PLACEMENT AGENT AND ADVISORY SERVICES AGREEMENT
PLACEMENT
AGENT AND ADVISORY
SERVICES
AGREEMENT
This
Placement Agent and Advisory Services Agreement (this "Agreement") is made
as of February 15, 2010 (the “Effective Date”), by
and between Pinnacle Energy Corp., a Nevada company (together with its
subsidiaries, the "Company"), and
Monarch Bay Associates, LLC, a California limited liability company ("MBA"). MBA
and the Company agree as follows:
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1.
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Engagement
of MBA: The Company hereby engages MBA, and MBA hereby
accepts such engagement, to act
as:
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(a)
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the
Company's placement agent, on an exclusive basis, with respect to finding
investors (the “Investors”) for one or more offerings of the Company’s
securities (including placements of the Company’s debt) in a transaction
or transactions exempt from registration under the Securities Act of 1933,
as amended, and in compliance with the applicable laws and regulations of
any jurisdiction in which securities are sold under this Agreement (each,
a “Financing”);
and
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(b)
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the
Company’s advisor, on an exclusive basis, in identifying and introducing
prospective parties to an acquisition, merger, joint venture or any other
similar transaction or relationship, directly or indirectly, involving the
Company (an “M&A
Transaction”).
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(c)
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the
Company will provide MBA with the right of first refusal for twelve (12)
months from the date of the termination of this Agreement to serve as a
financial advisor or to act as a joint financial advisor on at least equal
economic terms on any public or private financing (debt or equity),
merger, business combination, recapitalization or sale of some or all of
the equity or assets of the Company (collectively, “Future
Services”). In the event the Company notifies MBA of its
intention to pursue an activity that would enable MBA to exercise its
right of first refusal to provide Future Services, MBA shall notify the
Company of its election to provide such Future Services, including
notification of the compensation and other terms to which MBA claims to be
entitled, within thirty (30) days of written notice by the
Company. In the event the Company engages MBA to provide such
Future Services, MBA will be compensated consistent with the success fee
set forth in Section 2 of this Agreement, unless mutually agreed otherwise
by the Company and MBA.
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The
Company acknowledges and agrees that MBA's obligations hereunder are on a
reasonable best efforts basis only and that the execution of this Agreement does
not constitute a commitment by MBA to purchase any securities and does not
ensure the successful placement of any securities or any portion thereof or the
success of MBA with respect to securing any other financing, a M&A
Transaction on behalf of the Company. MBA will act solely as a broker
with respect to identifying and negotiating with potential investors in a
Financing and potential parties to an M&A Transaction. MBA will not act as
an underwriter in any Financing or M&A Transaction.
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2.
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MBA's
Compensation: The Company hereby agrees to pay MBA fees
in such amount and upon such terms and conditions contained herein upon
the successful completion of a Financing, a M&A Transaction as
follows:
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Success
Fees. The Company will pay MBA a Success Fee, as described
below, when the Company closes on a Financing or an M&A Transaction during
the Term (as hereinafter defined) of this Agreement or during a one-year period
thereafter.
Computation and Payment of
Success Fees.
(i) Financings. For
each Financing, the Success Fee will be (a) a cash fee equal to 8% of gross
proceeds raised in the Financing (including, without limitation, upon exercise
of any warrants issued in the Financing) and (b) warrants (the “MBA Warrants”) to
purchase 8% of the total number of shares of common stock issued and issuable by
the Company to Investors under and in connection with the Financing, including
(without limitation) shares issuable upon conversion or exercise of the
securities sold in the Financing, at an exercise price equal to the purchase
price of the common stock sold in the Financing or, in the event that securities
convertible into common stock are sold in the Financing, the conversion price of
such securities.
The cash
portion of the Success Fee will be due and payable upon the closing of each
Financing and will be payable directly to MBA from the escrow established for
such closing or in such other manner as may be acceptable to MBA.
MBA
Warrants will have a five (5) year term (or such longer term as is provided in
any warrants issued in the Financing) and will provide for cashless exercise
(even if the Investors do not have such a right). MBA Warrants will
have the benefit of anti-dilution protection against issuances of securities at
prices (or with conversion or exercise prices, in the case of convertible
securities, warrants, options or rights) below the exercise price of MBA
Warrants. MBA Warrants will not be callable or redeemable. The shares underlying
MBA Warrants will be included in the first registration statement filed by the
Company covering the securities issued in the Financing (or securities issuable
upon conversion or exercise thereof). MBA Warrants will be
transferable within MBA’s organization, at MBA’s discretion. MBA
Warrants will contain such other terms and conditions no less favorable to MBA
than the term and conditions of any warrants issued to the Investors in the
Financing.
(ii) M&A
Transactions. For each M&A Transaction, the Success Fee
will be a fee in the same form of consideration paid or received by the Company
equal to the following schedule of the Total Consideration (as defined below)
with respect to such M&A Transaction:
5%
of the first $5,000,000 of Total Consideration, or any part; plus,
4%
of the second $5,000,000 of Total Consideration, or any part; plus,
3%
of the third $5,000,000 of Total Consideration, or any part; plus,
2%
of the next $5,000,000 of Total Consideration, or any part; plus,
1%
of the balance of the Total Consideration.
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As used
herein. “Total
Consideration" means, with respect to any M&A Transaction, the total
value of all cash, securities, or other property paid or received, directly or
indirectly, by the Company or its owners (at closing or in the future) in
connection with such M&A Transaction, including (without limitation) in
respect of (i) the assumption (by contract, operation of law or otherwise) of
any indebtedness or (ii) consulting, non-compete or similar
agreements.
The
Success Fee will be due and payable upon the closing of each M&A Transaction
and will be payable directly to MBA from the escrow established for such closing
or in such other manner as may be acceptable to MBA; provided that in the
case of any installment or contingent payment made in respect of the M&A
Transaction, the Success Fee in respect of such installment or contingent
payment shall be due and payable on the date such payment is made.
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3.
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Certain
Matters Relating to MBA’s
Duties:
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(a)
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MBA
shall (i) assist the Company in the preparation
of information documents to be shared with potential
Investors and parties to M&A Transactions (ii) identify and screen
potential Investors and parties to M&A Transactions, and (iii) perform
other related duties.
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(b)
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MBA
shall perform its duties under this Agreement in a manner consistent with
the instructions of the Company. Such performance shall include the
delivery of information to potential interested parties, conducting due
diligence, and leading discussions with potential Investors and parties to
M&A Transactions.
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(c)
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MBA
shall not engage in any form of general solicitation or advertising in
performing its duties under this Agreement. This prohibition includes, but
is not limited to, any mass mailing, any advertisement, article or notice
published in any magazine, newspaper or newsletter and any seminar or
meeting where the attendees have been invited by any mass mailing, general
solicitation or advertising.
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(d)
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MBA
is and will hereafter act as an independent contractor and not as an
employee of the Company and nothing in this Agreement shall be interpreted
or construed to create any employment, partnership, joint venture, or
other relationship between MBA and the Company. MBA will not hold itself
out as having, and will not state to any person that MBA has, any
relationship with the Company other than as an independent contractor. MBA
shall have no right or power to find or create any liability or obligation
for or in the name of the Company or to sign any documents on behalf of
the Company.
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4.
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Certain
Matters Relating to Company’s
Duties:
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(a)
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The
Company shall promptly provide MBA with all relevant information about the
Company (to the extent available to the Company in the case of parties
other than the Company) that shall be reasonably requested or required by
MBA, which information shall be complete and accurate in all material
respects at the time
furnished.
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(b)
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The
Company recognizes that in order for MBA to perform properly its
obligations in a professional manner, it is necessary that MBA be informed
of and, to the extent practicable, participate in meetings and discussions
between the Company and any third party, including, without limitation,
any prospective purchaser of the Company’s securities, relating to the
matters covered by the terms of MBA's
engagement.
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(c)
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The
Company agrees that any report or opinion, oral or written, delivered to
it by MBA is prepared solely for its confidential use and shall not be
reproduced, summarized, or referred to in any public document or given or
otherwise divulged to any other person without MBA's prior written
consent, except as may be required by applicable law or
regulation.
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(d)
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The
Company will provide Consultant with the right of first refusal for one
year from the date of the termination of this Agreement to serve as a
financial advisor or to act as a joint financial advisor on at least equal
economic terms on any public or private financing (debt or equity),
merger, business combination, recapitalization or sale of some or all of
the equity or assets of the Company (collectively, “Future
Services”). In the event the Company notifies Consultant of its
intention to pursue an activity that would enable Consultant to exercise
its right of first refusal to provide Future Services, Consultant shall
notify the Company of its election to provide such Future Services,
including notification of the compensation and other terms to which
Consultant claims to be entitled, within thirty (30) days of written
notice by the Company. In the event the Company engages
Consultant to provide such Future Services, Consultant will be compensated
consistent with Section 3.0 of this Agreement, unless mutually agreed
otherwise by the Company and
Consultant.
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(e)
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The
Company represents and warrants that: (i) it has full right, power and
authority to enter into this Agreement and to perform all of
its obligations hereunder; (ii) this Agreement has been duly authorized
and executed by and constitutes a valid and binding agreement of the
Company enforceable in accordance with its terms; and (iii) the execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby do not conflict with or result in a breach of the
Company's certificate of incorporation or by-laws. Further, this Agreement
and the transactions contemplated herein shall not conflict with or result
in the breach of any agreement to which the Company is a party at the time
the transactions contemplated herein are
consummated.
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5.
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Term;
Termination of Agreement. The initial term of this Agreement shall
be from the Effective Date through the first anniversary thereof (the
“Initial Term”). After the Initial Term, the term of this
Agreement will automatically be extended for an additional successive
one-year periods unless either party provides written notice to the other
party of its intent not to so extend the term at least 30 days before the
expiration of the then current term. Either party may terminate
this Agreement prior to its expiration by notifying the other party in
writing upon a material breach by that other party, unless such breach is
curable and is in fact cured within fifteen (15) days after such
notice. Notwithstanding the foregoing, all provisions of this
Agreement (including Exhibit A hereto) other than Sections 1, 3 and 4 (a)
and (b) shall survive the termination or expiration of this
Agreement. MBA shall be entitled to compensation under Section
2 (and payment for expenses under Section 12) based on the completion of a
Financing or a M&A Transaction prior to the termination or expiration
of this Agreement or during the period one year following termination so
long as any Investors or party to a M&A Transaction, as the case may
be, (or any affiliate of any such person or entity) were identified by the
Company or introduced by MBA to the Company. MBA will provide
to the Company within ten business days after the expiration or
termination of this Agreement a list of all persons or entities identified
by the Company or introduced by MBA to the Company pursuant to this
Agreement (the “Introduction List”). Within five business day
following the delivery of the Introduction List to the Company, the
Company will provide MBA with written notice of any objections to the
inclusion of any person or entity in the Introduction List and state the
basis for each objection in reasonable detail. The
inclusion of a person or entity in the Introduction List shall be deemed
conclusive in making a later determination as to whether a Success Fee is
payable hereunder, unless the Company shall have made a timely and proper
objection. The parties will cooperate to resolve the status of
any person or entity as to which the Company shall have made a timely and
proper objection.
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Except as
otherwise specifically provided for herein, the Company shall have no liability
to MBA should the Company terminate this Agreement prior to the completion of a
Financing or an M&A Transaction.
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6.
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Indemnification. The
indemnification provisions set forth in Exhibit A hereto are incorporated
by reference and are a part of this
Agreement.
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7.
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Notices.
Any notice, consent, authorization or other communication to be given
hereunder shall be in writing and shall be deemed duly given and received
when delivered personally, when transmitted by fax during the normal
business hours of the party receiving such notice so long a copy of that
notice is also send by certified mail, return receipt requested at the
time it is transmitted by fax, five business days
after being mailed by certified mail, return receipt requested or one
business day after being sent by a nationally recognized overnight
delivery service, charges and postage prepaid, properly addressed to the
party to receive such notice, at the following address or fax number for
such party (or at such other address or fax number as shall hereafter be
specified by such party by like
notice):
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(a)
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If
to the Company, to:
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▇▇▇▇
▇▇▇▇▇, President
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▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
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▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
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Telephone
Number: (▇▇▇) ▇▇▇-▇▇▇▇
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Fax
Number: (▇▇▇) ▇▇▇-▇▇▇▇
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E-mail:
▇▇▇▇▇▇▇@▇▇▇▇▇.▇▇▇
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(b)
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If
to MBA, to:
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▇▇▇▇▇
▇▇▇▇▇, Principal
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Monarch
Bay Associates, LLC
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▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇ #▇▇▇
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▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
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Telephone
Number: (▇▇▇) ▇▇▇-▇▇▇▇
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Fax
Number: (▇▇▇) ▇▇▇-▇▇▇▇
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E-mail:
▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
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8.
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Company
to Control Transactions. The terms
and conditions under which the Company would enter into a Financing or an
M&A Transaction shall be at the sole discretion of the
Company. Nothing in this Agreement shall obligate the Company
to actually consummate a Financing or an M&A
Transaction. The Company may terminate any negotiations or
discussions at any time and reserves the right not to proceed with a
Financing or an M&A
Transaction.
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9.
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Confidentiality
of Company Information. MBA, and its officers, directors, employees
and agents shall maintain in strict confidence and not copy, disclose or
transfer to any other party (1) all confidential business and financial
information regarding the Company and its affiliates, including without
limitation, projections, business plans, marketing plans, product
development plans, pricing, costs, customer, vendor and supplier lists and
identification, channels of distribution, and terms of identification of
proposed or actual contracts and (2) all confidential technology of the
Company. In furtherance of the foregoing, MBA agrees that it shall not
transfer, transmit, distribute, download or communicate, in any
electronic, digitized or other form or media, any of the confidential
technology of the Company. The foregoing is not intended to preclude MBA
from utilizing, subject to the terms and conditions of this Agreement, the
Financing or Offering Memorandum and/or other documents prepared or
approved by the Company. Further, the Company must approve the
Financing or Offering Memorandum, being prepared by MBA, before it is
mailed to prospective Investors or parties to an M&A
Transaction.
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All
communications regarding any possible transactions, requests for due diligence
or other information, requests for facility tours, product demonstrations or
management meetings, will be submitted or directed to the Company, and MBA shall
not contact any employees, customers, suppliers or contractors of the Company or
its affiliates without express permission. Nothing in this Agreement
shall constitute a grant of authority to MBA or any representatives thereof to
remove, examine or copy any particular document or types of information
regarding the Company, and the Company shall retain control over the particular
documents or items to be provided, examined or copied. If a Financing or an
M&A Transaction is not consummated, or if at any time the Company so
requests, MBA and its representatives will return to the Company all copies of
information regarding the Company in their possession.
The
provisions of this Section shall survive any termination of this
Agreement.
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10.
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Press
Releases, Etc. The Company shall control all press
releases or announcements to the public, the media or the industry
regarding any Financing, M&A Transaction or business relationship
involving the Company or its affiliates. Except for
communication to Investors in furtherance of this Agreement, MBA will not
disclose the fact that discussions or negotiations are taking place
concerning a possible Financing or a M&A Transaction involving the
Company, or the status or terms and conditions thereof.
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11.
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Due
Diligence:
Neither the Company, nor any of its directors, officers or
stockholders, should, in any way rely on MBA to perform any due diligence
with respect to the Company. It is expressly understood and
agreed that the Investors and parties to any M&A Transaction will
conduct their own due diligence on the Company and the
opportunity.
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12.
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Expenses,
Etc. The Company will pay to MBA a non-accountable
expense fee equal to 3% of gross proceeds raised in each Private Placement
(the “Non-Accountable Fee”), which will be used to pay MBA’s travel and
other expenses. The Non-Accountable Fee will be paid in the
same time and manner as the Success Fee. The
Company will pay all other costs and expenses incident to the issuance,
offer, sale and delivery of each Private Placement, including but are not
limited to state “Blue Sky” fees, legal fees, printing costs, travel
costs, mailing, couriers, and personal background
checks.
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13.
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Compliance
with Laws. MBA represents and warrants that it shall
conduct itself in compliance with applicable federal and state
laws. MBA represents that it is not a party to any other
Agreement, which would conflict with or interfere with the terms and
conditions of this Agreement.
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14.
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Assignment
Permissable. MBA reserves the right to assign a portion
of this Agreement to one or more sub-agents with respect to any Financing
or M&A Transaction, subject to the prior written consent of the
Company. Any approved sub-agent shall be paid a portion of
Success Fees as may be determined by MBA. The
Company does acknowledge that MBA may pay other consultants or agents in
connection with the Financing(s) and M&A
Transaction(s).
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15.
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Amendments. Neither
party may amend this Agreement or rescind any of its existing provisions
without the prior written consent of the other
party.
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16.
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Governing
Law; Dispute Resolution. This Agreement shall be deemed
to have been made in the State of California and shall be construed, and
the rights and liabilities determined, in accordance with the law of the
State of California, without regard to the conflicts of laws rules of such
jurisdiction. Any controversy or claim relating to or arising from this
Agreement (an "Arbitrable Dispute") shall be settled by arbitration in
accordance with the Commercial Arbitration Rules of the American
Arbitration Association (the "AAA") as such rules may be modified herein
or as otherwise agreed by the parties in controversy. The forum for
arbitration shall be Orange County, California. Following thirty (30) days
notice by any party of intention to invoke arbitration, any Arbitrable
Dispute arising under this Agreement and not mutually resolved within such
thirty (30) day period shall be determined by a single arbitrator upon
which the parties agree.
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17.
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Waiver. Neither
MBA’s nor the Company’s failure to insist at any time upon strict
compliance with this Agreement or any of its terms nor any continued
course of such conduct on their part shall constitute or be considered a
waiver by MBA or the Company of any of their respective rights or
privileges under this Agreement.
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18.
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Severability.
If any provision herein is or should become inconsistent with any present
or future law, rule or regulation of any sovereign government or
regulatory body having jurisdiction over the subject matter of this
Agreement, such provision shall be deemed to be rescinded or modified in
accordance with such law, rule or regulation. In all other
respects, this Agreement shall continue to remain in full force and
effect.
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19.
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Counterparts.
This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, and will become effective and binding upon
the parties at such time as all of the signatories hereto have signed a
counterpart of this Agreement. All counterparts so executed
shall constitute one Agreement binding on all of the parties hereto,
notwithstanding that all of the parties are not signatory to the same
counterpart. Each of the parties hereto shall sign a sufficient
number of counterparts so that each party will receive a fully executed
original of this Agreement.
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20.
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Entire
Agreement. This Agreement (together with Exhibit A
hereto) constitutes the entire agreement between the Company and MBA. No
other agreements, covenants, representations or warranties, express or
implied, oral or written, have been made by any party hereto to any other
party concerning the subject matter hereof. All prior and
contemporaneous conversations, negotiations, possible and alleged
agreements, representations, covenants and warranties concerning the
subject matter hereof are merged herein and shall be of no further force
or effect.
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Monarch
Bay Associates, LLC (the “MBA”)
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By:
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▇▇▇▇▇
▇▇▇▇▇
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Title:
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Principal
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Pinnacle
Energy Corp. (the “Company”)
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By:
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▇▇▇▇
▇▇▇▇▇
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Title:
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President
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8
EXHIBIT
A
Indemnification
The Company agrees that it shall
indemnify and hold harmless, MBA, its members, managers, officers,
employees, agents, affiliates and controlling persons within the meaning of
Section 20 of the Securities Exchange Act of 1934 and Section 15 of the
Securities Act of 1933, each as amended (any and all of whom are referred to as
an "Indemnified Party"), from and against any and all losses, claims, damages,
liabilities, or expenses, and all actions in respect thereof (including, but not
limited to, all legal or other expenses reasonably incurred by an Indemnified
Party in connection with the investigation, preparation, defense or settlement
of any claim, action or proceeding, whether or not resulting in any liability),
incurred by an Indemnified Party with respect to, caused by, or otherwise
arising out of any transaction contemplated by this Agreement or MBA's
performing the services contemplated hereunder; provided, however, the Company
will not be liable to the extent, and only to the extent, that any loss, claim,
damage, liability or expense is finally judicially determined to have resulted
primarily from MBA's gross negligence or bad faith in performing such
services.
If the indemnification provided for
herein is conclusively determined (by an entry of final judgment by a court of
competent jurisdiction and the expiration of the time or denial of the right to
appeal) to be unavailable or insufficient to hold any Indemnified Party harmless
in respect to any losses, claims, damages, liabilities or expenses referred to
herein, then the Company shall contribute to the amounts paid or payable by such
Indemnified Party in such proportion as is appropriate and equitable under all
circumstances taking into account the relative benefits received by the Company
on the one hand and MBA on the other, from the transaction or proposed
transaction under the Agreement or, if allocation on that basis is not permitted
under applicable law, in such proportion as is appropriate to reflect not only
the relative benefits received by the Company on the one hand and MBA on the
other, but also the relative fault of the Company and MBA; provided, however, in
no event shall the aggregate contribution of MBA and/or any Indemnified Party be
in excess of the net compensation actually received by MBA and/or such
Indemnified Party pursuant to this Agreement.
The
Company shall not settle or compromise or consent to the entry of any judgment
in or otherwise seek to terminate any pending or threatened action, claim, suit
or proceeding in which any Indemnified Party is or could be a party and as to
which indemnification or contribution could have been sought by such Indemnified
Party hereunder (whether or not such Indemnified Party is a party thereto),
unless such consent or termination includes an express unconditional release of
such Indemnified Party, reasonably satisfactory in form and substance to such
Indemnified Party, from all losses, claims, damages, liabilities or expenses
arising out of such action, claim, suit or proceeding.
In
the event any Indemnified Party shall incur any expenses covered by this Exhibit
A, the Company shall reimburse the Indemnified Party for such covered expenses
within ten (10) business days of the Indemnified Party's delivery to the Company
of an invoice therefor, with receipts attached. Such obligation of the Company
to so advance funds may be conditioned upon the Company's receipt of a written
undertaking from the Indemnified Party to repay such amounts within ten (10)
business days after a final, non-appealable judicial determination that such
Indemnified Party was not entitled to indemnification hereunder.
The
foregoing indemnification and contribution provisions are not in lieu of, but in
addition to, any rights which any Indemnified Party may have at common law
hereunder or otherwise, and shall remain in full force and effect following the
expiration or termination of MBA's engagement and shall be binding on any
successors or assigns of the Company and successors or assigns to all or
substantially all of the Company's business or assets.
Initials
_______ Initials
________
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