Source Capital Group, Inc.
Source Capital Group, Inc.
| Members NASD, SIPC | Investment Bankers / Brokers | tcoffin @xxxxxxxxx.xxx |
X. Xxxx Xxxxxx
Xx. Xxxx X'Xxxxx
EYI Industries, Inc.
0000 Xxxxxx Xxxxxx Xxxxxxx, Xxxxx 000
Xxx Xxxxx, Xxxxxx 00000
May 25, 2004
Dear Xx. X'Xxxxx:
The purpose of this letter is to confirm the understanding and agreement (the "Agreement") between Source Capital Group, Inc., ("SCG") and EYI Industries, Inc. (or the "Company"), regarding the retention of SCG by the Company as its financial advisor for the purposes set forth herein.
Under this Agreement, SCG will provide financial advisory services to the Company as follows:
| A) | Raising of Capital. SCG shall use its best efforts to provide up to $5 million in equity/debt financing for the Company. |
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| B) | Fees, Commissions & Expenses. The Company agrees to pay the following fees to SCG for its services. |
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| 1. | SCG will be compensated 6% cash and 6% ("warrant")
coverage on any funds introduced by SCG during this engagement. The exercise
price of the warrants shall be equal to the issue price, conversion price
or strike price of the stock, convertible security or warrant at the time
of the sale and will be subject to adjustment in accordance with the terms
of any adjustment provided for in the Financing document. Said warrants
shall be exercisable for five (5) years from date of issuance. The terms
of said warrants shall include such piggyback registration rights, anti-dilution
rights, and "cashless" exercise provisions in the event of exercise by
SCG. Such fees shall be paid at the closing from an escrow account at
the same time any new investment is dispersed to the company. |
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| 2. | SCG will receive $-0- as a non-refundable retainer
upon signing of this agreement. |
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| 3. | Expenses. In addition to any fees that may
be payable to SCG under this Agreement, the Company agrees to reimburse
SCG for its reasonable out-of-pocket expenses incurred in connection with
the services rendered by SCG hereunder (including, without limitation,
travel and lodging, data and word processing, graphics and communication
charges, research costs, and courier services and |
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| Source Capital Group, Inc. | Page 2 of 6 |
| fees) provided expenses in excess of $200 shall
require the prior approval of the Company. |
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| 4. | All cash payments under this Agreement shall be
made in U.S. dollars and without withholding or deduction of any tax,
assessment or other governmental charges unless required by law. Fees
and retainers should be made payable and wired to: |
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| Source Capital Group Inc. Fleet Bank ABA# 000000000 Acct.# 9361882644 |
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| 5. | Xxxxxxx, Acquisitions & Joint Ventures ("MA&JV").
The Company may at its discretion and on a case by case basis engage
SCG to assist it in its discussions with potential Merger, Acquisition
and or Joint Venture candidates, which may include directly negotiating
on the Company's behalf and the rendering independent opinions as to valuation
and formulae, among other things. Upon SCG's acceptance of any such assignment,
The Company will pay SCG flat closing fee equal to 3.00% of the amount
paid or received (in kind) in any transaction by and or between the Company,
the MA&JV candidate and or the surviving company (the "M&A Fee").
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| C) | Information. The Company
will furnish or cause to be furnished to SCG, such information, as SCG
believes appropriate to its assignment (all such information so furnished
being the "Information"). The Company recognizes and confirms that SCG
(a) will use and rely primarily on the Information and on information
available from generally recognized public sources in performing the services
contemplated by this Agreement without having independently verified the
same, (b) does not assume responsibility for the accuracy or completeness
of the Information and such other information, (c) is entitled to rely
upon the Information without independent verification and (d) will not
make an appraisal of any assets or valuation of the Company in connection
with its assignment |
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| D) | Confidentiality. Except
as contemplated by the terms hereof or as required by applicable law or
legal process, SCG shall keep confidential all non-public information
provided to it by or at the request of the Company, and shall not disclose
such information to any third party or to any of its employees or advisors
except to those persons who have a need to know such information in connection
with SCG's performance of its responsibilities hereunder. The Company
understands that any documents, presentations or analyses prepared by
SCG are proprietary and SCG is under no obligation to provide (by e-mail,
floppy disk or otherwise) either the Company or its assigns with the computer
files of such work product. Except as required by applicable law, any
advice to be provided by |
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| Source Capital Group, Inc. | Page 3 of 6 |
SCG under this Agreement shall not be disclosed publicly
or made available to third parties without the prior written consent of
SCG. In addition, SCG may not be otherwise publicly referred to without
its prior written consent. All services, advice and information and reports
provided by SCG to the Company in connection with this assignment shall
be for the sole benefit of the Company and shall not be relied upon by
any other person. |
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| E) | Indemnity. The Company acknowledges and agrees
that SCG has been retained to act solely as financial advisor to the Company.
In such capacity, SCG shall act as an independent contractor, and any
duties of SCG arising out of its engagement pursuant to this Agreement
shall be owed solely to the Company. The Company agrees to indemnify SCG
in accordance with the indemnification agreement attached as Exhibit
A. |
| F) | Arbitration. Any and all disputes, demands,
claims or controversies hereto arising out of or relating to this agreement
or the breach thereof, shall be settled by binding arbitration in accordance
with the rules of the American Arbitration Association ("AAA"). The arbitration
shall be conducted in New York City under the rules of the AAA. Any judgment
upon the award rendered by the arbitrator may be entered into any court
or administrative tribunal having jurisdiction thereof. Costs associated
with the arbitration, including reasonable attorney's fees, shall be borne
by whichever parties the arbitrators shall deem just and fair. |
| G) | Term & Termination. The term of SCG's engagement hereunder (the "Term") shall commence on the date hereof and shall end on the earlier of June. 30, 2005, upon 90 days written notice after a closing of an equity financing by SCG or upon 10 days written notice prior to the closing of any equity financing pursuant to this Agreement (the "Expiration Date") without cause by either the Company or SCG. Notwithstanding the foregoing, the provisions relating to the payment of fees and expenses accrued through the Expiration Date, the status of SCG as an independent contractor and the limitation on to whom SCG shall owe any duties will survive any such termination, and any such termination shall not affect the Company's obligations under the indemnification agreement. SCG will be entitled to the fees set forth above in the event that within 18 months following the Expiration Date, a Financing is consummated with an investor who was introduced to the Company by SCG prior to the Expiration Date and which investor is included on a schedule of investors delivered by SCG to the Company within 10 calendar days following the Expiration Date. |
| H) | Right of First Refusal. Upon successful completion
of a financing SCG shall retain the right of first refusal on any additional
financing. |
| I) | Exclusivity. During the Term of this agreement,
The Company's relationship with SCG will be non-exclusive. Except in the
normal course of business operations, during the Term of this agreement
the Company will not engage any other financial advisor for the purpose
of performing an equity financing or receive or agree to receive any equity
based financing from an individual or entity without notifying SCG. |
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| Source Capital Group, Inc. | Page 4 of 6 |
| J) | Advertisements. The Company acknowledges
that SCG may, at its option and expense, place an announcement in such
newspapers and periodicals as it may choose, stating that SCG has acted
as the financial advisor to the Company. SCG agrees that the Company will
have the right to approve the form of such announcement, which approval
shall not be unreasonably withheld or delayed. |
This Agreement (including the attached indemnification) embodies the entire agreement and understanding between the parties hereto and supersedes all prior agreements and understandings relating to the subject matter hereof. If any provision of this Agreement is determined to be invalid or unenforceable in any respect, such determination will not affect such provision in any other respect, which will remain in full force and effect. No waiver, amendment or other modification of this Agreement shall be effective unless in writing and signed by each party to be bound thereby. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York applicable to contracts executed in and to be performed in that state.
Please confirm that the foregoing correctly sets forth our agreement by signing and returning to SCG the duplicate copy of this Agreement, the indemnification agreement attached hereto as Exhibit A.
| By: ______________________________ | |
| X. Xxxx Xxxxxx, Managing Director | |
| Source Capital Group, Inc. | |
| By: ______________________________ | |
| Xxxx X'Xxxxx | |
| EYI Industries, Inc. | |
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| Source Capital Group, Inc. | Page 5 of 6 |
This Exhibit A is a part of and is incorporated into that certain letter agreement, May 25, 2004 (the "Agreement"), by and between EYI Industries, Inc. an Nevada corporation (with its wholly-owned subsidiaries collectively, the "Company"), and Source Capital Group, Inc. (the "Placement Agent"). Capitalized terms used herein and not otherwise defined shall have the respective meanings provided in the Agreement.
The Company agrees to indemnify and hold harmless the Placement Agent, its affiliates and each person controlling the Placement Agent (within the meaning of Section 15 of the Securities Act), and the directors, officers, agents and employees of the Placement Agent, its affiliates and each such controlling person (the Placement Agent, and each such entity or person. an "Indemnified Person") from and against any losses, claims, damages, judgments, assessments, costs and other liabilities (collectively, the "Liabilities"), and shall reimburse each Indemnified Person for all fees and expenses (including the reasonable fees and expenses of one counsel for all Indemnified Persons, except as otherwise expressly provided herein) (collectively, the "Expenses") as they are incurred by an Indemnified Person in investigating, preparing, pursuing or defending any claim, action, proceeding or investigation, whether or not any Indemnified Person is a party thereto (collectively, the "Actions"), (i) caused by, or arising out of or in connection with, any untrue statement or alleged untrue statement of a material fact contained in any offering documents prepared by the Company (including any amendments thereof and supplements thereto) (the "Offer Documents") or by any omission or alleged omission to state therein a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading (other than untrue statements or alleged untrue statements in, or omissions or alleged omissions from, information relating to an Indemnified Person furnished in writing by or on behalf of such Indemnified Person expressly for use in the Offer Documents) or (ii) otherwise arising out of or in connection with advice or services rendered or to be rendered by any Indemnified Person 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; provided, however, that, in the case of clause (ii) only, the Company shall not be responsible for any Liabilities or Expenses of any Indemnified Person that have resulted primarily from such Indemnified Person's (x) gross negligence, bad faith or willful misconduct in connection with any of the advice, actions, inactions or services referred to above or (y) use of any offering materials or information concerning the Company in connection with the offer or sale of the Securities in the Transaction which were not authorized for such use by the Company and which use constitutes negligence, bad faith or willful misconduct. The Company also agrees to reimburse each Indemnified Person for all Expenses as they are incurred in connection with enforcing such Indemnified Person's rights under the Agreement, which includes this
Exhibit A.
Upon receipt by an Indemnified Person of actual notice of an Action against such Indemnified Person with respect to which indemnity may be sought under the Agreement, such Indemnified Person shall promptly notify the Company in writing; provided that failure by any Indemnified Person so to notify the Company shall not relieve the Company from any liability which the Company may have on account of this indemnity or otherwise to such Indemnified Person, except to the extent the Company shall have been prejudiced by such failure. The Company shall, if requested by the Placement Agent, assume the defense of any such Action including the employment of counsel reasonably satisfactory to the Placement Agent, which counsel may also be counsel to the Company. Any Indemnified Person shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Person unless: (i) the Company has failed promptly to assume the defense and employ counsel or (ii) the named parties to any such Action (including any impeded parties) include such Indemnified Person and the Company, and such Indemnified Person shall have been advised in the reasonable opinion of counsel that there is an actual conflict of interest that prevents the counsel selected by the Company from representing both the Company (or another client of such counsel) and any Indemnified Person; provided that the Company shall not in such event be responsible hereunder for the fees and expenses of more than one firm of separate counsel for all Indemnified Persons in connection with any Action or related Actions, in addition to any local counsel. The Company shall not be liable for any settlement of any Action effected without its written consent (which shall not be unreasonably withheld). In addition, the Company shall not, without the prior written consent of the Placement Agent (which shall not be unreasonably withheld), settle, compromise or consent to the entry of any judgment in or otherwise seek to terminate any pending or threatened Action in respect of which indemnification or contribution may be sought hereunder (whether or not such Indemnified Person is a party thereto) unless such settlement, compromise, consent or termination includes an unconditional release of each Indemnified Person from all Liabilities arising out of such Action for which indemnification or contribution may be sought hereunder. The indemnification required hereby shall be made by
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periodic payments of the amount thereof during the course of the investigation or defense, as such expense, loss, damage or liability is incurred and is due and payable.
In the event that the foregoing indemnity is unavailable to an Indemnified Person other than in accordance with the Agreement, the Company shall contribute to the Liabilities and Expenses paid or payable by such Indemnified Person in such proportion as is appropriate to reflect (i) the relative benefits to the Company, on the one hand, and to the Placement Agent and any other Indemnified Person, on the other hand, of the matters contemplated by the Agreement or (ii) if the allocation provided by the immediately preceding clause is not permitted by applicable law, not only such relative benefits but also the relative fault of the Company, on the one hand, and the Placement Agent and any other Indemnified Person, on the other hand, in connection with the matters as to which such Liabilities or Expenses relate, as well as any other relevant equitable considerations; provided that in no event shall the Company contribute less than the amount necessary to ensure that all Indemnified Persons, in the aggregate, are not liable for any Liabilities and Expenses in excess of the amount of fees actually received by the Placement Agent pursuant to the Agreement. For purposes of this paragraph, the relative benefits to the Company, on the one hand, and to the Placement Agent on the other hand, of the matters contemplated by the Agreement shall be deemed to be in the same proportion as (a) the total value paid or contemplated to be paid to or received or contemplated to be received by the Company in the transaction or transactions that are within the scope of the Agreement, whether or not any such transaction is consummated, bears to (b) the fees paid to the Placement Agent under the Agreement. Notwithstanding the above, no person guilty of fraudulent misrepresentation within the meaning of Section 11(f) of the Securities Act of 1933, as amended, shall be entitled to contribution from a party who was not guilty of fraudulent misrepresentation.
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 advice or services rendered or to be rendered by any Indemnified Person 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 except for Liabilities (and related Expenses) of the Company that have resulted primarily from such Indemnified Person's gross negligence, bad faith or willful misconduct in connection with any such advice, actions, inactions or services.
The reimbursement, indemnity and contribution obligations of the Company set forth herein shall apply to any modification of the Agreement and shall remain in full force and effect regardless of any termination of, or the completion of any Indemnified Person's services under or in connection with, the Agreement.
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