Exhibit 10.6
August 10 , 2006
Synova Healthcare Group,
Inc.
1400 N. Providence Road, Suite 6010
Media, PA 19603
Attention: Stephen E. King
Dear Mr. King:
This letter confirms the agreement
of Synova Healthcare Group. Inc. (the “Company”) to
retain BMO Capital Markets Corp. (“BMO,” or the
“Placement Agent”) as the Company’s exclusive
placement agent to introduce the Company to certain investors (the
“Investors”) as prospective purchasers of the
Company’s common stock, warrants to purchase common stock,
preferred stock, convertible notes (collectively referred to in
this letter as the “Securities”), in connection with a
possible private placement (the
“Transaction”).
The Placement Agent will use its
reasonable best efforts to complete the Transaction. The terms of
the Transaction shall be subject to mutual agreement of the Company
and each Investor in the Transaction. BMO will contact potential
Investors, assist in the negotiation and the structuring of the
Transaction, assist in the preparation of a private placement
memorandum or other appropriate materials and provide related
services to facilitate the successful completion of the
Transaction. BMO will conduct all sales and solicitation efforts in
a manner consistent with the Company’s intent that the
Transaction be an exempt transaction pursuant to the Securities Act
of 1933, as amended (the “Act”) and only to
“accredited investors” as defined in Rule 501(a) under
the Act. The Company shall in any event have sole and final
authority to approve the timing, price, investors and other terms
of the Transaction and may at any time elect not to proceed with
the Transaction.
The Transaction will be a private
placement in accordance with the applicable laws of the United
States and pursuant to the following procedures and terms and
conditions:
1. (a) Prior to the signing of any
purchase agreements with Investors, officers of the Company with
responsibility for financial affairs have been and will continue to
be available to answer inquiries from prospective Investors. After
the purchase agreements and the information referred to therein
have been reviewed by Investors approved by the Company, and they
have had the opportunity to address inquiries to the Company,
separate purchase agreements will be completed with each
prospective Investor approved by the Company. The conditions to the
closing of the Transaction (the “Closing”) shall be set
forth in the purchase agreements and mutually agreed between the
Company and the Investors. In connection with the Transaction, the
Company shall file a registration statement (the
“Registration Statement”) with respect to the possible
resale, from time to time, of the Securities which have been
purchased pursuant to such purchase agreements pursuant to terms to
be set forth in such purchase agreements. The Company agrees to
keep the Registration Statement effective until the earlier of
(i) two years from the effective date of the Registration
Statement or (ii) such time as all of the Securities covered
by the Registration Statement have been sold.
(b) Presently the Company plans to
sell approximately $15 million to $22 million of the Securities,
but the actual dollar amount the Company shall ultimately agree to
sell pursuant to each of the various purchase agreements and the
price at which the Securities will be sold is entirely within its
discretion.
(c) The Company will perform the
agreements set forth in the purchase agreements entered into with
the Investors.
(d) The Company will use its
reasonable efforts to cause the Company’s counsel to address
and deliver to the Company and BMO a letter dated as of the date of
the Closing and as of the effective date of the Registration
Statement containing the statements set forth in Exhibit A. In
addition, BMO shall be entitled to rely on any opinion delivered to
the purchasers by counsel to the Company in connection with this
transaction.
2. In connection with its engagement
hereunder, BMO will assist the Company in preparing a private
placement memorandum and/or other documents to be used in
connection with the Transaction (the “Offering
Document”). The Company acknowledges and agrees that the
Company is solely responsible for all the information in the
Offering Document concerning the Company and its business, that the
Offering Document is its own work product, that BMO may rely,
without independent verification, upon the accuracy and
completeness of all information furnished by the Company to BMO for
use in connection with the Transaction (collectively, the
“Information”) and that BMO does not assume any
responsibility therefor.
The Company shall advise BMO of
those states in which the Securities have been qualified or
exempted under the appropriate securities laws. BMO agrees not to
solicit any offerees who do not reside in jurisdictions in which
the Securities or the Transaction have been qualified or exempted
under the appropriate securities laws; provided, however, the
Company will take such action (if any, at its sole expense) as BMO
reasonably may request to qualify the Securities for offer and sale
under the securities laws of such states as BMO may specify;
provided, further, however, in connection therewith the Company
will not be required to qualify as a foreign corporation or file a
general consent to service or process. The Company agrees that it,
in conjunction with its counsel, will be responsible for making any
filings or taking other actions required under applicable state
securities laws.
The Company represents that
(i) the Information and the Offering Document will not include
an untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not
misleading, (ii) all historical financial data provided to BMO
will be prepared in accordance with generally accepted accounting
principles and practices then in effect in the United States and
will fairly present in all material respects the financial
condition and results of operations of the Company and
(iii) any forecasted financial, market or industrial
information provided to BMO will be prepared in good faith with a
reasonable basis for the assumptions and the conclusions reached
therein. In addition, the Company agrees that it will notify BMO
promptly if any of the foregoing representations ceases to be
accurate at any time during the period of BMO’s engagement
hereunder.
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BMO agrees to use all non-public
information provided to it by or on behalf of the Company hereunder
solely for the purpose of providing the services which are the
subject of this letter agreement and to treat all such information
confidentially, provided that nothing herein shall prevent
BMO from disclosing any such information (i) to purchasers or
prospective purchasers of the Securities in connection with the
Transaction, (ii) to any rating agency, (iii) pursuant to
the order of any court or administrative agency or in any pending
legal or administrative proceeding, (iv) upon the request or
demand of any regulatory authority having jurisdiction over BMO or
any of its affiliates, (v) to the extent that such information
was or becomes publicly available other than by reason of
disclosure by BMO in violation of this agreement or was or becomes
available to BMO or its affiliates from a source which is not known
by BMO to be subject to a confidentiality obligation to the Company
or (vi) to BMO’s affiliates and its and their respective
employees, legal counsel, independent auditors and other experts or
agents who need to know such information in connection with the
Transaction or any other services provided by BMO or its affiliates
to the Company and its affiliates. BMO accepts responsibility for
compliance by the persons referred to in clause (vi) above
with the provisions of this paragraph. This undertaking by BMO
shall automatically terminate one (1) year following the
earlier of completion of the Transaction or termination of
BMO’s engagement hereunder.
3. Any final arrangements, proposals
or advice rendered by BMO pursuant to this letter agreement may not
be disclosed in any manner without BMO’s prior written
approval and shall be treated as confidential. Notwithstanding the
foregoing, nothing herein shall prevent the Company from disclosing
such information in a manner consistent with the exceptions set
forth in clauses (ii) through (vi) in the paragraph
immediately above, substituting the Company for BMO therein, as
applicable.
4. The selling price of the
Securities to be issued and sold by the Company in the Transaction
will be specified in writing by BMO on behalf of the Company (by
facsimile, letter or otherwise) to the prospective Investors prior
to the execution of the purchase agreements, subject to the
Company’s approval.
5. BMO’s aggregate fee for
services provided in connection with the Transaction, will be 6.3%
of the total gross proceeds from the sale of all Securities sold in
the Transaction, together with warrants to purchase common stock
(the “Agent’s Warrants”) for the number of shares
of common stock equal to 2.7% of the number of shares of common
stock sold in the Transaction at Closing. Notwithstanding the prior
sentence, to the extent that any of the investors listed on Exhibit
C purchase Securities then the fee will be 3.15% of the total gross
proceeds from the sale of all Securities sold to such investors in
the Transaction, together with warrants to purchase common stock
for the number of shares of common stock equal to 1.35% of the
number of shares of common stock sold to such investors in the
Transaction. The exercise price of the Agent’s Warrants shall
be equal to the exercise price of the warrants sold to investors in
the Transaction. The Agent’s Warrants shall be exercisable
for a period of five (5) years after the date of the Closing,
and shall be transferable only to its directors, officers and
employees to the extent permitted by applicable securities laws and
regulations and the rules and regulations of the NASD. The
Agent’s Warrants shall include unlimited piggyback
registration rights within the life of the warrant and
“cashless” exercise rights. Such 6.3% (or 3.15% in the
case of the investors on Exhibit C) fee shall be payable in cash by
the Company, on the basis of the
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aggregate dollar amount of Securities sold by
the Company, at each Closing. In addition, the Company shall
reimburse BMO for all of the reasonable travel, legal and other
out-of-pocket expenses (up to a maximum of $60,000) incurred in
connection with the engagement hereunder. Upon request, BMO agrees
to provide the Company with a detailed description of such
expenses. Notwithstanding anything to the contrary contained
herein, it is agreed that the Company shall be entitled to secure
up to $2 million in debt financing (the “Bridge
Financing”) at any time prior to the Closing of the
Transaction. The Company will be entitled to use The Keystone
Equities Group (“Keystone”) as its agent in connection
with the Bridge Financing and BMO shall not be entitled to any fee
with respect to funds received by the Company in the Bridge
Financing. The Company will consult with BMO concerning the
proposed terms of the Bridge Financing.
If within twelve months after the
termination of this agreement, any Securities or securities
convertible into or exchangeable for the Securities are sold by the
Company or any of its subsidiaries through a placement to investors
previously identified and/or contacted by BMO in its capacity as
placement agent hereunder, then the Company shall pay BMO, at the
time of each such sale, an amount equal to the full fee set forth
above from each such sale, except for GM Capital and Oceana
Partners, and any investors referred to BMO by the Company that
were investors in prior capital raises for which GM Capital and/or
Oceana Partners were entitled to a fee, as listed in Exhibit C.
Upon termination of this agreement and at the request of the
Company, BMO will provide the Company with a list of Investors
identified and/or contacted by BMO in its capacity as placement
agent hereunder. The obligations of this paragraph shall survive
any termination of this agreement for any reason.
6. The Company hereby represents and
warrants to BMO that it has not had and will not have any
discussions with any person on the basis of which such person would
be able to assert a claim for a finder’s fee or similar fee
in connection with the sale by the Company of the Securities
covered by this letter to prospects in the United States of America
or overseas, except it is understood that GM Capital and Oceana
Partners may be entitled to a fee in the event investors listed in
Exhibit C purchase Securities and that Keystone will be entitled to
a fee in connection with the Bridge Financing.
7. The Company hereby represents and
warrants to BMO that, except for the Bridge Financing, during the
term of this engagement the Company and its subsidiaries will not
(i) offer any securities for sale to, or solicit any offers to
buy from, any person or persons, whether directly or indirectly,
other than through BMO or (ii) engage in any discussions with
any person other than representatives of BMO for the purpose of
engaging, or considering the engagement of, such person as a finder
or broker in connection with the sale by the Company of the
Securities covered by this letter to prospects in the United States
of America or overseas. The Compa
