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EXHIBIT 10.5
[LADENBURG THALMANN LOGO]
February 7, 2000
Steve Dempsey
President, Chief Executive Officer
Pet Quarters, Inc.
720 East Front Street
Lonoke, AR 72086
Dear Mr. Dempsey:
The purpose of this letter agreement (the "Agreement") is to set forth
the terms and conditions pursuant to which Ladenburg Thalmann & Co. Inc.
("LTCO") shall serve as exclusive placement agent in connection with the
proposed offering (the "Offering") of securities (the "Securities") of Pet
Quarters, Inc. (the "Company"). The gross proceeds from the Offering will be up
to $1,000,000. All references to dollars shall be to U.S. dollars. The terms of
such Offering and the Securities shall be substantially in the form set forth in
Exhibit D hereto, which exhibit is incorporated by reference herein.
Upon the terms and subject to the conditions of this Agreement, the
parties hereto agree as follows:
1. APPOINTMENT. (a) Subject to the terms and conditions of this
Agreement hereinafter set forth, the Company hereby retains LTCO, and LTCO
hereby agrees to act as the Company's exclusive placement agent and financial
advisor in connection with the Offering, effective as of the date hereof. The
Company expressly acknowledges and agrees that LTCO's obligations hereunder are
on a reasonable best efforts basis only and that the execution of this Agreement
does not constitute a commitment by LTCO to purchase the Securities and does not
ensure the successful placement of the Securities or any portion thereof or the
success of LTCO with respect to securing any other financing on behalf of the
Company.
(b) Except as set forth below in this Section 1, during the
effectiveness of this Agreement, neither the Company nor any of its subsidiaries
or affiliates shall, directly or indirectly, through any officer, director,
employee, agent or otherwise (including, without
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limitation, through any placement agent, broker, investment banker, attorney or
accountant retained by the Company or any of its subsidiaries or affiliates),
solicit, initiate or encourage the submission of any proposal or offer (an
"Investment Proposal") from any person or entity (including any of such person's
or entity's officers, directors, employees, agents and other representatives)
relating to any issuance of the Company's or any of its subsidiaries' equity
securities (including debt securities with any equity feature) or relating to
any other transaction having a similar effect or result on the Company's or any
of its subsidiaries' capitalization, or participate in any discussions or
negotiations regarding, or furnish to any other person or entity any information
with respect to, or otherwise cooperate in any way with, or assist or
participate in, facilitate or encourage any effort or attempt by any other
person or entity to do or seek to do any of the foregoing. The Company shall
immediately cease and cause to be terminated any and all contacts, discussions
and negotiations with third parties regarding any Investment Proposal. The
Company shall promptly notify LTCO if any such Investment Proposal, or any
inquiry or contact with any person or entity with respect thereto, is made. The
Company shall not provide or release any information with respect to this
Agreement or the Offering except as required by law.
2. FEES AND COMPENSATION. In consideration of the services rendered by
LTCO in connection with the Offering, the Company agrees to pay LTCO the
following fees and other compensation:
(a) A cash fee payable immediately upon the closing of any portion
of the Offering and equal to 8% of the aggregate capital
raised.
(b) 8% Warrant Coverage.
(c) All amounts payable hereunder shall be paid to LTCO out of an
attorney escrow account at the closing or by such other means
acceptable to LTCO.
3. TERMS OF RETENTION. (a) Unless extended or terminated in writing by
the parties hereto in accordance with the provisions hereof, this Agreement
shall remain in effect until the Termination Date of March 20, 2000.
(b) Notwithstanding anything herein to the contrary, the obligation to
pay the Fees and Compensation and Expenses described in Section 2, if any, and
paragraphs 2, 6, and 8 of Exhibit A and all of Exhibit B and Exhibit C attached
hereto, each of which exhibits is incorporated herein by reference, shall
survive any termination or expiration of the Agreement. It is expressly
understood and agreed by the parties hereto that any private financing of equity
or debt or other capital raising activity of the Company within 24 months of the
termination or expiration of this Agreement, with any investors or lenders to
whom the Company was introduced by LTCO or who was contacted by LTCO while this
Agreement was in effect and disclosed to the Company in writing, shall result in
such fees and compensation due and payable by the Company to LTCO under the same
terms of Section 2 above. Upon completion of the Offering, any future
renegotiation, restructuring, revision or other amendment of such Offering by
and between the Company and the investors in such Offering shall be deemed to be
a new
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financing and shall result in additional fees and compensation due and payable
by the Company to LTCO under the terms of Section 2 above.
4. RIGHT OF FIRST REFUSAL. Upon completion of the Offering, LTCO shall
have an irrevocable right of first refusal for a period of one year to provide
all private financing arrangements for the Company (other than conventional
banking arrangements, borrowing and commercial debt financing and discrete
unrelated transactions of not more than $250,000 where no investment banking fee
is being paid). LTCO shall exercise such right in writing within five (5)
business days of receipt of a written term sheet describing such proposed
transaction in reasonable detail.
5. INFORMATION. The Company recognizes and confirms that in completing
its engagement hereunder, LTCO will be using and relying on publicly available
information and on data, material and other information furnished to LTCO by the
Company or the Company's affiliates and agents. It is understood and agreed that
in performing under this engagement, LTCO will rely upon the accuracy and
completeness of, and is not assuming any responsibility for independent
verification of, such publicly available information and the other information
so furnished.
6. OFFERS AND SALES ONLY TO INSTITUTIONAL ACCREDITED INVESTORS. Offers
and sales of the Securities will be made only to qualified institutional buyers
(as defined in Rule 144A) and to "accredited investors" as defined in Rule
501(a) promulgated under the Securities Act of 1933, as amended (the "Securities
Act").
7. NO GENERAL SOLICITATION. The Securities will be offered only by
approaching prospective purchasers on an individual basis. No general
solicitation or general advertising in any form will be used in connection with
the offering of the Securities.
8. MISCELLANEOUS. This Agreement constitutes the entire understanding
and agreement between the parties with respect to its subject matter and there
are no agreements or understandings with respect to the subject matter hereof
which are not contained in this Agreement. This Agreement may be modified only
in writing signed by the party to be charged hereunder.
If the foregoing correctly sets forth our agreement, please confirm
this by signing and returning to us the duplicate copy of this letter.
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We appreciate this opportunity to be of service and are looking forward
to working with you on this matter.
Very truly yours,
LADENBURG THALMANN & CO. INC.
By:
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Name:
---------------------------------
Title:
--------------------------------
Agreed to and accepted as of the
date first written above:
PET QUARTERS, INC.
By:
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Name:
--------------------------
Title:
-------------------------
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EXHIBIT A
STANDARD TERMS AND CONDITIONS
1. The Company shall promptly provide LTCO with all relevant information
about the Company (to the extent available to the Company in the case
of parties other than the Company) that shall be reasonably requested
or required by LTCO, which information shall be accurate in all
material respects at the time furnished.
2. LTCO shall keep all information obtained from the Company strictly
confidential except: (a) information which is otherwise publicly
available, or previously known to, or obtained by LTCO independently of
the Company and without breach of LTCO's agreement with the Company;
(b) LTCO may disclose such information to its employees and attorneys,
and to its other advisors and financial sources on a need to know basis
only and shall ensure that all such employees, attorneys, advisors and
financial sources will keep such information strictly confidential; and
(c) pursuant to any order of a court of competent jurisdiction or other
governmental body or as may otherwise be required by law.
3. The Company recognizes that in order for LTCO to perform properly its
obligations in a professional manner, it is necessary that LTCO be
informed of and, to the extent practicable, participate in meetings and
discussions between the Company and any third party relating to the
matters covered by the terms of LTCO's engagement.
4. The Company agrees that any report or opinion, oral or written,
delivered to it by LTCO is prepared solely for its confidential use and
shall not be reproduced, summarized, or referred to in any public
document or given or otherwise divulged to any other person without
LTCO's prior written consent, except as may be required by applicable
law or regulation.
5. No fee payable to LTCO pursuant to any other agreement with the Company
or payable by the Company to any agent, lender or investor shall reduce
or otherwise affect any fee payable by the Company to LTCO hereunder.
6. The Company represents and warrants that: (a) it has full right, power
and authority to enter into this Agreement and to perform all of its
obligations hereunder; (b) this Agreement has been duly authorized and
executed and constitutes a valid and binding agreement of the Company
enforceable in accordance with its terms; and (c) the execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby does not conflict with or result in a breach of (i)
the Company's certificate of incorporation or by-laws or (ii) any
agreement to which the Company is a party or by which any of its
property or assets is bound.
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EXHIBIT A (CONTINUED)
7. Nothing contained in this Agreement shall be construed to place LTCO
and the Company in the relationship of partners or joint venturers.
Neither LTCO nor the Company shall represent itself as the agent or
legal representative of the other for any purpose whatsoever nor shall
either have the power to obligate or bind the other in any manner
whatsoever. LTCO, in performing its services hereunder, shall at all
times be an independent contractor.
8. This Agreement has been and is made solely for the benefit of LTCO and
the Company and each of the persons, agents, employees, officers,
directors and controlling persons referred to in Exhibit B and their
respective heirs, executors, personal representatives, successors and
assigns, and nothing contained in this Agreement shall confer any
rights upon, nor shall this Agreement be construed to create any rights
in, any person who is not party to such Agreement, other than as set
forth in this paragraph.
9. The rights and obligations of either party under this Agreement may not
be assigned without the prior written consent of the other party hereto
and any other purported assignment shall be null and void.
10. All communications hereunder, except as may be otherwise specifically
provided herein, shall be in writing and shall be mailed, hand
delivered, or sent via facsimile and confirmed by letter, to the party
to whom it is addressed at the following addresses or such other
address as such party may advise the other in writing:
To the Company:
Steve Dempsey
Pet Quarters, Inc.
720 East Front Street
Lonoke, AR 72086
Telephone: (501) 676-9222
Facsimile: (501) 676-9245
To LTCO:
Ladenburg Thalmann & Co. Inc.
590 Madison Avenue
New York, NY 10022
Attention: David B. Boris
Telephone: (212) 409-2000
Facsimile: (212) 409-2169
All notices hereunder shall be effective upon receipt by the party to which it
is addressed.
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EXHIBIT B
INDEMNIFICATION
The Company agrees that it shall indemnify and hold harmless, LTCO, its
stockholders, directors, officers, employees, agents, affiliates and controlling
persons within the meaning of Section 20 of the Securities Exchange Act of 1934
and Section 15 of the Securities Act of 1933, each as amended (any and all of
whom are referred to as an "Indemnified Party"), from and against any and all
losses, claims, damages, liabilities, or expenses, and all actions in respect
thereof (including, but not limited to, all legal or other expenses reasonably
incurred by an Indemnified Party in connection with the investigation,
preparation, defense or settlement of any claim, action or proceeding, whether
or not resulting in any liability), incurred by an Indemnified Party: (a)
arising out of, or in connection with, any actions taken or omitted to be taken
by the Company, its affiliates, employees or agents, or any untrue statement or
alleged untrue statement of a material fact contained in any of the financial or
other information furnished to LTCO by or on behalf of the Company or the
omission or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; or (b) with respect to, caused by, or
otherwise arising out of any transaction contemplated by the Agreement or LTCO's
performing the services contemplated hereunder; provided, however, the Company
will not be liable under clause (b) hereof to the extent, and only to the
extent, that any loss, claim, damage, liability or expense is finally judicially
determined to have resulted primarily from LTCO's gross negligence or bad faith
in performing such services.
If the indemnification provided for herein is conclusively determined
(by an entry of final judgment by a court of competent jurisdiction and the
expiration of the time or denial of the right to appeal) to be unavailable or
insufficient to hold any Indemnified Party harmless in respect to any losses,
claims, damages, liabilities or expenses referred to therein, then the Company
shall contribute to the amounts paid or payable by such Indemnified Party in
such proportion as is appropriate and equitable under all circumstances taking
into account the relative benefits received by the Company on the one hand and
LTCO on the other, from the transaction or proposed transaction under the
Agreement or, if allocation on that basis is not permitted under applicable law,
in such proportion as is appropriate to reflect not only the relative benefits
received by the Company on the one hand and LTCO on the other, but also the
relative fault of the Company and LTCO; provided, however, in no event shall the
aggregate contribution of LTCO and/or any Indemnified Party be in excess of net
compensation actually received by LTCO and/or such Indemnified Party pursuant to
this Agreement.
The Company shall not settle or compromise or consent to the entry of
any judgment in or otherwise seek to terminate any pending or threatened action,
claim, suit or proceeding in which any Indemnified Party is or could be a party
and as to which indemnification or contribution could have been sought by such
Indemnified Party hereunder (whether or not such Indemnified Party is a party
thereto), unless such
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EXHIBIT B (CONTINUED)
consent or termination includes an express unconditional release of such
Indemnified Party, reasonably satisfactory in form and substance to such
Indemnified Party, from all losses, claims, damages, liabilities or expenses
arising out of such action, claim, suit or proceeding.
The foregoing indemnification and contribution provisions are not in
lieu of, but in addition to, any rights which any Indemnified Party may have at
common law hereunder or otherwise, and shall remain in full force and effect
following the expiration or termination of LTCO's engagement and shall be
binding on any successors or assigns of the Company and successors or assigns to
all or substantially all of the Company's business or assets.
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EXHIBIT C
JURISDICTION
The Company hereby irrevocably: (a) submits to the jurisdiction of any
court of the State of New York or any federal court sifting in the State of New
York for the purposes of any suit, action or other proceeding arising out of the
Agreement between the Company and LTCO which is brought by or against the
Company or LTCO; (b) agrees that all claims in respect of any suit, action or
proceeding may be heard and determined in any such court; and (c) to the extent
that the Company has acquired, or hereafter may acquire, any immunity from
jurisdiction of any such court or from any legal process therein, the Company
hereby waves, to the fullest extent permitted by law, such immunity.
The Company waives, and the Company agrees not to assert in any such
suit, action or proceeding, in each case, to the fullest extent permitted by
applicable law, any claim that: (a) the Company is not personally subject to the
jurisdiction of any such court; (b) the Company is immune from any legal process
(whether through service or notice, attachment prior to judgment, attachment in
the aid of execution, execution or otherwise) with respect to it or its
property; (c) any such suit, action or proceeding is brought in an inconvenient
forum; (d) the venue of any such suit, action or proceeding is improper; or (e)
this Agreement may not be enforced in or by any such court.
Any process against the Company in, or in connection with, any suit,
action or proceeding filed in the United States District Court for the Southern
District of New York or any other court of the State of New York, arising out of
or relating to this Agreement or any transaction or agreement contemplated
hereby, may be served on personally, or by first class mail or overnight courier
(with the same effect as though served upon the Company personally) addressed to
the Company at the address set forth in the Agreement between the Company and
LTCO.
Nothing in these provisions shall affect any party's right to serve
process in any manner permitted by law or limit its rights to bring a proceeding
in the competent courts of any jurisdiction or jurisdictions or to enforce in
any lawful manner a judgment obtained in one jurisdiction in any other
jurisdiction.
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York, without regard to conflicts of law
principles.
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EXHIBIT D
PETQUARTERS, INC.
SYMBOL: PDEN
EXCHANGE: NASDAQ OTC BB
$1,000,000 OFFERING OF REDEEMABLE NOTES
Notes: 8%, maturing the later of 2 month or 60 days after effectiveness of
equity line registration. The notes shall be redeemable at any point
prior to maturity at par plus accrued interest.
Funding Schedule: $1,000,000 on May 5th if $ 1,000,000 has not been drawn under
equity line.
Legal Fees: The Company shall bear the cost of document preparation and
closing, not to exceed $5,000.
Agreed and accepted
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Thomas Badian, President, Curzon Capital Corp.
On behalf of Splendid Rock Holdings Ltd.
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PETQUARTERS, INC.
SYMBOL: PDEN
EXCHANGE: NASDAQ OTC BB
$1,000,000 OFFERING OF REDEEMABLE NOTES
Notes: 8%, maturing the later of 2 month or 60 days after effectiveness of
equity line registration. The notes shall be redeemable at any point
prior to maturity at par plus accrued interest.
Funding Schedule: $1,000,000 on May 5th if $ 1,000,000 has not been drawn under
equity line.
Legal Fees: The Company shall bear the cost of document preparation and
closing, not to exceed $5,000.
Agreed and accepted
- ---------------------------------------
Thomas Badian, President, Curzon Capital Corp.
On behalf of Splendid Rock Holdings Ltd.