FINANCIAL ADVISORY AND CONSULTING AGREEMENT
This Agreement is made and entered into as of this ___ day of
__________, 1998, by and between CUMETRIX DATA SYSTEMS CORP., a California
corporation (the "Company"), and Xxxxxx Xxxxxxx & Company, Inc. (the
"Consultant").
In consideration of and for the mutual promises and covenants
contained herein, and for other good and valuable consideration, the receipt of
which is hereby acknowledged, the parties hereto hereby agree as follows:
1. PURPOSE. The Company hereby retains the Consultant during the
term specified in SECTION 2 hereof to render consulting advice to the Company as
an investment banker relating to financial and similar matters, upon the terms
and conditions as set forth herein.
2. TERM. Subject to the provisions of SECTIONS 8, 9 and 10 hereof,
this Agreement shall be effective for a period of twenty-four (24) months
commencing on the date hereof.
3. DUTIES OF CONSULTANT. During the term of this Agreement, the
Consultant will provide the Company with such regular and customary consulting
advice as is reasonably requested by the Company, provided that the Consultant
shall not be required to undertake duties not reasonably within the scope of the
consulting advisory service contemplated by this Agreement. In performance of
these duties, the Consultant shall provide the Company with the benefits of its
best judgment and efforts. It is understood and acknowledged by the parties
that the value of the Consultant's advice is not measurable in any quantitative
manner, and that the Consultant shall be obligated to render advice, upon the
request of the Company, in good faith, but shall not be obligated to spend any
specific amount of time in doing so. The Consultant's duties may include, but
will not necessarily be limited to:
A. Providing sponsorship and exposure in connection with the
dissemination of corporate information regarding the Company
to the investment community at large under a systematic
planned approach.
B. Rendering advice and assistance in connection with the
preparation of annual and interim reports and press
releases.
C. Arranging, on behalf of the Company and its representatives,
at appropriate times, meetings with securities analysts of
major regional investment banking firms.
D. Assisting in the Company's financial public relations,
including discussions between the Company and the financial
community.
E. Rendering advice with regard to internal operations,
including:
(i) advice regarding formation of corporate goals and
their implementation;
(ii) advice regarding the financial structure of the
Company and its divisions or subsidiaries or any
programs and projects of such entities;
(iii) advice concerning the securing, when necessary and if
possible, of additional financing through banks,
insurance companies and/or other institutions; and
(iv) advice regarding corporate organization and
personnel.
F. Rendering advice with respect to any acquisition program of
the Company.
G. Rendering advice regarding a future public or private
offering of securities of the Company or of any subsidiary.
4. RELATIONSHIPS WITH OTHERS. The Company acknowledges that the
Consultant and its affiliates are in the business of providing financial
services and consulting advice (of all types contemplated by this Agreement) to
others. Nothing herein contained shall be construed to limit or restrict the
Consultant or its affiliates from rendering such services or advice to others.
5. CONSULTANT'S LIABILITY. In the absence of gross negligence or
willful misconduct on the part of the Consultant, or the Consultant's breach of
this Agreement, the Consultant shall not be liable to the Company, or to any
officer, director, employee, shareholder or creditor of the Company, for any act
or omission in the course of or in connection with the rendering or providing of
advice hereunder. Except in those cases where the gross negligence or willful
misconduct of the Consultant or the breach by the Consultant of this Agreement
is alleged and proven, the Company agrees to defend, indemnify and hold the
Consultant harmless from and against any and all reasonable costs, expenses and
liability (including, but not limited to, attorneys' fees paid in the defense of
the Consultant) which may in any way result from services rendered by the
Consultant pursuant to or in any connection with this Agreement.
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6. EXPENSES. The Company, upon receipt of appropriate supporting
documentation, shall reimburse the Consultant for any and all reasonable
out-of-pocket expenses incurred by the Consultant in connection with services
rendered by the Consultant to Company pursuant to this Agreement, including, but
not limited to, hotel, food and associated expenses, all charges for travel and
long-distance telephone calls and all other expenses incurred by the Consultant
in connection with services rendered by the Consultant to the Company pursuant
to this Agreement. Expenses payable under this SECTION 6 shall not include
allocable overhead expenses of the Consultant, including, but not limited to,
attorneys' fees, secretarial charges and rent.
7. COMPENSATION. As compensation for the services to be rendered by
the Consultant to the Company pursuant to SECTION 3 hereof, the Company shall
pay the Consultant a financial consulting fee of two thousand dollars ($2,000)
per month for twenty-four (24) months commencing on __________, 1998.
Forty-Eight Thousand Dollars ($48,000), representing payment in full of all
amounts due the Consultant pursuant to this Section 7, shall be paid by the
Company on __________, 1998.
8. OTHER ADVICE. In addition to the duties set out in SECTION 3
hereof, the Consultant agrees to furnish advice to the Company in connection
with the acquisition of and/or merger with other companies, joint ventures with
any third parties, license and royalty agreements and any other financing (other
than the private or public sale of the Company's securities for cash),
including, but not limited to, the sale of the Company itself (or any
significant percentage, subsidiaries or affiliates thereof).
In the event that any such transactions are directly or indirectly
originated by the Consultant for a period of five (5) years from the date
hereof, the Company shall pay fees to the Consultant as follows:
LEGAL CONSIDERATION FEE
------------------- ---
1. $ -0- - $3,000,000 5% of legal consideration
2. $ 3,000,001 - $4,000,000 Amount calculated pursuant to line
1 of this computation, plus 4% of
excess over $3,000,000
3. $ 4,000,001 - 5,000,000 Amount calculated pursuant to lines
1 and 2 of this computation, plus
3% of excess over $4,000,000
4. above $ 5,000,000 Amount calculated pursuant to lines
1, 2 and 3 of this computation,
plus 2% of excess over $5,000,000.
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Legal consideration is defined, for purposes of this Agreement, as the
total of stock (valued at market on the day of closing, or if there is no public
market, valued as set forth herein for other property), cash and assets and
property or other benefits exchanged by the Company or received by the Company
or its shareholders (all valued at fair market value as agreed or, if not, by
any independent appraiser), irrespective of period of payment or terms.
9. SALES OR DISTRIBUTIONS OF SECURITIES. If the Consultant assists
the Company in the sale or distribution of securities to the public or in a
private transaction, the Consultant shall receive fees in the amount and form to
be arranged separately at the time of such transaction.
10. FORM OF PAYMENT. All fees due to the Consultant pursuant to
SECTION 8 hereof are due and payable to the Consultant, in cash or by
certified check, at the closing or closings of a transaction specified in
such SECTION 8 or as otherwise agreed between the parties hereto; PROVIDED,
however, that in the case of license and royalty agreements specified in
SECTION 8 hereof, the fees due the Consultant in receipt of such license and
royalty agreements shall be paid as and when license and/or royalty payments
are received by the Company. In the event that this Agreement shall not be
renewed for a period of at least twelve (12) months at the end of the five
(5) year period referred to in SECTION 8 hereof or if terminated for any
reason prior to the end of such five (5) year period then, notwithstanding
any such non-renewal or termination, the Consultant shall be entitled to the
full fee for any transaction contemplated under SECTION 8 hereof which closes
within twelve (12) months after such non-renewal or termination.
11. LIMITATION UPON THE USE OF ADVICE AND SERVICES.
A. No person or entity, other than the Company or any of its
subsidiaries, shall be entitled to make use of or rely upon the advice of the
Consultant to be given hereunder, and the Company shall not transmit such advice
to others, or encourage or facilitate the use of or reliance upon such advice
by others, without the prior written consent of the Consultant.
B. It is clearly understood that the Consultant, for services
rendered under this Agreement, makes no commitment whatsoever as to making a
market in the securities of the Company or to recommend or advise its clients to
purchase the securities of the Company. Research reports or corporate finance
reports that may be prepared by the Consultant will, when and if prepared, be
done solely on the merits or judgment of analysts of the Consultant or senior
corporate finance personnel of the Consultant.
C. The use of the Consultant's name in any annual report or other
report of the Company, or any release or similar document prepared by or on
behalf of the Company, must have the prior written approval of the Consultant
unless the Company is required by law to include the Consultant's name in such
annual report, other report or release, in which event the Consultant will be
furnished with a copy of such annual report, other report or release using
Consultant's name in advance of publication by or on behalf of the Company.
D. Should any purchases of securities be requested to be effected
through the Consultant by the Company, its officers, directors, employees or
other affiliates, or by any person
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on behalf of any profit sharing, pension or similar plan of the Company, for the
account of the Company or the individuals or entities involved, such orders
shall be taken by a registered account executive of the Consultant, shall not be
subject to the terms of this Agreement, and the normal brokerage commission as
charged by the Consultant will apply in conformity with all rules and
regulations of the New York Stock Exchange, the National Association of
Securities Dealers, Inc. or other regulatory bodies. Where no regulatory body
sets the fee, the normal established fee as used by the Consultant shall apply.
E. The Consultant shall not disclose confidential information which
it learns about the Company as a result of its engagement hereunder, except as
such disclosure as may be required for Consultant to perform its duties
hereunder.
12. INDEMNIFICATION. Since the Consultant will be acting on behalf
of the Company in connection with its engagement hereunder, the Company and
Consultant have entered into a separate indemnification agreement substantially
in the form attached hereto as EXHIBIT A and dated the date hereof, providing
for the indemnification of Consultant by the Company. The Consultant has
entered into this Agreement in reliance on the indemnities set forth in such
indemnification agreement.
13. SEVERABILITY. Every provision of this Agreement is intended to
be severable. If any term or provision hereof is deemed unlawful or invalid for
any reason whatsoever, such unlawfulness or invalidity shall not affect the
validity of the remainder of this Agreement.
14. MISCELLANEOUS.
A. Any notice or other communication between the parties hereto
shall be sent by certified or registered mail, postage prepaid, if to the
Company, addressed to CUMETRIX, INC., 0000 Xxxx Xxxx Xxxxx, Xxxx xx Xxxxxxxx,
XX 00000, Attention: Max Toghraie, Chief Executive Officer with a copy to
Troop Xxxxxxxxx Xxxxxxx & Xxxxxx, LLP, 00000 Xxxxxxxx Xxxxxxxxx, Xxx Xxxxxxx,
XX 00000-0000, Attn: Xxxxxx X. Xxxxxxxx, or, if to the Consultant, addressed
to it at 00 Xxxxxx Xxxx, 0xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention:
Xxxxxx Xxxxxxx, Chief Executive Officer, with a copy to Xxxxxx, Xxxxxxxxxx &
Xxxxxxxxx LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxx
Xxxxxxxxxxx, Esq., or to such address as may hereafter be designated in
writing by one party to the other. Such notice or other communication shall
be deemed to be given on the date of receipt.
B. If, during the term hereof, the Consultant shall cease to do
business, the provisions hereof relating to the duties of the Consultant and
compensation by the Company as it applies to the Consultant shall thereupon
cease to be in effect, except for the Company's obligation of payment for
services rendered prior thereto. This Agreement shall survive any merger of,
acquisition of, or acquisition by the Consultant and, after any such merger or
acquisition, shall be binding upon the Company and the corporation surviving
such merger or acquisition.
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C. This Agreement embodies the entire agreement and understanding
between the Company and the Consultant and supersedes any and all negotiations,
prior discussions and preliminary and prior agreements and understandings
related to the central subject matter hereof.
D. This Agreement has been duly authorized, executed and delivered
by and on behalf of the Company and the Consultant.
E. This Agreement shall be construed and interpreted in accordance
with laws of the State of New York, without giving effect to conflicts of laws.
F. This Agreement and the rights hereunder may not be assigned by
either party (except by operation of law) and shall be binding upon and inure to
the benefit of the parties and their respective successors, assigns and legal
representatives.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date hereof.
CUMETRIX DATA SYSTEMS CORP.
By:
--------------------------------------------
Max Toghraie
Chief Executive Officer
XXXXXX XXXXXXX & COMPANY, INC.
By:
--------------------------------------------
Xxxxxx Xxxxx
Chief Operating Officer
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EXHIBIT A
_________________, 1998
XXXXXX XXXXXXX & COMPANY, INC.
00 Xxxxxx Xxxx
0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
In connection with our engagement of XXXXXX XXXXXXX & COMPANY, INC.
(the "Consultant") as our financial advisor and investment banker, we hereby
agree to indemnify and hold the Consultant and its affiliates, and the
directors, officers, partners, shareholders, agents and employees of the
Consultant (collectively the "Indemnified Persons"), harmless from and against
any and all claims, actions, suits, proceedings (including those of
shareholders), damages, liabilities and expenses incurred by any of them
(including, but not limited to, fees and expenses of counsel) which are (A)
related to or arise out of (i) any actions taken or omitted to be taken
(including any untrue statements made or any statements omitted to be made) by
us, or (ii) any actions taken or omitted to be taken by any Indemnified Person
in connection with our engagement of the Consultant pursuant to the Financial
Advisory and Consulting Agreement, of even date herewith, between the Consultant
and us (the "Consulting Agreement"), or (B) otherwise related to or arising out
of the Consultant's activities on our behalf pursuant to the Consultant's
engagement under the Consulting Agreement, and we shall reimburse any
Indemnified Person for all expenses (including, but not limited to, fees and
expenses of counsel) incurred by such Indemnified Person in connection with
investigating, preparing or defending any such claim, action, suit or proceeding
(collectively a "Claim"), whether or not in connection with pending or
threatened litigation in which any Indemnified Person is a party. We will not,
however, be responsible for any Claim which is finally judicially determined to
have resulted exclusively from the gross negligence or willful misconduct of any
person seeking indemnification hereunder. We further agree that no Indemnified
Person shall have any liability to us for or in connection with the Consultant's
engagement under the Consulting Agreement except for any Claim incurred by us
solely as a direct result of any Indemnified Person's gross negligence or
willful misconduct.
We further agree that we will not, without the prior written consent
of the Consultant settle, compromise or consent to the entry of any judgment in
any pending or threatened Claim in respect of which indemnification may be
sought hereunder (whether or not any Indemnified
Person is an actual or potential party to such Claim), unless such settlement,
compromise or consent includes a legally binding, unconditional, and irrevocable
release of each Indemnified Person hereunder from any and all liability arising
out of such Claim.
Promptly upon receipt by an Indemnified Person of notice of any
complaint or the assertion or institution of any Claim with respect to which
indemnification is being sought hereunder, such Indemnified Person shall notify
us in writing of such complaint or of such assertion or institution, but failure
to so notify us shall not relieve us from any obligation we may have hereunder,
unless, and only to the extent that, such failure results in the forfeiture by
us of substantial rights and defenses, and such failure to so notify us will not
in any event relieve us from any other obligation or liability we may have to
any Indemnified Person otherwise than under this Agreement. If we so elect or
are requested by such Indemnified Person, we will assume the defense of such
Claim, including the employment of counsel reasonably satisfactory to such
Indemnified Person and the payment of the fees and expenses of such counsel. In
the event, however, that such Indemnified Person reasonably determines in its
sole judgment that having common counsel would present such counsel with a
conflict of interest or such Indemnified Person concludes that there may be
legal defenses available to it or other Indemnified Persons different from or in
addition to those available to us, then such Indemnified Person may employ its
own separate counsel to represent or defend it in any such Claim and we shall
pay the reasonable fees and expenses of such counsel. Notwithstanding anything
herein to the contrary, if we fail timely or diligently to defend, contest, or
otherwise protect against any Claim, the relevant Indemnified Party shall have
the right, but not the obligation, to defend, contest, compromise, settle,
assert crossclaims or counterclaims, or otherwise protect against the same, and
shall be fully indemnified by us therefor, including, but not limited to, for
the fees and expenses of its counsel and all amounts paid as a result of such
Claim or the compromise or settlement thereof. In any Claim in which we assume
the defense, the Indemnified Person shall have the right to participate in such
defense and to retain its own counsel therefor at its own expense.
We agree that if any indemnity sought by an Indemnified Person
hereunder is held by a court to be unavailable for any reason, then (whether or
not the Consultant is the Indemnified Person) we and the Consultant shall
contribute to the Claim for which such indemnity is held unavailable in such
proportion as is appropriate to reflect the relative benefits to us, on the one
hand, and the Consultant, on the other, in connection with the Consultant's
engagement by us under the Consulting Agreement, subject to the limitation that
in no event shall the amount of the Consultant's contribution to such Claim
exceed the amount of fees actually received by the Consultant from us pursuant
to the Consultant's engagement under the Consulting Agreement. We hereby agree
that the relative benefits to us, on the one hand, and the Consultant, on the
other hand, with respect to the Consultant's engagement under the Consulting
Agreement shall be deemed to be in the same proportion as (a) the total value
paid or proposed to be paid or received by us or our stockholders as the case
may be, pursuant to the transaction (whether or not consummated) for which the
Consultant is engaged to render services bears to (b) the fee paid or proposed
to be paid to the Consultant in connection with such engagement.
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Our indemnity, reimbursement and contribution obligations under this
Agreement shall be in addition to, and shall in no way limit or otherwise
adversely affect any rights that an Indemnified Part may have at law or at
equity.
Should the Consultant, or any of its directors, officers, partners,
shareholders, agents or employees, be required or be requested by us to provide
documentary evidence or testimony in connection with any proceeding arising from
or relating to the Consultant's engagement under the Consulting Agreement, we
agree to pay all reasonable expenses (including but not limited to fees and
expenses of counsel) in complying therewith and one thousand dollars ($1,000)
per day for any sworn testimony or preparation therefor, payable in advance.
We hereby consent to personal jurisdiction and service of process and
venue in any court in which any claim for indemnity is brought by any
Indemnified Person.
It is understood that, in connection with the Consultant's engagement
under the Consulting Agreement, the Consultant may be engaged to act in one or
more additional capacities and that the terms of the original engagement or any
such additional engagement may be embodied in one or more separate written
agreements. The provisions of this Agreement shall apply to the original
engagement and any such additional engagement and shall remain in full force and
effect following the completion or termination of the Consultant's
engagement(s).
Very truly yours,
CUMETRIX DATA SYSTEMS CORP.
By:
--------------------------------------------
Max Toghraie
Chief Executive Officer
CONFIRMED AND AGREED TO:
XXXXXX XXXXXXX & COMPANY, INC.
By:
------------------------------
Xxxxxx Xxxxx
Chief Operating Officer
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