EXHIBIT 4.2
May 8, 2002
Mr. X. Xxxx Xxxxx
President, CEO & Chairman of the Board
Tel-One, Inc.
0000 X. Xxxxxxxx Xx.
Xxxxx, XX 00000
Dear Xxxx:
On behalf of Pinnacle Capital Services, LLC (PCS"), I wish to thank
Tel-One, Inc. and its owners, shareholders and affiliates (collectively, the
"Company") for the opportunity to represent you as an advisor in connection with
the Company's growth efforts. The purpose of this letter (the "Agreement") is to
set forth the terms and conditions under which Xxxxxx X. Xxxxxxxxxx and
Xxxxxxxxxxx X. Xxxxxxx agree, as employees of PCS, to serve the Company as an
advisor.
1. SERVICES. PCS shall cause each of Xxxxxx X. Xxxxxxxxxx and Xxxxxxxxxxx X.
Xxxxxxx to use his best efforts to perform the following services in a
timely manner: (a) become familiar with the business and operations of the
Company and review and analyze the Company's formal and informal financial,
strategic, and business plans; (b) in conjunction with the Company, prepare
and update a formal business plan; (c) advise the Company in strategic
planning matters and assist in the implementation of short- and long-term
strategic planning to fully develop and enhance the Company's assets,
resources, products, and services; (d) assist in the development and
awareness of the Company's core business of telephony project management in
regional and national markets; (e) advise and attend technology trade shows
and events in an attempt to increase the awareness of Tele-Medicine and
other technologies of the Company's core business; (f) assist in furthering
the development of referral of multi-site clients for the Company's core
business; (g) advise the Company on regional and national trends in the
telecommunications industry; (h) advise the Company of relative merger and
acquisition candidates relating to the telecommunications industry and
present to the Company acquisition targets, business opportunities, joint
ventures, and other forms of revenue enhancements; (j) assist and advise
the Company regarding the recruitment of potential candidates for the
Company's Board of Directors and assist and advise the Company in its
recruitment efforts of key executive and managerial talent consistent with
the expansion of the operations of the Company; (k) provide advice to and
consult with the Company concerning management, marketing, strategic
planning, and corporate organization in connection with the Company's
business and expansion of services and review and advise the Company
regarding its overall progress, needs, and condition; and (l) perform other
services as may be reasonably requested by the Company that are within the
normal scope of operations of PCS.
2. TERM. The term of this Agreement shall commence upon the execution of this
Agreement by the Company and PCS (the "Effective Date") and end on the
first anniversary thereafter unless terminated earlier according to
paragraph 6.
3. CONSIDERATION. In consideration for the services to be provided by PCS, the
Company shall issue to Xxxxxxxxxxx X. Xxxxxxx and Xxxxxx X. Xxxxxxxxxx, as
the designated representatives of PCS, certificates representing 400,000
shares of the Company's common stock, $.001 par value, (the "Shares") in
the denominations and with the restrictions set forth on Schedule A.
4. DELIVERY OF CONSIDERATION. Upon the Effective Date, the Company shall
deliver (a) certificates representing 125,000 Shares (250,000 Shares in the
aggregate) without any restrictions (i.e., freely tradable) to each of
Messrs. Gilcher and Xxxxxxxxxx and (b) certificates representing the
balance of the Shares to Xxxxx & Xxxxxxx, as escrow agent (the "Escrow
Agent"), on the terms and conditions set forth in the escrow agreement
attached hereto as Exhibit A.
5. REPRESENTATIONS AND WARRANTIES. The Company represents and warrants to PCS
that the statements contained in this paragraph 5 are correct and complete
as of the Effective Date:
(a) The Company is a corporation duly organized, validly existing and
of active status under the laws of the State of Florida.
(b) The Company has full corporate power and authority to (i) conduct
its business as now conducted and as proposed to be conducted and to own,
use, license, and lease its assets and properties and (ii) enter into this
Agreement and to consummate the transactions contemplated herein
(including, without limitation, the issuance and registration of the
Shares). Neither the execution of this Agreement nor the consummation of
the transactions contemplated in this Agreement by the Company will
constitute or cause a breach or violation of any covenants or obligations
binding upon it or affecting any of its properties. No approval of or
filing with any federal, state, or local court, authority or administrative
agency is necessary to authorize the execution of this Agreement by the
Company or the consummation of the transactions contemplated in this
Agreement by the Company. There is no judgment, decree, injunction, rule,
or order of any court, governmental department, commission, agency,
instrumentality, or arbitrator outstanding against the Company that could
reasonably be expected to have a material adverse effect on the ability of
the Company to fulfill its obligations under this Agreement.
(c) The Shares to be issued pursuant to this Agreement will be duly
authorized, validly issued fully paid and nonassessable, and no stockholder
of the Company has preemptive rights with respect to the Shares. The Shares
will be delivered free and clear of all liens, encumbrances, and other
claims or restrictions, except as provided herein.
(d) Neither the Company nor any person acting on its behalf has taken
any action (including, without limitation, any offering of any securities
of the Company under circumstances that would require, under the Securities
Act of 1933, as amended (the "Act"), the integration of such offering with
the offering, issuance, and sale of the Shares) that might reasonably be
expected to subject the offering, issuance, or sale of the Shares to the
registration requirements of Section 5 of the Act.
(e) The Company meets the eligibility requirements under the Act for
the use of Form S-8 to register the Shares.
6. TERMINATION. This Agreement may be terminated at any time:
(a) by mutual written agreement of the parties;
(b) by the Company (i) upon a willful breach by PCS of any of
provisions of this Agreement if such breach results in material injury to
the Company or (ii) upon 30 days' prior written notice to PCS;
(c) by PCS (i) if any representation or warranty of the Company is
not true and correct in all material respects as of the Effective Date,
(ii) if the Company does not fully comply with any covenant or agreement in
this Agreement, (iii) upon a Change of Control (as defined below) in the
Company, or (iv) upon 30 days' prior written notice to the Company.
This Agreement shall not be terminated by either party for the reasons
set forth in 6(b)(i) or 6(c)(i)-(iii), without the terminating party (a)
giving notice to the other party setting forth in reasonable detail the
reasons for the terminating party's intention to terminate and (b)
providing an opportunity to cure, if capable of being cured, within 15 days
after the non-terminating party's receipt of such notice.
7. EFFECT OF TERMINATION. Without limiting any other remedies available to the
terminating party for any willful or intentional breach of this Agreement,
(a) if (i) the Company shall terminate this Agreement pursuant to paragraph
6(b)(i) or (ii) PCS shall terminate this Agreement pursuant to paragraph
6(c)(iv), then PCS shall return to the Company any Shares that are subject
to restriction as described on Schedule I on the date of such termination
and (b) if (i) the Company shall terminate this Agreement pursuant to
paragraph 6(b)(ii) or (ii) PCS shall terminate this Agreement pursuant to
paragraphs 6(c)(i), (ii), or (iii), then all restrictions on the Shares as
described on Schedule I shall terminate and the Shares shall be freely
tradable.
8. EXPENSES. In addition to the consideration set forth in paragraph 3, the
Company shall reimburse PCS and its affiliates, upon request, for all
reasonable out-of-pocket expenses incurred in connection with the
performance by PCS of its obligations under this Agreement. Out-of-pocket
expenses may include necessary out-of-town travel agreed to by the Company
(including meals and lodging), database services, courier charges, and fees
and expenses of third parties such as legal counsel, etc. The Company shall
approve such expenses in advance.
9. REGISTRATION. The Company shall prepare and file a registration statement
on Form S-8 on or before June 20, 2002, providing for the sale of all the
Shares by Messrs. Gilcher and Xxxxxxxxxx. The Company will pay all expenses
in connection with the registration of the Shares pursuant to this
paragraph 9, including, without limitation, all Securities and Exchange
Commission registration and filing fees, fees and expenses of compliance
with securities or blue sky laws, and fees and expenses of the Company's
counsel.
10. CHANGE OF CONTROL. In the event of a Change of Control, any restrictions on
the Shares shall terminate and they shall be freely tradable. "Change of
Control" means: (a) the adoption of a plan of reorganization, merger, share
exchange, or consolidation of the Company with one or more other
corporations or other entities as a result of which the holders of the
Company's common stock as a group would receive less than 50% of the voting
power of the capital stock or other interests of the surviving or resulting
corporation or entity (unless such plan is subsequently abandoned); (b) the
adoption by the Company's shareholders of a plan of liquidation or the
approval of the dissolution of the Company (unless such liquidation or
dissolution is subsequently abandoned); (c) the approval by the Company's
shareholders of an agreement providing for the sale of all or substantially
all the assets of the Company (unless such sale is subsequently abandoned);
(d) the acquisition of more than 30% of the outstanding shares by any
person within the meaning of Rule 13(d)(3) under the Act if such
acquisition is not preceded by a prior expression of approval by the Board;
or (e) one-third or more of the Company's Board of Directors are not
Continuing Directors. A "Continuing Director" means any member of the Board
of Directors who was a member on the Effective Date and any director who
was recommended for election or is elected to fill a vacancy as a director
by a majority of the Continuing Directors then on such Board.
11. INDEMNITY. The Company agrees to indemnify, defend, and hold harmless PCS
and its affiliates, directors, officers, employees, agents, members,
managers successors, assigns, and controlling persons (as defined in the
Act) (each, an "Indemnified Party") from and against any and all losses,
claims, damages, costs, expenses, and liabilities (including any
investigatory, legal, and other expenses incurred as they are incurred by
an Indemnified Party in connection with preparing for or defending any
action, claim, or proceeding, whether or not resulting in any liability)
(collectively, "Indemnifiable Losses") to which any Indemnified Party may
become subject or liable relating to or arising out of (a) the Agreement or
the services to be performed under the Agreement or any agreement between
the parties to this Agreement, (b) any transactions referred to in the
Agreement or any transactions arising out of the transactions contemplated
by the Agreement, (c) any inaccuracy in or breach in the representations
and warranties of the Company contained in this Agreement, and (d) any
failure of the Company to perform its obligations under this Agreement,
provided that the Company shall not be liable to an Indemnified Party in
any such case to the extent that any such Indemnifiable Loss is found in a
final, nonappealable judgment by a court of competent jurisdiction to have
resulted as a direct and proximate cause from the willful misconduct or
gross negligence of an Indemnified Party. No Indemnified Party shall be
liable, responsible, or accountable in damages and costs and expenses
(including attorneys' fees) under this Agreement except for any liability
for losses, claims, damages, or liabilities finally judicially determined
to have resulted solely and exclusively from actions taken or omitted to be
taken as a direct result of such Indemnified Party's gross negligence or
willful misconduct. If for any reason, except as specifically provided
herein, the foregoing indemnity for Indemnifiable Losses is unavailable to
an Indemnified Party or insufficient to fully hold any Indemnified Party
harmless, then the Company agrees to contribute to the amount paid or
payable by such Indemnified Party as a result of such Indemnifiable Losses
in such proportion as is appropriate to reflect the relative benefits
received by and fault of the Company, on the one hand, and the relative
benefits received by and fault of PCS, on the other hand. The Company
agrees that it will not settle, compromise, or consent to the entry of any
judgment in any pending or threatened claim, action, or proceeding in
respect of which indemnification could be sought under the indemnification
provision of this Agreement (whether or not PCS or any other Indemnified
Party is an actual or potential party to such claim, action, or
proceeding), unless such settlement, compromise, or consent includes an
unconditional release of each Indemnified Party from all liability arising
out of such claim, action, or proceeding.
12. NON-CIRCUMVENT AGREEMENT. The Company agrees that all third parties
introduced to it by PCS represent significant efforts and working
relationships that are unique to, and part of, the work product of PCS.
Therefore, without the prior specific written consent of PCS, the Company
agrees to refrain from conducting direct or indirect business dealings of
any kind, with any third party so introduced by PCS, with the exception of
third parties with which the Company has previously had a formal business
relationship, for a period of three years from the initial introduction
made during the course of this Agreement. In the event of a violation of
this provision, PCS shall be entitled to obtain, on an ex parte
application, appropriate injunctive relief from any court of competent
jurisdiction, together with and including all remedies available at law.
This provision shall survive the remaining obligations and performance due
hereunder.
13. LEGAL MATTERS. This Agreement shall be interpreted under and governed by
the laws of the State of Florida. Except as set forth in paragraph 12, any
controversy, dispute, or claim between the parties relating to this
Agreement shall be resolved by binding arbitration in Hillsborough County,
Florida, in accordance with the rules of the American Arbitration
Association. The parties agree that in the event that any controversy,
dispute, or claim between the parties relating to this Agreement, is
resolved by binding arbitration, the prevailing party, as determined by the
arbitrator's award, shall be entitled to reimbursement of all expenses
including reasonable attorney's fees; provided that in no event shall the
arbitrator have the authority to award punitive damages.
14. REPRESENTATION. The parties agree and acknowledge that the services to be
provided by PCS under this Agreement are not in connection with the offer
or sale of securities of the Company in a capital raising transaction and
do not include, directly or indirectly, the promotion or maintenance of a
market for the Company's securities. The parties specifically acknowledge
that PCS has advised the Company that it is not a duly licensed securities
broker /dealer or member investment banking firm and, PCS is not required
under this Agreement to sell any securities or provide any services that
are exclusive to licensed securities broker/dealers or member investment
banking firms. The duties of PCS shall not include legal, accounting, or
appraisal services, which shall be procured by the Company at its own
expense. The Company shall fully cooperate with any company affiliated with
PCS and shall furnish to PCS and such affiliated company complete and
accurate current and historical business information. The Company
represents and warrants to PCS that all information to be provided to PCS
will not contain any untrue statements of a material fact or omit to state
a material fact necessary to make the statements therein not misleading.
The Company shall promptly inform PCS of any changes or events that may
materially affect the Company's business.
15. INDEPENDENT CONTRACTOR. PCS is an independent contractor and may engage in
other business activities. Since PCS is an independent contractor, nothing
in this Agreement shall be interpreted to constitute that PCS is an agent
of, employee of, or partner of the Company, nor shall either party have any
authority to bind the other. In its capacity as an independent contractor,
PCS agrees, and the Company agrees, that PCS has the sole right to control
and direct the means, manner, and method by which the services required by
this Agreement will be performed and the Company shall not withhold from
PCS's compensation any amount that would normally be withheld from an
employee's pay.
16. ENTIRE AGREEMENT. This Agreement and the schedules and exhibits to this
Agreement constitute the entire agreement between the parties pertaining to
the subject matter hereof and supersedes and cancels any prior
communications, representations, understandings, and agreements between the
parties. No modifications of or changes to this Agreement shall be binding,
nor can any of its provisions be waived, unless agreed to in writing by the
parties.
17. COUNTERPARTS. This Agreement may be executed in one or more counterparts,
each of which shall be an original but all of which together shall
constitute one instrument.
18. CONFIDENTIALITY. The parties agree that the terms and all of the
encompassing components of this Agreement shall be kept confidential,
unless this information is required to be disclosed pursuant to any
inquiries by federal, state, or local law enforcement or pursuant to
paragraph 9.
If the foregoing is acceptable to you, please execute this Agreement in the
place provided below and return a copy to me at the following address: 0000
Xxxxxxxxx Xxxx., Xxxxx 000, Xxxxx, XX 00000.
Very Truly Yours,
Pinnacle Capital Services, LLC
By: /S/ XXXXXXXXXXX XXXXXXX
------------------------
Xxxxxxxxxxx X. Xxxxxxx
Managing Partner
ACCEPTED AND AGREED TO THIS 8th DAY OF May, 2002.
Tel-One, Inc.
By: /S/ XXXX XXXXX
---------------
X. Xxxx Xxxxx, President, CEO & Chairman of the Board
JOINDER
-------
The undersigned hereby join in this Agreement and consent to its terms
insofar as this Agreement relates to the delivery of common stock of the Company
to the undersigned.
/S/ XXXXXXXXXXX XXXXXXX
-----------------------
XXXXXXXXXXX X. XXXXXXX
Date: May 8, 2002
/S/ XXXXXX X. XXXXXXXXX
-----------------------
XXXXXX X. XXXXXXXXXX
Date: May 8, 2002
SCHEDULE A
Certificates representing 400,000 shares in the aggregate shall be issued to
each of Xxxxxxxxxxx X. Xxxxxxx and Xxxxxx X. Xxxxxxxxxx equally in the
denominations and with only the restrictions set forth below. All Lock-Up
periods shall commence on the Effective Date of the Agreement.
(a) 250,000 shares with no restrictions (i.e. freely tradable);
(b) 37,500 shares with a 90-day Lock-Up period;
(c) 37,500 shares with a 180-day Lock-Up period;
(d) 37,500 shares with a 270-day Lock-Up period; and
(e) 37,500 shares with a 365-day Lock-Up period.
Xxxxxxxxxxx X. Xxxxxxx and Xxxxxx X. Xxxxxxxxxx agree that for the periods
specified above which shall commence on the Effective Date (the "Lock-up
Period") they will not, during the applicable Lock-Up period, without the prior
written consent of Tel-One, Inc., sell any of the shares in the public markets
which are held in escrow pursuant to the Escrow Agreement attached hereto as
Exhibit "A" and which are described in paragraphs (b), (c) , (d), and (e) above.
At the end of each such Lock-up Period, Messrs. Gilcher and Xxxxxxxxxx shall
have the right to receive the shares held in escrow for which the Lock-up Period
has expired, and such shares shall have no further restrictions (i.e., such
shares shall be freely tradable).
