August 18, 2010
Robert McCann
GulfStar Energy Corp
3410 Embassy Dr
West Palm Beach,
Florida. 33401
RE: Private Placement of Securities
Dear Mr. McCann:
This letter confirms our agreement that Gulfstar Energy Corp, a
Colorado corporation (collectively with its owned or controlled subsidiaries,
the "Company") has engaged Maxim Group LLC (together with its affiliates and
subsidiaries, the "Placement Agent") to act as the Company's exclusive Placement
Agent in connection with the Company's proposed private placement (the
"Offering") of equity, convertible, debt and/or equity linked securities (the
"Securities") of the Company. The precise terms of the Securities and the gross
proceeds of such Offering will be negotiated between the Placement Agent and the
Company with one or more Investors (as defined below), it being understood that
the gross proceeds of the Offering will be up to $15 million.
Upon acceptance (indicated by your signature below), this letter
agreement (the "Agreement") will confirm the terms of the engagement between the
Placement Agent and the Company on the terms and conditions set forth herein.
1. Appointment.
(a) Subject to the terms and conditions of this Agreement, the Company
hereby retains the Placement Agent, and the Placement Agent hereby agrees to
act, as the Company's exclusive Placement Agent in connection with the Offering.
As Placement Agent for the Offering, the Placement Agent will advise and assist
the Company in identifying one or more investors that are "accredited" within
the meaning of the U.S. federal securities laws ("Investors") to participate in
the Offering. The Company acknowledges and agrees that the Placement Agent is
only required to use its "commercially reasonable efforts" in connection with
its activities hereunder and that this Agreement does not constitute a legal or
binding commitment by the Placement Agent to purchase the Securities or
introduce the Company to Investors, nor does this Agreement constitute a
representation or warranty on the part of the Placement Agent that any Offering
will be consummated. The Placement Agent will, in its sole discretion, determine
the reasonableness of its efforts, and is under no obligation to perform at any
level other than what it deems reasonable. The Company retains the right to
determine all of the terms and conditions of the Offering and to accept or
reject any proposals submitted to it by the Placement Agent in its sole and
absolute discretion.
(b) In furtherance of the Company's agreement that the Placement
Agent's retention hereunder shall be exclusive, during the Term (as such term is
hereinafter defined), neither the Company nor any of its officers, directors,
employees, subsidiaries, affiliates, agents or representatives
("Representatives") will, directly or indirectly, solicit or otherwise encourage
the submission of any proposal or offer ("Investment Proposal") from any person
or entity relating to any issuance of the Company's or any of its subsidiaries'
equity or equity-linked securities (including warrants and debt securities with
any equity feature) or participate in any discussions regarding an Investment
Proposal. The term "Investment Proposal" shall not include (i) any investment in
the equity securities of any other entity, and (ii) any transaction or agreement
with one or more persons, firms or entities designated as a "strategic partner"
of the Company, as determined in good faith by the Board of Directors of the
Company, provided that each such person, firm or entity is, itself or through
its subsidiaries, an operating company in a business synergistic with the
business of the Company and in which the Company receives benefits in addition
to the investment of funds, but shall not include a transaction in which the
Company is issuing securities primarily for the purpose of raising capital or to
one or more persons or entities whose primary business is investing in
securities. The Company will immediately cease all contacts, discussions and
negotiations with third parties regarding any Investment Proposal and, during
the Term, will promptly inform that Placement Agent of any unsolicited
Investment Proposals received by the Company or its Representatives.
Notwithstanding the foregoing, the Company and Maxim agree that the Company may
on its own, prior to the Offering, raise up to $1.5 million for the purpose of
funding operations of the Company (the "Internal Financing"). It is understood
and agreed that Maxim shall not receive the fees detailed in Section 3 for any
monies raised in connection with the Internal Financing.
2. Information.
(a) The Company recognizes that, in completing its engagement
hereunder, the Placement Agent will be using and relying on both publicly
available information and on data, material and other information (including
non-public information) furnished to Placement Agent by the Company or its
Representatives. The Company will cooperate with the Placement Agent and
furnish, and cause to be furnished, to the Placement Agent, any and all
information and data concerning the Company, its business, financial condition
and plans for the Offering that the Placement Agent deems appropriate (
including, without limitation, the Company's strategic, business, growth,
acquisition and/or merger plans and plans for raising capital or additional
financing) that is reasonably requested by the Placement Agent (the
"Information"), including a Private Placement Memorandum to be used in
connection with the Offering, if deemed appropriate by the Placement Agent
(collectively, the "Private Placement Materials"). Any Information and Private
Placement Materials forwarded to prospective Investors will be in form
acceptable to Placement Agent and its counsel. The Company represents and
warrants that all Information and Private Placement Materials, including, but
not limited to, the Company's financial statements, will 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.
(b) It is further agreed that the Placement Agent will conduct a due
diligence investigation of the Company and the Company will cooperate with such
investigation as a condition of the Placement Agent's participation in the
Offering. The Company recognizes and confirms that the Placement Agent: (i) will
use and rely primarily on the Information, the Private Placement Materials and
information available from generally recognized public sources in performing the
services contemplated by this letter without having independently verified the
same; (ii) is authorized as the Placement Agent to transmit to any prospective
investors a copy or copies of the Private Placement Materials, forms of
subscription documents and any other legal documentation supplied to the
Placement Agent for transmission to any prospective investors by or on behalf of
the Company or by any of the Company's officers, representatives or agents, in
connection with the performance of the Placement Agent's services hereunder or
any transaction contemplated hereby; (iii) does not assume responsibility for
the accuracy or completeness of the Information or the Private Placement
Materials and such other information, if any provided to the Investors; (iv)
will not make an appraisal of any assets of the Company or the Company
generally; and (v) retains the right to continue to perform due diligence of the
Company, its business and its officers and directors during the course of the
engagement.
(c) Until the date that is one year from the date hereof, the Placement
Agent will keep all information obtained from the Company confidential except:
(i) Information which is otherwise publicly available, or previously known to or
obtained by, the Placement Agent independently of the Company and without breach
of any of the Placement Agent's agreements with the Company; (ii) the Placement
Agent may disclose such information to its officers, directors, employees,
agents and representatives, and to its other advisors and financial sources on a
need to know basis only and will ensure that all such persons will keep such
information strictly confidential. No such obligation of confidentiality shall
apply to information that: (i) is in the public domain as of the date hereof or
hereafter enters the public domain without a breach by the Placement Agent, (ii)
was known or became known by the Placement Agent prior to the Company's
disclosure thereof to the Placement Agent, (iii) becomes known to the Placement
Agent from a source other than the Company, and other than by the breach of an
obligation of confidentiality owed to the Company, (iv) is disclosed by the
Company to a third party without restrictions on its disclosure, (v) is
independently developed by the Placement Agent or (vi) is required to be
disclosed by the Placement Agent or its officers, directors, employees, agents,
attorneys and to its other advisors and financial sources, pursuant to any order
of a court of competent jurisdiction or other governmental body or as may
otherwise be required by law.
(d) The Company recognizes that in order for the Placement Agent to
perform properly its obligations in a professional manner, the Company will keep
the Placement Agent informed of and, to the extent practicable, permit the
Placement Agent to participate in meetings and discussions between the Company
and any third party relating to the matters covered by the terms of the
Placement Agent' engagement. If at any time during the course of the Placement
Agent's engagement, the Company becomes aware of any material change in any of
the information previously furnished to the Placement Agent, it will promptly
advise the Placement Agent of the change.
(e) The Offering shall be conditioned upon, among other things, the
following:
(i) Satisfactory completion by the Placement Agent of its due diligence
investigation and analysis of: (a) the Company's arrangements with its officers,
directors, employees, affiliates, customers and suppliers, (b) the audited
historical financial statements of the Company, and (c) the Company's projected
financial results for the fiscal years ending December 31, 2010 through 2014;
(ii) The Company retaining a firm nationally recognized in the U.S. of
independent PCAOB registered public accountants acceptable to the Placement
Agent, which will have responsibility for the preparation of the financial
statements and the financial exhibits, if any, to be included in the Private
Placement Materials, and will continue to engage accountants of comparable
quality (as may be determined by the Company's Board of Directors or audit
committee) for a period of at least three (3) years after the initial Closing
(as defined below);
(iii) The Company retaining a transfer agent for the Company's common equity
reasonably acceptable to the Placement Agent and continuing to retain a
competent transfer agent for a period of three (3) years after the initial
Closing;
(iv) Upon the execution of the engagement letter, the Company at its own expense
will conduct background checks, by a background search firm acceptable to the
Placement Agent, for the Company's senior management; and
3. Compensation. As compensation for services rendered and to be rendered
hereunder by Placement Agent, the Company agrees to provide the Placement Agent
with the following:
(a) The Company agrees to pay the Placement Agent a cash fee payable
upon each closing of the Offering (each, a "Closing") equal to eight percent
(8.0%) of the gross proceeds received by the Company at each Closing (the
"Placement Fee"). It is understood and agreed, however, that if any of the
investors listed in Exhibit B ("Company Investors") participates in the
Offering, than the fee payable upon Closing for the amount invested by the
Company Investors shall be equal to 2/3rd of the Placement Fee , or 5.3% (2/3rd
*8%). In the event that an investment is made by Company Investors in the form
of senior non-convertible debt instrument, Maxim fee on any gross proceeds
invested by Company Investors shall be equal to 2/3rd of 1%, or 0.6% (2/3rd
*1%).
(b) The Company shall, at the Closing, grant to the Placement Agent (or
its designated affiliates) securities purchase warrants (the "Warrants")
covering a number of the securities ("Securities") equal to eight percent (8.0%)
of the total number of Securities being sold and/or issued in the Offering. The
Warrants will be non-exercisable for six (6) months after the date of the
Closing and will be exercisable and expire five (5) years after the Closing. The
Warrants will be exercisable at a price per share equal to 110% of the price of
the Securities paid by the Investors in connection with the Offering. The
Warrants shall not be redeemable. To the extent that the Investors are granted
registration rights with respect their Securities (or components thereof), the
Company will grant identical rights to the Placement Agent with respect to the
Securities underlying the Warrants. The Placement Agent will be entitled to
customary demand and "piggyback" rights pursuant to FINRA Rule 5110. If so
registered, the Warrants (and the underlying securities) may not be transferred,
assigned or hypothecated for a period of six (6) months following the Effective
Date pursuant to FINRA Rule 5110(g)(1), except that they be assigned, in whole
or in part, to any successor, officer or member of the Placement Agent (or to
officers or partners of any such successor of member) pursuant to FINRA Rule
5110(g)(2). The Warrants may be exercised in whole or in part, shall provide for
"cashless" exercise, and shall provide for customary anti-dilution and price
protection.
(c) The Company shall pay the Placement Agent a non-refundable cash
retainer of $25,000 (the "Retainer") payable upon the execution of this
agreement. The Retainer shall be paid in US dollars by the Company via check or
wire transfer of immediate available funds to an account designated by the
Placement Agent.
(d) In addition to any fees payable to the Placement Agent hereunder,
subject to the provisions of Section 3(b), the Company shall promptly upon
request from time to time and at each Closing reimburse the Placement Agent for
all expenses (including, without limitation, fees and disbursements of the
Placement Agent's counsel and all travel and other out-of-pocket expenses)
incurred by the Placement Agent in connection with its engagement hereunder.
(e) The Company shall assist and cooperate with legal counsel to the
Placement Agent in effecting a filing with respect to the public offering
contemplated by the Registration Statement to be filed in connection with the
Offering (an "Issuer Filing") with the Financial Industry Regulatory Authority
("FINRA") Corporate Financing Department pursuant to FINRA Rule 5110, and the
Company shall pay the filing fee required by such Issuer Filing and the fees and
expenses of counsel to the Placement Agent in connection with the Issuer Filing
and clearing such filing with FINRA. The Company shall assist legal counsel to
the Placement Agent in pursuing the Issuer Filing until FINRA issues a letter
confirming that it does not object to the terms of the Offering contemplated by
the Registration Statement.
4. Term of Engagement.
(a) This Agreement will remain in effect until March 31st, 2011, after
which either party shall have the right to terminate it on thirty (30) days
prior written notice to the other. The date of termination of this Agreement is
referred to herein from time to time as the "Termination Date." The period of
time during which this Agreement remains in effect is referred to herein from
time to time as the "Term". In the event, however in the course of the Placement
Agent's performance of due diligence it deems it necessary to terminate the
engagement, the Placement Agent may do so prior to the termination date and upon
immediate written notice. If, within twelve months after the Termination Date,
the Company completes any private financing of equity, equity-linked or debt or
other capital raising activity of the Company (other than the exercise by any
person or entity of any options, warrants or other convertible securities other
than the warrants issued pursuant to this Agreement) with any of the Investors
who were first introduced to the Company in connection with the financing
contemplated hereby by the Placement Agent, the Company will pay to the
Placement Agent upon the closing of such financing the compensation set forth in
Sections 3(a) and 3(c).
(b) Notwithstanding anything herein to the contrary, subject to the
twelve months limitation described in Section 4(a) above, the obligation to pay
the compensation and expenses described in Section 3, this Section 4, Sections 6
and 8-18 and all of Exhibit A attached, hereto (the terms of which are
incorporated by reference hereto), will survive any termination or expiration of
this Agreement. The termination of this Agreement shall not affect the Company's
obligation to pay fees to the extent provided for in Section 3 herein and shall
not affect the Company's obligation to reimburse the expenses accruing prior to
such termination to the extent provided for herein. All such fees and
reimbursements due shall be paid to the Placement Agent on or before the
Termination Date (in the event such fees and reimbursements are earned or owed
as of the Termination Date) or upon the closing of the Offering or any
applicable portion thereof (in the event such fees are due pursuant to the terms
of Section 3 hereof).
5. Certain Placement Procedures. The Company and the Placement Agent each
represents to the other that it has not taken, and the Company and the Placement
Agent each agrees with the other that it will not take any action, directly or
indirectly, so as to cause the Offering to fail to be entitled to rely upon the
exemption from registration afforded by Section 4(2) of the Securities Act of
1933, as amended (the "Act"). In effecting the Offering, the Company and the
Placement Agent each agrees to comply in all material respects with applicable
provisions of the Act and any regulations thereunder and any applicable laws,
rules, regulations and requirements (including, without limitation, all U.S.
state law and all national, provincial, city or other legal requirements of
[INSERT FOREIGN JURSIDICTION IF APPLICABLE] The Company agrees that any
representations and warranties made by it to any Investor in the Offering shall
be deemed also to be made to the Placement Agent for its benefit. The Company
agrees that it shall cause any opinion of its counsel delivered to any Investors
in the Offering also to be addressed and delivered to the Placement Agent, or to
cause such counsel to deliver to the Placement Agent a letter authorizing it to
rely upon such opinion.
6. Indemnification. The Company agrees to indemnify Placement Agent in
accordance with the indemnification and other provisions attached to the
Agreement as Exhibit A (the "Indemnification Provisions"), which provisions are
incorporated herein by reference and shall survive the termination or expiration
of the Agreement.
7. Other Activities. The Company acknowledges that the Placement Agent has been,
and may in the future be, engaged to provide services as an underwriter,
placement agent, finder, advisor and investment banker to other companies in the
industry in which the Company is involved. Subject to the confidentiality
provisions of the Placement Agent contained in Section 2 hereof, the Company
acknowledges and agrees that nothing contained in this Agreement shall limit or
restrict the right of the Placement Agent or of any member, manager, officer,
employee, agent or representative of the Placement Agent, to be a member,
manager, partner, officer, director, employee, agent or representative of,
investor in, or to engage in, any other business, whether or not of a similar
nature to the Company's business, nor to limit or restrict the right of the
Placement Agent to render services of any kind to any other corporation, firm,
individual or association; provided that the Placement Agent and any of its
member, manager, officer, employee, agent or representative shall not use the
Information to the detriment of the Company. the Placement Agent may, but shall
not be required to, present opportunities to the Company.
8. Right of First Refusal. Upon the successful completion of any Closing of the
Offering, for a period of eighteen (18) months from the final Closing, the
Company grants the Placement Agent the right of first refusal to act as lead
managing underwriter and book runner for any and all future public and private
equity and public debt offerings during such eighteen (18 months) period of the
Company, or any successor to or any subsidiary of the Company (a "Subsequent
Offering"). Placement Agent shall notify the Company within 30 days of its
receipt of the written offer contemplated above as to whether or not it agrees
to accept such retention. If Placement Agent should decline such retention, the
Company shall have no further obligation to Maxim, except as specifically
provided for herein.
9. Governing Law; Jurisdiction; Waiver of Jury Trial. This Agreement will be
governed as to validity, interpretation, construction, effect and in all other
respects by the internal law of the State of New York. The Company and the
Placement Agent each (i) agree that any legal suit, action or proceeding arising
out of or relating to this Agreement shall be instituted exclusively in the New
York State Supreme Court, County of New York, or in the United States District
Court for the Southern District of New York, (ii) waives any objection to the
venue of any such suit, action or proceeding, and the right to assert that such
forum is an inconvenient forum, and (iii) irrevocably consents to the
jurisdiction of the New York State Supreme Court, County of New York, and the
United States District Court for the Southern District of New York in any such
suit, action or proceeding. Each of the Company and the Placement Agent further
agrees to accept and acknowledge service of any and all process that may be
served in any such suit, action or proceeding in the New York State Supreme
Court, County of New York, or in the United States District Court for the
Southern District of New York and agree that service of process upon it mailed
by certified mail to its address shall be deemed in every respect effective
service of process in any such suit, action or proceeding. The parties hereby
expressly waive all rights to trial by jury in any suit, action or proceeding
arising under this Agreement.
10. Securities and Other Law Compliance. The Company, at its own expense, will
use its best efforts to obtain any registration, qualification or approval
required to sell any Securities under the laws (including U.S. state "blue sky"
laws) of any applicable jurisdictions (including those of the [INSERT FOREIGN
JURISDICTION] or any instrumentality thereof).
11. Representations and Warranties. The Company and the Placement Agent each
respectively represent and warrant 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 legal, valid and binding agreement of such party 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) such party's certificate of incorporation or
by-laws or (ii) any agreement to which such party is a party or by which any of
its property or assets is bound.
12. Parties; Assignment; Independent Contractor; No Tax Advice. This Agreement
has been and is made solely for the benefit of the Placement Agent and the
Company and each of the persons, agents, employees, officers, directors and
controlling persons referred to in Exhibit A and their respective heirs,
executors, personal representatives, successors and assigns, and nothing
contained in this Agreement will confer any rights upon, nor will 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 section. 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
will be null and void. The Placement Agent has been retained under this
Agreement as an independent contractor, and it is understood and agreed that
this Agreement does not create a fiduciary relationship between the Placement
Agent and the Company or their respective Boards of Directors. The Placement
Agent shall not be considered to be the agent of the Company for any purpose
whatsoever and the Placement Agent is not granted any right or authority to
assume or create any obligation or liability, express or implied, on the
Company's behalf, or to bind the Company in any manner whatsoever. The Company
acknowledges that the Placement Agent does not provide accounting, tax or legal
advice. The Company is authorized, however, subject to applicable law, to
disclose any and all aspects of the Offering that are necessary to support any
U.S. federal income tax benefits expected to be claimed with respect to such
transaction, and all materials of any kind (including tax opinions and other tax
analyses) related to those benefits.
13. Validity. In case any term of this Agreement will be held invalid, illegal
or unenforceable, in whole or in part, the validity of any of the other terms of
this Agreement will not in any way be affected thereby.
14. Counterparts. This Agreement may be executed in counterparts and each of
such counterparts will for all purposes be deemed to be an original, and such
counterparts will together constitute one and the same instrument.
15. Notices. All notices will be in writing and will be effective when delivered
in person 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: GulfStar Energy Corp.
3410 Embassy Dr
West Palm Beach,
Florida. 33401
Attention: Robert McCann
Fax No.:
To the Placement Agent Maxim Group LLC
405 Lexington Avenue
New York, NY 10174
Attention: Clifford A. Teller and James Siegel, Esq.
Telephone: (212) 895-3500
Facsimile: (212) 895-3783 and (212) 895-3860
16. Press Announcements. The Company agrees that the Placement Agent shall, from
and after any Closing, have the right to reference the Offering and the
Placement Agent's role in connection therewith in the Placement Agent's
marketing materials and on its website and to place advertisements in financial
and other newspapers and journals, in each case at its own expense.
(Signature Page Follows)
We are delighted at the prospect of working with you and look forward
to proceeding with the Offering. If you are in agreement with the foregoing,
please execute and return two copies of this engagement letter to the
undersigned together with payment for in the amount of $50,000 for the Advance.
This Agreement may be executed in counterparts, electronic mail and by facsimile
transmission.
Very truly yours,
Maxim Group LLC
---------------------------
Name: Karl Brenza
Title: Managing Director,
Investment Banking
---------------------------
Name: Clifford A. Teller
Title: Executive Managing
Director of
Investment Banking
Agreed to and accepted this ____ day of ___________, 2010
/s/Robert McCann
- -----------------------------
Name: Robert McCann
Title: Chairman & CEO
Exhibit A
INDEMNIFICATION PROVISIONS
Capitalized terms used in this Exhibit shall have the meanings ascribed
to such terms in the Agreement to which this Exhibit is attached.
In addition to and without limiting any other right or remedy available
to the Placement Agent and the Indemnified Parties (as hereinafter defined), the
Company agrees to indemnify and hold harmless Placement Agent and each of the
other Indemnified Parties from and against any and all losses, claims, damages,
obligations, penalties, judgments, awards, liabilities, costs, expenses and
disbursements, and any and all actions, suits, proceedings and investigations in
respect thereof and any and all legal and 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, pursing or
defending any such action, suit, proceeding or investigation (whether or not in
connection with litigation in which any Indemnified Party is a party))
(collectively, "Losses"), directly or indirectly, caused by, relating to, based
upon, arising out of, or in connection with, Placement Agent's acting for the
Company, including, without limitation, any act or omission by Placement Agent
in connection with its acceptance of or the performance or non-performance of
its obligations under the Agreement between the Company and Placement Agent to
which these indemnification provisions are attached and form a part, any breach
by the Company of any representation, warranty, covenant or agreement contained
in the Agreement (or in any instrument, document or agreement relating thereto,
including any agency agreement), or the enforcement by Placement Agent of its
rights under the Agreement or these indemnification provisions, except to the
extent that any such Losses are 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 the
Indemnified Party seeking indemnification hereunder.
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 for or in connection with the engagement of Placement Agent by the
Company or for any other reason, except to the extent that any such liability is
found in a final judgment by a court of competent jurisdiction (not subject to
further appeal) to have resulted primarily and directly from such Indemnified
Party's gross negligence or willful misconduct.
These Indemnification Provisions shall extend to the following persons
(collectively, the "Indemnified Parties"): Placement Agent, its present and
former affiliated entities, managers, members, officers, employees, legal
counsel, agents and controlling persons (within the meaning of the federal
securities laws), and the officers, directors, partners, stockholders, members,
managers, employees, legal counsel, agents and controlling persons of any of
them. These indemnification provisions shall be in addition to any liability,
which the Company may otherwise have to any Indemnified Party.
If any action, suit, proceeding or investigation is commenced, as to
which an Indemnified Party proposes to demand indemnification, it shall notify
the Company with reasonable promptness; provided, however, that any failure by
an Indemnified Party to notify the Company shall not relieve the Company from
its obligations hereunder. An Indemnified Party shall have the right to retain
counsel of its own choice to represent it, and the fees, expenses and
disbursements of such counsel shall be borne by the Company. Any 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 any Indemnified
Party made with the Company's written consent. The Company shall not, without
the prior written consent of Placement Agent, 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 (i) includes, as an unconditional
term thereof, the giving by the claimant to all of the Indemnified Parties of an
unconditional release from all liability in respect of such claim, and (ii) does
not contain any factual or legal admission by or with respect to an Indemnified
Party or an adverse statement with respect to the character, professionalism,
expertise or reputation of any Indemnified Party or any action or inaction of
any Indemnified Party.
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 shall contribute to the Losses to which any Indemnified Party
may be subject (i) in accordance with the relative benefits received by the
Company and its stockholders, subsidiaries and affiliates, on the one hand, and
the Indemnified Party, on the other hand, and (ii) if (and only if) the
allocation provided in clause (i) of this sentence is not permitted by
applicable law, in such proportion as to reflect not only the relative benefits,
but also the relative fault of the Company, on the one hand, and the Indemnified
Party, on the other hand, in connection with the statements, acts or omissions
which resulted in such Losses as well as any relevant equitable considerations.
No person found liable for a fraudulent misrepresentation shall be entitled to
contribution from any person who is not also found liable for fraudulent
misrepresentation. The relative benefits received (or anticipated to be
received) by the Company and it stockholders, subsidiaries and affiliates shall
be deemed to be equal to the aggregate consideration payable or receivable by
such parties in connection with the transaction or transactions to which the
Agreement relates relative to the amount of fees actually received by Placement
Agent in connection with such transaction or transactions. Notwithstanding the
foregoing, in no event shall the amount contributed by all Indemnified Parties
exceed the amount of fees previously received by Placement Agent pursuant to the
Agreement.
Neither termination nor completion of the Agreement shall affect these
Indemnification Provisions which shall remain operative and in full force and
effect. The Indemnification Provisions shall be binding upon the Company and its
successors and assigns and shall inure to the benefit of the Indemnified Parties
and their respective successors, assigns, heirs and personal representatives.
Exhibit B
The following companies and their affiliates have been contacted by Gulfstar:
o JDLK Group, LLC
o Dribble Dunk, LLC
o ICO Fund
o Aberleen Capital
o Kodiak Capital
o ICAP Mgt
o Peninsula Funds
o Crestview Capital
o Gas Rock
o Meridian Capital
o Kerr Asset Management
o Remington Capital