EXHIBIT 10.12
WESTMINSTER SECURITIES CORPORATION
000 XXXX XXXXXX, 0XX XXXXX
XXX XXXX, XX 00000
(000) 000-0000
BY E-MAIL
March 17, 2005
Xx. X.X. Xxxxxxxxxx
Chairman and CEO
Free DA Connection Services
000-000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
REF: ENGAGEMENT LETTER FOR SERVICES ("ENGAGEMENT LETTER") EFFECTIVE MARCH 17,
2005
Dear Xx. Xxxxxxxxx:
We are pleased to submit to you this binding Engagement Letter (also referred to
as the "Agreement") that sets forth the arrangement whereby Westminster
Securities Corporation ("Westminster") will act as exclusive placement agent to
Free DA Connection Services and its respective affiliates, subsidiaries, and/or
successors (collectively referred to as the "Company"), to endeavor to secure
financing on a best efforts basis (the "Financing" or the "Offering") and to
advise the Company's management on matters to facilitate the growth of the
Company, including but not limited to mergers and acquisitions. The terms of
Agreement are as follows:
1 SERVICES: Westminster will use its best efforts
to secure equity-based and/or debt-based funding and/or lines of credit for the
Company in amounts and upon terms acceptable to the Company. Westminster may
also, as the parties deem appropriate:
a. Assist the Company with its desire to have its equity
publicly traded on a national exchange.
b. Introduce the Company to and advise about companies that are possible
strategic partners and/or merger/acquisition candidates.
c. Render such other financial advisory and investment
banking services as may from time to time be necessary or appropriate to
accomplish the Company's objectives, as may be agreed upon by Westminster and
the Company.
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2. RETAINER:
Upon signing of this agreement, Free DA agrees to pay Westminster Securities the
sum of $20,000.
3. CONTINGENT CASH FEE: Westminster
shall be entitled to receive and the Company shall pay to Westminster a
commission ("Contingent Cash Fee"), calculated as a percentage of the amount
raised from any source. Each such commission will be paid directly from escrow
at any time and upon each time funds are disbursed to the Company, per the
following schedule dependent upon the type of financing raised:
Equity-Based Funding ("Equity-Fee"): Ten Percent (10%) of any such equity-based
funding.
Debt-Based Funding Convertible Into Equity (Convertible Fee"): Eight Percent
(8%) of any such debt-based convertible funding, provided however that
Westminster shall not be entitled to further fees or commissions upon any
conversion of all or part of such convertible debt securities.
Non-convertible Debt ("Debt Fee"): Five Percent (5%) of any such nonconvertible
debt-based funding.
4. CONTINGENT WARRANT FEE: a.
Equity-Based Funding and Debt-Based Funding Convertible Into Equity: At each
closing of equity-based funding and/or debt-based funding convertible into
equity, Westminster or its assignees shall, in addition to any Contingent Cash
Fee, be entitled to receive warrants equal to Ten Percent (10%) of the number
of shares issued or issuable in connection with such funding, exercisable on the
same terms and at the same price paid by the investor(s).
b. Non-Convertible Debt: At any closing of non-convertible debt, Westminster
or its assignees shall, in addition to any Contingent Cash Fee, be entitled to
receive warrants to purchase a number of shares of the Company's common stock
equal to Five Percent (5%) of the current outstanding shares of the company
exercisable at a price of one cent per share.
5. MERGER OR ACQUISITION FEE ("MERGER FEE"): In the event the
Company requests Westminster's assistance with regard to a merger with,
acquisition of, or acquisition by another entity, either public or private,
("Transaction") the Company will pay Westminster a cash fee equal to Five
percent (5%) of the total
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transaction value which includes (i) cash, notes, securities and other property
of value; (ii) liabilities (x) repaid or retired in connection with or in
anticipation of a Transaction and/or (y) existing on the Company's balance sheet
at the time the Transaction is consummated (if such Transaction takes the form
of a sale of assets); (iii) payments to be made in installments; (iv) amounts
paid or payable under consulting, supply, service, distribution, licensing or
lease agreements not to compete or similar arrangements (including such payments
to engagement ; and, (v) contingent payments (whether or not related to future
earnings or operations ).
6. EXCLUSIVITY/AUTHORITY: Upon execution hereof, Westminster
shall become the Company's exclusive financial advisor for all equity, debt,
equity-linked or debt-linked placements for a period commencing on March 17,
2005 and ending on March 18, 2006 ("Initial Term") unless otherwise extended
upon the mutual consent of the parties.
Westminster shall have the non-exclusive right to offer strategic alliances and
merger and/or acquisition opportunities to the Company, subject to mutually
agreed upon terms and conditions.
Westminster shall have the right to associate itself with other members of the
National Association of Securities Dealers, Inc. ("NASD") and/or agents who will
share in compensation. The selection of other agents shall be mutually
agreeable between the Company and Westminster, but their compensation shall be
at Westminster's sole discretion.
In the event of a corporate filing, Westminster shall have the right to receive
financial statements concurrently with their filing by the Company with the
Securities and Exchange Commission on the XXXXX System.
The twelve (12) month period immediately following the Initial Term of this
Agreement shall be referred to as the "Tail Period". During the Tail Period,
Westminster shall be entitled to receive, and the Company shall be obligated to
pay to Westminster, the Equity Fee, Convertible Fee, Debt Fee, Contingent
Warrant Fee, and/or Merger Fee as defined in this Agreement for any such
transactions entered into by the Company with any entity introduced directly or
indirectly to the Company by Westminster or with whom Westminster was working on
behalf of the Company at the Company's direction.
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WESTMINSTER HEREBY ACKNOWLEDGES THAT THE COMPANY IS UNDER NO OBLIGATION TO
ACCEPT ANY DEBT OR EQUITY TRANSACTION PRESENTED BY WESTMINSTER.
7. INDEMNIFICATION: The Company agrees to indemnify
Westminster to the extent of and in accordance with the provisions of the
attached Schedule A which is incorporated by reference herein and made a part
hereof, and to provide such other indemnifications, representations and
warranties as Westminster may reasonably and from time-to-time request.
8. DUE DILIGENCE: The Company shall assist and take
whatever actions necessary to facilitate Westminster's due diligence review of
the Company and its operation.
9. EXPENSES: The Company shall, at its option,
make arrangement for, pre-pay and/or reimburse Westminster for its travel,
entertainment, and other expenses and disbursements incurred by Westminster (and
as approved by the Company) on the Company's behalf in furtherance of the
purpose of this Agreement. Such expenses shall also include by way of example
only: (i) legal and/or accounting fees for advice if and as required under this
Agreement; (ii) escrow fees if required; and/or, (iii) printing and mailing
costs.
Westminster shall notify the Company of the need for Financing memorandum and
other Offering documents which may be required under this Agreement. Upon such
notice, the Company shall issue funds to Xxxxxxx Xxxxxxxxx LLP ("Xxxxxxx"),
Westminster's securities counsel, in the amount of Seven Thousand, Five Hundred
Dollars ($7,500) in connection with Xxxxxxx'x services in preparation and review
of such memoranda and other documents. Any unused advances will be promptly
returned to the Company.
The Company shall, at its option, prepay or reimburse Westminster upon
presentation for any costs incurred by Westminster for collection of any
Contingent Cash Fee, Contingent Warrant Fee, and/or Expenses hereunder,
including but not limited to reasonable attorney's' fees and court costs.
10. Neither party will make any public or other disclosures concerning the
Financing or Offering or a Transaction without the prior written consent of the
other party, subject to each party's legal obligations. Upon the completion of
any funding, merger and/or acquisition, Westminster may request, subject to
applicable rules and regulations,
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and the Company shall agree to place, at the Company's expense, an appropriate
notice (commonly referred to as a "Tombstone") in the Wall Street Journal or
other such publication as Westminster may reasonably direct.
11. Westminster shall not be obligated to provide advice or perform services to
the Company that are not specifically addressed in this Agreement. In
connection with Westminster providing the services described above, the Company
shall provide Westminster with any information that Westminster reasonably
requires. The Company hereby acknowledges that Westminster will be using and
relying on said information without independent verification and that
Westminster assumes no responsibility for the accuracy and completeness of any
information provided to it by the Company.
12. The obligations of Westminster described in this Agreement consist solely
of best efforts services to the Company. In no event shall Westminster be
required by this Agreement to act as the agent of the Company or otherwise to
represent or make decisions for the Company or to provide legal or accounting
services. All final decisions with respect to acts of the Company or its
affiliates, whether or not made pursuant to or in reliance upon information or
advice furnished by Westminster hereunder, shall be those of the Company or such
affiliates, and Westminster shall under no circumstances be liable for any
expense incurred or loss suffered by the Company as a consequence of such
decisions.
13. The Company hereby acknowledges that Westminster is not a fiduciary of the
Company and that Westminster makes no representations or warranties regarding
the Company's ability to secure financing, whether now or in the future.
14. This Agreement will be governed by and construed in accordance with the
laws of the State of New York, without giving effect to its conflict of laws
principles or rules. If a dispute or claim shall arise with respect to any of
the terms or provisions of this Agreement, or with respect to the performance by
any of the parties under this Agreement, then the parties agree to submit the
dispute to binding arbitration in a venue located in New York, NY in accordance
with the rules of the American Arbitration Association ("AAA"). The prevailing
party shall be reimbursed by the nonprevailing party for all reasonable
attorney's fees and costs (including all arbitration costs) incurred by the
prevailing party in resolving such dispute.
15. In the event that any provision of this Agreement shall be held to be
invalid, illegal, or unenforceable in any circumstances, the remaining
provisions shall nevertheless remain in full force and effect and shall be
construed as if the unenforceable portion or portions were deleted.
16. This Agreement shall be binding upon and inure to the benefit of the
parties and their respective successors and authorized assigns. Any attempt by
either party to assign any rights, duties, or obligations which may arise under
this Agreement without the prior written consent of the other party shall be
void.
17. This document contains the entire agreement between the parties with
respect to the subject matter hereof, and neither party is relying on any
agreement, representation, warranty, or other understanding not expressly stated
herein.
18. The parties acknowledge that certain provisions of this Agreement must
survive any termination or expiration thereof in order to be fair and equitable
to the party to whom any promise or duty to perform is owed under such provision
prior to such termination or expiration of the Agreement. Therefore, the
parties agree that the provisions of paragraphs 2, 3, 4, 5, 6, 7, 8, 9, 10, 11,
12, 13, 14, 15, 16, 17, 18, and 19 shall survive the termination or expiration
of this Agreement for the period required to meet and satisfy any obligations
and promises arising therein and thereunder.
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19. This agreement may be executed in counterparts, each of which shall be
deemed an original and all of which together will constitute one and the same
instrument.
If the foregoing correctly sets forth the understanding between the Company
and Westminster, please sign below where indicated.
Very truly yours,
WESTMINSTER SECURITIES CORPORATION
By: ---------------------------
Xxxx X'Xxxx, President
ACCEPTED AND AGREED TO AS OF THE 31st DAY OF March, 2004.
FREE DA CONNECTION SERVICES
By: -------------------------------
X.X. Xxxxxxxxx, Chairman and CEO
ACCEPTED AND AGREED TO AS OF THE 31ST DAY OF MARCH, 2005
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SCHEDULE A- INDEMNIFICATION
Company agrees to indemnify Westminster, its employees, directors, officers,
agents, affiliates, and each person, if any, who controls it within the meaning
of either Section 20 of the Securities Exchange Act of 1934 or Section 15 of the
Securities Act of 1933 (each such person, including Westminster, is referred to
as an "Indemnified Party") from and against any losses, claims, damages and
liabilities, joint or several (including, all legal to other expenses reasonably
incurred by an Indemnified Party in connection with the preparation for or
defense of any threatened or pending claim, action or proceeding, whether or not
resulting in any liability) ("Damages"), to which such Indemnified Party in
connection with its services or arising out of its engagement hereunder, may
become subject under any applicable Federal or state law or otherwise, including
but not limited to, liability (i) caused by or arising out of an untrue
statement or an alleged untrue statement of a material fact or the omission or
the alleged omission to state a material fact necessary in order to make the
statement not misleading in light of the circumstances under which it was made,
(ii) caused by or arising out of any act, or (iii) arising out of Westminster's
engagement or the rendering by any Indemnified Party of its services under this
Agreement; provided, however, that Company will not be liable to the Indemnified
Party hereunder to the extent that any damages are found in a final
non-appealable judgment by a court of competent jurisdiction to have resulted
from the gross negligence, bad faith or willful misconduct of the Indemnified
Party seeking indemnification hereunder.
These indemnification provisions shall be in addition to any other liability,
which Company may otherwise have to any Indemnified Party.
If for any reason other than a final non-appealable judgment finding any
Indemnified Party liable for Damages for its gross negligence, bad faith or
willful misconduct the foregoing indemnity is unavailable to an Indemnified
Party or insufficient to hold an Indemnified Party harmless, then Company shall
contribute to the amount paid or payable by an Indemnified Party as a result of
such Damages in such proportion as is appropriate to reflect not only the
relative benefits received by Company and its shareholders on the one hand and
Westminster on the other, but also the relative fault of Company and the
Indemnified Party as well as any relevant equitable considerations, subject to
the limitation that in no event shall the total contribution of all Indemnified
Parties to all such Damages exceed the amount of fees actually received by
Westminster hereunder.
Promptly after receipt by the Indemnified Party of notice of any claim or of the
commencement of any action in respect of which indemnity may be sought, the
Indemnified Party will promptly notify Company in writing of the receipt or
commencement thereof; however Company shall not have the right to assume the
defense of such claim or action (including the employment of counsel). The
Indemnified Party shall have the right to retain counsel reasonably satisfactory
to Company, at Company's expense, to represent the Indemnified Party in any
claim or action in respect of which indemnity may be sought and agrees to
cooperate with Company and Company's counsel in the defense of such claim or
action. The omission by an Indemnified Party to promptly notify Company of the
receipt or commencement of any claim or action in respect of which indemnity may
be sought will relieve Company from any liability Company may have to such
Indemnified Party only to the extent that such a delay in notification
materially prejudices Company's ability to defend such claim or action. Company
shall not be liable for any settlement of any such claim or action effected
without its prior written consent, which shall not be unreasonably withheld or
delayed.
Initials --------- Initials ----------
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