AUGMENT SYSTEMS
0 Xxxxxxx Xxxx
Xxxxxxxx, Xxxxxxxxxxxxx 00000
August 3, 1998
Xxxxx Xxxxxxxx Xxxxxxx & Associates, LTD
000 Xxx Xxxx Xxxx
Xxxxxxxxx, Xxx Xxxx 00000
Gentlemen:
The undersigned, Augment Systems, Inc., a Delaware corporation (the
"Company"), proposes to issue to certain lenders (the "Lenders") (i) $1,500,000
of principal amount of 8% Convertible Promissary Notes (the"Notes") and (ii)
five year warrants to purchase up to 750,000 shares of the Company's common
stock $.01 par value per share ("common stock"), at an exercise price of $.40
per share (the "Warrants"). The notes and Warrants are collectively hereinafter
referred to as the "Securities". The sale of Securities to the Lenders is
hereinafter referred to as the "Bridge Financing".
The Bridge Financing is governed by the terms and conditions of a
certain Subscription Agreement ("Subscription Agreement"), Loan Agreement (the
"Loan Agreement") and Notes acceptable to you and your counsel and shall be
secured by certain collateral as set forth in a certain Security Agreement by
and between the Company and the Lenders (the "Security Agreement"). The Loan
Agreement, Notes and the Security Agreement are collectively referred to as the
"Loan Documents". The Warrants will be in form acceptable to you and your
counsel.
The Company acknowledges that AKH is responsible for locating the
Lenders who are purchasing Securities issued by the Company. This agreement sets
forth, inter alia the compensation to be paid to AKH in connection with the
Bridge Financing.
1. Representations and Warranties of the Company. The Company hereby
incorporates by reference all of the representations and warranties of the
Company as set forth in Section 5 of the Subscription Agreement with the same
force and effect as if specifically set forth herein, and such representations
and warranties are made to induce AKH to enter into this Agreement and the
transactions contemplated hereby.
Xxxxx Xxxxxxxx Xxxxxxx & Associates, LTD
August 3, 1998
Page 2
2. CLOSING FEES
(a) CLOSING. The closing of the purchase and sales of the Securities
("Closing") shall take place at the offices of AKH, or such mutually agreeable
location, at a time and date agreed upon between AKH and the Company. At the
Closing, payment for the Securities shall be made pursuant to the terms of the
Subscription Agreement against delivery of the Notes and Warrants to AKH on
behalf of the Lenders.
(b) PROCEDURES AT CLOSING. At the Closing, the Company shall provide
AKH with copies of all closing documentation provided to the parties including,
but not limited to, officer certificates and an executed opinion of Company
counsel, dated the Closing Date.
(c) PLACEMENT FEE AND NON-ACCOUNTABLE EXPENSE ALLOWANCE. In accordance
with the terms of this section 2(c), simultaneously with payment for and
delivery of the Securities as provided in Section 2(a) above, the Company shall
at Closing pay AKH via wire transfer (i) a selling commission equal to 10% of
the aggregate gross proceeds from the sale of the Securities and (ii) a
non-accountable expense allowance equal to 1% of the aggregate gross proceeds
from the sales of the Securities.
(d) ISSUANCE OF WARRANTS TO AKH. In addition to the fees of AKH
provided in Section 2(c) hereof, simultaneously with payment for and delivery of
the Securities, the Company shall at Closing issue to AKH or its designees, for
nominal consideration, five-year Warrants (the AKH Warrants") to acquire up to
1,000,000 shares of Common Stock (assuming the sale of all the Securities being
offered) at an exercise price of $0.40 per share on the same terms and
conditions as the Warrants. The AKH Warrants shall be in the form of Exhibit A
hereto. The Certificates representing the AKH Warrants will be in such
denominations and such names as AKH may request prior to the Closing.
(e) CONSULTING AGREEMENT. On or prior to the Closing, the Company shall
enter into a consulting agreement with AKH, which will provide that the Company
will pay AKH a monthly fee of $5,000 for the 12 month period following the
Closing, for AKH's agreement to provide investment banking and financial
advisory services as the Company may from time to time reasonably request, such
as advice relating to corporate management, strategic planning, financial
planning and relationships with banks, securities firms and financial
institutions. The first monthly fee shall be payable at the closing (retroactive
to July 1, 1998) and subsequent monthly fees shall be due and payable on the
first day of each succeeding month thereafter for the remaining term of the
consulting agreement. The consulting agreement shall be cancelable upon 30 days
written notice after January 1, 1999.
3. COVENANTS OF THE COMPANY
(a) EXPENSES OF OFFERING. Anything set forth herein to the contrary
notwithstanding, the Company shall bear all expenses incurred by it in
connection with the Bridge Financing, including, but not limited to, the
following: filing fees, registrar and transfer agent fees, its own counsel and
accounting fees, and issue and transfer
Xxxxx Xxxxxxxx Xxxxxxx & Associates, LTD
August 3, 1998
Page 3
taxes if any, blue sky fees and expenses and costs of supplying sufficient
copies of the documents related to the Bridge Financing. As promptly as
predictable after the Closing, the Company shall prepare at its own expense,
"bound volumes" relating to the Bridge Financing and will distribute volumes to
AKH and its legal counsel. AKH shall be responsible for its own expenses
incurred in connection with the Bridge Financing.
(b) DUE DILIGENCE. The Company will cooperate with AKH by making
available to AKH's representatives such information as may be appropriate in
making a reasonable investigation of the Company and its affairs. Prior to the
Closing, the Company will make available such materials relating to the Company,
and shall provide AKH or the Lenders with access to such employees, as shall be
reasonably requested.
(c) RESERVATION OF COMMON STOCK. The Company will reserve and keep
available that maximum number of its authorized but unissued shares of common
stock that are issuable upon exercise of any of the Warrants or the AKH
Warrants.
(d) INFORMATION RIGHTS. The Company shall provide AKH within three (3)
business days, of the filing or preparation thereof, with such financial and
other statements, including, without limitation, documents sent to the
shareholders, management letters and consolidated financial statements as are
provided to any other lenders to or security holders of the Company. In the
event any current officer, director, employee, consultant or other agent ceases
subsequent to the date hereof, to have such relationships with the Company and
such cessation has, or is likelyto have, a material effect on the Company,
taking as a whole, the Company shall promptly notify AKH of such event, which
notification shall comprehensively describe such circumstances, including,
without limitation, the plan to attempt to reverse such material adverse effect.
The Company shall, on a regular basis, provide to AKH updates of any material
litigation and/or governmental proceedings that may have a material adverse
effect on the business of the Company. The Company shall promptly provide to AKH
notice of any event of default under any agreement or other document with any
lender or holder of any security of the Company, or any other event that is
reasonably likely to have a material adverse effect on the Company.
4. INDEMNIFICATION
(a) The Company and its successors agree to indemnify and hold harmless
AKH and its agents, stockholders, officers, employees, and directors and each
person, if any, who controls AKH, as follows.
(i) against any and all losses liabilities, claims, damages and
expenses whatsoever arising out of any untrue statement or alleged untrue
statement of a fact set forth in the Subscription Agreement or Loan
Documents or th omission or alleged omission of a fact necessary in order
to make the statements therein, in light of the circumstances under which
they were made, not misleading unless such statement or omissions was made
in reliance on and in conformity with written information furnished
Xxxxx Xxxxxxxx Xxxxxxx & Associates, LTD
August 3, 1998
Page 4
to the Company by AKH expressly for inclusion in the Subscription Agreement
or Loan Documents.
(ii) against any and all losses, liabilities, claims, damages and
expenses whatsoever to th extent of the aggregate amount paid in settlement
of any litigation commenced or threatened, or any claim whatsoever based
upon any such untrue statement or omission or any such alleged untrue
statement or omission unless such statement was made in reliance on and in
reliance on and in conformity with written information furnished to the
Company by AKH expressly for inclusion in the Subscription Agreement or
Loan Documents; and
(iii) against any and all expenses whatsoever incurred in
investigating, preparing or defending against any litigation, commenced or
threatened, or any claim whatsoever based upon any such untrue statement or
omission or any alleged untrue statement or omission, to the extent that
any such expense is not paid under clause (i) or (ii) above unless such
statement or omission was made in reliance on and in conformity with
written information furnished to the Company by AKH expressly for inclusion
in the Subscription Agreement or Loan Documents.
(b) The Company and its successors agree to indemnify and hold harmless
AKH and its agents, stockholders, officers, employees, and cash person, if any,
who controls AKH to the same extent as the forgoing indemnity, against any and
all losses, liabilities, claims damages and expenses whatsoever arising out of
the exercise by any person of any right under the Securities Act of 1933, as
amended, the Securities Exchange Act of 1934, as amended, or the securities or
Blue Sky Laws of any state on account of violations of the representations,
warranties or agreements set forth in Sections 1 and 2 hereof.
(c) If any action is brought against AKH or any of its officers
directors, stockholders, employees, agents, advisors, consultants and counsel or
any controlling persons of AKH (each an "Indemnified Party" and collectively,
"Indemnified Parties"), in respect of which indemnity may be sought against the
Company pursuant to Sections 4(a) or 4(b) above, each such Indemnified Party
shall promptly notify the Company (the "Indemnifying Party") in writing of the
institution of such action (but failure to so notify shall not relieve the
Indemnifying Party from any liability it may have under this section 4 unless
such failure results in the imposition of a default judgment which cannot be
reopened), and the Indemnifying Party shall promptly assume the defense of such
action, including the employment of counsel (reasonably satisfactory to each
such Indemnified Party), and payment of expenses in connection therewith. Each
such Indemnified Party shall be at the expense of each such Indemnified Party
unless the employment of such counsel shall have been authorized in writing by
the Indemnifying Party in connection with the defense of such action or the
Indemnifying Party shall have not have promptly employed counsel reasonably
satisfactory to each such Indemnified Party shall have reasonably concluded that
there may be one or more legal defenses available to it or them or to other
Indemnified Parties which are different from or additional to those available to
one or more
Xxxxx Xxxxxxxx Xxxxxxx & Associates, LTD
August 3, 1998
Page 5
of the Indemnified Parties and it would be inappropiate for the same counsel to
represent both parties due to actual or potential differing interests between
them, in any of which events such fees and expenses shall be borne by the
Indemnifying Party and the Indemnifying Party shall not have the right to direct
the defense of such action on behalf of each Indemnified Party. Anything in this
Section 4(c) to the contrary notwithstanding, the Indemnifying Party shall not
be liable for any settlement of any such claim or action effected without its
written consent, which consent shall not be unreasonably withheld. The Company
agrees to promptly notify AKH of the commencement of any litigation or
proceedings against the Company or any of its officers or directors in
connection with the sale of Securities.
5. MISCELLANEOUS
(a) SURVIVAL. Any termination of the Bridge Financing without
consummation thereof shall be without obligation on the part of any party except
that the provisions of Sections 3(a) hereof and the indemnification provisions
provided in Section 4 hereof shall survive any termination.
(b) REPRESENTATIONS, Warranties and Covenants to Survive Delivery. The
representations, warranties, indemnities, agreements, covenants and other
statements of the Company shall survive execution of this Agreement and delivery
of the Securities, except that the representations and warranties shall survive
for a period of only 24 months.
(c) NO OTHER BENEFICIARIES. Except as provided in Section 4, this
Agreement is intended for the sole exclusive benefit of the parties hereto and
their respective successors and controlling persons and no other person, firm or
corporation shall have any third-party beneficiary or other rights hereunder.
(d) GOVERNING LAW. This agreement shall be governed by and construed in
accordance with the laws of the State of New York. The parties hereby; (i) in
any legal proceeding brought in connection with this Agreement or the
transactions contemplated hereby, irrevocably submit to the nonexclusive in
personsm jurisdiction of (A) any state or Federal court of competent
jurisdiction sitting in the State of New York, County of New York or (B) in the
event that any third party defendant in any legal proceeding in ehich it seeks
to join the other as a third-party defendant, any state or Federal court in
which such proceeding has properly been brought and consents to suit therein;
and (ii) waive any objection that it may now or hereafter have to the venue of
such proceeding in any such court or that such proceeding was brought in an
inconvenient court.
(e) NOTICES. All notices, requests, demands and other communications
which are required or may be given hereunder shall be in writing and shall be
deemed to have been duly given (i) when delivered personally, receipt
acknowledged, (ii) five (5) days after being sent by registered or certified
mail, return receipt requested postage prepaid, (iii) one (1) day after being
sent via overnight courier, receipt acknowledged, (iv) via telecopy, upon
written confirmation of receipt thereof. All notices shall be made to the
parties at the addresses designated below or at
Xxxxx Xxxxxxxx Xxxxxxx & Associates, LTD
August 3, 1998
Page 6
such other or different addresses which a party may subsequently provide with
notice thereof, and to their respective legal counsel, as follows:
(i) If to AKH, to:
Xxxxx Xxxxxxxx Xxxxxxx & Associates, LTD
000 Xxx Xxxx Xxxx
Xxxxxxxxx, Xxx Xxxx 00000
Attn: Xxxx Xxxxxxxx, Secetary & Treasurer
Telecopy: 000-000-0000
-with a copy to-
Xxxxxxx & Xxxxxx, LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx X. Xxxxxx, Esquire
Telecopy: 000-000-0000
(ii) If to the Company to:
Augment Systems, Inc.
0 Xxxxxxx Xxxx
Xxxxxxxx, XX 00000
Attn: Xxxxxxxx X. Xxxxxxx, Chief Executive Officer
Telecopy: 000-000-0000
-with a copy to-
Xxxxxxx Xxxxxx & Xxxxx, P.C.
00 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attn: Xxxxx Xxxxx, Esquire
Telecopy: 617-342-4001
or to such persons or addresses as either party shall furnish to the other party
in writing.
(f) Counterparts. This agreement may be signed in counterparts with the
same effect as if both parties had signed one and the same instrument.
(g) Entire Agreement. This agreement constitutes the entire agreement
between the parties hereto in pertaining to the subject matter hereof and
supersedes all prior and contemporaneous agreements, understandings, documents,
negotiations and discussions, whether oral or written, of the parties hereto.
Xxxxx Xxxxxxxx Xxxxxxx & Associates, LTD
August 3, 1998
Page 7
If you find the forgoing is in accordance with our
understanding, kindly sign and return to us a counterpart hereof, whereupon this
instrument along with all counterparts will become a binding agreement between
us.
Very Truly Yours,
By:_______________________________
Xxxxxxxx X. Xxxxxxx,
Chief Executive Officer
Agreed:
XXXXX XXXXXXXX XXXXXXX & ASSOCIATES, LTD
By:________________________________
Authorized Officer
