Exhibit 10.9
July 1, 2001
Xxxxxxx Communications Corporation
0000 Xxxxx Xxxx XX
Xxxxx Xxxxxx, XX 00000
RE: ENGAGEMENT LETTER
Gentlemen:
We are writing this letter to confirm our agreement ("Agreement") that as
of the date stated above, Xxxxxxx Xxxxxx & Company Financial Services, Inc.
("Berthel") has been engaged by Xxxxxxx Communications Corporation (the
"Company") as exclusive financial advisor and placement agent in connection with
providing merger and other financial advisory services.
This Agreement shall become effective upon the execution hereof by both the
Company and Berthel, and the term of this agreement and the exclusive
appointment provided for herein shall end 12 months from the date of this letter
(the "Term"). Upon the Agreement of both parties, the Agreement may be extended
an additional 12 months.
I. Performance of Services
Berthel shall act as financial advisor and exclusive agent with respect to
any offering of securities of the Company on a best efforts private placement
basis the "Financing"), and/or a reorganization/merger of the Company
("Merger").
II. Compensations for Services
A. In partial payment for its services hereunder, Berthel shall receive from the
Company a retainer fee of Twenty Thousand Dollars, ($20,000.00) per month (the
"Monthly Retainer Fee"), for each month of the engagement, payable beginning on
the fifteenth day of July, 2001, and on the 15th day of each subsequent month of
the engagement. Notwithstanding anything to the contrary stated herein, Berthel
agrees that one-half of the Monthly Retainer Fee will be credited toward the
Success Fee hereinafter set out in paragraphs II D and E.
B. If the Company and Berthel agree that a private placement of securities for
the company is in order, fees will be defined in a separate underwriting/sales
agreement at that time.
C. Attached hereto is a copy of a proposal dated July 31, 2001, by and between
the Company and Berthel wherein Berthel
agrees to and will attempt to cause the Company Private Warrant holders, which
were obtained as the result of investing in past private offerings of the
Company (the "Private Warrants"), to exercise the Private Warrants. In return
for causing said parties to exercise the Private Warrants, Berthel will be
compensated by payment of commission equal to 10% of the dollar amount of the
Private Warrants exercised and Berthel will be paid a non-accountable expense
allowance equal to 3% of the dollar amount of the Private Warrants exercised.
D. With respect to the contemplated merger of Informed Care, Inc., ("Informed"),
Grocery Shopping Network, Inc., ("GSN") and the Company in accordance with the
terms of the AGREEMENT AND PLAN OF REORGANIZATION dated as of July 25, 2001 (the
"Immediate Merger") the Company shall pay Berthel a Success Fee for a completed
merger or sale, in whole or in part, of 3% of the Aggregate Merger or Sale
Price, payable to Berthel, or its designee, 1/2 in cash and 1/2 in equity
securities of the Company payable at the Closing of the Immediate Merger. In
order to determine the compensation due to Berthel as a result of the Immediate
Merger the value to be used shall be $1 per share for 50 million shares, said
number of shares shall be adjusted for the total number of shares outstanding
once the Merger is completed (the "Merger Fee"). The Merger Fee shall be split
between Berthel and Waterford Financial Services, Inc. ("Waterford") pursuant to
a separate agreement executed between Berthel and Waterford. Berthel and
Waterford have agreed to split the Merger Fee equally, however all parties are
aware that the ability of Waterford to accept its portion of the Merger Fee is
subject to approval by the NASD/SEC. In the event that payment of Waterford's
portion of the Merger Fee is not allowed by the NASD/SEC then Berthel and
Waterford may be required to agree to alternative terms for payment to Waterford
for its activities in relation to the Immediate Merger or Waterford may have to
forgo any payment for its activities in relation to the Immediate Merger.
Waterford agrees in relation to the Immediate Merger only, that it has not
agreed to accept any other fees from any of the other parties to the Immediate
Merger and should it agree to such fees in the future or if there is an
agreement in existence at this time, said agreement must be disclosed to and
agreed to by Berthel and the other parties to the Immediate Merger.
E. With respect to any Merger, other than the Immediate Merger, involving either
a stock or asset purchase transaction, the Company shall pay Berthel a Success
Fee for a completed merger or sale, in whole or in part, calculated as a
percentage of the aggregate Merger or Sale Price as follows: 3% of the Aggregate
Merger or Sale Price, payable 1/2 in cash and 1/2 in equity securities of the
Company at closing of the Merger or Sale. The value of the Aggregate Merger or
Sale Price shall be defined as the greater of the (1) fair market enterprise
value of the
Company if reorganized, as determined through agreement with the Company, or (2)
as the present value of the sum of consideration paid by the Acquirer to or for
the Company or its shareholders including (i) cash, (ii) the face amount of any
installment notes, (iii) the amount of any debt, including long-term or current
debt issued in connection with the transaction, (iv) the balance of any debt
assumed by the Acquirer, (v) the fair market value of equity or any equity
interest(s) issued to the Company or its shareholders, and (vi) the value of any
subsequent or contingent payments including, but not limited to, earnouts,
non-compete payment and any other compensation paid to the Company, its
shareholders or employees in excess of standard amounts paid. For earnouts and
other payments that are not readily ascertainable at closing, Berthel will be
due its applicable Success Fee as those amounts are paid, unless mutually agreed
upon by both parties to this Agreement.
X. Xxxxxxx shall be entitled to the compensation provided in the event that at
any time prior to the expiration of twelve months after expiration or
termination of this Agreement and any extensions thereto a Financing or a merger
is consummated (i) with a lender/investor or merger partner introduced to the
Company by Berthel or contracted by Berthel or the Company during the term of
this Agreement or (ii) as a result of the use by the Company of materials or
other work product prepared by Berthel.
G. The Company agrees to reimburse Berthel for all reasonable out-of-pocket
expenses incurred in carrying out the terms of this Agreement, including travel,
telephone, facsimile, courier, computer time changes, attorneys' fees and
disbursements. These out-of-pocket expenses will be payable from time to time
promptly upon invoicing by Berthel therefor.
H. In addition to the compensation due under this Agreement as set out in this
Section II, the Company expressly acknowledges that as of the date of this
Agreement, it is in default of payment of the monthly financial advisory fees
due to Berthel in the amount of $90,000 and an invoice for expenses incurred by
Berthel on behalf of the Company, which has previously been provided to the
Company in the amount of $3,515.43 both of which are the result of the recently
expired Engagement Letter executed in December 1999 (the "Past Due Fees"). The
Company acknowledges that it remains liable for the Past Due Fees and agrees
that the Past Due Fees will be paid to Berthel at the first Closing which occurs
as the result of Financing or Merger pursuant to this Engagement Letter.
III. Indemnification
The Company and Berthel, hereby agree to the terms and conditions of the
Indemnification Agreement attached hereto as Appendix A which is incorporated
herein. The Company represents
and warrants that it has the right to enter into this Agreement and that it is
not bound by any prior agreement(s), which conflict with or are violated by this
Agreement.
IV. Coordination of Efforts
In order to coordinate the efforts of Berthel and the Company, and to
maximize the possibility of consummating a Financing or Merger during the term
of this Agreement, Berthel shall have the sole and exclusive authority to
initiate discussions with potential investors/clients/purchasers. In the event
the company, its directors, officers, employees or shareholders receive any
inquiries or conduct any discussions concerning a Financing or Merger, such
inquiries and discussions shall be promptly referred to Berthel.
V. Disclosure
Any financial or other advice, descriptive memoranda or other documentation
rendered by Berthel pursuant to this Agreement may not be disclosed, quoted or
otherwise referred to publicly, to any third party or in any document in any
manner without the prior written approval of Berthel. All non-public information
provided by the Company to Berthel will be considered as confidential
information and shall be maintained as such by Berthel, except as required by
law or as required to enable Berthel to perform its services pursuant to this
Agreement, until the same becomes known to third parties or the public without
release thereof by Berthel.
The Company agrees to provide to Berthel, among other things, all
information reasonably requested or requested by Berthel or potential
lenders/investors, including, but not limited to, information concerning
historical and projected financial results and possible and known litigation and
other contingent liabilities of the Company. The Company also agrees to make
available to Berthel such representatives of the Company, including among
others, directors, officers, employees, outside counsel and independent
certified public accountants, as Berthel or potential lenders/investors may
reasonably request. The Company will promptly advise Berthel of any material
changes in its business or finances. The Company represents that all information
made available to Berthel by the Company, including, without limiting the
generality of the foregoing any private placement memorandum or other
information or materials prepared by or approved by the Company, will be
completed and correct in all material respects and will not contain any untrue
statements of a material fact or omit a material fact necessary in order to make
the statement therein not misleading in light of the circumstances under which
such statements are made. In rendering its services hereunder, Berthel will be
using and relying primarily on such information without independent verification
thereof or independent apprisal of any of the Company's assets. Berthel does not
assume responsibility for the accuracy or completeness of the information.
The Company authorizes Berthel to make public notice in the form of a
"tombstone," at Xxxxxxx'x expense, of any Financing or Merger concluded under
this Agreement.
VI. Certain Offering Procedures
The Company and Berthel each represent to the other that it has not taken,
and the company and Berthel each agree with the other that it will not take, any
action, directly or indirectly, so as to cause the Financing or the Merger to
fail to be entitled to rely upon the exemption from registration afforded by
Section 4(2) of the Securities Act of 1933, as amended (the "Act"). In effecting
the Financing or Merger, the Company and Berthel each agree to comply in all
material respects with applicable provisions of the Act and any regulations
hereunder and any applicable state laws and requirements. The Company agrees
that any representations and warranties made by it to any lenders/investors in a
Financing or Merger shall be deemed also to be made to Berthel for its benefit.
The Company agrees that it shall cause any opinion of its counsel delivered to
any lenders/investors in a Financing or Xxxxxx also to be addressed and
delivered to Berthel or to cause such counsel to deliver to Berthel a letter
authorizing it to rely upon such opinion. It is understood that, once a
lender/investor group becomes identified, customarily special counsel of the
lender/investor group is appointed at the Company's expense to represent all
lender/investors. This means, in practical terms, that the final terms of a
Financing or Merger may be modified by negotiation between the Company and the
lenders/investors.
VII. Obligations of Berthel Solely to Company
The services herein provided are to be rendered solely to the Company. They
are not being rendered by Berthel as an agent for or as a fiduciary of the
shareholders of the Company, and Berthel shall not have any liability or
obligation with respect to its services hereunder to such shareholders or to any
other person, firm or corporation.
VIII. Acknowledgment
Although Informed, GSN and Waterford are not parties to this Agreement,
each of those parties has acknowledged at the end of this Agreement to indicate
each is aware of the provisions herein, that they understand the provisions and
agree thereto.
IX. Entire Agreement, Etc.
This Agreement sets forth the entire understanding of the parties relating
to the subject matter hereof and supersedes and cancels any prior
communications, understandings and agreements between the parties. This
Agreement cannot be terminated or changed, nor can any of its provisions be
waived, except by written agreement signed by all parties hereto. This Agreement
shall be binding upon and inure to the benefit of any successors, assigns, heirs
and personal representatives of the Company and Berthel. A facsimile of a signed
original of this agreement shall be sufficient to bind the parties whose
signatures appear hereon.
X. Governing Laws and Jurisdiction
This Agreement shall be governed by and construed to be in accordance with
the laws of the State of Iowa applicable to contracts made and to be performed
solely in such state. Any dispute arising out of this Agreement shall be
adjudicated in the courts of the State of Iowa or in the federal courts sitting
in the Northern District of Iowa, and the parties agree to personal jurisdiction
and venue in such courts and the Company hereby agrees that service of process
upon it by registered or certified mail at the address shown in this Agreement
shall be deemed adequate and lawful. The parties hereto shall deliver notices to
each other by personal delivery, by registered mail (return receipt requested)
or via recognized commercial carrier at the address set forth above.
XI. Miscellaneous
A. The provisions of Sections II, III, V, VI and VII shall survive termination
of the Engagement set out in this Agreement.
B. In relation to this Engagement Berthel is acting strictly as an independent
contractor with duties owing solely to the Company.
C. Both the Company and Berthel represent that this Agreement has been duly
authorized in all respects, executed and delivered by and on behalf of itself.
Nothing in this Agreement shall limit Xxxxxxx'x ability to consult and conduct
business for and with others, including competitors of the Company (provided
Berthel abides by all confidentiality provisions contained herein) and to engage
in activities similar to those contemplated herein and to buy, sell or hold
securities in or for its own account or for the account of others.
D. If any term, provision, covenant or restriction contained in this Agreement
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 terms, provisions, covenants and
restrictions contained in their Agreement shall remain in full force and effect
and shall in no way be affected, impaired or invalidated.
If the above terms are acceptable to the Company, please confirm your
acceptance by signing below and returning to Berthel by return mail along with a
check for the first month Retainer Fee.
Very truly yours,
XXXXXXX XXXXXX & COMPANY
FINANCIAL SERVICES, INC.
By: /s/ Xxxxxx X. Xxxxxxx
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XXXXXX X. XXXXXXX
Chief Executive Officer
Accepted By Xxxxxxx Communications Corporation
By: /s/
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