Hallmark Investments, Inc._______________
Exhibit
10.4
______________Hallmark
Investments, Inc._______________
000
Xxxxxxxxx Xxxxxx, 0xx Xxxxx,
Xxx Xxxx, XX 00000
Tel:
(000) 000-0000 (000) 000-0000 Fax: 000
000-0000
June 5,
2009
Xx.
Xxxxxxxx X. Xxxxxxx, CEO
000
Xxxxxxxx Xxxxxx, xxxxx 000X
Xxxxxxx
XX 00000
Dear Xx.
Xxxxxxx:
This
letter agreement (this “Agreement”) confirms our understanding that INVO
Bioscience, Inc., a Nevada corporation, and its affiliates, (the “Company”),
have engaged Hallmark Investments, Inc., (the “Placement Agent”) to act as a
Placement Agent on an exclusive basis in connection with a private placement by
the Company or its affiliates of debt and/or equity securities (the
“Securities”) on a “best efforts” basis of up to an aggregate offering of
approximately Five Hundred Thousand Dollars ($500,000.00) (the “Private
Placement”). This Agreement shall be effective for a period commencing June 1,
2009 and ending on August 31, 2009.
Section
1. Appointment
and Acceptance.
The
Company hereby appoints the Placement Agent Placement Agent on an exclusive
basis in connection with the Private Placement of the Securities. The
Placement Agent accepts such appointment, subject to the terms and conditions of
this letter agreement.
The
Placement Agent agrees that in its capacity hereunder it will use commercially
reasonable efforts to arrange the Private Placement. In no event shall the
Placement Agent be obligated to purchase the Securities for its own account or
for the accounts of its customers.
Section
2. The
Transaction
The
parties contemplate that an initial offering of a maximum of approximately
$500,000.00 of debt and /or equity securities will be offered in the
Private Placement. Upon commencement, the Private Placement shall continue
through August 31, 2009.
The
Placement Agent envisions the following terms:
A 10%
Senior Secured Convertible Note, (“the Note” or “the Notes”), with detachable
Common Stock Purchase Warrants. Interest on the Notes will be paid in
Shares of Common Stock. Each Note entitles the Note holder to convert
the Notes into Common Stock of the Company at of $.10 per Share The
Notes mature upon the earlier of one (1) year or the completion of a
follow-on-financing by the Company of a minimum of $2,500,000
dollars. The warrants are exercisable at a 100% premium to the
conversion pricing of the Notes at 100% coverage.
The
Placement Agent will assist in negotiating the terms and conditions for a
successful completion of the Private Placement; provided, however, that the
Company, in its sole discretion, must approve any such terms and conditions. To
facilitate the Private Placement, the Company shall prepare and deliver to the
Placement Agent any offering documents or other information to be used in the
Private Placement.
Section
3. Fees and
Expenses.
As
compensation to the Placement Agent for its services hereunder, the Company
agrees that the
Company and the Placement Agent shall determine whether more than one closing
shall be necessary. If there is more than one closing, at each closing the Gross
proceeds shall be paid into an escrow account (the Escrow Account). The Company
agrees that immediately upon the closing of a sale of the Securities the Escrow
Agent shall make disbursements from the Escrow Account as follows:
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(i)
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to the Placement Agent a placement fee consisting of the following: a cash
payment equal to ten percent (10%) of the gross proceeds raised (as
defined below), in a sale of equity securities, and
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(ii)
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As part of the Placement Agent’s compensation hereunder, the Company shall
issue to the Placement Agent, at each closing hereunder, five (5) year
Common Stock Purchase Warrants equal to ten percent (10%) of the number of
shares of common stock underlying any debt and/or equity securities sold
by the Placement Agent, as more fully described in the Offering Document.
The Common Stock Purchase Warrants shall be exercisable at the same price
as the shares of common stock underlying the debt and/or equity securities
sold by the Placement Agent. And, The Common Stock Purchase Warrants will
have features identical to the shares of common stock underlying the debt
and/or equity securities sold by the Placement Agent. The Placement Agent
may designate that the Placement Agent’s Common Stock or Preferred Stock
be issued in varying amounts to its officers, agents, consultants and
affiliates and not to the Placement
Agent.
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The
amounts payable or securities deliverable pursuant to subparts (i), and (ii)
above shall be referred to as the “Placement Fee.”
The
Company hereby agrees to complete the following and pay the expenses associated
therewith, in addition to a non-refundable retainer of fifteen thousand dollars
($15,000.00), which, at this time, the Company does not have and where there is
little or no prospect that the Company will have the retainer amount available
until such time as the Placement Agent raises this amount, and more, from its
investor clients. It is therefore expressly agreed that the retainer amount of
$15,000.00 will be paid to the Placement Agent by the Company from the first
monies raised by the Placement Agent but that such payment will in no way
diminish or be credited to the Company against the 10% commission fee for which
the Company is obligated to the Placement Agent. The
$15,000.00 retainer fee will be paid by the Company as soon as that
amount is raised by the Placement Agent.
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(i)
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the preparation and printing of the Offering Documents, and any
supplements or amendments thereto, including the cost of all copies
thereof;
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(ii)
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the issuance, sale, transfer and delivery of the Securities, including any
transfer or other taxes payable thereon and the fees of any transfer agent
or registrar;
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(iii)
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the registration or qualification of the Securities or the securing of an
exemption therefrom under state or foreign "blue sky" or securities laws,
including without limitation, filing fees payable in the jurisdictions in
which such registration or qualification or exemption therefrom is sought
and disbursements in connection
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Such
Placement Fee will be payable in the respect of each sale of Securities only if
such sale has been arranged by the Placement Agent or its Co-Placement Agents or
Selected Dealers. Gross proceeds raised shall include only cash consideration
received by the Company for the purchase of the Securities and shall not include
the cash received by the Company upon the exercise of warrants or other
convertible securities, if any. In no event shall the Company be
obligated to issue and sell any Securities unless the Company shall have
executed and delivered an investor subscription agreement pertaining to such
sale setting forth the terms of such sale of Securities and (ii) the aggregate
gross proceeds raised in connection with the Private Placement exceeds any
minimum set forth in the Offering. Additionally, the Company shall
have complete and absolute discretion in determining the terms of the Private
Placement and whether or not to sell Securities to any potential purchaser
presented by the Placement Agent.
Gross
proceeds shall include only cash consideration received by the Company for the
purchase of the Securities and shall not include the cash received by the
Company upon the exercise of warrants or other convertible securities, if
any.
The
Company and the Placement Agent acknowledge and agree that, in the course of
performing services hereunder, the Placement Agent may introduce the Company to
third parties who may, directly or indirectly through other third parties, be
interested in providing debt or equity financing to the Company (a “Financing”) in addition to the
Private Placement.
The
Company agrees that if during the terms of this agreement or within eighteen
(18) months year from the effective date of the termination of this Agreement,
the Company or any party to whom the Company was introduced by the Placement
Agent in connection with its services for the Company hereunder
proposes a Financing involving the Company and the Placement Agent is not
engaged as the Company’s financial advisor, agent, and/or investment banker in
connection with such Financing, then, if any such Financing is consummated, the
Company shall pay to the Placement Agent the following fees:
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(i)
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a cash fee of eight percent (8%) of the amount of capital raised, invested
or committed; and
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(ii)
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issue to the Placement Agent, at each closing hereunder, five year Common
Stock Purchase Warrants equal to eight percent (8%) of the number of
shares of common stock underlying any debt and/or equity securities issued
the amount of capital raised, invested or committed The Placement Agent
may designate that the Placement Agent’s Common Stock or Preferred Stock
be issued in varying amounts to its officers and agents and not to the
Placement Agent.
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Such fees
shall be payable to the Placement Agent in cash immediately at the closing or
closings of the Financing to which it relates. Any Financing to be
provided to the Company by the Placement Agent or underwriter shall be provided
pursuant to a separate agency or underwriting agreement between the Company and
the Placement Agent which agreement shall contain the terms set forth in Section
3 hereof and such other customary terms,
conditions, agreements, covenants, representations and warrants as the parties
may agree upon.
All cash
fees and expenses paid by the Company to the Placement Agent in Section 3 above
shall be in United States currency.
Section
4. Information
In
connection with the Placement Agent’s engagement, the Company will furnish the
Placement Agent with all information concerning the Company as the Company and
the Placement Agent may reasonably agree and will provide the Placement Agent
with reasonable access to the company’s officers, directors, employees,
accountants, counsel and other representatives. The Company
acknowledges and confirms that the Placement Agent (I) will rely solely on such
information in the performance of the services contemplated by this engagement
without assuming any responsibility for independent investigation or
verification thereof, (ii) assumes no responsibility for the accuracy or
completeness of such information or any other information regarding the Company
and (iii) will not make any appraisal of any assets of the Company.
The
Company will be solely responsible for the contents of the offering documents
(subject to review by counsel to the Placement Agent) or other offering document
used in connection with the Private Placement (as such private placement
memorandum or other
document
may be amended or supplemented and including any information incorporated herein
by reference, the “Private Placement Memorandum”) and any and all other written
communications provided by the Company to any actual or prospective purchaser of
the Securities.
The
Placement Agent shall not make any changes to the offering documents, and except
in connection with performing the services contemplated by and with the consent
of the Company, the Placement Agent shall keep the offering documents
confidential and shall not distribute it or any other materials related to
Private Placement.
The
Company represents and warrants that the Offering Memorandum and such other
communications will not, as of the date of any delivery by the Placement Agent
to a perspective purchaser and as of the time of sale of any Securities pursuant
to the Private Placement contain any untrue statement of a material fact or 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 in which they were
made, not misleading. If at any time prior to the completion of the
offer and sale of the Securities or the closing date of any such sale an event
occurs as a result of which the Offering Memorandum (as then supplemented or
amended) would include any untrue statement of a material fact or omits to state
any material fact necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading, the Company, will
promptly notify the Placement Agent of such event and the Placement Agent will
promptly suspend solicitations of prospective purchasers of the Securities and
distribution of the Offering Memorandum until such time as the Company shall
prepare (and the Company agrees that, if it shall have notified the Placement
Agent to suspend solicitations after the Company has accepted orders from
prospective purchasers, it will promptly prepare) a supplement or amendment to
the Offering Memorandum which corrects such statement(s) or
omission(s). Each party hereto shall be responsible for violations of
their respective agents and advisors of the obligations set forth in this
agreement.
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Section
5.
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Exemption from
Registration; Restrictions on Offer and Sale of Same or Similar
Securities
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It is
understood that the offer and sale of the Securities will be exempt from the
registration requirements of The Securities Act of 1933, as amended (the
“Act”). The Company will not, directly or indirectly, makes any offer
or sale of Securities or of securities of the same or of similar class as the
Securities if as a result the offer and sale of Securities contemplated hereby
would fail to be entitled to the exemption from the registration requirements of
the Act.
The
Placement Agent will not, directly or indirectly, make any offer of Securities,
if as a result the offer of Securities contemplated hereby would fail to be
entitled to the exemption from the registration requirements of the
Act. In addition, the Placement Agent will solicit offers only for
the Securities and will not, directly or indirectly make any offer of securities
of the same or similar class of the securities.
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A.
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Additional
Restrictions on the Company and the Placement
Agent
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In
connection with all offers and sales of the securities:
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(a)
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The Company will not offer or sell the Securities by means of any form of
general solicitation or general advertising. The Placement
Agent will not offer the Securities by means of any form of general
solicitations or general
advertising.
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(b)
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The Company will not offer or sell the Securities to any person who is not
an “accredited investor” as the term is defined in Section 501(a) or
Regulation D of the Securities Act of 1933, as amended (“Regulation
D”). The Placement Agent will not offer the Securities to any
person who is not a “qualified client” as defined in Regulation
D.
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(c)
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The Company will exercise reasonable care to ensure that purchasers of the
Securities are not underwriters within the meaning of Section 2(11) of the
Act and, without limiting the foregoing, that such purchases will comply
with Rule 502(d) under the Act.
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B.
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Compliance With
Securities Laws, Broker/Dealer Regulations And Relevant Self-Regulation
Organizations.
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The
company will make such notice filings and pay such fees under the securities
laws of such jurisdictions in the United States as the Company may reasonably
determine, in each case to the extent required under Section 18( c ) (2) of the
Act, and in such other jurisdictions as required by applicable law
The
Placement Agent hereby represents and warrants that it is (1) registered as a
broker or dealer as required under Section 15(a)(1) of the Securities and
Exchange Act of 1934, (the “Exchange Act”), (2) it is a (a) associated with a
broker/dealer, which is a person other than a natural person, and (b) registered
with the National Association of Securities Dealers as a registered
representative or (3) exempt from the regulation requirement of Section 15(a)(1)
of the Exchange Act and applicable state laws.
Section
6. Term
and Termination.
This
Agreement shall be effective for the period commencing June 1, 2009 and ending
August 31, 2009.
No
termination of the Placement Agent’s engagement hereunder shall affect (I) the
Company’s obligation to reimburse the Placement Agent for expenses as provided
herein or (ii) the provisions of Sections 3 and 9 of this letter
agreement.
Section
7. General.
In
connection with this engagement, the Placement Agent is acting as an independent
contractor and not in any other capacity, with duties owing solely to the
Company. All aspects of the relationship created by this agreement
shall be governed by and construed in accordance with the laws of the state of
New York, applicable to contracts made and to be performed
therein. Each of the Placement Agent and the Company waives all right
to trial by jury in any action, suit proceeding or counter claim (whether based
upon contract tort or otherwise) relating to or arising out of the engagement of
the Placement Agent pursuant to, or the performance by the Placement Agent of
the services contemplated by, this agreement. All actions and
proceedings arising out of or relating to this letter agreement shall be heard
and determined exclusively in any New York State court or federal court sitting
in the state of New York to whose jurisdiction the company and the Placement
Agent hereby irrevocably submit. The Company and the Placement Agent
irrevocably waive any defense or objection to the New York forum designated
above.
This
letter agreement contains the entire agreement of the parties with respect to
the subject matter hereof and supersedes and takes precedence over all prior
agreements or understandings, whether oral or written, between the Placement
Agent and the Company. The invalidity or enforceability of any
provision of the letter agreement shall not affect the validity or
enforceability of any other provisions of this agreement, which shall remain in
full force and effect.
We are
delighted that you have accepted this engagement and look forward to working
with you on this assignment. Please confirm that the foregoing is in accordance
with your understanding by signing and returning to us the enclosed duplicate of
this agreement.
Section
8. Governing
Law; Jurisdiction; Waiver of Jury Trail.
This
Agreement shall be governed by and construed in accordance with the laws of the
State of New York applicable to agreements made and to be fully performed
therein, with disregard to conflicts of law principles. The Company
irrevocably submits to the exclusive jurisdiction of any court of the State of
New York or the United States District Court for the Southern District of the
State of New York for the purpose of any suit, action or other proceeding
arising out of this Agreement, or any of the agreements or transactions
contemplated hereby, which is brought by or against the Company. All
notices provided hereunder shall be given in writing and either delivered
personally or by overnight
courier service or sent by certified mail, return receipt requested, or by
facsimile transmission, if to Hallmark Investments, Inc., 000 Xxxxxxxxx Xxxxxx,
Xxx Xxxx, XX 00000, Attn: Xxxxxx Xxxxxx, Managing Partner, Fax No.: (000)
000-0000, and if to the Company, to the address, set forth on the first page of
this Agreement: Xx. Xxxxxxxx X. Xxxxxxx, CEO, INVO Bioscience, Inc., 000
Xxxxxxxx Xxxxxx, xxxxx X000, Xxxxxxx, XX 00000: Fax No.: (000) 000-0000. The
parties hereby expressly waive all right to trail by jury in any suit, action or
proceeding arising under this Agreement.
Section
9.
Indemnification
Provisions
The Company agrees to indemnify and
hold harmless the Placement Agent and any indemnified parties identified herein
from and against any and all losses, claims, damages, obligations, penalties,
judgments, awards, liabilities, costs, expenses and disbursements, and any and
all actions, suits, proceedings and investigations in respect thereof and any
and all legal and other costs, expenses and disbursements in giving testimony or
furnishing documents in response to a subpoena or otherwise (including, without
limitation, the costs, expenses and disbursements, as and when incurred, of
investigating, preparing, pursing or defending any such action, suit, proceeding
or investigation (whether or not in connection with litigation in which any
Indemnified Party is a party))(collectively, “Losses”), directly or
indirectly, caused by, relating to, based upon, arising out of, or in connection
with, the Placement Agent acting for the Company, including, without limitation,
any act or omission by the Placement Agent in connection with its acceptance of
or the performance or non-performance of its obligations under the Agreement
between the Company and the Placement Agent to which these indemnification
provisions are attached and form a part (the “Agreement”), any breach by the
Company of any representation, warranty, covenant or agreement contained in the
Agreement (or in any instrument, document or agreement relating thereto,
including any Agency Agreement), or the enforcement by Placement Agent of its
rights under the Agreement or these indemnification provisions, except to the
extent that and such Losses are found in a final judgment by a court of
competent jurisdiction (not subject to further appeal) to have resulted
primarily and directly from the gross negligence or willful misconduct of the
Indemnified Party seeking indemnification hereunder. The Company also
agrees that no Indemnified Party shall have any liability (whether direct or
indirect, in contract or tort or otherwise) to the Company for its connection
with the engagement of the Placement Agent by the Company or for any
other
reason,
except to the extent that any such liability is found in a final judgment by a
court of competent jurisdiction (not subject to further appeal) to have resulted
primarily and directly from such Indemnified Party’s gross negligence or willful
misconduct.
These Indemnification Provisions shall
extend to the following persons (collectively, the “Indemnified
Parties”): the Placement Agent, its present and former
affiliated entities, managers, members, officers, employees, consultants,
advisors, legal counsel, agents and controlling persons (within the meaning of
the federal securities laws), and the officers, directors, partners
stockholders, members, managers, employees, legal counsel, agents and
controlling persons of any of them. These indemnification provisions
shall be in addition to any liability, which the Company may otherwise have to
any Indemnified Party. If any action, suit, proceeding or
investigation is commenced, as to which an Indemnified Party proposes to demand
indemnification, it shall notify the Company with reasonable promptness; provided, however,
that any failure by an Indemnified party to notify the Company shall not relieve
the Company from its obligations hereunder. An Indemnified Party
shall have the right to retain counsel of its own choice to represent it, and
the fees, expenses and disbursements of such counsel shall be borne by the
Company. Any such counsel shall, to the extent consistent with its
professional responsibilities, cooperate with the Company and any counsel
designated by the Company. The Company shall be liable for any
settlement of any claim against any Indemnified Party made with the Company’s
written consent. The Company shall not, without the prior written
consent of the Placement Agent settle or compromise any claim, or permit a
default or consent to the entry of any judgment in respect thereof, unless such
settlement, compromise or consent (I) includes, as an unconditional term
thereof, the giving by the claimant to all of the Indemnified Parties of an
unconditional release from all liability in respect of such claim, and (ii) does
not contain any factual or legal admission by or with respect to an Indemnified
Party or an adverse statement with respect to the character, professionalism,
expertise of any of the Indemnified Party or any action or inaction of any
Indemnified Party.
In order
to provide for just and equitable contribution, if a claim or indemnification
pursuant to these indemnification provisions Is made but is found in a final
judgment by a court competent jurisdiction (not subject to further appeal) that
such indemnification may not be enforced in such case, even though the express
provisions hereof provide for indemnification in such case, then the Company
shall contribute to the Losses to which any Indemnified Party may be subject to
in accordance with the relative benefits received by the Company and its
stockholders, subsidiaries and affiliates, on the one hand, and the Indemnified
Party, on the other hand and (ii) if (and only if) the allocation provided in
clause (I) of this sentence is not permitted by applicable law, in such
proportion as to reflect not only the relative benefits, but also the relative
fault of the Company, on the one hand, and the Indemnified Party, on the other
hand, in connection with statements, acts or omissions which results in such
Losses as well as any relevant equitable considerations. No person
found liable for a fraudulent misrepresentation shall be
entitled to contribution from any person who is not also found liable for
fraudulent misrepresentation. The relative benefits received (or
anticipated to be received) by the Company and its stockholders, subsidiaries
and affiliates shall be deemed to be equal to the aggregate consideration
payable or receivable by such parties in connection with the transaction or
transactions to which the Agreement relates relative to the amount of fees
actually received by the Placement Agent in connection with such transaction or
transactions. Notwithstanding the foregoing, in no event shall the
amount contributed by all Indemnified Parties exceed the amount of fees
previously received by Placement Agent pursuant to the Agreement.
Neither
termination nor completion of the Agreement shall affect these Indemnified
Provisions which shall remain operative and in full force and effect. The
Indemnified Provisions shall be binding upon the Company and its successors and
assigns and shall inure to the benefit of the Indemnified Parties and their
respective successors, assigns, heirs and personal representatives.
Section
10.
Notices
All
notices provided hereunder shall be given in writing and either delivered
personally or by overnight courier service or sent by certified , return receipt
requested, or by facsimile transmission, if to Hallmark Investments, Inc., 000
Xxxxxxxxx Xxxxxx, Xxx Xxxx, XX 00000, Attn: Xxxxxx Xxxxxx, Managing Partner, Fax
No.: (000) 000-0000, and if to the Company, to the address, set forth on the
first page of this Agreement: Xx. Xxxxxxxx X. Xxxxxxx, CEO, INVO Bioscience,
Inc., 000 Xxxxxxxx Xxxxxx, xxxxx X000, Xxxxxxx, XX 00000: Fax No.: (000)
000-0000. -443-1989
Section
11. Invalidation of Prior
Agreement
It is
herby agreed by the parties hereto that the Agreement executed by the Company
and the Placement Agent dated June 1, 2009 is deemed as null and
void.
| Very truly yours, | |||
| Hallmark Investments, Inc. | |||
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By:
|
/s/ Xxxxxx Xxxxxx | |
| Xxxxxx Xxxxxx | |||
| Managing Partner | |||
ACCEPTED
AND AGREED TO
AS OF THE
DATE FIRST ABOVE WRITTEN
INVO
Bioscience, Inc.
/s/
Xxxxxxxx Xxxxxxx
By: Xxxxxxxx X. Xxxxxxx
Title:
CEO
