Commonwealth Partners NY, LLC
Consulting Agreement
PERSONAL AND CONFIDENTIAL
November 30, 1999
Xx. Xxxxxx Xxxxxxx
President
Absolute Xxxxxx.xxx
00000 XX 0xx Xxxxxx, Xxxxx 0000
Xxxxxxxx, XX 00000-0000
Dear Xxxxxx:
This letter ("Engagement Letter") confirms that Commonwealth Partners NY,
LLC ("Commonwealth," we" or "our") has been engaged by Absolute Xxxxxx.xxx, its
subsidiaries, successors, affiliates, (the "Company," "you" or "your") to act as
their non-exclusive Consultant (and to perform other functions mutually agreed
upon by the parties) for the purpose of rendering to you financial advice and
other services in such capacity, on the terms and conditions hereinafter set
forth. Our engagement shall become effective as of the date set forth above.
1. Confidentiality
It is understood that during the course of this engagement Commonwealth
will be furnishing proprietary and confidential advice and information to you
relating to structure and capital sources developed by Commonwealth through its
relationships with such sources and that, accordingly, any such information or
any other information relating to Commonwealth's efforts on your behalf with
third parties provided to you by Commonwealth, is confidential. You agree to
treat as confidential any such information or related or similar information
provided to you by Commonwealth and you will not, without our prior written
consent, disclose such to any third party. We, in turn, will treat as
confidential and will not, without your prior written consent, disclose to any
third party any confidential information provided to Commonwealth by you.
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Notwithstanding the foregoing, the terms of this Paragraph 1 shall not apply to
any information which is or becomes generally available to the public, is
required by law to be disclosed, or is obtained from any third party which is in
possession of such information through no fault of Commonwealth and is not under
any obligation, to Commonwealth's knowledge, to treat such information as
confidential.
2. Engagement Fee for Advisory Services
In addition to any amounts payable pursuant to Paragraph 6 hereof, the
Company agrees to pay Commonwealth a nonrefundable consulting engagement fee of
1,100,000 registered shares of the common stock of the Company or a new or
successor entity or the surviving Company in any merger or acquisition, said
shares are payable upon the execution of this Engagement Letter, plus a
$7,000.00 per month advisory fee payable on the first day of each month after
execution of this Engagement Letter. Said fee shall be payable $2,500.00 in
cash and $4,500.00 in restricted common shares, of the Company, or the surviving
Company in any merger, or such other consideration which may form all or part of
the consideration paid or exchanged at any such closing or thereafter as part of
the transaction or a combination of both. If restricted common shares are
issued in lieu of cash then the Company shall cause said shares to be issued
quarterly to Commonwealth at a twenty-five (25%) discount to the closing bid
price. The closing bid price shall be calculated by taking the average of the
previous five (5) days closing bid prices of the of the common stock of the
Company prior to the first day of each month. Said fee shall be payable for the
financial advisory services to be provided by Commonwealth, as hereinafter set
forth, ("Financial Advisory Fee") is due and payable upon your acceptance of
this Engagement Letter. This fee is not contingent upon the consummation of any
acceptance of this Engagement Letter transaction.
3. Consulting Service
Commonwealth will, throughout the term of this engagement, in consideration
of the Consulting Fee set forth in Paragraph 2 above:
1. Commonwealth will introduce the Company to end user groups, joint venture
partners, strategic alliances, funding sources, retail and institutional
brokers, and other potential sources of business. Commonwealth during the term
hereof, shall provide Company with the benefit of its industry knowledge and
experience and it is understood and acknowledged by the Company that the value
of Commonwealth's services to be rendered hereunder is related to the quality
and not necessarily the quantity thereof.
2. Participate in strategic planning with management to analyze the
Company's capital funding requirements and proposed financing sources,
structures, mergers, acquisitions and consolidations or proposed transactions.
Commonwealth will also advise and assist the Company in negotiations with
potential capital sources, merger and/or acquisition candidates, and joint
venture partners. All decisions with respect to potential transactions,
however, will remain the sole responsibility and determination of the Company.
3. Commonwealth will, further, assist and advise the Company in the
Company's preparation of any letters of intent, agreements, documents or
materials that Commonwealth, in its sole discretion, deems appropriate to assess
and achieve the financing objectives of the Company ("Materials"). It is
understood that the Materials will be based upon assumptions and information
provided by the Company, that Commonwealth would not be required to make or be
responsible for any independent analysis or investigation of any information
provided by the Company, and that Commonwealth is entitled to rely thereon. It
is further agreed that Commonwealth assumes no responsibility or liability as to
the truth, accuracy or completeness of such information, which the Company
herewith warrants to Commonwealth, and that Commonwealth shall have the right to
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make appropriate disclaimers to any Materials with respect thereto. Although
Commonwealth may review and make suggestions regarding the Materials, the
contents, including, but not limited to, the completeness, truth and accuracy
thereof, are the sole responsibility of the Company and are not that of
Commonwealth.
4. Commonwealth will assist management of the Company in the preparation of
presentation materials for the purpose of pursuing financing, which may include
growth and acquisition financing.
5. Commonwealth will evaluate the Company's programs in the area of business
plans, corporate goals, financial structures and organization and merger and
acquisition plans that may include the creation of a global organization.
Commonwealth has available for use by the Company resources necessary to create
market and product exposure.
6. Commonwealth will act as non-exclusive financial advisor to the Company,
which may include evaluation of the capital structure of the Company for future
listing on the NASDAQ SC or NMS, Philadelphia and or London stock exchanges.
4. Appointment as Consultant and Finder for Capital Raising
The Company hereby further appoints and retains Commonwealth, on a "best
efforts" basis, as it's non-exclusive consultant and finder of debt and/or
equity capital sources and capital. The Company understands, however, that
Commonwealth itself shall not have any obligation hereunder as a result of such
appointment to purchase any securities of the Company or to provide financing of
any kind to the Company.
5. Non-circumvention
During the term of this Engagement Letter, the Company, its officer,
directors, employees, agents, affiliates and/or successors shall not directly or
indirectly (i) offer any of its securities (or any instrument similar to
securities) for sale or exchange to, or solicit any offer to purchase or
exchange any of its securities (or any instrument similar to a security) from,
or otherwise contact, approach or negotiate with respect thereto, any third
party, or (ii) authorize anyone other than Commonwealth to act on the Company's
behalf to place or exchange any of the Company's securities (or instruments
similar to securities) with any third party, without first notifying
Commonwealth.
The Company shall promptly refer to Commonwealth all offers, inquiries and
proposals relating to any placement or exchange of its securities made to the
Company, resulting from any referral or introduction made by Commonwealth, at
any time during the term of this Engagement Letter.
The Company hereby agrees that its officers, directors, employees, agents,
affiliates or successors, will not make any contact with, deal with or otherwise
be involved in any future transaction(s) with any banking or lending
institutions, trusts, corporations, companies or individuals, lenders or
borrowers, buyers or sellers, including those specified herein, which were
referred or introduced by Commonwealth to you, without the written consent of
Commonwealth. You further agree that no effort shall be made to circumvent the
terms of this Engagement Letter in an effort to amend or modify such terms,
including, without limitation, the fee structure set forth herein.
6. Compensation for Capital Raising Efforts
In addition to, but not in lieu of, any other compensation or other sums
payable to Commonwealth pursuant to this Engagement Letter, the Company agrees
to pay Commonwealth a "Success Fee" equal to a percentage, as described herein,
of the gross amount of any capital, or the value of any merger consideration,
whether debt or equity, raised by Commonwealth or its sources previously
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identified by Commonwealth for the Company; exclusive of the proposed financial
transaction currently in discussion for which Commonwealth will be compensated
as follows, five percent (4%) in cash and five percent (6%) in registered common
shares of the Company; (i) ten percent (10%) above $2,000,000.00, (ii) seven
percent (7%) above $2,000,000.00 above $5,000,000.00, (iii) five percent (5%)
above $5,000,000.00, plus for each $100,000.00 raised, 5000 restricted common
shares of the Company, or a new or successor entity or the surviving Company in
any merger or acquisition, to be issued by the Company upon exercise or
conversion of any security or other instrument issued by the Company in any
stage of financing, of which the Company may at its option pay up to sixty
percent (60%) of any such fee by means of registered common shares of the
Company, if such registered common shares are available. The Success Fee shall
be paid at the closing of any such transaction, in cash and securities, as
described above, of the Company, or the surviving Company in any merger, or such
other consideration which may form all or part of the consideration paid or
exchanged at any such closing. In the event funding is provided through the
introduction of Commonwealth and the funding source charges the Company fees,
then the "Success Fee" percentages for Commonwealth will be reduced to three
(3%) plus the difference between the above percentages and the fees paid to the
funding source, expressed as a percentage of the funding, additionally the total
"Success Fee" paid to Commonwealth's will be limited to the percentages
described above. In addition, if within thirty-six (36) months following
expiration or termination of this Engagement Letter, for any reason except the
gross and willful negligence or misconduct of Commonwealth, any transaction is
closed with any structure or capital source that was identified by Commonwealth
prior to such expiration or termination, the Success Fee shall be payable to
Commonwealth in accordance with this Paragraph 6.
7. Expenses and Break-Up Fee
You hereby authorize Commonwealth to incur, and will reimburse Commonwealth
by the end of the month for all approved expenses submitted within that month by
the fifteenth of said month, against written vouchers therefor, for all
reasonable and customary out-of-pocket expenses paid or incurred by us for goods
and services which are necessary or appropriate in order to fulfill our
obligations of this Engagement. The Company further agrees to pay Commonwealth,
as liquidated damages, a "break-up" fee of Two Hundred Thousand Dollar,
($200,000.00), if the Company for any reason determines not to proceed with any
financial transaction contemplated by this Engagement Letter after such
transaction has been accepted in writing by the Company. Until such acceptance
by the Company, the Company may, for any reason, refuse any transaction proposed
by Commonwealth. The Company shall pay such fee in lieu of any damages thereby
resulting to Commonwealth as a result of such withdrawal.
8. Term of Agreement and Termination
The term of this Agreement shall be twelve (12) months from the date first
above set forth, unless extended by mutual agreement of the parties or
previously terminated as hereinafter set forth.
This Engagement Letter may be terminated by either party at any time upon sixty
(60) days prior written notice, provided, however, that the provisions hereof
relating to confidentiality (Par.1), the payment of fees and expenses (Pars. 2,
6 and 7), the right of first refusal (Par. 9), indemnification (Par. 10) and
non-solicitation (Par. 5) will survive the expiration or earlier termination of
the term of this Engagement letter, unless terminated by reason of the gross and
willful negligence or misconduct of Commonwealth.
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9. Right of Participation
The Company hereby grants Commonwealth a continuing right of participation
to raise any capital or advise with respect to any merger or similar transaction
by the Company, and any subsidiary of the Company, including initial public
offerings, whether debt or equity, public or private (except commercial bank
lines of credit or short-term loans) for use in the normal course of the
Company's business, for a period of three (3) years, commencing with the date
first above set forth. The Company shall notify Commonwealth in writing of any
such proposed financing (including the material terms thereof) and Commonwealth
shall have five (5) days from receipt of such notice to provide such financing
on the same or substantially similar terms mutually acceptable to the parties.
10. Indemnification
If, in connection with any services which are the subject of our agreement,
we become involved in any capacity in any action or legal proceeding brought due
to any alleged acts or omissions by you, you agree to reimburse us for our
reasonable out-of-pocket expenses, including fees and disbursements of our
counsel. You also agree to indemnify and hold us harmless against any losses,
claims, damages or liabilities to which we may become subject in any action or
proceeding brought against us due to any acts or omissions by you in connection
with the services which are the subject of this Engagement Letter; provided,
however, that you shall not be liable with respect to any loss, claim, damage or
liability to the extent a court of competent jurisdiction shall have determined
to have resulted from our willful misfeasance or gross negligence.
11. Miscellaneous
A. Independent Contractor Status. It is understood and agreed that the
Company engages Commonwealth as an independent contractor, solely to provide the
services described herein. Nothing contained in this Engagement Letter nor the
performance of services contemplated hereby, or otherwise, shall create a
fiduciary duty on the part of Commonwealth to the Company, nor shall
Commonwealth have any duties, obligations or liability to the security holders
of the Company or any third party in connection with its engagement hereunder.
B. Commonwealth's Efforts. Commonwealth undertakes this engagement and will
work with you to achieve your desired objectives by using its best efforts,
judgment and skill. Commonwealth makes no representation or guarantee regarding
the outcome of our engagement. Commonwealth makes no representation or
warranties that any financing or structuring is or will be available nor that
any entity which desires or commits to provide financing or structuring would in
fact honor its commitments, Commonwealth will not be liable for the Company's
inability or failure to obtain financing or structuring through Commonwealth's
efforts.
C. Governing Law. This Engagement Letter shall be governed by and construed
in accordance with the internal laws of the State of New York, without any
references to it, conflicts of laws principles.
D. Entire Understanding. This Engagement Letter contains the entire
understandings between the Company and Commonwealth with reference to the
subject matter hereof and supersedes any prior understandings and agreements
related thereto, whether written or oral. This Engagement Letter may be
executed in one or more counterparts, which together shall constitute a binding
agreement. A signed facsimile will create and constitute an original, legally
binding agreement on the party sending the same.
E. Cost of Obtaining Benefits. The Company shall reimburse Commonwealth for
the full cost of any approved reasonable legal fees and expenses incurred by
Commonwealth in obtaining the benefits to which it is entitled under the terms
of this Engagement Letter.
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F. Currency. All fees, values, computations and the like herein are
expressed in U.S. Dollars.
G. Severability. If any provision of this Engagement Letter, or the
application of such provision to any person or circumstance, shall be held
invalid, the remainder of this Engagement Letter, or the application of such
provision to persons or circumstances other than those to which it is held
invalid, shall not be affected thereby.
H. Headings. The text in the headings of paragraphs and subparagraphs of
this Engagement Letter are for convenience of identification only and do not
constitute a part of any such paragraph and/or subparagraph.
If the foregoing constitutes the agreement and understanding of the
Company, please confirm this by signing and returning one copy of this
Engagement Letter to the undersigned, whereupon this agreement shall become
binding between you and Commonwealth as of the date first above written.
Very truly yours,
Commonwealth Partners NY, LLC
/s/ Xxxxx X. Xx Xxxxx
Managing Member
Accepted and agreed, /s/ Xxxxxxx X. Xxxxx
Managing Member
XxxxxxxxXxxxxx.xxx
/s/ Xxxxxx Xxxxxxx, President
Authorized Signature
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