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EXHIBIT 6.3
SERVICE AGREEMENT
AGREEMENT dated as of February 10, 1997, by and between D and N Consulting
Corporation, a Delaware corporation (the "Service Company"), and CVF Corp., a
Nevada Corporation ("Newco").
1. Payment of Operating Expenses. The Service Company agrees to be
responsible for all administrative requirements of Newco, including, but
not limited to, costs of maintaining the books of Newco, preparing
periodic reports to the Board of Directors of Newco and providing office
facilities and travel expenses, and except those expenses to be borne by
Newco which are described in Section 3 below. The Service Company will
also be responsible for compensating its employees and directors and any
other person or entity employed for the purpose of providing services to
Newco pursuant to this Service Agreement.
2. Service Fee
(a) Subject as set forth below, Newco will pay the Service
Company an annual service fee (the "Service Fee") based on an
annual budget prepared by the Service Company which will be
reasonable and commensurate with administering the business of
Newco and approved by the Board of Directors of Newco. Any fees or
other amounts received by the Service Company, or its respective
directors or officers from investee companies of Newco as financing
commitment fees, consulting fees, directors' fees or otherwise for
services rendered to the investee companies shall be credited
against the Service Fee.
(b) The Service Fee for each fiscal year shall be determined in
the last 30 days of Newco's prior fiscal year, based upon the
budget prepared by the Service Company and approved by the Board of
Directors of Newco.
(c) The Service Fee will be calculated and paid quarterly in
advance on the first day of January, April, July and October of
each year.
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(d) If the Service Fee shall be payable for any period which is
less than one year, such payments shall be adjusted on a pro rata
basis based upon the number of days that this Service Agreement is
in effect during such period. If this Service Agreement is
terminated as of a date that is not the last day of March, June,
September or December in any calendar year, then the Service
Company shall refund to Newco the unearned portion of the Service
Fee, calculated on a pro rata basis.
(e) The Service Company may, with the consent of Xxxxxxx Xxxxxx and
Xxxxxx Xxxxx, direct Newco to pay all expenses directly.
3. Exceptions to Payment of Service Fee.
(a) After fifteen months have elapsed from the date of this
Service Agreement, the Service Company's right to the Service Fee
in any quarter will depend on the trading price of the shares of
Newco Common Stock (the "Newco Common Shares"). If the 90 day
weighted average trading price (the "Trading Price") over the
course of the prior quarter does not, at any time in the prior
fiscal quarter of Newco, exceed the target price (the "Target
Price") set out below, the Service Company will not be entitled to
the Service Fee during the next quarter.
For purposes of this Service Agreement, the Target Price equals
$3.05. In the event that Newco shall at any time after the Closing
subdivide or change the outstanding number of Newco Common Shares,
the Target Price shall be proportionately adjusted.
If at any time in any fiscal quarter the Trading Price of Newco
Common Shares is greater than the Target Price but less than double
the Target Price, then the Service Company will be entitled to a
percentage of the Service Fee for all future quarters (based on the
proportion that the excess of the Trading Price over the Target
Price is of the Target Price).
If, at any time after fifteen months have elapsed from the date of
this Service Agreement, the Trading Price exceeds double the Target
Price, the Service Company will no longer be responsible for any
costs in relation to Newco and the Common Shares pledged by the
Service Company to Newco will be released and the Stock Pledge
Agreement cancelled.
(b) In lieu of satisfying its financial obligations under this Service
Agreement, the Service Company may put its 10.2% Common Share
interest (the "Share Interest") in Newco, or any portion thereof, to
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Exhibit 6.3
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Newco for the pro rata cancellation of the Service Company's financial
obligations. The Service Company's financial obligations will
decrease proportionately to the percentage of the Share Interest that
is put to Newco. For instance, if fifty percent of the Share Interest
is put to Newco, then fifty percent of the financial obligations of
Newco will be paid by the Service Company and fifty percent by Newco.
If and when the entire Share Interest is put to Newco, the Service
Company's financial obligations under the Service Agreement will
terminate. Thereafter, Newco will reimburse the Service company for
100 percent of its financial obligations.
4. Exceptions to Payment of Expenses by the Service Company.
(a) Notwithstanding Section 1, the following specific ongoing
expenses of Newco will not be paid by the Service Company but will
be paid by Newco:
(i) legal fees;
(ii) audit fees;
(iii) interest, taxes, brokerage and other fees
and expenses directly related to the implementation of
purchase, sale or other transactions for Newco's investments
or for Newco Common Shares, including documentation and
expenses related to investor relations; and
(iv) fees (legal or other) associated with
compliance with the rules and regulations of the Securities
Act of 1933, as amended, or the Securities Exchange Act of
1934, as amended.
(v) insurance premiums, if any, incurred to
protect Newco.
5. Service Company Duties. The Service Company covenants that it will
maintain a staff trained and experienced in the business of identifying
and providing assistance to new and emerging growth-oriented businesses
and adequate for the performance of the Service Company's duties under
this Service Agreement. Services to be rendered by the Service Company
shall include assistance within the areas of expertise of its staff and,
when considered appropriate by the Service Company, the services of its
officers and employees as directors, consultants and advisors to investee
companies. Services to be provided to a investee company by officers and
employees of the Service Company will be performed in good faith,
consistent with the
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obligations of the Service Company to Newco. Subject to the control and
direction of Newco's Board of Directors, the Service Company shall be
authorized to manage the operations of and act in the name of and bind
Newco. Selection of the Newco investments, shall be made by the Service
Company after consultation with and approval by Newco's Board of Directors.
6. Term. Commencing on the date hereof, services will be performed for
Newco for an initial term of five years (the "Initial Term"). This
service agreement will automatically renew for successive one year terms
upon six (6) months prior written notice by either party to the other
party.
7. Termination.
(a) During the Initial Term, Newco shall be entitled to
terminate the Service Agreement at any time for cause. For
purposes of this Service Agreement, "cause" shall mean (i) the
Service Company's material breach or material failure to perform
the services set forth in this Service Agreement and (ii) the
Service Company's or any of its directors' or officers' conviction
for fraud, embezzlement, misappropriation or other felony related
to the services to be performed under this Service Agreement.
(b) After the Initial Term, this Service Agreement may be
terminated with or without cause and without penalty upon six (6)
months prior written notice by either party to the other party.
8. Governing Law and Jurisdiction. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of
Delaware. The parties hereto irrevocably attorn to the jurisdiction of
the courts of Delaware.
9. Successors and Assigns. Except as otherwise expressly provided herein,
the provisions hereof shall enure to the benefit of, and be binding upon,
the successors, assigns, heirs, executors and administrators of the
parties hereto; provided, however, that the Service Company may not assign
its obligations hereunder to any party (other than a successor by merger
to the Service Company) without the written consent of the Board of
Directors of Newco.
10. Severability. In case any provision of the Agreement shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
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11. Counterparts. This Agreement may be executed in counterparts, each of
which when so executed and delivered shall constitute a complete and
original instrument but all of which together shall constitute one and the
same agreement, and it shall be necessary when making proof of this
Agreement or any counterpart thereof to account for any other counterpart.
12. Entire Agreement; Amendment. This Agreement can be modified or amended
only by a writing signed by the parties hereto and only with the written
consent of the Board of Directors of Newco. This Agreement constitutes
the full and entire understanding and agreement between the parties with
regard to the subject matter hereof.
IN WITNESS WHEREOF the undersigned have executed this Agreement as of the
date first above written.
D and N Consulting Corporation
By: /s/ Xxxxxxx Xxxxxx
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CVF CORP.
By: /s/ Xxxxxxx Xxxxxx
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