S E C U R I T I E S Twenty Seventh Floor New York, New York 10005
S
E C U R I T I E S
000
XXXX XXXXXX
Twenty
Xxxxxxx Xxxxx
Xxx
Xxxx, Xxx Xxxx 00000
000-000-0000
MEMBER
FINRA
MEMBER SIPC
January
16th
2008
CONFIDENTIAL
Xxxxxx
X.
Xxxxxxxx
Interim
Chief Executive Officer
United
Heritage Corporation
0000
Xxxx Xxxx
Xxxxxxx,
Xxxxx 00000
Dear
Xx.
Xxxxxxxx:
The
purpose of this letter agreement (the “Agreement”) is to set forth the terms of
the engagement by United Heritage Corporation (“UHCP” or the “Company”) of
Chadbourn Securities, Inc. (“Chadbourn” or the “Agent”). During the Term
(defined below), Chadbourn will act as the exclusive financial advisor to UHCP
and assist the Company with respect to one or more proposed private placements
of equity and/or debt securities (each a “Private Placement”), merger or
acquisition of or by the Company (“Transaction”).
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1.
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Engagement.
The Company hereby engages the Agent to act as its exclusive financial
advisor and placement agent concerning:
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The Private Placement of UHCP’s equity and/or debt securities (the “Securities”). It is currently contemplated that the Private Placement will be structured as an offering of equity and/or debt securities that will be exempt from the registration/qualification requirements of federal and state securities laws. The final terms of the Private Placement, however, will be negotiated between the Company and the investors / lenders who purchase the Securities in the Private Placement. The Agent is not authorized to act on behalf of the Company in accepting any terms or conditions associated with the issuance of the Securities. The Agent hereby accepts such engagement on a “best efforts” basis upon the terms and conditions set forth herein. It is understood that the Agent’s engagement pursuant to this Agreement does not constitute an agreement or a commitment, express or implied, by the Agent or any of the Agent’s affiliates to underwrite, purchase or place any Securities or otherwise provide financing to the Company.
Initials:
UHCP_____/Chadbourn_____ Date:
UHCP_____/Chadbourn
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United
Heritage Corporation
1/16/2008
Page
2 of 10
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2.
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Term. The
term of this Agreement will end 6 months from the date of this letter,
unless extended by mutual consent of the parties, subject to the
provisions of Section 7 (the “Term”).
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3.
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Services.
In
undertaking this assignment, the Agent will provide the following
services
to the Company, subject to the provisions of Sections 4 and
7:
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(a)
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advise
the Company as to the structure, form and appropriate amount of any
investment to be accepted in a Private Placement,
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(b)
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advise
on the formulation of a strategy and the development of procedures
and
timetables for marketing the Company to potential investors / potential
lenders;
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(c)
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assist
the Company’s management in making presentations to potential
investors/ potential lenders;
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(d)
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assist
in identifying suitable strategic partners, and qualify them as to
their
ability to consummate a Transaction and/or expand the Company’s business
and operations;
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(e)
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assist
in negotiating, structuring, reorganizing or restructuring of the
Company
as needed to consummate a Transaction or Private
Placement;
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(f)
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coordinate
due diligence investigations of or by the Company with regard to
a
proposed Private Placement or Transaction;
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(g)
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prepare,
with the assistance of the Company, a management presentation or
executive
summary describing the Company;
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(h)
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at
its discretion, provide other services as requested by the
Company.
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4.
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Certain
Agreements of the Company.
The
Company:
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(a)
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agrees
to make available to the Agent all information concerning the business,
assets, operations and financial condition of the Company, which
the Agent
reasonably requests in connection with the performance of its obligations
hereunder. The Company will make members of management and other
employees
available to the Agent for purposes of satisfying the Agent’s due
diligence requirements and consummating the Private Placement and
will
commit such time and other resources as are necessary or appropriate
to
secure reasonable and timely success of the Private Placement.
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Initials:
UHCP_____/Chadbourn_____ Date:
UHCP_____/Chadbourn
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(b)
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agrees
that all information furnished to the Agent in connection with this
Agreement will be accurate and complete in all material respects
at the
time provided and that if such information, in whole or in part,
becomes
materially inaccurate, misleading or incomplete during the Term of
the
Agent’s engagement hereunder, the Company will promptly advise the Agent
in writing and correct any such inaccuracy or omission;
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(c)
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agrees
that the management presentation, executive summary and all other
information provided to potential investors/potential lenders will
be
accurate and complete in all material respects and will not contain
an
untrue statement of material fact or omit to state a material fact
required to be stated herein, or necessary to make the statement
therein,
in light of circumstances under which they are made, not
misleading
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5.
Fees.
In
consideration for the services provided by the Agent, the Company hereby agrees
to pay the Agent the following fees:
(a)The
Private Placement Cash Fee.
(i)
If the
Company consummates during the Term the sale of any equity and/or equity-linked
securities, which include common or preferred stock, securities convertible
into
common or preferred stock, warrants or other equity linked securities with
the
exception of up to $500,000 of securities to be sold to affiliates of the
Company and any other investors introduced to the Company by the Company’s
management or significant shareholders (the “Equity Securities”), the Company
will pay to the Agent, upon the closing of each such Private Placement, a cash
placement fee equal to 8% of the gross proceeds to the Company up to $5MM and
4.00% on any financing amount in excess of $5MM.
(ii)
If
the Company consummates during the Term any non-convertible Subordinated Debt,
the Company will pay to the Agent, upon the closing of each such Private
Placement, a placement fee equal to 8% of the amount funded to the Company.
With
respect to any non-convertible Subordinated Debt with attached equity interests
in the Company, Agent will receive, in addition to the foregoing 8% fee, 8%
of
the number of securities attached thereto, in the same form received by the
lenders. For example, if the Company issues warrants to the lenders to purchase
100,000 shares of Common Stock, Agent will receive warrants, in the same form
and on the same terms, to purchase 8,000 shares of Common Stock. “Subordinated
Debt” includes any debt subordinate in rank to the Company’s Senior Debt (as
defined below).
(iii)
If
the Company consummates during the Term any non-convertible Senior Debt, the
Company will pay to the Agent, upon the closing of each such Private Placement,
a placement fee equal to 2% of the amount funded to the Company. With respect
to
any non-convertible Senior Debt with attached equity interests in the Company,
Agent will receive, in addition to the foregoing 2% fee, 8% of the number of
securities attached thereto, in the same form received by the
lenders.
For
example, if the Company issues warrants to the lenders to purchase 100,000
shares of common stock, Agent will receive warrants, in the same form and on
the
same terms, to purchase 8,000 shares of Common Stock. “Senior Debt” includes any
debt that has a first priority lien on the Company’s assets or is senior in rank
to any mezzanine debt of the Company.
Initials:
UHCP_____/Chadbourn_____ Date:
UHCP_____/Chadbourn
The
Company will pay all cash fees to Chadbourn in US Dollars via wire transfer
at
each applicable closing, to a bank account(s) designated by the
Agent.
In
the
event that any fees due Chadbourn are not paid or issued in full when due,
the
Company will also be liable to Chadbourn for interest on the value of the fees
due at the annual rate of three percent over the prime rate, accruing on a
daily
basis from the date on which such fees are due and unpaid, plus all of
Chadbourn's reasonable legal fees and expenses in connection with collection
of
said fees.
(b)
Warrants. The
Company agrees to issue to the Agent, concurrently with the successful
completion of a Private Placement contemplated by Paragraph 5(a) above, Common
Stock Warrants ("Warrants") covering shares of Common Stock equal to 8% of
the
number of shares of common stock actually issued in the Private Placement,
or in
the case of preferred stock 8% of the number of shares of common stock into
which the preferred stock so issued is initially convertible, or in the case
of
convertible debentures 8% of the number of shares of common stock into which
such debentures are initially convertible. All shares of Common Stock issuable
upon the exercise of such Warrants will be issuable out of the authorized
unissued shares of Common Stock of the Company. Such Warrants will have terms
that are commensurate with the Securities sold in such Private Placement. For
example, if the structure of the contemplated offering is a convertible
debenture with a three year term, the Agent’s Warrants will also have a three
year term. The Warrants will be non-transferable except to (i) successors to
the
Agent in merger or consolidation; (ii) purchasers of substantially all of the
Agent’s assets; (iii) officers, directors, employees, or agents of the Agent;
and (iv) shareholders of the Agent or shareholders or partners of its
transferees in the event of liquidation or dissolution. The Warrants will
contain provisions which require the Company to register the shares underlying
the Warrants whenever
either the Company or another investor initiates a registration with
the
Securities and Exchange Commission (the “SEC”), The exercise price of the
Warrants is equal to one hundred percent (100%) of the price of the Common
Stock
issued in the private placement, or in the case of convertible preferred stock
or convertible debentures, the initial conversion price of such convertible
Securities. The exercise price and the number of shares of Common Stock issuable
upon exercise of the Warrants will be subject to customary adjustment in the
case of stock splits, combinations and recapitalizations of the Company. The
Warrants will have a customary cashless exercise provision.
If
the
fair market value of one share of Common Stock is greater than the exercise
price of that share (at the date of calculation as set forth below), in lieu
of
exercising this Warrant for cash, the Holder may elect to receive shares equal
to the value (as determined below) of this Warrant (or the portion thereof
being
cancelled) by surrender of this Warrant at the principal office of the
Corporation together with the properly endorsed Subscription Form in which
event
the Corporation will issue to the holder a number of shares of Common Stock
computed using the following formula:
Initials:
UHCP_____/Chadbourn_____ Date:
UHCP_____/Chadbourn
X=Y
(A-B)
A
Where X=
the
number of shares of Common Stock to be issued to the Holder;
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Y=
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the
number of shares of Common Stock purchasable under the Warrant or,
if only
a portion of the Warrant is being exercised, the portion of the Warrant
being exercised (at the date of such
calculation);
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A=
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the
fair market value of one share of the Corporation’s Common Stock at the
date of exercise;
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| B= | exercise price (as adjusted to the date of such calculation). |
The
Company will send to the Agent, by registered mail, unless otherwise instructed
by Chadbourn, all equity/or equity-related compensation within 30 days of the
closing of an applicable Private Placement or Transaction facilitated by the
Agent.
(c)
Tail.
If any
Strategic Partners or Potential Investors / Potential Lenders that were
contacted by the Agent or that purchased Securities in a Private Placement,
during the term of this Agreement, make an equity and/or debt investment(s)
in
the Company within 12 months from the closing date of the Private Placement
or
expiration of this Agreement, the Agent will be paid an additional placement
fee
under the same terms for each security class as specified in paragraphs 5(a)
and
(b) above...
(d)
Retainer.
In
consideration for the services rendered by the Agent pursuant to this Agreement,
the Company agrees to pay the Agent a monthly fee of $15,000, which the Agent
may elect to have paid in common stock of the Company valued at the average
volume weighted average price of the common stock for the 5 trading days
preceding the end of the applicable month of service, provided that the first
payment shall be due upon execution of this Agreement. The cash value of the
fees (as calculated pursuant to the preceding sentence in the case of stock
payments) will be deducted from the fees specified in paragraph 5(a).
(e) Merger/Acquisition.
The
Company agrees to pay to the Agent a fee equal to 2.5% of the aggregate value
of
cash and/or stock received by or paid to the Company pursuant to any sale,
merger, or acquisition facilitated by the Agent during the Term and/or for
12
months after the termination of this of this Agreement.
Initials:
UHCP_____/Chadbourn_____ Date:
UHCP_____/Chadbourn
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6.
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Expenses.
In
addition to any fees that may be payable hereunder and regardless
of
whether any proposed transaction is consummated, the Company hereby
agrees
to reimburse the Agent for all reasonable travel, legal and other
out-of-pocket expenses incurred in performing the services described
herein, including reasonable fees and disbursements of the Agent’s legal
counsel. The Agent will not either incur any single expense item
over $100
or incur aggregate expenses under this Agreement in excess of $1,000
without the prior approval of the Company.
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7.
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Termination.
The Agent’s engagement under this letter agreement may be terminated on
either the Company's or the Agent’s written request with 30 days notice;
provided,
however,
that the provisions of Sections 5 through 14, inclusive of this letter
agreement and the indemnification provisions of the separate letter
agreement referenced in Section 17 hereof, and all of the Agent’s rights
under all of such provisions, will survive the expiration or termination
of this engagement and the consummation of any Private Placement
by the
Company. Termination will not affect the right of the Agent to receive
any
fees payable hereunder, any fees which have accrued prior to such
termination, or the right of the Agent to receive reimbursement for
its
out-of-pocket expenses described above. It is expressly understood
that
neither the Agent nor the Company will have any continuing obligation
or
liability to one another under this Agreement upon termination hereof,
except in respect of the matters specifically referenced in this
Section
8.
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8.
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Disclosure.
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(a)
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Restrictions
on Agent.
Agent recognizes that its relationship with Company will give it
access to
Confidential Information (as hereinafter defined). Consequently,
during
the Term and for the one (1) year period immediately thereafter,
Agent
will not use or disclose to any prospective investor or other third
party
any Confidential Information, unless or until such third party agrees
in
writing to be bound by the terms of this confidentiality provision.
“Confidential Information” shall include but not be limited to, any
information concerning Company’s processes, products, services,
inventions, purchasing, accounting, marketing, selling methods and
techniques, research and development, computer programs, purchasing
information, ideas and plans for development, historical financial
data
and forecasts, long range plans and strategies, customer lists, and
any
other information related to Company’s customers, and any such other
information concerning the business of Company or its manner of operation
which is not generally known in the industry. Confidential Information
shall not include any information that: (i) is or subsequently becomes
publicly available without Agent’s breach of this Agreement; (ii) was in
Agent’s possession at the time of disclosure and was not acquired from
Company; (iii) is received from third parties, and is rightfully
in the
possession of such third parties and not subject to a confidentiality
obligation of third parties; (iv) is required by law to be disclosed
(with
prior notice to Company); or (v) is intentionally disclosed without
restriction by Company to a third
party.
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Initials:
UHCP_____/Chadbourn_____ Date:
UHCP_____/Chadbourn
(b) Restrictions
on Company.
The
Company agrees that, except as required by applicable law or regulation, any
advice to be provided by the Agent under this Agreement will not be disclosed
publicly or made available to third parties without the prior approval of the
Agent, which approval will not be unreasonably withheld.
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9.
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Complete
Agreement.
This Agreement, together with the separate indemnity letter, incorporates
the entire agreement of the parties with respect to the subject matter
of
this Agreement, and may not be amended or modified except in writing.
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10.
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Enforceability
and Governing Law.
The invalidity or unenforceability of any provision of this Agreement
will
not affect the validity or enforceability of any other provision
of this
Agreement which will remain in full force and effect. This Agreement
will
be governed by and construed in accordance with the laws of the State
of
New York, without regard to the conflicts of law provisions thereof.
Venue
for any legal proceedings under this Agreement shall be in the state
or
federal courts located in the City of New York, New York, Borough
of
Manhattan.
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11.
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Successors
or Assigns.
The benefits of this letter agreement and the separate indemnity
letter
will inure to the benefit of respective successors and assigns of
the
parties hereto and of the indemnified parties hereunder and thereunder
and
their successors and assigns and representatives, and the obligations
and
liabilities assumed in this Agreement by the parties hereto will
be
binding upon their respective successors and assigns.
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12.
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Waivers.
No
waiver of any of the provisions of this Agreement will be deemed
or will
constitute a waiver of any other provision, whether or not similar,
nor
will any waiver constitute a continuing waiver. No waiver will be
binding
unless executed in writing by the Party making the waiver.
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13.
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Attorney’s
Fees. If
any legal action or proceeding is brought for the enforcement or
for a
declaration of rights and duties under this Agreement, or because
of an
alleged dispute, breach, default or misrepresentation in connection
with
any of the provisions of this Agreement, the successful or prevailing
Party or Parties will be entitled to recover reasonable attorney’s fees
and other costs incurred in that action or proceeding, in addition
to any
other relief to which the successful or prevailing Party or Parties
may be
entitled.
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14.
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Force
Majeure.
The
Agent’s failure to perform any term or condition of this Agreement as a
result of conditions beyond its control such as, but not limited
to, war,
acts of God, governmental restrictions, power failures, market conditions
or damage or destruction of network facilities or servers, will not
be
deemed a breach of this Agreement.
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15.
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Counterparts. This
Agreement may be executed and initialed in one or more counterparts,
each
of which will be deemed an original and all of which taken together
will
constitute one and the same instrument.
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16.
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Indemnification.
The Company agrees to enter into separate letter agreements with
the Agent
dated the date hereof, providing for indemnification of the Agent
by the
Company in connection with the Agent’s engagement hereunder. The
obligations contained in such letter will remain operative regardless
of
any expiration, termination or cancellation of the Agent’s services
hereunder and regardless of the consummation of any transaction
contemplated hereby.
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Initials:
UHCP_____/Chadbourn_____ Date:
UHCP_____/Chadbourn
United
Heritage Corporation
1/16/2008
Page 10
of 10
If
the
terms of our Agreement as set forth in this letter are satisfactory, kindly
initial and sign the enclosed copy of this letter and indemnification agreement
and return them to us. We look forward to working with you on this assignment
and appreciate the opportunity to be of service.
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Very
truly yours,
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Chadbourn
Securities, Inc.
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By:
/s/ Xxxxx
Xxxxxx
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Xxxxx
Xxxxxx
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President
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Accepted
and Agreed to:
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United
Heritage Corporation
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By:
______________________
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Name:
____________________
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Title:
____________________
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Initials:
UHCP_____/Chadbourn_____ Date:
UHCP_____/Chadbourn
