ENGAGEMENT AGREEMENT
LMKI Communications and Xxxxxxx Xxxxxxx
This Agreement is made on the 30th day of June 1999 between Xxxxxxx Xxxxxxx,
an NASD broker/ dealer with its headquarters at 0000 Xxxxxxxxx Xxxxx, Xxxxx
0000, Xxxxxx, XX 00000 (hereinafter referred to as "Xxxxxxx" or "Agent") and
LMCI Communications, 0000 X. Xxxxx, Xxxxx 000, XX 00000 and/or any of its
affiliates or commonly controlled entities (hereinafter referred to as
"LMCI").
In consideration of the mutual covenants and obligations and upon the term
and conditions, all as set forth below, the parties agree as follows:
1. Engagement of Xxxxxxx
LMCI hereby irrevocably engages Xxxxxxx as its exclusive
Placement Agent. Xxxxxxx will introduce LMCI to potential financing sources
on a best efforts basis for the placement of debt and/or equity financing
(the "Financing"). For the purposes of this Agreement, a strategic
investment or acquisition of a non-controlling or a controlling interest in
the Company shall also constitute a Financing, as defined herein. Xxxxxxx
does not guarantee a successful conclusion to the negotiations with any
financing source, and if after 120 days either party is dissatisfied with the
performance of the other for any reason, either party without cause may
terminate this Agreement.
2. Terms Acceptable to Buyer
LMCI will have the right to accept or reject any Financing
presented to it by a financing source introduced by Xxxxxxx. The terms of
any Financing shall be as negotiated solely between LMCI and the financing
source.
3. Xxxxxxx'x Fees
LMCI hereby agrees to pay fees in such amount and upon such terms
and conditions as follows:
(a) Engagement/Retainer Fees. Xxxxxxx will charge a monthly
retainer fee of $5,000 for its efforts on behalf of LMCI. This retainer will
be paid in advance at the first of each month.
(b) Xxxxxxx shall be entitled to a Success Fee upon the Closing
(as hereinafter defined) of a Financing with a financing source introduced,
either directly or indirectly, by Xxxxxxx. Said Success Fee shall be payable
to Xxxxxxx upon the occurrence of any of the following: (i) Xxxxxxx, during
the term hereof, identifies or introduces a prospective financing source and
LMCI obtains Financing from this source (ii) LMCI, within 24 months after
the term of this Agreement, obtains capital from a Financing source who has
negotiated with LMCI during the term of this Agreement or whose identity was
disclosed by Xxxxxxx during the term of this Agreement.
(c) Computation of Xxxxxxx'x Success Fee. Upon the happening of
any occurrence
described in subparagraphs 3 (b) (i) or 3 (b) (ii) above, Xxxxxxx shall be
paid a success fee based on the following formula:
Eight percent (8.0%) of the financing obtained for LMCI in the form of equity
or unsecured debt. The fee will be three percent (3.0%) for secured debt and
one percent (1.0%) for any short term financing. For purposes of the
foregoing, the Financing shall be the maximum (or gross) amount, which the
financing source commits to make available to LMCI, and is accepted by LMCI.
Additionally, Xxxxxxx will also be granted warrants equal to eight percent
(8.0%) of the equity purchased or granted to the Financing Source except in
the event the Financing Source acquires 100% of the Company's shares. For
example; if the Financing Source purchases 30% of the equity of LMCI, Xxxxxxx
will be granted 2.4% of the outstanding equity of LMCI. The Warrants will be
as follows:
Number of Shares: Equal to 8.0 % of the Financing raised
Exercise Price: Same as offered to Financing Source
Exercise Period: Five (5) years from the date of the Closing
Restrictions: None, other than State & Federal Securities Laws
Anti- Dilution: Standard for Financing Warrants
Registration Rights: Standard or otherwise as reasonably mutually agreed
upon
Co-Sale: Standard or otherwise as reasonably mutually agreed upon
Registration Rights, co-sale and similar provisions shall be conformed to any
such provisions given to the Financing Source.
Xxxxxxx'x Success Fee is to be paid in full in certified funds concurrently
at Closing. For purposes of the above, "Closing" shall mean the first time at
which any part of the Financing is either funded or available for funding by
the Financing Source to LMCI. In addition, in the event of a sale of all or
part of the capital stock or business, Xxxxxxx shall be paid on the total
consideration paid to LMCI. Consideration hereby being defined as the
purchase price including any monies paid to LMCI or its shareholders
resulting form the sale, including shares of the acquiring company (to be
valued at the average 10 day price prior to closing), Consulting Agreements,
Covenants Not to Compete Payments, and any Seller's liabilities assumed or
paid for by the Buyer. LMCI hereby irrevocably authorizes and instructs the
Financing Source to pay directly to Xxxxxxx the cash sums provided for in
item C in section 3 above.
4. Xxxxxxx'x Expense Reimbursement
(a) Xxxxxxx shall be paid expenses as incurred and billed monthly.
(b) LMCI shall reimburse Xxxxxxx for its expenses relating to the publishing
of any Tombstone or announcement of financing as published in the Orange
County and Orange County Business Journals. Said announcement of financing
shall comply with all required regulatory provisions concerning advertising,
and, shall be limited to $3,000.
(c) Xxxxxxx shall be reimbursed for any extraordinary expenses, such as
travel over 100 miles as incurred.
5. Miscellaneous Provisions
(a) LMCI shall indemnify and hold harmless Xxxxxxx to the full
extent permitted by law from and against all claims, damages, losses and
liabilities (including, without limitation, reasonable attorneys' fees and
expenses) arising out of or based upon this engagement or any financial
information, including without limitation, any misstatement or omission, or
alleged misstatement or omission, in an offering memorandum or any other
materials supplied or approved by LMCI, except LMCI shall not be liable for
any claim, damage, or loss or liability which is finally determined to have
resulted from Xxxxxxx'x xxxxx negligence, bad faith or willful misconduct.
(b) Xxxxxxx is authorized to release to a qualified financing
source, all pertinent financial information concerning the business as
Xxxxxxx deems appropriate. LMCI hereby represents and warrants that all
information given to Xxxxxxx regarding the business shall be true, accurate
and current in all material respect at the date given (and thereafter
updated by LMCI to the extent necessary, for continued accuracy).
(c) Continuation and Termination of Agreement. Upon the
successful closing of a Financing, this Agreement will automatically apply to
LMCI's next project unless mutually terminated.
(d) Arbitration. Any controversy, dispute or claim relating to
this Agreement between the parties shall be resolved by binding arbitration
in Orange County, California in accordance with the rules of the National
Association of Securities Dealers (NASD). In any arbitration or other such
action to enforce any of the provisions or rights under the terms of this
Agreement, the unsuccessful party to such arbitration or action, as
determined by the arbitrator or the Court in a final judgment or decree,
shall pay the prevailing party or parties reasonable attorney's fee incurred
by the successful party or parties (including any appeals).
(e) Assignment. This Agreement shall not be assignable by any
part except upon the consent, expressed in writing, of the other party(ies).
(f) Applicable Law. This Agreement shall be governed as to all
matters of interpretation and performance by the laws of the State of
California.
(g) Entire Agreement and Modifications. The making, execution
and delivery of this Agreement by the parties has been induced by no
representations, statements, warranties or agreements other than those
expressed herein. This Agreement embodies the entire understanding of the
parties and there are no further or other agreements or understandings,
written or oral, in effect between the parties relating to the subject matter
hereof unless expressly referred to by effect between the parties relating to
the subject matter herein. Modification of this Agreement by the parties may
only be made in writing.
(h) Severability. In the event that any part of this Agreement
is deemed unenforceable for any reason whatsoever, that fact shall not render
any other part unenforceable so long as enforcement of the latter part will
fairly effectuate the parties' intent as expressed herein.
(i) Successor-In-Interest. This Agreement shall bind and shall
inure to the benefit of the parties hereto and their respective heirs,
legatees, devisees, administrators, legal representatives, grantees,
successors and assigns.
(j) Authority of Signatories. By their respective signatures
below, each party hereto represents and warrants that he is fully authorized
to act on behalf and otherwise bind LMCI and Xxxxxxx, respectively, to the
terms and provisions of the Agreement.
6. Additional Financing(s)
In the event Xxxxxxx is successful in obtaining financing for LMCI, Xxxxxxx
shall have for a period of 12 months, a first right of refusal on any public
or private placements of the Company's debt or equity securities.
IN WITNESS WHEREOF, this Agreement has been executed on the day and year
first mentioned above.
For: XXXXXXX XXXXXXX for: LMCI
By: Xxxxxxxx Xxxxxx By: Xxxxxxx X. Xxxxxx
_______________________ ________________________
Its: Managing Director Its: President and Chairman
Investment Banking
By: Xxxxxx X. Xxx
_______________________
Its: Managing Director
Investment Banking
