CONFIDENTIAL
Exhibit
10.3
000
Xxxxxxx Xxxxxx
00xx
Xxxxx
Xxx
Xxxx,
XX 00000
Telephone:
(000) 000-0000
Fax:
(000) 000-0000
CONFIDENTIAL
October
31, 2006
Xx.
Xxxxx
X Xxxxxx
Chairman
of the Board, President & Chief Executive Officer
Blackhawk
Capital Group BDC, Inc.
00
Xxxx
Xxxxxx
Xxx
Xxxx,
XX 00000
Dear
Xx.
Xxxxxx,
This
letter (the “Agreement”) will confirm the engagement of Xxxxxxx Xxxxxx Xxxxxx
Inc., a Texas corporation (“SMH”), by Blackhawk
Capital Group BDC, Inc., a Delaware corporation and a business development
company registered under the Investment Company Act of 1940, as amended
(the
“Company”), as financial adviser and placement agent in connection with the
Company’s proposed Private Placement of a maximum $5 million in common stock
(“Securities”) to accredited investors (the “Offering”). There will be a minimum
of $3.5 million in Securities to be raised in the Offering. Included in both
amounts will be $100,000 in Blackhawk debt to be converted by The Concorde
Group, Inc. into 100,000 shares of Blackhawk common stock.
| 1. |
Scope
of SMH’s Services.
SMH will assist the Company in placing the Securities with terms
substantially like those described in the Term Sheet (Exhibit A).
To that
extent, SMH will distribute Offering Materials (as hereinafter defined)
to
potential investors, report the status of the Offering to the Company,
and
assist in consummating the Offering, including, but not limited
to:
|
| a. |
familiarizing
itself to the extent it deems appropriate and feasible with the
business
operations, properties, financial condition, and prospects of the
Company,
|
1
| b. |
assisting
the Company in preparing Offering Materials for distribution by SMH
to
potential investors selected by SMH and the
Company,
|
| c. |
screening
and contacting prospective
investors,
|
| d. |
assisting
in negotiations with prospective investors,
and
|
| e. |
advising
and assisting the Company in structuring and pricing the
Offering.
|
The
Offering will be conducted pursuant to the terms and conditions of a customary
placement agent agreement acceptable to SMH, the Company and their respective
counsel. The Company shall retain control of the Offering and shall have the
right to determine (a) whether to close the sale of the Securities to a specific
investor, (b) whether to close or terminate the Offering, and (c) the content
of
the Offering Materials. It is understood by both parties that SMH intends to
solicit interest from a limited number of potential investors and on a
“best-efforts” only basis. SMH will, in its sole discretion, determine the
reasonableness of its efforts and is under no obligation to perform at any
level
other than what it deems reasonable.
| 2. |
Fees
and Exclusivity.
In
return for SMH’s services in the placement of Securities, the Company will
pay SMH a cash fee equal to 9.00% of
the gross proceeds of any Securities placed by SMH (consisting of
a 2.0%
advisory fee and 7.00% placement agent
fee).
|
Any
fee
contemplated in the above sentence herein will be referred to as the “Financing
Fees”. Any Financing Fees payable to SMH will be due at the closing date of the
Offering and shall be payable to SMH by the Company.
Upon
the
closing of the Offering, SMH shall act as exclusive placement agent for the
Company during the remainder of the term and Residual Period (if the Company
and
SMH have agreed on a Residual Period) (as described in Section 4), and during
this period SMH shall receive the fees set forth in this Section 2 if securities
are sold by the Company through a private placement to investors contacted
by
SMH.
| 3. |
Expenses.
In
addition to the foregoing, the Company will, upon request, reimburse
SMH
for all reasonable out of pocket costs and expenses incurred by SMH
in
performing its obligations under this Agreement, which costs and
expenses
shall include, but not be limited to, travel expenses, expenses incurred
in performing due diligence in connection with transactions, legal
expenses, and all other expenses reasonably incurred by SMH in performing
its obligations under this Agreement; provided, however, that SMH
shall
obtain the prior approval of the Company for any single expenditure
in
excess of $10,000. In seeking reimbursement for expenses, SMH shall
provide to the Company a written statement or statements detailing
expenses for which reimbursement is sought and, upon request by the
Company, shall provide copies of invoices and other documentation
supporting such expenses. Reimbursable expenses shall be payable
by the
Company within 10 days of receipt by the Company of such written
statement
or, if requested by the Company, copies of supporting
documentation.
|
2
| 4. |
Term.
The term of this Agreement shall begin on the date hereof and shall
terminate 12 months thereafter. At the end of the 12 months, SMH
and the
Company may agree in writing to extend the 12 month period on an
annual
basis ("Residual Period"). SMH reserves the right to terminate its
engagement on 30 days notice in writing during the initial 12 months
and
Residual Period, but will not terminate its engagement if such termination
would jeopardize the closing of the
Offering.
|
| 5. |
Company
Information.
The Company will furnish SMH such information concerning the Company
as
SMH reasonable determines to be appropriate with respect to the Offering
(“Information”). The Company shall afford SMH and its counsel and
representatives full and complete access to its books and records
and will
use commercially reasonable efforts to afford SMH will full and complete
cooperation of management to gather the Information. The Company
recognizes and confirms that SMH (a) will use and rely on the Information
in performing the services contemplated by this Agreement, without
independently verifying the accuracy and completeness of the same,
(b)
does not assume responsibility for the accuracy or completeness of
the
Information, and (c) will not make an appraisal of any assets or
liability
of the Company.
|
The
Company hereby represents to SMH that all solicitation materials prepared by
the
Company and used in connection with the Offering (the “Offering Materials”) will
not, as of the date of any offer or sale in connection with the Offering,
contain any untrue statement of a material fact or omit a material fact
necessary to make the statements contained therein, not misleading, in light
of
the circumstances under which they were made. If at any time an event occurs
as
a result of which the Offering Materials, as then amended or supplemented,
would
include an untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein, in light of the circumstances
under which they were made when such Offering Materials are delivered to a
prospective purchaser pursuant hereto, not misleading, the Company will promptly
notify SMH to suspend solicitation of prospective purchasers in connection
with
the Offering; and if the Company decides to amend or supplement the Offering
Materials, it will promptly advise SMH by telephone (with confirmation in
writing) and will promptly prepare an amendment or supplement that will correct
such statement or omission.
3
SMH
will
not violate, or cause the Company to violate, any applicable federal and state
securities laws in connection with the Offering.
| 6. |
Confidentiality.
In
connection with this engagement, it is contemplated that SMH will
receive
from the Company certain information (including certain business
planning,
product, marketing, technical, financial, and other information and
materials) the Company considers confidential. SMH shall use this
confidential information solely for the purpose of providing services
to
the Company and will not disclose to any party (other than SMH’s officers,
directors, employees, affiliates, and counsel who have a need to
know such
information, herein “Representatives”) any such confidential information,
except with the prior written approval of the Company; provided,
however,
that the foregoing restrictions shall not apply to any information
that:
(a) is included in the Offering Materials and disclosed pursuant
to the
distribution of the Offering Materials as permitted by the Company,
(b)
the Company consents to having disclosed in connection with the Offering,
(c) is publicly available when provided or thereafter becomes publicly
available other than through disclosure by SMH or its Representatives,
or
(d) is required to be disclosed by SMH by judicial or administrative
process in connection with any action, suit, proceeding, or investigation;
and provided, further, however, that SMH shall give the Company notice
of
any such requirement immediately upon the becoming aware of same
and shall
not disclose such information except only to the extent required
after the
maximum time permitted. Information shall be deemed “publicly available”
if it becomes a matter of public knowledge or is contained in materials
available to the public or is obtained by SMH from any source other
than
the Company or its representatives, provided that such source was
not to
SMH’s actual knowledge subject to a confidentiality agreement with the
Company. SMH will take reasonable steps to assure that the Offering
Materials are not distributed to any persons not permitted to receive
them
pursuant to the terms hereof. Prospective investors in the Offering
must
execute a confidentiality agreement before being provided Offering
materials.
|
| 7. |
Indemnification.
The Company acknowledges that SMH will be acting on behalf of the
Company
and will require indemnification by the Company. The Company further
acknowledges that SMH’s indemnification provisions attached hereto as
Exhibit B are incorporated by reference herein or are made a part
hereof
for all purposes as though set forth entirely
herein.
|
| 8. |
Miscellaneous.
The Offering will be completed in accordance with Regulation E under
the
Securities Act of 1933, as amended, which is the private placement
offering exemption applicable to business development companies registered
under the Investment Company Act of 1940, as amended ("Investment
Company
Act"), and all applicable state or other jurisdictional securities
laws
(i.e. “blue sky” laws). All investors in the Transaction will be persons
who qualify as accredited investors under all applicable federal
and state
securities laws.
|
4
The
Company shall have the right to identify investors with which it has
affiliations who would be suitable accredited investors for the Offering
("Company-Introduced Investors"), and introduce these investors to SMH for
the
Offering. In the event that SMH and the Company decide that these investors
are
suitable for the Offering and purchase Securities in the Offering, fees shall
be
due to SMH respecting Securities purchased by Company-Introduced Investors
pursuant to Section 2 above. I
The
parties agree that their relationship under this Agreement is an advisory
relationship only, and nothing herein shall cause SMH to be partners, agents
or
fiduciaries of, or joint venture partners with, the Company or with each
other.
The
Company agrees that, following the closing of the Offering, SMH shall have
the
right to place advertisements in financial and other newspapers and journals
at
its own expense describing its services to the Company hereunder, provided
that
SMH will submit a copy of any such advertisement to the Company for its
approval, which approval shall not be unreasonably withheld or delayed. In
addition, before SMH provides the offering circular and offering documents
to a
prospective investor, it will have the investor execute a confidentiality
agreement.
This
Agreement may not be amended or modified except in writing and shall be governed
by, and construed in accordance with the laws of the State of New
York.
If
this
Agreement reflects our mutual understanding, please execute two copies in the
space indicated below and return one to us.
Very
truly yours,
XXXXXXX
XXXXXX XXXXXX INC.
/s/
Xxxxxxx X. Xxxxx
Xxxxxxx
X. Xxxxx
Managing
Director—Financial Services
Accepted
and agreed to as of October 31,
2006:
BLACKHAWK
CAPITAL GROUP BDC, INC.
/s/
Xxxxx
X. Xxxxxx
Xx. Xxxxx X Xxxxxx
Chairman
of the Board, President & Chief Executive Officer
5
Exhibit
A
Blackhawk
Capital Group BDC, Inc.
$5.0
Million Private Equity Placement
October
25, 2006
|
Issuer
|
Blackhawk
Capital Group BDC, Inc. (the “Company”).
|
|
|
Use
of Proceeds
|
General
corporate purposes and potential acquisitions of similar companies
in the
United States.
|
|
|
Amount
|
$5,000,000
(Minimum at $3,500,000)
|
|
|
Securities
|
5,000,000
shares of common stock (minimum at 3,500,000 shares) of the Company
(the
“Securities”), which will be unregistered upon issuance but will be
subsequently registered by the Company.
|
|
|
Purchase
Price
|
The
purchase price of the Securities per share will be
$1.00.
|
|
|
Funding
/ Registration
|
Upon
execution of purchase agreements and related documentation, the Investors
will fund into escrow. Share certificates will be subsequently delivered
to the Investors; however the Securities would not yet be registered.
The
Company will commit to file a registration statement for the Securities
with the SEC within 90 days of the closing.
|
|
|
Exclusive
Placement Agent
|
Xxxxxxx
Xxxxxx Xxxxxx, Inc. (“SMH”).
|
|
|
Plan
of Distribution
|
SMH
will market the Securities into both the institutional investment
community as well as high net-worth accredited investors. In addition,
SMH
will market the Securities within its own managed investment management
operations.
|
6
Exhibit
B
Indemnification
Blackhawk
Capital Group BDC, Inc., a Delaware corporation
(the “Company”) agrees to indemnify and hold harmless Xxxxxxx Xxxxxx Xxxxxx
Inc., a Texas corporation (“SMH”), together with its affiliates, directors,
officers, agents, and employees (SMH and each such entity or person, an
“Indemnified Person”), from and against any and all losses, claims, damages,
judgments, and liabilities, expenses, or costs (and all actions in respect
thereof and any legal or other expenses in giving testimony or furnishing
documents in response to a subpoena or otherwise), including the cost of
investigating, preparing for, or defending any such action or claim, whether
or
not in connection with litigation in which an Indemnified Person is a party,
as
and when incurred, directly or indirectly caused by, relating to, based upon,
or
arising out of SMH’s performance of its engagement by the Company under the
letter agreement dated as of October 25, 2006, as it may be amended from time
to
time (the “Agreement”), or otherwise arising out of or in connection with advice
or services provided or to be provided by Indemnified Persons 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, including any indemnified person’s sole or contributory
negligence, if such activities were performed (i) in good faith and (ii) in
such
manner reasonably believed by such Indemnified Person to be within the scope
of
the authority conferred by the Agreement or by law and to be on behalf of the
Company or in furtherance of the performance of SMH’s services under the
Agreement; provided, however, such indemnity agreement shall not apply to any
such loss, claim, damage, liability, or cost incurred by any Indemnified Person
to the extent it is found in a final judgment by a court of competent
jurisdiction (not subject to further appeal) to have resulted primarily and
directly from the gross negligence or willful misconduct or bad faith of such
Indemnified Person. 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 the any advice or services
provided by any Indemnified Persons in connection with the Agreement, the
transactions contemplated by the Agreement, or any Indemnified Persons’ actions
or inactions in connection with any such advice, services, or transactions
except for any such liability for losses, claims, damages, liabilities, or
costs
found in a final judgment by a court of competent jurisdiction (not subject
to
further appeal) to have resulted primarily and directly from such Indemnified
Person’s gross negligence or willful misconduct or bad faith in connection with
such advice, actions, inactions, or services.
These
Indemnification Provisions shall be in addition to any liability that the
Company may otherwise have to any Indemnified Person and shall extend to the
following: SMH, its affiliated entities, directors, officers, employees, agents,
legal counsel and controlling persons of SMH within the meaning of the federal
securities laws, and the respective successors, assigns, heirs, beneficiaries,
and legal representatives of each of the foregoing indemnified persons or
entities. All references to SMH or Indemnified Persons in these Indemnification
Provisions shall be understood to include any and all of the foregoing
indemnified persons or entities.
7
If
any
action, proceeding, or investigation is commenced, as to which an Indemnified
Person proposes to demand such indemnification, it will notify the Company
with
reasonable promptness; provided, however, that any failure by an Indemnified
Person to notify the Company will not relieve the Company from its obligations
hereunder except if and only to the extent that the Company’s defense of such
action, proceeding or investigation is actually prejudiced by the Indemnified
Person’s failure so to notify the Company. SMH will have the right to retain
counsel of its own choice to represent it; however, such firm shall be
acceptable to the Company, which acceptance shall not be unreasonably withheld,
and unless the Company assumes SMH’s defense as provided below, the Company will
pay the reasonable fees and expenses of such counsel, and such counsel shall
to
the fullest extent consistent with its professional responsibilities cooperate
with the Company and any counsel designated by it. The Company will be entitled
to participate at its own expense in the defense, or if it so elects, to assume
and control the defense of any action, proceeding, or investigation, but, if
the
Company elects to assume the defense, such defense shall be conducted by counsel
reasonably acceptable to SMH. Any Indemnified Person may retain additional
counsel of its own choice to represent it but shall bear the fees and expenses
of such counsel unless the Company shall have specifically authorized the
retaining of such counsel. The Company will not be liable for any settlement
of
any claim against an Indemnified Person made without its written consent.
In
order
to provide for just and equitable contribution, if a claim for indemnification
pursuant to these Indemnification Provisions is made but it is found in a final
judgment by a court of competent jurisdiction (not subject to further appeal)
that such indemnification may not be enforced in such case, even though the
express provisions hereof provide for indemnification in such case, then the
Company, on the one hand, and any Indemnified Person, on the other hand, shall
contribute to the losses, claims, damages, liabilities, or costs to which the
Indemnified Persons may be subject in accordance with the relative benefits
received by the Company, on the one hand, and SMH, on the other hand, and also
the relative fault of the Company, on the one hand, and SMH, on the other hand,
in connection with the statements, acts or omissions that resulted in such
losses, claims, damages, liabilities, or costs, and the relevant equitable
considerations shall also be considered. No person found liable for a fraudulent
misrepresentation shall be entitled to contribution from any person who is not
also found liable for such misrepresentation. Notwithstanding the foregoing,
SMH
shall not be obligated to contribute any amount hereunder that exceeds the
amount of fees received by SMH pursuant to the Agreement.
8
Neither
termination nor completion of the engagement of SMH or any Indemnified Person
under the Agreement shall affect the provisions of these Indemnification
Provisions, which shall then remain operative and in full force and
effect.
If
any
provision contained in this Exhibit B is held by a court of competent
jurisdiction or other authority to be invalid, void, unenforceable, or against
its regulatory policy, the remainder of the provisions contained in this Exhibit
B shall remain in full force and effect and shall in no way be affected,
impaired, or invalidated. These Indemnification Provisions may not be amended
or
modified in any way, except by subsequent agreement executed in
writing.
9
