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EXHIBIT 10.3
B-III CAPITAL LLC
105 ROWAYTON AVENUE
NORWALK, CT 06853
ROBERT M. BROWN, III
PRESIDENT
September 24, 1999
Steven B. Dempsey
President
PetQuarters, Inc.
Post Office Box 4 10
Lonoke, AR 72086
Dear Steve,
I offer the professional services of B-III Capital ("B-III") as an investment
banker, fundraiser and strategic advisor to PetQuarters, Inc. ("PetQuarters") on
the following terms and conditions (the "Agreement"):
1. Scope of B-III's Services
o ON A NON-EXCLUSIVE BASIS, arrange and participate in meetings
with prospective EQUITY OR DEBT investors, both financial and
strategic
o ON A NON-EXCLUSIVE BASIS, solicit feedback and negotiate
investment agreements with investors in one or more private
rounds of EQUITY OR DEBT funding leading to PetQuarters
registration and trading of registered shares
o Serve as a director of PetQuarters if elected/ appointed,
subject to acceptable indemnification provisions
o Work closely with PetQuarters to drive the Company to the stage
of a SEC-registered company with actively traded, NASDAQ listed
stock
o Advise PetQuarters on Internet content development
o Participate in strategic planning meetings with Company
directors and management
o Help identify and recruit advisory board members
o Help develop strategic affiliations and partnerships
o Maintain liaison with outside shareholders
o Share network of and coordinate contacts with "Madison Avenue",
i.e. New York advertising and media companies
o Help recruit additional members of management team as necessary
to sustain growth and credibility for actively traded public
company
o Use contacts to assist in developing commercial banking
relationships
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o Use contacts to help develop coverage by Wall Street securities
analysts and market makers
o Prepare and coordinate RFP for investment bankers, conduct
interviews and recommend selection of underwriters for public
offering of registered shares
B-III's services shall commence on the date of signing of this
Agreement and shall continue until this Agreement is terminated or
expires.
2. Compensation
o Retainer - PetQuarters shall pay B-III a monthly retainer of
$5,000, credited against any success fees, payable on B-III's
instructions.
o Warrants - Upon the signing of this Agreement, PetQuarters shall
grant B-III or its designee warrants to purchase the number of
PetQuarters shares equal to 5.0% of PetQuarters fully diluted
shares on the date of signing. The exercise price of the
warrants shall be equal to the closing price of PetQuarters
shares traded on the OTC bulletin board on the date of signing.
The warrants shall contain customary anti-dilutive protection,
including protection against below-market issuance. The warrants
shall vest in monthly increments over the two year term of this
Agreement, one twenty-fourth per month, subject to forfeiture as
provided in section 5. Unvested warrants shall vest immediately
in the event of a change of control of PetQuarters or in the
event of a successful public offering of registered shares or in
the event of termination of this Agreement by PetQuarters
without cause as provided in section 5. Unexercised warrants
shall expire five years after vesting.
o Success Fees - In connection with the private placement of any
PetQuarters shares NEGOTIATED by B-III TO AN INVESTOR PROCURED
FOR PETQUARTERS BY B-III, the Company agrees to pay B-III a
success fee in cash in an amount of 3% of the CASH CONSIDERATION
PAID FOR such shares, less any retainer fees paid and not
previously so credited, payable on B-III's instructions at
closing of the private placement. The success fee of 3% also
applies to any debt placed by B-III on the Company's behalf,
less any retainer fees paid and not previously credited.
o Trailer Fees - Should an investment ("Trailer Transaction") be
obtained by the Company, its affiliates, or any other entity
formed by the Company whose business purpose is similar to the
Company, from an investor introduced to PetQuarters by B-III
during the term of this Agreement, and such transaction is
completed or committed within a six (6) month period following
the termination of this Agreement, the Company shall pay to
B-III the full 3% success fee. If a Trailer Transaction is
completed or committed more than six (6) but less than one (1)
year after such termination, the Company shall pay to B-III half
of the compensation provided herein. Thereafter, no compensation
shall be due to B-III.
It is understood that fees shall be payable to B-III under this
section when investor funds are received by the Company. If an
investment transaction is completed in stages, fees payable to
B-III shall also be paid in stages on a pro rated basis.
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3. Expenses. The Company shall promptly reimburse B-III for
reasonable and customary expenses incurred by B-III WITH THE PRIOR
CONSENT OF THE COMPANY and properly invoiced to the Company. The
Company will allow a maximum monthly sum of $400 for incidental
expenses without prior written consent. The Company upon receipt
of the corresponding receipts or other documentation will
reimburse these expenses.
4. Indemnification. It is hereby understood and agreed that the
Company will indemnify B-III and its directors, officers,
employees, agents and controlling persons (B-III and each such
person being an "Indemnified Party") from and against any and all
losses, claims, damages and liabilities, joint or several, to
which such Indemnified Party may become subject under any
applicable federal or state law or otherwise, resulting from a
claim related to or arising out of any transaction ENGAGED IN or
service PERFORMED BY B-III AND contemplated by this Agreement. The
Company will reimburse any Indemnified Party for all expenses
(including reasonable counsel fees and expenses) as they are
incurred in connection with the investigation of, preparation for
or defense of any pending or threatened claim or any action or
proceeding arising therefrom. The Company will not be liable under
the foregoing indemnification provision to the extent that any
loss, claim, damage or liability is found in a final judgment by a
court of competent jurisdiction to have resulted from B-III's bad
faith, willful misconduct, MISREPRESENTATION, OMISSION or
negligence. The Company also agrees that no Indemnified Party
shall have any liability (whether direct or indirect, in contract
or tort or otherwise) to the Company related to or arising out of
the engagement of B-III pursuant to, or the performance by B-III
of the services contemplated by this Agreement except to the
extent that any loss claim, damage or liability is found in final
judgment by a court of competent jurisdiction to have resulted
from B-III's bad faith, willful misconduct, MISREPRESENTATION,
OMISSION or negligence.
If any action or proceeding shall be brought or asserted against
an Indemnified Party in respect of which indemnity shall be sought
from the Company, the Indemnified Party shall promptly notify the
Company in writing and the Company shall assume the defense
thereof including the employment of counsel reasonably
satisfactory to the Indemnified Party and the payment of all
expenses. The Indemnified Party shall have the right to employ
separate counsel in any such action and to participate in the
defense thereof, but the fees and expenses of such counsel shall
be at the expense of the Indemnified Party unless (i) the Company
has agreed to pay such fees and expenses or (ii) the Company shall
have failed promptly to assume the defense of such action or
proceeding and employ counsel, reasonably satisfactory to the
Indemnified Party in such action or proceeding or (iii) the named
parties to any such action or proceeding (including any impleaded
parties) include the Company or an Indemnified Party and the
Company or such Indemnified Party which are different from or
additional to those available to the Company (in which case, if
the Indemnified Party notifies the Company in writing that it
elects to employ separate counsel at the expense of the Company,
the Company shall not have the right to assume the defense of such
action or proceeding on behalf of the Indemnified Party, it being
understood however, that the Company shall not, in connection with
any one
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such action or proceeding or separate but substantially similar or
related actions or proceeding arising out of the same general
allegations or circumstances be liable for the reasonable fees and
expenses of more than one separate firm of attorneys (together
with appropriate local counsel) at any time for the Indemnified
party, which firm shall be designated by the Indemnified Party.
If the indemnification provided herein is for any reason held
unenforceable by an Indemnified Party although otherwise
applicable in accordance with its terms, the Company agrees to
contribute to the losses, claims, damages and liabilities for
which such indemnification is held unenforceable (i) in such
proportion as is appropriate to reflect the relative benefits to
the Company on the one hand, and B-III, on the other hand, of the
transaction of the Company or (ii) if (but only if) the allocation
provided for in clause (I) is for any reason held unenforceable,
in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (I) but also the relative
fault of the Company, on one hand, and B-III on the other hand, as
well as any other relevant equitable considerations. The Company
agrees that for purposes of this paragraph the relative benefits
to the Company and B-III of a transaction shall be deemed to be in
the same proportion that the total value received by the Company
as a result of or in connection with the transaction bears to the
fees to be paid to B-III under this contract.
The Company agrees that, without B-III's prior written consent, it
will not settle, compromise or consent to the entry of any
judgement in any pending or threatened claim, action or proceeding
in respect of which indemnification could be sought under the
indemnification provision of this letter agreement (whether or not
B-III or any other Indemnified Party is an actual or potential
party to such claim, action or proceeding) unless the foregoing
releases B-III from all liability or obligation. B-III shall act
as an independent entity, and any duties of B-III arising out of
its engagement pursuant to this Agreement shall be owed solely to
the Company.
Any advice (written or oral) rendered by B-III in connection with
an engagement pursuant to this Agreement or any similar letter
shall be covered by the terms of this Agreement to the extent not
otherwise expressly agreed and this Agreement may not be disclosed
publicly without B-III's written consent except to the extent
required by applicable law.
The foregoing provisions shall survive any termination of this
Agreement. The parties hereto waive the right to trial by jury in
connection with any claim relating to the services contemplated by
this Agreement, including any claim concerning B-III's advice. THE
PROVISIONS OF THIS PARAGRAPH 4 SHALL NOT APPLY TO ANY LOSSES,
CLAIMS OR ACTIONS TAKEN OR COMMENCED AGAINST B-III, OR ANY
DESIGNEE OF B-III, AS A RESULT OF ACTIONS ENGAGED IN AS A DIRECTOR
OF PETQUARTERS.
5. Expiration/Termination. This Agreement shall continue for a term
of two years from the date it is signed, unless terminated by
PetQuarters or B-III or extended in writing by both parties.
Either party may terminate this Agreement on 30 days prior written
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notice. If PetQuarters terminates without cause, B-III's warrants
fully vest immediately. If PetQuarters terminates with cause
(BEING B-III'S FAILURE TO PERFORM THE DUTIES SPECIFIED IN THE
"SCOPE OF B-III'S SERVICES" DESCRIBED ABOVE) or B-III terminates
for any reason, B-III forfeits its unvested warrants. The
expiration or termination of this Agreement shall in no way affect
the fees paid or to be paid pursuant to Paragraph 2 hereof or
B-III's rights to indemnification under Paragraph 4.
6. Governing Law/Dispute Resolution. The arrangements set out in this
letter agreement shall be governed by New York law and each party
agrees for the benefit of the other that proceedings against it
may be brought by the New York courts (without prejudice to the
other's right to bring proceedings elsewhere).
7. Assignment. Neither this Agreement nor any rights or obligations
of either party hereunder may be assigned to any other person
without the prior written consent of the other party. The
provisions hereof shall inure to the benefit of and be binding
upon the successors and permitted assigns of the parties hereto.
Sincerely,
B-III Capital LLC
By:
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Robert M. Brown, III
President
Agreed to and accepted as of the 25th day
of October 1999:
PetQuarters, Inc.
By:
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Steven B. Dempsey
President
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