EXHIBIT 10.3
X. Xxx Xxxxx, III
EXECUTIVE VICE PRESIDENT
APRIL 11, 2006
Xx. Xxxxxxx Xxxxxxxxx
Chief Executive Officer
SheerVision, Inc.
0000 Xxxxx Xxxxxx Xxxxx X., Xxxxx 000
Xxxxxxx Xxxxx, XX 00000
Dear XXXXXXX:
This letter agreement (the "Agreement") confirms our understanding that
Northeast Securities, Inc. ("NESC") has been engaged as EXCLUSIVE PLACEMENT
AGENT FOR CLEAN WATER TECHNOLOGIES, INC., A DELAWARE CORPORATION DBA
SHEERVISION, INC (the "Company"), including its successors and permitted
assigns, in connection with the private offering and sale (the "Offering") of
securities of the Company (the "Securities"). If appropriate in connection with
performing its services for the Company hereunder, NESC may utilize the services
of one or more of its affiliates, in which case references herein to NESC shall
include such affiliates.
1. THE OFFERING. We currently anticipate raising approximately $3
MILLION TO $4 MILLION through a "PIPE" transaction involving the sale of Company
securities to investors. The actual terms of the Offering will depend on market
conditions, and will be subject to negotiation between the Company and NESC and
prospective investors. Although we cannot guarantee you that we will be able to
raise new capital, we will conduct the Offering on a best efforts basis. IN
TURN, DURING THE TERM OF OUR ENGAGEMENT, YOU AGREE NOT TO USE ANY OTHER
INVESTMENT BANKING FIRM TO RAISE CAPITAL (INCLUDING CONVERTIBLE DEBT) FOR YOU.
The Company acknowledges and agrees that nothing contained in
this engagement shall constitute a commitment by NESC to underwrite, place or
purchase any securities, although NESC reserves the exclusive right to do so
during the term of this Agreement. XXXX acknowledges and agrees that nothing
contained in this engagement shall constitute a commitment by the Company to
accept any NESC Investor's (as defined in section 2(a) below) offer to purchase
any Securities in the Offering.
2. COMPENSATION. NESC's compensation for services rendered under
this engagement will be the following:
(a) If during the term of this engagement or within the twelve full
months following the termination of this Agreement, (i) the
Company consummates one or more Offerings with or through NESC,
any affiliate of NESC, any investor contacted by NESC during the
term of this Agreement or any affiliate of any such investor,
which investor was identified by NESC in writing to the Company
and acknowledged by the Company during the term of this
engagement and which actually invests in the Offering (an "NESC
Investor"), or (ii) (A) the Company accepts a written commitment
for an investment from such NESC Investor (the
acceptance by the Company of a commitment letter, term sheet,
letter of intent (or any similar document) or securities
purchase agreement shall be deemed to be receipt and acceptance
of such written commitment) and (B) at any time thereafter such
Offering by an NESC Investor is consummated, the Company,
subject to the rules and regulations of the National Association
of Securities Dealers and its affiliates and successors, will
pay NESC upon the closing date(s) thereof:
(i) in cash: eight percent (8%) of the gross proceeds
received by the Company from such Financing and
introduced by NESC, four percent (4%) of the gross
proceeds received by the Company from such Financing and
introduced by the Company (up to a limit of $1,000,000);
PROVIDED, HOWEVER, that following termination of this
Agreement, investments in the Offering by investors who
are not NESC Investors shall not be commissionable to
NESC. It is agreed that NESC has the right of allocation
for the first $3,000,000 invested in the Offering;
(ii) warrants exercisable at a price equal to the per share
price paid by investors in the Offering (or in the case
of convertible securities, the conversion or exchange
price) in an amount equal to FIVE PERCENT (5%) of the
aggregate number of shares of common stock of the
Company sold (or into which securities may be converted)
to all investors in the Offering. The warrants will
provide for cashless or "net" exercise at all times. In
the event warrants are issued to investors as part of
the Offering, the terms and conditions of the warrants
issued to NESC ("NESC Warrants") as compensation shall
be the same as the warrants issued to such investors,
except for the "net" exercise referenced above. The
shares issuable upon exercise of the NESC Warrants will
be entitled to the same registration rights as those
granted to the investors in connection with the
Offering. To that end, you agree that NESC will be
afforded the indemnification protections granted to the
investors as part of the agreement governing the
registration of the investor securities sold in the
Offering, as a third party beneficiary to such
provisions.
(b) Intentionally deleted.
3. EXPENSES. The Company shall bear all of its legal, accounting,
printing and other expenses in connection with the Offering and any offering and
sale of any Securities. It is understood that NESC will not be responsible for
any fees, expenses or commissions payable to any other advisors, underwriters or
agents (if any) utilized or retained by the Company or any offerees of the
Securities. In addition to any fees payable by the Company to NESC hereunder,
the Company shall, whether or not an Offering shall be consummated, and
regardless of whether any Securities are offered or sold, reimburse NESC for the
fees and disbursements of NESC's legal counsel to a maximum of $25,000 as well
as its other reasonable, accountable out-of-pocket expenses incurred in
connection with, or arising out of, NESC's activities under or contemplated by
this engagement; PROVIDED, however, that XXXX agrees that all such expenses
(including such fees and disbursements of counsel) shall not exceed $50,000 in
the aggregate without the prior
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written approval of the Company. Such reimbursements shall be made promptly upon
submission by NESC of statements for such expenses.
4. RELIANCE ON COMPANY INFORMATION. The Company recognizes and
confirms that, in advising the Company, in assisting in the preparation of any
memorandum and in completing its engagement hereunder, NESC will be using and
relying on non-public and publicly available information and on data, material
and other information furnished to NESC by the Company and other parties on
behalf or at the direction of the Company. The Company agrees that in performing
under this engagement NESC may assume and rely upon the accuracy and
completeness of, and is not assuming any responsibility for independent
verification of, such non-public and publicly available information and the
other information so furnished.
5. OFFERING MATERIAL; AGREEMENTS.
(a) You hereby authorize NESC to transmit to the prospective
purchasers of the securities a private placement memorandum
prepared by the Company with such exhibits and supplements as
may from time to time be required or appropriate or,
alternatively, copies of the Company's most recent filings with
the Securities and Exchange Commission, together with summary
materials prepared by the Company, if we deem them appropriate
(as the case may be, the "Memorandum"). The Company represents
and warrants that the Memorandum (i) will be prepared by the
management of the Company and reviewed and approved by its Board
of Directors; and (ii) will not contain any untrue statement of
a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein or
previously made, in light of the circumstances under which they
were made, not misleading. The Company will advise NESC
immediately of the occurrence of any event or any other change
known to the Company which results in the Memorandum containing
an untrue statement of a material fact or omitting to state a
material fact required to be stated therein or necessary to make
the statements therein or previously made, in light of the
circumstances under which they were made, not misleading.
(b) You agree that you will enter into subscription, registration
rights and other customary agreements, and will use reasonable
efforts to have Company counsel supply an opinion letter on the
transaction in form and substance reasonably acceptable to, and
addressed to, NESC and the investors.
(c) You further agree that we may rely upon, and are a third party
beneficiary of, the representations and warranties, and
applicable covenants, set forth in any agreements with investors
in the offering.
(d) In conjunction with the filing of the resale registration
statement for investors pursuant to the Registration Rights
Agreement, the Company will file with the NASD, via the COBRA
desk filing system, for approval of underwriting compensation
under Section 2710 of the rules and regulations of the NASD, use
its reasonable efforts to obtain from the NASD a standard
clearance letter, and
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coordinate with the placement agent on filings it will be
required to make upon sales under the registration statement.
6. INFORMATION. The Company will provide to NESC such information
regarding the business and financial condition of the Company and its affiliates
as NESC may reasonably request and as is reasonably required by NESC in order to
perform its obligations hereunder, including, without limitation, such
information as NESC may request in order to satisfy itself as to the accuracy of
the Company's representations and warranties set forth herein. All information
supplied by the Company that is identified in writing as non-public will be kept
confidential by XXXX except as the Company may agree or otherwise in accordance
with non-disclosure agreement(s).
7. TERMINATION. NESC's engagement under this Agreement may be
terminated at any time by either NESC or the Company, with or without cause,
effective upon 10 days prior written notice thereof to the other party;
PROVIDED, however, that termination of NESC's engagement hereunder shall not
affect (a) the Company's obligation to pay fees to the extent, in the amounts
and at the times provided for in paragraph 2 hereof, and the Company's
obligation to reimburse NESC's expenses accruing prior to such termination to
the extent provided for in Section 3 of this Agreement and (b) any of the terms
or provisions of the Standard Form of Indemnification Agreement set forth as
EXHIBIT A hereto.
8. INDEPENDENT CONTRACTOR; ADVICE. NESC has been retained under
this Agreement as an independent contractor with duties owed solely to the
Company. The advice (written or oral) rendered by NESC pursuant to this
Agreement is intended solely for the benefit of and use of the Board of
Directors and senior management of the Company in considering the matters to
which this Agreement relates, and the Company agrees that such advice may not be
relied upon by any other person, used for any other purpose or reproduced,
disseminated, quoted or referred to at any time, in any manner or for any
purpose, nor shall any public reference to NESC be made by the Company or its
representatives, without the prior written consent of NESC, which consent shall
not be reasonably withheld or delayed.
9. ADVERTISEMENTS. The Company agrees that NESC shall have the
right to place advertisements in financial and other newspapers and journals at
its own expense describing its services to the Company hereunder, provided that
NESC will submit a copy of any such advertisement to the Company for its
approval, and such approval shall not be unreasonably withheld or delayed.
10. GOVERNING LAW. This Agreement and all controversies arising from
or relating to performance under this Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without giving
effect to such state's rules concerning conflicts of laws. ANY RIGHT TO TRIAL BY
JURY WITH RESPECT TO ANY CLAIM OR ACTION ARISING OUT OF THIS AGREEMENT OR
CONDUCT IN CONNECTION WITH THE ENGAGEMENT IS HEREBY WAIVED.
11. MISCELLANEOUS. This Agreement may be executed in counterparts,
each of which together shall be considered a single document. This Agreement
shall be binding upon NESC and the Company and their respective successors and
assigns, provided, however, that this
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Agreement shall not be assignable by either party without the prior written
consent of the other. This Agreement is not intended to confer any rights upon
any shareholder, owner, or partner of the Company, or any other person not a
party hereto other than the indemnified persons entitled to indemnification
hereunder. This Agreement, and all exhibits hereto, represent the entire
agreement of the parties and may not be amended or waived except by a writing
signed by both parties.
12. INDEMNIFICATION. The Company agrees to indemnify NESC and its
controlling persons, representatives and agents in accordance with the
indemnification provisions set forth in EXHIBIT A, which is incorporated herein
by this reference. This provision will apply regardless of whether the proposed
offering is consummated.
[SIGNATURE PAGE FOLLOWS]
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We are pleased to accept this engagement and look forward to working
with the Company. Please confirm that the foregoing is in accordance with your
understanding by signing and returning to us the enclosed duplicate of this
letter, which shall thereupon constitute a binding agreement among the Company
and NESC.
Very truly yours,
NORTHEAST SECURITIES, INC.
By:
-------------------------------
Name: X. Xxx Xxxxx
Title: Executive Vice President
AGREED
CLEAN WATER TECHNOLOGIES, INC.
By:
-------------------------------------
Name: XXXXXXX XXXXXXXXX
Title: Chief Executive Officer
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EXHIBIT A
---------
STANDARD FORM OF INDEMNIFICATION AGREEMENT
------------------------------------------
INDEMNIFICATION AND CONTRIBUTION
The Company agrees to indemnify and hold harmless NESC and its
affiliates (as defined in Rule 405 under the Securities Act of 1933, as amended)
and their respective directors, officers, employees, agents and controlling
persons (NESC and each such person being an "Indemnified Party") from and
against all losses, claims, damages and liabilities (or actions, including
shareholder actions, in respect thereof), joint or several, to which such
Indemnified Party may become subject under any applicable federal or state law,
or otherwise, which are related to or result from the performance by NESC of the
services contemplated by or the engagement of NESC pursuant to, this Agreement
and will promptly reimburse any Indemnified Party for all reasonable expenses
(including reasonable counsel fees and expenses) as they are incurred in
connection with the investigation of, preparation for or defense arising from
any threatened or pending claim, whether or not such Indemnified Party is a
party and whether or not such claim, action or proceeding is initiated or
brought by the Company. The Company will not be liable to any Indemnified Party
under the foregoing indemnification and reimbursement provisions, (i) for any
settlement by an Indemnified Party effected without its prior written consent
(not to be unreasonably withheld), (ii) to the extent that any loss, claim,
damage or liability is found in a final, non-appealable judgment by a court of
competent jurisdiction to have resulted primarily from NESC's willful misconduct
or bad faith or (iii) to the extent that any loss, claim, damage or liability is
found in a final, non-appealable judgment by a court of competent jurisdiction
to have resulted primarily from any material misstatement or omission based upon
written information provided by any Indemnified Party for inclusion in the
memorandum. The Company also agrees that no Indemnified Party shall have any
liability (whether direct or indirect, in contract or tort or otherwise) to the
Company or its security holders or creditors related to or arising out of the
engagement of NESC pursuant to, or the performance by NESC of the services
contemplated by, this Agreement except to the extent that any loss, claim,
damage or liability is found in a final, non-appealable judgment by a court of
competent jurisdiction to have resulted primarily as a result of any of the
events described in clauses (i), (ii) or (iii) above..
Promptly after receipt by an Indemnified Party of notice of any
intention or threat to commence an action, suit or proceeding or notice of the
commencement of any action, suit or proceeding, such Indemnified Party will, if
a claim in respect thereof is to be made against the Company pursuant hereto,
promptly notify the Company in writing of the same. In case any such action is
brought against any Indemnified Party and such Indemnified Party notifies the
Company of the commencement thereof, the Company may elect to assume the defense
thereof, with counsel reasonably satisfactory to such Indemnified Party, and an
Indemnified Party may employ counsel to participate in the defense of any such
action provided, that the employment of such counsel shall be at the Indemnified
Party's own expense, unless (i) the employment of such counsel has been
authorized in writing by the Company, (ii) the Indemnified Party has reasonably
concluded (based upon advice of counsel to the Indemnified Party) that there may
be legal defenses available to it or other Indemnified Parties that are
different from or in addition to
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those available to the Company, or that a conflict or potential conflict exists
(based upon advice of counsel to the Indemnified Party) between the Indemnified
Party and the Company that makes it impossible or inadvisable for counsel to the
Indemnifying Party to conduct the defense of both the Company and the
Indemnified Party (in which case the Company will not have the right to direct
the defense of such action on behalf of the Indemnified Party), or (iii) the
Company has not in fact employed counsel reasonably satisfactory to the
Indemnified Party to assume the defense of such action within a reasonable time
after receiving notice of the action, suit or proceeding, in each of which cases
the reasonable fees, disbursements and other charges of such counsel will be at
the expense of the Company; provided, further, that in no event shall the
Company be required to pay fees and expenses for more than one firm of attorneys
representing Indemnified Parties. Any failure or delay by an Indemnified Party
to give the notice referred to in this paragraph shall not affect such
Indemnified Party's right to be indemnified hereunder, except to the extent that
such failure or delay causes actual harm to the Company, or prejudices its
ability to defend such action, suit or proceeding on behalf of such Indemnified
Party.
If the indemnification provided for in this Agreement is for any reason
held unenforceable by an Indemnified Party, the Company agrees to contribute to
the losses, claims, damages and liabilities for which such indemnification is
held unenforceable (i) in such proportion as is appropriate to reflect the
relative benefits to the Company, on the one hand, and NESC on the other hand,
of the Offering as contemplated whether or not the Offering is consummated or,
(ii) if (but only if) the allocation provided for in clause (i) is for any
reason unenforceable, in such proportion as is appropriate to reflect not only
the relative benefits referred to in clause (i) but also the relative fault of
the Company, on the one hand and NESC, on the other hand, as well as any other
relevant equitable considerations. The Company agrees that for the purposes of
this paragraph the relative benefits to the Company and NESC of the Offering as
contemplated shall be deemed to be in the same proportion that the total value
received or contemplated to be received by the Company or its shareholders, as
the case may be, as a result of or in connection with the Offering bear to the
fees paid or to be paid to NESC under this Agreement. Notwithstanding the
foregoing, the Company expressly agrees that NESC shall not be required to
contribute any amount in excess of the amount by which fees paid NESC hereunder
(excluding reimbursable expenses), exceeds the amount of any damages which NESC
has otherwise been required to pay.
Each party agrees that without the other's prior written consent, which
shall not be unreasonably withheld, it will not settle, compromise or consent to
the entry of any judgment in any pending or threatened claim, action or
proceeding in respect of which indemnification could be sought under the
indemnification provisions of this Agreement (in which NESC or any other
Indemnified Party is an actual or potential party to such claim, action or
proceeding), unless such settlement, compromise or consent includes an
unconditional release of each Indemnified Party from all liability arising out
of such claim, action or proceeding.
In the event that an Indemnified Party is requested or required to
appear as a witness in any action brought by or on behalf of or against the
Company in which such Indemnified Party is not named as a defendant, the Company
agrees to promptly reimburse NESC on a monthly basis for all expenses incurred
by it in connection with such Indemnified Party's appearing and
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preparing to appear as such a witness, including, without limitation, the
reasonable fees and disbursements of its legal counsel.
If multiple claims are brought with respect to at least one of which
indemnification is permitted under applicable law and provided for under this
Agreement, the Company agrees that any judgment or arbitrate award shall be
conclusively deemed to be based on claims as to which indemnification is
permitted and provided for, except to the extent the judgment or arbitrate award
expressly states that it, or any portion thereof, is based solely on a claim as
to which indemnification is not available.
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