PLACEMENT AGENT AGREEMENT
April
3,
2008
Smart
Energy Solutions, Inc.
210
West Parkway
Pompton
Plains, NJ 07444
| Attn: |
Pete
Mateja, Chief Executive Officer
Edward Braniff, Chief Financial
Officer
|
Gentlemen:
A.
Smart
Energy Solutions, Inc., a Nevada corporation (the
“Company”), hereby engages EKN Financial Services,
Inc. (“Placement Agent”) to act as its exclusive
placement agent (with permitted sub-placement agents) in
connection with the issuance and sale by the Company (the
“Offering”) of $4,000,000 (subject to an
over-allotment option of 25%) of its equity securities (the
“Securities”), which will include shares of the
Company’s common stock (the “Common Stock”)
and warrants. For the purposes of this Agreement, the term
Securities will not include certain existing convertible
promissory notes, in the aggregate principal amount of
$500,000 (the “Convertible Promissory Notes”),
which the Company is converting on the same terms as the
Securities issued in the Offering at the closing of Offering.
The Offering will include Common Stock, which shall be sold at
a 40% discount to the average closing price of the Common
Stock as quoted on the over-the-counter market under the
symbol “SMGY” for 15 consecutive trading days
prior to the closing, and warrants to purchase an additional
amount of Common Stock equal to 25% of the aggregate
number
of shares of Common Stock sold in the Financing, which warrants
shall be exercisable, for a period of five (5) years from the
closing, at an exercise price per share equal to 100% of the
purchase price of the Common Stock sold in the Financing (the
“Warrants”). For the purposes of this Placement Agent
Agreement the “Closing” shall be defined as such time
when the Placement Agent and the Company receive and approve
executed Securities Purchase Agreements and subscription funds for
a minimum of $4,000,000. Subject to the over-allotment option of
25%, subsequent closings may take place up to $5,000,000. Placement
Agent is hereby authorized to engage, at Placement Agent’s
option, the services of other broker-dealers who are members in
good standing of the Financial Industry Regulatory Authority
(“FINRA”) to assist Placement Agent in soliciting
subscribers and to share with such broker-dealers the commissions
payable to Placement Agent hereunder as Placement Agent shall
determine in accordance with agreements entered into directly
between Placement Agent and such other broker-dealers. The Company
shall not have any obligation or liability to pay commissions,
fees, other compensation, or expenses to any such other
broker-dealers. The Offering is subject to the terms and conditions
set forth in the Company’s Securities
Purchase Agreement ,
dated April 3, 2008, the Registration Rights Agreement, dated April
3, 2008, the Common Stock Purchase Warrant, dated April 3, 2008,
and the Company’s filings with the Securities and Exchange
Commission (“SEC”) each inclusive of all exhibits, all
amendments, supplements and appendices thereto, if any
(collectively the “Transaction
Documents”).
B.
The
Company is offering through the Placement Agent $4,000,000
(subject to an over-allotment option of 25%) of the
Company’s Common Stock on a “best efforts”
basis. The Company will issue the certificates representing
the Common Stock and Warrants at a closing after subscriptions
for at least $4,000,000 have been received and approved by the
Company and the Placement Agent and when funds from investors
have cleared the banking system in the normal course of
business.
C.
The
Offering commenced on January 25, 2008, it was suspended on
March 13, 2008 and resumed on April 1, 2008, and it shall
terminate on the earliest of (i) the date on which $4,000,000
in Common Stock has been sold, or (iii) April 30, 2008,
unless
the Company and Placement Agent mutually agree to extend the
Offering up and through May 31, 2008 (the
“Offering Period”). If the Offering is not sold
prior to the end of the Offering Period, the Offering will be
terminated and all funds received from investors will be
returned thereto, without interest thereon or deduction
therefrom. With respect to any subscriptions that are received
by Placement Agent or accepted by the Company subsequent to
the Offering Period, all funds received from investors will be
returned thereto, without interest thereon or deduction
therefrom. The Company reserves the right in its sole
discretion to reject any subscription agreements.
2.
Compensation to Placement Agent .
A.
As
compensation for the services to be provided the Placement
Agent hereunder, the Company agrees to pay to the Placement
Agent: (i) a cash fee equal to 10% of the gross proceeds of
the Offering; provided, however, that for the purposes of this
Section 2A, the gross proceeds of the Offering shall not
include any proceeds resulting from the issuance of the
Convertible Promissory Notes, and no fee whatsoever shall be
paid by the Company to the Placement Agent with respect to the
Convertible Promissory Notes and, provided further, that for
any person or entity making an investment of $250,000 or
greater the Company shall pay a cash fee of 7% instead of 10%;
and (ii) a warrant to the Placement Agent or its designee(s)
to purchase 15% of the Securities sold in the Offering (the
“Placement Agent Warrants”). The Placement Agent
Warrants shall
be exercisable, for a period of seven (7) years from the
Closing ,
at
an exercise price per share equal to (100%) of the purchase
price of the Securities sold in the Offering
,
shall have unlimited piggyback registration rights, cashless
exercise and anti-dilution provisions and shall be evidenced
by a registration rights agreement in form and substance
reasonably satisfactory to the Company and the Placement
Agent. The Placement Agent Warrants shall be executed
and
delivered
at the Closing. If the Offering is consummated by means of more
than one closing, the Placement Agent shall be entitled to the fees
provided herein at and with respect to each Closing.
B.
The
Securities will be offered without registration under the
Securities Act of 1933, as amended (the “Securities
Act”). Purchasers of the Securities will be granted
certain registration rights with respect to the Common Stock
and Warrants as more fully set forth in the Registration
Rights Agreement. Placement Agent will be granted certain
registration rights with respect to the shares of Common Stock
issuable upon exercise of the Placement Agent Warrants, as
more fully set forth in the Placement Agent
Warrants.
A.
The
Common Stock and Warrants shall have the terms set forth in
and shall be offered by the Company by means of the
Transaction Documents. Payment for the Common Stock shall be
made by check, money order or wire transfer as more fully
described in the Securities Purchase Agreement. The minimum
purchase by any purchaser shall be $25,000, unless
subscriptions for lesser amounts are accepted at the
discretion of the Company and Placement Agent. Placement Agent
and the Company agree that the Common Stock and Warrants will
be offered and sold only to “accredited investors”
within the meaning of Rule 501 of Regulation D
(“Accredited Investors”) promulgated under the
Securities Act and Rule 506 of Regulation D under the
Securities Act.
B.
All
Funds received from subscriptions arranged by Placement Agent
and its agents will be promptly transmitted to the escrow
account set up by the Company and maintained at Capital One
Bank, 24-02A Fairlawn Avenue, Fair Lawn, NJ 07410 (the
“Escrow Agent”) and designated as
“Capital One Bank as Escrow Agent for Smart Energy Solutions,
Inc” ( the
“Escrow Account”). The Escrow Agent shall, upon the
Closing of at least $4,000,000 (or additional closings if there
shall be more than one): (i) deliver to the Company, by wire
transfer of immediately available funds, the funds deposited in the
Escrow Account in payment for the Securities, less the amounts
payable to the Placement Agent pursuant to Section 2A above. The
Placement Agent shall receive all cash compensation under this
Placement Agent Agreement by wire transfer of immediately available
funds directly from the Escrow Agent at the time of the
Closing.
In
addition, the Company will furnish to the Placement Agent
copies of such agreements, opinions, certificates and other
documents delivered at the Closing as the Placement Agent may
reasonably request, including, without limitation, an opinion
of Company counsel to the effect that the placement of the
Securities was exempt from registration under the Securities
Act.
C.
Company
and Placement Agent each reserve the right to reject any
subscriber, in whole or in part, in their sole discretion.
Funds received by the Company from any subscriber whose
subscription is rejected will be returned to such subscriber,
without deduction therefrom or interest thereon, but no sooner
than such funds have cleared the banking system in the normal
course of business.
D.
If,
at any time after the end of the Offering Period and before
the first anniversary of the end of the Offering Period, the
Company shall consummate a private equity and/or debt
financing transaction, including any variant of the Offering,
with any party contacted or identified by the Placement Agent
in connection with the Offering, the Placement Agent will be
entitled to payment in full of the compensation described in
paragraph 2 of this Agreement as to all such
parties.
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4.
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Representations, Warranties and Covenants of Placement
Agent .
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Placement
Agent represents warrants and covenants as
follows:
(i)
Placement
Agent has the necessary power to enter into this Agreement and
to consummate the transactions contemplated
hereby.
(ii)
The
execution and delivery by Placement Agent of this Agreement
and the consummation of the transactions contemplated herein
will not result in any violation of, or be in conflict with,
or constitute a default under, any agreement or instrument to
which Placement Agent is a party or by which Placement Agent
is bound, or any judgment, decree, order or, to Placement
Agent’s knowledge, any statute, rule or regulation
applicable to Placement Agent. This Agreement constitutes the
legal, valid and binding obligation of Placement Agent,
enforceable against Placement Agent in accordance with its
terms, except to the extent that (a) the enforceability hereof
may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws from time to time in effect and
affecting the rights of creditors generally, (b) the
enforceability hereof is subject to general principles of
equity, or (c) the provisions hereof may be held to be
violative of public policy.
(iii)
Placement
Agent will deliver to each Accredited Investor, prior to any
submission to such person of a written offer relating to the
purchase of the Common Stock, a copy of the Transaction
Documents, as it may have been most recently amended or
supplemented by the Company. Placement Agent agrees not to
engage in any activities in connection with the Offering in
any state (i) in which the Offering is not qualified for sale
or exempt from qualification under the applicable securities
or blue sky laws thereof; (ii) in which Placement Agent or its
agents may not lawfully so engage, or (iii) in which it or its
agents are not a registered broker-dealer.
(iv)
Upon
receipt of all executed Transaction Documents, Placement Agent
will promptly forward copies of same to the
Company.
(v)
Placement
Agent will not deliver the Transaction Documents to any person
it does not reasonably believe to be an Accredited Investor,
and will offer and sell the Securities only to Accredited
Investors as that term is defined if Rule 501 (a) promulgated
under the Securities Act. Further, Placement Agent will not
make any representations on behalf of the Company to any
prospective purchasers of any material fact not contained in
the Transaction Documents, and will provide Company’s
counsel with copies of all agreements with any of its
broker-dealer agents assisting Placement Agent in the
Offering.
(vi)
Placement
Agent will not take any action which it reasonably believes
would cause the Offering to violate the provisions of the
Securities Act, the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), or the respective
rules and regulations promulgated thereunder (the “Rules
and Regulations”).
(vii)
Placement
Agent shall use all reasonable efforts to determine (a)
whether any prospective purchaser is an Accredited Investor;
and (b) that any information furnished by a prospective
investor is true and accurate, provided that for this purpose
the Placement Agent shall conclusively be entitled to rely
upon an executed Investor Questionnaire in the form
accompanying the Securities Purchase Agreement by a
subscriber. Placement Agent shall have no obligation to insure
that any check, note, draft or other means of payment for the
Common Stock will be honored, paid or enforceable against the
subscriber in accordance with its terms.
(viii)
Placement
Agent and the other broker-dealers that Placement Agent elects
to act as its agents for this Placement are and at all times
during the Offering Period will remain members in good
standing of FINRA and be and remain broker-dealers registered
as such under the Exchange Act and under the securities laws
of the states in which the Securities will be offered or sold
by Placement Agent and its agents, unless an exemption for
such state registration is available to Placement Agent or its
agents. Placement Agent and its agents are in compliance with
all material rules and regulations applicable to Placement
Agent and its agents generally and to Placement Agent’s
and its agent’s participation in the
Offering.
(ix)
Placement
Agent acknowledges that the Company is a public reporting
issuer and, as such, is subject to a broad range of U.S.
federal securities laws including, without limitation,
prohibitions against selective disclosure of material,
non-public information pursuant to Regulation FD. Placement
Agent understands and agrees that the Company is relying on
Placement Agent’s acknowledgement herein with respect to
the confidential treatment by Placement Agent and its agents
of the Transaction Documents and all of the information set
forth therein and which Placement Agent otherwise may obtain
from the Company and its affiliates, employees, advisors and
agents.
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5.
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Representations, Warranties and Covenants of the Company
.
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The
Company represents, warrants and covenants as
follows:
(i)
The
execution, delivery and performance of each of this Agreement,
the Transaction Documents and the Escrow Agreement has been or
will be duly and validly authorized by the Company and is, or
with respect to the Securities Purchase Agreement, will be, a
valid and binding obligation of the Company, enforceable in
accordance with its respective terms, except to the extent
that (a) the enforceability hereof or thereof may be limited
by bankruptcy, insolvency, reorganization, moratorium or
similar laws from time to time in effect and affecting the
rights of creditors generally, (b) the enforceability hereof
or thereof is subject to general principles of equity; or (c)
the indemnification provisions hereof or thereof may be held
to be violative of public policy. The issuance, sale and
delivery by the Company of the Securities have been or will be
prior to the Closing duly authorized by all requisite
corporate action of the Company and, when issued and paid for
in accordance with this Agreement and the Transaction
Documents, will be valid and binding obligations of the
Company, enforceable in accordance with their respective
terms, except to the extent that (a) the enforceability
thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws from time to time
in effect and affecting the rights of creditors generally; and
(b) the enforceability thereof is subject to general
principles of equity.
(ii)
All
issued and outstanding securities of the Company have been
duly authorized and validly issued, fully paid and
non-assessable and were issued in compliance with all
applicable federal and state securities laws; the holders
thereof have no rights of rescission or preemptive rights with
respect thereto and are not subject to personal liability
solely by reason of being security holders; and none of such
securities was issued in violation of the preemptive rights of
any holders of any security of the Company. The Company as of
March 27, 2008 has 500,000,000 shares of authorized Common
Stock, 84,672,679 shares of which are issued and outstanding,
and 1,000,000 shares of authorized Preferred Stock, none of
which are outstanding.
(iii)
Except
as set forth in the Transaction Documents, the Company’s
SEC filings or Exhibit A attached hereto, there are: (a) no
outstanding options, warrants, rights (including conversion or
preemptive rights) or agreements pursuant to which the Company
is or may become obligated to issue, sell or repurchase any
securities of the Company; (b) no restrictions on the transfer
of the Company’s capital stock imposed by the
Company’s Certificate of Incorporation or By-laws or any
agreement to which the Company is a party, any order of any
court or any governmental agency to which the Company is
subject or any statute other than those imposed by relevant
state and federal securities laws; (c) no cumulative voting or
preemptive rights for any of the Company’s capital
stock; (d) no registration rights under the Securities Act
with respect to the Company’s capital stock; (e) no
anti-dilution adjustment provisions or similar rights with
respect to the outstanding securities of the Company will be
triggered by the issuance of the Securities; (f) no voting
trusts or agreements, shareholders agreements, pledge
agreements, buy-sell, rights of first offer, negotiation or
refusal or proxies or similar arrangements relating to any
securities of the Company to which the Company is a party; and
(g) to the best of the Company’s knowledge, no options
or other rights to purchase securities from its shareholders
granted by such shareholders. The Company has, or shall have
at the time of issuance, good and marketable title to, all the
Securities contemplated in the Offering (including the Common
Stock, Warrants and Placement Agent Warrants) free and clear
of all liens, encumbrances, claims, security interests and
defects of any nature whatsoever, except as may be
specifically set forth in the Transaction
Documents.
(iv)
The
Securities and the Placement Agent Warrants, when issued in
accordance with the terms of the Securities Purchase Agreement
and the terms of this Agreement, as the case may be, will be
validly issued, fully-paid and non-assessable. Upon exercise
of the Placement Agent Warrants in accordance with the terms
thereof, the shares of Common Stock underlying the Placement
Agent Warrants will be validly issued, fully-paid and
non-assessable. Upon exercise of the Warrants in accordance
with the terms thereof, the shares of Common Stock underlying
the Warrants will be validly issued, fully-paid and
non-assessable. The holders of the Securities will not be
subject to personal liability under the Company’s
Certificate of Incorporation or By-laws or the laws of the
State of Nevada solely by reason of being such holders; the
Securities are not and will not be subject to the preemptive
rights of any holder of any security of the
Company.
(v)
There
is no litigation or governmental proceeding pending or, to the
best of the Company’s knowledge, threatened against, or
involving the Company or its properties or business, except as
set forth in the Transaction Documents or the Company’s
SEC filings. The Company is not a party to any order, writ,
injunction, judgment or decree of any court.
(vi)
The
Company is duly organized and validly exists as a corporation
in good standing under its respective jurisdiction of
incorporation. Except as set forth in the Transaction
Documents or the Company’s SEC filings, the Company does
not own or control, directly or indirectly, an interest in any
other corporation, partnership, trust, joint venture or other
business entity. The Company is duly qualified or licensed and
in good standing as a foreign corporation in each jurisdiction
in which the character of its operations requires such
qualification or licensing and where failure to so qualify
would have a material adverse effect on the Company. The
Company has all requisite corporate power and authority, and
all material and necessary authorizations, approvals, orders,
licenses, certificates and permits of and from all
governmental regulatory officials and bodies (domestic and
foreign) to conduct its businesses (and proposed business) as
described in the Transaction Documents, and the Company is
doing business in compliance with all such authorizations,
approvals, orders, licenses, certificates and permits and all
foreign, federal, state and local laws, rules and regulations
concerning the business in which it is engaged, except where
failure to so comply would not have a material adverse effect
on the Company. Any disclosures in the Transaction Documents
concerning the effects of foreign, federal, state and local
regulation on the Company’s business as currently
conducted and as contemplated are correct in all material
respects and do not omit to state a material fact. The Company
has all corporate power and authority to enter into this
Agreement, the Transaction Documents and all agreements
related to the Offering and to carry out the provisions and
conditions hereof and thereof and to issue, sell and deliver
the Securities. No consents, authorizations, approvals, or
orders of, or registration, qualification, declaration or
filing with, any federal, state or local governmental
aut
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