Placement Agent Agreement ZNOMICS, INC. Suite 200 Portland, OR 97201
CONFIDENTIAL
ZNOMICS,
INC.
0000
XX
0xx
Xxxxxx
Xxxxx
000
Xxxxxxxx,
XX 00000
June
11,
2007
Xxxxxxx
Securities, Inc.
00
Xxxxx
Xxxxxx
Xxx
Xxxx,
XX 00000
Attention:
Xxxxxx X. Xxxxxx, President
Gentlemen:
The
undersigned, Znomics, Inc., a Delaware corporation (the “Company”), hereby
agrees (the “Agreement”) with Xxxxxxx Securities, Inc. (“Xxxxxxx” or the
“Placement Agent”) to engage the Placement Agent to raise equity capital of up
to $10 million in a private placement transaction to be sold to qualified
investors. This letter confirms the terms and conditions of the
Agreement.
1.
Best
Efforts Offering.
The
Company hereby engages Xxxxxxx to act as its exclusive Placement Agent during
the term of the offering as provided herein to offer and sell on a “best
efforts” basis (the “Offering”) shares of the Company’s Series C Convertible
Preferred Stock (“Preferred Stock”) (or other securities of the Company
determined by the Company and the Placement Agent) (the Preferred Stock or
other
securities are hereinafter sometimes referred to as the “Securities”). The
Preferred Stock shall be a class that is senior to other outstanding classes
of
equity securities of the Company. The Securities shall be offered and sold
without registration in reliance on one or more applicable exemptions under
the
Securities Act of 1933, as amended, and the rules and regulations promulgated
thereunder (the “Act”) including the exemption from registration provided by
Regulation D thereof.
The
Offering shall be for a minimum (the “Minimum”) of at least $3 million and a
maximum of $10 million (the “Maximum”). An initial closing of the Offering will
occur on or before August 31, 2007 provided the Minimum is subscribed for,
and a
final closing may be held on or before October 31, 2007 as determined by the
Company and the Placement Agent. All proceeds from subscriptions by investors
will be deposited in an escrow account with a bank reasonably satisfactory
to
the Company and the Placement Agent.
2.
Offering
Materials.
The
Company shall, as soon as practicable, prepare offering materials (the "Offering
Materials"), which shall meet the anti-fraud and other requirements of federal
and state securities laws, in form and substance reasonably satisfactory to
the
Company and Placement Agent.
3.
Compensation.
The
Placement Agent will be paid at each closing of the Offering
a cash
commission of 7.0% of the aggregate amount of the Offering proceeds (the “Cash
Compensation”) for Securities sold to all investors (other than an aggregate of
up to $1 million of Offering proceeds from those investors listed on Exhibit
A
hereto (each an “Excluded Investor”). In addition, the Placement Agent shall
receive at each closing warrants to purchase such number of shares of the
Company’s
Preferred
Stock (or other Securities) equal to 7.0% of number of shares of Preferred
Stock
(or other Securities) sold in the Offering (the “Warrant Compensation”). Such
warrants shall be exercisable for a period of 5 years from the applicable
closing date at an exercise price equal to the price per share paid by the
investors in the Offering,
subject
to usual adjustments, and shall contain a provision for cashless
exercise.
The
Placement Agent shall be entitled to the same registration rights, if any,
with
respect to its Warrant Compensation and the underlying securities as may be
granted to any investors. The Placement Agent may designate any of its officers,
directors, partners, principals, employees and agents to receive any part of
the
Warrant Compensation.
Bridgeworks
Capital will be permitted to assist the Company in the private placement of
shares of Preferred Stock to investors introduced by Bridgeworks Capital
(“Bridgeworks Investors”). With respect to sales of Preferred Stock to
Bridgeworks Investors, Company will pay a cash commission and warrant
compensation to Bridgeworks Capital pursuant to a separate agreement between
the
Company and Bridgeworks Capital. Placement Agent agrees that Placement Agent
will receive no Cash Compensation or Warrant Compensation (or any other
compensation) with respect to sales to Bridgeworks Investors, limited, however,
to a maximum gross proceeds of $1 million from the sale of Preferred Stock
to
the Bridgeworks Investors.
Notwithstanding
anything to the contrary herein, if, during the term of the Offering hereunder,
an investor (other than an Excluded Investor) is informed of the Offering by
the
Placement Agent and if (i) the Offering hereunder does not close and such
investor purchases from the Company any privately placed securities of the
Company within 12 months after the termination of the Offering or (ii) the
Offering hereunder closes and such investor makes an investment
in the Offering and subsequently purchases from the Company within 12 months
after the final closing of the Offering any privately placed securities of
the
Company, the Placement Agent shall be entitled to Cash Compensation and Warrant
Compensation as set forth in the preceding paragraph with respect to purchases
by such investor. For the purposes hereof, an investor shall be deemed to have
been informed of the Offering by the Placement Agent if such investor had at
least one meeting in person or by telephone with a representative of the
Company. The provisions of this paragraph shall survive the Closing and any
termination of the Offering or this Agreement.
Whether
or not any Securities have been sold, if, at any time from the date hereof
until
12 months after termination of the Offering as provided herein, the Company
engages in a business transaction (as hereinafter defined) with a person or
entity introduced to the Company by the Placement Agent prior to the termination
of the Offering, the Company will pay or cause to be paid to the Placement
Agent
at the closing of such business transaction a cash fee equal to 5% of the total
consideration paid or contributed to the Company or shareholders of the Company,
including cash, securities, indebtedness, indebtedness assumed, contingent
or
future payment or other property, in such business transaction. If any such
consideration is other than cash, for the purpose of calculating the fee to
the
Placement Agent hereunder, such consideration will be valued at fair market
value as determined by the parties in good faith. For the purposes hereof,
a
business transaction shall include without limitation a purchase, sale,
exchange, lease or license of stock or assets other than in the ordinary course
of business of the Company, merger, consolidation or other form of business
combination, strategic alliance, joint venture or similar transaction.
Notwithstanding anything to the contrary provided above, the 12 months period
covered by this paragraph shall be extended if a business transaction is being
negotiated in good faith but is not yet closed during such period until the
closing shall occur. The provisions of this paragraph shall survive the closing
and any termination of the Offering or this Agreement.
4.
Expenses.
Whether
or not the Offering is successfully completed, it shall be the Company’s
obligation to bear all of its expenses in connection with the proposed Offering.
In addition, the Company shall reimburse the Placement Agent for its reasonable
actual out of pocket expenses,
2
including
reasonable legal fees and disbursements up to a maximum aggregate amount of
$50,000. The
provisions of this paragraph shall survive the Closing and any termination
of
the Offering or this Agreement.
5.
Further
Representations and Agreements of the Company.
The
Company further represents and agrees that (i) it is authorized to enter into
this Agreement and to carry out the Offering contemplated hereunder and this
Agreement constitutes a legal, valid and binding obligation of the Company,
enforceable in accordance with its terms, (ii) the Company shall not during
the
term of the Offering without notifying the Placement Agent in advance issue
any
equity securities or securities convertible into, exchangeable for, or giving
the holder thereof the right to acquire equity securities of the Company (other
than shares pursuant to the exercise of presently outstanding warrants or
options pursuant to its existing stock option plan or successor plan covering
no
more securities than the existing plan or other shares issuable pursuant to
existing contractual obligations), (iii) subject to the Placement Agent’s
obligation to maintain the confidentiality of any information not yet disclosed
by the Company to the public, the Company will, during the course of the
Offering, provide the
Placement Agent
with all
information and copies of documentation with respect to the Company's business,
financial condition and other matters as the Placement Agent may reasonably
deem
relevant, including copies of all documents sent to stockholders or filed with
any federal authorities, and will make reasonably available to the Placement
Agent the Company’s auditors, counsel, officers and directors to discuss with
the Placement Agent any aspect of the Company or its business which the
Placement Agent may reasonably deem relevant, and (iv) the Company will deliver
at the closing of the Offering (a) subscription documents signed by the Company
and each investor and (b) an opinion of counsel for the Company in customary
form
and
reasonably satisfactory to the Placement Agent, (v) the Company shall use its
best efforts to qualify the Securities for offer and sale under applicable
exemptions from registration under the securities or Blue Sky laws of such
jurisdictions as the Placement Agent may reasonably request.
6.
Indemnification.
The
Company agrees to indemnify the Placement Agent and certain affiliated and
related persons in accordance with the provisions set forth in Exhibit B
attached hereto. The
Placement Agent shall indemnify and hold harmless the Company and each of its
affiliates, stockholders, directors, officers, employees, agents and controlling
persons within the meaning of the Securities Act of 1933, as amended, to the
same extent as set forth in the indemnity from the Company in Exhibit B, but
only in connection with (i) information relating to the Placement Agent
furnished in writing to the Company specifically for inclusion in the Offering
Materials and (ii) any and all losses, claims, expenses, damages and liabilities
arising out of the gross negligence or willful misconduct of the Placement
Agent. Such indemnification will survive the Closing and any termination of
the
Offering or this Agreement.
7.
Termination.
This
Agreement and the Offering shall terminate on October 31, 2007 if the Offering
has not been consummated prior to such date. The Company and the Placement
Agent
may also terminate or extend the Agreement at any time by mutual written
consent.
8.
Competing
Claims.
The
Company acknowledges and agrees that no entity has any claims or is entitled
to
any payments for services in the nature of a finder’s fee or any other
arrangements, agreements, payments or understandings pursuant to this Offering,
except as specified in Section 3 above.
9. Miscellaneous.
(a)
Governing
Law.
This
Agreement and the transactions contemplated hereby shall be governed in all
respects by the laws of the State of New York, without giving effect to its
conflict of laws principles. Venue for all purposes herein shall be in the
State
of New York.
3
(b)
Counterparts.
This
Agreement may be executed in any number of counterparts, each of which shall
be
deemed an original and all of which together shall constitute one and the same
instrument.
(c)
Notices.
Whenever notice is required to be given pursuant to this Agreement, such notice
shall be in writing and shall either be mailed by certified first class mail,
postage prepaid, or delivered personally or by express courier, addressed to
the
parties at their respective addresses set forth above. The notice shall be
deemed given, if sent by mail, on the third day after deposit in a United States
post office receptacle, or if delivered personally or by express courier, then
upon delivery. Either party may change its address by like notice.
(d)
Dispute.
In the
event of any action at law, suit in equity or arbitration proceeding in relation
to this Agreement or the transactions contemplated by this Agreement, the
prevailing party, or parties, shall be paid its reasonable attorney's fees
and
expenses arising from such action, suit or proceeding by the other
party.
(e)
Entire
Agreement.
Except
for any non-disclosure or confidentiality agreement entered into by and between
the parties hereto, this Agreement sets forth the entire understanding of the
parties relating to the subject matter hereof, and supersedes and cancels any
prior communications, understanding, and agreements between parties. This
Agreement cannot be modified or changed, nor can any of its provisions be
waived, except by written agreement signed by the parties against which
enforcement is sought.
(f)
Broker-Dealer
Registration.
The
Placement Agent represents and warrants that it is duly licensed as a
broker-dealer in each jurisdiction in which its activities hereunder require
registration or license and it is authorized to enter into this Agreement and
to
carry out the Offering contemplated hereunder and this Agreement constitutes
a
legal, valid and binding obligation of the Placement Agent, enforceable in
accordance with its terms.
If
the
foregoing correctly sets forth the understanding
between the Placement Agent and the Company, please so indicate in the space
provided below for that purpose whereupon this letter shall constitute a binding
agreement between us.
| Very truly yours, |
| ZNOMICS, INC |
| By /s/ Xxxxxxx X Xxxxxxxx |
| Xxxxxxx Xxxxxxxx, Chief Executive Officer |
Confirmed
and agreed to:
XXXXXXX
SECURITIES, INC.
By
/s/
Xxxxxx X. Xxxxxx
Xxxxxx
X.
Xxxxxx, President
Date: June
11,
2007
4
CONFIDENTIAL
EXHIBIT
A
| Znomics Excluded Investor List | |
| Xxxxx Xxxx | (Founder) |
| Xxxxxxx Xxxxxxxx | (Founder) |
| Xxxxxx Xxxxxxx | (Founder) |
| Xxxxxxx Xxxxx | (Founder) |
| Xxxxxxx Xxxx | (Founder) |
| Xxxxx Xxxx | (Investor, Series A & B) |
| Xxxxxxx Xxxxxxxx | (Investor, Series A & B) |
| Xxxxxxx Xxxxx | (Investor, Series A) |
| Xxxxxx Xxxxxxx | (Investor, Series A) |
| Xxxxxxx Xxxxxxxxx | (Investor, Series A & B) |
| Xxxxxx Xxxxxxxxx | (Investor, Series A & B) |
| Xxxxx X’Xxxxxxxx | (Investor, Series A) |
| Xxxxxx Xxxx | (Investor, Series A) |
| Xxxxxx Xxxxxxxxx | (Investor, Series A) |
| Xxxxxxx Xxxxx | (Investor, Series A) |
| Xxx Xxxxxxxxxxx | (Investor, Series A & B) |
| Punk, Xxxxxx Co. | (Investor, Series A & B) |
| Xxxxx Xxxxxxxx | (Investor, Series A) |
| Xxxx Xxxxx | (Investor, Series A) |
| Xxxxxx Xxxxx | (Investor, Series A & B) |
| Xxxxxx and Xxxxxx Xxxxxx | (Investors, Series A) |
| Xxxxxxx Xxxxxx | (Investor, Series A) |
| Xxxxxxx Punk | (Investor, Series A) |
| Xxxxxx Xxxxxx and Xxxxxxx Xxxxxxxxx | (Investors, Series A) |
| Xxxx Xxxxxxx | (Investor, Series B) |
| Xxxxxxxx Xxxxxxxxx | (Investor, Series B) |
| OHSU | (Investor, Series A) |
| Any Znomics current employees or consultants | |
| Xxx Xxxxxx | (Bridgeworks) |
| Xxxxxx Xxxxx | (Bridgeworks) |
| Xxxxxx Xxxxx | (Bridgeworks) |
| Xxxxxxx Investment Co | (Bridgeworks) |
| Xxxxx Xxxxxx | (Bridgeworks) |
5
CONFIDENTIAL
EXHIBIT
B
June
11,
2007
Xxxxxxx
Securities, Inc.
00
Xxxxx
Xxxxxx
Xxx
Xxxx,
XX 00000
Attention:
Xxxxxx X. Xxxxxx, President
Dear
Xx.
Xxxxxx:
In
connection with our (the “Company”) engagement of Xxxxxxx Securities, Inc.
("Xxxxxxx") as our financial advisor and/or placement agent, we hereby agree
to
indemnify and hold harmless Xxxxxxx and its affiliates, and the respective
controlling persons, directors, officers, shareholders, agents and employees
of
any of the foregoing (collectively the "Indemnified Persons"), from and against
any and all claims, actions, suits, proceedings (including those of
shareholders), damages, liabilities and expenses incurred by any of them
(including the reasonable fees and expenses of counsel), (collectively a
"Claim"), which are (A) related to or arise out of (i) any actions taken or
omitted to be taken (including any untrue statements or alleged untrue
statements made or any statements omitted or alleged to have been omitted to
be
made) by the Company, or (ii) any actions taken or omitted to be taken by any
Indemnified Person in connection with our engagement of Xxxxxxx, or (B)
otherwise relate to or arise out of Xxxxxxx'x activities on our behalf pursuant
to Xxxxxxx’x engagement, and we shall reimburse any Indemnified Person for all
expenses (including the reasonable fees and expenses of counsel) incurred by
such Indemnified Person in connection with investigating, preparing or defending
any such claim, action, suit or proceeding, whether or not in connection with
pending or threatened litigation, in which any Indemnified Person is a party.
We
will not, however, be responsible for any Claim which is finally judicially
determined to have resulted from
the
gross negligence or willful misconduct of any Indemnified Person. We further
agree that no Indemnified Person shall have any liability to us for or in
connection with our engagement of Xxxxxxx except for any Claim incurred by
us as
a result of any Indemnified Person's gross negligence or willful
misconduct.
We
further agree that we will not, without the prior written consent of Griffin,
settle, compromise or consent to the entry of any judgment in any pending or
threatened Claim in respect of which indemnification may be sought hereunder
(whether or not any Indemnified Person is an actual or potential party to such
Claim), unless such settlement, compromise or consent includes an unconditional,
irrevocable release of each Indemnified Person hereunder from any and all
liability arising out of such Claim.
Promptly
upon receipt by an Indemnified Person of notice of any complaint or the
assertion or institution of any Claim with respect to which indemnification
is
being sought hereunder, such Indemnified Person shall notify us in writing
of
such complaint or of such assertion or institution, but failure to so notify
us
shall not relieve us from any obligation we may have hereunder unless and only
to the extent such failure results in the forfeiture by us of substantial rights
and defenses. If we so elect or are requested by such Indemnified Person, we
will assume the defense of such Claim, including the employment of counsel
reasonably satisfactory to such Indemnified Person and the payment of the fees
and expenses of such counsel. In the event, however, that legal counsel to
such
Indemnified Person
6
reasonably
determines and provides written correspondence to us that having common counsel
would present such counsel with a conflict of interest or if the defendant
in,
or target of, any such Claim, includes an Indemnified Person and us, and
legal
counsel to such Indemnified Person reasonably concludes that there may be
legal
defenses available to it or other Indemnified Persons different from or in
addition to those available to us, then such Indemnified Person may employ
its
own separate counsel to represent or defend it in any such Claim and we shall
pay the reasonable fees and expenses of such counsel. Notwithstanding anything
herein to the contrary, if we fail timely or diligently to defend, contest,
or
otherwise protect against any Claim, the Indemnified Person shall have the
right, but not the obligation,
to defend, contest, assert cross claims, or counterclaims or otherwise protect
against the same, and shall be fully indemnified by us therefor, including
without limitation, for the reasonable fees and expenses of its counsel and
all
amounts paid as a result of such Claim or the compromise or settlement thereof.
In no event, however, will any Indemnified Party, without our prior written
consent (which will not be unreasonably withheld), settle, compromise or
consent
to the entry of any judgment in any pending or threatened Claim in respect
of
which indemnification may be sought hereunder (whether or not any Indemnified
Person is an actual or potential party to such Claim). In any Claim in which
we
assume the defense, the Indemnified Person shall have the right to participate
in such Claim and to retain its own counsel therefor at its own
expense.
We
agree
that if any indemnity sought by an Indemnified Person hereunder is unavailable
for any reason then (whether or not Xxxxxxx is the Indemnified Person), we
and
Xxxxxxx shall contribute to the Claim for which such indemnity is held
unavailable in such proportion as is appropriate to reflect the relative
benefits to us, on the one hand, and Xxxxxxx on the other, in connection with
Xxxxxxx'x engagement referred to above, subject to the limitation that in no
event shall the amount of Xxxxxxx'x contribution to such Claim exceed the amount
of fees actually received by Xxxxxxx from us pursuant to Xxxxxxx'x engagement.
We hereby agree that the relative benefits to us, on the one hand, and Xxxxxxx
on the other, with respect to Xxxxxxx'x engagement shall be deemed to be in
the
same proportion as (a) the total value paid or proposed to be paid or received
by us or our stockholders as the case may be, pursuant to the transaction
(whether or not consummated) for which you are engaged to render services bears
to (b) the fee paid or proposed to be paid to Xxxxxxx in connection with such
engagement.
Our
indemnity, reimbursement and contribution obligations under this Agreement
shall
be in addition to, and shall in no way limit or otherwise adversely affect
any
rights that any Indemnified Party may have at law or at equity.
The
validity and interpretation of this agreement shall be governed by and construed
and enforced in accordance with the laws of the State of New York applicable
to
agreements made and to be fully performed therein (excluding the conflicts
of
laws rules). Each of Xxxxxxx and the Company hereby irrevocably submits to
the
jurisdiction of any court of the State of New York for the purpose of any suit,
action or other proceeding arising out of this agreement or the transactions
contemplated hereby, which is brought by or against Xxxxxxx or the Company
and
in connection therewith, each of Xxxxxxx and the Company (i) hereby irrevocably
agrees that all claims in respect of any such suit, action or proceeding may
be
heard and determined in any such court, (ii) to the extent that it has acquired,
or hereafter may acquire, any immunity from jurisdiction of any such court
or
from any legal process therein, it hereby waives, to the fullest extent
permitted by law, such immunity and (iii) agrees not to commence any action,
suit or proceeding relating to this agreement other than in any such court.
Each
of Xxxxxxx and the Company hereby waives and agrees not to assert in any such
action, suit or proceeding, to the fullest extent permitted by applicable law,
any claim that (a) it is not personally subject to the jurisdiction of any
such
court, (b) it is immune from any legal process (whether through service or
notice, attachment prior to judgment, attachment in aid of execution, execution
or otherwise) with respect to its property of (c) any suit, action or proceeding
is brought in an inconvenient forum.
7
The
provisions of this Agreement shall survive and remain in full force and effect
following the completion or termination of Xxxxxxx'x
engagement.
| Very truly yours, |
| ZNOMICS, INC |
| By /s/ Xxxxxxx X Xxxxxxxx |
| Xxxxxxx Xxxxxxxx, Chief Executive Officer |
Confirmed
and agreed to:
XXXXXXX
SECURITIES, INC.
By
/s/
Xxxxxx X. Xxxxxx
Xxxxxx
X.
Xxxxxx, President
Date:
June
11,
2007
