Financial Advisor and Syndicate Placement Agent Agreement - SheerVision Inc. and Northeast Securities Inc.
[NORTHEAST SECURITIES, INC. LOGO] OMITTED
O. Lee Tawes, III
Executive Vice President
August 3, 2005
Ms. Suzanne Lewsadder
Chief Executive Officer
SheerVision, Inc.
4040 Palos Verdes Drive N., Suite 105
Rolling Hills, CA 90274
Dear Ms. Lewsadder:
This letter confirms our understanding that Northeast Securities, Inc.
("NESC") has been engaged on a non-exclusive basis as financial advisor and
syndicate placement agent for SheerVision, Inc. (the "Company"), including its
successors and assigns, with respect to reviewing the Company's capital
structure, its principal businesses and its financing and refinancing
alternatives, and advising the Company in connection with raising funds through
a private sale of debt securities of the Company or any entity formed by or at
the direction of the Company to issue such securities (the "Securities"),
including acting as a placement agent and/or purchaser of any Securities, as
NESC may determine in its sole discretion (collectively, the "Financing"). 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. NESC will perform the following financial advisory and investment
banking services:
(a) familiarize itself to the extent it deems appropriate and feasible
with the business, operations, properties, condition (financial and
otherwise) and prospects of the Company;
(b) if requested by the Company, NESC will advise and assist the
management of the Company in making appropriate presentations to the
Board of Directors of the Company concerning the Financing;
(c) advise and assist the Company in the course of its negotiations with
potential purchasers of the Securities and will participate directly
in such negotiations;
(d) assist the Company in developing and preparing an offering
memorandum to be used in soliciting potential purchasers of the
Securities (as the same may be amended from time to time, the
"Memorandum"), it being agreed that (i) such Memorandum shall be
based entirely upon information supplied by the Company, which
information the Company
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hereby warrants shall be complete and accurate in all material
respects and not misleading, and (ii) the Company shall be solely
responsible for the accuracy and completeness of such Memorandum
except for information supplied by NESC;
(e) work with the Company to identify potential purchasers of the
Securities;
(f) assist the Company in marketing the Securities to potential
purchasers which have been approved by the Company in the manner
described in Section 2(b) below and meet all applicable purchaser
and suitability requirements; and
(g) render such other financial advisory and investment banking services
as may from time to time be agreed upon by NESC and the Company.
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 non-exclusive right to do so. NESC
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 Financing.
2. NESC compensation for services rendered under this engagement will
be the following:
(a) If during the term of this engagement or within the 12 months
following the termination of this engagement, (i) the Company
consummates one or more Financings with 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, listed on EXHIBIT B, and
acknowledged in writing by the Company during the term of this
engagement (an "NESC Investor") or (ii) (A) the Company receives and
accepts a written commitment for a Financing from such NESC Investor
(the execution by the Company of a commitment letter or securities
purchase agreement shall be deemed to be receipt and acceptance of
such written commitment) and (B) at any time thereafter such
Financing by an NESC Investor is consummated, the Company will pay
to NESC upon the closing date(s) thereof, eight percent (8%) of the
gross proceeds received by the Company from such Financing and
warrants exercisable at a $3 million valuation in an amount equal to
the product of (A) multiplied by (B), where (A) 2.5% of the shares
of common stock of the Company prior to the commencement of the
Financing and where (B) equals a fraction, the numerator of which
equals the gross proceeds to the Company in the Financing and the
denominator of which equals the maximum amount of the Financing,
provided that such fraction may not exceed 1.0. Such warrants shall
be afforded the same registration rights as being offered the NESC
Investors in the Financing.
(b) In the event the Company becomes a party to a transaction not
discussed above (e.g., a sale of substantially all of the assets, a
merger or other business transaction involving the Company) arising
out of or in connection with NESC's role as financial advisor, the
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Company agrees to pay NESC's a fee consistent with the market
practice for such services provided by nationally recognized
investment banking firms.
3. The Company shall bear all of its legal, accounting, printing and
other expenses in connection with the Financing 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 a Financing shall be proposed or consummated, and
regardless of whether any Securities are offered or sold, reimburse NESC for its
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 NESC agrees that all such expenses shall not exceed
$50,000 in the aggregate without the prior written approval of the Company. Such
reimbursements shall be made promptly upon submission by NESC of statements for
such expenses.
4. 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's by the Company and other parties. It is understood that in performing
under this engagement NESC's 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. The Company represents and warrants that all information and
documents (including any Memorandum) furnished by the Company in connection with
the Financing and to offerees of the Securities will not, at the time so
furnished and at the time of the closing of the Financing, contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading. The Company agrees that any securities purchase
agreements relating to any private placement of Securities will contain such
terms, covenants, conditions, representations, warranties and other provisions
as are reasonably satisfactory in form and substance to NESC's and its counsel.
6. The Company will provide to NESC during the term of this engagement
such information regarding the business and financial condition of the Company
and its affiliates as NESC may 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 non-public
information supplied by the Company will be kept confidential by NESC except to
the extent required to be provided to purchasers of Securities in accordance
with the terms of this Agreement.
7. The Company has not taken, nor will it take, any action, directly or
indirectly, so as to cause the offer and sale of the Securities to fail to be
entitled to the exemption from registration
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afforded by Section 4(2) of the Securities Act of 1933, as amended (the
"Securities Act"). In this regard, NESC will not offer or sell any Securities to
any investor that it does not reasonably believe to be an "accredited investor"
as defined by Regulation D of the rules and regulations of the U.S. Securities
and Exchange Commission under the Securities Act nor will NESC sell any
securities by means of general advertising or general solicitation. The Company
will take such action as NESC may reasonably request to qualify the Securities
as a private placement under the securities laws of such states as NESC may
reasonably request and to comply with such laws so as to permit such offers and
sales.
8. The term of this Agreement shall be from the date hereof through
December 31, 2005 (unless earlier terminated as provided below) provided that
this Agreement shall be renewed for 60 days upon the written consent of the
parties. This Agreement may be terminated with respect to all parties hereto 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 herein
and (b) any of the terms or provisions of the Standard Form of Indemnification
Agreement set forth as EXHIBIT A hereto. As set forth herein, Sections 2 and 14
shall survive any termination or expiration of this Agreement.
9. 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
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.
10. 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, such approval
shall not be unreasonably withheld or delayed.
11. 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 THIS ENGAGEMENT IS HEREBY WAIVED.
12. 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
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their respective successors and assigns, provided, however, that this Agreement
shall not be assignable by either party without the prior written consent of the
other party. 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, represents the entire agreement of the
parties and may not be amended or waived except by a writing signed by both
parties.
13. It is understood and agreed that NESC and its affiliates may from
time to time make a market in, have a long or short position in, buy and sell or
otherwise effect transactions for customer accounts and for their own accounts
in the securities of, or perform investment banking or other services, for, the
Company and other entities which are or may be the subject of the engagement
contemplated by this Agreement.
14. Since NESC will be acting on behalf of the Company in connection
with its engagement hereunder, the Company agrees to indemnify NESC in
accordance with the Standard Form of Indemnification Agreement set forth as
EXHIBIT A hereto which is incorporated herein as if set forth herein. EXHIBIT A
is an integral part of this Agreement and shall survive any termination or
expiration of this Agreement.
[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: /s/ O. Lee Tawes, III
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O. Lee Tawes, III
Executive Vice President
AGREED
SheerVision, Inc.
By: /s/ Ms. Suzanne Lewsadder
-----------------------------
Ms. Suzanne Lewsadder
Chief Executive Officer
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EXHIBIT A
STANDARD FORM OF INDEMMNIFICATION AGREEMENT
1. In connection with the services NESC has agreed to render to the
Company hereunder, the Company shall (a) indemnify NESC and hold it harmless to
the fullest extent permitted by law against any losses, claims, damages or
liabilities to which NESC may become subject in connection with (i) its use of
information that is inaccurate in any material respect (as a result of
misrepresentation, omission, failure to update, or otherwise) that is provided
to NESC by the Company, its representatives, agents or advisers, regardless of
whether NESC knew or should have known of such inaccuracy, or (ii) any other
aspect of its rendering such services, unless it is finally judicially
determined that such losses, claims, damages or liabilities relating thereto
arise only out of the gross negligence or willful misconduct of NESC, and (b)
reimburse NESC for any legal or other expenses reasonably incurred by it in
connection with investigating, preparing to defend or defending any lawsuits,
claims or other proceedings arising in any manner out of or in connection with
its performance of its duties hereunder.
2. If for any reason the foregoing indemnity is unavailable to NESC or
insufficient to hold NESC harmless, then the Company shall contribute to the
amount paid or payable by NESC as a result of such claims, liabilities, losses,
damages or expenses in such proportion as is appropriate to reflect not only the
relative benefits received by the Company on the one hand and NESC on the other
but also the relative fault of the Company and NESC, as well as any relevant
equitable considerations. Notwithstanding the provisions of this agreement, the
aggregate contribution of NESC to all claims, liabilities, losses, damages and
expenses shall not exceed the amount of fees actually received by NESC pursuant
to its engagement by the Company. It is hereby further agreed that the relative
benefits to the Company on the one hand and NESC on the other hand with respect
to the transactions contemplated in this engagement letter shall be deemed to be
in the same proportion as (i) the total value of the transaction bears to (ii)
the fees paid to NESC with respect to such transactions. The Company agrees that
the indemnification and reimbursement commitments set forth in this agreement
shall apply whether or not NESC is a formal party to any such lawsuits or other
proceedings, that NESC is entitled to retain separate counsel of its choice in
connection with any of the matters to which the foregoing indemnity relate, that
such indemnity shall be in addition to any liability that the Company may have
to NESC at common law or otherwise, and that such indemnity shall extend upon
the terms set forth in this agreement to any controlling person, director,
officer, employee, agent or affiliate of NESC who shall be deemed direct
beneficiaries of this agreement as if a signatory hereto and shall survive any
termination of this agreement.
3. The Company further agrees that neither NESC nor any indemnified
party shall have any liability (whether direct or indirect, in contract or tort
or otherwise) to the Company or any of its affiliates, creditors or security
holders for or in connection with the engagement or any actual or proposed
transactions or other conduct in connection therewith, except for losses
incurred by the Company that are finally judicially determined to have resulted
primarily from the gross negligence or willful misconduct of such indemnified
party.
4. The Company hereby submits to the sole and exclusive jurisdiction of
the courts of the Southern District of the State of New York in any proceeding
arising out of our relating to this agreement, including federal district courts
located in such state, agrees not to commence any suit, action or proceeding
relating to thereto except in such courts, and waives, to the fullest extent
permitted by law, the right to move to dismiss or transfer any action brought in
such court on the basis of any objection to personal jurisdiction, venue or
inconvenient forum. Solely, for the purposes of enforcing this agreement, the
Company hereby consents to personal jurisdiction, service of process and venue
in any such court in which any claim or proceeding that is subject to this
agreement is brought.
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