PROTON LABS, INC.
PLACEMENT AGENT AGREEMENT
Dated as of: November 28, 2005
The undersigned, Proton Labs, Inc., a Washington
corporation (the "COMPANY"),
hereby agrees with US EURO Securities, Inc.
(the "PLACEMENT AGENT") and Dutchess
Private Equities Fund, L.P., a Delaware
Limited Partnership (the "INVESTOR") as
follows:
1. OFFERING. The Company hereby engages the Placement Agent to act as
its
exclusive
placement agent in connection with the Investment Agreement
dated
November
28, 2005 (the "INVESTMENT AGREEMENT") pursuant to which the
Company
shall issue and sell to the Investor, from
time to time, and the
Investor shall
purchase from the Company (the "OFFERING") up to Ten Million
Dollars
($10,000,000)
of the Company's Class A Voting Common
Stock (the
"COMMITMENT
AMOUNT"), par value
$0.0001 per share (the "COMMON STOCK"), at
price per share
equal to the Purchase Price, as that term is defined in the
Investment
Agreement.
Pursuant to the terms hereof, the Placement
Agent
shall
render consulting services to the Company with respect to the
Investment
Agreement and shall be
available for consultation in connection
with the
advances to be requested by the Company pursuant to the
Investment
Agreement.
All capitalized terms used herein and not otherwise
defined
herein
shall have the same meaning ascribed to them
as in the Investment
Agreement.
The Investor will be granted certain
registration rights with
respect
to the Common Stock as more fully set forth in a
Registration
Rights
Agreement between the Company and the Investor dated
November 28,
2005
(the "REGISTRATION RIGHTS AGREEMENT"). The documents
to be executed
and delivered in connection with the
Offering, including, but not limited,
to this Agreement, the Investment Agreement, and the
Registration Rights
Agreement,
and any Prospectus or
other disclosure document ( including all
amendments
and supplements ) utilized in
connection with the Offering are
referred to
sometimes hereinafter collectively as the "OFFERING MATERIALS."
The Company's Common Stock is sometimes referred to hereinafter
as the
"SECURITIES."
The Placement Agent shall not be obligated to sell any
Securities
and this Offering by the Placement Agent
shall be solely on a
"best
efforts basis."
2. REPRESENTATIONS,
WARRANTIES
AND COVENANTS OF THE PLACEMENT AGENT.
The Placement Agent represents warrants and covenants as follows:
(i) The Placement Agent has the necessary authority to enter
into
this Agreement
and to consummate the transactions
contemplated
hereby.
(ii) The execution
and delivery by the Placement Agent of this
Agreement and
the consummation of
the transactions contemplated
herein will
not result in any violation of, or be in
conflict
with, or constitute a
default under, any agreement or instrument
to which the Placement Agent is a party or by which the
Placement
Agent or its properties are bound, or any judgment, decree,
order
or, to the Placement Agent's knowledge, any statute, rule
or
regulation applicable to the Placement Agent. This Agreement
when
executed and
delivered by the Placement Agent, will
constitute
the legal, valid and
binding obligations of the Placement Agent,
enforceable in
accordance with their respective terms, except to
the extent
that (a) the
enforceability hereof or thereof may be
limited by bankruptcy,
insolvency, reorganization, moratorium or
similar laws from time to time in effect and affecting the
rights
of creditors
generally, (b) the enforceability hereof or thereof
is subject
to general principles of equity, or (c) the
indemnification provisions hereof or thereof may be held to be
in
violation of
public policy.
(iii) Upon receipt and
execution of this Agreement the Placement Agent
will promptly forward
copies of this Agreement to the Company or
its counsel
and the Investor or its counsel.
(iv) The Placement
Agent will not take
any action that it reasonably
believes would
cause the Offering to violate the
provisions of
the Securities
Act of 1933, as amended (the "1933 ACT"),
the
Securities Exchange
Act of 1934 (the "1934 ACT"), the respective
rules and regulations promulgated there under (the "RULES AND
REGULATIONS") or
applicable
"Blue Sky" laws of any state or
jurisdiction.
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<PAGE>
(v) The Placement Agent will use all
reasonable efforts to determine
(a) whether
the Investor is an
Accredited Investor and (b) that
any information
furnished by the
Investor is true and accurate.
The Placement
Agent shall have no
obligation to insure that (x)
any check,
note, draft or other
means of payment for the Common
Stock will
be honored, paid or
enforceable against the Investor
in accordance
with its terms, or (y)
subject to the performance
of the Placement Agent's obligations and the accuracy of the
Placement Agent's
representations and
warranties hereunder, (1)
the Offering is exempt
from the registration requirements of the
1933 Act or any applicable state "Blue Sky" law or (2) the
Investor is
an Accredited Investor.
(vi) The Placement
Agent is a member of the National
Association of
Securities Dealers,
Inc., and is a broker-dealer registered
as
such under
the 1934 Act and under the securities laws of
the
states in which the Securities will be offered or sold
by the
Placement Agent
unless an exemption
for such state registration
is available
to the Placement Agent. The Placement
Agent is in
compliance with all
material rules and regulations applicable to
the Placement
Agent generally and applicable to the
Placement
Agent's participation
in the Offering.
3. REPRESENTATIONS AND
WARRANTIES OF THE COMPANY.
The Company makes to the Placement Agent all the representations and
warranties
it makes to the Investor in the Investment
Agreement and, in
addition,
represents
and warrants as follows:
(i) The execution, delivery and performance of each of this
Agreement, the
Investment Agreement
and the Registration Rights
Agreement has been or
will be duly and validly authorized by the
Company and
is, and with respect to this Agreement, the
Investment Agreement
and the Registration
Rights Agreement will
each be, a valid and binding agreement of the Company,
enforceable in
accordance
with its respective
terms, except to
the extent
that (a) the
enforceability hereof or thereof may be
limited by bankruptcy,
insolvency, reorganization, moratorium or
similar laws from time to time in effect and affecting the
rights
of creditors
generally, (b) the enforceability hereof or thereof
is subject
to general principles of equity or (c) the
indemnification provisions hereof or thereof may be held to be
in
violation of public
policy. The Securities to be issued pursuant
to the transactions contemplated by this Agreement and the
Investment Agreement
have been duly
authorized and, when issued
and paid for in accordance with (x) this Agreement, the
Investment Agreement
and the certificates/instruments
representing such
Securities,
(y) will be valid and binding
obligations of the
Company, enforceable in accordance with their
respective terms,
except to the extent that (1) the
enforceability thereof
may be limited by bankruptcy, insolvency,
reorganization,
moratorium or similar
laws from time to time in
effect and
affecting the rights
of creditors generally, and (2)
the enforceability
thereof is subject to general principles
of
equity. All
corporate action required to be taken for the
authorization,
issuance and sale of the Securities has been duly
and validly
taken by the Company.
(ii) The Company
has a duly authorized, issued and outstanding
capitalization as
set forth herein and in the Investment
Agreement. The
Company is not a party to or bound by any
instrument, agreement
or other arrangement providing for it
to
issue any capital stock, rights, warrants, options or other
securities, except
for this Agreement,
the agreements described
herein and
as described in the Investment
Agreement, dated the
date hereof and the
agreements described therein. All issued and
outstanding securities
of the Company, have been duly authorized
and validly
issued and are fully paid and non-assessable;
the
holders thereof have no rights of rescission or preemptive
rights
with respect
thereto and are not subject to personal
liability
solely by reason of being security holders; and none of
such
securities were
issued in violation of
the preemptive rights of
any holders
of any security of the Company. As of the date
hereof, the
authorized capital
stock of the Company consists of
100,000,000 shares of
Common Stock, par value $0.0001 per share,
of which 14,270,100 shares of Common Stock are issued and
outstanding. The
Company also has 20,000,000 shares of Preferred
Stock, par value $0.0001 per share, of which 19,600,000 shares
of
Preferred Stock are undesignated; and 400,000 shares of
Preferred
Stock are designated as Series A Preferred
Stock of which 8,000
shares are
issued and outstanding.
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<PAGE>
(iii) The Common
Stock to be issued in
accordance with this Agreement
and the Investment Agreement has been duly authorized
and when
issued and
paid for in accordance with this Agreement, the
Investment Agreement
and the certificates/instruments
representing such
Common Stock, will be validly issued,
fully-paid and
non-assessable;
the holders thereof
will not be
subject to
personal liability solely by reason of being such
holders; such
Securities are not and
will not be subject to the
preemptive rights
of any holder of any
security of the Company.
4. REPRESENTATIONS, WARRANTIES
AND COVENANTS OF THE INVESTOR.
The Investor makes to the Placement Agent all the representations
and
warranties
it makes to the Company in the Investment
Agreement and, in
addition
represents,
warrants and covenants as follows:
(i) The Investor has
the necessary power to enter into this Agreement
and to consummate the transactions contemplated hereby.
(ii) The execution and
delivery by the Investor of this Agreement and
the consummation of the transactions contemplated herein will
not
result in any violation of, or be in conflict with, or
constitute
a default under, any agreement or instrument to which the
Investor is
a party or by which the Investor or
its properties
are bound,
or any judgment,
decree, order or, to the Investor's
knowledge, any
statute, rule or regulation applicable to the
Investor. This
Agreement when executed and delivered by the
Investor, will
constitute
the legal, valid and binding
obligations of the Investor, enforceable in accordance with
their
respective terms,
except to the extent that (a) the
enforceability hereof
or thereof may be limited by
bankruptcy,
insolvency,
reorganization, moratorium or similar laws from time
to time in effect and affecting the rights of creditors
generally, (b) the enforceability hereof or thereof is subject
to
general principles
of equity, or (c) the indemnification
provisions hereof
or thereof may be held to be in
violation of
public policy.
(iii) The Investor
is not, and will not be, as a result of the
transactions
contemplated by
the Offering Materials
a "dealer"
within the
meaning of the Securities Exchange Act of
1934 and
applicable federal and state securities laws and regulations.
The
Investor covenants
that in this respect it is and will remain in
compliance with
the requirements of applicable "no action"
rulings of
the U.S. Securities Exchange Commission.
(iv) The Investor
will promptly forward copies of any and all due
diligence
questionnaires
compiled by
the Investor to the
Placement Agent.
(v) The Investor acknowledges that the
Company has agreed to pay the
Placement Agent
fees for its services from each advance
or Put
and that Company has instructed the Investor to pay this fee
directly to
Placement Agent at the
time of disbursement of such
funds; Investor
agrees to notify
Placement Agent at the time of
each such advance or draw down by Company and to pay the
fee
directly to
Placement Agent.
5. CERTAIN COVENANTS AND AGREEMENTS OF THE COMPANY.
The Company covenants and agrees at
its expense and without any expense to
the Placement Agent as follows:
A. To advise the Placement Agent of any material
adverse change in the
Company's financial
condition,
prospects or business or of any
development materially
affecting the Company or rendering untrue
or
misleading any
material statement in the Offering Materials occurring
at any time as soon as the Company is either informed or becomes
aware
thereof.
B. To use its commercially reasonable
efforts to cause the Common Stock
issuable in connection
with the Equity Line of Credit to be qualified
or registered
for sale on terms consistent with
those stated in the
Registration Rights
Agreement and under the securities laws of
such
jurisdictions as the Placement Agent and the Investor shall
reasonably
request.
Qualification,
registration and
exemption charges and fees
shall be at the sole cost and expense of the Company.
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<PAGE>
C. Upon written request, to
provide and continue to provide the Placement
Agent and the Investor copies of all quarterly
financial statements
and audited annual financial statements prepared by
or on behalf of
the Company, other reports prepared by or on behalf of the Company
for
public disclosure
and all documents delivered to the Company's
stockholders.
D. To deliver, during the registration period of the Investment
Agreement, to the
Placement Agent upon the Placement Agent's request,
(i) within
forty five (45) days, a statement of its
income for each
such
quarterly period, and its balance sheet and
a statement of
changes in
stockholders' equity
as of the end of such quarterly
period, all
in reasonable detail, certified by its principal
financial or
accounting
officer;
(ii) within ninety
(90) days after the close of each fiscal year, its
balance sheet as of
the close of such fiscal year, together with
a statement
of income, a statement of changes in
stockholders'
equity and
a statement of cash flow for such
fiscal year, such
balance sheet,
statement of income, statement of changes in
stockholders' equity
and statement of cash flow to be in
reasonable detail and accompanied by a copy of the certificate
or
report thereon
of independent auditors if audited financial
statements are
prepared; and
(iii) a copy
of all documents, reports and information
furnished to
its stockholders
at the time that such documents, reports
and
information are
furnished to its stockholders.
(iv) a copy of all documents, reports and information furnished to
the
Investor at the time that such documents, reports and
information
are furnished
to the Investor.
E. To comply with the terms of the Offering Materials.
F. To ensure that any transactions between or
among the Company, or any
of its officers, directors and affiliates
be on terms and conditions
that are no less favorable to the Company, than the terms and
conditions that
would be available in an "arm's length"
transaction
with an independent third party.
G. The Company acknowledges that the Company has agreed to pay the
Placement Agent
fees for its services from each advance or
Put and
that Company has instructed the Investor to pay these fees directly
to
Placement Agent
at the time of disbursement of such
funds; Company
agrees to notify Placement Agent at the time
of each such advance or
draw down by Company and to cooperate with
the process of fees being
paid directly
to Placement Agent, until all fees due are paid.
6. INDEMNIFICATION.
A. The Company hereby agrees that it will indemnify and hold the
Placement Agent
and each officer,
director, shareholder, employee or
