North Coast Securities Corporation
9995 Gate Parkway North
Suite 300
Jacksonville, FL 32246
February 3, 2006
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 $600,000 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 eight warrants to purchase one share of common stock
and the per share exercise prices of the warrants will be 100% of the conversion
price of the Notes for two warrants, 125% of the conversion price of the Notes
for three warrants and 150% of the conversion price of the Notes for three
warrants. 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.
February 3, 2006
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 $15,000 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. 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.
HealthRenu Medical, Inc.
February 3, 2006
Page 3
5. 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.
6. 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.
7. 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).
8. 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.
9. 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.
February 3, 2006
Page 4
10. 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.
11. 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.
12. 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).
13. 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).
14. 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.
February 3, 2006
Page 5
15. 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 $600,000 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 eight warrants to purchase one share
of common stock and the per share exercise prices
of the warrants will be 100% of the conversion
price of the Notes for two warrants, 125% of the
conversion price of the Notes for three warrants
and 150% of the conversion price of the Notes for
three warrants. The offer to sell Units pursuant
to this Offering will terminate on or before
February 28, 2006 at our discretion unless we
elect to extend the Offering through any date up
to including March 31, 2006.
Purchase Price of Units The purchase price per unit is $1,000.
A-1
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.
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 March 31, 2011. Each Unit includes
eight warrants to purchase one share of common
stock and the per share exercise prices of the
warrants will be 100% of the conversion price of
the Notes for two warrants, 125% of the conversion
price of the Notes for three warrants and 150% of
the conversion price of the Notes for three
warrants. 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 May 1, 2006.
The Company will use its best efforts to have the
registration statement declared effective within
60 days of filing.
A-2
Indemnification of
Placement Agent The Company will indemnify the Placement 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
and Jurisdiction New York law, New York courts.
A-3
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 February 3, 2006, 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