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Exhibit 10.12
[Commonwealth Partners Letterhead]
COMMONWEALTH PARTNERS NY, LLC "CONSULTING AGREEMENT"
PERSONAL AND CONFIDENTIAL
December 13, 1999
Xx. Xxxxxx Xxxxxxxx
Chief Financial Officer & Treasurer
AlphaCom, Inc.
0000 Xxxxxxxx Xxxx., Xxxxx X
Xxxxx, XX 00000
VIA FAX
Dear Xxxxxx:
This letter ("Engagement Letter") confirms that Commonwealth Partners
NY, LLC ("Commonwealth," "we" or "our") has been engaged by Xxxxx.Xxx, Inc., its
subsidiaries, successors, affiliates, (the "Company," "you" or "your") to act as
their non-exclusive Consultant (and to perform other functions mutually agreed
upon by the parties) for the purpose of rendering to you financial advice and
other services in such capacity, on the terms and conditions hereinafter set
forth. Our engagement shall become effective as of the date set forth above,
however, any services to be performed by Commonwealth under this Engagement
Letter will be requested in writing by the Company.
1. CONFIDENTIALITY
It is understood that during the course of this engagement Commonwealth
will be furnishing proprietary and confidential advice and information to you
relating to structure and capital sources developed by Commonwealth through its
relationships with such sources and that, accordingly, any such information or
any other information relating to Commonwealth's efforts on your behalf with
third parties provided to you by Commonwealth, is confidential. You agree to
treat as confidential any such information or related or similar information
provided to you by Commonwealth and you will not, without our prior written
consent, disclose such to any third party. We, in turn, will treat as
confidential and will not, without your prior written consent, disclose to any
third party any confidential information provided to Commonwealth by you.
Notwithstanding the foregoing, the terms of this Paragraph 1 shall not apply to
any information which is or becomes generally available to the public, is
required by law to be disclosed, or is obtained from any third party which is in
possession of such information through no fault of Commonwealth and is not under
any obligation, to Commonwealth's knowledge, to treat such information as
confidential.
2. ENGAGEMENT FEE FOR ADVISORY SERVICES
In addition to any amounts payable pursuant to Paragraph 6 hereof, the
Company agrees to pay Commonwealth a nonrefundable engagement fee of 200,000
shares of the common stock of the Company or a new or successor entity or the
surviving Company in any merger or acquisition, or such other consideration
which may form all or part of the consideration paid or exchanged at any such
closing or thereafter as part of the transaction or a combination of both said
shares are payable 100,000 restricted shares upon the execution of this
Engagement Letter and 100,000 registered shares payable between four and six
months hence, plus a $10,000.00 per month advisory fee payable on the first day
of each month after execution of this Engagement Letter. The cash portion of
this Section 2 shall accrue until the Company obtains its first funding of at
least $4,000,000.00. Said fee shall be payable for the financial advisory
services to be provided by Commonwealth, as hereinafter set forth, ("Financial
Advisory Fee") is due and payable upon your acceptance of
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this Engagement Letter. This fee is not contingent upon the consummation of any
acceptance of this Engagement Letter transaction.
3. CONSULTING SERVICE
Commonwealth will, throughout the term of this engagement, in
consideration of the Consulting Fee set forth in Paragraph 2 above:
1. Commonwealth will introduce the Company to end user groups, joint venture
partners, strategic alliances, funding sources, retail and institutional
brokers, and other potential sources of business. Commonwealth during the
term hereof, shall provide Company with the benefit of its industry
knowledge and experience and it is understood and acknowledged by the
Company that the value of Commonwealth's services to be rendered hereunder
is related to the quality and not necessarily the quantity thereof.
2. Participate in strategic planning with management to analyze the Company's
capital funding requirements and proposed financing sources, structures,
mergers, acquisitions and consolidations or proposed transactions.
Commonwealth will also advise and assist the Company in negotiations with
potential capital sources, merger and/or acquisition candidates, and joint
venture partners. All decisions with respect to potential transactions,
however, will remain the sole responsibility and determination of the
Company.
3. Commonwealth will, further, assist and advise the Company in the Company's
preparation of any letters of intent, agreements, documents or materials
that Commonwealth, in its sole discretion, deems appropriate to assess and
achieve the financing objectives of the Company ("Materials"). It is
understood that the Materials will be based upon assumptions and
information provided by the Company, that Commonwealth would not be
required to make or be responsible for any independent analysis or
investigation of any information provided by the Company, and that
Commonwealth is entitled to rely thereon. It is further agreed that
Commonwealth assumes no responsibility or liability as to the truth,
accuracy or completeness of such information, which the Company herewith
warrants to Commonwealth, and that Commonwealth shall have the right to
make appropriate disclaimers to any Materials with respect thereto.
Although Commonwealth may review and make suggestions regarding the
Materials, the contents, including, but not limited to, the completeness,
truth and accuracy thereof, are the sole responsibility of the Company and
are not that of Commonwealth.
4. Commonwealth will assist management of the Company in the preparation of
presentation materials for the purpose of pursuing financing, which may
include growth and acquisition financing.
5. Commonwealth will evaluate the Company's programs in the area of business
plans, corporate goals, financial structures and organization and merger
and acquisition plans that may include the creation of a global
organization. Commonwealth has available for use by the Company resources
necessary to create market and product exposure.
6. Commonwealth will act as non-exclusive financial advisor to the Company,
which may include evaluation of the capital structure of the Company for
future listing on the NASDAQ SC or NMS, Philadelphia and or London stock
exchanges.
4. APPOINTMENT AS CONSULTANT AND FINDER FOR CAPITAL RAISING
The Company hereby further appoints and retains Commonwealth, on a
"best efforts" basis, as it's non-exclusive consultant and finder of debt and/or
equity capital sources and capital. The Company understands, however, that
Commonwealth itself shall not have any obligation hereunder as a result of such
appointment to purchase any securities of the Company or to provide financing of
any kind to the Company.
5. NON-CIRCUMVENTION
During the term of this Engagement Letter, the Company, its officer,
directors, employees, agents, affiliates and/or successors shall not directly or
indirectly (i) offer any of its securities (or any instrument similar to
securities) for sale or exchange to, or solicit any offer to purchase or
exchange any of its securities (or any instrument similar to a security) from,
or otherwise contact, approach or negotiate with respect thereto, any third
party, or (ii) authorize anyone other than Commonwealth to act on the Company's
behalf to place or exchange any
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of the Company's securities (or instruments similar to securities) with any
third party, without first notifying Commonwealth.
The Company shall promptly refer to Commonwealth all offers, inquiries and
proposals relating to any placement or exchange of its securities made to the
Company, resulting from any referral or introduction made by Commonwealth, at
any time during the term of this Engagement Letter.
The Company hereby agrees that its officers, directors, employees, agents,
affiliates or successors, will not make any contact with, deal with or otherwise
be involved in any future transaction(s) with any banking or lending institu-
tions, trusts, corporations, companies or individuals, lenders or borrowers,
buyers or sellers, including those specified herein, which were referred or
introduced by Commonwealth to you, without the written consent of Commonwealth.
You further agree that no effort shall be made to circumvent the terms of this
Engagement Letter in an effort to amend or modify such terms, including, without
limitation, the fee structure set forth herein.
6. COMPENSATION FOR CAPITAL RAISING EFFORTS
In addition to, but not in lieu of, any other compensation or other
sums payable to Commonwealth pursuant to this Engagement Letter, the Company
agrees to pay Commonwealth a "Success Fee" equal to a percentage, as described
herein, of the gross amount of any capital, or the value of any merger
consideration, whether debt or equity, raised by Commonwealth or its sources
previously identified by Commonwealth for the Company: (i) ten percent (10%)
upto $2,000,000.00, (ii) seven percent (7%) above $2,000,000.00 upto
$5,000,000.00, (iii) five percent (5%) above $5,000,000.00, plus for each
$100,000.00 raised, 1000 restricted common shares of the Company, or a new
or successor entity or the surviving Company in any merger or acquisition, to
be issued by the Company upon exercise or conversion of any security or other
instrument issued by the Company in any stage of financing. Additionally the
Company agrees to pay Commonwealth a "Participation Success Fee" equal to a
percentage, as described herein, of the gross amount of any capital, or the
value of any merger consideration, whether debt or equity, when Commonwealth
participates in the fund raising effort for or with the Company; (i) three
percent (3%) upto $20,000,000.00, (ii) two percent (2%) above $20,000,000.00
upto $50,000,000.00, (iii) one percent (1%) above $50,000,000.00, said
"Participation Success Fee" shall be paid half in cash and half in restricted
common shares of the Company, or a new or successor entity or the surviving
Company in any merger or acquisition, to be issued by the Company upon
exercise or conversion of any security or other instrument issued by the
Company in any stage of financing. The Success Fee or Participation Success
Fee shall be paid at the closing of any such transaction, in cash and
securities, as described above, of the Company, or the surviving Company in
any merger, or such other consideration which may form all or part of the
consideration paid or exchanged at any such closing. In addition, if within
thirty-six (36) months following expiration or termination of this Engagement
Letter, for any reason except the gross and willful negligence or misconduct
of Commonwealth, any transaction is closed with any structure or capital
source that was identified by Commonwealth prior to such expiration or
termination, the Success Fee shall be payable to Commonwealth in accordance
with this Paragraph 6.
7. EXPENSES AND BREAK-UP FEE
You hereby authorize Commonwealth to incur, and will reimburse
Commonwealth by the end of the month for all approved expenses submitted
within that month by the fifteenth of said month, against written vouchers
therefor, for all reasonable and customary out-of-pocket expenses paid or
incurred by us for goods and services which are necessary or appropriate in
order to fulfill our obligations of this Engagement. The Company further
agrees to pay Commonwealth, as liquidated damages, a "break-up" fee of Two
Hundred Thousand Dollar, ($200,000.00), if the Company for any reason
determines not to proceed with any financial transaction contemplated by this
Engagement Letter after such transaction has been accepted in writing by the
Company. Until such acceptance by the Company, the Company may, for any reason,
refuse any transaction proposed by Commonwealth. The Company shall pay such
fee in lieu of any damages thereby resulting to Commonwealth as a result of
such withdrawal.
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8. TERM OF AGREEMENT AND TERMINATION
The term of this Agreement shall be twelve (12) months from the date
first above set forth, unless extended by mutual agreement of the parties or
previously terminated as hereinafter set forth.
This Engagement Letter may be terminated by either party at any time
upon sixty (60) days prior written notice, provided,however, that the
provisions hereof relating to confidentiality (Par.1), the payment of fees and
expenses (Pars. 2, 6 and 7), the right of first refusal (Par. 9), indemnifi-
cation (Par. 10) and non-solicitation (Par. 5) will survive the expiration or
earlier termination of the term of this Engagement letter, unless terminated by
reason of the gross and willful negligence of misconduct of Commonwealth.
9. RIGHT OF PARTICIPATION
The Company hereby grants Commonwealth a continuing right of
participation to raise any capital or advise with respect to any merger or
similar transaction by the Company, and any subsidiary of the Company,
including initial public offerings, whether debt or equity, public or private
(except commercial bank lines of credit or short-term loans) for use in the
normal course of the Company's business, for a period of three (3) years,
commencing with the date first above set forth. The Company shall notify
Commonwealth in writing of any such proposed financing (including the material
terms thereof) and Commonwealth shall have five (5) days from receipt of such
notice to provide such financing on the same or substantially similar terms
mutually acceptable to the parties.
10. INDEMNIFICATION
If, in connection with any services which are the subject of our
agreement, we become involved in any capacity in any action or legal proceeding
brought due to any alleged acts of omissions by you, you agree to reimburse us
for our reasonable out-of-pocket expenses, including fees and disbursements of
our counsel. You also agree to indemnify and hold us harmless against any
losses, claims, damages or liabilities to which we may become subject in any
action or proceeding brought against us due to any acts or omissions by you in
connection with the services which are the subject of this Engagement Letter;
provided, however, that you shall not be liable with respect to any loss, claim
damages or liability to the extent a court of competent jurisdiction shall have
determined to have resulted from our willful misfeasance or gross negligence.
11. MISCELLANEOUS
A. Independent Contractor Status. It is understood and agreed that the
Company engages Commonwealth as an independent contractor, solely to provide
the services described herein. Nothing contained in this Engagement Letter nor
the performance of services contemplated hereby, or otherwise, shall create a
fiduciary duty on the part of Commonwealth to the Company, nor shall
Commonwealth have any duties, obligations or liability to the security holders
of the Company or any third party in connection with its engagement hereunder.
B. Commonwealth's Efforts. Commonwealth undertakes this engagement and
will work with you to achieve your desired objectives by using its best
efforts, judgment and skill. Commonwealth makes no representation or guarantee
regarding the outcome of our engagement. Commonwealth makes no representation
or warranties that any financing or structuring is or will be available nor
that any entity which desires or commits to provide financing or structuring
would in fact honor its commitments. Commonwealth will not be liable for the
Company's inability or failure to obtain financing or structuring through
Commonwealth's efforts.
C. Governing Law. This Engagement Letter shall be governed by and
construed in accordance with the internal laws of the State of New York, without
any references to it, conflicts of laws principles.
D. Entire Understanding. This Engagement Letter contains the entire
understandings between the Company and Commonwealth with reference to the
subject matter hereof and supersedes any prior understandings and agreements
related thereto, whether written or oral. This Engagement Letter may be executed
in one or more counterparts, which together shall constitute a binding
agreement. A signed facsimile will create and constitute an original, legally
binding agreement on the party sending the same.
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E. Cost of Obtaining Benefits. The Company shall reimburse Commonwealth for
the full cost of any approved reasonable legal fees and expenses incurred by
Commonwealth in obtaining the benefits to which it is entitled under the terms
of this Engagement Letter.
F. Currency. All fees, values, computations and the like herein are expressed
in U.S. Dollars.
G. Severability. In any provision of this Engagement Letter, or the applica-
tion of such provision to any person or circumstance, shall be held invalid, the
remainder of this Engagement Letter, or the application of such provision to
persons or circumstances other than those to which it is held invalid, shall not
be affected thereby.
H. Headings. The text in the headings of paragraphs and subparagraphs of this
Engagement Letter are for convenience of identification only and do not
constitute a part of any such paragraph and/or subparagraph.
If the foregoing constitutes the agreement and understanding of the
Company, please confirm this by signing and returning one copy of this
Engagement Letter to the undersigned, whereupon this agreement shall become
binding between you and Commonwealth as of the date first above written.
Very truly yours,
Commonwealth Partners NY, LLC
/s/ Xxxxx X. Xx Xxxxx
Xxxxx X. Xx Xxxxx
Managing Member
Accepted and agreed, /s/ Xxxxxxx X. Xxxxx
Xxxxxxx X. Xxxxx
AlphaCom, Inc. Managing Member
/s/Xxxxxx X. Xxxxxxxx
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Authorized Signature
