**EXHIBIT 10.4**

 

Confidential

 

**iVOW****, Inc**2101 Faraday AvenueCarlsbad, CA 92008

 

May 3, 2005

 

Dawson James Securities925 South Federal Highway6th FloorBoca Raton, FL 33432

 

Re:  SellingAgreement (the “Agreement”)

 

Gentlemen:

 

IVOW, Inc., a Delaware corporation (the “Seller”),proposes to offer and sell (the “Offering”), to selected investors, upon theterms set forth herein and in the Confidential Private Placement Memorandum andother documents to be supplied to the investors (which collectively, togetherwith the attachments and exhibits thereto, is referred to as the “OfferingDocument”), a copy of which has been delivered to you, up to 8,500,000 units(the “Units”); each Unit consisting of 1 share of Common Stock (the “CommonStock”) and a warrant to purchase 1 share of Common Stock (the “Warrants”).  The Common Stock and Warrants shall havethose provisions described in Exhibit B hereto, and shall be acceptable tothe Selling Agent.  (The Units aresometimes referred to hereafter as the “Offered Securities”).  Dawson James Securities, Inc. (the “SellingAgent”) agrees to offer and sell on an exclusive “best efforts, all or none”basis, that number of Units that results in an aggregate sales price of atleast $2,000,000  (the“Minimum Number”), and on a best efforts basis with respect to additional Unitshaving an aggregate sales price of no more than $2,500,000 during the offeringperiod described in the Offering Document (the “Offering Period”). Capitalizedterms used and not otherwise defined herein shall have the respective meaningsset forth in the Offering Document.  Itis intended that the offer, offer for sale and sale of the Offered Securitieswill be exempt from the federal registration requirements of the Securities Actof 1933, as amended (the “1933 Act”), pursuant to Regulation D promulgatedunder Section 3(b) and/or Section 4(2), respectively, of the1933 Act and will qualify for an exemption from registration, if necessary,under the applicable state securities laws and regulations.

 

The Seller hereby confirms its agreement withSelling Agent as follows:

 

1.             Offerand Sale of Offered Securities by Selling Agent; Compensation; Closing.

 

1.1           Onthe basis of Selling Agent’s representations, covenants and warranties, theSeller appoints Selling Agent the agent of the Seller for the period commencingon the date of the completion of the Offering Document and ending on the dateset forth in the Offering Document, unless extended by the Seller and SellingAgent by their mutual

 

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agreement for a period not to exceed an additional thirty (30) days (“OfferingTermination Date”), to use Selling Agent’s best efforts to offer and sell, onthe terms and conditions set forth in this Agreement and in the OfferingDocument, subject only to Selling Agent’s right to engage participating broker-dealerspursuant to Section 2 hereof.  TheSelling Agent hereby accepts such appointment and agrees pursuant to the termsand conditions set forth herein and in the Offering Document to use its bestefforts to offer and sell the Offered Securities as agent for the Seller duringthe period specified above, and to attempt to find suitable accreditedpurchasers for the Offered Securities acceptable to the Seller.

 

1.2           Priorto and subject to the closing, subscription proceeds from the sale of theOffered Securities will be deposited in an escrow account at Silicon ValleyBank (the “Escrow Agent”).  The Sellerwill be responsible for setting up the Escrow Account, pursuant to an escrowagreement among the Seller, the Selling Agent and the Escrow Agent, whichescrow agreement will be approved by the Selling Agent.  Subscribers will be instructed to make theirchecks payable to “Silicon Valley Bank, Escrow Agent for IVOW, Inc.,” orshall cause the wire transfer of immediately available funds in favor ofSilicon Valley Bank, Escrow Agent for IVOW, Inc., in accordance withinstructions provided by the Selling Agent. Unless at least the Minimum Number of Units have been sold during theOffering Period (as the same may be extended by the mutual agreement of theSelling Agent and the Seller), the Offering will be terminated at the end ofthe Offering Period, no Offered Securities will be sold in the Offering and allsubscription proceeds will be refunded to subscribers by the Escrow Agent,without interest thereon.  Ifsubscriptions for at least the Minimum Number of Units are received by the endof the Offering Period (as the same may be extended by the mutual agreement ofthe Selling Agent and the Seller), a closing (the “First Closing”) will occuras soon as possible after subscriptions for the Minimum Number have beenaccepted by the Seller.  After the FirstClosing, one or more subsequent closings (the “Additional Closings”) will occurthereafter on such dates as mutually determined by the Seller and the SellingAgent, but in no event later than ten (10) days after the end of theOffering Period.  (The First Closing andany Additional Closing shall each be referred to herein as a “Closing” and thelast of the Closings shall be referred to as the “Final Closing”).

 

1.3           Forpurposes hereof, the Minimum Number of Units shall not be deemed to have beensold unless (x) subscription agreements, completed and fully executed bysubscribers who are accredited investors have been received covering theMinimum Number of the Units and (y) all checks, drafts and wire transferssubmitted by such subscribers in payment of the purchase price of such Unitshave been received by the Escrow Agent and have cleared so that there are “goodfunds” in the Escrow Account at least equal to the aggregate purchase price ofthe Minimum Number of Units.

 

1.4           Ascompensation for the Selling Agent’s services hereunder, the Seller shall payto Selling Agent in cash a selling commission (“Commission”) upon each Closing, in an amount equal to five percent (5%) of theaggregate offering price of the Offered Securities sold by the Selling Agent orits authorized agent at such Closing. At each Closing of the Offering, theSeller shall pay the Selling Agent its Commission relating to the sale of theOffered Securities that are subject of the Closing provided that the Seller orcounsel for the

 

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Seller has received all documents, including but not limited to, anexecuted Subscription Agreement for each investor (“Subscription Documents”)previously furnished to Selling Agent which the Selling Agent is required todeliver to the Seller or counsel for the Seller prior to Closing.  All or any portion of such Commission may bere-allowed to Participating Broker-Dealers (as hereinafter defined).  No Offered Securities shall be considered tohave been sold by Selling Agent or any Participating Broker-Dealer selected bySelling Agent unless the purchaser is acceptable to the Seller, and nocompensation will be payable with respect to any agreement for the purchase ofOffered Securities if the Subscription Agreement therefor is not actuallyaccepted by the Seller.  Anything in thisAgreement to the contrary notwithstanding, the Seller shall not be required topay a Commission to Selling Agent and Selling Agent shall not be entitled to aCommission, pursuant to this Section 1.4 or any other provision, if to doso would cause the Seller to violate federal or state securities laws,regulations or rules or any other law applicable to the Offering.

 

1.5           TheSeller will pay all of its costs relating to the Offering contemplated hereby,including, without limitation, audit expenses, issuance costs and taxes,counsel fees for the preparation of the Offering Documents, filing fees anddisbursements of counsel relating to the qualification of the OfferedSecurities under federal securities laws, and legal fees and expenses ofcounsel in connection with qualifying the Offered Securities under the stateblue sky laws.  To the extent required bylaw, the Seller shall qualify the Offered Securities for offer and sale inthose jurisdictions designated by the Selling Agent.  The Seller’s counsel shall be responsible forstate blue sky securities laws compliance by the Seller.

 

1.6           TheSeller shall pay the Selling Agent at each Closing anon-accountable expense allowance of 1.0% of the aggregate dollar value ofUnits sold at such Closing, $5,000 of which shall be advanced to Selling Agentcontemporaneous with the execution of this Agreement.

 

1.7           Once the Offered Securities are sold, or the Offering Period terminates,the agency between the Seller and the Selling Agent shall terminate.  The Selling Agent, on the basis of therepresentations and warranties herein contained, but subject to the terms andconditions herein set forth, accepts such appointment as the limited agent ofthe Seller and agrees to use its best efforts to find purchasers for theOffered Securities.

 

1.8           Uponeach Closing of the sale of the Offered Securities offered by the Sellerhereunder, the Seller will issue to the Selling Agent at a purchase price of$.001 per warrant, warrants to purchase five percent (5%) of the Units sold inthe Offering (“Selling Agent’s Warrants”). The Selling Agent’s Warrants shall be exercisable at any time during thefive (5) years from the date of First Closing at an exercise price equalto one hundred and twenty percent (120%) of the offering price. The SellingAgent’s Warrants shall be in the form and shall contain the provisions setforth in Exhibit A attached hereto.

 

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1.10         Each Closing shall be held at the offices of the Selling Agent, 925 S.Federal Highway, 6th Floor, Boca Raton, FL 33432, or in analternative location and at such time and date as Selling Agent and the Sellermay mutually agree.

 

2.             ParticipatingBroker-Dealers.  The Seller herebyauthorizes Selling Agent to engage other qualified broker-dealers (the “ParticipatingBroker-Dealers”) to assist the Selling Agent in the placement of the OfferedSecurities; provided that during all times that each such Participating Broker-Dealershall offer and sell the Offered Securities, each such Participating Broker-Dealershall be registered as a broker-dealer under the Securities Exchange Act of1934 (the “1934 Act”), shall be a member in good standing of the NationalAssociation of Securities Dealers, Inc. (“NASD”), and shall be authorizedto offer and sell the Offered Securities under the laws of the jurisdictions inwhich the Offered Securities will be offered and sold by such ParticipatingBroker-Dealer.  All Participating Broker-Dealerswill be required to execute a Participating Broker-Dealer Agreement, the formof which is subject to the reasonable approval of the Seller, with SellingAgent containing substantially the same terms and conditions as this Agreement,including, without limitation, the representations and warranties contained in Section 3.2below and provisions for indemnification of the Seller to the same extent asyour indemnification provided in Section 7 below.  Any commissions, fees, or expenses payable tosuch Participating Broker-Dealers will be paid by the Selling Agent and not bythe Seller.

 

3.             Representations,Warranties and Covenants.

 

3.1           The Sellerrepresents, warrants and covenants to Selling Agent that, except as set forthin Schedule 3.1 hereof:

 

(a)           The Sellerand each subsidiary is a corporation duly formed and validly existing and ingood standing under the laws of the jurisdiction of its incorporation as ineffect on the date of this Agreement, with adequate power and authority toenter into and perform this Agreement and to own its property and to conductits business as described in the Offering Document; and the Seller and eachsubsidiary is duly qualified as a foreign corporation to transact business andis in good standing in each jurisdiction in which it owns or leases substantialproperties or in which the conduct of its business requires such qualificationexcept for such jurisdictions in which the failure to qualify in the aggregatewould not have material and adverse effect on the earnings, affairs or businessprospects of the Seller or any such subsidiary (a “Material Adverse Effect”)and in which jurisdictions such failure may be cured without such MaterialAdverse Effects; the execution and delivery of this Agreement by the Seller hasbeen duly and validly authorized and will not result in a breach of itsCertificate of Incorporation or By-laws; and when executed and delivered byboth parties hereto, this Agreement will be a valid and binding obligation ofthe Seller, assuming the due execution by the Selling Agent, enforceable inaccordance with its terms (except to the extent that enforceability of theindemnification provisions may be limited under applicable securities laws andexcept as enforcement may be limited by bankruptcy, moratorium or other lawsaffecting creditors’ rights or general principles of equity); and the executionand delivery of this Agreement, the consummation of the transactions hereincontemplated and compliance

 

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with the terms of thisAgreement by the Seller do not and will not conflict with or result in a breachof any of the terms or provisions of, or constitute a default under, anyagreement or any applicable law, rule, regulation, judgment, order or decree ofany government, government instrumentality or court, domestic or foreign,having jurisdiction over the Seller, to which the Seller is a party or by whichit is bound;

 

(b)           TheOffering Document does not contain and will not contain, at any time betweenthe date hereof and to and including the date of each Closing, any untruestatement of a material fact and does not omit nor during such period will omitto state a material fact required to be stated therein or necessary to make thestatements therein, in light of the circumstances under which they were made,not misleading;

 

(c)           Exceptas is otherwise disclosed in the Offering Document, there is no litigation orgovernmental proceeding pending or, to the best of its knowledge, threatenedagainst or involving the property or business of the Seller or any subsidiaryof the Seller;

 

(d)           Exceptas is otherwise disclosed in the Offering Document, no material defaults existin the due performance and observance of any material obligation, term,covenant or condition of any agreement or instrument to which the Seller or anysubsidiary is a party or by which they are bound;

 

(e)           The offer,offer for sale, and sale of the Offered Securities have not been and will notbe registered with the Securities and Exchange Commission (the “SEC”) except ascontemplated in the Offering Document. The Company’s actions with respect to the offer, offer for sale and saleof the Offering Securities will be pursuant to the exemptions from theregistration requirements of Section 5 of the 1933 Act provided by Section 4(2) thereofand/or by Regulation D thereunder;

 

(f)            Tothe best of its knowledge and belief, assuming the offer, offer for sale andsale of the Offered Securities is made in compliance with the terms of theOffering Document, the applicable filings with the SEC and any applicable BlueSky States, and subject to the performance of the Selling Agent’s obligationshereunder, the Seller will have complied in all material respects with the 1933Act and with all state securities laws and regulations applicable to it inconnection with the offer, offer for sale, and sale of the OfferedSecurities.  The Seller has not taken andwill not take any action in conflict with the 1933 Act or applicable state orforeign securities or Blue Sky laws, or which would make the exemption, qualificationor registration pursuant to applicable federal or state securities or Blue Skylaws unavailable with respect to the offer, offer for sale and sale of theOffered Securities.  The Seller and itsofficers, directors or partners are not subject to any disqualification,including but not limited to any judgment, decree, order or decision issued bythe SEC, any state or foreign securities regulatory authority, any court ofcompetent jurisdiction or the United States Postal Service.  In offering the Offered Securities, theSeller will comply with all applicable federal, state or foreign securitieslaws, including the rules covering exemptions from registration;

 

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(g)           Subject tothe performance of the Selling Agent’s obligations hereunder, the OfferedSecurities, upon the payment therefor and issuance thereof, will conform to allstatements and descriptions in relation thereto contained in the OfferingDocument and will have the rights set forth in the Seller’s Certificate ofIncorporation;

 

(h)           To the bestof the Seller’s knowledge, the Seller has neither been engaged in, nor been thesubject of, any of the actions or proceedings specified in subsection (a) ofRule 262 promulgated under Section 3(b) of the 1933 Act, or anysubstantially similar provisions under the securities laws of any state inwhich the Offered Securities are to be sold, such that no exemption fromregistration would be available for the offering of the Offered Securities bythe Seller under applicable federal or state securities laws;

 

(i)            Since therespective dates as of which information is given in the Offering Document,there has been no material adverse change in the condition, business, property,capital commitments, working capital and liabilities or prospects of the Selleror any subsidiary, financial or otherwise; and the property and business of theSeller materially conform to the descriptions thereof contained in the OfferingDocument; there have been no material liabilities or obligations incurred ormaterial transactions entered into by the Seller or any subsidiary other thanthose in the ordinary course of business; there have been no dividends ordistributions of any kind declared, paid or made by the Seller on its capitalstock; there has not been any change in the capital stock, or any materialincrease in the current or long-term debt except as disclosed in the OfferingDocument, or any issuance of options, warrants, convertible securities or otherrights to purchase the capital stock of the Seller or any subsidiary; and therehave been no transactions between the Seller, shareholders owning five percent(5%) or more of its issued and outstanding capital stock, the Seller’s officersand/or directors, nor have there been any corporate opportunities taken orassumed by controlling shareholders, officers or directors, that are not fullydisclosed in the Offering Document.

 

(j)            The Sellerwill notify the Selling Agent immediately and confirm the notice in writing (i) ofthe issuance by the SEC or by any state attorney general or securitiesadministrator of any order enjoining the sale of the Offered Securities orsuspending the effectiveness of any qualification of the Offered Securities forsale or (ii) of the initiation of any proceedings for that purpose.  The Seller will make every reasonable effortto prevent the issuance of any such order and, if any such order shall at anytime be issued, to obtain the lifting thereof at the earliest possible moment;

 

(k)           The auditedand unaudited combined financial statements of the Seller (including therelated notes) included in the Offering Document present fairly the financialposition of the Seller and its subsidiaries at the dates indicated; saidfinancial statements have been prepared in conformity with United States generallyaccepted accounting principles applied on a consistent basis, except asexpressly qualified therein, and are in conformity with Regulation S-Xpromulgated under the Act;

 

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(l)            Except asset forth in the Offering Document, the Seller does not have any subsidiariesand does not own any interest in any other corporation, partnership, jointventure or other entity;

 

(m)          As of thedate of this Agreement, the Seller and its subsidiaries have not agreed, or agreedin principle, to any merger or acquisition, or combination with, of any othercorporation, partnership, person, party, entity or trust or the sale of itsbusiness or assets to any other corporation, partnership, person, party, entityor trust;

 

(n)           The Sellerand its subsidiaries have not, directly or indirectly, at any time during theirexistence (i) made any unlawful contribution to any candidate forpolitical office, or failed to disclose fully any contribution in violation oflaw, or (ii) made any payment to any federal, state or foreigngovernmental officer or official, or other person charged with similar publicor quasi-public duties, other than payments required or permitted by the lawsof the United States or any jurisdiction thereof;

 

(o)           To the bestof Seller’s knowledge, the Seller and its subsidiaries have filed all necessaryfederal, state, local, foreign and other tax returns required to be filed bythem and have paid all taxes shown as due thereon; the Seller and itssubsidiaries have not been notified, either orally or in writing, that anystate, local, federal or foreign taxing authority is conducting or intends toconduct an audit of any tax return or report filed by the Seller and itssubsidiaries or concerning their business or properties; and the Seller has noknowledge of any tax deficiency which has been asserted or threatened againstthe Seller and any subsidiary which would materially and adversely affect thebusiness, properties, financial condition, results of operations, liabilitiesor working capital of the Seller;

 

(p)           The Sellerand its subsidiaries make and keep accurate books and records and maintaininternal accounting controls which provide reasonable assurance that (i) transactionsare executed in accordance with management’s authorization, (ii) transactionsare recorded as necessary to permit preparation of its financial statements andto maintain accountability for its assets, (iii) access to their assets ispermitted only in accordance with management’s authorization, and (iv) thereported assets are compared with existing assets at reasonable intervals;

 

(q)           Thereare no pre-emptive rights applicable to any of the Seller’s outstandingsecurities, or granted by the Seller to any person or party;

 

(r)            Thecapitalization of the Seller is as described in the Offering Document and theSeller has outstanding no more than 11,062,346 shares of its Common Stock as ofthe date hereof; all presently outstanding shares of the Seller’s Common Stockare duly and validly authorized and issued, fully paid and non-assessable andcontain no preemptive rights; the Seller has not contracted for the issuance ofany additional equity securities other than as set forth herein or ascontemplated or described in the Offering Document; and no shares of any otherclasses of equity securities are issued and outstanding;

 

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(s)           The Selleragrees that, for a period of six months (6) months from the date hereof,it shall not solicit any offer to buy from or offer to sell to any personintroduced to the Seller by the Selling Agent in connection with the Offering,with the exception of MedCap Partners and their related funds and the Dugdalefamily and friends who invested in Seller’s February 2004 private placement,directly or indirectly, any securities of the Seller or provide the name of anysuch person to any other securities broker or dealer or selling agent.  In the event that the Seller or any of itsaffiliates, directly or indirectly, solicits, offers to buy from or offers tosell to any such person any such securities, or provides the name of any suchperson to any other securities broker or dealer or selling agent, and suchperson purchases such securities or purchases securities from any other securitiesbroker or dealer or selling agent, the Seller shall pay to the Selling Agent anamount equal to five percent (5.0%) of the aggregate purchase price of thesecurities so purchased by such person.

 

3.2           The SellingAgent represents and warrants to the Seller as follows:

 

(a)           The SellingAgent is, has been and will be at all times during the Offering Period, aDelaware corporation duly organized and validly existing under the laws of thestate of its incorporation, with all requisite power and authority to enterinto and perform this Agreement; the execution and delivery of this Agreementby the Selling Agent has been duly and validly authorized; and when executedand delivered by the Seller, this Agreement will be a valid and bindingobligation of the Selling Agent enforceable in accordance with its termssubject to:  (i) due authorization,execution and delivery hereof by the Seller; (ii) the enforcement ofremedies under applicable bankruptcy, insolvency and other laws affectingcreditors’ rights generally and moratorium laws from time to time in effect; (iii) generalequitable principles which may limit the right to obtain the remedy of specificperformance; and (iv) the public policy limitation on indemnificationunder the federal securities laws;

 

(b)           The SellingAgent shall not offer or sell the Offered Securities in any state or stateswithout the approval of the Seller and completion by the Seller of all, or any,Blue Sky filings for such states and shall not offer or sell the OfferedSecurities in any state or states in which it is not qualified or registered asa broker-dealer or authorized to engage in the brokerage business; and

 

(c)           The SellingAgent is (i) a broker-dealer registered with the SEC pursuant to the 1934Act, and no proceeding has been initiated to revoke such registration; (ii) amember in good standing of the NASD; and (iii) a broker-dealer registeredwith the securities authorities of each jurisdiction in which it is required tobe registered in connection with the offers or sales of the Offered Securities,and all such offers or sales will be made only by individuals licensed asrequired by all applicable federal and state securities laws.  The Selling Agent agrees to maintain each ofthe foregoing memberships and registrations in good standing throughout theOffering Period.

 

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(d)  The SellingAgent has no material litigation pending against it or its affiliates.

 

(e)  The SellingAgent does not currently have any material enforcement action or disciplinaryprocedure against it or its affiliates.

 

(f)  The SellingAgent will require that each purchaser of Offered Securities hereunderrepresent that such purchaser is an accredited investor and will solicit onlyaccredited investors.

 

4.             Saleand Delivery of Offered Securities.

 

4.1           No sale ofOffered Securities shall take place or be regarded as effective unless anduntil accepted by the Seller, such acceptance to occur at Closing, and theSeller reserves the right in its sole and absolute discretion to refuse to sellOffered Securities to any or all persons at any time.  Selling Agent shall send to the Seller and tothe Escrow Agent designated in Section 1.2, with copies to counsel for theSeller, all acceptable executed Subscription Documents, promptly upon receiptof the same, subject to any reasonable delay occasioned by further inquiry asto a prospective purchaser’s qualification or requests by the Seller or SellingAgent for further information from a prospective purchaser.  The Seller shall notify Selling Agent as towhom to send the originals of such executed Subscription Documents and to whomto send copies.  Selling Agent shallpromptly send each such prospective purchaser’s payment for his OfferedSecurities to Silicon Valley Bank, the Escrow Agent.  Subject to review by counsel for the Seller,the Seller shall notify Selling Agent whether such prospective purchaser willbe accepted by the Seller at Closing within ten (10) business days afterreceipt of the executed subscription documents for each prospective purchaserof Offered Securities, but in no event later than the earlier of (i) thedate the parties have agreed to for Closing or (ii) the OfferingTermination Date.  For every prospectivepurchaser of Offered Securities whose subscription is rejected, the Seller willpromptly return all of such prospective purchaser’s executed SubscriptionDocuments to Selling Agent for return to the prospective purchaser, and willnotify the Escrow Agent to return the funds received to such prospectivepurchaser without interest and without deduction.

 

5.             Conditionsto the Obligations of the Seller.

 

The obligations of theSeller hereunder are subject to the accuracy of Selling Agent’s representationsand warranties, to the observance and performance by Selling Agent of itsobligations hereunder, and to the following further conditions (any of whichmay be waived in writing in whole or in part by the Seller):

 

(a)           SellingAgent shall not have taken or failed to take any action at any time at or priorto Closing, which, in the opinion of the Seller or counsel for Seller,conflicts or would conflict with, or otherwise make unavailable, the exemptionfrom registration requirements for the offer and sale of the Offered Securitiesunder applicable securities laws and regulations.

 

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(b)           Ifany of the conditions specified in this Section 5 shall not have beenfulfilled when and as required by this Agreement to be fulfilled, all theobligations of the Seller under this Agreement may be terminated in writing atany time at or prior to Closing, and any such termination shall be withoutliability to the parties, and further provided that the obligations under Section 7and Section 9.1 shall nevertheless survive and continue thereafter.

 

6.             Conditionsof the Obligations of the Selling Agent.

 

The obligations of the Selling Agent to actas agent hereunder, to find purchasers for the Offered Securities, and toattend and to deliver documents at Closing shall be subject to the followingconditions:

 

(a)           Between thedate hereof and Closing, the Seller and its subsidiaries shall not havesustained any loss on account of fire, explosion, flood, accident, calamity orother cause, of such character as results in a Material Adverse Effect on theSeller and its subsidiaries, whether or not such loss is covered by insurance.

 

(b)           Between thedate hereof and Closing, there shall be no material litigation instituted orthreatened against the Seller or any subsidiary (other than as set forth in theOffering Document) and there shall be no material proceeding instituted orthreatened before or by any federal or state commission, regulatory body oradministrative agency or other governmental body, domestic or foreign, wherein anunfavorable ruling, decision or finding would materially adversely affect thebusiness, franchises, licenses, permits, operations or financial condition orincome of the Seller.

 

(c)           Exceptas contemplated herein or as set forth in the Offering Document, during theperiod subsequent to the date hereof, and prior to Closing, the Seller and eachsubsidiary:  (i) shall haveconducted its business in the usual and ordinary manner as the same was beingconducted on the date hereof, and (ii) except in the ordinary course ofits business, the Seller and each subsidiary shall not have incurred anyliabilities or obligations (direct or contingent), or disposed of any assets,or entered into any material transaction or suffered or experienced anysubstantially adverse change in its condition, financial or otherwise, or inits working capital position.  AtClosing, the capitalization of the Seller shall be substantially the same asset forth in the Offering Document.

 

(d)           Theauthorization for the issuance and delivery of the Offered Securities and theOffering Document and related materials, and for the execution and delivery ofthis Agreement, and all other legal matters incident thereto, shall bereasonably satisfactory in all respects to counsel for Selling Agent.

 

(e)           The Sellershall have furnished to the Selling Agent the opinion, dated the Closing Date,of its counsel, which opinion shall be acceptable to the Selling Agent.

 

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(f)            Therepresentations and warranties of the Seller made in this Agreement or in anydocument or certificate delivered to the Selling Agent pursuant hereto shall betrue and correct on and as of the Closing with the same force and effect asthough such representations and warranties have been made on and as of theClosing, and the Selling Agent shall have received a certificate, dated theClosing Date, to such effect executed by the Chairman of the Board or Presidentof the Seller.

 

(g)           The Sellershall have performed and complied in all material respects with all covenants,terms and agreements to be performed and complied with by the Seller on orbefore the Closing.

 

(h)           The Sellershall have provided such certificates as the Selling Agent shall reasonablyrequest.

 

(i)            The Sellerand its President shall provide certificates to the Selling Agent certifyingthat the proceeds of the Offering will be used in accordance with the usesdesignated in “Use of Proceeds” in the Offering Document.

 

7.             Indemnification.

 

7.1           The Selleragrees to indemnify and hold harmless Selling Agent and each person, if any,who controls Selling Agent within the meaning of the 1933 Act or the 1934 Act(together, the “Acts”), the Selling Agent’s affiliated entities, partners,employees, legal counsel and agents (the “SA Indemnified Parties”) against anylosses, claims, damages, obligations, penalties, judgments, awards,liabilities, costs, expenses and disbursements (and any and all actions, suits,proceedings and investigations in respect thereof and any and all legal andother costs, expenses and disbursements in giving testimony or furnishingdocuments in response to a subpoena or otherwise), joint or several, to whichSelling Agent or such person may be subject, under the Acts or otherwise,including, without limitation, the costs, expenses and disbursements, as andwhen incurred, of investigating, preparing or defending any such action, suit,proceeding or investigation (whether or not in connection with litigation inwhich the Selling Agent is a party), directly or indirectly, caused by,relating to, based upon, arising out of, or in connection with (i) theviolation or breach of any representation, warranty or covenant or agreement ofthe Seller set forth in this Agreement or in any instrument, document,agreement or certificate delivered by the Seller in connection herewith; (ii) anyuntrue statement or omission or any alleged untrue statement or omission in theOffering Document or selling material, excluding information contained in oromitted from the Offering Document or selling material in reliance upon, and inconformity with, information furnished to the Seller by Selling Agent or anyParticipating Broker-Dealer specifically for use in preparation of the OfferingDocument or selling material, as the case may be; (iii) any informationprovided by or on behalf of Seller in order to qualify or exempt the OfferedSecurities for sale in any jurisdiction; or (iv) the failure of the Sellerto comply with the provisions of the Acts and the regulations thereunder, includingRegulation D; and will reimburse the SA Indemnified Parties for any legalor other expenses reasonably incurred by

 

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the SA IndemnifiedParties in connection with investigation of or defending against any such loss,claim, expense, damage, liability, (or actions in respect thereof); provided,however, that the Seller shall not be required to indemnify the SA IndemnifiedParties for any payment made to any claimant in settlement of any suit or claimunless such payment is agreed to by the Seller (which agreement shall not beunreasonably withheld) or by a court having jurisdiction of thecontroversy.  This indemnity agreementshall remain in full force and effect notwithstanding any investigation made bySelling Agent or on Selling Agent’s behalf, shall survive consummation of thesale of the Offered Securities hereunder and shall be in addition to anyliability which the Seller may otherwise have.

 

7.2           SellingAgent agrees to indemnify and hold harmless the Seller and each person, if any,who controls the Seller within the meaning of the Acts, Seller’s affiliatedentities, partners, employees, legal counsel and agents (the “SellerIndemnified Parties”) against any losses, claims, expenses, damages or liabilities(or actions in respect thereof), joint or several, to which the SellerIndemnified Parties or any such controlling person may become subject, underthe Acts or otherwise, insofar as such losses, claims, expenses, damages orliabilities (or actions in respect thereof) arise out of or are based upon anyuntrue statement or omission or any alleged untrue statement or omission in theOffering Document contained in or omitted from the Offering Document inreliance upon, and in conformity with, information furnished to the Seller bySelling Agent or any Participating Broker-Dealer or either of them specificallyfor use in preparation of the Offering Document or selling material, as thecase may be; and will reimburse the Seller Indemnified Parties for any legal orother expenses reasonably incurred by them in connection with investigating ordefending against any such loss, claim, expense, damage, liability, (or actionsin respect thereof); provided, however, that Selling Agent shall not berequired to indemnify the Seller Indemnified Parties for any payment made toany claimant in settlement of any suit or claim unless such payment is approvedby a court having jurisdiction over the controversy or Selling Agent agrees tosuch settlement (which agreement shall not be unreasonably withheld); andprovided further that Selling Agent shall not be liable under this Section 7.2for any losses, claims, expenses, damages or liabilities arising out of any actor failure to act on the part of any other person except Selling Agent, itspartners, employees and agents (including registered representatives) or anyParticipating Broker-Dealer.  Thisindemnity agreement shall remain in full force and effect notwithstanding anyinvestigation made by or on behalf of the Seller and shall survive consummationof the sale of the Offered Securities hereunder and the termination of thisAgreement, and shall be in addition to any liability which Selling Agent mayotherwise have.  Notwithstanding theforegoing, in no event shall the amount that the Selling Agent is required toindemnify the Seller Indemnified Parties, exceed in the aggregate thecompensation received by the Selling Agent hereunder, except in the case offraud on the part of the Selling Agent.

 

7.3           Theindemnified party shall notify the indemnifying party in writing promptly afterthe summons or other first legal process giving information of the nature ofany and all claims which have been served upon the indemnified party.  In case any action is brought against anyindemnified party upon any such claim, the indemnifying party shall be entitledto participate at its own expense in the defense, or if it so elects, inaccordance with arrangements satisfactory to any other indemnifying party orparties similarly notified, to

 

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assume the defensethereof, with counsel who shall be satisfactory to such indemnified party andother indemnified parties who are defendants in such action; and after noticefrom the indemnifying party to such indemnified party of its election so toassume the defense thereof and the retaining of such counsel by theindemnifying party, the indemnifying party shall not be liable to suchindemnified party under this Section 7 for any legal or other expensessubsequently incurred by such indemnified party in connection with the defensethereof, other than the reasonable costs of investigation, unless theindemnified party shall have reasonably concluded that there are or may bedefenses available to it which are different from or in addition to thoseavailable to the indemnifying party (in which case the indemnifying party shallnot have the right to direct the defense of such action on behalf of theindemnified party), in any of which circumstances such expenses shall be borneby the indemnifying party.

 

8.             Terminationof Agreement.

 

8.1           ThisAgreement shall terminate:

 

(a)           If at anytime after commencement of the Offering, any material condition of SellingAgent’s obligations hereunder shall not have been met or shall cease to be metand Selling Agent shall have given to the Seller notice of Selling Agent’sdesire to terminate this Agreement on account of the nonfulfillment of suchcondition; or

 

(b)           If theSeller, at any time, gives notice to Selling Agent to terminate the Offering;or

 

(c)           At such timeas all of the Offered Securities shall have been sold and the subscriptionstherefor have been accepted or the Offering Termination Date has been reached,whichever shall first occur.

 

Notwithstanding the terminationof this Agreement in accordance with the foregoing provisions of this Section 8,the respective indemnities, covenants, agreements, representations, warrantiesand other statements of the Seller and Selling Agent set forth in or madepursuant to this Agreement will remain operative and in full force and effect.

 

8.2           If thisAgreement is terminated pursuant to Section 8.1(a) above, the SellingAgent shall have no liability to the Seller, and if this Agreement isterminated pursuant to Section 8.1(b) above, the Seller shall have noliability to the Selling Agent.

 

9.             Miscellaneous.

 

9.1           Except asotherwise specifically provided in this Agreement or as may be otherwise agreedbetween the parties hereto, Selling Agent, on the one hand, and the Seller, onthe other, shall each pay their respective expenses incident to this Agreementand the transactions contemplated hereby (including, without limitation, thefees and disbursements of their respective counsel), and no party to theAgreement shall have any liability for such expenses incurred by any otherparty.

 

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9.2           It isunderstood and agreed that Selling Agent’s relationship to the Seller is thatof an independent contractor and that nothing herein shall be construed tocreate a relationship of partners, affiliates, joint venturers or employer andemployee between Selling Agent or either of them and the Seller.

 

9.3           No rights orinterests arising hereunder may be assigned except with the prior written consentof both the Seller and the Selling Agent. Subject to this limitation, this Agreement shall inure to the benefitand be binding upon Selling Agent and the Seller and their respectivesuccessors and assigns.  This Agreementis intended to be and is for the sole and exclusive benefit of the partieshereto, and their respective successors and assigns and for the benefit of noother person.  Except as provided in thisAgreement, nothing expressed or mentioned in this Agreement is intended orshall be construed to give any person, other than the parties to it and theirrespective successors and assigns, any legal or equitable right, remedy orclaim under or with respect to this Agreement or any of its provisions.  No purchaser of Offered Securities shall be construedas a successor or assign merely by reason of such purchase.

 

9.4           If anyportion of this Agreement shall be held invalid or inoperative, then so far asis reasonable and possible:

 

(a)           the remainderof this Agreement shall be considered valid and operative; and

 

(b)           to the extent possible under applicable law, effect shall begiven to the intent manifest by the portion held invalid or inoperative.

 

9.5           ThisAgreement may be executed in a number of identical counterparts and byfacsimile, each of which shall be deemed to be an original, but all of whichconstitute, collectively, one and the same Agreement; but, in making proof ofthis Agreement, it shall not be necessary to produce or account for more thanone counterpart.

 

9.6           ThisAgreement may not be modified or amended except by written agreement executedby each of the parties to this Agreement.

 

9.7           Wheneverthe context so requires, the masculine shall include the feminine and neuter,and the singular shall include the plural, and conversely.  The words “shall” and “will” and “agrees” aremandatory, “may” is permissive.

 

9.8           Theparties to this Agreement covenant and agree that they will execute any otherand further instruments and documents which reasonably are or may becomenecessary or convenient to effectuate and carry out this Agreement.

 

9.9           ThisAgreement (and the other documents and agreements referenced herein) containsthe entire understanding between the parties and supersedes prior

 

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understandings orwritten or oral agreements between the parties with respect to the subjectmatter of this Agreement.

 

9.10         ThisAgreement shall be construed and governed by the laws of the State ofFlorida.  Any terms and conditions ofthis Agreement which are inconsistent with the terms and conditions of theOffering Document, shall be modified to conform to the terms and conditions setforth in the Offering Document.

 

9.11         All noticesor communications, except as otherwise specifically provided, shall be inwriting, and, if sent to any party, shall be mailed, delivered or telegraphedand confirmed to that party at the address set forth below:

 
| If to the Seller:             | **iVOW, Inc.**                           |
|-------------------------------|-----------------------------------------------|
|                          | 2101 Faraday Avenue                           |
|                          | Carlsbad, CA 92008                       |
|                          | Attention: Chief Financial Officer            |
|                          |                                          |
| With a copy contemporaneously |                                          |
| by like means:                | Heller Ehrman White & McAuliffe, LLP |
|                          | 4350 La Jolla Village Dr. 7th  Floor     |
|                          | San Diego, CA 92122                           |
|                          | Attention: Jeffrey Thacker, Esq.         |
|                          |                                          |
| If to Selling Agent, to:      | Dawson James Securities,                      |
|                          | 925 S. Federal Highway                        |
|                          | 6th Floor                                     |
|                          | Boca Raton, FL 33432                          |
|                          | Attention: Robert Keyser                      |
|                          |                                          |
| With a copy contemporaneously |                                          |
| by like means:                | Blank Rome LLP                                |
|                          | 1200 North Federal Highway, Suite 417    |
|                          | Boca Raton, FL 33432                          |
|                          | Attention: Bruce C. Rosetto, Esq.        |

 

9.12         All of theterms of this Agreement, including all representations, warranties, covenantsand agreements of Selling Agent and the Seller, shall survive completion of theOffering for three years.

 

9.13         Section titlesor captions contained in this Agreement are inserted only as a matter ofconvenience and for reference.  Thosetitles in no way define, limit, extend or describe the scope of this Agreement,or the intent of any provision of this Agreement.

 

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If the foregoing correctly sets forth theunderstanding between us, please indicate acceptance by signing in the spaceprovided below for that purpose and return to us a counterpart hereof sosigned, whereupon this letter and Selling Agent’s acceptance shall constitute abinding agreement between us.

 
|   | Very truly yours, |
|--------|-------------------|
|   |              |
|   | Howard Sampson    |   |
|   |              |
|   |              |
|   | By:               | /s/ Howard Sampson |   |
|   |              | (Authorized Officer) |
|        |                   |  |  |  |

 

The foregoing Selling Agreement for IVOW, Inc.is hereby accepted and agreed to as of the date first above written.

 

 
| DAWSON JAMES SECURITIES, INC. |
|-------------------------------|
| As Selling Agent              |
|                          |
| By:                           | /s/ Robert Keyser |   |
|                          | (Authorized Officer) |   |
|                          |
|                          |
| By:                           | ** ** | ** ** |
| ** **                    | (Authorized Officer) | ** ** |

 

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