AdStar Inc. Contracts
Sample Business Contracts
Engagement Agreement - AdStar.com Inc. and RCG Capital Markets Group Inc.
Consulting Forms
ENGAGEMENT AGREEMENT
August 24, 1999
Mr. B.J. Douck
Senior Vice President & CFO
AdStar.com, Inc.
4553 Glencoe Avenue, Suite 325
Marina del Ray, CA 90292
1. This letter agreement will confirm the understanding between AdStar.com,
Inc. and/or its affiliates and successors (the "Company" or "AdStar") and
RCG Capital Markets Group, Inc. ("RCG") with respect to the matters set
forth herein. RCG will provide consulting and other services, as more
particularly described herein and in the attachment hereto entitled
Financial Relations Services Attachment (the "Financial Relations
Services"), to the Company and will represent the Company during the
engagement as exclusive Financial Relations Consultants with respect to the
Financial Relations Services, on the terms and conditions set forth herein
and in the attachments hereto, all of which are incorporated herein by
reference and form a part hereof. The period during which RCG will perform
the Financial Relations Services for the Company will commence on the date
set forth below above the signatures of the parties hereto (the
"Commencement Date") and, unless otherwise terminated as provided in this
paragraph or in paragraph nine of this letter agreement, will terminate on
the date which is the first anniversary of the effective date of the
Company's initial public offering (the "Termination Date"). The period
beginning on the Commencement Date and ending on the Termination Date is
hereafter referred to as the "Engagement Term". As more particularly
described in paragraph 9 below, this agreement may be terminated by either
party at any time after the six month anniversary of the Commencement Date
upon thirty (30) days prior written notice to the other party.
2. During the Engagement Term, the Company agrees to furnish or cause to be
furnished to RCG all information concerning the Company as RCG reasonably
requests and deems appropriate for purposes of providing the Financial
Relations Services. The Company represents that all information, with
respect to the Company, provided to RCG will be complete and correct in all
material respects and will not contain any untrue statement of a material
fact or omit to state a material fact necessary in order to make the
statements therein not misleading in light of the circumstances under which
such statements are made. AdStar understands, that in rendering the
Financial Relations Services required hereunder, RCG will be using and
relying on publicly available information and the information furnished to
RCG by AdStar without independent verification thereof. RCG will treat as
confidential any non-public information provided to it hereunder and will
not disclose the same to third parties at any time unless required by
applicable law. In the event disclosure has been or will be made by RCG, RCG
will use its best efforts to cooperate as reasonably requested by the
Company in minimizing any potential loss or injury to the Company as a
consequence of any such necessary disclosure. In addition, RCG will comply
with all applicable state and Federal securities laws in the performance of
this agreement.
3. During the Engagement Term, RCG and its employees, consultants and
contractors will be available to AdStar in connection with its rendering of
the Financial Relations Services. Specifically, RCG (a) will outline,
develop and implement a financial relations program to assist the Company in
creating and/or enhancing a positive and more visible public image, (b) may
contact existing and future shareholders, broker/dealers, potential
investors, registered representatives, institutions, mutual fund managers,
investment banking sources, securities analysts, independent portfolio
managers, and other professional investment community contacts including
certain financial media sources for the purpose of enhancing the Company's
public image and perceived value, (c) will assist the Company in the
creation, production and distribution of certain financial markets and
investor/shareholder corporate image materials, including corporate
profiles, due diligence materials and investor packages, as well as all
financial press releases; (d) assist the Company in its endeavor to secure
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research analyst coverage through a targeted securities professionals
campaign and (e) otherwise perform the services described in the
Financial Relations Services Attachment.
4. During the Engagement Term, the Company will afford RCG an opportunity
to review and/or comment on any disclosure, prior to its release, which
the Company plans to make to any of the sources described in paragraph
(3) and which relates to the Financial Relations Services to be provided
hereunder. In addition, RCG will be responsible for assisting the
Company in writing and/or editing, producing, coordinating and
disseminating all financial industry press releases. RCG agrees that it
will not release or distribute any press release without the Company's
prior consent.
5. In consideration of RCG's services hereunder, the Company agrees to pay
RCG, promptly when due, the Compensation as described by and in strict
accordance with the attachment hereto entitled Financial Relations
Compensation Attachment. Should RCG and the Company determine to extend
the Engagement Term or change the scope of the engagement, then a
mutually acceptable amendment or supplement to that attachment shall be
promptly executed by RCG and Company. Absent any such amendment, all
terms and conditions of this letter agreement shall be binding to the
parties. NOTWITHSTANDING ANYTHING CONTAINED HEREIN TO THE CONTRARY,
ADSTAR SHALL NOT BE OBLIGATED TO PAY ANY OF THE COMPENSATION TO RCG
AFTER THIS LETTER AGREEMENT HAS BEEN TERMINATED EXCEPT THAT ADSTAR SHALL
ISSUE ANY OPTIONS THAT HAVE VESTED PRIOR TO SUCH TERMINATION PURSUANT TO
THE TERMS HEREOF AND RCG'S REGISTRATION RIGHTS WITH RESPECT TO ANY
OPTION SHARES UNDERLYING VESTED OPTIONS SHALL BE UNAFFECTED BY SUCH
TERMINATION.
6. RCG shall be entitled to such additional fees as may be mutually agreed
upon by separate agreement between the parties hereto, for additional
consulting services not anticipated in this letter agreement rendered
during the Engagement Term.
7. As more particularly set forth in the Financial Relations Compensation
Attachment, the Company agrees to pay all of RCG's out-of-pocket
expenses reasonably incurred in connection with the performance of the
Financial Relations Services. As set forth in the Financial Relations
Compensation Attachment, an expense retainer shall be utilized for this
purpose.
8. The Company and RCG agree to indemnify each other (the indemnifying
party hereafter being referred to as the "Indemnitor", and the party
entitled to indemnification hereafter being referred to as the
"Indemnitee") as follows: Indemnitor agrees to defend, indemnify and
hold harmless Indemnitee, and its officers, directors, and employees
against any and all losses, claims, demands, suits, actions, judgments,
awards, damages, liabilities, costs, reasonable attorneys' fees, and
expenses incurred in investigating, preparing or defending any such
action or claim, directly or indirectly caused by, related to, or
asserted by a third party, based upon or arising out of (a) the
Indemnitor's breach of or the incorrectness of any of its
representations, warranties, agreements or covenants contained in this
letter agreement; and/or (b) any of the Financial Relations Services
rendered by RCG. Notwithstanding the foregoing, the Indemnitor shall
have no obligation to indemnify or hold the Indemnitee harmless with
regard to Indemnitee's negligence, willful misconduct, or the material
breach of or the incorrectness of any representation, warranty or
covenant of Indemnitee contained in this letter agreement.
9. (a) Either party hereto may terminate this letter agreement at any time
beginning six months after the Commencement Date upon thirty (30) days
prior written notice to the other party.
(b) A party to this letter agreement may terminate this letter agreement
prior to the sixth month anniversary of the Commencement Date, if
the other party to this letter agreement commits a "Terminable
Act". A Terminable Act shall mean: (i) a material breach of any
term or provision of this letter agreement by such other party
and such breach remains unremedied for a period of thirty (30)
days following the receipt of notice from the nonbreaching party
setting forth in reasonable
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detail the circumstances of such breach; provided, however, if the party
receiving such notice has begun to remedy such breach such cure period
shall be extended for no more than an additional thirty (30) days; and
provided further, however, if such breach cannot be remedied, termination
shall be immediate; (ii) the negligence, willful misconduct, fraud or
misrepresentation of such other party; (iii) the failure of such other
party to materially comply with any applicable law or regulation relating
to the Financial Relations Services being provided; (iv) if such other
party shall plead guilty or nolo contendre to any violation of the
securities laws of the United States or any state; and (v) upon the filing
by or against such other party of a petition to have such party adjudged
as bankrupt or a petition for reorganization or arrangement under any law
relating to bankruptcy, and where any such involuntary petition is not
dismissed within 90 days.
(c) Upon termination under subparagraphs (a) or (b) of this paragraph 9,
the Company shall have no liability to RCG for Compensation accruing after
such termination, and RCG shall have no further entitlement thereto. Upon
such termination, RCG shall be entitled to receive and retain only accrued
Compensation and vested Options to the date of such termination, to the
extent it is unpaid, together with expenses not yet reimbursed.
(d) If this letter agreement is not terminated by either party prior to
the Termination Date, it shall renew automatically on a month to month
basis until specifically renewed in writing or terminated upon thirty (30)
days prior written notice. Such renewal on month to month basis shall be
on the same terms and conditions contained herein.
10. RCG hereby fully discloses that certain associates, affiliates, officers
and employees of RCG are:
(a) Licensed as Registered Securities Principals issued by the National
Association of Securities Dealers ("NASD"); and/or
(b) Licensed as Registered Representatives issued by the NASD.
All NASD registrations are carried by SWS Financial Services, Inc., which
is a non-RCG affiliated NASD-registered broker/dealer.
RCG REPRESENTS AND WARRANTS AND THE COMPANY SPECIFICALLY ACKNOWLEDGES THAT
RCG IS NOT A BROKER/DEALER REGISTERED WITH THE NASD OR ANY OTHER
REGULATORY AGENCY. FURTHERMORE, IN THE PERFORMANCE OF FINANCIAL RELATIONS
SERVICES UNDER THE TERMS AND CONDITIONS OF THIS AGREEMENT, SUCH SERVICES
SHALL NOT BE CONSIDERED TO BE ACTING IN ANY BROKER/DEALER OR UNDERWRITING
CAPACITY AND THEREFORE RCG IS NOT RECEIVING ANY COMPENSATION FROM THE
COMPANY AS SUCH.
11. The Company understands and acknowledges that RCG provides other and
similar consulting services to companies which may or may not conduct
business and activities similar to those of the Company. RCG is not
required to devote its full time and attention to the performance of its
duties detailed in this agreement, and may devote only so much of its time
and attention as is reasonable or necessary. RCG represents and warrants
that it does not currently represent nor does it perform services to or
for any individual, partnership, limited liability company, sole
proprietorship, corporation or any other entity engaged in the business of
developing, licensing, selling, marketing or distributing internet and
software applications to or for the classified advertising industry. RCG
further covenants and agrees that throughout the Engagement Term and any
extension thereof it will not represent or provide services to or for any
individual, partnership, limited liability company, sole proprietorship,
corporation or any other entity engaged in the business of developing,
licensing, selling, marketing or distributing internet and software
applications to or for the classified advertising industry.
12. The terms of this letter agreement shall be governed by and interpreted in
accordance with the laws of the State of California.
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13. For the convenience of the parties, any number of counterparts of this
letter agreement may be executed by the parties hereto. Each such
counterpart shall be deemed to be an original instrument, but all such
counterparts taken together shall constitute one and the same letter
agreement.
If the foregoing correctly sets forth our agreement, please sign the enclosed
copy of the letter in the space provided and return it to us, whereupon all
parties will be bound to the terms of this engagement.
Confirmed and agreed to this 24 day of August, 1999
RCG CAPITAL MARKETS GROUP, INC. AdStar.com
By: /s/ By: /s/ B.J. Douck
----------------------------- ------------------------------
Title: President SVP & CFO
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Page 5
FINANCIAL RELATIONS
SERVICES ATTACHMENT
At the date of execution of this letter agreement as delineated in
Paragraph 1 of this letter agreement, RCG Capital Markets Group, Inc. ("RCG")
will serve as the exclusive Financial Relations Counsel for AdStar.com ("AdStar"
or "Company"). Consistent with the AdStar.com Financial Relations Campaign
Overview, a copy of which is attached hereto, RCG anticipates the following
services will be attempted and/or implemented within the scope of this
engagement:
Pre-IPO Activities:
- Assist Paulson Investment Company in expanding selling group for IPO;
- Coordinate additional roadshow participation in conjunction with the
Paulson schedule
- Continually review and attempt to enhance PowerPoint presentation for
IPO roadshow (for use also in post-IPO presentations);
- Participate in the roadshow and assist in the follow-up coordination
of all investment community contacts
- Create an expanded "Broker Fact Sheet" for use during the IPO process;
- Assist the Company in obtaining a listing for its securities on AMEX.
- RCG will assist with routine investment community inquiries and
distribution of offering memorandum during the IPO process; channel
all lead opportunities to Paulson Investment Company.
POST-IPO ACTIVITIES:
- Outline, define, establish and implement a well-coordinated "Financial
Relations" campaign.
- Create, produce, enhance existing and distribute high-quality, due
diligence and marketing materials, which specifically include, but are
not limited to a "Corporate Profile" document and the Company's
"Investor Package".
- Specifically develop, proactively execute and maintain a targeted
securities professionals telecommunications and information campaign
specifically directed toward retail brokers, institutional investors,
third-party portfolio managers and small/mid-cap mutual funds, buy and
sell side analysts and the financial media as circumstances dictate,
including, but not limited to, preparation, clearing with the Company
and dissemination of quarterly press releases and other news releases
deemed appropriate by the Company. RCG will allocate and utilize its
proprietary securities industry, small/mid cap company oriented,
databases and fax-line communications programs. (This will include
responding to all incoming investment community inquiries and
fulfillment of information and data requests.)
- RCG will attempt to secure investment recommendations and on-going
corporate research coverage from national or regional investment
banking or research firms and/or an endorsement by an investment news
letter publication.
- When appropriate, plan, arrange and coordinate specific follow-on
road-show presentations to strategically targeted primary metropolitan
financial markets.
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- RCG will be responsible for the origination and release of financial industry
data and financial media information on behalf of AdStar. RCG will also be
responsible for editing (or writing) all press releases and coordinating
information disseminated to all media sources relating to the securities
industry and capital markets.
- RCG will organize, monitor and follow-up all conference calls between the
Company and RCG's targeted segment of the investment community, in conjunction
with material press releases, through a teleconferencing service. (RCG will be
responsible for faxing and/or emailing the invitations and will follow up with
calls to the recipients in an effort to expand the conference call
participation.)
- Plan, arrange and coordinate periodic registered representative, institutional
and/or other securities professionals meetings, luncheons, dinners or special
gatherings.
- Implement periodic direct mailings which may include the most recent
statistical information reports, and any appropriate articles or press
releases that have been released during the last reported quarter.
- Update all due diligence and marketing materials. RCG anticipates updating
Company information on a regular basis as required when there are material
changes or events that should be disseminated to the investment community.
- Implement an AdStar Internet Site on RCG's Internet Home Page, RCG Online (the
"AdStar Page"). RCG Online will also create an Internet link to the Company's
home page. The purpose of these inclusions will be to provide the investment
community a 24-hour access site to obtain up-to-date information about the
Company. The AdStar Page will be available within 30 days of the completion of
the Company's initial public offering. Except as set forth in the next
sentence, AdStar agrees that it will pay RCG the sum of $350 per month for
this service beginning with the month the AdStar Page is available online.
Within 90 days of the launch of the AdStar Page, RCG will provide the Company
with a Peer Group Comparison Report (the "Report"). AdStar shall have 30 days
from the receipt of the Report to notify RCG if it wants to terminate the
AdStar Page and AdStar will have no further liability to RCG with respect to
the AdStar Page from the date of such termination.
RCG intends to perform the services and accomplish the specified goals within
the scope of this engagement. However, due to the nature and type of services
being performed, RCG cannot guarantee, nor can it be assumed that certain
specific results will be realized with reference to increased market valuation
of AdStar securities.
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FINANCIAL RELATIONS
COMPENSATION ATTACHMENT
In consideration of the Financial Relations Services to be rendered pursuant
hereto, AdStar agrees to pay RCG the following compensation (the
"Compensation"):
A. Cash Compensation. AdStar shall pay RCG a monthly retainer as follows:
(a) $6,100.00 for each of the first six months of the Engagement Term,
payable monthly beginning on the Commencement Date
(b) $5,000.00 for each month thereafter until this letter agreement is
terminated in accordance with its terms.
B. Expense reimbursement. In addition, RCG shall be reimbursed for reasonable
out-of-pocket incurred in connection with the performance of the Financial
Relations Services pursuant hereto. It is the policy of RCG that an expense
debit account of $5,000 be utilized for these out-of-pocket costs. RCG will
provide the Company with a detailed breakdown of all reimbursable expenses
debited against the remaining monthly balance by the twentieth (20th) day of the
following month of service and, upon request by the Company, will provide the
Company with a copy of all receipts, invoices or other documentation
substantiating such disbursements. When the remaining unused portion of the
expense debit account falls below $1,250, the Company will be required to
reinstate the account balance to $5,000. If the expense reimbursement account
drops to zero, or has accrued a debit balance, RCG may upon written notification
cease to incur expenses on behalf of the Company until the expense reimbursement
account is replenished to the $5,000 level. Such discontinuance does not
extinguish the Company's obligation for reimbursement.
RCG will obtain prior approval from the Company for all specific expense items
and any single miscellaneous expense item in excess of $500. RCG acknowledges
and understands that the Company will have specific amounts budgeted for these
expenditures and will attempt to ensure those budget amounts are not exceeded.
C. Stock Options. As additional compensation for Financial Relations Services,
RCG requests non-forfeitable granted options/warrants to purchase 55,000 shares
of AdStar common stock (the "Options"). The Options will only be granted if the
Company completes an initial public offering pursuant to a registration
statement filed with the Securities and Exchange Commission (the "Company IPO").
The Options will vest as follows:
(a) Options covering 25,000 shares, as additional compensation for the
"Pre-IPO activities," shall vest upon completion of the Company's IPO.
(b) Options covering 1,666 shares, as additional compensation for the
"Post-IPO activities," shall vest on the last day of each of the six
months commencing on the last day of the seventh month following the
Commencement Date.
(c) The remaining options, as additional compensation for the "Post-IPO
activities," shall vest and become exercisable at the expiration of
five years from the date of grant provided that RCG is still providing
services to the Company on that date and provided further than such
options shall vest and become earlier exercisable on a performance
basis as outlined below:
5,000 shall become exercisable upon confirmation of an average 5%
increase per calendar month in the average daily trading
volume of AdStar for any period of 90 calendar days;
provided, however, in no event shall any Options vest if
the average daily trading volume in AdStar common stock
is less than 5,000 shares. (The baseline average shall
determine as the average daily trading volume calculated
from the 23rd through the 44th trading day (inclusive) as
a public company.)
5,000 shall become exercisable upon confirmation of corporate
research coverage from a buy- or sell-side analyst at a
reputable national or regional investment banking firm
having institutional clients and at least 50 retail
brokers.
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5,000 shall become exercisable upon securing confirmation of two (2) new
institutional investors or third-party portfolio managers positioning
at least 2% of the Company's issued and outstanding stock. (Vesting to
be prorated at 2,500 Options for each investor secured.) For this
purpose, the term "new" shall mean an investor that did not purchase
securities in the Company IPO.
5,000 shall become exercisable upon confirmation of two (2) positive
financial (non-trade oriented) media events, such as articles in
newspapers or financial magazines of recognized standing in the
financial and investment community or television or radio media
coverage on nationally recognized financial, investment or business
programs. (Vesting to be prorated at 2,500 Options for each media
event).
The Company agrees to issue an options/warrants document within sixty (60) days
of the IPO effective date which conforms to and delineates the terms and
conditions contained herein.
The exercise price for all options/warrants shall be set at 110% of the IPO
price.
The Options issued will possess a five (5) year expiration term and the shares
of AdStar common stock underlying the Options (the "Option Shares") will be
eligible for registration 13 months after the effective date of the Company IPO.
Such registration shall be accomplished by one demand registration rights via a
form S-3 registration statement or by non-prorated piggy-back registration
rights should the Company file a registration after the one year period. In the
event that RCG provides a written request to register the Option Shares, as
provided herein, the Company hereby agrees that it will use its reasonable best
efforts to file such registration statement within 45 days of such request. The
Company's obligation to file a registration statement, or cause such
registration statement to become and remain effective, shall be suspended for a
period not to exceed 120 days in any 12-month period if there exists at the time
material non-public information relating to the Company which, in the reasonable
opinion of the Company, based on the advice of counsel, should not be disclosed.
RCG agrees to pay 50% of the cost of such S-3 registration up to an amount not
to exceed $12,500. Such payment by RCG is due upon the effective date of the
registration statement. RCG's demand registration right shall terminate at such
time as the Option Shares shall be salable under Rule 144 during a period of
not more than 90 days.
Notwithstanding anything contained herein, the Company shall not be required to
include any Options in any Registration Statement filed in connection with the
Company IPO or on Form S-8 or Form S-4 or their equivalents relating to an
offering of securities by the Company to be issued in connection with any
acquisition of any entity or business or otherwise issuable in connection with
any stock option or employee benefit plan.
In the event that AdStar is merged into or a controlling interest is acquired by
any entity, or there is a material change in AdStar management, RCG will be
immediately vested in all remaining options, including those, which to that
point have not yet been vested.
NOTWITHSTANDING ANYTHING CONTAINED HEREIN, ADSTAR SHALL NOT BE OBLIGATED TO PAY
ANY OF THE FOREGOING COMPENSATION TO RCG AFTER THIS LETTER AGREEMENT HAS BEEN
TERMINATED EXCEPT THAT ADSTAR SHALL ISSUE ANY OPTIONS THAT HAVE VESTED PRIOR TO
SUCH TERMINATION PURSUANT TO THE TERMS HEREOF AND RCG'S REGISTRATION RIGHTS WITH
RESPECT TO ANY OPTION SHARES UNDERLYING VESTED OPTIONS SHALL BE UNAFFECTED BY
SUCH TERMINATION.