Exhibit 10.30
December 12, 2001
FINANCIAL ADVISORY AGREEMENT
Mr. Xxxxx Xxxxxxx
EBIZ ENTERPRISES, INC.
Xxxxx Business Systems, Inc.
00000 Xxxxxx Xx., Xxxxx X
Xxxxxxxx, Xxxxx 00000
Dear Xx. Xxxxxxx:
This Financial Advisory Agreement (the "Agreement") shall serve to set
forth the terms upon which First Financial Equity Corporation ("FFEC" or the
"Financial Advisor") will render advisory services to EBIZ Enterprises, Inc. and
Xxxxx Business Systems, Inc. (collectively, the "Company"). On the basis of
discussions held between FFEC and the Company's respective representatives,
subject to the terms and conditions of Paragraph 9 hereafter, FFEC agrees to act
as the Company's Financial Advisor to assist the Company in raising
debtor-in-possession financing (the "DIP Financing") on a "best efforts" basis,
pursuant to the following terms and conditions:
1. TERMS OF THE DIP FINANCING.
A. FFEC shall act as the Company's Financial Advisor relating to the
proposed DIP Financing of the Company. Specifically, the Company proposes to
raise approximately $1,100,000.00 of DIP Financing through the issuance of a new
class of debt to a group of financially sophisticated persons who understand the
risks involved in this type of financing transaction and can afford to lose
their entire investment or institutions (the "Lender Group"). The parties agree
that the DIP Financing shall have a minimum raise of $300,000.00 (the "Minimum
Raise"). Until FFEC has successfully raised $300,000.00, all funds received by
FFEC relating to the DIP Financing shall be held by FFEC in escrow for the
Company and the individual members of the Lender Group and shall not be
disbursed to the Company. The parties acknowledge and agree that the Chapter 11
Plan of Reorganization, which the Company expects to file in its pending Chapter
11 Bankruptcy Case (the "Plan"), may provide each member of the Lender Group
with the right or option to exchange or convert that debt into equity. The
ultimate terms of the DIP Financing will be determined by the Company and FFEC.
EBIZ Enterprises, Inc.
December 12, 2001
Page 2
FFEC, as the Company's Financial Advisor, will market the DIP Financing on a
best efforts basis;
B. The DIP Financing will be structured to comply with Sections 364
and 1145 of the U.S. Bankruptcy Code and all applicable securities laws. It is
the intent of the parties that the exemptions from certain securities
regulations provided by 11 U.S.C ss.ss.364(f) & 1145(a), 15 U.S.C. ss.77(c) and
any other available securities law exemptions shall be applicable to the DIP
Financing. The DIP Financing will be sold through disclosure documents (an
"Offering Circular") that comply with applicable securities and bankruptcy laws.
The Financial Advisor will solicit a limited number of prospects to participate
in the Lender Group who are financially sophisticated and understand the risks
involved in this type of financing transaction; and
C. FFEC and the Company expect that FFEC shall act as the agent for
the Lender Group and, therefore, shall have continuing duties to the individual
members of the Lender Group with respect to the property that shall serve as
collateral for the DIP Financing and the debtor-creditor relationship between
the Company and the Lender Group. The further terms and conditions between the
Company, the Lender Group and FFEC, as the agent for the Lender Group, shall be
set forth in a Pledge and Security Agreement and Appointment of Agent For
Holders, separate Promissory Notes and a UCC-1 Financing Statement (the "DIP
Financing Agreements"). The DIP Financing Agreements shall be subject to
Bankruptcy Court approval.
2. TERMS. Subject to Paragraph 3, the term of this Agreement shall be from
the date of execution of this Agreement through the earlier of confirmation of
the Plan or six months from the date of the Company's acceptance of this
Agreement (the "Term"). The Term may be extended by mutual written agreement.
3. TERMINATION. This Agreement may be terminated by either party upon
written notice. In the event of termination, FFEC will be entitled to
compensation (including any amounts deferred) payable to FFEC pursuant hereto as
of the date of termination.
4. COMPENSATION TO FFEC. Subject only to Bankruptcy Court approval of the
amount of fees that shall be earned and which may become due and owing to FFEC
hereunder, and the other terms and conditions of this Agreement, for assisting
EBIZ Enterprises, Inc.
December 12, 2001
Page 3
in the DIP Financing and serving as the agent for the Lender Group, FFEC shall
receive cash fees and warrants, upon the Effective Date of the Plan - as that
term is defined in the Plan, with respect to the aggregate amount of funds from
persons introduced by FFEC to the DIP Financing and actually loaned by the
Lender Group to the Company (the "Loan Amount"), as follows:
A. Cash fees equal to eight percent (8.0%) of the Loan Amount;
B. An additional banking fee equal to two percent (2.0%) of the Loan
Amount;
C. Warrants to purchase such number of shares of the Company's common
stock that shall equal ten percent (10.0%) of the aggregate number of shares of
common stock actually issued to or to be issued to the Lender Group on the
Effective Date of the Plan (the "DIP Warrants"); and,
D. The Financial Advisor shall not be entitled to any compensation
from the Company unless the amount of the Minimum Raise is actually met and
loaned to the Company.
The DIP Warrants will be exercisable at a price of $0.65 per Warrant. The
terms of the DIP Warrants shall be set forth in a Warrant Agreement, in form and
substance reasonably satisfactory to the Financial Advisor and the Company,
which shall contain, without limitation, anti-dilution provisions and piggy-back
registration rights. All Warrants issued to FFEC pursuant to the terms of this
Agreement shall be exercisable for a period of three (3) years from the date of
the closing of the DIP Financing.
5. EXPENSES. The Company shall be responsible for the preparation of the
Offering Circular, including legal fees, accounting, and printing expenses, as
well as filing and registration fees, marketing expenses and background checks
of senior management. The Company will reimburse the Financial Advisor,
following notice and approval by the Bankruptcy Court, for its reasonable
out-of-pocket expenses; provided, however, that FFEC obtain prior written
permission for any expense in excess of $1,000.00 or aggregate expenses in
excess of $2,500.00. FFEC will not charge for local telephone calls, local
automobile expenses, or business meals, unless a representative of the Company
is present. The Company will pay for courier and/or postage costs related to the
mailing of materials to prospective investors or lenders, and for telephone
conference calls.
EBIZ Enterprises, Inc.
December 12, 2001
Page 4
6. REPRESENTATIONS AND INDEMNIFICATION.
A. Each party represents and warrants to the other that: (i) such
party will not take or knowingly permit any action to be taken in connection
with the DIP Financing which violates federal or state securities laws or any
bankruptcy laws; and (ii) none of the information or statements provided by a
party in the Offering Circular will violate the anti-fraud provisions of the
Securities and Exchange Act of 1934 (recognizing that FFEC will only provide
plan of distribution information);
B. The Company represents, warrants and covenants that: (i) current
Company management will continue in place after the DIP Financing until the
earlier of the first meeting of the shareholders of the Reorganized Debtor
following the Effective Date of the Plan, the date on which any member of
current management may resign his or her position or the date on which any such
person is terminated by the Company; (ii) the financial statements included in
the Offering Circular will fairly reflect the financial condition of the Company
and the results of its operations at the time and for the periods covered by
such financial statements; and (iii) the Company has prepared and delivered to
the Financial Advisor its most recent estimate of sales, earnings, and cash flow
and agrees to update those estimates on a quarterly basis during the pendency of
the DIP Financing;
C. FFEC represents and warrants to the Company that: (i) it possesses
all licenses or permits necessary to effect the DIP Financing; and (ii) it is a
party to that certain Confidentiality and Non-Disclosure Agreement with the
Company (the "Confidentiality Agreement") pursuant to which FFEC agreed to keep
confidential and not disclose certain proprietary confidential information
regarding the Company that the Company agreed to furnish to FFEC and
acknowledges that such agreement is valid, binding on the parties and continues
in full force and effect; and
D. Each party agrees to indemnify and hold the other and its
attorneys, accountants, agents, employees, officers and directors, free and
harmless from any liability, cost and expense, including attorneys' fees and
costs, in the event of a breach of any representation or warranty herein.
EBIZ Enterprises, Inc.
December 12, 2001
Page 5
7. SUCCESSORS AND ASSIGNS. The benefits of this Agreement shall inure to
the respective successors and assigns of the parties hereto, and the obligations
and liabilities assumed in this Agreement by the parties hereto shall be binding
upon their respective successors and assigns.
8. GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of Arizona.
9. Conditions of Performance by FFEC. Notwithstanding anything on the
contrary hereinabove set forth, the performance of the obligations of FFEC as
provided in this Agreement is specifically subject to and conditioned upon the
following:
A. Successful completion of in-depth investigative procedures to be
conducted by FFEC with respect to the Company, its operations and general
performance, as well as its officers and directors, within thirty (30) days of
the date hereof (commonly referred to as "due diligence" procedures);
B. Results of due diligence procedures employed by FFEC satisfactory
to FFEC in its sole determination; and
C. Any necessary Bankruptcy Court approval.
10. AMENDMENT. This Letter of Intent may be amended by mutual consent of
both parties.
11. CONFIDENTIALITY. FFEC shall maintain in confidence until disclosed
publicly by the Company, any information, including projections prepared by or
provided by the Company, and shall rigorously adhere to all of the terms of the
previously executed Confidentiality Agreement.
EBIZ Enterprises, Inc.
December 12, 2001
Page 6
If this Agreement correctly sets forth our understanding, please so
indicate by signing and returning the enclosed copy of this Agreement.
Respectfully,
FIRST FINANCIAL EQUITY
CORPORATION
By: /s/ Xxxxxx Xxxxxxx
---------------------------------------
Xxxxxx Xxxxxxx, President
ACCEPTED AND AGREED:
this _______ day of ________________, 2001.
EBIZ ENTERPRISES, INC. XXXXX BUSINESS SYSTEMS, INC.
By: /s/ Xxxxx X. Xxxxxxx By: /s/ Xxxxx X. Xxxxxxx
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Xxxxx Xxxxxxx, President Xxxxx Xxxxxxx, President
