STAR ASSOCIATES, LLC
July 29, 2002
Ventures - National Incorporated
5525 South 900 East
Suite 11D
Salt Lake City, Utah 84117
Attention: Chief Executive Officer
Gentlemen:
We are pleased to set forth the terms of the retention of STAR
Associates, LLC ("STAR") by Ventures-National Incorporated (collectively with
its affiliates the "Company").
1. STAR will assist the Company as its non-exclusive financial
advisor, finder, and agent in connection with any Transaction with which the
Company may be involved. As used in this Agreement, the term "Transaction"
shall mean (a) any merger, consolidation, reorganization, recapitalization,
business combination, or other transaction pursuant to which the Company is
acquired by, or combined with, any third party which shall be introduced to
the Company by STAR during the term of this Agreement (any such entity, a
"Target") or (b) the acquisition or sale, directly or indirectly, by the
Company (or by one or more persons acting together with the Company pursuant
to a written agreement or otherwise), in a single transaction or a series of
transaction, of (i) all or substantially all, or any of the assets of the
Company or Target or (ii) shares of the Target's capital stock. STAR's
services will include advice with respect to valuation and structuring of any
Transaction, assisting the Company in the Company's efforts to obtain
financing for any Transaction, and assisting the Company in negotiations
relating to any Transaction.
2. In connection with STAR's activities on the Company's behalf, the
Company will cooperate with STAR and will furnish STAR with all information
and data concerning the Company, any Transaction, and, to the extent available
to the Company (the "Information") which STAR deems appropriate and will
provide STAR with access to the Company's officers, directors, employees,
independent accountants, and legal counsel. To the extent that the Company
has access to the officers, directors, employees, independent accountants, and
legal counsel of the Target, it will provide such access to STAR. The Company
represents and warrants that all Information (a) made available to STAR by the
Company or (b) contained in any filing by the Company with any court or
governmental regulatory agency, commission, or instrumentality with respect to
any Transaction will, at all times during the period of the engagement of STAR
hereunder, 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. The
Company further represents and warrants that any projections provided by it to
STAR will have been prepared in good faith and will be based upon assumptions,
which, in light of the circumstances under which they are made, are
reasonable. The Company acknowledges and agrees that, in rendering its
services hereunder, STAR will be using and relying on the Information (and
information available from public sources and other sources deemed reliable by
STAR) without independent verification thereof by STAR or independent
appraisal by STAR of any of the Company or the Company's assets or of the
Target or the Target's assets. STAR does not assume responsibility for the
accuracy or completeness of the Information or any other information regarding
the Target, the Company, or any Transaction. Any advice rendered by STAR
pursuant to this Agreement may not be disclosed publicly without STAR's prior
written consent.
3. In consideration of our services pursuant to this Agreement,
STARshall be entitled to receive, and the Company agrees to pay STAR aggregate
investment banking fees equal to 1.0% of the Consideration (as hereinafter
defined) given upon the closing of such Transaction in aggregate, which 1.0%
the Company and STAR agree is fair compensation to STAR for services in
connection with this Agreement. For purposes of this Agreement,
"Consideration" shall include the aggregate amount of cash, securities, or
other assets received by the Company or its shareholders in connection with a
Transaction, plus (i) the present value of any payments made or to be made
pursuant to installment notes, covenants not-to-compete, or other, similar
arrangements (but excluding any future compensation for future employment in
an amount consistent with that paid by the Company prior to the Transaction);
(ii) the face amount of any debt of the company or the Company's shareholders
(but excluding operating leases, trade payables and normal accruals) which is
assumed otherwise borne by the purchaser; and (iii) the amount of any
dividends or other extraordinary payments or distributions made by the Company
to its shareholders, officers, directors, or employees in anticipation of the
Transaction. The "present value of any payments made or to be made" shall be
determined using the face amount of the payments, and a discount rate equal to
the yield of 5-year Treasuries plus 1% at the end of the day immediately
preceding the close of the Transaction. Any securities or other non-cash
consideration, received as consideration shall have a value equal to the cash
equivalent value, as reasonably determined by STAR. If the Transaction takes
the form of a purchase of assets and an assumption of liabilities, then
Consideration shall include the fair market value of the assets purchased from
the Company, its shareholders or their affiliates, plus the face amount of any
debt of the company, its shareholders, or their affiliates (but excluding
operating leases, trade payables and normal accruals) that is assumed by the
purchaser. If all or any portion of the consideration payable in connection
with the Transaction includes contingent future payments, then the Company
shall pay to STAR, upon consummation of the Transaction, an additional cash
fee determined in accordance with this Paragraph 3, when, and if, such
contingency payments are received. However, in the event of an installment
purchase at a fixed price and a fixed time schedule the Company agrees to pay
to STAR, upon consummation of the Transaction, a cash fee determined in
accordance with this Paragraph 3 based upon the present value of such
installment payments using a discount rate referenced above. All monetary
fees shall be made payable and wired to the order of STAR Associates, LLC.
Such compensation shall be paid in cash at the time described for each payment
herein without regard to whether such consummated Transaction involves
payments in cash, in stock, or in a combination of cash and stock, or is made
on an installment basis. In the event that, for any reason, the Company shall
fail to pay to STAR all or any portion of the compensation otherwise due
thereto pursuant to this Agreement, in addition interest shall accrue on such
amount and shall be payable on the unpaid balance due hereunder from the date
such amount was due through and including the date actually received by STAR
at the rate of interest equal to two points over the prime rate of interest as
determined by Citibank, N.A. in New York, New York, computed on a daily basis
and adjusted as announced from time to time.
4. In addition to the fees described in paragraph 3 above, the
Company agrees to promptly reimburse STAR, upon request, for all out-of-pocket
expenses incurred by STAR (including reasonable fees and disbursements of
counsel, and of other consultants and advisors retained by STAR) in connection
with the matters contemplated by this Agreement.
5. The Company agrees to indemnify STAR in accordance with the
indemnification provisions (the "Indemnification Provisions") attached to this
Agreement, which Indemnification Provisions are incorporated herein and made a
part hereof.
6. The term of this Agreement shall commence on the date hereof and
expire on the second anniversary of the date hereof. Notwithstanding anything
herein to the contrary, if the Company shall, within two years immediately
following the termination of such two year period or the date of the
termination of this Agreement, if earlier, consummate a Transaction with any
party directly or indirectly introduced to the Company by, or on behalf of, or
worked with on behalf of the Company STAR, the Company shall be required to
pay to STAR the fee determined in accordance with Section 3 hereof with
respect to such Transaction. Notwithstanding the foregoing, either party
hereto may terminate this Agreement at any time upon written notice, without
liability or expenses incurred or continuing obligation, except as otherwise
set forth in this Paragraphs 3, 4, and 9. Neither termination of this
Agreement nor completion of the assignment contemplated hereby shall affect:
(i) any compensation earned by STAR or any other finder up to the date of
termination or completion, as the case may be, (ii) any compensation to be
earned by STAR after termination hereof, (iii) the reimbursement of expenses
incurred by STAR up to the date of termination or completion, as the case may
be, (iv) the provisions of Sections 3 through 11, inclusive, of this
Agreement, and (v) the attached Indemnification Provisions which are
incorporated herein, all of which shall remain operative and in full force and
effect.
7. The validity and interpretation of this Agreement shall be
governed by the law of the State of Delaware applicable to agreements made and
to be fully performed therein, without reference to conflicts of laws.
8. For the convenience of the parties, any number of counterparts of
this Agreement may be executed by the parties hereto. Each such counterpart
shall be, and shall be deemed to be, an original instrument, but all such
counterparts taken together shall constitute one and the same Agreement. This
Agreement may not be modified or amended except in writing signed by the
parties hereto.
9. The Consultant may disclose any Confidential Information that is
required to be disclosed by law, government regulation, or court or
administrative order or process. If disclosure is required, the Consultant
will give the Company advance notice so that the Company may seek a protective
order or take other action reasonable under of the circumstances. The Company
also understands the Consultant must release all types of information in
performance of the duties for the Company and requests to be informed upon
request for a list of which confidential information has been dispersed.
10. Upon termination of this Agreement, the Consultant will promptly
return to the Company at the Company's cost and request or destroy all
materials containing Confidential Information, including, but not limited to,
data, records, reports, and other property furnished by the Company to the
Consultant.
11. Each of the parties hereto represents and warrants that
execution, delivery, or performance of this Agreement does not conflict with,
or violate the terms of, any other agreement to which it is a party or by
which it is bound.
12. Any notice provided under this Agreement shall be in writing and
shall be deemed to have been effectively given when delivered personally, sent
by private express mail service (such as Federal Express), or sent by
registered or certified mail (return receipt requested) to the address set
forth herein (or to such other address as any party has furnished in writing
to the other parties).
13. The invalidity or unenforceability of any particular provision of
this Agreement or portion thereof shall not affect the validity or
enforceability of any other provision thereof or portion thereof. If any
provision of this Agreement is adjudicated to be so broad as to be
unenforceable, it shall be interpreted to be only as broad as is enforceable.
14. The benefits of this Agreement shall inure to the respective
successors and assigns of the parties hereto and of the indemnified parties
hereunder and their successors and assigns and representatives, and the
obligations and liabilities assumed in this Agreement by the parties hereto
shall be binding upon their respective successors and assigns.
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If the foregoing correctly sets forth our Agreement, please sign the
enclosed copy of this letter in the space provided and return it to us.
Very truly yours,
STAR ASSOCIATES, LLC
By: /s/ Robert E. Ciri
Name: Robert E. Ciri
Title: Principal
Confirmed and Agreed to
this 29th day of July, 2002:
VENTURES-NATIONAL, INC.
By: /s/ John Winchester
Name: John Winchester
Title: President
INDEMNIFICATION PROVISIONS
Ventures-National Incorporated, a Utah corporation (the "Company"),
agrees to indemnify and hold harmless STAR Associates, LLC ("STAR") against
any and all losses, claims, damages, obligations, penalties, judgments,
awards, liabilities, costs, expenses, and disbursements (and all actions,
suits, proceedings, and investigations in respect thereof and any and all
legal or other costs, expenses, and disbursements in giving testimony or
furnishing documents in response to a subpoena or otherwise), including,
without limitation, the costs, expenses, and disbursements, as and when
incurred, of investigating, preparing, or defending any such action,
proceeding, or investigation (whether or not in connection with litigation in
which STAR is a party), directly or indirectly, caused by, relating to, based
upon, arising out of, or in connection with (a) STAR's acting for the Company,
including, without limitation, any act or omission by STAR in connection with
its acceptance of or the performance or non-performance of its obligations
under the agreement, dated August ____, 2002, between STAR and the Company, as
such agreement may be amended from time to time (the "Agreement"), or (b) any
Transaction (as such term is defined in the Agreement); provided, however,
such indemnity shall not apply to any portion of any such loss, claim, damage,
obligation, penalty, judgment, award, liability, cost, expense, or
disbursement to the extent it is found in a final judgment by a court of
competent jurisdiction (not subject to further appeal) to have resulted
primarily and directly from the gross negligence or willful misconduct of
STAR. The Company also agrees that STAR shall not have any liability
(whether direct or indirect in contract or tort or otherwise) to the Company
for or in connection with the engagement of STAR, except to the extent that
any such liability is found in a final judgment by a court of competent
jurisdiction (not to subject to further appeal) to have resulted primarily and
directly from STAR's gross negligence or willful misconduct.
These Indemnification Provisions shall be in addition to any liability
which the Company may otherwise have to STAR or the persons indemnified below
in this sentence and shall extend to the following: STAR, its affiliated
entities, directors, officers, employees, counsel, agents, and controlling
persons (within the meaning of the federal securities laws). All references
to STAR in these Indemnification Provisions shall be deemed to include any and
all of the foregoing.
If any action, suit, proceeding, or investigation is commenced as to
which STAR proposed to demand indemnification, it shall notify the Company
with reasonable promptness; provided, however, that any failure by STAR to
notify the Company shall not relieve the Company from its obligations
hereunder. STAR shall have the right to retain counsel of its own choice to
represent it, and the Company shall pay the fees, expenses, and disbursements
of such counsel; and such counsel shall, to the extent consistent with its
professional responsibilities, cooperate with the Company and any counsel
designated by the Company. The Company shall be liable for any settlement of
any claim against STAR made with its written consent, which consent shall not
be unreasonably withheld. The Company shall not, without the prior written
consent of STAR, settle or compromise any claim, or permit a default or
consent to the entry of any judgment in respect thereof, unless such
settlement, compromise, or consent includes, as an unconditional term thereof,
the giving by the claimant to STAR of an unconditional release from all
liability in respect of such claim.
In order to provide for just and equitable contribution, if a claim for
indemnification pursuant to these Indemnification Provisions is made, but it
is found in a final judgment by a court of competent jurisdiction (not subject
to further appeal) that such indemnification may not be enforced in such case,
even though the express provisions hereof provide for indemnification in such
case, then the Company, on the one hand, and STAR, on the other hand, shall
contribute to the losses, claims, damages, obligations, penalties, judgments,
awards, liabilities, costs, expenses, and disbursements to which the
indemnified persons may be subject in accordance with the relative benefits
received by the Company, on the one hand, and STAR, on the other hand, in
connection with the statements, acts, or omissions which resulted in such
losses, claims, damages, obligations, penalties, judgments, awards,
liabilities, costs, expenses, and disbursements and the relevant equitable
considerations shall also be considered. No person found liable for a
fraudulent misrepresentation shall be entitled to contribution from any person
who is not also found liable for such fraudulent misrepresentation.
Notwithstanding the foregoing, STAR shall not be obligated to contribute any
amount hereunder that exceeds the amount of fees previously received by STAR
pursuant to the Agreement.
Neither termination nor completion of the engagement of STAR referred to
above shall affect these Indemnification Provisions, which shall then remain
operative and in full force and effect.