EXHIBIT 10.13
INVESTMENT BANKING AGREEMENT
This Investment Banking Agreement (this "Agreement") is effective as of
April 15, 2003 , by and between Recom Managed Systems, Inc., a Delaware
corporation (hereinafter referred to as the "Company") and Brookstreet
Securities Corporation, a California corporation (hereinafter referred to as
the "Consultant").
RECITALS
WHEREAS, the Company is desirous of preparing itself to commence a
private or public offering to raise capital, pursue Mergers & Acquisitions,
attract additional Market Makers of its Public Stock, move to a National
Marketplace, and other investment banking activities that could enhance the
Companies financial health; and
WHEREAS, Consultant has extensive experience and knowledge associated
with corporate finance and investment banking business; and
WHEREAS, the Company wishes to engage the services of the Consultant to
assist the Company in preparing to commence a private or public offering,
advise and assist the Company on Merger & Acquisitions matters and implement
other Investment Banking activity as required.
WHEREAS, the Company and Consultant specifically acknowledge that the
Company has recently declared a 3 for 1 stock split for shareholders of record
of the Company's Common Stock as of Friday, April 11, 2003 and that this
agreement is affective post-split.
NOW, THEREFORE, in consideration of the mutual promises herein contained,
the parties hereto hereby agree as follows:
1. INVESTMENT BANKING SERVICES; EXCLUSIVE NATURE OF SERVICES
Attached hereto as Exhibit A and incorporated herein by this reference is
a description of the services to be provided by the Consultant hereunder (the
"Consulting Services"). Consultant hereby agrees to utilize its best efforts
in performing the Consulting Services, however, Consultant makes no
warranties, representations or guarantees regarding any financing attempted by
the Company or the eventual effectiveness of the Consulting Services.
Consultant hereby specifically acknowledges that the Company may hire
other consultants and that Consultant is providing services on a non-exclusive
basis.
2. TERM OF AGREEMENT
This Agreement shall be in full force and effect commencing upon the date
hereof and concluding at the close of business on the same date in the year
2004 or upon the execution of an underwriting agreement or placement agent
agreement with Consultant, whichever occurs earlier ("termination date").
Either party hereto shall have the right to terminate this Agreement without
notice in the event of the death, bankruptcy, insolvency, or assignment for
the benefit of creditors of the other party. Consultant shall have the right
Page 1
to terminate this Agreement if Company fails to comply with any of the
material terms of this Agreement, including without limitation its
responsibilities for fees as set forth in this Agreement, and such failure
continues unremedied for a period of thirty (30) days after written notice to
the Company by Consultant. The Company shall have the right to terminate this
Agreement for any reason by delivering to Consultant a termination notice.
This Agreement is not exclusive, and accordingly Company may retain other
consultants, advisors or investment banker's to perform services for the
Company similar to the services to be performed hereunder.
3. TIME DEVOTED BY CONSULTANT
It is anticipated that the Consultant shall spend as much time as deemed
necessary by the Consultant in order to perform the obligations of Consultant
hereunder. The Company understands that this amount of time may vary, and
that the Consultant may perform Consulting Services for other companies just
as the Company may seek other Consultants and Investment Bankers to perform
services for the Company.
4. PLACE WHERE SERVICES WILL BE PERFORMED
The Consultant will perform most services in accordance with this
Agreement at Consultant's offices. In addition, the Consultant will perform
services on the telephone and at such other place(s) as necessary to perform
these services in accordance with this Agreement.
5. COMPENSATION TO CONSULTANT
The Consultant's compensation for the Consulting Services shall be as set
forth in Exhibit B attached hereto and incorporated herein by this reference.
6. INDEPENDENT CONTRACTOR
Both Company and the Consultant agree that the Consultant will act as an
independent contractor in the performance of his duties under this Agreement.
Nothing contained in this Agreement shall be construed to imply that
Consultant, or any employee, agent or other authorized representative of
Consultant, is a partner, joint venturer, agent, officer or employee of
Company.
7. CONFIDENTIAL INFORMATION
The Consultant and the Company acknowledge that each will have access to
proprietary information regarding the business operations of the other and
agree to keep all such information secret and confidential and not to use or
disclose any such information to any individual or organization without the
non-disclosing parties prior written consent. It is hereby agreed that from
time to time Consultant and the Company may designate certain disclosed
information as confidential for purposes of this Agreement.
8. INDEMNIFICATION
The Company hereby agrees to indemnify and hold Consultant harmless from
any and all liabilities incurred by Consultant under the Securities Act of
1933, as amended (the "Act"), the various state securities acts, or otherwise,
insofar as such liabilities arise out of or are based upon (I) any material
misstatement or omission contained in any offering documents provided by the
Page 2
Company, or (ii) any intentional actions by the Company, direct or indirect,
in connection with any offering by the Company, in violation of any applicable
federal or state securities laws or regulations; provided, however, that there
is no indemnification for liabilities caused by Consultant. Furthermore, the
Company agrees to reimburse Consultant for any legal or other expenses
incurred by Consultant in connection with investigating or defending any
action, proceeding, investigation, or claim in connection herewith. The
indemnity obligations of the Company under this paragraph shall extend to the
shareholders, directors, officers, employees, agents, and control persons of
Consultant.
Consultant hereby agrees to indemnify and hold the Company harmless from
any and all liabilities incurred by the Company under the Act, the various
state securities acts, or otherwise, insofar as such liabilities arise out of
or are based upon (I) any actions by Consultant, its officers, employees,
agents, or control persons, direct or indirect, in connection with any
offering by the Company, in violation of any applicable federal or state
securities laws or regulations, or (ii) any breach of this Agreement by
Consultant; provided, however, that there is no indemnification for
liabilities caused by Consultant.
The indemnity obligations of the parties under this paragraph 8 shall be
binding upon and inure to the benefit of any successors, assigns, heirs, and
personal representatives of the Company, the Consultant, and any other such
persons or entities mentioned herein above.
9. COVENANTS OF CONSULTANT
Consultant covenants and agrees with the Company that, in performing
Consulting Services related to the raising of capital by the Company or
providing investor relations or other Investment Banking support services,
Consultant will:
(a) Not make any representations other than those expressly set forth in
documents provided by the Company; and
(b) Not publish, circulate or otherwise use any materials other than
materials provided by or otherwise approved by the Company; and
(c) Neither short-sell, hedge, pre-sell, barter, or allow any person to
borrow directly or indirectly any securities of the Company that are being
delivered to Consultant hereunder. This is a material factor inducing the
Company to execute this Agrement. Consultant agrees to provide the Company
with any records of its choosing to confirm Consultant's adherence to this
covenant.
10. MISCELLANEOUS
(a) Attorneys' Fees. If either party files any action or brings any
proceeding against the other arising out of this Agreement, then the
prevailing party shall be entitled to reasonable attorneys' fees.
(b) Waiver. No waiver by a party of any provision of this Agreement
shall be considered a waiver of any other provision or any subsequent breach
of the same or any other provision. The exercise by a party of any remedy
provided in this Agreement or at law shall not prevent the exercise by that
party of any other remedy provided in this Agreement or at law.
Page 3
(c) Assignment. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and no assignment shall be allowed without first
obtaining the written consent of the non-assigning party.
(d) Severability. In any condition or covenant herein contained is held
to be invalid or void by any court of competent jurisdiction, the same shall
be deemed severable form the remainder of this Agreement and shall in no way
effect the other covenants and conditions contained herein.
(e) Amendment. This Agreement may be amended only by a written
agreement executed by all parties hereto.
(f) Headings. Titles or captions contained herein are inserted as a
matter of convenience and for reference, and in no way define, limit, extend,
or describe the scope of this Agreement or any provision hereof. No provision
in this Agreement is to be interpreted for or against either party because
that party or his legal representative drafted such provision.
(g) Notice. All written notices, demands, or requests of any kind,
which either party may be required or any desire to serve on the other in
connection with this Agreement, must be served by registered or certified
mail, with postage prepaid and return receipt requested. In lieu of mailing,
either party may cause delivery of such notice, demands and requests to be
made by personal service facsimile transmission, provided that acknowledgment
of receipt is made. Notice shall be deemed given upon personal delivery or
receipt of facsimile transmission, or two (2) days after mailing. All such
notices, demands, and requests shall be delivered as follows:
If to the Company: RECOM MANAGED SYSTEMS, INC.
0000 Xxxxxx Xxxxxx Xxxx., Xxxxx 000
Xxxxxx Xxxx, XX 00000
ATTN: Xxxxxx X. Xxxx, President
FAX: (000) 000-0000
If to Consultant: BROOKSTREET SECURITIES CORPORATION
0000 Xxxxxx Xxxxx
Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
ATTN: Xxxxxxx X. Xxxxxx, President
FAX: (000) 000-0000
(h) Entire Agreement. This Agreement, including any Exhibits or
Schedules attached hereto, contains all of the representations, warranties,
and the entire understanding and agreement between the parties.
Correspondence, memoranda, or agreements, whether written or oral, originating
before the date of this Agreement are replaced in total by this Agreement
unless otherwise especially stated.
(i) Counterparts; Facsimile Signatures. This Agreement may be executed
simultaneously in one or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument. The Parties agree that facsimile signatures of this Agreement
shall be deemed a valid and binding execution of this Agreement.
Page 4
(j) Governing Law and Venue. This Agreement shall be governed by and
construed in accordance with the laws of the State of California which would
apply if both parties were residents of California and this Agreement was
made and performed in California. In any legal action involving this
Agreement or the parties' relationship, the parties agree that the exclusive
venue for any lawsuit shall be in the state or federal court located within
the County of Los Angeles, California. The parties agree to submit to the
personal jurisdiction of the state and federal courts located within Los
Angeles County, California.
IN WITNESS WHEREOF, the parties hereto have placed their signatures
hereon on the day and year first above written.
"COMPANY" "CONSULTANT"
RECOM MANAGED SYSTEMS, INC. BROOKSTREET SECURITIES
0000 Xxxxxx Xxxxxx Xxxx., Xxxxx 000 XXXXXXXXXXX
Xxxxxx Xxxx, XX 00000 0000 Xxxxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
/s/ Xxxxxx X. Xxxx /s/ Xxxxxxx X. Xxxxxx
BY: Xxxxxx X. Xxxx BY: Xxxxxxx X. Xxxxxx
ITS: President ITS: President
Page 5
EXHIBIT A
DESCRIPTION OF INVESTMENT BANKING & CONSULTING SERVICES
Advising and assisting the Company in connection with its proposed
financing strategy. The general scope of Consultant's services in this regard
is as follows:
(1) Due diligence services, including, but not limited to, the
following:
(a) Review of history of the Company;
(b) Review of existing and proposed capital structure of the
Company;
(c) Review latest year-end and current interim financial
statements;
(d) Review management's estimated use of proceeds;
(e) Review of proposed transactions and financings;
(f) Analysis of management structure, including organizational
chart, and requirements and compensation agreements;
(g) Analysis of financial forecasts relating to the Company and the
reasonableness of such projections incorporating potential ROI projections;
and
(h) Site visits to the Company's offices to collect relevant data
and conduct due diligence interviews.
(2) Assisting the Company with any and all meetings or negotiations with
its partners, merchants, equity partners, debt sources, and any other
individuals and entities as reasonable and necessary to assist the Company.
(3) Advisory services such as are reasonable and necessary to assist the
Company with its capital needs, including, but not limited to the following:
(a) Preparation of a business plan;
(b) Locating potential sources of debt and equity capital;
(c) Coordinating and assisting in the preparation of financing
offering documentation;
(d) Utilizing Consultant's national broker/dealer database, market
making and retail broker network including providing access to the various
associations of which Consultant belongs such as, but not limited too; Boston
Stock Exchange National Association of Security Dealers, National Futures
Association and the Regional Investment Bankers Association; Assisting the
Company in evaluating and executing its plan to proceed onto a National
Market; and
(e) Assisting the Company in the valuation of its securities and
business.
Page A-1
(4) Providing access to Cash Management, Asset Management and
transaction clearing on the New York and all major exchanges, as well as on
Nasdaq for the full array of Consultants investment products and Investment
Banking services:
(5) Security and safety. Consultants selection of National Financial
Services Corporation ("NFSC") as its clearing firm was made in order to
provide the Company assurance that the safekeeping of their Cash Management,
Asset Management and transaction accounts was assigned to a national leader.
Customers accounts held at NFSC are protected up to $100,000,000, with up to
$500,000 protected by SIPC (claims limited to $100,000 for cash awaiting
reinvestment), and additional protection of $99,500,000. Consultants senior
executives are fidelity bonded to $1,000,000.
Page A-2
EXHIBIT B
TERMS OF COMPENSATION
The Consultant's compensation hereunder shall be as follows:
1. Compensation.
The Consultant shall receive warrants and/or options as compensation for
services but only for services agreed to and outlined in the service agreement
for that transaction and always budgeted for in advance of the service being
provided. The terms of compensation pursuant to the attached agreement shall
be:
a. Warrants to purchase an aggregate of 200,000 shares of the
Company's common stock. Warrants shall be issued in 4 tranches of 50,000 as
follows:
Tranche 1 Warrants to purchase 50,000 shares of common stock.
Tranche 1 warrants will be fully vested when issued,
have an exercise price of $1.25 per share and a term
of 5 years from the date of issue.
Tranche 2 Warrants to purchase 50,000 shares of common stock.
Tranche 2 warrants will vest 90 days after the
execution of this agreement , have an exercise price
of $2.25 per share, and a term of 5 years from the
date of issue.
Tranche 3 Warrants to purchase 50,000 shares of common stock.
Tranche 3 warrants will vest 180 days after the
execution of this agreement, have an exercise price
of $3.25 per share, and a term of 5 years from the
date of issue.
Tranche 4 Warrants to purchase 50,000 shares of common stock.
Tranche 4 warrants will vest 270 days after the
execution of this agreement, have an exercise price
of $4.25 per share, and a term of 5 years from the
date of issue.
In the event this agreement is terminated by either party, no additional
warrants shall vest after the date of termination. Warrants will not provide
for cashless execution nor contain registration rights and must be exercised
in 25,000 share minimum amounts. Warrants will also be subject to adjustment
for splits and recapitalizations.
Company has access, at any time, to the Consultants' Chairman, Executive
Vice President, National Sales Director and Director of Corporate Finance at
no charge to discuss what services need to be provided.
Fees and other forms of compensation will be competitive and within the
guidelines of the National Association of Securities Dealers, Securities and
Exchange Commission and any other regulatory agency governing the transaction
at hand. For example;
Page B-1
Merger & Acquisition fees:
The Xxxxxx Formula applies plus a setup fee and/or monthly per
diem based on the extent of the services required usually between
$3,000 and $10,000 per month for one (1) to six (6) months.
Financing fees: Public or Private, debt or equity.
The NASD Corporate Finance compensation guidelines will apply. A
setup fee and/or monthly per diem ,usually between $5,000 and
$10,000 per month for three (3) to six (6) months, is charged
against total compensation if the transaction is completed by the
Company.
Due Diligence fees:
NASD rules prohibit Consultant from making a profit from Due
Diligence income so fees are a reimbursement of cost. Usually a
one time expense and completed in connection with a financing.
The fee schedule is directly related to work required and quality
and timing of information received from the Company. The industry
average cost is $15,000 to $30,000 and paid in three (3)
installments as work is completed.
Cash Management & Asset Management fees:
Cost is fee based or transaction based depending on type of
service requested. For example you will be provided a VIP Cash
Management Account. The Annual maintenance fee currently is $60.
Included in this fee is unlimited check writing privileges,
money-market automatic account sweeps and VISA Gold debit card.
The annual fee for Asset Management Accounts is 2% to 4% depending
on the amount of assets under management.
Retail Exposure:
Service is provided free however direct costs can be incurred.
Road Shows and presentations to Consultants Syndicate Members are
priced at cost.
Page B-2
2. Expenses.
Consultant shall be reimbursed for any pre-approved out-of-pocket
expenses incurred by Consultant on behalf of Company within 15 days of
submission by Consultant and upon submission of receipts or accounting to the
Company, including, but not limited to, travel expenses, long-distance
telephone charges, facsimile costs, copy charges, meal expenses, messenger
services, mail expenses and such other Company related charges as may occur.
"COMPANY" "CONSULTANT"
RECOM MANAGED SYSTEMS, INC. BROOKSTREET SECURITIES
0000 Xxxxxx Xxxxxx Xxxx., Xxxxx 000 XXXXXXXXXXX
Xxxxxx Xxxx, XX 00000 0000 Xxxxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
/s/ Xxxxxx X. Xxxx /s/ Xxxxxxx X. Xxxxxx
BY: Xxxxxx X. Xxxx BY: Xxxxxxx X. Xxxxxx
ITS: President ITS: President
Page B-3
