EXHIBIT 10.4
Source Capital Group, Inc.
Members NASD, SIPC Investment Bankers / Brokers xxxxxxx@xxxxxxxxx.xxx
X. Xxxx Xxxxxx
Xx. Xxxx Xxxxxxxxx - CEO
Xxxxxxx Xxxx, Xxxxxxx Hill,
Bakewell, Derbyshire DE45 1DL UK.
March 23, 2004
Dear Xx. Xxxxxxxxx:
The purpose of this letter is to confirm the understanding and agreement (the
"Agreement") between Source Capital Group, Inc., ("SCG") and Peak Entertainment
Holdings, Inc. (the "Company"), regarding the retention of SCG by the Company as
its financial advisor for the purposes set forth herein.
Under this Agreement, SCG will provide financial advisory services to the
Company as follows:
A) Raising of Capital. SCG shall use its best efforts to provide equity
financing for the Company.
B) Fees, Commissions & Expenses. The Company agrees to pay the following fees
to SCG for its services.
1. SCG will be compensated 6% cash and 6% ("warrant") coverage on
any funds introduced by SCG during this engagement. The exercise
price of the warrants shall be equal to the issue price,
conversion price or strike price of the stock, convertible
security or warrant at the time of the sale and will be subject
to adjustment in accordance with the terms of any adjustment
provided for in the Financing document. Said warrants shall be
exercisable for five (5) years from date of issuance. The terms
of said warrants shall include such piggyback registration
rights, anti-dilution rights, and "cashless" exercise provisions
in the event of exercise by SCG. Such fees shall be paid at the
closing from an escrow account at the same time any new
investment is dispersed to the company.
2. SCG will receive $-0- as a non-refundable retainer upon signing
of this agreement.
3. Expenses. In addition to any fees that may be payable to SCG
under this Agreement, the Company agrees to reimburse SCG for its
reasonable out-of-pocket expenses incurred in connection with the
services rendered by SCG hereunder (including, without
limitation, travel and lodging, data and word processing,
graphics and communication charges, research costs, and courier
services and fees) provided expenses in excess of $200 shall
require the prior approval of the Company.
0000 Xxxx Xxxx Xxxx x Xxxxxxxx, XX 00000 o 000 000-0000 o 000 000-0000 o Fax 203
000-0000
Source Capital Group, Inc. Page 2 of 6
4. All cash payments under this Agreement shall be made in U.S.
dollars and without withholding or deduction of any tax,
assessment or other governmental charges unless required by law.
Fees and retainers should be made payable and wired to:
Source Capital Group Inc.
Fleet Bank
ABA# 000000000
Acct.# 9361882644
5. Xxxxxxx, Acquisitions & Joint Ventures ("MA&JV"). The Company may
or may not, at its sole discretion, and on a case by case basis,
engage SCG to assist it in its discussions with potential Merger,
Acquisition and or Joint Venture candidates, which may include
directly negotiating on the Company's behalf and the rendering
independent opinions as to valuation and formulae, among other
things. Upon the Company's written request and SCG's acceptance
of any such assignment, The Company will pay SCG a flat closing
fee equal to 3.00% of the amount paid or received (in kind) in
any transaction by and or between the Company, the MA&JV
candidate and or the surviving company (the "M&A Fee"), with such
fee due on closing of such MA&JV transaction.
C) Information. The Company will furnish or cause to be furnished to SCG, such
information, as SCG believes appropriate to its assignment (all such
information so furnished being the "Information"). The Company recognizes
and confirms that SCG (a) will use and rely primarily on the Information
and on information available from generally recognized public sources in
performing the services contemplated by this Agreement without having
independently verified the same, (b) does not assume responsibility for the
accuracy or completeness of the Information and such other information, (c)
is entitled to rely upon the Information without independent verification
and (d) will not make an appraisal of any assets or valuation of the
Company in connection with its assignment
D) Confidentiality. Except as contemplated by the terms hereof or as required
by applicable law or legal process, SCG shall keep confidential all
non-public information provided to it by or at the request of the Company,
and shall not disclose such information to any third party or to any of its
employees or advisors except to those persons who have a need to know such
information in connection with SCG's performance of its responsibilities
hereunder. The Company understands that any documents, presentations or
analyses prepared by SCG are proprietary and SCG is under no obligation to
provide (by e-mail, floppy disk or otherwise) either the Company or its
assigns with the computer files of such work product. Except as required by
applicable law, any advice to be provided by SCG under this Agreement shall
not be disclosed publicly or made available to third parties without the
prior written consent of SCG. In addition, SCG may not be otherwise
Source Capital Group, Inc. Page 3 of 6
publicly referred to without its prior written consent. All services,
advice and information and reports provided by SCG to the Company in
connection with this assignment shall be for the sole benefit of the
Company and shall not be relied upon by any other person.
E) Indemnity. The Company acknowledges and agrees that SCG has been retained
to act solely as financial advisor to the Company. In such capacity, SCG
shall act as an independent contractor, and any duties of SCG arising out
of its engagement pursuant to this Agreement shall be owed solely to the
Company. The Company agrees to indemnify SCG in accordance with the
indemnification agreement attached as Exhibit A.
F) Arbitration. Any and all disputes, demands, claims or controversies hereto
arising out of or relating to this agreement or the breach thereof, shall
be settled by binding arbitration in accordance with the rules of the
National Association of Securities Dealers, Inc. ("NASD"). The arbitration
shall be conducted in New York City under the rules of the NASD. Any
judgment upon the award rendered by the arbitrator may be entered into any
court or administrative tribunal having jurisdiction thereof. Costs
associated with the arbitration, including reasonable attorney's fees,
shall be borne by whichever parties the arbitrators shall deem just and
fair.
G) Term & Termination. The term of SCG's engagement hereunder (the "Term")
shall commence on the date hereof and shall end on the earlier of June 30,
2005, upon 90 days written notice after a closing of an equity financing by
SCG or upon 10 days written notice prior to the closing of any equity
financing pursuant to this Agreement (the "Expiration Date") without cause
by either the Company or SCG. Notwithstanding the foregoing, the provisions
relating to the payment of fees and expenses accrued through the Expiration
Date, the status of SCG as an independent contractor and the limitation on
to whom SCG shall owe any duties will survive any such termination, and any
such termination shall not affect the Company's obligations under the
indemnification agreement.
SCG will be entitled to the fees set forth above in the event that within
18 months following the Expiration Date, a Financing is consummated with an
investor who was first introduced to the Company by SCG prior to the
Expiration Date and which investor is included on a schedule of investors
delivered by SCG to the Company within 10 calendar days following the
Expiration Date.
H) Exclusivity. During the Term of this agreement, The Company's relationship
with SCG will be non-exclusive. If the Company retains another entity to
raise capital, other than any present advisor, the Company will notify SCG
within three business days of such retention.
I) Advertisements. The Company acknowledges that SCG may, at its option and
expense, place an announcement in such newspapers and periodicals as it may
choose, stating that SCG has acted as the financial advisor to the Company.
SCG agrees that the Company will have the right to pre-approve the form of
such announcement, which approval shall not be unreasonably withheld or
delayed. SCG acknowledges that while the Company has a registration
statement under review by the SEC, the Company may delay any such
announcement as reasonably required.
Source Capital Group, Inc. Page 4 of 6
This Agreement (including the attached indemnification) embodies the entire
agreement and understanding between the parties hereto and supersedes all prior
agreements and understandings relating to the subject matter hereof. If any
provision of this Agreement is determined to be invalid or unenforceable in any
respect, such determination will not affect such provision in any other respect,
which will remain in full force and effect. No waiver, amendment or other
modification of this Agreement shall be effective unless in writing and signed
by each party to be bound thereby. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York applicable to
contracts executed in and to be performed in that state.
Please confirm that the foregoing correctly sets forth our agreement by signing
and returning to SCG the duplicate copy of this Agreement, the indemnification
agreement attached hereto as Exhibit A.
By: /s/ X. Xxxx Xxxxxx
-----------------------------
X. Xxxx Xxxxxx, Managing Director Source
Capital Group, Inc.
By: /s/ Xxxx Xxxxxxxxx
--------------------------------
Xxxx Xxxxxxxxx - CEO
Peak Entertainment Holdings, Inc.
Source Capital Group, Inc. Page 5 of 6
This Exhibit A is a part of and is incorporated into that certain letter
agreement, March 22, 2004 (the "Agreement"), by and between Xxxx Entertainment.,
a ________ corporation (with its wholly-owned subsidiaries collectively, the
"Company"), and Source Capital Group, Inc. (the "Placement Agent"). Capitalized
terms used herein and not otherwise defined shall have the respective meanings
provided in the Agreement.
The Company agrees to indemnify and hold harmless the Placement Agent, its
affiliates and each person controlling the Placement Agent (within the meaning
of Section 15 of the Securities Act), and the directors, officers, agents and
employees of the Placement Agent, its affiliates and each such controlling
person (the Placement Agent, and each such entity or person. an "Indemnified
Person") from and against any losses, claims, damages, judgments, assessments,
costs and other liabilities (collectively, the "Liabilities"), and shall
reimburse each Indemnified Person for all fees and expenses (including the
reasonable fees and expenses of one counsel for all Indemnified Persons, except
as otherwise expressly provided herein) (collectively, the "Expenses") as they
are incurred by an Indemnified Person in investigating, preparing, pursuing or
defending any claim, action, proceeding or investigation, whether or not any
Indemnified Person is a party thereto (collectively, the "Actions"), (i) caused
by, or arising out of or in connection with, any untrue statement or alleged
untrue statement of a material fact contained in any offering documents prepared
by the Company (including any amendments thereof and supplements thereto) (the
"Offer Documents") or by any omission or alleged omission to state therein a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading (other than untrue
statements or alleged untrue statements in, or omissions or alleged omissions
from, information relating to an Indemnified Person furnished in writing by or
on behalf of such Indemnified Person expressly for use in the Offer Documents)
or (ii) otherwise arising out of or in connection with advice or services
rendered or to be rendered by any Indemnified Person pursuant to the Agreement,
the transactions contemplated thereby or any Indemnified Person's actions or
inactions in connection with any such advice, services or transactions;
provided, however, that, in the case of clause (ii) only, the Company shall not
be responsible for any Liabilities or Expenses of any Indemnified Person that
have resulted primarily from such Indemnified Person's (x) gross negligence, bad
faith or willful misconduct in connection with any of the advice, actions,
inactions or services referred to above or (y) use of any offering materials or
information concerning the Company in connection with the offer or sale of the
Securities in the Transaction which were not authorized for such use by the
Company and which use constitutes negligence, bad faith or willful misconduct.
The Company also agrees to reimburse each Indemnified Person for all Expenses as
they are incurred in connection with enforcing such Indemnified Person's rights
under the Agreement, which includes this Exhibit A.
Upon receipt by an Indemnified Person of actual notice of an Action against such
Indemnified Person with respect to which indemnity may be sought under the
Agreement, such Indemnified Person shall promptly notify the Company in writing;
provided that failure by any Indemnified Person so to notify the Company shall
not relieve the Company from any liability which the Company may have on account
of this indemnity or otherwise to such Indemnified Person, except to the extent
the Company shall have been prejudiced by such failure. The Company shall, if
requested by the Placement Agent, assume the defense of any such Action
including the employment of counsel reasonably satisfactory to the Placement
Agent, which counsel may also be counsel to the Company. Any Indemnified Person
shall have the right to employ separate counsel in any such action and
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of such Indemnified Person unless: (i) the Company has
failed promptly to assume the defense and employ counsel or (ii) the named
parties to any such Action (including any impeded parties) include such
Indemnified Person and the Company, and such Indemnified Person shall have been
advised in the reasonable opinion of counsel that there is an actual conflict of
interest that prevents the counsel selected by the Company from representing
both the Company (or another client of such counsel) and any Indemnified Person;
provided that the Company shall not in such event be responsible hereunder for
the fees and expenses of more than one firm of separate counsel for all
Indemnified Persons in connection with any Action or related Actions, in
addition to any local counsel. The Company shall not be liable for any
settlement of any Action effected without its written consent (which shall not
be unreasonably withheld). In addition, the Company shall not, without the prior
written consent of the Placement Agent (which shall not be unreasonably
withheld), settle, compromise or consent to the entry of any judgment in or
otherwise seek to terminate any pending or threatened Action in respect of which
indemnification or contribution may be sought hereunder (whether or not such
Indemnified Person is a party thereto) unless such settlement, compromise,
consent or termination includes an unconditional release of each Indemnified
Person from all Liabilities arising out of such Action for which indemnification
or contribution may be sought hereunder. The indemnification required hereby
shall be made by
Source Capital Group, Inc. Page 6 of 6
periodic payments of the amount thereof during the course of the investigation
or defense, as such expense, loss, damage or liability is incurred and is due
and payable.
In the event that the foregoing indemnity is unavailable to an Indemnified
Person other than in accordance with the Agreement, the Company shall contribute
to the Liabilities and Expenses paid or payable by such Indemnified Person in
such proportion as is appropriate to reflect (i) the relative benefits to the
Company, on the one hand, and to the Placement Agent and any other Indemnified
Person, on the other hand, of the matters contemplated by the Agreement or (ii)
if the allocation provided by the immediately preceding clause is not permitted
by applicable law, not only such relative benefits but also the relative fault
of the Company, on the one hand, and the Placement Agent and any other
Indemnified Person, on the other hand, in connection with the matters as to
which such Liabilities or Expenses relate, as well as any other relevant
equitable considerations; provided that in no event shall the Company contribute
less than the amount necessary to ensure that all Indemnified Persons, in the
aggregate, are not liable for any Liabilities and Expenses in excess of the
amount of fees actually received by the Placement Agent pursuant to the
Agreement. For purposes of this paragraph, the relative benefits to the Company,
on the one hand, and to the Placement Agent on the other hand, of the matters
contemplated by the Agreement shall be deemed to be in the same proportion as
(a) the total value paid or contemplated to be paid to or received or
contemplated to be received by the Company in the transaction or transactions
that are within the scope of the Agreement, whether or not any such transaction
is consummated, bears to (b) the fees paid to the Placement Agent under the
Agreement. Notwithstanding the above, no person guilty of fraudulent
misrepresentation within the meaning of Section 11(f) of the Securities Act of
1933, as amended, shall be entitled to contribution from a party who was not
guilty of fraudulent misrepresentation.
The Company also agrees that no Indemnified Person shall have any liability
(whether direct or indirect, in contract or tort or otherwise) to the Company
for or in connection with advice or services rendered or to be rendered by any
Indemnified Person pursuant to the Agreement, the transactions contemplated
thereby or any Indemnified Person's actions or inactions in connection with any
such advice, services or transactions except for Liabilities (and related
Expenses) of the Company that have resulted primarily from such Indemnified
Person's gross negligence, bad faith or willful misconduct in connection with
any such advice, actions, inactions or services.
The reimbursement, indemnity and contribution obligations of the Company set
forth herein shall apply to any modification of the Agreement and shall remain
in full force and effect regardless of any termination of, or the completion of
any Indemnified Person's services under or in connection with, the Agreement.
