EXHIBIT 10.12
AGENCY AGREEMENT
Xxxxxx Xxxxxx & Co., LLC
00 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Xxxxx 00, 0000
Xxxxxxxxx:
Tarpon Industries, Inc. (formerly known as Wall St. Acquisitions, Inc.), a
Michigan corporation (the "Company"), proposes to offer (the "Offering") for
sale to "accredited investors", in a private placement, units ("Units"), each
Unit consisting (i) $100,000.00 principal amount of 8.0% junior secured
promissory notes (the "Notes") and (ii) warrants (the "Warrants") to purchase
shares of the Company's common stock, no par value (the "Common Stock")
equivalent to, 100% of the investment (150% for persons investing $500,000 or
more) divided by 100% of the offering price at which the Company offers its
Common Stock to the public. Such offering and sale of Units are referred to
herein as the "Offering," A minimum of fifteen (15) Units for a total of
$1,500,000("Minimum Offering") and a maximum of twenty (20) Units for a total of
$2,000,000 ("Maximum Offering") will be offered. The Minimum Offering will be
made on an "all or none" basis and the Maximum Offering will be made on a "best
efforts" basis. The Units are being offered in accordance with Section 4(2) of
the Securities Act of 1933, as amended (the "Securities Act") and Rule 506 of
Regulation D promulgated thereunder.
Xxxxxx Xxxxxx & Co., LLC is sometimes referred to herein as the "Placement
Agent." The Private Placement Memorandum and the Exhibits thereto. ("PPM") are
collectively referred to herein as the "Offering Documents."
The Company will prepare and deliver to the Placement Agent a reasonable
number of copies of the Offering Documents in form and substance satisfactory
to counsel to the Placement Agent.
Each prospective investor ("Subscriber") subscribing to purchase Units
will be required to deliver, among other, things, a Subscription Agreement and
an Accredited Investor Questionnaire ("Questionnaire") in the form to be
provided to offerees. Capitalized terms used herein, unless otherwise defined or
unless the context otherwise indicates, shall have the same meanings provided in
the Offering Documents.
1. Appointment of Placement Agent.
(a) Appointment. You are hereby appointed exclusive Placement Agent
of the Company (subject to your right to have selected dealers participate in
the Offering) during the Offering Period (as hereinafter defined) herein
specified for the purposes of assisting the
Company in finding qualified Subscribers pursuant to the Offering described in
the Offering Documents. "The Offering Period" shall mean the period commencing
on the date hereof and shall continue until the earlier to occur of (i) the sale
of all of the Maximum Offering or (ii) April 26, 2004 but may be extended by you
until May 26, 2004. The day that the Offering Period terminates is hereinafter
referred to as the "Termination Date." If the Minimum Offering is not sold prior
to the Termination Date, the Offering will be terminated and all funds received
from Subscribers will be returned, without interest and without any deduction.
(b) Acceptance. Subject to the performance by the Company of all of
its obligations to be performed under this Agreement and to the completeness and
accuracy of all representations and warranties of the Company contained in this
Agreement and the Offering Documents, Xxxxxx Xxxxxx & Co., LLC hereby accepts
its appointment as exclusive Placement Agent and agrees to use its best efforts
to assist the Company in finding accredited investors pursuant to the Offering
described in the Offering Documents. It is understood that the Placement Agent
has no commitment to sell the Units. The agency hereunder of the Placement Agent
is not terminable by the Company except upon termination of the Offering Period.
(c) Subscriptions. Subscriptions for Units shall be evidenced by the
execution by Subscribers of a Subscription Agreement. No Subscription Agreement
shall be effective unless and until it is accepted by an authorized officer.
Until the Closing, all subscription funds received shall be held in escrow
pursuant to the Escrow Agreement. The Placement Agent shall not have any
obligation to independently verify the accuracy or completeness of any
information contained in any Subscription Agreement or Offeree Questionnaire or
the authenticity, sufficiency, or validity of any check delivered by any
prospective investor in payment for Units.
(d) Purchases. The Placement Agent and its affiliates may purchase
Units sold in the Offering.
2. Representations and Warranties of the Company. The Company
represents and warrants to the Placement Agent and each Selected Dealer, if any,
as follows (for the purposes hereof these representations are also made for each
and every subsidiary of the Company):
(a) Securities Law Compliance. The Offering Documents conform in all
material respects with the requirements of Section 4(2) of the Securities Act
and Regulation D promulgated thereunder and with the requirements of all other
published rules and regulations of the Securities and Exchange Commission (the
"Commission") currently in effect relating to "private offerings" to "accredited
investors" of the type contemplated by the Company. The Offering Documents will
not contain an untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements therein, in light of the
circumstances in which they were made, not misleading. If at any time prior to
the completion of the Offering or other termination of this Agreements, any
event shall occur as a result of which it might become necessary to amend
or supplement the Offering Documents so that they do not include any untrue
statement of any material fact or omit to state any material fact necessary in
order to make the statements therein, in the light of the circumstances then
existing, not misleading, the Company will promptly notify you and will supply
you with amendments or supplements correcting such
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statement or omission. The Company will also provide the Placement Agent, for
delivery to all offerees and purchasers and their representatives, if any, any
information, documents and instruments which the Placement Agent deems
reasonably necessary to comply with applicable state and federal law.
(b) Organization. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the state of its
incorporation and has all requisite corporate power and authority to own and
lease its properties, to carry on its business as currently conducted and as
proposed to be conducted, to execute and deliver this Agreement and to carry out
the transactions contemplated by this Agreement, as appropriate, and is duly
licensed or qualified to do business as a foreign corporation in each other
jurisdiction in which the conduct of its business or ownership or leasing of its
properties requires it to be so qualified, except where the failure to be so
licensed or qualified would not, in the aggregate, have a material adverse
effect on the business or financial condition of the Company (a "Material
Adverse Effect").
(c) Capitalization. The authorized, issued and outstanding capital
stock of the Company prior to and upon the consummation of the transactions
contemplated hereby is as set forth in the PPM. All issued and outstanding
shares of the Company are validly issued, fully paid and nonassessable and such
shares have not been issued in violation of the preemptive rights of any
stockholder of the Company. All prior sales of securities of the Company were
either registered under the Securities Act and applicable state securities laws
or exempt from such registration, and no security holder has any rescission
rights with respect thereto.
(d) Warrants, Preemptive Rights, Etc. Except as set forth in or
contemplated by the PPM, there are not, nor will there be immediately after the
Closing (as hereinafter defined), any outstanding warrants, options, agreements,
convertible securities, preemptive rights to subscribe for or other commitments
pursuant to which the Company is, or may become, obligated to issue any shares
of its capital stock or other securities of the Company and this Offering will
not cause any anti-dilution adjustments to such securities or commitments except
as reflected in the PPM.
(e) Subsidiaries and Investments. The Company has no subsidiaries
and the Company does not own, directly or indirectly, any capital stock or other
equity ownership or proprietary interests in any other corporation, association,
trust, partnership, joint venture or other entity except as set forth on
Schedule 2(e) annexed hereto.
(f) Financial Statements. (i) The financial information regarding
the Company and, to the best knowledge of the Company, any proposed acquisition
which is contained in the PPM is and will be accurate in all material respects.
(ii) Promptly after the Initial Closing, (as hereinafter defined)
the Company shall use its best efforts to obtain a non-qualified opinion of an
auditing form acceptable to the Placement Agent (a "Non-Qualified Opinion") as
to its financial statements for its two prior fiscal years. As a condition of
the acquisition of any other business, the Company shall similarly
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obtain, prior to the consummation thereof, a Non-Qualified Opinion as to its
financial statements for its two prior fiscal years.
(g) Absence of Changes. To the best of Company's knowledge, since
December 31, 2003, except as disclosed in the PPM, the Company or such
Subsidiary has not incurred any liabilities or obligations, direct or
contingent, not consistent with its past practices, or entered into any
transaction not consistent with its past practices, which is material to the
business of the Company or such Subsidiary, and, since the date of the PPM,
there has not been any change in the capital stock of, or any incurrence of
funded debt by, the Company or such Subsidiary, or any issuance of options,
warrants or other rights to purchase the capital stock of the Company or such
Subsidiary, or any adverse change or any development involving, so far as the
Company or such Subsidiary can now reasonably foresee, a prospective adverse
change in the condition (financial or otherwise), net worth, results of
operations, business, key personnel or properties which would be material to the
business or financial condition of the Company or such Subsidiary, and the
Company or such Subsidiary has not become a party to, and neither the business
nor the property of the Company or such Subsidiary has become the subject of,
any material litigation whether or not in the ordinary course of business.
(h) Title. The Company has good and marketable title to all
properties and assets, owned by it, free and clear of all liens, charges,
encumbrances or restrictions, except such as are not significant or important in
relation to the Company's or such Subsidiary business; all of the material
leases and subleases under which the Company or such Subsidiary is the lessor or
sublessor of properties or assets or under which the Company or such Subsidiary
holds properties or assets as lessee or sublessee are in full force and effect,
and the Company or such Subsidiary is not in default in any material respect
with respect to any of the terms or provisions of any of such leases or
subleases, and no material claim has been asserted by anyone adverse to rights
of the Company or such Subsidiary as lessor, sublessor, lessee or sublessee
under any of the leases or subleases mentioned above, or affecting or
questioning the right of the Company or such Subsidiary to continued possession
of the leased or subleased premises or assets under any such lease or sublease.
The Company and such Subsidiary owns or leases, respectively, all such
properties as are necessary to its operations as now conducted.
(i) Proprietary Rights. The Company owns or possesses adequate and
enforceable rights to use all patents, patent applications, trademarks, service
marks, copyrights, trade secrets, processes, formulations, technology or
know-how actually used in the conduct of its business as described in the PPM
and will own or possess such rights with respect to the business to be conducted
as contemplated by the PPM (the "Proprietary Rights"). The Company or such
Subsidiary has not received any notice of any claims, nor does it have any
knowledge of any threatened claims, and knows of no facts which would form the
basis of any claim, asserted by any person to the effect that the sale or use of
any product or process now used or offered by the Company or such Subsidiary, or
proposed to be used or offered by the Company or such Subsidiary infringes on
any patents or infringes upon the use of any such Proprietary Rights of another
person and, to the best of the Company's or such Subsidiary's knowledge, no
others are infringing the Company's or such Subsidiary's Proprietary Rights.
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(j) Litigation. Except as set forth on Schedule 2(j) hereto, there
is no action, suit, investigation, customer complaint, claim or proceeding at
law or in equity by or before any arbitrator, governmental instrumentality or
other agency now pending or, to the knowledge of the Company, threatened against
the Company, or the senior management thereof. The Company is not subject to any
judgment, order, writ, injunction or decree of any Federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign except as set forth on Schedule 2(j).
(k) Non-Defaults; Non-Contravention. The Company is not in violation
of or default under, nor will the execution and delivery of this Agreement or
any of the Offering Documents, or consummation of the transactions contemplated
herein or therein result in a violation of or constitute a default in the
performance or observance of any obligation under (i) its Articles of
Incorporation, or its By-laws, or (ii) any indenture, mortgage, contract,
material purchase order or other agreement or instrument to which the Company
or such Subsidiary is a party or by which it or its property is bound or
affected, where such violation or default would have a Material Adverse Effect,
or (iii) any material order, writ, injunction or decree of any court of any
Federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, where such violation or
default would have a Material Adverse Effect, and there exists no condition,
event or act which constitutes, nor which after notice, the lapse of time or
both, could constitute a default under any of the foregoing, which in either
case would, have a Material Adverse Effect.
(l) Taxes. The Company has filed all Federal, state, local and
foreign tax returns, if any, which are required to be filed by it to the
relevant agencies and all such returns are true and correct in all material
respect. The Company has paid all taxes pursuant to such returns or pursuant to
any assessments received by it or which it is obligated to withhold from amounts
owing to any employee, creditor or third party. The Company has properly
accrued all taxes required to be accrued by generally accepted accounting
principals consistently applied. To the best of current management's knowledge,
the tax returns, of the Company have never been audited by any state, local or
Federal authorities. The Company has not waived any statute of limitations with
respect to taxes or agreed to any extension of time with respect to any tax
assessment or deficiency.
(m) Compliance With Laws; Licenses, Etc. The Company has not
received notice of any violation of or noncompliance with any Federal, state,
local or foreign, laws, ordinances, regulations and orders applicable to its
business which has not been cured, the violation of, or noncompliance with
which, would have a Material Adverse Effect. The Company and such Subsidiary has
all licenses and permits and other governmental certificates, authorizations and
permits and approvals (collectively, "Licenses") required by every Federal,
state and local government or regulatory body for the operation of its business
as currently conducted and the use of its properties, except where the failure
to be licensed would not have a Material Adverse Effect. The Licenses are in
full force and effect and to the Company's or such Subsidiary's knowledge no
violations currently exist in respect of any License and no proceeding is
pending or threatened to revoke or limit any thereof.
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(n) Authorization of Agreement, Etc. This Agreement has been duly
and validly authorized, executed and delivered by the Company and the execution,
delivery and performance by the Company of this Agreement and the other
agreements included in the Offering Documents, have been duly authorized by all
requisite corporate action by the Company and when delivered, constitute or will
constitute the legal, valid and binding obligations of the Company or such
Subsidiary, enforceable in accordance with their respective terms, subject to
applicable laws regarding creditors rights and the availability of equitable
remedies.
(o) Authorization of Notes and Warrants Etc. The issuance, sale and
delivery of the Notes and the Warrants (as defined herein) have been duly
authorized by all requisite corporate action of the Company. When so issued,
sold and delivered, the Notes and the Warrants will be duly executed, issued and
delivered and will constitute valid and legal obligations of the Company
enforceable in accordance with their respective terms, and will not be subject
to preemptive or any other similar rights of the stockholders of the Company or
others which rights shall not have been waived prior to the Initial Closing.
(p) Authorization of Reserved Shares. The issuance, sale and
delivery by the Company of the shares of Common Stock issuable upon exercise of
the Warrants (the "Reserved Shares") have, been duly authorized by all requisite
corporate action of the Company, and the Reserved Shares have been duly reserved
for issuance upon exercise of all or any of the Warrants and when so issued,
sold, paid for and delivered, the Reserved Shares will be validly issued and
outstanding, fully paid and nonassessable, and not subject to preemptive or any
other similar rights of the stockholders of the Company or others which rights
shall not have been waived prior to the Initial Closing.
(q) Exemption from Registration. Assuming (i) the accuracy of the
information provided by the respective Subscribers in the Subscription Documents
and (ii) that the Placement Agent has complied in all material respects with the
provisions of Regulation D promulgated under the Securities Act, to be complied
with by it, the offer and sale of the Units pursuant to the terms of this
Agreement are exempt from the registration requirements of the Securities Act
and the rules and regulations promulgated thereunder (the "Regulations"). The
Company is not disqualified from the exemption under Regulation D by virtue of
the disqualifications contained in Rule 505(b)(2)(iii) or Rule 507 promulgated
thereunder.
(r) Registration Rights. Except with respect to holders of the
Units, no person has any right to cause the Company to effect the registration
under the Securities Act of any securities of the Company. The Company shall
grant registration rights under the Securities Act to the investors in the
Offering and/or their transferees as more fully described in the Subscription
Agreement between the Company and the investors.
(s) Brokers. Neither the Company nor any of its officers, directors,
employees or stockholders has employed any broker or finder in connection with
the transactions contemplated by this Agreement other than the Placement Agent.
(t) Title to Units. When certificates representing the securities
comprising the
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Units shall have been duly delivered to the purchasers and payment shall have
been made therefor, the several purchasers shall have good and marketable title
to the Notes and Warrants and/or the Reserved Shares free and clear of all
liens, encumbrances and claims whatsoever (with the exception of claims arising
through the acts or omissions of the purchasers and except as arising from
applicable Federal and state securities laws or pursuant to the Subscription
Agreement), and the Company shall have paid all taxes, if any, in respect of the
original issuance thereof.
(u) Right of First Refusal. No person, firm or other business entity
is a party to any agreement, contract or understanding, written or oral
entitling such party to a right of first refusal with respect to offerings by
the Company.
(v) PPM. The information in the PPM is accurate and complete and
contains no material misleading statements.
3. Closing; Placement and Fees.
(a) Closing. Provided the Minimum Offering shall have been
subscribed for and funds representing the sale thereof shall have cleared a
closing (the "Initial Closing") shall take place at the offices of the Placement
Agent, 00 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx within one business day thereafter
(which date (the "Initial Closing Date") may be accelerated or adjourned by
agreement between the Company and the Placement Agent). At the Initial Closing,
payment for the Units issued and sold by the Company shall be made against
delivery of the Notes and Warrants comprising such Units. Thereafter, one or
more additional Closings may be held during the Offering Period or up to 10 days
thereafter for funds received during the Offering Period.
(b) Conditions to Placement Agent's Obligations. The obligations of
the Placement Agent hereunder will be subject to the accuracy in all material
respects of the representations and warranties of the Company herein contained
as of the date hereof and as of each Closing Date, to the performance by the
Company of its obligations hereunder and to the following additional conditions:
(i) Due Qualification or Exemption. (A) The Offering will
become qualified or be exempt from qualification under the securities laws of
the several states not later than the Closing Date, and (B) at the Closing Date
no stop order suspending the sale of the Units shall have been issued, and no
proceeding for that purpose shall have been initiated or threatened;
(ii) No Material Misstatements. Neither the Blue Sky
qualification materials nor the PPM, nor any supplement thereto, will contain an
untrue statement of a fact which in the reasonable opinion of the Placement
Agent is material, or omits to state a fact, which in the reasonable opinion of
the Placement Agent is material and is required to be stated therein, or is
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading;
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(iii) Compliance with Agreements. The Company will have
complied in all material respects with all agreements and satisfied all
conditions on its part to be performed or satisfied hereunder at or prior to
each Closing;
(iv) Corporate Action. The Company will have taken all
necessary corporate action including, without limitation, obtaining the approval
of the Company's Board of Directors, for the execution delivery of this
Agreement, the performance by the Company of its obligations hereunder and the
offering contemplated hereby;
(v) Opinion of Counsel. The Placement Agent shall receive the
opinion of counsel to the Company, dated the Closing, substantially to the
effect that:
(A) the Company and each subsidiary is validly existing and in
good standing under the laws of its incorporation, has all requisite
corporate power and authority necessary to own or hold its properties and
conduct its business and is duly qualified or licensed to do business as a
foreign corporation and is in good standing in each other jurisdiction in
which the ownership or leasing of its properties or conduct of its
business requires such qualification, except where the the failure to so
qualify or be licensed would not have a material adverse effect;
(B) each of this Agreement, the Notes, the Warrants and the
other agreements included in the Offering Documents, has been duly and
validly authorized, executed and delivered by the Company, and are the
valid and binding obligation of the Company, enforceable against it in
accordance with its terms, subject to any applicable bankruptcy,
insolvency or other laws affecting the rights of creditors generally and
to general equitable principles;
(C) As of the Closing Date, the number of authorized, issued
and outstanding capital, stock of the Company (before giving effect to the
transactions contemplated by this Agreement) is 1,229,741 shares. The
Company has authorized the issuance of (i) warrants to purchase that
number of shares of common stock equal to $150,000 divided by the initial
public offering price of Common Stock; (ii) an estimated 70,262 shares of
Common Stock (assuming a $5.00 initial public offering price) to certain
shareholders who were granted a right to receive additional shares of
Common Stock if the Company engages in an initial public offering or
reverse merger at a per share valuation that is less than 1.35 times the
per share purchase price paid by the investors in the Company's Second
Prior Financing (as defined in the PPM), and (iii) a stock option plan
authorizing the issuance of up to 400,000 shares of Common Stock of which
the Company has committed to issue 80,000 shares to Xxxx X. Xxxxx, 80,000
shares to Xxxxxxx X. Xxxxxxx and 30,000 shares to Xxxx Xxxxx, Jr. To such
counsel's actual knowledge and based upon a certificate of an authorized
officer of the Company, there are no outstanding warrants, options,
agreements, convertible securities, or preemptive rights pursuant to which
the Company is, or may become, obligated to issue any shares of its
capital stock or other securities of the Company other than as set forth
in the PPM and
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herein. All of the issued shares of capital stock of the Company have been
duly and validly authorized and issued, are fully paid and nonassessable
and to such counsel's actual knowledge have not been issued in violation
of the preemptive rights of any securityholder of the Company;
(E) assuming (i) the accuracy of the information provided by
the Subscribers in the Subscription Agreements and Accredited Investor
Questionnaires and (ii) that the Placement Agent has complied with the
requirements of section 4(2) of the Securities Act (and the provisions of
Regulation D promulgated thereunder), the issuance and sale of the Units
in the Offering is exempt from registration under the Securities Act and
Regulation D promulgated thereunder;
(F) neither the execution and delivery of this Agreement, and
the other agreements included in the Offering Documents, nor compliance
with the terms hereof or thereof, nor the consummation of the
transactions herein or therein contemplated, nor the issuance of the
Notes, the Warrants and the Reserved Shares, has, nor will, conflict with,
result in a breach of, or constitute a default under the Articles of
Incorporation or By-laws of the Company and any subsidiary or any
material contract, instrument or document known to such counsel to which
the Company or any subsidiary is a party, or by which it or any of its
properties is bound or violate any applicable law, rule, regulation,
judgment, order or decree known to such counsel of any governmental agency
or court having jurisdiction over the Company or any subsidiary or any of
its properties or business;
(G) counsel will confirm to you based upon a search of
relevant court records there are no claims, actions, suits,
investigations or proceedings before or by any arbitrator, court,
governmental authority or instrumentality pending or, based upon a
certificate from the Company's authorized officer, threatened against or
affecting the Company or any subsidiary or involving the properties of
the Company or any subsidiary except as set forth on Schedule 2(j) to the
Agreement.
(H) counsel has reviewed the PPM and, without independent
investigation by such counsel of the facts set forth therein, and noting
that it is special counsel, nothing has come to the attention of such
counsel to cause them to have reason to believe that the PPM contains any
material misstatement, and that such counsel expresses no opinion as to
any financial statements, accompanying notes, other financial information
and statistical data, or any forward looking statements contained in the
PPM.
(I) The stock purchase agreement between the Company and
Xxxxxxx Xxxxxxx and the redemption agreement between EWCO and Xxxxxxx
Xxxxxxx, have been consummated and the Company owns all of the outstanding
capital stock of Xxxxxx Welding Company.
In lieu of giving the above opinions as to any non-United States subsidiary of
the Company, and as to the matters in (I), the Company can provide an opinion of
other counsel reasonably satisfactory to the Placement Agent and its counsel.
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(vi) Officers' Certificate. The Placement Agent shall receive
a certificate of the Company, signed by the Chief Executive Officer and Chief
Financial Officer thereof, that the representations and warranties contained in
Section 2 hereof are true and accurate in all material respects at the Closing
with the same effect as though expressly made at such Closing.
(vii) Fund Escrow Agreement. Within three (3) days from the
date hereof, the Placement Agent shall receive a copy of a duly executed escrow
agreement in the form previously delivered to you regarding the deposit of funds
pending the closing(s) of the respective Placements with a bank or trust company
acceptable to the Placement Agent (the "Fund Escrow Agreement").
(viii) Outstanding Debt. On or prior to any Closing, the
Company and any Subsidiary will have no outstanding indebtedness, other than
trade payables in the ordinary course and bank debt existing on the date hereof
and disclosed in its Financial Statements, any other debt disclosed in the PPM
which has been approved by the Placement Agent, and any debt arising from Units
theretofore sold.
(ix) No Adverse Changes. There shall not have occurred, at
any time prior to the Closing: (i) any domestic or international event, act or
occurrence which has materially disrupted, or in the Placement Agent's opinion
will in the immediate future materially disrupt, the securities markets; (ii) a
general suspension of, or a general limitation on prices for, trading in
securities on the New York Stock Exchange or the American Stock Exchange or in
the over-the-counter market; (iii) any outbreak of major hostilities or other
national or international calamity; (iv) any banking moratorium declared by a
state or federal authority; (v) any moratorium declared in foreign exchange
trading by major international banks or other persons; (vi) any material
interruption in the mail service or other means of communication within the
United States; (vii) any material adverse change in the business, properties,
assets, results of operations, or financial condition of the Company or any
Subsidiary or acquisition identified in the PPM; or (viii) any change in the
market for securities in general or in political, financial, or economic
conditions which, in the Placement Agent's reasonable judgment, makes it
inadvisable to proceed with the offering, sale, and delivery of the Units.
(x) EWCO/Steelbank. There shall have been the consummation of
the acquisition by the Company of Xxxxxx Welding Company on terms reasonably
acceptable to the Placement Agent, and a definitive agreement for the
acquisition of Steelbank, Inc.
(xi) Xxxxxx/Other. There shall be a definitive agreement for
the acquisition of the Xxxxxx facility of Xxxxxx on terms reasonably
acceptable to the Placement Agent, or a substitute acquisition reasonably
acceptable to the Placement Agent, in either case by May 15, 2004, the
consummation of which shall occur before the contemplated Public Offering; and
such acquiree shall have provided an Unqualified Opinion for its financial
statements for its two most recent fiscal years, which will be available for
inclusion in the registration statement for the Public Offering.
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(xii) Employment Agreements. Employment agreements with key
management reasonably acceptable to the Placement Agent shall have been
executed and delivered.
(xiii) Board of Directors. A Board of Directors composition
reasonably acceptable to the Placement Agent shall be in place.
(xiv) Consulting Agreement. A consulting agreement acceptable
to the Placement Agent shall have been entered into between the Company and
Bainbridge Advisors, LLC relating to mergers, acquisitions and integration of
operations.
(xv) Lenders. There shall be an agreement with the Xxxxxx
Welding Company lenders acceptable to the Placement Agent, and which will
permit all of the transactions contemplated hereby.
(xvi) Name. A name for the Company which is reasonably
acceptable to the Placement Agent shall have been adopted by the Company.
(xvii) Ladenburg Xxxxxxxx. A general release of the Company by
Ladenburg Xxxxxxxx shall have been delivered to the Placement Agent.
(xviii) Due Diligence. There shall be satisfaction by the
Placement Agent, in its sole discretion, with its ongoing due diligence of
the Company and any subsidiaries.
(xix) Observer. The appointment of an observer designated by
the Placement Agent, to the Board of Directors of the Company and any Subsidiary
shall have been adopted.
(xx) Projection. An eight quarter projection of operations,
financial position and cash flow of the Company and any Subsidiary or
acquisition then contemplated, as approved by the Board of Directors and
executive officers of the Company, shall have been delivered to the Placement
Agent.
(xxi) Public Offering. There shall be approval by the Board of
Directors of the Company of the contemplated Public Offering on the terms
outlined on Schedule 3(t) annexed hereto and a resolution that if the Public
Offering is not pursued in good faith, the Company shall pay the sum of
$200,000 to the Placement Agent as liquidated damages for its failure to do so.
(xxii) Investment Banking Agreement. The Company shall have
entered into an investment banking agreement with the Placement Agent in the
form of Exhibit A hereto.
(c) Blue Sky. Counsel to the Placement Agent will prepare and file
the necessary documents so that offers and sales of the securities to be offered
in the Offering may be
11
made in certain jurisdictions. It is understood that such filings may be based
on or rely upon (i) the representations of each Subscriber set forth in the
Subscription Agreement delivered by such Subscriber, (ii) the representations,
warranties and agreements of the Company set forth in Section 2 of this
Agreement, (iii) the representations and warranties of the Placement Agent, and
(iv) the representations of the Company set forth in the certificate to be
delivered at each closing pursuant to paragraph (vi) of Section 3(b).
(d) Placement Fee and Expenses. Simultaneously with payment for and
delivery of the Units at the Closing as provided in paragraph 3(a) above, the
Company shall at such Closing pay to the Placement Agent (i) a commission equal
to seven percent (7%) of the aggregate purchase price of the Units sold; (ii) an
investment banking fee equal to three percent (3%) of the aggregate purchase
price of the Units sold; (iii) reimbursement of out-of-pocket expenses; and
(iv) reimbursement of fees and disbursements of counsel to the Placement Agent
as per a retainer agreement to which the Company is a party. The Company shall
also pay all expenses in connection with the qualification of the Units under
the securities or Blue Sky laws of the states which the Placement Agent shall
designate, including reasonable legal fees and filing fees.
(e) Non-Accountable Payment. The Company shall pay the Placement
Agent $50,000 prior to the execution of this Agreement as a non-accountable,
non-refundable retainer. $25,000 to be applied to the proposed initial public
offering activities of the Placement Agent.
(f) Warrants. At the time of each Closing, the Company shall
issue and deliver five (5) year common cashless exercise stock purchase
warrants to the Placement Agent for the purchase of such number of shares of
its common stock as is equal to five percent (5%) of the number of dollars in
the aggregate purchase price of the Units sold at such Closing (eg: if
$2,000,000 of Units are sold, the Placement Agent's warrant would cover 100,000
shares) and which shall have an initial exercise price of 125% of the offering
price of the Company's common stock in a public offering (the "Public Offering")
contemplated by the parties.
(g) Bring Down Opinions and Certificates. If there is more than one
Closing, then at each Closing there shall be delivered to the Placement Agent
updated opinions and certificates as described in Section 3(b) (v) and (vi).
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4. Covenants of the Company.
(a) Increase of Offering. The Company agrees to increase the Maximum
Offering beyond $2,000,000 in the event that one or more acquisition
opportunities are presented prior to the Initial Closing which are reasonably
acceptable to the Company and the Placement Agent and which require such funding
increase.
(b) Use of Proceeds. The net proceeds of the Offering will be used
by the Company as set forth in the PPM. The Company shall not use any of the
proceeds from the Offering to repay any indebtedness of the Company (other than
trade payables in the ordinary course), including but not limited to
indebtedness to any current executive officers, directors or principal
stockholders of the Company except as set forth in the PPM.
(c) Expenses of Offering. The Company shall be responsible for, and
shall bear all expenses directly incurred in connection with the Offering or by
reimbursement of the Placement Agent including, but not limited to, (i) legal
fees of the Placement Agent's counsel and (ii) blue sky filing fees and
the fees and disbursements of Placement Agent's counsel in connection with
blue sky matters (exposure for (i) and (ii) fees not to exceed $35,000), and
(iii) the cost of the Placement Agent's printing, mailing, telephone,
telegraph, travel, due diligence meetings, or other similar expenses, as set
forth herein, subject to a $25,000 credit for a portion of the retainer received
by the Placement Agent.
(d) Termination. If the Company decides not to proceed with the
Offering for any reason, other than a material breach by the Placement Agent
hereunder, or, if the Placement Agent decides not to proceed with the Offering
because of a material breach by the Company of its representations, warranties,
or covenants in this Agreement or as a result of material adverse changes in
the affairs of the Company, the Company will be obligated to pay the Placement
Agent liquidated damages of $50,000 if termination occurs before printing of the
PPM and $100,000 thereafter, and to reimburse the Placement Agent for its
expenses hereunder. The Placement Agent shall have no liability to the Company
for any reason should the Placement Agent choose not to proceed with the
Offering contemplated hereby.
(e) Notification. The Company shall notify the Placement Agent
immediately, and in writing, (A) when any event shall have occurred during the
period commencing on the date hereof and ending on the later of the last Closing
or the Termination Date as a result of which the PPM would include any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and
(B) of the receipt of any notification with respect to the modification,
rescission, withdrawal or suspension of the qualification or registration of the
Units, or of any exemption from such registration or qualification, in any
jurisdiction. The Company will use its best efforts to prevent the issuance of
any such modification, rescission, withdrawal or suspension and, if any
such modification, rescission, withdrawal or suspension is issued and you so
request, to obtain the lifting thereof as promptly as possible.
13
(f) Blue Sky. The Company will use its best efforts to qualify or
register the Units for offering and sale under, or establish an exemption from
such qualification or registration under, the securities or "blue sky" laws of
such jurisdictions as the Placement Agent may reasonably request; provided
however, that the Company will not be obligated to qualify as a dealer in
securities in any jurisdiction in which it is not so qualified. The Company will
not consummate any sale of Units in any jurisdiction in which it is not so
qualified or in any manner in which such sale may not be lawfully made.
(g) Form D Filing. The Company shall file five copies of a Notice of
Sales of Securities on Form D with the Securities and Exchange Commission (the
"Commission") no later than 15 days after the first sale of the Units. The
Company shall file promptly such amendments to such Notices on Form D as shall
become necessary and shall also comply with any filing requirement imposed by
the laws of any state or jurisdiction in which offers and sales are made. The
Company shall furnish the Placement Agent with copies of all such filings.
(h) Investor Relations. The Company shall not, during the period
commencing on the date hereof and ending on the later of the last Closing and
the Termination Date, issue any press release or other communication, or hold
any press conference with respect to the Company, its financial condition,
results of operations, business, properties, assets, or liabilities, or the
Offering, without the prior consent of the Placement Agent, which consent shall
not be unreasonably withheld.
(i) Quarterly Financial Statement. Within 30 days after the end of
each fiscal quarter, the Company shall provide the Placement Agent with
consolidated and consolidating financial statements of the Company and its
subsidiaries, including a balance sheet, statement of operations, statement of
cash flow and applicable notes, certified by an officer of the Company.
(j) Public Relations Advisor. Not later than May 30, 2004, the
Company shall appoint and thereafter maintain a recognized, third party,
financial public relations advisor reasonably acceptable to the placement Agent.
(k) Investor Warrant Exercise Period. The Company shall modify the
investor warrants, at the direction of the Placement Agent, to extend the 90 day
period before exercise to up to 180 days.
5. Indemnification.
(a) The Company agrees to indemnify and hold harmless the Placement
Agent and each Selected Dealer, if any, and their respective shareholders,
members, directors, officers, agents and controlling persons (an"Indemnified
Party") against any and all loss, liability, claim, damage and expense
whatsoever (and all actions in respect thereof), and to reimburse the Placement
Agent for reasonable legal fees and related expenses as incurred (including, but
not limited to the costs of investigating, preparing or defending any such
action or claim whether or not in connection with litigation in which the
Placement Agent is a party and the costs of giving testimony or furnishing
documents in response to a subpoena or otherwise), arising out of any
14
untrue statement or alleged untrue statement of a material fact contained in the
Offering Documents or the omission or alleged omission therefrom of a material
fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading or any breach of the
representations, warranties or covenants of the Company set forth herein.
(b) Promptly after receipt by an Indemnified Party under this
Section of notice of any claim or the commencement of any action, the
indemnified party will, if a claim in respect thereof is to be made against the
Company under this Section, notify in writing the Company of the commencement
thereof; but the omission so to notify the Company will not relieve it from any
liability which it may have to the Indemnified Party otherwise than under this
Section except to the extent the defense of the claim is prejudiced. In case
any such action is brought against an Indemnified Party, and it notifies the
Company of the commencement thereof, the Company will be entitled to participate
in, and, to the extent that it may wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, subject to the
provisions herein stated, with counsel reasonably satisfactory to the
Indemnified Party, and after notice from the Company to the Indemnified Party of
its election so to assume the defense thereof, the Company will not be liable to
the Indemnified Party under this Section for any legal or other expenses
subsequently incurred by the Indemnified Party in connection with the defense
thereof other than reasonable costs of investigation (provided the Company has
been advised in writing that such investigation is being undertaken). The
Indemnified Party shall have the right to employ separate counsel in any such
action and to participate in the defense thereof, but the fees and expenses of
such counsel shall not be at the expense of the Company if the Company has
assumed the defense of the action with counsel reasonably satisfactory to the
Indemnified Party; provided that the fees and expenses of such counsel shall be
at the expense of the Company if (i) the employment of such counsel has been
specifically authorized in writing by the Company or (ii) the named parties to
any such action (including any impleaded parties) include both the Indemnified
Party or Parties and the Company and, in the reasonable judgment of counsel
for the Indemnified Party, it is advisable for the Indemnified Party or Parties
to be represented by separate counsel due to an actual or potential conflict of
interest (in which case the Company shall not have the right to assume the
defense of such action on behalf of the an Indemnified Party or Parties), it
being understood, however, that the Company shall not, in connection with any
one such action or separate but substantially similar or related actions in the
same jurisdiction arising out of the same general allegations or circumstances,
be liable for the reasonable fees and expenses of more than one separate firm of
attorneys for all the Indemnified Parties. No settlement of, any action against
an Indemnified Party shall be made unless such an Indemnified Party is fully and
completely released in connection therewith.
6. Contribution.
To provide for just and equitable contribution, if (i) an
Indemnified Party makes a claim for indemnification pursuant to Section 5 but it
is found in a final judicial determination, not subject to further appeal, that
such indemnification may not be enforced in such case, even though this
Agreement expressly provides for indemnification in such case, or (ii) any
indemnified or indemnifying party seeks contribution under the Securities Act,
the Securities
15
Exchange Act of 1934 (the "Exchange Act"), or otherwise, then the Company
(including for this purpose any contribution made by or on behalf of any
officer, director, employee or agent for the Company, or any controlling person
of the Company), on the one hand, and the Placement Agent and any Selected
Dealers (including for this purpose any contribution by or on behalf of an
indemnified party), on the other hand, shall contribute to the losses,
liabilities, claims, damages, and expenses whatsoever to which any of them may
be subject, in such proportions as are appropriate to reflect the relative
benefits received by the Company, on the one hand, and the Placement Agent and
the Selected Dealers, on the other hand; provided, however, that if applicable
law does not permit such allocation, then other relevant equitable
considerations such as the relative fault of the Company and the Placement Agent
and the Selected Dealers in connection with the facts which resulted in such
losses, liabilities, claims, damages, and expenses shall also be considered. In
no case shall the Placement Agent or a Selected Dealer be responsible for a
portion of the contribution obligation in excess of the compensation received by
it pursuant to Section 3 hereof or the Selected Dealer Agreement, as the case
may be. No person guilty of a fraudulent misrepresentation shall be entitled to
contribution from any person who is not guilty of such fraudulent
misrepresentation. For purposes of this Section 6, each person, if any, who
controls the Placement Agent or a Selected Dealer within the meaning of Section
15 of the Securities Act or Section 20(a) of the Exchange Act and each officer,
director, stockholder, employee and agent of the Placement Agent or a Selected
Dealer, shall have the same rights to contribution as the Placement Agent or the
Selected Dealer, and each person, if any who controls the Company within the
meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act
and each officer, director, employee and agent of the Company, shall have the
same rights to contribution as the Company, subject in each case to the
provisions of this Section 6. Anything in this Section 6 to the contrary
notwithstanding, no party shall be liable for contribution with respect to the
settlement of any claim or action effected without its written consent, not to
be unreasonable withheld or delayed.
7. Miscellaneous.
(a) Survival. The indemnification provided in Section 5 hereof and
the contribution provided in Section 6 hereof shall survive any termination and
shall survive the Closing, for a period of five years. The representations,
warranties, indemnities, agreements, covenants and other statements of the
Company as of the date hereof shall survive execution of this Agreement and
delivery of the Units and the termination of this Agreement for a period of two
(2) years after such respective event.
(b) No Other Beneficiaries. This Agreement is intended for the sole
and exclusive benefit of the parties hereto and their respective successors and
controlling persons, and no other person, firm or corporation shall have any
third-party beneficiary or other rights hereunder.
(c) Governing Law; Resolution of Disputes. This Agreement shall be
governed by and construed in accordance with the law of the State of New York
without regard to conflict of law provisions. The Placement Agent and the
Company will attempt to settle any claim or controversy arising out of this
Agreement through consultation and negotiation in good
16
faith and a spirit of mutual cooperation. Should such attempts fail, then the
dispute will be mediated by a mutually acceptable mediator to be chosen by the
Placement Agent and the Company within 15 days after written notice from either
party demanding mediation. Neither party may unreasonably withhold consent to
the selection of a mediator, and the parties will share the costs of the
mediation equally. Any dispute which the parties cannot resolve through
negotiation or mediation within 60 days of the date of the initial demand for it
by one of the parties may then be submitted to the courts for resolution.
Exclusive jurisdiction shall be in the state and Federal courts sitting in the
State of New York, County of New York. The use of mediation will not be
construed under the doctrine of latches, waiver or estoppel to affect adversely
the rights of either party. Nothing in this paragraph will prevent either party
from resorting to judicial proceedings if (a) good faith efforts to resolve the
dispute under these procedures have been unsuccessful or (b) interim relief from
a court is necessary to prevent serious and irreparable injury.
(d) Counterparts. This Agreement may be signed in counterparts with
the same effect as if both parties had signed one and the same instrument.
(e) Notices. Any communications specifically required hereunder to
be in writing, if sent to the Placement Agent, will be sent by overnight courier
to it at Xxxxxx Xxxxxx & Co., LLC, 00 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000,
Att: Xxxxxxx X. Xxxxx, with a copy to Ruskin Moscou Faltischek, P.C., 000 XXX
Xxxxx, Xxxx Tower, 15th Floor, Uniondale, New York, New York 11556, Att: Xxxxxx
Xxxxxx and if sent to the Company, will be sent by overnight courier to 0000
Xxxxx Xxxxxx, Xxxxxxxxxx, XX 00000, with a copy to the Xxxxxxx & Xxxxxx, P.C.,
00000 Xxxxxxxxxxxx Xxx., 0xx Xxxxx, X.X. Xxx 0000, Xxxxxxxxxx, XX 00000-0000,
Att: Xxxxx Xxxxxxx-Xxxxxx.
(f) Entire Agreement. This Agreement constitutes the entire
agreement of the parties with respect to the matters herein referred and
supersedes all prior agreements and understandings, written and oral, between
the parties with respect to the subject matter hereof. Neither this Agreement
nor any term hereof may be changed, waived or terminated orally, but only by an
instrument in writing signed by the party against which enforcement of the
change, waiver or termination is sought.
17
If you find the foregoing is in accordance with our understanding, kindly
sign and return to us a counterpart hereof, whereupon this instrument along with
all counterparts will become a binding agreement between us.
Very truly yours,
Tarpon Industries, Inc.
By: /s/ Xxxx Xxxxx
------------------------------
Name: Xxxx Xxxxx
Title: Chief Executive Officer
Agreed:
XXXXXX XXXXXX & CO., LLC
By: /s/ Xxxxxxx X. Xxxxx
----------------------
Name: Xxxxxxx X. Xxxxx
Title: Member
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