WFG INVESTMENTS INC. 12221 Merit Drive, Suite 300 Dallas, Texas 75251 [Fax No. ]
WFG
INVESTMENTS INC.
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[Fax
No.
]
May
9,
2007
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President
Microwave
Satellite Technologies, Inc.
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▇▇▇▇▇▇▇▇▇,
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Dear
▇▇▇▇▇:
This
letter agreement (the “Agreement”) confirms our understanding with respect to
the engagement by Microwave Satellite Technologies, Inc. (the “Company”) of WFG
Investments Inc., (“WFG”) as placement agent in connection with the sale of up
to $12.5 million of equity or equity-linked securities on a best efforts basis
through a private placement or similar unregistered transaction on terms that
have been or will be determined by the Company and its advisors as set forth
in
the Company’s Confidential Private Placement Memorandum dated May 7, 2007, as
may be revised by the Company from time to time (the “Transaction”) to investors
(the “Investors”). For purposes hereof, the term “Transaction” also includes a
convertible loan or other type of investment convertible into or exchangeable
for or otherwise linked to the equity of the Company. The term of the Agreement
(the “Term”) shall be for a period of twelve (12) months from the date hereof or
until earlier terminated by either party as described below in Section 7.
| 1. |
Scope.
The Company hereby engages WFG to act as placement agent during the
Term
in connection with the Transaction(s). The goal of the engagement
is to
raise up to $12.5 million in capital for the Company to be used for
growth
opportunities and general working capital purposes. WFG shall assist
the
Company and shall, on behalf of the Company, contact such potential
investors as WFG and the Company agree in advance. WFG shall assist
the
Company in effecting the Transaction(s), and shall use its best efforts
to
offer and sell the securities in accordance with this Agreement.
WFG shall
market to those, and only those investors listed in Addendum A hereto,
as
may be amended by mutual agreement of the parties from time to time,
and
the Company shall retain the right, in its sole discretion, to accept
or
reject investors identified by WFG. WFG’s engagement by the Company shall
be exclusive solely as to the potential investors included in Addendum
A.
WFG shall receive written approval from the Company prior to marketing
to
any other investors who have not been included on Addendum A. It
is
anticipated that the Company shall also engage its own legal counsel
and
may require the services of an accounting firm.
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| 2. |
Company
Information.
The Company shall cooperate with WFG in connection with its financial
review and analysis of the Company and shall provide WFG with such
information concerning the Company as WFG deems necessary or appropriate
for such review and analysis (collectively, the “Information”).
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WFG
shall
keep in confidence and shall use only for the purposes of performing its
obligations pursuant to this Agreement, and shall not, without the Company's
consent, disclose to any person any non-public Information furnished by the
Company to WFG except (a) its own counsel and other advisors on a confidential
basis, (b) to the Investors approved by the Company in accordance with the
terms
hereof and (c) to such other persons as such counsel has advised is required
by
applicable law, and then only after informing the Company of such legal
requirement and providing the Company sufficient time to seek a protective
order
or otherwise prevent or restrict such disclosure.
Microwave
Satellite Technologies, Inc.
May
__, 2007
All
Information provided by the Company shall be accurate and complete in all
material respects and shall not contain any untrue statement of a material
fact
or omit to state any material fact necessary to make the statements therein,
in
light of the circumstances under which they were made, not false or misleading.
WFG does not assume responsibility for the accuracy or completeness of the
Information, including but not limited to any disclosure materials related
to
the Transaction(s) except for such information that is provided in writing
by
WFG to the Company that is independently produced by WFG and not based on
Information provided by the Company or information available from generally
recognized public sources. The Company acknowledges and agrees that WFG will
rely primarily on the Information and on information available from generally
recognized public sources in performing its services hereunder, without having
any obligation to independently verify the same and that WFG has no obligation
to undertake an independent evaluation, appraisal or physical inspection of
any
assets or liabilities of the Company. If at any time prior to the completion
of
a Transaction an event occurs which would cause
the
Information (as supplemented or amended) to contain an untrue statement of
a
material fact or to omit to state a material fact necessary in order to make
the
statements therein, in light of the circumstances under which they were made,
not misleading, the Company will notify WFG immediately of such
event.
| 3. |
Fees.
The Company shall pay WFG the following
amounts:
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| a. |
Private
Placement Fee.
WFG shall be paid upon consummation of the Transaction(s) a transaction
fee, payable in cash, of 7.0% of the Gross Proceeds (as defined below)
from the capital received, directly or indirectly, by the Company
solely
from investors identified on Addendum A, with respect to a Transaction
(the “Transaction Fee”). For purposes hereof, “Gross Proceeds” shall mean
the fair market value of all of the consideration (including, without
limitation, cash, securities, other assets and contingent payment
amounts
actually paid, plus debt and liabilities assumed (including, without
limitation, indebtedness for borrowed money, pension liabilities
and
guarantees, license fees, royalty fees, joint venture interests or
other
property, obligations or services, but excluding payments made to
exercise
any convertible securities) received by the Company or any of its
security
holders in connection with any Transaction, directly or indirectly,
from
the sale or exchange of the Company’s securities issued in a Transaction
before the deduction of expenses related to such Transaction, including
but not limited to the fee payable to WFG. All cash compensation
payable
by the Company to WFG hereunder shall be paid by wire transfer.
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| b. |
Placement
Warrants.
Upon consummation of a Transaction, the Company will issue to WFG
five-year stock purchase warrants (the “Placement Agent Warrants”),
equivalent to 7% of the shares issued in the Transaction to investors
listed
in Addendum A,
taking into consideration any increase in shares under a ratchet
or
similar provision pursuant to which the number of shares initially
purchased is subsequently increased, with an “exercise price” equal to
100% of the exercise price of the warrants issued in the Transaction.
The
exercise price is defined as the price at which WFG may convert the
Placement Agent Warrants into common stock of the Company. In addition
to
the exercise price, WFG shall pay a “warrant cost” of $0.001 per share
(one-tenth of a cent) to the Company upon the issuance of Placement
Agent
Warrants.
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Microwave
Satellite Technologies, Inc.
May
__, 2007
A
separate Placement Agent Warrant Agreement shall be prepared after consummation
of the Transaction, and shall take the form of WFG’s standard warrant agreement,
but shall be acceptable to the Company, which contains the following terms,
among others: the Placement Agent Warrants are not transferable by the
warrantholder other than to a limited number of employees and affiliates of
WFG
subject to compliance with all applicable securities laws; the Placement Agent
Warrants may be exercised as to all or any lesser number of shares of equity
securities commencing immediately after the date of the consummation of the
Transaction; the Placement Agent Warrants may be exercised on a cash-less basis
if not registered within 1 year of the closing of the Transaction and be
redeemable on the same terms as the Transaction warrants; and the warrant
agreement will contain provisions for change of control, weighted average based
anti-dilution and customary piggy-back registration rights.
| c. |
In
the event consideration is to be paid in whole or in part by installment
payments, the portion of WFG’s fee relating thereto shall be calculated
and paid when and as such installment payments are
made.
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| d. |
Consideration
received by the Company paid in whole or in part in the form of securities
or other noncash consideration will be valued at its fair market
value, as
reasonably determined by an independent third party to be mutually
agreed
upon by the Company and WFG, as of the day prior to the closing of
the
Transaction (or later date on which a contingent payment is made),
provided, however, that if such consideration consists of securities
with
an existing trading market, such securities will be valued at the
average
of the last sales price for such securities on the five trading days
prior
to the date of the closing (or later date on which a contingent payment
is
made).
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| e. |
The
foregoing fees (including the Placement Agent Warrants) are payable
for
any Transaction that occurs during the Term or within 12 months thereafter
with respect to investors included in Addendum A.
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4.
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Expenses.
In addition to the Transaction Fee and the Warrants, the Company
agrees to
reimburse WFG for its reasonable expenses incurred in connection
with this
engagement approved in advance in writing by Company. These expenses
generally include travel costs and other customary expenses for this
type
of transaction. Such expenses shall not exceed $25,000 in the aggregate
without the prior written consent of the Company. Legal fees incurred
by
WFG to prepare, review and finalize this letter agreement will not
be
reimbursable by the Company.
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5.
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Advertisements.
Upon a closing of a Transaction, the Company agrees that WFG has
the right
to place advertisements in financial and other newspapers and journals
(whether in print or on the internet), and to publicize on its website
and
in its marketing materials, at its sole expense, describing its services
to the Company hereunder, provided that the Company has the right
to
review, comment on and approve all such advertisements, website postings
and publications prior to publication.
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6.
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Indemnification.
The Company shall indemnify WFG, its agents and affiliates in accordance
with Annex A attached hereto and made a part hereof.
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7.
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Termination;
Survival.
This Agreement may be terminated at any time by either party hereto
upon
five days prior written notice to the other party, effective upon
receipt
of such notice to that effect by the other party, or automatically
upon
the consummation of the Transaction. Upon termination or expiration
of
this Agreement, the Company shall have no further obligation to WFG
other
than with respect to fees payable to WFG as provided herein, provided
that
the provisions of Sections 3 through 9, inclusive, and WFG’s obligation to
preserve the confidential information provided to it by Company for
an
indefinite period, shall survive any such expiration or termination.
The
indemnification provisions in Annex A shall survive the termination
or
expiration of this Agreement for the earlier of (i) forty months
after
such termination or expiration or (ii) the applicable statute of
limitations period.
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Microwave
Satellite Technologies, Inc.
May
__, 2007
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8.
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Venue.
The Company and WFG agree that any legal suit, action, or proceeding
arising out of or relating to this Agreement and/or the transactions
contemplated by this Agreement shall be instituted exclusively in
the
state or federal courts located in New York County, New York. The
parties
further irrevocably consent to the service of any complaint, summons,
notice or other process relating to any such action or proceeding
by
delivery thereof to such party by hand or by registered or certified
mail
in the manner prescribed in Section 9(f) hereof. The parties further
irrevocably consent that any judgment rendered by such court in the
State
of New York may be entered in other courts having competent jurisdiction
thereof. Without in any way limiting the indemnification provisions
in
Annex A hereto, the prevailing party shall have the right to recover
any
costs, including reasonable attorneys’ fees, in the event of any action
brought to enforce any of the terms or provisions of this Agreement.
The
parties agree that service may be made by overnight mail at its address
set forth herein in any action to enforce any of the provisions herein.
Without in any way limiting the indemnification provision in Annex
A
hereto, and subject to Section 7 hereof, any action arising under
or
related to this Agreement for compensation must be brought prior
to six
months following the later of (i) the closing of the Transaction,
(ii)
notice of the claim giving rise to such action, or (iii) termination
of
this Agreement, or such action shall be barred as
untimely.
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| 9. |
Miscellaneous.
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a. Successors
and Assigns.
This
Agreement shall be binding on and inure to the benefit of each party's agents,
affiliates, successors and assigns, but may not be assigned without the prior
written consent of the other party.
b. Governing
Law.
This
Agreement shall be governed by and construed in accordance with the internal
laws of the State of New York, without regard to conflicts of laws or principles
thereof.
c. Amendment.
This
Agreement may not be modified or amended except in writing signed by the parties
hereto.
d.
WFG’s
Obligations.
The
obligations of WFG and the Company hereunder are solely corporate obligations,
and no officer, director, employee, agent, member, shareholder, or controlling
person shall be subject to any personal liability whatsoever to any person,
nor
will any such claim be asserted by or on behalf of WFG or the Company or
any of
their respective affiliates. The Company acknowledges and agrees that WFG
is
acting as an independent contractor under this Agreement and that the engagement
of WFG is not intended to confer rights on any person or entity other than
the
Company and WFG. Nothing contained in this Agreement shall limit or restrict
the
right of WFG or of any member, employee, agent or representative of WFG,
to be a
member, shareholder, partner, director, officer, employee, agent or
representative of, or to engage in, any other business, whether of a similar
nature or not, nor to limit or restrict the right of WFG to render services
of
any kind to any other corporation, company, firm, individual or association.
WFG
is a registered broker-dealer in good standing with the SEC under the Securities
Act of 1934 and in all jurisdictions in which the nature of its activities
or
the substance of its actions would require such registration or qualification
pursuant to the blue-sky laws of such jurisdiction. WFG will comply with
all
laws, rules and regulations related to its activities on behalf of Company
pursuant to this Agreement. All consents, authorizations, and approvals
necessary or appropriate for WFG to undertake its obligations set forth
in this
Agreement have been obtained by WFG prior to execution of this Agreement
and WFG
shall immediately use its best efforts to secure investors for the Company
as
set forth herein.
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Microwave
Satellite Technologies, Inc.
May
__, 2007
e. Entire
Agreement.
This
Agreement embodies the entire agreement and understanding of the parties hereto
with respect to the subject matter hereof and supersedes any and all prior
agreements, arrangements and understandings whether written or oral, relating
to
matters provided herein, including the Placement Agent Agreement, dated May
9,
2007, between the parties hereto. This Agreement is entered into by each of
the
parties hereto without reliance on any statement, representation, promise,
inducement or agreement not expressly contained within this Agreement. Except
as
set forth in Annex A hereof, nothing in this Agreement is intended to confer
upon any other person (including the stockholders, employees or creditors of
the
Company) any rights or remedies hereunder or by reason hereof. In case any
provision of this Agreement shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions of this
Agreement shall not in any way be affected or impaired thereby.
f. Notices.
All
notices or communications hereunder shall be in writing and mailed, sent by
fascimile or delivered to the Company and to WFG at their respective addresses
set forth above (with a copy (if to the Company) to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.,
▇▇▇▇▇▇ and ▇▇▇▇▇, LLP, ▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, facsimile: (▇▇▇)-▇▇▇-▇▇▇▇).
g. Opinions
and Advice.
WFG is
acting as financial advisor and is not an expert on, and cannot render opinions
regarding, legal, accounting, regulatory or tax matters. The Company should
consult with its other professional advisors concerning these matters before
undertaking the proposed Transaction. WFG will not have any rights or
obligations in connection with the sale and purchase of the securities
contemplated by this Agreement except as expressly provided in this Agreement.
In no event will WFG be obligated to purchase the securities for its own account
or for the accounts of its customers.
h.
No
Waiver.
The
failure or neglect of the parties hereto to insist, in any one or more
instances, upon the strict performance of any of the terms or conditions of
this
Agreement, or their waiver of strict performance of any of the terms or
conditions of this Agreement, shall not be construed as a waiver or
relinquishment in the future of such term or condition, but the same shall
continue in full force and effect.
i. Counterparts.
This
Agreement may be executed in any number of counterparts, each of which shall
be
deemed to be an original and all of which taken together shall be deemed one
and
the same instrument.
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Microwave
Satellite Technologies, Inc.
May
__, 2007
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Sincerely,
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| WFG Investments Inc. | ||
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| By: | /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ | |
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▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, President
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APPROVED
AND ACCEPTED
On
May
__, 2007:
MICROWAVE
SATELLITE TECHNOLOGIES, INC.
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By:
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/s/
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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Print
name:
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▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇
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Title:
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President
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[Addendum
A and Annex A follow]
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Microwave
Satellite Technologies, Inc.
May
__, 2007
Addendum
A
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Microwave
Satellite Technologies, Inc.
ANNEX
A
The
Company agrees that it will indemnify and hold harmless WFG, its affiliates,
and
their respective directors, members, officers, employees, agents,
representatives and controlling persons (collectively “WFG” and each such entity
or person being an “Indemnified
Party”)
from
and against any and all losses, claims, damages and liabilities, joint or
several, as incurred, to which such Indemnified Party may become subject, and
related to or arising out of the engagement of WFG hereunder, the activities
performed or omitted by or on behalf of an Indemnified Party pursuant to this
Agreement, the Transactions contemplated thereby or WFG’s role in connection
therewith; provided
that the
Company will not be liable to the extent that any loss, claim, damage or
liability is found in a final judgment (not subject to further appeal) by a
court to have resulted primarily from actions taken or omitted to be taken
by
WFG in bad faith or from WFG's gross negligence or willful misconduct in
performing the services described above. The Company also agrees to reimburse
any Indemnified Party for all expenses (including reasonable counsel fees and
disbursements) as they are incurred in connection with the investigation of,
preparation for or defense of any pending or threatened claim, or any action,
investigation, suit or proceeding arising therefrom, whether or not such
Indemnified Party is a party, whether or not liability resulted and whether
or
not such claim, action or proceeding is initiated or brought by or on behalf
of
the Company. The Company also agrees that no Indemnified Party shall have any
liability (whether direct or indirect, in contract or tort or otherwise) to
the
Company or its security holders or creditors related to or arising out of the
engagement of WFG pursuant to, or the performance by WFG of the services
contemplated by, this Agreement except to the extent that any loss, claim,
damage or liability is found in a final judgment (not subject to further appeal)
by a court to have resulted primarily from actions taken or omitted to be taken
by WFG in bad faith or from WFG's gross negligence or willful
misconduct.
If
the
indemnification provided for in this Agreement is for any reason held
unenforceable, the Company agrees to contribute to the losses, claims, damages
and liabilities, as incurred by any Indemnified Person, for which such
indemnification is held unenforceable in such proportion as is appropriate
to
reflect the relative benefits to the Company, on the one hand, and WFG, on
the
other hand, of the Transaction (whether or not the Transaction is consummated).
The Company agrees that for the purposes of this paragraph the relative benefits
to the Company and WFG of the Transaction shall be deemed to be in the same
proportion that the total value of the Transaction or contemplated Transaction
by the Company as a result of or in connection with the proposed Transaction
bears to the fee paid or to be paid to WFG under this Agreement; provided
that, to
the extent permitted by applicable law, in no event shall the Indemnified
Parties be required to contribute an aggregate amount in excess of the aggregate
fees actually paid to WFG under this Agreement.
Promptly
after receipt by an Indemnified Party of notice of any claim or the commencement
of any action, suit or proceeding with respect to which an Indemnified Party
may
be entitled to indemnity hereunder, such Indemnified Party will notify the
Company in writing of such claim or of the commencement of such action or
proceeding, and the Company will
assume the defense of such action, suit or proceeding and will employ counsel
satisfactory to the Indemnified Parties and will pay the fees and disbursements
of such counsel, as incurred. Notwithstanding the preceding sentence, any
Indemnified Party will be entitled to employ counsel separate from counsel
for
the Company and from any other party in such action if such Indemnified Party
reasonably determines that a conflict of interest exists which makes
representation by counsel chosen by the Company not advisable or if such
Indemnified Party reasonably determines that the Company’s assumption of the
defense does not adequately represent its interest. In such event, the fees
and
disbursements of such separate counsel will be paid by the Company, but in
no
event will the Company be liable for the fees and expenses of more than one
counsel (in addition to local) for all Indemnified Parties in connection with
any one action or separate but similar or related actions in the same
jurisdiction arising out of the same general claims or circumstances.
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Microwave
Satellite Technologies, Inc.
May
__, 2007
The
Company agrees that, without WFG’s prior written consent, it will not settle,
compromise or consent to the entry of any judgment in any pending or threatened
claim, action or proceeding in respect of which indemnification could be sought
under the indemnification provision of this Agreement (whether or not WFG or
any
other Indemnified Party is an actual or potential party to such claim, action
or
proceeding), unless such settlement, compromise or consent includes an
unconditional release of each Indemnified Party from all liability arising
out
of such claim, action or proceeding. WFG agrees that, without the Company’s
prior written consent, it will not settle, compromise or consent to the entry
of
any judgment in any pending or threatened claim, action or proceeding in respect
of which indemnification could be sought under the indemnification provision
of
this Agreement (whether or not the Company is an actual or potential party
to
such claim, action or proceeding), unless such settlement, compromise or consent
includes an unconditional release of each Indemnified Party from all liability
arising out of such claim, action or proceeding.
In
the
event any Indemnified Party is requested or required to appear as a witness
in
any action, suit or proceeding brought by or on behalf of or against the Company
or any affiliate or any participant in a Transaction covered hereby in which
such Indemnified Party is not named as a defendant, the Company agrees to
reimburse WFG and such Indemnified Party for all reasonable disbursements
incurred by them in connection with such Indemnified Party’s appearing and
preparing to appear as a witness, including, without limitation, the reasonable
fees and disbursements of their legal counsel, and to compensate WFG and such
Indemnified Party in an amount to be mutually agreed upon.
In
the
event that any amounts due under these indemnification provisions contained
in
this Annex A are not paid within thirty days after written notice of such event
giving rise to the indemnification obligations, such amounts shall bear interest
at a rate of 1.5% per month or at the highest rate permitted under the laws
of
the State of New York, whichever rate is lower.
The
provisions of Annex A shall be in addition to any liability which the Company
may otherwise have. These provisions shall be governed by the law of the State
of New York and shall be operative, in full force and in full effect, regardless
of any termination or expiration of this agreement, subject to Sections 7 and
8
of the Agreement.
| WFG INVESTMENTS INC. |
MICROWAVE
SATELLITE
TECHNOLOGIES,
INC.
|
||
| By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ | By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ | ||
|
[Name,
Title]
|
▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇, President
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