the event the NASD, SEC or other regulatory
authority determines that the aggregate or any portion of the compensation to be
paid to May Xxxxx under this Agreement violates the NASD's Corporate Financing
Rules, including without limitation, Rule 2710 of the NASD, May Xxxxx will
reduce the aggregate compensation to be paid to May Xxxxx hereunder to be in
compliance with such Rules, and such reduced compensation shall be the
compensation to be paid by the Company to May Xxxxx hereunder. May Xxxxx shall
not be entitled to terminate this Agreement as a result of limitations place on
the Compensation to be paid to May Xxxxx under the NASD's Corporate Financing
Rules.
4. Representations and Warranties of the Company.
A. The Company represents and warrants as follows:
Except as stated below or on the disclosure schedules attached hereto,
the Company hereby represents and warrants to, and covenants with, the Investors
that the following are true and correct as of the date hereof.
(i) Organization and Qualification. Each of the Company and its
subsidiaries is duly incorporated or organized and validly existing in the
jurisdiction of its incorporation or organization and has all requisite power
and authority corporate power to own their properties and to carry on their
business as now being conducted. Each of the Company and its subsidiaries is
duly qualified as a foreign corporation to do business and is in good standing
in every jurisdiction in which the nature of the business conducted by it makes
such qualification necessary, except to the extent that the failure to be so
qualified or be in good standing would not have a Material Adverse Effect on the
Company and its subsidiaries taken as a whole.
(ii) Authorization, Enforcement, Compliance with Other Instruments.
(i) The Company has the requisite corporate power and authority to enter into
and perform this Agreement, the Registration Rights Agreement and any related
agreements, in accordance with the terms hereof and thereof, (ii) the execution
and delivery of this Agreement, the Registration Rights Agreement, the Escrow
Agreement and any related agreements by the Company and the consummation by it
of the transactions contemplated hereby and thereby, have been duly authorized
by the Company's Board of Directors and no further consent or authorization is
required by the Company, its Board of Directors or its stockholders( other than
as may be required as stated in Section 7.2(g) hereof), (iii) this Agreement,
Registration Rights Agreement, the Escrow Agreement and any related agreements
have been duly executed and delivered by the Company, (iv) this Agreement, the
Registration Rights Agreement, Escrow Agreement and any related agreements
constitute the valid and binding obligations of the Company enforceable against
the Company in accordance with their terms, except as such enforceability may be
limited by general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors' rights and remedies.
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(iii) Capitalization. The authorized capital stock of the Company
consists of 100,000,000 shares of Common Stock $0.001 par value, and 100,000,000
shares of Preferred Stock, $0.001 par value. As of July 23, 2001 , the Company
had 62,167,450 shares of Common Stock outstanding excluding 60,000 shares of
Common Stock in its treasury which are being cancelled, the Company filed a
Certificate of Designations authorizing 600,000 shares of Series B Convertible
Redeemable Preferred Stock par value $0.001 per share (the "Series B Stock") in
connection with a proposed transaction with Xxxxxxxx Media and Communications
Ltd. Such transaction was not consummated and no shares of the Series B Stock
were issued in connection therewith. There are no shares of Preferred Stock
issued and outstanding except for the transactions of the reorganized entities
preceding the Reorganizations, for which the Company has relied on third party
representations, all of such outstanding shares have been validly issued and are
fully paid and nonassessable. All of such outstanding shares have been validly
issued and are fully paid and nonassessable. Except as disclosed in the SEC
Documents or Schedule 4.3, no shares of Common Stock are subject to preemptive
rights or any other similar rights or any liens or encumbrances suffered or
permitted by the Company. Except as disclosed in Schedule 4.3 hereto, as of the
date hereof, (i) there are no outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its subsidiaries, or contracts, commitments, understandings or
arrangements by which the Company or any of its subsidiaries is or may become
bound to issue additional shares of capital stock of the Company or any of its
subsidiaries or options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any of its
subsidiaries, (ii) there are no outstanding debt securities and (iii) there are
no agreements or arrangements under which the Company or any of its subsidiaries
is obligated to register the sale of any of their securities under the
Securities Act (except pursuant to the Registration Rights Agreement). There are
no securities or instruments containing anti-dilution or similar provisions that
will be triggered by this Agreement or any related agreement or the consummation
of the transactions described herein or therein. The Company has furnished to
the Investors true and correct copies of the Company's Certificate of
Incorporation, as amended and as in effect on the date hereof (the "Certificate
of Incorporation"), and the Company's By-laws, as in effect on the date hereof
(the "By-laws").
(iv) No Conflict. The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby and assuming receipt of shareholder approval under Section
2.7 herein will not (i) result in a violation of the Certificate of
Incorporation, any certificate of designations of any outstanding series of
preferred stock of the Company or By-laws or (ii) conflict with or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which
the Company or any of its subsidiaries is a party, or result in a violation of
any law, rule, regulation, order, judgment or decree (including federal and
state securities laws and regulations and the rules and regulations of the
Principal Market on which the Common Stock is quoted) applicable to the Company
or any of its subsidiaries or by which any material property or asset of the
Company or any of its subsidiaries is bound or affected and which could cause a
Material
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Adverse Effect. Except as disclosed in the SEC Documents, neither the Company
nor its subsidiaries is in violation of any term of or in default under its
Certificate of Incorporation or By-laws or their organizational charter or
by-laws, respectively, or any material contract, agreement, mortgage,
indebtedness, indenture, instrument, judgment, decree or order or any statute,
rule or regulation applicable to the Company or its subsidiaries. The business
of the Company and its subsidiaries is not being conducted in violation of any
material law, ordinance, regulation of any governmental entity. Except as
specifically contemplated by this Agreement and as required under the Securities
Act and any applicable state securities laws, the Company is not required to
obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency in order for it to execute,
deliver or perform any of its obligations under or contemplated by this
Agreement or the Registration Rights Agreement in accordance with the terms
hereof or thereof. All consents, authorizations, orders, filings and
registrations which the Company is required to obtain pursuant to the preceding
sentence have been or will be obtained or effected on or prior to the Effective
Date. The Company and its subsidiaries are unaware of any fact or circumstance
which might give rise to any of the foregoing.
(v) SEC Documents; Financial Statements. Except as set forth in Schedule
4.5 attached the Equity Line of Credit Agreement, since April 2000, the Company
has filed all reports, schedules, forms, statements and other documents required
to be filed by it with the SEC under of the Exchange Act (all of the foregoing
filed prior to the date hereof and all exhibits included therein and financial
statements and schedules thereto and documents incorporated by reference
therein, being hereinafter referred to as the "SEC Documents"). The Company has
delivered to the Investors or its representatives, or made available through the
SEC's website at xxxx://xxx.xxx.xxx, true and complete copies of the SEC
Documents. As of their respective dates, the financial statements of the Company
disclosed in the SEC Documents (the "Financial Statements") complied as to form
in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto. Such financial
statements have been prepared in accordance with generally accepted accounting
principles, consistently applied, during the periods involved (except (i) as may
be otherwise indicated in such financial statements or the notes thereto, or
(ii) in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments).
(vi) 10b-5. The SEC Documents, when filed, did not include any untrue
statements of material fact, nor do they omit to state any material fact
required to be stated therein necessary to make the statements made, in light of
the circumstances under which they were made, not misleading.
(vii) No Default. Except as disclosed Section 4.5 the Company is not in
default in the performance or observance of any material obligation, agreement,
covenant or condition contained in any indenture, mortgage, deed of trust or
other material instrument or agreement to which it is a party or by which it is
or its property is bound and neither the execution, nor the delivery by the
Company, nor the performance by the Company of its obligations under this
Agreement or any of the exhibits or attachments hereto will conflict with or
result in the breach or
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violation of any of the terms or provisions of, or constitute a default or
result in the creation or imposition of any lien or charge on any assets or
properties of the Company under its Certificate of Incorporation, By-Laws, any
material indenture, mortgage, deed of trust or other material agreement
applicable to the Company or instrument to which the Company is a party or by
which it is bound, or any statute, or any decree, judgment, order, rules or
regulation of any court or governmental agency or body having jurisdiction over
the Company or its properties, in each case which default, lien or charge is
likely to cause a Material Adverse Effect on the Company's business or financial
condition.
(viii) Absence of Events of Default. Except for matters described in the
SEC Documents and/or this Agreement, no Event of Default, as defined in the
respective agreement to which the Company is a party, and no event which, with
the giving of notice or the passage of time or both, would become an Event of
Default (as so defined), has occurred and is continuing, which would have a
Material Adverse Effect on the Company's business, properties, prospects,
financial condition or results of operations.
(ix) Intellectual Property Rights. The Company and its subsidiaries own
or possess adequate rights or licenses to use all material trademarks, trade
names, service marks, service xxxx registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights necessary to conduct their respective
businesses as now conducted. The Company and its subsidiaries do not have any
knowledge of any infringement by the Company or its subsidiaries of trademark,
trade name rights, patents, patent rights, copyrights, inventions, licenses,
service names, service marks, service xxxx registrations, trade secret or other
similar rights of others, and, to the knowledge of the Company, there is no
claim, action or proceeding being made or brought against, or to the Company's
knowledge, being threatened against, the Company or its subsidiaries regarding
trademark, trade name, patents, patent rights, invention, copyright, license,
service names, service marks, service xxxx registrations, trade secret or other
infringement; and the Company and its subsidiaries are unaware of any facts or
circumstances which might give rise to any of the foregoing.
(x) Employee Relations Neither the Company nor any of its subsidiaries
is involved in any labor dispute nor, to the knowledge of the Company or any of
its subsidiaries, is any such dispute threatened. None of the Company's or its
subsidiaries' employees is a member of a union and the Company and its
subsidiaries believe that their relations with their employees are good.
(xi) Environmental Laws. The Company and its subsidiaries are (i) in
compliance with any and all applicable material foreign, federal, state and
local laws and regulations relating to the protection of human health and
safety, the environment or hazardous or toxic substances or wastes, pollutants
or contaminants ("Environmental Laws"), (ii) have received all permits, licenses
or other approvals required of them under applicable Environmental Laws to
conduct their respective businesses and (iii) are in compliance with all terms
and conditions of any such permit, license or approval.
(xii) Title. Except as set forth in the SEC Documents, the Company has
good and
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marketable title to its properties and material assets owned by it, free and
clear of any pledge, lien, security interest, encumbrance, claim or equitable
interest other than such as are not material to the business of the Company. Any
real property and facilities held under lease by the Company and its
subsidiaries are held by them under valid, subsisting and enforceable leases
with such exceptions as are not material and do not interfere with the use made
and proposed to be made of such property and buildings by the Company and its
subsidiaries.
(xiii) Insurance. The Company and each of its subsidiaries are insured
by insurers of recognized financial responsibility against such losses and risks
and in such amounts as management of the Company believes to be prudent and
customary in the businesses in which the Company and its subsidiaries are
engaged. Neither the Company nor any such subsidiary has been refused any
insurance coverage sought or applied for and neither the Company nor any such
subsidiary has any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not materially and adversely affect the condition,
financial or otherwise, or the earnings, business or operations of the Company
and its subsidiaries, taken as a whole.
(xiv) Regulatory Permits. The Company and its subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state or foreign regulatory authorities necessary to conduct their respective
businesses, and neither the Company nor any such subsidiary has received any
notice of proceedings relating to the revocation or modification of any such
certificate, authorization or permit.
(xv) Internal Accounting Controls. The Company and each of its
subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in accordance with
management's general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
(xvi) No Material Adverse Breaches, etc. Except as set forth in the SEC
Documents, neither the Company nor any of its subsidiaries is subject to any
charter, corporate or other legal restriction, or any judgment, decree, order,
rule or regulation which in the judgment of the Company's officers has or is
expected in the future to have a Material Adverse Effect on the business,
properties, operations, financial condition, results of operations or prospects
of the Company or its subsidiaries. Neither the Company nor any of its
subsidiaries is in breach of any contract or agreement which breach, in the
judgment of the Company's officers, has or is expected to have a Material
Adverse Effect on the business, properties, operations, financial condition,
results of operations or prospects of the Company or its subsidiaries.
(xvii) Absence of Litigation. Except as set forth in the SEC Documents,
there is no action, suit, proceeding, inquiry or investigation before or by any
court, public board, government
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agency, self-regulatory organization or body pending against or affecting the
Company, the Common Stock or any of the Company's subsidiaries, wherein an
unfavorable decision, ruling or finding would (i) have a Material Adverse Effect
on the transactions contemplated hereby (ii) adversely affect the validity or
enforceability of, or the authority or ability of the Company to perform its
obligations under, this Agreement or any of the documents contemplated herein,
or (iii) except as expressly disclosed in the SEC Documents, have a Material
Adverse Effect on the business, operations, properties, financial condition or
results of operation of the Company and its subsidiaries taken as a whole.
(xviii) Subsidiaries. Except as disclosed in the SEC Documents, the
Company does not presently own or control, directly or indirectly, any interest
in any other corporation, partnership, association or other business entity.
(xix) Other Outstanding Securities/Financing Restrictions. As of the
date hereof, other than warrants and options to acquire shares of Common Stock
as disclosed in Schedule 4.3, there are no other warrants and options registered
with the SEC, which are available for sale as unrestricted ("free trading")
stock.
(xx) Tax Status. The Company and each of its subsidiaries has made,
filed, or has obtained current extensions for all federal and state income and
all other tax returns, reports and declarations required by any jurisdiction to
which it is subject and (unless and only to the extent that the Company and each
of its subsidiaries has set aside on its books provisions reasonably adequate
for the payment of all unpaid and unreported taxes) has paid all taxes and other
governmental assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith and has set aside on its books provision
reasonably adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations apply. There are no
unpaid taxes in any material amount claimed to be due by the taxing authority of
any jurisdiction, and the officers of the Company know of no basis for any such
claim.
(xxi) Certain Transactions. Except as set forth in the SEC Documents,
none of the officers, directors, or employees of the Company is presently a
party to any transaction with the Company (other than for services as employees,
officers and directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from any
officer, director or such employee or, to the knowledge of the Company, any
corporation, partnership, trust or other entity in which any officer, director,
or any such employee has a substantial interest or is an officer, director,
trustee or partner.
(xxii) Fees and Rights of First Refusal. Except as set forth in the SEC
Documents, the Company is not obligated to offer the securities offered
hereunder on a right of first refusal basis or otherwise to any third parties
including, but not limited to, current or former shareholders of the Company,
underwriters, brokers, agents or other third parties.
(xxiii) Use of Proceeds. The Company represents that the net proceeds
from this
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offering will be used for working capital purposes and to reduce indebtedness .
However, in no event shall the net proceeds from this offering be used by the
Company for the payment (or loaned to any such person for the payment) of any
judgment, or other liability, incurred by any executive officer, officer,
director, or employee of the Company.
(xxiv) Further Representation and Warranties of the Company. For so long
as any securities issuable hereunder held by the Investors remain outstanding,
the Company acknowledges, represents, warrants and agrees that it will use
commercially reasonable efforts to maintain the listing of its Common Stock on
NASD Bulletin Board.
(xxv) Opinion of Counsel. Investors shall receive an opinion letter from
counsel to the Company (updated where applicable) on the date hereof and updated
annually for the life of the this Agreement in form substantially acceptable to
the Investors.
(xxvi) Opinion of Counsel. The Company will obtain for the Investors, at
the Company's expense, any and all opinions of counsel which may be reasonably
required in order to sell the securities issuable hereunder without restriction.
(xxvii) Dilution. The Company is aware and acknowledges that issuance of
shares of the Company's Common Stock could cause dilution to existing
shareholders and could significantly increase the outstanding number of shares
of Common Stock.
(xxviii) No General Solicitation. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the Securities Act) in connection with the offer or sale of
the shares of Common Stock offered hereby.
B. There are no claims for services in the nature of a finder's
or origination fee with respect to the sale of the Common Stock or any other
arrangements, agreements or understandings that may affect May Xxxxx'x
compensation, as determined by the National Association of Securities Dealers,
Inc.
C. Subject to the performance by May Xxxxx of its obligations
hereunder, the Equity Line of Credit and the offer and sale of the Securities
comply, and will continue to comply, up to the Registration Period (as defined
in the Equity Line of Credit ) in all material respects with the requirements of
Rule 506 of Regulation D promulgated by the SEC pursuant to the 1933 Act and any
other applicable federal and state laws, rules, regulations and executive
orders. Neither the Offering Materials nor any amendment or supplement thereto
nor any documents prepared by the Company in connection with the Offering will
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 under which they were made, not misleading. All
statements of material facts in the Offering Materials are true and correct as
of the date of the Offering Materials and will be true and correct on the date
of the Closing.
D. All material taxes which are due and payable from the Company
have been paid in full or adequate provision has been made for such taxes on the
books of the Company except for
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those taxes disputed in good faith the Company does not have any tax deficiency
or claim outstanding assessed or proposed against it.
E. None of the Company nor any of its officers, directors,
employees or agents, nor any other person acting on behalf of the Company, has,
directly or indirectly, given or agreed to give any money, gift or similar
benefit (other than legal price concessions to customers in the ordinary course
of business) to any customer, supplier, employee or agent of a customer or
supplier, or official or employee of any governmental agency or instrumentality
of any government (domestic or foreign) or any political party or candidate for
office (domestic or foreign) or other person who is or may be in a position to
help or hinder the business of the Company (or assist it in connection with any
actual or proposed transaction) which (A) might subject the Company to any
damage or penalty in any civil, criminal or governmental litigation or
proceeding, or (B) if not given in the past, might have had a materially adverse
effect on the assets, business or operations of the Company as reflected in any
of the financial statements contained in the Offering Materials, or (C) if not
continued in the future, might adversely affect the assets, business, operations
or prospects of the Company in the future.
5. Certain Covenants and Agreements of the Company.
The Company covenants and agrees at its expense and without any expense
to May Xxxxx as follows:
A. To advise May Xxxxx of any material adverse change in the Company's
financial condition, prospects or business or of any development materially
affecting the Company or rendering untrue or misleading any material statement
in the Offering Materials occurring at any time as soon as the Company is either
informed or becomes aware thereof.
B. To use its commercially reasonable efforts to cause the Common Stock
issuable in connection with the Equity Line of Credit and upon exercise of the
Convertible Debentures to be qualified or registered for sale on terms
consistent with those stated in the Registration Rights Agreement and under the
securities laws of such jurisdictions as May Xxxxx and the Investors shall
reasonably request, provided that such states and jurisdictions do not require
the Company to qualify as a foreign corporation. Qualification, registration and
exemption charges and fees shall be at the sole cost and expense of the Company.
C. Upon written request, to provide and continue to provide the each
holder of Securities, copies of all quarterly financial statements and audited
annual financial statements prepared by or on behalf of the Company, other
reports prepared by or on behalf of the Company for public disclosure and all
documents delivered to the Company's stockholders.
D. To deliver, during the Registration Period, to May Xxxxx, upon May
Xxxxx'x request, within forty five (45) days, a statement of its income for each
such quarterly period, and its balance sheet and a statement of changes in
stockholders' equity as of the end of such quarterly period, all in reasonable
detail, certified by its principal financial or accounting officer; (ii) within
ninety (90) days after the close of each fiscal year, its balance sheet as of
the close of such fiscal year, together with a statement of income, a statement
of changes in stockholders' equity and a statement of cash flow for such fiscal
year, such balance sheet, statement of income, statement of changes in
stockholders' equity and statement of cash flow to be in reasonable detail and
accompanied by a copy of the certificate or report thereon of independent
auditors if audited financial statements are prepared; and (iii) a copy of all
documents, reports and information furnished to its stockholders at the time
that such documents, reports and information are furnished to its stockholders.
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E. To comply with the terms of the Equity Line of Credit, the
Registration Rights Agreement, and the Escrow Agreement.
F. To ensure that any transactions between or among the Company, or any
of its officers, directors and affiliates be on terms and conditions that are no
less favorable to the Company, than the terms and conditions that would be
available in an "arm's length" transaction with an independent third party.
6. Indemnification.
A. The Company hereby agrees that it will indemnify and hold May
Xxxxx and each officer, director, shareholder, employee or representative of May
Xxxxx, and each person controlling, controlled by or under common control with
May Xxxxx within the meaning of Section 15 of the 1933 Act or Section 20 of the
1934 Act or the SEC's Rules and Regulations promulgated thereunder (the "Rules
and Regulations"), harmless from and against any and all loss, claim, damage,
liability, cost or expense whatsoever (including, but not limited to, any and
all reasonable legal fees and other expenses and disbursements incurred in
connection with investigating, preparing to defend or defending any action, suit
or proceeding, including any inquiry or investigation, commenced or threatened,
or any claim whatsoever or in appearing or preparing for appearance as a witness
in any action, suit or proceeding, including any inquiry, investigation or
pretrial proceeding such as a deposition) to which May Xxxxx or such indemnified
person of May Xxxxx may become subject under the 1933 Act, the 1934 Act, the
Rules and Regulations, or any other federal or state law or regulation, common
law or otherwise, arising out of or based upon (i) any untrue statement or
alleged untrue statement of a material fact contained in (a) Section 4 of this
Agreement, (b) the Offering Materials (except those written statements relating
to May Xxxxx given by an indemnified person for inclusion therein), (c) any
application or other document or written communication executed by the Company
or based upon written information furnished by the Company filed in any
jurisdiction in order to qualify the Common Stock under the securities laws
thereof, or any state securities commission or agency; (ii) the omission or
alleged omission from documents described in clauses (a), (b) or (c) above of a
material fact required to be stated therein or necessary to make the statements
therein not misleading; or (iii) the breach of any representation, warranty,
covenant or agreement made by the Company in this Agreement. The Company further
agrees that upon demand by an indemnified person, at any time or from time to
time, it will promptly reimburse such indemnified person for any loss, claim,
damage, liability, cost or expense actually and reasonably paid by the
indemnified person as to which the Company has indemnified such person pursuant
hereto. Notwithstanding the foregoing provisions of this Paragraph 6(A) the
Company shall not be obligated to indemnify any indemnified person in any
proceeding in which a final judgment by a court of competent jurisdiction (after
all appeals or the expiration of time to appeal) is entered against May Xxxxx or
such indemnified person as a direct result of May Xxxxx or such person's gross
negligence or breach of this Agreement and the Company will not be required to
indemnify any person hereunder as a result of any statement made by any
indemnified person furnished to the Company arising out of or based upon i) the
conduct of May Xxxxx or its officers, employees or representatives in its acting
as Placement Agent for the Offering or (ii) the breach of any representation,
warranty, covenant or agreement made by May Xxxxx in this Agreement (iii) any
false or misleading information provided to the Company by one of the May Xxxxx
indemnified persons.
11
B. May Xxxxx hereby agrees that it will indemnify and hold the Company
and each officer, director, shareholder, employee or representative of the
Company, and each person controlling, controlled by or under common control with
the Company within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act or the Rules and Regulations, harmless from and against any and all
loss, claim, damage, liability, cost or expense whatsoever (including, but not
limited to, any and all reasonable legal fees and other expenses and
disbursements incurred in connection with investigating, preparing to defend or
defending any action, suit or proceeding, including any inquiry or
investigation, commenced or threatened, or any claim whatsoever or in appearing
or preparing for appearance as a witness in any action, suit or proceeding,
including any inquiry, investigation or pretrial proceeding such as a
deposition) to which the Company or such indemnified person of the Company may
become subject under the 1933 Act, the 1934 Act, the Rules and Regulations, or
any other federal or state law or regulation, common law or otherwise, arising
out of or based upon (i) the conduct of May Xxxxx or its officers, employees or
representatives in its acting as Placement Agent for the Offering or (ii) the
breach of any representation, warranty, covenant or agreement made by May Xxxxx
in this Agreement (iii) any false or misleading information provided to the
Company by one of the May Xxxxx indemnified persons.
C. Promptly after receipt by an indemnified party of notice of
commencement of any action covered by Section 6(A) or 6(B), the party to be
indemnified shall, within five (5) business days, notify the indemnifying party
of the commencement thereof; the omission by one (1) indemnified party to so
notify the indemnifying party shall not relieve the indemnifying party of its
obligation to indemnify any other indemnified party that has given such notice
and shall not relieve the indemnifying party of any liability outside of this
indemnification if not materially prejudiced thereby. In the event that any
action is brought against the indemnified party, the indemnifying party will be
entitled to participate therein and, to the extent it may desire, to assume and
control the defense thereof with counsel chosen by it which is reasonably
acceptable to the indemnified party. After notice from the indemnifying party to
such indemnified party of its election to so assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under such
Section 6(A) or 6(B) for any legal or other expenses subsequently incurred by
such indemnified party in connection with the defense thereof, but the
indemnified party may, at its own expense, participate in such defense by
counsel chosen by it, without, however, impairing the indemnifying party's
control of the defense. Subject to the proviso of this sentence and
notwithstanding any other statement to the contrary contained herein, the
indemnified party or parties shall have the right to choose its or their own
counsel and control the defense of any action, all at the expense of the
indemnifying party if, (i) the employment of such counsel shall have been
authorized in writing by the indemnifying party in connection with the defense
of such action at the expense of the indemnifying party, or (ii) the
indemnifying party shall not have employed counsel reasonably satisfactory to
such indemnified party to have charge of the defense of such action within a
reasonable time after notice of commencement of the action, or (iii) such
indemnified party or parties shall have reasonably concluded that there may be
defenses available to it or them which are different from or additional to those
available to one or all of the indemnifying parties (in which case the
indemnifying parties shall not have the right to direct the defense of such
action on behalf of the indemnified party or parties), in any of which events
such fees and expenses of one additional counsel shall be borne by the
indemnifying party; provided, however, that the indemnifying party shall not, in
connection with any one action or separate but substantially similar or related
actions
12
in the same jurisdiction arising out of the same general allegations or
circumstance, be liable for the reasonable fees and expenses of more than one
separate firm of attorneys at any time for all such indemnified parties. No
settlement of any action or proceeding against an indemnified party shall be
made without the consent of the indemnifying party.
D. In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in Section 6(A) or 6(B)
is due in accordance with its terms but is for any reason held by a court to be
unavailable on grounds of policy or otherwise, the Company and May Xxxxx shall
contribute to the aggregate losses, claims, damages and liabilities (including
legal or other expenses reasonably incurred in connection with the investigation
or defense of same) which the other may incur in such proportion so that May
Xxxxx shall be responsible for such percent of the aggregate of such losses,
claims, damages and liabilities as shall equal the percentage of the gross
proceeds paid to May Xxxxx and the Company shall be responsible for the balance;
provided, however, that no person guilty of fraudulent misrepresentation within
the meaning of Section 11(f) of the 1933 Act shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation. For
purposes of this Section 6(D), any person controlling, controlled by or under
common control with May Xxxxx, or any partner, director, officer, employee,
representative or any agent of any thereof, shall have the same rights to
contribution as May Xxxxx and each person controlling, controlled by or under
common control with the Company within the meaning of Section 15 of the 1933 Act
or Section 20 of the 1934 Act and each officer of the Company and each director
of the Company shall have the same rights to contribution as the Company. Any
party entitled to contribution will, promptly after receipt of notice of
commencement of any action, suit or proceeding against such party in respect of
which a claim for contribution may be made against the other party under this
Section 6(D), notify such party from whom contribution may be sought, but the
omission to so notify such party shall not relieve the party from whom
contribution may be sought from any obligation they may have hereunder or
otherwise if the party from whom contribution may be sought is not materially
prejudiced thereby. The indemnity and contribution agreements contained in this
Section 6 shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any indemnified person or any termination
of this Agreement.
7. Payment of Expenses.
The Company hereby agrees to bear all of it's own expenses in connection
with the Offering, including, but not limited to the following: filing fees,
printing and duplicating costs, advertisements, postage and mailing expenses
with respect to the transmission of Offering Materials, registrar and transfer
agent fees, fees of the Investors Counsel, Escrow Agent fees and expenses, fees
of the Company's counsel and accountants, issue and transfer taxes, if any.
8. Conditions of Closing
The Closing shall be held at the offices of May Xxxxx or its counsel.
The obligations of May Xxxxx hereunder shall be subject to the continuing
accuracy of the representations and warranties of the Company herein as of the
date hereof and as of the Date of Closing (the "Closing Date") with respect to
the Company as if it had been made on and as of such Closing Date; the accuracy
on and as of the Closing Date of the statements of the officers of the Company
made pursuant to the provisions hereof; and the performance by the Company on
and as of the Closing Date of its covenants and obligations hereunder and to the
following further conditions:
13
A. At the Closing, May Xxxxx shall receive the opinion of Xxxxxx X.
Xxxxxxx, Esq., dated as of the date of the Closing, which opinion shall be in
form and substance reasonably satisfactory to counsel for May Xxxxx.
B. At or prior to the Closing, counsel for May Xxxxx shall have been
furnished such documents, certificates and opinions as they may reasonably
require for the purpose of enabling them to review or pass upon the matters
referred to in this Agreement and the Offering Materials, or in order to
evidence the accuracy, completeness or satisfaction of any of the
representations, warranties or conditions herein contained.
C. At and prior to the Closing, (i) there shall have been no material
adverse change nor development involving a prospective change in the condition
or prospects or the business activities, financial or otherwise, of the Company
from the latest dates as of which such condition is set forth in the Offering
Materials; (ii) there shall have been no transaction, not in the ordinary course
of business, entered into by the Company which has not been disclosed in the
Offering Materials or to May Xxxxx in writing; (iii) except as set forth in the
Offering Materials, the Company shall not be in default under any provision of
any instrument relating to any outstanding indebtedness for which a waiver or
extension has not been otherwise received; (iv) except as set forth in the
Offering Materials, the Company shall not have issued any securities (other than
those to be issued as provided in the Offering Materials) or declared or paid
any dividend or made any distribution of its capital stock of any class and
there shall not have been any change in the indebtedness (long or short term) or
liabilities or obligations of the Company (contingent or otherwise) and trade
payable debt; (v) no material amount of the assets of the Company shall have
been pledged or mortgaged, except as indicated in the Offering Materials; and
(v) no action, suit or proceeding, at law or in equity, against the Company or
affecting any of its properties or businesses shall be pending or threatened
before or by any court or federal or state commission, board or other
administrative agency, domestic or foreign, wherein an unfavorable decision,
ruling or finding could materially adversely affect the businesses, prospects or
financial condition or income of the Company, except as set forth in the
Offering Materials.
D. At Closing, May Xxxxx shall receive a certificate of the Company
signed by an executive officer and chief financial officer, dated as of the
applicable Closing, to the effect that the conditions set forth in subparagraph
(C) above have been satisfied and that, as of the applicable closing, the
representations and warranties of the Company set forth herein are true and
correct.
9. Termination.
This Agreement shall be co-terminus with, and terminate upon the same
terms and conditions as those set forth in, the Equity Line of Credit . The
rights of the Investors and the obligations of the Company under the
Registration Rights Agreement, and the rights of May Xxxxx and the obligations
of the Company shall survive the termination of this Agreement unabridged.
10. Miscellaneous.
A. This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but all which shall be deemed to be one
and the same instrument.
B. Any notice required or permitted to be given hereunder shall be given
in writing and shall be deemed effective when deposited in the United States
mail, postage prepaid, or when received if personally delivered or faxed ( upon
confirmation of receipt received by the sending party), addressed as follows:
14
If to Placement Agent, to: The May Xxxxx Group, Inc.
Xxx Xxxxx Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx Xxxxxx
Telephone: (000)000-0000
Facsimile: (000) 000-0000
With Copy to: Xxxxxx Xxxxxxxx LLP
0000 Xxxxxxxxxx Xxxxxx
Xxxxx, XX 00000
Attention: Xxxxx Xxxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Company, to: Xxxxxxx Media International Inc.
0000 Xxxxxx xx xxx Xxxxx
Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Attention: Xxxxxx Xxxxxxx
Chairman and Chief Executive Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to: Xxxxxx X. Xxxxxxx, Esq.
0000 00xx Xxxxxx
Xxxxx Xxxxxx, XX 9043
Attention: Xxxxxx X. Xxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
or to such other address of which written notice is given to the others.
C. This Agreement shall be governed by and construed in all respects
under the laws of the State of New York, without reference to its conflict of
laws rules or principles. Any suit, action, proceeding or litigation arising out
of or relating to this Agreement shall be brought and prosecuted in such federal
or state court or courts located within the State of New York as provided by
law. The parties hereby irrevocably and unconditionally consent to the
jurisdiction of each such court or courts located within the State of New York
and to service of process by registered or certified mail, return receipt
requested, or by any other manner provided by applicable law, and hereby
irrevocably and unconditionally waive any right to claim that any suit, action,
proceeding or litigation so commenced has been commenced in an inconvenient
forum.
15
D. This Agreement and the other agreements referenced herein contain the
entire understanding between the parties hereto and may not be modified or
amended except by a writing duly signed by the party against whom enforcement of
the modification or amendment is sought.
E. If any provision of this Agreement shall be held to be invalid or
unenforceable, such invalidity or unenforceability shall not affect any other
provision of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
XXXXXXX MEDIA INTERNATIONAL INC.
By:
-------------------------------------
Name: Xxxxxx Xxxxxxx
Title: Chairman and Chief Executive
Officer
MAY XXXXX GROUP, INC.
By:
-------------------------------------
Name: Xxxxxxx Xxxxxx
Title: Managing Director
17
