Exhibit 2.2
Xxxxxxx Securities, LLC
0000 XXX Xxxxxxx, Xxxxx 0000
Xxxxxxxxx Xxxxxxx, Xxxxxxxx 00000-0000
(000) 000-0000
(000) 000-0000 fax
Confidential
October 28, 2004
Xx. Xxxxx X. Xxxxxxx, President
Sunningdale, Inc. 000
Xxxxxxxxx Xxxxxxxxx
Xxxx Xxxxx, XX 00000
Dear Xx. Xxxxxxx:
Re: Financial Advisory Agreement
This letter will confirm our agreement ("Agreement") that Xxxxxxx Securities,
LLC ("Xxxxxxx") is authorized to represent Sunningdale, Inc. and its affiliates,
subsidiaries and related entities (collectively, the "Company") and to assist
the Company as its financial advisor on the terms and conditions set forth
herein. This Agreement shall become effective upon the execution hereof by both
Xxxxxxx and the Company.
1. Performance of Services. In its capacity as financial advisor, Xxxxxxx
will assist the Company by undertaking the following activities, to the
extent that such activities are required or requested by the Company. The
services being provided by Xxxxxxx hereunder are being rendered solely to
the Board of Directors of the Company (the "Board"). These services are
not being rendered by Xxxxxxx as an agent or as a fiduciary of the
shareholders of the Company, and Xxxxxxx shall not have any obligation or
liability with respect to its services hereunder to such shareholders or
any other person, firm or corporation.
A. Reverse Merger Services. Xxxxxxx shall make itself available to
consult with the Board and the officers, senior managers,
representatives and agents of the Company at reasonable times,
concerning matters pertaining to the Company's efforts to acquire a
private company with an operating business in a "going public" or
reverse merger transaction ("Reverse Merger"). Xxxxxxx will assist
the Company in: (i) the identification and presentation of suitable
private company acquisition targets; (ii) the corporate, business
and financial due diligence evaluation of the target company; (iii)
the capital and transaction structuring; (iv) development of capital
markets strategy; (v) valuation analysis; (vi) company, market and
industry research; (vii) analysis of various exchange listing
requirements; and (viii) transaction negotiation and execution. The
services set forth in this paragraph shall be referred to herein in
as "Reverse Merger Services".
B. Capital Raising Services. On an exclusive basis, Xxxxxxx shall act
as a placement agent to raise equity or debt capital on behalf of
the Company in private placements or public offerings in such manner
and amounts as determined by the Board in its sole discretion from
time to time ("Capital Raising Services"). The obligations of
Xxxxxxx to perform Capital Raising Services under this Agreement
shall be limited to private placements and public offerings of
equity or debt capital that the Company and Xxxxxxx mutually agree
are financially viable based on the terms and conditions proposed by
the Board (the "Placements").
C. Mergers and Acquisitions Services. On a non-exclusive basis and as
requested by the Company, Xxxxxxx shall advise the Company with
respect to mergers, acquisitions, sales and divestitures, including,
without limitation, identification of counterparties, assessment of
acquisition opportunities, approach and financial strategy,
structure, evaluation, and assistance in negotiation and execution
("M&A Services"); provided, however, during the Term hereof, the
Company grants Xxxxxxx the right of first refusal to serve as its
advisor on mergers and acquisitions involving the Company and its
subsidiaries in the United States. The obligations of Xxxxxxx to
perform M&A Services under this Agreement shall include transactions
and opportunities identified by the Company from any source or
identified by Xxxxxxx.
D. Other Financial Advisory Services. Xxxxxxx shall make itself
available to consult with the Board and the officers, senior
managers, representatives and agents of the Company at reasonable
times, concerning matters pertaining to investment banking, capital
markets strategy and approach, business and financial operations,
regulatory matters, business and market development, and any other
matter of importance concerning the business of the Company. Xxxxxxx
may, at the request of the Company, assist in the preparation of
written reports on financial, accounting or marketing matters,
review financial information, analyze markets and business
opportunities, develop short-term and long-term strategic business
plans, and report to the Board on proposed acquisition, merger and
investment opportunities. Xxxxxxx may provide liaison services to
the Company with respect to the Company's current or potential
relationships with unaffiliated third parties. The services set
forth in this paragraph shall be referred to herein in as "Other
Financial Advisory Services".
The parties hereto acknowledge and agree that Xxxxxxx is not rendering
legal advice or performing accounting or auditing services as part of the
services provided under this Agreement. Xxxxxxx shall be free to provide
services for other persons, which services shall not be deemed to be in
conflict with the services to be performed by Xxxxxxx under this Agreement.
2. Term. The term of this Agreement shall commence on the date of this
Agreement and continue until the first anniversary of the closing of the
Reverse Merger, or for such longer period as mutually agreed to by the
parties in writing (the "Term"). Notwithstanding anything contained herein
to the contrary, the provisions of Section 3 (Compensation), Section 9
(Indemnification), Section 10 (Disclosure) and Section 11 (Miscellaneous)
shall survive the termination and expiration of this Agreement.
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3. Compensation. As compensation for the services rendered by Xxxxxxx under
this Agreement, the Company shall pay Xxxxxxx as follows:
A. Reverse Merger Fees. In consideration of the Reverse Merger Services
rendered by Xxxxxxx, upon closing of a Reverse Merger involving the
Company, the Company shall pay Xxxxxxx a fee of $190,000, payable in
cash in U.S. Dollars, as follows: $50,000 due at closing of a
Reverse Merger, and the balance payable in fourteen (14) equal
monthly installments of $10,000 due on the first day of each month
following closing of the Reverse Merger until paid in full.
Notwithstanding the foregoing, the deferred payments of the Reverse
Merger fees as set forth in the preceding sentence shall be
accelerated and become immediately due and payable upon the
Company's closing of a Placement or Placements generating net
proceeds of at least $1,000,000. The Company shall reimburse Xxxxxxx
on a monthly basis for its out-of-pocket expenses incurred in
connection with its Reverse Merger Services.
B. Capital Raising Fees. For the Capital Raising Services rendered by
Xxxxxxx, the Company shall pay Xxxxxxx a commission ("Commission")
equal to: (i) 10% of the gross proceeds of any public or private
offering of equity securities; and (ii) 5% of the gross proceeds of
any public or private offering of debt securities. In the event the
Company undertakes a public offering of its securities in a firm
commitment, underwritten offering with an underwriter introduced by
Xxxxxxx ("Underwritten Offering"), the Company shall pay Xxxxxxx an
advisory fee equal to 2% of the gross proceeds of the Underwritten
Offering (excluding any portion of the gross proceeds of the
Underwritten Offering for which Xxxxxxx receives a selling agent
commission). The Company shall also issue and sell, at each closing
of any offering (other than an Underwritten Offering), to Xxxxxxx
and/or its designees, 5-year warrants to purchase such number of
shares of common stock of the Company as shall equal 10% of the
number of shares of common stock sold (or, in the case of
convertible securities sold, the number of shares of common stock
underlying the convertible securities) at the particular closing at
a price of $.0001 per warrant (the "Warrants"). The Warrants shall
be exercisable at any time during a period of four (4) years
commencing at the beginning of the second year after their issuance
at a price equaling one hundred twenty (120%) percent of the
offering price of the shares sold (or, in the case of convertible
securities sold, the conversion price of such convertible
securities) at such closing. The Warrants to be issued under this
paragraph (including the underlying common stock) shall have
piggyback registration rights, and if such securities have not been
included in one or more registration statements of the Company,
Xxxxxxx may demand registration thereof beginning one year after the
issuance of the Warrants. The Company shall pay Xxxxxxx a
non-accountable expense allowance equal to 3% of the gross proceeds
of any offering (other than an Underwritten Offering), $25,000 of
which is payable upon the decision by the Company's board of
directors to proceed with the proposed offering and the balance of
which is payable by the Company at each closing.
C. Merger and Acquisition Fees. For any M&A Transactions (as defined
herein) in which the Company requests Xxxxxxx to perform M&A
Services, the Company shall pay Xxxxxxx a monthly retainer fee, in
such amount as mutually agreed to from time to time by the parties,
during any period that the Company is actively pursuing such M&A
Transaction ("M&A Retainer Fees"). For any M&A Transaction in which
the Company requests Xxxxxxx to perform M&A Services, which is
consummated (i) during the Term hereof; or (ii) during the
twelve-month period after termination or expiration of this
Agreement, the Company shall pay Xxxxxxx a success fee mutually
agreed to by the parties. The Company shall reimburse Xxxxxxx on a
monthly basis for its out-of-pocket expenses incurred in connection
with M&A Services requested by the Company.
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D. Other Financial Advisory Fees. The Company shall pay Xxxxxxx a
monthly retainer fee, in such amount as mutually agreed to from time
to time by the parties, during any period that the Company requests
Xxxxxxx to provide Other Financial Advisory Services. The Company
shall reimburse Xxxxxxx on a monthly basis for its out-of-pocket
expenses incurred in connection with its Other Financial Advisory
Services.
4. Affiliated Companies. The Company acknowledges and agrees, and
enters into this Agreement with the full knowledge that, Xxxxxxx and
its officers, directors and affiliates: (i) own, directly or
indirectly, an interest in the Company as of the date of this
Agreement; (ii) own, directly or indirectly, an interest in certain
investment funds that have provided or may provide equity or debt
financing to the Company for which Xxxxxxx would be entitled to
compensation hereunder with respect to financing raised from such
funds during the Term hereof; and (iii) manage certain investment
funds that have provided or may provide equity or debt financing to
the Company for which Xxxxxxx would be entitled to compensation
hereunder with respect to financing raised from such funds during
the Term hereof.
5. Board Designation and Participation Rights. Upon closing of the Reverse
Merger, for one (1) year following the closing thereof, Xxxxxxx may
designate a person reasonably acceptable to the Company for election to
the Company's Board of Directors, provided, however, that if Xxxxxxx
appoints a designee to the Company's Board of Directors as provided in
this paragraph, such designee must qualify as an "independent" director as
defined in applicable laws or regulations (including the regulations of
the self regulatory organization that the Company's shares are listed or
quoted upon). In the event Xxxxxxx elects not to exercise the right, as
set forth above, then it may designate one person to attend all meetings
of the Company's Board of Directors for a period of one (1) year following
the closing of the Reverse Merger. Such person shall be entitled to attend
all such meetings and to receive all notices and other correspondence and
communications sent by the Company to members of its Board of Directors.
Xxxxxxx'x designee shall be reimbursed for out-of-pocket expenses incurred
in connection with attendance at Board of Directors meetings.
6. Exclusivity. During the Term hereof, the Company agrees to deal
exclusively with Xxxxxxx with respect to the Reverse Merger Services and
Capital Raising Services being provided by Xxxxxxx hereunder and to refer
all inquiries from any prospective reverse merger candidateor financing
source to Xxxxxxx. Whether or not so referred, Xxxxxxx shall be entitled
to the compensation set forth herein for any Reverse Merger or Placements
completed during the Term hereof with any of such parties. Xxxxxxx shall
refer to the Company any reasonable proposal for Reverse Merger or
Placements it receives, and the Company agrees to approve or reject such
proposal promptly.
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7. Definitions. For purposes of this Agreement:
A. The term "M&A Transaction" shall mean any transaction or series or
combination of transactions, whereby, directly or indirectly,
control of an interest in a company or any of its businesses or
assets, other than in the ordinary course of business, is
transferred to or by the Company or its affiliates for Consideration
(as defined herein), including, without limitation, a sale or
exchange of capital stock or assets, a lease of assets with or
without a purchase option, a merger or consolidation, a share
exchange, a tender or exchange offer, a reorganization, a leveraged
buyout, the formation of a joint venture, minority investment or
partnership, or any similar transaction. A Reverse Merger shall not
be deemed an M&A Transaction.
B. All references to "$" or "dollars" shall mean the U.S. dollar.
8. Availability and Accuracy of Information. The Company shall furnish
Xxxxxxx with all reasonable information and material requested or required
by Xxxxxxx involving the Company and/or any potential acquisition target
including, without limitation, information concerning historical and
projected financial results, material contracts and commitments, proposed
financings, acquisitions or other transactions, and possible and known
litigation, environmental and other contingent liabilities of the Company
and/or any potential acquisition target ("Information"). The Company also
agrees to make available to Xxxxxxx such representatives of the Company,
including, among others, directors, officers, employees, outside counsel
and independent certified public accountants, as Xxxxxxx may reasonably
request. The Company will promptly advise Xxxxxxx of any material changes
in the Company's business or finances. The Company represents and warrants
that the Information provided or made available to Xxxxxxx by the Company,
at all times during the Term hereof, is and shall be complete and true in
all material respects and will not contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make
such statements not misleading in light of the circumstances under which
such statements are made. The Company further represents and warrants that
any projections provided to Xxxxxxx will have been prepared in good faith
and will be based upon assumptions that, in light of the circumstances
under which they are made, are reasonable. The Company acknowledges and
agrees that in rendering its services hereunder Xxxxxxx will be using and
relying on the Information, without independent investigation, appraisal
or verification, and Xxxxxxx assumes no responsibility for the accuracy or
completeness of the Information.
9. Indemnification. The Company agrees to indemnify and hold harmless
Xxxxxxx, its affiliates and their respective officers, directors, members,
partners, employees, agents and affiliates and control persons of any of
the above (each an "Indemnified Person") from and against all claims,
liabilities, losses or damages (or actions in respect thereof) or other
expenses that (a) are related to or arise out of (i) actions taken or
omitted to be taken (including any untrue statements made or any
statements omitted to be made) by the Company, or (ii) actions taken or
omitted to be taken by an Indemnified Person with the consent of or in
conformity with the actions or omissions of the Company; or (b) are
otherwise related to or arise out of Xxxxxxx'x duly authorized activities
on behalf of the Company. The Company shall not be responsible, however,
for any losses, claims, damages, liabilities or expenses pursuant to the
preceding sentence that are finally judicially determined to have resulted
solely from Xxxxxxx'x or such other Indemnified Person's gross negligence
or reckless or wrongful conduct. The Company agrees to reimburse each
Indemnified Person for all out-of-pocket expenses (including fees and
expenses of counsel for such Indemnified Person) of such Indemnified
Person in connection with investigating, preparing, conducting or
defending any such action or claim, whether or not in connection with
litigation in which any Indemnified Person is a named party, or in
connection with enforcing the rights of an Indemnified Person under this
Agreement. The indemnity agreements under this Section shall survive the
completion of services rendered for Company by Xxxxxxx and the termination
or expiration of this Agreement.
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10. Disclosure and Confidentiality. Any financial or other advice, descriptive
memoranda or other documentation rendered by Xxxxxxx pursuant to this
Agreement may not be disclosed publicly or to any third party without the
prior written approval of Xxxxxxx. All non-public information provided by
the Company to Xxxxxxx will be considered confidential information and
shall be maintained as such by Xxxxxxx, except as required by law or as
required to enable Xxxxxxx to perform its services pursuant to this
Agreement, until the same becomes known to third parties or the public
without release thereof by Xxxxxxx or any other third party that owes a
duty to the Company to treat such information confidentially.
11. Miscellaneous.
A. Before the Company releases any information referring to Xxxxxxx'x
role as the Company's financial advisor under this Agreement or uses
Xxxxxxx'x name in a manner which may result in public dissemination
thereof, the Company shall furnish drafts of all documents or
prepared oral statements to Xxxxxxx for comments, and shall not
release any information relating thereto without the prior written
consent of Xxxxxxx. Nothing herein shall prevent the Company from
releasing any information to the extent that such release is
required by law.
B. The Company agrees that, following the consummation of any
transaction covered by this Agreement, Xxxxxxx shall have the right
to place advertisements in financial and other newspapers and
journals at Xxxxxxx'x expense, describing its services to the
Company hereunder, provided that Xxxxxxx will submit a copy of any
such advertisements to the Company for its prior approval, which
approval shall not be unreasonably withheld.
C. The Company represents and warrants that this Agreement has been
duly authorized and represents the legal, valid, binding and
enforceable obligation of the Company and that neither this
Agreement nor the consummation of any transactions contemplated
hereby requires the approval or consent of any governmental or
regulatory agency or violates or conflicts with any law, regulation,
contract or order binding the Company.
D. The terms, provision and conditions of this Agreement are solely for
the benefit of the Company and Xxxxxxx and the other Indemnified
Persons and their respective heirs, successors and permitted assigns
and no other person or entity shall acquire or have a right by
virtue of this Agreement. This Agreement may not be assigned by
either party without prior written consent of the other party.
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E. This Agreement (including all exhibits and any addenda or schedules
attached hereto) contains the entire understanding and agreement
between the parties hereto with respect to Xxxxxxx'x engagement
hereunder, and all prior writings and discussions are hereby merged
into this Agreement. This Agreement specifically amends and restates
in its entirety that certain financial advisory agreement dated
November 15, 2003 between the parties hereto. No provision of this
Agreement may be waived or amended except in a writing signed by
both parties. A waiver or amendment of any term or provision of this
Agreement shall not be construed as a waiver or amendment of any
other term or provision.
F. Each party represents and warrants that it will comply with all
applicable securities and other laws, rules and regulations relating
hereto and that it shall not circumvent or frustrate the intent of
this Agreement.
G. This Agreement may be executed by facsimile signatures and in
multiple counterparts, each of which shall be deemed an original. It
shall not be necessary that each party executes each counterpart, or
that any one counterpart be executed by more than one party so long
as each party executes at least one counterpart.
H. If any provision of this Agreement is declared by any court of
competent jurisdiction to be invalid for any reason, such invalidity
shall not affect the remaining provisions of this Agreement.
I. This Agreement shall be governed by and constructed under the laws
of the State of Colorado without regard to such state's conflicts of
law principles, and may be amended, modified or supplemented only by
written instrument executed by parties hereto.
J. All disputes, controversies or claims ("Disputes") arising out of or
relating to this Agreement shall in the first instance be the
subject of a meeting between a representative of each party who has
decision-making authority with respect to the matter in question.
Should the meeting either not take place or not result in a
resolution of the Dispute within twenty (20) business days following
notice of the Dispute to the other party, then the Dispute shall be
resolved in a binding arbitration proceeding to be held in Denver,
Colorado in accordance with the international rules of the American
Arbitration Association. The arbitrators may award attorneys' fees
and other related arbitration expenses, as well as pre- and
post-judgment interest on any award of damages, to the prevailing
party, in their sole discretion. The parties agree that a panel of
three arbitrators shall be required, all of whom shall be fluent in
the English language, and that the arbitration proceeding shall be
conducted entirely in the English language. Any award of the
arbitrators shall be deemed confidential information for a minimum
period of five years.
K. All notices required by the terms of this Agreement shall be in
writing and delivered to the other party at the addresses set forth
below, either by personal delivery, by a recognized international
overnight courier service, or by facsimile or e-mail transmission.
Notices will be deemed given as of the date of receipt, which date
shall be evidenced by the signature of an authorized representative
of the receiving party or by written evidence of a successful
transmission of either a facsimile or e-mail message.
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If to Xxxxxxx:
Xxxxxxx Securities, LLC
Attn: Xxxxxxx X. Xxxxxxx, President
0000 XXX Xxxxxxx, Xxxxx 0000
Xxxxxxxxx Xxxxxxx, Xxxxxxxx 00000-0000
(000) 000-0000 telephone
(000) 000-0000 fax
xx@xxxxxxxxxxxxxxxxxx.xxx
-------------------------
If to the Company:
Sunningdale, Inc.
Attn: Xxxxx X. Xxxxxxx, President
000X Xxxxxxxxx Xxxxxxxxx, Xxxxx 00
Xxxx Xxxxx, XX 00000
(000) 000-0000 telephone
If the forgoing correctly sets forth the entire understanding and
agreement between the Company and Xxxxxxx, please so indicate by executing this
Agreement as indicated below and returning an executed copy to Xxxxxxx,
whereupon this Agreement shall constitute a binding agreement as of the date
first above written.
Very truly yours,
XXXXXXX SECURITIES, LLC
By: /s/ Xxxxxxx X. Xxxxxxx
--------------------------------
Xxxxxxx X. Xxxxxxx, President
ACCEPTED AND AGREED TO:
Sunningdale, Inc. ("Company")
By: /s/ Xxxxx X. Xxxxxxx
-------------------------------
Xxxxx X. Xxxxxxx, President
Date: October 28, 2004
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