EXHIBIT 10.5
BOLDER VENTURE PARTNERS
0000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000
July 28, 1999
Messrs. Xxxxx Xxxxxx & Xxxxx Xxxxxxx
E-XACT TRANSACTIONS LTD.
0000 - 000 Xxxx Xxxxxxxx Xxxxxx
Xxxxxxxxx, XX X0X 0X0
Dear Sirs:
We write to record our agreement (the "Agreement") with respect to the matters
described herein. This Agreement supersedes the Letter of Intent entered into by
us on June 21, 1999, which has no further effect. Bolder Venture Partners, LLC
("BVP") has reviewed e-XACT Transactions Ltd. ("e-XACT") and its e-commerce
software and is most impressed with the opportunity e-XACT has to become a
first-to-market service provider in the e-commerce world. BVP wishes to pursue
the opportunity presented by e-XACT and to play a significant role in aiding
e-XACT in its future growth and e-XACT wishes to engage BVP for that purpose.
Accordingly, BVP and e-XACT agree as follows:
1. BVP will lead a complete financing plan which will include the following:
(a) an initial U.S.$700,000 private placement (the "Initial Placement") to
close within 30 days after the later of (i) the signing of this Agreement,
and (ii) the corporate continuance of e-XACT into the State of Delaware,
subject to the completion, prior to the Initial Placement, of a capital
reorganization which will result in e-XACT having a fully-diluted capital
structure consisting of 4.2 million shares;
(b) immediately upon completion of the Initial Private Placement, BVP will lead
and direct an initial public offering (the "IPO") to raise approximately US
$1.5 million, depending on market conditions, and listing of e-XACT shares
on the Vancouver Stock Exchange (the "VSE"); and
(c) following the IPO, BVP will complete a US $3,000,000 - US $5,000,000
private placement (the "Follow-On Placement") which will qualify e-XACT to
list its shares on the Nasdaq Small Cap Market Place.
In addition, e-XACT will pay BVP a success fee of U.S. $30,000, 50% on
closing of the Initial Placement and the balance (50%), on completion of
the IPO.
The time horizon from the Initial Placement through the IPO and to
completion of the Follow-On Placement which will be in the range of 12 - 24
months. BVP is prepared to fund, if required, as agent and as principal,
100% of each financing tranche and will fund not less than 50% of each
tranche.
e-XACT management will provide BVP with a "President's List" of close
personal friends, relatives and business associates who have expressed
interest in participating in financings carried out by e-XACT and BVP.
e-XACT management and BVP will agree on the approximate number of e-XACT
shares to be reserved for subscribers from the President's List. BVP will
have the right, but not the obligation, to accept subscriptions from the
President's List, in the denominations and to the persons set out therein.
BVP may include one or more a sub-agent in the financing process, if
required. The sub-agents shall consist of firms suggested by either e-XACT
or BVP. Sub-agents shall receive a percentage of any fees paid to BVP, in
an amount to be determined by BVP, for any portion of a financing raised by
them.
2. Subject to an approved capital reorganization of e-XACT, BVP proposes that:
(i) the Initial Placement consist of 1,400,000 shares at a price of US
$0.50 per share (US $700,000); (ii) the IPO consist of approximately
1,500,000 shares at approximately US $1.00 per share (US $1,500,000); and
(iii) the Follow-On Placement raise US $3,000,000 to US $5,000,000 at a
price to be determined with reference to market conditions at the time.
3. In partial consideration of BVP's services, e-XACT will issue BVP warrants
(the "Warrants") to purchase 900,000 shares exercisable for a period of
five years from the date hereof, which will vest in four equal trancbes,
subject to performance by BVP, as follows:
/_/ 25% of the Warrants will be exercisable upon execution by e-XACT of
this Agreement, at a price of U.S.$0.25 per share;
/_/ 25% of the Warrants will be exercisable upon completion of the Initial
Placement, at a price per share equal to the private placement price
(estimated to be US $0.50 per share);
/_/ 25% of the Warrants will be exercisable upon completion of the IPO, at
a price per Share equal to the IPO price (estimated to be US $1. 00
per share); and
/_/ The final 25% of the Warrants will be exercisable immediately upon
completion of the Follow-On Placement, at a price equal to the private
placement price.
The Warrants and any shares issued upon their exercise will have the
customary anti-dilution protection and demand and piggyback registration
rights, which will be set out in the Warrant certificates.
If all of the Shares of e-XACT are purchased by a third party, unaffiliated
to e-XACT, its shareholders, officers or directors, prior to the vesting of
all of the Warrants in accordance with the foregoing schedule, BVP will
have no entitlement to exercise any Warrants which have not vested at the
time of completion of that transaction.
The vesting schedule, described above, notwithstanding, if e-XACT is
successful in securing a NASDAQ listing and concurrent financing in an
amount not less than the total of the amounts of the IPO and the Follow-On
Placement without first completing the IPO and VSE listing, the balance of
the unvested Warrants (450,000), will vest and be exercisable by BVP at a
price of U.S.$1.00 for the same term 5 year term as the previously vested
warrants.
4. e-XACT will pay BVP's reasonable out-of-pocket expenses up to $3,000 per
month. Expenses exceeding US $3,000 per month will require prior approval
from e-XACT management in order to qualify for reimbursement.
5. BVP will also serve as corporate development and financial advisor to
e-XACT for a period of 12 months, and in that capacity will advise and
assist with respect to matters including, but not limited to: (i) strategic
planning; (ii) the recruitment of senior management, employees and
directors; (iii) the establishment of operating presence in the United
States; and (iv) the financings described above, culminating in the
securing of a NASDAQ listing with sponsorship from a US investment banking
firm. This engagement will commence effective July 1, 1999 and will
continue to have effect until June 30, 2000. In consideration of BVP's
services in this advisory capacity, e-XACT will pay BVP a monthly fee of
U.S. $10,000 on the last business day of each month throughout the
engagement period, except that, prior to the completion of the IPO, US
$7,500 per month will be paid on the last business day of every month the
balance of U.S. $2,500 will be deferred and paid upon completion of the
IPO.
BVP looks forward to aiding current management in developing e-XACT into a major
e-commerce service provider. We believe that the combination of current
management's skills and the experience BVP brings, both from a technology and a
financial markets perspective, will successfully drive the growth of e-XACT.
Throughout the term of this agreement, BVP will report directly to both of you
on all financing and/ or operational issues concerning e-XACT.
Please confirm our agreement, set forth above by executing, in the space
indicated below, and returning to us the enclosed copy of this letter.
Sincerely yours,
BOLDER VENTURE PARTNERS, LLC
/S/XXXXX XXXXX
Xxxxx Xxxxx
General Partner
Accepted and agreed to as per the terms set forth above, this 25th day of
June 1999.
e-XACT Transactions Ltd.
By: /S/XXXXX XXXXX
-----------------------------
Authorized Signatory
