EXHIBIT 10.1
[KEANE SECURITIES CO., INC. LOGO]
Fifty Broadway
New York, NY 10004
(212) 422-1255
March 11, 2004
VIA TELECOPIER
--------------
305-932-4404
------------
Mr. David A. Collins, President
DAC Technologies Group International, Inc.
1601 Westpark Drive, Suite 4C
Little Rock, AR 72204
Dear Mr. Collins:
In connection with Keane Securities Co., Inc. (the "Placement Agent"
or "Keane") acting as the exclusive agent and representative with respect to
the private placement (the "Placement") of certain securities (the "Units") of
DAC Technologies Group International, Inc. (the "Company"), described on the
term sheet ("Term Sheet") attached hereto as Exhibit A, the provisions of which
shall be incorporated herein as if at length set forth, the Company and the
Placement Agent hereby agree as follows.
1. The Company hereby agrees to pay and deliver to the Placement
Agent at the closing(s) the compensation set forth in Exhibit A for the
Placement Agent's services. The foregoing compensation shall be deemed earned
and shall be due and payable only upon consummation of the closing and in no
event shall such compensation (except for reimbursable expenses) be deemed
earned nor be payable if the closing(s) do not occur.
2. The Placement Agent acknowledges that the Units will not have been
registered under the Securities Act of 1933, as amended, (the "Act") or any
state securities laws in reliance upon existing exemptions for private
offerings and that
1
neither the Units nor the components thereof can be sold unless they are
registered or an exemption from registration is available.
3. The Company and the Placement Agent each represent to the
other that it has not taken, and the Company and the Placement Agent each agree
with the other that it will not take any action, directly or indirectly, so as
to cause the Placement to fail to be entitled to rely upon the exemption from
registration afforded by Section 4(2) of the Act and Regulation D promulgated
thereunder. In effecting the Placement, the Company and the Placement Agent
each agree to comply in all material respects with all applicable provisions of
the Act and any regulations thereunder and all applicable state laws and
requirements. It is understood by the Company and the Placement Agent that the
investors in the Placement will be "accredited investors" within the meaning of
Regulation D, and that all investors shall be subject to the approval of the
Company and the Placement Agent in all events.
4. The Placement Agent shall use diligent efforts to complete
the Placement as contemplated herein by June 15, 2004. If the minimum Placement
closes by June 15, 2004, the Placement Agent shall have until July 15, 2004 to
complete the maximum Placement. The Company agrees that from the date hereof
through June 15, 2004, it shall not attempt to sell any of its securities
except through the Placement Agent. At the closing, the Company shall deliver
covenants, warranties, representations and opinions as are traditional in
private placements.
5. The Company understands and agrees that Keane, in performing
its services hereunder, will use and rely upon the information contained in
certain documents ("Placement Documents") to be prepared by the Company and
upon other information supplied by the Company, and that Keane does not assume
responsibility for independent verification of any information concerning the
Company, including, without limitation, any financial information, forecasts or
projections considered by Keane in connection with the rendering of its
services. Accordingly, Keane shall be entitled to assume and rely upon the
accuracy or completeness of all such information, and is not required to conduct
a physical inspection of any of the properties or assets or liabilities of the
Company. With respect to any financial forecasts and projections made available
to Keane by the Company and used by Keane in its analysis, Keane shall be
entitled to assume that such forecasts and projections have been prepared on
reasonable bases reflecting the best currently available estimates and
judgments of the management of the Company as to the matters covered thereby.
While Keane can rely on such information, it reserves the right to investigate,
confirm and/or request other information in conjunction with the Company, or
independently, and the Company will
2
cooperate in providing such information and/or instructing its outside counsel
and auditors to supply such information.
6. The Company authorizes Keane, as the Company's exclusive
Placement Agent, to submit the Placement Documents to potential investors and to
execute on behalf of the Company if, as and when necessary a customary
confidentiality agreement to be entered into by such parties. Additionally, the
Company authorizes Keane to take all reasonable actions necessary to perform its
services on behalf of the Company as exclusive Placement Agent as long as such
actions are in accordance with this Agreement.
7. The Company covenants that for a period of one (1) year from
the closing of the Placement, Keane shall have the right to purchase for
Keane's account or to sell for the account of the Company any securities (other
than purely debt securities; securities offered as part of a compensation plan
for officers, employees and consultants; and securities offered in exchange for
assets or securities of other corporations) with respect to which the Company
may seek a public offering in the United States pursuant to a registration
under the Act and/or a private offering in the United States pursuant to a
registration under the Act and/or a private offering in the United States of
said securities. The Company will consult Keane with regard to any such
offering and will offer Keane exclusively the opportunity to purchase, sell or
act as underwriter or placement agent for the purchase or sale of any such
securities on terms not less favorable to the Company than it can secure
elsewhere. If Keane fails to accept in writing such proposal for financing made
by the Company within ten (10) business days after the receipt of a notice
containing such proposal, then Keane shall have no further claim or right with
respect to the financing proposal contained in such notice. If, thereafter,
such proposal is modified in any material respect, the Company shall adopt the
same procedure as with respect to the original proposal. If Keane does not
avail itself of such opportunity to act as underwriter or placement agent, this
will not affect its preferential rights for future financings during the
aforesaid one (1) year period. The Company acknowledges that its violation of
the covenants of this Paragraph 7 and/or violation of Keane's rights of first
refusal would cause irreparable harm to Keane and agrees that Keane shall be
entitled to injunctive relief to prevent any violation of the provisions of
this Paragraph 7. The Company represents and warrants that no other person or
entity has any rights to participate in any offer, sale or distribution of
securities
3
with respect to which Keane shall have preferential rights. The Company also
represents and warrants that the terms contemplated herein will not breach any
covenant warranty or condition agreed to by the Company in the equity and/or
debt financings effected by the Company to date. Keane may exercise the right
of first refusal granted pursuant to this Paragraph 7 either on its own behalf
or together with another firm or firms designated by Keane and reasonably
acceptable to the Company provided that in each instance Keane shall be fully
qualified to act as underwriter or placement agent in the offering.
8. The Company hereby agrees to indemnify and hold harmless the
Placement Agent and its officers, directors and shareholders, individually and
collectively, ("Indemnified Person(s)") from and against any and all claims,
liabilities, losses, damages and reasonable expenses incurred by any
Indemnified Person (including reasonable fees and disbursements of one law
firm) which (a) are related to or arise out of (i) actions taken or omitted to
be taken (including any untrue statements made or any statements omitted to be
made) by the Company or (ii) actions taken or omitted by an Indemnified Person
with the Company's written consent or in conformity with the Company's prior
written instructions or (b) are otherwise directly related to or arise out of
the Placement, and will reimburse the Indemnified Persons for all reasonable
costs or expenses, including reasonable fees and disbursements of counsel, as
they are incurred, in connection with an investigation, inquiry or other
proceeding, whether or not in connection with pending or threatened litigation,
caused by or arising out of or in connection with the Placement whether or not
any liability results therefrom. The Company will not, however, be responsible
for any claims, liabilities, losses, damages, or expenses which are finally
judicially determined to have resulted primarily from the Placement Agent's bad
faith, gross negligence or willful misconduct.
The Placement Agent hereby agrees to indemnify and hold harmless the
Company and its officers, directors and shareholders, individually and
collectively, ("Indemnified Person(s)") from and against any and all claims,
liabilities, losses, damages and reasonable expenses incurred by any
Indemnified Person (including reasonable fees and disbursements of one law
firm) which (a) are related to or arise out of (i) actions taken or omitted to
be taken (including any untrue statements made or any statements omitted to be
made) by the Placement Agent or (ii) actions taken or omitted by an Indemnified
Person with the Placement Agent's written consent or
4
in conformity with the Placement Agent's prior written instructions or (b) are
otherwise directly related to or arise out of the Placement, and will reimburse
the indemnified Persons for all reasonable costs or expenses,including
reasonable fees and disbursements of counsel, as they are incurred, in
connection with an investigation, inquiry or other proceeding, whether or not in
connection with pending or threatened litigation, caused by or arising out of or
in connection with the Placement whether or not any liability results therefrom.
The Placement Agent will not, however, be responsible for any claims,
liabilities, losses, damages, or expenses which are finally judicially
determined to have resulted primarily from the Company's bad faith, gross
negligence or willful misconduct.
9. In the event of a closing of the Placement, Keane shall have the
right to disclose its participation therein, including, without limitation, the
placement of "tombstone" advertisements in financial and other newspapers and
journals as an accountable expense (maximum $7,500) provided for in Exhibit A,
subject to the prior review of and approval by counsel to the Company.
10. The Company recognizes that Keane has been engaged by the Company
only and that the Company's engagement of Keane is not deemed to be on behalf
of and is not intended to confer rights upon any shareholder, partner or other
owner of the Company or any other person not a party hereto as against Keane or
its directors, officers, agents, employees or representatives. Unless otherwise
expressly agreed, no one other than the Company is authorized to rely upon the
Company's engagement of Keane or any statements, advice, opinions or conduct by
Keane. Without limiting the foregoing, any opinions or advice rendered by Keane
to the Company's Board of Directors or management in the course of the
Company's engagement of Keane are for the purpose of assisting the Board or
management, as the case may be,in connection with the Placement and do not
constitute a recommendation to any shareholder of the Company, concerning
action that such shareholder might or should take in connection with the
Placement. Keane's role herein is that of an independent contractor, nothing
herein is intended to create or shall be construed as creating a fiduciary
relationship between the Company and Keane.
5
11. All notices, requests or instructions hereunder shall be in
writing and delivered personally, sent by telecopier or sent by registered or
certified mail, postage prepaid, as follows:
(1) If to the Company:
DAC Technologies Group International, Inc.
1601 Westpark Drive, Ste. 4C
Little Rock, AR 72204
Att: David A. Collins, President
Telecopier: 305-932-4404
(2) If to the Placement Agent:
Keane Securities Co., Inc.
50 Broadway, 13th Floor
New York, New York 10004
Att: Walter D. O'Hearn, Jr.,
Senior Vice President
Telecopier: 212-509-6613
Any of the above addresses may be changed at any time by notice given
as set forth above; provided, however, that any such notice of change of
address shall be effective only upon receipt. All notices, requests or
instructions given in accordance herewith shall be deemed received on the date
of delivery, if hand delivered or delivered by telecopier and two (2) business
days after the date of mailing, if mailed.
12. Except as expressly set forth herein, this Agreement, Exhibit A
and the Agent's Warrants contain the entire agreement among the parties hereto
with respect to the transaction contemplated hereby and shall supersede all
previous agreements of the parties with respect to the subject matter thereof.
13. This Agreement shall not be assignable by either party hereto
except pursuant to a writing executed by all of the parties hereto. This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns.
14. If any provision of this Agreement, or the application of any
such provision to any person or circumstance, shall be held invalid by a court
of competent jurisdiction, the remainder of this Agreement, or the application
of such
6
provision to persons or circumstances other than those as to which it is held
invalid, shall not be affected thereby.
15. In addition to the covenants and agreements herein above
provided, each of the parties hereto shall use such party's diligent efforts to
take such actions as may be reasonably necessary or reasonably requested by the
other party hereto to carry out and consummate the transactions contemplated by
this Agreement.
16. This Agreement may be executed in counterparts, each of which
shall be deemed an original, but all of which taken together shall constitute
one and the same instrument.
17. No modification or amendment of this Agreement shall be
effective unless in writing and signed by the party against which it is sought
to be enforced.
18. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York.
Very truly yours,
Keane Securities Co., Inc.
/s/ Walter D. O'Hearn, Jr.
-----------------------------
Name: Walter D. O'Hearn, Jr.
Title: Senior Vice President
Agreed:
DAC Technologies Group International, Inc.
By: /s/ David A. Collins, President
--------------------------------------
Name: David A. Collins
Title: President
7
TERM SHEET
PRINCIPAL AMOUNT - $1.7 million with a minimum of $500,000 and a minimum
investment of $25,000 per investor (unless waived by the Company and the
Placement Agent).
THE UNITS - a) Up to Sixty-Eight (68) Units priced at $25,000 per Unit, with
each Unit to consist of:
- An undetermined number of shares of the Company's common
stock, par value $0.001 per share (the "Common Stock") as
equals $25,000 divided by the Closing Price of the Common
Stock, as hereinafter defined.
- The number of Common Stock purchase warrants (the "Unit
Warrants") as will produce a 50% warrant coverage. By way of
example, assuming the Closing Price of Common Stock is pegged
at $2.00 per share, each $25,000 Unit will consist of 12,500
shares of Common Stock and 6,250 Unit Warrants.
b) Each Unit Warrant shall entitle the holder to purchase one
(1) share of Common Stock for the greater of $2.40 or 150% of
the Closing Price of the Common Stock (as hereinafter defined)
per share for a period of five (5) years from the date of
issue. Each Unit Warrant shall contain customary anti-dilution
provisions. By way of example, assuming the Closing Price of
the Common Stock is pegged at $2.00 per share, each Unit
Warrant will be exercisable at $3.00 per share.
c) The term Closing Price of the Common Stock shall mean the
average of the daily closing prices (or closing bid price if
there is no closing price) of the Common Stock for a period of
ten (10) trading days ending two (2) trading days prior to the
closing date, but in no event less than $1.60.
d) The Unit Warrants shall be non-redeemable for a period of two
(2) years from the date of the closing of the Placement. Unit
Warrants shall be redeemable, in whole and not in part, at the
option of the Company, upon thirty (30) days prior written
notice at a redemption price of $0.05 per Warrant from and
after that time when the Closing Price of the Common Stock (as
defined) for each of ten (10) consecutive trading days ending
not less than five (5) days before the date of the aforesaid
redemption notice exceeds 200% of the Closing Price of the
Common Stock.
PLACEMENT AGENT'S FEE - 8% of the aggregate proceeds from all sales of the
Units achieved through the efforts of the Company, Keane and/or any third
party, paid at closing(s).
1
- 5,000 warrants, identical to the Unit Warrants, issued to Keane
and/or its designees for each Unit sold (at a cost of $.001 per
warrant) (the "Agent's Warrants").
- Accountable, reimbursable expenses, including legal fees, not to
exceed $30,000, with a non-refundable advance of $5,000.
ADDITIONAL TERMS AND CONDITIONS
a) Placement Documents to be satisfactory in form and content:
1. A detailed statement of the intended use of net proceeds and
detailed two (2) year projections with a statement of
assumptions.
2. A Subscription Agreement containing standard
covenants, representations, warranties and conventional
anti-dilution protections.
3. A Registration Rights Agreement providing for (i) on or before
September 30, 2004, registration of the Common Stock underlying
the Units and Unit Warrants on Form S-3 if the Company is
eligible to use such form, or (ii) registration of said Common
Stock as soon as the Company becomes eligible to use Form S-3,
or (iii) in the event the Company is not eligible to use Form
S-3, evergreen piggyback registration rights covering the
Common Stock and Warrants; all at the expense of the Company.
4. Form 10-K for the year ended December 31, 2003.
5. An Accredited Investor Questionnaire, apart from or as a part
of the Subscription Agreement.
6. A list of directors, officers and 5% or greater shareholders by
name, residence address, social security number and
relationship with the Company.
7. ALL material written agreements.
8. The latest filed U.S. tax return.
b) For a three (3) year period from the first closing, the Company
shall grant Keane the right to appoint a designee as an observer
having the right to attend all meetings of the Company's Board of
Directors and Committees, but not having the right to vote. The
observer will be reimbursed for his out-of-pocket expenses in
connection with attending such meeting.
c) If the Company closes a sale(s) of any of its securities within
twenty-four (24) months after the first closing of the Placement
with any of the investors introduced by Keane to the Company, in
writing, Keane shall be
2
entitled to the cash portion of Placement Agent's Fee and Agent's
Warrants set forth above. This provision shall not be deemed to alter
the one (1) year preferential rights period provided for in Section 7
of this Agreement.
d) Escrow Agreement: The Placement Agent will promptly deposit funds
received from investors in an escrow account or other account (the
"Account") permitted by Rule 15c2-4 promulgated under the Securities
and Exchange Act of 1934, as amended, formed by the Placement Agent
with a qualified institution (the "Bank") and hold funds in
accordance with the terms of this Agreement for the benefit of the
investors and the Company. The Bank shall release funds from the
Account to the Company and/or its designees only upon receipt of
instructions executed by each of the Placement Agents and the
Company. If the Placement does not close on or before May 15, 2004,
the Placement Agent will instruct the Bank to return the funds to the
investors without any deduction therefrom or interest thereon. The
Company shall bear the costs of the escrow account.
e) Conditions to Closing. No closing of this Placement shall take place
unless, prior to June 15, 2004, the Company shall have caused its
counsel to issue an opinion in form and content reasonably
satisfactory to Keane; it being understood that said opinion must set
forth a Rule 10b-5 statement.
f) Closing: The closing(s) of the Placement shall take place at the
offices of the Company or the Placement Agent at times and dates
agreed upon by the Placement Agent and the Company upon the receipt
of Subscription Agreements and related documents in form and
substance satisfactory to the Company and the Placement Agent which
are equal to or are in excess of the Placement. At each closing,
payment for the Units shall be made against delivery of certificates
representing the Units sold.
EXHIBIT A
3