Exhibit 10.7
CAPITAL MARKETS CONSULTING AGREEMENT
THIS CAPITAL MARKETS CONSULTING AGREEMENT ("Agreement") is made and
entered into effective as of the 5th day of July 2005 ("Effective Date") by and
between FORTUNET, INC., a Nevada corporation ("FortuNet"), and SPIEGEL PARTNERS,
LLC, a Delaware limited liability company ("Spiegel").
RECITALS
X. Xxxxxxx is in the business of providing financial consulting,
capital advisory and strategic consulting services.
B. FortuNet desires to execute an initial public offering (the "IPO")
of its common stock.
X. Xxxxxxx and FortuNet have entered into that certain Memorandum of
Understanding ("MOU") dated July 5, 2005.
X. Xxxxxxx desires to provide certain advisory and consulting services
as provided herein.
X. XxxxxXxx and Xxxxxxx hereby enter into this Agreement in order to
set forth the terms and conditions of the agreements and covenants of the
parties and to supersede the MOU in its entirety.
AGREEMENTS
NOW, THEREFORE, in consideration of the mutual agreements and covenants
set forth herein, FortuNet and Spiegel hereby amend and restate the MOU in its
entirety and hereby agree as follows:
1. Services in General. During the term of this Agreement, Spiegel will
provide the Services as defined below. Spiegel is solely responsible for
determining the manner and method in which the Services are to be provided;
provided, however, that Spiegel will provide the Services in accordance with
standards reasonably acceptable to FortuNet.
2. Scope of Services. Spiegel shall provide the following strategic
advisory services ("Services") to FortuNet:
(a) Review and discuss with FortuNet management its business plans,
models and strategies related to its IPO;
(b) Assist FortuNet in evaluating business development opportunities
related to its IPO, and other business development opportunities for six months
thereafter;
(c) Assist FortuNet in evaluating financing alternatives, including a
private placement of debt or equity securities, a public offering or a strategic
transaction such as a merger, acquisition or joint venture; and
(d) Assist FortuNet in its selection and engagement of a lead
underwriter for the IPO, potential co-managers of the IPO and potential board
members;
Unless otherwise expressly requested by FortuNet, Spiegel shall limit its
provision of Services to consulting directly with FortuNet's management and will
have no independent interaction with third parties by or on behalf of FortuNet
unless specifically authorized by FortuNet.
3. Limitation on Services. Spiegel represents and warrants, and
FortuNet acknowledges, that Spiegel is not a licensed securities broker or
dealer or a licensed investment advisor. Accordingly, Spiegel shall not, and
shall have no authority, express or implied, to:
(a) Sell any securities of FortuNet, offer to sell any securities of
FortuNet, or solicit offers to purchase any securities of FortuNet;
(b) Negotiate with any prospective purchaser of securities or potential
acquiror of FortuNet on behalf of or as a representative of FortuNet; without
limiting the generality of the foregoing, Spiegel shall not conduct any due
diligence regarding FortuNet or any potential investor or acquiror;
(c) Make any representations or warranties on behalf of FortuNet or with
respect to FortuNet or any of FortuNet's securities;
(d) Prepare or disseminate any documentation regarding FortuNet or any
potential investment in or acquisition of FortuNet unless specifically
authorized by FortuNet; without limiting the generality of the foregoing,
Spiegel shall not engage in any general advertising or solicitation with respect
to FortuNet;
(e) Advise any potential investor or potential acquiror regarding any
potential investment in or acquisition of FortuNet; without limiting the
generality of the foregoing, Spiegel shall not make any recommendations to any
potential investor or potential acquiror regarding the value of any securities
or terms of any proposed transaction;
(f) Act for or bind FortuNet in any way;
(g) Disseminate term sheets, offering documents, business plans or any
other FortuNet information unless specifically authorized by FortuNet;
(h) Receive or transmit funds to or from potential investors in or
acquirors of FortuNet;
4. No Authority to Bind FortuNet. Spiegel shall not have any right,
power or authority to create any obligation, express or implied, or make any
representation on behalf of
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FortuNet, except as expressly authorized in advance in writing from time to time
by FortuNet and then only to the extent of such authorization.
5. Term.
(a) The term of this Agreement will commence as of the Effective Date
first written above and will continue until the earlier of (i) the successful
completion of the IPO, (ii) FortuNet or any selected underwriter agreeing to
abandon the IPO (unless a replacement underwriter is identified by Spiegel and
approved by FortuNet, which approval shall not be unreasonably withheld, and
such underwriter has agreed to proceed with an underwriting), (iii) December 31,
2005 or (iv) termination of this Agreement for "cause" as defined in Section 7
below. Notwithstanding the foregoing, if a registration statement with respect
to the IPO has been filed with the Securities and Exchange Commission on or
before December 31, 2005 and the IPO has not been completed by December 31,
2005, this Agreement will continue after December 31, 2005 until the successful
completion or abandonment of the IPO subject to the registration statement as
filed on or before December 31, 2005.
(b) Upon successful completion of the IPO, the term of this Agreement
shall be extended through the period that additional Services are to be provided
as specified in Section 7 below.
(c) Sections 11 and 14 relating to confidentiality and governing law and
venue of this Agreement will survive termination of this Agreement for any
reason.
6. Compensation.
(a) Upon the Effective Date of this Agreement, FortuNet will pay to
Spiegel a signing bonus in the amount of $10,000. This amount will be considered
a portion of the Contingent Fees as defined in subsection (d) below and shall be
treated as all Contingent Fees under this Agreement.
(b) FortuNet will pay expenses incurred by Spiegel during this Agreement
that have been preauthorized by FortuNet.
(c) Upon the Effective Date of this Agreement and on the fifth day of
each month thereafter during the term of this Agreement or the earlier
successful completion of the IPO, FortuNet will pay to Spiegel a fee in the
amount of $10,000.
(d) Commencing on September 5, 2005 and on the fifth day of each month
thereafter during the term of this Agreement or the earlier successful
completion of the IPO, FortuNet will advance to Spiegel a monthly contingent fee
in the amount of $20,000 ("Contingent Fees"). The parties agree that while paid
currently, these fees are contingent upon the successful completion of the IPO
within the term of this Agreement as provided in Section 5(a) above. In the
event the IPO is abandoned or not completed within the term of this Agreement,
and except as provided in subsection (f) below, Spiegel agrees to immediately
pay FortuNet cash in the amount equal to all Contingent Fees advanced to Spiegel
by FortuNet or in the alternative Spiegel agrees to
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immediately deliver a promissory note in the face amount of all Contingent Fees
previously paid and Spiegel covenants to repay, by December 31, 2006, all
principal plus 10% interest on the total amount due under the promissory note.
(e) Upon successful completion of the IPO by an Identified Underwriter
as defined in Section 8 below, FortuNet will pay to Spiegel a success fee of
$350,000, less all amounts previously paid pursuant to subsections (a), (c) and
(d) above.
(f) If FortuNet has selected an Identified Underwriter to proceed with
the IPO, but then elects not to proceed with the IPO, and the selected
underwriter has advised FortuNet that the IPO is viable, then the cumulative
monthly Contingent Fees previously paid will be deemed earned by Spiegel.
(g) If FortuNet has selected an Identified Underwriter to proceed with
the IPO, but then the selected Identified Underwriter decides not to complete
the IPO for any reason whatsoever or no reason at all and Spiegel has not
identified a replacement underwriter which is approved (which approval shall not
be unreasonably withheld) by FortuNet, the cumulative Contingent Fees advanced
to Spiegel will become immediately due and payable to FortuNet by Spiegel
according to the repayment provisions set forth in subsection (d) above.
(h) If FortuNet enters into an agreement to sell its business or elects
to raise capital in an alternative form such as the sale of securities to
strategic investors, private equity firms or other institutional investors or
any private party investors before the earlier of (i) consummation or
abandonment of the contemplated IPO or (ii) December 31, 2005, and provided that
subsection (g) does not apply, Spiegel will be entitled to receive all
compensation specified in subsection (e) above reduced by any previously paid
fees as if FortuNet had proceeded with its contemplated IPO and Section 7,
provided that Spiegel shall be paid cash in lieu of stock specified in Section
7, unless such stock compensation terms and conditions can be mutually agreed
upon in good faith by both FortuNet and Spiegel. For purposes of this subsection
(h), a sale of FortuNet shall mean any transaction or related series or
combination of transactions whereby, directly or indirectly, control of FortuNet
or all or substantially all of FortuNet's business or assets is acquired by a
third party in a sale or exchange of stock, merger or consolidation, sale of
assets or other similar transaction. FortuNet will notify Spiegel immediately of
any approaches made to third parties or approaches received from third parties
prior to termination of this Agreement.
7. Spiegel's Continued Advisory Services and Compensation. Spiegel
agrees to continue to provide Services to FortuNet for a period of six months
after the IPO is successfully completed. In consideration of these continued
Services, FortuNet agrees to issue Spiegel shares of FortuNet common stock in an
amount equal to $500,000, the value of the stock being based on the price of
FortuNet's stock at the actual final pricing of the IPO, without any discounts,
preferences and warrants. Initially, none of the shares shall be vested.
One-sixth of such shares shall vest upon completion of each one month of
Services. Additionally, FortuNet agrees to pay Spiegel a $250,000 fee for
Spiegel's continued advisory Services, payable in six equal monthly installments
to be paid in arrears on the fifth day of each month commencing after Spiegel
has provided one full calendar month of continued advisory Services following
the IPO. Following
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the completion of the IPO, FortuNet may only terminate this Agreement for cause.
For purposes of this Section 7, "cause" means personal dishonesty, willful
misconduct, gross negligence, breach of fiduciary duties or conviction of a
felony involving moral turpitude or securities related fraud by Spiegel or its
principals. Upon a for "cause" termination, FortuNet shall have the right to
repurchase any unvested shares at the par value of the shares.
8. Non-Circumvention. FortuNet authorizes Spiegel to introduce FortuNet
to and engage in negotiations with The Xxxxxxx Xxxxx Group, Inc.; Xxxxxxxxx &
Company; Xxxx Capital Partner, LLC; X.X. Xxxxxxxxx + Co. and any other entities
solely as FortuNet and Spiegel shall mutually agree upon in writing (each, an
"Identified Underwriter"). Further, FortuNet will not, prior to December 31,
2006, without the express written consent of Spiegel, and agreement upon terms
of adequate compensation to be paid to Spiegel, engage in any financing
transaction with these investment banking firms. The foregoing specifically does
not preclude any of these investment banking firms from participating in the
IPO. All restrictions under this Section 8 lapse on December 31, 2006 on the
earlier payment of compensation to Spiegel pursuant to Section 6(e) or (h) above
and thereafter nothing in this Agreement will prevent FortuNet from engaging in
any transaction with the investment banking firms named herein.
9. Agreement Subject to Approval. Spiegel acknowledges that all terms
of this Agreement are subject to the review and approval by the Nevada Gaming
Control Board ("Board") and the Nevada Gaming Commission ("Commission"). In the
event that any provision or the Agreement in its entirety is found to be
unacceptable to the Board or Commission, the provision or this Agreement will be
null and void, releasing FortuNet and Spiegel from any obligation or liability
hereunder. Notwithstanding the foregoing, the parties agree to act in good faith
and use their best efforts to replace the invalidated provision or the Agreement
with a new provision or agreement that approximates the intent and results of
the terms and provisions of this Agreement and that is acceptable to the Board
and Commission.
10. Spiegel's Covenants.
(a) Spiegel, its employees and agents will comply at all times with all
applicable laws and regulations of any jurisdiction in which Services are
provided and with all applicable FortuNet rules, policies and standards.
(b) Spiegel, its employees and agents will comply at all times with all
security provisions in effect from time to time at FortuNet's premises with
respect to access to premises and materials and information belonging to
FortuNet.
(c) Spiegel will not use FortuNet's name in any promotional materials or
other communications with third parties without FortuNet's prior written
consent.
(d) Spiegel is legally authorized to engage in business in the United
States and will provide FortuNet satisfactory evidence of such authority upon
request.
11. Confidentiality. During the course of performance of this Agreement,
each party may be given access to information (regardless of whether in oral,
written, electronic, digital,
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magnetic or other form or media) that relates to the other's past, present, and
future research, development, business activities, customers, products,
services, and technical knowledge, and has been identified as proprietary or
confidential ("Confidential Information"). In connection therewith, the
following subsections shall apply:
(a) Confidential Information of the other party may be used by the
receiver only in connection with the Services called for by this Agreement.
(b) Each party agrees to protect the confidentiality of the Confidential
Information of the other in the same manner that it protects the confidentiality
of its own proprietary and confidential information of like kind. Access to the
Confidential Information will be restricted to those of FortuNet's and Spiegel's
personnel and professional advisors engaged in a use permitted hereby.
(c) Confidential Information may not be copied or reproduced without the
discloser's prior written consent.
(d) All Confidential Information made available hereunder, including
copies thereof (regardless of whether in written, electronic, digital, magnetic
or other form or media), will be returned or destroyed (including deleting such
information from all computer systems) upon the first to occur of (i)
termination of this Agreement or (ii) request by the discloser.
(e) Nothing in this Agreement will prohibit or limit either party's use
of information (including, but not limited to, ideas, concepts, know-how,
techniques, and methodologies) (i) previously known to it without obligation of
confidence, (ii) independently developed by it, (iii) acquired by it from a
third party which is not, to its knowledge, under an obligation of confidence
with respect to such information, or (iv) which is or becomes publicly available
through no breach of this Agreement.
(f) In the event either party receives a subpoena or other validly
issued administrative or judicial process requesting any portion of the
Confidential Information of the other party, it will promptly notify the other
party and tender to the other party defense of such demand. Unless the demand
has been timely limited, quashed or extended, the recipient shall thereafter be
entitled to comply with such subpoena or other process to the extent required by
law. If requested by the disclosing party, the recipient will cooperate (at the
expense of the disclosing party) in the defense of a demand.
12. Independent Contractor. Spiegel is and shall remain an independent
contractor and Spiegel acknowledges, and confirms to FortuNet, its status as
that of an independent contractor. Nothing herein shall be deemed or construed
to create a joint venture, partnership, agency or employment relationship
between the parties for any purpose, including but not limited to taxes or
employee benefits. Spiegel shall be solely responsible for payment of any and
all employment related taxes, insurance and employee benefits with respect to
Spiegel's personnel.
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13. Assignment. Neither party shall have the right to assign all or part
of its rights under this Agreement to any third party unless the assignment is
approved by the Board and the Commission.
14. Governing Law; Venue. This Agreement shall be governed by and
construed in accordance with the laws of the State of Nevada, without reference
to choice of law principles. The parties agree to bring any actions related to
this Agreement only in the state and federal courts sitting in Xxxxx County,
Nevada.
15. Severability. If any term or provision of this Agreement shall be
found by a court of competent jurisdiction to be invalid, illegal or otherwise
unenforceable, the same shall not effect the other terms or provisions hereof or
the whole of this Agreement, but such term or provision shall be deemed modified
to the extent necessary in the court's opinion to render such term or provision
enforceable, and the rights and obligations of the parties shall be construed
and enforced accordingly, preserving to the fullest permissible extent the
intent and agreements of the parties herein set forth.
16. Notice. Any notice or other communication given pursuant to this
Agreement shall be in writing and shall be effective either when delivered
personally to the party for whom intended, or five days following deposit of the
same into the United States mail (certified mail, return receipt requested, or
first class postage prepaid), addressed to such party at its last known address.
Either party may designate a different address by notice to the other given in
accordance herewith.
17. Complete Agreement; Amendment. This Agreement sets forth the entire
understanding between the parties hereto and supersedes all prior agreements,
arrangements and communications, whether oral or written, with respect to the
subject matter hereof. No other agreements, representations, warranties or other
matters, whether oral or written, shall be deemed to bind the parties hereto
with respect to the subject matter hereof. This Agreement may not be modified or
amended except by the mutual written agreement of the parties.
18. Indemnification.
(a) Each party (an "Indemnifying Party") shall indemnify and hold the
other party, its employees and agents (each, an "Indemnified Party"), harmless
from and against all claims, demands, loss, damage or expense, including
reasonable attorneys' fees (collectively, "Losses"), to the extent such Losses
are caused by the gross negligence, willful acts or omissions of breach of this
Agreement by the Indemnifying Party and except to the extent such Losses are
caused by the negligent or willful acts or omissions of the Indemnified Party.
(b) To receive the foregoing indemnity, the Indemnified Party must
promptly notify the Indemnifying Party in writing of a claim or suit and provide
reasonable cooperation (at the Indemnifying Party's expense) and full authority
to defend or settle the claim or suit. Neither party shall have any obligation
to indemnify the other under any settlement made without its written consent.
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the day and year first above written.
SPIEGEL PARTNERS, LLC FORTUNET INCORPORATED
/s/ Jordan X. Xxxxxxx /s/ Xxxx Xxxxx
------------------------------------ ------------------------------------
By: Jordan X. Xxxxxxx By: Xxxx Xxxxx
Its: Manager Its: President
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