CONFIDENTIAL

 

February 27, 2018

 

Weild & Co.
777 29th Street

Suite 402

Boulder, CO 80303 USA

 

Attention: David Weild IV, CEO

 

Dear David:

 

This letter agreement (this “Agreement”) confirms our understanding with respect
to our engagement of Weild & Co., Inc., a Delaware corporation, through its
subsidiary broker/dealer Weild Capital, LLC (collectively, the “Agent”) to serve
as exclusive “Placement Agent” with respect to the matters set forth herein to
ProLung, Inc., a Delaware corporation (the “Company”) for a period of 90 days
commencing the date of acceptance of this Agreement (“Term”) unless otherwise
terminated.

 

1.        SERVICES.

 

Agent is hereby appointed as Placement Agent to the Company the sale of up to
$3,000,000 aggregate principal amount of convertible promissory notes of the
Company (the “Convertible Notes”) (and may also include the sale of
over-subscriptions of the Convertible Notes in amounts agreed by the Company and
Agent and other debt or equity issues of the Company) to one or more Accredited
Investors (as such term is defined in Rule 501 of Regulation D under the
Securities Act), including existing stockholders of the Company.

 

(a)       Services. In connection with the proposed financing transaction, Agent
will provide services that shall include, but not be limited to, the following:

 

  ● Introduce the Company’s investment opportunity to prospective investors,
including existing stockholders of the Company;         ● Arrange meetings for
the Company as needed to secure investment commitments;         ● Facilitate
negotiations with investors or investor groups;         ● Distribute to
prospective investors current copies of offering documents provided by the
Company, including term sheets, suitability questionnaires, subscription
agreements, and related agreements, including supplements and amendments to each
of the foregoing as may be produced or provided by the Company (the “Offering
Documents”);         ● Assist with preparation of the Offering Documents and
other documentation as necessary; and         ● Perform any such other placement
agent services as may be appropriate.  

 

(b)       Authorizing Resolutions and Amendments. As necessary or appropriate,
the Company’s Board of Directors shall adopt resolutions authorizing the
issuance of the Convertible Notes, and the Company’s Certificate of
Incorporation and Bylaws shall be amended, if needed, to authorize a number of
shares sufficient to permit conversion shares of common stock of the Company.
Other terms of the offering will be subject to negotiation between the Company
and prospective investors and are subject to approval by the Company.

 

 

 

 

ProLung, Inc.

February 27, 2018

Page | 2

 

(c)       General Solicitation. Company and Agent agree that any such private
equity offering will not be made pursuant to Rule 506(b) of Regulation D under
the Securities Act of 1933, as amended (the “Securities Act”). In that regard,
Company and Agent agree not to offer or sell any Securities by means of any form
of general solicitation or general advertising.

 

(d)       Best Efforts Offering. The Placement Agent shall only be obligated to
assist the Company with the sale of the Convertible Notes (“Securities”) on a
“best efforts” basis for the Term of this Agreement (subject to provisions
described in the Offering Documents), as described above. The Securities may
only be offered in jurisdictions in which the Placement Agent or its sub
placement agents are duly licensed and authorized to conduct business as
broker/dealer(s) in securities or are exempt from registration therefrom in
connection with the activities contemplated in this letter.

 

(e)       Acknowledgment and Waiver. The Company hereby acknowledges and agrees
that Agent’s relationships with, and fiduciary duties in favor of, the
prospective investors require Agent to perform certain advisory services for the
purpose of protecting the interests of such prospective investors. The Company
hereby waives any conflict or objection to Agent performing such advisory
services as may be required at the sole determination of Agent.

 

(f)       Proprietary Information. The Company hereby acknowledges and agrees
that (i) the names and contact data of prospective investors originally
introduced by Agent is proprietary information of Agent, and (ii) such
proprietary information shall not be shared with any third party except (y) as
required by law, or (z) under written non-disclosure agreement and written
consent of Agent.

 

2.       COMPENSATION.

 

As compensation for acting as placement agent to the Company hereunder, Agent
shall be entitled to receive success fees and reimbursement of expenses, as
described below.

 

(a)       Contingent Placement Fees. In the event the Company closes one or more
sales of Convertible Notes during the Term or Tail Period, the Company shall (i)
pay to Agent a cash placement fee equal to ten percent (10%) of the value of the
Convertible Notes, and upon the conversion of such notes (ii) issue to Agent
common stock purchase warrants (the “Warrants”) to purchase ten percent (10%) of
the potential conversion shares of stock associated with the Convertible Notes
issued by the Company (the “Share Awards”). Warrants issued to Agent shall
include an exercise price equal to 100% of the price per share of the most
recent sale of equity securities by the Company, expiration after five years
from issuance, and standard provisions for cashless exercise, anti-dilution for
stock splits and dividends, division, transferability and “piggyback”
registration rights for any offering other than the initial public offering of
the Company.

 

(b)       Payment and Delivery. All fees payable to Agent pursuant to Section
2(a) shall be (i) payable in cash, by wire transfer of immediately available
funds to an account designated by Agent and (ii) due and payable within ten (10)
days following the consummation of a Financing Transaction and any related
transaction thereto. Aggregate Share Awards required to be issued to Agent
pursuant to Section 2(a) above shall be issued within ten (10) days following
the conversion of such notes into common stock.

 

 

 

 

ProLung, Inc.

February 27, 2018

Page | 3

 

(c)       Expense Reimbursement. In addition to the compensation provided for in
Section 2(a) above, the Company shall also reimburse the following expenses to
the Agent:

 

(i)       A $25,000 non-accountable expense allowance (the “Diligence Expense”),
of which $15,000 is payable upon the closing of the first $1,000,000 of the
Financing Transaction, and $10,000 is payable upon the close of an aggregate of
$3,000,000 of the Financing Transaction.

 

(ii)       All out-of-pocket expenses incurred by Agent during the Term on
behalf of the Company (the “Marketing Expense”), which shall in no case exceed
one percent (1%) of the gross investment proceeds received from sale of the
Convertible Notes (the “Maximum Expense Reimbursement”), and shall include,
without limitation, travel costs, meals and entertainment, printing and other
related costs. Marketing Expenses exceeding $1,000 per incident, or $10,000 in
aggregate, shall be subject to approval by the Company in writing, such approval
not to be unreasonably withheld.

 

(iii)       Payment of Diligence Expense and Marketing Expense shall be due and
payable in cash, by wire transfer of immediately available funds to an account
designated by Agent, within ten (10) days after each closing of the Convertible
Notes.

 

(iv)       Fees and expenses payable to Agent according to this Section 2 that
are more than thirty (30) days past due shall be subject to a penalty of 2.0%
per month.

 

3.       INDEMNIFICATION.

 

The Company shall indemnify the Agent in accordance with the terms of the
Agent’s indemnity provisions, attached hereto as Appendix A, which shall be
incorporated by this reference.

 

4.       TERM AND TERMINATION.

 

(i)       The term (the “Term”) of this Agreement will be 90 days, beginning on
the date hereof. Within the Term, the Agreement may be terminated (i) by the
Company for Cause by written notice, or (ii) by Agent with fifteen (15) days
written notice. The provisions of Sections 2, 3, 4, 5 and 7 hereof shall survive
any expiration or termination of this Agreement.

 

(ii)       Notwithstanding anything to the contrary herein, unless this
Agreement is terminated by the Company for Cause (as defined below), in the
event that the Company closes a financing transaction (excluding any
underwritten offering) within one (1) year following the expiration of the Term
(the “Tail Period”) with an investor originally introduced by Agent, the Company
shall pay and deliver to Agent all fees, expenses and warrants set forth in
Section 2(a), in accordance with the terms thereof as though such Financing
Transaction were consummated during the Term.

 

(iii)       As used in this paragraph, “Cause” means gross negligence, bad faith
or willful misconduct by Agent, a material breach of this Agreement by Agent, or
a material failure by the Agent to provide the services as contemplated by this
Agreement; provided, however, that such breach or failure is either not capable
of remedy or, if capable of remedy, is not remedied promptly and in any event
with (30) days written notice thereof given to Agent by the Company.

 

 

 

 

ProLung, Inc.

February 27, 2018

Page | 4

 

5.       REPRESENTATIONS, WARRANTIES AND COVENANTS.

 

(a)       Representations and Warranties.

 

(i)       Each party represents and warrants to the other party that (A) such
party is duly organized, validly existing and in good standing under the laws of
the state of its formation and has all requisite power and authority to carry on
its business as presently conducted and as proposed to be conducted, (B) all
corporate action required to be taken by such party in order to authorize the
Company to enter into this Agreement and, where applicable, issue the warrants
described in Section 2(a) has been taken or will be taken prior to the
consummation of a transaction, and (C) this Agreement, when executed and
delivered by the parties, shall constitute valid and legally binding obligations
of the parties, enforceable against each.

 

(ii)       Agent represents and warrants that: (A) it is a broker/dealer
registered with the U.S. Securities & Exchange Commission (“SEC”), and a member
in good standing with the Financial Industry Regulatory Authority (“FINRA”) and
any applicable state agencies; (B) no proceedings are pending or to the Agent’s
knowledge, threatened, to revoke or limit its good standing or status with any
such federal or state agency or authority; and (C) it holds all permits,
licenses and other registrations required to perform the services contemplated
to be performed by Agent under the terms of this Agreement. Agent further
represents and warrants that it is an Accredited Investor.

 

(iii)       Company represents, warrants and agrees that it will exercise
reasonable care to assure that the purchasers of the securities are not
underwriters within the meaning of Section 2(11) of the Securities Act and,
without limiting the foregoing, that such purchases will comply with Rule 502(d)
under the Act. Company will also file Form D with the Securities and Exchange
Commission as Contemplated by Rule 506 under the Securities Act.

 

(iv)       Agent represents, warrants and agrees that neither it, nor any of its
directors, executive officers, or other officers participating in the marketing
or sale of the Convertible Notes, nor any other officers or employees of Agent
or any such general partner or managing member that have been or will be paid
(directly or indirectly) remuneration for solicitation of purchasers in
connection with any Financing Transaction (each, an “Agent Covered Person”), is
subject to any of the “Bad Actor” disqualifications described in Rule
506(d)(1)(i) to (viii) under the Securities Act (a “Disqualification Event”),
except for a Disqualification Event (i) contemplated by Rule 506(d)(2) under the
Securities Act and (ii) a description of which has been furnished in writing to
the Company prior to the date hereof. The Agent shall provide prompt written
notice to the Company of any Disqualification Event relating to any Agent
Covered Person, or any event that would, with the passage of time, become such a
Disqualification Event, prior to closing the Transaction. The Agent represents
and warrants that it is not aware of any person other than any Covered Person or
Agent Covered Person that has been or will be paid (directly or indirectly)
remuneration for solicitation of purchasers in connection with the sale of
Securities, and the Agent will notify the Company, prior to Closing the
Transaction, of any agreement entered into between the Agent and such person in
connection with any sale of Securities.

 

(v)       Each party represents, warrants and agrees that all sales of
Convertible Notes in this Transaction shall be made only to Accredited
Investors.

 

 

 

 

ProLung, Inc.

February 27, 2018

Page | 5

 

(vi)       The Company acknowledges and agrees that Agent will provide, and the
Company shall not rely on Agent for, tax, legal or accounting advice.

 

(b)       Confidentiality. Except as contemplated by the terms hereof or as
required by applicable law or legal process (a “Demand”), Agent shall keep
confidential all material non-public information provided to it by or at the
request of the Company, and shall not disclose such information to any third
party or to any of its employees or advisors except to those persons who have a
need to know such information in connection with Agent’s performance of its
responsibilities hereunder and who are advised of the confidential nature of the
information and who agree to keep such information confidential. In the event of
the public announcement of any Financing Transaction, if approved by the
Company, Agent shall have the right to disclose its participation in such
Financing Transaction, including, without limitation, the placement at its cost
of “tombstone” advertisements in financial and other newspapers and journals.
Except as required by applicable law, pursuant to an order of a court of
competent jurisdiction or the request of a regulatory authority having
jurisdiction over the Company or its affiliates, any advice to be provided by
Agent under this Agreement shall not be disclosed publicly or made available to
third parties (other than the Company’s other professional advisors) without the
prior written consent of Agent (which consent shall not be unreasonably
withheld, conditioned or delayed). Notwithstanding the foregoing, the parties
announce that if a Financing closes, the material terms of Agent’s engagement
will need to be disclosed on Form 8-K, and a copy of this Agreement may need to
be filed with the SEC. In the event that Agent is served with a Demand, Agent
will promptly advise the Company of the same and will cooperate with all
reasonable and lawful requests by the Company to prevent the disclosure of
confidential and/or proprietary information pursuant to such Demand.
Notwithstanding any of the foregoing, the following will not constitute
confidential information for purposes of this Agreement: (i) information which
was already in Agent’s possession (or the possession of any of its
professionals) and not subject to any existing confidentiality obligations to
the Company, or that was available to Agent on a non-confidential basis, prior
to its receipt from the Company; (ii) information which is obtained by Agent (or
any of its professionals) from a third person who, insofar as is known to Agent,
is not prohibited from transmitting the information to Agent by a contractual,
legal or fiduciary obligation to the Company; or (iii) information which is or
becomes publicly available through no fault of Agent or any of its
professionals.

 

(c)       Attorneys’ Fees. If any action, proceeding or arbitration at law or in
equity is necessary to enforce or interpret the terms of this Agreement, and a
party is found to have violated the terms of this Agreement, a non-violating
party agrees that, in addition to any other relief that a non-violating party
may be entitled, it shall also indemnify and reimburse a non-violating party for
all of its reasonable attorneys’ fees, costs and disbursements incurred in
connection with such action.

 

6.       CERTAIN DEFINITIONS.

 

(a)       “Transaction Value” shall mean the total proceeds and other
consideration payable to the Company, or contributed into any collaboration
between the Company and a counter-party to placement of the Convertible Notes,
including cash, securities and/or other property paid to the Company in
connection with this Agreement.

 

 

 

 

ProLung, Inc.

February 27, 2018

Page | 6

 

7.       MISCELLANEOUS.

 

This Agreement contains the entire understanding between the parties with
respect to its subject matter. Neither this Agreement nor any provision
contained this Agreement may be amended, terminated, extended, varied, modified,
supplemented, or otherwise changed except by written agreement signed by each
party. Headings are inserted for reference only and shall not in any way define
or affect the meaning, construction or scope of any of the provisions of this
Agreement. A waiver by a party of any right or provision under this Agreement
must be in writing and shall not operate or be construed as a waiver of such
right or provision at any other time. This Agreement shall not be assigned
unless by written agreement among the parties, provided that either party may
assign this Agreement to the purchaser of substantially all of its assets and
business. This Agreement shall inure to the benefit of, and may be enforced by
the successors and assigns of, each party. This Agreement is entered into under
the laws of the State of Utah and shall be governed by the laws of such state
(without giving effect to its conflicts of law principles). Any lawsuit or legal
action or proceeding relating to this Agreement shall be brought in one of the
state or federal courts sitting in Salt Lake County, Utah, and the parties
submit to the jurisdiction of such courts for that purpose and hereby
irrevocably waive all rights to a trial by jury in any such action or
proceeding. If any provision of this Agreement is found to be invalid or
unenforceable, the parties agrees that any such provision may be altered or
modified in a manner so as to protect the parties’ respective legitimate
business interests and that such finding shall not affect the validity or
enforcement of the other provisions of this Agreement. This Agreement may be
executed in counterparts, each of which shall be deemed an original and all of
which shall constitute a single agreement. Each party represents and warrants to
the other party that it has had a full opportunity to seek legal advice and
representation by an independent counsel of its own choosing in connection with
this Agreement and such party has either done so or, in its business judgment,
declined to do so.

 

If the terms of our engagement as set forth in this Agreement are satisfactory
to you, kindly countersign and date the enclosed copy of this Agreement and
return it to us. This Agreement shall be effective and binding as of the date of
your countersignature below.

 

  Very truly yours,         PROLUNG, INC.         By: /s/ Steven C. Eror    
Steven C. Eror     President and CEO

 

ACCEPTED AND AGREED:       WEILD & CO., INC.         By: /s/ David Weild   Name:
David Weild   Title: Manager, Chairman & CEO   Dated: February 28, 2018  

 

 

 

 

APPENDIX A

 

INDEMNIFICATION PROVISION

 

This Appendix A is a part of and is incorporated into that certain letter
agreement (together, the “Letter Agreement”) dated February 27, 2018 by and
between ProLung, Inc. (the “Company”), and Weild & Co., Inc. and its subsidiary
broker/dealer Weild Capital, LLC (collectively, the “Advisor”).

 

The Company will indemnify and hold harmless the Advisor and their respective
directors, officers, agents and employees of the Advisor (each such entity or
person, an “Indemnified Person”) from and against any losses, claims, damages,
judgments, assessments, costs and other liabilities (collectively
“Liabilities”), and will reimburse each Indemnified Person for all fees and
expenses (including the reasonable fees and expenses of counsel) (collectively,
“Expenses”) as they are incurred in investigating, preparing, pursuing or
defending any claim, action, proceeding or investigation, in connection with
pending or threatened litigation or arbitration (collectively, “Actions”),
arising out of or in connection with advice or services rendered or to be
rendered by any Indemnified Person pursuant to the Letter Agreement, the
transactions contemplated hereby or any Indemnified Person’s actions or
inactions in connection with any such advice, services or transactions; provided
that the Company will not be responsible for any Liabilities or Expenses of any
Indemnified Person that are determined by a judgment of a court of competent
jurisdiction which is no longer subject to appeal or further review to have
resulted from such Indemnified Person’s fraud, gross negligence or willful
misconduct in connection with any of the advice, actions, inactions or services
referred to above. The Company also agrees to reimburse each Indemnified Person
for all Expenses as they are incurred in connection with enforcing such
Indemnified Person’s rights under this Appendix A.

 

Upon receipt by an Indemnified Person of actual notice of an Action against such
Indemnified Person with respect to which indemnity may be sought under this
Agreement, such Indemnified Person shall promptly notify the Company in writing;
provided that failure to so notify the Company shall not relieve the Company
from any liability which the Company may have on account of this indemnity or
otherwise, except to the extent the Company shall have been materially
prejudiced by such failure. An Indemnified Person will provide the Company with
all information, cooperation and approvals that the Company reasonably requires
and an Indemnified Person can reasonably provide in connection with such Action.
The Company shall, if requested by the Advisor, assume the defense of any such
Action including the employment of counsel reasonably satisfactory to the
Advisor. Any Indemnified Person shall have the right to employ separate counsel
in any such action and participate in the defense thereof but the fees and
expenses of such counsel shall be at the expense of such Indemnified Person,
unless: (i) the Company has failed to assume the defense and employ counsel or
(ii) the named parties to any such Action (including any impleaded parties)
include such Indemnified Person and the Company, and such Indemnified Person
shall have been advised by counsel that there may be one or more legal defenses
available to it that are in conflict with those available to the Company;
provided that the Company shall not in such event be responsible hereunder for
the fees and expenses of more than one firm of separate counsel in connection
with any Action in the same jurisdiction, in addition to any local counsel. The
Company shall not be liable for any settlement of any Action effected without
its written consent, which consent shall not be unreasonably withheld. In
addition, the Company will not, without prior written consent of the Advisor,
which consent shall not be unreasonably withheld, settle, compromise or consent
to the entry of any judgment in or otherwise seek to terminate any pending or
threatened Action in respect of which indemnification or contribution may be
sought hereunder (whether or not any Indemnified Person is a party thereto)
unless such settlement, compromise, consent or termination includes an
unconditional release of each Indemnified Person from all Liabilities arising
out of such Action.

 

 

 

 

ProLung, Inc.

February 22, 2018

Page | 8

 

In the event the foregoing indemnity is unavailable to an Indemnified Person
other than in accordance with this Agreement, the Company shall contribute to
the Liabilities and Expenses paid or payable by such Indemnified Person in such
proportion as is appropriate to reflect (i) the relative benefits to the Company
and its stockholders or owners, on the one hand, and to the Advisor, on the
other hand, of the matters contemplated by this Agreement or (ii) if the
allocation provided by the immediately preceding clause is not permitted by the
applicable law, not only such relative benefits but also the relative fault of
the Company, on the one hand, and the Advisor, on the other hand, in connection
with the matters as to which such Liabilities or Expenses relate, as well as any
other relevant equitable considerations; provided that in no event shall the
Company contribute less than the amount necessary to ensure that all Indemnified
Persons, in the aggregate, are not liable for any Liabilities and Expenses in
excess of the amount of fees actually received by the Advisor pursuant to this
Agreement. For purposes of this paragraph, the relative benefits to the Company
and its stockholders or owners, on the one hand, and to the Advisor, on the
other hand, of the matters contemplated by this Agreement shall be deemed to be
in the same proportion as (a) the total value paid or contemplated to be paid or
received or contemplated to be received by the Company or the Company’s
stockholders or owners, as the case may be, in the transaction or transactions
that are within the scope of this Agreement, whether or not any such transaction
is consummated, bears to (b) the fees paid or to be paid to the Advisor under
this Agreement.

 

The reimbursement, indemnity and contribution obligations of the Company set
forth herein shall apply to any modification of this Agreement and shall remain
in full force and effect regardless of any termination of, or the completion of
any Indemnified Person’s services under or in connection with, this Agreement.