CONFIDENTIAL
000
Xxxxx Xxxx Xxxxxx
Xxx
Xxxxxxx, XX 00000
Telephone:
(000) 000-0000
Fax:
(000) 000-0000
CONFIDENTIAL
Dated
as
of August 4, 2006
Xx.
Xxxxxxx X. Xxxxx
Chief
Executive Officer
New
Motion, Inc.
00
Xxxxxxxxx Xxxx
Xxxxxx
Xxxxx
Xxxxxx,
XX 00000
Dear
Ray,
This
letter (the “Agreement”) will confirm the engagement of Xxxxxxx Xxxxxx Xxxxxx
Inc., a Texas corporation (“SMH”), by New
Motion, Inc.,
a
[Delaware] corporation (the “Company”), as financial adviser and placement agent
in connection with the Company’s proposed Private Placement of approximately $10
million in equity or equity-linked securities (“Securities”) to accredited
investors (the “Offering”).
|
1.
|
Scope
of SMH’s Services.
SMH will assist the Company in placing the Securities with terms
substantially like those described in the Term Sheet (Exhibit A).
To that
extent, SMH will distribute Offering Materials (as hereinafter defined)
to
potential investors, report the status of the Offering to the Company,
and
assist in consummating the Offering, including, but not limited
to:
|
|
a.
|
familiarizing
itself to the extent it deems appropriate and feasible with the business
operations, properties, financial condition, and prospects of the
Company,
|
|
b.
|
assisting
the company in the search and selection of a viable public shell
company
for the purpose of effecting a reverse
merger,
|
|
c.
|
assisting
the Company in preparing Offering Materials for distribution by SMH
to
potential investors selected by SMH and the
Company,
|
|
d.
|
screening
and contacting prospective
investors,
|
|
e.
|
assisting
in negotiations with prospective investors,
and
|
|
f.
|
advising
and assisting the Company in structuring and pricing the
Offering.
|
The
Offering will be conducted pursuant to the terms and conditions of a customary
placement agent agreement acceptable to SMH, the Company and their respective
counsel. The Company shall retain control of the Offering and shall have the
right to determine (a) whether to close the sale of the Securities to a specific
investor, (b) whether to close or terminate the Offering, and (c) the content
of
the Offering Materials. It is understood by both parties that SMH intends to
solicit interest from a limited number of potential investors and on a
“best-efforts” only basis. SMH will, in its sole discretion, determine the
reasonableness of its efforts and is under no obligation to perform at any
level
other than what it deems reasonable.
New
Motion, Inc.
August
4, 2006
Page
2
|
2.
|
Fees.
In return for SMH’s services in the placement of Securities, the Company
will pay SMH the following fees:
|
|
a.
|
a
cash fee equal to 7.5% of the gross proceeds of any Securities placed
by
SMH (consisting of a 3.5% advisory fee and a 4% placement agent
fee);
|
|
b.
|
warrants
to purchase a number of shares of common stock equal to 8% of the
number
of shares sold in the Offering. Such warrants shall have a five-year
term
and an exercise price equal to the price per share of the Securities
sold
in the Offering,
|
Any
fee
contemplated in the above sentence herein will be referred to as the “Financing
Fees”. Any Financing Fees payable to SMH will be due at the closing date of the
Offering and shall be payable to SMH by the Company. The Company shall also
pay
SMH a Financing Fee if Securities are sold by the Company through a private
placement during the Residual Period to investors contacted by SMH regarding
the
Offering.
|
3.
|
Expenses.
In addition to the foregoing, the Company will, upon request, reimburse
SMH for all reasonable out of pocket costs and expenses incurred
by SMH in
performing its obligations under this Agreement, which costs and
expenses
shall include, but not be limited to, travel expenses, expenses incurred
in performing due diligence in connection with transactions, legal
expenses, and all other expenses reasonably incurred by SMH in performing
its obligations under this Agreement; provided, however, that SMH
shall
obtain the prior approval of the Company for any single expenditure
in
excess of $10,000 and total expenses in aggregate shall not exceed
$50,000
without the express written consent and approval of the Company..
In
seeking reimbursement for expenses, SMH shall provide to the Company
a
written statement or statements detailing expenses for which reimbursement
is sought and, upon request by the Company, shall provide copies
of
invoices and other documentation supporting such expenses. Reimbursable
expenses shall be payable by the Company within 10 days of receipt
by the
Company of such written statement or, if requested by the Company,
copies
of supporting documentation.
|
|
4.
|
Term.
The term of this Agreement shall begin on the date hereof and shall
terminate no later than three (3) months thereafter. A “Residual Period”
shall extend for six (6) months from the date of termination or expiration
of this Agreement. Either party reserves the right to terminate this
engagement on 30 days notice in
writing.
|
|
5.
|
Company
Information.
The Company will furnish SMH such information concerning the Company
as
SMH reasonable determines to be appropriate with respect to the Offering
(“Information”). The Company shall afford SMH and its counsel and
representatives full and complete access to its books and records
and will
use commercially reasonable efforts to afford SMH will full and complete
cooperation of management to gather the Information. The Company
recognizes and confirms that SMH (a) will use and rely on the Information
in performing the services contemplated by this Agreement, without
independently verifying the accuracy and completeness of the same,
(b)
does not assume responsibility for the accuracy or completeness of
the
Information, and (c) will not make an appraisal of any assets or
liability
of the Company.
|
The
Company hereby represents to SMH that all solicitation materials prepared by
the
Company and used in connection with the Offering (the “Offering Materials”) will
not, as of the date of any offer or sale in connection with the Offering,
contain any untrue statement of a material fact or omit a material fact
necessary to make the statements contained therein, not misleading, in light
of
the circumstances under which they were made. If at any time an event occurs
as
a result of which the Offering Materials, as then amended or supplemented,
would
include an untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein, in light of the circumstances
under which they were made when such Offering Materials are delivered to a
prospective purchaser pursuant hereto, not misleading, the Company will promptly
notify SMH to suspend solicitation of prospective purchasers in connection
with
the Offering; and if the Company decides to amend or supplement the Offering
Materials, it will promptly advise SMH by telephone (with confirmation in
writing) and will promptly prepare an amendment or supplement that will correct
such statement or omission.
New
Motion, Inc.
August
4, 2006
Page
3
SMH
will
not violate, or cause the Company to violate, any applicable securities laws
in
connection with the Offering.
|
6.
|
Confidentiality.
In connection with this engagement, it is contemplated that SMH will
receive from the Company certain information (including certain business
planning, product, marketing, technical, financial, and other information
and materials) the Company considers confidential. SMH shall use
this
confidential information solely for the purpose of providing services
to
the Company and will not disclose to any party (other than SMH’s officers,
directors, employees, affiliates, and counsel who have a need to
know such
information, herein “Representatives”) any such confidential information,
except with the prior written approval of the Company; provided,
however,
that the foregoing restrictions shall not apply to any information
that:
(a) is included in the Offering Materials and disclosed pursuant
to the
distribution of the Offering Materials as permitted by the Company,
(b)
the Company consents to having disclosed in connection with the Offering,
(c) is publicly available when provided or thereafter becomes publicly
available other than through disclosure by SMH or its Representatives,
or
(d) is required to be disclosed by SMH by judicial or administrative
process in connection with any action, suit, proceeding, or investigation;
and provided, further, however, that SMH shall give the Company notice
of
any such requirement immediately upon the becoming aware of same
and shall
not disclose such information except only to the extent required
after the
maximum time permitted. Information shall be deemed “publicly available”
if it becomes a matter of public knowledge or is contained in materials
available to the public or is obtained by SMH from any source other
than
the Company or its representatives, provided that such source was
not to
SMH’s actual knowledge subject to a confidentiality agreement with the
Company. SMH will take reasonable steps to assure that the Offering
Materials are not distributed to any persons not permitted to receive
them
pursuant to the terms hereof.
|
|
7.
|
Indemnification.
The Company acknowledges that SMH will be acting on behalf of the
Company
and will require indemnification by the Company. The Company further
acknowledges that SMH’s indemnification provisions attached hereto as
Exhibit B are incorporated by reference herein or are made a part
hereof
for all purposes as though set forth entirely
herein.
|
|
8.
|
Miscellaneous.
The Offering will be completed in accordance with Regulation D, Rule
506,
the safe harbor exemption from registration under the federal Securities
Act of 1933, as amended, and applicable state or other jurisdictional
securities laws (i.e. “blue sky” laws). All investors in the Transaction
will be persons who qualify as accredited investors under all applicable
local securities laws.
|
The
parties agree that their relationship under this Agreement is an advisory
relationship only, and nothing herein shall cause SMH to be partners, agents
or
fiduciaries of, or joint venture partners with, the Company or with each
other.
The
Company agrees that, following the closing of the Offering, SMH shall have
the
right to place advertisements in financial and other newspapers and journals
at
its own expense describing its services to the Company hereunder, provided
that
SMH will submit a copy of any such advertisement to the Company for its
approval, which approval shall not be unreasonably withheld or
delayed.
New
Motion, Inc.
August
4, 2006
Page
4
This
Agreement may not be amended or modified except in writing and shall be governed
by, and construed in accordance with the laws of the State of New
YorkCalifornia.
If
this
Agreement reflects our mutual understanding, please execute two copies in the
space indicated below and return one to us.
Very
truly yours,
XXXXXXX
XXXXXX XXXXXX INC.
By:__________________________
Name: Xxxx
Xxxxx
Title: Managing
Director
Accepted
and agreed to as of August __, 2006:
COMPANY
NAME, Inc.
By:_________________________________
Name: Xxxxxxx
Xxxxx
Title: CEO
New
Motion, Inc.
August
4, 2006
Page
5
`
Exhibit
A
NEW
MOTION, INC.
$10
Million Private Equity Placement
August
2006
|
Issuer
|
New
Motion, Inc. (the “Company”).
|
|
Use
of Proceeds
|
General
corporate purposes and potential acquisitions of similar companies
in the
United States.
|
|
Amount
|
$10,000,000
|
|
Securities
|
[_,___,___]
shares of common or convertible preferred stock of the Company
(the
“Securities”),
which will be unregistered upon issuance but will be subsequently
registered by the Company.
|
|
Purchase
Price
|
The
purchase price per share for the Securities will have an implied
pre-money
value for the pro forma public entity of $40 million.
|
|
Funding
/ Registration
|
Upon
execution of purchase agreements and related documentation, the Investors
will fund into escrow. Share certificates will be subsequently delivered
to the Investors, however the Securities would not yet be registered.
The
Company will commit to register the Securities with the SEC within
90 days
of the closing.
|
|
Exclusive
Placement Agent
|
Xxxxxxx
Xxxxxx Xxxxxx, Inc. (“SMH”).
|
|
Plan
of Distribution
|
SMH
will market the Securities into both the institutional investment
community as well as high net-worth accredited investors. In addition,
SMH
will market the Securities within its own managed investment management
operations.
|
New
Motion, Inc.
August
4, 2006
Page
6
Exhibit
B
Indemnification
COMPANY
NAME, Inc., a Delaware corporation (the “Company”) and its subsidiaries, agrees
to indemnify and hold harmless Xxxxxxx Xxxxxx Xxxxxx Inc., a Texas corporation
(“SMH”), together with its affiliates, directors, officers, agents, and
employees (SMH and each such entity or person, an “Indemnified Person”), from
and against any and all losses, claims, damages, judgments, and liabilities,
expenses, or costs (and all actions in respect thereof and any legal or other
expenses in giving testimony or furnishing documents in response to a subpoena
or otherwise), including the cost of investigating, preparing for, or defending
any such action or claim, whether or not in connection with litigation in which
an Indemnified Person is a party, as and when incurred, directly or indirectly
caused by, relating to, based upon, or arising out of SMH’s performance of its
engagement by the Company under the letter agreement dated as of June 28, 2006,
as it may be amended from time to time (the “Agreement”), or otherwise arising
out of or in connection with advice or services provided or to be provided
by
Indemnified Persons pursuant to the Agreement, the transactions contemplated
thereby, or any Indemnified Person’s actions or inactions in connection with any
such advice, services, or transactions, including any indemnified person’s sole
or contributory negligence, if such activities were performed (i) in good faith
and (ii) in such manner reasonably believed by such Indemnified Person to be
within the scope of the authority conferred by the Agreement or by law and
to be
on behalf of the Company or in furtherance of the performance of SMH’s services
under the Agreement; provided, however, such indemnity agreement shall not
apply
to any such loss, claim, damage, liability, or cost incurred by any Indemnified
Person to the extent it is found in a final judgment by a court of competent
jurisdiction (not subject to further appeal) to have resulted primarily and
directly from the gross negligence or willful misconduct or bad faith of such
Indemnified Person. The Company also agrees that no Indemnified Person shall
have any liability (whether direct or indirect, in contract or tort or
otherwise) to the Company for or in connection with the any advice or services
provided by any Indemnified Persons in connection with the Agreement, the
transactions contemplated by the Agreement, or any Indemnified Persons’ actions
or inactions in connection with any such advice, services, or transactions
except for any such liability for losses, claims, damages, liabilities, or
costs
found in a final judgment by a court of competent jurisdiction (not subject
to
further appeal) to have resulted primarily and directly from such Indemnified
Person’s gross negligence or willful misconduct or bad faith in connection with
such advice, actions, inactions, or services.
These
Indemnification Provisions shall be in addition to any liability that the
Company may otherwise have to any Indemnified Person and shall extend to the
following: SMH, its affiliated entities, directors, officers, employees, agents,
legal counsel and controlling persons of SMH within the meaning of the federal
securities laws, and the respective successors, assigns, heirs, beneficiaries,
and legal representatives of each of the foregoing indemnified persons or
entities. All references to SMH or Indemnified Persons in these Indemnification
Provisions shall be understood to include any and all of the foregoing
indemnified persons or entities.
If
any
action, proceeding, or investigation is commenced, as to which an Indemnified
Person proposes to demand such indemnification, it will notify the Company
with
reasonable promptness; provided, however, that any failure by an Indemnified
Person to notify the Company will not relieve the Company from its obligations
hereunder except if and only to the extent that the Company’s defense of such
action, proceeding or investigation is actually prejudiced by the Indemnified
Person’s failure so to notify the Company. SMH will have the right to retain
counsel of its own choice to represent it; however, such firm shall be
acceptable to the Company, which acceptance shall not be unreasonably withheld,
and unless the Company assumes SMH’s defense as provided below, the Company will
pay the reasonable fees and expenses of such counsel, and such counsel shall
to
the fullest extent consistent with its professional responsibilities cooperate
with the Company and any counsel designated by it. The Company will be entitled
to participate at its own expense in the defense, or if it so elects, to assume
and control the defense of any action, proceeding, or investigation, but, if
the
Company elects to assume the defense, such defense shall be conducted by counsel
reasonably acceptable to SMH. Any Indemnified Person may retain additional
counsel of its own choice to represent it but shall bear the fees and expenses
of such counsel unless the Company shall have specifically authorized the
retaining of such counsel. The Company will not be liable for any settlement
of
any claim against an Indemnified Person made without its written consent.
New
Motion, Inc.
August
4, 2006
Page
7
In
order
to provide for just and equitable contribution, if a claim for indemnification
pursuant to these Indemnification Provisions is made but it is found in a final
judgment by a court of competent jurisdiction (not subject to further appeal)
that such indemnification may not be enforced in such case, even though the
express provisions hereof provide for indemnification in such case, then the
Company, on the one hand, and any Indemnified Person, on the other hand, shall
contribute to the losses, claims, damages, liabilities, or costs to which the
Indemnified Persons may be subject in accordance with the relative benefits
received by the Company, on the one hand, and SMH, on the other hand, and also
the relative fault of the Company, on the one hand, and SMH, on the other hand,
in connection with the statements, acts or omissions that resulted in such
losses, claims, damages, liabilities, or costs, and the relevant equitable
considerations shall also be considered. No person found liable for a fraudulent
misrepresentation shall be entitled to contribution from any person who is
not
also found liable for such misrepresentation. Notwithstanding the foregoing,
SMH
shall not be obligated to contribute any amount hereunder that exceeds the
amount of fees received by SMH pursuant to the Agreement.
Neither
termination nor completion of the engagement of SMH or any Indemnified Person
under the Agreement shall affect the provisions of these Indemnification
Provisions, which shall then remain operative and in full force and
effect.
If
any
provision contained in this Exhibit A is held by a court of competent
jurisdiction or other authority to be invalid, void, unenforceable, or against
its regulatory policy, the remainder of the provisions contained in this Exhibit
A shall remain in full force and effect and shall in no way be affected,
impaired, or invalidated. These Indemnification Provisions may not be amended
or
modified in any way, except by subsequent agreement executed in
writing.
