North Coast Securities Corporation
9995 Gate Parkway North
Suite 300
Jacksonville, FL 32246
July 28, 2005
HealthRenu Medical, Inc.
12777 Jones Road
Suite 481
Houston, TX 77070
Attn: Robert W. Prokos
President and Chief Executive Officer
Dear Rob:
We are pleased to confirm our mutual understanding regarding the retention of
North Coast Securities Corporation ("Agent") by HealthRenu Medical, Inc.
(collectively with its affiliates, the "Company"), subject to the terms and
conditions of this agreement (the "Agreement").
1. Agent will act as the Company's Agent in connection with the private
placement of up to $1,000,000 of Equity Units (referred to as the "Units"), each
Unit consisting of a convertible promissory note in the principal amount of
$1,000 (the "Notes") and two warrants to purchase one share of common stock for
each share of common stock issued upon conversion of the Notes. The Units will
be issued only to accredited investors (as defined in Rule 501 under the
Securities Act of 1933, as amended), on terms mutually agreeable between the
parties hereto, certain of which terms are set forth on Exhibit A, annexed
hereto and incorporated herein by reference (such private placement referred to
as the "Offering"). The Offering will be made on a best efforts basis subject to
the terms and conditions set forth herein. Agent will act as the non-exclusive
Agent for the Offering and sale of the Units constituting the Offering.
2. Agent will provide the Company with the following services in connection
with the Offering:
A. Assisting the Company in preparation of documents in connection with
the Offering, and acting as the Agent in connection with such
Offering;
B. Coordinating the marketing effort for the sale of the Securities;
C. Assisting the Company in negotiating transaction terms with
potential investors in the Securities; and
HealthRenu Medical, Inc.
July 28, 2005
Page 2
D. Providing such other advice, assistance or services as may be
reasonably requested by the Company in connection with the Offering
and as mutually agreed upon by Agent and the Company.
3. Agent's compensation for acting as Agent for the Company in connection
with the Offering pursuant to this Agreement will be as follows:
A. A fee equal to 12% of the gross proceeds raised in the Offering by
Agent (the "Offering Amount"), payable on the Offering Amount
subscribed for and accepted at each Closing of the Offering.
B. At each Closing of the Offering, the Company shall pay to Agent, a
non-accountable expense allowance in the amount equal to 3% of the
Offering Amount subscribed for and accepted at that Closing.
C. Agent will receive as a Due Diligence and Pre-Marketing Fee, a
payment from the Company of $25,000 upon execution of this
Agreement, to cover the costs and expenses of Agent's due diligence
investigation and pre-marketing activities on behalf of the Company.
D. Agent will receive warrants to purchase that number of shares of
common stock of the Company as equals 10% of the number of shares of
common stock that would be issuable to investors in the Offering
assuming conversion of Notes at each applicable closing date, with
an exercise price equal to 110% of the conversion price of the
shares on such date, a term of four years and all other terms
substantially the same as those of other warrants issued by the
Company in the offering.
4. The Company will pay all expenses incurred by or on behalf of the Company
in connection with the preparation and printing of the Securities, blue sky
filings and fees, legal expenses of the Agent up to a maximum of $15,000, and
all other documents and instruments required in connection with the Offering.
HealthRenu Medical, Inc.
July 28, 2005
Page 3
5. In connection with Agent's activities on the Company's behalf, the Company
will cooperate with Agent and will furnish Agent with all information and data
concerning the Company which Agent reasonably believes appropriate to the
performance of services contemplated by this Agreement (all such information so
furnished being the "Information") and will provide Agent with reasonable access
to the Company's officers, directors, employees, independent accountants and
legal counsel. The Company recognizes and confirms that Agent (i) will use and
rely primarily on the Information and on information available from generally
recognized public sources in performing the services contemplated by the
Agreement, without having independently verified same, (ii) does not assume
responsibility for the accuracy or completeness of the Information and such
other information and (iii) will not make an independent appraisal of any of the
Company's assets. The Information to be furnished by the Company, when
delivered, will be, to the best of the Company's knowledge, true and correct in
all material respects and will not contain any material misstatements of fact or
omit to state any material fact necessary to make the statements contained
therein not misleading. The Company will promptly notify Agent if it learns of
any material inaccuracy or misstatement in, or material omission from any
information thereto delivered to Agent. Agent agrees to keep the Information
confidential and only to release the Information with the consent of the
Company. At the Closing, the Company shall deliver to Agent an officer
certificate and opinion of counsel reasonably acceptable to the Company and
Agent. If the transaction contemplated by this Agreement is not completed for
whatever reason, Agent will return the Information (without keeping any copies
thereof) forthwith on demand by the Company. Agent on its part represents,
warrants, and agrees that it has and at all times while it is performing
services under this Agreement it will comply with all laws, rules, and
regulations applicable to it in connection with the services it performs under
this Agreement, such compliance to include all licenses in all applicable
jurisdictions it and its agents are required to maintain for purposes of its
activities under this Agreement.
6. The Company agrees that Agent has the right to place "tombstone" or other
advertisements describing its services to the Company under this Agreement in
financial and other newspapers and journals, provided the Company consents to
the same, and which consent shall not be unreasonably withheld, and provided
further that any such advertisement complies with applicable law.
7. The Company agrees to indemnify Agent in accordance with the
indemnification provisions (the "Indemnification Provisions") attached to this
Agreement, as Exhibit B, and which Indemnification Provisions are incorporated
herein and made a part hereof and which shall survive the termination or
expiration of this Agreement.
8. The validity and interpretation of this Agreement shall be governed by,
and construed and enforced in accordance with, the laws of the State of Delaware
applicable to agreements made and to be fully performed therein (excluding the
conflicts of laws rules).
9. The benefits of this Agreement shall inure to the parties hereto, their
respective successors and assigns and to the indemnified parties hereunder and
their respective successors and assigns and representatives, and the obligations
and liabilities assumed in this Agreement by the parties hereto shall be binding
upon their respective successors and assigns.
10. Each of the Company and Agent (and, to the extent permitted by law, on
behalf of their respective equity holders and creditors) hereby knowingly,
voluntarily and irrevocably waives any right it may have to a trial by jury in
respect of any claim based upon, arising out of or in connection with this
Agreement and the transactions contemplated hereby. Each of the Company and
Agent hereby certify that no representative or agent of the other party has
represented expressly or otherwise that such party would not seek to enforce the
provisions of this waiver. Further each of the Company and Agent acknowledges
that each party has been induced to enter this Agreement by, inter alia, the
provisions of this Section.
HealthRenu Medical, Inc.
July 28, 2005
Page 4
11. If it is found in a final judgment by a court of competent jurisdiction
(not subject to further appeal) that any term or provision hereof is invalid or
unenforceable, (i) the remaining terms and provisions hereof shall be unimpaired
and shall remain in full force and effect and (ii) the invalid or unenforceable
provision or term shall be replaced by a term or provision that is valid and
enforceable and that comes closest to expressing the intention of such invalid
or unenforceable term or provision.
12. This Agreement embodies the entire agreement and understanding of the
parties hereto and supersedes any and all prior agreements, arrangements and
understanding relating to the matters provided for herein. No alteration,
waiver, amendment, change or supplement hereto shall be binding or effective
unless the same is set forth in writing signed by a duly authorized
representative of each party.
13. The Company has all requisite corporate power and authority to enter into
this Agreement and the transactions contemplated hereby. This Agreement has been
duly and validly authorized by all necessary corporate action on the part of the
Company and has been duly executed and delivered by the Company and constitutes
a legal, valid and binding agreement of the Company, enforceable in accordance
with its terms (except as enforceability may be limited by applicable
bankruptcy, insolvency or similar laws).
14. Agent has all requisite corporate power and authority to enter into this
Agreement, once executed by Agent's Officers. This Agreement has been duly and
validly authorized by all necessary corporate action on the part of Agent and
has been duly executed and delivered by Agent and constitutes a legal, valid and
binding agreement of Agent, enforceable in accordance with its terms (except as
enforceability may be limited by applicable bankruptcy, insolvency or similar
laws).
15. This Agreement does not create, and shall not be construed as creating,
rights enforceable by any person or entity not a party hereto, except those
entitled thereto by virtue of the Indemnification Provisions hereof. The Company
acknowledges and agrees that with respect to the services to be rendered by
Agent, Agent is not and shall not be construed as a fiduciary of the Company and
shall have no duties or liabilities to the equity holders or creditors of the
Company or any other person by virtue of this Agreement and the retention of
Agent hereunder, all of which are hereby expressly waived. The Company also
agrees that Agent shall not have any liability (including without limitation,
liability for losses, claims, damages, obligations, penalties, judgments,
awards, liabilities, costs, expenses or disbursements resulting from any
negligent act or omission of Agent, whether direct or indirect, in contract,
tort or otherwise) to the Company or to any person (including, without
limitation, equity holders and creditors of the Company) claiming through the
Company for or in connection with the engagement of Agent, this Agreement and
the transactions contemplated hereby, except for liabilities which arise as a
result of the gross negligence or willful misconduct of Agent. The Company
acknowledges that Agent was induced to enter into this Agreement by, inter alia,
the provisions of this Section.
HealthRenu Medical, Inc.
July 28, 2005
Page 5
16. For the convenience of the parties, any number of counterparts of this
Agreement may be executed by the parties hereto. Each such counterpart shall be,
and shall be deemed to be, an original instrument, but all such counterparts
taken together shall constitute one and the same Agreement.
If the foregoing correctly sets forth our agreement, we would appreciate
your signing the enclosed copy of this letter in the space provided and
returning it to us.
Very truly yours,
NORTH COAST SECURITIES CORPORATION
By:
----------------------------------------
Frank Pasterczyk
President and Chief Executive Officer
Confirmed and agreed to:
HEALTHRENU MEDICAL, INC.
By:
----------------------------------------
Robert W. Prokos
President and Chief Executive Officer
EXHIBIT A
Summary of Certain Terms of Offering
Offering Sale of up to $1,000,000 of Units to raise
money principally for working capital
purposes and capital expenditures. No minimum
dollar amount of Units must be subscribed for
in order to close. Expenses of the offering,
sales commissions and additional fees and
costs of the Placement Agent will be deducted
from the proceeds of the offering.
Equity Unit Each Unit consisting of a convertible
promissory note in the principal amount of
$1,000 (the "Notes") and two warrants to
purchase one share of common stock for each
share of common stock issued upon conversion
of the Notes. The common stock shall be
subject to demand and piggyback registration
rights as described below.
Purchase Price of Units The purchase price per unit is $1,000.
Notes The Notes are convertible at the election of
the holder thereof, at any time commencing
from and after their date of issuance and for
a period of three years thereafter, upon
written notice to the Company.
The conversion price is equal to 80% of the
average closing price of the common stock on
the OTC-BB for the 10 trading days
immediately preceding the day upon which the
Company receives a conversion notice from the
Noteholder.
The Notes accrue interest at the rate of 8%
per annum payable in shares of Company common
stock.
A-1
Warrants The warrants included in the Units are
exercisable for shares of Company common
stock at any time beginning on the date of
conversion of the Notes and ending on October
31, 2009. Each Unit includes two warrants for
each share of common stock issued upon
conversion of the Note to purchase one share
of our common stock. The per share exercise
prices of the warrants will be 125% and 150%,
respectively, of the conversion price of the
Notes. The warrants are subject to adjustment
for anti-dilution purposes.
Registration Rights Stockholders will have the following
registration rights with respect to the
shares of common stock into which the Notes
are convertible and warrants are exercisable.
The Company will undertake to file with the
SEC a registration statement covering the
underlying shares of common stock at the
Company's expense on or before December 31,
2005. The Company will use its best efforts
to have the registration statement declared
effective within 60 days of filing. The
Unitholders will be subject to a lock-up of
the sale of the securities until 90 days
after the effective date of any registration
statement filed on behalf of Cornell Capital
Partners, L.P. as a selling stockholder.
Indemnification of The Company will indemnify the Placement
Placement Agent Agent for any and all claims by other
brokers, dealers, placement agents,
investment advisors or the like.
Qualified Investors Accredited investors only.
Confidentiality The Company will not disclose, and will not
include in any public announcement, the name
of the investors in this offering, unless
expressly agreed to by the investor or unless
such disclosure is required by law or
applicable regulation, and then only to the
extent of such requirement.
Governing Law New York law, New York courts.
and Jurisdiction
A-2
EXHIBIT B
INDEMNIFICATION PROVISIONS
Capitalized terms used herein that are not defined in these
indemnification provisions ("Indemnification Provisions") have the meaning set
forth in the engagement letter agreement dated June 23, 2005, between North
Coast Securities Corporation ("Agent") and HealthRenu Medical, Inc., as such a
agreement may be amended from time to time (the "Agreement").
The Company agrees to indemnify and hold harmless Agent, to the fullest
extent permitted by law, from and against any and all losses, claims, damages,
liabilities, obligations, penalties, judgments, awards, 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 or defending
any such action, suit, proceeding or investigation (whether or not in connection
with litigation in which Agent is a party), directly or indirectly, caused by,
relating to, based upon, arising out of or in connection with (a) Agent's acting
for the Company, including, without limitation, any act or omission by Agent in
connection with its acceptance of or the performance or nonperformance of its
obligations under the Agreement, (b) any untrue statement or alleged untrue
statement of a material fact contained in, or omissions or alleged omissions
from any information furnished to Agent by the Company or (c) any Offering;
provided, however, such indemnity agreement shall not apply to any portion of
any such loss, claim, damage, obligation, penalty, judgment, award, liability,
cost, expense or disbursement to the extent it is 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 Agent.
These Indemnification Provisions shall be in addition to any liability
which the Company may otherwise have to Agent or the persons indemnified below
in this sentence and shall extend to the following Agent its affiliated
entities, directors, officers, employees, legal counsel, agents and controlling
persons (within the meaning of the federal securities laws). All references to
Agent in these Indemnification Provisions shall be understood to include any and
all of the foregoing.
If any action, suit, proceeding or investigation is commenced, as to which
Agent proposes to demand indemnification, it shall notify the Company with
reasonable promptness; provided, however, that the Company shall be relieved
from its obligations hereunder to the extent a failure by Agent to notify the
Company with reasonable promptness results in a significant increase in the
Company's obligations hereunder. Agent shall have the right to retain counsel of
its own choice to represent it, which counsel shall be reasonably acceptable to
the Company, and the Company shall pay the fees, expenses and disbursements of
such counsel; and 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 Agent made with the Company's written consent, which consent shall
not be unreasonably withheld. The Company shall not, without the prior written
consent of 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 includes, as an unconditional term thereof, the giving by
the claimant to Agent of an unconditional and irrevocable release from all
liability in respect of such claim.
B-1
In order to provide for just and equitable contribution, if a claim for
indemnification pursuant to these Indemnification Provisions is made but it is
found in a final judgment by a court of 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, on the one hand, and Agent, on the other hand, shall
contribute to the losses, claims, damages, obligations, penalties, judgments,
awards, liabilities, costs, expenses and disbursements to which the indemnified
persons may be subject in accordance with the relative benefits received by the
Company, on the one hand, and Agent, on the other hand, and also the relative
fault of the Company, on the one hand, and Agent, on the other hand, in
connection with the statement, acts or omissions which resulted in such losses,
claims, damages, obligations, penalties, judgments, awards, liabilities, costs,
expenses or disbursements and the relevant equitable considerations shall also
be considered. No person found liable for a fraudulent misrepresentation shall
be entitled to contribution from any person who is not also found liable for
such fraudulent misrepresentation. Notwithstanding the foregoing, Agent shall
not be obligated to contribute any amount hereunder that exceeds the amount of
fees previously received by Agent pursuant to the Agreement.
Neither termination nor completion of the engagement of Agent referred to
above shall affect these Indemnification Provisions which shall then remain
operative and in full force and effect.
B-2