LOGISTICAL SUPPORT, INC.
INVESTMENT BANKING AGREEMENT
Dated as of: May 5, 2005
Hunter World Markets, Inc.
0000 Xxxxxxxx Xxxxxxxxx
Xxxxxxxxx Xxxxx
Xxxxxxx Xxxxx, XX 00000
Ladies and Gentlemen:
The undersigned, Logistical Support, Inc. (the "Company"), hereby agrees to
engage Hunter World Markets, Inc. ("Hunter") as its investment banker on the
terms and conditions as set forth in this letter agreement.
1. Terms.
The Company hereby engages Hunter to act as its exclusive investment
banker for a period of one year. The scope of the investment banking work shall
include an offering of up to $6,500,000 (the "Offering" and the period before
the closing of the Offering, the "Offering Term").
Hunter reserves the right to raise up to an additional $4,000,000 in
either PIPE financing or as Hunter's exercise of its warrants on terms and
conditions to be approved by Hunter.
Hunter shall not be obligated to sell any securities as underwriter
and Hunter shall be engaged solely on a "best efforts basis."
2. Compensation.
(a) Hunter shall receive a placement fee of 8% on the $6,500,000
financing.
(b) Hunter shall receive a placement fee of 10% on any other funding
facilitated by Hunter including any PIPE financings or warrant exercises.
(c) The Parties shall mutually agree on the investment banking
compensation to Hunter for deals other than this offering, which shall be no
less than customary investment banking fees.
(d) In the event that Hunter has to give up options as a result of a
condition of closing the $6,500,000 financing, the Company will issue Hunter
shares of common stock of the Company equal to a cashless exercise of the
options Hunter relinquishes. For example, if Hunter's options are priced at
$0.20 and the market price is $1.65, the difference between the warrant price
and the market price is $1.45. Multiplying $1.45 by the number of options
(3,000,000) results in $4,350,000, which is then divided by the market price
($1.65) which results in Hunter being entitled to receive 2,636,363 shares of
the Company's common stock (the "Option Shares"). The Option Shares shall have
piggyback registration rights.
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3. Exclusivity.
(a) Hunter will advise the company on all financial matters
including mergers and acquisitions, subsequent financing transactions and
listing on the Nasdaq or National Exchanges. Hunter will introduce the company
to its network of institutional investors.
(b) The Company may not solicit third party finders, brokers, or
other consultants, during the Offering Term, without express written approval of
Hunter. During the Offering Term, the Company shall provide Hunter with the name
and other pertinent information on any potential investor before accepting such
investment, however the Company shall at all times retain sole discretion to
accept such investment.
4. Right of First Refusal. For a period of one year after the closing
of the Offering, Hunter shall have the right of first refusal to act as sole
investment banker in the underwriting or placement financings done by the
Company and offerings of the Company's securities other than strategic
financings. During such one year period, the Company will provide Hunter with
the terms of any offering of its equity securities along with the terms and
conditions for underwriters or placement agents for such offering. Hunter shall
have ten business days to exercise such right.
5. Representations, Warranties and Covenants of Hunter.
Hunter represents, warrants and covenants as follows:
(a) Hunter has the necessary power to enter into this Agreement and
to consummate the transactions contemplated hereby.
(b) The execution and delivery by Hunter of this Agreement and the
consummation of the transactions contemplated herein will not result in any
violation of, or be in conflict with, or constitute a default under, any
agreement or instrument to which Hunter is a party or by which Hunter or its
properties are bound, or any judgment, decree, order or, to Hunter's knowledge,
any statute, rule or regulation applicable to Hunter. This Agreement, when
executed and delivered by Hunter, will constitute the legal, valid and binding
obligations of Hunter, enforceable in accordance with their respective terms,
except to the extent that (i) the enforceability hereof or thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
from time to time in effect and affecting the rights of creditors generally,
(ii) the enforceability hereof or thereof is subject to general principles of
equity, or (iii) the indemnification provisions hereof or thereof may be held to
violate public policy.
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(c) Hunter shall use all reasonable efforts to determine (i) whether
the Investor is an Accredited Investor and (ii) that any information furnished
by the Investor is true and accurate. Hunter shall have no obligation to insure
that any check, note, draft or other means of payment for the Units will be
honored, paid or enforceable against the Investor in accordance with its terms.
(d) Hunter is a member of the NASD, and is a broker-dealer
registered as such under the Securities Exchange Act of 1934 and under the
securities laws of the states in which the Units will be offered or sold by
Hunter, unless an exemption for such state registration is available to Hunter.
Hunter is in compliance with all material rules and regulations applicable to
Hunter generally and applicable to Hunter's participation in the Offering.
6. Representations and Warranties of the Company.
The Company represents and warrants as follows:
(a) The execution, delivery and performance of this Agreement has
been or will be duly and validly authorized by the Company and will be, a valid
and binding agreement of the Company, enforceable in accordance with its
respective terms, except to the extent that (i) the enforceability hereof or
thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws from time to time in effect and affecting the rights of creditors
generally, (ii) the enforceability hereof or thereof is subject to general
principles of equity or (iii) the indemnification provisions hereof or thereof
may be held to violate public policy. The securities to be issued pursuant to
the transactions contemplated by this Agreement have been duly authorized and,
when issued and paid for in accordance with (x) this Agreement and (y) the
certificates/instruments representing such securities, will be valid and binding
obligations of the Company, enforceable in accordance with their respective
terms, except to the extent that (1) the enforceability thereof may be limited
by bankruptcy, insolvency, reorganization, moratorium or similar laws from time
to time in effect and affecting the rights of creditors generally, and (2) the
enforceability thereof is subject to general principles of equity. All corporate
action required to be taken for the authorization, issuance and sale of the
securities has been duly and validly taken by the Company.
(b) The Company has a duly authorized, issued and outstanding
capitalization as set forth in any offering document. The Company is not a party
to or bound by any instrument, agreement or other arrangement providing for it
to issue any capital stock, rights, warrants, options or other securities,
except for this Agreement, the agreements described herein or as set forth in
any offering document. All issued and outstanding securities of the Company,
have been duly authorized and validly issued and are fully paid and
non-assessable; the holders thereof have no rights of rescission or preemptive
rights with respect thereto and are not subject to personal liability solely by
reason of being security holders; and none of such securities was issued in
violation of the preemptive rights of any holders of any security of the
Company.
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(c) The securities to be offered as well as issuable have been duly
authorized and when issued and paid for in accordance with this Agreement and
the certificates/instruments representing such common stock, will be validly
issued, fully-paid and non-assessable; the holders thereof will not be subject
to personal liability solely by reason of being such holders; such securities
are not and will not be subject to the preemptive rights of any holder of any
security of the Company.
(d) All information and statements provided directly by the Company
in writing to prospective investors introduced to the Company by Hunter in any
offer will be true and correct as of the time such statement was made.
(e) Any written offering material prepared by the Company will not
be misleading or violative of the anti-fraud provisions of the Securities
Exchange Act of 1934.
(f) The financial statements presented to Hunter fairly reflect the
financial condition of the Company and the results of its operations at a time
and for the periods covered by the financial statements.
7. Certain Covenants and Agreements of the Company.
The Company covenants and agrees at its expense and without any
expense to Hunter as follows:
(a) To ensure that any transactions between or among the Company, or
any of its officers, directors and affiliates be on terms and conditions that
are no less favorable to the Company, than the terms and conditions that would
be available in an "arm's length" transaction with an independent third party.
(b) For a period of 36 months, beginning on April ___, 2005, the
Company agrees that the Company, its employees, agents and representatives shall
not knowingly, either directly or indirectly, contact, solicit, employ or engage
or attempt to contact, solicit, enter into discussions with or contract with in
any capacity, any person introduced to the Company by Hunter and listed on
Schedule 7(b) or any employees, agents, or representatives of Hunter.
8. Indemnification.
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(a) The Company hereby agrees that it will indemnify and hold Hunter
and each officer, director, shareholder, employee, attorneys, accountants,
agents or representative of Hunter, and each person controlling, controlled by
or under common control with Hunter within the meaning of Section 15 of the
Securities Act of 1933 or Section 20 of the Securities Exchange Act of 1934 or
the SEC's rules and regulations promulgated thereunder (the "Rules and
Regulations"), harmless from and against any and all loss, claim, damage,
liability, cost or expense whatsoever (including, but not limited to, any and
all reasonable legal fees and other expenses and disbursements incurred in
connection with investigating, preparing to defend or defending any action, suit
or proceeding, including any inquiry or investigation, commenced or threatened,
or any claim whatsoever or in appearing or preparing for appearance as a witness
in any action, suit or proceeding, including any inquiry, investigation or
pretrial proceeding such as a deposition including attorneys' fees in the event
of a breach of this representation and warranty) to which Hunter or such
indemnified person of Hunter may become subject under the Securities Act of
1933, the Securities Exchange Act of 1934, the Rules and Regulations, or any
other federal or state law or regulation, common law or otherwise, arising out
of or based upon (i) any untrue statement or alleged untrue statement of a
material fact contained in (a) this Agreement, (b) any written offering material
prepared by the Company including the PPM (except those written statements
relating to Hunter given by an indemnified person for inclusion therein), (c)
any application or other document or written communication executed by the
Company or based upon written information furnished by the Company filed in any
jurisdiction in order to qualify the common stock and the warrants under the
securities laws thereof, or any state securities commission or agency; (ii) the
omission or alleged omission from documents described in clauses (a), (b) or (c)
above of a material fact required to be stated therein or necessary to make the
statements therein not misleading; or (iii) the breach of any representation,
warranty, covenant or agreement made by the Company in this Agreement. The
Company further agrees that upon demand by an indemnified person, at any time or
from time to time, it will promptly reimburse such indemnified person for any
loss, claim, damage, liability, cost or expense actually and reasonably paid by
the indemnified person as to which the Company has indemnified such person
pursuant hereto. Notwithstanding the foregoing provisions of this Section 9(a),
any such payment or reimbursement by the Company of fees, expenses or
disbursements incurred by an indemnified person in any proceeding in which a
final judgment by a court of competent jurisdiction (after all appeals or the
expiration of time to appeal) is entered against Hunter or such indemnified
person as a direct result of Hunter or such person's gross negligence or willful
misfeasance will be promptly repaid to the Company.
(b) Hunter hereby agrees that it will indemnify and hold the Company
and each officer, director, shareholder, employee or representative of the
Company, and each person controlling, controlled by or under common control with
the Company within the meaning of Section 15 of the Securities Act of 1933 or
Section 20 of the Securities Exchange Act of 1934 or the Rules and Regulations,
harmless from and against any and all loss, claim, damage, liability, cost or
expense whatsoever (including, but not limited to, any and all reasonable legal
fees and other expenses and disbursements incurred in connection with
investigating, preparing to defend or defending any action, suit or proceeding,
including any inquiry or investigation, commenced or threatened, or any claim
whatsoever or in appearing or preparing for appearance as a witness in any
action, suit or proceeding, including any inquiry, investigation or pretrial
proceeding such as a deposition) to which the Company or such indemnified person
of the Company may become subject under the Securities Act of 1933, the
Securities Exchange Act of 1934, the Rules and Regulations, or any other federal
or state law or regulation, common law or otherwise, arising out of or based
upon (i) the conduct of Hunter or its officers, employees or representatives in
acting as placement agent for the Offering or (ii) the breach of any
representation, warranty, covenant or agreement made by Hunter in this
Agreement.
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(c) Promptly after receipt by an indemnified party of notice of
commencement of any action covered by Section 9(a) or 9(b), the party to be
indemnified shall, within five (5) business days, notify the indemnifying party
of the commencement thereof; the omission by one indemnified party to so notify
the indemnifying party shall not relieve the indemnifying party of its
obligation to indemnify any other indemnified party that has given such notice
and shall not relieve the indemnifying party of any liability outside of this
indemnification if not materially prejudiced thereby. In the event that any
action is brought against the indemnified party, the indemnifying party will be
entitled to participate therein and, to the extent it may desire, to assume and
control the defense thereof with counsel chosen by it which is reasonably
acceptable to the indemnified party. After notice from the indemnifying party to
such indemnified party of its election to so assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under such
Section 9(a) or 9(b) for any legal or other expenses subsequently incurred by
such indemnified party in connection with the defense thereof, but the
indemnified party may, at its own expense, participate in such defense by
counsel chosen by it, without, however, impairing the indemnifying party's
control of the defense. Subject to the proviso of this sentence and
notwithstanding any other statement to the contrary contained herein, the
indemnified party or parties shall have the right to choose its or their own
counsel and control the defense of any action, all at the expense of the
indemnifying party if, counsel to the indemnifying party or parties shall have
reasonably concluded that there may be defenses available to it or the
indemnified party or them which are different from or additional to those
available to one or all of the indemnifying parties (in which case the
indemnifying parties shall not have the right to direct the defense of such
action on behalf of the indemnified party or parties), in any of which events
such fees and expenses of one additional counsel shall be borne by the
indemnifying party; provided, however, that the indemnifying party shall not, in
connection with any one action or separate but substantially similar or related
actions in the same jurisdiction arising out of the same general allegations or
circumstance, be liable for the reasonable fees and expenses of more than one
separate firm of attorneys at any time for all such indemnified parties. No
settlement of any action or proceeding against an indemnified party shall be
made without the consent of the indemnifying party.
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in Section 9(a) or 9(b)
is due in accordance with its terms but is for any reason held by a court to be
unavailable on grounds of policy or otherwise, the Company and Hunter shall
contribute to the aggregate losses, claims, damages and liabilities (including
legal or other expenses reasonably incurred in connection with the investigation
or defense of same) which the other may incur in such proportion so that Hunter
shall be responsible for such percent of the aggregate of such losses, claims,
damages and liabilities as shall equal the percentage of the gross proceeds paid
to Hunter and the Company shall be responsible for the balance; provided,
however, that no person guilty of fraudulent misrepresentation within the
meaning of Section 11(f) of the Securities Act of 1933 shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 9(d), any person controlling,
controlled by or under common control with Hunter, or any partner, director,
officer, employee, representative or any agent of any thereof, shall have the
same rights to contribution as Hunter and each person controlling, controlled by
or under common control with the Company within the meaning of Section 15 of the
Securities Act of 1933 or Section 20 of the Securities Exchange Act of 1934 and
each officer of the Company and each director of the Company shall have the same
rights to contribution as the Company. Any party entitled to contribution will,
promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect of which a claim for contribution may
be made against the other party under this Section 9(d), notify such party from
whom contribution may be sought, but the omission to so notify such party shall
not relieve the party from whom contribution may be sought from any obligation
they may have hereunder or otherwise if the party from whom contribution may be
sought is not materially prejudiced thereby. The indemnity and contribution
agreements contained in this Section 9 shall remain operative and in full force
and effect regardless of any investigation made by or on behalf of any
indemnified person or any termination of this Agreement.
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9. Non-Circumvention.
Pursuant to this Agreement, it is contemplated that Hunter shall
supply to the Company and its officers and directors and its counsel certain
information concerning investors and other customers of Hunter. Except for any
prior contracts established prior to the date of this Agreement, neither the
Company, nor any of its majority owned or controlled entities or any of their
officers and directors or its counsel shall, without the prior written consent
of Hunter, contact any of such investors and other customers listed on Schedule
9 for the purpose of an investment in the Company or an investment in any other
entity or enterprise controlled by the Company.
In the event that the Company or any of its majority owned or
controlled entities or any of its or their officers and directors and its
counsel enters into an agreement with any investor or other customer of Hunter
referenced above either (i) during the Offering Term or (ii) within two years
after the Offering Term, regarding a Transaction and completes such Transaction,
Hunter shall be entitled to payment at the closing of such Transaction of five
percent (5%) of the Aggregate Consideration with respect to such Transaction
(excluding the offerings pursuant to which amounts payable to Hunter are set
forth herein). "Transaction" shall be defined as any direct or indirect sale,
transfer, conveyance, exchange, financing, sale, transfer, conveyance, exchange,
financing, investment, trade, exchange or other change in legal or beneficial
ownership of any property, whether accomplished by an issuance or purchase of
assets of securities, merger, consolidation, management contract, joint venture,
partnership, trade or exchange of assets or stock or otherwise. The "Aggregate
Consideration" in a Transaction for purposes of determining the aforementioned
fees shall mean (x) the aggregate amount of consideration received by the
subject party and/or its shareholders (treating any shares issuable under
exercise of options, warrants or other rights of conversion as outstanding) and
the implied value of any equity interest retained by the subject party's
shareholders and the value of any assets retained by the subject party plus (y)
the amount of any debt assumed or repaid or preferred stock redeemed or
remaining outstanding in connection with a Transaction (i.e. deferred payments,
covenants not to compete, consulting agreements or traded/exchange properties).
10. Payment of Expenses.
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The Company hereby agrees to bear all of the expenses in connection
with the Offering, including, but not limited to the following: filing fees,
printing and duplicating costs, advertisements, European and U.S. road show
costs and expenses, postage and mailing expenses with respect to the
transmission of offering materials, registrar and transfer agent fees, escrow
agent fees and expenses, fees of the Company's counsel and accountants, fees of
Hunter's counsel in the amount of $15,000 and issue and transfer taxes, if any.
11. Conditions of Each Closing.
Each closing shall be held at the offices of Company's counsel or as
otherwise determined by Hunter and the Company. The obligations of Hunter
hereunder shall be subject to the continuing accuracy of the representations and
warranties of the Company herein as of the date hereof and as of each closing
date with respect to the Company as if it had been made on and as of such
closing date; the accuracy on and as of each closing date of the statements of
the officers of the Company made pursuant to the provisions hereof; and the
performance by the Company on and as of each closing of its covenants and
obligations hereunder and to the following further conditions:
(a) At or prior to each closing, counsel for Hunter shall have been
furnished such documents, certificates and opinions as they may reasonably
require for the purpose of enabling them to review or pass upon the matters
referred to in this Agreement and the offering materials or in order to evidence
the accuracy, completeness or satisfaction of any of the representations,
warranties or conditions herein contained.
(b) At and prior to each closing, (i) there shall have been no
material adverse change in the condition or prospects or the business
activities, financial or otherwise, of the Company from the latest dates as of
which such condition is set forth in the offering materials; (ii) there shall
have been no transaction, not in the ordinary course of business, entered into
by the Company which has not been disclosed in the offering materials or to
Hunter in writing; (iii) except as set forth in the offering materials, the
Company shall not be in default under any provision of any instrument relating
to any outstanding indebtedness for which a waiver or extension has not been
otherwise received; (iv) except as set forth in the offering materials, the
Company shall not have issued any securities (other than those to be issued as
provided in the offering materials) or declared or paid any dividend or made any
distribution of its capital stock of any class and there shall not have been any
change in the indebtedness (long or short term) or liabilities or obligations of
the Company (contingent or otherwise); (v) no material amount of the assets of
the Company shall have been pledged or mortgaged, except as indicated in the
offering materials; and (vi) no action, suit or proceeding, at law or in equity,
against the Company or affecting any of its properties or businesses shall be
pending or threatened before or by any court or federal or state commission,
board or other administrative agency, domestic or foreign, wherein an
unfavorable decision, ruling or finding could materially adversely affect the
businesses, prospects or financial condition or income of the Company, except as
set forth in the offering materials.
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(c) At each closing, Hunter shall have received a certificate of the
Company signed by its chief executive officer, dated as of the applicable
closing date, to the effect that the conditions set forth in subparagraph (b)
above have been satisfied and that, as of the applicable closing date, the
representations and warranties of the Company set forth herein are true and
correct.
12. Miscellaneous.
(a) This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original, but all which shall be deemed
to be one and the same instrument.
(b) Any notice required or permitted to be given hereunder shall be
given in writing and shall be deemed effective when deposited in the United
States mail, postage prepaid, or when received if personally delivered or faxed,
addressed as follows:
To Hunter:
Hunter World Markets, Inc.
0000 Xxxxxxxx Xxxxxxxxx
Xxxxxxxxx Xxxxx
Xxxxxxx Xxxxx, XX 00000
Attention: Xxxx Xxxxxx
Telephone: (000) 000-0000
Fax: (000) 000-0000
with a copy to:
Xxxxxxx Xxxxx & Xxxxxx
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxx, Esq.
Telephone: (000) 000-0000
Fax: (000) 000-0000
To the Company:
Logistical Support, Inc.
00000 Xxxxxxxx Xxxxxx,
Xxxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx Xxxxxxx
Telephone:
Facsimile:
with a copy to:
Xxxxxxxxxx & Xxxxx LLP
00000 Xxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxx Xxxxxxx, XX 00000
Attention: Xxxxxx Xxxxx
Telephone: (000) 000-0000
Fax: (000) 000-0000
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or to such other address of which written notice is given to the others.
(c) All questions concerning the construction, validity, enforcement
and interpretation of this Agreement shall be governed by the internal laws of
the State of California, without giving effect to any choice of law or conflict
of law provision.
(d) This Agreement contain the entire understanding between the
parties hereto and may not be modified or amended except by a writing duly
signed by the party against whom enforcement of the modification or amendment is
sought.
(e) If any provision of this Agreement shall be held to be invalid
or unenforceable, such invalidity or unenforceability shall not affect any other
provision of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
LOGISTICAL SUPPORT, INC.
a Utah corporation
/s/ Xxxxx Xxxxxxx
-----------------
By: Xxxxx Xxxxxxx
Its: Chief Executive Officer
AGREED AND ACCEPTED
HUNTER WORLD MARKETS, INC.
A California corporation
/s/ Xxxx Xxxxxx
---------------
By: Xxxx Xxxxxx
Its: President and CEO
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