MEMORANDUM OF UNDERSTANDING
EXHIBIT
10.1
This is a
Memorandum of Understanding dated January 13, 2009 between Atlas Investment, LLC
(Atlas) of 000 Xxxxx Xxx, Xxxxx 00, 0xx Xxxxx,
Xxx Xxxx, XX and Mikojo, Inc., (Mikojo) a Delaware Company of Foster City,
California. This Memorandum defines the points and basis for the
relationship between Atlas and Mikojo. Both parties have entered this agreement
under their own free will and will abide to the covenants of said
agreement.
WHEREAS,
both parties are interested in developing an ongoing working business
relationship;
WHEREAS,
the Company is in the business of placement of internet advertising with such
internet content providers as Yahoo!, Xxx.xxx and MSN (collectively, “Content
Providers”). The Company is then compensated by the Content Providers
on a “per click” basis based upon usage attributable to advertising placed by
the Company;
WHEREAS,
the Company is able to achieve a favorable arbitrage on the funds committed for
such advertising and achieves positive cash flow based on such
arbitrage.
WHEREAS,
in order for the Company to place advertising with the Content Providers, it
must provide such Content Providers with either an advance cash payment or
acceptable payment guarantee or credit enhancement of any amounts payable on
account of such advertising.
WHEREAS,
Atlas has the ability to provide such financial capability in the form of a bank
instrument to Mikojo to be able to fulfill the funding capability requirements
of the Yahoo pay per click advertising contract;
THEREFORE,
it is agreed that Atlas will provide such funding to Mikojo in a form acceptable
to Yahoo and other vendors to fulfill these types of contracts in exchange for
compensation to be paid in the form of senior debentures issued by Mikojo that
will mature on a monthly basis. The form of the funding provided by
Atlas will be Letters of Credit (LCs) issued by acceptable banking institutions
to be provided for collateral purposes for Mikojo to demonstrate capability to
perform on the contracts with Yahoo and et al. The aggregate amount
of LCs to be provided by Atlas which would be outstanding at any point in time
will be $5,000,000. The LCs provided by Atlas can be in one LC or
multiple LCs as long as they are issued by acceptable banking
institutions. The term period that the LCs will be issued for is 14
months with an option to renew or rollover for an additional 12
months. The option to renew shall be at the sole discretion of
Atlas. The 14 month time period is to allow Mikojo a 2 month time
period to ramp up the business with Yahoo, during which time Mikojo may not need
the full $5,000,000 in LCs. Atlas agrees to the following schedule:
In the first month, Atlas shall provide an LC for $1,000,000; in the second
month, Atlas shall have an additional LC(s) issued for $2, 000, 0000 to bring
the aggregate total outstanding to $3,000,000; and, in the third month, Atlas
shall have another LC(s) issued for $2,000,000, bringing the aggregate total to
the agreed $5,000,000. The LCs shall be issued with Yahoo being the
Beneficiary.
Mikojo shall issue senior debentures to
Atlas for an aggregate amount of $4,600,000. These debentures will
have staggered maturity dates commencing in 3 months of the issuance of the
first LC. The exact schedule will be attached as an addendum to this
MOU. The $4,600,000 aggregate total reflects the 90 day cycle for
Mikojo to generate revenues, receive payments and make payments on advertising
clicks that are covered by the underlying LC collateral provided by Atlas over
the 14 month period of this MOU. Unless this arrangement is
terminated pursuant to the provisions of “Term and Termination”, below, the
$4,600,000 is the estimated minimum amount of payments to Atlas under this MOU,
in the event the full Credit Enhancement cannot be utilized an amount equal to
twenty percent (20%) of the gross amount of invoices issued by such Content
Provider for which such Credit Enhancement applies will be paid to
Atlas. However, Atlas shall have the first right of refusal to
arrange factoring of Mikojo’s receivables that are generated by utilizing the LC
collateral provided by Atlas. Under this scenario, additional
revenues and profits for Mikojo will be generated by the accelerated cycle rate
created by the factoring arranged by Atlas. Mikojo agrees to pay
Atlas additional profits generated by this accelerated payment cycle based upon
the same formula the initial $4,600,000 return has been
calculated. Mikojo agrees that if any factoring of receivables is
done, the receivables generated by using Atlas’ LCs will be the first ones
factored. Atlas will also consider arranging factoring for any
additional receivables that Mikojo generates using funds and or collateral other
than the LCs provided by Atlas. Mikojo will not issue any notes in a
senior position to the Atlas notes without procuring Atlas’ written permission
in advance to this action.
Control of Funds Received by
Mikojo. All funds received by the Mikojo from the Content
Providers on account of advertising placed which is the subject of any Credit
Enhancement by Atlas shall be deposited in a specific designated company account
(“Special Account”) established for that purpose. The special Account
shall act as a Lock Box account. The priorities for payment from the
Special Account shall be first to the payment of invoices submitted to Mikojo by
Content Providers; second to payment to Atlas of the consideration for the
provision of such Credit Enhancement payable under the terms of this Agreement
and remaining funds shall be paid to Mikojo for its working capital and general
purposes. Upon mutual agreement, an independent third party
administrator will be appointed to facilitate the distributions from this
Special Account to the various parties designated in this MOU.. Atlas
retains the right to inspect the book and records of Mikojo at any time to
verify the records and cash flows. Atlas has the right to use an
independent auditor and/or accounting firm to conduct this
review. Mikojo agrees to make the books and records available for
Atlas’ inspections. In addition, Mikojo agrees to provide reports or
internet access to Atlas on a weekly basis to allow Atlas to monitor the
business being generated by Mikojo using the LCs provided by
Atlas.
Events of
Default. Mikojo shall be in default of this Agreement upon the
occurrence of any of the following events (each, and “Event of
Default”):
(a) Mikojo shall default in the payment
of any amount due under the terms of this Agreement; or
(b) Mikojo shall fail to perform or
observe, in any material respect, any other covenant, term, provision,
condition, agreement or obligation of Mikojo under this Agreement or any other
obligation to Atlas and such failure shall continue uncured for a period of 10
(10) days after notice from Atlas of such failure; or
(c) Mikojo shall (1) become insolvent;
(2) admit in writing its inability to pay its debts generally as they mature;
(3) make an assignment for the benefit of creditors or commence proceedings for
its dissolution; (4) apply for or consent to the appointment of a trustee,
liquidator or receiver for its or for a substantial part of its property or
business; (5) file a petition for bankruptcy relief, consent to the filing of
such petition or have filed against it an involuntary petition for bankruptcy
relief, all under federal or state laws as applicable; or
(d) A trustee, liquidator or receiver
shall be appointed for Mikojo or for a substantial part of its property or
business without its consent and shall not be discharged within thirty (30) days
after such appointment; or
(e) Any governmental agency or any
court of competent jurisdiction at the instance of any governmental agency shall
assume custody or control of the whole or any substantial portion of the
properties or assets of Mikojo; or
(f) Any money judgment, writ or warrant
of attachment, or similar process, in excess of Ten Thousand ($10,000) Dollars
in the aggregate shall be entered or filed against Mikojo or any of its
properties or other assets and shall remain unpaid, unvacated, unbonded or
unstayed for a period of fifteen (15) days or in any event later than five (5)
days prior to the date of any proposed sale thereunder; or
(g) Bankruptcy, reorganization,
insolvency or liquidation proceedings, or other proceedings for relief under any
bankruptcy law or any law for the relief of debtors shall be instituted
voluntarily by or involuntarily against the Mikojo;
Then, or
at any time thereafter, unless cured, and in each and every such case, unless
such Event of Default shall have been waived in writing by Atlas (which waiver
shall not be deemed to be a waiver of any subsequent default) at the option of
Atlas and in Atlas’ sole discretion, Atlas may immediately, and without
expiration of any period of grace, enforce any and all of Atlas’ rights and
remedies provided herein or any other rights or remedies afforded by
law.
Term and Termination.
The term of this Agreement shall be for a period commencing with the date of
this Agreement and terminating on the earlier of (a) one (1) year and two (2)
months following the commencement date of this Agreement or (b) the occurrence
of any event of default by Mikojo hereunder at Atlas’ sole
discretion. In addition, there shall be a one (1) year option to
extend this agreement at the $5,000,000 level at Atlas’ sole
discretion. Upon mutual agreement between Mikojo and Atlas, Atlas may
increase the amount of collateral in the accepted format at the same terms and
conditions outlined in this MOU.
Notwithstanding
the foregoing, Mikojo shall have the unilateral right to terminate this
Agreement in the event it is no longer able to place internet advertising with
Content Providers due to circumstances or events which are totally beyond
Mikojo’s control. In the event this Agreement is so terminated based
thereon, and Atlas’ LCs are fully released without any further liability to
Atlas thereon, the aggregate amount of the Mikojo debentures issued to Atlas
shall be reduced to an amount derived by multiplying the aggregate amount of
such debentures by a fraction, the numerator of which is the number of months
(including any partial months) the arrangement was in place prior to such
termination and the denominator of which is 16 (plus the number of months of any
agreed extension(s) of the arrangement).
Miscellaneous.
(a) Entire
Agreement. This Agreement constitutes the entire agreement
among the Parties and supersedes any prior understandings, agreements or
representations by or among the Parties, written or oral, with respect to the
subject matter hereof.
(b) Succession and
Assignment. This Agreement shall be binding upon and inure to
the benefit of the Parties named herein and their respective successors and
permitted assigns. No Party may assign either this Agreement or any
of its rights, interests or obligations hereunder without the prior written
approval of the other party.
(c) Counterparts and Facsimile
Signature. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. This Agreement
may be executed by facsimile signature.
(d) Headings. The
section headings contained in this Agreement are inserted for convenience only
and shall not affect in any way the meaning or interpretation of this
Agreement.
(e)
Governing
Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York without giving effect
to any choice or conflict of law provision or rule (whether of the State of New
York or any other jurisdiction) that would cause the application of laws of any
jurisdictions other than those of the State of New York. The Parties
hereby consent to the exclusive jurisdiction of the courts of the State of New
York for all disputes arising under this Agreement.
(f)
Amendments and
Waivers. The Parties may mutually amend any provision of this
Agreement at any time during the term of this Agreement prior to the termination
of this Agreement. No amendment of any provision of this Agreement
shall be valid unless the same shall be in writing and signed by the
Parties. No waiver of any right or remedy hereunder shall be valid
unless the same shall be in writing and signed by the party giving such
waiver. No waiver by any party with respect to any default,
misrepresentation or breach of warranty or covenant hereunder shall be deemed to
extend to any prior or subsequent default, misrepresentation or breach of
warranty or covenant hereunder or affect in any way any rights arising by virtue
of any prior or subsequent such occurrence.
(g)
Severability. Any
term or provision of this Agreement that is invalid or unenforceable in any situation in any
jurisdiction shall not affect the validity or enforceability of the remaining
terms and provisions hereof or the validity or enforceability of the offending
term or provision in any other situation or in any other
jurisdiction. If the final judgment of a court of competent
jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to limit the term or
provision, to delete specific words or phrases, or to replace any invalid or
unenforceable term or provision with a term or provision that is valid and
enforceable and that comes closest to expressing the intention of the invalid or
unenforceable term or provision, and this Agreement shall be enforceable as so
modified.
(h)
Construction. The
language used in this Agreement shall be deemed to be the language chosen by the
Parties to express their mutual intent, and no rule of strict construction shall
be applied against any party. Any reference to any federal, state,
local or foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires
otherwise.
(i)
Remedies. In the event of any
dispute under this Agreement, the prevailing party shall be entitled to recover
its costs incurred in connection with the resolution thereof, including
reasonable attorneys fees.
(j)
Commissions and
Fees. All commissions and fees that are due and earned by
introductory brokers or intermediaries are payable solely by Mikojo and not
Atlas. Mikojo shall indemnify Atlas against any commission or fee
claims by any brokers or intermediaries. The fees and commissions due
to the brokers and intermediaries shall be paid by the appointed independent
third party administrator from the Special Account on an automated basis from
the schedule of monies due under the agreement between Mikojo and any brokers or
intermediaries.
[signatures
are on the next page]
IN
WITNESS WHEREOF, the parties hereto have duly executed this Agreement as an
instrument under seal as of the date first written above.
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MIKOJO,
INCORPORATED
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ATLAS
INVESTMENTS, LLC
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/s/ Xxxxx X. Xxxxx
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/s/
Xxxxxx Xxxxxxxxxx
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By:
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By:
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| Name: Xxxxx X. Xxxxx |
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Name:
Xxxxxx Xxxxxxxxxx
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| Title: Chief Executive Officer |
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Title:
President
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