EXHIBIT 10.14
WESTMINSTER SECURITIES CORPORATION
000 XXXX XXXXXX, 0XX XXXXX
XXX XXXX, XX 00000
(000) 000-0000
XXXXXX & XXXXXXX, LLC
000 XXXXXXX XXXXXX, 00XX XXXXX
XXX XXXX, XX 00000
(000)000-0000
BY E-MAIL
March 2, 2005
Xx. Xxxxxx Xxxxx
Chief Financial Officer
ASTRATA GROUP INCORPORATED
0000 Xxxxxxx Xxxx Xxxx
Xxxxx 0000
Xxx Xxxxxxx, XX 00000-0000
RE: ENGAGEMENT LETTER EFFECTIVE MARCH 2, 2005
Dear Xx. Xxxxx:
Upon the execution hereof by all parties hereto, this letter agreement shall
supersede, in the entirety except for monies owed to Westminster, that certain
Engagement Letter by and between Westminster Securities Corporation
("Westminster") and Astrata Group Incorporated (OTCBB: ATTG) and its respective
affiliates and/or successors (collectively referred to as the "Company"), dated
December 24, 2004 and effective December 20, 2004 (the "Superseded Agreement"),
which Superseded Agreement shall be deemed a legal nullity and neither party
thereunder shall have any further responsibilities to the other, except for such
monies owed to Westminster and as may specifically be referenced hereinbelow.
Westminster and Xxxxxx & Xxxxxxx ("Xxxxxx"; collectively, with Westminster, the
"Placement Agents" ) are pleased to submit to you this binding Engagement Letter
(also referred to as the "Agreement") that sets forth the arrangement whereby
Westminster and Xxxxxx will act as co-exclusive placement agents to the Company
, to endeavor to secure financing on a best efforts basis (the "Financing" or
the "Offering") and to advise the Company's management on matters to facilitate
the growth of the Company. The terms of Agreement are as follows:
1. SERVICES: The Placement Agents will use their
respective best efforts to secure
equity-based and/or debt-based funding
and/or lines of credit for the Company in
amounts and upon terms acceptable to the
Company, it being understood that the
Company seeks funding initially in the range
of Ten Million-to-Fifteen Million Dollars
($10,000,000-to-$15,000,000). The Placement
Agents may also, as
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the parties deem appropriate and as may be
agreed upon by the Placement Agents and the
Company:
a. Assist the Company with its desire
to have its equity publicly traded
on a national exchange.
b. Introduce the Company to and advise
about companies that are possible
strategic partners and/or merger or
acquisition candidates.
c. Render such other financial
advisory and investment banking
services as may from time to time
be necessary or appropriate to
accomplish the Company's
objectives.
2. RETAINER: Pursuant to the Superseded Agreement, the
Company previously issued to Westminster
Fifteen Thousand (15,000) shares of the
Company's common stock in retainer. All of
such shares were: (a) "unregistered"; (b) to
be registered with and have the same
registration rights as the next round of
investment; and, (c) fully paid and
non-cancelable. The shares represented a
nonrefundable, advance payment to
Westminster for its good faith efforts in
providing the Services referenced in Section
1 of the Superseded Agreement which the
parties deem to have been earned by
Westminster upon the signing hereof. The
Company is not obligated hereunder or
thereunder to issue any additional shares of
its common stock to either of the Placement
Agents as a retainer or for any other
purposes except as otherwise expressly set
forth or referenced hereinbelow.
3. CONTINGENT CASH FEE: The Placement Agents shall be entitled to
receive and the Company shall pay to the
Placement Agents a commission ("Contingent
Cash Fee"), calculated as a percentage of
the amount raised from any source. Each such
commission will be paid directly from escrow
at any time and upon each time funds are
disbursed to the Company, per the following
schedule dependent upon the type of
financing raised:
Equity-Based Funding ("Equity-Fee"): Ten
Percent (10%) of any such equity-based
funding.
Debt-Based Funding Convertible Into Equity
("Convertible Fee"): Ten Percent (10%) of
any such debt-based convertible funding;
PROVIDED, HOWEVER, that neither of the
Placement Agents shall be entitled to
further fees or commissions
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upon any conversion of all or part of such
convertible debt securities.
Non-convertible Debt ("Debt Fee"): Eight
Percent (8%) of any such nonconvertible
debt-based funding.
Subject to the payment of certain fees to
third-party brokers who introduce investors
to the Company through either of the
Placement Agents, which investors are
accepted by the Company and participate in
the equity or debt fundings referenced above
(the payment of which fees shall be deducted
from the parties' commissions on a PARI
PASSU basis), the Placement Agents shall
allocate the Equity Fee, the Convertible
Fee, and the Debt Fee between themselves as
follows:
a. In respect to subscriptions from
Retail Investors (defined as
funding obtained for the Company:
(i) by registered Broker Dealers
under a Select Broker Agreement
made with Westminster; and/or, (ii)
from Ram Capital, Special
Situations, and/or SF Capital),
whose subscriptions are accepted by
the Company, Westminster shall
receive one hundred percent (100%)
of the commission, regardless of
whether such investor was
introduced to the Company through
its efforts or those of Xxxxxx; and
b. In respect to subscriptions from
Institutional Investors (defined as
funding obtained for the Company
from sources other than Retail
Investors), whose subscriptions are
accepted by the Company, Xxxxxx
shall receive sixty percent (60%)
of the commission and Westminster
shall receive forty percent (40%)
of the commission, regardless of
whether such investor was
introduced to the Company through
the efforts of Xxxxxx or of
Westminster. Westminster and Xxxxxx
agree to use their best efforts to
work together in a businesslike
manner and to coordinate their
respective efforts to maximize
their joint effectiveness in
obtaining sufficient investors
satisfactory to the Company to
close investment referenced in
paragraph 1, above, at the maximum
level.
4. CONTINGENT WARRANT FEE: a. EQUITY-BASED FUNDING AND DEBT-BASED
FUNDING CONVERTIBLE INTO EQUITY: At
each closing of equity-based
funding and/or debt-
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based funding convertible into
equity, the Placement Agents or
their respective assignees shall,
in addition to any Contingent Cash
Fee, be entitled to receive
warrants equal to Eight Percent
(8%) of the number of shares issued
or issuable in connection with such
funding, exercisable on the same
terms and at the same price paid by
the investor(s). Such number of
warrants shall be allocated between
the Placement Agents in the same
manner as the Contingent Cash Fee.
b. NON-CONVERTIBLE DEBT: At any
closing of non-convertible debt,
the Placement Agents or their
respective assignees shall, in
addition to any Contingent Cash
Fee, be entitled to receive
warrants to purchase a number of
shares of the Company's common
stock equal to Five Percent (5%) of
any such funds raised divided by
the average closing price of the
Company's common stock for the
twenty (20) trading days
immediately preceding the issuance
of such warrant(s) ("ACP"). The
exercise price for such warrants
shall be One Hundred Percent (100%)
of the ACP. Such number of warrants
shall be allocated between the
Placement Agents in the same manner
as the Contingent Cash Fee.
5. MERGER OR ACQUISITION FEE
("MERGER FEE"): In the event the Company requests in writing
the assistance of either of the Placement
Agents with regard to a merger with,
acquisition of, or acquisition by another
entity, either public or private (a
"Transaction"), the Company will, in the
absence of any other written agreement
between the parties, pay the Placement
Agents a cash fee equal to Five percent (5%)
of the total transaction value which
includes (i) cash, notes, securities and
other property of value; (ii) liabilities
(x) repaid or retired in connection with or
in anticipation of a Transaction and/or (y)
existing on the Company's balance sheet at
the time the Transaction is consummated (if
such Transaction takes the form of a sale of
assets); (iii) payments to be made in
installments; (iv) amounts paid or payable
under consulting, supply, service,
distribution, licensing or lease agreements
not to compete or similar arrangements
(including such payments to engagement); and
(v) contingent payments (whether or not
related to future earnings or operations ).
Xxxxxx shall receive sixty percent (60%) of
such cash fee and Westminster shall receive
forty percent (40%) thereof, regardless of
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which of the two Placement Agents were
requested by the Company. Notwithstanding
anything to the contrary contained in this
paragraph 5, Westminster shall be entitled
to 100% of any fee paid for the merger,
acquisition, or other business consolidation
of or with Vertrax Inc (currently located in
New Haven Connecticut).
6. EXCLUSIVITY/AUTHORITY: Upon execution hereof, the Placement Agents
shall become the Company's exclusive
financial advisors for all equity, debt,
equity-linked or debt-linked placements for
a period commencing on December 20, 2004 and
ending on February 28, 2006 ("Initial Term")
unless otherwise extended upon the mutual
consent of all of the parties hereto.
Notwithstanding anything to the contrary
contained in this paragraph, the Company may
terminate this Agreement upon thirty (30)
days written notice to each of the Placement
Agents in the event that the Company and/or
the Placement Agents have been unable to
raise at least Ten Million Dollars, by June
30, 2005. Nothing in the preceding sentence
shall change, void or mitigate the terms of
paragraph 13 below.
Each of the Placement Agents shall have the
non-exclusive right to offer strategic
alliances and merger and/or acquisition
opportunities to the Company, subject to
mutually agreed upon terms and conditions.
Each of the Placement Agents shall have the
right to associate themselves with other
members of the National Association of
Securities Dealers, Inc. ("NASD") and/or
agents who will share in compensation. The
selection of other agents shall be mutually
agreeable between the Company and the
Placement Agents, but their compensation
shall be at the Placement Agents' sole
discretion.
Each of the Placement Agents acknowledges
that The Xxxxxx Group, LLC, has entered into
a consulting agreement with the Company, as
a result of which The Xxxxxx Group may
receive a fee for acting as a finder in
respect of a Financing or a Transaction and
that any such finder fee shall not be deemed
to be a part of any compensation otherwise
owed to either of the Placement Agents by
the Company hereunder and shall not be
subject to the potential sharing arrangement
referenced in the immediately preceding
paragraph. Notwithstanding anything to the
contrary contained in this paragraph,
nothing in this
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Agreement shall diminish, limit or curtail
the Company's appointment of the Placement
Agents as the Company's exclusive agents for
all equity, debt, equity-linked or
debt-linked placements and/or offerings for
or during the Initial Term or any extension
thereof and as provided by the Tail.
Each of the Placement Agents shall have the
right to receive financial statements
concurrently with their filing by the
Company with the Securities and Exchange
Commission on the XXXXX System.
The twelve (12)-month period immediately
following the Initial Term of this Agreement
shall be referred to as the "Tail Period".
During the Tail Period, the Placement Agents
shall be entitled to receive, and the
Company shall be obligated to pay to the
Placement Agents, the Equity Fee,
Convertible Fee, Debt Fee, Contingent
Warrant Fee, and/or Merger Fee as defined in
this Agreement, allocated between them as
set forth above, for any such transactions
entered into by the Company with any entity
introduced directly or indirectly to the
Company by either of the Placement Agents or
with whom either of the Placement Agents was
working on behalf of the Company at the
Company's direction.
EACH OF THE PLACEMENT AGENTS HEREBY
ACKNOWLEDGES THAT THE COMPANY IS UNDER NO
OBLIGATION TO ACCEPT ANY DEBT OR EQUITY
TRANSACTION PRESENTED BY EITHER OF THE
PLACEMENT AGENTS.
7. INDEMNIFICATION: The Company agrees to indemnify each of the
Placement Agents to the extent of and in
accordance with the provisions of the
attached Schedule A which is incorporated by
reference herein and made a part hereof, and
to provide such other indemnifications,
representations and warranties as each of
the Placement Agents may reasonably and from
time-to-time request.
8. DUE DILIGENCE: The Company shall assist and take whatever
actions necessary to facilitate the
Placement Agents' due diligence review of
the Company and its operation.
9. EXPENSES: The Company shall, at its option, make
arrangement for, pre-pay and/or reimburse
each of the Placement Agents for their
respective travel, entertainment, and other
expenses and disbursements incurred by them
(and as approved
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by the Company) on the Company's behalf in
furtherance of the purpose of this
Agreement. Such expenses shall also include
by way of example only: (i) legal and/or
accounting fees for advice if and as
required under this Agreement; (ii) escrow
fees if required; and/or, (iii) printing and
mailing costs. Upon the execution of the
Superseded Agreement, the Company deposited
Ten Thousand Dollars ($10,000) with
Westminster as a reserve for out-of-pocket
expenses and the Company issued a check to
Xxxxxxx Xxxxxxxxx LLP ("Xxxxxxx"),
Westminster's and Xxxxxx'x securities
counsel, in the amount of Seven Thousand,
Five Hundred Dollars ($7,500) in connection
with Xxxxxxx'x services in preparation and
review of private placement memoranda and
other offering documents which may be
required under this Agreement. Any unused
advances will be promptly returned to the
Company. For clarity, the Company is not
obligated hereunder or thereunder to deposit
any funds to either of the Placement Agents
or to Xxxxxxx as a reserve or retainer or
for any other purposes except as otherwise
expressly set forth in the Superseded
Agreement or herein.
The Company shall, at its option, prepay or
reimburse the Placement Agents upon
presentation for any costs incurred by
either of them for collection of any
Contingent Cash Fee, Contingent Warrant Fee,
and/or Expenses hereunder, including but not
limited to reasonable attorney's' fees and
court costs.
10. Neither the Company nor either of the Placement Agents will make any public
or other disclosures concerning the Financing or Offering or a Transaction
without the prior written consent of the other parties, subject to each party's
legal obligations. Notwithstanding the foregoing, upon the completion of any
funding, merger and/or acquisition, either of the Placement Agents may request,
subject to applicable rules and regulations, and the Company shall agree to
place, at the Company's expense, an appropriate notice (commonly referred to as
a "Tombstone") in the Wall Street Journal or other such publication as the
Placement Agents may reasonably direct.
11. The Placement Agents shall not be obligated to provide advice or perform
services to the Company that are not specifically addressed in this Agreement.
In connection with the Placement Agents providing the services described above,
the Company shall provide the Placement Agents with any information that either
of the Placement Agents reasonably requires. The Company hereby acknowledges
that each of the Placement Agents will be using and relying on said information
without independent verification and that each of the Placement Agents assumes
no responsibility for the accuracy and completeness of any information provided
to it by the Company.
12. The obligations of the Placement Agents described in this Agreement consist
solely of best efforts services to the Company. In no event shall the Placement
Agents be required by this Agreement to act as the co-agents of the Company or
otherwise to represent or make decisions for the Company or to provide legal or
accounting
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services. All final decisions with respect to acts of the Company or its
affiliates, whether or not made pursuant to or in reliance upon information or
advice furnished by either of the Placement Agents hereunder, shall be those of
the Company or such affiliates, and neither of the Placement Agents shall under
any circumstances be liable for any expense incurred or loss suffered by the
Company as a consequence of such decisions.
13. The Company hereby acknowledges that neither of the Placement Agents is a
fiduciary of the Company and that neither of the Placement Agents makes any
representations or warranties regarding the Company's ability to secure
financing, whether now or in the future.
14. This Agreement will be governed by and construed in accordance with the laws
of the State of New York, without giving effect to its conflict of laws
principles or rules. If a dispute or claim shall arise with respect to any of
the terms or provisions of this Agreement, or with respect to the performance by
any of the parties under this Agreement, then the parties agree to submit the
dispute to binding arbitration in a venue located in New York, NY, in accordance
with the rules of the American Arbitration Association ("AAA"). The prevailing
party shall be reimbursed by the non-prevailing party for all reasonable
attorney's fees and costs (including all arbitration costs) incurred by the
prevailing party in resolving such dispute.
15. In the event that any provision of this Agreement shall be held to be
invalid, illegal, or unenforceable in any circumstances, the remaining
provisions shall nevertheless remain in full force and effect and shall be
construed as if the unenforceable portion or portions were deleted.
16. This Agreement shall be binding upon and inure to the benefit of the parties
and their respective successors and authorized assigns. Any attempt by any of
the parties to assign any rights, duties, or obligations which may arise under
this Agreement without the prior written consent of any of the other parties
shall be void; however, any such consent shall not be unreasonably withheld,
delayed, or denied.
17. This document and the Co-Placement Agents Agreement among the parties hereto
and of even date herewith contains the entire agreement between the parties with
respect to the subject matter hereof, and neither party is relying on any
agreement, representation, warranty, or other understanding not expressly stated
herein.
18. The parties acknowledge that certain provisions of this Agreement must
survive any termination or expiration thereof in order to be fair and equitable
to the party to whom any promise or duty to perform is owed under such provision
prior to such termination or expiration of the Agreement. Therefore, the parties
agree that the provisions of paragraphs 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13,
14, 15, 16, 17, 18, and 19 shall survive the termination or expiration of this
Agreement for the period required to meet and satisfy any obligations and
promises arising therein and thereunder.
19. This agreement may be executed in counterparts, each of which shall be
deemed an original and all of which together will constitute one and the same
instrument.
If the foregoing correctly sets forth the understanding between the
Company and Westminster, please sign below where indicated.
Very truly yours,
WESTMINSTER SECURITIES CORPORATION
By:________________________________________
Xxxx X'Xxxx, President
XXXXXX AND XXXXXXX, LLC
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By:________________________________________
Xxxxxx X. Xxxxx, Chief Financial Officer
ACCEPTED AND AGREED TO AS OF THE 2nd DAY OF March, 2005.
ASTRATA GROUP INCORPORATED
By:________________________________________
Xxxxxx Xxxxx, Chief Financial Officer
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SCHEDULE A - INDEMNIFICATION
Company agrees to indemnify each of Westminster and Xxxxxx, their respective
employees, directors, officers, agents, affiliates, and each person, if any, who
controls it within the meaning of either Section 20 of the Securities Exchange
Act of 1934 or Section 15 of the Securities Act of 1933 (each such person,
including each of Westminster and Xxxxxx, is referred to as an "Indemnified
Party") from and against any losses, claims, damages and liabilities, joint or
several (including, all legal to other expenses reasonably incurred by an
Indemnified Party in connection with the preparation for or defense of any
threatened or pending claim, action or proceeding, whether or not resulting in
any liability) ("Damages"), to which such Indemnified Party in connection with
its services or arising out of its engagement hereunder, may become subject
under any applicable Federal or state law or otherwise, including but not
limited to, liability (i) caused by or arising out of an untrue statement or an
alleged untrue statement of a material fact or the omission or the alleged
omission to state a material fact necessary in order to make the statement not
misleading in light of the circumstances under which it was made, (ii) caused by
or arising out of any act, or (iii) arising out of Westminster's and Xxxxxx'x
engagement or the rendering by any Indemnified Party of its services under this
Agreement; provided, however, that Company will not be liable to the Indemnified
Party hereunder to the extent that any damages are found in a final
non-appealable judgment by a court of competent jurisdiction to have resulted
from the gross negligence, bad faith or willful misconduct of the Indemnified
Party seeking indemnification hereunder.
These indemnification provisions shall be in addition to any other liability,
which Company may otherwise have to any Indemnified Party.
If for any reason other than a final non-appealable judgment finding any
Indemnified Party liable for Damages for its gross negligence, bad faith or
willful misconduct the foregoing indemnity is unavailable to an Indemnified
Party or insufficient to hold an Indemnified Party harmless, then Company shall
contribute to the amount paid or payable by an Indemnified Party as a result of
such Damages in such proportion as is appropriate to reflect not only the
relative benefits received by Company and its shareholders on the one hand and
each of Westminster and Xxxxxx on the other, but also the relative fault of
Company and the Indemnified Party as well as any relevant equitable
considerations, subject to the limitation that in no event shall the total
contribution of all Indemnified Parties to all such Damages exceed the amount of
fees actually received by each of Westminster and Xxxxxx hereunder.
Promptly after receipt by the Indemnified Party of notice of any claim or of the
commencement of any action in respect of which indemnity may be sought, the
Indemnified Party will promptly notify Company in writing of the receipt or
commencement thereof; however Company shall not have the right to assume the
defense of such claim or action (including the employment of counsel). The
Indemnified Party shall have the right to retain counsel reasonably satisfactory
to Company, at Company's expense, to represent the Indemnified Party in any
claim or action in respect of which indemnity may be sought and agrees to
cooperate with Company and Company's counsel in the defense of such claim or
action. The omission by an Indemnified Party to promptly notify Company of the
receipt or commencement of any claim or action in respect of which indemnity may
be sought will relieve Company from any liability Company may have to such
Indemnified Party only to the extent that such a delay in notification
materially prejudices Company's ability to defend such claim or action. Company
shall not be liable for any settlement of any such claim or action effected
without its prior written consent, which shall not be unreasonably withheld or
delayed.
Notwithstanding anything to the contrary contained herein or in the Co-Placement
Agents Agreement among the parties hereto and of even date herewith, if there is
a conflict in the scope of the indemnification provisions of this Schedule A and
the indemnification provisions of Section 5 of such Co-Placement Agents
Agreement, the broader indemnification provisions shall be applicable; PROVIDED,
HOWEVER, that the parties do not intend, by this paragraph, to increase the
scope or breadth of the indemnification provided by either such provision, but,
rather, to provide for an interpretive provision in the event of an
inconsistency in the manner in which an indemnification claim will be prosecuted
or determined.
Initials _________ Initials __________
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