August 19, 2004
Mark A. Josipovich
Chief Executive Officer and Principal Accounting Officer
The Bluebook International Holding Company
21098 Bake Parkway, Suite 100
Lake Forest, CA 92630-2163
Re: Engagement Letter
Dear Mark:
Roth Capital Partners, LLC ("we" or "RCP") is pleased to act as the
exclusive financial advisor and placement agent for The Bluebook International
Holding Company ("you" or the "Company") in connection with your proposed
private placement. The terms of our engagement are set forth below. We look
forward to working with you.
1. The Offering.
(a) We currently anticipate raising approximately $5 million through a
"PIPE" transaction involving the sale of securities to institutional investors.
The actual terms of the offering will depend on market conditions, and will be
subject to negotiation between the Company and RCP and prospective investors.
(b) Although we cannot guarantee you that we will be able to raise new
capital, we will conduct the offering on a best efforts basis.
(c) In turn, during the term of our engagement, you agree not to use any
other investment banking firm to raise capital (including debt) for you.
2. Fees and Expenses.
(a) Concurrently with the consummation of the offering, the Company will
pay RCP in cash a fee equal to 8% of the gross proceeds received from the sale
of securities.
i. If The First American Corporation (an "Excluded Investor") Purchases
securities as the lead or sole investor, the Company shall pay RCP a
cash fee equal to 2% of the gross proceeds received. If the Excluded
Investor Purchases securities in a syndicated transaction where it is
not the lead investor, the Company shall pay RCP a cash fee equal to
4% of the gross proceeds received
(b) In addition, the Company agrees to reimburse RCP upon request for its
out-of-pocket expenses, including the fees and disbursements of RCP's legal
counsel, up to $20,000.
(c) Furthermore, upon the closing of the offering, the Company shall grant
to RCP warrants for the purchase of an amount equal to eight percent (8%) of the
securities issued in the offering. The
The Bluebook International Holding Company
August 19, 2004
Page 2
Warrants will be exercisable into securities similar to those issued as part of
the offering, have a strike price equal to 110% of the Offering price and have a
term of five years.
3. Term of Engagement.
(a) The term of our engagement will be six months; however, either party
may terminate our engagement at any time upon 10 days written notice to the
other party. Upon termination, we will be entitled to collect all fees earned
and expenses incurred through the date of termination.
(b) If the offering is not consummated during the term, for reasons other
than termination of this engagement by us, and during the six months following
termination of this Agreement, either (i) the Company completes an offering of
its securities, or (ii) any person which we introduced to the Company or with
which we have discussions or negotiations during the term on behalf of the
Company, purchases securities from the Company (other than through a
underwritten public offering), you agree to pay us upon the closing a cash fee
in the amount that would otherwise have been payable to RCP had such transaction
occurred during the term. In the case of a merger, acquisition, joint venture or
other strategic transaction with such person, the cash fee will be equal to 1%
of the enterprise value of the Company.
4. Offering Memorandum; Representations and Warranties.
(a) You hereby authorize RCP to transmit to the prospective purchasers of
the securities a private placement memorandum prepared by the Company with such
exhibits and supplements as may from time to time be required or appropriate or,
alternatively, copies of the Company's most recent filings with the Securities
and Exchange Commission, together with summary materials prepared by the
Company, if we deem them appropriate (as the case may be, the "Memorandum"). The
Company represents and warrants that the Memorandum (i) will be prepared by the
management of the Company and reviewed and approved by its Board of Directors;
and (ii) will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein or previously made, in light of the circumstances under which
they were made, not misleading. The Company will advise RCP immediately of the
occurrence of any event or any other change known to the Company which results
in the Memorandum containing an untrue statement of a material fact or omitting
to state a material fact required to be stated therein or necessary to make the
statements therein or previously made, in light of the circumstances under which
they were made, not misleading.
(b) You agree that you will enter into subscription, registration rights
and other customary agreements, and that your counsel will supply an opinion
letter on the transaction, and comfort letter on the non-financial portions of
the Memorandum and your auditors will supply a "comfort" letter of the financial
information in the Memorandum, all of which will be in form and substance
reasonably acceptable to, and addressed to, us and the investors.
(c) You further agree that we may rely upon, and are a third party
beneficiary of, the representations and warranties, and applicable covenants,
set forth in any agreements with investors in the offering.
5. Indemnification, Contribution, and Confidentiality. The Company agrees
to indemnify RCP and its controlling persons, representatives and agents in
accordance with the indemnification provisions set forth in Appendix I, and the
parties agree to the confidentiality provisions of Appendix II, all of which
The Bluebook International Holding Company
August 19, 2004
Page 3
are incorporated herein by this reference. These provisions will apply
regardless of whether the proposed offering is consummated.
6. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the state of California applicable to contracts
executed and to be wholly performed therein without giving effect to its
conflicts of laws principles or rules. The Company and RCP agree that any
dispute concerning this Agreement this Agreement shall be resolved through
binding arbitration before the NASD pursuant to its arbitration rules.
Arbitration will be venued in Los Angeles County.
7. Announcement of Offering. If the Offering is consummated, RCP may, at
its expense, place an announcement in such newspapers and periodicals as RCP may
desire.
8. Advice to the Board. The Company acknowledges that any advice given by
us to you is solely for benefit and use of the Board of Directors of the Company
and may not be used, reproduced, disseminated, quoted or referred to, without
our prior written consent.
9. Entire Agreement. This Agreement constitutes the entire Agreement
between the parties and supersedes and cancels any and all prior or
contemporaneous arrangements, understandings and agreements, written or oral,
between them relating to the subject matter hereof.
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The Bluebook International Holding Company
August 19, 2004
Page 4
We look forward to working with you toward the successful conclusion of
this engagement, and developing a long-term relationship with the Company.
Very truly yours,
ROTH CAPITAL PARTNERS, LLC
/s/ Joseph Schimmelpfennig
- --------------------------
Joseph Schimmelpfennig
Confirmed and accepted as of
this 19th day of August 2004:
The Bluebook International Holding Company
/s/ Mark A. Josipovich
- ----------------------
Mark A. Josipovich
Chief Executive Officer and Principal Accounting Officer
The Bluebook International Holding Company
August 19, 2004
Page 5
APPENDIX I
INDEMNIFICATION AND CONTRIBUTION
The Company agrees to indemnify and hold harmless RCP and its affiliates
(as defined in Rule 405 under the Securities Act of 1933, as amended) and their
respective directors, officers, employees, agents and controlling persons (RCP
and each such person being an "Indemnified Party") from and against all losses,
claims, damages and liabilities (or actions, including shareholder actions, in
respect thereof), joint or several, to which such Indemnified Party may become
subject under any applicable federal or state law, or otherwise, which are
related to or result from the performance by RCP of the services contemplated by
or the engagement of RCP pursuant to, this Agreement and will promptly reimburse
any Indemnified Party for all reasonable expenses (including reasonable counsel
fees and expenses) as they are incurred in connection with the investigation of,
preparation for or defense arising from any threatened or pending claim, whether
or not such Indemnified Party is a party and whether or not such claim, action
or proceeding is initiated or brought by the Company. The Company will not be
liable to any Indemnified Party under the foregoing indemnification and
reimbursement provisions, (i) for any settlement by an Indemnified Party
effected without its prior written consent (not to be unreasonably withheld); or
(ii) to the extent that any loss, claim, damage or liability is found in a
final, non-appealable judgment by a court of competent jurisdiction to have
resulted primarily from RCP's willful misconduct or gross negligence. The
Company also agrees that no Indemnified Party shall have any liability (whether
direct or indirect, in contract or tort or otherwise) to the Company or its
security holders or creditors related to or arising out of the engagement of RCP
pursuant to, or the performance by RCP of the services contemplated by, this
Agreement except to the extent that any loss, claim, damage or liability is
found in a final, non-appealable judgment by a court of competent jurisdiction
to have resulted primarily from RCP's willful misconduct or gross negligence.
Promptly after receipt by an Indemnified Party of notice of any intention
or threat to commence an action, suit or proceeding or notice of the
commencement of any action, suit or proceeding, such Indemnified Party will, if
a claim in respect thereof is to be made against the Company pursuant hereto,
promptly notify the Company in writing of the same. In case any such action is
brought against any Indemnified Party and such Indemnified Party notifies the
Company of the commencement thereof, the Company may elect to assume the defense
thereof, with counsel reasonably satisfactory to such Indemnified Party, and an
Indemnified Party may employ counsel to participate in the defense of any such
action provided, that the employment of such counsel shall be at the Indemnified
Party's own expense, unless (i) the employment of such counsel has been
authorized in writing by the Company, (ii) the Indemnified Party has reasonably
concluded (based upon advice of counsel to the Indemnified Party) that there may
be legal defenses available to it or other Indemnified Parties that are
different from or in addition to those available to the Company, or that a
conflict or potential conflict exists (based upon advice of counsel to the
Indemnified Party) between the Indemnified Party and the Company that makes it
impossible or inadvisable for counsel to the Indemnifying Party to conduct the
defense of both the Company and the Indemnified Party (in which case the Company
will not have the right to direct the defense of such action on behalf of the
Indemnified Party), or (iii) the Company has not in fact employed counsel
reasonably satisfactory to the Indemnified Party to assume the defense of such
action within a reasonable time after receiving notice of the action, suit or
proceeding, in each of which cases the reasonable fees, disbursements and other
charges of such counsel will be at the expense of the Company; provided,
further, that in no event shall the Company be required to pay fees and expenses
for more than
The Bluebook International Holding Company
August 19, 2004
Page 6
one firm of attorneys representing Indemnified Parties unless the defense of one
Indemnified Party is unique or separate from that of another Indemnified Party
subject to the same claim or action. Any failure or delay by an Indemnified
Party to give the notice referred to in this paragraph shall not affect such
Indemnified Party's right to be indemnified hereunder, except to the extent that
such failure or delay causes actual harm to the Company, or prejudices its
ability to defend such action, suit or proceeding on behalf of such Indemnified
Party.
If the indemnification provided for in this Agreement is for any reason
held unenforceable by an Indemnified Party, the Company agrees to contribute to
the losses, claims, damages and liabilities for which such indemnification is
held unenforceable (i) in such proportion as is appropriate to reflect the
relative benefits to the Company, on the one hand, and RCP on the other hand, of
the Offering as contemplated whether or not the Offering is consummated or, (ii)
if (but only if) the allocation provided for in clause (i) is for any reason
unenforceable, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) but also the relative fault of the
Company, on the one hand and RCP, on the other hand, as well as any other
relevant equitable considerations. The Company agrees that for the purposes of
this paragraph the relative benefits to the Company and RCP of the Offering as
contemplated shall be deemed to be in the same proportion that the total value
received or contemplated to be received by the Company or its shareholders, as
the case may be, as a result of or in connection with the Offering bear to the
fees paid or to be paid to RCP under this Agreement. Notwithstanding the
foregoing, the Company expressly agrees that RCP shall not be required to
contribute any amount in excess of the amount by which fees paid RCP hereunder
(excluding reimbursable expenses), exceeds the amount of any damages which RCP
has otherwise been required to pay.
The Company agrees that without RCP's prior written consent, which shall
not be unreasonably withheld, it will not settle, compromise or consent to the
entry of any judgment in any pending or threatened claim, action or proceeding
in respect of which indemnification could be sought under the indemnification
provisions of this Agreement (in which RCP or any other Indemnified Party is an
actual or potential party to such claim, action or proceeding), unless such
settlement, compromise or consent includes an unconditional release of each
Indemnified Party from all liability arising out of such claim, action or
proceeding.
In the event that an Indemnified Party is requested or required to appear
as a witness in any action brought by or on behalf of or against the Company in
which such Indemnified Party is not named as a defendant, the Company agrees to
promptly reimburse RCP on a monthly basis for all expenses incurred by it in
connection with such Indemnified Party's appearing and preparing to appear as
such a witness, including, without limitation, the reasonable fees and
disbursements of its legal counsel.
If multiple claims are brought with respect to at least one of which
indemnification is permitted under applicable law and provided for under this
Agreement, the Company agrees that any judgment or arbitration award shall be
conclusively deemed to be based on claims as to which indemnification is
permitted and provided for, except to the extent the judgment or arbitrate award
expressly states that it, or any portion thereof, is based solely on a claim as
to which indemnification is not available.
The Bluebook International Holding Company
August 19, 2004
Page 7
APPENDIX II
INFORMATION TO BE SUPPLIED; CONFIDENTIALITY.
In connection with RCP's activities on behalf of the Company, the
Company will furnish RCP with all financial and other information regarding the
Company that RCP reasonably believes appropriate to its assignment (all such
information so furnished by the Company, whether furnished before or after the
date of this Agreement, being referred to herein as the "Information"). The
Company will provide RCP with access to the officers, directors, employees,
independent accountants, legal counsel and other advisors and consultants of the
Company. The Company recognizes and agrees that RCP (i) will use and rely
primarily on the Information and information available from generally recognized
public sources in performing the services contemplated by this Agreement without
independently verifying the Information or such other information, (ii) does not
assume responsibility for the accuracy of the Information or such other
information, and (iii) will not make an appraisal of any assets or liabilities
owned or controlled by the Company or its market competitors.
RCP will maintain the confidentiality of the Information and, unless
and until such information shall have been made publicly available by the
Company or by others without breach of a confidentiality agreement, shall
disclose the Information only as authorized by the Company or as required by law
or by order of a governmental authority or court of competent jurisdiction. In
the event that RCP is legally required to make disclosure of any of the
Information, RCP will give notice to the Company prior to such disclosure, to
the extent that RCP can practically do so.
The foregoing paragraph shall not apply to information that:
(i) at the time of disclosure by the Company is, or thereafter becomes,
generally available to the public or within the industries in which
the Company or RCP or its affiliates conduct business, other than as a
direct result of a breach by RCP of its obligations under this
Agreement;
(ii) prior to or at the time of disclosure by the Company, was already in
the possession of, or conceived by, RCP or any of its affiliates, or
could have been developed by them from information then in their
possession, by the application of other information or techniques in
their possession, generally available to the public, or available to
RCP or its affiliates other than from the Company;
(iii) at the time of disclosure by the Company or thereafter, is obtained
by RCP or any of its affiliates from a third party who RCP reasonably
believes to be in possession of the information not in violation of
any contractual, legal or fiduciary obligation to the Company with
respect to that information; or
(iv) is independently developed by RCP or its affiliates.
Nothing in this Agreement shall be construed to limit the ability of RCP or
its affiliates to pursue, investigate, analyze, invest in, or engage in
investment banking, financial advisory or any other business relationship with
entities other than the Company, notwithstanding that such entities may be
engaged in a business which is similar to or competitive with the business of
the Company, and
The Bluebook International Holding Company
August 19, 2004
Page 8
notwithstanding that such entities may have actual or potential operations,
products, services, plans, ideas, customers or supplies similar or identical to
the Company's, or may have been identified by the Company as potential merger or
acquisition targets or potential candidates for some other business combination,
cooperation or relationship. The Company expressly acknowledges and agrees that
it does not claim any proprietary interest in the identity of any other entity
in its industry or otherwise, and that the identity of any such entity is not
confidential information.