EXHIBIT 5.31
December 21, 1999
XXXxxxxxx.xxx, Inc.
Xxxxx 000,
0000 Xxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx Xxxxxxxx
Xxxxxx X0X 0X0
Attention: Xxxxx X. Xxxxx
Dear Xxxxx:
In accordance with our telephone discussions during the past several weeks, we
are pleased to submit to you this letter which, along with the attached standard
Terms and Conditions ("Agreement"), is our proposal to you setting forth the
financial and investment banking services we will provide to XXXxxxxxx.xxx, Inc.
("PCS").
ICE Holdings North America, LLC ("ICE") ("Investment Banker") will assist you
and PCS as its exclusive representative, subject to the terms herein, in
connection with identifying and seeking out a person, group of persons,
partnership, joint venture, corporation or other entity (each together with its
affiliates, a "Partner") which would be interested in entering into one or more
Transactions with PCS. The Investment Banker will, among other things, do the
following as part of this engagement:
. Advise, negotiate and otherwise assist PCS regarding strategies for
obtaining capital, as well as about the Transaction's possible structure
and terms.
. Advise, negotiate and otherwise assist PCS regarding various possible
structuring vehicles by way of convertible secured notes, secured notes
with warrants attached, debt combined with options and/or warrants, new
private equity or debt investment, public offering, or other forms of
transactions ("Transactions").
. Secure for PCS, on a best efforts basis, revolving debt financing in an
amount of between US$1,000,000.00 and US$1,200,000.00 ("Debt
Financing"), which shall be secured by collateral, including,
collectively, any and all of the presently existing and hereinafter
arising accounts and rights to payments arising out of the sale or lease
of goods or the rendition of services by PCS, irrespective of whether
earned by performance ("Accounts") where Collateral or Security each
mean,
collectively, any and all of the Accounts, deposit accounts, negotiable
collateral, in each case whether now existing or hereafter acquired or
created, and any proceeds or products of any of the foregoing, or any
portion thereof and any money or other tangible or intangible property
resulting from the sale or other disposition of the Accounts, deposit
accounts or negotiable collateral, or any portion thereof or interest
therein, and the substitutions, replacements, additions, accession,
products and proceeds thereof. The Debt Financing shall be in the form
of convertible secured notes, secured notes with warrants attached,
other secured debt combined with options and/or warrants, or such
similar secured debt financing on substantially the following terms and
conditions:
1. In the event of Secured notes with warrants attached, warrants
for 1,000,000 shares, on a fully diluted basis, which shall
have an exercise price of between US$1.05 to US$1.25 ("A
Warrants"); warrants for 500,000 shares, on a fully diluted
basis, which shall have an exercise price of between US$1.75
and US$2.25 ("B Warrants"). The A Warrants shall have an
exercise term of 18 month from the Date of Closing. The B
Warrants shall have an exercise term of 30 months from the Date
of Closing. The A Warrants and B Warrants shall be issued and
delivered immediately upon PCS' first drawdown of funds under
the Debt Financing.
2. The Debt Financing shall be fully available from the date of
closing (on or about January 15, 2000) ("Date of Closing") for
a period of one year (on or about January 15, 2001).
3. The Debt Financing shall be available in tranches in draw down
amounts of US$100,000.00 subject to sub-paragraph 4 hereafter.
4. The funds provided by the Debt Financing, or any part thereof,
shall only be available upon confirmation that at least one
commercial transaction will take place between PCS and any of
the following: Go-Figure, or Unisys, or other third party, on
such terms and conditions as are, in the sole judgment of the
Investment Banker, sufficient to provide net cash flow to
service and repay the Debt Financing or any part thereof which
PCS is requesting be drawn down. The foregoing confirmation
will be made by the Investment Banker before the first drawdown
but no further confirmations will be required before PCS can
make any subsequent drawdown.
5. The Debt Financing shall bear interest at 11% per annum,
payable monthly, not in advance, on such portion thereof as has
been drawn down, interest to commence on the date of the draw
down.
6. The Debt Financing may be repaid, in whole or in part, at any
time without penalty, at the sole option of PCS.
7. All underlying shares which may be obtained by exercise of the
A Warrants or the B Warrants shall be registered. There shall
be piggy-back registration rights on any subsequent financing
greater than US$3,000,000.00, whether in the form of equity,
debt or a combination thereof, subject to customary underwriter
cut-backs and restrictions.
8. In the event of convertible Secured notes without warrants, the
conversion shall be at such pricing as to permit the total
equity, on a fully diluted basis, obtained upon conversion to
be substantially identical to what would have been obtained in
the event of Secured notes with warrants.
9. In the event of other Secured debt/equity structure, the
conversion shall be at such pricing as to permit the total
equity, on a fully diluted basis, obtained upon conversion to
be substantially identical to what would have been obtained in
the event of Secured notes with warrants.
10. Any Debt Financing shall be on a fully Secured basis and shall
have priority over all other currently existing or after
acquired debt and the Company shall not assume any additional
debt without the express written authorization of the
Investment Banker, which consent shall not be unreasonably
withheld.
11. Prior to the Date of Closing, PCS shall have implemented a
plan, including stock options and other reasonable business
incentives and salary, reasonably satisfactory to the
Investments Banker to permit the immediate commencement of a
search for additional senior management.
Upon funding of the Debt Financing:
. Advise, negotiate and otherwise assist PCS in preparing presentation
materials and financial analysis concerning PCS, as well as advising and
making presentations to potential sources of capital and/or financing.
To the extent that we and you consider it advisable and necessary, we
will work with such experts and consultants as we jointly agree would
assist in the preparation of such material. These individuals or
entities will be engaged and compensated by the Company. The Investment
Banker will engage an individual or individuals acceptable to PCS, to
design and execute a branding campaign. The individual so engaged shall
be compensated directly by the Company.
. Advise, negotiate and otherwise assist PCS, on a best efforts basis, to
structure and close an equity public offering.
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. In the event that PCS accepts an equity public offering without selling
restrictions, the Investment Banker will cause certain of the A Warrants
and B Warrants to be exercised as follows:
1. 50% of the A Warrants and 0% of the B Warrants, if PCS accepts
an equity public offering of at least US$3,000,000.00 at a share
price of no less than US$3.00 per share.
2. 75% of the A Warrants and 25% of the B Warrants, if PCS accepts
an equity public offering of at least US$4,000,000.00 at a share
price of no less than US$4.00 per share.
3. 100% of the A Warrants and 50% of the B Warrants, if PCS accepts
an equity public offering of at least US$5,000,000.00 at a share
price of no less than US$5.00 per share.
4. 100% of the A Warrants and 100% of the B Warrants, if PCS
accepts an equity public offering of at least US$6,000,000.00 at
a share price of no less than US$6.00 per share.
. The Investment Banker shall have the right to designate an individual to
serve as a member of the Board of Directors of PCS, upon a draw down of
all or any part of the Debt Financing, and shall receive a copy of all
management accounts and related financial information at the time of
release to management.
. The Investment Banker shall have a right of first refusal on any
subsequent financing (debt, equity or combination thereof) for a period
of twelve (12) months from the Date of Closing.
. The Investment Banker agree to accept a co-lead on any subsequent
financing in an amount greater than US$5,000,000.00 and to surrender
their right of first refusal on any subsequent financing in an amount
greater than US$15,000,000.00.
. The Investment Banker will use best efforts to arrange an equity
financing of a least US$3,000,000.00 to close on or before June 30, 2000
(time not of the essence), subject to the achievement by PCS of its
designated business objectives, it being understood that this
undertaking shall be event driven and shall be subject to the sole
judgment of the Investment Banker.
. The Investment Banker will use best efforts to arrange for PCS to
transfer its listing from the OTC Bulletin Board to an exchange of
superior value at the earliest reasonable opportunity, subject to the
achievement by PCS of its designated business objectives, it being
understood that this undertaking is event driven and shall be subject to
the sole judgment of the Investment Banker.
. Advise, negotiate and otherwise assist PCS in structuring, negotiating
and closing a Transaction on terms which management deems favorable to
it and in the best interest of the Company.
. Advise, negotiate and otherwise assist PCS in developing a negotiating
strategy for a Transaction, and participating (directly or otherwise) in
any such negotiations.
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. Advise, negotiate and otherwise assist PCS in implementing and closing a
Transaction or Transactions.
. Xxxxxx Xxxxx will be responsible for and will undertake to fulfill the
above engagement on behalf of the Investment Banker.
As consideration for the services provide by Investment Banker, PCS agrees to
pay Investment Banker the following compensation and to incur the following
obligations:
. In the event that PCS enters into a Debt Financing in substantially the
form and amounts set forth above, PCS will pay the Investment Banker a
fee of 7 1/2% of the amount raised of the Debt Financing ("Debt
Financing Fee"). It is understood and agreed that in the event that the
Investment Banker secure a Debt Financing in substantially the form and
amounts set forth above and the conditions of paragraph 4 are met, and
PCS elects not to enter into the Debt Financing, then PCS shall pay to
the Investment Banker the sum of US$150,000.00 as a break-up fee
("Break-up Fee") within fifteen (15) days of the date originally set for
closing on the Debt Financing. In and to the extent that the Break-up
Fee or any portion of it is unpaid, it shall be deemed a Secured debt of
the Company.
. PCS will incur the obligation of the Break-up Fee upon advise in writing
from the Investment Banker that they have secured the Debt Financing and
are prepared to close and the conditions of paragraph 4 are met. The
obligation of the Break-up Fee will be discharged upon acceptance of the
Debt Financing.
. The Debt Financing Fee shall only be payable on the amount raised of the
Debt Financing and there shall be no additional financing fee on any
equity conversion resulting from or due to the Debt Financing.
. In the event that PCS enters into one or more Transactions with any
Partner introduced to PCS by the Investment Banker during the period
when Investment Banker is retained by PCS or within 12 months after
termination of this Agreement, PCS will pay Investment Banker a
Transaction Fee of 7 1/2% of the Aggregate Transaction Value. This shall
be in addition to the Retainer set forth below. It is understood that in
the event that the Company enters into a Transaction after the
termination of this Agreement with an entity which was not introduced to
it by Investment Banker or which is not a Partner, then no Transaction
Fee shall be due to Investment Banker hereunder.
. In addition to any fees that may be payable to Investment Banker, and
without regard to whether a Transaction is completed, PCS will reimburse
Investment Banker promptly upon request, from time to time, for its
reasonable out-of-pocket expenses incurred in connection with this
engagement. It is understood that these out-of-pocket expenses shall not
include payments to experts or outside consultants. PCS must give prior
approval for any single expense in excess of US$1,000.00, it being
understood and agreed that reasonable and customary travel, meal and
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hotel expenses incurred in negotiating and closing the Debt Financing
are hereby approved by PCS. Any such engagement and payment shall be
undertaken only with the express agreement of PCS, in accordance with
above scope of engagement. It is understood that legal fees for
documentation of a Transaction, as well as expert fees, accounting fees
etc. ("Additional Fees"), shall not be part of the Retainer, Debt
Financing Fee or Transaction Fee. We have provided you with an estimate
of what we believe certain of those Additional Fees may be. PCS shall
pay all legal fees associated with the Debt Financing and any
Transaction, including those of the Investment Banker and the lenders.
There shall be a cap on the legal fees for the Investment Banker and
lenders in the amount of US$75,000.00, which shall be deemed an approved
and agreed upon expense. At the sole option of the attorneys providing
the legal services, they may convert the legal fees to debt or equity on
the same terms and conditions as the Debt Financing.
. PCS will pay the Investment Banker a retainer ("Retainer") in the amount
of $50,000.00, payable on January 31, 2000 or upon the closing of any
Debt Financing, whichever is the later. In the event that PCS enters
into a Debt Financing, the Retainer shall be credited against the Debt
Financing Fee. The Investment Banker shall have the option to convert
the Retainer to debt or equity on the same terms and conditions as the
Debt Financing.
The Investment Banker shall be engaged as the exclusive investment banker to PCS
for a period of four (4) months with respect to the Transaction or until the
successful completion or closing of the Transaction(s) contemplated by this
Agreement, whichever occurs earlier, subject to PCS's right to terminate this
Agreement as provided below.
In the event that there is a Transaction as might be considered a conflict with
this engagement, PCS waives any such conflict and will permit Investment Banker
to continue to implement the Transaction and provide the investment banking
services detailed above. In the event that management requests that Investment
Banker represent it in such a Transaction, PCS will not object to Investment
Banker representation of the management, under such circumstances.
In order to coordinate efforts to effect a Transaction, during the period of
this engagement, PCS and its officers, directors, employees and representatives
will advise Investment Banker of any contacts which are made or have been made
by or on behalf of any prospective Partner and Investment Banker will assist PCS
in any subsequent discussion.
Either party hereto may terminate this Agreement with cause at any time after
four (4) months from the date of signing by giving thirty (30) days written
notice of such party's desire to terminate to the other party. Neither
termination of this Agreement nor completion of the assignment or Transaction
contemplated shall effect PCS's obligation to pay any compensation earned by
Investment Banker up to the date of termination or completion, as the case may
be or the Transaction Fee or reimbursement of expenses
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incurred up to the date of termination or completion or the standard terms and
conditions, all of which shall remain operative and in full force and effect.
If the foregoing is satisfactory and is consistent with the engagement which you
want to retain us to perform and the assistance which you seek from us, I would
appreciate it if you would sign the enclosed copy of this letter and return it
to the undersigned.
Sincerely yours,
ICE Holdings North America, LLC
By: /s/ Xxxxxx Xxxxx
----------------------
Xxxxxx Xxxxx
Managing Director
Accepted and Agreed to:
XXXxxxxxx.xxx, Inc.
By: /s/ Xxxxx X. Xxxxx
------------------------
Xxxxx X. Xxxxx
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STANDARD TERMS AND CONDITIONS
-----------------------------
1. As used herein, the term Aggregate Transaction Value, unless otherwise
mutually agreed upon by PCS and INVESTMENT BANKER in writing, is defined as
follows:
a. In the case of a cash Transaction, the total cash consideration
paid.
b. In the case of assumption of bank debt, the principal amount
assumed by the Buyer on the day of the Closing.
c. In the case of publicly traded common stock, the total public
market value of such common stock based on the closing price on
the day of the Transaction.
d. In the case of debt securities, the total public market value of
such debt securities based on the closing price on the day of the
Transaction; if not publicly traded, then at the face value.
e. In the case of preferred stock, the total liquidation value or
public market value of such preferred stock based on the closing
price on the day to the Transaction, whichever is higher.
f. Should the medium of exchange be any other compensation, security
or any combination of the above, the value will be mutually
agreed upon. Any such dispute will be settled by an independent
investment banker acceptable to PCS and INVESTMENT BANKER.
g. Both PCS and INVESTMENT BANKER acknowledge that PCS may elect to
enter into a transaction which is not the Transaction. It is
understood that if the Company effects a transaction in lieu of
the Transaction, the Company and INVESTMENT BANKER will in good
faith mutually agree upon acceptable cash compensation for
INVESTMENT BANKER taking into account the results obtained, and
the custom and practice among professionals acting in similar
transactions. Other transactions include, for example, license
agreements, joint ventures, non-cash contributions to the
Company, etc.. A transaction entered into in the ordinary course
of PCS's business shall not be deemed to be a Transaction under
this Agreement.
h. If the purchase price is to be paid in one or more installments,
or in a contingent pay-out, the INVESTMENT BANKER cash fee shall
be paid at the date of such installment or contingent pay-out in
the same proportion which the installment or contingent
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pay-out bears to the total purchase price.
i. If the Transaction includes debt, leveraged buyout financing,
deferred payment or any other funding, reallocation of equity or
revaluation of current equity, the total amount of the funds,
reallocation or revaluation, however denominated.
2. The Company recognizes and confirms that, in performing its engagement,
INVESTMENT BANKER will be using and relying on data, material and other
information furnished to it by the Company, or its auditing firm, attorneys,
or others (collectively "Advisors") as well as information otherwise
available, both oral and written (such data, material and other information
is herein referred to as the "Information"). The Company recognizes and
confirms that INVESTMENT BANKER does not assume responsibility for the
accuracy or completeness of the Information. The Company represents and
warrants that any of the Information furnished by it or its Advisors to
INVESTMENT BANKER will be complete in all material respects and not contain
any untrue statements of a material fact or omit to state any material fact
necessary to make the statement therein not false or misleading.
3. INVESTMENT BANKER recognizes and confirms that some of the Information is
either non-public, confidential or proprietary in nature. INVESTMENT BANKER
hereby agrees that the Information will be kept confidential and will not,
without the prior consent of the Company, be disclosed by them, their agents
or employees, other than in connection with the services to the Company as
described above as a part of its engagement or as otherwise required by law.
4. The Company agrees to indemnify and hold harmless INVESTMENT BANKER, its
employees and representatives and each person, if any, who controls
INVESTMENT BANKER within the meaning of the Securities Exchange Act of 1934
(the "Act") from and against any and all losses, claims, damages or
liabilities, joint or several, arising out of or in connection with our
engagement, including all reasonable out-of-pocket expenses, fees and
disbursements of counsel incurred by INVESTMENT BANKER, its employees,
representative or such controlling person in defending any claim, action, or
proceeding whether or not resulting in liability to INVESTMENT BANKER, its
employees, representatives or such controlling person, to which they may
become subject, caused by, or arising out of any untrue statement of a
material fact contained in Information furnished to INVESTMENT BANKER by the
Company or its Advisors in connection with our engagement, or any omission
to state therein any material fact required or necessary to make the
information not misleading in light of circumstances under which given, or
any other violation of the federal securities law or the securities laws of
any state, or otherwise arising out of our engagement hereunder except in
respect of any matter as to which INVESTMENT BANKER shall have been
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adjudicated to have acted without reasonable and ordinary care. Any party
seeking indemnification shall give PCS prompt written notice of any claim
made against such party. The INVESTMENT BANKER shall permit PCS (at PCS'
sole expense) to assume the defense of any claim or any litigation resulting
therefrom, provided that counsel for PCS shall be satisfactory to the
INVESTMENT BANKER.
5. INVESTMENT BANKER and the Company agree to waive the right to trial by jury
in the context of any claim relating to the services provided by INVESTMENT
BANKER pursuant to its engagement hereunder, including any claim concerning
INVESTMENT BANKER' advice. The parties agree that all disputes, except for
any under paragraph 1 (f), shall be resolved by binding arbitration in
accordance with the rules of procedure of he American Arbitration
Association.
6. This Agreement, the Retainer Agreement executed simultaneously herewith and
any other matters hereunder shall be governed by and construed in accordance
with the internal laws of the State of New York, including, without
limitation, Sections 5-1401 and 5-1402 of the New York General Obligations
Law and Rule 327(b) of the New York Civil Practice Law and Rules. INVESTMENT
BANKER and PCS hereby irrevocably submit the to non-exclusive jurisdiction
of the federal and New York State courts located in the City, the Borough of
Manhattan in connection with any suit, action or proceeding related to this
Agreement or any of the matters contemplated hereby, irrevocably waive any
defense of lack of personal jurisdiction and irrevocably agree that all
claims in respect of any suit, action or proceeding any be heard and
determined in any such court. INVESTMENT BANKER and PCS irrevocably waive,
to the fullest extent they may effectively do so under applicable law, any
objections which they may now or hereafter have to the laying of venue of
any such suit, action or proceeding brought in any such court and any claim
that any such suit, action or proceeding brought in any such court has been
brought in any inconvenient forum.
7. To the extent of the Fees provided for hereunder paid to INVESTMENT BANKER,
INVESTMENT BANKER will indemnify and hold PCS harmless from any claims by
corporations, firms or persons claiming by virtue of a relationship with
INVESTMENT BANKER to be entitled to a share of the fees provided hereunder.
Each party shall indemnify and hold the other party harmless from and
against any claim, liability, loss or damages (including reasonable
attorneys fees) resulting from the breach by the such indemnifying party of
any term, condition or provision of this agreement.
8. The INVESTMENT BANKER agrees to indemnify the Company and its officers and
directors and each person, if any, who controls any thereof within the
meaning of Section 15 of the Securities Act and their respective successors
against all claims, losses, damages and liabilities (or actions in respect
thereof) arising out of or based on any untrue statement of a material fact
contained in any prospectus, offering circular or other document incident to
any registration, qualification or compliance relating to securities
purchased pursuant to the Warrants (or in any related registration
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statement, notification or the like) or any omission (or alleged omission)
to state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading and will reimburse the Company
and each other person indemnified pursuant to this subsection (ii) for any
legal and any other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability or
action; provided, however, that this subsection (ii) shall apply only if
(and only to the extent that) such statement or omission was made in
reliance upon information (including, without limitation, written negative
responses to inquiries) furnished to the Company by an instrument duly
executed by the INVESTMENT BANKER and stated to be specifically for use in
such prospectus, or other document (or related registration statement,
notification or the like) or any amendment or supplement thereto; provided
further, that in no case shall any INVESTMENT BANKER be responsible for any
amount in excess of the amount of net proceeds received by such INVESTMENT
BANKER from the offering of the securities.
9. The Company represents and warrants that it is authorized to enter into and
consummate this Agreement and agrees that it will make available to
INVESTMENT BANKER all information relating to the Transaction which
INVESTMENT BANKER reasonably requires relating to the Transaction. The
Company acknowledges that INVESTMENT BANKER is entitled to rely on the
material and information supplied to it by the Company or its advisors and
shall not in any respect be responsible for the accuracy or completeness of
such information.
10. INVESTMENT BANKER does not guarantee that any Transaction will be
consummated and the Company agrees and acknowledges that it will have no
claim whatsoever against INVESTMENT BANKER if any Transaction is not
consummated.
11. The Company acknowledges that INVESTMENT BANKER does not perform legal or
accounting or tax services nor does it render legal or accounting or tax
advise on any aspect of any Transaction contemplated by this Agreement.
INVESTMENT BANKER is purely an independent contracting advisor to the
Company and is neither retained nor authorized to act as an agent in
arranging any placement of any securities of the Company.
12. No interest of any party under this Agreement may be assigned or otherwise
transferred except with the written consent of the other party. This
Agreement shall bind and inure to the benefit of the successors, assigns,
personal representatives, heirs and legatees of the parties hereto, as their
interests shall appear.
13. Failure by any party to insist upon strict compliance by another party with
any of the terms of this Agreement will not be deemed a waiver by such party
of strict compliance with any other term or provision. The unenforceability
or invalidity of any article, provision or portion of this Agreement shall
not effect the enforceability, or validity of the remaining portions,
articles or provisions thereof.
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14. This Agreement constitutes and contains the entire agreement between
Investment Bankers and the Company with respect to the subject matter
hereof, including a certain letter of engagement which is an integral part
of the Agreement and is included herein by reference as though it were set
forth. No modifications, amendments or waiver of the provisions of this
Agreement shall be effective unless made in writing specifically referring
to the Agreement and signed by each of the parties hereto. Both parties
disclaim specific authorship of this Agreement.
/s/ DWR (XXXxxxxxx.xxx, Inc. initial)
-----------------
/s/ AS (ICE Holdings North America, LLC initial)
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