Financial Advisory Agreement Garden State Securities Inc.
Exhibit
99.1
Garden
State Securities Inc.
October
29, 2010
0000
XXXXXX XXXX
XXXXX
XXXXX, XX
ATTN:
Xxxxx X. Xxxxx, Chief Executive Officer
Re:
Advisory Services
Dear Xx.
Xxxxx:
This letter confirms the engagement of
Garden State Securities Inc., a FINRA member firm (“GSS”), as a non-exclusive
financial advisor to Document Capture Technologies, Inc. (the “Company”) for a
period of 12 months commencing upon the date of your acceptance of this
letter. In this regard, the parties agree to the following terms and
conditions:
1. Engagement. The
Company hereby engages and retains GSS as a non-exclusive financial advisor for
and on behalf of the Company to perform the Services as defined in Section
2. GSS hereby accepts this engagement on the terms and conditions set
forth in this Agreement.
2. Services. In
connection with its engagement pursuant to this Agreement, GSS agrees to perform
the following services for the Company:
A. Advisory Services. As
requested from time to time by the Company, GSS shall provide financial advisory
services to the Company pertaining to the Company’s business
affairs. Without limiting the foregoing, GSS will assist the Company
in developing, studying and evaluating a financing plan, strategic and financial
alternatives, and merger and acquisition proposals and will assist in
negotiations and discussions pertaining thereto. Additionally, GSS will assist
the Company in preparing an offering document or presentation materials
describing the Company, its operations, its historical performance and future
prospects.
B. Business
Combinations. GSS will use its best efforts to coordinate the
introduction of the Company to one or more individuals, firms or other entities
(the “Candidates”) that may have an interest in pursuing some form of Business
Combination with the Company and in analyzing, structuring, negotiating and
effecting such a Business Combination. As used in this letter, the
term “Business Combination” means (i) any merger, consolidation, reorganization
or other business combination pursuant to which any portion of the business of
the Company is combined with that of another entity, including without
limitation any joint venture, licensing agreement, or product sale or marketing
distribution agreement or (ii) the acquisition, directly or indirectly, of
beneficial ownership of more than 50% of any class of capital stock of the
Company or substantially all of the assets of the Company. Nothing contained
herein shall be deemed or construed as an agreement by GSS to issue any
“fairness opinion” with respect to a Business Combination. In the event that the
Company desires GSS to issue a fairness opinion, the parties shall
negotiate the terms of a separate agreement with respect
thereto.
C. GSS
agrees to use its best efforts to make itself available to the Company’s
officers, at such mutually agreed upon place and time during normal business
hours for reasonable periods of time for the purpose of advising and assisting
the Company in preparing reports, summaries, corporate and/or transaction
profiles, due diligence packages and/or other material and documentation as
shall be necessary, in the reasonable opinion of GSS. Such
availability will be subject to reasonable advance notice and mutually
convenient scheduling. In addition, GSS shall make its Investment
Banking personnel available for telephone conferences with the Company’s
principal financial sales and/or operating officers during normal business hours
upon reasonable advance notice and mutually agreed upon dates and times to
assist with, and evaluate proposals.
3. Compensation. As
compensation for the services rendered by GSS to the Company pursuant to this
Agreement and in addition to the expense allowance set forth in Section 4
(“Expenses”) below, the Company shall pay to GSS as set forth
below:
Advisory
Services: Upon execution of this Agreement, the Company shall
pay to GSS $30,000.00 and the Company shall pay to GSS $7,500.00 each month from
the first day of the 4th month through the 12th month
of the execution of this Agreement. Additionally, upon the execution
of this Agreement, the Company shall issue 425,000 shares of restricted common
stock (“Initial Advisory Stock”) on the date hereof. Upon execution
of this Agreement the Company will deliver to GSS the Initial Advisory Stock.
The Initial Advisory Stock shall immediately vest in connection with GSS’s
performance of their duties hereunder, except as otherwise set forth in Section
10, below. On the 1st day of
each of the 4th month
through the 12th month
from the execution of this Agreement, the Company will deliver to GSS an
additional 47,223 shares of restricted common stock (“Additional Advisory
Stock”), which shall vest upon issuance thereof. The Company shall deliver to
GSS and the Company’s transfer agent, legal opinion letters for GSS and for each
designee, at the time that the Initial Advisory Stock and the Additional
Advisory Stock is eligible to be sold pursuant to SEC Rule 144, upon GSS’s
request. The Initial Advisory Stock issued prior to
January 1, 2011 will vest on January 1, 2011 upon completion of approximately ¼
of the agreement, with the Additional Advisory Stock issued subsequent to
January 1, 2011 vesting immediately.
4. Expenses. In
addition to the compensation in Section 4, “Compensation” above, The Company
agrees to reimburse GSS, upon request made from time to time, for its reasonable
out-of-pocket expenses incurred by GSS in connection with its activities under
this Agreement; provided, however, GSS shall not incur any expenses in the
aggregate in excess of $500 without the prior written consent of the
Company. These expenses include but are not limited to long distance
phone charges, airfare, hotel lodging and meals, transportation, outside
consultants, printing, and overnight express mail incurred by GSS in fulfilling
its duties under this Agreement.
5. Right of First
Refusal: In the event that this Agreement remains in effect
after 90 days from the date hereof, GSS shall have an irrevocable right of
first refusal for a period of 12 months from the date thereof, to purchase for
its account or to sell for the account of the Company, or any subsidiary of or
successor to the Company, that the Company or any such subsidiary or successor
may seek to sell through an underwriter, placement agent or broker-dealer
whether pursuant to registration under the Act or otherwise, or any securities
offered directly by the Company. The Company, any such subsidiary or successor
will consult with GSS with regard to any such offering and will offer GSS the
exclusive opportunity to purchase or sell any such securities on terms not more
favorable to the Company, any such subsidiary or successor than it or they can
secure elsewhere as presented by a bona fide written offer from a registered
broker dealer firm or investor. If GSS fails to accept such offer within
15 business days after the mailing of a notice containing all of the material
terms of such offer (including a copy of an executed term sheet or letter of
intent) by overnight courier sent to GSS, then GSS shall have no further claim
or right, with the exception of any other rights detailed in this Agreement,
with respect to the financing proposal contained in such notice. If, however,
the terms of such proposal are subsequently modified in any material respect,
the preferential right referred to herein shall apply to such modified proposal
as if the original proposal had not been made. GSS's failure to exercise
its preferential right with respect to any particular proposal shall void any
future of its preferential rights relative to future proposals. The
Company represents and warrants that there are presently no other rights of
first refusal for future financing now outstanding. In the event that the
Company requests that GSS waive the provisions of this Section 4, GSS shall
agree to such waiver provided that the Company pays GSS a fee of $250,000 as a
liquidated damages fee. This paragraph shall survive any termination
of this Letter Agreement provided this Right of First Refusal is then
effective.
6. Confidentiality and Non-
Disclosure. The Company is prepared to make available to GSS
certain information concerning the business, financial condition, operations,
assets and liabilities of the Company in connection with the performance of its
duties hereunder. As a condition to such information being furnished
to GSS and its employees or agents, GSS agrees to treat any information
concerning the Company (whether prepared by the Company, its advisors, investors
or otherwise and irrespective of the form of communication) which is furnished
to GSS or to its employees or agents now or in the future by or on behalf of the
Company (herein collectively referred to as the “Evaluation Material”)
in accordance with the provisions of this Agreement, and to take or abstain from
taking certain other actions hereinafter set forth. The term “Evaluation Material”
also shall be deemed to include all notes, analyses, compilations, studies,
interpretations or other documents prepared by GSS, its employees or agents
which contain, reflect or are based upon, in whole or in part, the information
furnished to GSS, its employees or agents pursuant hereto. The term
“Evaluation
Material” does not include information which (i) is or becomes generally
available to the public other than as a result of a disclosure by GSS, its
employees or agents, or (ii) becomes available to GSS on a non-confidential
basis from a source other than the Company (including without limitation any of
the Company’s directors, officers, employees or agents), or any of its
attorneys, accountants, investors, consultants, bankers and financial advisors
(collectively, the “Representatives”),
provided that such source is not bound by a confidentiality agreement with or
other contractual, legal or fiduciary obligation of confidentiality to the
Company or any other party with respect to such information.
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GSS hereby agrees that GSS, its
employees and agents shall use the Evaluation Material solely for the purposes
contemplated by this Agreement, that the Evaluation Material will be kept
confidential and that GSS, its employees and agents will not disclose any of the
Evaluation Material in any manner whatsoever; provided, however, that GSS may
make any disclosure of such information to which the Company gives its prior
written consent.
However, the Company will not provide
GSS or any GSS affiliate with any material non-public information without prior
written notice in which GSS will only accept receipt of such material non-public
information after the signing of a separate non-disclosure agreement between the
Company and GSS.
7. Indemnification. The
Company agrees to indemnify GSS and its affiliates and their respective
directors, officers, employees, agents and controlling persons (each such person
being an “Indemnified Party”) from and against any and all losses, claims,
damages and liabilities, joint or several, related to or arising out of any
Business Combination, or the engagement of GSS pursuant to, and the performance
by GSS of the services contemplated by, this Agreement and will reimburse any
Indemnified party for all reasonable expenses (including fees and costs of
counsel) as they are incurred in connection with the investigation of,
preparation for or defense of any pending or threatened claim or any action or
proceeding arising therefrom, 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. If the indemnification of an Indemnified
Party provided for in this Agreement is for any reason held unenforceable, the
Company agrees to contribute to the losses, claims, damages and liabilities for
which such indemnification is held unenforceable is such proportion as is
appropriate to reflect the relative benefits to the Company, on the one hand,
and GSS, on the other hand; provided, however, that in no event shall the
Indemnified Parties be required to contribute an aggregate amount in excess of
the aggregate fees actually paid to GSS under this Agreement (which fees shall
include but not be limited to the aggregate proceeds generated by the sale of
any common stock issued to GSS or its designees pursuant to this
Agreement). The Company agrees that 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 GSS 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.
8. Independent
Contractor. The Company acknowledges that GSS has been
retained to act solely as a financial advisor to the Company. In such
capacity, GSS shall act as an independent contractor, and any duties of GSS
arising out of its engagement pursuant to this Agreement shall be owed solely to
the Company. GSS shall be responsible for the payment of all federal,
state and local taxes which may be payable in connection with the receipt of
compensation hereunder.
9. Governing
Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York. Each of GSS and
the Company (a) agrees that any legal suit, action or proceeding arising out of
or relating to this Agreement shall be instituted exclusively in New York State
Supreme Court, County of New York, or in the United States District Court for
the Southern District of New York, (b) waives any objection which the Company
may have now or hereafter to the venue of any such suit, action or proceeding,
and (c) irrevocably consents to the jurisdiction of the foregoing named courts
in any such suit, action or procedure. Each of the Company and GSS further
agrees to accept and acknowledge service of any and all process which may be
served in any suit, action or proceeding in the foregoing courts, and agrees
that service of process upon the Company or GSS mailed by certified mail to the
address of the recipient otherwise appearing in this Agreement shall be deemed
in every respect effective service of process upon the Company in any such suit,
action or proceeding. In the event of litigation between the parties
arising hereunder, the prevailing party shall be entitled to costs and
reasonable attorney's fees.
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10. Term and
Termination. This Agreement shall be effective upon its
execution and shall remain in effect for 12 months from the date of acceptance
by the Company. However, the Company or GSS may terminate GSS’s
engagement and responsibilities hereunder with a 20-day advance written notice
at any time prior to the date that is 90 days from the date of the execution of
this Agreement. However, except as otherwise set forth herein, no
termination of this Agreement shall in any way effect the right of GSS to
receive the vested Initial Advisory Stock for the services rendered hereunder,
especially the fees detailed in Section 3 of this Agreement. In the
event that GSS terminates this Agreement prior to the date that is 90 days from
the date hereof, GSS shall immediately return to the Company for cancellation a
pro rata number of shares of Initial Advisory Stock. Such number of
shares shall be determined by multiplying 425,000 by a fraction the numerator of
which shall be the number of days equal to 90 minus the number of days the
Agreement was in effect prior to GSS’s termination and the denominator of which
shall be 90. In addition, Section 5, “Right of First Refusal”,
Section 7, “Indemnification,” Section 8, “Independent Contractor,” and Section
9, “Governing Law” shall survive any termination of this Agreement.
11. Entire
Agreement. This
Agreement contains the entire Agreement and understanding between the parties
with respect to its subject matter and supersedes all prior discussion,
agreements and understandings between them with respect thereto. This
Agreement may not be modified except in a writing signed by the
parties.
12. Assignment. Neither
this Agreement nor the rights of either party hereunder shall be assigned by
either party without the prior written consent of the other party.
13. Counterparts. This
Agreement may be executed in one or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
14. No Fiduciary
Relationship. The Company acknowledges and agrees that: (i) this
Agreement is an arm’s-length commercial transaction between the Company
and GSS; (ii) in connection therewith and with the process leading
to any subsequent transaction as referred to hereunder, including any
offering of securities of the Company, GSS is not acting as a fiduciary of
the Company; (iii) GSS has not assumed any fiduciary responsibility in
favor of the Company or any subscriber or investor with respect to any
securities offering contemplated hereby or the process leading thereto,
including any negotiation related to the pricing of any securities; and (iv) the
Company has consulted its own legal and financial advisors to the extent it has
deemed appropriate in connection with this Agreement.
15. Press Releases/Public
Announcements. Neither party shall issue any press release or public
announcement of this Agreement or the terms hereof without the prior consent of
the other party; provided, however, the Company may make filings under
applicable federal and state securities laws as required under applicable law
but shall provide GSS with a reasonable opportunity to review and comment upon
any proposed filing.
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Sincerely,
Garden State Securities Inc.
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By:
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/s/ Xxxxxx Xxxxxxxxxx | |
| Name: | Xxxxxx Xxxxxxxxxx | ||
| Title: | Director of Corporate Finance | ||
Agreed
and
Accepted:
Date:
October 29, 2010
By: /s/ Xxxxx X.
Xxxxx
Name:
Xxxxx X. Xxxxx
Title:
CEO
