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Sample Business Contracts

Engagement Agreement - AdStar.com Inc. and RCG Capital Markets Group Inc.

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                              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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August 23, 1999
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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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August 23, 1999
Page 3

     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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August 23, 1999
Page 4

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
<PAGE>   5
August 23, 1999
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.
<PAGE>   6

August 23, 1999
Page 6


- 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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August 23, 1999
Page 7


                              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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August 23, 1999
Page 8


     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.