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Corporate Finance Agreement - Axxess Inc. and Spencer Trask Securities Inc.
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[SPENCER TRASK SECURITIES INCORPORATED LETTERHEAD APPEARS HERE]
August 20, 1998
Axxess, Inc.
201 Park Place, Suite 321
Altamonte Springs, FL 32701
Attention: Kevin A. Lichtman, President and Chairman
Gentlemen:
This is to acknowledge and confirm the terms of our corporate finance
agreement (the "Agreement") as follows:
(1) Axxess, Inc., a Nevada (the "Company"), hereby engages Spencer Trask
Securities Incorporated (the "Advisor") and the Advisor hereby agrees to render
services to the Company as its corporate finance consultant, financial advisor
and investment banker.
(2) During the term of this Consulting Agreement, the Advisor shall
provide advice to, and consult with, the Company concerning financial planning,
corporate organization and structure, financial matters in connection with the
operation of the business of the Company, private and public equity and debt
financing, acquisitions, mergers and other similar business combinations and
shall review and advise the Company regarding its overall progress, needs and
financial condition. The Advisor is not obligated to devote any specific amount
of time to providing advice and consultation to the Company.
(3) The Company shall compensate the Advisor as follows: $10,000 initial
retainer fee upon signing of this Agreement and, within ten (10) days of signing
this Agreement, five-year warrants to purchase 200,000 shares of the Company's
common stock at an exercise price equal to the lesser of $0.50 or 50% of the
average closing price during the five (5) business days prior to the date of
this Consulting Agreement; plus payments in the sum of $5,000 on the first day
of each month of the term of this Consulting Agreement commencing with the month
of September, 1998; plus contingency payments in event of certain transactions,
as set forth below. Payment of the initial retainer fee and subsequent monthly
fees due to the Advisor may be deferred, at the Company's option, until the
closing date of a Transaction with a party introduced to the Company or
contacted by Spencer Trask or the Company during the term (as hereinafter
defined) or the receipt by the Company of additional funding in the amount of
$500,000 or more. The Company shall also reimburse the Advisor, promptly upon
receipt of invoices therefor, for out-of-pocket expenses incurred in connection
with its services hereunder. Said expenses shall not exceed $500 in any 30 day
period of the term unless approved in writing by an officer or director of
Axxess. In the event the Company fails to pay the fees as set forth herein, the
Company will pay all costs and expenses incurred by the Advisor in connection
with recovering such fees, plus interest at ten percent per annum from the date
the fees were due to the date actually paid. Should the Advisor assist in
raising financing for the Company, such services will be subject to engagement
terms separate from this Agreement.
(4) If any Transaction (as hereinafter defined) is consummated during the
Term or within two years after the end of the Term with a party introduced to
the Company or contacted by Spencer Trask or the Company during the Term, the
Company shall pay Spencer Trask or cause Spencer Trask to be paid, at the
closing of each such Transaction, a cash fee equal to the sum of: (a) five
percent (5%) of the first two million dollars of the aggregate consideration of
a Transaction (the "Aggregate Consideration"), (b) four percent (4%) of the
second two million dollars or portion thereof, (c) three percent (3%) of the
third million dollars or portion therof, and (d) two and one and one-half
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percent (2 1/2%) of the balance of the Aggregate Consideration. Aggregate
Consideration is defined and computed as follows:
A. The total sale proceeds and other consideration received (which shall be
deemed to include amounts paid into escrow) by the Company and/or its
shareholders or by a Target and/or its shareholders upon the consummation
of the Transaction (including payments made in installments), inclusive of
cash, securities, notes, consulting agreements and agreements not to
compete, plus the total value of liabilities assumed.
B. If a portion of such consideration includes contingency payments (whether
or not related to future earnings or operations), Aggregate Consideration
will include 75% of the face value of such payments without regard to
whether the conditions for the payment of such contingent amounts have been
or may be satisfied.
C. If the Aggregate Consideration for the Transaction consists in whole or in
part of securities, for the purposes of calculating the amount of Aggregate
Consideration, the value of such securities will be the value therof on the
day preceding the consummation of the Transaction as the Company and
Spencer Trask agree; provided, however, that in the case of securities for
which there is a public trading market, the value will be determined by the
average last sales price for such securities for the last twenty days prior
to such consummation as determined by Spencer Trask and communicated by
Spencer Trask to the Company. If there is no public trading market for such
securities or other property received or receivable as a part of the
Aggregate Consideration and the parties are unable to agree, then each of
Spencer Trask and the Company will select an investment banking firm
respected in the merger and acquisition field to determine a value and the
midpoint between the two values established by the two independent experts
will be the fair market value for the purpose hereof.
For the purposes of this agreement, any of the following transactions shall
constitute a "Transaction": (a) the sale, outside of the ordinary course of
business, of the Company or any of its assets, securities, or business by means
of a merger, consolidation, joint venture, exchange offer or purchase or sale of
stock or assets, or any transaction resulting in any change of control of the
Company or its assets or business; or (b) the purchase by the Company, outside
of the ordinary course of business, of another company or any of its assets,
securities or business by means of a merger, consolidation, joint venture,
exchange offer or purchase or sale of stock or assets.
(5) The term of this Consulting Agreement shall be until August 10, 1999.
(6) The Advisor will not disclose to any other person, firm, or
corporation, nor use for its own benefit, during or after the term of this
Consulting Agreement, any trade secret or other information designated as
confidential by the Company which is acquired by the Advisor in the course of
performing services hereunder. (A trade secret is information not generally
known to the trade which gives the Company an advantage over its competitors.
Trade secrets can include, by way of example, products or services under
development, production methods and processes, sources of supply, customer lists
and marketing plans). Any financial advice rendered by the Advisor pursuant to
this Consulting Agreement may not be disclosed publicly in any manner without
the prior written approval of the Advisor.
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(7) The Company agrees to indemnify and hold the Advisor, its affiliates,
control persons, officers, employees and agents (collectively, the "Indemnified
Persons") harmless from and against all losses, claims, damages, liabilities,
costs or expenses (including reasonable attorneys' and accountants' fees) joint
and several, arising out of the performance of this Agreement, whether or not
the Advisor is a party to such dispute. This indemnity shall not apply, however,
where a court of competent jurisdiction has made a final determination that the
Advisor engaged in gross recklessness and willful misconduct in the performance
of its services hereunder which gave rise to the loss, claim, damage,
liability, cost or expense sought to be recovered hereunder (but pending any
such final determination, the indemnification and reimbursement provision of
this Agreement shall apply and the Company shall perform its obligations
hereunder to reimburse the Advisor for its expenses).
If for any reason the foregoing indemnification is unavailable to the
Advisor or such other Indemnified Person or insufficient to hold it harmless,
then the Company shall contribute to the amount paid or payable by the Advisor
or such other Indemnified Person as a result of such loss, claim, damage, or
liability in such proportion as is appropriate to reflect not only the relative
benefits received by the Company and its shareholders on the one hand and the
Advisor or such other Indemnified Person on the other hand, as well as any
relevant equitable considerations; provided that in no event will the aggregate
contribution by the Advisor and any other Indemnified Person hereunder exceed
the amount of fees actually received by the Advisor pursuant to this Consulting
Agreement. The reimbursement, indemnity and contribution obligations of the
Company under this paragraph shall be in addition to any liability which the
Company may otherwise have and shall be binding upon and inure to the benefit of
any successors, assigns, heirs and personal representatives of the Company, the
Advisor and any other Indemnified Person.
The provisions of this paragraph (7) shall survive the termination and
expiration of this Consulting Agreement.
(8) This Consulting Agreement is not assignable and cannot be modified or
changed, nor can any of its provisions be waived, except be written agreement
signed by all parties. The Finder's Agreement dated as of July 2, 1998 between
the parties hereto remains in full force and effect provided, however, that in
the event that there are conflicts between the terms of said Finder's Agreement
and this Consulting Agreement, the terms of this Consulting Agreement shall
govern.
(9) This Consulting Agreement shall be governed by the laws of the State
of New York.
Please confirm that the foregoing correctly sets forth our understanding by
signing the enclosed copy of this letter where provided and returning it to us
with payment of the initial retainer fee at your earliest convenience.
Very truly yours, Accepted and Agreed:
SPENCER TRASK SECURITIES, INC. AXXESS, INC.
By: By: /s/ Kevin A. Lichtman
-------------------------------- ---------------------------------
William P. Dioguardi Kevin A. Lichtman
President President & Chairman
Date: Date: 8-31-98
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FINDER'S AGREEMENT
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This agreement (the "Agreement") is entered into as of July 2, 1998 between
Axxess, Inc., a _______________corporation (the "Company") and Spencer Trask
Securities, Inc., a Delaware corporation ("Finder").
RECITALS
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WHEREAS, Finder represents that it will endeavor to introduce the Company to
one or more Targets (as defined in Section 2 (b) below) who may be interested in
engaging in a business combination or financing arrangement with the Company
which may include an investment in the securities of or loan to a Target, or a
merger or purchase of some or all of the stock or assets of a Target (singularly
and in combination, a "Transaction"); and
WHEREAS, the Company desires to engage the services of Finder to provide an
introduction to such Targets in accordance with the terms and conditions set
forth in this Agreement.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the premises and mutual covenants
hereinafter contained, and for other good and valuable consideration the receipt
and sufficiency of which are hereby acknowledged, the parties agree as follows:
1. The Company engages Finder as one of the Company's non-exclusive
finders, to find Targets interested in effecting a Transaction. Finder will
endeavor to introduce the Company to such targets.
2. (a) In order to coordinate the Company's and Finders respective efforts
during the period of engagement hereunder, Finder will obtain the Company's
consent prior to contacting potential Targets. The Company will promptly inform
Finder whether it is interested in being introduced to such potential Targets.
If so, Finder will introduce representatives of the Company to representatives
of such Targets.
(b) For the purposes of this Agreement, "Targets" shall, mean
individuals or entities introduced to the Company by Finder; in this connection,
Vector Index Advisors, Inc. is specifically acknowledged as a Target that has
been introduced to the Company by Finder.
3. In the event of a consummated Transaction, the Company shall pay to
Finder a fee as follows:
(a) 5% of the first $2,000,000 or portion thereof of the consideration paid
in such transaction; plus
(b) 4% of the next $2,000,000 or portion thereof of the consideration paid
in such transaction; plus
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(c) 3% of the next $2,000,000 or portion thereof of the consideration paid
in such transaction; plus
(e) 2.5% of any consideration paid in such transaction in excess of
$6,000,000
"Consideration paid in such transaction" for purposes of this Agreement
shall mean the value of a) all consideration, including proceeds of investments
and loans, paid to a Target and/or the stockholders of a Target in connection
with a Transaction, including cash, securities or other consideration exchanged
or paid at closing; assumption of debt; and any deferred payments including
without limitation notes, contingent payments, license fees or royalty payments;
and b) the aggregate amount of any investment made by the Company and a Target
in a joint venture.
Payment of the applicable fee as set forth above will be made at the closing of
the related Transaction. The fee shall be payable in cash or in kind (i.e. the
same form of consideration received by a Target and/or its stockholders), and
any consideration other than cash which is paid in the consummated Transaction
shall be valued at its fair market value.
In the event that any fees due Finder are not paid when due, the Company
shall also be liable to Finder for interest on the amount due at the annual rate
of three percent over the prime rate, accruing on a daily basis from the date of
closing, plus all of Finder's reasonable legal fees and expenses in connection
with collection of said fees.
4. This Agreement shall remain in full force and effect for a period of
twelve (12) months after the date hereof; provided, however, that Finder shall
be entitled to receive the full fee set forth in paragraph 3 hereof in the event
discussions are held with a Target during the term of this agreement and a
Transaction or other business arrangement is consummated with such Target within
eighteen months years from the expiration of this Agreement.
5. The Company shall not be liable for any retainers, costs, expenses or
other charges incurred by Finder or third parties at the request of Finder
unless the Company has authorized such costs or expenses in writing, except for
out-of-pocket expenses of Finder not in excess of $1,000 in connection with its
services pursuant to this Agreement, which expenses shall be paid upon
invoicing.
6. (a) Finder is an independent contractor and financial advisor and is not
an employee or agent of the Company and it shall have no authority to bind the
Company in any manner whatsoever.
(b) The Company acknowledges that Finder has not done any due diligence
with respect to any Target and that Finder makes no representations whatsoever
with respect to any Target (including without limitation its financial condition
or its ability to perform any obligations to which it is or may become bound),
and the Company expressly agrees that Finder shall have no liability whatsoever
in connection with any Transaction it may enter into with a Target.
7. This Agreement shall be governed by and construed in accordance with the
laws of the State of New York, without giving effect to its conflict of law
principles.
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8. This Agreement constitutes the entire agreement between the parties and
supersedes any prior agreements, whether written or oral, between the parties.
No modification, extension or change in this Agreement shall be effective unless
it is in writing and signed by both Finder and the Company.
9. The provisions of this Agreement shall be binding upon and shall inure
to the benefit of the parties hereto, their heirs, legal representatives,
successors and assigns. This Agreement may not be assigned except upon the prior
written consent of the other party to this Agreement.
10. Any notice hereunder shall be in writing and delivery thereof shall be
complete if delivered in person, by facsimile or mailed by overnight mail, or
registered or certified mail, postage prepaid to the following addresses (unless
changed by written notice):
Finder. Spencer Trask Securities, Inc.
535 Madison Avenue, 18th Floor
New York, NY 10022
Attention: William P. Dioguardi, President
Company: Axxess, Inc.
201 Park Place, Ste 321
Altamonte Springs, FL 32701
Attention: Kevin A. Lichtman, President and Chairman
IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto
as of the date first above written.
AXXESS, INC. SPENCER TRASK SECURITIES, INC
By: By:
-------------------------- ---------------------------------
Kevin A. Lichtman William P. Dioguardi
President & Chairman President
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