EXHIBIT 10.35
XXXXXX XXXXXX
--------------------------------------------------------------------------------
XXXXXX XXXXXX & COMPANY, INC.
0 XXXX XXX XXXX
00000 XXXX XXX XXXXXXX, XXXXX 0000
XXXXXXX, XXXXX 00000
713/840-3600 FAX 713/000-0000
WATS 800/840-2606
June 8, 2004
Xx. Xxxxxxx Xxxxxxxxxxxx
Chairman and Chief Executive Officer
Xxxxx-Xxxxxxxx Corporation
0000 Xxxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Dear Xxxxx:
Xxxxx-Xxxxxxxx Corporation (the "Company") wishes to offer and sell
(the "Placement") common stock (the "Securities") on the terms and conditions
set forth below. The Company desires to retain Xxxxxx Xxxxxx & Company, Inc.
("Xxxxxx Xxxxxx") to act as exclusive placement agent in connection with the
Placement on the terms and conditions set forth below.
The Company hereby appoints Xxxxxx Xxxxxx to act as its exclusive placement
agent in connection with the Placement of Securities and authorizes Xxxxxx
Xxxxxx, on behalf of the Company as its placement agent and not as principal, to
offer the Securities to investors meeting qualifications agreed upon by the
Company and Xxxxxx Xxxxxx. Subject to Xxxxxx Xxxxxx'x satisfactory completion of
its due diligence review of the Company and the approval of Xxxxxx Xxxxxx'x
Commitment Committee, Xxxxxx Xxxxxx hereby accepts such appointment to act as
exclusive placement agent. The Company and Xxxxxx Xxxxxx agree that Securities
will be offered and sold only at prices and on terms that are acceptable to the
Company and that Xxxxxx Xxxxxx makes no representation as to what, if any, price
or on what terms investors will be willing to purchase Securities of the
Company. Xxxxxx Xxxxxx undertakes this engagement on a "best efforts" basis
only, and shall not be obligated to purchase any unsold allotment of Securities
offered by the Company. The Placement of the Securities is to be made directly
by the Company to purchasers of Securities pursuant to a definitive common stock
purchase or other agreement entered into by the purchasers and the Company. The
Company agrees that any definitive purchase agreement shall, among other things
(a) contain customary representations, warranties and covenants on behalf of the
Company, and (b) provide for the delivery by the Company's counsel of customary
opinions.
1. The Company agrees to pay a $50,000 retainer fee upon execution of this
agreement. As compensation for Xxxxxx Xxxxxx'x services hereunder, the
Company agrees to pay to Xxxxxx Xxxxxx, contingent upon the successful
closing of a sale of Securities (the "Contingent Placement Fee"), a
placement fee in cash at each closing equal to 7% of the gross proceeds
delivered to the Company at such closing from the sale of Securities in
the Placement, net of the retainer fee (other than the securities
described in Section 7, thereof).
Xxxxx-Xxxxxxxx Corporation
June 8, 2004
Page 2
If more than one closing is required in connection with the sale of such
Securities, only that portion of the Contingent Placement Fee applicable to each
closing shall be payable at such closing. In addition, if the Placement is
cancelled by the Company for any reason prior to its completion, the Company
will reimburse Xxxxxx Xxxxxx for its reasonable out-of-pocket expenses
(including fees and expenses of counsel) incurred in connection with its acting
as placement agent hereunder, upon delivery to the Company of reasonable
documentation evidencing such expenses. Such out-of-pocket expenses shall not
exceed $30,000 without the prior written consent of the Company, which shall not
be unreasonably withheld.
2. The Company represents and warrants to Xxxxxx Xxxxxx that, except as
disclosed in the Company's filings with the Securities and Exchange
Commission or as set forth in Exhibit A, it has not, directly or
indirectly, made any offers or sales of the Securities or securities of
the same or a similar class as the Securities during the four month
period ending on the date of this letter, and has no current intention
of making an offer or sale of the Securities or securities of the same
or a similar class as the Securities for a period of six months after
completion of this private placement, except for the offering of the
Securities through Xxxxxx Xxxxxx pursuant hereto. As used herein, the
terms "offer" and "sale" have the meanings specified in Section 2(3) of
the Securities Act of 1933, as amended (the "Act").
3. The Company and Xxxxxx Xxxxxx agree that:
(a) The Company will not, directly or indirectly, make any offer or
sale of any of the Securities or any securities of the same or
similar class as the Securities, the result of which would cause
the offer and sale of the Securities to fail to be entitled to the
exemption from registration afforded by Section 4(2) of the Act.
(b) The Company will furnish Xxxxxx Xxxxxx with such information (the
"Information"), including financial statements, with respect to
the business, operations, assets and liabilities of the Company as
Xxxxxx Xxxxxx may reasonably request in order to permit Xxxxxx
Xxxxxx to conduct its due diligence review of the Company and
assist the Company in preparing a private placement memorandum
(the "Private Placement Memorandum") for use in connection with
the offering of the Securities. Xxxxxx Xxxxxx may rely upon the
accuracy and completeness of the Information without independent
verification.
(c) The Company will be solely responsible for the contents of the
Private Placement Memorandum and any and all other written or oral
communications provided to any actual or prospective purchaser of
the Securities with the approval of the Company. The Company
represents and warrants that the Private Placement Memorandum and
Xxxxx-Xxxxxxxx Corporation
June 8, 2004
Page 3
such other communications will not, as of the date of the offer or
sale of the Securities, contain any untrue statement of a material
fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not
misleading. The Company authorizes Xxxxxx Xxxxxx to provide the
Private Placement Memorandum and such other communications to
prospective purchasers of the Securities, provided that such
prospective purchasers execute and deliver to the Company a
Confidentiality and Non-Disclosure Agreement meeting the
requirements of Regulation FD and otherwise on terms reasonably
acceptable to Xxxxxx Xxxxxx and the Company.
(d) The Company will comply with all requirements of Regulation D
promulgated under the Act. Without limitation, the Company will:
(1) not offer or sell the Securities by means of any form of
general solicitation or general advertising;
(2) not offer or sell the Securities to any person who it does
not have a reasonable basis to believe is an "accredited
investor" (as defined in Rule 501 under the Act);
(3) exercise reasonable care to assure that the purchasers of the
Securities are not underwriters within the meaning of Section
2(11) of the Act and, without limiting the foregoing, that
such purchases will comply with Rule 502(d) under the Act;
and
(4) file a Form D with the Securities and Exchange Commission as
contemplated by Rule 503 under the Act.
(e) Xxxxxx Xxxxxx will comply with all applicable requirements of
Regulation D promulgated under the Act. Without limitation, Xxxxxx
Xxxxxx will:
(1) not offer the Securities by means of any form of general
solicitation or general advertising;
(2) not offer the Securities to any person who it does not have a
reasonable basis to believe is an "accredited investor" (as
defined in Rule 501 under the Act); and
(3) exercise reasonable care to assure that the purchasers of the
Securities are not underwriters within the meaning of Section
2(11) of the Act and, without limiting the foregoing, that
such purchases will comply with Rule 502(d) under the Act.
Xxxxx-Xxxxxxxx Corporation
June 8, 2004
Page 4
(f) The Company agrees to cause a registration statement to be filed
with the United States Securities Exchange Commission to qualify
the Securities for offer and sale within 60 days after completion
of the offering and use its reasonable efforts to cause the
registration statement to become effective within 120 days after
completion of the offering.
(g) The Company agrees to take such action (if any) as Xxxxxx Xxxxxx
may reasonably request to qualify the Securities for offer and
sale under registration or qualification exemptions of the
securities laws of such states as Xxxxxx Xxxxxx may specify. The
Company agrees that it will make any filings or take other actions
required under applicable state securities laws to permit the sale
of the Securities pursuant to registration or qualification
exemptions.
(h) In order to allow proper coordination of the proposed Placement,
during the term of this engagement, the Company will promptly
notify Xxxxxx Xxxxxx of any potential purchasers known to the
Company to be interested in purchasing any Securities. In
addition, the Company will keep Xxxxxx Xxxxxx fully and promptly
informed of the status of any discussions or negotiations between
the Company and any potential purchaser of Securities.
(i) The Company agrees to use its reasonable efforts to list its
common stock on the American Stock Exchange within 120 days after
completion of the offering.
4. Xxxxxx Xxxxxx will not have any obligations in connection with the
private placement of the Securities contemplated by this Agreement
except as expressly provided in this Agreement. Xxxxxx Xxxxxx will use
its reasonable "best efforts" in connection with the engagement
hereunder; provided, however, that this Agreement does not imply any
obligation on the part of Xxxxxx Xxxxxx to provide such equity capital
to the Company, and in no event shall Xxxxxx Xxxxxx be obligated to
purchase the Securities for its own account.
5. The Company shall indemnify Xxxxxx Xxxxxx in the manner and to the
extent provided in Appendix A attached hereto, which Appendix A is
incorporated herein by reference.
6. The term of Xxxxxx Xxxxxx'x appointment and authorization hereunder
shall extend from the date hereof through the earlier of December 31,
2004, and the date upon which a Placement is completed, or such other
date as may be mutually agreed by the Company and Xxxxxx Xxxxxx. The
provisions of Sections 2, 4, 5, 7, 8, 9, 11, 12 and this Section 6
shall survive any termination of this Agreement.
Xxxxx-Xxxxxxxx Corporation
June 8, 2004
Page 5
7. Subject to the provisions of Sections 3(a) and 3(d), the Company has
informed Xxxxxx Xxxxxx that up to 20% of the securities offered may be
directly sold by the Company. Potential purchasers will be disclosed to
Xxxxxx Xxxxxx prior to the commencement of the placement and investor
representation letters will be provided prior to closing. Xxxxxx Xxxxxx
will not earn any fee for the placement of the Company directed sales.
8. All opinions and advice provided to the Company in connection with this
engagement are intended solely for the benefit and use of the Company
in connection with the matters described in this Agreement, and
accordingly such advice shall not be relied upon by any person or
entity other than the Company. The Company will not make any other use
of any such opinions or advice. In addition, none of (i) the name of
Xxxxxx Xxxxxx, (ii) any advice rendered by Xxxxxx Xxxxxx to the
Company, or (iii) any communication from Xxxxxx Xxxxxx pursuant to this
Agreement will be quoted or referred to in any report, document,
release or other communication prepared, issued or transmitted by the
Company, or any person controlled by the Company, without Xxxxxx
Xxxxxx'x prior written consent, which consent will not be unreasonably
withheld. Notwithstanding the foregoing, the Company shall be entitled
to disclose the terms of this Agreement in an Information Statement to
be filed with the Securities and Exchange Commission and distributed to
stockholders of the Company in connection with the approval by the
stockholders of the Company of the Offering, as required by Regulation
14C of the Securities and Exchange Commission.
9. The Company will, at the closing, furnish Xxxxxx Xxxxxx with the same
favorable opinion of the Company's counsel as is furnished to the
investors, together with a letter from such counsel that Xxxxxx Xxxxxx
may rely on such opinion as if directed to Xxxxxx Xxxxxx, and Xxxxxx
Xxxxxx shall be deemed to be a third party beneficiary of such opinion.
Such opinion will include, among other things, legal assurances
regarding compliance with applicable corporate and securities laws and
the availability of exemption from registration for the offer and sale
of the Securities in the Placement. Such counsel also shall furnish
Xxxxxx Xxxxxx a letter stating that on the basis of information
developed during the course of such counsel's representation of the
Company, nothing has come to such counsel's attention giving such
counsel reason to believe that the Private Placement Memorandum, or any
amendment or supplement thereto made prior to the closing, as of its
date and as of the closing, contained or contains any untrue statement
of a material fact or omitted or omits to state a material fact
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading (provided that
such counsel need express no belief regarding the financial statements
and related schedules and other financial or statistical data contained
in the Private Placement Memorandum, or any amendment or supplement
thereto). In addition, at closing, the Company will provide Xxxxxx
Xxxxxx with a certificate which provides that Xxxxxx Xxxxxx may rely on
Xxxxx-Xxxxxxxx Corporation
June 8, 2004
Page 6
the representations and warranties of the Company provided to the
purchasers and the same certificates of the officers of the Company as
are furnished to such purchasers and such other certification, opinions
and documents as we or our counsel may deem reasonably appropriate, in
form and substance reasonably satisfactory to us and our counsel.
10. In the event of consummation of any transaction, Xxxxxx Xxxxxx 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 Xxxxxx Xxxxxx will submit a copy
of any such advertisements to the Company for its approval, which
approval shall not be unreasonably withheld.
11. The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provisions
of this Agreement, which shall remain in full force and effect.
12. This Agreement may not be amended or modified except in writing signed
by each of the parties hereto and shall be governed by and construed in
accordance with the laws of the State of Tennessee. Each of the parties
hereto expressly waives all right to trial by jury in any action or
proceeding arising out of this Agreement. This Agreement incorporates
the entire understanding of the parties with respect to the subject
matter hereof and supersedes all previous agreements should they exist
with respect thereto and shall be binding upon and inure to the benefit
of the Company, Xxxxxx Xxxxxx, and the other Indemnified Persons and
their respective successors, assigns, heirs and personal
representatives.
Xxxxx-Xxxxxxxx Corporation
June 8, 2004
Page 7
If the foregoing correctly sets forth the understanding and agreement
between Xxxxxx Xxxxxx and the Company, please so indicate in the space provided
below, whereupon this letter shall constitute a binding agreement as of the date
first above written.
Very truly yours,
XXXXXX XXXXXX & COMPANY, INC.
By: /s/ R. Xxxxx Xxxxxx
---------------------------------------
Name: R. Xxxxx Xxxxxxx
---------------------------------------
Title: First Vice President
---------------------------------------
Agreed and Accepted:
XXXXX-XXXXXXXX CORPORATION
By: /s/ Xxxxxxx X. Xxxxxxxxxxxx
---------------------------------------
Name: Xxxxxxx X. Xxxxxxxxxxxx
---------------------------------------
Title: Chairman and CEO
---------------------------------------
Xxxxx-Xxxxxxxx Corporation
June 8, 2004
Page 8
APPENDIX A
INDEMNIFICATION
---------------
1. If, in connection with or arising out of the services or matters that
are the subject of this letter agreement ("Agreement"), Xxxxxx Xxxxxx
or any controlling person, affiliate, director, officer, employee or
agent of Xxxxxx Xxxxxx (Xxxxxx Xxxxxx and each such other person
referred to as an "Indemnified Person") becomes involved in any
capacity in any lawsuit, claim or other proceeding for which indemnity
may be sought pursuant to Section 5 of this Agreement, the Company
shall immediately reimburse such Indemnified Person for any and all
legal or other expenses reasonably incurred by such Indemnified Person
in connection with investigating, preparing to defend or defending such
lawsuit, claim or other proceeding. The Company also agrees to
indemnify each Indemnified Person from, and hold it harmless against,
any and all losses, claims, damages, liabilities or expenses to which
such Indemnified Person may become subject (i) arising out of or based
upon any untrue statement or alleged untrue statement of a material
fact contained in, or incorporated by reference in, the Private
Placement Memorandum or any other written or oral communication
provided to any actual or prospective purchaser of the Securities or
arising out of or based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances
under which they were made, not misleading or (ii) arising in any
manner out of or in connection with the services or matters which are
the subject of this Agreement, including, without limitation, the offer
and sale of the Securities; provided, however, that the Company shall
not be liable in respect of any loss, claim, damage, liability or
expense to the extent that it is finally judicially determined by a
court of competent jurisdiction that such loss, claim, damage or
liability resulted from the gross negligence or willful misconduct of
Xxxxxx Xxxxxx in the performance of its services hereunder or Xxxxxx
Xxxxxx'x breach of this Agreement.
2. Promptly after receipt by an Indemnified Person of notice of its
involvement in any claim, action, suit, proceeding or investigation (a
"Claim"), such Indemnified Person shall, if a Claim in respect thereof
is to be made against the Company for indemnification, notify the
Company in writing of such involvement. Failure by such Indemnified
Person to so notify the Company shall not relieve the Company from its
obligation to indemnify any Indemnified Parties under this Agreement,
except to the extent that such failure to notify results in the
forfeiture by the Company of substantive rights or defenses. If an
Indemnified Person seeks indemnification hereunder with respect to any
Claim brought by a third party, the Company shall be entitled to assume
the defense of any such Claim with counsel reasonably satisfactory to
such Indemnified Person. Upon assumption by the Company of the defense
of any such Claim, such Indemnified Person shall have the right to
participate in the defense of such Claim and to retain its own counsel
but the Company shall not be liable for any legal fees or expenses
subsequently incurred by such Indemnified Person in connection with the
defense thereof, unless (i) the Company has agreed in writing to pay
such fees and expenses, (ii) the Company shall have failed to employ
counsel reasonably satisfactory to such Indemnified Person in a timely
manner or (iii) such Indemnified Person shall have determined and can
Xxxxx-Xxxxxxxx Corporation
June 8, 2004
Page 9
reasonably demonstrate to the Company that representation of such
Indemnified Party by counsel provided by the Company pursuant to the
foregoing would be inappropriate due to actual or potential conflicting
interests between the Company and such Indemnified Person, including,
without limitation, situations in which there are one or more legal
defenses available to such Indemnified Person that are different from
or additional to those available to the Company. The Company shall not
be liable for any settlement of any Claim effected without its written
consent (which consent shall not be unreasonably withheld or delayed).
In no event shall the Company be responsible for the payment of the
fees and expenses of more than one counsel on behalf of all Indemnified
Persons other than local counsel.
3. The Company agrees that the indemnification and reimbursement
commitments set forth in this Section 5: (i) shall apply whether or not
any Indemnified Person is a formal party to any such lawsuit, claim or
other proceeding and (ii) are in addition to any liability that the
Company may otherwise have to any Indemnified Person. The Company
agrees that, unless a final judicial determination is made to the
effect specified in the preceding paragraph, any settlement of a
lawsuit, claim or other proceeding against the Company arising out of
the transactions contemplated by this Agreement which is entered into
by the Company shall include a release from the party bringing such
lawsuit, claim or other proceeding of each Indemnified Person, which
release shall be reasonably satisfactory to Xxxxxx Xxxxxx. The Company
further agrees that no Indemnified Person shall have any liability
(whether direct or indirect, in contract, tort or otherwise) to the
Company in connection with Xxxxxx Xxxxxx'x engagement hereunder, except
for such losses, claims, damages or liabilities incurred by the Company
that are finally judicially determined by a court of competent
jurisdiction to have resulted from the gross negligence or willful
misconduct of such Indemnified Person or Xxxxxx Xxxxxx'x breach of this
Agreement.
4. The Company and Xxxxxx Xxxxxx agree that if indemnification or
reimbursement sought pursuant to this Appendix A is finally judicially
determined by a court of competent jurisdiction to be unavailable for
reasons other than those set forth in the proviso in the last sentence
of Paragraph 1 of this Appendix A, then, whether or not Xxxxxx Xxxxxx
is the Indemnified Person, the Company and Xxxxxx Xxxxxx shall
contribute to the losses, claims, damages, liabilities and expenses of
Xxxxxx Xxxxxx for which such indemnification or reimbursement is sought
but held unavailable (i) in such proportion as is appropriate to
reflect the relative benefits to the Company, on one hand, and Xxxxxx
Xxxxxx on the other, in connection with the transactions to which such
indemnification or reimbursement relates, or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in
such proportion as appropriate to reflect not only the relative
benefits referred to in clause (i) but also the relative faults of the
Company, on the one hand, and Xxxxxx Xxxxxx on the other, as well as
any other equitable considerations; provided, however, that in no event
shall the aggregate amount of loss, damage, expense and damage suffered
by Xxxxxx Xxxxxx exceed the amount of the cash portion of the
Contingent Placement Fee actually received by Xxxxxx Xxxxxx hereunder.
Initial ____
Xxxxx-Xxxxxxxx Corporation
June 8, 2004
Page 10
EXHIBIT A
OFFERS AND SALES OF SECURITIES
The Company has outstanding certain options and warrants issued prior to the
date hereof, which are described in the Company's filings and which may be
deemed to be outstanding offers to sell securities. During June 2004, a warrant
to exercise 15,000 shares of Common Stock was exercised.
