Exhibit 1.3
[GRAPHIC OMITTED]
August 9, 2004
UTIX Group, Inc.
000 Xxxxxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Attn: Xxxxxxx Xxxx, President
Gentlemen:
This letter agreement ("ENGAGEMENT LETTER") shall confirm our agreement with you
regarding the agreement of Utix Group, Inc., a Delaware corporation (the
"COMPANY") to engage SD Partners, LLC ("SD") for the sole purpose of pursuing
and arranging for an initial public offering in 2005 of debt and/or equity
securities of the Company or its subsidiaries on the Alternative Investment
Market of the London Stock Exchange (the "AIM FINANCING"). Our engagement shall,
during the term of this Engagement Letter, be on an exclusive basis, solely to
the extent that it involves the AIM Financing by or through any source
introduced to the Company by SD (any of the foregoing, the "AIM FINANCING
SOURCES").
We understand and acknowledge that the Company is currently undertaking an
equity offering of its securities in the United States through a Form SB-2
registration statement. Nothing contained in this Engagement Letter shall in any
manner limit or restrict the Company, during the term of this Engagement Letter
or thereafter, from pursuing, on its own or through any other investment banker
or broker of the Company's choosing, one or more debt and/or equity financings
in the United States or in any other jurisdiction or on any securities exchange,
other than the proposed AIM Financing.
1) This Engagement Agreement shall commence as at the date hereof and shall
expire upon the earlier to occur of (a) consummation of the AIM Financing, or
(b) June 30, 2005. Notwithstanding the foregoing, it is acknowledged that the
Company will not commence active efforts to obtain an AIM Financing until after
January 2005 and that such efforts will depend, in part, upon the Company's
capital requirements at that time in light of the results achieved from the
launch of its gift ticket programs through retail distribution sources in 2004.
Subject to the foregoing, it is anticipated that commencing in or about January
2005, if requested by the Company, SD shall perform the following tasks in
connection with its engagement hereunder:
o Assisting in preparation of business plan presentations for potential
investors;
o Consulting for positioning of the message to potential investors,
o Identification of AIM Financing Sources,
o Assisting the Company in opening an operating presence in the United
Kingdom to expand its business activities into Europe; and
o Presentation and "RoadShow" to specific investors and AIM Financing
Sources.
00 Xxxxxxxx Xxxxx Xxxxxxxx, XX 00000 Tel: 000 000 0000
[GRAPHIC OMITTED]
2) Neither SD nor any of its affiliates or associates shall attempt to bind
the Company with respect to any AIM Financing, alternate financial arrangement
or other obligation, or hold SD or themselves out as an officer, employee,
affiliate or representative of the Company for any purpose whatsoever. The final
terms and conditions of any AIM Financing shall be acceptable in all respects to
the Company and its board of directors and management, and nothing contained in
this Engagement Letter or otherwise shall in any manner obligate the Company to
consummate the AIM Financing or any other transaction proposed or introduced to
the Company by SD.
3) In consideration of any introductions that SD makes to an AIM Financing
Source, upon consummation of any AIM Financing, the Company agrees to pay to SD
the following compensation at and upon the closing or consummation of the AIM
Financing (such compensation, the "SUCCESS FEES"); which Success Fees shall be
payable in full upon consummation of an offering and sale in the AIM Financing
of shares of Company common stock or other securities that are convertible,
exchangeable or exercisable for Company equity:
(a) Five percent (5.0%) of the gross amount of the AIM Financing
(prior to the deduction of any fees, expenses, commissions or other charges). In
the event any warrants are included in the AIM Financing and exercised for cash,
we shall be entitled, in connection with such exercise, to 5% of the gross
dollar amount received by you. If the exercise of such warrants is a cashless
exercise, you agree to pay us an amount equal to 5% of the value of the shares
of the common stock tendered to the Company in connection with such cashless
exercise; and
(b) Warrants (the "WARRANTS") to acquire securities of the Company
in the amount of five percent (5%) of the same type of securities or interests
issued, conferred or granted in connection with the AIM Financing. Warrants
granted are to be five (5) years in duration from the date of consummation of
such AIM Financing. The exercise price of the Warrants shall be equal to 110% of
the offering price per share of the common stock of the Company offered for
public sale in the AIM Financing. The Warrants shall contain piggyback
registration rights for the underlying Common Stock.
(c) An additional cash fee at the rate of $25,000 per month (the
"MONTHLY FEE"), payable for the period commencing as of January 1, 2005 and
ending in the month in 2005 in which the AIM Financing shall be consummated;
such Monthly Fee being deemed earned as of the first day of each such month;
provided, however, that in no event shall the Company be obligated to pay SD
Monthly Fees aggregating more than $150,000. SD acknowledges that the Company
has heretofore paid to SD an advance of $75,000 against such Monthly Fees; which
advance shall be deemed credited against the maximum of $150,000 of Monthly Fees
that may become payable hereunder. The $75,000 balance of such Monthly Fees
shall be payable monthly, commencing February 2005. However, if the AIM
Financing shall not be consummated by June 30, 2005, or the Company terminates
this Engagement Letter prior to June 30, 2005, the $75,000 advanced on the
Monthly Fees shall not be subject to refund by SD.
(d) The Company shall issue and sell to SD, for $1,125, a total of
1,125,000 shares of the Company's Common Stock.
(e) In the event, and only in the event that the Company shall
receive gross proceeds of at least (U.S.) $2,500,000 in connection with an AIM
Financing from an AIM Financing
[GRAPHIC OMITTED]
Source, upon consummation of such AIM Financing from such AIM Financing Source,
SD shall be entitled to purchase from the Company for $1,000, additional five
year warrants (the "ADDITIONAL WARRANTS") entitling the holders to purchase up
to 1,000,000 shares of Common Stock at an exercise price of $0.35 per share. The
Additional Warrant shall not contain "cashless exercise" provisions and shall be
immediately exercisable by the holders. The shares of Common Stock underlying
the Additional Warrants shall be registered by the Company for potential future
issuance in any registration statement (other than its currently pending Form
SB-2 registration statement) that the Company may elect or be required to file
with the Securities and Exchange Commission in the future for the benefit of
other selling security holders. In addition, subject to receipt of the minimum
proceeds described above, the Company will retain SD as a financial consultant
for $15,000 per month for 24 months following the AIM Financing pursuant to a
consulting agreement to be mutually agreed upon.
4) Notwithstanding the provisions of Section 3 above or any other
provision, express or implied, contained herein, the Company shall have the
right, in the exercise of its sole and absolute discretion, at any time
following January 31, 2005 and upon thirty (30) days prior written notice, to
terminate this Agreement and SD's services hereunder, without any further
liability to SD, except as is provided in Section 5 below.
5) In the event that the Company's board of directors shall determine, in
the exercise of its sole discretion, that the Company should not seek an AIM
Financing in the first six months of 2005, or, for any other reason, the AIM
Financing shall not be consummated by June 30, 2005, then and in such event, the
Company shall be obligated to pay to SD, as a "breakup fee" to compensate SD for
its commitments and agreements contained herein, an aggregate of 1,125,000
shares of Company Common Stock for $1,125 (the "BREAKUP FEE").
6) In addition to any Success Fees or Breakup Fee that may be payable to SD
hereunder (and regardless of whether a AIM Financing occurs), the Company hereby
agrees to, from time to time upon request, to reimburse SD promptly for travel
and other related out-of-pocket expenses (exclusive of expenses for any
consultants, accountants and lawyers) incurred in performing their services
hereunder. The Company shall pre-approve all expenses and in relation to travel
expenses all such expenses above $500.
7) The termination of this Agreement, at, prior to or following June 30,
2005, shall not in any manner affect the indemnification, contribution and
confidentiality obligations of the parties, the right of SD to receive any
Success Fees payable hereunder or Breakup Fees that have accrued prior to such
expiration, or the right of SD to receive reimbursement for its out-of-pocket
expenses as described above.
8) If within the thirty (30) month period following the expiration or
termination of this Agreement, any debt or equity financing (including an AIM
Financing) is consummated by the Company through an AIM Financing Source
introduced to the Company by SD or its affiliates or associates, then and in
such event SD shall be entitled to its full Success Fee as specified herein
(less any Break-up Fee, if any, previously paid). SD shall furnish the Company
with a list of each AIM Financing Source, which list shall be updated from time
to time.
[GRAPHIC OMITTED]
9) The Company agrees to indemnify SD and/or any of their successors,
assigns, employees, agents, affiliates and representatives in accordance with
the indemnification provisions attached hereto as Annex A, which are
incorporated herein in their entirety by reference.
10) The Company recognizes and confirms that SD in acting pursuant to this
Agreement will be using information provided by others, including, without
limitation, information provided by or on behalf of the Company, and that SD
does not assume responsibility for and may rely, without independent
verification, on the accuracy and completeness of any such information. The
Company hereby warrants that any information relating to the Company will not
knowingly contain any untrue statement of a material fact or omit to state any
material fact necessary to make the statements contained therein, in the light
of circumstances under which they were made, not misleading. The Company agrees
to provide SD with (a) prompt notice of any material development affecting the
Company or the occurrence of any event or other change known to the Company that
could result in the information containing an untrue statement of a material
fact or omitting to state any material fact necessary to make the statements
contained therein, in the light of the circumstances under which they were made,
not misleading, (b) copies of any financial reports as soon as reasonably
practicable and (c) such other information concerning the business and financial
condition of the Company as SD may from time to time reasonably request. SD will
have the right to approve the information and other written communications
furnished by or on behalf of the Company in connection with an AIM Financing and
the Company will cause to be furnished to SD, on the closing date of the AIM
Financing, copies of such opinions of counsel and such other documents, letters,
certificates and opinions as SD or the investors, purchasers or sellers may
reasonably request in form and substance reasonably satisfactory to SD and its
counsel or the investors, purchasers or sellers and their respective counsel.
11) Except as contemplated by the terms hereof or as required by applicable
law, regulation or legal process, SD shall keep confidential all material
non-public information provided to it by the Company, and shall not disclose
such information to any third party without the Company's consent, other than to
such of its employees and advisors as SD determines have a need to know. The
Company agrees that any information or advice rendered by SD or its
representatives in connection with this Agreement is solely for the confidential
use of the Company and, except as otherwise required by applicable law,
regulation or legal process, the Company will not and will not permit any third
party to disclose or otherwise refer to such advice or information in any manner
without SD's prior written consent.
12) This agreement shall be governed by and construed in accordance with the
laws of the State of New York, regardless of the laws that might otherwise
govern under applicable principles of conflicts of law thereof. The parties
hereby expressly and irrevocably agree and consent that any action, suit or
proceeding arising out of or relating to this Agreement and the transactions
contemplated hereby may be instituted in any state or federal court sitting in
the State of New York and, by execution of this Agreement, the parties expressly
waive any objection which they may have now or hereafter to the venue or
jurisdiction of any such action, suit or proceeding and irrevocably submit to
the jurisdiction of any such court in any such action, suit or proceeding. The
Company and SD agree to waive trial by jury in any action, proceeding or
counterclaim brought by or on behalf of either party with respect to any matter
whatsoever
[GRAPHIC OMITTED]
relating to or arising out of any actual or proposed AIM Financing, or the
engagement of or performance by SD hereunder.
13) The Company has not taken, and will not take, any action, directly or
indirectly, that may cause any AIM Financing to fail to be entitled to exemption
from registration under the U.S. Federal Securities or applicable state
securities or "blue sky" laws.
14) Upon consummation of the AIM Financing, SD may, at its own expenses,
place announcements or advertisements in financial newspapers and journals
describing its services hereunder, if pre-approved by the Company, which
approval shall not be unreasonably withheld.
15) This Engagement Letter: (a) 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, (b) may not be amended or
modified except in writing executed by the Company and SD, (c) shall be binding
upon and inure to the benefit of the Company, SD, the Indemnified Parties (as
defined in Annex A hereto) and their respective successors and assigns and (d)
may be executed in two or more counterparts (including by facsimile), each of
which shall be deemed to be an original, but all of which shall constitute one
and the same agreement.
16) This Engagement Letter will serve to amend and restate in its entirety
and shall supercede our letter agreement of May 21, 2004; which prior letter
agreement is hereby rendered null and void, AB INITIO.
We expect this relationship to be mutually beneficial and look forward to a
long-term relationship with the Company.
Please confirm that the foregoing is in accordance with your understanding of
our agreement by signing and returning to us a copy of this letter.
Thank you, once again. We are excited to be working with you.
Very truly yours,
SD PARTNERS, LLC UTIX GROUP, INC.
Date: ___________________ Date: ___________________
By: ____________________ By: ____________________
President and CEO
Accepted and agreed to as of
the date set forth above.
[GRAPHIC OMITTED]
ANNEX A: INDEMNIFICATION PROVISIONS
In connection with the engagement of SD Partners LLC ("SD") by Utix Group, Inc.
(the "Company") pursuant to a letter agreement dated August 9, 2004 between the
Company and SD as it may be amended from time to time (the "Agreement"), the
Company hereby agrees as follows:
A) The Company agrees to indemnify SD and/or any controlling person,
partner, director, officer, employee, agent, affiliate and
representative of SD (hereinafter collectively referred to as the
"Indemnified Parties") and hold each of them harmless against any
losses, claims, damages, expenses (including the reasonable fees and
expenses of their respective attorneys), liabilities, actions,
proceedings, investigations (formal or informal), inquiries or threats
thereof (all of the above being hereinafter collectively referred to as
"Liabilities") to which the Indemnified Parties may become subject
arising in any manner out of or in connection with the rendering of
services by SD hereunder (including, without limitation services
rendered in connection with a AIM Financing), unless it is finally
judicially determined that the Liabilities arose out of the gross
negligence or willful misconduct of the Indemnified Parties, and in case
any action shall be brought against the Indemnified Parties with respect
to which indemnity may be sought against the Company, SD shall promptly
notify the Company in writing and the Company shall assume the defense
thereof, including the employment of counsel reasonably satisfactory to
SD and payment of all fees and expenses. SD shall fully cooperate in all
such proceedings.
The Indemnified Parties shall have the right to retain separate counsel,
but the fees and expenses of such counsel shall be at the expense of the
Indemnified Parties, unless (i) the employment of such counsel has been
specifically authorized in writing by the Company, (ii) the Company has
failed to assume the defense and employ counsel as required above, or
(iii) the named parties to any such action (including any impleaded
parties) include both (a) the Indemnified Parties and (b) the Company,
and the Indemnified Parties shall have been advised by counsel that
there may be one or more legal defenses available to the Indemnified
Parties which are different from or additional to those available to the
Company (in which case the Company shall not have the right to assume
the defense of such action on behalf of the Indemnified Parties); it
being understood, however, that the Company shall not, in connection
with any one such action or separate, substantially similar or related
actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys for the Indemnified
Parties, which firm shall be designated in writing by SD.
For actions brought against the Indemnified Parties for which the
Company has assumed the defense, the Company agrees that it will not
enter into a settlement of any such action without the prior written
consent of the Indemnified Parties. For actions brought against the
Indemnified Parties for which the Indemnified Parties shall seek
[GRAPHIC OMITTED]
indemnification, the Indemnified Parties agree that they will not enter
into a settlement of any such action without the prior written consent
of the Company.
B) The Company and SD agree that if any indemnification or reimbursement
sought pursuant to the preceding Paragraph A is finally judicially
determined to be unavailable (except by reason of the gross negligence
or willful misconduct of the Indemnified Parties) then, whether or not
SD is the person entitled to indemnification or reimbursement, the
Company and SD shall contribute to the Liabilities for which such
indemnification or reimbursement is held unavailable in such proportion
as is appropriate to reflect (a) the relative benefits to the Company on
the one hand, and SD on the other hand, in connection with the
transaction to which such indemnification or reimbursement relates, (b)
the relative fault of the parties, and (c) other equitable
considerations; provided, however, that in no event shall the amount to
be contributed by SD exceed the amount of fees actually received by SD
for the AIM Financing, as the case may be.
SD PARTNERS, LLC UTIX GROUP, INC.
Date: ________________________ Date: ________________________
By: __________________________ By: __________________________
President and CEO
