EXHIBIT 1.1
ENGAGEMENT AGREEMENT
BY AND BETWEEN
X. X. XXXXXXX & CO. AND SARDY HOUSE LLC
This Engagement Agreement (also referred herein as the "Engagement" or the
"Agreement") confirms our mutual understanding regarding the retention of X.X.
XXXXXXX & Co (also referred to as the "Advisor") and SARDY HOUSE LLC (also
referred to as the "Company"), and the Company's sole member, North and South
Aspen, L.L.C. (also referred to herein as the "Holder"), as their exclusive
financial advisor and underwriter with respect to the proposed Transaction. As
used in this Engagement Agreement the term "Transaction" shall refer to the
public, registered sale, on a best efforts all or none minimum, best efforts
maximum basis, of the Company's newly issued membership interests to investors
(the "Offering").
As the Company's financial advisor and underwriter, we will act on behalf of the
Company and will provide independent advice and counsel on issues of a financial
nature pertaining to this Engagement. Advisor will report directly to Xxxxxx
Xxxxxx and Xxxxx Xxxxxx as the authorized representatives of the Company's
Manager and Member. Advisor will keep same apprised of our activities as
requested to our progress on a going forward basis.
In carrying out this assignment, Advisor recognizes that sales of membership
interests pursuant to the Offering may be solicited by the Company, by the
Holder or by a limited number of real estate agents selected by the Company. The
Company and Holder recognize that any such solicitation needs to be in strict
compliance with all applicable federal and state securities laws and
regulations. The Company, Holder and Advisor will coordinate their efforts and
work closely with each other and the Company's in-house staff and such outside
real estate agents selected by the Company, as well as the professionals
retained to assist the Company and Holder in their overall program to achieve
various corporate objectives and remain in compliance with all applicable
federal and state securities laws and regulations.
1. The financial and investment banking services and activities Advisor
anticipates performing over the entire course of this Engagement for the
Company can be generally described as follows:
PREPARATION OF THE OFFERING MATERIALS. Advisor will work with the Company
and its counsel to prepare all necessary documentation for the Offering.
This includes, but is not limited to, the preliminary prospects, final
prospectus, subscription agreements and any other marketing materials to
be used by the Company in the marketing of membership interests in the
Company. As part of this process, Advisor will perform due diligence on
the Company and its business, management and financial situation. The
Company agrees to cooperate fully, and cause its
-1-
management, employees and agents to cooperate fully with Advisor in the
due diligence process.
MARKETING OF OFFERING. As discussed above, the Company intends to market
the Offering through its in-house staff and selected real estate brokers.
The Company has requested a No-Action Letter regarding the participation
of real estate brokers in the marketing of the Offering. Advisor will
work with the Company's securities counsel to provide guidance to the
Company's in-house staff and selected real estate brokers so as to assure
that the Company, the Holder and Advisor remain at all times in
compliance with all applicable federal and state securities laws and
regulations. All potential investors in the Offering will be referred by
the Company's in-house staff and the selected real estate brokers to
Advisor and Advisor will respond to such potential investors' questions
with regards to the Offering. In addition, Advisor will require that any
potential investor submit information pursuant to a subscription
agreement, which information will be reviewed by Advisor to determine
whether an investment in the Offering is suitable for such potential
investor. The determination as to suitability will be at the sole
discretion of Advisor.
OTHER SERVICES. Advisor will also serve as an advisor to the Company in
connection with the Offering and in achieving its corporate objectives.
Advisor will perform all tasks necessary for the Company to complete a
sale of membership interests to investors, including reviewing all
closing and marketing materials prepared by the Company and its counsel,
establishing any required escrow accounts, securing approval of the
underwriting and closing arrangements by the NASD, and managing the
closing process.
The possible services and tasks listed above are reflective of the
overall commitment Advisor is prepared to make to assist the Company
through completion of the Offering. The above list of services and tasks
is representative of the type of work that will have to be done by
Advisor, in order for the Company to achieve its business objectives. It
is based on Advisor's present understanding of the Company's
circumstances, requirements and goals and, as such, is subject to
modification and adjustment in the event that those factors change. Many
of the activities outlined above are interrelated, subject to iteration
and continuing in nature, to be sure. We believe Advisor possesses such
expertise and is prepared to dedicate the time and resources required to
do the job properly and professionally and agree to use our "best
efforts" to perform our services hereunder. Of course, no assurance can
be given to the Company or to the Holder that the Offering will be
successful, notwithstanding our best efforts.
2. In consideration of Advisor's services, the Holder agrees to pay the
Advisor the following compensation:
(a) A non-refundable retainer of $7,500 due on the date of execution
of this Engagement Agreement. Such retainer is in consideration of
Advisor's role as Advisor to the Company and to the Holder.
-2-
(b) In addition to the non-refundable retainer specified in paragraph
2(a) above, Company agrees to pay an advisory fee equal to $7,500
per month commencing on June 1, 2003 and each month thereafter
through and including December 1, 2003. In the event there is a
closing of a sale of membership interests prior to December 1,
2003 or in the event of an earlier termination of this Agreement,
then such advisory fees shall be waived from the immediately
succeeding month through December 1, 2003. No advisory fees shall
be payable by the Company subsequent to the December 1, 2003
payment.
(c) Upon the closing of a sale of a membership interest pursuant to
the Offering, Advisor shall be paid in certified funds, as
underwriter of the Company, a cash success fee equal to 7% of the
total Transaction value (defined in paragraph 3) for the first 10
membership interests sold, a fee equal to 6% of the total
Transaction value for the next 7 membership interest sold and a
fee equal to 7% of the total Transaction value for each of the
remaining membership interests sold. However, in the event that
such closing of a sale of a membership interest was to an investor
that was referred to Advisor by the Company or any of the real
estate brokers selected by the Company, such cash success fee
shall be reduced by 3.5% of the total Transaction value of each
sale of a membership interest by such third-party.
(d) The foregoing compensation is agreed to by client in specific
reliance upon Advisor's assurance that Advisor will secure
approval of the NASD to underwrite the Offering as soon as
commercially reasonable. In the event, Advisor is unable to secure
NASD underwriter approval on or before August 1, 2003, Advisor
shall promptly refund to Client the advisory fees and any other
payments previously made by Client to Advisor (except for the
non-refundable retainer specified in paragraph 2(a)), and this
Agreement shall terminate.
3. It is the intent of the parties that any fee payable to Advisor pursuant
to paragraph 2(c) above will be computed based upon the total
consideration regardless of how allocated or the form of consideration.
Therefore, the "total Transaction value" referred to above shall include
(i) any and all deferred installments of the transaction price, (ii) any
portion of the transaction price held in escrow at closing.
4. The Company and the Holder agree that Advisor will act as the exclusive
Advisor and underwriter to the Company, with regard to all matters
related to this Engagement Agreement from the date of acceptance of this
Engagement Agreement until such time as all membership interests being
sold pursuant to the Offering are sold or the Company cancels the
Offering.
5. It is the Advisor's intent that the Offering contemplated in this
Engagement Agreement be pursued on a negotiated basis and the Advisor
makes no representations or
-3-
guarantees that the Offering will be completed. The Advisor is not
obligated to purchase any portion of the Offering in connection with this
Engagement.
6. The Advisor agrees that any corporate information provided by the
Company, in the course of this Engagement, is the property of the Company
and not to be considered proprietary material of the Advisor. However,
all material prepared by the Advisor and included in any prospectus or
related documents is proprietary and may not be copied or duplicated by
the Company and/or used for any purpose unrelated to the completion of
this Offering.
7. In the event this Engagement is terminated prior to the sale of all
membership interests being sold pursuant to the Offering as a result of a
determination by the Company to cancel the Offering and if the Company or
the Holder subsequently sells membership interests in the Company on
substantially similar terms and conditions (excluding price) as the
Offering within a twenty-four month period following the termination date
of this Engagement, the Advisor will be entitled to the fees set forth in
paragraph 2(c) except such fees will be reduced by any fees required to
be paid to any third party. For purposes of this section, the sale of all
or substantially all of the Company to a single purchaser (which sale may
include the sale of all or substantially all membership interests in the
Company) shall not be considered a sale on "substantially similar terms
and conditions" hereunder; provided that, upon such a sale within a
twenty-four month period following termination, Advisor shall be paid a
fee equal to 1% of the total Transaction value.
8. The Company and the Holder agree to reimburse Advisor within 14 days from
receipt of a statement from the Advisor for all out-of-pocket expenses
incurred by the Advisor (other than the fees and expenses of Advisor's
counsel and the NASD fees related to Advisor's underwriter approval) in
connection with the matters contemplated by this Engagement in excess of
$500 each month. Advisor will not incur single expenses in excess of $250
without the prior approval of the Company.
9. Each party agrees to indemnify and hold the other harmless and each of
its officers, directors, employees, representatives and agents harmless
to the fullest extent permitted by law from and against any and all
losses, claims, damages, obligations, penalties, judgments, awards,
liabilities, cost, expenses and disbursements (including without
limitation fees and disbursements of counsel) related to or arising out
of any untrue statement or alleged untrue statement of a material fact
made by the party or any omission or alleged omission of the party to
state a material fact; and to reimburse the other party for all
reasonable expenses as may be incurred by it in connection with
investigating, preparing or defending any such action or claim, whether
or not in connection with pending or threatened litigation or
administrative proceedings. This provision of this paragraph 9 shall
survive the expiration or termination of this Engagement including a
termination resulting from a closing of the Transaction.
10. In connection with Advisor's services, the Company will furnish (or cause
to be furnished) to the Advisor such information and data as is within
the Company's
-4-
possession or control relating to the Company as the Advisor reasonably
deems necessary and reasonably requests in order to complete its
assignments for the Company. Advisor will keep and maintain all
non-public information which it receives or develops concerning the
Company confidential and will disclose such information only as is
required in its reasonable judgment by this assignment or is required by
law. The Company recognizes and confirms that in the performance of its
services hereunder: (i) Advisor may rely upon information provided by the
Company without independent verification; (ii) Advisor. shall incur no
liability as a result of such reliance; and (iii) Advisor does not assume
responsibility for the accuracy or completeness of such information,
whether or not it makes an independent verification.
11. No party identified under Paragraph 9, may assign its rights, duties or
responsibilities hereunder without the prior consent of the other party,
which shall not be unreasonably withheld. This Engagement shall inure to
the benefit of the respective successors and assigns of the parties
hereto and of the indemnified parties hereunder and their successors and
assigns and representatives, and the obligations and liabilities assumed
in this Engagement by the parties hereto shall be binding upon their
respective successors and assigns.
12. Advisor may publish, at its own expense, an advertisement announcing the
completion of the Offering and Advisor's role therein.
13. By signing this Engagement Agreement, each signatory hereby acknowledges
the fact that he/she is legally empowered to sign this Engagement
Agreement on behalf of the party identified with his/her signature.
14. The parties agree and covenant that they will execute such other and
further instruments and documents as are or may become necessary or
advisable to effectuate the terms of this Agreement, including without
limitation, a direct placement agreement or underwriting agreement with
customary warranties and representations.
15. This Agreement may not be amended or modified except in writing and shall
be governed and construed in accordance with the laws of the State of
Colorado without regard to the principles of the conflicts of law. The
indemnity and reimbursement provisions contained herein shall remain in
full force and effect in the event of termination. The invalidity,
legality or enforceability of any provision of this agreement shall in no
way affect the validity, legality or enforceability of any other
provision. If any provision is held to be unenforceable as a matter of
law, the other provisions shall not be affected thereby and shall remain
in full force and effect. This Engagement Agreement incorporates the
entire understanding of the parties with respect to the subject matter
hereof and supersedes all previous agreements should they exist with
regard to the subject matter of this Engagement Agreement.
16. Signatures on this Agreement may be communicated by facsimile
transmission and shall be binding upon the parties transmitting the same
by facsimile transmission. This
-5-
Agreement may be executed in counterparts, all of which taken together,
shall constitute a single agreement.
We are extremely pleased to propose this Engagement. If the foregoing correctly
sets forth the agreed upon terms of Engagement, please sign in the appropriate
space below and return to X. X. Xxxxxxx & Company at 0000 Xxxxxx Xxxxx Xxxxx
Xxxxx, Xxxxx 000, Xxxxxx, Xxxxxxxx 00000.
Sincerely,
Submitted this May 12th, 0000
X.X. Xxxxxxx & Company
Accepted this 12th day of May, 2003
/S/ XXXXX X. XXXXXXX COMPANY:
--------------------
Xxxxx X. Xxxxxxx
President Sardy House, LLC
By: Block 66, LLC, its Manager
By: /s/ XXXXXX X. XXXXXX
-----------------------------
HOLDER:
North and South Aspen, LLC
By: /s/ XXXXXX X. XXXXXX
---------------------------------
-6-
