LADENBURG
XXXXXXXX & CO. INC.
June 15, 2000
Xxxxx Xxxxxx
Director & Chief Executive Officer
XXXXXX.XX INC.
00 Xxxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxx
Xxxxxx X0X 0X0
Dear Xx. Xxxxxx:
The purpose of this letter agreement (the "Agreement") is to set forth
the terms and conditions pursuant to which Ladenburg Xxxxxxxx & Co. Inc.
("LTCO") shall serve as exclusive placement agent in connection with the
proposed private offering (the "Offering") of securities (the
"Securities") of XXXXXX.XX INC. (the "Company"). The gross proceeds
from the Offering will be up to $3,500,000. All references to dollars
shall be to U.S. dollars. The terms of such Offering and the Securities
shall be substantially in the form set forth in Exhibit E hereto, which
exhibit is incorporated by reference herein.
Upon the terms and subject to the conditions of this Agreement,
the parties hereto agree as follows:
1. Appointment.
(a) Subject to the terms and conditions of this Agreement hereinafter
set forth, the Company hereby retains LTCO, and LTCO hereby agrees to
act as the Company's exclusive placement agent and financial advisor in
connection with the Offering, effective as of the date hereof. The
Company expressly acknowledges and agrees that LTCO's obligations
hereunder are on a reasonable best efforts basis only and that the
execution of this Agreement does not constitute a commitment by LTCO to
purchase the Securities and does not ensure the successful placement of
the Securities or any portion thereof or the success of LTCO with
respect to securing any other financing on behalf of the Company.
(b) Except as set forth below in this Section 1, during the
effectiveness of this Agreement, neither the Company nor any of its
subsidiaries or affiliates shall, directly or indirectly, through any
officer, director, employee, agent or otherwise (including, without
limitation, through any placement agent, broker, investment banker,
attorney or accountant retained by the Company or any of its
subsidiaries or affiliates), solicit, initiate or encourage the
submission of any proposal or offer (an "Investment Proposal") from any
person or entity (including any of such person's or entity's officers,
directors, employees, agents and other representatives) relating to any
issuance of the Company's or any of its subsidiaries' equity securities
(including debt securities with any equity feature) or relating to any
other transaction having a similar effect or result on the Company's or
any of its subsidiaries' capitalization, or participate in any
discussions or negotiations regarding, or furnish to any other person or
entity any information with respect to, or otherwise cooperate in any
way with, or assist or participate in, facilitate or encourage any
effort or attempt by any other person or entity to do or seek to do any
of the foregoing. The Company shall immediately cease and cause to be
terminated any and all contacts, discussions and negotiations with third
parties regarding any Investment Proposal. The Company shall promptly
notify LTCO if any such Investment Proposal, or any inquiry or contact
with any person or entity with respect thereto, is made. The Company
shall not provide or release any information with respect to this
Agreement or the Offering, including any press release, except as
required by law.
2. Fees and Compensation. In consideration of the services rendered
by LTCO in connection with the Offering, the Company agrees to pay LTCO
the following fees and other compensation:
A cash fee payable immediately upon the closing of any portion of the
Offering and equal to 6% of the aggregate capital raised.
6% warrant coverage on the total amount of the Offering, payable at the
first closing. Such warrants shall be in the form of Exhibit D.
$35,000 non-accountable expense allowance, payable at the first closing.
Upon the exercise of investor warrants, if any, by a holder thereof, the
Company shall promptly notify LTCO of such exercise, and shall pay to
LTCO an amount equal to 6% of the gross dollar amount received by the
Company in connection with such exercise of the warrants.
All amounts payable hereunder shall be paid to LTCO out of an attorney
escrow account at the closing or by such other means acceptable to LTCO.
Should LTCO provide a qualified institutional investor(s) ) within 60
days after the date hereof, reasonably acceptable to the Company and
such investor(s) is willing to invest in the Offering on substantially
the same terms as outlined in the term sheet marked Exhibit E, and the
Company declines to enter into definitive agreements with such
investor(s) to consummate the Offering, for reasons other than a breach
of this Agreement by LTCO, the Company will pay $200,000 to LTCO as a
"break-up" fee.
3. Terms of Retention.
(a) Unless extended or terminated in writing by the parties hereto by
written notice to the other in accordance with the provisions hereof,
this Agreement shall remain in effect until the Termination Date of
August 15, 2000.
(b) Notwithstanding anything herein to the contrary, the obligation to
pay the Fees and Compensation and Expenses described in Section 2, if
any, and paragraphs 2, 5, and 8 of Exhibit A and all of Exhibit B and
Exhibit C attached hereto, each of which exhibits is incorporated herein
by reference, shall survive any termination or expiration of the
Agreement. It is expressly understood and agreed by the parties hereto
that any private financing of equity or debt or other capital raising
activity of the Company within 24 months of the termination or
expiration of this Agreement, with any investors or lenders to whom the
Company was introduced by LTCO or who was contacted by LTCO while this
Agreement was in effect and disclosed to the Company in writing, shall
result in such fees and compensation due and payable by the Company to
LTCO under the same terms of Section 2 above. Upon completion of the
Offering, any future renegotiation, restructuring, revision or other
amendment of such Offering by and between the Company and the investors
in such Offering which results in the receipt of any net new funds by
the Company from such investor(s) shall be deemed to be a new financing
and shall result in additional fees and compensation due and payable by
the Company to LTCO under the terms of Section 2 above.
4. Right of First Refusal. Upon completion of the Offering, LTCO
shall have an irrevocable right of first refusal for a period of one
year to provide all private financing arrangements for the Company
(other than conventional banking arrangements, borrowing and commercial
debt financing and discrete unrelated transactions of not more than
$250,000 where no investment banking fee is being paid). LTCO shall
exercise such right in writing within five (5) business days of receipt
of a written term sheet describing such proposed transaction in
reasonable detail.
5. Information. The Company recognizes and confirms that in
completing its engagement hereunder, LTCO will be using and relying
solely on publicly available information and on data, material and other
information furnished to LTCO by the Company or the Company's affiliates
and agents. It is understood and agreed that in performing under this
engagement, LTCO will rely upon the accuracy and completeness of, and is
not assuming any responsibility for independent verification of, such
publicly available information and the other information so furnished.
6. Offers and Sales Only to Institutional Accredited Investors.
Offers and sales of the Securities will be made only to qualified
institutional buyers (as defined in Rule 144A) and to "accredited
investors" as defined in Rule 501(a) promulgated under the Securities
Act of 1933, as amended (the "Securities Act").
7. No General Solicitation. The Securities will be offered only by
approaching prospective purchasers on an individual basis. No general
solicitation or general advertising in any form will be used in
connection with the offering of the Securities. From and after the
execution of this Agreement until the completion of the Offering, the
Company shall pre-clear any proposed press release which mentions this
Agreement or the Offering with LTCO.
8. Miscellaneous. This Agreement, together with the attached
Exhibits A though E constitutes the entire understanding and agreement
between the parties with respect to its subject matter and there are no
agreements or understandings with respect to the subject matter hereof
which are not contained in this Agreement. This Agreement may be
modified only in writing signed by the party to be charged hereunder.
If the foregoing correctly sets forth our agreement, please confirm this
by signing and returning to us the duplicate copy of this letter.
We appreciate this opportunity to be of service and are looking
forward to working with you on this matter.
Very truly yours,
LADENBURG XXXXXXXX & CO. INC.
By: /s/ Xxxxxx X. Xxxxx
Name: Xxxxxx X. Xxxxx
Title: Director of I.B.
Agreed to and accepted
as of the date first written above:
XXXXXX.XX INC.
By: /s/ Xxxxx Xxxxxx
Name: Xxxxx Xxxxxx
Title: Chief Executive Officer
By: /s/ Xxxxxx Xxxxx
Name: Xxxxxx Xxxxx
Title: Secretary
EXHIBIT A
STANDARD TERMS AND CONDITIONS
1. The Company shall promptly provide LTCO with all relevant information
about the Company (to the extent available to the Company in the case of
parties other than the Company) that shall be reasonably requested or
required by LTCO, which information shall be complete and accurate in all
material respects at the time furnished.
2. LTCO shall keep all information obtained from the Company strictly
confidential except: (a) information which is otherwise publicly
available, or previously known to, or obtained by LTCO independently of
the Company and without breach of LTCO's agreement with the Company; (b)
LTCO may disclose such information to its employees and attorneys, and to
its other advisors and financial sources on a need to know basis only and
shall use best efforts to ensure that all such employees, attorneys,
advisors and financial sources will keep such information strictly
confidential; and (c) pursuant to any order of a court of competent
jurisdiction or other governmental body (including any subpena) or as may
otherwise be required by law.
3. The Company recognizes that in order for LTCO to perform properly its
obligations in a professional manner, it is necessary that LTCO be informed
of and, to the extent practicable, participate in meetings and discussions
between the Company and any third party, including, without limitation, any
prospective purchaser of the securities, relating to the matters covered by
the terms of LTCO's engagement.
4. The Company agrees that any report or opinion, oral or written,
delivered to it by LTCO is prepared solely for its confidential use and
shall not be reproduced, summarized, or referred to in any public document
or given or otherwise divulged to any other person without LTCO's prior
written consent, except as may be required by applicable law or regulation.
5. No fee payable to LTCO pursuant to any other agreement with the
Company or payable by the Company to any agent, lender or investor shall
reduce or otherwise affect any fee payable by the Company to LTCO
hereunder. If LTCO engages any other broker-dealer or other finder to
assist LTCO in the placement of the Offering, then the fees of such other
broker-dealer or finder shall be paid by LTCO.
6. The Company represents and warrants that: (a) it has full right,
power and authority to enter into this Agreement and to perform all of its
obligations hereunder; (b) this Agreement has been duly authorized and
executed by and constitutes a valid and binding agreement of the Company
enforceable in accordance with its terms; and (c) the execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby do not conflict with or result in a breach of (i) the
Company's certificate of incorporation or by-laws or (ii) any agreement to
which the Company is a party or by which any of its property or assets is
bound.
7. Nothing contained in this Agreement shall be construed to place LTCO
and the Company in the relationship of partners or joint venturers. Neither
LTCO nor the Company shall represent itself as the agent or legal
representative of the other for any purpose whatsoever nor shall either
have the power to obligate or bind the other in any manner whatsoever.
LTCO, in performing its services hereunder, shall at all times be an
independent contractor.
8. This Agreement has been and is made solely for the benefit of LTCO
and the Company and each of the persons, agents, employees, officers,
directors and controlling persons referred to in Exhibit B and their
respective heirs, executors, personal representatives, successors and
assigns, and nothing contained in this Agreement shall confer any rights
upon, nor shall this Agreement be construed to create any rights in, any
person who is not party to such Agreement, other than as set forth in this
paragraph.
9. The rights and obligations of either party under this Agreement may
not be assigned without the prior written consent of the other party hereto
and any other purported assignment shall be null and void.
10. All communications hereunder, except as may be otherwise specifically
provided herein, shall be in writing and shall be mailed, hand delivered,
sent by a recognized overnight courier service such as Federal Express, or
sent via facsimile and confirmed by letter, to the party to whom it is
addressed at the following addresses or such other address as such party
may advise the other in writing:
To the Company:
Xxxxx Xxxxxx
XXXXXX.XX INC.
00 Xxxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxx
Xxxxxx X0X 0X0
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
To LTCO:
Ladenburg Xxxxxxxx & Co., Inc.
000 Xxxxxxx Xxxxxx
xx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
All notices hereunder shall be effective upon receipt by the party to which
it is addressed.
EXHIBIT B
INDEMNIFICATION
The Company agrees that it shall indemnify and hold harmless, LTCO,
its stockholders, directors, officers, employees, agents, affiliates and
controlling persons within the meaning of Section 20 of the Securities
Exchange Act of 1934 and Section 15 of the Securities Act of 1933, each as
amended (any and all of whom are referred to as an "Indemnified Party"),
from and against any and all losses, claims, damages, liabilities, or
expenses, and all actions in respect thereof (including, but not limited
to, all legal or other expenses reasonably incurred by an Indemnified Party
in connection with the investigation, preparation, defense or settlement of
any claim, action or proceeding, whether or not resulting in any
liability), incurred by an Indemnified Party: (a) arising out of, or in
connection with, any actions taken or omitted to be taken by the Company,
its affiliates, employees or agents, or any untrue statement or alleged
untrue statement of a material fact contained in any of the financial or
other information furnished to LTCO by or on behalf of the Company or the
omission or alleged omission of a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; or (b) with
respect to, caused by, or otherwise arising out of any transaction
contemplated by the Agreement or LTCO's performing the services
contemplated hereunder; provided, however, the Company will not be liable
under clause (b) hereof to the extent, and only to the extent, that any
loss, claim, damage, liability or expense is finally judicially determined
to have resulted primarily from LTCO's gross negligence or bad faith in
performing such services.
If the indemnification provided for herein is conclusively determined
(by an entry of final judgment by a court of competent jurisdiction and the
expiration of the time or denial of the right to appeal) to be unavailable
or insufficient to hold any Indemnified Party harmless in respect to any
losses, claims, damages, liabilities or expenses referred to herein, then
the Company shall contribute to the amounts paid or payable by such
Indemnified Party in such proportion as is appropriate and equitable under
all circumstances taking into account the relative benefits received by the
Company on the one hand and LTCO on the other, from the transaction or
proposed transaction under the Agreement or, if allocation on that basis is
not permitted under applicable law, in such proportion as is appropriate to
reflect not only the relative benefits received by the Company on the one
hand and LTCO on the other, but also the relative fault of the Company and
LTCO; provided, however, in no event shall the aggregate contribution of
LTCO and/or any Indemnified Party be in excess of the net compensation
actually received by LTCO and/or such Indemnified Party pursuant to this
Agreement.
The Company shall not settle or compromise or consent to the entry of
any judgment in or otherwise seek to terminate any pending or threatened
action, claim, suit or proceeding in which any Indemnified Party is or
could be a party and as to which indemnification or contribution could have
been sought by such Indemnified Party hereunder (whether or not such
Indemnified Party is a party thereto), unless such consent or termination
includes an express unconditional release of such Indemnified Party,
reasonably satisfactory in form and substance to such Indemnified Party,
from all losses, claims, damages, liabilities or expenses arising out of
such action, claim, suit or proceeding.
In the event any Indemnified Party shall incur any expenses covered
by this Exhibit B, the Company shall reimburse the Indemnified Party for
such covered expenses within ten (10) business days of the Indemnified
Party's delivery to the Company of an invoice therefor, with receipts
attached. Such obligation of the Company to so advance funds may be
conditioned upon the Company's receipt of a written undertaking from the
Indemnified Party to repay such amounts within ten (10) business days after
a final, non-appealable judicial determination that such Indemnified Party
was not entitled to indemnification hereunder.
The foregoing indemnification and contribution provisions are not in
lieu of, but in addition to, any rights which any Indemnified Party may
have at common law hereunder or otherwise, and shall remain in full force
and effect following the expiration or termination of LTCO's engagement and
shall be binding on any successors or assigns of the Company and successors
or assigns to all or substantially all of the Company's business or assets.
EXHIBIT C
JURISDICTION
The Company and LTCO each hereby irrevocably: (a) submits to the
jurisdiction of any court of the State of New York or any federal court
sitting in the State of New York for the purposes of any suit, action or
other proceeding arising out of the Agreement between the Company and LTCO
which is brought by or against the Company or LTCO; (b) agrees that all
claims in respect of any suit, action or proceeding may be heard and
determined in any such court; and (c) to the extent that the Company or
LTCO has acquired, or hereafter may acquire, any immunity from
jurisdiction of any such court or from any legal process therein, the
Company an LTCO each hereby waives, to the fullest extent permitted by law,
such immunity. The prevailing party in any litigation respecting this
Agreement shall be entitled to an award of its costs, including reasonable
attorneys' fees, in connection therewith.
The Company and LTCO each waives, and agrees not to assert in any
such suit, action or proceeding, in each case, to the fullest extent
permitted by applicable law, any claim that: (a) it is not personally
subject to the jurisdiction of any such court; (b) it is immune from any
legal process (whether through service or notice, attachment prior to
judgment, attachment in the aid of execution, execution or otherwise) with
respect to it or its property; (c) any such suit, action or proceeding is
brought in an inconvenient forum; (d) the venue of any such suit, action or
proceeding is improper; or (e) this Agreement may not be enforced in or by
any such court.
Any process against the Company or LTCO in, or in connection with,
any suit, action or proceeding filed in the United States District Court
for the Southern District of New York or any other court of the State of
New York, arising out of or relating to this Agreement or any transaction
or agreement contemplated hereby, may be served personally, or by first
class mail or overnight courier (with the same effect as though served
personally) addressed to the party being served at the address set forth in
the Agreement between the Company and LTCO.
Nothing in these provisions shall affect any party's right to
serve process in any manner permitted by law or limit its rights to
bring a proceeding in the competent courts of any jurisdiction or
jurisdictions or to enforce in any lawful manner a judgment obtained in
one jurisdiction in any other jurisdiction.
This Agreement shall be governed by and construed in accordance
with the laws of the State of New York, without regard to conflicts of
law principles.
EXHIBIT D
FORM OF WARRANT
EXHIBIT E
XXXXXX.XX INC
Ticker: URBA
Exchange: OTC BB
Proposed Private Placement Term Sheet
Up to $3,500,000 Regulation D Offering of Common Stock and Warrants
Pricing:
The common stock initially issued to the investors
(the "Initial Common Stock") shall be priced at 90% of the closing bid
price of the Company's Common Stock on the day (the "Initial Closing
Date") of the initial closing (the "Initial Closing Price"), as quoted
by OTC BB.
Use of Proceeds:
Working capital.
Conversion: Up to 33% of the Initial Common Stock held
by investor(s) can be repriced and sold every 30 days after the 90-day
restrictive period. If the registration statement is declared effective
prior to the 90th day, the investor(s) may sell any part of its/their
Initial Common Stock position, but without any re-pricing rights.
Schedule of Re-pricing Events: Investor(s) must notify the Company within
24 hours of the last day of the re-pricing period regarding the amount
of the Initial Common Stock to be re-priced for that period.
Day 91 to Day 120: 115% Re-pricing Event (first 33%):
If the average closing bid price for the Company's common stock
for a period of any 5 business days out of 20 consecutive business days
(the "Re-pricing Price") is not equal to or greater than 115% of the
Initial Closing Price, then the Company shall be obligated to issue
additional shares of common stock (the "Re-Pricing Stock") to
investor(s) according to the following formula:
((1.15*Initial Closing Price) - Re-pricing Price)*(# of Shares)
The re-pricing obligation for this re-pricing period may be paid in cash
or in common stock at the option of the Company.
Day 131 to Day 160: 120% Re-pricing Event (second 33%):
If the average closing bid price for the Company's common stock for a
period of any 5 business days out of 20 consecutive business days (the
"Re-pricing Price") is not equal to or greater than 120% of the Initial
Closing Price, then the Company shall be obligated to issue Re-Pricing
Stock to investor(s) according to the following formula:
((1.20*Initial Closing Price) - Re-pricing Price)*(# of Shares)
The re-pricing obligation for this re-pricing period may be paid in cash
or in common stock at the option of the Company.
Day 171 to Day 200: 123% Re-pricing Event (third 33%):
If the average closing bid price for the Company's common stock for a
period of any 5 business days out of 20 consecutive business days (the
"Re-pricing Price") is not equal to or greater than 123% of the Initial
Closing Price, then the Company shall be obligated to issue Re-Pricing
Stock to investor(s) according to the following formula:
((1.23*Initial Closing Price) - Re-pricing Price)*(# of Shares) / Re-
pricing Price.
The re-pricing obligation for this re-pricing period may be paid in cash
or in common stock at the option of the Company.
Investor Warrants:
Warrant Coverage: 15% warrant coverage
Term: 4-year life.
Strike Price of Warrants: 110% of the Closing Bid Price of the
Company's Common Stock on the Initial Closing Date.
Limitation on Short Sales: The investors will agree not to enter
into a "short sale" (as such term is defined in Rule 3b-3 of the 0000
Xxx) of the Company's Common Stock during any Re-pricing Event valuation
period until such time as such investors no longer hold any of the
Company's Common Stock that is subject to re-pricing.
Redemption: The Company shall have a right to redeem upon a
30-day written notice any portion of the Initial Common Stock that has
not been re-priced and that is not subject of an initiated Re-pricing
Event valuation period. The redemption price shall be as set forth
below:
For the period from Day 1 - 90: 110%
Registration of Common Stock:
The Company will agree to file a registration
statement under the Securities Act of 1933 with respect to the shares of
Common Stock and the Warrants within 60 days of the Closing. The
Company will cause the registration statement to become effective on the
date (the "SEC Effective Date") which will be within the earlier of 105
days of such Closing or within five days of SEC clearance to request
acceleration of effectiveness. The Company will maintain the
effectiveness of such registration statement for a minimum of four
years.
Registration Penalty: If the registration statement is not
effective by the negotiated date, the Company will pay investors in cash
2.0% per month (of invested funds) pro rated for periods of less than 30
days.
