Xx. Xxxxx Xxxxxxxxxxxx
President & CEO
Freedom Financial Group, Inc.
0000 X Xxx Xxxxxx
Xxxxxxxxxxx, XX 00000
Dear Xx. Xxxxxxxxxxxx:
This agreement ("Agreement") sets forth the terms of the engagement by Freedom
Financial Group, Inc. (the "Company") of Milestone Advisors, LLC ("MAL"),
pursuant to which MAL shall act as financial advisor to the Company with regard
to the proposed private offering of debt and equity securities (the "Offering").
It is acknowledged that the Company is under no obligation to enter into any
transaction.
1. Scope of Services. In connection with the analysis and pursuit of exploring
the Company's strategic alternatives, MAL will, as the Company's financial
advisor and investment banker, work with the Company on one or more of the
following activities, as requested from time to time by management of the
Company (hereinafter referred to as the "Advisory Services"):
(a) Evaluation of the Company, its current and historical financial condition,
franchise value, operations and projected results;
(b) Peer group performance comparisons and comparable company analyses;
(c) Advise on the transaction capacity, appropriate transaction structure and
pricing parameters for the Offering;
(d) Participation in: (i) discussions between the Company, its current
shareholders and
their representatives, and the potential debt and equity investors in the
Offering (the "Potential Investors"); (ii) "due diligence" discussions between
the Company and the Potential Investors; and (iii) negotiation of a letter of
intent, memorandum of understanding and/or definitive agreement with the
Potential Investors;
(e) Issue a fairness opinion to the Board of Directors of the Company, as to the
fairness of the Offering from a financial point of view ("Fairness Opinion")
within 45 days from the date the Company provides MAL with a completed set of
due diligence materials, MAL will either (i) issue the Fairness Opinion or (ii)
provide a summary response regarding its conclusion of the Offering;
(f) If appropriate, conduct presentations to the Company's Board of Directors
regarding the Offering and the Fairness Opinion; and
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September 24, 2004
Page 2
(g) Such other financial advisory and investment banking services as are
customary in engagements of the type contemplated hereby and as may be
reasonably agreed upon by the Company and MAL.
2. Fees and Expenses
(a) MAL shall be paid a retainer fee of $25,000 ("Retainer Fee"), which shall be
paid upon execution of the Agreement; and
(b) Upon MAL's issuance of the Fairness Opinion, MAL shall be paid a fairness
opinion fee equal to $200,000 ("Fairness Opinion Fee");
(c) The Company will agree to reimburse MAL for reasonable out of pocket
expenses, which may include but shall not be limited to costs of travel, meals
and lodging, photocopying, telephone, facsimile and couriers, payable at the
closing of the Offering, or if no Offering is consummated, at the time this
Agreement is terminated.
3. Confidential Review. MAL and its agents and counsel will be accorded access
to and may examine documents, records and other materials and information of the
Company and its subsidiaries as MAL reasonably deems appropriate to perform its
obligations hereunder. MAL shall keep all such information, to the extent
confidential and proprietary to the Company, confidential except to the extent
disclosure is required by any judicial, administrative or self-regulatory agency
or organization. The following information shall not be deemed confidential or
proprietary:
(a) Information that at the time of disclosure, or after disclosure, is or
subsequently becomes generally available to the public or within the industries
in which the Company or MAL and its affiliates conduct business, other than as
a result of a breach by MAL of its obligations under this Agreement;
(b) Information that prior to or at the time of disclosure by the Company, was
already
in the possession of MAL or its affiliates (provided that MAL or its
affiliates, at the time of such disclosure was not subject to a non-disclosure
obligation relating to such information including any non-disclosure obligation
under applicable "Xxxxxxx Xxxxxxx" laws and regulations) or could have been
developed by them from information then in their possession, by the application
of other information or techniques in their possession or generally available
to the public or available to them, other than from the Company or its agents;
(c) Information that at the time of disclosure or subsequent to disclosure, is
obtained by MAL or its affiliates from a third party who is lawfully in
possession of the information and who is not in violation of any contractual,
legal or fiduciary obligation to the Company with respect to that information;
or
(d) Information that is or was independently developed by MAL or its affiliates
from information lawfully obtained by MAL or its affiliates from parties
lawfully in possession of
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September 24, 2004
Page 3
such information and who are not in breach of any contractual, legal or
fiduciary obligation to the Company with respect to the information.
The Company has furnished and will continue to furnish or cause to be
furnished to MAL such information as MAL believes appropriate to its assignment
(all information so furnished being the "Information"). The Company recognizes
and confirms that MAL: (a) will use and rely primarily on the Information and on
information available from generally recognized public sources in performing the
services contemplated by this Agreement without having independently verified
the same; (b) does not assume responsibility for the accuracy or completeness of
the Information and such other information; and (c) will not make an appraisal
of any assets or liabilities of the Company or any of their market competitors.
4. Term. This Agreement and the retention of MAL hereunder shall remain in full
force and effect for twelve months from the date hereof and may be terminated by
the Company or MAL at any time, with or without cause, upon 30 days written
notice to that effect to the other party, without further obligation to each
other, except it is agreed that the provisions relating to indemnification,
limitation of liabilities, contribution, settlement, the provisions relating to
the payment of fees and expenses, confidentiality, the status of MAL as an
independent contractor, the limitation on to whom MAL shall owe any duties and
the waiver of the right to trial by jury in this Agreement will survive any such
termination.
5. Independent Contractor. The Company acknowledges and agrees that it is a
sophisticated business enterprise and that MAL has been retained pursuant to
this Agreement to provide services to the Company solely with respect to the
Offering. In such capacity, MAL shall act as an independent contractor, and any
duties of MAL arising out of its engagement pursuant to this Agreement shall be
contractual in nature and shall be owed solely to the Company. Each party
disclaims any intention to impose any fiduciary duty on the either.
6. Indemnification, Contribution, and Limitation of Liability. The Company
agrees to indemnify MAL and its controlling persons, representatives and agents
in accordance with the indemnification provisions set forth in Appendix I, and
agrees to the other provisions of Appendix I, which is incorporated herein by
this reference, regardless of whether the proposed Acquisition Transaction is
consummated.
7. Beneficiaries. This Agreement shall inure to the sole and exclusive benefit
of MAL and the Company and the persons referred to in Appendix I and their
respective successors and representatives. The obligations and liabilities under
this Agreement shall be binding upon MAL and the Company.
8. Amendments. This Agreement may be modified or amended, or its provisions
waived, only in writing signed by the person or persons against whom enforcement
of the modification, amendment or waiver is sought.
9. No Commitment. This Agreement does not and will not constitute any agreement,
commitment or undertaking, express or implied on the part of MAL or any
affiliate to purchase or to sell any securities or to provide any financing and
does not ensure the successful arrangement or completion of a Acquisition
Transaction.
Xx. Xxxxx Xxxxxxxxxxxx
September 24, 2004
Page 4
10. Entire Agreement. This Agreement constitutes the entire Agreement between
the parties and supersedes and cancels any and all prior or contemporaneous
arrangements, understandings and agreements, written or oral, between them
relating to the subject matter hereof.
11. Severability. If any portion of this Agreement shall be held or made
unenforceable or invalid by a statute, rule, regulation, decision of a tribunal
or otherwise, the remainder of this Agreement shall not be affected thereby and
shall remain in full force and effect, and, to the fullest extent, the
provisions of the Agreement shall be severable.
12. Governing Law; Waiver of Trial by Jury
This Agreement, and the rights and obligations of the parties hereto, shall
be governed by and construed in accordance with Delaware law (without regard to
any rules or principles of conflicts of law that might look to any jurisdiction
outside of the State of Delaware). Any dispute arising hereunder shall be
brought before a court in the State of Delaware.
EACH OF THE PARTIES HERETO (ON ITS OWN BEHALF AND, TO THE EXTENT PERMITTED
BY APPLICABLE LAW, ON BEHALF OF ITS STOCKHOLDERS AND INDEMNIFIED PARTIES) WAIVES
ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERACTION (WHETHER
BASED UPON CONTRACT, OR OTHERWISE) RELATED TO OR ARISING OUT OF THE ENGAGEMENT
PURSUANT TO, OR THE PERFORMANCE OF THE SERVICES CONTEMPLATED BY, THIS AGREEMENT.
13. Waiver, Amendment and Modification; Headings
No waiver, amendment or other modification of this Agreement shall be
effective unless signed in writing by each of the parties hereto. The headings
used herein are for ease of reference only and shall not be used to construe the
meaning of this Agreement.
Xx. Xxxxx Xxxxxxxxxxxx
September 24, 2004
Page 5
If the foregoing terms correctly set forth our agreement, please sign and return
to us a duplicate copy of this Agreement. We look forward to working with you
toward the successful conclusion of this engagement and developing a long term
relationship with the Company.
Very truly yours,
MILESTONE ADVISORS, LLC
By: /s/ Xxxxxx X. Xxxx
-------------------------------
Xxxxxx X. Xxxx
Managing Director
Confirmed and accepted as of this
27th day of September, 2004:
FREEDOM FINANCIAL GROUP, INC.
By /s/ Xxxxx Xxxxxxxxxxxx
--------------------------------
Xxxxx Xxxxxxxxxxxx
President & CEO
Xx. Xxxxx Xxxxxxxxxxxx
September 24, 2004
Page 6
APPENDIX I
The Company agrees to indemnify and hold harmless MAL and its
affiliates (as defined in Rule 405 under the Securities Act of 1933, as amended)
and their respective directors, officers, employees, agents and controlling
persons (MAL and each such person being an "Indemnified Party") from and against
all losses, claims, damages and liabilities (or actions, including shareholder
actions, in respect thereof), joint or several, to which such Indemnified Party
may become subject under any applicable federal or state law, or otherwise,
which are related to or result from the performance by MAL of the services
contemplated by or the engagement of MAL pursuant to, this Agreement and will
promptly reimburse any Indemnified Party for all reasonable expenses (including
reasonable counsel fees and expenses) as they are incurred in connection with
the investigation of, preparation for or defense arising from any threatened or
pending claim, whether or not such Indemnified Party is a party and whether or
not such claim, action or proceeding is initiated or brought by the Company. The
Company will not be liable to any Indemnified Party under the foregoing
indemnification and reimbursement provisions, (i) for any settlement by an
Indemnified Party effected without its prior written consent (not to be
unreasonably withheld); or (ii) to the extent that any loss, claim, damage or
liability is found in a final, non-appealable judgment by a court of competent
jurisdiction to have resulted primarily from MAL's willful misconduct or gross
negligence. 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 MAL pursuant to, or the performance by MAL of the services
contemplated by, this Agreement except to the extent that any loss, claim,
damage or liability is found in a final, non-appealable judgment by a court of
competent jurisdiction to have resulted primarily from MAL's willful misconduct
or gross negligence. Notwithstanding the foregoing, the Company shall not be
required by the Agreement to indemnify the Indemnified Party for any loss,
claims, damage or liability which it may sustain as a result of any
misstatements, misrepresentations by MAL or any failure to disclose any facts or
information by MAL in the performance of its services.
Promptly after receipt by an Indemnified Party of notice of any
intention or threat to commence an action, suit or proceeding or notice of the
commencement of any action, suit or proceeding, such Indemnified Party will, if
a claim in respect thereof is to be made against the Company pursuant hereto,
promptly notify the Company in writing of the same. In case any such action is
brought against any Indemnified Party and such Indemnified Party notifies the
Company of the commencement thereof, the Company may elect to assume the defense
thereof, with counsel reasonably satisfactory to such Indemnified Party, and an
Indemnified Party may employ counsel to participate in the defense of any such
action provided, that the employment of such counsel shall be at the Indemnified
Party's own expense, unless (i) the employment of such counsel has been
authorized in writing by the Company, (ii) the Indemnified Party has reasonably
concluded (based upon advice of counsel to the Indemnified Party) that there may
be legal defenses available to it or other Indemnified Parties that are
different from or in addition to those available to the Company, or that a
conflict or potential conflict exists (based upon advice of counsel to the
Indemnified Party) between the Indemnified Party and the Company that makes it
impossible or inadvisable for counsel to the Indemnifying Party to conduct the
defense of both the Company and the Indemnified Party (in which case the Company
will not have the right to direct the defense of such action on behalf of the
Indemnified Party), or (iii) the Company has
Xx. Xxxxx Xxxxxxxxxxxx
September 24, 2004
Page 7
not in fact employed counsel reasonably satisfactory to the Indemnified Party to
assume the defense of such action within a reasonable time after receiving
notice of the action, suit or proceeding, in each of which cases the reasonable
fees, disbursements and other charges of such counsel will be at the expense of
the Company; provided, further, that in no event shall the Company be required
to pay fees and expenses for more than one firm of attorneys representing
Indemnified Parties unless the defense of one Indemnified Party is unique or
separate from that of another Indemnified Party subject to the same claim or
action. Any failure or delay by an Indemnified Party to give the notice referred
to in this paragraph shall not affect such Indemnified Party's right to be
indemnified hereunder, except to the extent that such failure or delay causes
actual harm to the Company, or prejudices its ability to defend such action,
suit or proceeding on behalf of such Indemnified Party.
If the indemnification provided for in this Agreement is for any reason
held unenforceable by an Indemnified Party, the Company agrees to contribute to
the losses, claims, damages and liabilities for which such indemnification is
held unenforceable (i) in such proportion as is appropriate to reflect the
relative benefits to the Company, on the one hand, and MAL on the other hand, of
the transaction contemplated by the Agreement whether or not the transaction is
consummated or, (ii) if (but only if) the allocation provided for in clause (i)
is for any reason unenforceable, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) but also the relative
fault of the Company, on the one hand and MAL, on the other hand, as well as any
other relevant equitable considerations. The Company agrees that for the
purposes of this paragraph the relative benefits to the Company and MAL of the
transaction as contemplated shall be deemed to be in the same proportion that
the total value received or contemplated to be received by the Company or its
shareholders, as the case may be, as a result of or in connection with the
transaction, bear to the fees paid or to be paid to MAL under this Agreement.
Notwithstanding the foregoing, the Company expressly agrees that MAL shall not
be required to contribute any amount in excess of the amount by which fees paid
MAL hereunder (excluding reimbursable expenses), exceeds the amount of any
damages which MAL has otherwise been required to pay.
The Company agrees that without MAL's prior written consent, which
shall not be unreasonably withheld, 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 provisions of this Agreement (in which MAL 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.
In the event that an Indemnified Party is requested or required to
appear as a witness in any action brought by or on behalf of or against the
Company in which such Indemnified Party is not named as a defendant, the Company
agrees to promptly reimburse MAL on a monthly basis for all expenses incurred by
it in connection with such Indemnified Party's appearing and preparing to appear
as such a witness, including, without limitation, the reasonable fees and
disbursements of its legal counsel. In addition to any reimbursed fees, expenses
or costs outlined hereunder, MAL shall also receive from the Company cash
compensation of $2,000.00 per person, per day, plus reasonable out-of-pocket
expenses and costs should MAL be required to provide testimony in any formal or
informal proceeding regarding the Company.
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September 24, 2004
Page 8
If multiple claims are brought with respect to at least one of which
indemnification is permitted under applicable law and provided for under this
Agreement, the Company agrees that any judgment or arbitrate award shall be
conclusively deemed to be based on claims as to which indemnification is
permitted and provided for, except to the extent the judgment or arbitrate award
expressly states that it, or any portion thereof, is based solely on a claim as
to which indemnification is not available.
