PLACEMENT AGENCY
AGREEMENT
As of June 28, 2006
Brookstreet Securities
Corporation
2361 Campus Drive, Suite
210
Irvine, California 92612
Ladies and Gentlemen:
Alchemy Enterprises, Ltd., a Nevada
corporation (the “Company”), proposes to offer for sale
to “accredited investors,” in a private placement (the
“Offering”), up to 30,000,000 shares (the
“Shares”) of the Company’s common stock, par
value $.001 per share (the “Common Stock”), with an
aggregate value of $10,500,000. The Shares will be offered pursuant
to those terms and conditions acceptable to you as reflected in the
engagement letter, dated April 11, 2006, as amended or supplemented
(the “Engagement Letter”). The Shares will be offered
on a “best efforts - all or none” basis as to the first
10,000,000 Shares offered (the “Minimum Offering”) and
on a “best efforts” basis as to the 20,000,000 Shares
offered and sold thereafter (the “Maximum Offering”),
pursuant to the Engagement Letter and related documents, in
accordance with Section 4(2) of the Securities Act of 1933, as
amended (the “Securities Act”), and Regulation D
promulgated thereunder. The Company has also granted to Brookstreet
Securities Corporation (the “Placement Agent”) an
option, subject to the closing of the Maximum Offering, to be
exercised within 60 days after the final Closing (as such term is
defined in Section 4(a) hereof), to sell up to 4,500,000 additional
Shares solely to cover over-subscriptions (the
“Over-subscription Shares”), if any.
Giving consideration to present
market conditions, and assuming no adverse changes in the business
or prospects of the Company, it is contemplated that, upon the sale
of $6,000,000 in shares of Common Stock, the existing shareholders
of the Company will retain approximately 57% of the Company’s
outstanding shares of Common Stock. The Placement Agent may form a
selling group of selected dealers to offer and sell the Shares in
the Offering.
The Offering will be accomplished
pursuant to a confidential private placement memorandum (the
“Private Placement Memorandum”). The Private Placement
Memorandum, as it may be amended or supplemented from time to time,
the form of proposed subscription agreement between the Company and
each subscriber (the “Subscription Agreement”) and the
other exhibits which are part of the Private Placement Memorandum
and/or the Subscription Agreement are collectively referred to
herein as the “Offering Documents.”
The Company will prepare and deliver
to the Placement Agent a reasonable number of copies of the
Offering Documents in form and substance satisfactory to counsel to
the Placement Agent.
Each prospective investor
subscribing to purchase Shares (a “Subscriber”) will be
required to deliver, among other things, a Subscription Agreement
and a confidential subscriber questionnaire (a
“Questionnaire”) in the form to be provided to
offerees.
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1.
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Appointment of Placement
Agent .
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(a)
You are hereby appointed exclusive
Placement Agent, for the purposes of assisting the Company in
finding qualified Subscribers pursuant to the Offering of the
Company, for a term commencing as of June 28, 2006, the date of the
Private Placement Memorandum, and expiring 90 days from that date;
provided , however , that the expiration date of the
term (the “Termination Date”) may be extended for two
successive 30-day periods thereafter by the Company or the
Placement Agent. The Company shall not solicit any other
broker-dealers to participate in the Offering and the Company will
not sell any Shares directly to the public without the Placement
Agent’s prior consent.
(b)
Subject to the performance by the
Company of all of its obligations to be performed under this
Agreement and to the completeness and accuracy of all
representations and warranties of the Company contained in this
Agreement, the Placement Agent hereby accepts such agency and
agrees to use its best efforts to assist the Company in finding
qualified Subscribers pursuant to the Offering described in the
Offering Documents. It is understood that the Placement Agent has
no commitment to sell the Shares. The agency of the Placement Agent
hereunder is not terminable by the Company except upon termination
of the Offering Period.
(c)
Subscriptions for Shares shall be
evidenced by the execution by Subscribers of a Subscription
Agreement. No Subscription Agreement shall be effective unless and
until it is accepted by the Company. Until the Closing, all
subscription funds received shall be held as described in the
Subscription Agreement and in Section 4(b) hereof. The Placement
Agent shall not have any obligation to independently verify the
accuracy or completeness of any information contained in any
Subscription Agreement or the authenticity, sufficiency or validity
of any check delivered by any prospective investor in payment for
Shares.
2.
Representations and Warranties of
the Company . The Company
represents and warrants to the Placement Agent as
follows:
(a)
Securities Law
Compliance . The Offering
Documents conform in all respects with the requirements of Section
4(2) of the Securities Act and Regulation D promulgated thereunder
and with the requirements of all other published rules and
regulations of the Securities and Exchange Commission (the
“Commission”) currently in effect relating to
“private offerings” to “accredited
investors.” The Offering Documents, when read together as of
their respective dates, will not contain an untrue statement of a
material fact or omit to state any material fact necessary in order
to make the statements therein, in light of the circumstances in
which they were made, not misleading. If at any time prior to the
Termination Date or other termination of this Agreement any event
shall occur as a result of which it might become necessary to amend
or supplement the Offering Documents so that they do not include
any untrue statement of any material fact or omit to state any
material fact necessary in order to make the statements therein, in
the light of the circumstances then existing, not misleading, the
Company will promptly notify the Placement Agent and will supply
the Placement Agent with amendments or supplements correcting such
statement or omission. The Company will also provide the Placement
Agent for delivery to all offerees and purchasers and their
representatives, if any, any information, documents and instruments
which the Placement Agent deems necessary to comply with applicable
state and federal law.
(b)
Organization
. The Company is a corporation duly
organized, validly existing and in good standing under the laws of
the State of Nevada and has all requisite corporate power and
authority to own and lease its properties, to carry on its business
as currently conducted and as
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proposed to be conducted, to execute
and deliver this Agreement and to carry out the transactions
contemplated by this Agreement, and is duly licensed or qualified
to do business as a foreign corporation in each jurisdiction in
which the conduct of its business or ownership or leasing of its
properties requires it to be so qualified, except where the failure
to be so qualified would not have a material adverse effect on the
business, financial condition or prospects of the
Company.
(c)
Capitalization
. The authorized, issued and
outstanding capital stock of the Company prior to the consummation
of the transactions contemplated hereby is as set forth in the
Offering Documents. All issued and outstanding shares of the
Company are validly issued, fully paid and nonassessable and have
not been issued in violation of the preemptive rights of any
shareholder of the Company. All prior sales of securities of the
Company were either registered under the Securities Act and
applicable state securities laws or exempt from such
registration.
(d)
Warrants, Preemptive Rights,
etc. Except for the
warrants to purchase shares of Common Stock to be issued to the
Placement Agent or its designees in consideration for acting as
Placement Agent hereunder (the “Agent’s
Warrants”) and except as set forth in the Engagement Letter,
including the exhibits thereto, there are not, nor will there be
immediately after the Closing, any outstanding warrants, options,
agreements, convertible securities, preemptive rights to subscribe
for or other commitments pursuant to which the Company is, or may
become, obligated to issue any shares of its capital stock or other
securities of the Company and this Offering will not cause any
anti-dilution adjustments to such securities or commitments except
as reflected in the Engagement Letter.
(e)
Subsidiaries and
Investments . Except as
stated in the Offering Documents, the Company has no subsidiaries
and the Company does not own, directly or indirectly, any capital
stock or other equity ownership or proprietary interests in any
other corporation, company, association, trust, partnership, joint
venture or other entity.
(f)
Financial Statements
. The financial information
contained in the Offering Documents is accurate in all material
respects (such financial statements included as part of the
Offering Documents are hereinafter referred to collectively as the
“Financial Statements”). The Financial Statements have
been prepared in conformity with generally accepted accounting
principles consistently applied and show all material liabilities,
absolute or contingent, of the Company required to be recorded
thereon and present fairly the financial position and results of
operations of the Company as of the dates and for the periods
indicated.
(g)
National Security
Legislation . Neither the
sale of the Shares hereunder nor its use of the proceeds thereof
will violate the Trading with the Enemy Act, as amended, or any of
the foreign assets control regulations of the United States
Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or
any enabling legislation or executive order relating thereto.
Without limiting the foregoing, neither the Company nor any of its
subsidiaries (a) is a person whose property or interests in
property are blocked pursuant to Section 1 of Executive Order 13224
of September 23, 2001 Blocking Property and Prohibiting
Transactions With Persons Who Commit, Threaten to Commit, or
Support Terrorism (66 Fed. Reg. 49079 (2001)) or (b) engages in any
dealings or transactions, or be otherwise associated, with any such
person. The Company and its subsidiaries are in compliance with the
USA Patriot Act of 2001 (signed into law October 26,
2001).
(h)
Absence of Changes
. Except as set forth in the
Offering Documents, the Company has not incurred any liabilities or
obligations, direct or contingent, not in the ordinary course of
business, or entered into any transaction not in the ordinary
course of business, which is material to the business of the
Company, and there has not been any change in the capital stock of,
or any incurrence of long-term debt by, the Company, or any
issuance of options, warrants or other rights to purchase
the
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capital stock of the Company, or any
adverse change or any development involving, so far as the Company
can now reasonably foresee, a prospective adverse change in the
condition (financial or otherwise), net worth, results of
operations, business, key personnel or properties which would be
material to the business or financial condition of the Company, and
the Company has not become a party to, and neither the business nor
the property of the Company has become the subject of, any
litigation which if adversely determined would have a material
adverse affect, whether or not in the ordinary course of
business.
(i)
Title . Except as set forth in the Offering Documents,
the Company has good and marketable title to all properties and
assets owned by it, free and clear of all liens, charges,
encumbrances or restrictions, except such as are not materially
significant or important in relation to the Company’s
business; all of the material leases and subleases under which the
Company is the lessor or sublessor of properties or assets or under
which the Company holds properties or assets as lessee or sublessee
are in full force and effect, and the Company is not in default in
any material respect with respect to any of the terms or provisions
of any of such leases or subleases, and no material claim has been
asserted by anyone adverse to rights of the Company as lessor,
sublessor, lessee or sublessee under any of the leases or subleases
mentioned above, or affecting or questioning the right of the
Company to continued possession of the leased or subleased premises
or assets under any such lease or sublease. The Company owns or
leases all such properties as are necessary to its operations as
now conducted and to be conducted, as presently planned.
(j)
Patents, Trademarks,
etc. The Company owns or
possesses adequate and enforceable rights to use all patents,
patent applications, trademarks, service marks, copyrights, trade
secrets, processes, formulations, technology or know-how used or
proposed to be used in the conduct of its business as described in
the Offering Documents (collectively, “Proprietary
Rights”). The Company has not received any notice of any
claims, nor does it have any knowledge of any threatened claims,
and knows of no facts which could form the basis of any claim,
asserted by any person to the effect that the sale or use of any
product or service now used or offered by the Company or proposed
to be used or offered by the Company infringes on any patents or
infringes upon the use of any such Proprietary Rights of another
person and, to the best of the Company’s knowledge, no others
have infringed the Company’s Proprietary Rights.
(k)
Software . The current software of the Company (the
“Software”) is original and capable of copyright
protection in the United States, and the Company has complete
rights to the ownership of such Software, including possession of,
or ready access to, the source code for such Software in its most
recent version. No part of any such Software is an imitation or
copy of, or infringes upon, the software of any other person or
entity, or violates or infringes upon any common law or statutory
rights of any other person or entity, including, without
limitation, rights relating to defamation, contractual rights,
copyrights, trade secrets, and rights of privacy or publicity. The
Company has not sold, assigned, licensed, distributed or in any
other way disposed of or encumbered the Software, other than in the
ordinary course of its business. The Software, to the extent any
part of it is licensed from any third-party licensor or constitutes
“off-the-shelf” software, is held by the Company
legitimately. The Company warrants that, to the best of the
Company’s knowledge, the Software is free from any
significant software defect or programming or documentation error,
operates and runs in a reasonable and efficient business manner,
and conforms to its stated specifications. The Company has no
knowledge of the existence of any bugs or viruses with respect to
the Software which would have a material adverse effect on the
condition (financial or otherwise), earnings, operations, business
or business prospects of the Company.
(l)
Litigation
. There is no material action, suit,
investigation, customer complaint, claim or proceeding at law or in
equity by or before any arbitrator, governmental
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instrumentality or other agency now
pending or, to the knowledge of the Company, threatened against the
Company (or basis therefor known to the Company), the adverse
outcome of which could materially adversely affect the
Company’s business. The Company is not subject to any
judgment, order, writ, injunction or decree of any federal, state,
municipal or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign which could
materially adversely affect the Company’s business or
prospects.
(m)
Nondefaults;
Noncontravention . The
Company is not in violation of or default under, nor will the
execution and delivery of this Agreement or any of the Offering
Documents or consummation of the transactions contemplated herein
or therein result in a violation of or constitute a default in the
performance or observance of any obligation (i) under its Articles
of Incorporation or its By-laws, (ii) under any indenture,
mortgage, deed of trust, material contract, material purchase order
or other material agreement or instrument to which the Company is a
party or by which it or its property is bound or affected or (iii)
with respect to any material order, writ, injunction or decree of
any court or any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality,
domestic or foreign, and there exists no condition, event or act
which constitutes, nor which after notice, the lapse of time or
both, could constitute a default under any of the foregoing, which
in either case would have a material adverse effect on the business
of the Company.
(n)
Taxes . The Company has filed all federal, state,
local and foreign tax returns which are required to be filed by it
and all such returns are true and correct in all material respects.
The Company has paid all taxes pursuant to such returns or pursuant
to any assessments received by it or which it is obligated to
withhold from amounts owing to any employee, creditor or third
party. The Company has properly accrued all taxes required to be
accrued. The tax returns of the Company are not currently being
audited by any state, local or federal authorities. The Company has
not waived any statute of limitations with respect to taxes or
agreed to any extension of time with respect to any tax assessment
or deficiency.
(o)
Compliance with Laws; Licenses,
etc. The Company has not
received notice of any violation of or noncompliance with any
federal, state, local or foreign laws, ordinances, regulations and
orders applicable to its business which has not been cured, the
violation of, or noncompliance with which, would have a materially
adverse effect on the business or operations of the Company. The
Company has all licenses and permits and other governmental
certificates, authorizations and approvals (collectively,
“Licenses”) required by every federal, state and local
government or regulatory body for the operation of its business as
currently conducted and the use of its properties, except where the
failure to be licensed would not have a material adverse effect on
the business of the Company. The Licenses are in full force and
effect and no violations are or have been recorded in respect of
any License and no proceeding is pending or, to the knowledge of
the Company, threatened to revoke or limit any thereof.
(p)
Authorization of Agreement,
etc. This Agreement has
been duly executed and delivered by the Company and the execution,
delivery and performance by the Company of this Agreement and the
Subscription Agreement and other Offering Documents have been duly
authorized by all requisite corporate action by the Company and
constitute the legal, valid and binding obligations of the Company,
enforceable in accordance with their respective terms.
(q)
Authorization of
Shares . The issuance,
sale and delivery of the Shares and the Agent’s Warrants have
been duly authorized by all requisite corporate action of the
Company and, when so issued, paid for and delivered, will be
validly issued, fully paid and nonassessable and, will not be
subject to preemptive or any other similar rights of the
shareholders of the Company or others which rights shall not have
been waived prior to the Closing.
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(r)
Authorization of Reserved
Shares . The issuance,
sale and delivery by the Company of the shares of Common Stock
reserved for issuance upon exercise of the Agent’s Warrants
(the “Reserved Shares”) have been duly authorized by
all requisite corporate action of the Company. The Reserved Shares
have been duly reserved for issuance upon exercise of the
Agent’s Warrants and when so issued, sold, paid for and
delivered, the Reserved Shares will be validly issued and
outstanding, fully paid and nonassessable, and not subject to
preemptive or any other similar rights of the shareholders of the
Company or others which rights shall not have been waived prior to
the Closing.
(s)
Exemption from
Registration . Assuming
(i) the accuracy of the information provided by the respective
Subscribers in the Subscription Documents and the other Offering
Documents and (ii) that the Placement Agent has complied in all
material respects with the provisions of Rule 502(c) of Regulation
D promulgated under the Securities Act, the offer and sale of the
Shares pursuant to the terms of this Agreement are exempt from the
registration requirements of the Securities Act and the rules and
regulations promulgated thereunder (the “Regulations”).
The Company is not disqualified from the exemption under Regulation
D by virtue of the disqualifications contained in Rule
505(b)(2)(iii) or Rule 507 promulgated thereunder.
(t)
Registration Rights
. Except with respect to holders of
the Shares and the Agent’s Warrants, no person has any right
to cause the Company to effect the registration under the
Securities Act of any securities of the Company.
(u)
Brokers . Neither the Company nor any of its officers,
directors, employees or shareholders has employed any broker or
finder in connection with the transactions contemplated by this
Agreement other than the Placement Agent.
(v)
Title to Shares
. When certificates representing the
Common Stock and/or Reserved Shares shall have been duly delivered
to the purchasers and payment shall have been made therefor
(assuming such purchasers are bona fide purchasers within the
meaning of the Uniform Commercial Code), the several purchasers
shall have marketable title to the Common Stock and/or Reserved
Shares free and clear of all liens, encumbrances and claims
whatsoever (with the exception of claims arising from or through
the acts of the purchasers and except as arising from applicable
federal and state securities laws), and the Company shall have paid
all transfer taxes, if any, in respect of the original issuance
thereof.
(w)
Right of First Refusal
. No person, firm or other business
entity is a party to any agreement, contract or understanding,
written or oral, entitling such party to a right of first refusal
with respect to the offer or sale of any equity or debt securities
by the Company.
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(x)
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Solvency . The Company’s assets currently exceed
its liabilities.
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3.
Representations and Warranties of
the Placement Agent . The
Placement Agent represents and warrants to the Company as
follows:
(a)
This Agreement has been duly
authorized, executed and delivered by the Placement Agent and is a
valid and binding agreement on its part, enforceable against the
Placement Agent in accordance with its terms.
(b)
The Placement Agent is duly
registered pursuant to the provisions of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”), as a
broker-dealer and is a member in good standing of the National
Association of Securities Dealers, Inc. and is duly registered as
a
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broker-dealer in those states in
which it is required to be so registered in order to carry out the
Offering contemplated hereby.
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4.
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Closing; Escrow; Placement and
Fees .
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(a)
Closing . Provided the Offering shall have been
subscribed for and funds representing the sale of at least
10,000,000 Shares shall have cleared, a closing (the
“Closing”) shall take place at the offices of counsel
to the Placement Agent, Greenberg Traurig LLP, at 2450 Colorado
Avenue, Suite 400E, Santa Monica, California 90404, on such date
(the “Closing Date”) which is on or before the
Termination Date (which date may be accelerated or adjourned by
agreement between the Company and the Placement Agent). At the
Closing, payment for the Shares issued and sold by the Company
shall be made against delivery of stock certificates representing
such Shares. In addition, one or more subsequent closings (if
applicable; and the date of each and any subsequent closing and
such subsequent closing shall also be referred to as a
“Closing Date” and a “Closing,”
respectively) may be scheduled at the discretion of the Company and
the Placement Agent.
(b)
Escrow Account
. Funds received from the sale of
the Shares will be deposited by the Placement Agent with a
chartered banking institution as escrow agent (the “Escrow
Agent”), and held by the Escrow Agent in trust for the
investors until the Placement Agent is required to deliver the
funds to the Company or return the funds to the investors upon
termination of the Offering or upon instruction from the Company.
All funds returned to investors will be with interest.
(c)
Conditions to Placement
Agent’s Obligations . The obligations of the Placement Agent
hereunder will be subject to the accuracy of the representations
and warranties of the Company herein contained as of the date
hereof and as of each Closing Date, to the performance by the
Company of its obligations hereunder and to the following
additional conditions:
(i)
Due Qualification or
Exemption . (A) The
Offering contemplated by this Agreement will become qualified or be
exempt from qualification under the securities laws of the several
states pursuant to paragraph 5(g) not later than the Closing Date,
and (B) at the Closing Date no stop order suspending the sale of
the Shares shall have been issued, and no proceeding for that
purpose shall have been initiated or threatened.
(ii)
No Material
Misstatements . The
Placement Agent will not have notified the Company that the Blue
Sky qualification materials or the Engagement Letter, or any
supplement thereto, contains an untrue statement of a fact which in
its opinion is material, or omits to state a fact which in its
opinion is material and is required to be stated therein, or is
necessary to make the statements therein, in light of the
circumstances under which they were made, not
misleading.
(iii)
Compliance with
Agreements . The Company
will have complied with all agreements and satisfied all conditions
on its part to be performed or satisfied hereunder, including with
respect to the Merger, in all material respects at or prior to the
Closing Date.
(iv)
Corporate Action
. The Company will have taken all
necessary corporate action, including, without limitation,
obtaining the approval of the Company’s Board of Directors,
for the execution and delivery of this Agreement, the performance
by the Company of its obligations hereunder and the Offering
contemplated hereby.
(v)
Opinion of Company
Counsel . At each
Closing, and dated as of the date thereof, the Placement Agent
shall receive the opinion of counsel to the Company substantially
to the effect that:
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(A) the Company is a corporation
duly organized, validly existing and in good standing under the
laws of the State of Nevada, has all requisite power and authority
to own or lease its properties, to carry on its business as
currently conducted and as proposed to be conducted, to execute and
deliver this Agreement and to carry out the transactions
contemplated by this Agreement and is duly qualified or licensed to
do business as a foreign corporation and is in good standing in
each other jurisdiction to such counsel’s knowledge, in which
the ownership or leasing of its properties or conduct of its
business requires such qualification, except where the failure to
be so qualified or licensed would not have a material adverse
effect on the business, financial condition or prospects of the
Company;
(B) each of this Agreement, the
Subscription Agreement, the other Offering Documents and the
Agent’s Warrants has been duly and validly authorized,
executed and delivered by the Company, and is the valid and binding
obligation of the Company, enforceable against it in accordance
with its terms, subject to any applicable bankruptcy, insolvency or
other laws affecting the rights of creditors generally and to
general equitable principles and except that the enforcement of the
indemnification and contribution provisions thereof may be limited
or denied based on federal or applicable state securities laws and
public policies underlying such laws;
(C) the authorized capital stock of
the Company as of the date hereof (before giving ef
