| A Placement Agency Agreement is an agreement | | | | an amount of capital not to exceed Ten Million Dollars |
| between an issuer of stock of a company and a | | | | ($10,000,000). All securities will be sold pursuant to an |
| placement agent. Per the terms of the agreement, a | | | | effective shelf registration statement and appropriate |
| placement agent agrees to use his or her "best | | | | prospectus supplements (the "SHELF") and, at the |
| efforts" to secure investors to invest in the | | | | time of the Placement, will be free from any |
| company. The agreement is an integral part of the | | | | contractual restriction or lock-up agreement. Upon the |
| process by which a company tries to secure | | | | terms and subject to the conditions of this |
| institutional or private investors as part of a public or | | | | Agreement, the parties hereto agree as follows:" |
| private offering of stock. Generally a subscription | | | | Following this introductory purpose paragraph, the |
| agreement, an escrow agreement, a letter of opinion | | | | first provision should lay out the terms and conditions |
| from the company's legal counsel, and a shelf | | | | governing the appointment of the placement agent. |
| registration statement and prospectus supplement will | | | | This provision generally contains an exclusivity |
| accompany this agreement. | | | | provision, meaning the placement agent is retained on |
| Generally a placement agent will require a placement | | | | an exclusive basis. In return for this exclusive |
| agency agreement to commence the process of | | | | appointment, the placement agent must agree to use |
| finding buyers for the company's stock. In these | | | | his "reasonable best efforts" to execute the purpose |
| situations, there are several important terms and | | | | of the relationship, which is to find investors to |
| conditions a new company must be sure to include in | | | | purchase the company's stock. In addition, this |
| their placement agency agreement. Most importantly, | | | | appointment provision should clearly state that the |
| the agreement must begin by laying out the | | | | agreement does not constitute a commitment by the |
| underlying purpose of the agreement, and should | | | | placement agent to purchase the securities and does |
| next describe the terms of the appointment. | | | | not ensure the successful placement of the securities |
| At the top of the agreement, the company will want | | | | or the successful procurement of any other financing. |
| list the parties and lay out the purpose of the | | | | As in any enforceable contract, consideration must |
| agreement. For instance, this provision could read: | | | | be present on both sides. On its face, it may seem |
| "This Agreement is dated April 1, 2002 between | | | | that because the placement agent is under no |
| Placement Agency X (the "PLACEMENT AGENT") and | | | | obligation to successfully secure financing, the |
| Corporation Y (the "COMPANY"). | | | | placement agent is not providing any consideration |
| The purpose of this letter agreement (the | | | | for the contract. However, under well-established |
| "AGREEMENT") is to set forth the terms and | | | | case law, an agent's express or implied promise to |
| conditions pursuant to which DP shall serve as | | | | use his or her "best efforts" to effect the purpose |
| placement agent in connection with the proposed | | | | of the contract is deemed adequate consideration. |
| placement of common stock (the "PLACEMENT") of | | | | Regardless, to eliminate all ambiguity, a drafter of a |
| the Company. Such agency shall apply to up to three | | | | placement agent agreement should be sure to make |
| (3) institutional investors (the "Investors") which the | | | | this promise clearly expressed in the appointment |
| Placement Agent may introduce to the company1. | | | | provision of the agreement. |
| Placement Agent may assist the Company in raising | | | | |