TECHNOCONCEPTS,
INC.
PLACEMENT AGENT
AGREEMENT
Dated: __________, 2007
Westminster
Securities Corporation
The undersigned, TechnoConcepts, Inc., a
Colorado corporation (the “Company”), proposes to issue
and sell a minimum of $2,000,000 of investment units
(“Units”) (the “Minimum Offering”) and a
maximum of $4,000,000 of Units (the “Maximum Offering”)
(subject to an over-allotment allowance of up to an additional
$2,000,000). The terms and conditions of the sale, issuance, and
rights held by the securities underlying these Units are as set
forth in the subscription agreements among the Company and the
investors in the offering (“Investors”), which shall be
prepared by the Company and subject to the approval of the
Placement Agent (together with all exhibits, schedules and
supplements thereto, the “Subscription Documents”). The
Units, the 8% Secured Convertible Debentures forming a part of the
Units (“Debentures”), the common stock underlying the
Debentures (“Shares”), the warrants forming a part of
the Units and the additional warrants issuable in respect of
certain sales of Units (collectively, the “Warrants”),
the common stock underlying the Warrants (“Warrant
Shares”), and the Placement Agent Warrants (as hereinafter
defined) are referred to collectively herein as the
“Equity”.
The offering of Units in the Company (the
“Offering”) will be conducted on a “best efforts,
all or none” basis with respect to the Minimum Offering and
on a “best efforts” basis with respect to the remainder
of the Maximum Offering in excess of the Minimum Offering.
Fractional Units may be sold at the discretion of the Company. As
used herein, including with respect to the representations and
warranties contained herein, unless the context otherwise requires,
the term “Company” shall include the Company together
with all of its direct and indirect wholly owned subsidiaries, and
all representations and warranties of the Company herein shall also
be deemed made on behalf of and with respect to each such
subsidiary of the Company, except where the context indicates that
such representation and warranty applies only to the Company,
including, without limitation, any representations and warranties
relating to the capital stock of the Company. This Placement Agent
Agreement (“Agreement”) is to confirm the arrangements
with you (the “Placement Agent”), with respect to the
sale of the Units by the Placement Agent as exclusive agent for the
Company in the Offering.
The Offering will not be registered with the
Securities and Exchange Commission (“SEC”) nor with any
state securities authority, but rather will be offered as a private
placement pursuant to an exemption from registration under
Regulation D (“Regulation D”) promulgated under Section
4(2) and Rule 506 of the Securities Act of 1933, as amended
(“Securities Act”), and available state securities law
exemptions. The Units are to be sold in the Offering only to
“accredited investors”, as that term is defined in
Regulation D, pursuant to the Subscription Documents.
SECTION 1. Description of Capital Stock.
The Equity shall conform in all respects to descriptions thereof
contained in the Subscription Documents.
SECTION 2. Representations and Warranties of
the Company. The Company hereby represents, warrants and
covenants with the Placement Agent as follows:
(a) The Subscription Documents, copies of which
will be delivered to the Placement Agent, will be carefully
prepared to disclose or incorporate by reference all information
concerning the Company which would be material to an investment
decision by a reasonable investor. The date on which the Offering
is authorized by the Company to commence is January 19, 2007 and is
herein called the “Commencement Date.” The time and
date of each issuance of Units hereunder is herein called an
“Issuance Date” or a “Closing.”
(b) The Company is duly incorporated and validly
existing as a corporation in good standing under the laws of the
state of its incorporation, having corporate power and authority to
own its properties and conduct its business and is duly qualified
and in good standing in each foreign jurisdiction where the conduct
of its business so requires such qualification, except where the
failure to be so qualified would not have a material adverse effect
on the financial condition, results of operations, assets or
business of the Company or the Material Subsidiaries, taken as a
whole (a “Material Adverse Effect”). No direct or
indirect rights to acquire Common Stock exist, except as have been
previously disclosed to the public or as disclosed in the
Subscription Documents.
(c) The audited financial statements of the
Company for the years ended September 30, 2006 and 2005, each
included in the SEC Reports (defined below) (collectively, the
“Financial Statements”), fairly present in all material
respects the information purported to be shown therein of the
Company, at the respective dates to which they apply; and such
Financial Statements have been prepared in conformity with GAAP
consistently applied throughout the periods involved and are in
accordance in all material respects with the books and records of
the Company.
(d) The assets of the Company, as shown in the
Financial Statements, are owned by the Company with good title,
free and clear of all liens, encumbrances and equities of record or
otherwise, except (i) those specifically referred to in the
Subscription Documents, (ii) those which do not materially
adversely affect the use or value of such assets, (iii) the lien of
current taxes not now due or which are being contested in good
faith and for which adequate reserves have been set aside and (iv)
those disclosed in the Financial Statements or elsewhere in the
Subscription Documents. The Company has the full corporate right,
power and authority to maintain and operate its business and
properties as the same are now operated or proposed to be operated
and is complying with all laws, ordinances and regulations
applicable thereto, except where the failure to so comply would not
have a Material Adverse Effect.
(e) There are no actions, suits or proceedings
at law or in equity pending, or to the Company’s knowledge,
threatened, against the Company before or by any federal or state
commission, regulatory body, administrative agency or other
governmental body wherein, either in any case or in the aggregate,
an unfavorable ruling, decision or finding would have a Material
Adverse Effect which are not disclosed in the Subscription
Documents or the SEC Reports.
(f) The execution and delivery by the Company of
this Agreement, the consummation and performance of the
transactions herein contemplated, and compliance with the terms of
this Agreement by the Company will not conflict with, result in a
material breach of, or constitute a material default under, the
Certificate of Incorporation or the bylaws of the Company, in each
case as amended, or any indenture, mortgage, deed of trust or other
agreement or instrument to which the Company is now a party or by
which it or any of its assets or properties is bound and which is
filed as an exhibit to the Company’s Annual Report on Form
10-K for the year ended September 30, 2006, or any other periodic
or current report filed by the Company with the Securities and
Exchange Commission since September 30, 2006 (the “SEC
Reports”) (such agreements or instruments, the
“Material Contracts”), or any law, order, rule,
regulation, writ, injunction, judgment or decree of any government,
governmental instrumentality or court, domestic or foreign, having
jurisdiction over the Company or any of its business or properties,
to the extent that such conflict, breach or default could have a
Material Adverse Effect.
(g) Except as set forth in the Subscription
Documents or the SEC Reports, all material licenses, permits and
approvals referred to in the Subscription Documents or the SEC
Reports (including the Financial Statements) (the
“Permits”) have been obtained and are valid and in full
force and effect. There are no proceedings pending, or to the
knowledge of the Company threatened, seeking to cancel, terminate
or limit such Permits. Neither the Company nor, to the knowledge of
the Company, any other party is in default under any of the
Material Contracts, and to the knowledge of the Company, no event
has occurred which with the passage of time or the giving of
notice, or both, would constitute a default thereunder.
(h) Except as described in the Subscription
Documents or the SEC Reports, the Company has timely filed all
federal, state and local tax returns required to be filed,
including without limitation, all sales tax returns, or has
obtained extensions thereof and has paid, or is contesting in good
faith, all taxes shown on such returns.
(i) The Company shall use the net proceeds from
the sale of the Units hereunder primarily as described in the
Subscription Documents. The Company will not use any proceeds from
the sale of the Units for the satisfaction of any indebtedness for
borrowed money, to redeem any Common Stock or Common Stock
Equivalents or to settle any litigation outstanding as of any
Closing.
(j) The SEC Reports describe all material
patents, trademarks, trade names, copyright registrations and
applications therefor now or heretofore used or presently proposed
to be used in the conduct of the business of the Company and the
failure of which the Company to have would have a Material Adverse
Effect (the “IP Rights”). Except as set forth in the
SEC Reports: (i) the Company owns or possesses adequate
licenses or other valid rights to use all IP Rights necessary to
the conduct of the business of the Company as presently being
conducted; (ii) the validity of such IP Rights and the rights
of the Company thereto have not been questioned in any litigation
to which the Company is or has been a party, nor, to the best
knowledge of the Company, is any such litigation threatened, other
than as set forth in the SEC Reports; (iii) to the best
knowledge of the Company, the conduct of the business of the
Company as now conducted does not and will not conflict with IP
Rights of others in any way which has or might reasonably be
expected to have a Material Adverse Effect; and (iv) no
proceedings are pending against the Company nor, to the best
knowledge of the Company, are any proceedings threatened against
the Company, alleging any violation of IP Rights of any third
person. The Company does not know of (x) any use
that has heretofore been or is now being made of any IP Rights
owned by the Company, except by the Company, any licensor of such
IP Rights to the Company or by a person duly licensed by the
Company to use the same under an agreement described in the SEC
Reports or (y) any material infringement of any IP
Right owned by or licensed by or to the Company. To the best
knowledge of the Company, all IP Rights heretofore owned or held by
any agent, independent contractor, employee or officer of the
Company or any subsidiary thereof and used in the business of the
Company in any manner have been duly and effectively transferred to
the Company. The consummation of the transactions contemplated by
this Agreement will not alter or impair the rights and interests of
the Company in any of the IP Rights.
(k) All of the representations, agreements and
warranties in this Section 2 shall survive delivery of and payment
for all or any part of the Units for two years from and after such
delivery and payment.
(l) The Company has no subsidiaries other than as
disclosed in the Subscription Documents.
(m) All of the SEC Reports were true and correct in
all material respects upon the dates of filing thereof except as
subsequently amended or disclosed in the SEC Reports.
SECTION 3. Issuance, Sale and Delivery of the
Units.
(a) The Company hereby agrees to sell the Units
directly to subscribers identified by the Placement Agent on a
“best efforts all-or-none” basis with respect to the
Minimum Offering, and thereafter on a “best efforts”
basis with respect to the remaining Units up to the Maximum
Offering. The offering will commence on the Commencement Date and
continue until January 31, 2007. Pending the closing of the sale of
the Minimum Offering, the proceeds of the Offering will be
deposited in escrow in a non-interest bearing account at Signature
Bank. Unless the Minimum Offering of Units is sold, the Offering
will terminate and all funds theretofore received from the sale of
the Units will be promptly returned to the subscribers without
deduction therefrom or interest thereon. During the period of
escrow, subscribers will not be entitled to a return of their
subscriptions, except as required by law. If the Minimum Offering
is completed, the remaining Units up to the amount of the Maximum
Offering will be offered on a “best efforts” basis
until the first to occur of (i) the completion of the Maximum
Offering (including any over-allotment sales), (ii) February 28,
2007 or (iii) the termination of the Offering by mutual agreement
of the Placement Agent and the Company (“Final
Closing”). The Units will be offered for cash and, in certain
cases, in exchange for debt securities of the Company, and delivery
of the purchase price for the Units and the certificates
representing the Debentures and Warrants shall be pursuant to the
procedures set forth in the Subscription Documents.
(b) As its basic compensation, the Placement
Agent (or its designees) shall receive (i) cash compensation equal
to seven percent (7%) of the gross cash proceeds received by the
Company from the sale of Units, as commission; and (ii) additional
compensation in the form of warrants (“Placement Agent
Warrants”) to purchase shares of Common Stock, in an amount
equal to 9% of the Shares and Warrant Shares underlying Units sold
in the Offering, exercisable at the conversion price of the
Debentures or the exercise price of the Warrants. The Placement
Agent Warrants and the shares of Common Stock issuable upon
exercise of the Placement Agent Warrants shall have registration,
anti-dilution and other rights identical to the Shares and Warrant
Shares included in or issuable upon sale of the Units, and shall be
exercisable any time from the Issuance Date through the last
expiration date of any of the Warrants. Cash compensation shall be
paid in full on the Issuance Date with respect to gross proceeds
for Units deliverable on such date.
(c) The parties hereto represent that at the
Issuance Date, the representations and warranties herein contained,
and the statements contained in all certificates theretofore or
simultaneously delivered by any party to another pursuant to this
Agreement, shall be true and correct, except as otherwise disclosed
in any certificate delivered on the Issuance Date.
SECTION 4. Covenants of the Company . The
Company covenants and agrees with the Placement Agent
that:
(a) On the Commencement Date, and on each
Issuance Date, the Subscription Documents (as amended or as
supplemented, if the same shall have been amended or supplemented)
will not (i) contain an untrue statement of a material fact and
will not omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not
misleading and (ii) contain any material, non-public information
required to be disclosed to the general public in order to comply
with Regulation FD promulgated under the Securities Exchange Act of
1934, as amended, unless all recipients of the Subscription
Documents execute a confidentiality agreement in form and substance
acceptable to the Company and the Placement Agent, prior to receipt
of the Subscription Documents.
(b) The Company will prepare promptly upon the
reasonable request of the Placement Agent, such amendments or
supplements to the Subscription Documents, in such form as in the
opinion of counsel to the Placement Agent may be reasonably
necessary or advisable in connection with the Offering. In
addition, if at any time prior to the last date on which Units
shall be issued, (i) an event relating to or affecting the Company
shall have occurred which, in the judgment of the Company or in the
opinion of counsel for the Placement Agent, would cause the
Subscription Documents as then in effect to include an untrue
statement of a material fact or to omit to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they
were made, not misleading, or (ii) it is otherwise necessary to
amend or supplement the Subscription Documents, the Company shall
promptly notify the Placement Agent of the occurrence and shall
promptly prepare and deliver to the Placement Agent, without
charge, sufficient copies of any amended or supplemented
Subscription Documents, and shall use its reasonable best efforts
to cause the appropriate state securities authorities to take any
required action with regard to any amendment as may be necessary to
permit the lawful use of the Subscription Documents, as so amended
and supplemented, in connection with the Offering.
(c) The Company’s counsel shall prepare
and file any necessary filings, in the reasonable opinion of
Company’s counsel or Placement Agent’s counsel, under
the state securities, or so-called “blue sky” laws and
regulations (the “Blue Sky Laws”) and the Company shall
pay the filing fees and all other expenses in connection with any
such qualification in such jurisdictions as the Placement Agent
shall designate, and to continue such qualification in effect so
long as required for the purposes of the Offering; provided,
however, that the Company shall not be required to qualify as a
foreign corporation or to file a consent to service of process in
any jurisdiction in any action other than one arising out of the
offering or sale of the Units. The Company will provide copies to
the Placement Agent of all documents, exhibits and information
filed in connection with the qualification of the Units for sale
under the Blue Sky Laws.
(d) The Company, at its own expense, will give
and continue to give such financial statements and other
information to and as may be required by the proper public bodies
of the jurisdictions in which the Offering may be
qualified.
(e) The Company will pay all fees, taxes
(excluding any taxes on the income or revenue of the purchasers of
the Units) and expenses incident to the preparation and
distribution of the Subscription Documents, the establishment of
the escrow account with the Escrow Agent, the issuance of the Units
and the fees and expenses of counsel and accountants for the
Company. The Company will pay all of Placement Agent’s
accountable fees and expenses (including printing, mailing, travel,
etc), payable at the earlier of each Closing or the termination of
the Offering. The Company also agrees to pay all the reasonable
fees of Feldman Weinstein LLP, Westminster Securities Corp.’s
counsel, in addition to all reasonable and customary disbursements
of such counsel, subject to a maximum aggregate amount of $25,000.
The Company will additionally pay the Placement Agent for its
non-accountable fees and expenses at the rate of one percent (1%)
of the gross proceeds received by the Company from the sale of the
Units, payable at each Closing. In the event that any payment due
to the Placement Agent or its counsel hereunder shall not be made
when due, interest shall accrue on the unpaid balance of such
overdue payments at the rate of twelve percent (12%) per annum
until paid.
(f) The form of Subscription Documents,
Debentures, Warrants and Placement Agent Warrant shall contain the
registration rights, anti-dilution protection and such other
information, representations, warranties and covenants as shall be
reasonably acceptable to the Placement Agent.
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