STRATEGICA SERVICES CORPORATION
0000 Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxx, Xxxxxxx 00000
Xxxxxxxx X. Xxxxxxxx Main Line: (000) 000-0000
Managing Director Facsimile: (000) 000-0000
Direct Lines (000) 000-0000
May 7, 1998
Xx. Xxxxxxx X. Xxxxxx, Xx., Chairman and President
Colmena Corp.
00000 Xxxxxxx Xxxx
Xxxxxxxx, Xxxx 00000 PERSONAL & CONFIDENTIAL
Re: Invest Banking and Advisory Services Agreement Colmena Corp., a
public company trading on the Bulletin Board as "CLME"
(separately and collectively with any affiliate, subsidiary and
related entity, now owned and to be acquired, controlled and/or
merged, "Colmena" or the "Company")
Dear Xxxxxxx:
This investment banking and advisory services agreement ("Agreement") is between
Colmena and Strategica Services Corporation ("Services") and Strategica
Financial Corporation ("Financial"), pursuant to which the Company has retained
Services and Financial to render certain financial advisory and other services
to the Company, on the terms and conditions set forth below. As you know,
Strategica has introduced the Company to several acquisition/merger candidates
including Global-Net, Inc. ("Global") and North American Communications Control,
Inc., ("NACC"). If Colmena proceeds with a Transaction (as defined below)
involving Global, or NACC (and any other Offering or Transaction arranged or
introduced by Strategica as hereafter described), Strategica shall be a
compensated as set forth herein. Further, you agree that Strategica will
endeavor to arrange for a funding facility, based upon a business plan to be
presented to and approved by Strategica, to carry out the business plan in whole
or in part. Any such finding facility shall be subject to, among other things,
raising a minimum of $2,000,000 of new funds as equity for the Company under
agreed upon terms and the negotiation and execution of definitive agreement for
the acquisitions and the funding due execution and delivery of final
documentation for the funding facility, and compliance with all conditions and
covenants of the ultimate funding sources.
1. Retention.
A. The Company hereby retains Services or, a Services' option,
Financial, to act as the Company's financial advisor and, subject
to the terms hereof, Services agrees to serve in such capacity
from the date of execution of this Agreement through April 30,
2003 (the "Expiration Date"). The parties acknowledge that
Services may also cause some of its duties to be performed under
the name Strategica Group or another affiliate and all rights and
benefits under this Agreement in favor of Services shall likewise
be available to Strategica Group. Services and Financial, as
applicable shall have a right of first refusal concerning
arranging or introducing any debt or equity funding for the
Company and providing any future investment banking or financial
advisory or related services for the Company. Services shall have
the exclusive right concerning arranging or introducing
Transactions (as hereafter defined) for the Company and the
Company and the Company shall refer all such inquiries to
Services.
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B. In particular, after Services has been provided with certain
information, which it reasonably requests, Services will,
consistent with custom in the Investment banking industry,
endeavor to (1) provide advice to the Company as to, and assist
the Company with contract negotiations, business strategies, and
if applicable, required regulatory filings, (2) provide the
Company as to, and assist the Company with, options available to
the Company, (3) advise the company with respect to the terms and
timing of potential public offerings and private placements of
equity or debt securities, (4) assist the Company in preparing
the required offering documents, (5) assist the Company in
identifying one or more potential equity and/or debt investors
and discuss with such potential investors the possibility of
their making investments in the Company, (6) provide advice to
the Company with respect to potential marketing strategies,
mergers, other acquisitions reorganizations, recapitalizations or
sales of assets, and (7) provide advice in the structure of all
business strategies and agreements and quarterback the
negotiations and strategies.
C. The Company shall be responsible for all fees and costs,
including reasonable attorneys and other professional fees and
expenses, and for all travel, meals, lodging, long distance
telephone, courier, postage, printing, and other expenses
incurred by Services and/or Financial and by any professionals
from time to time in connection with any of the aforementioned
activities and the Company agrees to pay such fees and expenses
and to reimburse Services and/or Financial, as applicable within
10 days of written request or invoice thereof, regardless of
whether the services are fully or satisfactorily performed.
Services and Financial agrees that no single expense item from
time to time sought to be reimbursed shall exceed $2,500 without
the prior written approval of the Company, which approval of the
Company, which approval shall not be unreasonably withheld. Fees
and costs of legal counsel and other professionals which shall
not be limited, however, rates and duties shall be pre-approved.
2. Compensation
A. In consideration of the execution of this Agreement, and subject
to the terms and conditions hereof, the Company agrees to pay all
of the following fees:
(i) The Company has previously paid Strategica a
non-refundable fee of $25,000 for its due diligence review
with the March 26, 1998 letter agreement. To date the
Company has not delivered all requested documentation
required for Strategica to complete its diligence. The
Company agrees to forthwith deliver all remaining
documentation required by Strategica Be retained as
investment advisor to the Company pursuant to this Agreement
and assist the Company with the proposed acquisitions of
Global and NACC (and any other Offering or Transaction
arranged or introduced by Strategica as hereafter
described), and advise the Company accordingly on its
corporate financing needs and structure.
(ii) To Services, a monthly fee of $5,000 payable on May 1,
1998 and payable on the first day of each month and
continuing thereafter for 60 days.
(iii) To Financial, 5% of the gross proceeds committed to the
Company in respect of equity sold or issued after the date
of this Agreement and prior to the Expiration Date and 3% of
the gross proceeds committed to the Company in respect of
deft issued after the date of this Agreement and prior to
the Expiration Date, which are directly or indirectly
arranged or introduced by Financial or Services or an
affiliate (each such event being an "Offering"), payable as
provided in Section 2d, upon the closing of such Offering.
(iv) To Services, 5% of the gross purchase price (including,
without limitation, the gross amount of any promissory
obligations, cash and other proceeds) received in a sale of
the Company or a Company subsidiary or affiliate, a line of
business, business segment or operation or material assets,
or any merger or acquisition of the Company (or a Company
subsidiary or affiliate) with or into any other company or
person and any acquisition, reorganization or
recapitalization of the Company (or a Company subsidiary or
affiliate)
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(iv) To Services, 5% of the gross purchase price (including,
without limitation, the gross amount of any promissory
obligations, cash and other proceeds) received in a sale of
the Company or a Company subsidiary or affiliate, a line of
business, business segment or operation or material assets,
or any merger or acquisition of the Company (or a Company
subsidiary or affiliate) with or into any other company or
person and any acquisition, reorganization or
recapitalization of the Company (or a Company subsidiary or
affiliate) or a sale of assets involving any line of
business or business segment or operation or material asset
of the Company (or a Company subsidiary or subsidiary or
affiliate) and a debt restructuring fee if 15% of all debt
restructured, converted to equity, extended, etc., in each
such case prior to the Expiration Date (each of the
aforementioned such events being a "Transaction") in
addition to any fees pursuant to Section 2a payable, except
as provided in Section 2d, upon the closing of such
Transaction. If any merger or acquisition Transaction would
be deemed to require Services to register as a broker-dealer
within the meaning of the Securities Exchange Act of 1934,
such transaction will be handled by Financial who will be
responsible for all aspects of such transaction and be
entitled to the compensation with respect thereto.
B. In addition to the compensation to be paid to Services and
Financial as provided in Section 2a, the Company shall reimburse
Services and Financial, within 10 days after a written request or
invoice therefor, for all reasonable out-of-pocket expenses
(including reasonable fees and disbursements of Services and
Financial counsel, if any) from time to time incurred in
connection with this Agreement regardless of the success of any
negotiations or of any other events affecting the Company and
regardless of whether any such matters are consummated or
received or consummated satisfactorily. Services agrees that no
single expenses shall exceed $2,500 without prior written
approval of the Company, which approval shall not be unreasonably
withheld. Fees and costs of counsel and other professionals which
shall not be limited, however rates and duties shall be
pre-approved.
C. Notwithstanding the foregoing, if prior to the Expiration Date,
Services or Financial resigns either (i) as a result of a
material disagreement on strategy and/or terms, or (ii) because
any information provided to it or potential investors by the
Company was materially inaccurate, misstatements or omissions.
Services or Financial shall be entitled, in addition to other
rights and remedies, to receive and/or retain all of the amounts
which would have become due and payable during the term of this
Agreement, as if Services or Financial, as the case may be, had
not resigned and all amounts due and payable up to and including
the date of such resignation, including any compensation paid to
such date under Section 2a and all amounts due pursuant to
Section 2 hereof for expenses, including reasonable fees and
disbursements of its counsel incurred up to and including the
effective date of such resignation and through resolution of any
dispute. If prior to the Expiration Date, Services or Financial
resigns because any information provided to it or potential
investors by the Counsel was materially inaccurate or contained
material misstatements or omissions, and the Company thereafter
proceeds with an Offering or Transaction within 3 years after
such resignation, Services and Financial shall also be entitled
to receive all of the compensation such party would have been
entitled to received under Section 2a hereof as if such party had
not resigned and as if such party had actually introduced or
arranged the Offering or Transaction and all amounts due pursuant
to Section 2 hereof for expenses, including reasonable fees and
disbursements of its counsel incurred up to and including the
effective date of such resignation and through resolution of any
dispute.
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D. Notwithstanding anything herein to the contrary, the Company
shall not be obligated hereunder or consummate any Offering or
Transaction, but if the Company shall accept the terms of a
proposed Offering or Transaction directly or indirectly
introduced or arranged by Services or Financial, and such
Offering or Transaction shall fail to close due to the Company's
breach of a condition to closing or because the Company withdraws
from or changes the terms of any such proposed Offering or
Transaction or for any other reason, Services and Financial shall
be entitled. Upon such event, to receive the fees specified
herein which such party would have received with respect to such
Offering or Transaction as if such Offering or Transaction had
closed.
E. Notwithstanding anything herein to the contrary, if the Company
shall accept the terms of a proposed Offering or Transaction
within 3 years after the Expiration Date which was directly or
indirectly introduced or arranged, or from a source directly or
indirectly introduced or arranged, by Services or Financial prior
to the Expiration Date, then Services and Financial shall be
entitled, upon such event, to receive the fees specified herein
which such party would have received with respect to such
Offerings or Transaction as if such Offering or had closed.
F. If Services or Financial performs services for the Company prior
to the Expiration Date not specifically covered by this
Agreement, such as providing a fairness option or due diligence
investigation with respect to an acquisition target, such
services will be the subject of separate letter agreements and
subject to customary investment banking fees.
G. With respect to any Offering or Transaction, the Company and
Services or Financial, as may be applicable, shall enter into
usual and customary documentation required to affect such
Offering or Transaction, including any necessary underwriting or
placement agreement.
3. Equity
A. Strategica shall receive warrants for 25% of the common stock of
the Company, with the Exercise Prices being the lowest market
price any shares of common stock are sold or issued or salable or
insalable on or after March 26, 1998, capped at $6.00/share, with
full anti-dilution and registration rights. The anti-dilution
rights shall be waived for dilutive transactions exceeding
$10.00/share. Strategica's warrants shall be earned and issued
upon closing of a funding or acquisition transaction directly or
indirectly introduced or arranged by Strategica. Strategica's
equity shall be subject to increase if the Company does not
achieve at least 80% of its mutually agreed upon projected
business plan performance annually during the advisory term,
based on the percentage variance off of EBIT.
B. In the event of the issuance of any additional stock options or
warrants to acquire additional stock of the Company (an
"Anti-dilution Event"). The Company shall immediately issue or
reserve the number of additional shares necessary, so that the
aggregate shares owned by and issuable to Services equals the
percentage of shares of outstanding capital stock of the Company
following the occurrence of such Anti-dilution Event, equals the
same percentage owned by and issuable to Services of shares of
capital stock of the Company immediately prior to the occurrence
of such Anti- dilution Event, taking into account any additional
shares of capital stock required to be issued by the Company to
Services pursuant to this Section 3 above or pursuant to earlier
Anti-dilution Events.
C. The Company shall execute and deliver a registration rights
agreement in the form required by Services with respect to the
underlying shares owned by Services.
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4. Indemnity.
The Company hereby agrees to indemnify and hold harmless Services and
Financial and their respective affiliates, directors, officers, employment,
managing directors principals, shareholders, agents, controlling persons,
attorneys, auditors and accountants (Services and Financial and each such person
being an "Indemnified Party") from and against any and all losses, claims,
damages and liabilities, joint or several;, to which such Indemnified Party may
become subject under any applicable law or suit related to or arising out of the
matters described in this Agreement (including the performance of any services
for the Company and undertaking any negotiations on behalf of the Company with
third parties and for the consequences of any such negotiations, and the Company
will reimburse each Indemnified Party for all fees and expenses (including
reasonable counsel fees and expenses) as they are incurred in connection with
the investigation or, preparation for, and defense of any pending or threatened
claim or any action or proceeding arising therefrom, whether or not such
Indemnified Party is a party and the prosecution and defense of any counter
claims, cross claims and third party claims arising therefrom or related
thereto. The Company shall defend the Indemnified Parties with counsel who shall
be selected by Services and Financial and shall fund such retainers and payments
as required by such counsel. The Company will not be liable under the foregoing
indemnification provision in respect of any loss, claim, damage, or liability to
the extent that a court of competent jurisdiction shall have determined by a
final judgment that such loss, claim, damage or liability resulted primarily
from the Indemnified Party's willful misconduct. The Company shall execute and
deliver to Services and Financial and such other indemnified party such
additional indemnification agreements, as any of the, shall require to
supplement the aforementioned indemnification agreement.
5. Survival of Certain Provisions.
Sections 2 through 17 of this Agreement (and any other provisions of
this Agreement which, by their terms, are to remain operative) shall remain
operative and in full force and effect regardless of (a) consummation of any
Offering or Transaction involving the Company or (b) any termination of this
Agreement. This Agreement shall be binding upon, and shall inure to the benefit
of, the Company, Services, Financial and, in the case of the Indemnity
Agreement, the Indemnified Parties referred to in Section 4 hereof and their
respective legal representatives, successors and assigns and heirs, and no other
person or entity shall acquire or have any right under or by virtue of this
Agreement. The Company represents that the provisions of this Agreement are the
legal, valid, binding and enforceable against the Company according to its
terms.
6. Confidentiality.
The parties agree that, except as required by law, any advice rendered
pursuant to this Agreement may not be disclosed publicly by the Company without
the prior written approval of Services and Financial, and further, that no such
legally required disclosure will be made without prior consultation with
Services and Financial. In addition, no public announcement or filing in which
the name of either party appears may be made without prior written approval of
the other party, except as may be required by law following consultation with
the appropriate party. Notwithstanding the foregoing, the parties agree that
Services or Financial, as may be applicable, may publish announcements of its
endeavors on behalf the Company, including any successful restructuring,
financing or similar events in conventional "tombstone" style or other form
approved by Services or Financial.
Page 307
7. Board Seats.
Services may, at its option, elect to designate a person to sit on the
board(s) so long as it is a shareholder of the Company or the holder of warrants
or options to acquire shares of the Company. Services may require the Company
obtain acceptable director and officer insurance. If there is no acceptable
director and officer insurance available, Services at its option, will be an
advisor to the board. In any event, Services shall receive notice of all board,
shareholders and committee meetings, have the right to receive all meeting
materials and financial data, and have the right to attend and participate in
all discussions. Unless expressly prohibited by applicable law, the Company
agrees to take such actions consistent with this Section as directed by
Services.
8. Full Disclosure.
A. The Company will provide, or cause to be provided, to Services
and Financial all financial and other information requested by
Services or Financial for the purpose of rendering its services
pursuant to this Agreement (all such information being the
Company, all notices and correspondence and agreements involving
any Contract Parties or which have or may have a material impact
on the Company or its business. The Company recognizes and
confirms that Services and Financial will use the Information in
performing the services contemplated by this Agreement without
having independently verified the Information and that Services
and Financial do not assume any responsibility for the accuracy
or completeness of the information. Services and Financial agree
to use such information strictly in accordance with this
Agreement.
B. There is no fact known to the Company's senior management which
materially affects or may (so far as the Company's senior
management can now reasonably foresee) materially affect the
business, properties, condition (financial or other) or
operations (present or Prospective) of the Company which has not
been set forth in written form delivered by the Company to
Services or Financial. The Company agrees to keep Services and
Financial promptly informed of any facts hereafter known to the
Company which materially affects or may (so far as the Company's
senior management can now reasonably foresee) materially affects
the business, properties, condition (financial or other) or
operations (present or prospective) of the Company.
C. As used throughout this Agreement, the term Company refers to any
entity falling within the definition of Company on the first page
of this Agreement and, upon consummation of any Transaction, any
entity hereafter entity hereafter merged or acquired including
Global and NACC, as applicable.
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9. Consideration.
The parties acknowledge the receipt and adequacy of good, valuable and
contemporaneous consideration for this Agreement. Further, the parties
acknowledge that Services and Financial shall be performing investment banking
and financial advisory services to the Company and are receiving compensation
(fees and equity) in connection with this Agreement, regardless of whether
Services or an affiliate is part of the ultimate lender and regardless whether
all of the advisory services are performed or performed satisfactorily. The
parties acknowledge that the compensation (fees and equity) payable to Services
and Financial are not, and are not to be construed, as the payment of interest
or the reserving, charging or taking of interest with respect to any financing
now or hereafter committed or funded by any affiliate of Services or Financial
or any other lender. Further, the Company acknowledges that the work of the
warrants issued to Services in connection with this Agreement is wholly
dependent on the success of the Company's business venture.
10. Binding Agreement.
When signed by all parties, this Agreement constitutes the entire
agreement of the parties and all prior written or oral agreements are merged
into this letter. The persons signing below are duly authorized to do so on
behalf of the Company and its officers, directors, employees, affiliates,
subsidiaries, partners and shareholders, as applicable, and the provisions of
the Agreement are binding upon such persons and entities. This Agreement may be
executed in counterpart copies and the fact of execution transmitted via
telecopy.
11. Finders or Brokers.
Each party acknowledges that there are no finders or brokers involved
in introducing us to the Company other than Biltmore Securities, Inc., who
introduced this matter to us, and the Company shall be solely responsible to pay
any fee or commission, including any equity, in connection with this agreement
and the transactions hereby contemplated and same shall not be an obligation of
Services or Financial or any affiliate thereof.
12. Construction: Jurisdiction and Forum.
This Agreement shall be governed by, and construed in accordance with
the laws of the State of Florida, without regard to principles of conflicts of
law, and the exclusive forum and venue for resolution of legal and
interpretative issues shall be the state or Federal courts in Miami-Dade County,
Florida. The parties hereby consent to personal jurisdiction in such forum and
to personal service of process by mail.
13. Shareholder Agreement.
At Strategica's request, the parties shall enter into an appropriate
shareholder, voting trust, or other similar agreement, as appropriate, with any
major or non-ordinary course of business, sale of equity, acquisitions, mergers,
rising any debt or equity funds, affiliated transactions, private placement,
public offerings, spin-offs, etc.)
14. Material Agreements.
The parties agree that employment agreements satisfactory to Services
must be in place with key management personnel prior to concluding any
transaction, which must contain satisfactory performance levels, standards and
compensation, both for continuance and renewal. The parties agree to cooperate
with Services in connection with background, credit and other similar reviews on
the Company and key management personnel, all of which must be satisfactory to
Services.
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15. No Conflict.
You acknowledge and agree that Services or Financial or an affiliate
may be involved with or participate in an Offering or Transaction, including as
a part of the ultimate finding source in an Offering or as part of the targeted
entity in any acquisition or merger or other Transaction and Services or
Financial or such affiliates may be separately compensated.
16. First Refusal.
Although the services of Services and Financial shall be rendered on a
non-exclusive basis, nevertheless, the Company agrees to refer all third party
funding proposals to Services or Financial or its designee. The Company agrees
that Services and Financial shall have a right of first refusal to arrange or
provide any funding contemplated for the Company from a non-Strategica
affiliated entity and Services or Financial or its designee shall have a
reasonable time within which to find alternative funding under substantially
similar terms.
17. No Jury Trial.
The parties hereby waive any right to a jury trial in connection with
any dispute arising out of this Agreement.
Please confirm that the foregoing is in accordance with your
understanding by signing and remitting to us duplicates of this Agreement within
two (2) business days from the date of this letter.
Very truly yours,
STRATEGICA SERVICES CORPORATION
By: /s/ Xxxxxxxx X. Xxxxxxxx
Title: Managing Director
STRATEGICA FINANCIAL CORPORATION
By: /s/ Xxxxxxxx X. Xxxxxxxx
Title: President & C.E.O.
ACCEPTED:
(on behalf of the Company as defined above)
By: /s/ Xxxxxxx X. Xxxxxx, Xx., President SEAL 5-7-98
Duly authorized, on behalf of the Company
as described above
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