Document:

Exhibit 10.13

 

INDEMNITY
AGREEMENT

 

THIS INDEMNITY AGREEMENT
(this “Agreement”) dated as of                 ,
2006, is made by and between TorreyPines Therapeutics, Inc. a Delaware corporation (the “Company”),
and                                   (“Indemnitee”).

 

R E C I T
A L S:

 

A.                                   The
Company desires to attract and retain the services of highly qualified
individuals as directors, officers, employees and agents.

 

B.                                     The
Company’s bylaws (the “Bylaws”)
require that the Company indemnify its directors and executive officers, and
allow the Company to indemnify its other officers, employees and agents, as
authorized by the Delaware General Corporation Law, as amended (the “Code”), under which the Company is
organized and such Bylaws expressly provide that the indemnification provided
therein is not exclusive and contemplates that the Company may enter into
separate agreements with its directors, officers and other persons to set forth
specific indemnification provisions.

 

C.                                     Indemnitee
does not regard the protection currently provided by applicable law, the
Company’s governing documents and available insurance as adequate under the
present circumstances, and the Company has determined that Indemnitee and other
directors, officers, employees and agents of the Company may not be
willing to serve or continue to serve in such capacities without additional
protection.

 

D.                                    The
Company desires and has requested Indemnitee to serve or continue to serve as a
director, officer, employee or agent of the Company, as the case may be,
and has proferred this Agreement to Indemnitee as an additional inducement to
serve in such capacity.

 

E.                                      Indemnitee
is willing to serve, or to continue to serve, as a director, officer, employee
or agent of the Company, as the case may be, if Indemnitee is furnished
the indemnity provided for herein by the Company.

 

A G R E E
M E N T :

 

NOW THEREFORE, in
consideration of the mutual covenants and agreements set forth herein, the
parties hereto, intending to be legally bound, hereby agree as follows:

 

1.                                      Definitions.

 

(a)                                  Agent.
For purposes of this Agreement, the term “agent” of the Company means any
person who:  (i) is or was a
director, officer, employee or other fiduciary
of the Company or a subsidiary of the Company; or (ii) is or was serving at
the request or for the convenience of, or representing the interests of, the
Company or a subsidiary of the Company, as a director, officer, employee or
other fiduciary of a foreign or domestic corporation, partnership,  joint venture, trust or other enterprise.

 

 

(b)                                  Expenses.
For purposes of this Agreement, the term “expenses” shall be broadly construed
and shall include, without limitation, all direct and indirect costs of any
type or nature whatsoever (including, without limitation, all attorneys’, witness,
or other professional fees and related disbursements, and other out-of-pocket
costs of whatever nature), actually and reasonably incurred by Indemnitee in
connection with the investigation, defense or appeal of a proceeding or
establishing or enforcing a right to indemnification under this Agreement, the
Code or otherwise, and amounts paid in settlement by or on behalf of
Indemnitee, but shall not include any judgments, fines or penalties actually
levied against Indemnitee for such individual’s violations of law. The term “expenses”
shall also include reasonable compensation for time spent by Indemnitee for
which he is not compensated by the Company or any subsidiary or third party (i) for
any period during which Indemnitee is not an agent, in the employment of, or
providing services for compensation to, the Company or any subsidiary; and (ii) if
the rate of compensation and estimated time involved is approved by the
directors of the Company who are not parties to any action with respect to
which expenses are incurred, for Indemnitee while an agent of, employed by, or
providing services for compensation to, the Company or any subsidiary.

 

(c)                                  Proceedings.
For purposes of this Agreement, the term “proceeding” shall be broadly
construed and shall include, without limitation, any threatened, pending, or
completed action, suit, arbitration, alternate dispute resolution mechanism,
investigation, inquiry, administrative hearing or any other actual, threatened
or completed proceeding, whether brought in the right of the Company or
otherwise and whether of a civil, criminal, administrative or investigative
nature, and whether formal or informal in any case, in which Indemnitee was, is
or will be involved as a party or otherwise by reason of:  (i) the fact that Indemnitee is or was a
director or officer of the Company; (ii) the fact that any action taken by
Indemnitee or of any action on Indemnitee’s part while acting as director,
officer, employee or agent of the Company; or (iii) the fact that
Indemnitee is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise, and in any such case
described above, whether or not serving in any such capacity at the time any
liability or expense is incurred for which indemnification, reimbursement, or
advancement of expenses may be provided under this Agreement.

 

(d)                                  Subsidiary.
For purposes of this Agreement, the term “subsidiary” means any corporation or
limited liability company of which more than 50% of the outstanding voting
securities or equity interests are owned, directly or indirectly, by the
Company and one or more of its subsidiaries, and any other corporation, limited
liability company, partnership, joint venture, trust, employee benefit plan or
other enterprise of which Indemnitee is or was serving at the request of the
Company as a director, officer, employee, agent or fiduciary.

 

(e)                                  Independent
Counsel. For purposes of this Agreement, the term “independent counsel”
means a law firm, or a partner (or, if applicable, member) of such a law firm,
that is experienced in matters of corporation law and neither presently is, nor
in the past five (5) years has been, retained to represent: (i) the
Company or Indemnitee in any matter material to either such party, or (ii) any
other party to the proceeding giving rise to a claim for indemnification
hereunder. Notwithstanding the foregoing, the term “independent counsel” shall 

 

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not
include any person who, under the applicable standards of professional conduct
then prevailing, would have a conflict of interest in representing either the
Company or Indemnitee in an action to determine Indemnitee’s rights under this
Agreement.

 

2.                                      Agreement
to Serve. Indemnitee will serve, or continue to serve, as a director,
officer, employee or agent of the Company or any subsidiary, as the case may be,
faithfully and to the best of his or her ability, at the will of such
corporation (or under separate agreement, if such agreement exists), in the
capacity Indemnitee currently serves as an agent of such corporation, so long
as Indemnitee is duly appointed or elected and qualified in accordance with the
applicable provisions of the bylaws or other applicable charter documents of
such corporation, or until such time as Indemnitee tenders his or her
resignation in writing; provided, however, that nothing contained in this
Agreement is intended as an employment agreement between Indemnitee and the
Company or any of its subsidiaries or to create any right to continued
employment of Indemnitee with the Company or any of its subsidiaries in any
capacity.

 

The Company acknowledges
that it has entered into this Agreement and assumes the obligations imposed on
it hereby, in addition to and separate from its obligations to Indemnitee under
the Bylaws, to induce Indemnitee to serve, or continue to serve, as a director, officer, employee or agent of the Company, and the Company
acknowledges that Indemnitee is relying upon this Agreement in serving as a
director, officer, employee or agent of the Company.

 

3.                                      Indemnification.

 

(a)                                  Indemnification
in Third Party Proceedings. Subject to Section 10 below, the Company
shall indemnify Indemnitee to the fullest extent permitted by the Code, as the
same may be amended from time to time (but, only to the extent that such
amendment permits Indemnitee to broader indemnification rights than the Code
permitted prior to adoption of such amendment), if Indemnitee is a party to or
threatened to be made a party to or otherwise involved in any proceeding, for
any and all expenses, actually and reasonably incurred by Indemnitee in
connection with the investigation, defense, settlement or appeal of such proceeding.

 

(b)                                  Indemnification
in Derivative Actions and Direct Actions by the Company. Subject to Section 10
below, the Company shall indemnify Indemnitee to the fullest extent permitted
by the Code, as the same may be amended from time to time (but, only to
the extent that such amendment permits Indemnitee to broader indemnification
rights than the Code permitted prior to adoption of such amendment), if
Indemnitee is a party to or threatened to be made a party to or otherwise
involved in any proceeding by or in the right of the Company to procure a
judgment in its favor, against any and all expenses actually and reasonably
incurred by Indemnitee in connection with the investigation, defense,
settlement, or appeal of such proceedings.

 

4.                                      Indemnification
of Expenses of Successful Party. Notwithstanding any other provision of
this Agreement, to the extent that Indemnitee has been successful on the merits
or otherwise in defense of any proceeding or in defense of any claim, issue or
matter therein, including the dismissal of any action without prejudice, the
Company shall indemnify 

 

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Indemnitee
against all expenses actually and reasonably incurred in connection with the
investigation, defense or appeal of such proceeding.

 

5.                                      Partial
Indemnification. If Indemnitee is entitled under any provision of this
Agreement to indemnification by the Company for some or a portion of any
expenses actually and reasonably incurred by Indemnitee in the investigation,
defense, settlement or appeal of a proceeding, but is precluded by applicable
law or the specific terms of this Agreement to indemnification for the total
amount thereof, the Company shall nevertheless indemnify Indemnitee for the
portion thereof to which Indemnitee is entitled.

 

6.                                      Advancement
of Expenses. To the extent not prohibited by law, the Company shall advance
the expenses incurred by Indemnitee in connection with any proceeding, and such
advancement shall be made within twenty (20) days after the receipt by the
Company of a statement or statements requesting such advances (which shall
include invoices received by Indemnitee in connection with such expenses but,
in the case of invoices in connection with legal services, any references to
legal work performed or to expenditures made that would cause Indemnitee to
waive any privilege accorded by applicable law shall not be included with the
invoice) and upon request of the Company, an undertaking to repay the
advancement of expenses if and to the extent that it is ultimately determined
by a court of competent jurisdiction in a final judgment, not subject to
appeal, that Indemnitee is not entitled to be indemnified by the Company. Advances
shall be unsecured, interest free and without regard to Indemnitee’s ability to
repay the expenses. Advances shall include any and all expenses actually and
reasonably incurred by Indemnitee pursuing an action to enforce Indemnitee’s
right to indemnification under this Agreement, or otherwise and this right of
advancement, including expenses incurred preparing and forwarding statements to
the Company to support the advances claimed. Indemnitee acknowledges that the
execution and delivery of this Agreement shall constitute an undertaking
providing that Indemnitee shall, to the fullest extent required by law, repay
the advance if and to the extent that it is ultimately determined by a court of
competent jurisdiction in a final judgment, not subject to appeal, that
Indemnitee is not entitled to be indemnified by the Company. The right to
advances under this Section shall continue until final disposition of any
proceeding, including any appeal therein. This Section 6 shall not apply
to any claim made by Indemnitee for which indemnity is excluded pursuant to Section 10(b).

 

7.                                      Notice
and Other Indemnification Procedures.

 

(a)                                  Notification
of Proceeding. Indemnitee will notify the Company in writing promptly upon
being served with any summons, citation, subpoena, complaint, indictment,
information or other document relating to any proceeding or matter which may be
subject to indemnification or advancement of expenses covered hereunder. The
failure of Indemnitee to so notify the Company shall not relieve the Company of
any obligation which it may have to Indemnitee under this Agreement or otherwise.

 

(b)                                  Request
for Indemnification and Indemnification Payments. Indemnitee shall notify
the Company promptly in writing upon receiving notice of any demand, judgment
or other requirement for payment that Indemnitee reasonably believes to be
subject to indemnification under the terms of this Agreement, and shall request
payment thereof by the Company. Indemnification payments requested by
Indemnitee under Section 3 hereof shall be 

 

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made
by the Company no later than sixty (60) days after receipt of the written
request of Indemnitee. Claims for advancement of expenses shall be made under
the provisions of Section 6 herein.

 

(c)                                  Application
for Enforcement. In the event the Company fails to make timely payments as
set forth in Sections 6 or 7(b) above, Indemnitee shall have the right to
apply to any court of competent jurisdiction for the purpose of enforcing
Indemnitee’s right to indemnification or advancement of expenses pursuant to
this Agreement. In such an enforcement hearing or proceeding, the burden of
proof shall be on the Company to prove by that indemnification or advancement
of expenses to Indemnitee is not required under this Agreement or permitted by
applicable law. Any determination by the Company (including its Board of
Directors, stockholders or independent
counsel) that Indemnitee is not entitled to indemnification hereunder, shall
not be a defense by the Company to the action nor create any presumption that
Indemnitee is not entitled to indemnification or advancement of expenses
hereunder.

 

(d)                                  Indemnification
of Certain Expenses. The Company shall indemnify Indemnitee against all
expenses incurred in connection with any hearing or proceeding under this Section 7
unless the Company prevails in such hearing or proceeding on the merits in all
material respects.

 

8.                                      Assumption
of Defense. In the event the Company shall be requested by Indemnitee to
pay the expenses of any proceeding, the Company, if appropriate, shall be
entitled to assume the defense of such proceeding, or to participate to the
extent permissible in such proceeding, with counsel reasonably acceptable to
Indemnitee. Upon assumption of the defense by the Company and the retention of
such counsel by the Company, the Company shall not be liable to Indemnitee
under this Agreement for any fees of counsel subsequently incurred by
Indemnitee with respect to the same proceeding, provided that Indemnitee shall
have the right to employ separate counsel in such proceeding at Indemnitee’s sole
cost and expense. Notwithstanding the foregoing, if Indemnitee’s counsel
delivers a written notice to the Company stating that such counsel has
reasonably concluded that there may be a conflict of interest between the
Company and Indemnitee in the conduct of any such defense or the Company shall
not, in fact, have employed counsel or otherwise actively pursued the defense
of such proceeding within a reasonable time, then in any such event the fees
and expenses of Indemnitee’s counsel to defend such proceeding shall be subject
to the indemnification and advancement of expenses provisions of this
Agreement.

 

9.                                      Insurance.
To the extent that the Company maintains an insurance policy or policies
providing liability insurance for directors, officers, employees, or agents of
the Company or of any subsidiary (“D&O Insurance”),
Indemnitee shall be covered by such policy or policies in accordance with its
or their terms to the maximum extent of the coverage available for any such
director, officer, employee or agent under such policy or policies. If, at the
time of the receipt of a notice of a claim pursuant to the terms hereof, the
Company has D&O Insurance in effect, the Company shall give prompt notice
of the commencement of such proceeding to the insurers in accordance with the
procedures set forth in the respective policies. The Company shall thereafter
take all necessary or desirable action to cause such insurers to pay, on behalf
of 

 

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Indemnitee,
all amounts payable as a result of such proceeding in accordance with the terms
of such policies.

 

10.                               Exceptions.

 

(a)                                  Certain
Matters. Any provision herein to the contrary notwithstanding, the Company
shall not be obligated pursuant to the terms of this Agreement to indemnify
Indemnitee on account of any proceeding with respect to (i) remuneration
paid to Indemnitee if it is determined by final judgment or other final
adjudication that such remuneration was in violation of law (and, in this
respect, both the Company and Indemnitee have been advised that the Securities
and Exchange Commission believes that indemnification for liabilities arising
under the federal securities laws is against public policy and is, therefore,
unenforceable and that claims for indemnification should be submitted to
appropriate courts for adjudication, as indicated in Section 10(d) below);
(ii) a final judgment rendered against Indemnitee for an accounting,
disgorgement or repayment of profits made from the purchase or sale by
Indemnitee of securities of the Company or in connection with a settlement by
or on behalf of Indemnitee to the extent it is acknowledged by Indemnitee and
the Company that such amount paid in settlement resulted from Indemnitee’s
conduct from which Indemnitee received monetary personal profit, pursuant to
the provisions of Section 16(b) of the Securities Exchange Act of
1934, as amended, or other provisions of any federal, state or local statute or
rules and regulations thereunder; (iii) a final judgment or other
final adjudication that Indemnitee’s conduct was in bad faith, knowingly
fraudulent or deliberately dishonest or constituted willful misconduct (but
only to the extent of such specific determination); or (iv) on account of
conduct that is established by a final judgment as constituting a breach of
Indemnitee’s duty of loyalty to the Company or resulting in any personal profit
or advantage to which Indemnitee is not legally entitled. For purposes of the
foregoing sentence, a final judgment or other adjudication may be reached
in either the underlying proceeding or action in connection with which
indemnification is sought or a separate proceeding or action to establish
rights and liabilities under this Agreement.

 

(b)                                  Claims
Initiated by Indemnitee. Any provision herein to the contrary
notwithstanding, the Company shall not be obligated to indemnify or advance
expenses to Indemnitee with respect to proceedings or claims initiated or
brought by Indemnitee against the Company or its directors, officers, employees
or other agents and not by way of defense, except (i) with respect to
proceedings brought to establish or enforce a right to indemnification under
this Agreement or under any other agreement, provision in the Bylaws or
Certificate of Incorporation or applicable law,
or (ii) with respect to any other proceeding initiated by Indemnitee that
is either approved by the Board of Directors or Indemnitee’s participation is
required by applicable law. However, indemnification or advancement of expenses
may be provided by the Company in specific cases if the Board of Directors
determines it to be appropriate.

 

(c)                                  Unauthorized
Settlements. Any provision herein to the contrary notwithstanding, the
Company shall not be obligated pursuant to the terms of this Agreement to indemnify
Indemnitee under this Agreement for any amounts paid in settlement of a
proceeding effected without the Company’s written consent. Neither the Company
nor Indemnitee shall unreasonably withhold consent to any proposed settlement;
provided, however, that the 

 

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Company
may in any event decline to consent to (or to otherwise admit or agree to
any liability for indemnification hereunder in respect of) any proposed
settlement if the Company is also a party in such proceeding and determines in
good faith that such settlement is not in the best interests of the Company and
its stockholders.

 

(d)                                  Securities
Act Liabilities. Any provision herein to the contrary notwithstanding, the
Company shall not be obligated pursuant to the terms of this Agreement to
indemnify Indemnitee or otherwise act in violation of any undertaking appearing
in and required by the rules and regulations promulgated under the
Securities Act of 1933, as amended (the “Act”), or
in any registration statement filed with the SEC under the Act. Indemnitee
acknowledges that paragraph (h) of Item 512 of Regulation S-K currently
generally requires the Company to undertake in connection with any registration
statement filed under the Act to submit the issue of the enforceability of
Indemnitee’s rights under this Agreement in connection with any liability under
the Act on public policy grounds to a court of appropriate jurisdiction and to
be governed by any final adjudication of such issue. Indemnitee specifically
agrees that any such undertaking shall supersede the provisions of this
Agreement and to be bound by any such undertaking.

 

11.                               Nonexclusivity
and Survival of Rights. The provisions for indemnification and advancement
of expenses set forth in this Agreement shall not be deemed exclusive of any
other rights which Indemnitee may at any time be entitled under any
provision of applicable law, the Company’s Certificate of Incorporation, Bylaws
or other agreements, both as to action in Indemnitee’s official capacity and
Indemnitee’s action as an agent of the Company, in any court in which a
proceeding is brought, and Indemnitee’s rights hereunder shall continue after
Indemnitee has ceased acting as an agent of the Company and shall inure to the
benefit of the heirs, executors, administrators and assigns of Indemnitee. The
obligations and duties of the Company to Indemnitee under this Agreement shall
be binding on the Company and its successors and assigns until terminated in
accordance with its terms. The Company shall require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Company, expressly to assume
and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform if no such succession
had taken place.

 

No amendment, alteration or repeal of this Agreement
or of any provision hereof shall limit or restrict any right of Indemnitee
under this Agreement in respect of any action taken or omitted by such
Indemnitee in his or her corporate status prior to such amendment, alteration
or repeal. To the extent that a change in the Code, whether by statute or
judicial decision, permits greater indemnification or advancement of expenses
than would be afforded currently under the Company’s Certificate of
Incorporation, Bylaws and this Agreement, it is the intent of the parties
hereto that Indemnitee shall enjoy by this Agreement the greater benefits so
afforded by such change. No right or remedy herein conferred is intended to be
exclusive of any other right or remedy, and every other right and remedy shall
be cumulative and in addition to every other right and remedy given hereunder
or now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, by Indemnitee shall
not prevent the concurrent assertion or employment of any other right or remedy
by Indemnitee.

 

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12.                               Term.
This Agreement shall continue until and terminate upon the later of: (a) five
(5) years after the date that Indemnitee shall have ceased to serve as a
director or and/or officer, employee or agent of the Company; or (b) one (1) year
after the final termination of any proceeding, including any appeal then
pending, in respect to which Indemnitee was granted rights of indemnification
or advancement of expenses hereunder.

 

No
legal action shall be brought and no cause of action shall be asserted by or in
the right of the Company against an Indemnitee or an Indemnitee’s estate,
spouse, heirs, executors or personal or legal representatives after the
expiration of five (5) years from the date of accrual of such cause of
action, and any claim or cause of action of the Company shall be extinguished
and deemed released unless asserted by the timely filing of a legal action
within such five-year period; provided, however, that if any shorter period of
limitations is otherwise applicable to such cause of action, such shorter
period shall govern.

 

13.                               Subrogation.
In the event of payment under this Agreement, the Company shall be subrogated
to the extent of such payment to all of the rights of recovery of Indemnitee,
who, at the request and expense of the Company, shall execute all papers
required and shall do everything that may be reasonably necessary to
secure such rights, including the execution of such documents necessary to
enable the Company effectively to bring suit to enforce such rights.

 

14.                               Interpretation
of Agreement. It is understood that the parties hereto intend this
Agreement to be interpreted and enforced so as to provide indemnification to
Indemnitee to the fullest extent now or hereafter permitted by law.

 

15.                               Severability.
If any provision of this Agreement shall be held to be invalid, illegal or
unenforceable for any reason whatsoever, (a) the validity, legality and
enforceability of the remaining provisions of the Agreement (including without
limitation, all portions of any paragraphs of this Agreement containing any
such provision held to be invalid, illegal or unenforceable, that are not
themselves invalid, illegal or unenforceable) shall not in any way be affected
or impaired thereby; and (b) to the fullest extent possible, the
provisions of this Agreement (including, without limitation, all portions of
any paragraph of this Agreement containing any such provision held to be
invalid, illegal or unenforceable, that are not themselves invalid, illegal or
unenforceable) shall be construed so as to give effect to the intent manifested
by the provision held invalid, illegal or unenforceable and to give effect to Section 14
hereof.

 

16.                               Amendment
and Waiver. No supplement, modification, amendment, or cancellation of this
Agreement shall be binding unless executed in writing by the parties hereto. No
waiver of any of the provisions of this Agreement shall be deemed or shall
constitute a waiver of any other provision hereof (whether or not similar) nor
shall such waiver constitute a continuing waiver.

 

17.                               Notice.
Except as otherwise provided herein, any notice or demand which, by the
provisions hereof, is required or which may be given to or served upon the
parties hereto shall be in writing and, if by telegram, telecopy or telex,
shall be deemed to have been validly served, given or delivered when sent, if
by overnight delivery, courier or personal delivery, shall be deemed to have
been validly served, given or delivered upon actual delivery and, if mailed,
shall be deemed to have been validly served, given or delivered three (3) business
days after deposit in 

 

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the
United States mail, as registered or certified mail, with proper postage
prepaid and addressed to the party or parties to be notified at the addresses
set forth on the signature page of this Agreement (or such other
address(es) as a party may designate for itself by like notice). If to the
Company, notices and demands shall be delivered to the attention of the Secretary
of the Company.

 

18.                               Governing
Law. This Agreement shall be governed exclusively by and construed
according to the laws of the State of Delaware, as applied to contracts between
Delaware residents entered into and to be performed entirely within Delaware.

 

19.                               Counterparts. This Agreement may be executed
in one or more counterparts, each of which shall for all purposes be deemed to
be an original but all of which together shall constitute but one and the same
Agreement. Only one such counterpart need be produced to evidence the
existence of this Agreement.

 

20.                               Headings. The headings of the sections of this Agreement are inserted for
convenience only and shall not be deemed to constitute part of this
Agreement or to affect the construction hereof.

 

21.                               Entire
Agreement. This Agreement constitutes the entire agreement between the
parties with respect to the subject matter hereof and supersedes all prior
agreements, understandings and negotiations, written and oral, between the
parties with respect to the subject matter of this Agreement; provided,
however, that this Agreement is a supplement to and in furtherance of the
Company’s Certificate of
Incorporation, Bylaws, the Code and any other applicable law, and shall not be
deemed a substitute therefor, and does not diminish or abrogate any
rights of Indemnitee thereunder. 

 

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IN WITNESS WHEREOF,
the parties hereto have entered into this Agreement effective as of the date
first above written.

 

	
   

  	
  COMPANY

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  TorreyPines Therapeutics, Inc., a Delaware

  
	
   

  	
  corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  INDEMNITEE

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Signature of Indemnitee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Print or Type Name of Indemnitee

  
					

 

10Edgewater Foods International, Inc. Exhibit 10.7

PLACEMENT CONSULTANT AGREEMENT

THIS AGREEMENT (“Agreement”) is made as of the 9th day of March, 2006, by and between EDGEWATER FOODS INTERNATIONAL, INC. (the “Company”), and, Pai’s International Trade, Inc. , a New York corporation (the “Consultant”).

WITNESSETH:

WHEREAS, the Company desires to consider strategic alternatives available to it which include, but are not limited to, issuing and selling equity and/or debt of the Company in the amount of up to $5,000,000.00; and

WHEREAS, the Consultant has offered to assist the Company in the procurement, if necessary, of potential purchasers of the Company’s equity and/or debt, and the Company desires to secure the services of the Consultant on the terms and conditions hereinafter set forth.

AGREEMENT

NOW, THEREFORE, in consideration of the premises and the mutual promises, conditions and covenants herein contained, the parties hereto do hereby agree as follows:

1.

Engagement of Consultant.  

(a)

Appointment.  The Company hereby appoints the Consultant as a non-exclusive consultant to identify potential qualified purchasers of the Company’s unregistered restricted equity and/or debt securities (the “Consultant Services”).  The Consultant, on the basis of the representations and warranties herein contained, but subject to the terms and conditions herein set forth, accepts such appointment.  This appointment shall commence as of the date hereof and end upon the termination of the Agreement in accordance with Section 7 hereof (the “Term”).

(b)

Outside of Engagement.  Nothing in this Agreement shall be interpreted or construed to constitute the Consultant as the agent or representative of the Company with authority to sell or make offers to sell its securities.  In performance of this Agreement, neither the Consultant nor its affiliates shall take any action or fail to take any action that, either directly or indirectly, would cause any of them to come within the definition of a “broker,” “dealer,” “agent,” “sales representative,” “underwriter” or “investment advisor,” as those terms are defined and/or interpreted under the Securities Act of 1933, the Securities Exchange Act of 1934, the Investment Advisers Act of 1940 or the state securities laws of those jurisdictions in which the Consultant or its affiliates may act to locate financing for the Company, unless such persons are registered as such in all applicable jurisdictions with all required regulatory agencies.

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(c)

Engagement as Finder.  The efforts of the Consultant shall be confined to introductions as a finder.  The Consultant is not authorized to engage in any negotiations on the Company's behalf and shall have no authority whatsoever to represent the Company in any such negotiations.  The Consultant shall not participate in the preparation of any materials specifically related to a financing, shall not distribute information relating to the Company to any prospective investor until such prospect is approved by the Company, and shall only distribute information with respect to the Company which has been approved by the Company and which does not contain any information other than the amount of financing the Company is seeking and information which may be publicly available.  The Consultant shall not perform any independent analysis of any financing or engage in any due diligence activities.

2.

Representations and Warranties of the Company.  In order to induce the Consultant to enter into this Agreement, the Company hereby represents and warrants to and agrees with the Consultant as follows:

(a)

Accuracy of Information.  All information provided by the Company to the Consultant regarding the Company is complete and correct in all material respects and does not omit any material fact necessary to make such information, in light of the circumstances under which it was delivered, not misleading.  If during the Term, any event occurs or any event known to the Company relating to or affecting the Company and/or the Consultant shall occur as a result of which the information provided to the Consultant becomes incorrect or misleading, the Company shall inform the Consultant of such occurrence within a reasonable period of time.  Nothing in this Agreement shall be interpreted to require the Company to disclose or release to the Consultant any confidential information that the Company, in its sole and exclusive discretion, determines should not be disclosed or released.

(b)

No Defaults.  The execution and delivery of this Agreement, and the consummation of the transactions herein contemplated, and compliance with the terms of this Agreement will not conflict with or result in a breach of any of the terms, conditions or provisions of, or constitute a default under, the Certificate of Incorporation or Bylaws of the Company (in any respect that is material to the Company), any material note, indenture, mortgage, deed of trust, or other material agreement or instrument to which the Company is a party or by which the Company or any property of the Company is bound, or to the Company’s knowledge, any existing law, order, rule, regulation, writ, injunction or decree of any government, governmental instrumentality, agency or body, arbitration tribunal or court, domestic or foreign, having jurisdiction over the Company or any property of the Company.  

(c)

Incorporation and Authorization.  The Company is duly formed and validly existing in good standing as a corporation under the laws of the State of its incorporation.  The execution and delivery by the Company of this Agreement have been duly authorized by all necessary action, and this Agreement is the valid, binding and legally enforceable obligation of the Company.

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3.

Representations and Warranties of the Consultant.  In order to induce the Company to enter into this Agreement, the Consultant hereby represents and warrants to and agrees with the Company as follows:

(a)

No Defaults.  The execution and delivery of this Agreement, and the consummation of the transactions herein contemplated, and compliance with the terms of this Agreement will not conflict with or result in a breach of any of the terms, conditions or provisions of, or constitute a default under, the Articles of Incorporation or By-Laws of the Consultant (in any respect that is material to the Consultant), any material note, indenture, mortgage, deed of trust, or other agreement or instrument to which the Consultant is a party or by which the Consultant or any property of the Consultant is bound, or to the Consultant’s knowledge, any existing law, order, rule, regulation, writ, injunction or decree of any government, governmental instrumentality, agency or body, arbitration tribunal or court, domestic or foreign, having jurisdiction over the Consultant or any property of the Consultant.

(b)

Incorporation and Authorization.  The Consultant is duly formed and validly existing in good standing as a corporation under the laws of the State of its incorporation.  The execution and delivery by the Consultant of this Agreement have been duly authorized by all necessary action, and this Agreement is the valid, binding and legally enforceable obligation of the Consultant.

4.

Placement Fee.

(a)

Notice of Prospects Required.  The Consultant shall provide advance written notice (the “Notice”) to the Company of the names and addresses of all entities and persons it desires to contact or has identified (the “Prospects”) regarding a potential financing.  The Consultant shall not be entitled to give the Company Notice of any additional Prospects once it has received a notice of termination from the Company.  If an entity or person listed on the Notice meets, corresponds with, or engages in a telephone conversation with, an officer of the Company or other agent of the Company, to discuss a financing, then the Consultant shall be entitled to the placement fee, specified below, in the event a transaction is closed involving the Prospect and the Company within twelve (12) months of the date of the applicable Notice.  Notwithstanding the Consultant including any person or entity in a Notice, the Consultant shall not be entitled to a fee in connection with any transaction with any person or entity with whom the Company has had contact prior to the Consultant providing the Company a Notice listing such person or entity unless otherwise agreed in writing by the Company.  The Company will notify the Consultant in writing as soon as possible after receipt of any Notice if the Company has had prior contact with any person or entity listed thereon.  The Consultant shall not initiate any correspondence or conversations with any contact provided in the Notice until it has received notification from the Company as to whether or not the Company has had prior contact with any person or entity listed in the Notice.

(b)

Fee.  The Company shall pay the Consultant, upon receipt of the cash proceeds from a financing that is completed with a Prospect within twelve (24) months of 

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the Notice relating to the Prospect as a direct result of the Consultant Services under this Agreement, a fee of $400,000 for $5,000,000 of the gross subscription proceeds of an equity offering received by the Company from purchasers procured by the Consultant; provided such subscriptions are accepted by the Company.   In the event that the gross subscription proceeds received by the Company are less than or greater that $5,000,000, the Company and the Consultant agree that the Consultant’s fee herein shall be adjusted in an equitable manner in order to reflect the difference in the amount of gross proceeds actually received.  The Company shall also issue, within ten (10) days of the closing of each financing completed as a direct result of the Consultant Services under this Agreement, to the Consultant warrants (“Warrants”) in an amount equal to ten percent (10%) of the number of shares of common stock or other securities issued by the Company in connection with the financing .  The Warrants shall be exercisable for three (3) years at an exercise price equal to the purchase price of the securities issued in the financing.  The Warrants shall have registration rights which are the same as those granted to purchasers procured by the Consultant.  It is agreed and acknowledged that the Company is not required to offer to sell or make its securities available for sale unless such sale can be accomplished in any jurisdiction in which it is to be offered for sale or sold pursuant to exemptions from all federal and state securities laws that require the filing of a registration statement.   In the event that the Consultant introduces the Company to a placement agent that charges a commission in consideration for introducing the Company to purchasers of its securities, in no event shall the aggregate commissions and fees to be paid by the Company (including the fees due to the Consultant as set forth in this Section 4(b)) exceed a cash fee of 8% of the total gross proceeds received by the Company or warrant coverage in excess 10% of the total amount of securities issued by the Company in connection with the financing.

(c)

No Requirement to Close.  It is agreed and acknowledged that no compensation shall be earned by or paid to the Consultant arising out of or in connection with a financing that fails to close and that the Company shall be under no obligation to proceed with a proposed financing, or to seek to compel performance by such third-party of a proposed financing, for the benefit of the Consultant.  The Company may refuse, for any reason or no reason, to accept, proceed with or close on a proposed financing and in such event, shall not be obligated to pay the Consultant any fee.  The Consultant is responsible for paying all expenses incurred by it in connection with this Agreement.

5.

Non-Circumvention.

The Company hereby agrees as follows:

(a)

Client Confidentiality.  The Company agrees to maintain the confidentiality of the Consultant’s clients, except as required by applicable law.  Such clients shall be those entities or individuals that the Consultant has procured for investment in the Company.  For a period of two (2) years from the termination of this Agreement, the Company will not solicit or enter into any transaction covered by this Agreement with the Prospects without payment to the Consultant compensation no less than the compensation to be paid to the Consultant hereunder. 

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(b)

Breach.  In the event that the Company breaches Section 5(a) of this Agreement, the Consultant shall be entitled to receive compensation in the same proportion to the transaction done without the Consultant’s participation as the compensation to the Consultant under this Agreement bears to the transaction.

6.

Indemnification.

(a)

Indemnity by Company.  The Company agrees to indemnify and hold harmless the Consultant and the Consultant’s employees, accountants, attorneys and Consultants (the “Consultant’s Indemnities”) against any and all losses, claims, damages or liabilities to which they or any of them may become subject under any statute or at common law for any legal or other expenses (including the costs of any investigation and preparation) incurred by them in connection with any litigation, whether or not resulting in any liability, but only insofar as such losses, claims, damages, liabilities and litigation arise out of or are based upon a breach of this Agreement; provided, however, that the indemnity agreement contained in this Section 6(a) shall not apply to amount paid in settlement of any such litigation, if such settlements are made without the consent of the Company, nor shall it apply to the Consultant’s Indemnities in respect to any such losses, claims, damages or liabilities arising out of or based upon any breach on their part of this Agreement or their negligence or willful misconduct.  This indemnity is in addition to any other liability the Company may otherwise have to the Consultant’s Indemnities.  The Consultant’s Indemnities agree, within ten (10) days after the receipt by them of written notice of the commencement of any action against them in respect to which indemnity may be sought from the Company under this Section 6(a), to notify the Company in writing of the commencement of such action; provided, however, that the Company shall be entitled to participate in (and, to the extent that the Company shall wish, to direct) the defense thereof at its own expense, but such defense shall be conducted by counsel of recognized standing and reasonably satisfactory to the Consultant’s Indemnities in such litigation.  The Company agrees to notify the Consultant’s Indemnities promptly of the commencement of any litigation or proceedings against the Company or any of the Company’s officers or directors related to this Agreement and to furnish to the Consultant’s Indemnities, at their request, copies of all pleadings therein and to permit the Consultant’s Indemnities to be observers therein and apprise the Consultant’s Indemnities of all developments therein.

(b)

Indemnity by Consultant.  The Consultant agrees, in the same manner and to the same extent as set forth in Section 6(a) above, to indemnify and hold harmless the Company and the Company’s employees, accountants, attorneys and Consultants (the “Company’s Indemnities”) with respect to any breach of any representation, warranty or covenant made by the Consultant in this Agreement or any negligence or willful misconduct of the Consultant. 

(c)

Survival.  The indemnification obligations in this Section 6 shall survive termination of this Agreement.

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7.

Termination.

(a)

Method of Termination.  This Agreement may be terminated by either party upon thirty (30) days prior written notice to the other party. 

(b)

Effect of Termination.  Any termination of this Agreement pursuant to this Section shall be without liability of any character (including, but not limited to, loss of anticipated profits or consequential damages) on the part of any party thereto, except that the Company shall remain obligated to pay to the Consultant any fees earned by the Consultant for introduction of its clients, as specified in Sections 4 and 5; and the Company and the Consultant shall be obligated to pay, respectively, all losses, claims, damages or liabilities under Section 6 hereof.

8.

Miscellaneous.  

(a)

Notice.

  Whenever notice is required by the provisions of this Agreement to be given to the Company, such notice shall be in writing, addressed to the Company, at:

If to Company:

EDGEWATER FOODS INTERNATIONAL, INC.

400 Professional Drive, Suite 310

Gaithersburg, Maryland 20878

Phone: 240-864-0449 

Fax: 240-864-0450

 

Whenever notice is required by the provisions of this Agreement to be given to the Consultant, such notice shall be given in writing, addressed to the Consultant, at:

If to the Consultant:

Pai's International trade, Inc

27 Maple Street

Roslyn Heights, NY 11577

Phone: (917) 293 2635

Fax: (516) 908 4144

By written notice to the other party, a party may amend this provision concerning the address for service, which writing will be deemed to amend and be incorporated into this Agreement.  Notice to be made to either party shall be determined to have been properly made if sent by registered mail or facsimile to the address or facsimile number as set forth above, or such other address or facsimile number that may have later been submitted by a party.

(b)

Governing Law.

The validity, interpretation, and construction of this Agreement will be governed by the Laws of the State of New York (without regard to conflict of laws).  The parties agree to submit to jurisdiction in Illinois and agree that any cause of action arising under this Agreement shall be brought in an arbitration proceeding 

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administered by the American Arbitration Association in accordance with its rules then in effect, before a single arbitrator with significant business experience.  The arbitration shall occur in New York, NY and the decision of the arbitrator be enforced by any court of competent jurisdiction.

(c)

Counterparts.

This Agreement may be executed in any number of counterparts, each of which may be deemed an original and all of which together will constitute one and the same instrument.

(d)

Confidential Information.

All confidential financial or business information (except publicly available otherwise obtained from another source) respecting either party will be used solely by the other party in connection with the within transactions, be revealed only to employees or contractors of such other party who are necessary to the conduct of such transactions, and be otherwise held in strict confidence.  Notwithstanding the foregoing, the Consultant and its affiliates shall keep confidential all information concerning the Company and its affiliates obtained by them in connection with the performance of the Consultant Services hereunder, except to the extent disclosure of such information is: (i) necessary to the performance of the Consultant Services (it being understood that persons to whom such disclosure is made shall be informed of the confidential nature of such information);  (ii) required by applicable law, regulation or legal process; or (iii) of information which has become public knowledge otherwise than through the actions or efforts of the Consultant or its affiliates or clients.  The Consultant shall return to the Company all confidential information provided by the Company to it upon request of the Company or termination of this Agreement.  In all events, the Company shall have the right to make any and all disclosures relating to this Agreement and any proposed financing as it believes may be required or advisable in connection with its disclosure obligations under the securities laws.  These obligations shall survive termination of this Agreement.

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(e)

Entire Agreement.  This is the entire Agreement between the parties with respect to the subject matter hereof.  This Agreement may not be modified otherwise than by a writing signed by the party to be changed.

IN WITNESS WHEREOF, the parties hereto have duly caused this Agreement to be executed as of the day and year first above written.

	 	 	COMPANY

	 	 	

EDGEWATER FOODS INTL., INC.

	 	 	 
	 	 	By:  ______________________________

	 	 	Name:  Robert Saunders

Title:  Chairman/CEO

	 	 	 
	 	 	CONSULTANT

	 	 	 
	 	 	Pai’s International Trade, Inc.

By:______________________________

	 	 	Name:  Sam Pai

Title:  President

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