Exhibit 10.31
X. X. XXXXXXXXXX & CO., INC.
INVESTMENTS SINCE 1868
000 Xxxx Xxxxxx Tel. (000) 000-0000
44th Floor (800)
729-3940
Xxx Xxxx, XX 00000 Fax. (000) 000-0000
February 2, 2004
CONFIDENTIAL
Xxxxxx X. Xxxxx
President & Chief Executive Officer
PetCARE Television Network, Inc.
0000 Xxxxxxxx Xxxx, Xxxxx X
Xxxxx, XX 00000
Attention: Xxxxxx X. Xxxxx
President & Chief Executive Officer
This letter agreement (this "Agreement") confirms the engagement of X.X.
Xxxxxxxxxx & Co., Inc. ("HCW") by PetCARE Television Network, Inc. ("PetCARE" or
the "Company") as placement agent to arrange the sale of debt, equity or
equity-linked securities (the "Securities") on behalf of the Company. The sale
of Securities (the "Financing" or "Financings") may be completed under an
effective shelf registration statement, if applicable, or may occur through a
private placement pursuant to one or more exemptions from registration under the
Securities Act of 1933, as amended (the "Securities Act"), and in compliance
with applicable securities laws of states and other jurisdictions ("Blue Sky
Laws").
1. Authorization Period. HCW's engagement shall become effective on the
date hereof and, unless extended by PetCARE and HCW, shall expire one (1) year
after the signing of this Agreement. In the event that there has not been an
initial closing on a Financing totaling $500,000 (the "Bridge Loan") within
ninety (90) days of the execution of this Agreement, the Company may terminate
this Agreement in writing upon ten days notice. The period from the date hereof
through the expiration of this Agreement is called the "Authorization Period."
2. Retention. Subject to the terms and conditions of this Agreement,
PetCARE hereby engages HCW to act on behalf of the Company as placement agent
during the Authorization Period to arrange the sale of Securities in an amount
and on terms and conditions satisfactory to the Company and HCW hereby accepts
such engagement.
During the remaining months of the Authorization Period immediately
following the closing of the Bridge Loan, PetCARE shall not, and shall not
permit its affiliates or their representatives to, directly or indirectly, (i)
offer any Securities for sale to, or otherwise contact, discuss or negotiate
with respect to any offer or sale of any Securities with, any person, except as
it pertains to offers made prior to the Authorization Period (a list of said
offers is attached hereto as Exhibit "A") and closed during the Authorization
Period, (ii) authorize anyone other than HCW to act on behalf of the Company to
place any Securities or (iii) have any discussions or negotiations with any
person other than HCW with respect to engaging such person as a finder, broker,
dealer, agent or financial advisor in connection with any sale of Securities.
PetCARE shall, and shall cause its affiliates and its and their officers,
directors, employees and representatives to, promptly refer to HCW all offers,
inquiries and proposals relating to any Securities received at any time during
the Authorization Period. Notwithstanding anything to the contrary contained
herein, from the execution of this Agreement until the closing of the Bridge
Loan, the Company may continue to offer any of its Securities for sale, and the
relationship between HCW and PetCARE shall be non-exclusive and PetCARE may
engage other investment bankers on a non-exclusive basis to assist in its
endeavors to raise additional capital. Upon the closing of the Bridge Loan, HCW
shall become PetCARE's exclusive placement agent during the term of this
Agreement.
2. Compensation. PetCARE shall pay HCW the compensation set forth below:
a. Cash Fee. PetCARE shall pay to HCW a non-refundable retainer fee
of common stock warrants to purchase 50,000 shares of the Company's common stock
(the "Common Stock") at an exercise price of $0.001 per share that shall have
the same rights and privileges associated with the placement agent warrants
detailed below. This retainer fee shall be payable promptly upon execution of
this Agreement, which shall be offset against the cash placement fee. PetCARE
shall pay HCW a cash placement fee equal to 10.0% on any gross proceeds received
by the Company in connection with the Financings thereafter. The cash placement
fee shall be payable on the closing date on which such aggregate consideration
is received by the Company. HCW shall act as solicitation agent on behalf of
PetCARE in connection with the exercise of investor warrants issued in
connection with the Financings and shall pay HCW a cash fee of 4% of the
aggregate consideration received by PetCARE in connection with the exercise of
such warrants.
b. Placement Agent Warrants. On each closing date on which aggregate
consideration is paid or becomes payable, PetCARE shall issue to HCW or its
permitted assigns warrants (the "Warrants") to purchase 20% of the amount of
Securities issued to purchasers. The exercise price of the Warrants shall be
equal to the price at which common equity of the Company is issued (or in the
event of a convertible security, the conversion price or exercise price into
common equity on the closing date). The Warrants shall be exercisable after the
date of issuance and shall expire five years after the date of issuance, unless
otherwise extended by the Company. The Warrants shall include customary
anti-dilution protection, including protection against issuances of securities
at prices (or with exercise prices, in the case of warrants, options or rights)
below the exercise price of the Warrants, a cashless exercise provision, and
shall be non-redeemable. The Warrants, subject to the written consent of Pet
Edge, LLC, shall include one demand registration right exercisable following the
first anniversary of the closing, and piggyback registration rights. The
Warrants shall be transferable within HCW, at HCW's discretion. Notwithstanding
the foregoing, the compensation payable under this section may be paid in shares
of PetCARE common stock, subject to mutual agreement between HCW and PetCARE.
c. Tail Period. PetCARE shall and shall cause its affiliates to, pay
to HCW all compensation described in this Section 3 with respect to all
Securities sold to a purchaser or purchasers at any time prior to the expiration
of twelve (12) months after the expiration of this Agreement (the "Tail Period")
if (i) such purchaser or purchasers were identified to the Company by HCW during
the Authorization Period, (ii) HCW advised the Company with respect to such
purchaser or purchasers during the Authorization Period or (iii) the Company or
HCW had discussions with such purchaser or purchasers during the Authorization
Period.
4. Reimbursements. Until the Financing or sales of Securities are
consummated, the Company shall reimburse HCW for all of its reasonable
out-of-pocket expenses, not to exceed $5,000 in the aggregate, without the
written consent of PetCARE, incurred in connection with its engagement,
including the fees and disbursements of counsel for HCW and the expenses of any
travel that may be necessary. Once the Financing or sales of Securities are
consummated, the Company shall reimburse HCW for all of its reasonable
out-of-pocket expenses, not to exceed an aggregate of $20,000 without the
written consent of PetCARE, incurred in connection with its engagement,
including the fees and disbursements of counsel for HCW and the expenses of any
travel that may be necessary. In connection with the reimbursement of expenses,
HCW shall provide PetCARE with appropriate documentation detailing the
out-of-pocket expenses incurred in connection with its engagement.
5. Representations, Warranties and Covenants of PetCARE. PetCARE
represents and warrants to, and covenants with, HCW as follows:
a. Neither the Company nor any person acting on its behalf has
taken, and PetCARE shall not and shall not permit its affiliates to take,
directly or indirectly, any action so as to cause any of the transactions
contemplated by this Agreement to fail to be entitled to exemption from
registration or qualification under all applicable securities laws or which
constitutes general advertising or general solicitation (as those terms are used
in Regulation D under the Securities Act) with respect to the Securities.
b. PetCARE shall take and shall cause its affiliates to take such
actions as may be required to cause compliance with this Agreement. HCW
acknowledges that PetCARE may cause its affiliates to perform any of its
obligations hereunder; provided, however, that PetCARE's intention to do so (or
any action by PetCARE or HCW in respect thereof) shall not relieve PetCARE from
its obligation to perform such obligations when due.
c. The Company will furnish, or cause to be furnished, to HCW such
information as HCW believes appropriate to its engagement hereunder (all such
information, the "Information"), and the Company represents that all such
Information will be accurate and complete in all material respects. The Company
will notify HCW promptly of any change
2
that may be material in such Information. It is understood that HCW will be
entitled to rely on and use the Information and other information that is
publicly available without independent verification, and will not be responsible
in any respect for the accuracy, completeness or reasonableness of all such
Information or to conduct any independent verification or any appraisal or
physical inspection of properties or assets.
6. Representations, Warranties and Covenants of HCW. HCW represents and
warrants to, and covenants with, PetCARE as follows:
a. None of HCW, its affiliates or any person acting on behalf of HCW
or any of such affiliates has engaged or will engage in any general solicitation
or general advertising (as those terms are used in Regulation D under the
Securities Act) with respect to the Securities.
b. HCW will use its best efforts to conduct the offering and sale of
Securities so that Securities are sold in a transaction or series of
transactions exempt from registration under the Securities Act.
c. HCW will send Materials related to the Financings only to persons
that the HCW reasonably believes are "accredited investors" (as defined under
Rule 501(a) of the Securities Act).
d. HCW agrees that, except as otherwise required by law, regulation
or court order or as contemplated by its engagement hereunder, the non-public
Information furnished to HCW by the Company shall be held by HCW as
confidential.
7. Indemnification. The Company and HCW agree to the indemnification and
other agreements set forth in the attached Indemnification Agreement, the
provisions of which are incorporated herein by reference.
8. Subsequent Offerings. HCW shall have the right from the date hereof
until twelve months after the expiration of this Agreement, to act as the
managing placement agent in connection with the sale of equity or equity-linked
securities through a Private Placement or Directed Public Offering under a shelf
registration statement. In addition, during the Authorization Period and for two
years thereafter, HCW, subject to the approval of PetCARE's managing
underwriter, shall have the right to participate as a co-lead manager in an
underwritten public offering of the Company's securities and shall receive a
percentage of the gross underwriting fees equal to the percentage of securities
sold by HCW in the offering, including its pro-rata share of any non-accountable
expense allowances, associated with any sale of equity securities and HCW's
name, subject to the approval of PetCARE's managing underwriter, shall appear as
a co-managing underwriter on the cover of any prospectus used in connection with
any sale of equity securities described in this clause. If however, the Company
is involved in a Business Combination as defined below, excluding acquisitions,
the terms and conditions in this section will become null and void and
participation in subsequent offerings will be renegotiated between the surviving
entity and HCW.
9. Mergers & Acquisitions. During the Authorization Period, HCW shall act
as the financial advisor to the Company with respect to any potential business
combination involving the Company, including acquisitions or mergers or the sale
of the Company or certain assets or divisions of the Company (a "Business
Combination"). HCW shall be compensated for any Business Combination completed
during the Authorization Period or for the twelve (12) month period thereafter
(the "Tail Period") with any person with whom the Company or HCW had discussions
with during the Authorization Period or with any person identified by HCW during
the Authorization Period. PetCARE shall pay HCW an amount (the "Transaction
Fee") according to the schedule hereunder, based on the transaction value, which
is payable in cash on the closing date of such Business Combination.
------------------------------------------------------
Transaction Value Transaction Fee
------------------------------------------------------
Up to $50,000,000 2.0% of such amount; plus
------------------------------------------------------
In excess of 50,000,000 1.5% of such amount
------------------------------------------------------
For the six month period following the expiration of this Agreement, if PetCARE
elects to pursue the sale of the Company or receives an offer to purchase or
merge with the Company by a person not covered under the section above, PetCARE
agrees to engage HCW to act as its financial advisor in connection with the
potential sale or merger. The Company shall compensate HCW as its financial
advisor under terms that reflect HCW's normal and customary compensation for
such services, as agreed between PetCARE and HCW in good faith. HCW shall
provide financial advisory services on terms to be negotiated in good faith
prior to the Closing.
3
10. Survival of Certain Provisions. The expense, indemnification,
reimbursement and contribution obligations of PetCARE provided herein and in the
attached Indemnification Agreement and HCW's rights to compensation (which term
includes all fees, amounts and Warrants due or which may become due) shall
remain operative and in full force and effect regardless of (i) any withdrawal,
termination or consummation of or failure to initiate or consummate any
transaction described herein which is determined to be a result of the Company's
failure to perform under the terms of this Agreement, or (ii) the completion or
expiration of this Agreement.
11. Notices. Notice given pursuant to any of the provisions of this
Agreement shall be given in writing and shall be sent by certified mail, return
receipt request or recognized overnight courier or personally delivered (a) if
to the Company, to PetCARE Television Network, Inc. office at 0000 Xxxxxxxx
Xxxx, Xxxxx X, Xxxxx, XX 00000. Attention: Xxxxxx X. Xxxxx, President & Chief
Executive Officer; and (b) if to HCW, to its office at 000 Xxxx Xxxxxx, 00xx
xxxxx, Xxx Xxxx, XX 00000. Attention: Xxx Xxxxx.
12. Confidentiality. No financial advice rendered by HCW pursuant to this
Agreement may be disclosed publicly in any manner without HCW's prior written
consent, except as may be required by law, regulation or court order but subject
to the limitation below. If the Company is required or reasonably expects to be
so required to disclose any advice, PetCARE shall provide HCW with prompt notice
thereof so that HCW may seek a protective order or other appropriate remedy and
take reasonable efforts to assure that all of such advice disclosed will be
covered by such order or other remedy. Whether or not such a protective order or
other remedy is obtained, PetCARE will and will cause its affiliates to disclose
only that portion of such advice which the Company is so required to disclose.
13. Miscellaneous. This Agreement (including the attached Indemnification
Agreement) sets forth the entire agreement between the parties, supersedes and
merges all prior written or oral agreements with respect to the subject matter
hereof, may only be amended in writing and shall be governed by the laws of the
State of New York applicable to agreements made and to be performed entirely
within such State. The parties shall make reasonable efforts to resolve any
dispute concerning this Agreement, its construction or its alleged breach by
face-to-face negotiations. If such negotiations fail to resolve the dispute, the
dispute shall be finally decided by arbitration in accordance with the rules
then in effect of the American Arbitration Association. Any arbitration will be
conducted in the New York City metropolitan area. PetCARE (for the Company, for
anyone claiming through or in the name of the Company and on behalf of the
equity holders of the Company) and HCW each hereby irrevocably waives any right
it may have to trial by jury in respect of any claim arising out of this
Agreement or the transactions contemplated hereby.
This Agreement may not be assigned by either party without the prior
written consent of the other party.
If any provision of this Agreement is determined to be invalid or
unenforceable in any respect, such determination will not effect such provision
in any other respect or any other provision of this Agreement.
Please confirm that the foregoing correctly sets forth our agreement
by signing and returning to HCW the enclosed duplicate copy of this Agreement.
Very truly yours,
X.X. Xxxxxxxxxx & Co., Inc.
By: /s/Xxxxxx Xxxx
-----------------------------------
Name: Xxxxxx Xxxx
Title: President
Accepted and agreed to as of
the date first written above
PetCARE Television Network, Inc.
By: /s/Xxxxxx X. Xxxxx
--------------------------------
Name: Xxxxxx X. Xxxxx
Title: President & Chief Executive Officer
4
TO: X.X. Xxxxxxxxxx & Co., Inc. February 2, 2004
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
In connection with your engagement pursuant to our letter agreement of
even date herewith (the "Engagement"), we agree to indemnify and hold harmless
X.X. Xxxxxxxxxx & Co., Inc. ("X.X. Xxxxxxxxxx" or "you") and its affiliates, the
respective directors, officers, partners, agents and employees of X.X.
Xxxxxxxxxx and its affiliates, and each other person, if any, controlling X.X.
Xxxxxxxxxx or any of its affiliates (collectively, "Indemnified Persons"), from
and against, and we agree that no Indemnified Person shall have any liability to
us or our owners, parents, affiliates, security holders or creditors for, any
losses, claims, damages or liabilities (including actions or proceedings in
respect thereof) (collectively "Losses") (A) related to or arising out of (i)
our actions or failures to act (including statements or omissions made, or
information provided, by us or our agents) or (ii) actions or failures to act by
an Indemnified Person with our consent or in reliance on our actions or failures
to act, or (B) otherwise related to or arising out of the Engagement or your
performance thereof, except that this clause (B) shall not apply to any Losses
that are finally judicially determined to have resulted primarily from your bad
faith or gross negligence or breach of the letter agreement. If such
indemnification is for any reason not available or insufficient to hold you
harmless, we agree to contribute to the Losses involved in such proportion as is
appropriate to reflect the relative benefits received (or anticipated to be
received) by us and by you with respect to the Engagement or, if such allocation
is judicially determined unavailable, in such proportion as is appropriate to
reflect other equitable considerations such as the relative fault of us on the
one hand and of you on the other hand; provided, however, that, in no event
shall the amount to be contributed by you exceed the fees actually received by
you under the Engagement.
We will reimburse each Indemnified Person for all expenses (including
reasonable fees and disbursements of counsel) as they are incurred by such
Indemnified Person in connection with investigating, preparing for or defending
any action, claim, investigation, inquiry, arbitration or other proceeding
("Action") referred to above (or enforcing this agreement or any related
engagement agreement), whether or not in connection with pending or threatened
litigation in which any Indemnified Person is a party, and whether or not such
Action is initiated or brought by you . We further agree that we will not settle
or compromise or consent to the entry of any judgment in any pending or
threatened Action in respect of which indemnification may be sought hereunder
(whether or not an Indemnified Person is a party therein) unless we have given
you reasonable prior written notice thereof and used all reasonable efforts,
after consultation with you, to obtain an unconditional release of each
Indemnified Person from all liability arising therefrom. In the event we are
considering entering into one or a series of transactions involving a merger or
other business combination or a dissolution or liquidation of all or a
significant portion of our assets, we shall promptly notify you in writing. If
requested by X.X. Xxxxxxxxxx, we shall then establish alternative means of
providing for our obligations set forth herein on terms and conditions
reasonably satisfactory to X.X. Xxxxxxxxxx.
If multiple claims are brought against you in any Action with respect to
at least one of which indemnification is permitted under applicable law and
provided for under this agreement, we agree that any judgment, arbitration award
or other monetary award shall be conclusively deemed to be based on claims as to
which indemnification is permitted and provided for. In the event that you are
called or subpoenaed to give testimony in a court of law, we agree to pay your
expenses related thereto and $5,000 per person per day for every day or part
thereof that we are required to be there or in preparation thereof. Our
obligations hereunder shall be in addition to any rights that any Indemnified
Person may have at common law or otherwise. Solely for the purpose of enforcing
this agreement, we hereby consent to personal jurisdiction and to service and
venue in any court in which any claim which is subject to this agreement is
brought by or against any Indemnified Person. We acknowledge that in connection
with the Engagement you are acting as an independent contractor with duties
owing solely to us. YOU HEREBY AGREE, AND WE HEREBY AGREE ON OUR OWN BEHALF AND,
TO THE EXTENT PERMITTED BY APPLICABLE LAW, ON BEHALF OF OUR SECURITY HOLDERS, TO
WAIVE ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY CLAIM, COUNTER-CLAIM OR
ACTION ARISING OUT OF THE ENGAGEMENT, YOUR PERFORMANCE THEREOF OR THIS
AGREEMENT.
The provisions of this agreement shall apply to the Engagement (including
related activities prior to the date hereof) and any modification thereof and
shall remain in full force and effect regardless of the completion or
termination of the Engagement. This agreement and any other agreements relating
to the Engagement shall be governed by and construed in accordance with the laws
of the state of New York, without regard to conflicts of law principles thereof.
Very truly yours,
Accepted and Agreed:
X.X. XXXXXXXXXX & CO., INC. Client: PetCARE Television Network, Inc.
By: /s/Xxxxxx Xxxx By: /s/Xxxxxx X. Xxxxx
-------------------------------- --------------------------------
Name: Xxxxxx Xxxx Name: Xxxxxx X. Xxxxx
Title: President Title: President & Chief
Executive Officer
5
TO: PetCARE Television Network, Inc. February 2, 2004
0000 Xxxxxxxx Xxxx, Xxxxx X
Xxxxx, XX 00000
In connection with our engagement pursuant to your letter agreement of
even date herewith (the "Engagement"), we agree to indemnify and hold harmless
PetCARE Television Network, Inc. ("PetCARE" or "you") and its affiliates, the
respective directors, officers, partners, agents and employees of PetCARE and
its affiliates, and each other person, if any, controlling PetCARE or any of its
affiliates (collectively, "Indemnified Persons"), from and against, and we agree
that no Indemnified Person shall have any liability to us or our owners,
parents, affiliates, security holders or creditors for, any losses, claims,
damages or liabilities (including actions or proceedings in respect thereof)
(collectively "Losses") (A) related to or arising out of (i) our actions or
failures to act (including statements or omissions made, or information
provided, by us or our agents) or (ii) actions or failures to act by an
Indemnified Person with our consent or in reliance on our actions or failures to
act, or (B) otherwise related to or arising out of the Engagement or your
performance thereof, except that this clause (B) shall not apply to any Losses
that are finally judicially determined to have resulted primarily from your bad
faith or gross negligence or breach of the letter agreement. If such
indemnification is for any reason not available or insufficient to hold you
harmless, we agree to contribute to the Losses involved in such proportion as is
appropriate to reflect the relative benefits received (or anticipated to be
received) by us and by you with respect to the Engagement or, if such allocation
is judicially determined unavailable, in such proportion as is appropriate to
reflect other equitable considerations such as the relative fault of us on the
one hand and of you on the other hand; provided, however, that, in no event
shall the amount to be contributed by you exceed the fees actually received by
you under the Engagement.
We will reimburse each Indemnified Person for all expenses (including
reasonable fees and disbursements of counsel) as they are incurred by such
Indemnified Person in connection with investigating, preparing for or defending
any action, claim, investigation, inquiry, arbitration or other proceeding
("Action") referred to above (or enforcing this agreement or any related
engagement agreement), whether or not in connection with pending or threatened
litigation in which any Indemnified Person is a party, and whether or not such
Action is initiated or brought by you . We further agree that we will not settle
or compromise or consent to the entry of any judgment in any pending or
threatened Action in respect of which indemnification may be sought hereunder
(whether or not an Indemnified Person is a party therein) unless we have given
you reasonable prior written notice thereof and used all reasonable efforts,
after consultation with you, to obtain an unconditional release of each
Indemnified Person from all liability arising therefrom. In the event we are
considering entering into one or a series of transactions involving a merger or
other business combination or a dissolution or liquidation of all or a
significant portion of our assets, we shall promptly notify you in writing. If
requested by PetCARE, we shall then establish alternative means of providing for
our obligations set forth herein on terms and conditions reasonably satisfactory
to PetCARE.
If multiple claims are brought against you in any Action with respect to
at least one of which indemnification is permitted under applicable law and
provided for under this agreement, we agree that any judgment, arbitration award
or other monetary award shall be conclusively deemed to be based on claims as to
which indemnification is permitted and provided for. In the event that you are
called or subpoenaed to give testimony in a court of law, we agree to pay your
expenses related thereto and $5,000 per person per day for every day or part
thereof that we are required to be there or in preparation thereof. Our
obligations hereunder shall be in addition to any rights that any Indemnified
Person may have at common law or otherwise. Solely for the purpose of enforcing
this agreement, we hereby consent to personal jurisdiction and to service and
venue in any court in which any claim which is subject to this agreement is
brought by or against any Indemnified Person. We acknowledge that in connection
with the Engagement you are acting as an independent contractor with duties
owing solely to us. YOU HEREBY AGREE, AND WE HEREBY AGREE ON OUR OWN BEHALF AND,
TO THE EXTENT PERMITTED BY APPLICABLE LAW, ON BEHALF OF OUR SECURITY HOLDERS, TO
WAIVE ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY CLAIM, COUNTER-CLAIM OR
ACTION ARISING OUT OF THE ENGAGEMENT, YOUR PERFORMANCE THEREOF OR THIS
AGREEMENT.
The provisions of this agreement shall apply to the Engagement (including
related activities prior to the date hereof) and any modification thereof and
shall remain in full force and effect regardless of the completion or
termination of the Engagement. This agreement and any other agreements relating
to the Engagement shall be governed by and construed in accordance with the laws
of the state of New York, without regard to conflicts of law principles thereof.
Very truly yours,
Accepted and Agreed:
PetCARE Television Network, Inc. Client: X.X. XXXXXXXXXX & CO., INC.
By: /s/Xxxxxx X. Xxxxx By: /s/Xxxxxx Xxxx
------------------------------- --------------------------------
Name: Xxxxxx X. Xxxxx Name: Xxxxxx Xxxx
Title: President and Chief Title: President
Executive Office
6
