EXHIBIT 1.1
[WINDSTONE CAPITAL PARTNERS LOGO]
CHICAGO PHOENIX NEW YORK
0000 XXXXX 00XX XXXXXX
XXXXXXX, XXXXXXX 00000
October 24, 2003
Xxxxxx X. Xxxxxxxxx
Chief Executive Officer
CPI
0000 Xxxxxxxxx Xxx.
Rancho Cucamonga, CA 91730
RE: Investment Banking Agreement
Dear Xxxxxx:
You have advised us that Xxxxxxxx-Xxxxxxxx Development Corporation (the
"Company"), providing construction, management and service to the petroleum
industry (the "Business") is committed to maximizing value of the Business
through strategic alliances, and a bridge loan of up to $1.5MM and capital raise
of up to $7MM. This letter is to confirm our understanding that Windstone
Capital Partners, Inc. ("Windstone"), has been engaged as an Investment
Banker/Financial Advisor to the Company, on an exclusive basis with respect to
financial advisory, corporate finance, private/public placements (each a
"Possible Transaction"). The Company has also retained Windstone on a exclusive
basis with respect to transactions between the Company and other parties, on
possible business combination through tender offer, merger, sale or exchange of
the outstanding capital stock of the Company, or sales of all or substantially
all of its assets or otherwise, each a ("Business Combination".)
A. FINANCIAL ADVISORY SERVICES
During the term of this agreement, Windstone or its affiliates shall
provide the Company with such regular and customary investment banking, and/or
financial advisory services as are reasonably requested by the Company, provided
that Windstone shall not be required to undertake duties not reasonably within
the scope of the services in which it is generally engaged. In performance of
its duties, Windstone shall provide the Company with the benefits of its best
judgment and efforts. It is understood and acknowledged by the parties that the
value of Xxxxxxxxx's advice is not measurable in a quantitative manner and
Windstone shall be obligated to render advice, upon the request of the Company,
in good faith, as shall be determined by Windstone. Windstone or its affiliate's
duties at its sole discretion may include, but will not necessarily be limited
to:
(i) Familiarizing itself to the extent it deems
appropriate with the business, operations, financial
condition and prospects of the Company;
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(ii) Advice regarding the formation of corporate goals and
their implementation;
(iii) Advice regarding the form and content of the
Company's collateral materials, including but not
limited to the Company's executive summary, Power
Point presentation and website;
(iv) Advice regarding the financial structure of the
Company or its divisions;
(v) Advice regarding obtaining outside financing or
acting as placement agent on a best efforts
underwriting;
(vi) Advice regarding corporate organization, personnel or
needed specialty skills;
(vii) Advice regarding obtaining PR, IR and/or advertising
firms or mediums;
(viii) Mergers and acquisitions advisory, reorganizations,
reverse mergers, divestitures, and capital sources,
due diligence studies;
(ix) Capital raising on a best efforts basis up to $5 to
$10 million net to the Company;
(x) Capital structures, banking methods and systems,
financial transactions;
(xi) Broker/dealer and/or institutional investor contacts
and introductions for the Company;
(xii) Market making contacts and introductions for the
Company; and
(xiii) Participation in meetings of the Board of Directors
of the Company.
The Company acknowledges that Windstone is in the business of providing
financial advisory services (of all types contemplated by this agreement) to
others. Nothing herein contained shall be construed to limit or restrict
Windstone or its affiliates in conducting such business with respect to others
or in rendering such advice to others. Either the Company or Windstone may
terminate this Agreement upon giving written 90-day notice to that effect to the
other party. No such termination will affect (i) Windstone's rights to receive
fees accrued prior to such termination or to receive reimbursement of its
out-of-pocket expenses as set forth above or (ii) the rights of Windstone or any
other Indemnified Person (as defined in Schedule A hereto) to receive
indemnification and contribution. In addition, if a Transaction is consummated
during the twelve months following the termination or expiration of this
Agreement, Xxxxxxxxx will be entitled to payment in full of the Success Fee.
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B. COMPANY RESPONSIBILITIES
In connection with Xxxxxxxxx's activities on the Company's behalf, the
Company agrees to cooperate with Xxxxxxxxx and will furnish to, or cause to be
furnished to, Windstone, all information and data in concerning the Company, any
Possible Transaction and any possible participant which Xxxxxxxxx deems
appropriate and will provide Windstone with access to Company's officers
directors, employees and advisors. In addition, Company shall do the following:
(i) Prepare and/or revise the Company's collateral
materials, including but not limited to an executive
summary and Power Point presentation, based on the
Windstone format;
(ii) Prepare and/or revise Company's website content based
upon Windstone recommendations;
(iii) Make mutually agreeable changes to the existing
private offering that are requested by Xxxxxxxxx;
(iv) Be responsible for the payment of all of its outside
legal and accounting expenses;
(v) Turn over all leads and inquiries regarding
financings or Possible Transactions to Windstone; and
(vi) Prepare a full due diligence package including all
materials itemized in the Windstone due diligence
checklist.
C. COMPENSATION
1. ENGAGEMENT AND RETAINER FEES. In consideration of such financial
advisory services, the Company agrees to pay Xxxxxxxxx an initial engagement fee
of $50,000. The payment of said Engagement Fee shall be $15,000 upon execution
of this agreement and the remainder upon initial funding of a Bridge Loan
contemplated herein.
2. SUCCESS FEES. Xxxxxxxxx will be entitled to a success fee upon
subject to the following terms and conditions:
(a) In the case of any equity and/or, convertible debt
financing raised through Xxxxxxxxx's Dealer/Broker
affiliates, during the term of this Agreement, the
Company shall pay Windstone as follows:
(i) A cash fee equal to 12% of any capital
raised, plus 3% in non-accountable corporate
finance expenses. This fee is gross fee paid
by the Company. The net fee to Windstone is
this amount, less any commission paid to
Xxxxxxxxx's approved syndicate partners. It
is totally up to the discretion of Windstone
to approve syndicate partners. Company may
not enter into
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selling agreements without the expressed
written consent by Xxxxxxxxx of any such
agreement;
(ii) A five-year warrant to purchase shares of
common stock at 110% of the successful offer
price per share in the quantity equal to
2.5% of the number of total outstanding
shares on a fully-diluted basis at the time
of the offer plus same warrant structure for
10% of specific raise.
(b) In the case of any equity and/or, convertible debt
financing directly raised by Xxxxxxxxx through
institutional investors, during the term of this
Agreement, the Company shall pay Windstone as
follows:
(i) A cash fee equal to 10% of any capital
raised. This fee is gross fee paid by the
company;
(ii) five-year warrant to purchase shares of
common stock at 110% of the successful offer
price per share in the quantity equal to
2.5% of the number of total outstanding
shares on a fully-diluted basis at the time
of the offer.
(c) In the case of any senior secured debt financing, or
bridge loan financing during the term of this
Agreement, the Company shall pay Windstone a cash fee
equal to 5% of such senior secured debt raised.
(d) In the case of any merger or acquisition transaction,
the Company shall pay Windstone the fees set forth in
Section D.
(e) In the case of product or technology development
agreements, technology transfers or licensing,
government or private grants or funding, or similar
transactions that contain an upfront cash or cash
equivalent or liquid security component, Windstone
will be paid 7% of that upfront component
(f) If Windstone has had discussions with a party, and a
financing transaction is consummated during the 12
month period following the termination of this
Agreement with that party, the Company shall pay
Windstone upon the consummation of such financing
transaction as outlined above for an investment and
in paragraph D for a Control Acquisition.
(g) Cash fees are payable as earned via wire transfer.
D. ACQUISITION TRANSACTION
For purposes of this agreement, the term "Acquisition Transaction"
means (i) any merger, consolidation, reorganization or other business
combination pursuant to which the businesses of a third party are combined with
that of the Company, (ii) the acquisition, directly or indirectly, by the
Company of all or a substantial portion of the assets or common equity of a
third party by way of negotiated purchase or otherwise or (iii) the acquisition,
directly or indirectly, by a third party of all or a substantial portion of the
assets or common equity of the Company by way of
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negotiated purchase or otherwise; provided, however, "Acquisition Transaction"
shall in no event include the Reverse Merger.
In connection with a proposed Acquisition Transaction, Xxxxxxxxx's
advisory services will include the following: (i) assistance in the evaluation
of a third party from a financial point of view, (ii) assistance and advice with
respect to the form and structure of the Acquisition Transaction and the
financing thereof, (iii) conducting discussions and negotiations regarding an
Acquisition Transaction and (iv) providing other related advice and assistance
as the Company may reasonably request in connection with an Acquisition
Transaction.
For purpose of this agreement, "Consideration" means the aggregate
value, whether in cash, securities, assumption (or purchase subject to) of debt
or liabilities (including, without limitation, indebtedness for borrowed money,
pension liabilities and guarantees) or other property, obligations or services,
paid or payable directly or indirectly (in escrow or otherwise) or otherwise
assumed in connection with an Acquisition Transaction including employment,
consulting, non-compete, stock options, stock appreciation writes or similar
agreements as well as debt retirement or other similar consideration.
If the Consideration payable in an Acquisition Transaction includes
contingent payments to be calculated by reference to uncertain future
occurrences, such as future financial or business performance, then any fees of
Windstone relating to such Consideration shall be payable in cash at closing,
utilizing a discount rate of estimated future values discounted by a rate of
12%.
In connection with our services, you agree that if, during the term of
this agreement or, within one year thereafter, an Acquisition Transaction is
consummated with a third party whose discussion with Company or Windstone were
conducted, Company will pay Windstone a transaction fee equal to five percent
(5%) of the Consideration. Payments are payable in cash via wire transfer at
closing.
E. INDEMNITY
The Company agrees to indemnify Windstone and related persons in
accordance with the indemnification letter annexed hereto as Schedule A, the
provisions of which are incorporated herein in their entirety.
F. FIRST RIGHT OF REFUSAL
Upon successful completion of the capital raise discussed above,
Xxxxxxxxx will have the first right of refusal for all Financial Advisory
Services as described herein for a period of 2 years from the signature date of
this engagement.
G. GENERAL
Windstone Capital Partners is an independent investment banking firm.
Windstone is not a broker dealer, nor is Windstone owned by any broker dealer.
Broker dealers that may participate in conjunction with Windstone in any
transaction are separate legal entities with separate contractual obligations.
Xxxxxxxxx represents, warrants and agrees it will offer
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securities of the Company in a manner, which complies with Regulation D and
applicable state securities laws.
The services to be provided by Xxxxxxxxx hereunder do not include the
giving of tax, legal, regulatory, valuation, actuarial or other specialist
advice or the provision of any other services unless Xxxxxxxxx specifically
agrees in writing to provide such services. Xxxxxxxxx will have no liability in
respect of any services or advice provided to the Company by persons other than
Windstone (including accountants, legal advisers, broker dealers, and other
specialist advisers) and the degree to which Xxxxxxxxx may rely on the work of
such other persons shall not be affected by any limitation of liability for such
work agreed between them and the Company.
Xxxxxxxxx will not have any responsibility for due diligence which
would normally be carried out by outside specialist advisers (such as
accountancy, tax, legal or valuation advisers) notwithstanding that any
information or advice from these advisers may be passed on to Windstone or
passed on by Windstone to the Company. It is solely the Company's responsibility
to ensure that the information and advice relating to such due diligence is
received and considered by the Company and is adequate for the purposes of the
transaction.
Notwithstanding that Windstone is not held responsible or liable for
due diligence, Windstone reserves the right at its absolute discretion and for
its own purposes to take whatever steps it may consider appropriate to satisfy
itself as to the accuracy and completeness of information provided by Company in
connection with any transaction and the Company agrees to cooperate fully with
Xxxxxxxxx in the taking of such steps.
If Xxxxxxxxx thinks it necessary or desirable, it may delegate the
performance of any of the services set out in this letter to any of its
affiliated parties, subject to written approval of the Company.
It is understood and agreed between the parties that the Company's
counsel will draft all legal documents required in connection with these
financings or Acquisition transaction and that Company will pay those fees. It
is further understood that Company agrees to pay directly Xxxxxxxxx's securities
counsel (to be designated by Windstone) to review the documents generated by
Company. Such cost will not exceed $10,000.00.
In addition to all other charges payable to Windstone as per the terms
hereof, the, Company agrees to reimburse Windstone, upon requests made from time
to time, for all of its reasonable out-of-pocket expenses incurred in connection
with its activities under this agreement. It is understood and agreed between
the parties that the Company's counsel will draft all legal documents required
in connection with this agreement and that the Company will pay those fees.
All unpaid balances due Windstone are to accrue interest at 2% per
month beginning immediately after due date of said balances. Any negotiated
monthly retainers must be paid within 5 business days of due date. Payments
received more than 5 business days after due date will result in the
acceleration of all installment payments to 10 business days after the missed
due date. Any late payments constitute, at Xxxxxxxxx's option, the right to
terminate the contract
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with no refund of any xxxxxxx money or expenses. Termination for late payment
would not free Company from obligations regarding success fees.
This letter agreement, including Schedule A, constitutes the entire
understanding of the parties with respect to the subject matter hereof and may
not be altered or amended except in a writing signed by both parties. This
agreement shall be governed by and construed under the laws of the State of
Arizona without regard to principles of conflicts of law thereof. Neither the
execution and delivery of this letter by the Company nor the consummation of the
transactions contemplated hereby will, directly or indirectly, with or without
the giving of notice or lapse of time, or both: (i) violate any provisions of
the Certificate of Incorporation or By-laws of the Company; or (ii) violate, or
be in conflict with, or constitute a default under, any agreement, lease,
mortgage, debt or obligation of the Company or require the payment, any
pre-payment or other penalty with respect thereto.
If the foregoing correctly sets forth the terms of our agreement,
kindly so indicate by signing and returning the enclosed copy of this letter,
along with a check made payable to Windstone Capital Partners, Inc. in the
appropriate amount as per the terms of this letter. If not executed and returned
prior to 5:00 p.m. MST on October 24, 2003 this offer will automatically expire.
WINDSTONE CAPITAL PARTNERS, INC.
By: /s/ Xxxxxx X. Xxxxxx
-------------------------------
Xxxxxx X. Xxxxxx, Managing Director
ACCEPTED AND AGREED TO
This 24th day of October 2003:
XXXXXXXX-XXXXXXXX DEVELOPMENT CORPORATION
By: /s/ Xxxxxx X. Xxxxxxxxx
---------------------------------------------
Xxxxxx X. Xxxxxxxxx - Chief Executive Officer
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SCHEDULE A: INDEMNIFICATION
The Company agrees that it will indemnify and hold harmless Windstone, its
affiliates, and their respective directors, officers, employees, agents,
representatives and controlling persons (Windstone and each such entity or
person being an "Indemnified Party") from and against any and all losses,
claims, damages and liabilities, joint or several, as incurred, to which such
Indemnified Party may become subject, and related to or arising out of
activities preformed by or on behalf of an Indemnified Party pursuant to this
Agreement, the Transactions contemplated thereby or Xxxxxxxxx's role in
connection therewith; provided that the company will not be liable to the extent
that any loss, claim, damage or liability is found in a final judgment by a
court to have resulted primarily from actions taken or omitted to be taken by
Windstone in bad faith or from Windstone's negligence or willful misconduct in
performing the services described above. The Company also agrees to reimburse
any Indemnified Party for all expenses (including reasonable counsel fees and
disbursements) in connection with the investigation of, preparation for or
defense of any pending or threatened claim, or any action, investigation, suit
or proceeding arising there from, whether or not such Indemnified Party is a
party and whether or not such claim, action or proceeding is initiated or
brought by or on behalf of the Company. The Company also agrees that no
Indemnified Party shall have any liability (whether direct or indirect, in
contract or tort or otherwise) to the Company or its security holders or
creditors related to or arising out of the engagement of Windstone pursuant to,
or the performance by Xxxxxxxxx of the services contemplated by, this Agreement
except to the extent that any loss, claim, damage or liability is found in a
final judgment by a court to have resulted primarily from actions taken or
omitted to be taken by Windstone in bad faith or from Windstone's negligence or
willful misconduct.
If the indemnification provided for in this Agreement is for any reason held
unenforceable, the Company agrees to contribute to the losses, claims, damages
and liabilities, as incurred by any Indemnified Person, for which such
indemnification is held unenforceable in such proportion as is appropriate to
reflect the relative benefits to the Company, on the one hand, and Windstone, on
the other hand, of the Transaction (whether or not the Transaction is
consummated). The Company agrees that for the purposes of this paragraph the
relative benefits to the Company and Windstone of the Transaction shall be
deemed to be in the same proportion that the total value of the Transaction or
contemplated Transaction by the Company as a result of or in connection with the
proposed Transaction bears to the Fee paid or to be paid to Windstone under this
Agreement; PROVIDED that, to the extent permitted by applicable law, in no event
shall the Indemnified Parties be required to contribute an aggregate amount in
excess of the aggregate fees actually paid to Windstone under this Agreement.
Promptly after receipt by an Indemnified Party of notice of any claim or the
commencement of any action, suit or proceeding with respect to which an
Indemnified Party may be entitled to indemnity hereunder, the Indemnified Party
will notify the Company in writing of such claim or of the commencement of such
action or proceeding, and the Company will assume the defense of such action,
suit or proceeding and will employ counsel reasonably satisfactory to the
Indemnified Party and will pay the fees and disbursements of such counsel, as
incurred.
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Notwithstanding the preceding sentence, any Indemnified Party will be entitled
to employ counsel separate from counsel for the Company and from any other party
in such action if such Indemnified Party reasonably determines that a conflict
of interest exists which makes representation by counsel chosen by the Company
not advisable. In such event, the fees and disbursements of such separate
counsel will be paid by the Company, but in no event shall the Company be liable
for the fees and disbursements of more that one counsel (in addition to local
counsel) for all Indemnified Parties in connection with any one action or
separate but similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances.
The Company agrees that, without Xxxxxxxxx's prior written consent, it will not
settle, compromise or consent to the entry of any judgment in any pending or
threatened claim, action or proceeding in respect of which indemnification could
be sought under the indemnification provision of this Agreement (whether or not
Windstone or any other Indemnified Party is an actual or potential party to such
claim, action, or proceeding), unless such settlement, compromise or consent
includes an unconditional release of each Indemnified Party from all liability
arising out of such claim, action or proceeding. Xxxxxxxxx agrees that, without
the Company's prior written consent, it will not settle, compromise or consent
to the entry of any judgment in any pending or threatened claim, action or
proceeding in respect of which indemnification could be sought under the
indemnification provision of this Agreement (whether or not the Company is an
actual or potential party to such claim, action or proceeding), unless such
settlement, compromise or consent includes an unconditional release of each
Indemnified Party from all liability arising out of such claim, action or
proceeding.
In the event any Indemnified Party is requested or required to appear as a
witness in any action, suit or proceeding brought by or on behalf of or against
the Company or any affiliate or any participant in a Transaction covered hereby
in which such Indemnified Party is not named as a defendant, the Company agrees
to reimburse Windstone for all reasonable disbursements incurred by it in
connection with such Indemnified Party's appearing and preparing to appear as a
witness, including, without limitation, the fees and disbursements of it's legal
counsel, and to compensate Xxxxxxxxx in an amount to be mutually agreed upon.
The provisions of Schedule A shall be in addition to any liability, which the
Company may otherwise have. These provisions shall be governed by the law of the
State of Arizona and shall be operative, in full force and in full effect
regardless of any termination or expiration of this agreement.
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[WINDSTONE CAPITAL PARTNERS LOGO]
San Xxxxx Xxxxxx Hills Capital
000-000-0000
f. 000-000-0000
RE: Finders Fee
This letter is to confirm our understanding that Windstone Capital
Partners, Inc. ("Windstone"), will pay to San Xxxxx Xxxxxx Hills Capital
("Finder") a finders fee for referring potential clients ("Client") to
Windstone.
Windstone will use its best efforts to engage Client for a transaction
to be identified, Windstone, in its sole discretion, may decide to forego an
assignment with client and will notify Finder promptly of any such decision, at
which time Finder is released from any obligations herein described above.
Should Windstone consummate a transaction and Windstone receive a success fee(s)
from Client, Windstone shall pay finder a fee of 10% of the total success fee
that Windstone receives, within 10 business days of its receipt of success fee
from Client.
Please fax this agreement to 000-000-0000
Agreed and Accepted:
Windstone Capital Finder
/s/ ????? 8/12/03
-------------------------- ------- ------------------------------ -------
Xxxxxx X. Xxxxxx Date San Xxxxx Xxxxxx Hills Capital Date
