EXHIBIT 10.1
September 17, 1999
FullNet Communications, Inc.
000 Xxxxx Xxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxxx, President and Chief Executive Officer
Re: Engagement Agreement: Financial Advisory Services
Dear Xxx:
This agreement ("Agreement") commences effective September 1, 1999 between
FullNet Communications, Inc., an Oklahoma corporation (the "Company"), and
National Securities Corporation, a registered broker/dealer ("National").
Pursuant to this Agreement, National will provide services to the Company as set
forth below:
1. Purpose.
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The Company hereby retains National on an exclusive basis during the
Engagement Period (as herein after defined) to render financial advisory
services to the Company relating to investment banking, shareholder value and
merger and acquisitions matters (as more fully described in Section 3 below),
upon the terms and conditions as set forth herein (provided, however, National
acknowledges the pre-existing relationship between the Company and Xxxxxxx &
Xxxxxxx, Inc., and agrees that the existence of such relationship shall not be
deemed to be a breach of this Section 1). In performance of these duties,
National shall provide the Company with the benefits of its best judgment and
efforts. It is understood and acknowledged by the parties that the value of
National's advice is not measurable in any quantitative manner, and that
National shall not be obligated to spend any specific amount of time performing
duties hereunder.
2. Engagement Period.
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The term of this agreement shall be for twelve months commencing effective
September 1, 1999 and terminating as of August 31, 2000, unless extended by
mutual agreement of National and the Company or earlier terminated as provided
in sections 10 and 14(b) hereof (the "Engagement Period").
3. Financial Advisory Services.
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A. Services.
---------
National will provide such of the following advisory services to the
Company as are appropriate and as the Company may request:
(i) Provide general financial and strategic advice to assist the
Company in increasing shareholder value;
(ii) Advise the Company in developing and implementing a
financial/public relations strategy;
FullNet Communications, Inc.
September 17, 1999
Page 2
(iii) When deemed appropriate by National, advise the Company on
exchange listing issues;
(iv) Advise on capitalization structure and capital needs of the
Company;
(v) Advise on the Company's quarterly forecasting and financial
reporting;
(vi) Advise on the Company's acquisition models, analysis and purchase
procedures;
(vii) Advise in the preparation and/or modification of the Company's
business plan; and
(viii) Provide general corporate finance, capital planning and strategic
advice to the Company.
B. Compensation.
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(i) For serving as financial advisor, the Company agrees to pay
National a financial advisory fee of $5,000 upon execution of
this Agreement and $5,000 monthly due on or before the 1st day of
each month during the Engagement Period (collectively, the
"Financial Advisory Fees"). Should a sale of the Company occur
during the Engagement Period, all unpaid Financial Advisory Fees
shall be due and payable. Additionally, the Company shall issue
to National or its designees, promptly upon notification by
National of the names of its designees, if any, and the
respective share amounts to be issued to such persons, an
aggregate 100,000 shares (the "Shares") of its common stock
("Common Stock"). Such Shares shall be "restricted," as such term
is defined under Rule 144 of the Securities Act of 1933, as
amended (the "Securities Act"), and shall contain a restrictive
legend restricting the transferability thereof. Compensation
payable to National under this Agreement shall be in addition to
the amounts payable under the separate Engagement Agreement
relating to Private Placement/Financings dated the date of this
Agreement (the "Private Placement/Financings Agreement");
provided, however, to the extent that a Business Combination is
consummated by the Company, and a Business Combination
Transaction Fee is payable to National pursuant to Section 4(B)
of this Agreement, no Financing Fees or Placement Fees (as such
terms are defined in the Private Placement/Financings Agreement),
shall be payable to National under the Private
Placement/Financings Agreement in respect of such transaction
unless a separate Private Placement or Debt Financing (as such
terms are defined in the Private Placement/Financings Agreement)
is consummated in connection with the Business Combination.
(ii) If the Company at any time proposes to register any shares of its
Common Stock under the Securities Act, whether or not for sale
for its own account, other than an offering primarily or
exclusively to employees, and the registration form to be used
may also be used for the registration of Common Stock (a
"Piggyback Registration") owned by National or its designees
(collectively, the "National Group"), the Company shall at such
time notify the National Group at least 30 days prior to the
filing of any registration statement with respect thereto. Upon
the receipt of a written request of any member of the National
Group made within ten (10) days after such notice (which request
shall specify the Common Stock intended to be registered), the
Company will use its best efforts, subject to the limitations set
forth below, to include in such registration the Shares. For the
purposes of this Section 3(B)(ii), best efforts shall not require
the Company to reduce the amount or sale price of the securities
it proposes to register. Each such request shall also contain an
undertaking from the participating member(s) of the National
Group to provide all such information and material and to take
all actions as may be required by the Company in order to permit
the Company to comply with all applicable federal and state
securities laws. Notwithstanding any other provision of this
Section 3(B)(ii), in the case of an underwritten public offering,
if the managing underwriter determines that market factors
require a limitation of the number of shares to be underwritten,
the managing underwriter may limit, or exclude entirely, the
number of shares (including those of the participating members of
the National Group) to be included in such Piggyback
Registration. If limited, the Shares of the participating members
of the National Group will be registered pro rata with any other
holders of Common Stock or Common Stock equivalents having
registration rights.
FullNet Communications, Inc.
September 17, 1999
Page 3
The participating members of the National Group shall pay all
sales commissions or other similar selling charges with respect
to Common Stock sold by them pursuant to a registration. The
Company shall pay all registration and filing fees, fees and
expenses of compliance with federal and state securities laws,
printing expenses, messenger and delivery expenses, and the fees
and disbursements of the Company's counsel and accountants,
unless the applicable state securities laws require that
stockholders whose securities are being registered pay their pro
rata share of such fees, expenses and disbursements, in which
case each stockholder (including the participating members of the
National Group) participating in the registration shall pay its
pro rata share of all such fees, expenses and disbursements based
on its pro rata share of the total number of shares being
registered.
4. Merger/Acquisition Services.
----------------------------
A. Services.
---------
During the Engagement Period, the Company and National agree as follows:
National will advise the Company with respect to the structure and financial
analysis of potential mergers, exchanges of capital stock, asset acquisitions or
other similar business combinations, including equity investment in another
company (each, a "Business Combination") in which the Company may participate.
National may also introduce the Company to persons or entities (each, a "Target
Business") with whom the Company may effect a Business Combination. The parties
acknowledge and agree that the Company previously has engaged in discussions
relating to a possible Business Combination with the entities identified on
Schedule A, attached hereto (each, a "Company-identified Business"), and that
none of such entities shall be considered a Target Business for purposes of this
Agreement.
B. Compensation.
(i) In compensation for the services set forth in 4 (A), the Company
agrees to pay National $2,500 monthly due on or before the 1st
day of each month during the Engagement Period (the "Business
Combination Advisory Fee.")
(ii) Additionally, the Company agrees that if (a) a Business
Combination is consummated with a Target Business, National shall
be entitled to a cash fee equal to a percentage of the value of
consideration paid for such Business Combination as follows: 5%
on the first $1,000,000 of consideration; 4% of the second
$1,000,000 of consideration; 3% of the third $1,000,000 of
consideration; 2% of the fourth $1,000,000 of consideration; and
1% of the consideration over $4,000,000, and (b) a Business
Combination is consummated with a Company-identified Business,
National shall be entitled to a cash fee equal to the greater of
$5,000 and a percentage of the value of consideration paid for
such Business Combination as follows: 2 1/2% on the first
$1,000,000 of consideration, 2% of the second $1,000,000 of
consideration, 1 1/2% of the third $1,000,000 of consideration,
1% of the fourth $1,000,000 of consideration, and .5% of the
consideration over $4,000,000 (any cash fee payable under (a) or
(b), collectively, the "Business Combination Transaction Fee").
FullNet Communications, Inc.
September 17, 1999
Page 4
(iii) If the consideration paid by or to the Company in connection with
any Business Combination is in securities, the closing price of
such securities on the last trading date immediately prior to the
closing of the Business Combination shall be deemed to be the
value of the consideration as hereinabove used. If the securities
are not publicly traded, the value shall be the fair market value
of the securities. The monies shall be payable by wire transfer
to National at the closing of such Business Combination, except
that any Business Combination Transaction Fee in respect of any
contingent consideration shall be payable whenever such
consideration is paid.
(iv) For any Business Combination for which National has introduced a
Target Business during the Engagement Period, National shall be
entitled to receive the Business Combination Transaction Fee with
respect to any such Business Combination which is completed by
the Company at any time from the date hereof until a period
ending twelve months after the termination of the Engagement
Period.
5. Relationships with Others; Confidentiality.
-------------------------------------------
The Company acknowledges that National or its affiliates are in the
business of providing investment banking financial advisory and consulting
services to others. Nothing herein contained shall be construed to limit or
restrict National in conducting such business with respect to others, or in
rendering such advise to others. In connection with the rendering of services
hereunder, National has been or will be furnished with confidential information
concerning the Company including, but not limited to, financial statements and
information, cost and expense data, production data, trade secrets, marketing
and customer data, and such other information not generally obtained from public
or published information or trade sources. Such information shall be deemed
"Confidential Material" and, except as specifically provided herein, shall not
be disclosed by National without prior written consent of the Company. In the
event National is required by applicable law or legal process to disclose any of
the Confidential Material, it is agreed that National will deliver to the
Company prompt notice of such requirement prior to disclosure of same to permit
the Company to seek an appropriate protective order and/or waive compliance of
this provision. If, in the absence of a protective order or receipt of written
waiver, National is nonetheless, in the written opinion of counsel, compelled to
disclose any Confidential Material, National may do so without liability
hereunder provided that notice of such prospective disclosure is delivered to
the Company prior to actual disclosure. Following the termination of this
Agreement, National shall deliver to the Company all Confidential Material.
6. Financial Advisor's Liability.
------------------------------
In the absence of gross negligence or willful misconduct on the part of
National, National shall not be liable to the Company or to any officer,
director, employee, agent, representative, stockholder or creditor of the
Company for any action or omission of National or any of its officers,
directors, employees, agents, representatives or stockholders in the course of,
or in connection with, rendering or performing any services hereunder.
FullNet Communications, Inc.
September 17, 1999
Page 5
7. Limitation Upon the Use of Advice and Services.
-----------------------------------------------
(a) No person or entity, other than the Company or any of its subsidiaries
or directors or officers of each of the foregoing, shall be entitled
to make use of or rely upon the advice of National to be given
hereunder, and the Company shall not transmit such advice to, or
encourage or facilitate the use or reliance upon such advice by others
without the prior consent of National.
(b) It is clearly understood that National, for services rendered under
this Agreement, makes no commitment whatsoever to recommend or advise
its clients to purchase the securities of the Company. Research
reports or corporate finance reports that may be prepared by National
will, when and if prepared, be done solely on the merits or judgment
of analysts of National or any corporate finance personnel of
National.
(c) It is clearly understood that National, for services rendered under
this Agreement, makes no commitment whatsoever to make a market in any
of the Company's securities on any stock exchange or in any electronic
marketplace. Any decision by National to make a market in any of the
Company's securities shall be based solely on the independent judgment
of National's management, employees, and agents.
(d) Use of the National's name in annual reports or any other report of
the Company or releases by the Company must have the prior approval of
National unless the Company is required by law to include National's
name in such annual reports, other report or release of the Company,
in which event National will be furnished with copies of such annual
reports or other reports or releases using National's name in advance
of publication by the Company.
8. Indemnification.
----------------
Since National shall be acting on behalf of the Company, the Company agrees
to indemnify National in accordance with the provisions of Annex A hereto, which
is incorporated by reference and made a part hereof.
9. Expenses.
---------
The Company shall reimburse National for all of its reasonable actual
out-of-pocket expenses, including but not limited to travel, legal fees,
printing, and other expenses, incurred in connection with the provision of
services hereunder; provided, however, National agrees not to accrue or incur
expenses in any monthly period in excess of $5,000 without the consent of the
Company. National will not bear any of the Company's legal, accounting, printing
or other expenses in connection with any transaction considered or consummated
hereby. It also is understood that neither National, nor the directors,
employees and agents of National, will be responsible for any fees or
commissions payable to any finder or to any other financial or other advisor
utilized or retained by the Company. The Company shall deposit herewith $1,000
for reimbursable expenses, such expenses to be billed on a monthly basis and be
paid within ten days of receipt.
FullNet Communications, Inc.
September 17, 1999
Page 6
10. Termination.
------------
This Agreement may be terminated by National or the Company at any time by
written notice to the other party, without liability or continuing obligation
except as set forth in the following sentence. No termination shall affect: (a)
any Financial Advisory Fees or Business Combination Advisory Fees earned by
National up to the date of termination, (b) the issuance of the Shares pursuant
to Section 3(B)(i) hereof, (c) any Business Combination Transaction Fees payable
to National after termination pursuant to Section 4(B)(ii) hereof, (d) the
reimbursement of expenses as described in Section 9 hereof, (e) all obligations
of the Company under Section 8 hereof, and (f) the Indemnification Provisions
attached hereto as Annex A which are incorporated herein, all of which shall
remain operative and in full force and effect.
11. Limitation of Liability.
------------------------
The liability of National pursuant to this Engagement Letter shall be
limited to the aggregate fees received by National hereunder, which shall not
include any liability for incidental, consequential or punitive damages
12. Discretion.
-----------
Nothing contained herein shall require the Company to enter into any
transaction presented to it by National, which decision shall be at the
Company's sole discretion.
13. Severability.
-------------
Every provision of this Agreement is intended to be severable. If any term
or provision hereof is deemed unlawful or invalid for any reason whatsoever,
such unlawfulness or invalidity shall not affect the validity of this Agreement.
14. Miscellaneous.
--------------
(a) Any notice or communication between parties hereto shall be
sufficiently given if sent by certified or registered mail, postage
prepaid, or faxed and confirmed as follows:
If to the Company, addressed to it at:
FullNet Communications, Inc.
000 Xxxxx Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxxx, President and Chief Executive Officer
Facsimile number: (000) 000-0000
FullNet Communications, Inc.
September 17, 1999
Page 7
With copies to:
Xxxxxxxx X. Xxxxxxx, Esq.
Day Xxxxxxx Xxxxxxxx Propester & Xxxxxxxxxxx, P.C.
000 Xxxx Xxx., Xxxxx 0000
Xxxxxxxx Xxxx, XX 00000
Facsimile number: (000) 000-0000
Or, if to National, addressed to it at:
National Securities Corporation 0000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxxxx 00000
Attention: ___________________
Facsimile number: (000) 000-0000
With copies to:
Such notice or other communication shall be deemed to be given on the date
of receipt.
(a) If National shall cease to do business, the provisions hereof relating
to duties of National and compensation by the Company as it applies to
National shall thereupon cease to be in effect, except for the
Company's obligation of payment for services rendered prior thereto.
This Agreement shall survive any merger of, acquisition of, or
acquisition by National and after any such merger or acquisition shall
be binding upon the Company and the corporation surviving such merger
or acquisition.
(b) This Agreement embodies the entire agreement and understanding between
the Company and National and supersedes any and all negotiations,
prior discussions and preliminary and prior agreements and
understandings related to the subject matter hereof, and may be
modified only by a written instrument duly executed by each party.
(c) This Agreement has been duly authorized, executed and delivered by and
on behalf of the Company and National.
(d) This Agreement shall be construed and interpreted in accordance with
the laws of the State of Washington, without giving effect to
conflicts of laws.
(e) There is no relationship of partnership, agency, employment, franchise
or joint venture between the parties. Neither party has the authority
to bind the other or incur any obligation on its behalf.
FullNet Communications, Inc.
September 17, 1999
Page 8
(f) This Agreement and the rights hereunder may not be assigned by either
party (except by operation of law) and shall be binding upon and inure
to the benefit of the parties and their respective permitted
successors, assigns and legal representatives.
If you are in agreement with the foregoing, please execute and return one
copy of this letter to National, along with a check or wire transfer made
payable to National Securities Corporation in the amount of $13,500 in
accordance with Sections 3, 4, and 9 above (consisting of the sum of $5,000 due
upon execution of this agreement, the $7,500 initial monthly payment and the
$1,000 deposit due pursuant to paragraph nine above).
Sincerely,
National Securities Corporation
By:/s/ Xxxxxx X. Xxxxxxxxx
--------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: Chairman
Agreed to and accepted this 17th day of September, 1999.
FullNet Communications, Inc.
By:/s/ Xxxxxxx X. Xxxxxxxx
---------------------------
Name: Xx. Xxxxxxx X. Xxxxxxxx
Title: President and Chief Executive Officer
FullNet Communications, Inc.
September 17, 1999
Page 9
ANNEX A
INDEMNIFICATION
Recognizing that transactions of the type contemplated in this engagement
sometimes result in litigation and that National Securities Corporation's
("National") role is advisory, FullNet Communications, Inc. (the "Company")
agrees to indemnify and hold harmless National, its affiliates and their
respective officers, directors, employees, agents and controlling persons
(collectively, the "Indemnified Parties"), from and against any losses, claims,
damages and liabilities, joint or several, related to or arising in any manner
out of any transaction, proposal or any other matter (collectively, the
"Matters") contemplated by the engagement of National hereunder, and will
promptly reimburse the Indemnified Parties for all expenses (including
reasonable fees and expenses of legal counsel) as incurred in connection with
the investigation of, preparation for, or defense of any pending or threatened
claim related to or arising in any manner out of any Matter contemplated by the
engagement of National hereunder, or any action or proceeding arising therefrom
(collectively, "Proceedings"), whether or not such Indemnified Party is a formal
party to any such Proceeding. Notwithstanding the foregoing, the Company shall
not be liable in respect of any losses, claims, damages, liabilities or expenses
that a court of competent jurisdiction shall have determined by final judgment
resulted solely from the gross negligence or willful misconduct of an
Indemnified Party. The Company further agrees that it will not, without the
prior written consent of National, settle compromise or consent to the entry of
any judgment in any pending or threatened Proceeding in respect of which
indemnification may be sought hereunder (whether or not National or any
Indemnified Party is an actual or potential party to such Proceeding), unless
such settlement, compromise or consent includes an unconditional release of
National and each other Indemnified Party hereunder from all liability arising
out of such Proceeding.
The Company agrees that if any indemnification or reimbursement sought
pursuant to this letter were for any reason not to be available to any
Indemnified Party or insufficient to hold it harmless as and to the extent
contemplated by this letter, then the Company shall contribute to the amount
paid or payable by such Indemnified Party in respect of losses, claims, damages
and liabilities in such proportion as is appropriate to reflect the relative
benefits to the Company and its stockholders on the one hand, and National on
the other, in connection with the Matters to which such indemnification or
reimbursement relates or, if such allocation is not permitted by applicable law,
not only such relative benefits but also the relative faults of such parties as
well as any other equitable considerations. It is hereby agreed that the
relative benefits to the Company and/or its stockholders and to National with
respect to National's engagement shall be deemed to be in the same proportion as
(i) the total value paid or received or to be paid or received by the Company
and/or its stockholders pursuant to the Matters (whether or not consummated) for
which National is engaged to render services bears to (ii) the fees paid to
National in connection with such engagement. In no event shall the Indemnified
Parties contribute or otherwise be liable for an amount in excess of the
aggregate amount of fees actually received by National pursuant to such
engagement (excluding amounts received by National as reimbursement of the
expenses).
The Company further 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 National's engagement hereunder except for
losses, claims, damages, liabilities or expenses that a court of competent
jurisdiction shall have determined by final judgment resulted solely from the
gross negligence or willful misconduct of such Indemnified Party. The indemnity,
reimbursement and contribution obligations of the Company 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 or an Indemnified Party.
The indemnity, reimbursement and contribution provisions set forth herein
shall remain operative and in full force and effect regardless of (i) any
withdrawal, termination or consummation of or failure to initiate or consummate
any Matter referred to herein, (ii) any investigation made by or on behalf of
any party hereto or any person controlling (within the meaning of Section 15 of
the Securities Act of 1933 as amended, or Section 20 of the Securities Exchange
Act of 1934, as amended) any party hereto, (iii) any termination or the
completion or expiration of this letter of National's engagement and (iv)
whether or not National shall, or shall not be called upon to, render any formal
or informal advice in the course of such engagement.
