Exhibit 10.1
NON-EXCLUSIVE FINDER'S AGREEMENT
This Finder's Agreement (this "Agreement") is made as of November 30, 2004,
between SLS International, Inc., a Delaware corporation (the "Company"), and The
Shemano Group, Inc., a California corporation (the "Finder"). The Finder and the
Company agree:
1. ENGAGEMENT OF FINDER: The Company hereby engages the Finder,
and the Finder hereby accepts such engagement, to act as the
Company's non-exclusive finder with respect to sales by the
Company in a private placement transaction (the "Offering") of
up to $15 million aggregate principal amount of Equity,
Equity-Related or Debt Securities (the "Securities") of the
Company to the investors during the term of this Agreement as
set forth in Section 6.
2. OFFERING PROCEDURES: The Finder will introduce the Company to
investors who the Finder reasonably believes to be "accredited
investors," as that term is defined in Rule 501 of Regulation
D promulgated under the Securities Act of 1933, as amended
(the "1933 Act"), with whom the Finder has a pre-existing
substantive relationship (the "Offerees").
3. FINDER'S COMPENSATION: In consideration for the services
rendered by the Finder hereunder, the Company shall pay to the
Finder, or cause the Finder to be paid, compensation as
provided in this section within 3 days of the Company's
receipt of funds from the Offerees.
(A) CASH COMPENSATION: The Company shall pay to the Finder
cash compensation equal to six percent (6%) of the gross
Offering funds received in the Offering.
(B) WARRANTS: The Finder shall receive 4% warrant
compensation. The warrant calculation translates to
40,000 warrants per $1 million raised. The warrants
issued to the Finder shall have a strike price equal to
the lesser of $2.50 or the conversion price of any Equity
or Equity-Related Securities sold, have a five-year term
and cashless exercise after one year if the underlying
shares are not then registered. The registration rights
will be equal to to an warrants sold to Offerees in the
Offering. The warrant shares shall be subject to
equitable adjustment for stock splits, stock dividends
and similar events. The warrant shares shall have
"piggyback" registration rights.
For purposes of determining the Finder's compensation
under this Section 3, the gross offering funds received
in the Offering(s) shall include any amounts paid to the
Company by investors in respect to an exercise or
conversion of any of the Securities or Warrants,
including the value allocated to any securities not
issued pursuant to a "cashless exercise" or similar
provision, whenever actually received by the Company.
4. CERTAIN MATTERS RELATING TO FINDER'S DUTIES:
(A) The Finder's responsibilities shall be limited to
introducing potential investors to the Company, and the
Page 1
Finder shall not have authority to offer or sell the
Securities to any potential investor. Finder shall not
use any general solicitation or general advertising
within the meaning of the applicable securities laws in
connection with any offering. The Finder shall have no
responsibility to participate or assist in any
negotiations between any potential investor and the
Company. The Finder will have no responsibility to act,
and the parties contemplate that the Finder will not act,
as a broker or dealer with respect to the offer or sale
of the Securities. Further, the finder shall have no
responsibility for fulfilling any SEC reporting or filing
requirements as relates to the Company provided however,
Finder agrees to provide Company with reasonable
assistance related to any registration, qualification or
other requirements of applicable securities laws and
other regulatory matters, upon request of the Company.
(B) The Finder agrees to introduce the Company to Offerees
only in states in which the Finder has been advised by
the Company that offers and sales of Securities can be
legally made by the Company.
(C) The Finder shall perform its duties under this Agreement
in a manner consistent with the instructions of the
Company. Such performance shall include, but not be
limited to, the delivery to each Offeree a current copy
of the Private Placement Memorandum, Subscription
Agreement and any Offering Questionnaire and/or similar
documents provided to the Finder by the Company, as such
documents may be amended from time to time by the Company
and delivered to the Finder. The Finder shall
consecutively number each copy of the Private Placement
Memorandum (which will include the first letter of the
Finder's name or other identifying xxxx sufficient to
designate an Offeree introduced by the Finder); keep a
log of when and to whom each copy of the Private
Placement Memorandum is given, with the Private Placement
Memorandum numbers; maintain a copy of any written
information the Finder obtains regarding the suitability
of each Offeree; and only use the Private Placement
Memorandum in introducing Offerees to the Company. The
Finder shall provide this log and all such written
information to the Company at any time and promptly upon
request of the Company at the termination of this
Agreement. The Company shall, promptly following
execution of this Agreement, provide the Finder with a
written list of prospective Offerees which the Company
does not want the Finder to contact. The Finder agrees to
not contact the persons on such list, and the Finder
shall not be entitled to the compensation set forth in
Section 3 with respect to any investment made by such
person in the Company's Securities.
(D) The Finder is and will hereafter act as an independent
contractor and not as an employee of the Company and
nothing in this Agreement shall be interpreted or
construed to create any employment, partnership, joint
venture, or other relationship between the Finder and the
Company. The Finder will not hold itself out as having,
and will not state to any person that the Finder has, any
relationship with the Company other than as an
independent contractor. The Finder shall have no right or
power to find or create any liability or obligation for
or in the name of the Company or to sign any documents on
behalf of the Company.
Page 2
5. RIGHT OF FIRST REFUSAL. In consideration for the Finder acting
as the finder in connection with the proposed offering, the
Company hereby grants the Finder a right of first refusal to
serve as the Company's exclusive financial advisor and
investment banker in connection with any financial transaction
for a period of 1 year from the closing of the transaction. In
the event the company advises the Finder that it desires to
effect any financial transaction, the Company and the Finder
will negotiate in good faith the terms of the Finder's
engagement in a separate agreement which would set forth,
among other matters, compensation for the Finder based upon
customary fees for the services provided.
6. TERMINATION OF AGREEMENT. Either party may terminate this
Agreement by notifying the other party in writing upon a
material breach by that other party, unless such breach is
curable and is in fact cured within 15 days after such notice.
This Agreement will otherwise terminate upon completion or
termination of the Offering. The Company may terminate this
Agreement following ninety (90) days after the date hereof
upon written notice. Notwithstanding the foregoing, all
provisions of this Agreement other than section 1, 2 and 4
shall survive the termination of this Agreement with respect
to Offerees who the Finder introduces to the Company prior to
any termination with respect to the Offering. The Finder shall
be entitled to compensation under section 3 based on
investments made by such Offerees prior to the termination of
this Agreement or at any time within one year thereafter.
7. INDEMNIFICATION. The Company and the Finder each shall
indemnify and defend the other and the other's affiliates,
directors, officers, employees, agents, consultants,
attorneys, accountants and other representatives (each an
"Indemnified Person") and shall hold each Indemnified Person
harmless, to the fullest extent permitted by law, from and
against any and all claims, liabilities, losses, damages and
expenses (including reasonable attorney's fees and costs), as
they are incurred, in connection with the Offering, resulting
from the indemnifying party's negligence, bad faith or willful
misconduct in connection with the Offering, any violation by
the indemnifying party (not caused by an Indemnified Person)
of Federal or state securities laws in connection with the
Offering, or any breach by the indemnifying party of this
Agreement. In case any litigation or proceeding shall be
brought against any Indemnified Person under this section, the
indemnifying party shall be entitled to assume the defense of
such litigation or proceeding with counsel of the indemnifying
party's choice at its expense (in which case the indemnifying
party shall not be responsible for the fees and expenses of
any separate counsel retained by such Indemnified Person,
except in the limited circumstances described below in this
section); provided, however, that such counsel shall be
reasonably satisfactory to the Indemnified Person.
Notwithstanding the indemnifying party's election to assume
the defense of such litigation or proceeding (a) such
Indemnified Person shall have the right to employ separate
counsel and to participate in the defense of such litigation
or proceeding, and (b) the indemnifying party shall bear the
reasonable fees, costs and expenses of separate counsel if
(but only if) the use of counsel selected by the indemnifying
party to represent such Indemnified Person would present such
counsel with a conflict of interest under applicable laws or
rules of professional conduct.
Page 3
8. CONFIDENTIALITY OF OFFEREE INFORMATION. The Company
acknowledges that the identity of the Offerees, and all
confidential information about Offerees received by the
Company from an Offeree or the Finder, is confidential
information of the Finder and may not be shared with any other
person without the consent of the Finder.
9. NOTICES. Any notice, consent, authorization or other
communication to be given hereunder shall be in writing and
shall be deemed duly given and received when delivered
personally, when transmitted by fax, three days after being
mailed by first class mail, or one day after being sent by a
nationally recognized overnight delivery service, charges and
postage prepaid, properly addressed to the party to receive
such notice, at the following address or fax number for such
party (or at such other address or fax number as shall
hereafter be specified by such party by like notice):
(A) If to the Company, to:
Xxxx Xxxx
President and CFO
0000 Xxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
Phone: (000) 000-0000
E-Mail: xxxxx@xxxxxxxxxxxxxxx.xxx
(B) If to the Finder, to:
Xxxx Xxxxxxx
CEO
000 Xxxxxxxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
E-Mail: xxxxxxxx@xxxxxxx.xxx
--------------------
10. COMPANY TO CONTROL TRANSACTIONS. The prices, terms and
conditions under which the Company shall offer or sell any
Securities shall be determined by the Company in its sole
discretion. The Company shall have the authority to control
all discussions and negotiations regarding any proposed or
actual offering or sale of Securities. Nothing in this
Agreement shall obligate the Company to actually offer or sell
any Securities or consummate any transaction. The Company may
terminate any negotiations or discussions at any time and
reserves the right not to proceed with any offering or sale of
Securities. Compensation pursuant to this Agreement shall only
be paid to the Finder in the event of an actual Closing of the
Offering to an Offeree introduced by Finder.
11. CONFIDENTIALITY OF COMPANY INFORMATION. The Finder, and its
officers, directors, employees and agents shall maintain in
strict confidence and not copy, disclose or transfer to any
other party (1) all confidential business and financial
information regarding the Company and its affiliates,
including without limitation, projections, business plans,
marketing plans, product development plans, pricing, costs,
customer, vendor and supplier lists and identification,
channels of distribution, and terms of identification of
proposed or actual contracts and (2) all confidential
technology of the Company. In furtherance of the foregoing,
Page 4
the Finder agrees that it shall not transfer, transmit,
distribute, download or communicate, in any electronic,
digitized or other form or media, any of the confidential
technology of the Company. The foregoing is not intended to
preclude the Finder from utilizing, subject to the terms and
conditions of this Agreement, the Private Placement Memorandum
and/or other documents prepared or approved by the Company for
use in the Offering.
All communications regarding any possible transactions,
requests for due diligence or other information, requests for
facility tours, product demonstrations or management meetings,
will be submitted or directed to the Company, and the Finder
shall not contact any employees, customers, suppliers or
contractors of the Company or its affiliates without express
permission. Nothing in this Agreement shall constitute a grant
of authority to the Finder or any representatives thereof to
remove, examine or copy any particular document or types of
information regarding the Company, and the Company shall
retain control over the particular documents or items to be
provided, examined or copied. If the Offering is not
consummated, or if at any time the Company so requests, the
Finder and its representatives will return to the Company all
copies of information regarding the Company in their
possession.
The provisions of this Section shall survive any termination
of this Agreement.
12. PRESS RELEASES, ETC. The Company shall control all press
releases or announcements to the public, the media or the
industry regarding any offering, placement, transaction or
business relationship involving the Company or its affiliates.
Except for communication to Offerees in furtherance of this
Agreement and the provision of the Private Placement
Memorandum, the Finder will not disclose the fact that
discussions or negotiations are taking place concerning a
possible transaction involving the Company, or the status or
terms and conditions thereof. Notwithstanding the foregoing,
the Company agrees to issue a press release prior to the
opening of the market on the business day following the
Company's receipt of executed agreements binding Offerees to
purchase Securities in at least the amount of the minimum
Offering (if there is any such minimum) setting forth the
material terms of the Offering.
13. DUE DILIGENCE: Neither the Company, nor any of its directors,
officers or shareholders, should, in any way rely on the
Finder to perform any due diligence with respect to the
Company. It is expressly understood and agreed that to the
extent due diligence is conducted; it will be conducted by the
investors.
14. EXPENSES, ETC. The compensation described in Section 3 of this
Agreement shall be the Finder's sole compensation for all of
its services and efforts to the Company and its affiliates, in
connection with any offering or placement of Securities. The
Finder shall be exclusively responsible for any compensation,
fees, commissions or payments of its employees, agents
representatives, co-finders or other persons or entities
utilized by it in connection with its activities on behalf of
the Company, and the Finder will indemnify and hold harmless
the Company and its affiliates from the claims of any such
persons or entities.
15. COMPLIANCE WITH LAWS. The Finder represents and warrants that
it is a duly registered broker/dealer and in good standing
Page 5
with the SEC, NASD and the State of California and has and
shall maintain such registrations as well as all other
necessary licenses and permits to conduct its activities under
this Agreement, which it shall conduct in compliance with
applicable federal and state laws relating to a private
placement under Regulation D of the 1933 Act. The Finder
represents that it is not a party to any other agreement which
would conflict with or interfere with the terms and conditions
of this Agreement.
16. ASSIGNMENT PROHIBITED. No assignment of this Agreement shall
be made without the prior written consent of the other party.
17. AMENDMENTS. Neither party may amend this Agreement or rescind
any of its existing provisions without the prior written
consent of the other party.
18. GOVERNING LAW. This Agreement shall be deemed to have been
made in the State of California and shall be construed, and
the rights and liabilities determined, in accordance with the
law of the State of California, without regard to the
conflicts of laws rules of such jurisdiction.
19. WAIVER. Neither Finder's nor the Company's failure to insist
at any time upon strict compliance with this Agreement or any
of its terms nor any continued course of such conduct on their
part shall constitute or be considered a waiver by Finder or
the Company of any of their respective rights or privileges
under this Agreement.
20. SEVERABILITY. If any provision herein is or should become
inconsistent with any present or future law, rule or
regulation of any sovereign government or regulatory body
having jurisdiction over the subject matter of this Agreement,
such provision shall be deemed to be rescinded or modified in
accordance with such law, rule or regulation. In all other
respects, this Agreement shall continue to remain in full
force and effect.
21. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and
will become effective and binding upon the parties at such
time as all of the signatories hereto have signed a
counterpart of this Agreement. All counterparts so executed
shall constitute one Agreement binding on all of the parties
hereto, notwithstanding that all of the parties are not
signatory to the same counterpart. Each of the parties hereto
shall sign a sufficient number of counterparts so that each
party will receive a fully executed original of this
Agreement.
22. ENTIRE AGREEMENT. This Agreement and all other agreements and
documents referred herein constitutes the entire agreement
between the Company and the Finder. No other agreements,
covenants, representations or warranties, express or implied,
oral or written, have been made by any party hereto to any
other party concerning the subject matter hereof. All prior
and contemporaneous conversations, negotiations, possible and
alleged agreements, representations, covenants and warranties
concerning the subject matter hereof are merged herein. This
is an integrated Agreement.
23. ARBITRATION. The parties agree that this Agreement and all
controversies which may arise between the Finder and the
Page 6
Company, whether occurring prior, on or subsequent to the date
of this Agreement, will be determined by arbitration. The
parties understand that:
(A) Arbitration is final and binding on the parties.
(B) The parties are waiving their right to seek remedies in court,
including the right to a jury trial.
(C) Pre-arbitration discovery is generally more limited than and
different from court proceedings.
(D) The arbitrators' award is not required to include factual
findings or legal reasoning and any party's right to appeal or
to seek modification or rulings by the arbitrators is strictly
limited.
(E) The panel of arbitrators will typically include a minority of
arbitrators who were or are affiliated with the securities
industry.
Page 7
The parties agree that any arbitration under this Agreement will be
held at the facilities of and before an Arbitration Panel appointed by the
National Association of Securities Dealers, Inc. ("NASD"), or if the NASD
refuses to accept jurisdiction, then before JAMS/ENDISPUTE in San Francisco,
California. The award of the arbitrators, or of the majority of them, will be
final, and judgments upon the award may be entered in any court, state or
federal, having jurisdiction. The parties hereby submit themselves and their
personal representatives to the jurisdiction of any state or federal court for
the purpose of such arbitration and entering such judgment.
Any forbearance to enforce an agreement to arbitrate will not
constitute a waiver of any rights under this Agreement except to the extent
stated herein.
THIS AGREEMENT IS GOVERNED BY A PRE-DISPUTE ARBITRATION CLAUSE
CONTAINED IN PARAGRAPH 23 OF THIS AGREEMENT
THE SHEMANO GROUP, INC. (the "Finder")
By:
---------------------------------
Xxxx Xxxxxxx
Title: CEO
SLS INTERNATIONAL, INC. (the "Company")
By:
---------------------------------
Xxxx Xxxx
Title: President and CFO
Page 8
