EXHIBIT 10.7
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VALENTEC SYSTEMS, INC.
PLACEMENT AGENT AGREEMENT
Dated as of: April 28, 2005
Newbridge Securities Corporation
1451 Cypress Creek Road, Suite 204
Fort Lauderdale, Florida 33309
Ladies and Gentlemen:
The undersigned, Valentec Systems, Inc., a Delaware corporation (the
"COMPANY"), hereby agrees with Newbridge
Securities Corporation (the "PLACEMENT
AGENT") and Cornell Capital Partners, LP, a Delaware Limited
Partnership (the
"INVESTOR"), as follows:
1. OFFERING. The Company hereby
engages the Placement Agent to act as its
exclusive placement agent in connection with the Standby Equity
Distribution
Agreement dated the date hereof (the
"STANDBY EQUITY
DISTRIBUTION
AGREEMENT"),
pursuant to which the Company shall issue
and sell to the Investor, from time to
time, and the Investor shall purchase from the Company (the
"OFFERING") up to
Fifteen Million Dollars ($15,000,000) of the Company's common stock (the
"COMMITMENT AMOUNT"), par value $0.01 per share (the
"COMMON STOCK"), at price
per share equal to the Purchase Price, as that term is defined in the
Standby
Equity Distribution Agreement. The Placement Agent services shall consist
of
reviewing the terms of the Standby
Equity Distribution Agreement and advising
the Company with respect to those
terms.
All capitalized terms used herein and not
otherwise defined
herein shall
have the same meaning ascribed to them as in the Standby
Equity Distribution
Agreement. The Investor will be granted
certain registration rights with respect
to the Common Stock as more fully set forth
in the Registration Rights Agreement
between the Company and the Investor dated the date hereof (the
"REGISTRATION
RIGHTS AGREEMENT"). The documents to be executed and
delivered in
connection
with the Offering, including, but not
limited, to the Company's latest Quarterly
Report on Form 10-QSB as filed with the
United States
Securities
and Exchange
Commission, this Agreement, the Standby Equity Distribution Agreement, the
Registration Rights Agreement, and the Escrow Agreement dated the
date hereof
(the "ESCROW AGREEMENT"), are referred to sometimes
hereinafter collectively as
the "OFFERING MATERIALS." The Company's
Common Stock purchased
by the Investor
hereunder or to be issued in connection
with the conversion of any debentures
are sometimes referred to hereinafter as the
"SECURITIES." The
Placement Agent
shall not be obligated to sell any
Securities.
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2. COMPENSATION. Within five
(5) days following the
consummation of
the
merger with Acorn Holding Corp,
the Company shall
issue to the Placement
Agent
or its designee shares of Acorn Holding Corp. or
the surviving entity's
Common
Stock in an amount equal to Ten Thousand
Dollars ($10,000) divided by the volume
weighted average price of the Common Stock,
as quoted by Bloomberg, LP, on the
second (2nd) trading day following the consummation of the merger (the
"PLACEMENT AGENT'S SHARES"). The Placement Agent shall be entitled to
"piggy-back" registration rights with respect to the
Placement Agent's Shares,
which shall be triggered upon registration of any shares of
Common Stock by the
Company pursuant to the Registration Rights
Agreement dated the date hereof.
3. REPRESENTATIONS, WARRANTIES
AND COVENANTS OF THE PLACEMENT AGENT.
A. The
Placement Agent represents, warrants and covenants as
follows:
(i)
The Placement Agent has the necessary power to enter into
this Agreement and to consummate the
transactions contemplated hereby.
(ii) The
execution and delivery by the 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
the Placement Agent is a party or by
which the Placement Agent or its properties
are bound, or any judgment, decree,
order or, to the Placement Agent's
knowledge,
any statute,
rule or regulation
applicable to the Placement Agent. This
Agreement when executed and delivered by
the Placement Agent, will constitute the
legal, valid and binding obligations of
the Placement Agent, enforceable in accordance
with their
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 in
violation of public policy.
(iii) Upon
receipt and execution of this Agreement, the
Placement Agent will promptly forward
copies of this Agreement to the Company or
its counsel and the Investor or its
counsel.
(iv) The
Placement Agent will not intentionally take any
action that it reasonably believes would cause the Offering to violate the
provisions of the Securities Act of 1933,
as amended (the "SECURITIES ACT"), the
Securities Exchange Act of 1934 (the
"EXCHANGE ACT"), the
respective rules and
regulations promulgated thereunder (the "RULES AND
REGULATIONS") or applicable
"Blue Sky" laws of any state or
jurisdiction.
(v)
The Placement
Agent
is a member of the National
Association of Securities Dealers, Inc., and is a broker-dealer
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 the Placement Agent unless an
exemption for such state registration is available to the
Placement Agent.
The
Placement Agent is in material compliance with the rules and regulations
applicable to the Placement Agent generally and applicable to the Placement
Agent's participation in the Offering.
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4. REPRESENTATIONS AND
WARRANTIES OF THE COMPANY.
A. The Company
represents and warrants as follows:
(i)
The execution,
delivery and
performance of each of this
Agreement, the Standby Equity Distribution
Agreement, the Escrow Agreement, and
the Registration Rights Agreement has been or will be duly and validly
authorized by the Company and is, or with
respect to this Agreement, the Standby
Equity Distribution Agreement, the Escrow
Agreement, and the Registration Rights
Agreement, will be a valid and binding
agreement 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 in violation of
public policy.
The Securities to be issued pursuant to the transactions contemplated by this
Agreement and the Standby Equity Distribution Agreement have been duly
authorized and, when issued and paid for in
accordance with this Agreement, the
Standby Equity Distribution Agreement and the certificates/instruments
representing such Securities, will be valid and binding obligations of the
Company, enforceable in accordance with
their respective
terms, except to
the
extent that (1) 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 (2) the
enforceability thereof is subject to
general principles of equity. All corporate
action required to be taken for the authorization, issuance and sale of the
Securities has been duly and validly taken
by the Company.
(ii) The
Company has a duly authorized, issued and outstanding
capitalization as set forth herein and in the Standby Equity Distribution
Agreement. The Company is not a party to or
bound by any instrument, agreement
or other arrangement providing for it to issue any capital stock, rights,
warrants, options or other securities,
except for this Agreement, the agreements
described herein and as described in the
Standby Equity Distribution Agreement,
dated the date hereof and the agreements described therein. All issued and
outstanding securities of the Company,
have been duly
authorized
and validly
issued and are fully paid and
non-assessable; 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 were issued in violation of the
preemptive rights of
any holders of
any security of the Company.
(iii) The
Common Stock to be issued in accordance with this
Agreement and the Standby Equity
Distribution Agreement has been duly authorized
and, when issued and paid for in
accordance
with this Agreement, the Standby
Equity Distribution Agreement and the Compensation Debenture, the
certificates/instruments representing such Common Stock
will be validly issued,
fully-paid and non-assessable; the holders thereof will not be subject to
personal liability solely by reason of
being such holders;
such Securities are
not and will not be subject to the preemptive rights of any holder of any
security of the Company.
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(iv) The
Company has good and
marketable
title to, or valid
and enforceable leasehold estates in, all items of real and
personal property
necessary to conduct its business
(including,
without limitation,
any real or
personal property stated in the Offering
Materials to be owned
or leased by the
Company), free and clear of all liens,
encumbrances, claims,
security interests
and defects of any material nature
whatsoever, other than those set forth in the
Offering Materials and liens for taxes not
yet due and payable.
(v)
There is no litigation or governmental proceeding pending
or, to the best of the Company's knowledge,
threatened against, or involving the
properties or business of the Company, except as set forth in the
Offering
Materials.
(vi) The
Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the State of
Delaware. Except as set forth in the
Offering Materials,
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
Offering Materials.
Any disclosures in
the Offering Materials concerning the effects of foreign,
federal, state and
local regulation on the Company's businesses 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 Standby Equity Distribution Agreement, the Registration
Rights Agreement, and the Escrow Agreement, to carry out the provisions and
conditions hereof and thereof, and all
consents,
authorizations,
approvals and
orders required in connection
herewith and therewith
have been obtained. No
consent, authorization or order of, and no filing with,
any court,
government
agency or other body is required by the Company for the issuance of the
Securities or execution and delivery of the Offering Materials except for
applicable federal and state securities
laws. The Company,
since its inception,
has not incurred any liability arising under or as a result of
the application
of any of the provisions of the Securities Act, the Exchange Act or the
Rules
and Regulations.
(vii) There
has been no material adverse change in the
condition or prospects of the Company,
financial or
otherwise, from the
latest
dates as of which such condition or prospects,
respectively,
are set forth in
the Offering Materials, and the outstanding debt, the
property and the business
of the Company conform in all material respects to the descriptions thereof
contained in the Offering Materials.
(viii) Except
as set forth in the Offering Materials, the
Company is not in breach of, or in default
under, any term or provision of any
material indenture, mortgage, deed of
trust, lease, note, loan or Standby Equity
Distribution Agreement or any other material
agreement or instrument evidencing
an obligation for borrowed money, or any
other material
agreement or instrument
to which it is a party or by which it or
any of its properties
may be bound or
affected. The Company is not in violation of any provision of its charter or
by-laws or in violation of any franchise,
license, permit,
judgment, decree
or
order, or in violation of any material
statute, rule or regulation. Neither the
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execution and delivery of the Offering
Materials nor the issuance and sale or
delivery of the Securities, nor the consummation of any of the transactions
contemplated in the Offering Materials nor the compliance by the Company with
the terms and provisions hereof or thereof,
has conflicted with or will conflict
with, or has resulted in or will result in a breach of, any of the
terms and
provisions of, or has constituted or will constitute a default under,
or has
resulted in or will result in the creation
or imposition of any lien, charge or
encumbrance upon any property or assets of the
Company or pursuant to the terms
of any indenture, mortgage, deed of trust, note,
loan or any other agreement or
instrument evidencing an obligation for
borrowed money, or any
other agreement
or instrument to which the Company
may be bound or to which any of the property
or assets of the Company is subject except
(a) where such default, lien, charge
or encumbrance would not have a material
adverse effect on the
Company and (b)
as described in the Offering Materials; nor will such action result in any
violation of the provisions of the charter or the by-laws of the
Company or,
assuming the due performance by the Placement Agent of its obligations
hereunder, any material statute or any material order, rule or regulation
applicable to the Company of any court or of any
foreign, federal, state or
other regulatory authority or other
government body having jurisdiction over the
Company.
(ix)
Subsequent to the dates as of which information is given
in the Offering Materials, and except as may otherwise be indicated or
contemplated herein or therein and the securities offered pursuant to the
Securities Purchase Agreement dated the date hereof,
the Company has not
(a)
issued any securities or incurred any liability or obligation, direct or
contingent, for borrowed money, or (b) entered
into any transaction
other than
in the ordinary course of business, or (c)
declared or paid any dividend or made
any other distribution on or in respect of its capital stock. Except as
described in the Offering Materials,
the Company has no
outstanding obligations
to any officer or director of the
Company.
(x)
There are no
claims for services in the nature of a
finder's or origination fee with respect to the sale of
the Common Stock or any
other arrangements, agreements or understandings that
may affect the Placement
Agent's compensation, as determined by the National
Association of
Securities
Dealers, Inc.
(xi) The
Company owns or possesses, free and clear of all
liens or encumbrances and rights thereto or therein by third parties, the
requisite licenses or other rights to use all trademarks, service marks,
copyrights, service names, trade names, patents, patent applications and
licenses necessary to conduct its business
(including, without
limitation, any
such licenses or rights described in the Offering
Materials as being
owned or
possessed by the Company) and, except as set forth in the
Offering
Materials,
there is no claim or action by any person
pertaining to, or proceeding, pending
or threatened, which challenges the
exclusive rights of the Company with respect
to any trademarks, service marks, copyrights, service names, trade names,
patents, patent applications and licenses used in
the conduct of the Company's
businesses (including, without limitation,
any such licenses or rights described
in the Offering Materials as being owned or
possessed by the Company) except any
claim or action that would not have a
material adverse
effect on the
Company;
the Company's current products, services or processes do not
infringe or will
not infringe on the patents currently held
by any third party.
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(xii) Except
as described in the Offering Materials, the
Company is not under any obligation to pay royalties or fees of any kind
whatsoever to any third party with respect to
any trademarks,
service marks,
copyrights, service names, trade names,
patents, patent applications, licenses
or technology it has developed, uses,
employs or intends to use or employ, other
than to their respective licensors.
(xiii) Subject to the
performance by the
Placement Agent of its
obligations hereunder the offer and sale of
the Securities
complies, and will
continue to comply, in all material respects with the requirements of
Rule 506
of Regulation D promulgated by the SEC pursuant to the
Securities
Act and any
other applicable federal and state laws, rules, regulations and executive
orders. Neither the Offering Materials nor any amendment or
supplement thereto
nor any documents prepared by the Company in
connection with the
Offering will
contain any untrue statement of a material fact or omit to state any
material
fact required to be stated therein or
necessary to make the statements therein,
in light of the circumstances under which they were made, not
misleading. All
statements of material facts in the Offering Materials are true and correct
as
of the date of the Offering Materials.
(xiv) All
material taxes which are due and
payable from the
Company have been paid in full or adequate provision has been made for such
taxes on the books of the Company, except
for those taxes disputed in good faith
by the Company
(xv) None
of the Company nor any of its officers, directors,
employees or agents, nor any other person
acting on behalf of the Company, has,
directly or indirectly, given or agreed to give any
money, gift or similar
benefit (other than legal price
concessions to
customers in the ordinary course
of business) to any customer, supplier, employee or agent of a customer or
supplier, or official or employee of any
governmental agency or instrumentality
of any government (domestic or foreign) or any
political party or candidate for
office (domestic or foreign) or other person who is
or may be in a position to
help or hinder the business of the Company
(or assist it in connection with any
actual or proposed transaction) which (A) might subject the Company to any
damage or penalty in any civil, criminal or governmental litigation or
proceeding, or (B) if not given in the
past, might have had a materially adverse
effect on the assets, business or operations of the
Company as reflected in any
of the financial statements contained in the Offering
Materials, or (C) if
not
continued in the future, might adversely
affect the assets, business, operations
or prospects of the Company in the
future.
5. REPRESENTATIONS, WARRANTIES
AND COVENANTS OF THE INVESTOR.
A. The Investor
represents, warrants and covenants as follows:
(i)
The Investor has the
necessary power to
enter into this
Agreement and to consumm
