Cantella & Co., Inc.
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37 SAW MILL RIVER ROAD Telephone: (914) 347-4800
HAWTHORNE, NY 10532 Fax: (914)347-3927
July 9, 1998
Raja Tuli, President
The WideCom Group
72 Devon Road, Unit 18
Brampton, Ontario
Canada L6T 5B4
Re: US$2,000,000 Private Placement
Dear Raja:
The purpose of this letter agreement (the "Agreement") is to confirm
the engagement of Cantella & Co., Inc, as placement agent and arranger in
connection with the WideCom Group's ("the Company") offer and sale of 50
units (each unit consisting of 15,625 shares of WideCom Group's shares of
common stock and a $30,000 convertible note), (the "Offering"). The
Offering is expected to take the form of a private offering of the
Securities to accredited investors within the meaning of Rule 501(A) (1),
(2), (3) or (D) of Regulation D under the U.S. Securities Act of 1933, as
amended (the "Act").
As placement agent and arranger of the Offering, the Placement
Agent's role will involve various aspects of the Offering including:
working with the Company to (a) prepare the offering attachments thereto
(the "Private Placement Memorandum"), (b) assess market conditions in
connection with the Offering, and (c) market the Offering to accredited
investors in the United States, all in accordance with applicable law.
The Placement Agent will use its best efforts to sell the Securities.
The Placement Agent's engagement hereunder does not constitute any
commitment by it to purchase all or any part of the Securities.
The Company shall pay to Placement Agent a fee equal to ten percent
(10%) of the gross proceeds of the Offering. The company shall also pay
to the Placement Agent, a non-accountable expense allowance of 3% of the
gross proceeds of the Offering. Upon execution of this letter the Company
will deliver to the Placement Agent a check in the amount of $15,000 which
shall be applied against the Placement Agent's non-accountable expense
allowance. Additionally, the Company shall, at the closing of the Offering,
grant to the Placement Agent certain warrants to purchase up to 298,550
shares of the Company's common stock under the terms and conditions set
forth on a term sheet agreed upon by the Company, attached hereto as
Schedule I.
The Company represents and warrants to the Placement Agent that at
all times prior to and at the time of the consummation of the Offering or
termination of the Placement Agent's engagement hereunder, the Private
Placement Memorandum will not contain any untrue statement of a material
fact or omit to state any material fact to make the statements contained
therein in light of the circumstances under which they were made, not
misleading.
In consideration for the Placement Agent's agreeing to provide the
services referred to herein, the Company agrees to fully indemnify to hold
harmless the Placement Agent in accordance with the terms of Annex 1.
This Agreement shall automatically terminate in one (1) month from the
date hereof unless on or prior thereto the Company has in writing agreed to
the terms and conditions proposed herein. In addition, the Placement
Agent's engagement hereunder may be terminated by the Company or by the
Placement Agent at any time prior to execution of the Placement Agent
Agreement, upon written notice to the other party without any liability of
continuing obligation of any party to any other party, provided that, if
the Company terminates this Agreement the Placement Agent shall be entitled
to retain all of the fees paid to it under this Agreement and if the
Placement Agent at any time prior to the expiration of four (4) months
after any such termination by the Company of this Agreement, the Company
consummates any financing of the type contemplated in the Agreement, the
Placement Agent will be entitled to payment of an amount equal to the fees
set forth in Schedule I of this Agreement less the amount of any fees
previously paid to the Placement Agent hereunder. The representations and
expense reimbursement and indemnity obligation of the Company hereunder
shall survive any termination of the Placement Agent's engagement hereunder
and any consummation of the Offering.
The Placement Agent's commitment to this process will be subject to
the following standard requirements: (a) satisfactory due diligence process,
(b) satisfactory finalization of all standard documentation, including
presentation in the Private Placement Memorandum of information sufficient
to meet the standards of accredited investors (c) the absence of a material
adverse change in the current financial, political or economic conditions
that would in the Placement Agent's view, be likely to prejudice the success
of the offering and distribution of the securities or dealings of the
securities in the secondary market.
In connection with this engagement, the Company has given, or will be
giving to the Placement Agent certain written information concerning the
Company (all such information being referred to herein as the "confidential
material"). The term "confidential material" does not include information
which (i) prior to the delivery of such information to the Placement Agent
was already in its possession on a non-confidential basis, (ii) was or
becomes generally available to the public other than as a result of
disclosures by the Placement Agent, (iii) becomes available to the
Placement Agent on a non-confidential basis from a source other than the
Company or its respective affiliates, provided that such source is not bound
by a confidentiality agreement with an obligation of secrecy to the Company
and such disclosure does not constitute a breach of any fiduciary
obligation or privilege, (iv) is disclosed in the offering materials
relating to the Offering, or (v) was or is independently developed by the
Placement Agent. Except as otherwise required by law or regulation
confidential material which is given to the Placement Agent will be treated
confidentially by it so long as it remains non-public and the Placement
Agent will not disclose such material to a third party other than its
attorneys, accountants or other advisors or agents without the prior written
consent of the Company, or use such confidential material for any other
purpose other than the engagement contemplated hereunder provided that,
notwithstanding the foregoing, the Placement Agent's obligation to maintain
such confidentiality shall expire five (5) years from the date hereof unless
the information sooner becomes public.
Each of the parties hereto irrevocable submits to the non-exclusive
jurisdiction of any New York or Federal court sitting in the City of New
York or any Suit, action or proceeding arising out of or relating to this
Agreement and irrevocably waives to the fullest extent permitted by law,
any objection to the laying of venue on the grounds that such suit, action
or proceeding has been brought in an inconvenient forum. The Company hereby
consents to the service of any and all process which may be reserved in any
suit, action or proceeding arising out of or relating to this Agreement by
means of personal delivery of courier service, addressed to it at its
address provided above and to the attention of any secretary or any other
officer, director, managing agent or general agent of the Company and the
Company hereby irrevocably waives, to the fullest extent permitted by law,
any objection it may now or hereafter have under New York law or any law of
any state of the United States or any other jurisdiction or otherwise to
service of process in such manner. Nothing in this paragraph shall affect
or limit any right to serve process in any manner permitted by law, to
begin proceedings in the courts of any jurisdiction or to enforce in any
lawful manner a judgement obtained in one jurisdiction in any other
jurisdiction.
This Agreement may be executed in any number of counterparts and by
the parties hereto in separate counterparts each of which when so executed
shall be deemed to be an original and all of which when taken together
shall constitute the same agreement.
This Agreement shall be governed by and consumed in accordance with
the laws of the State of New York without regards to the conflicts of laws
provisions thereof.
If the foregoing correctly sets forth the agreement by and between
the Company of the Placement Agent, please sign and return the enclosed
copy of this Agreement to the undersigned.
Sincerely,
CANTELLA & CO., INC.
/S/ Jim Freeman
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Name: Jim Freeman
Title: President
Accepted and Agreed to as of the date set forth above.
The WideCom Group Inc.
/s/ Raja Tuli
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Name: Raja Tuli
Title: President
Annex 1
In consideration for the Placement Agent agreeing to provide the
services referred to herein, the Company agrees to fully indemnify and hold
harmless the Placement Agent, its officers, directors, partners, employees,
agents and counsel, its affiliates and each other entity or person, if any,
controlling, controlled by or under common control with the placement agent
or any of its affiliates within the meaning of the federal securities laws
and their respective directors, officers, agents and employees (the
Placement Agent and each such entity or person being referred to as an
"Indemnified Person"), from and against any claim by any third party for
any losses, claims, damages, or liabilities (or actions in respect thereof)
relating to or arising out of the services performed pursuant to this
Agreement or the Placement Agent's role in connection therewith and to
reimburse any Indemnified Person on a current basis for all expenses
(including without limitation, fees and disbursements of counsel) incurred
in connection therewith. The Company shall not be liable for any settlement
of any proceeding effected without its written consent, but if settled
with such consent or if there be a final judgement for the Plaintiff, the
Company agrees to indemnify the Indemnified Person from and against any
loss or liability by reason for such settlement or judgment. The Company
shall not without the prior written consent of any indemnified person,
effect any settlement of any pending or threatened proceeding in respect of
which such Indemnified Person is or could have been a party and
indemnification could have been sought thereunder by such Indemnified
Person, unless such settlement includes an unconditional release of such
Indemnified Person from all liability or claims that are the subject matter
of such proceeding.
If any action, suit, proceeding or investigation is commenced, as to
which the Placement Agent proposes to demand indemnification, it shall
notify the Company with reasonable promptness (provided, however, that any
failure by the Placement Agent to notify the Company shall not relieve the
Company from its obligations hereunder), and the company shall have the
right to assume the defense of such action. The Placement Agent shall have
the right to retain counsel of its own choice to represent it, but the fees
and expenses of such counsel shall be at its expense unless the employment
of such counsel shall have been authorized in writing by the Company in
connection with the defense of such action or the Company shall not have
promptly employed counsel reasonably satisfactory to the Placement Agent to
have charge of the defense of such action or the Placement Agent shall have
reasonably concluded that there may be one or more legal defenses available
to the Company, in any of which events such fees and expenses shall be borne
by the Company. Any such counsel of the Placement Agent shall, to the extent
consistent with its professional responsibilities, cooperate with the
Company and any counsel designated by the Company. In no event shall the
Company be liable for fees and expenses of more than one counsel for all
indemnified parties in connection with any one action or separate but
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances. Anything in this paragraph 12 to the
contrary notwithstanding, the Company shall not be liable for any settlement
of any claim or action effected without its written consent; provided
however, that such consent was not unreasonably withheld.
The Placement Agent, agrees to indemnify and hold harmless the
Company, its officers, directors, partners, employees, agents, and counsel,
and each person, if any, who control the Company within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act, to the same
extent as the foregoing indemnity from the Company to the Placement Agent,
but only with respect to statements, if any, made in the Confidential
Offering Memorandum, or any amendment or supplement thereto, in reliance
upon and in conformity with written information furnished to the Company by
the Placement Agent concerning the Placement Agent expressly for inclusion
in the Confidential Offering Memorandum, or any amendment or supplement
thereof, provided, however, that the Placement Agent's obligations to
provide indemnification hereunder shall be limited to the fees actually
received by the Placement Agent pursuant to this Agreement. If any action
shall be brought against the Company, in respect of which indemnification
may be sought against the Placement Agent pursuant hereto, the Placement
Agent shall have the rights and duties given to the Company above, and the
Company shall have the rights and duties so given to the Placement Agent.
Schedule I
Below are the terms for the private offering for WideCom Group (the
Company and Cantella & Co., Inc.
1. Cantella & Co., Inc. ("Cantella") will use its best efforts to raise
$2,000,000 in gross proceeds for the Company in a private offering
(the "Offering") on a $1,000,000 minimum--$2,000,000 maximum basis.
2. Cantella proposes that the Offering will be made to Accredited
investors within the meaning of Rule 501(A) (1), (2), (3) or (D) of
Regulation D under the U.S. Securities Act of 1933, as amended (the
"Act") and will consist of 50 Units (the "Unit"), at an offering
price of $40,000 per Unit, each Unit consisting of 15,625 shares of
the Company's common stock and a $30,000 convertible note (the
"Note"), which may be convertible into 13,338 shares of the Company's
Common Stock. The Notes will be redeemable by the Company at any time
after the Company's common stock underlying the Notes is registered
under the Securities Act of 1933, as amended, provided, that during
the 20 consecutive trading days ending within 10 days of the date or
the notice of redemption the closing bid price of the Company's
Common Stock is not less than 150% of the conversion price, and the
trading volume of the Company's common stock is not less than 30,000
shares per day. The redemption price shall be equal to par value plus
accrued and unpaid Interest. One-half units will be issued if agreed
to by the Company and Cantella. The notes will mature three (3) years
from the date of issue. The Note will carry interest of 12% paid
quarterly. The Company will immediately, upon the closing of the
Offering, undertake to register the Unit(s) shares, the shares
underlying the Notes and the shares underlying the Agent warrants.
3. For acting as placement agent in connection with the Offering
Cantella shall be entitled to receive upon closing, a fee equal to
10% of the gross proceeds of all the units sold. In addition,
Cantella shall be entitled to receive a non-accountable expense
allowance of 3% of the gross proceeds. Upon execution of an
engagement letter, the Company shall deliver to Cantella a check in
the sum of $15,000 which said amount shall be applied against
Cantella's non-accountable expense allowance.
4. At the closing of the Offering the Company shall deliver to Cantella,
(or its designated affiliates or assignees) common stock purchase
warrants, ("Cantella Warrants"), to purchase 5,791 shares per Unit
sold or part thereof pro rata. The purchase price of the Cantella
Warrants shall be $.001 each. Such Cantella Warrants will expire five
(5) years from the date of the Closing and will have an exercise
price of $0.75 per share. Cantella shall have certain anti-dilution
rights, providing for adjustment in (i) the number of such shares,
and (ii) the exercise price of the warrants. Cantella will also have
certain registration rights for the underlying shares.
5. The Company shall prepare a Confidential Offering Memorandum. The
Company shall pay all fees, charges, expenses and disbursements in
connection with (i) the preparation, printing, filing, distribution
and mailing of the Confidential Offering Memorandum all other
documents relating to the Offering including the cost of all copies;
(ii) the issuance, sale, transfer and delivery of Units, including
any transfer or other taxes payable thereon and the fees of any
escrow agent, transfer agent or registrar; and (iii) the registration
or qualification of the Units for offer and sale under the securities
laws of such states and other jurisdictions as the Company and
Cantella may designate.
6. The Company shall also prepare or cause to be prepared, at its own
cost and expense such subscription agreements and other documentation
(including, without limitation, warrant agreements, escrow
agreements, warrants stock certificates and registration right
agreements) in connection with the Offering, all of which shall be in
form and content as shall be reasonably satisfactory to Cantella.
7. The Company agrees to have no more than 8,924,754 shares issued or
reserved on a "fully diluted" basis immediately prior to the closing,
except for shares issued in connection with the acquisition of the
photo printer business. In addition, the Company will have no more
than $200,000 in long term debt issued.
8. The Company agrees that subsequent to the Offering it will not issue
any additional debt for borrowed money except (i) bank and
institutional debt financing; or (ii) debt which is subordinated to
the Notes sold in the offering, without the written permission of
Cantella until 80% of the debt issued in the offering is either
repaid or converted.
9. This letter is conditioned on the execution of a mutually agreeable
financial consulting agreement between the Company and Robb Peck
McCooey ("Robb Peck"), under which Robb Peck will receive warrants to
purchase 50,000 shares or the Company's common stock in return for
financial consulting services including assistance in the completion
of this offering. The Company will deliver a check to Robb Peck for
$5,000 and a non-refundable advance against expenses. The agreement
will contain a right of first refusal by Robb Peck to act as
underwriter or Placement Agent for future offerings by the Company.