Exhibit 10.62


 


PLACEMENT AGENCY AGREEMENT


 


February 13, 2004


 


Casimir
Capital L.P


100
Broadway, 11th Floor


New
York, NY 10005


Attention:  Richard Sands, President


 


Ladies and Gentlemen:


 


MFIC Corporation, a Delaware
corporation (the “Company”), hereby confirms its agreement (the “Agreement”)
with Casimir Capital L.P., a Delaware corporation (the “Placement Agent”), as
follows:


 


1.             Offering.


 


(a)           The Company will offer investment units to accredited investors (the
“Offering”), each unit (a “Unit”) consisting of (i) one (1) share (“Share”) of
common stock, par value $.01 per share, of the Company (the “Common Stock”) and
(ii) one (1) three-year warrant (the “Warrant”) to purchase one-half of a share
of Common Stock.  The offering price per
Unit shall be equal to 85% of the average VWAP (as defined below) of the Common
Stock over the twenty (20) trading days immediately prior to each closing of
the sale of Units (a “Closing”).  The
exercise price of the Warrants shall be equal to such offering price per Unit
at each applicable Closing. The Warrants shall have full-ratchet antidilution
provisions excluding shares issuable upon the conversion or exercise of options, warrants or other convertible
securities outstanding as of the date hereof or options hereafter issued
pursuant to the Company’s employee stock option plans or director stock option
plans as presently in effect.  The total amount of gross
proceeds from the sale of Units in the Private Placement shall be a minimum of
$2,000,000 (the “Minimum Amount”) and a maximum of $5,000,000 (the “Maximum
Amount”). The Shares, together with the Warrants shall be referred to
herein as the “Securities”.  All share prices, exercise prices and
conversion prices should be assumed to be proportionally adjusted to reflect
stock splits, stock dividends, recapitalizations and the like.


 


As used herein, “VWAP” shall mean for any
date, the price determined by the first of the following clauses that applies:
(a) if the Common Stock is then listed or quoted on a principal trading market
or the OTC Bulletin Board, the daily volume weighted average price of the
Common Stock for such date (or the nearest preceding date) on the primary
trading market (including the OTC Bulletin Board) on which the Common Stock is
then listed or quoted as reported by Bloomberg Financial L.P. (based on a
trading day from 9:30 a.m. Eastern Time to 4:02 p.m. Eastern Time) using the
VAP function; (b) if the Common Stock is not then listed or quoted


 

















 


on a principal trading market or the OTC
Bulletin Board and if prices for the Common Stock are then reported in the
“Pink Sheets” published by the National Quotation Bureau Incorporated (or a
similar organization or agency succeeding to its functions of reporting
prices), the most recent bid price per share of the Common Stock so reported;
or (c) in all other cases, the fair market value of a share of Common
Stock as determined by a nationally recognized-independent appraiser selected
in good faith by the Placement Agent.


 


(b)           The Units will be offered on a reasonable efforts basis for a period of
60 days from the date that the Memorandum (as defined in Section 1(d)) is first
sent to prospective investors (the “Commencement Date”), which period may be
extended by the mutual written agreement of the Company and the Placement Agent
for up to an additional 30 days (the “Offering Period”).  The date on which the Offering shall
terminate shall be referred to as the “Termination Date.”


 


(c)           The minimum
subscription for Units shall be $75,000, however, the Placement Agent and the
Company may, in their discretion, accept less than the minimum subscription
amount; provided, however, that the Placement Agent shall not
tender to the Company and the Company shall not accept subscriptions from, or
sell Units to, any persons or entities that do not qualify as (or are not
reasonably believed to be) “accredited investors,” as such term is defined in
Rule 501 of Regulation D promulgated under Section 4(2) of the Securities Act
of 1933, as amended (the “Act”).


 


(d)           The Offering will be
made by the Placement Agent on behalf of the Company solely pursuant to the
Memorandum, which at all times will be in form and substance reasonably
acceptable to the Placement Agent and its counsel and contain such legends and
other information as the Placement Agent and its counsel may, from time to
time, reasonably deem necessary and desirable to be set forth therein.  “Memorandum” as used in this Agreement means
the Company’s Confidential Private Placement Memorandum, inclusive of all
exhibits, and any and all amendments, supplements and appendices thereto and
other Company-approved documents that the Placement Agent may use on the
Company’s behalf to sell the Units. 
Unless otherwise defined, each term used in this Agreement will have the
same meaning as shall be set forth in the Memorandum.


 


2.       Representations and
Warranties.  The Company hereby
represents and warrants to the Placement Agent that each of the following shall
be true in all respects as of the date hereof and, as applicable, on and as of
the date of the Memorandum as if made on and as of the date hereof:


 


(a)           The Memorandum will be,
and as of the date of the Memorandum has been, diligently prepared by the
Company, at its sole cost, in conformity with all applicable laws, and will be
in compliance with Regulation D as promulgated under Section 4(2) of the Act
(“Regulation D”), the Act and the requirements of all other rules and
regulations (the “Regulations”) of the Securities and Exchange Commission (the
“SEC”) relating to offerings of the type contemplated by the Offering, and the
applicable securities laws and the rules and regulations of those jurisdictions
wherein the Units are to be offered and sold, excluding foreign
jurisdictions.  The Units will be
offered and sold pursuant to the registration exemption provided by Regulation
D and Section 4(2)


 


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and/or Section 4(6) of the Act
as a transaction not involving a public offering and the requirements of any
other applicable state securities laws and the respective rules and regulations
thereunder in those United States jurisdictions in which the Placement Agent
notifies the Company that the Units are being offered for sale.  The Memorandum will describe all material
aspects, including attendant risks, of an investment in the Company.  The Company has not taken nor will it take
any action that conflicts with the conditions and requirements of, or that
would make unavailable with respect to the Offering, the exemption(s) from
registration available pursuant to Regulation D or Section 4(2) and/or Section
4(6) of the Act and knows of no reason why any such exemption would be
otherwise unavailable to it.  Neither
the Company nor its affiliates has been subject to any order, judgment or
decree of any court or governmental authority of competent jurisdiction
temporarily, preliminarily or permanently enjoining such person for failing to
comply with Section 503 of Regulation D.


 


(b)           The Memorandum will
not, and as of the date of the Memorandum does not, include any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.  None of the statements, documents,
certificates or other items prepared or supplied by the Company with respect to
the transactions contemplated hereby contains or will contain an untrue
statement of a material fact or omits a material fact necessary to make the
statements contained therein not misleading. 
There is no fact that the Company has not disclosed to the Placement
Agent and its counsel in writing and of which the Company is aware that
materially and adversely affects or could materially and adversely affect the
business, prospects, financial condition, operations, assets or affairs of the
Company or any of its subsidiaries.


 


(c)           The Company is a
corporation duly organized, validly existing and in good standing under the
laws of Delaware.  The Company has no
subsidiaries and does not have an equity interest in any other firm,
partnership, association or other entity other than Microfluidics Corporation,
a Delaware corporation (the “Active Subsidiary”) and MediControl Corporation, a
Delaware corporation (“MediControl”). 
MediControl is inactive and does not have any outstanding liabilities or
obligations, except for liabilities or obligations that could not have a
material adverse effect on the Company. 
The Company owns all of the outstanding capital stock of its subsidiaries.  The Company is duly qualified to transact
business as a foreign corporation and is in good standing under the laws of
each jurisdiction where the location of its properties or the conduct of its
business makes such qualification necessary, except where the failure to be so
qualified would not have a material adverse effect on the Company or its
business.  As of the date of the First
Closing, the Active Subsidiary will be duly qualified to transact business as a
foreign corporation and will be in good standing under the laws of each
jurisdiction where the location of its properties or the conduct of its
business makes such qualification necessary, except where the failure to be so
qualified would not have a material adverse effect on the Active Subsidiary or
its business.


 


(d)           The Company and its
Active Subsidiary have all requisite power and authority (corporate and other)
to conduct its business as presently conducted and as proposed to be conducted
(described in the Memorandum).  The Company
has all requisite power and authority (corporate and other) to enter into and
perform its obligations under this Agreement and the other agreements


 


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contemplated hereby, the
Securities and by the Memorandum (collectively, the “Transaction Documents”)
and to issue, sell and deliver the Units and the shares of Common Stock
issuable upon exercise of the Warrants (the “Conversion Shares”).  The execution and delivery of each of the
Transaction Documents has been duly authorized by all necessary corporate
action.  This Agreement has been duly
executed and delivered and constitutes, and each of the other Transaction
Documents, upon due execution and delivery, will constitute, valid and binding
obligations of the Company, enforceable against the Company in accordance with
their respective terms.


 


(e)           None of the execution
and delivery of, or performance by the Company under, any of the Transaction
Documents or the consummation of the transactions herein or therein contemplated
conflicts with or violates, or will result in the creation or imposition of,
any lien, charge or other encumbrance upon any of the assets of the Company or
its Active Subsidiary under any agreement or other instrument to which the
Company or its Active Subsidiary is a party or by which the Company, its Active
Subsidiary or their respective assets may be bound, any term of the charter or
by-laws of the Company or its Active Subsidiary, or any license, permit,
judgment, decree, order, statute, rule or regulation applicable to the Company,
its Active Subsidiary or any of their respective assets.


 


(f)            The Company will have
the authorized and outstanding capital stock set forth under the heading
“Capitalization” in the Memorandum. 
Except as set forth in the Memorandum, all outstanding shares of capital
stock of the Company and its Active Subsidiary are duly authorized, validly
issued and outstanding, fully paid and nonassessable.  Except as set forth in the Memorandum: (i) there are no
outstanding options, stock subscription agreements, warrants or other rights
permitting or requiring the Company or others to purchase or acquire any shares
of capital stock, or other equity securities of the Company or its Active
Subsidiary, or to pay any dividend or make any other distribution in respect
thereof; (ii) there are no securities issued or outstanding that are
convertible into or exchangeable for any of the foregoing and there are no
contracts, commitments or understandings, whether or not in writing, to issue or
grant any such option, warrant, right or convertible or exchangeable security;
(iii) no shares of stock or other securities of the Company or its Active
Subsidiary are reserved for issuance for any purpose; (iv) there are no
voting trusts or other contracts, commitments, understandings, arrangements or
restrictions of any kind with respect to the ownership, voting or transfer of
shares of stock or other securities of the Company, including without
limitation, any preemptive rights, rights of first refusal, proxies or similar
rights; and (v) no person holds a right to require the Company or its
Active Subsidiary to register any securities of the Company under the Act or to
participate in any such registration. 
The issued and outstanding shares of capital stock of the Company
conform to all statements in relation thereto contained in the Memorandum and
the Memorandum describes all material terms and conditions thereof.  All issuances by the Company and its Active
Subsidiary of their respective securities were at the time of their issuance
either (i) exempt from registration under the Act and any applicable state
securities laws or (ii) appropriately registered.


 


(g)           The Shares, the
Warrants, the Conversion Shares and the Agent’s Warrants (as defined in Section
3(e) hereof) have been duly authorized and, when issued and delivered against
payment


 


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therefor as provided in the
Transaction Documents, will be validly issued, fully paid and nonassessable and
will be free and clear of all liens, charges, restrictions, claims and
encumbrances imposed by or through the Company other than as provided in the
Transaction Documents.  No holder of any
of the Securities, the Conversion Shares or the Agent’s Securities (as defined
in Section 3(e) hereof) will be subject to personal liability solely by reason
of being such a holder and, except as set forth in the Memorandum, none of the
Securities, the Conversion Shares or the Agent’s Securities is subject to
preemptive or similar rights of any securityholder of the Company, nor will the
issuance of such securities trigger an adjustment under the antidilution or
exercise rights of any holders of any outstanding shares of capital stock,
options, warrants or other rights to acquire any securities of the
Company.  A sufficient number of
authorized but unissued shares of Common Stock has been reserved for issuance
upon exercise of the Warrants and the exercise of the Agent’s Warrants.


 


(h)           No consent,
authorization or filing of or with any court or governmental authority is
required in connection with the issuance of the Securities, the Conversion
Shares or the Agent’s Securities (as defined in Section 3(e) hereof) or the
consummation of the transactions contemplated herein or in the other
Transaction Documents, except for required filings with the SEC, if any, and
applicable “blue sky” or state securities commissions relating specifically to
the Offering (all of which will be duly made on a timely basis).


 


(i)            Except as set forth in
the Memorandum, the financial statements, together with the related notes
thereto, of the Company included or incorporated by reference in the Memorandum
are true and complete and present fairly, in all material respects, the
financial position of the Company and its Active Subsidiary as of the
respective dates specified and the results of its operations and changes in
financial position for the respective periods covered thereby.  Such financial statements and related notes
were prepared in accordance with U.S. generally accepted accounting principles
(“GAAP”) applied on a consistent basis throughout the periods indicated and
except that the unaudited financial statements omit full notes, and except for
normal year-end adjustments.  Except as
set forth in such financial statements or in the Memorandum, the Company and
its Active Subsidiary have no material liabilities of any kind, whether
accrued, absolute, contingent or otherwise or entered into any material
transactions or commitments.  The other
financial and statistical information with respect to the Company and its
Active Subsidiary included in the Memorandum present fairly the information
shown therein on a basis consistent with the financial statements of the
Company and its Active Subsidiary included in the Memorandum.  The Company does not know of any facts,
circumstances or conditions (or any state of facts, circumstances or conditions
which management of the Company has concluded could give rise thereto) that could
materially adversely affect its business, operations, earnings or prospects
that have not been fully disclosed in the Memorandum.


 


(j)            The conduct of
business by the Company and its Active Subsidiary as presently and proposed to
be conducted is not subject to continuing oversight, supervision, regulation or
examination by any governmental official or body of the United States or any
other jurisdiction wherein the Company or its Active Subsidiary conducts or
proposes to conduct such business, except as described in the Memorandum or
except such regulation as is applicable to commercial


 


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enterprises generally.  Except as set forth in the Memorandum, all
material licenses, permits, approvals, government authorizations, leases,
contracts and agreements referred to in the Memorandum, along with all other
material licenses, permits, approvals, leases, governmental authorizations or
contracts to which the Company or its Active Subsidiary is a party, have been
obtained and are valid and in full force and effect and neither the Company,
its Active Subsidiary nor, to the knowledge of the Company, any other party is
in default thereunder, and to the knowledge of the Company, no event has
occurred which with the passage of time or the giving of notice, or both, would
constitute a default thereunder except for a default which would not have a
material adverse effect on the Company. 
Except as described in the Memorandum, all material licenses, permits,
approvals or governmental authorizations necessary to permit the Company and
its Active Subsidiary to conduct their business have been obtained and are
outstanding and will be outstanding on each Closing Date, and the Company and
its Active Subsidiary, as applicable, are in all material respects complying therewith.  Future legislation or administrative action,
which cannot be accurately predicted, may result in adverse government
regulation.  For example, H.R. 3162
enacted on October 21, 2001 (the “Patriot Act”) and other governmental
regulation may impose export restrictions on sale of equipment or transfer of
technology to certain countries or groups. 
There can be no assurance that sales of the Company’s equipment will not
be impacted by such legislation or designation. Depending upon which countries
and sales may be designated for trade restriction such action could have a
material adverse effect on the Company’s business, financial condition, or
results of operations.  Also, certain
agreements that may be entered into by the Company involving exclusive license
rights may also be subject to national or supranational antitrust regulatory
control, the effect of which cannot be predicted.  There are no proceedings pending, or to the knowledge of the
Company threatened, seeking to cancel, terminate or limit such licenses,
approvals or permits.


 


(k)           Except as disclosed in
the Memorandum, no default by the Company or, to the best knowledge of the
Company, any other party exists in the due performance under any material
agreement to which the Company or its Active Subsidiary is a party or to which
any of its assets is subject (collectively, the “Company Agreements”).  The Company Agreements disclosed in the
Memorandum are the only material agreements to which the Company or its Active
Subsidiary are bound or by which their assets are subject, are accurately and
fairly described in the Memorandum and are in full force and effect in
accordance with their respective terms.


 


(l)            Except as set forth in
the Memorandum, there are no actions, proceedings, claims or investigations,
before or by any court or governmental authority (or any state of facts which
management of the Company has concluded could give rise thereto) pending or, to
the best knowledge of the Company, threatened, against the Company or its
Active Subsidiary, or involving their assets or, to the knowledge of the
Company, involving any of their officers or directors which, if determined
adversely to the Company, its Active Subsidiary or such officer or director,
could result in any material adverse change in the condition (financial or
otherwise) or prospects of the Company or adversely affect the transactions
contemplated by this Agreement or the other Transaction Documents or the
enforceability thereof.


 


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(m)          Neither the Company nor
its Active Subsidiary are in violation of: (i) their charter or by-laws; (ii) any
indenture, mortgage, deed of trust, note or other agreement or instrument to
which the Company or its Active Subsidiary is a party or by which it is or may
be bound or to which any of their respective assets may be subject; (iii) any
statute, rule or regulation currently applicable to the Company or its Active
Subsidiary; or (iv) any judgment, decree or order applicable to the
Company or its Active Subsidiary, which violation or violations individually,
or in the aggregate, would result in any material adverse change in the
condition (financial or otherwise) or prospects of the Company.


 


(n)           Except as set forth in
the Memorandum, neither the Company nor its Active Subsidiary own any real
property in fee simple, and the Company and its Active Subsidiary has good and
marketable title to all property (personal, tangible and intangible) owned by
it, free and clear of all security interests, liens and encumbrances.


 


(o)           The Company or its
Active Subsidiary owns all right, title and interest in, or possesses adequate
and enforceable rights to use, all patents, patent applications, trademarks,
trade names, service marks, copyrights, rights, licenses, franchises, trade
secrets, confidential information, processes, formulations, software and source
and object codes reasonably necessary for the conduct of its business, except
as otherwise described in the Memorandum (collectively, the “Intangibles”).  To the best knowledge of the Company,
neither the Company not its Active Subsidiary has infringed upon the rights of
others with respect to the Intangibles, nor does the Company have any reason to
believe it or its Active Subsidiary has infringed upon the rights of others
with respect to the Intangibles; neither the Company not its Active Subsidiary
has received notice that they have or may have infringed or are infringing upon
the rights of others with respect to the Intangibles, or any notice of conflict
with the asserted rights of others with respect to the Intangibles that could,
individually or in the aggregate, materially and adversely affect the business,
condition (financial or otherwise) or prospects of the Company and its Active
Subsidiary, taken as a whole.  Except as
set forth in the Memorandum, to the best knowledge of the Company, no others
have infringed or are infringing upon the Intangibles.


 


(p)           Except as set forth in
the Memorandum and as may otherwise be contemplated therein, the Company and
its Active Subsidiary have operated their business diligently and only in the
ordinary course as theretofore conducted and since the date of the financial
statements disclosed in the Memorandum there has been no: (i) material
adverse change in the business condition (financial or otherwise) or prospects
of the Company and its Active Subsidiary; (ii) transaction otherwise than
in the ordinary course of business; (iii) issuance of any securities (debt
or equity) or any rights to acquire any such securities; (iv) damage, loss
or destruction, whether or not covered by insurance, with respect to any asset
or property of the Company or its Active Subsidiary; or (v) agreement to
permit any of the foregoing.


 


(q)           The Company and its
Active Subsidiary have filed, on a timely basis, each Federal, state, local and
foreign tax return which is required to be filed by it, or has requested an
extension therefor and has paid all taxes and all related assessments,
penalties and interest to the extent that the same have become due.


 


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(r)            The Company is not
obligated to pay, and has not obligated the Placement Agent to pay, a finder’s
or origination fee in connection with the Offering and agrees to indemnify the
Placement Agent from any such claim made by any other person.  The Company has not offered for sale or
solicited offers to purchase the Units except for negotiations with the
Placement Agent.  Except as set forth in
the Memorandum, as of the commencement of the Offering, no other person has any
right to participate in any offer, sale or distribution of the Company’s
securities to which the Placement Agent’s rights, described herein, shall
apply.


 


(s)           The Company and its
Active Subsidiary have and will maintain appropriate casualty and liability
insurance coverage, in scope and amounts reasonable and customary for similar
businesses.


 


(t)            As of their respective
filing dates, the Company’s filings with the SEC were true and correct in all
material respects.


 


3.             Placement Agent
Appointment and Compensation.


 


(a)           In accordance with the
terms hereof, the Company hereby appoints the Placement Agent and its selected
dealers, as its exclusive agent in connection with the Offering.  The Company acknowledges that the Placement
Agent may use selected dealers and sub agents to fulfill its agency hereunder
provided that such dealers and sub agents are provided that such dealers and
sub-agents are in good standing with the National Association of Securities
Dealers, Inc. (the “NASD”) and are compensated solely by the Placement
Agent.  Except as expressly stated
herein, the Company has not and will not make, or permit to be made, any offers
or sales of the Units other than through the Placement Agent without the Placement
Agent’s prior written consent.  The
Placement Agent has no obligation to purchase any of the Units.  The agency of the Placement Agent hereunder
shall continue until the earlier of the Termination Date or the Final Closing
(as defined in Section 4(c) hereof).


 


(b)           The Company will cause to
be delivered to the Placement Agent copies of the Memorandum and has consented,
and hereby consents, to the use of such copies for the purposes permitted by
the Act and applicable securities laws, and hereby authorizes the Placement
Agent and its agents, employees and selected dealers to use the Memorandum in
connection with the sale of the Units until the Termination Date, and no other
person or entity is or will be authorized to give any information or make any
representations other than those contained in the Memorandum or to use any
offering materials other than those contained in the Memorandum in connection
with the sale of the Units.  The Company
will provide at its own expense such quantities of the Memorandum and other
documents and instruments relating to the Offering as the Placement Agent may
reasonably request.


 


(c)           The Company will
cooperate with the Placement Agent by making available to its representatives
such information as may be requested in making a reasonable investigation of
the Company and its affairs and shall provide reasonable access to senior
executive employees as shall be reasonably requested.


 


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(d)           The Company shall pay
to the Placement Agent a placement fee equal to eight percent (8%) of the
aggregate gross purchase price of all Units paid for at each Closing (the
“Placement Agent’s Fee”).  In addition,
the Company shall pay all expenses set forth in Section 5(i) hereof.  The Placement Agent’s Fee and the expenses
set forth in Section 5(i) hereof will be deducted from the gross proceeds of
the Units sold at each Closing, as set forth in Section 4 hereof.  The Placement Agent shall direct all such
amounts to be paid directly from the escrow account established pursuant to
Section 4(b) hereof.


 


(e)           As additional
compensation hereunder, at each Closing, the Company shall sell to the
Placement Agent or its designees, for nominal consideration, warrants to
purchase the number of shares of Common Stock equal to ten percent (10%) of the
Shares and Conversion Shares underlying the Warrants purchased at each Closing
(the “Agent’s Warrants”), at an exercise price per share equal to 105% of the
exercise price per share of the Warrants issued at the applicable Closing.  The shares of Common Stock underlying the
Agent’s Warrants shall be referred to collectively herein as the “Agent’s
Shares” and, together with the Agent’s Warrants, as the “Agent’s
Securities”.  The Agent’s Warrants shall
be exercisable until five years after their date of issuance.  The holders of the Agent’s Securities shall
have registration rights equivalent to those granted to the holders of
Units.  Prior to the First Closing, the
Company and Placement Agent shall agree to the form of Agent’s Warrant, which
shall contain such terms and other customary provisions including cashless
exercise and full ratchet anti-dilution provisions (excluding shares issuable
upon conversion or exercise of options, warrants, or other convertible
securities outstanding as of the date hereof or options hereafter issued
pursuant to the Company’s employee stock option plans or director stock option
plans presently in effect) in form and substance reasonably satisfactory to the
Placement Agent and the Company.


 


(f)            Provided
that the Placement Agent has identified the investors or parties that it
contacted in connection with the Offering, in the event any investor or party
contacted by the Placement Agent in connection with the Offering subsequently
invests in or provides other consideration to the Company at any time within
eighteen (18) months from the later of the Termination Date or the final
Closing of the Offering (the “Final Closing”), the Company shall pay to the
Placement Agent cash and warrant compensation with respect to such investment or
consideration equal to that which is set forth herein with respect to the
Offering, except where the Company can demonstrate to the Placement Agent’s
reasonable satisfaction that payment of such compensation would violate the
rules of the NASD or any state or federal authority. Within five says following
the execution hereof, the Company shall provide a list of parties (the “Company
Investors”) with whom it has already discussed an equity or debt investment in
the Company and whose investment shall not result in any fee or compensation
payable to the Placement Agent pursuant to this Section 3(f), unless mutually
agreed upon in advance between the Company and the Placement Agent.  Notwithstanding the foregoing sentence, the
Placement Agent shall be entitled to its fees, expenses and compensation with
respect to Company Investors that participate in the Offering.


 


(g)           The
Company shall pay to the Placement Agent cash and warrant compensation equal to
that which is set forth herein with respect to the following: (i) proceeds from
investments through private offerings by the Company made within 18 months
after the Final Closing of the Offering


 


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by
investors who participated in the Offering; and (ii) proceeds from investments
through private offerings by the Company made within 12 months after the Final
Closing of the Offering by investors who subscribed to and sought to
participate in the Offering but were rejected by the Company, except where the
Company can demonstrate to the Placement Agent’s reasonable satisfaction that
payment of such compensation would violate the rules of the NASD or any state
or federal authority.


 


4.             Subscription and
Closing Procedures.


 


(a)           Each prospective
purchaser will be required to complete and execute one original signature page
for the Subscription Agreement in the form annexed to the Memorandum and the
accredited investor certification attached thereto, which will be forwarded or
delivered to the Placement Agent at the Placement Agent’s offices at the
address set forth in Section 11 hereof, together with the subscriber’s check or
good funds in the full amount of the purchase price per Unit for the number of
Units desired to be purchased.


 


(b)           All funds for
subscriptions received from the Offering will be promptly forwarded by the
Placement Agent or the Company, if received by it, to and deposited in an
escrow account (the “Escrow Account”) with Signature Bank acting as escrow
agent (the “Escrow Agent”) established for the purpose of holding subscription
funds prior to a Closing. All such funds for subscriptions will be held in the
Escrow Account pursuant to the terms of the escrow agreement with respect
thereto among the Company, the Placement Agent and the Escrow Agent.  The Company will pay all fees related to the
establishment and maintenance of the Escrow Account.  The Placement Agent or the Company can reject any subscriptions
for any reason.  Subject to the receipt
of such subscriptions for the Minimum Amount, the Company will either accept or
reject the Subscription Agreements in a timely fashion and at each Closing will
countersign the Subscription Agreements and provide copies of such agreements
to the Placement Agent.  The Company
will give written notice to the Placement Agent of its acceptance or rejection
of each subscription.  The Company, or
the Placement Agent on the Company’s behalf, will promptly return to
subscribers incomplete, improperly completed, improperly executed and rejected
subscriptions and give written notice thereof to the Placement Agent upon such
return.


 


(c)           If subscriptions for at
least the Minimum Amount have been accepted prior to the Termination Date, the
funds therefor have been collected by the Escrow Agent and all of the
conditions set forth elsewhere in this Agreement are fulfilled, a closing shall
be held promptly with respect to that portion of the Units sold (the “First
Closing”).  Thereafter, the remaining
Units will continue to be offered and sold until the Termination Date.  Additional Closings may from time to time be
conducted at times mutually agreeable with respect to the additional Units
sold, with the Final Closing to occur within ten (10) days after the earlier of
the Termination Date or the sale of all Units offered.  Delivery of payment for the accepted
subscriptions from the funds held in the Escrow Account will be made at each
Closing at the Placement Agent’s offices against delivery by the Company of the
Securities comprising the Units at the address set forth in Section 11 hereof (or
at such other place as may be mutually agreed upon between the Company and the
Placement Agent), net of amounts due to the Placement Agent and Blue Sky
counsel pursuant to Section 5(i)


 


10

















 


hereof as of such Closing.  Executed Securities and the Agent’s Warrants
will be in such authorized denominations and issued in such names as the
Placement Agent may request on or before the second full business day prior to
the date of each Closing (“Closing Date”), and will be made available to the
Placement Agent for review and packaging at the Placement Agent’s office at
least one full business day prior thereto.


 


(d)           If Subscription
Agreements for the Minimum Amount have not been received and accepted by the
Company on or before the Termination Date for any reason, the Offering will be
terminated, no Units will be sold, and the Escrow Agent will, at the request of
the Placement Agent, cause all monies received from subscribers for the Units
to be promptly returned to such subscribers without interest, penalty, expense
or deduction.


 


5.             Further Covenants.  The Company hereby covenants and agrees
that:


 


(a)           Except with the prior
written consent of the Placement Agent, the Company shall not, at any time
prior to the Final Closing, take any action that would cause any of the
representations and warranties made by it in this Agreement not to be complete
and correct on and as of each Closing Date with the same force and effect as if
such representations and warranties had been made on and as of each such date.


 


(b)           If, at any time prior
to the Final Closing, any event shall occur that does or may reasonably be
expected to materially affect the Company or as a result of which it might
become necessary to amend or supplement the Memorandum so that the
representations and warranties herein and therein remain true, or in case it
shall, in the reasonable opinion of counsel to the Placement Agent, be
necessary to amend or supplement the Memorandum to comply with Regulation D or
any other applicable securities laws or regulations, the Company will promptly
notify the Placement Agent and shall, at its sole cost, prepare and furnish to
the Placement Agent copies of appropriate amendments and/or supplements in such
quantities as the Placement Agent may request. 
The Company will not at any time, whether before or after the Final
Closing, prepare or use any amendment or supplement to the Memorandum of which
the Placement Agent will not previously have been advised and furnished with a
copy, or to which the Placement Agent or its counsel will have objected in
writing or orally (confirmed in writing within 24 hours), or which is not in
compliance with the Act, the Regulations and other applicable securities laws.  As soon as the Company is advised thereof,
the Company will advise the Placement Agent and its counsel, and confirm the
advice in writing, of any order preventing or suspending the use of the
Memorandum, or the suspension of the qualification or registration of the Units
for offering or the suspension of any exemption for such qualification or
registration of the Units for offering in any jurisdiction, or of the
institution or threatened institution of any proceedings for any of such
purposes, and the Company will use its best efforts to prevent the issuance of
any such order, judgment or decree, and, if issued, to obtain as soon as
reasonably possible the lifting thereof.


 


(c)           The Company shall
comply with the Act, the Regulations, the Securities Exchange Act of 1934, as
amended (the “1934 Act”), and the rules and regulations thereunder, all
applicable state securities laws and the rules and regulations thereunder in
the states in which the Placement


 


11

















 


Agent’s Blue Sky counsel has
advised the Placement Agent that the Units are qualified or registered for sale
or exempt from such qualification or registration, so as to permit the
continuance of the sales of the Units, and will file with the SEC, and shall
promptly thereafter forward to the Placement Agent, any and all reports on Form
D as are required.


 


(d)           The Company shall use
its reasonable best efforts to qualify the Units for sale (or seek exemption
therefrom) under the securities laws of such jurisdictions in the United States
as the Placement Agent shall designate, and the Company will (through Blue Sky
counsel) make such applications and furnish information as may be required for
such purposes.  The Company will, from
time to time, prepare and file such statements and reports as are or may be
required to continue such qualifications in effect for so long a period as the
Placement Agent may reasonably request.


 


(e)           The Company shall place
a legend on the certificates representing the Securities issued to subscribers
stating that the securities evidenced thereby have not been registered under
the Act or applicable state securities laws, setting forth or referring to the
applicable restrictions on transferability and sale of such securities under
the Act and applicable state laws.


 


(f)            The Company shall
apply the net proceeds from the sale of the Units to fund its working capital
requirements and/or for such other purposes as shall be specifically described
under “Use of Proceeds” in the Memorandum. 
The net proceeds shall not be used to repay indebtedness to or pay
bonuses or other extraordinary or deferred compensation to current executive
officers or principal shareholders of the Company, or to repurchase or redeem
any securities, except that it is hereby understood and agreed that up to
$75,000 of subordinated debt may be paid from the net proceeds of the Offering
to two individuals who are principal shareholders but who are not directors,
officers or employees of the Company.


 


(g)           During the Offering
Period, the Company shall make available for review by prospective purchasers
of the Units during normal business hours at the Company’s offices, upon their
request, copies of the Company Agreements to the extent that such disclosure
shall not violate any obligation on the part of the Company to maintain the
confidentiality thereof and shall afford each prospective purchaser of Units
the opportunity to ask questions of and receive answers from an officer of the
Company concerning the terms and conditions of the Offering and the opportunity
to obtain such other additional information necessary to verify the accuracy of
the Memorandum to the extent it possesses such information or can acquire it
without unreasonable expense.


 


(h)           Except with the prior
written consent of the Placement Agent or as set forth in the Memorandum with
respect to the issuance of Units, the Company shall not, at any time prior to
the earlier of the Final Closing or the Termination Date, engage in or commit
to engage in any transaction outside the ordinary course of business,
including, without limitation, the incurrence of material indebtedness (except
for the substitution of a senior lender and loan facility under terms no less
favorable than existing terms with the Company’s current lender upon the
satisfaction of all liabilities and obligations owed to such current lender);
materially change its business or operations as shall be described in the
Memorandum; dispose of any material assets or make any


 


12

















 


material acquisition; or issue,
agree to issue or set aside for issuance any securities (debt or equity) or any
right to acquire such securities, except as shall be contemplated by the
Memorandum.


 


(i)            Whether or not the
transactions contemplated hereby are consummated, or this Agreement is
terminated, the Company hereby agrees to pay all fees, costs and expenses
incident hereto and to the Offering, including, without limitation, those in
connection with (i) preparing, distributing and binding the Memorandum and
any and all amendments and/or supplements thereto, fees for bound volumes and
any and all agreements, contracts and other documents related hereto and
thereto; (ii) the authorization, issuance, transfer and delivery of the
Shares, the Warrants, Conversion Shares, the Agent’s Shares and the Agent’s
Warrants, including, without limitation, fees and expenses of any transfer
agent or registrar; (iii) the fees and expenses of the Escrow Agent
(subject to Section 4(b) hereof); (iv) all fees and expenses of legal,
accounting and other advisers to the Company; (v) all filing fees, costs
and legal fees and expenses for Blue Sky services and related filings with
respect to Blue Sky exemptions and qualifications, including legal fees of
$3,000 for the first ten states and $450 per state thereafter, $3,000 of which
shall be paid to the Placement Agent’s counsel upon execution of this Agreement
for legal fees in connection with obtaining Blue Sky exemptions, up to a
maximum of $10,000 (the “Blue Sky Fees”) (notwithstanding the foregoing $10,000
cap on Blue Sky Fees, the Placement Agent shall in no way be responsible for
any such filing fees, costs and legal fees and expenses for Blue Sky services
and related filings with respect to Blue Sky exemptions and qualifications);
and (vi) subject to Section 9 hereof, a nonaccountable expense allowance
(“Placement Agent Expenses”) relating to expenses incurred by the Placement
Agent in connection with the Offering (including, without limitation, travel
and related expenses and fees and expenses of legal, accounting and other
advisers to the Placement Agent) equal to 3% of aggregate gross purchase price
of the Units sold, to be deducted from the gross proceeds from the sale of
Units at each Closing, less a good faith advance of $20,000 to cover up front
expenses to be incurred by the Placement Agent which has been paid by the
Company, receipt of which is hereby acknowledged by the Placement Agent.


 


(j)            Until the Termination
Date, neither the Company nor any person or entity acting on its behalf will
negotiate or enter into any agreement with any other placement agent or
underwriter with respect to a private or public offering of the Company’s or
any subsidiary’s debt or equity securities. 
Neither the Company nor anyone acting on its behalf will, until the
Termination Date, without the prior written consent of the Placement Agent,
offer for sale to, or solicit offers to subscribe for Units or other securities
of the Company from, or otherwise approach or negotiate in respect thereof
with, any other person.


 


(k)           At each Closing Date, (i) the independent auditors
for the Company shall have provided a “comfort letter” concerning the Company’s
financial statements in the form customarily provided by Brown & Brown, LLP
in connection with securities offerings by its audit clients and (ii) the chief
executive officer and chief financial officer of the Company shall have
provided representations and warranties relating to the Company’s most recent
quarterly and year-to-date unaudited financial statements and internal
financial controls, similar to those to be included in the Company’s 2002
annual report on Form 10-KSB under the 1934 Act, and as required by the
Sarbanes-Oxley Act of 2002.


 


13

















 


(l)            The
Company shall use its best efforts to file a Registration Statement on Form
SB-2 or another appropriate registration document under the Securities Act of
1933, as amended, for resale of the shares of Common Stock included in the
Units, and the Common Stock underlying the Warrants and the Placement Agent
Warrants, as soon as possible following the Final Closing, and in any event,
not later than 30 days following the Final Closing.  The Company shall use its best efforts to cause the effectiveness
of such Registration Statement on or before ninety (90) days after the Final
Closing.  If the Registration Statement
has not been filed within the said 30-day period or does not become effective
on or before 90 days after the Final Closing (120 days in the event of a “full review”
by the SEC), the Company shall pay to each investor an amount in cash, as
liquidated damages and not as a penalty, equal to 1.0% per month of the
subscription amount paid by such investor for the Units until the filing or
effectiveness of the Registration Statement, as applicable. If the Company
fails to pay any liquidated damages pursuant to this Section in full within
seven days after the date payable, the Company will pay interest thereon at a
rate of 15% per annum (or such lesser maximum amount that is permitted to be
paid by applicable law) to each investor, accruing daily from the date such
liquidated damages are due until such amounts, plus all such interest thereon,
are paid in full. The liquidated damages pursuant to the terms hereof shall apply
on a pro-rata basis for any portion of a month prior to the filing or
effectiveness of the Registration Statement, as applicable.


 


6.             Conditions of
Placement Agent’s Obligations.  The
obligations of the Placement Agent hereunder are subject to the fulfillment, at
or before each Closing, of the following additional conditions:


 


(a)           Each of the
representations and warranties of the Company shall be true and correct when
made on the date hereof and on and as of each Closing Date as though made on
and as of each Closing Date.


 


(b)           The Company shall have
performed and complied with all agreements, covenants and conditions required
to be performed and complied with by it under the Transaction Documents at or
before each Closing.


 


(c)           No order suspending the
use of the Memorandum or enjoining the offering or sale of the Units shall have
been issued, and no proceedings for that purpose or a similar purpose shall
have been initiated or pending, or, to the best of the Company’s knowledge, are
contemplated or threatened.


 


(d)           As of the date of the
Memorandum, the Company will have an authorized and outstanding capitalization
as described in the Memorandum.  Prior
to the Final Closing, no additional
securities will be issued by the Company, including but not limited to shares,
options, stock subscription agreements or warrants to purchase shares of the
Company or any other obligation to issue shares or other securities of the
Company, without the prior written consent of the Placement Agent.  Notwithstanding the preceding sentence, the
Company may issue (i) compensatory option grants to employees and consultants
in the ordinary course of business pursuant to option plans presently in
effect, (ii) shares of its Common Stock upon exercise of outstanding options or
warrants or


 


14

















 


conversion
of outstanding convertible securities and (iii) securities included in the
Units sold in the Offering and the Agent’s Warrants.


 


(e)           The Placement Agent
shall have received certificates of the chief financial officer of the Company,
dated as of each Closing Date, certifying on behalf of the Company, in such
detail as Placement Agent may reasonably request, as to the fulfillment of the
conditions set forth in subparagraphs (a), (b), (c) and (d) above.


 


(f)            The Company shall have
delivered to the Placement Agent (i) a currently dated good standing
certificate from the Secretary of State of Delaware and each jurisdiction in
which the Company is qualified to do business as a foreign corporation, and
(ii) certified resolutions of the Company’s Board of Directors approving this
Agreement and the other Transaction Documents, and the transactions and
agreements contemplated by this Agreement and the other Transaction Documents.


 


(g)           On or prior to the date
hereof and at each Closing, the chief executive officer and chief financial
officer of the Company shall have provided a certificate to the Placement Agent
confirming on behalf of the Company that there have been no undisclosed
material and adverse changes in the business condition (financial or otherwise)
or prospects of the Company from the date of the latest financial statements
included in the Memorandum, the absence of undisclosed liabilities and such
other matters relating to the financial condition and prospects of the Company
that the Placement Agent may reasonably request.


 


(h)           At each Closing, the
Company shall (i) pay to the Placement Agent the Placement Agent’s Fee in
respect of all Units sold at such Closing, (ii) pay all fees, costs and
expenses set forth in Section 5(i) hereof, and (iii) execute and deliver to the
Placement Agent the Agent’s Warrants in an amount proportional to the Units
sold at such Closing.


 


(i)            There shall have been
delivered to the Placement Agent a signed opinion of counsel to the Company
Gadsby Hannah, LLP (“Company Counsel”), subject to usual and customary
limitations, assumptions and caveats (including without limitation, exclusion
of any opinion regarding the securities or “blue sky” laws of any of the several
states, a public policy exclusion as
to enforceability, and reliance as to factual matters on certifications of
the Company’s executive officers and as to legal matters with respect to opinion (xi) set
forth in Exhibit A, in part on the certifications of the
Company’s general counsel) dated as of each Closing Date, in
substantially the form attached hereto as Exhibit A.


 


(j)            All actions taken at
or prior to each Closing and related documentation in connection with the
authorization, issuance and sale of the Units and the Agent’s Warrants will be
reasonably satisfactory in form and substance to the Placement Agent and its
counsel, and such counsel shall have been furnished with all such documents,
certificates and opinions as they may reasonably request upon reasonable prior
notice in connection with the transactions contemplated hereby.


 


15

















 


(k)           The Placement Agent
shall be satisfied with the results of its due diligence investigation of the
Company.


 


7.             Indemnification.


 


(a)           The Company will (i)
indemnify and hold harmless the Placement Agent, its selected dealers and their
respective officers, directors, employees and each person, if any, who controls
the Placement Agent within the meaning of the Act and such selected dealers
(each an “Indemnitee”) against, and pay or reimburse each Indemnitee for, any
and all losses, claims, damages, liabilities or expenses whatsoever (or actions
or proceedings or investigations in respect thereof), joint or several (which will,
for all purposes of this Agreement, include, but not be limited to, all
reasonable costs of defense and investigation and all reasonable attorneys’
fees, including appeals), to which any Indemnitee may become subject, under the
Act or otherwise, in connection with the offer and sale of the Units, whether
such losses, claims, damages, liabilities or expenses shall result from any
claim of any Indemnitee or any third party; and (ii) reimburse each Indemnitee
for any legal or other expenses reasonably incurred in connection with
investigating or defending against any such loss, claim, action, proceeding or
investigation; provided, however, that the Company will not be
liable in any such case to the extent that any such claim, damage or liability
results directly and primarily from (A) an untrue statement or alleged untrue
statement of a material fact made in the Memorandum, or an omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in reliance upon and
in conformity with written information furnished to the Company by the
Placement Agent or any such controlling persons specifically for use in the
preparation thereof, or (B) any violations by the Placement Agent of the Act or
state securities laws which does not result from a violation thereof or a
breach hereafter by the Company or any of its affiliates.  In addition to the foregoing agreement to
indemnify and reimburse, the Company will indemnify and hold harmless each
Indemnitee against any and all losses, claims, damages, liabilities or expenses
whatsoever (or actions or proceedings or investigations in respect thereof),
joint or several (which shall for all purposes of this Agreement, include, but
not be limited to, all costs of defense and investigation and all reasonable
attorneys’ fees, including appeals) to which any Indemnitee may become subject
insofar as such costs, expenses, losses, claims, damages or liabilities arise
out of or are based upon the claim of any person or entity that he or it is
entitled to broker’s or finder’s fees from any Indemnitee in connection with
the Offering.


 


(b)           The Placement Agent
will indemnify and hold harmless the Company, its officers, directors,
employees and each person, if any, who controls the Company within the meaning
of the Act against, and pay or reimburse any such person for, any and all
losses, claims, damages or liabilities or expenses whatsoever (or actions,
proceedings or investigations in respect thereof) to which the Company or any
such person may become subject under the Act or otherwise, whether such losses,
claims, damages, liabilities or expenses (or actions, proceedings or
investigations in respect thereof) shall result from any claim of the Company,
any of its officers, directors, employees, agents, any person who controls the
Company within the meaning of the Act or any third party, insofar as such
losses, claims, damages or liabilities are based upon (i) any untrue statement
or alleged untrue statement of any material fact contained in the Memorandum
but only


 


16

















 


with reference to information
contained in the Memorandum relating to the Placement Agent, or an omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, if made or omitted
in reliance upon and in conformity with written information furnished to the
Company by the Placement Agent or any such controlling persons, specifically
for use in the preparation thereof or (ii) acts or omissions by selected
dealers or sub-agents of the Placement Agent. 
The Placement Agent will reimburse the Company or any such person for
any legal or other expenses reasonably incurred in connection with
investigating or defending against any such loss, claim, damage, liability or
action, proceeding or investigation to which such indemnity obligation
applies.  Notwithstanding the foregoing,
in no event shall the Placement Agent’s indemnification obligation hereunder
exceed the amount of the Placement Agent’s Fees actually received by it.


 


(c)           Promptly after receipt
by an indemnified party under this Section 7 of notice of the commencement of
any action, claim, proceeding or investigation (“Action”), such indemnified
party, if a claim in respect thereof is to be made against the indemnifying
party under this Section 7, will notify the indemnifying party of the
commencement thereof, but the omission to so notify the indemnifying party will
not relieve it from any liability which it may have to any indemnified party
under this Section 7 unless the indemnifying party has been substantially
prejudiced by such omission.  The
indemnifying party will be entitled to participate in, and, to the extent that
it may wish, jointly with any other indemnifying party, to assume the defense
thereof subject to the provisions herein stated, with counsel reasonably
satisfactory to such indemnified party. 
The indemnified party will have the right to employ separate counsel in
any such Action and to participate in the defense thereof, but the fees and
expenses of such counsel will not be at the expense of the indemnifying party
if the indemnifying party has assumed the defense of the Action with counsel
reasonably satisfactory to the indemnified party; provided,  however,
that if the indemnified party shall be requested by the indemnifying party to
participate in the defense thereof or shall have concluded in good faith and
specifically notified the indemnifying party either that there may be specific
defenses available to it which are different from or additional to those
available to the indemnifying party or that such Action involves or could have
a material adverse effect upon it with respect to matters beyond the scope of
the indemnity agreements contained in this Agreement, then the counsel
representing it, to the extent made necessary by such defenses, shall have the
right to direct such defenses of such Action on its behalf and in such case the
reasonable fees and expenses of such counsel in connection with any such
participation or defenses shall be paid by the indemnifying party.  No settlement of any Action against an
indemnified party will be made without the consent of the indemnifying party
and the indemnified party, which consent shall not be unreasonably withheld or
delayed in light of all factors of importance to such party and no indemnifying
party shall be liable to indemnify any person for any settlement of any such
claim effected without such indemnifying party’s consent.


 


8.             Contribution.  To provide for just and equitable
contribution, if (i) an indemnified party makes a claim for indemnification
pursuant to Section 7 hereof and it is finally determined, by a judgment, order
or decree not subject to further appeal that such claims for indemnification
may not be enforced, even though this Agreement expressly provides for
indemnification in such case; or (ii) any indemnified or indemnifying party
seeks contribution under the Act, the 1934 Act, or


 


17

















 


otherwise, then each
indemnifying party shall contribute to such amount paid or payable by such
indemnified party in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the Company on the one hand
and the Placement Agent on the other in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities or
expenses (or actions in respect thereof), as well as any other relevant
equitable considerations.  The relative
benefits received by the Company on the one hand and the Placement Agent on the
other shall be deemed to be in the same proportion as the total net proceeds
from the Offering (before deducting expenses) received by the Company bear to
the total commissions and fees received by the Placement Agent.  The relative fault, in the case of an untrue
statement, alleged untrue statement, omission or alleged omission will be
determined by, among other things, whether such statement, alleged statement,
omission or alleged omission relates to information supplied by the Company or
by the Placement Agent, and the parties’ relative intent, knowledge, access to
information and opportunity to correct or prevent such statement, alleged
statement, omission or alleged omission. 
The Company and the Placement Agent agree that it would be unjust and
inequitable if the respective obligations of the Company and the Placement
Agent for contribution were determined by pro  rata allocation of
the aggregate losses, liabilities, claims, damages and expenses or by any other
method or allocation that does not reflect the equitable considerations
referred to in this Section 8.  No
person guilty of a fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) will be entitled to contribution from any person who is not
guilty of such fraudulent misrepresentation. 
For purposes of this Section 8, each person, if any, who controls the Placement
Agent within the meaning of the Act will have the same rights to contribution
as the Placement Agent, and each person, if any, who controls the Company
within the meaning of the Act will have the same rights to contribution as the
Company, subject in each case to the provisions of this Section 8.  Anything in this Section 8 to the contrary
notwithstanding, no party will be liable for contribution with respect to the
settlement of any claim or action effected without its written consent.  This Section 8 is intended to supersede, to
the extent permitted by law, any right to contribution under the Act, the 1934
Act or otherwise available.


 


9.             Termination.


 


(a)           (I) The Offering may be
terminated by the Placement Agent at any time prior to the expiration of the
Offering Period in the event that (i) any of the representations or
warranties of the Company contained herein shall have been false or misleading
in any material respect when made or deemed made, (ii) the Company shall
have failed to perform any of its material obligations hereunder, (iii) the
Company shall have determined for any reason not to continue with the Offering
or (iv) the Placement Agent shall determine in its sole discretion,
reasonably exercised, that it is reasonably likely that any of the conditions
to Closing set forth herein will not, or cannot, be satisfied.  In the event of any such termination
occasioned by or arising out of or in connection with the matters set forth in
clauses (i)-(iii) above, or occasioned by or arising out of or in connection
with a matter set forth in clause (iv) above due to any material breach or
failure hereunder on the part of the Company, the Placement Agent shall be
entitled to receive, an amount equal to the sum of: (A) any Placement
Agent’s Fees to which the Placement Agent is entitled pursuant to Section 3(d)
hereof earned through the Termination Date, (B) an amount equal to three
percent (3%) of the aggregate purchase price per Unit of all Units sold in the
Offering (deeming,


 


18

















 


for this purpose, all Units
offered as having been sold), less any amounts theretofore paid in respect of
Placement Agent Expenses, and all unpaid Blue Sky Fees and other expenses set
forth in Section 5(i) hereof and (C) all amounts that may become payable
pursuant to Section 3(f) hereof.  If the Offering is not completed because the
Placement Agent prevents its completion (except where the Placement Agent does
so because of a material breach by the Company of a material covenant,
representation or warranty contained herein or in the Memorandum which the
Company fails to cure within ten (10) business days of receipt of written
notice from the Placement Agent) or the Company terminates the Offering because
of failure of the Commencement Date to occur within 10 days from the date
hereof, the Placement Agent shall retain the $20,000 previously paid to the
Placement Agent.  If the Company
prevents completion of the Offering (except where the Company does so because
of a material breach by the Placement Agent of a material covenant,
representation or warranty contained herein which the Placement Agent fails to
cure within ten (10) business days of receipt of written notice from the
Company), the Company’s liability for the Placement Agent’s expenses shall be
equal to 3% of the Maximum Amount to cover the Placement Agent’s expenses and
efforts.  Notwithstanding the foregoing,
in the event the Company completes one or more private offerings of its
securities within one year after the Company prevents the completion of the
Offering (except where the Company does so because of a material breach by the
Placement Agent of a material covenant, representation or warranty contained
herein which the Placement Agent fails to cure within ten (10) business days of
receipt of written notice from the Company), the Company shall also pay the
Placement Agent an investment banking fee equal to five percent (5%) of the
total consideration received by the Company in connection with such sales of
securities, up to a maximum fee of $100,000 except where the Company can
demonstrate to the Placement Agent’s reasonable satisfaction that payment of
such compensation would violate the rules of the NASD or any state or federal
authority.  The Company shall not have any
liability to the Placement Agent under the preceding sentence unless the
Placement Agent obtains subscriptions for the Minimum Offering prior to
expiration of the Offering Period.


 


(II)           This
Offering may be terminated by the Placement Agent by notice to the Company at
any time if, in the sole judgment of the Placement Agent, the Offering or the
sale or the payment for or the delivery of the Units is rendered impracticable
or inadvisable because (i) additional material governmental restrictions not in
force and effect on the date hereof shall have been imposed upon trading in
securities generally, or minimum or maximum prices shall have been generally
established on the New York Stock Exchange, or trading in securities generally
on such exchange shall have been suspended or a general banking moratorium
shall have been established by federal or New York State authorities, (ii) a
war, major hostilities, terrorist or similar activity, act of God or other
calamity shall have occurred, (iii) of a material adverse change in the
condition (financial or otherwise) of the Company, its business or business
prospects or (iv) the Placement Agent, in its sole discretion, shall be
dissatisfied with the results of its due diligence investigation.


 


(b)           This Offering may be
terminated by the Company at any time prior to the Termination Date in the
event that the Placement Agent shall have failed to perform any of its material
obligations hereunder.  In the event of
any termination by the Company pursuant to this paragraph, the Placement Agent
shall be entitled to receive all amounts as may be due under any indemnity or
contribution obligation provided herein or any other Transaction Document, at
law or otherwise.


 


19

















 


On such Termination Date, the
Company shall pay all unpaid Blue Sky Fees and other expenses set forth in
Section 5(i) hereof.


 


(c)           Upon any such
termination, the Escrow Agent will, at the request of the Placement Agent,
cause all money received in respect of subscriptions for Units not sold to be
promptly returned to such subscribers without interest, penalty, expense or
deduction.  Any interest earned thereon
shall be applied first to the payment of amounts, if any, due to the Escrow
Agent and next to the payment of any amounts payable to the Placement Agent
hereunder which remain unpaid.


 


10.           Survival.


 


(a)           The obligations of the
parties to pay any costs and expenses hereunder and to provide indemnification
and contribution as provided herein shall survive any termination hereunder.


 


(b)           The respective indemnities,
agreements, representations, warranties and other statements of the Company set
forth in or made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation made by or on behalf of, and regardless
of any access to information by, the Company or the Placement Agent, or any of
their officers or directors or any controlling person thereof, and will survive
the sale of the Units.


 


11.           Notices.  All communications hereunder will be in
writing and, except as otherwise expressly provided herein or after notice by
one party to the other of a change of address, if sent to the Placement Agent,
will be mailed, delivered or telefaxed and confirmed to Casimir Capital L.P., 100 Broadway, 11th Floor, New
York, NY 10005, Attention: Matthew McGovern, Telefax number
212-798-1399, with a copy to Feldman Weinstein LLP, 420 Lexington Avenue, New
York, New York 10170, Attention: David N. Feldman, Esq., Telefax number
(212) 997-4242, and if sent to the Company, will be mailed, delivered or
telefaxed and confirmed to MFIC Corporation, 30 Ossipee Road, Newton, MA  02464, Attention: Jack M. Swig, Esquire,
Telefax number (617) 965-1213, with a copy to Jeffrey S. Stoler, Esq., Gadsby
Hannah, LLP, 225 Franklin Street, Boston, MA 
02110, Telefax number (617) 204-8011.


 


12.  APPLICABLE LAW, COSTS, ETC.  THIS AGREEMENT WILL BE GOVERNED BY,
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE.  ALL CONTROVERSIES, THAT ARISE BETWEEN THE
PARTIES CONCERNING THIS AGREEMENT, SHALL BE EXCLUSIVELY DETERMINED BY
ARBITRATION PURSUANT TO THE RULES THEN PERTAINING TO THE AMERICAN ARBITRATION
ASSOCIATION (THE “AAA”) IN NEW YORK COUNTY, NEW YORK.  HEARINGS WITH REGARD TO SUCH DISPUTE SHALL BE HELD EXCLUSIVELY AT
THE OFFICES OF THE AAA IN THE CITY OF NEW YORK AND JUDGMENT UPON ANY AWARD
RENDERED PURSUANT THERETO MAY BE ENTERED IN ANY COURT OF COMPETENT
JURISDICTION.  ANY DECISION RENDERED BY
THE AAA SHALL BE FINAL AND BINDING. SERVICE OF PROCESS MAY BE MADE UPON THE
COMPANY BY MAILING A COPY THEREOF TO IT, BY CERTIFIED OR REGISTERED MAIL, AT
ITS


 


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ADDRESS TO BE USED FOR THE
GIVING OF NOTICES UNDER THIS AGREEMENT. 
THE COMPANY AND THE PLACEMENT AGENT EACH HEREBY WAIVES ITS RIGHT TO A
JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
AGREEMENT OR ANY DOCUMENT OR AGREEMENT CONTEMPLATED HEREBY.


 


13.  Confidentiality.  The Company hereby agrees to hold
confidential the identities of the purchasers in the Offering and shall not
disclose their names and addresses without the prior written consent of the
Placement Agent, unless required by law. 
The Company hereby consents to the granting of an injunction against it
by any court of competent jurisdiction to enjoin it from violating the
foregoing confidentiality provisions. 
The Company hereby agrees that the Placement Agent will not have an
adequate remedy at law in the event that the Company breaches these
confidentiality provisions contained herein, and that the Placement Agent will
suffer irreparable damage and injury as a result of any such breach.  Resort to such equitable relief shall not,
however, be construed to be a waiver of any other rights or remedies which the
Placement Agent may have.


 


14.  Miscellaneous.  No provision of this Agreement may be
changed or terminated except by a writing signed by the party or parties to be
charged therewith.  Unless expressly so
provided, no party to this Agreement will be liable for the performance of any
other party’s obligations hereunder. 
Any party hereto may waive compliance by the other with any of the
terms, provisions and conditions set forth herein; provided, however,
that any such waiver shall be in writing specifically setting forth those
provisions waived thereby.  No such
waiver shall be deemed to constitute or imply waiver of any other term,
provision or condition of this Agreement. 
This Agreement shall be binding upon and inure to the benefit of the
parties and their successors and permitted assigns.  Except with respect to the use of selected dealers and sub-agents
by the Placement Agent, neither party may assign this Agreement or any rights
or obligations hereunder without the prior written consent of the other party,
which consent shall not be unreasonably withheld.  This Agreement may be executed in counterparts, each of which
shall be deemed an original and all of which shall constitute a single agreement.  If any provision of this Agreement is held
to be invalid or unenforceable in any respect, the validity and enforceability
of the remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefore, and upon
so agreeing, shall incorporate such substitute provision in this Agreement.


 


15.  Entire Agreement. 
This Agreement together with any other agreement referred to herein
contains the entire Agreement between the parties hereto and is intended to
supersede all prior agreements between the parties with respect to the Units
purchased hereunder and the subject matter hereof.


 


[SIGNATURE PAGE FOLLOWS]


 


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If the foregoing is in
accordance with your understanding of our agreement, kindly sign and return
this Agreement, whereupon it will become a binding agreement between the
Company and the Placement Agent in accordance with its terms.


 


	
   

  	
  Very truly
  yours,

  
	
   

  	
   

  
	
   

  	
  MFIC
  CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Accepted and
  agreed to this

  
	
   

  	
       
  day of
                           ,
  2004.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CASIMIR
  CAPITAL L.P.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  



 


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EXHIBIT A


 


FORM OF LEGAL OPINION


 


The phrase “Transaction
Documents,” whenever it is used in this letter, means (a) the Placement Agency
Agreement dated as of
                       ,
2004 by and among MFIC Corporation (the “Company”) and Casimir Capital LP (the
“Placement Agent”) (such agreement, the “Placement Agency Agreement”), (b) the
Placement Agent Warrant dated as of
                       ,
2004, by and among the Company and the Placement Agent (the “Placement Agent
Warrant”) and (c) the Subscription Agreement, dated as
of                       ,
2004, by and among the Company and each investor signatory thereto (such
investors, the “Investors” and such agreement, the “Subscription Agreement”),
and all other documents executed in connection with (a)-(c).  All capitalized terms used in this letter
have the respective meanings set forth in the Placement Agency Agreement unless
otherwise defined herein.


 


(i)            The Company has been
organized as a corporation and is validly existing and in corporate good
standing under the laws of the State of Delaware, has full corporate power and
authority to own, lease and operate its properties and conduct its business as
described in the Memorandum and is duly qualified as a foreign corporation for
the transaction of business and is in good standing in each jurisdiction where
the conduct of its business makes such qualification necessary, except where
the failure to so qualify would not have a material adverse effect upon the
business (as currently conducted), financial condition or results of operation
of the Company (a “Material Adverse Effect”).


 


(ii)           The Company has the
full corporate power and authority to execute and deliver the Transaction
Documents and all other agreements, documents and certificates contemplated
thereby and to perform its obligations thereunder.  The execution, delivery and performance thereof and thereunder
has been duly authorized by all necessary corporate action.  Each of the Transaction Documents has been
duly executed and delivered on behalf of the Company, and constitutes legal,
valid and binding obligations of the Company, enforceable against it in
accordance with its terms except as such enforceability may be limited by
public policy considerations, applicable bankruptcy, insolvency or laws
affecting creditor’s rights or remedies and general principles of equity.


 


(iii)          The Company has an
authorized and outstanding capital stock as set forth in the Memorandum.  The Units, the components thereof,
Conversion Shares and the Agent’s Shares have been duly authorized, and when
duly and validly delivered and paid for pursuant to the terms of the
Transaction Documents will be validly issued, fully paid and
nonassessable.  Except as set forth in
the Confidential Private Placement Memorandum (the “Memorandum”), the issuance
of the Units, the components thereof, Conversion Shares or the Agent’s
Securities are not subject to statutory, or to our knowledge, contractual or
other preemptive rights of any stockholder of the


 


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Company.  The Units, the components thereof,
Conversion Shares and the Agent’s Securities conform in all material respects
to all statements in relation thereto contained in the Memorandum.  A sufficient number of authorized but unissued
shares of Common Stock have been reserved for issuance upon conversion or
exercise of the components of the Units and exercise of the Agent’s Warrants.


 


(iv)          None of the execution
and delivery of, or performance by the Company under, any of the Transaction
Documents or the consummation of the transactions therein contemplated, will
conflict with or violate (a) any term of the charter or by-laws of the Company,
(b) any statute, rule, regulation or ordinance applicable to the Company, or
(c) any permit, judgment, decree, or order known to such counsel which is
applicable to the Company or any of its assets, properties or businesses.


 


(v)           To our knowledge, none
of the execution and delivery of, or performance by the Company under, any of
the Transaction Documents or the consummation of the transactions therein
contemplated, will conflict with or result in the creation or imposition of,
any lien, charge or other encumbrance upon any of the properties or assets of
the Company pursuant to the terms of any material indenture, mortgage, deed of
trust, note, material license, agreement or other instrument known to such
counsel to which the Company is a party or by which the Company may be bound or
to which any of its assets, properties or businesses is or may be subject.


 


(vi)          To our knowledge, no
consent, approval, authorization, order, registration or qualification of or
with any court or regulatory, administrative or governmental agency, body or
authority of the United States of America or any political subdivision thereof
is required on behalf of the Company in connection with the issuance or sale of
the Units or the Agent’s Warrants except for required filings with the United
States Securities and Exchange Commission and applicable “Blue Sky” or state
securities commissions relating specifically to the Offering.


 


(vii)         To our knowledge, except
as set forth in the Memorandum, there are no legal or regulatory,
administrative or governmental charges, actions, suits, proceedings, claims,
hearings or investigations, before or by any court, governmental authority, or
instrumentality pending or threatened against the Company, or involving its
assets or properties or any of its officers or directors which, if determined
adversely to the Company, could have a Material Adverse Effect on the Company
or adversely affect any of the transactions contemplated by the Transaction
Documents or the validity or enforceability thereof.


 


(viii)        To our knowledge, the
Company is not in material violation or breach of: (i) its charter or by-laws,
(ii) any material indenture, mortgage, deed of trust, note or other agreement
or instrument to which the Company is a party or by which it is or may be bound
or to which any of its assets, properties or businesses may be subject; or
(iii) any judgment, decree or order applicable to the Company which violation
or violations individually, or in the aggregate, might result in any Material
Adverse Effect in the condition (financial or otherwise), or prospects of the
Company.


 


(ix)           To our knowledge, the
Company has obtained all authorizations, approvals, licenses,


 


24

















 


permits, franchises and orders
of and from all governmental officials and bodies to own or lease and operate
its assets and properties (the “Authorizations”) and to conduct its business as
currently conducted as described in the Memorandum; all of such Authorizations
are to the best of our knowledge in full force and effect and there are, to the
knowledge of such counsel no proceedings pending or threatened seeking to
cancel or terminate such Authorizations.


 


(x)            We have participated
in the preparation of the Memorandum and in conferences with officers and other
representatives of the Company, at which such conferences the contents of the Memorandum
and related matters were discussed, and based upon those conferences and upon
such counsel’s participation in the preparation of the Memorandum, and any
amendment or supplement thereto (other than the financial statements, including
supporting schedules and other financial and statistical information derived
therefrom), we are not specifically aware that the Memorandum contains any
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements therein not misleading with respect to all
material contracts of the Company filed as exhibits to the Company’s filings
with the Securities and Exchange Commission.


 


(xi)           Based on a certificate
from a duly authorized officer of the Company as to certain factual matters
annexed hereto and assuming that the Units were sold only to “accredited
investors” (as defined in Rule 501 of Regulation D) and the Placement Agent
complied in all material respects with Regulation D and requirements of Section
4(2) that are applicable to it, (i) such sales were made in conformity in all
material respects with the requirements of Sections 4(2) of the Act and
Regulation D and (ii) the issuance of the Units in accordance with the
Memorandum is exempt from registration under the Securities Act of 1933, as
amended.


 


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