EXHIBIT 10.9
PLACEMENT AGENT AGREEMENT
November 23, 2005
Xxxxxxx Xxxxxx Xxxxxx Inc.
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Gentlepersons:
1. INTRODUCTORY. Xxxxxxx Xxxxxx Xxxxxx Inc., a Texas corporation, proposes
to act on a best efforts basis as the exclusive placement agent for the Century
Pacific Financial Corporation, a Delaware corporation ("Century") and Versatile
Entertainment Inc., a California limited liability company ("Versatile"), and
Xxxxx Xxxx, LLC, a California limited liability company ("Bella" and together
with Versatile, the "Company"), in a private placement of Series A Convertible
Preferred Stock (the "Preferred Stock") of Century and certain selling
stockholders of the Company (the "Offering"). Prior to the closing of the
Offering, all of the owners of the Versatile and Xxxxx Xxxx will exchange 100%
of their respective ownership interests for shares of Preferred Stock. Century
will sell a number of shares of Preferred Stock convertible into approximately
6.25 million shares of Century's common stock (the "Common Stock") after giving
effect to a reverse stock split of 9.25 shares of Common Stock to 1 share of
Common Stock (the "Reverse Split"). The Company will sell its shares (the
"Shares") of Preferred Stock at a purchase price of $13.5135 per share (the
"Offering Price"), which represents a price of $1.25 per share, on as-converted
to Common Stock basis and after giving effect to the Reverse Split. Century,
Bella, all of the members of Bella, Versatile and all of the stockholders of
Versatile have entered into an Exchange Agreement, dated as of October 28, 2005
(the "Exchange Agreement"), pursuant to which Century will acquire all of the
outstanding membership interests (the "Interests") of Bella from its members and
all of the outstanding shares of capital stock of Versatile (the "Versatile
Shares") from its stockholders in exchange for shares of Preferred Stock as set
forth in the Exchange Agreement. The exchange of Interests and Versatile Shares
for the Preferred Stock contemplated in the Merger Agreement and the other
transactions contemplated thereunder are referred to as the "Transaction" or the
"Transactions."
Following the consummation of the Transactions and prior to the closing
of the Offering, Century shall assume all of the Company's rights and
obligations under this Agreement and all references to the Company shall
thereafter be deemed to be references to Century; provided, that prior to
Century's approval and assumption of this Agreement, references to the Company
shall only be deemed to include, together, Versatile and Bella. In addition,
upon consummation of the Transactions, Century will prepare an information
statement pursuant to Rule 14(c) promulgated under Section 14A of the Exchange
Act (together with any amendments or supplements thereto, the "Information
Statement") in connection with the approval and adoption of the Stockholder
Matters (as set forth in the Exchange Agreement.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
(a) Each of Bella and Versatile jointly and severally represents
and warrants to, and covenants with, you as follows:
(i) AUTHORITY. As of the Closing (as defined in Section
4(d) below), all action required to be taken by each Company necessary for the
authorization of this Agreement, the Subscription Agreements between the Company
and the purchasers of the Preferred Stock in the form attached as EXHIBIT A
hereto (the "Subscription Agreements"), the Registration Rights Agreement in the
form attached as EXHIBIT B hereto (the "Registration Rights Agreement" and
together with the Subscription Agreements, the "Related Agreements") and the
performance of all obligations of the Company hereunder will have been taken;
and this Agreement and the Related Agreements shall be in full force and effect.
(ii) AUTHORITY OF EXCHANGE TRANSACTION. As of the Closing,
all action required to be taken by each Company necessary for the authorization
of the Exchange Agreement (collectively with each of the ancillary agreements
related thereto, collectively the "Transaction Documents") and the performance
of all obligations of the Company hereunder will have been taken.
(iii) ORGANIZATION OF BELLA. Bella is a limited liability
company duly formed or organized, validly existing and in good standing under
the laws of the State of California and has the requisite power and authority to
own, lease and operate its assets and properties and to carry on its business as
it is now being or currently planned by Bella to be conducted. To its knowledge,
Bella is in possession of all franchises, grants, authorizations, licenses,
permits, easements, consents, certificates, approvals and orders ("Approvals")
necessary to own, lease and operate the properties it purports to own, operate
or lease and to carry on its business as it is now being conducted, except where
the failure to have such Approvals could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect (as hereinafter
defined) on Bella. Bella is not in violation of any of the provisions of Bella's
articles of organization or operating agreement ("Bella's Charter Documents").
For purposes of this Agreement, the term "Material Adverse Effect" when used in
connection with an entity means any change, event, violation, inaccuracy,
circumstance or effect, individually or when aggregated with other changes,
events, violations, inaccuracies, circumstances or effects, that is materially
adverse to the business, assets (including intangible assets), revenues,
financial condition or results of operations of such entity or its subsidiaries,
if any, taken as a whole (it being understood that neither of the following
alone or in combination shall be deemed, in and of itself, to constitute a
Material Adverse Effect: (a) changes attributable to the public announcement or
pendency of the Transactions, (b) changes in general national or regional
economic conditions, (c) changes affecting the industry generally in which the
Company operates, or (d) any SEC rulemaking requiring enhanced disclosure of
reverse merger transactions with a public shell.
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(iv) ORGANIZATION OF VERSATILE. Versatile is a corporation
duly formed or organized, validly existing and in good standing under the laws
of the State of California and has the requisite power and authority to own,
lease and operate its assets and properties and to carry on its business as it
is now being or currently planned by Versatile to be conducted. To its
knowledge, Versatile is in possession of all Approvals necessary to own, lease
and operate the properties it purports to own, operate or lease and to carry on
its business as it is now being conducted, except where the failure to have such
Approvals could not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect on Versatile. Versatile is not in violation of
any of the provisions of Versatile's Articles of Incorporation or bylaws
("Versatile's Charter Documents").
(v) QUALIFICATION. Each Company is duly qualified or
licensed to do business as a foreign company and is in good standing in each
jurisdiction where the character of the properties owned, leased or operated by
it or the nature of its activities makes such qualification or licensing
necessary, except for such failures to be so duly qualified or licensed and in
good standing that could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on either Company.
(vi) CORPORATE RECORDS. The minute books or the equivalent
of each Company to the extent of their existence contain true and accurate
records of meetings and true, complete and accurate records of consents in lieu
of meetings of its managers, managing members, directors (and any committees
thereof), similar governing bodies, members and stockholders ("Corporate
Records"), since the time of each Company's organization.
(vii) SUBSIDIARIES. Neither Bella nor Versatile has any
subsidiaries.
(viii) CAPITALIZATION.
a. At the close of business on the business day
prior to the date hereof, Schedule 2(a)(viii) hereto contains all of the
outstanding Interests of Bella. All Interests on Schedule 2(a)(viii) have been
validly issued, fully paid and are nonassessable. Except as set forth in
Schedule 2(a)(viii), there are no outstanding securities, convertible
securities, options, warrants or derivative securities of Bella, and there are
no agreements or commitments obligating Bella to issue or grant any of the
foregoing, including any pre-emptive or similar rights. All outstanding
Interests, options, warrants and other securities of Bella have been issued in
compliance with (i) all applicable securities laws and (in all material
respects) other applicable laws and regulations, and (ii) all requirements set
forth in any applicable contracts. Except as described in Schedule 2(a)(viii)
hereto, there are no commitments or agreements of any character to which Bella
is bound obligating Bella to accelerate the vesting of any options or warrants
as a result of the Transactions.
b. The authorized capital stock of Versatile
consists of 100 shares of common stock, no par value ("Versatile Common Stock").
At the close of business on the business day prior to the date hereof, (i) 90
shares of Versatile Common Stock were issued and outstanding, all of which are
validly issued, fully paid and
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nonassessable, (ii) no shares of Versatile Common Stock were reserved for
issuance upon the exercise of outstanding options to purchase Versatile Common
Stock granted to employees of Versatile or other persons, (iii) no shares of
Versatile Common Stock were reserved for issuance upon the exercise of
outstanding warrants to purchase Versatile Common Stock, and (iv) no shares of
Versatile Common Stock were reserved for issuance upon the conversion of
outstanding convertible securities of Versatile. Except as set forth in Schedule
2(a)(viii), there are no outstanding securities, convertible securities,
options, warrants or derivative securities of Versatile, and there are no
agreements or commitments obligating Versatile to issue or grant any of the
foregoing, including any pre-emptive or similar rights. All outstanding
Versatile Shares, options, warrants and other securities of Versatile have been
issued in compliance with (i) all applicable securities laws and (in all
material respects) other applicable laws and regulations, and (ii) all
requirements set forth in any applicable contracts.
c. Except as set forth in Schedule 2(a)(viii)
hereto, there are no equity securities, partnership interests or similar
ownership interests of any class of any equity security of either Versatile or
Bella, or any securities exchangeable or convertible into or exercisable for
such equity securities, partnership interests or similar ownership interests,
issued, reserved for issuance or outstanding. Except as set forth in Schedule
2(a)(viii) hereof, there are no subscriptions, options, warrants, equity
securities, partnership interests or similar ownership interests, calls, rights
(including preemptive rights), commitments or agreements of any character to
which either Versatile or Bella is a party or by which it is bound obligating
either Company to issue, deliver or sell, or cause to be issued, delivered or
sold, or repurchase, redeem or otherwise acquire, or cause the repurchase,
redemption or acquisition of, any interests, shares of capital stock,
partnership interests or similar ownership interests of either Company or
obligating either Company to grant, extend, accelerate the vesting of or enter
into any such subscription, option, warrant, equity security, call, right,
commitment or agreement.
d. Except as contemplated by the Exchange
Agreement and this Agreement and except as set forth in Schedule 2(a)(viii)
hereto, there are no registration rights, and there is no voting trust, proxy,
rights plan, anti-takeover plan or other agreement or understanding to which
either Company is a party or by which either Company is bound with respect to
any interests, equity securities, partnership interests or similar ownership
interests of any class of either Company, and there are no agreements to which
either Company is a party, or which either Company has knowledge of, which
conflict with this Agreement or the transactions contemplated herein or
otherwise prohibit the consummation of the transactions contemplated hereunder.
(ix) AUTHORITY RELATIVE TO THIS AGREEMENT. Each Company
has all necessary power and authority to execute and deliver this Agreement and
to perform its obligations hereunder and, to consummate the transactions
contemplated hereby (including the Transactions). The execution and delivery of
this Agreement and the consummation by each Company of the transactions
contemplated hereby (including the Transactions) have been duly and validly
authorized by all necessary action on the part of each Company (including the
approval by its managers, managing members, members, directors and
stockholders), and no other proceedings on the part of Company aren
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necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by each of Versatile and Bella and, assuming the due authorization,
execution and delivery thereof by the other parties hereto, constitutes the
legal and binding obligation of each Company, enforceable against each Company
in accordance with its terms, except as may be limited by bankruptcy,
insolvency, reorganization or other similar laws affecting the enforcement of
creditors' rights generally, by general principles of equity and public policy
and except as enforceability of the indemnity and contribution provisions
contained in Section 7 hereof may be limited by applicable law or principles of
public policy.
(x) NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
a. The execution and delivery of this Agreement
by each Company does not, and the performance of this Agreement by each Company
shall not, (i) conflict with or violate either Company's Charter Documents, (ii)
to its knowledge, conflict with or violate any Legal Requirements, or (iii)
result in any breach of or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or materially impair either
Company's rights or alter the rights or obligations of any third party under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or encumbrance on any of
the properties or assets of either Company pursuant to, any Material Contracts
(as defined in Section 2(a)(xxiv)), except, with respect to clauses (ii) or
(iii), for any such conflicts, violations, breaches, defaults or other
occurrences that would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on either Company. For purposes of
this Agreement, the term "LEGAL Requirements" means any federal, state, local,
municipal, foreign or other law, statute, constitution, principle of common law,
resolution, ordinance, code, edict, decree, rule, regulation, ruling or
requirement issued, enacted, adopted, promulgated, implemented or otherwise put
into effect by or under the authority of any Governmental Entity (as defined in
paragraph b. below).
b. The execution and delivery of this Agreement
by each Company does not, and the performance of each Company's obligations
hereunder will not, require any consent, approval, authorization or permit of,
or filing with or notification to, any court, administrative agency, commission,
governmental or regulatory authority, domestic or foreign (a "Governmental
Entity"), except (i) for applicable requirements, if any, of the Securities Act
of 1933, as amended (the "Securities Act"), the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), state securities laws ("Blue Sky Laws"), and
the rules and regulations thereunder, and appropriate documents with the
relevant authorities of other jurisdictions in which each Company is qualified
to do business, and (ii) where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on either Company or, after the Closing, Century, or prevent
consummation of the Transactions or otherwise prevent the parties hereto from
performing their obligations under this Agreement.
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(xi) COMPLIANCE. To the knowledge of each Company, it has
complied with and is not in violation of any Legal Requirements with respect to
the conduct of its business, or the ownership or operation of its business,
except for failures to comply or violations which, individually or in the
aggregate, have not had and are not reasonably likely to have a Material Adverse
Effect on either Company. To each Company's knowledge, the businesses and
activities of each Company have not been and are not being conducted in
violation of any Legal Requirements. Neither Company is in default or violation
of any term, condition or provision of any applicable Charter Documents or
Contracts. Except as set forth on Schedule 2(xi), to each Company's knowledge,
no written notice of non-compliance with any Legal Requirements relating or with
respect to the business of each Company has been received by each such Company
(and each Company has no knowledge of any material such notice delivered to any
other person). To each Company's knowledge, it is not in violation of any
material term of any contract or covenant relating to employment, patents,
proprietary information disclosure, non-competition or non-solicitation.
(xii) FINANCIAL STATEMENTS.
a. The audited financial statements of
Versatile to be provided to you prior to the Closing will be a complete copy of
the audited financial statements (including, in each case, any related notes
thereto) of Versatile for the fiscal years ended December 31, 2004 and 2003,
which statements will be prepared in accordance with generally accepted
accounting principles of the United States ("U.S. GAAP") applied on a consistent
basis throughout the period involved (except as may be indicated in the notes
thereto), will be audited in accordance with the auditing standards of the
Public Company Accounting Oversight Board ("PCAOB") by an independent accountant
registered with PCAOB, and such statements will fairly present in all material
respects the financial position of Versatile at the dates thereof and the
results of its operations and cash flows for the periods indicated, and will not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
b. The unaudited financial statements to be
provided by Versatile and Bella to you prior to the Closing will be a complete
copy of the unaudited financial statements (including, in each case, any related
notes thereto) of Versatile and Bella for the three-month and nine-month periods
ended September 30, 2005 and 2004, which statements will be prepared in
accordance with U.S. GAAP applied on a consistent basis throughout the period
involved (except as may be indicated in the notes thereto), will be reviewed by
an independent accountant registered with PCAOB, and such statements will fairly
present in all material respects the financial position of each at the dates
thereof and the results of its operations and cash flows for the periods
indicated, except that the unaudited interim financial statements will be
subject to normal adjustments which are not expected to have a Material Adverse
Effect on the Company. Notwithstanding the foregoing, Bella's financial
statements shall be for the period from inception (May 13, 2005) through
September 30, 2005. The audited financial statements described in Section
2(a)(xii)a and the unaudited financial statements described in this
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Section 2(a)(xii)b are collectively referred to herein as the "U.S. GAAP
Financial Statements."
c. To each Company's knowledge, the books of
account and other financial records of each Company have been maintained in
accordance with good business practice.
(xiii) NO UNDISCLOSED LIABILITIES. Except as set forth in
Schedule 2(a)(xiii) hereto, neither Company has any liabilities individually in
excess of $25,000 and in the aggregate in excess of $50,000 (absolute, accrued,
contingent or otherwise) of a nature required to be disclosed on a balance sheet
or in the related notes to the financial statements prepared in accordance with
U.S. GAAP which are, individually or in the aggregate, material to the business,
results of operations or financial condition of Company, except: (i) liabilities
provided for in or otherwise disclosed in the balance sheets of each Company as
of September 30, 2005 prepared in accordance with U.S. GAAP, and (ii) such
liabilities arising in the ordinary course of each Company's business since
September 30, 2005, none of which would have a Material Adverse Effect on the
Company.
(xiv) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set
forth in Schedule 2(a)(xiv) hereto or in the interim balance sheets of each
Company as of September 30, 2005 and except for the Transactions, since
September 30, 2005, there has not been: (i) any Material Adverse Effect on
either Company, (ii) any declaration, setting aside or payment of any dividend
on, or other distribution (whether in cash, securities or property) in respect
of, either Company's equity or other securities, or any purchase, redemption or
other acquisition by either Company of any of equity or other securities or any
options, warrants, calls or rights to acquire any such equity or other
securities, (iii) any split, combination or reclassification of either Company's
capital, (iv) any granting by either Company of any increase in compensation or
fringe benefits, except for normal increases of cash compensation in the
ordinary course of business consistent with past practice, or any payment by
either Company of any bonus, except for bonuses made in the ordinary course of
business consistent with past practice, or any granting by either Company of any
increase in severance or termination pay or any entry by either Company into any
currently effective employment, severance, termination or indemnification
agreement or any agreement the benefits of which are contingent or the terms of
which are materially altered upon the occurrence of a transaction involving
either Company of the nature contemplated hereby, (v) entry by either Company
into any licensing or other agreement with regard to the acquisition or
disposition of any Intellectual Property (as defined in Section 2(a)(xxiii)
hereof) other than licenses in the ordinary course of business consistent with
past practice or any amendment or consent with respect to any licensing
agreement filed or required to be filed by either Company with respect to any
Governmental Entity, (vi) any material change by either Company in its
accounting methods, principles or practices, (vii) any change in the auditors of
either Company, (vii) any issuance of equity or other securities of either
Company, or (viii) any revaluation by either Company of any of their respective
assets, including, without limitation, writing down the value of capitalized
inventory or writing off notes or
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accounts receivable or any sale of assets of either Company other than in the
ordinary course of business.
(xv) LITIGATION. Except as disclosed in Schedule 2(a)(xv)
hereto, there are no claims, suits, actions or proceedings pending, or to the
knowledge of either Company threatened against them, before any court,
governmental department, commission, agency, instrumentality or authority, or
any arbitrator that seeks to restrain or enjoin the consummation of the
transactions contemplated by this Agreement or which could reasonably be
expected, either individually or in the aggregate with all such claims, actions
or proceedings, to have a Material Adverse Effect on either Company or have a
Material Adverse Effect on the ability of the parties hereto to consummate the
Transactions.
(xvi) EMPLOYEE BENEFIT PLANS. Except as disclosed in
Schedule 2(a)(xvi) hereto, neither Company has any written employee
compensation, incentive, fringe or benefit plans, programs, policies,
commitments or other arrangements covering any active or former employee,
director or consultant of either Company, or any trade or business (whether or
not incorporated) which is under common control with either Company
(collectively, the "Plans").
(xvii) LABOR MATTERS. Except as disclosed in Schedule
2(a)(xvii) hereto, neither Company is a party to any collective bargaining
agreement or other labor union contract applicable to persons employed by either
Company nor does either Company know of any activities or proceedings of any
labor union to organize any such employees.
(xviii) RESTRICTIONS ON BUSINESS ACTIVITIES. Except as
disclosed on Schedule 2(a)(xviii) hereto, to each Company's knowledge there is
no agreement, commitment, judgment, injunction, order or decree binding upon
either Company or to which either Company is a party which has or could
reasonably be expected to have the effect of prohibiting or materially impairing
any business practice of either Company, any acquisition of property by either
Company or the conduct of business by either Company as currently conducted
other than such effects, individually or in the aggregate, which have not had
and could not reasonably be expected to have a Material Adverse Effect on either
Company.
(xix) TITLE TO PROPERTY.
a. All leases of real property held by each
Company and all personal property and other property and assets of each Company
(other than real property) owned, used or held for use in connection with the
business of each Company (the "Personal Property") obligating each Company to
make annual payments in excess of $15,000 are shown or reflected on the balance
sheets of each Company prepared in accordance with U.S. GAAP or in Schedule
2(a)(xix). To each Company's knowledge, each Company owns and has good and
marketable title to the Personal Property, and all such assets and properties
are in each case held free and clear of all liens, except for Liens disclosed in
the financial statements of each Company prepared in accordance with U.S. GAAP
or in Schedule 2(a)(xix) hereto, none of which liens has or will have,
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individually or in the aggregate, a Material Adverse Effect on such property or
on the present or contemplated use of such property in the businesses of each
Company.
b. To each Company's knowledge, all leases
pursuant to which each Company leases from others material real or personal
property are valid and effective in accordance with their respective terms, and
there is not, under any of such leases, any existing material default or event
of default of the Company or, to each Company's knowledge, any other party (or
any event which with notice or lapse of time, or both, would constitute a
material default), except where the lack of such validity and effectiveness or
the existence of such default or event of default could not reasonably be
expected to have a Material Adverse Effect on each Company.
(xx) TAXES.
a. DEFINITION OF TAXES. For the purposes of
this Agreement, "Tax" or "Taxes" refers to any and all federal, state, local and
foreign taxes, including, without limitation, gross receipts, income, profits,
sales, use, occupation, value added, ad valorem, transfer, franchise,
withholding, payroll, recapture, employment, excise and property taxes,
assessments, governmental charges and duties together with all interest,
penalties and additions imposed with respect to any such amounts and any
obligations under any agreements or arrangements with any other person with
respect to any such amounts and including any liability of a predecessor entity
for any such amounts.
b. TAX RETURNS AND AUDITS. Except as set forth
in Schedule 2(a)(xx) hereto, to each Company's knowledge: (i) Each Company has
timely filed all federal, state, local and foreign returns, estimates,
information statements and reports relating to Taxes ("Returns") required to be
filed by each Company with any Tax authority prior to the date hereof, except
such Returns which are not material to each Company. All such Returns are true,
correct and complete in all material respects. Each Company has paid all Taxes
shown to be due on such Returns; (ii) All Taxes that each Company is required by
law to withhold or collect have been duly withheld or collected, and have been
timely paid over to the proper governmental authorities to the extent due and
payable; (iii) No audit or other examination of any Return of either Company by
any Tax authority is presently in progress, nor has either Company been notified
of any request for such an audit or other examination; (iv) Neither Company has
taken any action nor knows of any fact, agreement, plan or other circumstance
that is reasonably likely to prevent the Transactions from qualifying as a
tax-deferred exchange within the meaning of Section 351 of the Code.
(xxi) ENVIRONMENTAL MATTERS. Except as disclosed in
Schedule 2(a)(xxi) hereto and except for such matters that, individually or in
the aggregate, are not reasonably likely to have a Material Adverse Effect, to
each Company's knowledge: (i) each Company has complied with all applicable
Environmental Laws; (ii) the properties currently owned or operated by each
Company (including soils, groundwater, surface water, buildings or other
structures) are not contaminated with any Hazardous Substances; (iii) the
properties formerly owned or operated by each Company were not contaminated with
Hazardous Substances during the period of ownership or operation by
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each Company; (iv) neither Company is subject to liability for any Hazardous
Substance disposal or contamination on any third party property; (v) neither
Company has been associated with any release or threat of release of any
Hazardous Substance; (vi) neither Company has received any notice, demand,
letter, claim or request for information alleging that either Company may be in
violation of or liable under any Environmental Law; and (vii) neither Company is
subject to any orders, decrees, injunctions or other arrangements with any
Governmental Entity or subject to any indemnity or other agreement with any
third party relating to liability under any Environmental Law or relating to
Hazardous Substances.
a. As used in this Agreement, the term
"Environmental Law" means any federal, state, local or foreign law, regulation,
order, decree, permit, authorization, opinion, common law or agency requirement
relating to: (A) the protection, investigation or restoration of the
environment, health and safety, or natural resources; (B) the handling, use,
presence, disposal, release or threatened release of any Hazardous Substance or
(C) noise, odor, wetlands, pollution, contamination or any injury or threat of
injury to persons or property.
b. As used in this Agreement, the term
"Hazardous Substance" means any substance that is: (i) listed, classified or
regulated pursuant to any Environmental Law; (ii) any petroleum product or
by-product, asbestos-containing material, lead-containing paint or plumbing,
polychlorinated biphenyls, radioactive materials or radon; or (iii) any other
substance which is the subject of regulatory action by any Governmental Entity
pursuant to any Environmental Law.
(xxii) BROKERS; THIRD PARTY EXPENSES. Neither Company nor,
to each Company's knowledge, any of its members or stockholders has incurred,
nor will they incur, directly or indirectly, any liability for brokerage,
finders' fees, agent's commissions or any similar charges in connection with
this Agreement or any transactions contemplated hereby except as set forth in
this Agreement and the Related Agreements. Except as set forth in this Agreement
and in the Related Agreements or as disclosed on Schedule 2(a)(xxii), no
membership interests, ownership interests, equity securities, convertible
securities, warrants, options, or other derivative securities of either Company
or Century are payable to any third party by either Company or any of its
members or stockholders as a result of the Transactions.
(xxiii) INTELLECTUAL PROPERTY. For the purposes of this
Agreement, the following terms have the following definitions:
a. "Intellectual Property" shall mean any or
all of the following: (i) patents and applications therefor and all reissues,
divisions, renewals, extensions, provisionals, continuations and
continuations-in-part thereof ("Patents") worldwide; (ii) inventions (whether
patentable or not), invention disclosures, improvements, trade secrets,
proprietary information, know how, technology, technical data and customer
lists, and all documentation relating to any of the foregoing; (iii) registered
copyrights and applications therefor, and all other rights corresponding
thereto, worldwide; (iv) material domain names, uniform resource locators
("URLs") and other
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names and locators associated with the Internet ("Domain Names"); (v) registered
industrial designs and applications therefor, worldwide; (vi) registered trade
names, logos, trademarks and service marks, and any applications therefor
(collectively, "Trademarks"), worldwide; (vii) all databases and data
collections and all rights therein; and (viii) all moral and economic rights of
authors and inventors, however denominated.
b. "Company Intellectual Property" shall mean
any Intellectual Property that is owned by, or licensed to, either Company.
c. "Company Products" means all current
versions of products of either Company.
d. Except as disclosed on Schedule 2(a)(xxiii),
to each Company's knowledge, the Company Intellectual Property and Company
Products are not subject to any material proceeding or outstanding decree,
order, judgment, contract, license, agreement or stipulation restricting in any
manner the use, transfer or licensing thereof by either Company, or which may
affect the validity, use or enforceability of such Company Intellectual Property
or Company Product, which in any such case could reasonably be expected to have
a Material Adverse Effect on either Company.
e. Except as disclosed on Schedule 2(a)(xxiii)
hereto, to each Company's knowledge, each Company either owns and has good and
marketable title to each material item of Company Intellectual Property owned by
it free and clear of any liens (excluding licenses and related restrictions
granted in the ordinary course) or has one or more licenses sufficient for each
Company's use of Company Intellectual Property; and each Company is the owner or
licensee of all Trademarks used in connection with the operation or conduct of
the business of each Company including the sale of any products by either
Company.
f. The operation of the business of each
Company as such business currently is conducted, including (i) the design,
development, manufacture, distribution, reproduction, marketing or sale of the
products of each Company (including Company Products) and (ii) each Company's
use of any product, device or process, to each Company's knowledge and except as
could not reasonably be expected to have a Material Adverse Effect, has not and
does not infringe or misappropriate the Intellectual Property of any third party
or constitute unfair competition or trade practices under the laws of any
jurisdiction.
g. Except as set forth on Schedule 2(a)(xxiii)
hereto, Versatile owns all right, title and interest in and to the Trademark
"People's Liberation" and "Xxxxxxx Xxxx" in the jurisdictions set forth on
Schedule 2(a)(xxiii) hereto.
(xxiv) AGREEMENTS, CONTRACTS AND COMMITMENTS.
a. Schedule 2(a)(xxiv) hereto sets forth a
complete and accurate list of all Material Contracts (as hereinafter defined),
specifying the parties thereto. For purposes of this Agreement, (i) the term
"Contracts" shall mean all written contracts, agreements, leases, mortgages,
indentures, notes, bonds, liens, licenses,
11
arbitration awards, judgments, decrees, orders, documents, instruments,
understandings and commitments to which either Company is a party or by or to
which any of the properties or assets of either Company may be bound, subject or
affected (including without limitation notes or other instruments payable by or
to either Company), and (ii) the term "Material Contracts" shall mean (x) each
Contract (I) providing for payments (present or future) to either Company in
excess of $25,000 in the aggregate, or (II) under which or in respect of which
either Company presently has any liability or obligation of any nature
whatsoever (absolute, contingent or otherwise) in excess of $25,000, and (y)
without limitation of subclause (x), each of the following Contracts: (1) any
mortgage, indenture, note, installment obligation or other instrument, agreement
or arrangement for or relating to any borrowing of money by or from either
Company; (2) any guaranty, direct or indirect, by either Company or any officer,
director or 5% or more stockholder ("Insider") of either Company of any
obligation of either Company for borrowings, or otherwise, excluding
endorsements made for collection in the ordinary course of business; (3) any
Contract made other than in the ordinary course of business or (x) providing for
the grant of any preferential rights to purchase or lease any asset of either
Company or (y) providing for any right (exclusive or non-exclusive) to sell or
distribute, or otherwise relating to the sale or distribution of, any product or
service of either Company; (4) any obligation to register any shares of the
capital stock or other securities of either Company with any Governmental
Entity; (5) any obligation to make payments, contingent or otherwise, arising
out of the prior acquisition of the business, assets or stock of other persons;
(6) any collective bargaining agreement with any labor union; (7) any lease or
similar arrangement for the use by either Company of personal property; (8) any
Contract granting or purporting to grant, or otherwise in any way relating to,
any mineral rights or any other interest (including, without limitation, a
leasehold interest) in real property; and (9) any Contract with either Company
to which any Insider of either Company is a party.
b. Each Material Contract was entered into at
arms' length and in the ordinary course, is in full force and effect and, to
each Company's knowledge, is valid and binding upon and enforceable against each
of the parties thereto.
c. Except as set forth in Schedule 2(a)(xxiv),
neither Company nor, to each Company's knowledge, any other party thereto, is in
breach of or in default under, and no event has occurred which with notice or
lapse of time or both would become a breach of or default under, any Material
Contract, which breach, individually or in the aggregate, could be reasonably
likely to have a Material Adverse Effect on either Company, and no party to any
Material Contract has given any written notice of any claim of any such breach,
default or event, which, individually or in the aggregate, are reasonably likely
to have a Material Adverse Effect on either Company. Each Material Contract to
which either Company is a party or by which it is bound that has not expired by
its terms is in full force and effect, except where such failure to be in full
force and effect is not reasonably likely to have a Material Adverse Effect on
either Company.
(xxv) INSURANCE. Schedule 2(a)(xxv) sets forth each
Company's insurance policies covering the assets, business, equipment,
properties, operations,
12
employees, officers, directors, managers and managing members (collectively, the
"Insurance Policies") of each Company which each Company reasonably believes are
adequate in amount and scope for the business in which it is engaged.
(xxvi) GOVERNMENTAL ACTIONS/FILINGS. To the knowledge of
each Company, each Company holds, and has made, all Governmental Actions/Filings
reasonably necessary to the conduct by each Company of its business (as
presently conducted), except with respect to any Governmental Actions/Filings
the failure of which to hold or make would not reasonably be likely to have a
Material Adverse Effect on either Company.
a. For purposes of this Agreement, the term
"Governmental Action/Filing" shall mean any franchise, license, certificate of
compliance, authorization, consent, order, permit, approval, consent or other
action of, or any filing, registration or qualification with, any federal,
state, municipal, foreign or other governmental, administrative or judicial
body, agency or authority.
(xxvii) MANAGEMENT. During the past five year period, to each
Company's knowledge, no current or former manager, managing member, member,
director, executive officer or stockholder of either Company has been the
subject of: (a) a petition under the Federal bankruptcy laws or any other
insolvency or moratorium law or has a receiver, fiscal agent or similar officer
been appointed by a court for such person, or any partnership in which such
person was a general partner at or within two years before the time of such
filing, or any corporation or business association of which such person was an
executive officer at or within two years before the time of such filing; (b) a
conviction in a criminal proceeding or a named subject of a pending criminal
proceeding (excluding traffic violations that do not relate to driving while
intoxicated or driving under the influence); (c) any order, judgment or decree,
not subsequently reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining any such person from, or
otherwise limiting, the following activities: (1) Acting as a futures commission
merchant, introducing broker, commodity trading advisor, commodity pool
operator, floor broker, leverage transaction merchant, any other person
regulated by the United States Commodity Futures Trading Commission or an
associated person of any of the foregoing, or as an investment adviser,
underwriter, broker or dealer in securities, or as an affiliated person,
director or employee of any investment company, bank, savings and loan
association or insurance company, or engaging in or continuing any conduct or
practice in connection with such activity; (2) Engaging in any type of business
practice; or (3) Engaging in any activity in connection with the purchase or
sale of any security or commodity or in connection with any violation of
Federal, state or other securities laws or commodities laws; (d) any order,
judgment or decree, not subsequently reversed, suspended or vacated, of any
Federal, state or local authority barring, suspending or otherwise limiting for
more than 60 days the right of any such person to engage in any activity
described in the preceding sub-paragraph, or to be associated with persons
engaged in any such activity; (e) a finding by a court of competent jurisdiction
in a civil action or by the U.S. Securities and Exchange Commission (the
"Commission") to have violated any securities law, regulation or decree and the
judgment in such civil action or finding by the Commission has not been
13
subsequently reversed, suspended or vacated; or (f) a finding by a court of
competent jurisdiction in a civil action or by the Commodity Futures Trading
Commission to have violated any federal commodities law, and the judgment in
such civil action or finding has not been subsequently reversed, suspended or
vacated.
(xxviii) REPRESENTATIONS AND WARRANTIES COMPLETE. All
representations, warranties and other disclosures provided to you regarding the
Company, its business and the transactions contemplated hereby, furnished by or
on behalf of the Company are true and correct and do not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in light of the circumstances under
which they were made, not misleading.
(xxix) The Escrow Agreement (the "Escrow Agreement") among
the Company, you, Century and Sterling Bank (the "Escrow Agent") has been duly
and validly executed and delivered by or on behalf of Versatile and constitutes
a legal, valid, and binding obligation of Versatile enforceable in accordance
with its terms, except as such enforceability may be limited by (a) applicable
bankruptcy, insolvency, reorganization, moratorium, or other laws of general
application relating to or affecting enforcement of creditors' rights generally
and (b) laws relating to the availability of specific performance, injunctive
relief, or other equitable remedies.
(xxx) Neither the Company nor any of its affiliates is or
has been subject to any order, judgment, or decree of any court of competent
jurisdiction temporarily, preliminarily, or permanently enjoining such person
for failure to comply with Rule 503 under Regulation D.
(b) The Company represents, warrants, and agrees
that upon the consummation of the Transactions, the following are true, correct
and complete at and as of the date of Closing:
(i) All reports and statements required
to be filed by the Company with the Securities and Exchange Commission under the
Exchange Act and the rules and regulations thereunder, due at or prior to the
date of this Agreement have been made. Such filings, together with all documents
incorporated by reference therein, are referred to as "Exchange Act Documents."
Each Exchange Act Document, as amended, conformed in all material respects to
the requirements of the Exchange Act and the rules and regulations thereunder,
and no Exchange Act Document, as amended, at the time each such document was
filed, included any untrue statement of a material fact or omitted 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.
(ii) The audited financial statements,
together with the related notes of Century at September 30, 2004 and September
30, 2005, and for the years then ended, included in Century's Annual Report on
Form 10-KSB for the year ended September 30, 2005, fairly present in all
material respects, on the basis stated therein and on the date thereof, the
financial position of Century at the respective dates therein specified and its
results of operations and cash flows for the periods then ended. To the
knowledge of the
14
Company, such statements and related notes have been prepared in accordance with
U.S. GAAP applied on a consistent basis except as expressly noted therein
(provided that the unaudited financial statements lack footnotes and other
presentation items).
(iii) Except for the Transactions and as
disclosed on SCHEDULE 2(b)(iii), subsequent to September 30, 2005, the Company
has not incurred any material liabilities or obligations, direct or contingent,
except in the ordinary course of business and except for liabilities or
obligations reflected or reserved against on the Company's balance sheets dated
September 30, 2005, and there has not been any material adverse change, or to
the actual knowledge of the Company, any development involving a prospective
material adverse change, in the condition (financial or otherwise), business, or
results of operations of the Company or any change in the capital or material
increase in the long-term debt of the Company, nor has the Company declared,
paid, or made any dividend or distribution of any kind on its capital stock.
(iv) All action required to be taken by
the Company necessary for the authorization of this Agreement and Related
Agreements, the performance of all obligations of the Company hereunder and
thereunder at the Closing, and as a condition to the due and proper
authorization, issuance, sale, and delivery of the Shares to subscribers
therefor in accordance with the terms of this Agreement has been, or prior to
the Closing Date (as defined in Section 4(d) below), will have been taken and
upon the payment of the consideration for the Shares specified herein, the
Shares will be duly and validly issued, fully paid, and non-assessable with no
personal liability attaching to the ownership thereof and free and clear of all
liens imposed by or through the Company.
(v) The Company is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Delaware and has all requisite right, power, and authority to own or lease its
properties, to conduct its business as described in the Exchange Act Documents,
and to execute, deliver, and perform this Agreement, the Subscription Agreements
and the Registration Rights Agreement, to issue and sell the Shares and to carry
out the provisions of this Agreement, and the Related Agreements and to carry on
its business as presently conducted. The Company is duly qualified to do
business and in good standing as a foreign corporation in all other
jurisdictions in which its ownership or leasing of properties, or the conduct of
its business requires or may require such qualification except where the failure
to be so qualified would not have a material adverse effect on the Company. The
Company has complied in all material respects with all material laws, rules,
regulations, applicable to the Company's business, operations, properties,
assets, products, and services, and the Company is in possession of and
operating in compliance with all material permits, licenses, and other
authorization, required to conduct its business as currently conducted.
(vi) The authorized capital stock of
Century consists of: (i) 150,000,000 shares of Common Stock, and (ii) 10,000,000
shares of preferred stock, of which [3,500,000] have been designated as Series A
Convertible Preferred Stock. Following the closing of the Transactions, and
immediately prior to the Closing, Century will have 13,775,021 shares of Common
Stock issued and outstanding and approximately [2,460,106.34] shares of
Preferred Stock issued and outstanding. Except as contemplated
15
by this Agreement, the Exchange Agreement, or as described in the Exchange Act
Documents or on SCHEDULE 2(b)(vi), immediately prior to the Closing (a) there is
no commitment by the Company to issue any shares of capital stock,
subscriptions, warrants, options, convertible securities, or other similar
rights to purchase or receive Company securities or to distribute to the holders
of any of its equity securities any evidence of indebtedness, cash, or other
assets, (b) the Company is under no obligation (contingent or otherwise) to
purchase, redeem, or otherwise acquire any of its equity or debt securities or
any interest therein, and (c) to the Company's knowledge there are no voting
trusts or similar agreements, stockholders' agreements, pledge agreements,
buy-sell agreements, rights of first refusal, preemptive rights, or proxies
relating to any securities of the Company. Except for those persons issued
securities pursuant to the Exchange Agreement or as set forth in the Exchange
Act Documents or filings with the Commission made by third parties pursuant to
Schedule 13D or 13G or Form 3 or 4, and to the knowledge of the Company, no
person holds of record or beneficially, 5% or more of the outstanding shares of
the capital stock of the Company. All outstanding securities of the Company were
issued in compliance with applicable Federal and state securities laws.
(vii) Except as disclosed in the Exchange
Act Documents or as described on SCHEDULE 2(b)(vii), there is no pending or, to
the knowledge of the Company, threatened (a) action, suit, claim, proceeding, or
investigation against the Company, at law or in equity, or before or by any
Federal, state, municipal, or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign Governmental Body, (b)
arbitration proceeding against the Company, (c) governmental inquiry against the
Company, or (d) any action or suit by or on behalf of the Company pending or
threatened against others.
(viii) The Company is not in violation of
its certificate of incorporation or bylaws, or in default, or with the giving of
notice or lapse of time or both, would be in default, in the performance of any
material obligation, agreement, or condition contained in any lease, license,
material contract, indenture, or loan agreement or in any bond, debenture, note,
or any other evidence of indebtedness, except for such defaults as would not
have a Material Adverse Effect on the Company. The execution, delivery, and
performance of this Agreement, the Related Agreements, and the Escrow Agreement,
the incurrence of the obligations herein, the issuance, sale, and delivery of
the Shares, and the consummation of the transactions contemplated herein, have
been duly authorized by all requisite corporate action on the part of the
Company and (a) do not and will not conflict with the Company's certificate of
incorporation or bylaws, (b) do not and will not, with or without the passage of
time or the giving of notice, result in the breach of, or constitute a default,
cause the acceleration of performance, or require any consent under, or result
in the creation of any lien, charge or encumbrance upon any property assets of
the Company pursuant to, any material loan agreement, mortgage, deed of trust,
indenture, or other instrument or agreement to which the Company is a party or
by which the Company or its properties are bound, except such consents as have
been obtained as of the date hereof or to the extent that the same have been, or
prior to the Closing Date will be, waived or cured, and as may be required by
the NASD OTC Bulletin Board, which the Company undertakes to obtain as promptly
as practicable, or (c) do not and will not result in the
16
violation of any law, statute, order, rule, administrative regulation, or decree
of any court, or governmental agency or body having jurisdiction over the
Company or its properties. The Exchange Agreement is in full force and effect.
(ix) Except as disclosed in the Exchange
Act Documents or as described on SCHEDULE 2(b)(ix), and other than pursuant to
the Exchange Agreement and the documents related thereto, there are no
pre-emptive rights or other rights to subscribe for or to purchase, or any
restriction upon the voting or transfer of, shares of Common Stock pursuant to
the Company's certificate of incorporation, bylaws, or any agreement or other
instrument to which the Company is a party. Except as disclosed on SCHEDULE
2(b)(ix), the issuance of the Shares is not subject to any preemptive right of
any stockholder of the Company or to any right of first refusal or other right
in favor of any person.
(x) The obligations of the Company
under this Agreement has been duly and validly assumed by the Company and this
Agreement constitutes a legal, valid, and binding obligation of the Company
enforceable in accordance with its terms, except to the extent that its
enforceability is limited by (a) applicable bankruptcy, insolvency,
reorganization, moratorium, or other laws of general application relating to or
affecting the enforcement of creditors' rights generally, and (b) laws relating
to the availability of specific performance, injunctive relief, or other
equitable remedies and except as enforceability of the indemnity and
contribution provisions contained in Section 7 hereof may be limited by
applicable law or principles of public policy.
(xi) The Escrow Agreement has been duly
and validly executed and delivered by or on behalf of Century and constitutes a
legal, valid, and binding obligation of Century enforceable in accordance with
its terms, except as such enforceability may be limited by (a) applicable
bankruptcy, insolvency, reorganization, moratorium, or other laws of general
application relating to or affecting enforcement of creditors' rights generally
and (b) laws relating to the availability of specific performance, injunctive
relief, or other equitable remedies.
(xii) No consent, approval,
authorization, or order of any court or governmental authority or agency is
required for the consummation by the Company of the transactions contemplated by
this Agreement, except such as may be required by the NASD, the Securities Act,
or the rules and regulations thereunder or state securities or Blue Sky laws.
(xiii) Except as would not have a Material
Adverse Effect on the Company, the Company has filed, or caused to be filed, on
a timely basis, all tax returns (including payroll, unemployment, and other
taxes related to its employees and independent contractors) required to be filed
with any Governmental Body and has paid or caused to be paid all taxes, levies,
assessments, tariffs, duties or other fees imposed, assessed, or collected by
any Governmental Body that may have become due and payable pursuant to those tax
returns or otherwise except taxes being disputed by the Company in good faith.
Except as disclosed on Schedule 2(b)(xiii), no deficiency assessment with
respect to or proposed adjustment of any of the Company's Federal, state,
municipal, or
17
local tax returns has occurred or is threatened. There has been no tax lien
imposed by any Governmental Body outstanding against the Company's assets or
properties, except the lien for current taxes not yet due. The charges,
accruals, and reserves on the books of the Company with respect to taxes for all
fiscal periods are adequate, in the opinion of the Company, and the Company does
not know of any actual or proposed tax assessment for any fiscal period or of
any basis therefor against which adequate reserves have not been set up. Except
as disclosed on Schedule 2(b)(xiii), the Company has not been advised that any
Federal income tax return of the Company has been, or will be, examined or
audited by the Internal Revenue Service.
(xiv) The Common Stock is registered
pursuant to Section 12(g) of the Exchange Act and is listed for quotation with
the symbol "CYPC.OB" on the NASD OTC Bulletin Board.
(xv) The Company has not during the past
twelve months offered or sold any security by or for the Company that is of the
same or a similar class as the Shares, other than offers of securities made
solely to accredited investors or otherwise under an employee benefit plan as
defined in Rule 405 under the Securities Act, securities issued in connection
with the Transactions or other acquisitions, or other securities that will not
invalidate the exemption from registration relied on to offer and sell the
Shares.
(xvi) Neither the Company nor any of its
affiliates is or has been subject to any order, judgment, or decree of any court
of competent jurisdiction temporarily, preliminarily, or permanently enjoining
such person for failure to comply with Rule 503 under Regulation D.
(xvii) The execution, delivery, and
performance by the Company of this Agreement and the Related Agreements, and the
offer and sale of the Shares require no consent of, action by or in respect of,
or filing with, any person or Governmental Body other than those consents that
have been obtained and filings that have been made pursuant to applicable state
securities laws and post-sale filings pursuant to applicable state and federal
securities laws, which the Company undertakes to file within the applicable time
period.
(xviii) All disclosure provided to you
regarding the Company, its business and the transactions contemplated hereby,
furnished by or on behalf of the Company (including the disclosures,
representations and warranties made by each of the parities to the Merger
Agreement) are true and correct and do not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.
(xix) Other than pursuant to this
Agreement, there are no brokers, representatives or other persons which have an
interest in commissions or other compensation payable by the Company in
connection with the transactions contemplated hereunder.
18
3. REPRESENTATIONS AND WARRANTIES OF XXXXXXX XXXXXX XXXXXX INC. You
represent and warrant to, and agree with, the Company that:
(a) You have been duly organized and are validly existing and in
good standing as a corporation under the laws of the State of Texas with power
and authority (corporate and other) to perform your obligations under this
Agreement and the Escrow Agreement; you are a broker-dealer registered and in
good standing under the Exchange Act and under the securities or Blue Sky laws
of each state in which the Shares are being offered or sold by you, and you are
a member in good standing of the NASD; you are in possession of and operating in
compliance with all authorizations, licenses, permits, consents, certificates,
and orders required for the performance of your duties under this Agreement and
the Escrow Agreement, and your performance of your duties hereunder and
thereunder will be in compliance with all applicable laws, including state
securities and Blue Sky laws.
(b) There are no legal or governmental proceedings pending to
which you are a party or of which any of your properties is the subject or, to
your knowledge, threatened, which, if determined adversely to you, would
individually or in the aggregate materially and adversely affect your ability to
perform your obligations under this Agreement or the Escrow Agreement.
(c) No consent, approval, authorization or order of any court or
governmental authority or agency is required for the performance by you of your
obligations under this Agreement, except such as may be required by the NASD or
under Regulation D or state securities or Blue Sky laws.
(d) This Agreement has been duly and validly executed and
delivered by or on behalf of you and constitutes a legal, valid, and binding
obligation of you enforceable in accordance with its terms, except to the extent
that its enforceability is limited by (a) applicable bankruptcy, insolvency,
reorganization, moratorium, or other laws of general application relating to or
affecting the enforcement of creditors' rights generally, and (b) laws relating
to the availability of specific performance, injunctive relief, or other
equitable remedies and except as enforceability of the indemnity and
contribution provisions contained in Section 7 hereof may be limited by
applicable law or principles of public policy.
(e) The Escrow Agreement among the Company, you, Century and the
Escrow Agent has been duly and validly executed and delivered by or on behalf of
you and constitutes a legal, valid, and binding obligation of you enforceable in
accordance with its terms, except as such enforceability may be limited by (a)
applicable bankruptcy, insolvency, reorganization, moratorium, or other laws of
general application relating to or affecting enforcement of creditors' rights
generally and (b) laws relating to the availability of specific performance,
injunctive relief, or other equitable remedies.
4. OFFERING AND SALE OF THE SHARES.
19
(a) On the basis of the representations, warranties, and covenants
herein contained, but subject to the terms and upon the conditions herein set
forth, you are hereby appointed the placement agent of the Company on an
exclusive basis during the term herein specified (the "Offering Period") for the
purpose of finding subscribers for the Shares on a best-efforts basis for the
account of the Company at the Offering Price through a private offering (the
"Offering") to an unlimited number of "accredited investors" (as such term is
defined in Rule 501 of Regulation D) ("Accredited Investors") pursuant to and in
accordance with the Securities Act. Subject to the performance by the Company of
all its obligations to be performed hereunder, and to the completeness and
accuracy of all the representations and warranties contained herein, you hereby
accept such agency and agree on the terms and conditions herein set forth to use
your best efforts during the Offering Period to find subscribers for Shares at
the Offering Price. Your agency hereunder, which is terminable as provided in
Section 11 hereof, shall terminate at 11:59 p.m., New York time, on November 21,
2005; provided that such termination date (the "Termination Date") may be
extended by mutual written agreement of the parties until November 23, 2005.
(b) Each Investor desiring to purchase Shares will be required to:
(i) complete, execute, and deliver to you an executed copy of (a) a Subscription
Agreement between the Investor and the Company, and (b) an Investor
Questionnaire, in the form attached as EXHIBIT C hereto, and (ii) deliver to the
escrow agent payment for such subscription in the form of a check payable to the
order of "CENTURY PACIFIC FINANCIAL CORPORATION - ESCROW ACCOUNT" or a wire
transfer of immediately available funds in the amount that the Investor desires
to purchase as provided in the Escrow Agreement or as otherwise directed by you.
Any payment you receive that does not conform to this requirement will be
returned to an Investor by the end of the next business day following receipt.
In the event funds are received by you, you shall hold all such Subscription
Agreements and Investor Questionnaires for safekeeping and immediately forward
all funds delivered to you to the Escrow Agent. The Escrow Agent, upon receipt
of such funds, will hold the funds in an escrow account pursuant to the Escrow
Agreement. You shall promptly forward each executed Subscription Agreement
received to the Company for acceptance or rejection together with a schedule
setting forth the name and address of each subscriber and the amount received
from each subscriber. The Company shall notify you of such acceptance or
rejection within 10 days of receipt of a Subscription Agreement.
(c) In the event that acceptable subscriptions for $4,500,000 in
Shares (the "Minimum Shares") shall not have been received and accepted by the
Company by the Termination Date, all funds received from subscribers (if any)
shall be returned in full, and your agency and this Agreement shall terminate
without obligation on your part or on the part of the Company.
(d) If, by the Termination Date or such earlier time as may be
agreed upon by you and the Company, you have received subscriptions for the
Minimum Shares and such subscriptions have been accepted by the Company (in its
sole discretion) and the other conditions to Closing the Offering of Shares have
been satisfied, you shall promptly notify the Company in writing of the
aggregate amount of Shares for which you have received subscriptions (the
"Notice Date"). Payment of the purchase price for the Shares
20
for which you have found subscribers, and delivery, with respect to each
subscriber for Shares, of a copy of a Subscription Agreement signed by such
subscriber (the "Closing"), shall then be made at such place and time as shall
be agreed upon between you and the Company, no later than the fifth full
business day after the Notice Date (the "Closing Date").
(e) As compensation for your services, a cash commission will be
paid to you with respect to subscriptions received by you as to which the
payments and deliveries provided for in this Section 4 are made at the Closing
Date equal to 7.0% of the purchase price of each Share purchased at the Closing.
Such commissions shall be paid to you on the Closing Date by bank wire transfer
payable in immediately available funds. In addition, the Company agrees to
reimburse you for your reasonable out-of-pocket expenses in accordance with
Section 6 hereof.
(f) Neither you, the Company, nor any Additional Agent (as
hereinafter defined) shall, directly or indirectly, pay or award any finder's
fees, commissions or other compensation to any person engaged by a potential
investor for investment advice as an inducement to such advisor to advise the
purchase of the Shares; provided, however, that normal sales commissions payable
to a registered broker-dealer or other properly licensed person for selling the
Shares shall not be prohibited hereby.
(g) You will prepare and file such statements and reports as are
or may be required to enable the Shares to be qualified for sale under the
securities laws of such jurisdictions as you may designate.
(h) As additional compensation, the Company will issue to you on
the Closing Date a Common Stock purchase warrant (the "Agent's Warrant") in
substantially the form attached hereto as EXHIBIT D granting you the right to
purchase from the Company for a period commencing after the Closing Date and
ending five years after the Closing Date, a number of shares of Common Stock
equal to 10% of the number of common Shares sold in the Offering, at a per share
purchase price equal to the Common Stock equivalent of the Offering Price.
(i) In connection with the Offering you will, to the extent within
your control, conduct the Offering in accordance with the applicable provisions
of the Securities Act and Regulation D so as to preserve for the Company the
exemption provided by Rule 506 of Regulation D. You agree not to offer or sell
the Shares by means of (a) any means of general solicitation, including any
advertisement, article, notice, or other communication published in any
newspaper, magazine, or similar media or broadcast over television or radio or
(b) any seminar or meeting, whose attendees have been invited by any general
solicitation or general advertising. Prior to the sale of any of the Shares, you
will have reasonable grounds to believe, and in fact believe, that each
subscriber for Shares is an Accredited Investor. You agree not to disclose any
material nonpublic information regarding the Company to any subscriber except as
such disclosure may be permitted pursuant to Regulation FD and is agreed to in
advance by the Company.
21
(j) In connection with the performance of your obligations under
this Agreement, SMH may engage, for the account of the Company, the services of
one or more broker-dealers ("Additional Agents") who are members of NASD and who
are acceptable to the Company, and, as compensation for their services, shall
pay to such Additional Agents an amount to be negotiated between you and such
Additional Agents. Such amount will be paid to the Additional Agents by you only
out of the commissions received by you in respect of sales of Common Stock as
described in paragraph (e) of this Section 4, and the Company shall have no
obligation to any Additional Agents respecting any such payment. The
arrangements, if any, between the Company, you, and any Additional Agent shall
be set forth in an Additional Agent Agreement ("Additional Agent Agreement"),
which shall provide, among other things, that such Additional Agent shall be
deemed to have agreed to the matters set forth herein as if the Additional Agent
were a signatory hereof. Nothing contained in this Agreement or in the
Additional Agent Agreement shall be deemed to constitute the Additional Agents,
if any, as your agents, and you shall not be liable to the Company in respect of
the performance by the Additional Agents, if any, of any representations,
warranties or covenants of such Additional Agents contained herein or in the
Additional Agent Agreement.
5. COVENANTS AND AGREEMENTS OF THE COMPANY. The Company covenants and
agrees with you that:
(a) Except as contemplated or described in this Agreement, the
Exchange Agreement or in a public disclosure made prior to the date hereof, it
will not, prior to the Closing Date, incur any material liability or obligation,
direct or contingent, or enter into any material transaction, in each case,
other than in the ordinary course of business. It will not, prior to the Closing
Date, declare or pay any dividend on the Common Stock or make any distribution
on the Common Stock payable to stockholders of record on a date prior to the
Closing Date.
(b) It will cooperate with you to enable the Shares to be
qualified for sale under the securities laws of such jurisdictions as you may
designate, subject to approval by the Company, and at your request will make
such applications and furnish such information as may be required of it for that
purpose; provided, however, that you and the Company shall first determine
whether an exemption from registration other than the Uniform Limited Offering
Exemption (ULOE) or a similar exemption is available in each such jurisdiction
and the Company shall not be required to qualify to do business or to file a
general consent to service of process in any such jurisdiction or to subject
itself to taxation. It will, from time to time, prepare and file such statements
and reports as are or may be required to continue such qualifications in effect
for so long a period as you may reasonably request for the distribution of the
Shares.
(c) It will make available to you and each purchaser of Shares at
a reasonable time prior to the Closing Date the opportunity to ask questions and
receive answers concerning the terms and conditions of the Offering and to
obtain any additional information that the Company possesses or can acquire
without unreasonable effort or expense that is necessary to verify the accuracy
of any information in the Exchange Act Documents or otherwise furnished by the
Company to you or any purchaser of Shares;
22
provided, however, that the Company shall not be required to disclose any
material nonpublic information to any purchaser of Shares.
(d) It will file all reports required by Regulation D with regard
to sales of the Shares and use of the proceeds therefrom; provided that you
provide all relevant information to the Company in writing as to purchasers of
the Shares required for such filings.
(e) It will not offer or sell any securities of the Company that
are of the same or a similar class as the Shares for a period of six months
after the Closing Date, other than those offers or sales of securities under an
employee benefit plan as defined in Rule 405 under the Securities Act, in
connection with options, warrants, or convertible securities outstanding as of
the Closing Date, or in connection with an acquisition of assets or another
business by the Company, if such offering will be integrated with the Offering
of the Shares pursuant to this Agreement for purposes of the exemptions under
Regulation D, so as to invalidate the exemption from registration relied on to
offer and sell the Shares.
(g) For a period of at least 18 months following the Closing Date,
the Company will maintain the registration of its Common Stock under Section 12
of the Exchange Act so long as the Exchange Act requires it to be so registered,
will comply in all respects with its reporting and filing obligations under the
Exchange Act, and will not take any action or file any document (whether or not
permitted by the Exchange Act or the rules thereunder) to terminate or suspend
such registration or to terminate or suspend its reporting and filing
obligations under said Act unless required to do so by the Exchange Act.
(h) The Company shall prepare and file with the NASD OTC Bulletin
Board an additional shares listing application covering the Shares and take all
steps necessary to cause such shares to be approved for listing as soon as
practicable thereafter.
(i) For a period of at least 18 months following the Closing Date,
the Company will use its commercially reasonable best efforts (i) to timely file
all reports required to be filed by the Company after the date hereof under the
Securities Act and the Exchange Act (including the reports pursuant to Section
13(a) or 15(d) of the Exchange Act referred to in subparagraph (c)(1) of Rule
144) and the rules and regulations adopted by the Commission thereunder), (ii)
if the Company is not required to file reports pursuant to such sections, it
will prepare and furnish to the purchasers of Shares and make publicly available
in accordance with Rule 144(c) such information as is required for the
purchasers to sell the Shares under Rule 144, and (iii) to take such further
action as any holder of Shares may reasonably request, all to the extent
required from time to time to enable the purchasers to sell Shares without
registration under the Securities Act within the limitation of the exemptions
provided by Rule 144, including causing its attorneys to issue and deliver any
appropriate legal opinion required to permit a purchaser to sell Shares under
Rule 144 upon receipt of appropriate documentation relating to such sale.
23
(j) The Company shall use commercially reasonable efforts to
consummate the Transactions.
6. PAYMENT OF EXPENSES. If this Agreement becomes effective and the
transactions contemplated by this Agreement are consummated, the Company shall
pay (a) all reasonable expenses incident to the performance of the obligations
of the Company under this Agreement, (b) all of your reasonable out-of-pocket
expenses (including fees and disbursements of your counsel, travel, and related
expenses incurred in connection with this Agreement and the Offering) incurred
in connection with this Agreement, preparing to market, and marketing the
Shares, (c) the reasonable legal fees and expenses incurred by counsel to
subscribers for Shares in connection with the negotiation, execution, and
delivery of subscription agreements and any related agreements, and (d) the fees
and expenses of the Escrow Agent; provided that the aggregate expenses
reimbursed pursuant to clauses (a) and (b) shall not to exceed $50,000 in the
aggregate.
7. INDEMNIFICATION AND CONTRIBUTION. (a) The Company agrees to indemnify
and hold harmless you, each Additional Agent, and each person, if any, who
controls you or such Additional Agent within the meaning of the Securities Act,
against any losses, claims, damages, liabilities, or expenses (including, unless
the Company elects to assume the defense as hereinafter provided, the reasonable
cost of investigating and defending against any claims therefor and counsel fees
incurred in connection therewith), joint or several, which arise out of the
Company's breach of a representation or warranty or covenant or agreement
contained in this Agreement; provided that in no case is the Company to be
liable with respect to any claims made against you, such Additional Agent, or
any such controlling person unless you, such Additional Agent, or such
controlling person shall have notified the Company in writing promptly after the
summons or other first legal process giving information of the nature of the
claim shall have been served upon you or such controlling person, but failure to
notify the Company of any such claim shall not relieve it from any liability
that it may have to you, such Additional Agent, or such controlling person
otherwise than on account of the indemnity agreement contained in this
paragraph. The Company will be entitled to participate at its own expense in the
defense, or if it so elects, to assume the defense of any suit brought to
enforce any such liability, but, if the Company elects to assume the defense,
such defense shall be conducted by counsel chosen by it and reasonably
acceptable to you. In the event the Company elects to assume the defense of any
such suit and retain such counsel, you, such Additional Agent, or such
controlling person or persons, defendant or defendants in the suit, may retain
additional counsel but shall bear the fees and expenses of such counsel unless
(i) the Company shall have specifically authorized the retaining of such counsel
or (ii) the parties to such suit include you, such Additional Agent, or such
controlling person or persons, and the Company and you, such Additional Agent,
or such controlling person or persons have been advised by counsel that one or
more material legal defenses may be available to you, such Additional Agent, or
them that may not be available to the Company in which case the Company shall
not be entitled to assume the defense of such suit notwithstanding its
obligation to bear the reasonable fees and expenses of such counsel. In no event
shall the Company be liable for the fees and
24
expenses of more than one counsel for all indemnified parties in connection with
any one action or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances. The
Company shall not be required to indemnify any person for any settlement of any
such claim effected without the Company's consent, which shall not be
unreasonably withheld. The Company shall not, without your consent, consent to
the entry of any judgment or enter into any settlement that does not include as
an unconditional term thereof, the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect of such claim or
litigation. This indemnification obligation will be in addition to any primary
liability that the Company might otherwise have. The foregoing obligation of
indemnification of the Company shall be limited to the net proceeds of the
Offering.
(b) You and each Additional Agent agree to indemnify and hold
harmless the Company, each of the Company's officers, directors, and each other
person, if any, who controls the Company within the meaning of the Securities
Act, against any losses, claims, damages, liabilities, or expenses (including,
unless you or such Additional Agent elect to assume the defense, the reasonable
cost of investigating and defending against any claims therefor and counsel fees
incurred in connection therewith), joint or several, which (i) arise of any
untrue statement of a material fact with respect to the Company made by you or
such Additional Agent to any purchaser of Shares not contained in an Exchange
Act Document or other written material provided to you or such Additional Agent
by the Company, (ii) arise out of any acts or omissions by you, any Additional
Agent, or any purchaser of Shares that cause the offering to involve a public
offering under the Securities Act or your failure to be properly licensed to
sell the Shares or (iii) arise out of your breach of a representation or
warranty or covenant or agreement contained in this Agreement; provided,
however, that in no case are you or any Additional Agent to be liable with
respect to any claims made against the Company or any such person against whom
the action is brought unless the Company or such person shall have notified you
or such Additional Agent in writing within a reasonable time after the summons
or other first legal process giving information of the nature of the claim shall
have been served upon the Company or such person, but failure to notify you or
such Additional Agent of such claim shall not relieve you or such Additional
Agent from any liability that you or such Additional Agent may have to the
Company or such person otherwise than on account of the indemnity agreement
contained in this paragraph. You or such Additional Agent shall be entitled to
participate at your or its expense in the defense, or if you or such Additional
Agent so elect, to assume the defense of any suit brought to enforce any such
liability, but, if you or such Additional Agent elect to assume the defense,
counsel chosen by you or such Additional Agent and reasonably acceptable to the
Company shall conduct such defense. In the event that you or such Additional
Agent elect to assume the defense of any such suit and retain such counsel, the
Company, said officers and directors and any person or persons, defendant or
defendants in the suit, may retain additional counsel but shall bear the fees
and expenses of such counsel unless (i) you shall have specifically authorized
the retaining of such counsel or (ii) the parties to such suit include you, such
Additional Agent, or such controlling person or persons, and the Company and
you, such Additional Agent, or such controlling person or persons have been
advised by counsel that one or more material legal defenses may be available
25
to the Company that may not be available to you or them in which case you shall
not be entitled to assume the defense of such suit notwithstanding your
obligation to bear the reasonable fees and expenses of such counsel. You or such
Additional Agent shall not be liable to indemnify any person for any settlement
of any such claim effected without your or its consent which consent shall not
be unreasonably withheld. You shall not, without the consent of the Company,
consent to entry of any judgment or enter into any settlement that does not
include as an unconditional term thereof, the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in respect
of such claim or litigation. This indemnification obligation will be in addition
to any primary liability that you or any Additional Agent might otherwise have.
(c) If the indemnification provided for in this Section 7 is
unavailable, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) in such proportion as is
appropriate to reflect not only the relative benefits received by the Company on
one hand and you and the Additional Agents, if any, on the other from the
offering, but also the relative fault of the Company on the one hand and you and
the Additional Agents, if any, on the other in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities, or
expenses (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and you and the Additional Agents, if any, on the other, shall be
deemed to be in the same proportion as the total net proceeds from the Offering
(before deducting expenses) received by the Company, bear to the total selling
commissions received by you and the value of the Agent's Warrant issued to you
pursuant to Section 4(h). The relative fault shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company, you, or an Additional Agent, the
party's relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission, and whether a party breached a
representation or warranty or covenant or agreement contained in this Agreement.
The Company and you agree that it would not be just and equitable if
contribution were determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable considerations referred
to above. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages, liabilities or expenses (or actions in respect thereof)
referred to above shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such claim. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
8. SURVIVAL OF INDEMNITIES, REPRESENTATIONS, WARRANTIES, ETC. The
respective representations and warranties of you and the Company as set forth in
this Agreement or made by them respectively, pursuant to this Agreement, shall
remain in full force and effect, regardless of any investigation made by or on
behalf of you, the Company, or any of the officers or directors of the Company
or any controlling person, and shall survive
26
delivery of and payment for the Shares for a period ending on the date two years
subsequent to the Closing Date.
9. CONDITIONS OF YOUR OBLIGATIONS. Your obligations hereunder are subject
to: (i) the accuracy in all material respects at and (except as otherwise stated
herein) as of the date hereof, of the representations and warranties made by the
Company in Section 2(a); (ii) the accuracy in all material respects at and
(except as otherwise stated herein) as of the Closing Date, of the
representations and warranties made by the Company in Section 2(b); (iii) the
compliance in all material respects at and as of the Closing Date by the Company
with its covenants and agreements herein contained and other provisions hereof
to be satisfied at or prior to the Closing Date; and (iv) the following
additional conditions:
(a) You shall not have stated in writing prior to the Closing Date
to the Company that any Exchange Act Document, or any amendment or supplement
thereto contains an untrue statement of fact which, in your reasonable opinion,
is material, or omits to state a fact which, in your reasonable opinion, is
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(b) The Transactions shall have been consummated.
(c) You shall have received a certificate, dated the Closing Date,
on behalf of the Company by the Chief Executive Officer or the President and the
Chief Financial or Accounting Officer of the Company to the effect that:
(i) The representations and warranties of the Company in
Section 2(b) are true and correct in all material respects at and as of the
Closing Date, and the Company has complied with all the agreements and satisfied
in all material respects all the conditions on its part to be performed or
satisfied at or prior to the Closing Date;
(ii) The Transactions have been consummated;
(iii) Between the date of this Agreement and the Closing
Date, no litigation has been instituted or, to the knowledge of the Company,
threatened against the Company; and
(iv) Between the date of this Agreement and the Closing
Date, there has not been any material adverse change in the financial condition,
business, or results of operations of the Company.
(d) The Company shall have entered into the Registration Rights
Agreement with the Purchasers.
27
(e) The Company shall have prepared the Information Statement and
be prepared to file it with the Commission as soon as practicable following the
Closing, but in no event later than 10 days thereafter.
(f) You shall have received from Xxxxxx Xxxxxxxx & Markiles, LLP,
counsel to the Company, an opinion, dated the Closing Date, with respect to such
matters as SMH may request.
(g) The Company shall have delivered a Voting Agreement executed by
each of Xxxxxxx Reverse Merger Fund, LLC, a Delaware limited liability company,
Xxxxx Xxxx and Xxxxxx X. Xxxx, substantially in the form attached to the
Exchange Agreement as EXHIBIT A.
(h) The Company shall have delivered a Lock-Up Agreement executed by
Xxxxx Xxxx, substantially in the form attached hereto as EXHIBIT E, and Xxxxxx
X. Xxxx, substantially in the form attached hereto as EXHIBIT F.
(i) You shall have received such other documentation reasonably
requested by you to effect the transactions contemplated herein.
If any of the conditions provided for in this Section 9 shall not have
been satisfied when and as required by this Agreement, this Agreement may be
terminated by you by notifying the Company of such termination in writing at or
prior to the Closing Date, but you shall be entitled to waive any of such
conditions.
10. EFFECTIVE DATE. This Agreement shall become effective at 11:00 A.M.,
Houston time, on the date hereof (the "Effective Time").
11. TERMINATION. In the event of any termination of this Agreement under
this or any other provision of this Agreement, there shall be no liability of
any party to this Agreement to any other party, other than as provided in
Sections 6, 7, and 8 and this Section 11. This Agreement may be terminated after
the Effective Time by (a) the Company for any reason by notice to you and (b)
you by notice to the Company (i) if at or prior to the Closing Date trading in
securities on the New York Stock Exchange, the American Stock Exchange, or the
Nasdaq Stock Market (collectively, the "Exchanges") shall have been suspended
for longer than four consecutive hours or minimum or maximum prices shall have
been established on either such exchange or stock market, or a banking
moratorium shall have been declared by Texas or United States authorities
(unless such suspension is made pending completion of the sale of the Shares, at
which time, such suspension will be lifted); (ii) if at or prior to the Closing
Date there shall have been a material escalation of hostilities between the
United States and any foreign country (other than Iraq), or any other material
insurrection or armed conflict involving the United States which, in your
reasonable judgment, after consultation with the Company, makes it impracticable
or inadvisable to offer or sell the Shares; or (iii) if there shall be any
material litigation or regulatory action, pending or threatened against or
involving the Company, which, in your reasonable judgment, after consultation
with the
28
Company, makes it impracticable or inadvisable to offer or deliver the Shares on
the terms contemplated by this Agreement.
If, and only if, the Company terminates this Agreement after it becomes
effective for any reason (other than your material failure to comply with your
obligations under this Agreement or material breach of your representations and
warranties) or the Offering fails to close because of the Company's breach of
any representations or warranties contained in this Agreement or the Company's
failure to fulfill its covenants and agreements contained in this Agreement, the
Company shall pay you your actual out-of-pocket expenses incurred as provided in
Section 6 hereof.
12. AGREEMENT CONCERNING DISCLOSURE OF INFORMATION. You agree to treat
confidentially any material nonpublic information that is furnished to you (or
to parties acting on your behalf) by or on behalf of the Company (the
"Information"). You agree that you will use the Information only for the
purposes related to a determination of your willingness to act as non-exclusive
selling agent pursuant to this Agreement, and that the Information will be kept
confidential by you and your partners, members, managers, officers, directors,
employees, agents, and other affiliates (collectively, the "Affiliates"), and
your attorneys and accountants (collectively, the "Professionals"), and that
you, such Affiliates, or Professionals will not disclose the Information to any
investor or other person; provided, however, that the Information may be
disclosed to (a) Affiliates and Professionals who need to know such Information
for the purpose of evaluating or providing services in connection with you and
your clients' investment in the Company; provided such parties agree to be bound
by this undertaking, (b) to any federal or state regulatory agency and their
employees, agents, and attorneys (collectively, "Regulators") for the purpose of
making any filings with Regulators if disclosure of such Information is required
by law (provided that you advise the Company in writing of the Information to be
so disclosed within a reasonable time prior to such filing), and (c) any other
person to which the Company consents in writing prior to any such disclosure.
In the event that you are requested or required (by oral questions,
documents, subpoena, civil investigation, demand, interrogatories, request for
information, or other similar process) to disclose to any person or entity any
information supplied to you, your Affiliates, or your Professionals in the
course of their dealings with the Company or their respective representatives,
you agree that you will provide the Company with prompt notice of such
request(s) within a reasonable time prior to such disclosure so that the Company
may seek an appropriate protective order and/or waiver of compliance with the
provisions of this Agreement. It is further agreed that, if a protective order
is not obtained, or a waiver is not granted hereunder, and you are nonetheless,
in the written opinion of counsel, compelled to disclose information concerning
the Company to any tribunal or else stand liable for contempt or suffer the
censure or penalty, you may disclose such information to such tribunal without
liability hereunder. Prior to making such disclosure, you shall deliver a
written opinion of your counsel to the Company's counsel that disclosure is
compelled by law. You will exercise your best efforts to obtain a protective
order or other reliable assurance that confidential treatment will be accorded
the Information.
29
13. NOTICES. All notices or other communications that are required or
permitted under this Agreement shall be in writing and sufficient if delivered
by hand, by facsimile transmission, by registered or certified mail, postage
pre-paid, by electronic mail, or by courier or overnight carrier, to the persons
at the addresses set forth below (or at such other address as any party shall
have furnished to the other parties in writing), and shall be deemed to have
been delivered as of the date so delivered:
If to the Company: Xxxxxx Xxxx
Versatile Entertainment, Inc.
000 Xxxx 00xx Xxxxxx
Xxx Xxxxxxx, XX 00000
(000) 000-0000
(000) 000-0000 telecopy
WITH A COPY TO:
Xxxxxx Xxxxxxxx & Markiles, LLP
00000 Xxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Attn: Xxxx XxXxxxx, Esq.
(000) 000-0000 telephone
(000) 000-0000 telecopy
If to you: Xxxxxxx Xxxxxx Xxxxxx Inc.
000 X. Xxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Attn. Xxxxx Xxxxx
(000) 000-0000 telephone
(000) 000-0000 telecopy
e-mail: xxxxx.xxxxx@xxxxxxxx.xxx
WITH A COPY TO:
Xxxxxxxxxx & Xxxxx LLP
00000 Xxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxx X. Xxxxx, Esq.
(000) 000-0000 telephone
(000) 000-0000 telecopy
e-mail: xxxxxx@XxxxxxxxxxXxxxx.xxx
14. SUCCESSORS. This Agreement shall inure to the benefit of and be binding
upon you, and Additional Agents, the Company, and their respective successors
and legal representatives, except that neither the Company nor you may assign or
transfer any of its or your rights or obligations under this Agreement without
the prior written consent of the other; provided, however, that upon
consummation of the Transactions, Parent shall assume all of the rights and
obligations of the Company under this Agreement without
30
the need for further consent of the parties. Nothing expressed or mentioned in
this Agreement is intended or shall be construed to give any person other than
the persons mentioned in the preceding sentence any legal or equitable right,
remedy or claim under or in respect of this Agreement, or any provisions herein
contained, this Agreement and all conditions and provisions hereof being
intended to be and being for the sole and exclusive benefit of such persons and
for the benefit of no other person; except that the representations, warranties,
covenants, agreements and indemnities of the Company contained in this Agreement
shall also be for the benefit of the person or persons, if any, who control you
or any Additional Agents within the meaning of Section 15 of the Securities Act,
and your and any Additional Agent's indemnities shall also be for the benefit of
each officer and director of the Company and the person or persons, if any, who
control the Company within the meaning of Section 15 of the Securities Act.
15. APPLICABLE LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York. Any judicial proceeding
brought against either of the parties to this agreement or any dispute arising
out of this Agreement or any matter related hereto may be brought in the courts
of the State of New York or the State of Texas or in the United States District
Court for the Southern District of New York or the Southern District of Texas
and, by its execution and delivery of this agreement, each party to this
Agreement accepts the jurisdiction of such courts. The foregoing consent to
jurisdiction shall not be deemed to confer rights on any person other than the
parties to this Agreement. The prevailing party in any such litigation shall be
entitled to receive from the losing party or parties all costs and expenses,
including reasonable attorney fees, incurred by the prevailing party.
[SIGNATURES ON FOLLOWING PAGE]
31
If the foregoing correctly sets forth our understanding please indicate
your acceptance thereof in the space provided below for that purpose, whereupon
this letter and your acceptance shall constitute a binding agreement between us.
Very truly yours,
XXXXX XXXX, LLC
By: /s/ Xxxxxx X. Xxxx
-------------------------
Xxxxxx X. Xxxx, Manager
VERSATILE ENTERTAINMENT, INC.
By: /s/ Xxxxxx X. Xxxx
-------------------------
Xxxxxx X. Xxxx, President
Accepted and delivered in Los Angeles,
California as of the date first above written
XXXXXXX XXXXXX XXXXXX INC.
By /s/ Xxxxx Xxxxx
-------------------------------------
Xxxxx Xxxxx, Vice-President
EXHIBIT A
SUBSCRIPTION AGREEMENT
EXHIBIT B
REGISTRATION RIGHTS AGREEMENT
EXHIBIT C
INVESTOR QUESTIONNAIRE
EXHIBIT D
AGENT'S WARRANT
EXHIBIT E
FORM OF LOCK-UP AGREEMENT (XXXXX XXXX)
EXHIBIT F
FORM OF LOCK-UP AGREEMENT (XXXXXX XXXX)
DISCLOSURE SCHEDULES
OF
XXXXX XXXX, LLC, VERSATILE ENTERTAINMENT, INC.
AND CENTURY PACIFIC FINANCIAL CORPORATION
TO
THE PLACEMENT AGENT AGREEMENT
DATED NOVEMBER___, 2005
Any capitalized terms used in these Schedules but not defined herein shall have
the same meanings ascribed thereto in the Placement Agent Agreement (the
"Agreement") by and among Xxxxx Xxxx, LLC, ("Bella"), Versatile Entertainment,
Inc., ("Versatile") and Xxxxxxx Xxxxxx Xxxxxx, Inc.
The headings contained in these Schedules are for reference purposes only and
shall not affect in any way the meaning or interpretation of these Schedules.
Nothing in these Schedules is intended to broaden the scope of any
representation or warranty contained in the Agreement or to create any covenant
unless clearly specified to the contrary herein. Disclosures made under the
heading of one section may apply to, augment or qualify disclosures under all
sections to which such disclosures reasonably relate. Inclusion of any item in
these Schedules: (a) does not represent a determination that such item is
material nor shall it be deemed to establish a standard of materiality, (b) does
not represent a determination that such item did not arise in the ordinary
course of business, (c) does not represent a determination that the transactions
contemplated by the Agreement require the consent of third parties and (d) shall
not constitute, or be deemed to be, an admission to any third party concerning
such item.
SCHEDULE 2(a)(viii)
OUTSTANDING INTERESTS OF BELLA:
-------------------------------------------------------------------------------
NAME OF MEMBER MEMBERSHIP INTEREST HELD
-------------------------------------------------------------------------------
Xxxxxx Xxxx 90%
-------------------------------------------------------------------------------
Fashionistas, LLC (Formerly known as
FOADB Investors, LLC) 10%
-------------------------------------------------------------------------------
TOTAL: 100%
-------------------------------------------------------------------------------
OUTSTANDING SECURITIES OF VERSATILE:
--------------------------------------------------------------------------------
NAME OF SHAREHOLDER NUMBER OF
SHARES HELD
--------------------------------------------------------------------------------
Xxxxx Xxxx 2.961
--------------------------------------------------------------------------------
Xxx Xxxxxx 0.550
--------------------------------------------------------------------------------
Xxxxxx Xxxxxx 0.529
--------------------------------------------------------------------------------
Xxxxxxx Xxxx 0.106
--------------------------------------------------------------------------------
Venture Group, LLC 1.903
--------------------------------------------------------------------------------
Xxxxx Xxxxxxxx 0.892
--------------------------------------------------------------------------------
Xxxxxx Xxxxxxxx & Markiles, LLP 1.125
--------------------------------------------------------------------------------
Xxxxxx Xxxx as Custodian for Xxxxxxxx Xxxx UTMA of CA 4.653
--------------------------------------------------------------------------------
Xxxxxx Xxxxxxx 3.171
--------------------------------------------------------------------------------
Xxxxx Xxxx 37.176
--------------------------------------------------------------------------------
Xxxx Xxxxx 1.480
--------------------------------------------------------------------------------
Xxxxx Xxxx 35.454
--------------------------------------------------------------------------------
TOTAL: 90.000
--------------------------------------------------------------------------------
SCHEDULE 2(a)(xi)
BELLA: None
VERSATILE: None
SCHEDULE 2(a)(xiii)
BELLA: None
VERSATILE: None
SCHEDULE 2(a)(xiv)
BELLA: None
VERSATILE: None
SCHEDULE 2(a)(xv)
BELLA: None
VERSATILE: None
SCHEDULE 2(a)(xvi)
BELLA: None
VERSATILE: Versatile has a Medical Plan for its employees.
SCHEDULE 2(a)(xvii)
BELLA: None
VERSATILE: None
SCHEDULE 2(a)(xviii)
BELLA: None
VERSATILE: None
SCHEDULE 2(a)(xix)
BELLA:
1. Pursuant to a Factoring Agreement dated October 12, 2005, between Bella
and FTC Commercial Corp., Bella granted FTC a security interest in
certain of its assets.
2. Bella pays $600 per month for showroom participation in Los Angeles.
VERSATILE:
1. Versatile entered into a lease agreement with Ofer and Xxxxx Xxxxxxxxx
on September 30, 2005. The lease is for the rental of a 38,500 square
foot industrial building at 000 Xxxx Xxxxxxxxx Xxxxxxxxx in Los Angeles
for a base rent of $23,485 per month. The lease commences on January 1,
2006, but includes an optional early possession date of October 15,
2005. The lease terminates December 31, 2008, but includes an option to
extend the lease 36 months.
3. Pursuant to a Factoring Agreement dated October 14, 2004, between
Versatile and FTC Commercial Corp. and Amendment No. 1 to the Factoring
Agreement dated September 30, 2005, Versatile granted FTC a security
interest in certain of its assets.
4. Versatile pays $600 per month for showroom participation in Los
Angeles.
SCHEDULE 2(a)(xx)
BELLA: None
VERSATILE: None
SCHEDULE 2(a)(xxi)
BELLA: None
VERSATILE: None
SCHEDULE 2(a)(xxii)
BELLA: None
VERSATILE: None
SCHEDULE 2(a)(xxiii)
(d) Versatile: None
Bella: None
(e)
Pursuant to a Factoring Agreement dated October 14, 2004, between Versatile and
FTC Commercial Corp. and Amendment No. 1 to the Factoring Agreement dated
September 30, 2005, Versatile granted FTC a security interest in certain of its
assets, including intellectual property rights.
Pursuant to a Factoring Agreement dated October 12, 2005, between Bella and FTC
Commercial Corp., Bella granted FTC a security interest in certain of its
assets, including intellectual property rights.
(g) Trademark Rights Owned by Bella: None
Trademark Rights Owned by Versatile:
NAME OF XXXX JURISDICTION
---------------------------- ---------------------------------------------
Xxxxxxx Xxxx Australia
---------------------------- ---------------------------------------------
Canada
---------------------------- ---------------------------------------------
European Community
---------------------------- ---------------------------------------------
Japan
---------------------------- ---------------------------------------------
Republic of Korea
---------------------------- ---------------------------------------------
Mexico
---------------------------- ---------------------------------------------
United States of America
---------------------------- ---------------------------------------------
---------------------------- ---------------------------------------------
People's Liberation Australia
---------------------------- ---------------------------------------------
Canada
---------------------------- ---------------------------------------------
European Community
---------------------------- ---------------------------------------------
Japan
---------------------------- --------------------------------------------
Mexico
---------------------------- ---------------------------------------------
United States of America
---------------------------- ---------------------------------------------
---------------------------- ---------------------------------------------
Adept Canada
---------------------------- ---------------------------------------------
United States of America
---------------------------- ---------------------------------------------
---------------------------- ---------------------------------------------
DW United States of America
---------------------------- ---------------------------------------------
---------------------------- ---------------------------------------------
Dirty Wear United States of America
---------------------------- ---------------------------------------------
SCHEDULE 2(a)(xxiv)
1) On May 16, 2005, Xxxx Xxxx loaned Versatile $75,000
2)
(a) The Factoring Agreement dated October 14, 2004, between Versatile and
FTC Commercial Corp., as amended on September 30, 2005, is secured by a
personal guarantee of Xx. Xxxxxx Xxxx.
(b) The Factoring Agreement dated October 12, 2005, between Bella and FTC
Commercial Corp. is secured by a personal guarantee of Xx. Xxxxxx Xxxx.
3)
(a) XXXXX XXXX IS PARTY TO A COMMISSION AGREEMENT WITH MK SPORTSWEAR DATED
JULY 29, 2004.
(b) VERSATILE IS PARTY TO AN IMPORT/DISTRIBUTION AGREEMENT WITH U
INTERNATIONAL OFFICE DATED AUGUST 23, 2005. PURSUANT TO THE AGREEMENT,
U INTERNATIONAL OFFICE GUARANTEES TO VERSATILE THAT BY THE END OF THE
2006 CALENDAR YEAR, IT SHALL HAVE DELIVERED PURCHASE ORDERS TO
VERSATILE WITH A TOTAL PURCHASE ORDER VALUE OF NO LESS THAN $500,000.
IF THE PURCHASE ORDER VALUE FOR 2006 IS LESS THAN $500,000, U
INTERNATIONAL OFFICE SHALL PAY VERSATILE THE DIFFERENCE BY JANUARY 31,
2007.
(c) Xxxxx Xxxx entered into an apparel brand agreement with an entity owned
by Xxxxxx Xxxxxxxxxx. Pursuant to the terms of the agreement, Xxxxx
Xxxx has the exclusive right to manufacture clothing and accessories
under the Xxxxxxx Xxxx tradename. Xx. Xxxxxxxxxx'x entity will receive
the greater of 50% of the net profits of the Xxxxxxx Xxxx apparel line
or 6% of net sales, with Xxxxx Xxxx to receive the remaining profits.
Under the terms of the agreement, Xxxxx Xxxx will manage the joint
venture, and is responsible for funding the cost of the venture.
8)
(a) VERSATILE ENTERED INTO A LEASE AGREEMENT WITH OFER AND XXXXX XXXXXXXXX
ON SEPTEMBER 30, 2005. THE LEASE IS FOR THE RENTAL OF A 38,500 SQUARE
FOOT INDUSTRIAL BUILDING AT 000 XXXX XXXXXXXXX XXXXXXXXX XX LOS ANGELES
FOR A BASE RENT OF $23,485 PER MONTH. THE LEASE COMMENCES ON JANUARY 1,
2006, BUT INCLUDES AN OPTIONAL EARLY POSSESSION DATE OF OCTOBER 15,
2005. THE LEASE TERMINATES DECEMBER 31, 2008, BUT INCLUDES AN OPTION TO
EXTEND THE LEASE 36 MONTHS.
(b) Xxxxx Xxxx is party to a Commission agreement with MK Sportswear dated
July 29, 2004, pursuant to which Bella pays $600 for showroom
participation in Los Angeles.
SCHEDULE 2(a)(xxv)
Versatile has an insurance policy with Hartford Casualty Insurance Company dated
June 3, 2005 and expiring on June 3, 2006. The policy covers commercial
property, commercial general liability, and commercial umbrella liability.
SCHEDULE 2(b)(iii)
None
SCHEDULE 2(b)(vi)
None
SCHEDULE 2(b)(vii)
None
SCHEDULE 2(b)(ix)
None
SCHEDULE 2(b)(xiii)
None
