FINANCIAL COMMUNICATIONS AND STRATEGIC CONSULTING AGREEMENT FOR MORLEX, INC.
FINANCIAL
COMMUNICATIONS AND STRATEGIC
CONSULTING
AGREEMENT FOR
MORLEX,
INC.
April
11,
2008
Xx.
Xxxxx
X. Xxxxx
0000
Xxx
Xxxxxx Xxx
Xxxxx
000
Xxx
Xxxxx, XX 00000
| I. |
CONTEXT
AND SCOPE OF PROPOSAL
|
After
reviewing information on the company, and meeting with the company’s management
team to gain a more thorough understanding of the company and its business,
Hayden Communications is pleased to submit the following proposal.
Based
on
our preliminary observations and due diligence, there are a number of key points
that we believe should be incorporated into the corporate communications and
outreach strategy to help facilitate the Company’s ability to building an
informed audience of both professional and high net worth investors, which
will
help improve liquidity and further diversify the shareholder base prior to
and
post the merger transaction of Ad Authority Group, Inc. into Morlex, Inc, the
public company. These include:
*
Packaging the story to provide comprehensive information on the Company’s unique
position in the online advertising business, including the 1) strength of its
lead generation model and opportunity to leverage Superfly’s technology and
opportunity to drive content sites including Rightside, 2) experience of its
management team, 3) its competitive advantages including a lower cost per lead
generated, 4) extensive base of domains and 5) new product development
capabilities, 6) growth in the overall domestic market for online advertising
and lead spend, 7) International growth opportunities, and 8) the fragmented
market which is creating future acquisition opportunities.
1
*
Targeting institutional investors who focus on the media and online advertising
market segments.
*
Expand
the investor audience through introductions, road shows, conference calls and
regular follow-ups to key institutions, brokers and analysts who have an
interest and purchase micro/small-cap stocks.
With
12
years of operating experience as a full service Investor Relations firm, Hayden
Communications, Inc. has developed a thorough understanding of the public
micro-cap marketplace, and how to articulate a client’s core competencies and
growth objectives in a clear, concise and consistent manner. We are very pleased
to have this opportunity to present this proposal which we feel best suits
the
Company at this particular time.
Objective:
To
provide the ongoing market visibility and corporate positioning necessary to
create a well educated and informed audience about Morlex’s business. The
rewards of achieving this goal are 1) improved corporate visibility through
investment research and sponsorship and business media coverage, 2) increased
interest which leads to liquidity and diversification of the shareholder base,
and 3) and a market capitalization, which is consistent with comparable public
companies operating in the online media and advertising sector, 4) the ability
to achieve a listing on a major stock exchange and 5) the ability to raise
capital or utilize its currency (stock) in the future under the most favorable
terms for acquisitions or for working capital. Our efforts, in combination
with
the Company’s growth rate, ROI, profit margins, and management’s ability to
execute on a go forward basis should lead to a market multiple consistent with
the Company’s financial progress and sector status.
| II. |
SCOPE
OF
SERVICES/PROGRAMS/ACTIVITIES
|
Hayden
Communications, Inc. (HC) will develop, implement, and maintain an ongoing
stock
market support system for “Morlex” with the general objective of expanding
awareness in “Morlex” among stockbrokers, analysts, micro-cap portfolio/fund
managers, market makers, and the appropriate financial & trade publications.
| 1. |
PROFESSIONAL
INVESTMENT COMMUNITY
AWARENESS
|
|
A.
|
Introductions
to professionals at select firms, with a focus on members of the
Financial
Community in various geographic regions in the United State. The
targeted
group of professionals, which would be drawn from our proprietary
database
of contacts will be a subset
of
the following:
|
|
1.
|
Over
15,000 Equity Brokers
|
|
2.
|
Over
750 Analysts (700 Buy-Side and 50 Sell Side), both generalists and
industry specialists.
|
|
3.
|
Over
3,000 Micro-Cap Portfolio/Hedge Fund
Managers
|
|
4.
|
Over
100 Market Makers (both retail and
wholesale)
|
|
5.
|
Financial,
Trade and Industry Publications
|
|
B.
|
Introductions
to an expanded group of fund managers and analysts (buy and sell
side)
beyond our current database through the utilization of both Big Dough
subscription service and other on-line tools such as StreetWise,
etc.
|
2
|
C.
|
Introductions
to High Net-Worth accredited investors who build positions in micro-cap
companies and are familiar with other quality companies, which HC
currently and previously
represented.
|
|
D.
|
Broker
conference calls/meetings arranged by HC in select cities (and at
compatible times) with top management at “Morlex” on a Quarterly basis.
The following cities encompass locations we typically travel to for
Road
Shows - New York, Boston, Dallas, Houston, Denver, Atlanta,
Phoenix/Scottsdale, Milwaukee, Cleveland, Chicago, Minneapolis, Southern
Florida, Southern California, and San Francisco. HC will seed markets
prior to effectuating road shows and will only incorporate areas
of
significant interest. Other interested parties can be introduced
via
conference calls.
|
|
E.
|
Road
Show assistance.
|
|
F.
|
All
interested parties will be continually updated of Client’s progress via
phone conversations and through our fax/e-mail list for news releases.
|
|
G.
|
Featuring
“Morlex” in future editions of the HC Newsletter which is distributed to
over 7,500 professional and high-net worth investors on a quarterly
basis.
Each feature includes a summary of each respective client’s operating
activities along with insightful industry commentary to help investors
embrace the investment opportunity and thesis. HC does not provide
specific investment recommendations or advice but rather the facts
by
utilizing public information for its publication.
|
|
H.
|
HC
will screen all investment firms for upcoming financial conferences,
which
would be appropriate for “Morlex”. HC will work through the proper
channels with the goal of receiving invitations for management to
present
at those relevant conferences.
|
| 2. |
SHAREHOLDER
COMMUNICATIONS
|
|
A.
|
Understand
the financials and all operating metrics of the company in detail,
facilitating interactions with new and current investors and articulating
the necessary information to assist professionals in completing their
due
diligence. This activity enables management to focus on executing
its
business plan.
|
|
B.
|
Handle
investor requests for timely information via the telephone and e-mail.
HC
will have a knowledgeable associate available during market hours
to field
and respond to all investor inquiries and update the shareholder
database
accordingly. This helps shareholder retention by showing that the
Company
is shareholder friendly and proactive in its communication
efforts.
|
|
C.
|
Contact
shareholders on a quarterly basis and gather perception feedback
on their
views of how the business is evolving and management’s execution relative
to expectations. Open dialogue, expand and update database and keep
key
investors informed once material developments are
reported
|
|
D.
|
Host
Quarterly Conference Calls to accompany the earnings release. HC
will
assist with scripting these calls and monitoring the continuity to
ensure
a smooth roll-out for investors. These will be especially important
as
these will represent some of the first interactions between the Company
and a broader investor audience.
|
|
3.
|
MEDIA
RELATIONS
|
Financial
Newsletter and Business Publication campaign. HC will work through our media
contacts, which include financial newsletters to solicit “Buy Recommendations”
for “Morlex”. These publications maintain a paid subscription base of investors
focused mainly on micro cap stocks and do not solicit compensation for coverage.
A “Buy Recommendation” can produce a great deal of new investor interest and
lends third party support and opinion. Additionally, we will make introductions
to appropriate editors at business publications where we have relationships
including Business Week, Fortune, Investors Business Daily, Wall Street Journal,
among others.
3
|
4.
|
THE
FINANCIAL PRESS
|
|
A.
|
HC
will assist senior management to draft and complete press releases
on all
material events as deemed by the Company. Management and corporate
counsel
will approve all releases before they are sent to the
wire.
|
|
B.
|
HC
will disseminate news releases electronically to our established
database
of financial professionals including: special situation analysts,
brokers,
fund managers, individual investors, money managers, and current
or
prospective individual shareholders who are already invested or have
expressed an interest in “Morlex”.
|
|
4.
|
PUBLIC
MARKET INSIGHT is
utilized to assist senior management in understanding the dynamics
and
life cycle of the financial markets and most importantly how “Morlex” is
impacted directly and indirectly by different variables, including
both
macro and micro-economic events. The Team at HC leverages its collective
expertise gained through representing over 200 public companies,
in
addition to industry experience gained through working on the “buy” and
“sell-side” to help our clients understand expectations, valuations,
perceptions, and investment methodologies utilized by investment
professionals. This consulting aspect is extremely valuable for management
to optimize key opportunities and to avoid pitfalls, which can carry
long
term significant implications while providing crisis management.
We will
also take a key role in introducing and interviewing, if applicable,
board
members, consultants and other market professionals which will
collectively help the company execute its growth plan.
|
| A. |
Major
Exchange Listing – Assist
Company with meeting the necessary requirements to achieve
a listing on a major exchange, either AMEX or Nasdaq.
|
| III. |
AGENDA
|
Paramount
to our collective efforts, HC will educate senior management on the importance
of establishing conservative expectations and how various corporate actions
may
be perceived and impact the public market. HC has the capability to help assess
acquisition candidates, discuss the financial impacts, in addition to the longer
term implications.
TIMELINE
FIRST
30 DAYS
| A |
Spend
significant time with management to understand the Company’s business
plan, financial forecasts, capital expenditure needs and cash flow
projections, in addition to acquisition and expansion plans. Visit
and
tour company facilities during next 2 months.
|
| C. |
Create
a two-page Corporate
Profile, which
clearly articulates “Morlex” current business and financial position, as
well as its strategy for future growth. This is an important marketing
piece for investors to quickly learn about the company.
|
4
| D. |
Create
and/or Update Investor PowerPoint presentation utilizing our preferred
format. HC will utilize proprietary research, feedback from conversations
and meetings to incorporate and improve the Investor PowerPoint and
message delivery. PRESENTATION UPDATED AT LEAST 1X PER
QUARTERLY
|
| E. |
Assist
and provide input for all corporate press releases including both
creation
and ongoing revisions. We will assist by providing additional fact
finding
and other market research which will help the context and delivery
of the
message. THIS
WILL BE AN ONGOING INITIATIVE AND
OBJECTIVE
|
| F. |
Create
a formal investor package and update accordingly to augment electronic
investor kits typically distributed. HC will mail these directly
upon
investor request. Generally this will include two page corporate
profile,
PowerPoint and recent quarterly/annual and press releases.
|
| G. |
Present
“Morlex” as a new client feature while including in future editions of the
HC Client Newsletter. Include on xxx.xxxxxxxx.xxx
website.
|
.
MONTH
2
| A. |
Provide
suggestions for the corporate website, including IR Section – assist with
layout in concert with web designer.
|
| B. |
Formalize
Press Release calendar for coming 3 months. Create, edit and release
accordingly.
|
| C. |
Discuss
goals for obtaining any additional independent board members (if
necessary) while being attentive to what qualities the optimal candidate
would posses.
|
| D. |
Begin
making introductions to investment professionals while seeding and
confirming meetings for Road Shows. Practice and refine presentation
with
management team.
|
| E. |
Target
brokers, micro-cap fund managers, Buy and Sell Side Analysts, and
very
high net worth investors which follow companies with a similar profile
to
“Morlex”.
|
| F. |
Initiate
formal Road Show during months 2-3. A detailed description of each
contact
will be provided prior to the meeting. During the meetings and/or
conference calls a member of HC will be available to facilitate the
correspondence and assist with due diligence. Management will be
provided
with a summary of feedback including HC’s suggestions for improvements on
both the context and delivery of the company’s
story.
|
MONTH
3
|
A.
|
Make
additional introductions for investment professionals on behalf of
the
Company. Follow-up and spend time to assist with due diligence efforts
and
convert introductions to potential new shareholders. Schedule conference
calls if necessary and establish a que’ for next road
show.
|
| B. |
Formalize
and continually update the database to ensure that all press releases
are
faxed and/or e-mailed to all interested professionals. This includes
the
input of notes to keep track of all investor correspondence and reminder
calls to all investor prior to earnings conference calls.
(ongoing).
|
| C. |
Update
and conduct perception study with current and future shareholders
to
better understand current and future expectations. This information
will
be utilized in upcoming conference calls to ensure the company is
proactive and prudent in setting the correct bar for investors to
measure
performance.
|
5
MONTH
4
|
A.
|
Target
brokerage firms who hold conferences which would be applicable for
“Morlex”. Establish a goal of having management present in at least 2-3
conferences during the twelve month period. These would be non-paid
for
and have high institutional attendance. We will also seek to have
the
Company be included in “sell-side” sponsored investor tours in the
U.S.
|
|
B.
|
Target
newsletter editors and publishers for a “Buy Recommendation”. Focus on
Business Publications for appropriate stories on “Morlex” products,
competitive advantage and value proposition to investors.
|
MONTH
5
|
A.
|
Begin
to Plan out and book next Road Show Agenda targeting different cities
than
previously visited.
|
MONTHS
6 - 12
|
A.
|
Continue
with agenda based items to ensure continuity of Investor Relations
Plan.
|
|
B.
|
Book
formal Road Shows each quarter, preferably just after earnings are
released and try to tie these with participation in conferences.
|
|
C.
|
Support
the company as it goes through the formal Nasdaq/AMEX review process.
|
Provide
progress reports to senior management when appropriate. Evaluate achievements
after the first 180 days and make changes where necessary. Many of the above
items will occur simultaneously but certain items will have chronological
priority over others. As “Morlex” grows, we will recommend changes to the Agenda
that compliment this growth. As the company continues to execute its strategic
plan by winning new customers and expanding its base of business we will target
an expanded universe of institutional investors. At each stage of growth, the
appropriate approach to the market will be incorporated into the agenda for
optimal results.
Assuming
that management’s efforts are leading ultimately to success and greater
profitability, the end results of this financial communication and awareness
campaign should be:
| * |
An
increase in the number of financial professionals (including brokers,
institutions and analysts) and individual
investors well educated and knowledgeable about “Morlex”: including senior
management, the
company’s products, as well as the current financial condition and growth
opportunities.
|
| * |
An
increase in the number of articles printed in both trade and financial
publications.
|
| * |
An
increase in the liquidity of the common
stock.
|
| * |
An
increase in “Morlex” market capitalization coupled with a broader, more
diverse shareholder base.
|
| * |
Suitable
and better access to the capital markets, which will facilitate future
acquisitions and working capital needs.
|
| IV. |
CONTRACTUAL
RELATIONSHIP
|
In
performing services under this proposal, HC shall operate as, and have the
status of, an independent contractor. HC agrees that all information disclosed
to it about the Client’s products, processes and services are the sole property
of the Client and it will not assert any rights of any confidential or
proprietary information or material, nor will it directly or indirectly, except
as required in the conduct of its duties.
6
| V. |
TERM
|
This
agreement shall remain in effect for a period commencing on the signature date
and expires twelve months (365 days) from signing date. In the event that HC
commits any material breach or violation of the provisions of this Agreement,
then, the Client has the right to terminate this agreement any time during
the
contractual period and/or any extension periods after the initial contractual
period. In addition, the Client has the right to terminate after the initial
six
month period if HC is unable to fulfill its obligations detailed in the formal
agreement.
| VI. |
COMPENSATION
|
Regarding
compensation, it is our intention to propose parameters that are mutually
acceptable to both parties in order to accomplish our collective mission. Based
on a commitment of resources necessary to perform successfully on behalf of
“Morlex” for a period of 12 months, Hayden Communications, Inc. proposes the
following compensation terms:
Cash
and Equity
|
A.
|
$11,000
per month for the contractual period.
|
|
B.
|
Equity:
150,000 shares of restricted 144 common stock. The certificate is
to be
sent to Hayden Communications, Inc. (HC) within 30 days of the formal
contract signing.
|
Expenses:
Only
expenses that would ordinarily be incurred by the Client will be billed back
on
a monthly basis. Applicable reimbursements would include: creation, printing
and
postage for investor packages, fees for news wire services, and fees for
fax-broadcasting news releases. Any packages requiring additional
photocopying/printing will be billed back to the Client at cost (with no
xxxx-up). Any extraordinary items, such as broker lunch presentations, air
travel, hotel, ground transportation or media campaigns, etc. shall be paid
by
the Client, only with Client authorization prior to incurring any expenses.
Assuming
HC schedules at least four organized, formal Road Shows during 2008, creates
and
print out formal investor packages, participate in at least 2 financial
conference and the Company issues at least 12 press releases to the wire, we
would suggest budgeting a total of approximately $35,000-45,000 in hard costs
for Investor Relations during the next twelve months. Actual costs could be
less
but we want to create a reasonable expectation for budgeting purposes.
| VII. |
PRIOR
RESTRICTION
|
HC
represents to the Company that it is not subject to, or bound by, any agreement
which sets forth or contains any
provision,
the
existence or enforcement of which would in any way restrict or hinder HC from
performing the services on behalf of the Company that HC is herein agreeing
to
perform.
| VIII. |
ASSIGNMENT
|
This
Agreement is personal to HC and may not be assigned in any way by HC without
the
prior written consent of the Company. Subject to the foregoing, the rights
and
obligations under this Agreement shall inure to the benefit of, and shall be
binding upon, the heirs, legatees, successors and permitted assigns of HC,
and
upon the successors and assigns of the Company.
7
| IX. |
CONFIDENTIALITY
|
Except
as
required by law or court order, HC will keep confidential any trade secrets
or
confidential or proprietary information of the Company which are now known
to HC
or which hereinafter may become known to HC and HC shall not at any time
directly or indirectly disclose or permit to be disclosed any such information
to any person, firm, or corporation or other entity, or use the same in any
way
other than in connection with the business of the Company and in any case only
with prior written permission of BluePhoenix. For purposes of this Agreement,
“trade secrets or confidential or proprietary information” includes information
unique to or about the Company including but not limited to its business and
is
not known or generally available to the public.
| X. |
DEFAULT
|
10.1 Except
for a claim or controversy arising under Section 6 of this Agreement, any claim
or controversy
arising under any of the provisions of this Agreement shall, at the election
of
either party hereto, be determined by arbitration in New
York
City in accordance with the rules of the American Arbitration Association.
The
decision of the Arbitrator shall be binding and conclusive upon the parties.
Each party shall pay its own costs and expenses in any such
arbitration.
The
parties
shall share the costs of filing fee for the arbitration and the fees of the
arbitrators equally.
10.2 In
the
event that HC commits any material breach
of
any provision
of this
Agreement, as determined by the Company in good faith, the Company may, by
injunctive action, compel HC to comply with, or restrain HC from violating,
such
provision, and, in addition, and not in the alternative, the Company shall
be
entitled to declare HC in default hereunder and to terminate this Agreement
and
any further payments hereunder.
10.3 Since
HC
must at all times rely upon the accuracy and completeness of information
supplied to it by the Company’s officers, directors, agents, and employees, the
Company agrees to indemnify, hold harmless, and defend HC, its officers, agents,
and employees at the Company’s expense, against
any
proceeding or suit which may arise out of and/or be
due
to
any material
misrepresentation
in such information
supplied
by the Company to HC (or any material omission by the Company that caused such
supplied information to be materially misleading).
| XI. |
SEVERABILITY
AND REFORMATION
|
If
any
provision of this Agreement is held to be illegal, invalid, or unenforceable
under present or future law, such provision shall be fully severable, and this
Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provision were never a part hereof, and the remaining provisions
shall remain in full force and shall not be affected by the illegal, invalid,
or
unenforceable provision, or by its severance; but in any such event this
Agreement shall be construed to give effect to the severed provision to the
extent legally permissible.
8
| XII. |
NOTICES
|
Any
notices required by this Agreement shall (i) be made in writing and
delivered to the party to whom it is addressed by
hand
delivery, by certified mail, return receipt requested, with adequate postage
prepaid, or by courier
delivery service (including major overnight delivery companies such as Federal
Express and Airborne), (ii) be deemed given when received,
and
(iii) in the case of the Company, be mailed to its principal office in
California at 0000 Xxx Xxxxxx Xxx, Xxxxx 000, Xxx Xxxxx XX 00000 and in the
case
of HC, be mailed to Hayden Communications, Inc., Xxx X. Xxxxxxxxx, Xxxxx 000,
XX
00000.
| XIII. |
MISCELLANEOUS
|
13.1
This
Agreement may not be amended, except by a written instrument signed and
delivered by each of the parties hereto.
13.2
This
Agreement constitutes the entire understanding between the parties hereto with
respect to the subject matter hereof, and all other agreements relating to
the
subject matter hereof are hereby superseded.
13.3
This
Agreement shall be governed by, and construed in accordance with, the laws
of
the State of New
York.
In
Witness Whereof, the parties have executed this Consulting Agreement as of
the
day and year first above written.
AGREED:
|
Morlex,
Inc.
|
||||
|
/s/
Xxxxx Xxxx
|
By:
|
/s/
Xxxxx X. Xxxxx
|
||
|
Xxxxx
Xxxx, Partner
|
Xxxxx
Xxxxx, CEO
|
|||
9
