EXHIBIT 10.11
PLACEMENT AGENCY AGREEMENT
This Placement Agency Agreement (this "Agreement") is made and entered
into as of August 26, 2003 (the "Effective Date"), by and between Verdisys,
Inc., a California corporation (the "Company"), and Stonegate Securities, Inc.,
a Texas corporation ("Stonegate").
WHEREAS, the Company desires to retain Stonegate as its non-exclusive
placement agent, and Stonegate is willing to act in such capacity, in each case
subject to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the Company and Stonegate (each a "Party" and
collectively, the "Parties") hereby agree as follows:
1. RETENTION OF STONEGATE; SCOPE OF SERVICES.
(a) Subject to the terms and conditions set forth herein, the Company
hereby retains Stonegate to act as the non-exclusive placement
agent to the Company during the Contract Period (as defined in
Section 2 below), and Stonegate hereby agrees to be so retained.
(b) As the non-exclusive placement agent to the Company, Stonegate
will have the non-exclusive right during the Contract Period to
identify for the Company prospective purchasers (collectively,
the "Purchasers" and each individually, a "Purchaser") in one or
more placements (each , a "Placement", and collectively, the
"Placements") of debt and/or equity securities to be issued by
the Company, the type and dollar amount being as mutually agreed
to by the Parties (the "Securities"). The Company and Stonegate
understand that the Company intends to undertake an initial
"bridge" Placement of up to $3 million of Securities (the "Bridge
Placement"), which Placement shall only qualify as such if it is
completed on or prior to September 30, 2003. Thereafter, the
Company intends to undertake a second Placement. All provisions
of this Agreement applicable to a Placement shall also be
applicable to the Bridge Placement, unless otherwise provided
herein.
(c) Terms of the Placements shall be as set forth in subscription
documents, including any stock purchase or subscription
agreement, escrow agreement, registration rights agreement,
warrant agreement and/or other documents to be executed and
delivered in connection with the Placement (collectively, the
"Subscription Documents"). The Placements are intended to be
exempt from the registration requirements of the Securities Act
of 1933, as amended (the "Securities Act"), pursuant to
Regulation D ("Regulation D") of the rules and regulations of the
Securities and Exchange Commission (the "SEC") promulgated under
the Securities Act.
(d) Stonegate will act on a best efforts basis and will have no
obligation to purchase any of the Securities offered in the
Placements. During the Contract Period, Stonegate shall have the
non-exclusive right to arrange for all sales of Securities in the
Placements, including without limitation the non-exclusive right
to identify potential buyers for the Securities. All sales of
Securities in the Placements shall be subject to
the approval of the Company, which approval may be withheld in
the Company's sole discretion.
2. CONTRACT PERIOD AND TERMINATION.
(a) Stonegate shall act as the Company's non-exclusive placement
agent under this Agreement for a period commencing on the
Effective Date, and continuing until terminated by either Party
upon 30 days notice to the other Party (the "Contract Period").
(b) Upon termination, neither party will have any further obligation
under this Agreement, except as provided in Sections 5, 6, 7, 8,
9 and 10 hereof.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The representations and warranties of the Company made to the
Purchasers as set forth in the Subscription Documents are hereby
incorporated by reference as of the date of consummation of the sale of
the Securities (the "Closing") and all such representations and
warranties are hereby deemed made by the Company directly to Stonegate
as though set forth in full herein.
4. COVENANTS OF THE COMPANY.
The Company covenants and agrees as follows:
(a) Neither the Company nor any affiliate of the Company (as defined
in Rule 501(b) of Regulation D) will sell, offer for sale or
solicit offers to buy or otherwise negotiate in respect of any
security (as defined in the Securities Act) of the Company which
will be integrated with the sale of the Securities in a manner
which would require the registration under the Securities Act of
the Securities.
(b) Any and all filings and documents required to be filed in
connection with or as a result of the Placement pursuant to
federal and state securities laws are the responsibility of the
Company and will be filed by the Company.
(c) Any press release to be issued by the Company announcing or
referring to the Placement shall be subject to the prior review
of Stonegate, and each such press release shall, at the request
of Stonegate, identify Stonegate as the placement agent.
Stonegate shall be permitted to publish a tombstone or similar
advertisement upon completion of the Placement identifying itself
as the Company's placement agent with respect thereto. This
Agreement shall not be filed publicly by the Company without the
prior written consent of Stonegate, unless required by applicable
law or regulation.
5. FURNISHING OF COMPANY INFORMATION; CONFIDENTIALITY.
(a) In connection with Stonegate's activities hereunder on the
Company's behalf, the Company shall furnish Stonegate with all
reasonable information concerning the Company and its operations
that Stonegate deems necessary or appropriate (the
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"Company Information") and shall provide Stonegate with
reasonable access to the Company's books, records, officers,
directors, employees, accountants and counsel. The Company
acknowledges and agrees that, in rendering its services
hereunder, Stonegate will be using and relying upon the Company
Information without independent verification thereof or
independent appraisal of any of the Company's assets and may, in
its sole discretion, use additional information contained in
public reports or other information furnished by the Company or
third parties.
(b) Stonegate agrees that the Company Information will be used solely
for the purpose of performing its services hereunder. Subject to
the limitations set forth in subsection (c) below, Stonegate will
keep the Company Information provided hereunder confidential and
will not disclose such Company Information or any portion
thereof, except (i) to a third party contacted by Stonegate on
behalf of, and with the prior approval of, the Company pursuant
hereto who has agreed to be bound by a confidentiality agreement
satisfactory in form and substance to the Company, or (ii) to any
other person for which the Company's consent to disclose such
Company Information has been obtained.
(c) Stonegate's confidentiality obligations under this Agreement
shall not apply to any portion of the Company Information which
(i) at the time of disclosure to Stonegate or thereafter is
generally available to and known by the public (other than as a
result of a disclosure directly or indirectly by Stonegate in
violation of this Agreement); (ii) was available to Stonegate on
a non-confidential basis from a source other than the Company,
provided that such source is not and was not bound by a
confidentiality agreement with the Company; (iii) has been
independently acquired or developed by Stonegate without
violating any of its obligations under this Agreement; or (iv)
the disclosure of which is legally compelled (whether by
deposition, interrogatory, request for documents, subpoena, civil
or administrative investigative demand or other similar process).
In the event that Stonegate becomes legally compelled to disclose
any of the Company Information, Stonegate shall provide the
Company with prompt prior written notice of such requirement so
that the Company may seek a protective order or other appropriate
remedy and/or waive compliance with the terms of this Agreement.
(d) The obligations of the Parties under this Section 5 shall survive
the termination of this Agreement for 12 months.
6. FEES AND EXPENSES.
(a) As compensation for services rendered by Stonegate in connection
with the Bridge Placement, the Company agrees to pay Stonegate a
fee of five percent (5%) of the gross proceeds from the sale of
Securities sold in the Bridge Placement to any Stonegate Contacts
(as defined in Section 8 below) (the "Bridge Agency Fee"). The
Bridge Agency Fee shall be paid immediately upon the closing of
each sale of Securities by the Company in the Bridge Placement.
(b) As compensation for services rendered by Stonegate in connection
with a Placement (excluding the Bridge Placement), the Company
agrees to pay Stonegate a fee of
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eight percent (8%) of the gross proceeds from the sale of
Securities sold in the Placement to Stonegate Contacts in the
event total gross proceeds are less than $5 million, a fee of
seven percent (7%) of the gross proceeds from the sale of
Securities sold in the Placement to Stonegate Contacts if total
gross proceeds are between $5 million and $10 million, and a fee
of six percent (6%) of the gross proceeds from the sale of
Securities sold in the Placement to Stonegate Contacts in the
event total gross proceeds are in excess of $10 million (the
"Agency Fee"). The Agency Fee shall be paid immediately upon the
closing of each sale of Securities by the Company
(c) In order to compensate Stonegate for its initial diligence
efforts, upon execution of this Agreement by the Parties, the
Company shall issue and deliver to Stonegate a certificate
evidencing 20,000 shares of the Company's common stock, no par
value (the "Shares"). The Shares will not be registered under the
Securities Act; provided, however, in the event Purchasers in the
Placements are granted registration rights, the holders of the
Shares shall automatically be granted identical registration
rights.
(d) In addition, the Company shall also promptly reimburse Stonegate
for all reasonable out-of-pocket expenses incurred by Stonegate
and its directors, officers and employees in connection with the
performance of Stonegate's services under this Agreement. For
these purposes, "out-of-pocket expenses" shall include, but not
be limited to, attorney's fees and costs, long distance
telephone, facsimile, courier, mail, supplies, travel and similar
expenses. Except for bills for long distance telephone,
facsimile, federal express, courier, mail and supplies, Stonegate
will not incur any expenses without the prior consent of the
Company; and the Parties shall attempt to have the Company direct
billed as often as possible for such expenses.
(e) Upon closing of the Bridge Placement, the Company agrees to issue
to Stonegate a Securities Purchase Warrant (the "Bridge
Representative's Warrant") entitling the holder(s) thereof to
purchase an amount of Securities equal to five percent (5%) of
the total number of Securities sold in the Bridge Placement to
Stonegate Contacts for a period of five (5) years at an exercise
price per share equal to the price at which the Securities are
sold to Purchasers. The Representative's Warrant shall otherwise
be substantially in the form of Exhibit A attached hereto.
(f) Upon closing of any Placement (excluding the Bridge Placement),
the Company agrees to issue to Stonegate an additional
Representative's Warrant entitling the holder(s) thereof to
purchase an amount of Securities equal to ten percent (10%) of
the total number of Securities sold in any such Placement to
Stonegate Contacts for a period of five (5) years at an exercise
price per share equal to the price at which the Securities are
sold to Purchasers.
(g) The obligations of the Parties under this Section 6 shall survive
the termination of this Agreement for any reason.
7. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold Stonegate harmless from
and against any and all losses, claims, damages or liabilities
(or actions, including securityholder
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actions, in respect thereof) related to or arising out of
Stonegate's engagement hereunder or its role in connection
herewith, and will reimburse Stonegate for all reasonable
expenses (including reasonable costs, expenses, awards and
counsel fees and/or judgments) as they are incurred by Stonegate
in connection with investigating, preparing for or defending any
such action or claim, whether or not in connection with pending
or threatened litigation in which Stonegate is a party. The
Company will not, however, be responsible for any claims,
liabilities, losses, damages or expenses which are finally
judicially determined to have resulted primarily from the bad
faith, gross negligence or willful misconduct of Stonegate. The
Company also agrees that Stonegate shall not have any liability
to the Company for or in connection with such engagement, except
for any such liability for losses, claims, damages, liabilities
or expenses incurred by the Company that result primarily from
the bad faith, gross negligence or willful misconduct of
Stonegate. In the event that the foregoing indemnity is
unavailable (except by reason of the bad faith or gross
negligence of Stonegate), then the Company shall contribute to
amounts paid or payable by Stonegate in respect of its losses,
claims, damages and liabilities in such proportion as
appropriately reflects the relative benefits received by, and
fault of, the Company and Stonegate in connection with the
matters as to which such losses, claims, damages or liabilities
relate, and other equitable considerations. The foregoing shall
be in addition to any rights that Stonegate may have at common
law or otherwise and shall extend upon the same terms to and
inure to the benefit of any director, officer, employee, agent or
controlling person of Stonegate. The Company hereby consents to
personal jurisdiction, service and venue in any court in which
any claim which is subject to this agreement is brought against
Stonegate or any other person entitled to indemnification or
contribution under this subsection (a).
(b) Stonegate agrees to indemnify and hold the Company harmless from
and against any and all losses, claims, damages or liabilities
(or actions, including securityholder actions, in respect
thereof) which are finally judicially determined to have resulted
primarily from the bad faith, gross negligence or willful
misconduct of Stonegate, and will reimburse the Company for all
reasonable expenses (including reasonable costs, expenses, awards
and counsel fees and/or judgments) as they are incurred by the
Company in connection with investigating, preparing for or
defending any such action or claim, whether or not in connection
with pending or threatened litigation in which the Company is a
party. In the event that the foregoing indemnity is unavailable,
then Stonegate shall contribute to amounts paid or payable by the
Company in respect of its losses, claims, damages and liabilities
in such proportion as appropriately reflects the relative
benefits received by, and fault of, the Company and Stonegate in
connection with the matters as to which such losses, claims,
damages or liabilities relate, and other equitable
considerations. The foregoing shall be in addition to any rights
that the Company may have at common law or otherwise and shall
extend upon the same terms to and inure to the benefit of any
director, officer, employee, agent or controlling person of the
Company. Stonegate hereby consents to personal jurisdiction,
service and venue in any court in which any claim, which is
subject to this agreement, is brought against the Company or any
other person entitled to indemnification or contribution under
this subsection (b).
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(c) The obligations of the Parties under this Section 7 shall survive
the termination of this Agreement.
8. NON-CIRCUMVENTION.
The Company hereby agrees that, for a period of one year from the end
of the Contract Period or other termination of this Agreement, the
Company will not enter into any agreement, transaction or arrangement
with any of the institutions (including their agents, principals and
affiliates and the accounts and funds which they manage or advise)
which Stonegate has introduced, directly or indirectly, to the Company
as prospective purchasers of the Securities in the Placements
(collectively, the "Stonegate Contacts"), regardless of whether a
transaction is consummated with such prospective purchasers, unless the
Company notifies Stonegate in writing of the agreement, transaction or
arrangement, and pays Stonegate a fee equal to the Agency Fee for
securities of the Company sold to Stonegate Contacts.
9. GOVERNING LAW.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE STATE OF TEXAS, WITHOUT GIVING EFFECT TO ANY CONFLICT
OF LAWS PROVISIONS THEREOF.
10. ARBITRATION.
Stonegate and the Company will attempt to settle any claim or
controversy arising out of this Agreement through consultation and
negotiation in good faith and a spirit of mutual cooperation. Any
dispute which the parties cannot resolve may then be submitted by
either party to binding arbitration in Dallas, Texas under the rules of
the American Arbitration Association for resolution. 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.
11. NO WAIVER.
The failure or neglect of any party hereto to insist, in any one or
more instances, upon the strict performance of any of the terms or
conditions of this Agreement, or waiver by any party of strict
performance of any of the terms or conditions of this Agreement, shall
not be construed as a waiver or relinquishment in the future of such
term or condition, but the same shall continue in full force and
effect.
12. SUCCESSORS AND ASSIGNS.
The benefits of this Agreement shall inure to the benefit of the
Parties, their respective successors, assigns and representatives, and
the obligations and liabilities assumed in this Agreement by the
Parties shall be binding upon their respective successors and assigns.
This Agreement may not be assigned by either Party without the express
written consent of the other Party, which consent shall not be
unreasonably withheld.
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13. NOTICES.
All notices and other communications required or permitted to be given
under this Agreement shall be in writing and shall be delivered
personally or sent by certified mail, return receipt requested,
recognized overnight delivery service, or facsimile as follows:
If to the Company:
Verdisys, Inc.
000 Xxxxxxxxx Xxxx
Xxxxxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxxxx Xxxxxx, Chief Financial Officer
If to Stonegate:
Stonegate Securities, Inc.
0000 Xxxxxx Xxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxx Xxxxxxxx, President
Either Party may change its address or facsimile number set forth above
by giving the other Party notice of such change in accordance with the
provisions of this Section 13. A notice shall be deemed given (a) if by
personal delivery, on the date of such delivery, (b) if by certified
mail, on the date shown on the applicable return receipt, (c) if by
overnight delivery service, on the day after the date delivered to the
service, or (d) if by facsimile, on the date of transmission.
14. NATURE OF RELATIONSHIP.
The Parties intend that Stonegate's relationship to the Company and the
relationship of each director, officer, employee or agent of Stonegate
to the Company shall be that of an independent contractor and not as an
employee of the Company or an affiliate thereof. Nothing contained in
this Agreement shall constitute or be construed to be or create a
partnership or joint venture between Stonegate and the Company or their
respective successors or assigns. Neither Stonegate nor any director,
officer, employee or agent of Stonegate shall be considered to be an
employee of the Company by virtue of the services provided hereunder.
15. MISCELLANEOUS.
Stonegate's obligations under this Agreement are subject to the
following general conditions:
(a) All relevant terms, conditions, and circumstances relating to the
Placement will be reasonably satisfactory to Stonegate and its
counsel.
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(b) Stonegate reserves the right to solicit the assistance of outside
dealers ("Dealers") to assist in the offer and sale of the
Placements; provided, however, that any such Dealers agree in
writing to be bound by the terms of the Placement. It is
understood that Stonegate, in its sole discretion, shall be
entitled to pay over to any such Dealers any portion of the
compensation received by Stonegate hereunder. The Company shall
have no financial liability for any fees or expenses of any such
Dealers.
16. CAPTIONS.
The Section titles herein are for reference purposes only and do not
control or affect the meaning or interpretation of any term or
provision hereof.
17. AMENDMENTS.
No alteration, amendment, change or addition hereto shall be binding or
effective unless the same is set forth in a writing signed by a duly
authorized representative of each Party.
18. PARTIAL INVALIDITY.
If it is finally determined that any term or provision hereof is
invalid or unenforceable, (a) the remaining terms and provisions hereof
shall be unimpaired, and (b) the invalid or unenforceable term or
provision shall be replaced by a term or provision that is valid and
enforceable and that comes as close as possible to expressing the
intention of the invalid or unenforceable term or provision.
19. ENTIRE AGREEMENT.
This Agreement embodies the entire agreement and understanding of the
Parties and supersedes any and all prior agreements, arrangements and
understandings relating to the matters provided for herein.
20. COUNTERPARTS.
This Agreement may be executed in one or more counterparts, each of
which shall be an original, but all of which together shall be
considered one and the same agreement.
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IN WITNESS WHEREOF, this Agreement has been executed as of the date
first written above by duly authorized representatives of the Company and
Stonegate.
VERDISYS, INC.
By: /s/ Xxxxxx Xxxxxx
Title: Chief Financial Officer
STONEGATE SECURITIES, INC.
By: /s/ Xxxxx Xxxxxxxx
Title: President
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