CONSULTANT Investments LLP
00 Xxxxxx Xxxx
Xxxxxxxxx, XX 00000
January 31, 2005
Xxxx Xxxxxx and Bondholders
Telediscount Communications, Inc.
0000 Xxxxxxxxxx Xxx
Xxxxx Xxxx, XX 00000
Dear Shareholders:
This letter confirms the terms upon which Telediscount Communications, Inc., a
New York Corporation (the "Company") engages Xxxxxxx Xxxxxxx (the "Consultant")
to act as a consultant in connection with taking the Company "public" through a
reverse merger or any other means and giving the Company access to at least $5
million in capital.
1. Scope of engagement.
The Company hereby engages Consultant as its exclusive agent in the placement of
securities of the Company or any of its affiliates in one or more related
transactions to one or more investors in the form of equity, debt, or
convertible instruments, equity line, or any other securities and instrument.
2. Offering Process.
In connection with the engagement:
o Consultant will familiarize itself to the extent it deems
appropriate with the business, operations, financial condition and
prospects of the Company;
o The Company, with Consultant's assistance, will prepare a
Confidential Offering Memorandum (the "Confidential Memorandum")
which will contain a description of the Company, their businesses,
assets, prospects and management; the terms and conditions of the
Private Placements and of the securities offered; and certain
financial information. If necessary, the Company will update the
Confidential Memorandum prior to completion of the Private
Placements;
o CONSULTANT will identify possible investors, which might have an
interest in receiving the Confidential Memorandum and evaluating
participation in the reverse merger and in the raising of capital.
o CONSULTANT will contact one or more of such possible investors and
distribute the Confidential Memorandum;
o CONSULTANT will assist the Company in evaluating proposals received
from possible investors;
o CONSULTANT will assist the Company and its counsel in negotiations
relating to raising capital; and
3. Company Responsibilities, Representations and Warranties.
In connection with the reverse merger and fund raising:
o The Company agrees to cooperate with CONSULTANT and will furnish to
CONSULTANT all information and data concerning the Company (the
"Information") which CONSULTANT reasonably deems appropriate for
purposes of the Confidential Memorandum, and will provide CONSULTANT
access to its officers, directors, employees and advisors.
o The Company represents and warrants to CONSULTANT that all
Information included or incorporated by reference in the
Confidential Memorandum or otherwise made available to CONSULTANT by
the Company to be communicated to possible investors in connection
with the Private Placement: (a) will be complete and correct and
does not and will not knowingly contain any untrue statement of a
material fact or omit to state a material fact necessary in order to
make the statements made, in light of the circumstances under which
they were made, not misleading; and (b) any projected financial
information or other forward-looking information which the Company
provides to CONSULTANT will be made by the Company in good faith,
based on management's best estimates at the time and based on facts
and assumptions which the Company believes are reasonable;
o The Company agrees to promptly notify CONSULTANT if the Company
believes that any Information that was previously provided to
CONSULTANT has become materially misleading; and
o The Company acknowledges and agrees that, in rendering its services
hereunder, CONSULTANT will be using and relying on the Information
(and information available from public sources and other sources
deemed reliable by CONSULTANT) without independent investigation or
verification thereof or independent appraisal or evaluation of the
Company or its business or assets, or any other party to the
transaction. CONSULTANT does not assume responsibility for the
accuracy or completeness of the Information, the Confidential
Memorandum or any other information regarding the Company. The
references in this Section to the Company will, when appropriate, be
deemed also to include its subsidiaries or other affiliates.
o Any advice rendered by CONSULTANT during the Private Placement
process are intended solely for the benefit and confidential use of
the Board of Directors and will not be reproduced, summarized,
described or referred to or given to any other person for any
purpose without CONSULTANT's prior written consent.
o The Company represents to CONSULTANT that the Company will not
unreasonably withhold approval, reject the transaction or reduce the
amount of funding.
4. Fees.
a. Placement Fee. Upon the consummation of taking the Company "public"
and finding the Company a total of $5 million in capital which can
be in part and finalized with the deposit of at least $5 million or
the signing of documents providing a line of credit in any form of
debt or equity financing to at least $5 million in capital, the
Company will pay CONSULTANT a fee (the "Consulting Fee") equal to
10.0% of the total shares outstanding, on a fully diluted basis, as
of the date of the later of the two events: (1) the Company starts
trading on the Over-The-Counter Bulletin Board, NASDAQ Small Cap
Market or Pink Sheets, or (2) the deposit of at least $5 million in
capital from a secondary offering or, (3) the signing of documents
for access, via a line of credit, to at least $5 million in capital.
This date will be called "Transaction Date".
b. Registration. The Company should register the shares with the SEC
within one year of the Transaction Date or at the time that the
current shareholders of the Company register their shares, whichever
is earliest. All costs of such registration will be incurred by the
Company.
5. Expenses. The Company will reimburse CONSULTANT for all out-of-pocket
expenses including fees and expenses for counsel reasonably incurred by it
in connection with its engagement hereunder, whether or not the
transaction is consummated, up to US$1,000. It will be the obligation of
the Company to create any legal documentation relating to the contemplated
financing, which will be subject to review by CONSULTANT counsel. Any
Expenses in excess of US$200.00 will be submitted to the Company for
pre-approval, which shall not be unreasonable withheld. Such reimbursement
will be payable promptly upon submission by CONSULTANT of statements to
the Company.
6. Indemnification. The Company will indemnity CONSULTANT of any liabilities
related to this engagement, providing among other things for the
indemnification of CONSULTANT by the Company in connection with Losses and
Expenses in connection with CONSULTANT's engagement hereunder. The Company
will cover all legal expenses incurred by CONSULTANT in protecting itself
from legal challenges related to this engagement.
7. Termination. CONSULTANT's engagement hereunder may be terminated by either
the Company or CONSULTANT at any time, with or without cause, upon written
notice to the other party; provided, however, that (a) no such termination
will affect CONSULTANT's right to expense reimbursement under Section 5,
the payment of any accrued and unpaid fees pursuant to Section 4 or the
indemnification contemplated by Section 6 and (b) if the Company, directly
or indirectly, consummates an issuance of its securities within twelve
months following such termination with a CONSULTANT-Identified Party, then
CONSULTANT will be entitled to the full amount of the fees and warrants
contemplated by Sections 4.a. and 4.b.
8. Governing Law; Jurisdiction; Waiver of Jury Trial. This letter agreement
will be governed by the laws of the State of New York. The Company and
CONSULTANT irrevocably submit to the jurisdiction of any court of the
State of New York for the purpose of any suit, action or other proceeding
arising out of this letter agreement or the Indemnity Agreement, or any of
the agreements or transactions contemplated hereby, which is brought by or
against the Company. Each of the Company (and, to the extent permitted by
law, on behalf of the Company's equity holders and creditors) and
CONSULTANT hereby knowingly, voluntarily and irrevocably waives any right
it may have to a trial by jury in respect of any claim based upon, arising
out of or in connection with the Indemnity Agreement, this letter
agreement and the transactions contemplated hereby.
9. No Rights in Equityholders, Creditors. This letter agreement does not
create, and will not be construed as creating, rights enforceable by any
person or entity not a party hereto, except those entitled thereto by
virtue of the Indemnity Agreement. The Company acknowledges and agrees
that (a) CONSULTANT will act as an independent contractor and is being
retained solely to assist the Company in its efforts to effect a Private
Placement and that, CONSULTANT is not being retained to advise the Company
on, or to express any opinion as to, the wisdom, desirability or prudence
of consummating the Private Placements, (b) CONSULTANT is not and will not
be construed as a fiduciary of the Company or any affiliate thereof and
will have no duties or liabilities to the equityholders or creditors of
the Company, any affiliate of the Company or any other person by virtue of
this letter agreement and the retention of CONSULTANT hereunder, all of
which duties and liabilities are hereby expressly waived and (c) nothing
contained herein shall be construed to obligate CONSULTANT to purchase, as
principal, any of the securities offered by the Company in the Private
Placements. Neither equity holders nor creditors of the Company are
intended beneficial to CONSULTANT hereunder. The Company confirms that it
will rely on its own counsel, accountants and other similar expert
advisors for legal, accounting, tax and other similar advice.
10. Representations and Warranties of CONSULTANT. CONSULTANT hereby
represents, warrants, covenants and acknowledges to CONSULTANT as follows:
a. CONSULTANT has the authority to execute, deliver and perform its
obligations under this Agreement.
b. This Agreement has been duly authorized by all necessary corporate
action.
c. This Agreement has been duly executed and delivered is the legal,
valid and binding obligation of CONSULTANT enforceable against it in
accordance with its terms.
d. CONSULTANT will acquire the Shares solely for investment purposes
for its own account, and not with a view to the distribution thereof
or any interest therein.
e. CONSULTANT is able to bear the economic risk of the investment in
the Shares and is aware of the limited ability to sell, transfer or
otherwise dispose of them.
f. CONSULTANT has such knowledge and experience in financial and
business matters and to enable it to evaluate the merits and risks
of the purchase of the Shares.
g. CONSULTANT understands that:
i. CONSULTANT must bear the investment risk in the Shares
since they have not been registered under the Act or any
other applicable federal or state statute and they
cannot be transferred, sold or otherwise disposed of
unless registered under the Act or pursuant to an
exemption therefrom;
ii. The Shares have not been registered under the Act or any
state securities laws.
iii. a legend to the effect of the following will be placed
on the certificates evidencing the Shares:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR ANY STATE SECURITIES
LAWS. THE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE
SOLD, TRANSFERRED, ASSIGNED OR OTHERWISE DISPOSED OF IN THE ABSENCE
OF A CURRENT AND EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND
SUCH APPLICABLE STATE SECURITIES LAWS WITH RESPECT TO SUCH SHARES,
OR AN OPINION OF THE REGISTERED HOLDER'S COUNSEL REASONABLY
ACCEPTABLE TO THE ISSUER'S COUNSEL TO THE EFFECT THAT SUCH
REGISTRATION IS NOT REQUIRED.
iv. Telediscount will issue "stop-transfer" instructions to
its transfer agent or make a similar notation on its
records with respect to the Shares that CONSULTANT may
receive pursuant to this Agreement.
v. CONSULTANT is aware that Rule 144 under the Act, as such
rule is presently written and as herein relevant,
permits public sales of restricted securities such as
the Shares only if a minimum of one year, as calculated
in accordance with the provisions of such Rule, has
elapsed between the later of the date of the acquisition
of such securities from the issuer, and with respect to
any resale of such securities in reliance on Rule 144
for the account of either CONSULTANT or any subsequent
holder of such securities, such one year period to begin
at the time that such securities are fully paid as
contemplated in such Rule, and only upon satisfaction of
the other conditions to the availability of such Rule.
If such Rule is available to CONSULTANT, CONSULTANT may
make only routine sales of such securities in limited
amounts in accordance with the terms and conditions of
such Rule.
h. CONSULTANT understands that TELEDISCOUNT is the only person which
may register the Shares under the Act and that except as otherwise
expressly set forth herein TELEDISCOUNT has no intention or
obligation to do so.
i. CONSULTANT has had the opportunity to discuss the business,
management and financial condition of TELEDISCOUNT with the
management of TELEDISCOUNT and has had the opportunity to ask
questions of the management of TELEDISCOUNT. TELEDISCOUNT has made
available to CONSULTANT all documents and information CONSULTANT has
requested in order for CONSULTANT to evaluate the merits and risks
of an investment in the Shares.
11. Representations and Warranties of TELEDISCOUNT. TELEDISCOUNT hereby
represents, warrants, covenants and acknowledges to CONSULTANT as follows:
i. The Shares, when issued to CONSULTANT pursuant to the terms hereof,
will be duly authorized, validly issued, fully paid and
non-assessable.
ii. TELEDISCOUNT has the corporate power and authority to execute,
deliver and perform its obligations under this Agreement.
iii. This Agreement and the Warrants has been duly authorized by all
necessary corporate action.
iv. This Agreement has been duly executed and delivered and is and the
Warrants will be the legal, valid and binding obligation of
TELEDISCOUNT enforceable against it in accordance with the
respective terms.
12. Registration. TELEDISCOUNT hereby agrees to include the Shares in any
Registration Statement filed by TELEDISCOUNT under the Act, other than a
Registration Statement on Form S-8 or successor form thereto, which upon
the effectiveness thereof will permit CONSULTANT to publicly offer and
sell the Shares.
1. Survival. All of the representations, warranties and agreements of
the parties hereto shall survive the performance of the obligations
of the parties.
2. Public Disclosure. Any reference to CONSULTANT or any advice,
information or other matter pertaining to the Services shall not be
publicly disclosed or made available to any third parties without
the prior written consent of CONSULTANT, unless such disclosure is
required by law.
13. Indemnification.
a. TELEDISCOUNT hereby agrees to indemnify, defend and hold harmless
CONSULTANT or any of its affiliates (collectively, the "Consultant
Indemnified Parties"), to the full extent lawful, from and against
any and all demands, claims, actions or causes of action,
assessments, losses, damages, liabilities, costs and expenses,
including, without limitation, interest, penalties and attorneys'
fees and expenses asserted against, imposed upon or incurred by
CONSULTANT Indemnified Parties resulting from or by reason of a
breach of any representation, warranty or covenant contained herein
or as a result of any action improperly taken or omitted to be taken
as required hereby by TELEDISCOUNT, its agents or employees.
b. CONSULTANT xxxxxx agrees to indemnify, defend and hold harmless
TELEDISCOUNT, subsidiaries, directors, officers, partners, agents
and employees and each other person, if any, controlling or any of
its affiliates (collectively "Indemnified Parties") to the full
extent lawful, from and against any and all demands, claims, actions
or causes of action, assessments, losses, damages, liabilities,
costs and expenses, including, without limitation, interest,
penalties and attorneys' fees and expenses asserted against, imposed
upon or incurred TELEDISCOUNT resulting from or by reason of a
breach of any representation, warranty or covenant contained herein
or as a result of any action improperly taken or omitted to be taken
as required hereby by CONSULTANT, its agents or employees.
c. No party shall be liable to indemnify any other party to the extent
that demands, claims, actions or causes of action, assessments,
losses, damages, liabilities, costs or expenses resulted from bad
faith, gross negligence or reckless disregard of duty.
d. The rights of indemnification as set forth in this Paragraph shall
be in addition to any rights that CONSULTANT Indemnified Parties or
TELEDISCOUNT Indemnified Parties or any other person entitled to
indemnification may have in law or otherwise, including but not
limited to, any right to contribution.
e. Any party seeking indemnification ("Indemnitee") shall notify the
other party ("Indemnitor") of any claim against Indemnitee within 15
days after it has notice of such claim, but failure to notify
Indemnitor shall in no case prejudice the rights of Indemnitee under
this Agreement unless Indemnitor shall be prejudiced by such failure
and then only to the extent of such prejudice. Should Indemnitor
fail to discharge or undertake to defend Indemnitee against such
liability (with counsel reasonably approved by Indemnitee), within
10 days after Indemnitee gives Indemnitor written notice of the
same, then Indemnitee may settle such claim, and Indemnitor's
liability to Indemnitee shall be conclusively established by such
settlement, the amount of such liability to include both the
settlement consideration and the reasonable costs and expenses,
including attorney's fees, incurred by Indemnitee in effecting such
settlement. Indemnitee shall have the right to employ its own
counsel in any such case, but the fees and expenses of such counsel
shall be at the expense of Indemnitee unless: (a) the employment of
such counsel and the fees payable thereto shall have been authorized
in writing by Indemnitor in connection with the defense of such
action, (b) Indemnitor shall not have employed counsel to direct the
defense of such action, or (c) Indemnitee shall have reasonably
concluded that there may be defenses available to it which are
different from or additional to those available to Indemnitor which
results in a conflict of interest (in which case Indemnitor shall
not have the right to direct the defense of such action or of
Indemnitee), in any of which events such fees and expenses shall be
borne by Indemnitor.
14. Status of Consultant. CONSULTANT shall be deemed to be an independent
contractor. CONSULTANT shall have no authority to, and shall not, bind
TELEDISCOUNT to any agreement or obligation with a third party. Nothing in
this Agreement shall be construed to constitute the parties hereto as
partners or joint venture with each other.
15. Other. This letter agreement may not be modified or amended except in
writing executed in counterparts, each of which will be deemed an original
and all of which will constitute one and the same instrument. Parties
signing below unequivocally state that they have authority to represent
the Company and CONSULTANT and can legal bind the Company and CONSULTANT
to the terms ad obligations of this agreement.
If the foregoing correctly sets forth our agreement, please so indicate by
signing below and returning an executed copy to the CONSULTANT Investments,
Attention: Consultant. We look forward to working with you.
ACCEPTED AND AGREED AS OF:
THE DATE FIRST ABOVE WRITTEN
By:
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Name: Xxxx Xxxxxx
Title: Chief Executive Officer
Company: Telediscount Communications, Inc.
By:
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Name:
Title: Bondholder of Telediscount Communications, Inc.
Very truly yours,
CONSULTANT Investments, Inc.
By:
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Name: Xxxxxxx Xxxxxxx
Title: Consultant
