Goodrich Capital International Corporate Financial Advisors
Xxxxxxxx
Capital
International
Corporate
Financial Advisors
52
Vanderbilt, Suit 501
New
York,
NY 10017
Tel:
000-000-0000
Fax:
000-000-0000
E-mail:
xxxx@xxxxxxx.xxx
September
26, 2005
Xx
Xxxxxxx Xxxxxxx
President
& CEO
Axial
Vector Engine Corporation
One
World
Trade Center
000
XX
Xxxxxx Xxxxxx, Xxxxx 0000
Portland,
Oregon 97204
Dear
Xxx:
This
letter agreement (the “Agreement”) will confirm that Axial Vector Engine
Corporation (the “Company”) has engaged Xxxxxxxx Capital (the “Advisor”) as the
Company’s exclusive business and financial advisor on the terms set forth
herein.
| 1. |
SERVICES.
Advisor will assist the Company and its subsidiaries and affiliates
by
providing strategic planning services, financial advisory services,
business consulting and such other services as required to assist
the
Company in securing the required capitalization as described in the
“Engagement Proposal Outline” attached hereto as Appendix A (the
“Outline”) or as the Company and Advisor otherwise mutually agree (the
“Services”). The Services shall not include any services that would
constitute Advisor as a broker-dealer (see Section 9 below), and
this
Agreement is not intended for the purpose of selling or buying securities.
Advisor will devote such time and efforts to the affairs of the Company
as
is reasonable and adequate to render the Services. In conjunction
with the
Services, Advisor agrees to make itself available to the officers
of the
Company at mutually agreed upon place(s), during normal business
hours and
for reasonable periods of time, subject to reasonable advance notice
and
mutually convenient scheduling. Otherwise, Advisor will have the
latitude
to perform the Services at the Advisor’s business location. Given the
nature of the Services, Advisor cannot warrant or guarantee any particular
outcome. Further, the advice and direction provided by Advisor as
a result
of the Services will constitute recommendations only, subject to
acceptance and implementation by the Company in its discretion. In
the
event that the Company determines to engage an executive recruiting
firm
in order to implement any of the executive staffing recommendations
arising out of the Services, the Company shall engage Xxxxxxx-Xxxxx
International, an affiliate of Advisor, on mutually agreeable terms
and
pursuant to a separate engagement
letter.
|
| 2. |
INDEPENDENT
CONTRACTOR. Advisor is an independent contractor in the performance
of the
Services. Advisor will not, by reason of this Agreement or the performance
of the Services, be or be deemed to be an employee, agent, partner,
co-venturer or controlling person of the Company, and Advisor will
have no
power to enter into any agreement on behalf of or otherwise bind
the
Company.
|
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September
26, 2005
Page
2
| 3. |
COMPENSATION.
The Company will compensate Advisor for the Services rendered hereunder
as
follows:
|
| a. |
Throughout
the term of Advisor’s engagement, the Company agrees to pay to Advisor a
nonrefundable cash fee related to the level of services provided,
payable
monthly in advance. The initial phase of the project as described
in the
Outline involves the first three month period of Services during
which the
Advisor will be paid a fee of $150,000. The fee will be paid at the
monthly rate of $50,000. The Company shall make the first payment
upon the
execution of this Agreement, covering the first month thereafter.
The
monthly fee shall be pro rated for any partial months. On or about
90 days
from the date hereof, the Company and Advisor will jointly evaluate
the
monthly fee in light of the continuing Services to be rendered and
will
consider in good faith whether an equitable adjustment (increase
or
decrease) is warranted.
|
| b. |
For
each capital raising transaction closed during the term of Advisor’s
engagement (or thereafter in accordance with Section 5 below), the
Company
agrees to pay or issue, as applicable, to Advisor for the Services
(i) a
cash fee equal to five percent (5%) of the “Transaction Amount” (as
defined below) or the equivalent economic value of a strategic partnership
as agreed by the parties in good faith; and (ii) warrants to purchase
five
percent (5%) of the capital stock of the Company issued in conjunction
with such capital raising transaction (same class of stock as purchased
by
investors, e.g. Series A Preferred, and same purchase price). In
the event
there is more than one transaction, Advisor will be issued initial
warrants at the first closing and additional warrants at each subsequent
closing, but only based on the additional shares (or equivalent equity
interests) issued in each such subsequent closing. The warrants will
contain customary terms for similar transactions, including, without
limitation, anti-dilution provisions for stock splits, stock dividends,
merger and other recapitalization transactions; the ability of Advisor
to
transfer the warrants, or underlying shares upon exercise, to Advisor’s
assignees; cashless exercise rights; and piggyback registration and
tag
along rights on the underlying
shares.
|
As
used
herein “Transaction Amount” shall mean the total proceeds and other
consideration paid or received and to be paid or received (which shall be deemed
to include amounts paid into escrow) and all liabilities assumed in connection
with a transaction, including, without limitation: (i) cash; (ii) interest
bearing notes or other types of interest bearing debt, securities, and other
property valued at the fair market value thereof; (iii) payments to be made
in
installments; (iv) amounts paid or payable under consulting agreements,
agreements not to compete or similar arrangements; and (v) the net present
value
of contingent payments (whether or not related to the Company’s earnings or
operations).
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September
26, 2005
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3
Subject
to the following sentence, the fee under Section 3(b) will be paid or issued
at
the closing of the applicable transaction. In the event that a transaction
is
closed, but the proceeds (i) are receivable in installments or subject to
contingencies, all cash fees in respect thereof will be subject to the same
payment schedule or contingencies and Advisor will be paid a portion of its
fee
at the closing and upon the payment of each such installment on a pro rata
basis; (ii) are receivable pursuant to a note or notes, all fees in respect
thereof will be paid on a pro rata basis when and to the extent that payments
on
such note(s) are actually received by the Company; or (iii) are escrowed all
fees in respect thereof will be paid only when such escrowed amounts are
released from escrow.
| 4. |
EXPENSES.
In addition to any fees that may be payable to Advisor hereunder,
the
Company will reimburse Advisor on a monthly basis for all reasonable
travel and other out-of-pocket expenses incurred in performing the
Services hereunder upon presentation by Advisor to the Company of
written
documentation evidencing the same reasonably satisfactory to the
Company.
Advisor undertakes not to incur expenses that exceed $1,000 per month
without the Company’s prior
approval.
|
| 5. |
TERM.
Advisor’s engagement will commence on the date hereof and will continue
for one (1) year and shall automatically renew for additional periods
of
1-year each provided that Advisor has met applicable performance
goals to
be agreed upon between the parties and memorialized in writing.
Notwithstanding termination or expiration of this Agreement, if any
investor or strategic partner introduced to the Company by Advisor
consummates one or more investments in or transactions with the Company
during the 12-month period following the date of termination or expiration
of this Agreement, the Company will pay Advisor upon the closing
of each
such investment or tansaction a fee under Section 3(b) equal to the
amount
that would have been paid had this Agreement been in place. Payment
will
be made in accordance with Section 3 above. Sections 3, 5, 6, 7,
8, 9, 10,
11 and 12 will survive the termination or expiration of this Agreement,
and any other provisions which are expressly or by implication intended
to
survive termination or expiration of this
Agreement.
|
| 6. |
INDEMNITY.
The Company agrees to indemnify, defend, and hold harmless Advisor
as set
forth on Exhibit A.
|
| 7. |
CONFIDENTIALITY.
In connection with this Agreement, the Company will furnish Advisor
with
information reasonably requested by Advisor. Advisor will rely solely
upon
such information supplied by the Company and its representatives
without
assuming any responsibility for independent investigation or verification
thereof, or for any misstatements or omissions therein. To the extent
consistent with legal requirements, all information provided to Advisor
by
the Company, unless publicly available or otherwise available to
Advisor
without restriction or breach of any confidentiality obligation,
will be
held by Advisor in confidence and, without the Company’s prior approval,
will not be disclosed to anyone, other than Advisor’s owners, members,
officers, employees, and subcontractors or service providers involved
in
the Services (collectively, the employees, and subcontractors or
service
providers involved in the Services (collectively, the “Representatives”)
who have a need to know such information in connection with this
engagement, or used for any purpose other than the transactions
contemplated hereunder. In the event that Advisor is requested in
any
proceeding to disclose any such confidential information, Advisor
will
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September
26, 2005
Page
4
| give the Company prompt notice of such request so that the Company may seek an appropriate protective order. The Company agrees, however, that if Advisor is nevertheless compelled to disclose any such information as Advisor is explicitly required to disclose), provided that, upon the Company’s request and at the Company’s expense, Advisor uses commercially reasonable efforts to obtain assurances that confidential treatment will be accorded to the information so disclosed. Advisor will, upon the written request of the Company, return to the Company or destroy all of its confidential information received or developed pursuant to this Agreement (and all copies and reproductions thereof); provided that Advisor may retain one copy of the confidential information in a file accessible only to counsel for the purpose, in the event of a future dispute, of proving what information it did or did not receive hereunder. |
| 8. |
USE
OF ADVISOR NAME. The Company agrees not to, directly or indirectly,
refer
to Advisor or attribute any information to Advisor (A) in the press,
(B)
for advertising or promotional purposes, or (C) for the purpose of
informing or influencing any third party, including the investment
community, without the prior written consent of Advisor, which consent
(as
to (C)), shall not be unreasonably withheld or
delayed.
|
| 9. |
BROKER-DEALER.
The Company acknowledges that the compensation specified in this
Agreement
is related to Advisor’s consultative efforts in business and financial
planning. Advisor is not a licensed securities broker-dealer and
therefore
Advisor is not involved under this Agreement in the sale of securities
on
behalf of the Company or any issuer affiliated with the Company.
Advisor
does not intend to perform services that are defined in the Securities
Exchange Act of 1934 as being exclusive to licensed broker-dealers.
Moreover, Advisor does not negotiate raising of capital transactions,
does
not directly solicit purchasers of the Company’s securities and will not
hold any funds or securities in a capital raising transaction. Further,
neither Advisor nor any of its members or employees provides any
legal
advice or counsel.
|
| 10. |
NO
BROKER. The Company has not dealt with any broker, investment banker,
agent, or other person, except for Advisor, who may be entitled to
any
commission or compensation in connection with this Agreement or the
transactions contemplated hereby.
|
| 11. |
ENTIRE
AGREEMENT. This Agreement constitutes the entire agreement between
the
parties pertaining to the subject matter hereof and supersedes and
cancels
any prior communications, representations, understandings, and agreements
between the parties. No modifications of or changes to this Agreement
will
be binding, nor can any of its provisions be waived, unless agreed
to in
writing by the parties.
|
| 12. |
GOVERNING
LAW. This Agreement will be interpreted under and governed by the
laws of
the State of New York, without regard to its choice of laws principles.
Any controversy, dispute, or claim between the parties relating to
this
Agreement will be resolved in a confidential manner by binding arbitration
in New York, New York in accordance with the rules of the American
Arbitration Association. Judgment upon the award rendered by the
arbitrator may be entered in any State or Federal court having
jurisdiction thereof.
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September
26, 2005
Page
5
| 13. |
SAVINGS
CLAUSE. If any term or other provision of this Agreement is determined
to
be invalid, illegal or incapable of being enforced by any rule
of law or
public policy, all other terms, provisions and conditions of this
Agreement shall nevertheless remain in full force and effect. Upon
such
determination that any term or other provision is invalid, illegal
or
incapable of being enforced, the parties hereto will negotiate
in good
faith to modify this Agreement so as to effect the original intent
of the
parties as closely as possible to the fullest extent permitted
by
applicable law in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the extent possible. Nothing
in this
Agreement will be interpreted so as to require either party to
violate any
applicable laws.
|
We
are
delighted to accept this engagement and look forward to working with you.
Please
confirm that the foregoing is in accordance with your understanding of our
agreement by signing and returning to us a copy of this letter. We are confident
that you will be pleased with our performance.
Very
truly yours,
XXXXXXXX
CAPITAL
By:
/s/ Xxxxxx X. Xxxxx
Xxxxxx
X.
Xxxxx
President
and CEO
Accpeted
and agreed to as of the
Date
set
forth above:
Axial
Vector Engine Corporation
By:
/s/ Xx. Xxxxxxx Xxxxxxx
Xx.
Xxxxxxx Xxxxxxx
Title:
President and CEO
5
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September
26, 2005
Page
6
Exhibit
A
The
Company agrees to indemnify, defend, and hold harmless Advisor and its
affiliates, directors, officers, counsel, employees, agents, members, managers,
successors, assigns and controlling persons (each, an “Indemnified Party”) from
and against any and all losses, claims, damages, costs, expenses, and
liabilities (including any investigatory, legal, and other expenses as they
are
incurred by an Indemnified Party in connection with preparing for or defending
any action, claim, or proceeding, whether or not resulting in any liability)
(collectively, “Indemnifiable Losses”) to which any Indemnified Party may become
subject or liable relating to or arising out of (a) this Agreement or the
Services to be performed under this Agreement or any agreement between the
parties to this Agreement, (b) any transactions referred to in this Agreement
or
any transactions arising out of the transactions contemplated by this Agreement,
(c) any inaccuracy in or breach in the representations and warranties of
the
Company contained in this Agreement, and (d) any failure of the Company to
perform its obligations under this Agreement, provided that the Company shall
not be liable to an Indemnified Party in any such case to the extent that
any
such Indemnifiable Loss is found in a final, nonappealable judgment by a
court
of competent jurisdiction or by arbitration to have resulted as a direct
and
proximate cause from the willful misconduct or gross negligence of an
Indemnified Party. If for any reason, except as specifically provided herein,
the foregoing indemnity for Indemnifiable Losses is unavailable to an
Indemnified Party or insufficient to fully hold any Indemnified Party harmless,
then the Company agrees to contribute to the amount paid or payable by such
Indemnified Party harmless, then the Company agrees to contribute to the
amount
paid or payable by such Indemnified Party as a result of such Indemnifiable
Losses in such proportion as is appropriate to reflect the relative benefits
received by and fault of the Company, on the one hand, and the relative benefits
received by and fault of the Indemnified Party, on the other hand.
