EXHIBIT 1.1
HEARTLAND COMMUNICATIONS & MANAGEMENT, INC.
MANAGING PLACEMENT AGENT AGREEMENT
August ___, 1997
Northridge Capital Corporation
000 Xxxxxxxx Xxxx Xxxxx -- Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Gentlemen:
Heartland Communications & Management, Inc. ("HCMI") hereby confirms its
agreement with Northridge Capital Corporation (the "Selling Agent") as described
as follows:
Section 1. Introduction. HCMI desires to retain the Selling Agent as its
best efforts managing placement agent in connection with the offering by HCMI of
up to 4,000,000 shares of common stock, $.001 par value per share (the
"Shares"), in connection with its proposed $20,000,000 public offering (the
"Offering"). Specifically, the Selling Agent will act as managing placement
agent on a best efforts basis for the sale of the Shares in the Offering. By
and through this Agreement, HCMI confirms the retention of the Selling Agent to
assist in such capacity during the Offering.
The Form S-1 Registration Statement was filed July 26, 1996 with, and must
be approved by, the Securities and Exchange Commission (the "SEC") which
Registration Statement (and the related Prospectus) must be declared effective
by the SEC pursuant to the Securities Act of 1933 (the "Securities Act").
Copies of the Prospectus, as authorized for use and declared effective by the
SEC, will be delivered to the Selling Agent promptly after the SEC Order of
Effectiveness issues.
Unless otherwise defined herein, capitalized terms used herein shall have
the same meanings ascribed to them in the Prospectus.
Section 2. Selling Agent.
(a) Appointment as Selling Agent. HCMI hereby appoints the Selling
Agent as its managing placement agent to offer and sell the Shares on a best
efforts basis pursuant to the Prospectus and any amendments or supplements
thereto, and in compliance with the terms and conditions thereof and of this
Agreement. Specifically, HCMI will offer exclusively through the Selling
Agent, on a best-efforts basis, and/or selected dealers chosen by the Selling
Agent, a minimum of four hundred thousand (400,000) Shares and a maximum of
four million (4,000,000) Shares at five dollars ($5) per share. (Such
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commitment is subject to receipt of a fairness opinion described in Section
15, "Termination," and the Registration Statement being declared effective by
the SEC.) Subject to the $20,000,000 maximum during the Initial and
Continuous Offering Period as defined in the Prospectus (up to 18 months from
the Effective Date (defined below) of the Registration Statement and
associated Prospectus), unless earlier terminated by HCMI, the Selling Agent
will use its best efforts to sell the Shares at the $5.00 per share Selling
Price. All subscriptions for Shares will be deposited with Xxxxxx Xxxxx Bank
and maintained in the name of Heartland Communications & Management, Inc. --
Escrow Account (hereafter the "Escrow Account") until such subscriptions are
accepted at the end of the Initial Offering Period and during the Continuous
Offering Period. Funds in such Escrow Account will be held during the
Initial Offering Period until the minimum subscription of $2,000,000 is
accepted (at which time the funds will be released to HCMI as more fully
described in the Prospectus). If the $2,000,000 minimum is achieved during
the Initial Offering Period, the Offering will continue at the election of
HCMI and with the consent of the Selling Agent for up to 18 months from the
date of the Prospectus (the "Continuous Offering Period").
HCMI authorizes the Selling Agent and the Selling Agent agrees to use its
best efforts to offer and sell the Shares pursuant to the Registration
Statement and Prospectus and in compliance with the terms and conditions
thereof and of this Agreement. The Selling Agent may appoint registered
broker-dealers (the "Additional Selling Agents") to offer and sell Shares.
Commencing on the effective date (the "Effective Date") of the Registration
Statement, the Selling Agent and the Additional Selling Agents (if any) will
attempt to sell the Shares, at a price equal to $5.00 per share, for a period
(such period, including any extension thereof as hereinafter provided, being
herein called the "Initial Offering Period") of two (2) months from the
Effective Date (or for a period of up to seven (7) additional months if
extended by HCMI, unless all Shares having an aggregate Selling Price of
$20,000,000 registered with the SEC have previously been subscribed for).
If at least 400,000 Shares have been subscribed for and accepted during
the Initial Offering Period, HCMI may, with the consent of the Selling Agent,
continue to offer Shares at the $5.00 per share Selling Price during the
balance (the "Continuous Offering Period") of this up to eighteen (18) month
Offering Period. The offering will terminate (i) if subscriptions for at
least 400,000 shares have not been received within the Initial Offering
Period as defined or (ii) at any time by written notice by HCMI to the
Selling Agent, provided the Selling Agent is compensated for all sales
accepted by HCMI.
The Selling Agent may designate as an Additional Selling Agent (i ) any
person who is a member of the National Association of Securities Dealers, Inc.
(the "NASD") or (ii) any foreign person who is not a member of the NASD and who
agrees that it will make no offer or sale of Shares within the United States,
its territories or possessions or to persons who are U.S. citizens or residents,
and in making offers and sales of Shares, will comply with the Rules of Fair
Practice of the NASD including, but not limited to Sections 8, 24, 25 and 36 of
Article III to the NASD By-Laws, provided, that any such
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person as a condition to selection as an Additional Selling Agent, shall
enter into a Selected Dealer Agreement substantially in the form attached as
Exhibit A.
(b) Undertakings. The Selling Agent will use its best efforts to find
eligible persons to purchase the Shares on the terms stated herein and in the
Prospectus and any amendments or supplements thereto. It is understood that
the Selling Agent has no commitment with regard to the sale of the Shares.
The Selling Agent represents that it will comply fully with all applicable
laws and the rules of the NASD, the SEC and of state securities
administrators of the several states and various other jurisdictions in which
it offers to sell Shares.
During this Offering Period, the Selling Agent will promptly upon receipt
deliver all cash and checks received from subscribers for Shares to the
Escrow Agent for deposit in the HCMI Escrow Account. Such cash or checks
will be accompanied by one executed copy of the Subscription Agreement and
Power of Attorney for each subscription obtained, properly completed and
executed in the form of Exhibit A to the Prospectus (the "Subscription
Documents"). Promptly after receipt of the Subscription Documents by the
Selling Agent, an interim receipt will be mailed by the Selling Agent to each
subscriber for the amount deposited. All subscription checks received during
this Offering Period will be held in the Escrow Account until accepted at the
Initial and each Subsequent Closing.
Counsel for the Selling Agent shall make all required filings with the
National Association of Securities Dealers, Inc. (the "NASD"). All corporate
proceedings undertaken by HCMI and other legal matters which relate to the
Offering and other related transactions shall be satisfactory in all material
respects to counsel for the Placement Agent. The Registration Statement and
all amendments thereto shall be approved by counsel to the Selling Agent
prior to filing with the SEC (which approval shall not be unreasonably
withheld).
Section 3. Retention of the Selling Agent; Compensation; Sale and
Delivery of the Shares. Subject to the terms and conditions herein set
forth, HCMI hereby engages the Selling Agent to (a) act as the Selling Agent
in connection with the Offering and (b) to use its best efforts to solicit
subscriptions and purchase orders for the Shares. The Selling Agent is a
registered broker-dealer and is a member of the National Association of
Securities Dealers, Inc. (the "NASD").
The obligations of the Selling Agent pursuant to this Agreement shall
continue through completion or termination of the Offering, but in no event
shall extend later than eighteen (18) months from the Effective Date of the
Registration Statement. All fees due to the Selling Agent, but unpaid, will
be payable at that time.
The Selling Agent and any broker-dealer group assembled and managed by
the Selling Agent shall transmit promptly all checks directly to the Escrow
Agent after receipt by the Selling Agent or such Additional Selling
Agent/broker-dealer. If all conditions precedent to the consummation of the
Offering are satisfied, the Escrow Agent agrees to issue or have issued the
Shares sold in the Offering on the Initial Closing Date (as
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hereinafter defined) against payment to HCMI; provided, however, that the
Initial (any Subsequent) Closing may not occur until the conditions specified
in Section 8 hereof shall have been complied with to the reasonable
satisfaction of the Selling Agent and its counsel. The release of Shares
against payment therefor shall be made on the date and at the place
acceptable to HCMI and the Selling Agent. The date upon which HCMI shall
release and deliver the Shares sold in the Offering in accordance with the
terms hereof relating to the Initial Offering Period is herein referred to
as the "Initial Closing Date." HCMI shall release and deliver the Shares sold
during the Continuous Offering Period at each Subsequent Closing Date
(typically at month-end or, if earlier, when subscriptions for at least
$250,000 are accepted).
The Selling Agent shall receive the following for its services hereunder
at each closing:
(i) a selling commission of 10% of the gross subscriptions on all Shares
sold (the parties hereto acknowledging that compensation payable to
any member of the selling group shall be determined between the
Selling Agent and each Additional Selling Agent/ selected dealer
pursuant to individual Selected Dealer Agreement(s));
(ii) warrants as outlined in Section 4 below; and
(iii) reimbursement for its expenses on a nonaccountable basis in the
amount of one and one-half percent (1 1/2 %) of gross proceeds of the
Offering (or actual expenses if greater).
Except as provided above, all out-of-pocket expenses incurred by the Selling
Agent in connection with the Offering, including travel, communications,
postage and legal fees and expenses, will be absorbed by the Selling Agent.
Other than as described as above, HCMI will pay all costs and expenses
incident to the offering, sale and delivery of the Shares including, but not
limited to, all fees and expenses of filing with regulatory agencies and the
NASD; all Blue Sky fees and expenses; all auditing and accounting fees; all
promotion (including those associated with "road shows" and related travel
and entertainment) and printing costs, including costs of printing the
Registration Statement and the placement agent documents, Blue Sky memoranda
and as many Prospectuses as HCMI and the Selling Agent deem reasonably
necessary; and, with the exclusion of Xxxxxxxx Evaluation Advisors, Inc., the
cost and expenses of any other firm or professional service organization it
may employ in connection with the advisory services set forth herein.
Section 4. Warrants. Upon termination of the Offering, HCMI will sell
to the Selling Agent Common Stock Purchase Warrants (the "Warrants") for an
aggregate purchase price of one hundred dollars ($100), entitling the Selling
Agent to purchase one share of HCMI's common stock for each ten Shares of
common stock which have been sold in the Offering (i.e. for the minimum
offering of 400,000 Shares, 40,000 warrants will be issued
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and, for the maximum offering of 4,000,000 Shares, 400,000 warrants will be
issued). The Warrants shall be nonexercisable for a period of twenty-four
(24) months following the date of the definitive Prospectus. However, if
HCMI merges or reorganizes in such a way as to terminate the Warrants, the
Warrants may be exercised immediately prior to such action. The Warrants
will be exercisable for a period of four (4) years, such period to commence
twelve (12) months after the date of the definitive Prospectus and if the
Warrants are not exercised during this term, they shall by their terms
automatically expire. The exercise price of the Warrants shall be one
hundred and twenty percent (120%) of the per share offering price (for
example, a $6 exercise price if the public offering price is $5). HCMI will
set aside and at all times have available sufficient number of Shares of its
common stock to be issued upon the exercise of the Warrants to be sold to the
Selling Agent. The Warrants will not be transferable to anyone for a period
of twelve (12) months after the date of the definitive Prospectus, except to
officers of the Selling Agent.
In the event that the outstanding shares of common stock of HCMI are at
any time increased or decreased or changed into or exchanged for a different
number or kind of share or other security of HCMI or of another corporation
through reorganization, merger, consolidation, liquidation, recapitalization,
stock split, combination of shares or stock dividends payable with respect to
such common stock, appropriate adjustments in the number and kind of such
securities then subject to this Warrant shall be made effective as of the
date of such occurrence so that the Selling Agent's position upon exercise
will be the same as it would have been had it owned, immediately prior to the
occurrence of such events, the common stock subject to this Warrant. Such
adjustment shall be made successively whenever any event listed above shall
occur and HCMI will notify the Selling Agent of each such adjustment. Any
fraction of a share resulting from any adjustment shall be eliminated and the
price per share of the remaining shares subject to this Warrant adjusted
accordingly.
Subject to the other provisions of this Warrant, the rights represented
by this warrant may be exercised by (i) surrender of this Warrant at the
principal executive office of HCMI (or such other office or agency of HCMI,
as it may designate by notice in writing to HCMI appearing on the books of
HCMI); (ii) payment to HCMI of the exercise price for the number of shares
specified together with applicable stock transfer taxes, if any; and (iii)
delivery to HCMI of a statement by the Selling Agent (in a form acceptable to
HCMI and its counsel) that such shares are being acquired by the Selling
Agent for investment and not with a view to their distribution or resale. In
lieu of any cash payment required for the exercise of this Warrant, unless
otherwise prohibited by law, the Selling Agent shall have the right at any
time and from time to time to exercise this Warrant in full or in part (i) by
receiving from HCMI the number of shares of common stock otherwise issuable
upon such exercise less the number of shares of common stock having an
aggregate Current Market Price on the date of exercise equal to the exercise
price per share multiplied by the number of shares for which this Warrant is
being exercised and/or by delivering to HCMI the number of shares of common
stock having an aggregate Current Market Price on the date of exercise equal
to the exercise price multiplied by the number of shares of common stock for
which this Warrant is being exercised. The term "Current Market Price" shall
mean (a) if the common stock is traded on the NASDAQ National Market ("NNM")
or on a national
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securities exchange, the per share closing price of the common stock on the
date of exercise of the Warrant or (b) if the common stock is traded in the
over-the-counter market and not in the NNM or a national securities exchange,
the average of the per share closing bid prices of the common stock on the
thirty (30) consecutive trading days immediately preceding the date in
question, as reported by the NASDAQ Small Cap Market (or an equivalent
generally accepted reporting service if quotations are not reported on the
NASDAQ Small Cap Market). The closing price referred to in clause (a) above
shall be the last reported sale price or, in case no such reported sale takes
place on such day, the average of the reported closing bid and asked prices,
in either case in the NNM or on the principal stock exchange on which the
common stock is then listed. For purposes of clause (b) above, if trading in
the common stock is not reported by the NASDAQ Small Cap Market, the bid
price referred to in said clause shall be the lowest bid price as reported in
the NASDAQ Electronic Bulletin Board or, if not reported thereon, as reported
in the "pink sheets" published by National Quotation Bureau, Incorporated
and, if such Common Stock is not so reported, shall be the price of a share
of common stock determined in good faith by HCMI's Board of Directors.
Section 5. Representations and Warranties of HCMI. HCMI represents and
warrants to the Selling Agent that:
(a) The Registration Statement must be approved and the related
Prospectus must be authorized for use and declared effective by the SEC
before the Offering may commence. On such date and at all times subsequent
thereto, no order has been issued by the SEC or any other state or federal
regulatory authority preventing or suspending the use of the Prospectus, and
HCMI does not have any knowledge that any action by or before any such
government entity revoking such approval or authorization is pending or
threatened.
(b) The Prospectus and any marketing materials to be used in
connection with the Offering authorized by HCMI for use in the Offering do
not and will not, at any relevant time hereto, contain any misstatements or
untrue statement of a material factor 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;
provided, however, that representations or warranties in this Section 4(b)
shall not apply to statements or omissions made in reliance upon and in
conformity with written information furnished to HCMI by the Selling Agent
expressly regarding the Selling Agent for use in the Prospectus.
(c) The offer and sale of the Shares will be conducted in
accordance with all applicable laws, regulations, decisions and orders,
including all terms, conditions, requirements and provisions precedent to the
Offering imposed upon HCMI by the SEC or any other regulatory authority. To
the best of HCMI's knowledge, no person has sought to obtain review of the
final action of the SEC in approving the Registration Statement or the
Prospectus and all prior sales of Shares were properly exempt from
registration pursuant to Regulation D under the Securities Act of 1933.
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(d) The Registration Statement, including the Prospectus contained in
the Registration Statement (including any amendments or supplements thereto),
comply in all material respects with the applicable regulations.
(e) HCMI is organized and validly exists as a Delaware corporation
with full power and authority to conduct its business as described in the
Prospectus.
(f) HCMI has all such power, authority, authorizations, approvals and
orders necessary to enter into this Agreement, to carry out the provisions and
conditions hereof and to issue and sell the Shares to be sold as provided
herein. The execution, delivery and performance of this Agreement have been
duly and validly authorized by all necessary corporate action on the part of
HCMI. This Agreement is the valid, legal and binding agreement of HCMI
enforceable in accordance with its terms subject to bankruptcy, insolvency,
reorganization, moratorium or other laws affecting creditors' rights generally
and the exercise of judicial discretion in accordance with general principles
applicable to equitable and similar remedies (regardless of whether such
enforceability is considered in a proceeding at law or equity, and except as to
those provisions which may be limited by public policy).
(g) There is no litigation or pending governmental proceeding or, to
the knowledge of HCMI, threatened against, or involving the properties of HCMI
which individually or in the aggregate might materially and adversely affect the
Offering, the performance of this Agreement or the condition (financial or
otherwise), operations, business, assets or properties of HCMI.
(h) The financial statements which will constitute part of the
Prospectus will fairly present the financial condition, results of operations,
changes in stockholders' equity and cash flows of HCMI at the dates thereof and
for the respective periods covered thereby and comply as to form in all material
respects with generally accepted accounting principles. Such financial
statements will be prepared in accordance with generally accepted accounting
principles consistently applied through the periods involved, presenting fairly
in all material respects the information required to be stated therein.
(i) Except as may otherwise be stated in the Prospectus as declared
effective: (i) there has been no material adverse change, financial or
otherwise, in the condition of HCMI or in the earnings, capital or properties of
such company whether or not arising in the ordinary course of business; (ii)
there has been no material increase in any long-term debt of HCMI, nor has HCMI
issued any securities or incurred any liability or obligation for borrowing
other than in the ordinary course of business; and (iii) there have been no
material transactions entered into by HCMI except with respect to those
transactions entered into in the ordinary course of business. The
capitalization, liabilities, assets, properties and business of HCMI will
conform in all material respects to the descriptions thereof contained in the
Prospectus.
(j) HCMI is not presently in breach of, or in default (nor has an
event occurred which with notice or lapse of time or both would constitute a
default) under any
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indenture, mortgage, deed of trust, note, bank loan or credit agreement or any
other instrument or agreement to which HCMI is a party or by which any of its
properties may be bound or affected, except for such breaches or defaults as
will not have a material adverse effect on the business, operations or financial
condition of HCMI.
(k) Neither the execution and delivery of this Agreement, the
incurrence of the obligations herein set forth, nor the consummation of the
transactions herein contemplated will conflict with or constitute a breach of or
default under, or result in the creation or imposition of any lien, charge or
other encumbrance upon any of the properties or assets of HCMI pursuant to:
(i)_HCMI's articles of incorporation; (ii)_any contract, lease, loan agreement,
mortgage, note, indenture or other instrument to which HCMI is a party or by
which it may be bound, or to which any of the properties or assets of HCMI are
subject; or (iii)_any applicable law, administrative regulation or
administrative or court decree, except for such conflicts, breaches, defaults,
liens, charges or other encumbrances which, with respect to (ii) and (iii)
above, will not have a material adverse effect on the business, operations or
financial condition of HCMI.
(l) Upon consummation of the Offering, the authorized, issued and
outstanding equity capital of HCMI will be, in all material respects, as set
forth in the Prospectus under the caption "Capitalization"; the Shares of HCMI
have been duly authorized by all necessary action of HCMI, and shall, upon
issuance thereof and payment therefor, be validly issued, fully paid and
nonassessable and shall conform to the description thereof contained in the
Prospectus and good title thereto shall be transferred by HCMI, free and clear
of all claims, encumbrances, security interests and liens whatsoever; and the
issuance of the Shares is not subject to preemptive rights.
(m) No approval or consent of any regulatory or supervisory or other
public authority is required in connection with the execution and delivery of
this Agreement or the issuance of the Shares by HCMI, except for the approval of
the SEC, issuance of the "fairness letter" from the NASD and any necessary
qualification or registration under the securities laws of the various states in
which the Shares are offered and the expiration of any statutory waiting
periods.
(n) Appropriate arrangements have been made for placing the funds
received from subscriptions for Shares in the Escrow Account at Xxxxxx Xxxxx
Bank until the Initial and any Subsequent Closing Dates, with provision for
refund to the purchasers in the event that the Offering is not completed for
whatever reason or for delivery to HCMI at the Initial Closing Date.
(o) Prior to the Offering, HCMI has not: (i) except as to the
preferred stock by HCC, had any material dealings within the 12 months prior to
the date hereof with any member of the NASD, or any person related to or
associated with such member, other than discussions and meetings related to the
proposed Offering and routine business activities; and (ii) engaged any
intermediary between the Selling Agent and HCMI in connection with the Offering
of the Shares and no person is being compensated in any manner for such service.
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Section 6. Covenants of HCMI. HCMI covenants and agrees that:
(a) HCMI shall deliver to the Selling Agent, from time to time, such
number of copies of the Prospectus as the Selling Agent may reasonably request.
HCMI authorizes the Selling Agent to use the Prospectus in connection with the
sale of the Shares.
(b) HCMI will not at any time file any amendment or supplement to the
Registration Statement or the Prospectus without so notifying the Selling Agent
before any such filing and without first providing the Selling Agent and its
counsel adequate time to review and comment on such amendment or supplement
prior to filing.
(c) HCMI will use its best efforts to cause any amendment or
supplement to the Registration Statement to be approved by the SEC and will
promptly upon receipt of any information concerning the events listed below
notify the Selling Agent and confirm the notice in writing: (i) when such
amendment or supplement has been approved; (ii) of the receipt of any comments
from the SEC or any other governmental entity for any amendment or supplement to
the Registration Statement or for additional information; (iii) of the issuance
by the SEC any other governmental entity of any order or other action suspending
the Offering or the use of the Prospectus; or (iv) of the occurrence of any
event mentioned in paragraph (d) below.
(d) If, during the period when the Prospectus is used in connection
with the offer and sale of the Shares, any event relating to or affecting HCMI
shall occur as a result of which it is necessary, in the reasonable opinion of
counsel for the Selling Agent and in the reasonable opinion of counsel for HCMI,
to amend or supplement the Prospectus in order to make the Prospectus not false
or misleading in light of the circumstances existing at the time it is delivered
to an offeree or a purchaser of the Shares, HCMI shall, at its expense,
forthwith prepare and furnish to the Selling Agent a reasonable number of copies
of amendment(s) or supplement(s) to the Prospectus which shall amend or
supplement the Prospectus so that, as amended or supplemented, the Prospectus
shall not contain an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in light of the
circumstances existing at the time the Prospectus is delivered to an offeree or
a purchaser of the Shares, not misleading. For the purposes of this subsection,
HCMI shall furnish such information with respect to itself as the Selling Agent
from time to time reasonably may request.
(e) HCMI will comply in all material respects with any and all terms,
conditions, requirements and provisions with respect to the Offering and the
transactions contemplated thereby imposed by the SEC. During the periods when
the Prospectus is required to be delivered, HCMI will comply, at its own
expense, with all requirements imposed by the SEC, in each case as from time to
time in force, in accordance with the provisions hereof and the Prospectus.
(f) HCMI shall take all reasonably necessary action to qualify or
register the Shares for offer and sale under the securities laws of such
jurisdictions as the Selling Agent and HCMI may mutually agree upon; provided,
however, that HCMI shall not be
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obligated to qualify as a foreign corporation to do business under the laws of
any such jurisdiction. In each jurisdiction where such qualification or
registration shall be affected, HCMI, unless the Selling Agent agrees that such
action is not necessary or advisable in connection with the distribution of the
Shares, shall file and make such statements or reports as are, or reasonably may
be, required by the laws of each such jurisdiction.
(g) For a period of three (3) years from the date of this Agreement,
HCMI shall furnish to the Selling Agent, as soon as available, a copy of its
annual report to shareholders and, if HCMI is registered under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), reports prepared pursuant
to the Exchange Act (including, but not limited to, reports on Forms 00-X, 00-X,
0-X and/or 8); and HCMI will furnish to the Selling Agent: (i) as soon as
available, a copy of each report or definitive proxy statement of HCMI filed
pursuant to the Exchange Act or mailed to shareholders; (ii) concurrently, a
copy of any Schedule 13D filing made with the SEC with regard to HCMI's stock;
and (iii) from time to time, such other public information concerning HCMI as
the Selling Agent may reasonably request.
(h) HCMI intends to use the net proceeds from the sale of the Shares
in the manner set forth in the Prospectus under the caption "Application of
Proceeds."
(i) HCMI will conduct its business in compliance in all material
respects with all material applicable federal and state laws, rules,
regulations, decisions, directives and orders including all decisions,
directives and orders of the SEC.
(j) HCMI shall not deliver the Shares until it has satisfied or
caused to be satisfied in all material respects each and every condition set
forth in Section 9 hereof, unless such condition is waived in writing by the
Selling Agent.
(k) No person has acted as a finder or investment advisor in
connection with the transactions contemplated herein and will indemnify the
Selling Agent with respect to any claim for any finder's fee in connection with
the Offering.
(l) No officer or director of HCMI is a member of the NASD or an
employee or associated member of the NASD.
(m) HCMI covenants that it has not promised or represented to any
person that any part of the Shares will be directed or otherwise made available
to them in connection with the proposed public offering.
(n) HCMI covenants that it has disclosed to the Selling Agent all
potential conflicts of interest involving HCMI officers, directors, principal
shareholders and/or employees and has disclosed all material conflicts of
interest in the Prospectus.
(o) All documents and other information relating to HCMI's affairs
will be made available upon request to the Selling Agent and its attorneys at
the Selling Agent's
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office or at the office of the Selling Agent's attorney and copies of any such
documents will be furnished upon request to the Selling Agent or its attorneys.
(p) HCMI will provide the Selling Agent with unaudited monthly
financial data concerning HCMI from now until termination of the Offering.
(q) If required under applicable securities laws, HCMI will prepare
and file a Registration Statement with the SEC under the Securities and Exchange
Act of 1934, as amended, as soon as required. HCMI agrees that for at least
five (5) years after its common stock is registered under the Securities and
Exchange Act of 1934, HCMI will issue to its shareholders, within forty-five
(45) days after the end of HCMI's first three fiscal quarters, quarterly reports
containing unaudited financial information. HCMI and the Selling Agent shall,
upon HCMI becoming eligible and provided that at least $12,000,000 has been
achieved in the Offering, mutually agree upon on an exchange or NASDAQ listing.
HCMI will within one hundred twenty (120) days from completion of the Offering
apply for "listing" in Moody's Over-the-Counter manual and maintain such
"listing" on a current basis. HCMI shall obtain a CUSIP number for its
certificate and shall engage a transfer agent acceptable to the Selling Agent.
(r) The properties owned or held under option by HCMI, the capital
structure of HCMI immediately preceding the Offering, the contemplated dilution
to the public investor , executive compensation and HCMI's business plan shall
be acceptable to the Selling Agent (whose concurrence shall not be unreasonably
withheld).
(s) Any employee (including officers' and/or directors') incentive
plan of whatever nature, presently contemplated, shall be fully disclosed in the
Registration Statement and subject to the approval of the Selling Agent.
(t) Upon the initial closing of the Offering, HCMI shall proceed to
expeditiously nominate to its Board of Directors two (2) nominees of the Selling
Agent, whose backgrounds and experience shall be reasonably satisfactory to
HCMI, to be placed upon HCMI's Board of Directors, not to exceed nine (9)
persons. HCMI shall exercise all available rights to facilitate the election of
the Selling Agent nominees. HCMI shall continue to nominate such Selling Agent
nominees until HCMI has shown operating profits on an audited basis for two (2)
consecutive years.
(u) The statements contained in the Registration Statement, as
amended from time to time, will be in form and content satisfactory to the
Selling Agent and to the Selling Agent's counsel, and will have been prepared
and reported on by independent certified public accountants satisfactory to the
Selling Agent.
(v) The Registration Statement and any amendments thereto will be
submitted to the Selling Agent and to the Selling Agent's counsel as soon as
possible.
11
(w) HCMI covenants that the content of any oral comments and copies
of all comment letters from regulatory bodies shall immediately be supplied to
the Selling Agent and its counsel.
(x) HCMI shall not obtain an effective date from the SEC or allow the
Registration Statement (or any amendment) to become effective without prior
approval of the Selling Agent.
(y) During the period of the proposed Offering and for one (1) year
from the date of the definitive Prospectus, HCMI will not sell, directly or
indirectly (such as through options), any equity or long-term debt securities
without the Selling Agent's prior written consent (which may not be unreasonably
withheld). The foregoing limitation shall not, however, preclude HCMI from
obtaining bridge financing to fund specific activities discussed in the draft
Prospectus occasioned by any delays in the SEC filing and the opportunity costs
of not proceeding in a timely enough fashion, so long as mutually agreeable to
the parties, and subject to any applicable regulatory approval.
(z) Prior to the effective date of the Registration Statement, HCMI
will cause each of its officers and directors and shareholders who own over
five percent (5%) of HCMI's Shares outstanding prior to the effective date of
the Registration Statement to enter into an undertaking to the Selling Agent
pursuant to the terms of which each such person will agree not to sell any
Shares owned directly or indirectly by him for twelve (12) months from the date
of the definitive Prospectus without the Selling Agent's prior written consent.
(aa) All investor leads resulting from the Offering shall be referred
to the Selling Agent.
(bb) HCMI's officers, directors and promoters will comply with the
applicable blue sky requirements, including those pertaining to the escrow of
Shares, provided such escrow shall in no event extend beyond a period of
eighteen (18) months from the Effective Date of the Registration Statement.
(cc) Subscriptions in escrow will be accepted or rejected by HCMI
within 48 hours of deposit into escrow.
(dd) As soon as practicable, HCMI shall make generally available to
its security holders and to the Selling Agent an earnings statement which will
comply with the provisions of Section 11(a) of the 1933 Act and Rule 158(a)
under the Act.
(ee) HCMI will furnish to the Selling Agent copies of all reports to
shareholders or filing with the SEC and NASD or stock exchanges or material
press releases.
(ff) HCMI will maintain, as necessary, a transfer agent and a
registrar function (or engage a transfer agent and registrar) for the Shares.
12
(gg) HCMI will not make any material amendments to any employment
agreements with its executives for a period of two years after the effective
date of the Registration Statement without the concurrence of the Selling Agent
(which shall not be unreasonably withheld).
(hh) HCMI shall, as soon as practicable, take all necessary and
appropriate actions to be included in Standard & Poor's and Xxxxx'x Investor
Services, Inc. manuals.
(ii) Until termination of the offering, HCMI shall not, without the
prior written consent of the Selling Agent, issue any press release, other than
trade releases issued in the ordinary course of HCMI's operations.
Section 7. Selling Agent Representations and Warranties. The Selling
Agent represents and warrants to HCMI that:
(a) All references and information concerning the Selling Agent to be
included in the Prospectus and supplied by the Selling Agent will be accurate in
all material respects and, as to the Selling Agent, will not contain any
misleading or untrue statement of a material fact or omit to state a material
fact which is required to be made or is necessary to prevent the statements
therein from being misleading.
(b) The Selling Agent is a corporation duly organized and validly
existing under the laws of the state of its incorporation, is a member in good
standing of the NASD and has full power and authority to act as marketing agent
in the manner contemplated by this Agreement and as described in the Prospectus.
(c) The Selling Agent is in good standing and in compliance with all
applicable broker-dealer registration requirements in any jurisdiction where the
parties agree the Shares will be sold by it; and any use or distribution of the
Prospectus or any other written communications prepared to accompany the
Prospectus by the Selling Agent will comply with the terms and conditions set
forth in the Prospectus, with the procedures set forth in this Agreement and
with the Securities Act of 1933, as amended (the "Securities Act"), the Exchange
Act, all applicable state securities laws and the rules and regulations
promulgated under all such acts and laws and all applicable rules and
regulations of the NASD.
(d) The Selling Agent has and will maintain all required governmental
and regulatory approvals and licenses to perform its obligations under this
Agreement and to act as described in the Prospectus, and the performance of its
obligations under this Agreement and its acting as described in the Prospectus
will not violate or result in a material breach of any provisions of either of
its Articles of Incorporation or By-laws, or any agreement, order, law or
regulation binding upon it.
(e) This Agreement has been duly and validly authorized, executed and
delivered on behalf of the Selling Agent, and is a valid and binding agreement
of the Selling Agent enforceable in accordance with its terms.
13
Section 8. Payment of Expenses. HCMI shall bear all costs and expenses
incident to the issuance, offer, sale and delivery of the Shares, including all
expenses and fees incident to the filing of the Registration Statement with the
SEC and the NASD, the costs and counsel fees of qualification under state
securities laws, fees and disbursements of HCMI counsel and accountants, fees
and expenses of the valuation firm for the fairness opinion, costs for preparing
and printing the Registration Statement and cost of printing as many copies of
the underwriting documents and Prospectuses and related exhibits as the Selling
Agent may deem necessary, including all amendments and supplements to the
Registration Statement. In the unlikely event that blue sky work is undertaken
by counsel to the Selling Agent, it shall be separately billed to HCMI and shall
be the financial obligation of HCMI. All other fees of Selling Agent's counsel
shall be paid directly by the Selling Agent. Other than those specifically
provided in Section 3, the Selling Agent will absorb all actual accountable
out-of-pocket expenses arising out of, in connection with, and otherwise
incident to, the Offering, including those related to any and all travel,
communications, postage and legal fees and expenses.
Section 9. Conditions of the Selling Agent's Obligations. The
obligations of the Selling Agent as provided herein shall be subject to the
accuracy of the representations and warranties contained herein as of the date
hereof and as of the Initial and any Subsequent Closing Date, to the accuracy of
the statements of officers and directors of HCMI made pursuant to the provisions
hereof, to the performance by HCMI of its obligations hereunder and to the
following conditions:
(a) At the Initial and any subsequent Closing Date, HCMI will have
completed the conditions precedent to, and shall have conducted the Offering in
all material respects in accordance with the Registration Statement and all
applicable laws, regulations, decisions and orders, including any and all terms,
conditions, requirements and provisions precedent to the Offering imposed upon
it by the SEC.
(b) At the Initial and any subsequent Closing Date, no order or other
action suspending the approval of the Registration Statement or the consummation
of the Offering shall have been issued or proceedings therefore initiated or, to
the knowledge of any of the parties, threatened by the SEC or any state
authority.
(c) At the Initial and any subsequent Closing Date, the Selling Agent
shall receive the favorable opinion of The Xxxxxxxx Law Group, P.C., counsel for
HCMI, dated the Initial Closing Date, addressed to the Selling Agent to the
effect that:
(i) HCMI is organized and validly existing as a Delaware
corporation with full power and authority to own its properties and conduct its
business as described in the Prospectus. HCMI's articles of incorporation
comply in all material respects with Delaware law.
(ii) HCMI has obtained all licenses, permits and other
governmental authorizations currently required for the conduct of its business,
except for those licenses,
14
permits and authorizations which the failure to obtain would not have a material
adverse effect on the business, operations or financial condition of HCMI.
(iii) The issuance and sale of the Shares have been duly and
validly authorized by all necessary corporate action on the part of HCMI; and
the Shares, when issued in accordance with the terms of the Prospectus and this
Agreement, will be validly issued, fully paid, nonassessable and free of
preemptive rights.
(iv) The Shares conform to the description thereof contained in
the Prospectus, and the Shares comply as to form in all material respects with
applicable legal requirements.
(v) No further approval, authorization, consent or other order
of any federal board or body besides the SEC is required in connection with the
execution and delivery of this Agreement, the issuance and sale of the Shares
and consummation of the Offering except for any necessary qualification or
registration under the securities laws of the various states in which the Shares
are to be offered.
(vi) The execution and delivery of this Agreement have been duly
and validly authorized by all necessary action on the part of HCMI; and this
Agreement is a valid and binding obligation of HCMI, enforceable in accordance
with its terms except that the enforceability of the obligations of HCMI may be
subject to bankruptcy, insolvency, reorganization, moratorium or other laws
affecting creditors' rights generally or the rights of creditors of a saving
bank, the accounts of which are insured by the FDIC (including laws concerning
fraudulent conveyance or fraudulent obligations) and the exercise of judicial
discretion in accordance with general principles applicable to equitable and
similar remedies (regardless of whether such enforceability is considered in a
proceeding at law or equity) and except as to those provisions which may be
limited by public policy, including provisions relating to the right of a party
to obtain reimbursement of its attorneys' fees and litigation costs from another
party, as to which such counsel need express no opinion, and except as to those
provisions relating to indemnity or contribution for liabilities arising under
the Securities Act, as to which such counsel need express no opinion.
(vii) There are no material, legal or governmental proceedings
pending or threatened against HCMI; such counsel does not know of any statutes
or regulations required to be described or disclosed in the Prospectus which are
not so described or disclosed; and the description in the Prospectus of such
statutes and regulations are accurate summaries thereof and fairly present the
information required to be shown.
(viii) The statements in the Prospectus, insofar as they
constitute statements of law or legal conclusions, have been prepared or
reviewed by them and are materially correct.
(ix) Based on certificates of officers and such investigation and
verification as deemed appropriate, HCMI is presently not in breach of, or in
default (nor has an event occurred which with notice or lapse of time or both
would constitute a default)
15
under any indenture, mortgage, deed of trust, note, bank loan or credit
agreement or any other instrument or agreement to which HCMI is a party or by
which any of its properties may be bound or affected, except for such breaches
or defaults as will not have a material adverse effect on the business,
operations or financial condition of HCMI; and HCMI is not in violation of any
term or provision of its articles of incorporation or any judgment, government
authorization, injunction, license, permit, decree, order, statute, rule, writ
or regulation, except for such violations as will not have a material adverse
effect on the business, operations or financial condition of HCMI.
(x) Neither the execution and delivery of this Agreement nor the
incurrence of the obligations herein set forth will conflict with HCMI's
articles of incorporation; (ii) constitute a breach of or default under, or
result in the creation or imposition of any lien, charge or other encumbrance
upon any of the properties or assets of HCMI pursuant to_any contract, lease,
loan agreement, mortgage, note, indenture or other instrument known to such
counsel to which HCMI is a party or by which it may be bound, or to which any of
the properties or assets of HCMI are subject; or (iii)_ conflict with any
applicable law, administrative regulation or administrative or court decree,
except for such conflicts, breaches, defaults, liens, charges or other
encumbrances which, with respect to (ii) and (iii) above, will not have a
material adverse effect on the business, operations or financial condition of
HCMI.
(xi) At the time that the Registration Statement became
effective, the Registration Statement (as amended or supplemented) -- other than
the financial statements, notes to financial statements, financial tables or
other financial and statistical data as to which counsel need express no opinion
-- complied as to form in all material respects with pertinent regulations.
Based on conferences with and certificates of officers of HCMI, discussions with
customers and vendors and other appropriate due diligence measures, all
material documents and exhibits relating to HCMI required to be filed with the
Registration Statement (as amended or supplemented) have been so filed. The
description in the Registration Statement and the Prospectus of such documents
and exhibits is accurate in all material respects and fairly presents the
information required to be shown. Nothing has come to such counsel's attention
that caused counsel to believe that, at the date hereof, the Registration
Statement or the Prospectus contained an untrue statement of a material fact
relating to HCMI or omitted to state a material fact relating to HCMI required
to be stated therein or necessary to make the statements therein not misleading,
in light of the circumstances under which they were made.
(d) Counsel for the Selling Agent shall have been furnished such
documents and opinions as they reasonably may require for the purpose of
enabling them to review or pass upon the matters required by the Selling Agent,
and for the purpose of evidencing the accuracy, completeness or satisfaction of
any of the representations, warranties or conditions herein contained,
including, but not limited to, resolutions of the Board of Directors of HCMI
regarding the authorization of this Agreement and the transactions contemplated
hereby.
16
(e) At the Initial and any subsequent Closing Date, the Selling Agent
shall receive a certificate of the President and of the chief financial or
accounting officer of HCMI, dated the Initial Closing Date, to the effect that:
(i) they have carefully examined the Prospectus and, in their opinion, at the
time the Prospectus became authorized for final use, it did not contain an
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading; (ii) since the date the Prospectus became
authorized for final use, no event has occurred which, in their opinion, should
have been set forth in an amendment or supplement to the Prospectus which has
not been so set forth, including specifically, but without limitation, any
material adverse change in the condition, financial or otherwise, or in the
earnings, capital or properties of HCMI and, the conditions set forth in this
Section 8 have been satisfied; (iii) no order has been issued by the SEC to
suspend the Offering or the authorization for final use of the Prospectus and no
action for such purposes has been instituted or, to the best of their knowledge,
threatened by such regulatory agencies; (iv) to the best of their knowledge, no
person has sought to obtain review of the final action of the SEC approving the
Registration Statement; and (v) all of the representations and warranties
contained in Section 4 of this Agreement are true and correct, with the same
force and effect as though expressly made on the Initial Closing Date.
(f) At or prior to the Initial Closing Date, the Selling Agent shall
receive: (i) a copy of the letter from the SEC declaring the Registration
Statement effective; and (ii) a certified copy of HCMI's articles of
incorporation.
(g) Concurrent with SEC effectiveness, the Selling Agent shall
receive a letter from BDO Xxxxxxx,, LLP, certified public accountants, dated the
date hereof and addressed to the Selling Agent: (i) confirming that BDO Xxxxxxx
is a firm of independent public accountants within the meaning of 12 C.F.R.
Section 571.2(c)(3) under the Securities Act and no information concerning its
relationship with or interests in HCMI is required to be disclosed in the
Registration Statement, and stating in effect that in its opinion on the
consolidated financial statements of HCMI for the years ended December 31, 1995,
as included in the Prospectus and covered by their respective opinions included
therein, comply as to form in all material respects with generally accepted
accounting principles; (ii) stating in effect that, consistent with SAS 72 and
after reading the latest available unaudited interim financial statements of
HCMI, a reading of the minutes of the meetings of the Board of Directors and
consultations with officers of HCMI responsible for financial and accounting
matters, nothing came to its attention which caused it to believe that: (a) the
unaudited financial statements included in the Prospectus, fail to comply as to
form in any material respect with generally accepted accounting principles; (b)
such unaudited financial statements are not in conformity with generally
accepted accounting principles applied on a basis substantially consistent with
that of the audited financial statements included in the Prospectus; or (c)
during the period from the date of the latest unaudited consolidated financial
statements included in the Prospectus to a specified date not more than five
business days prior to the date hereof, there was any material increase in
borrowing by HCMI.
17
(h) At the Initial Closing Date, BDO Xxxxxxx, LLP will deliver to the
Selling Agent a letter in form and substance satisfactory to counsel for the
Selling Agent dated the Initial Closing Date, confirming the statements made by
them in the letter delivered by them pursuant to the preceding subsection as of
a specified date not more than three (3) business days prior to the Initial
Closing Date.
(i) At or prior to the Initial Closing Date, counsel to the Selling
Agent shall have been furnished with such documents and opinions as they may
reasonably require for the purpose of enabling them to evidence the accuracy or
completeness of any of the representations or warranties, or the fulfillment of
any of the conditions, herein contained; and all proceedings taken by HCMI in
connection with the Offering and the sale of the Shares as herein contemplated
shall be reasonably satisfactory in form and substance to the Selling Agent and
its counsel.
(j) HCMI shall not have sustained, since the date of the latest
audited financial statements, any material loss or interference with its
business from fire, explosion, flood or other calamity, whether or not covered
by insurance, or from any labor dispute or court or governmental action, order
or decree, otherwise than as set forth or contemplated in such statements, there
shall not have been any material change in the consolidated long_term debt of
HCMI or any change or any development involving a prospective material change in
or affecting the general business affairs, management, financial position,
stockholders' equity, cash flow or results of operations of HCMI, otherwise than
as set forth or contemplated in such statements, the effect of which, in any
such case described above, is in the reasonable judgment of the Selling Agent
sufficiently material and adverse as to make it impracticable or inadvisable to
proceed with the Offering or the delivery of the Shares on the terms and in the
manner contemplated in the Prospectus.
All such opinions, certificates, letters and documents shall be in
compliance with the provisions hereof only if they are satisfactory, in their
reasonable opinion, to the Selling Agent and its counsel. Any certificates
signed by an officer or director of HCMI and delivered to the Selling Agent or
to counsel for the Selling Agent shall be deemed a representation and warranty
by HCMI to the Selling Agent as to the statements made therein. If any
condition to the Selling Agent's obligations hereunder to be fulfilled prior to
or at the Initial Closing Date is not so fulfilled, the Selling Agent may
terminate this Agreement or, if the Selling Agent so elects, may waive any such
conditions which have not been fulfilled or may extend the time of their
fulfillment.
Section 10. Right of First Refusal. Subject to sale of at least four
hundred thousand (400,000) Shares in the Offering, HCMI and the Selling Agent
agree that for a period of two (2) years from the date of the definitive
Prospectus, the Selling Agent shall have a non-transferable right of first
refusal to purchase for its account or to sell for the account of HCMI any
equity or debt securities with respect to which HCMI may seek a public offering
or private offering for cash. Specifically excluded from the Selling Agent's
right of first refusal are public or private offerings of HCMI's Shares in
exchange for properties, assets or stock of other individuals or corporations.
HCMI will consult the Selling Agent with regard to any such covered offering for
cash prior to consulting any other prospective
18
underwriter and will offer the Selling Agent the opportunity to purchase or sell
any such securities on terms not less favorable to HCMI than it can secure
elsewhere. HCMI shall have thirty (30) days in which to exercise its right of
first refusal. However, HCMI shall not be required to consult with the Selling
Agent concerning any borrowing form banks and institutional lenders or
concerning financing any equipment leading or similar arrangements.
Section 11. Registration Rights. HCMI agrees that if, at any time it
should file a Registration Statement with the SEC pursuant to the Securities
Act, HCMI, will offer, at its own expense, to the Selling Agent and its
warrantholders the opportunity to register or qualify the warrants or shares of
common stock issued upon exercise of the warrants as described in Section 4
hereof. This registration right is not applicable to a Registration Statement
filed by HCMI on Form S-8 or Form S-4.
Within the period commencing twelve (12) months and ending five (5) years
after the date of the definitive Prospectus, HCMI agrees that (upon written
request of the then holder(s) of at least 80% of the total warrants and/or
common stock issued upon the exercise of the Warrants which were originally
issued to the Selling Agent), it will file, no more than once, a Registration
Statement and all necessary amendments thereto, under the Securities Act,
registering the Shares of common stock underlying the Warrants. HCMI agrees to
use its best efforts to cause the above filing to become effective. All
expenses of such registration or qualification, including, but not limited to,
legal, accounting and printing fees, will be borne by HCMI (up to $25,000).
HCMI shall not be responsible for the cost of any separate counsel to review the
Registration Statement on behalf of or to advise the selling shareholders.
In addition to the rights above provided, HCMI will cooperate with the then
holder(s) of the Warrants and common stock issued upon the exercise of the
Warrants in preparing and signing any Registration Statement, in addition to the
Registration Statement discussed above, required in order to sell or transfer
the Shares of common stock issued upon the exercise of the Warrants and will
supply all information required therefor, but such additional Registration
Statement shall be at the then holder(s) cost and expense.
Section 12. Indemnification.
(a) HCMI agrees to indemnify and hold harmless the Selling Agent and
any of its directors, officers, employees, agents (including counsel) and
affiliates who act on behalf of HCMI and in connection with the services called
for under this Agreement, from and against any and all loss, cost, damage, claim
liability or expense of any kind, including reasonable attorneys' fees and other
expenses incurred in investigating, preparing to defend and defending any claim
or claims; provided however, that any payments provided for in this Section 12
shall not be paid or payable by HCMI if the Selling Agent or any of its
directors, officers, employees, agents or affiliates are found by a court to
have been grossly negligent or to have acted in bad faith in performing the
services which are the subject of this letter agreement. This indemnity shall
be in addition to any liability HCMI may have to the Selling Agent otherwise.
If any action is brought against the Selling Agent which HCMI is obligated
hereby to indemnify, then the Selling Agent promptly shall notify HCMI in
writing
19
of such action. HCMI agrees promptly to notify the Selling Agent of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the sale of the Shares or in connection with the
Prospectus.
(b) The Selling Agent agrees to indemnify and hold harmless HCMI, its
directors and executive officers and each person, if any, who has control 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 HCMI to the Selling Agent, but
only with respect to any untrue or alleged untrue statement of a material fact
or the omission or alleged omission of a material fact required to be stated or
necessary to make not misleading any statements contained in the Prospectus in
reliance upon, and in conformity with, written information furnished to HCMI
with respect to the Selling Agent by or on the behalf of the Selling Agent
expressly for use in the Prospectus or any materially misleading unwritten
statement made to a purchaser of the Shares by any director or officer or any
person employed by the Selling Agent. If any action is brought against HCMI or
any other person the Selling Agent is obligated hereby to indemnify, then such
person promptly shall notify the Selling Agent in writing of such action. The
Selling Agent agrees promptly to notify HCMI of the commencement of any
litigation or proceedings against the Selling Agent or any of its directors,
officers or employees in connection with the sale of the Shares or in connection
with the Prospectus.
(c) Each indemnified party shall give prompt written notice to each
indemnifying party of any action, proceeding, claim (whether commenced or
threatened), or suit instituted against it in respect of which indemnity may be
sought hereunder, but failure to notify an indemnifying party promptly shall not
relieve it from any liability which it may have on account of this Section 12 or
otherwise. An indemnifying party may participate at its own expense in the
defense of such action. In addition, if it so elects within a reasonable time
after receipt of such notice, an indemnifying party, jointly with any other
indemnifying parties receiving such notice, may assume the defense of such
action with counsel chosen by it and approved by the indemnified parties that
are defendants in such action, unless such indemnified parties reasonably object
to such assumption on the ground that there may be legal defenses available to
them that are different from or in addition to those available to such
indemnifying party. If an indemnifying party assumes the defense of such
action, the indemnifying party shall not be liable for any fees and expenses of
counsel for the indemnified parties incurred thereafter in connection with such
action, proceeding or claim, other than reasonable costs of investigation. In
no event shall the indemnifying parties be liable for the fees and expenses of
more than one separate firm of attorneys (and any special counsel that said firm
may retain) for each indemnified party in connection with any one action,
proceeding or claim or separate but similar or related actions, proceedings or
claims in the same jurisdiction arising out of the same general allegations or
circumstances.
Section 13. Contribution. In order to provide for just and equitable
contribution in circumstances in which the indemnity agreement provided for in
Section 12 above is for any reason held to be unavailable to the Selling Agent,
HCMI shall agree to contribute to the aggregate losses, liabilities, claims,
damages, and expenses of the nature contemplated by
20
Section 12 of this Agreement incurred by HCMI or the Selling Agent (i) in such
proportion as is appropriate to reflect the relative benefits received by HCMI
and the Selling Agent from the Offering of the Shares or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of HCMI in connection with
the statements or omissions which resulted in such losses, claims, damages,
liabilities or judgments, as well as any other relevant equitable
considerations. The relative benefits received by HCMI and the Selling Agent
shall be deemed to be in the same proportions as the total proceeds from the
Offering (before deducting expenses) received by HCMI to the total marketing and
commission fees received by the Selling Agent under this Agreement. The
relative fault of HCMI and the Selling Agent shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission to state a material fact relates to information
supplied by HCMI or by the Selling Agent and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
HCMI and the Selling Agent agree that it would not be just and equitable if
contribution pursuant to this Section 13 were determined by pro rata allocation
or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph.
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 13, the Selling Agent shall not
be required to contribute any amount in excess of the amount by which fees owed
the Selling Agent pursuant to this Agreement exceeds the amount of any damages
which the Selling Agent has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation shall be entitled to contribution from
any person who is not guilty of such fraudulent misrepresentation.
Section 14. Survival of Agreements, Representations and Indemnities. The
respective indemnities of HCMI and the Selling Agent set forth in or made
pursuant to this Agreement shall remain in full force and effect, regardless of
any termination or cancellation of this Agreement or any investigation made by
or on behalf of any of the parties hereto and the warranties of HCMI set forth
in or made pursuant to this Agreement shall remain in full force and effect,
regardless of any termination or cancellation of this Agreement or any
investigation made by or on behalf of any of the parties hereto or any
controlling person, and shall survive the termination date of this Agreement.
Any legal representative, successor or assign of the Selling Agent or HCMI, and
any such controlling person shall be entitled to the benefit of the respective
agreements, indemnities, warranties and representations.
21
Section 15. Termination.
(a) The Selling Agent and HCMI shall each have the right to terminate
this Agreement at any time prior to the Initial Closing Date if any domestic or
international event or act or occurrence has materially disrupted, or in such
party's good faith opinion will in the immediate future materially disrupt, the
securities markets; or if trading on the New York Stock Exchange shall have been
suspended for more than 24 hours, or minimum or maximum prices for trading shall
have been fixed, or maximum ranges for prices for securities shall have been
required, on the New York Stock Exchange, by the New York Stock Exchange or by
the order of the Securities and Exchange Commission or any other governmental
authority having jurisdiction; or if the United States shall have become engaged
or continues to be engaged in a war or major hostilities if the effect of such
war or hostilities, in such party's reasonable judgment, makes it impracticable
or inadvisable to proceed with the offering; of the Shares on the terms and in
the manner contemplated by the Prospectus; or if a banking moratorium has been
declared by a state or federal authority; or if a moratorium in foreign exchange
trading by major international banks or persons has been declared; or if HCMI
shall have sustained a material loss by fire, flood, accident, hurricane,
earthquake, threat, sabotage or other calamity or malicious act, whether or not
covered by insurance, which in such party's good faith opinion, will make it
inadvisable to proceed with the Offering, or if there shall have been such
material adverse change in the condition or prospects of HCMI or the prospective
market for the HCMI's securities as in such party's good faith opinion would
make it inadvisable to proceed with the offering, sale or delivery of the
Shares; or if in such party's good faith opinion the price for the Shares is not
reasonable or equitable under then prevailing market conditions; or if any other
party has breached in any material respect the representations, warranties or
covenants contained in the Agreement.
(b) Selling Agent reserves the right in its uncontrolled discretion
to determine whether the Offering can be successfully marketed through a
placement agent group and may, without any obligation to HCMI, for any reason,
including, without limiting the generality of the foregoing, market conditions
(both those relating to securities and commodities generally and those relating
to HCMI's stock) and the reaction of prospective members of the selling group to
the proposed offering, decline to proceed further with the Offering. If Selling
Agent has terminated its services, any commitment relating to compensation
(other than legal fees), advisor agreements, warrants and other executory rights
shall become null and void.
(c) Should HCMI be unable to obtain blue sky clearance without
significant suitability restrictions in the major proposed marketing
jurisdictions, or NASD clearance or SEC effectiveness is not obtained on or
before December 31, 1997, the Selling Agent may elect to terminate the Offering.
(d) Should a mutually agreeable valuation firm independent of HCMI be
unable to issue a fairness opinion confirming that the five dollar ($5) per
share price to the public shareholders is fair, the Selling Agent may elect to
terminate the Offering.
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(e) If any party elects to terminate this Agreement as provided in
this Section 15, the other parties shall be notified promptly by the party
terminating this Agreement by telephone or telegram, confirmed by letter.
Section 16. Notices. All communications hereunder, except as herein
otherwise specifically provided, shall be in writing and if sent to the Selling
Agent shall be mailed, delivered or telegraphed and confirmed to Northridge
Capital Corporation (with a copy to its counsel, Attn: Xxxx Xxxxx, Esq., 000
Xxxxxxxx Xxxx Xxxxx -- Xxxxx 000, Xxxxxxx, Xxxxxxx 00000).
Section 17. Parties. HCMI shall be entitled to act and rely on any
request, notice, consent, waiver or agreement purportedly given on behalf of the
Selling Agent when the same shall have been given by the undersigned. The
Selling Agent shall be entitled to act and rely on any request, notice, consent,
waiver or agreement purportedly given on behalf of HCMI, when the same shall
have been given by any officer. This Agreement shall inure solely to the
benefit of, and shall be binding upon, the Selling Agent and HCMI.
Section 18. Closings. The initial closing for the sale of the Shares shall
take place on a business day to be agreed upon by the parties hereto at the
offices of The Xxxxxxxx Law Group, P.C. or such other location as mutually
agreed upon by the Selling Agent and HCMI (the "Initial Closing Date").
Subsequent closings will occur during the Continuous Offering Period on the date
that $250,000 in subscriptions are accepted or at each month-end, whichever
first occurs (each constituting a "Subsequent Closing Date"). At each closing,
HCMI shall deliver to the Selling Agent in next day funds the commissions due
and owing to the Selling Agent as set forth herein and the opinions and
certificates required hereby and other documents deemed reasonably necessary by
the Selling Agent shall be executed and delivered to effect the sale of the
Shares as contemplated hereby and pursuant to the terms of the Prospectus.
Section 19. Partial Invalidity. In the event that any term, provision or
covenant herein or the Registration Statement thereof to any circumstance or
situation shall be invalid or unenforceable, in whole or in part, the remainder
hereof and the Registration Statement of said term, provision or covenant to any
other circumstance or situation shall not be affected thereby, and each term,
provision or covenant herein shall be valid and enforceable to the full extent
permitted by law.
Section 20. Construction. This Agreement shall be construed in accordance
with the laws of the State of Georgia.
Section 21. Counterparts. This Agreement may be executed in separate
counterparts, each of which when so executed and delivered shall be an original,
but all of which together shall constitute but one and the same instrument.
Section 22. Entire Agreement. This Agreement shall constitute the entire
agreement of the parties and shall supersede any and all prior or
contemporaneous understandings or arrangements with regard to the subject matter
hereof.
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If the foregoing correctly sets forth the understanding between the Selling
Agent and HCMI, please so indicate in the space provided below for that purpose,
whereupon this letter shall constitute a binding agreement between us.
Very truly yours,
______________________________
Xxxxxxx X. Xxxxx
President and Chief Executive Officer
Heartland Communications & Management, Inc.
Accepted as of the date first written above
NORTHRIDGE CAPITAL CORPORATION
By:
--------------------------------
Xxxxxxx Xxxx Xxxxx, President
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