Attention: Mr. Larry Hargrave
December
24, 2007
Xx. Xxxxx
Xxxxxxxx
Chief
Executive Officer
Best
Energy Services, Inc.
0000
Xxxxx Xxxxx 0000
Houston,
Texas 77002
| Attention: | Xx. Xxxxx Xxxxxxxx |
|
Chief
Executive Officer
|
Dear Xx.
Xxxxxxxx
This will
confirm the understanding and agreement (this "Agreement") between Xxxxxx
Xxxxxxx,
Inc. and its affiliates (collectively, the "Placement Agent"), and Best
Energy Services,
Inc. and its affiliates (collectively, the "Company") as
follows:
1. Retention
of Placement
Agent.
The
Company hereby engages the Placement Agent, and the Placement Agent hereby
accepts such engagement, as the Company's exclusive agent for the Private
Placement
(as defined below), which such engagement (and this Agreement) shall terminate
180 days
from the date this agreement is executed and the completion of the Placement
Agent's
due diligence. Pursuant to such engagement, the Placement Agent agrees to use
its best
efforts to raise for the Company two financings in the form of:
(a) Twelve
month Bridge note financing in the amount of $800,000. The note holders
shall
receive stock equal to their investment at the same price and valuation as the
investors in
Financing B ("Equity Incentive"). In addition, the note holders shall have the
option to "roll over"
their notes into Financing B in lieu of repayment of principal. Should the note
holders elect to
do so, such "roll over" will be treated as a cash investment into Financing B
and fees shall be
payable to Placement Agent in accordance with the fees outlined in this
agreement.
(b) $12,000,000
of Equity or Mezzanine financing.
In
addition, Placement Agent will use its best efforts to arrange approximately
$23,000,000 in debt
financing with one of its partners, ECH Consulting. The terms of this engagement
are to be
arranged under a separate engagement agreement with ECH Consulting.
The above
terms are preliminary. Should the amounts or structure of the above financings
differ
from the contemplated amounts and structure, the fees payable shall be
calculated based
on the fee structure outlined
in this agreement.
| Initials: /s/ X.X. |
Initials: /s/
L.H.
|
| Xxxx Xxxx |
Xxxxx Xxxxxxxx
|
Employees
and the families of Placement Agent may participate in the
financings.
2. The
Private Placement.
(a) The
Private Placement shall be structured as a transaction exempt from Section 5 of
the
Securities Act of 1933, as amended (the "Securities Act"), and shall
comply with Section 4(2) of
the Securities Act and Regulation D thereunder and state securities laws and
shall be offered
and sold solely to "accredited investors," as defined in Rule 501 under the
Securities Act. The
Private Placement shall be conducted by the Placement Agent on a best
efforts
basis.
(b)
The Private Placement will be subject to compliance with the Securities Act and
other applicable
federal and state securities laws. The Placement Agent shall comply with the
Rules of
Conduct of the National Association of Securities Dealers, Inc. (the "NASD"). The feasibility
of the Private Placement will depend upon the results of our investigation of
the Company,
information about the Company that the Placement Agent may receive including,
but not
limited to, due diligence reports concerning the Company's operations,
management, and
business plan, and the continuation of the operation of the Company without
material adverse
change.
(c) Notwithstanding
anything to the contrary herein, the Company shall retain the right to
alter the
terms of the Private Placement, provided that if, within a 24 month period
following the date
of this Agreement, the Company or any of its subsidiaries sells any security or
debt instrument
to an actual or potential subscriber to the Private Placement that was
previously identified
by the Placement Agent, then the Company shall pay the Placement Agent
the
commissions
set forth in Paragraph 3 and Paragraph 4 hereof for such sale.
(d)
The Company will comply with all Blue-Sky requirements.
3. Commissions;
Expenses.
(a) The
commissions payable to the Placement Agent for the Private Placement offering
shall be:
(i) three percent of total amount raised (3%) management fee; and (ii) seven
percent
of total amount raised (7%) selling commission on the securities placed in this
offering,
including the proceeds derived from the exercise of the investors warrants
issued,
if any (a total of ten percent (10%)).
(b) In
addition, two (2%) of the total amount raised shall be payable to the Placement
Agent for
unaccountable expenses. It is understood that the Placement Agent may engage
certain
experts, subject to the prior approval of the Company which shall not be
unreasonably
withheld, for analysis of the Company's operations, management, and business
plan, and that such analyses may be material to the decision of the Placement
Agent as
to the feasibility of the proposed Private Placement.
(c) If
the Placement Agent has raised the funds under the terms agreed upon in this
Agreement,
and if the Company does not close under said terms, the Placement Agent shall
be
entitled 50% of the fees outlined above 3(a) and 3(b).
| Initials: /s/ X.X. |
Initials: /s/
L.H.
|
| Xxxx Xxxx |
Xxxxx Xxxxxxxx
|
(d) The
Company will pay all direct expenses incurred in connection with: (i) the
preparation
and printing of all other documents and instruments required in connection with
the
Private Placement (whether or not ultimately consummated) including, without
limitation, the
Placement Agent's Warrants (as defined below) and the shares issuable upon the
exercise
of the Placement Agent's Warrants; (ii) the Company's actual expenses for
accounting
and legal costs involved with the Private Placement; (iii) blue sky filings,
including fees,
disbursements, and counsel fees with respect to blue sky qualification; (iv) the
road show, if
any.
4.
Placement Agent's Warrants/Shares
(a) For Financing A. Upon the
successful completion and closing of the bridge financing, the
Company will issue to the Placement Agent shares of the Company's common stock
equal to
10% of the amount of shares received by the note holders upon investment (the
Equity
Incentive). The Placement Agent's Shares shall contain certain anti-dilution
provisions consistent
with transactions of the type contemplated herein. Such anti-dilution provisions
shall
protect against dilution in both price and percentage of the Company if there
shall be any stock
split, stock dividend, recapitalization, or reorganization of the common stock
or any successor
securities. The shares shall be included in the first registration statement
following the
closing of the financing.
(b) For Financing B. Upon the
successful completion and closing of the Private Placement,
the Company will issue to the Placement Agent warrants to acquire Units which
shall be
identical to the Units in the Private Placement (the "Placement Agent's Warrants").
The
amount of the Placement Agent's Warrants shall equal ten percent (10%) of the
Units sold in
the Private Placement. The exercise price of the Placement Agent's Warrants
shall be equal to
the price of the Units sold to investors in the Private Placement. In addition,
in the event
that this offering includes warrants to the investors, the Placement Agent shall
receive 10% of
the total number of warrants that the investor receives. The exercise price of
these Placement
Agent warrants shall be identical to the exercise price for the investor. The
Placement
Agent's Warrants shall be exercisable for a period of five (5) years commencing
one year
after the date of this Agreement and shall contain certain anti-dilution
provisions consistent
with transactions of the type contemplated herein. Such anti-dilution provisions
shall
protect against dilution in both price and percentage of the Company if there
shall be any stock
split, stock dividend, recapitalization, or reorganization of the common stock
or any successor
securities. The shares underlying the Placement Agent's warrants shall be
registered
at the same time as the Investor shares are registered. The Placement Agent's
Warrants
shall not be transferable; provided that, if such transfers are made in
accordance with
Section 4(2) of the Securities Act, the Placement Agent may transfer all or
any portion of the
Placement Agent's Warrants to its affiliates, associates and employees. The
warrants shall
provide for a cashless exercise and shall be issued to the Placement Agent at
the closing
of the Private Placement. The shares underlying the warrants shall be included
in the first
registration statement following the closing of the financing.
5. Undertaking
to Give Notice of
Events
Until the
date of the last closing of the Private Placement, the Company shall
accordingly
and promptly disclose matters relating to the Company that shall effect the
Private
Placement in the negative or change the Company's status.
| Initials: /s/ X.X. |
Initials: /s/
L.H.
|
| Xxxx Xxxx |
Xxxxx Xxxxxxxx
|
6. Inclusion
in Future Offerings.
(a) The
Placement Agent will have the right of first refusal on any private equity, debt
or rights
offering for a period of 24 months from the date of closing.
(b) The
Company will use reasonable commercial efforts to ensure that the Placement
Agent
will be included as a co-manager and be named on the front and back covers of
the prospectus
relating thereto in the next underwritten public offering of securities of the
Company.
In the event that the lead manager objects to such arrangement, the Company
will use
reasonable commercial efforts to ensure that the Placement Agent will be
included as a
member of the underwriting or selling group in the next underwritten public
offering of securities
of the Company.
7. General
Conditions.
The
Placement Agent's intention as expressed in this Letter Agreement is subject to
the following
general conditions:
(a) All
relevant terms, conditions, and circumstances relating to the Private Placement
will be
satisfactory to the Placement Agent and its counsel.
(b) Subject
to the Company's prior written approval, the Placement Agent will have the
right to
choose one or more Co-Managers, reasonably acceptable to the Company, to assist
it in the
Private Placement. Such Co-Managers will be paid by the Placement Agent from the
amounts
it would otherwise have received from the Company as set forth
herein.
(c) There
will have been no materially adverse change in the business or financial
condition
of the Company.
(d) Affiliates,
associates and employees of the Placement Agent as well as family members
of affiliates, associates and employees of the Placement Agent who are otherwise
accredited
investors as defined in rule 501 of the securities act shall be entitled to
invest in the
Private Placement.
(e) All
references to monetary amounts in this Agreement shall be in United States
dollars.
8. Indemnification.
Recognizing
that transactions of the type contemplated by this engagement sometimes
result in litigation and that the Placement Agent's role is limited to acting as
the Company's
agent, the Company agrees to indemnify the Placement Agent (and its directors,
officers,
agents, employees, and controlling persons) to the full extent lawful against
any and all
claims, losses and expenses (including all reasonable fees and disbursements of
the Placement
Agent and such person's counsel and the Placement Agent's and such person's
reasonable
travel and other out-of-pocket expenses reasonably and necessarily incurred in
connection
with the investigation of, and preparation for, any such pending or threatened
claims
and any litigation or other proceeding) arising out of any actions or omissions
by the Company
(and its directors, officers, agents, employees, and controlling persons) in
| Initials: /s/ X.X. |
Initials: /s/
L.H.
|
| Xxxx Xxxx |
Xxxxx Xxxxxxxx
|
settlement
tantamount thereto) to constitute willful misconduct, bad faith or gross
negligence on the
part of the Placement Agent. The foregoing indemnification agreement shall be in
addition
to any rights that any indemnified party may have at common law.
9. Miscellaneous
Provisions.
(a) The
Placement Agent shall have the right to appoint one member to the Board of
Directors,
or appoint an advisor to the board, to be compensated on the same basis as an
outside
Board member.
10. Confidential
Information.
All
information that is identified in writing or verbally by the Company as
confidential shall
remain the property of the Company and shall not be used by the Placement Agent
in any way
except in connection with the services performed or to be performed under this
Agreement.
The foregoing shall not apply to any information that is or becomes publicly
available
without breach of this Agreement, which is rightfully received by Placement
Agent
from a
third party without such restrictions, which is made available by the Company to
third parties
without such restrictions, or which is released in writing from such
restrictions by the Company.
Please
confirm that the foregoing is in accordance with your understanding by signing
and
returning to the Placement Agent the enclosed copy of this Letter Agreement as
set forth below.
We at
Xxxxxx Xxxxxxx look forward to working with you on this project and hope it will
be the
beginning of a long and mutually rewarding relationship.
AGREED AND
ACCEPTED Date:
12/24/07
| Xxxxxx Xxxxxxx Inc. | Best Energy Services, Inc. |
| By: /s/ Xxxx Xxxx | By: /s/ Xx. Xxxxx Xxxxxxxx |
| Xxxx Xxxx | Xx. Xxxxx Xxxxxxxx |
| Director | Chief Executive Officer |
|
Investment
Banking
|
