Exhibit 10.9
March 8, 2007
Organic Sales & Marketing, Inc.
000 Xxxxxxxx
Xxxxxxx, XX 00000
Attention: Xxx Xxxxxxxx
President
Dear Xx. Xxxxxxxx:
This will confirm the understanding and agreement (this "Agreement") between
Xxxxxx Xxxxxxx, Inc. (collectively, the "Placement Agent"), and Organic Sales &
Marketing, Inc. (collectively, the "Company") as follows:
1. Retention of Placement Agent
(a) During the period (I) commencing on the date upon the last to occur of the
following events: (i) six (6) months and one (1) day from the date the Company
makes its final issuance and/or sale of its securities pursuant to an exemption
from the registration requirements of Section 5 of the Securities Act of 1933,
as amended (the "Act") pursuant to Rule 504 of Regulation D of the Act; (ii) the
date the Placement Agent receives the documents necessary to offer and sell the
securities of the Company in its proposed private placement (the "Proposed
Private Placement"), including, but not limited to, a Private Placement
Memorandum and related documents (collectively, a "PPM"), and a Powerpoint
presentation, all of which documents must be satisfactory to the Placement
Agent, (iii) the Company's Form 10 is declared effective by the Securities and
Exchange Commission (the "SEC") and all SEC comments regarding the Form 10 are
responded to by the Company in a manner satisfactory to the SEC, and (iv) the
Company's common stock (the "Common Stock") is quoted on the NASD Bulletin Board
and the Common Stock receives from the NASD a trading symbol (the date of the
last to occur of each of such events being referred to as the "Commencement
Date"), and (II) terminating on the date six (6) months from the Commencement
Date, subject to a sixty (60) day extension (collectively, the "Term"), the
Company shall, subject to the terms and conditions set forth herein, engage the
Placement Agent as the Company's exclusive agent for a "reasonable efforts"
private placement. Pursuant to such engagement, the Placement Agent shall use
its reasonable efforts to raise the Company up to $6,000,000 of gross proceeds
on the terms and conditions agreed to by the Placement Agent. The Company and
its legal counsel will prepare for issuance to investors all documents required
for the closing of the Private Placement, including, but not limited to the PPM,
a Securities Purchase Agreement or Subscription Agreement, Registration Rights
Agreement and all other required documents.
(b) Notwithstanding anything to the contrary provided herein or elsewhere, in no
event is the Placement Agent committed to and/or obligated to, raising any funds
for the Company and it shall only act as placement agent for the Company in the
Proposed
Private Placement if it agrees to, among other items, all terms and conditions
of the Proposed Private Placement, including, but not limited to, the securities
to be offered and all related terms thereto.
(c) The parties will agree on the use of proceeds for the Private Placement.
(d) If the Proposed Private Placement is commenced, the Company shall no later
than the Commencement Date, establish an escrow account ("Escrow Account") with
an FDIC insured bank, acting as an escrow agent, for the purpose of maintaining
and holding the proceeds, if any, of the Proposed Private Placement until any
minimum dollar amount of such Proposed Private Placement is reached.
Furthermore, the escrow agreement covering the escrow account shall fully comply
with the corporate finance rules of the NASD and SEC, shall be approved by the
Placement Agent, who shall also be included as a party thereto.
(e) At each closing of the Proposed Private Placement, if any, among other
items, the Company shall provide to any purchasers in the Proposed Private
Placement (the "Investors") and the Placement Agent a (i) legal opinion of its
legal counsel (which shall include a lOb-5 and an exemption pursuant to Rule 506
of the Act from the registration requirements of the Act opinions), reasonably
satisfactory to the Investors and the Placement Agent relating to the Proposed
Private Placement and related matters; and (ii) lock-up agreement from all
officers, directors, and 5% or greater shareholders pursuant to which each such
person shall agree not to, among other items, sell, hypothecate and/or transfer
any Company securities for a period of twelve (12) months following the
effective date of any resale registration statement filed in connection with the
Proposed Private Placement.
2. The Proposed Private Placement
(a) Assuming terms of the Proposed Private Placement are agreed upon, the
Private Placement shall be structured as a transaction exempt from Section 5 of
the Act, shall comply with Section 4(2) of the Act and Regulation D thereunder
and state securities laws, shall be offered and sold solely to "accredited
investors," as defined in Rule 501 under the Act and shall be conducted by the
Placement Agent on a "reasonable efforts" basis.
(b) The Proposed Private Placement will be subject to compliance with the Act
and other applicable federal and state securities laws. The Placement Agent
shall comply with (i) the Rules of Conduct of the National Association of
Securities Dealers, Inc. ("NASD") and (ii) all federal and state securities
laws. The feasibility of the Proposed Private Placement will depend upon, among
other factors, the results of our investigation of the Company, its terms and
conditions, the compensation to the Placement Agent, information about the
Company that the Placement Agent may receive including, but not limited to, due
diligence reports concerning the Company's operations, management, and business
plan, market conditions for equity securities for entities similar to the
Company and the continuation of the operation of the Company without material
adverse change.
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(c) Notwithstanding anything to the contrary herein, the Company shall retain
the right to alter the terms of the Proposed Private Placement (so long as such
terms are not materially less beneficial to potential investors than the terms
set forth in this letter agreement), provided that if, within a 12 month period
following the end of the Term, the Company or any of its subsidiaries sells any
security or debt instrument to a third party that was previously identified by,
and introduced to the Company by, the Placement Agent (an "Introduced Party"),
then the Company shall pay the Placement Agent the commissions set forth in
Paragraph 3 hereof based upon the actual funds received by the Company from such
Introduced Party.
(d) The Company will comply with all applicable Blue-Sky requirements.
(e) The commencement of the Proposed Private Placement, in addition to other
conditions set forth herein and/or otherwise subsequently agreed to by the
Placement Agent, shall be expressly subject to the condition that the Proposed
Private Placement in the sole opinion of the Placement Agent and its legal
counsel will not result in any integration of any prior offers and/or sales of
Company securities with the Proposed Private Placement.
3. Commissions; Expenses; Termination
(a) The commissions payable to the Placement Agent for the Proposed Private
Placement offering shall be 10% of the total amount raised by the Placement
Agent in the Private Placement and received by the Company.
(b) Upon the execution hereof, the Company shall pay to the Placement Agent a
non-refundable advanced fee of $10,000 for legal fees. This amount will be
deducted from the payable expenses accumulated as described in Section 3(d)
below.
(c) If during the Term, funds are deposited into the Escrow Account by Investors
and/or others, pursuant to subscription documentation executed by such persons
and the Company, and the Company for any reason or no reason elects not to
effectuate a closing of the Proposed Private Placement, then the Placement Agent
shall be entitled to the same compensation and expense reimbursement as if it
sold the Units hereunder.
(d) The Company will pay all the Proposed Private Placement's direct expenses
reasonably incurred in connection with: (i) the preparation and printing of all
other documents and instruments required in connection with the Proposed Private
Placement (whether or not ultimately consummated) including, without limitation,
the Placement Agent's Warrants; (ii) the Company's expenses for accounting and
legal costs involved with the Private Proposed Placement; (iii) blue sky
filings, including fees, disbursements, and counsel fees with respect to blue
sky qualification, which blue sky counsel fees shall not exceed $10,000 and
shall be performed by the Placement Agent's counsel (excluding state filing fees
and expenses, which the Company will pay separately); (iv) the road show, if
any; and (v) the Placement Agent's legal fees (which the Placement Agent
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currently estimates will be approximately $25,000, excluding blue sky legal
work), marketing and due diligence fees. Legal expenses will be reimbursed by
the Company to the Placement Agent at the Closing, while the roadshow bills will
be paid as incurred by the Company, subject to a prior approval of the Company
for any item exceeding $500.
(e) This Agreement shall terminate upon the earlier of (i) the last day of the
Term, or (ii) upon the final closing of the Proposed Private Placement. Such
date of termination shall be referred to as the "Termination Date".
4. Placement Agent's Warrants
(a) At the closing of the Proposed Private Placement, the Company will issue to
the Placement Agent warrants to acquire Units which shall be identical to the
Units sold to investors in the Private Placement (the "Placement Agent's
Warrants"), with the provision that the Warrants included in each Unit will not
be callable by the Company. The number of the Placement Agent's Warrants shall
equal 10 percent (10%) of the securities sold in the Proposed Private Placement.
The exercise price of the Placement Agent's Warrants shall equal the price of
the securities sold through the Proposed Private Placement. The Placement
Agent's Warrants shall be exercisable for a period of five (5) years shall
contain cashless exercise provisions and weighted average anti-dilution
provisions consistent with transactions. Such anti-dilution provisions shall
protect against dilution in both price and percentage of the Company if there
shall be any sales of securities by the Company below the purchase price (or
conversion, exchange or exercise price if convertibly exchangeable or
exercisable Securities are sold in the Proposed Private Placement) of securities
sold in the Proposed Private Placement, any stock split, stock dividend,
recapitalization, or reorganization of the Company or any successor securities.
The Placement Agent's Warrants shall be transferable only in accordance with
Section 4(2) of the Act and otherwise in accordance with applicable law to the
Placement Agent's affiliates, associates, employees and consultants.
(b) The Placement Agent's Warrants shall have one (1) demand registration right
and unlimited "piggyback" registration rights for the securities underlying the
Placement Agent's Warrants with respect to any registration statement the
Company files while the Placement Agent's Warrants are outstanding, provided no
other registration statement is then effective with respect to such securities.
The inclusion of such securities in a registration statement by the Placement
Agent, its transferees and designees, however, shall be subject to standard
underwriter cutbacks, provided all other persons who are registering shares for
resale in any such registration statement are subject to the same underwriter
cutbacks.
5. Undertaking to Give Notice of Events
Until the Termination Date, whichever occurs first, the Company will
notify the Placement Agent promptly of the occurrence of any event which might
materially affect the Proposed Private Placement or the status of the Company.
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6. Inclusion in Future Offerings
In the event that the Company effectuates one (1) or more closings of the
Proposed Private Placement, the Company shall, during the 2 year period
following the Termination Date, first offer the Placement Agent the opportunity
to act as exclusive placement agent on all subsequent offerings of its
securities by the Company; provided however, that in the event that the
Placement Agent elects not to pursue such an offering, then the Company's
obligation to continue to offer the Placement Agent such a right of first offer
shall terminate only with respect to such offering, but shall continue with
respect to such offering, but shall continue with respect to subsequent
offerings of securities by the Company.
7. General Conditions
The Placement Agent's intention as expressed in this Letter Agreement is
subject to, among other conditions, the following.
(a) All relevant terms, conditions, and circumstances relating to the
Proposed Private Placement will be reasonably satisfactory to the Placement
Agent and its counsel.
(b) Subject to the Company's prior written approval, the Placement Agent will
have the right to choose one or more Co-managers, reasonably acceptable to the
Company, to assist it in the Proposed Private Placement. Such Co-Managers will
be paid by the Placement Agent from the amounts it would otherwise have received
from the Company as set forth herein.
(c) There will have been no materially adverse change in the business or
financial condition of the Company, no materially adverse change in the overall
capital markets in the United States, or in the market for equity securities for
entities similar to the Company, no declaration of a banking moratorium by the
Federal Government or New York State, and no action by any government in respect
of its monetary affairs which has a material adverse effect on any United States
securities market.
(d) Affiliates, associates and employees of the Placement Agent as well as
family members of affiliates, associates and employees of the Placement Agent
who are otherwise accredited investors as defined in rule 501 of the Securities
Act shall be entitled to invest in the Proposed Private Placement.
(e) All references to monetary amounts in this Agreement shall be in United
States dollars.
(f) It is understood that the Placement Agent may engage certain experts,
subject to the prior approval of the Company which shall not be unreasonably
withheld, for analysis of the Company's operations, management, and business
plan, and that such analyses may be material to the decision of the Placement
Agent as to the feasibility of
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the Proposed Private Placement. At the request of the Company, each such expert
will be required to execute a confidentiality agreement in customary form.
(g) The commencement of the Proposed Private Placement on the Commencement Date
is subject to the completion of a Placement Agent Agreement on terms acceptable
to the parties and which incorporates, among other terms and conditions, the
terms and conditions set forth herein.
(h) This Agreement shall be governed by and construed in accordance with the
internal laws of the State of New York without regard to the conflicts of laws
principles thereof. The parties hereto hereby irrevocably agree that any suit or
proceeding arising directly and/or indirectly pursuant to or under this
Agreement, shall be brought solely in a federal or state court located in the
City, County and State of New York. By its execution hereof, the parties hereby
covenant and irrevocably submit to the in personam jurisdiction of the federal
and state courts located in the City, County and State of New York and agree
that any process in any such action may be served upon any of them personally,
or by certified mail or registered mail upon them or their agent, return receipt
requested, with the same full force and effect as if personally served upon them
in New York City. The parties hereto expressly and irrevocably waive any claim
that any such jurisdiction is not a convenient forum for any such suit or
proceeding and any defense or lack of in personam jurisdiction with respect
thereto. In the event of any such action or proceeding, the party prevailing
therein shall be entitled to payment from the other party hereto of its
reasonable counsel fees and disbursements.
8. Indemnification
(a) The Company hereby agrees to indemnify and hold harmless the Placement Agent
(and its directors, officers, agents, employees, and controlling persons) to the
fullest extent lawful against any and all claims, losses and expenses
(including, but not limited to, all reasonable fees and disbursements of the
Placement Agent and such person's counsel (as and when incurred) and the
Placement Agent's and such person's reasonable travel and other out-of-pocket
expenses reasonably and necessarily incurred in connection with the
investigation of, and preparation for, any such pending or threatened claims and
any litigation or other proceeding) arising directly and/or indirectly from
and/or out of any actions or omissions by the Company (and its directors,
officers, agents, employees, and controlling persons) in connection with the
actual or proposed private placement or the Placement Agent's engagement
hereunder; provided, however, there shall be excluded from such indemnification:
(a) any such claim, loss or expense that arises, to any material extent out of,
or is based upon, any action or failure to act by the Placement Agent (and its
directors, officers, agents, employees, and controlling persons), other than an
action or failure to act undertaken upon the written consent of the Company; and
(b) any willful misconduct, gross negligence or bad faith on the part of the
Placement Agent.
(b) The foregoing indemnification agreement shall be in addition to any rights
that any indemnified party may have at common law.
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9. Confidential Information; Miscellaneous
All information that is identified in writing or verbally by the Company
as confidential shall remain the property of the Company and shall not be used
by the Placement Agent in any way except in connection with the services
performed or to be performed under this Agreement. The foregoing shall not apply
to any information that is or becomes publicly available without breach of this
Agreement, which is rightfully received by Placement Agent from a third party
without such restrictions, which is made available by the Company to third
parties without such restrictions, or which is released in writing from such
restrictions by the Company.
This offer to act as your financial advisor under the terms and conditions
of this Agreement will expire unless we receive your written agreement and
consent by 5:00 PM March 15, 2007.
Please confirm that the foregoing is in accordance with your understanding
by signing and returning to the Placement Agent the enclosed copy of this Letter
Agreement as set forth below.
We at Xxxxxx Xxxxxxx look forward to working with you on this project and
hope it will be the beginning of a long and mutually rewarding relationship.
XXXXXX XXXXXXX INC.
By: /s/ Xxxxxx Xxxxxxxxx 3/8/07
----------------------------
Xxxxxx Xxxxxxxxx
Managing Director
ORGANIC STALES & MARKETING, INC.
By: /a/ Xxx Xxxxxxxx
---------------------------- 3/13/07
Xxx Xxxxxxxxx
President
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