EXHIBIT 10.42
July 2, 2003
Xxxx Xxxxxxx
US Dataworks
0000 Xxxxxxxxx Xxxx
Xxxxx 000
Xxxxxxx, XX 00000
PERSONAL & CONFIDENTIAL
-----------------------
XXXXXXXX CURHAN FORD & CO. ADVISORY AGREEMENT
Dear Xx. Xxxxxxx:
Xxxxxxxx Curhan Ford & Co. ("MCF") is pleased to act as financial advisor to US
Dataworks, Inc. (the "Company"). We will provide financial and capital market
advisory services to the Company which may include: (i) review of financial and
non-public internal business plans, (ii) evaluation of strategic alternatives
based on Company objectives and MCF Industry expertise, (iii) advice on
appropriate capital structure and strategies to achieve maximum return to
shareholders and (iv) sponsorship for and introductions to institutional
investors. The purpose of this letter is to memorialize the terms of our
engagement by the Company.
1. SACS. In connection with this engagement, MCF will perform the
following services:
a. INSTITUTIONAL SPONSORSHIP: MCF will review the Company's
Investor Presentations (Power Point presentations, handouts,
letters to shareholders, etc.) and advise the Company on any
recommended changes. MCF will also introduce Company
management to its institutional sales force and select
institutional investor clients for group and individual
meetings.
b. REVIEW OF FINANCIAL CONDITION/CAPITAL STRUCTURE: MCF will
review both publicly available documents and confidential
Company materials to determine if the Company has an
appropriate capital structure given its market opportunity.
MCF may advise changes In capital structure as a result of
this review and present strategies to effect such changes. In
the event that specific transactions are identified, MCF will
execute additional engagement letters to specify the
compensation and responsibilities of MCF in each case.
c. STRATEGIC/COMPETITIVE ANALYSIS: MCF will help the Company
assess its strategic positioning within its industry sector
and advise the Company on appropriate corporate development
strategies including potential acquisition, merger and sale
strategies. In the event that specific transactions are
identified, MCF will execute additional engagement letters to
specify the compensation and responsibilities of MCF in each
case.
-1-
US Dataworks, Inc.
July 2, 2003
Page 2
2. INFORMATION PROVIDED TO MCF. In connection with our engagement, the
Company has agreed to furnish to MCF, on a timely basis, all relevant
information needed by MCF to perform under the terms of this agreement.
During our engagement, it may be necessary for us: to interview the
management of, the auditors for, and the consultants and advisors to,
the Company; to rely (without independent verification) upon data
furnished to us by them; and to review any financial and other reports
relating to the business and financial condition of the Company as we
may determine to be relevant under the circumstances. In this
connection, the Company will make available to us such information as
we may request, including information with respect to the assets,
liabilities, earnings, earning power, financial condition, historical
performance, future prospects and financial projections and the
assumptions used in the development of such projections of the Company.
We agree that all nonpublic information obtained by us in connection
with our engagement will be held by us in strict confidence and will be
used by us solely for the purpose of performing financial advisory
services and will not be used for institutional marketing, sales,
trading or market making.
We do not assume any responsibility for, or with respect to, the
accuracy, completeness or fairness of the Information and data supplied to us by
the Company or its representatives. In addition, the Company acknowledges that
we will assume, without independent verification, that all information supplied
to us with respect to the Company will be true, correct and complete in all
material respects and will not contain any untrue statements of material fact or
omit to state a material fact necessary to make the information supplied to us
not misleading. If at any time during the course of our engagement the Company
becomes aware of any material change in any of the information previously
furnished to us, it will promptly advise us of the change.
3. SCOPE OF ENGAGEMENT. The Company acknowledges that we will not make, or
arrange for others to make, an appraisal of any physical assets of the
Company. Nonetheless, if we determine after review of the information
furnished to us that any such appraisal or appraisals are necessary or
desirable, we will so advise the Company and, if approved by the
Company in writing, the costs incurred in connection with such
appraisal(s) will be borne by the Company.
MCF has been engaged by the Company only in connection with the matters
described in this letter agreement and for no other purpose. We have not made,
and will assume no responsibility to make any representation in connection with
our engagement as to any legal matter.
4. TERM OF ENGAGEMENT. This agreement will be effective for one year from
the date this letter agreement is executed. Either party may terminate
the relationship, at any time, upon thirty days written notice to the
other party. However, Company hereby agrees to a six-month minimum
engagement with MCF (the "Initial Term"). In the event of termination
or expiration of this agreement, Mss financial advisory fee and
expenses incurred will be payable in full.
US Dataworks, Inc.
July 2, 2003
Page 3
5. FEES AND EXPENSES. As compensation for our professional services, MCF
will receive a non-refundable financial advisory fee of $25,000 on July
11, 2003. This payment will be in consideration of the first month of
services provided by MCF. MCF will receive a financial advisory fee of
$5,000 for each month thereafter of its engagement by the Company,
payable on the first day of each month. Company agrees to a six-month
minimum obligation. ($50,000 total.) The Company also agrees to
reimburse our reasonable out-of-pocket expenses (including, but not
limited to, messenger, overnight courier, printing, travel and counsel
fees) on a monthly basis, up to a maximum of $2,500 without written
consent of the Company. In addition, on July 11, 2003, MCF will receive
a warrant to purchase 500,000 shares of common stock of the Company at
an exercise price equal to the dosing price of the Company's common
stock as reported by the appropriate exchange on July 11, 2003. The
number of shares of each warrant will be adjusted for stock splits or
other dilutive events. The warrants will also include piggyback
registration rights, a net exercise provision, will be fully
exercisable on their issuance date and will have a term of five years
from the issuance date. If MCF refers any buyers of the Company's
proposed financing (as defined by any financing completed by the
Company after the date of execution of this letter and prior to
September 30, 2003), MCF will be paid 7.0% of the gross proceeds.
6. INDEMNITY AND CONTRIBUTION. The parties agree to the terms of MCF's
standard indemnification agreement, which is attached hereto as
APPENDIX A and incorporated herein by reference. The provisions of this
paragraph 6 shall survive any termination of this Agreement.
7. OTHER BUSINESS. For one year from the effective date of this agreement,
if the Company is considering an offer of securities to the public, the
Company agrees to offer MCF the opportunity to participate as an
advisor, with no less than a 30% role in the investment activity. If
the Company is considering a private offer of securities, the Company
agrees to offer MCF the opportunity to participate as sole advisor. MCF
will also be given first right of refusal to act as financial advisor
in the case of a merger or acquisition and to prepare any fairness
opinion related to a merger or acquisition transaction. As compensation
for any of the foregoing services, MCF will be paid customary fees to
be mutually agreed upon at the appropriate time. The terms of any such
additional engagements will be set forth in separate letter agreements
containing terms and conditions to be mutually agreed upon, including
without limitation appropriate indemnification provisions.
The Company further understands that if MCF is asked to act for the Company in
any other formal additional capacity relating to this engagement, but not
specifically addressed in this letter, then such activities shall constitute
separate engagements and the terms and conditions of any such additional
engagements will be embodied in one or more separate written agreements,
containing provisions and terms to be mutually agreed upon, including without
limitation appropriate indemnification provisions. The indemnity provisions in
APPENDIX A shall apply to any such additional engagements, unless superseded by
an indemnity provision set forth in a separate agreement applicable to any such
additional engagements, and shall remain in full force and effect regardless of
any completion, modification or termination of MCF's engagement(s)
US Dataworks, Inc.
July 2, 2003
Page 4
8. OTHER MCF ACTIVITIES. MCF is a securities firm engaged in securities
trading and brokerage activities as well as corporate financial
advisory services. In the ordinary course of our trading and brokerage
activities, MCF or its affiliates may hold positions, for its own
account or the accounts of customers, in equity, debt or other
securities of the Company.
THIS AGREEMENT MAKES NO REPRESENTATION; NOR DOES IT SUGGEST, IMPLY OR
GUARANTEE THAT A XXXXXXXX CURHAN FORD & CO. ANALYST WILL PUBLISH A
REPORT REGARDING THE COMPANY. FURTHER, IF A XXXXXXXX CURHAN FORD & CO.
ANALYST SHOULD CHOOSE TO PREPARE A REPORT REGARDING THE COMPANY: THIS
AGREEMENT MAKES NO REPRESENTATION, NOR DOES IT SUGGEST, IMPLY OR
GUARANTEE THAT SUCH REPORT WILL CAST THE COMPANY IN A FAVORABLE LIGHT,
NOR RECOMMEND PURCHASE OF THE COMPANY'S STOCK.
9. COMPLIANCE WITH APPLICABLE LAW. In connection with this engagement, the
Company and MCF will comply with all applicable federal, state and
foreign securities laws and other applicable laws.
10. INDEPENDENT CONTRACTOR. MCF is and at all times during the term hereof
will remain an independent contractor, and nothing contained in this
letter agreement will create the relationship of employer and employee
or principal and agent as between the Company and MCF or any of its
employees. Without limiting the generality of the foregoing, all final
decisions with respect to matters about which MCF has provided services
hereunder shall be solely those of the Company, and MCF shall have no
liability relating thereto or arising therefrom. MCF shall have no
authority to bind or act for the Company in any respect. It is
understood that MCF's responsibility to the Company is solely
contractual in nature and that MCF does not owe the Company, or any
other party, any fiduciary duty as a result of its engagement
11. SUCCESSORS AND ASSIGNS. This letter agreement and all obligations and
benefits of the parties hereto shall bind and shall inure to their
benefit and that of their respective successors and assigns. The
indemnity and contribution provisions incorporated into this letter
agreement are for the express benefit of the officers, directors,
employees, consultants, agents and controlling persons of MCF and their
respective successors and assigns.
12. ANNOUNCEMENTS. The Company grants to MCF the right to place customary
announcement(s) of this engagement in certain newspapers and to mail
announcement(s) to persons and firms selected by MCF, and all costs of
such announcement(s) will be borne by MCF.
US Dataworks, Inc.
July 2, 2003
Page 5
13. ARBITRATION. Any dispute between the parties concerning the
interpretation, validity or performance of this letter agreement or any
of its terms and provisions shall be submitted to binding arbitration
in San Francisco County, California, before the American Arbitration
Association, and the prevailing party in such arbitration shall have
the right to have any award made by the arbitrators confirmed by a
court of competent jurisdiction. The provisions of Section 1283.05 of
the California Code of Civil Procedure, authorizing the taking of
depositions and obtaining discovery, are incorporated herein by this
reference and shall be applicable to any such arbitration.
14. GENERAL PROVISIONS. No purported waiver or modification of any of the
terms of this letter agreement will be valid unless made in writing and
signed by the parties hereto. Section headings used in this letter
agreement are for convenience only, are not a part of this letter
agreement and will not be used in construing any of the terms hereof.
This letter agreement constitutes and embodies the entire understanding
and agreement of the parties hereto relating to the subject matter
hereof, and there are no other agreements or understandings, written or
oral, in effect between the parties relating to the subject matter
hereof. No representation, promise, inducement or statement of
intention has been made by either of the parties hereto which is to be
embodied in this letter agreement, and none of the parties hereto shall
be bound by or liable for any alleged representation, promise,
inducement or statement of intention, not so set forth herein. No
provision of this letter agreement shall be construed in favor of or
against either of the parties hereto by reason of the extent to which
either of the parties or its counsel participated in the drafting
hereof. If any provision of this letter agreement is held by a court of
competent jurisdiction to be invalid, illegal or unenforceable, the
remaining provisions hereof shall in no way be affected and shall
remain in full force and effect. In case of any litigation or
arbitration between the parties hereto, the prevailing party shall be
entitled to its reasonable legal fees. This letter agreement is made
and entered in the State of California, and the laws of that state
relating to contracts made in, and to be performed entirely in, the
State shall govern the validity and the interpretation hereof. This
letter agreement may be executed in any number of counterparts and by
facsimile signature.
If the foregoing correctly sets forth your understanding of our
agreement, please sign the enclosed copy of this letter and return it to MCF,
whereupon it shall constitute a binding agreement between us.
Very truly yours,
XXXXXXXX CURHAN FORD & CO.
By: /S/ D. XXXXXXXX XXXXXXXX
-----------------------------
D. Xxxxxxxx Xxxxxxxx
Chairman & CEO
US Dataworks, Inc.
July 2, 2003
Page 6
The undersigned hereby accepts, agrees to and becomes party to the
foregoing letter agreement, effective as of the date first written above.
US DATAWORKS, INC.
By: /S/ XXXX XXXXXXX
--------------------------------
Xxxx Xxxxxxx
APPENDIX A--INDEMNIFICATION AGREEMENT
The Company agrees to indemnify and hold harmless MCF and its officers,
directors, employees, consultants, attorneys, agents and controlling persons
(within the meaning of Section 15 of the Securities Act of 1933, as amended, or
Section 20 of the Secures Exchange Act of 1934, as amended) (MCF and each such
other persons are collectively and individually referred to below as an
"Indemnified Party") from and against any and all loss, claim, damage, liability
and expense whatsoever, as incurred, including, without limitation, reasonable
costs of any investigation, legal and other fees and expenses incurred in
connection with, and any amounts paid in settlement of, any action, suit or
proceeding or any claim asserted, to which the Indemnified Party may become
subject under any applicable federal or state law (whether in tort, contract or
on any other basis) or otherwise, and related to the performance by the
Indemnified Party of the services contemplated by this letter agreement and will
reimburse the Indemnified Party for all expenses (including legal fees and
expenses) 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 the 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 under the foregoing indemnification
provision to the extent that any loss, claim, damage, liability or expense is
found in a final judgment by a court or arbitrator, not subject to appeal or
further appeal, to have resulted from the Indemnified Party's bad faith, willful
misconduct or gross negligence. The Company also agrees that the Indemnified
Party shall have no liability (whether direct or indirect, in contract, tort or
otherwise) to the Company related to, or arising out of, the engagement of the
Indemnified Party pursuant to, or the performance by the Indemnified Party of
the services contemplated by, this letter agreement except to the extent that
any loss, claim, damage, liability or expense is found in a final judgment by a
court or arbitrator, not subject to appeal or further appeal, to have resulted
from the Indemnified party's bad faith, willful misconduct or gross negligence.
If the indemnity provided above shall be unenforceable or unavailable for any
reason whatsoever, the Company, its successors and assigns, and the Indemnified
Party shall contribute to all such losses, claims, damages, liabilities and
expenses (including, without limitation, all costs of any investigation, legal
or other fees and expenses incurred in connection with, and any amounts paid in
settlement of, any action, suit or proceeding or any claim asserted) (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company and MCF under the terms of this letter agreement or (ii) if the
allocation provided for by clause (i) of this sentence is not permitted by
applicable law, 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 and MCF in connection with the matter(s) as to which contribution is to
be made. The relative benefits received by the Company and MCF shall be deemed
to be in the same proportion as the fee the Company actually pays to MCF bears
to the total value of the consideration paid or to be paid to the Company and/or
the Company's shareholders in the Capital Raising Transaction or Sale
Transaction, as the case may be, or the Target in an Acquisition Transaction.
The relative fault of the Company and MCF shall be determined by reference to,
among other things, whether any untrue or alleged untrue statement of material
fact or omission or alleged omission to state a material fact relates to
information supplied by the Company or by MCF and the Company's and MCF's
A-1
relative intent, knowledge, access to information and opportunity t o correct.
The Company and MCF agree that it would not be just or equitable if contribution
pursuant to this paragraph were determined by pro rata allocation or by any
other method of allocation which does not take into account these equitable
considerations. Notwithstanding the foregoing, to the extent permitted by law,
in no event shall the Indemnified Party's share of such losses, claims, damages,
liabilities and expenses exceed, in the aggregate, the fee actually paid to the
Indemnified Party by the Company.
The Indemnified Party will give prompt written notice to the Company of any
claim for which it seeks indemnification hereunder, but the omission to so
notify the Company will not relieve the Company from any liability which it may
otherwise have hereunder except to the extent that the Company is damaged or
prejudiced by such omission or from any liability it may have other than under
this Appendix A. The Company shall have the right to assume the defense of any
claim, lawsuit or action (collectively an "action") for which the Indemnified
Party seeks indemnification hereunder, subject to the provisions stated herein
with counsel reasonably satisfactory to the Indemnified Party. After notice from
the Company to the Indemnified Party of its election so to assume the defense
thereof, and so long as the Company performs its obligations pursuant to such
election, the Company will not be liable to the Indemnified Party for any legal
or other expenses subsequently incurred by the Indemnified Party in connection
with the defense thereof other than reasonable costs of investigation. The
Indemnified Party shall have the right to employ separate counsel in any such
action and to participate in the defense thereof at its own expense; PROVIDED,
HOWEVER, that the reasonable fees and expenses of such counsel shall be at the
expense of the Company if the named parties to any such action (including any
impleaded parties) include both the Indemnified Party and the Company and the
Indemnified Party shall have reasonably concluded, based on advice of counsel,
that there may be legal defenses available to the Indemnified Party which are
different from, or in conflict with, any legal defenses which may be available
to the Company (in which event the Company shall not have the right to assume
the defense of such action on behalf of the Indemnified Party, it being
understood, however, that the Company shall not be liable for the reasonable
fees and expenses of more than one separate firm of attorneys for all
Indemnified Parties in each jurisdiction in which counsel is needed). Despite
the foregoing, the Indemnified Party shall not settle any claim without the
prior written approval of the Company, which approval shall not be unreasonably
withheld, so long as the Company is not in material breach of this Appendix A.
Also, each Indemnified Party shall make reasonable efforts to mitigate its
losses and liabilities. In addition to the Company's other obligations hereunder
and without limitation, the Company agrees to pay monthly, upon receipt of
itemized statements therefor, all reasonable fees and expenses of counsel
incurred by an Indemnified Party in defending any claim of the type set forth in
the preceding paragraphs or in producing documents, assisting in answering any
interrogatories, giving any deposition testimony or otherwise becoming involved
in any action or response to any claim relating to the engagement referred to
herein, or any of the matters enumerated in the preceding paragraphs, whether or
not any claim is made against an Indemnified Party or an Indemnified Party is
named as a party to any such action.
A-2
US DATA WORKS, INC. / XXXXXXXX CURHAN FORD & CO.
ADVISORY AGREEMENT
APPENDIX B -- OTHER BUSINESS EXCLUSION
Notwithstanding any provision of the captioned Advisory Agreement, including but
not limited to Section 7, Other Business, MCF and the Company specifically
hereby agree that MCF shall receive no compensation for any financing completed
after the date of the Advisory Agreement and prior to September 30, 2003 that is
the result of introductions and/or presentations made by or through the efforts
of Xxxxxx Xxxx ("Xxxx"), Bridgewater Capital ("Bridgewater"), or Xxxxx Xxxxxxx
("Venison") or any of their respective affiliates or designees. The Company
confirms that discussions with Xxxx, Bridgewater and Venison concerning possible
financings have commenced prior to the date of the Advisory Agreement. The
Company further hereby obligates itself to fully inform MCF of any proposal,
term sheet or other form of contemplated financing introduced by Xxxx,
Bridgewater or Venison promptly upon receipt.
XXXXXXXX CURHAN FORD & CO.
By: /S/ D. XXXXXXXX XXXXXXXX
--------------------------------------- --------------------
D. Xxxxxxxx Xxxxxxxx Date Chairman & CEO Date
US DATAWORKS, INC.
By: /S/ XXXX X. XXXXXXX
--------------------------------------- --------------------
Xxxx X. Xxxxxxx, CFO Date
B-1
