X. X. XXXXXXXX & CO., INC.
Founded 1960
Brokers & Dealers in Securities
Underwriters
Newport Office Tower
000 Xxxxxxxxxx Xxxx., X.X. Xxx 000 Xxxxxx Xxxx, XX 00000-0000
000-000-0000 -- 000-000-0000 --- Fax 000-000-0000
Xx. Xxxx Xxxxxx
Chief Executive Officer
Pinnacle Business Management, Inc.
0000 Xxxx xx Xxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Dear Xx. Xxxxxx:
THIS AGREEMENT (the "AGREEMENT") is made as of August 18, 1999 between
Pinnacle Business Management, Inc. ("PINNCLE") NASDAQ symbol; "PCBM", and X.X.
Xxxxxxxx & Co., Inc. ("XXXXXXXX").
In consideration of the mutual covenants contained herein and intending to
be legally bound thereby, PINNACLE and XXXXXXXX hereby agree as follows:
1. XXXXXXXX will perform investment banking services, on a non-exclusive
basis, for PINNACLE on the terms set forth below for a period of five
years from the date hereof. Such services will be performed on a best
efforts basis and will include, without limitation, assistance to
PINNACLE in mergers, acquisitions, and internal capital structuring
and the placement of new debt and equity issues of PINNACLE all with
the objective of accomplishing PINNACLE's business and financial
goals. In each instance, XXXXXXXX shall endeavor, subject to market
conditions, to assist PINNACLE in identifying corporate candidates for
mergers and acquisitions and sources of private and institutional
funds; to provide planning, structuring, strategic and other advisory
services to PINNACLE; and to assist in negotiations on behalf of
PINNACLE. XXXXXXXX will have the option to perform all financings to
be done by PINNACLE for as long as this AGREEMENT is in effect. In
each instance, XXXXXXXX will render such services as to which PINNACLE
and XXXXXXXX mutually agree and XXXXXXXX will exert its best efforts
to accomplish the goals agreed to by XXXXXXXX and PINNACLE.
2. In connection with the performance of this AGREEMENT, XXXXXXXX and
PINNACLE shall comply with all applicable laws and regulations,
including, without limitation, those of the National Association of
Securities Dealers, Inc. and the Securities and Exchange Commission.
3. In consideration of the services previously rendered and to be
rendered by XXXXXXXX hereunder, XXXXXXXX is hereby granted five-year
Warrants to purchase, at a price of $.125 per share, a total of
5,580,000 shares of common Stock of PINNACLE, with demand and piggy
back registration rights as set forth in paragraph 4 below. Such
Warrants ("XXXXXXXX Warrants") may be exercised at any time from
August 18, 1999 to and including August 18, 2004. In any event, the
XXXXXXXX Warrants shall vest and become irrevocable as follows:
2,790,000 immediately upon the signing of this AGREEMENT, 1,395,000
four months after the signing of this AGREEMENT; and the remaining
1,395,000 in six months after the signing of this AGREEMENT. After one
year from the date of this AGREEMENT, XXXXXXXX shall have, at
XXXXXXXX'x discretion, both a cashless exercise option to exercise the
Warrants and rights of registration as described in 4 below. If the
cashless exercise option is exercised, it would be accomplished by
surrendering the vested Warrants and replacing them with the
equivalent of shares that may be sold under Rule 144. The amount of
shares of common stock of PINNACLE to be issued will be based on the
fair market value per share on the date of exercise and shall be
valued at the average of the daily closing price for the five
consecutive trading days immediately preceding the date of exercise.
The presentation of a copy of this AGREEMENT by XXXXXXXX, together
with a request that part or all of the Warrant be exercised and a
direction that the appropriate number of shares be withheld to pay the
exercise price, shall be deemed to be the surrender of such number of
shares for purposes of exercising the cashless exercise option.
4. In addition to the exercise format described in paragraph 3 above, an
additional registration route may also be available to XXXXXXXX, at
their sole discretion, which is as follows; during the period from
August 18, 2000 to August 18, 2004 the holders of at least 51% of: (i)
the XXXXXXXX Warrants not then exercised; and (ii) the shares
previously issued upon exercise of any of the XXXXXXXX Warrants
(hereinafter, collectively, the "XXXXXXXX EQUITY"), may demand, on one
occasion only, that PINNACLE at PINNACLE's expense, promptly file a
Registration Statement under the Securities Act of 1933, as amended
("ACT"), to permit a public offering of the shares of Common Stock
issued and issuable pursuant to exercise of the XXXXXXXX Warrants (the
"XXXXXXXX SHARES"). Additionally, if PINNACLE during the period from
August 18, 2000 to August 18, 2004 files a Registration Statement
covering the sale of any of PINNACLE's common stock, then PINNACLE on
each such occasion, at the request of the holders of at least 51% of
the shares and warrants constituting the XXXXXXXX EQUITY, shall
include in any such Registration Statement, at PINNACLE's expense, the
XXXXXXXX SHARES, provided that, if the sale of securities by PINNACLE
is being made through an underwriter and the underwriter objects to
inclusion of the XXXXXXXX SHARES in the Registration Statement, the
XXXXXXXX SHARES shall not be so included in the Registration Statement
or in any registration statement filed within 90 days after the
effective date of the underwritten Registration Statement.
5. In the event that PINNACLE files to honor the exercise by XXXXXXXX of
any vested warrants as set forth herein, by failing to deliver the
certificate(s) for the underlying shares of common stock to XXXXXXXX
within 10 days after such exercise then XXXXXXXX may take legal
action, without further notice to PINNACLE to obtain such underlying
shares, and PINNACLE agrees to pay all damages, costs and expenses
incurred by XXXXXXXX, including reasonable attorneys' fees. In
addition to any other damages sustained by XXXXXXXX as a result of
PINNACLE's failure to honor such exercise, including any diminution in
the value of the underlying shares over time, PINNACLE agrees that it
will pay XXXXXXXX interest, at the average prime rate based on New
York City banking levels for the prior six months, on the market value
of the underlying shares as of the 10th day after the exercise, for
the period beginning on the 10th day after the exercise and ending on
the day the certificates for the underlying shares are received by
XXXXXXXX.
6. In PINNACLE should, at any time, or from time to time hereafter,
effect a stock split, a reverse stock split, a business combination, a
recapitalization or merger, the terms of the XXXXXXXX Warrant shall be
proportionately adjusted to prevent the dilution or enlargement of the
rights of the XXXXXXXX interest.
7. The obligation of PINNACLE to register the XXXXXXXX SHARES, including
the shares issuable upon exercise of the XXXXXXXX Warrants, pursuant
to the demand or the piggy back registration rights set forth in
paragraph 6 above, shall be without regard to whether the XXXXXXXX
Warrants have been or will be exercised.
8. PINNACLE agrees that, for a period of three (3) years from the date of
this AGREEMENT, PINNACLE will utilize the registration exemption set
forth in Regulation S under the ACT, nor issue any security with a
downward ratchet dilution program without the consent of XXXXXXXX,
which consent will not be unreasonably withheld.
9. The AGREEMENT constitutes and entire Warrant Agreement between the
parties and when a copy hereof is presented to PINNACLE's transfer
agent, together with a request that all or part of the XXXXXXXX
Warrant be exercised and a certified check in the proper amount or a
direction, pursuant to the cashless exercise option, that shares be
withheld to pay for the exercise, the certificates for the appropriate
number of shares of Common Stock shall be promptly issued.
10. Upon the execution of this AGREEMENT, PINNACLE shall include in its
next annual report and filings the highlights and terms of this
investment banking AGREEMENT.
11. Upon the signing of this AGREEMENT, PINNACLE shall pay XXXXXXXX
$10,000 as a non-accountable and non-refundable expense allowance for
due diligence and general compliance review. XXXXXXXX shall be
entitled to additional compensation, to be negotiated between XXXXXXXX
and consummated by PINNACLE or are executed by XXXXXXXX at PINNACLE's
request, during the term of this AGREEMENT to the extent that such
compensation is normal and ordinary for such transactions. In
addition, XXXXXXXX shall be reimbursed by PINNACLE for any reasonable
out-of-pocket expenses that PERSON may incur in connection with
rendering any service to or on behalf of PINNACLE that is approved, in
writing, in advance by PINNACLE's chief Executive Officer.
12. PINNACLE agrees to indemnify and hold XXXXXXXX and its directors,
officers and employees harmless from and against any and all losses,
claims, damages, liabilities, costs or expenses arising out of any
action or cause of action brought against XXXXXXXX in connection with
its rendering services under this AGREEMENT except for any losses,
claims, damages, liabilities, costs or expenses resulting from any
violation by XXXXXXXX of applicable laws and regulations including,
without limitation, those of the National Association of Securities
Dealers, Inc., the Securities and Exchange Commission or any state
securities commission or from any act of XXXXXXXX involving willful
misconduct and except that PINNACLE shall not be liable for any amount
paid in settlement of any claim that is settled without its prior
written consent.
13. XXXXXXXX agrees to indemnify and hold PINNACLE and its directors,
officers and employees harmless from and against any and all losses
claims, damages, liabilities, costs or expenses resulting from any
violation by XXXXXXXX of applicable laws and regulations including,
without limitation, those the National Association of Securities
Dealers, Inc., the Securities and Exchange Commission or any state
securities commission or from any act of XXXXXXXX involving willful
misconduct.
14. Within 90 days of the date of this AGREEMENT, a representative of
XXXXXXXX will visit the corporate headquarters of PINNACLE. PINNACLE
will submit to XXXXXXXX a current business plan setting forth how
PINNACLE plans to proceed over the next two (2) years.
15. Nothing contained in this AGREEMENT shall be construed to constitute
XXXXXXXX as a partner, employee, or agent of PINNACLE; nor shall
either party have any authority to bind the other in any respect, in
being intended that XXXXXXXX is, and shall remain an independent
contractor.
16. This AGREEMENT may not be assigned by either party hereto, except that
XXXXXXXX may assign any or all of its Warrants to its employees, and
shall be interpreted in accordance with the laws of the State of New
Jersey applicable to agreements negotiated, entered into, and
performed wholly within the State of New Jersey, and shall be binding
upon the successors of the parties. Either party may terminate this
AGREEMENT at any time, however, legally vested Warrants will remain
with XXXXXXXX.
17. If any paragraph, sentence, clause or phrase of this AGREEMENT is for
any reason declared to be illegal, invalid, unconstitutional, void or
unenforceable, all other paragraphs, sentences, clauses or phrases
hereof not so held shall be and remain in full force and effect.
18. None of the terms of this AGREEMENT shall be deemed to be waived or
modified except by an express agreement in writing signed by the party
against whom enforcement of such waiver or modification is sought. The
failure of either party at any time to require performance by the
other party of any provision hereof shall, in no way, affect the full
right to require such performance at any time thereafter. Nor shall
the waiver by either party of a breach of any provision hereof be
taken or held to be a waiver of any succeeding breach of such
provision or as a waiver of the provision itself.
19. Any dispute, claim or controversy arising out of or relating to this
AGREEMENT, or the breach thereof, shall be settled by arbitration in
Jersey City, New Jersey, in accordance with the commercial Arbitration
Rules of the American Arbitration Association. The parties hereto
agree that they will abide by and perform any award rendered by the
arbitrator(s) and that judgment upon any such award may be entered in
any Court, state or federal, having jurisdiction over the party
against whom the judgment is being entered. Any arbitration demand,
summons, complaint, other process, notice of motion, or other
application to an arbitration panel, Court or Judge, and any
arbitration award or judgment may be served upon any party hereto by
registered or certified mail, or by personal service, provided a
reasonable time for appearance or answer is allowed.
20. For purposes of compliance with laws pertaining to potential inside
information being distributed unauthorized to anyone, all
communications regarding PINNACLE; confidential information should
only be directed to Xxxxxx X. Xxxxxxxx, Chairman, Xxxxxxx Xxxxxxxxx,
President, or Xxxxxx Xxxxxxx, Vice President, Compliance. If
information is being faxed, our confidential compliance fax number is
(000) 000-0000 for communication use.
IN WITNESS WHEREOF, the parties hereto have executed this AGREEMENT as of
the day and year set forth above.
X.X. XXXXXXXX & CO., INC. PINNACLE BUSINESS MANAGEMENT, INC.
By: /S/ Xxxxxxx Xxxxxxxxx By: /S/ Xxxx Xxxxxx
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Xxxxxxx Xxxxxxxxx Xxxx Xxxxxx
President Chief Executive Officer
