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SELLING AGENT AGREEMENT

Sales Agreement

SELLING AGENT AGREEMENT | Document Parties: The Project Group, Inc. | First Montauk Securities Corp. You are currently viewing:
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The Project Group, Inc. | First Montauk Securities Corp.

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Title: SELLING AGENT AGREEMENT
Governing Law: New York     Date: 3/9/2004
Law Firm: Goldstein DiGioia LLP    

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                             The Project Group, Inc.

 

                             SELLING AGENT AGREEMENT

 

                                                       Dated as of March 1, 2004

 

 

First Montauk Securities Corp.

Parkway 109 Office Center

328 Newman Springs Road

Red Bank, New Jersey 07701

 

Gentlemen:

 

                  The Project Group, Inc. (the "Company") proposes to offer for

sale (the "Offering") in a private offering pursuant to Section 4(2) of the

Securities Act of 1933, as amended (the "Act"), and/or Regulation D promulgated

by the Securities and Exchange Commission thereunder, an aggregate of up to

$1,500,000 of units comprised of up to 1,500 shares of preferred stock and

common stock warrants, at a subscription price of $1000.00 per unit (the

"Securities"). The Offering and terms of the securities are more fully described

in the Term Sheet date as of February 18, 2004 executed by the Company and First

Montauk Securities Corp. Offers and sales of the Securities shall be to

Accredited Investors (as defined in Regulation D.) This letter agreement shall

confirm our agreement concerning First Montauk Securities Corp. acting as

exclusive selling or placement agent (the "Selling Agent" or "FMSC")) in

connection with the sale of the Securities.

 

                   l. Appointment of Selling Agent.

 

                  On the basis of the representations and warranties contained

herein, and subject to the terms and conditions set forth herein, the Company

hereby appoints First Montauk Securities Corp. as exclusive selling

agent/placement agent and grants to FMSC the right to offer, as its agent, the

Securities pursuant to the terms of this Agreement. On the basis of such

representations and warranties, and subject to such conditions, FMSC hereby

accepts such appointment and agree to use its reasonable best efforts to secure

subscriptions to purchase up to $1,500,000 of subscriptions for Securities. The

Company understands that the Selling Agent is being retained to obtain

subscriptions on a "best efforts" basis and has not guaranteed the sale of any

Securities.

 

                  2. Terms of the Offering.

 

                           (a) The Offering shall consist of up to $1,500,000 of

units, consisting of (i) 1,500 shares of Series B 4% Redeemable Preferred Stock,

with an issue price of $1,000 per share and (ii) 6,500 redeemable common stock

warrants for each share of preferred stock, all as more described in the term

sheet, which is deemed a part hereof. The Offering is being made on a "best

efforts" basis with no minimum offering amount. The offering shall be completed

in two tranches of up to $750,000 each, as more fully described in the Term

Sheet. In the event a subscription is not accepted, such rejected subscription

funds will be returned to the subscriber without interest or deduction.

 

                           (b) The Company has prepared a Securities Purchase

Agreement, Certificate of Designation for the Series B Stock and form of Warrant

to be delivered to all prospective investors. The Securities Purchase Agreement,

Certificate of Designation and form of Warrant, including all supplements,

exhibits and appendices thereto and documents delivered therewith, are referred

to herein as the "Documents" and shall include any supplements or amendments in

 

                                        1

 

<PAGE>

 

accordance with this Agreement. The Offering shall commence on the date hereof,

and shall expire at 5:00 p.m., New York time, on March 12, 2004, and may be

extended by mutual agreement of FMSC and the Company until March 17, 2004. Such

period, as same may be so extended, shall hereinafter be referred to as the

"Offering Period."

 

                           (c) Each prospective investor ("Prospective

Investor") who desires to purchase Securities shall deliver to the Selling Agent

the Securities Purchase Agreement and immediately available funds in the amount

necessary to purchase the number of Securities such Prospective Investor desires

to purchase. The Selling Agent shall not have any obligation to independently

verify the accuracy or completeness of any information contained in any Purchase

Agreement or the authenticity, sufficiency, or validity of any check delivered

by any Prospective Investor in payment for Securities.

 

                           (d) The Selling Agent shall deliver each check (or

wire of funds) received from a Prospective Investor to the Selling Agent (or

directly to the escrow bank) for deposit in a segregated escrow account

maintained at Signature Bank in New York, New York (or in the alternative, the

funds may be deposited in an attorney escrow account) and shall deliver the

executed copies of the subscription agreement received from such Prospective

Investor to the Company. All funds shall be held in the segregated bank account

pending acceptance of the subscription. The Company shall notify the Selling

Agent promptly of the acceptance or rejection or any subscription.

 

                  3. Escrow; Closings; Release of Funds.

 

                           (a) All funds shall be placed into an escrow account

at Signature Bank pursuant to the terms of an escrow agreement to be executed

between the Company, Selling Agent and the bank (or in the alternative, the

funds may be deposited in an attorney escrow account). Funds shall not bear

interest. In the event that a subscription is returned to an investor, it will

be returned without interest or deduction. No funds shall be released without a

written notice executed by the Company and FMSC and delivered to the escrow

agent.

 

                            (b) The date that the initial subscriptions for the

first tranche of $750,000 are accepted by the Company and funds are released

from the segregated account shall be deemed the "Initial Closing". At least one

(1) day prior to the release of funds, FMSC and the Company shall send written

notice to each other confirming the amount of funds to be released, the name and

address of each subscriber whose subscription has been accepted, and the amount

of each subscription.

 

                           (c) The closing for the second tranche of $750,000

("Final Closing") shall be

made within five business days following the effective date of the registration

statement required to be filed by the Company in accordance with the terms of

the Securities Purchase Agreement. References herein to a "Closing" shall mean

the Initial Closing or the Final Closing, as the context requires, and the date

thereof shall be referred to as a "Closing Date."

 

                  4. Representations and Warranties of the Selling Agent.

 

                  The Selling Agent represents and warrants to the Company as

                  follows:

 

                           (a) The Selling Agent is duly incorporated and

validly existing and in good standing under the laws of its State of

incorporation.

 

 

                                        2

 

<PAGE>

 

 

                           (b) The Selling Agent is, and at the time of each

Closing will be, a member in good standing of the NASD.

 

                           (c) Offers and Sales of Securities by the Selling

Agent will only be made in such jurisdictions in which the Selling Agent is a

registered broker-dealer or where an applicable exemption from such registration

exists.

 

                           (d) Offers and sales of Securities by the Selling

Agent will be made only in accordance with this Placement Agreement and in

compliance with the provisions of Rule 506 of Regulation D (it being understood

and agreed that the Selling Agent shall be entitled to rely upon the information

and statements provided by the Prospective Investor in the Purchase Agreement

and/or Section 4(2) of the Securities Act of 1933), and the Selling Agent will

furnish to each investor a copy of the Documents prior to accepting any

subscription for the Securities.

 

                   5. Compensation.

 

                           (a) The Selling Agent shall be entitled, on each

Closing Date, as compensation for its services as Selling Agent under this

Agreement, to (i) selling Commissions equal to 10 % of the gross subscription

proceeds received by the Company through subscriptions made by investors

introduced by FMSC.

 

                           (b) In addition to the compensation payable to the

Selling Agent set forth in clause (a) above, the Company shall grant the Selling

Agent (or its assigns) warrants to purchase up to 850,000 shares of Common Stock

with an exercise price of $0.30 per share based upon 425,000 warrants for each

tranche of the Offering ("Selling Agent Warrants"). The Selling Agent Warrants

shall be exercisable for a period of three (3) years from the Final Closing Date

and the Selling Agent shall be entitled to registration rights with respect to

the shares of Common Stock underlying the Selling Agent Warrants on the same

terms as provided to investors in the Offering. The Selling Agent Warrants shall

not be redeemable. In addition, the Selling Agent shall have the right to

require the Company amend the terms of the Selling Agent Warrants in the event

that the NASD, Inc. Department of Corporate Finance requires amendments thereto

so as to comply with the NASD rules regarding compensation. In the event that

the Prospective Investors breach their commitment to provide the funds for the

2nd investment tranche, all of the Selling Agent Warrants shall be deemed

immediately terminated.

 

                           (c) In the event that the Company seeks to redeem the

Warrants , FMSC shall also be entitled to a warrant solicitation fee in

connection with the solicitation of the exercise of the Warrants equal to 5% of

the aggregate exercise price of any Warrant which is exercised through the

efforts of the Selling Agent as solicitation agent evidenced by written

acknowledgment of the warrant holder and provided that the warrant solicitation

is conducted in accordance with the rules of the NASD. The fee shall be payable

only in accordance with NASD Rule 2710(6)(xii). In the event that the Company

seeks to redeem the Warrants, then the Selling Agent shall be entitled to serve

as warrant solicitation agent The Company may not employ any other broker dealer

or agent in connection with any Warrant redemption and may not redeem the

warrants, or solicit their exercise, without employing FMSC. FMSC shall have the

right to deliver any warrant redemption notice on the Company's behalf and shall

be named in any press release or public disclosure regarding the warrant

redemption.

 

                  6. Representations and Warranties of the Company.

 

                           (a) The Company represents and warrants to, and

agrees with, the Selling

Agent that:

 

                                        3

 

<PAGE>

 

 

                                    (i) Assuming the accuracy of the

representations and warranties of the Prospective Investors set forth in the

Purchase Agreement and the representations and warranties of the Selling Agent

set forth herein, the Documents (a) contain, and at all times during the period

from the date hereof to and including each Closing Date, will contain all

information required to be contained therein, if any, pursuant to Rules 502 and

506 of Regulation D and all applicable federal and/or state securities and "blue

sky" laws, and (b) do not, and during such period will not, contain any untrue

statement of a material fact or omit to state any material fact required to be

stated therein or necessary to make the statements therein in light of the

circumstances made therein not misleading.

 

                                    (ii) No Documents or information provided by

the Company to Prospective Investors, including, without limitation the SEC

Reports (as defined in the Documents), shall contain any untrue statement of a

material fact or omit to state any material fact required to be stated therein

or necessary to make the statements therein in light of circumstances made

therein not misleading.

 

                                    (iii) The Company is, and at all times

during the period from the date hereof to and including each Closing Date will

be, a corporation duly organized, validly existing, and in good standing under

the laws of the State of Nevada, with full corporate power and authority, and

has obtained all necessary consents, authorizations, approvals, orders,

licenses, certificates, and permits and declarations of and from, and has made

filings with, all federal, state and local authorities, to own, lease, license,

and use its properties and assets and to conduct its business as presently

conducted as described in the Documents and/or in any such case where the

failure to have any of the foregoing would not have a material adverse effect on

the Company's presently conducted business. As of the date hereof, the Company

is, and at all times during the period from the date hereof to and including

each Closing Date, duly qualified to do business and is in good standing in

every jurisdiction in which its ownership, leasing, licensing, or use of

property and assets or the conduct of its business makes such qualification

necessary except where the failure to be so qualified would not have a material

adverse effect on the Company's business.

 

                                    (iv) The Company has made, or shall make,

during the Offering Period all required filings with the SEC and/or blue sky

authorities of the appropriate states in connection with the offer and sale of

the Securities so as to comply with the requirements of Regulation D and /or the

laws of the various states.

 

                                    (v) The financial statements (the "Financial

Statements") of the Company included in the SEC Documents fairly present in

accordance with generally accepted accounting principles the financial position,

the results of operations, and the other information with respect to the Company

purported to be shown therein at the respective dates and for the respective

periods to which they apply. The Financial Statements have been prepared in

accordance with generally accepted accounting principles consistently applied

throughout the periods involved, are correct and complete, and are in accordance

with the books and records of the Company. There has at no time been a material

adverse change in the financial condition, results of operations, business,

properties, assets, liabilities, or future prospects of the Company from the

latest information set forth in the Documents, except as may be properly

described in the Documents as having occurred or as may occur and except for

continued deterioration in the Company's cash position and total assets and

continued losses from operations.

 

 

                                         4

 

<PAGE>

 

 

 

                                    (vi) As of the date hereof, except as

disclosed in the Documents, there is no, and as of each Closing Date there shall

not be any, litigation, arbitration, claim, governmental or other proceeding

(formal or informal), or investigation pending or to the Company's knowledge

threatened, with respect to the Company, or its respective operations,

businesses, properties, or assets, except as properly described in the Documents

or such as individually or in the aggregate do not now have and will not in the

future have a material adverse effect upon the operations, business, properties,

or assets of the Company. The Company is not, nor as of each Closing Date shall

be, in violation of, or in default with respect to, any law, rule, regulation,

order, judgment, or decree, except as properly described in the Documents or

such as individually or in the aggregate do not have and will not in the future

have a material adverse effect upon the operations, business, properties, or

assets of the Company; nor is the Company required to take any action in order

to avoid any such violation or default.

 

                                    (vii) As of the date hereof, the Company is

not, and at all times during the period from the date hereof to and including

the Final Closing Date, shall not be, in violation or breach of, or in default

with respect to complying with any material provision of any material contract,

agreement, instrument, lease, license, arrangement, other than any such

violation or breach which would not have, individually or in the aggregate, a

material adverse effect on the Company's business, and each such contract,

agreement, instrument, lease, license, arrangement, and under- standing is in

full force and effect and is the legal, valid, and binding obligation of the

parties thereto enforceable as to them in accordance with its terms. The Company

enjoys peaceful and undisturbed possession under all leases and licenses under

which it is operating as of the date hereof. As of the date hereof, the Company

is not a party to or bound by any contract, agreement, instrument, lease,

license, arrangement, or understanding, or subject to any charter or other

restriction, which has had or may in the future have a material adverse effect

on the financial condition, results of operations, business, properties, assets,

liabilities, or future prospects of the Company. The Company is not in violation

or breach of, or in default with respect to, any term of its Certificate of

Incorporation or By- Laws.

 

                                    (viii) To its best knowledge, the Company

has not infringed, is not infringing, or has not received notice of infringement

with respect to asserted Intangibles of others. To the best knowledge of the

Company, none of the patents, patent applications, trademarks, service marks,

trade names and copyrights, and licenses and rights to the foregoing presently

owned or held by the Company, materially infringe upon any like right of any

other person or entity. The Company (i) owns or has the right to use, free and

clear of all liens, charges, claims, encumbrances, pledges, security interests,

defects or other restrictions of any kind whatsoever, sufficient patents,

trademarks, service marks, trade names, copyrights, licenses and right with

respect to the foregoing, to conduct its business as presently conducted except

as set forth in the Documents, and (ii) except as set forth in the Documents, is

not obligated or under any liability whatsoever to make any payments by way of

royalties, fees or otherwise to any owner or licensee of, or other claimant to,

any patent, trademark, service mark, trade name, copyright, know-how, technology

or other intangible asset, with respect to the use thereof or in connection with

the conduct of its business as now conducted or otherwise. The Company has

direct ownership of title to all its intellectual property (including all United

States and foreign patent applications and patents), other proprietary rights,

confidential information and know-how; owns all the rights to its Intangibles as

are currently used in or have potential for use in its business.

 

                                    (ix) The Company has all requisite corporate

power and authority to execute, deliver, and perform this Agreement and to

consummate the transactions contemplated hereby. All necessary corporate

proceedings of the Company have been duly taken to authorize the execution,

delivery, and performance by the Company of this Agreement and the consummation

of the transactions contemplated hereby. This Agreement has been duly

 

 

                                        5

 

<PAGE>

 

 

authorized, executed, and delivered by the Company, is a legal, valid, and

binding obligation of the Company, and is enforceable as to the Company in

accordance with its terms. Assuming the accuracy of the representations and

warranties of the Prospective Investors set forth in the Purchase Agreements and

the representations and warranties of the Selling Agent set forth herein, no

consent, authorization, approval, order, license, certificate, or permit of or

from, or registration, qualification, declaration, or filing with, any federal,

state, local, foreign, or other governmental authority or any court or other

tribunal is required by the Company for the execution, delivery, or performance

by the Company of this Agreement, the consummation of the transactions

contemplated hereby and thereby, except the filing of a Notice of Sales of

Securities on Form D pursuant to Regulation D, and such consents,

authorizations, approvals, registrations, and qualifications as may be required

under all applicable federal and/or securities or "blue sky" laws in connection

with the issuance, sale, and delivery of the Securities pursuant to this

Agreement. No consent of any party to any material contract, agreement,

instrument, lease, license, arrangement, or understanding to which the Company

is a party, or to which any of its properties or assets are subject, is required

for the execution, delivery, or performance of this Agreement, and the

consummation of the transactions contemplated hereby and thereby, and such

execution, delivery and performance will not violate, result in a breach of,

conflict with, or (with or without the giving of notice or the passage of time

or both) entitle any party to terminate or call a default under any such

contract, agreement, instrument, lease, license, arrangement, or understanding,

violate or result in a breach of any term of the


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