Exhibit 2.3 (ii)
Page 1
July 12, 1999
Xxxxxx X. Xxxxx
President & CEO
EWRX Internet Systems, Inc.
#000-000 Xxxxxxxxx Xxxxxx
Xxxxxxxxx, X.X. V6C 1X8
CANADA
Dear Xx. Xxxxx:
We are pleased to set forth in this agreement (the "Agreement") the terms of the
retention of Harmonic Research, Inc. ("HR") by EWRX Internet Systems, Inc., its
affiliates, successors, subsidiaries or assigns (collectively, "the Company").
1) Services: HR will assist the Company as its non-exclusive financial
advisor. In connection with HR's activities on the Company's behalf, HR
will familiarize itself with the business, operations, properties and
financial condition and prospects of the Company. HR's services on a
best effort basis shall include:
a) Raising $1,500,000 up to $3,000,000 financing through a
private placement of units, each unit consisting of 50,000
shares of Class A common stock and one three-year warrant to
purchase 50,000 shares of Class A common stock at an exercise
price per share to be determined at the time of Financing (the
"Financing"),
b) Introducing the Company to the broker/dealer financial community
as well as to potential strategic partners,
c) Such other investment banking services as may be mutually agreed
upon by HR and the Company.
2) Information: In connection with HR's activities on the Company's
behalf, the Company will cooperate with HR and will furnish HR with all
information and data concerning the Company and other parties as
appropriate (the "Information") which XX xxxxx appropriate and will
provide HR with access to the Company's officers, directors, employees,
independent accountants and legal counsel. The Company represents and
warrants that all Information made available to HR by the Company will
be complete and correct in all material respects and will not contain
any untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein not misleading
in the light of the circumstances under which such statements are made.
The Company acknowledges and agrees that, in rendering its services,
hereunder, HR will be using and relying on the Information without
independent verification thereof by HR or independent appraisal by HR
of any of the Company's assets. HR does not assume responsibility for
the accuracy or completeness of the Information or any other
information regarding the Company (or any other party as appropriate).
Page 2
3) Retention: In consideration of our services as set forth above, HR
shall be entitled to receive, and the Company agrees to pay HR, the
following compensation: a) An initial fee of $15,000.00 payable upon
execution of this Agreement as advance payment for the 90 day
consulting period commencing on the date of execution of this
Agreement, and
b) Thereafter, the Company will continue to retain HR for a fee of
$15,000.00 per quarter for a period of no less than 90 days
payable in advance.
c) As compensation for HR's services hereunder (in addition to
section3(a) & 3(b) above}, the Company shall grant to HR and its
designees three-year warrants (the "Warrants") to purchase a
total of 300,000 shares (the "Shares") of the Company's common
stock at $1.00 per share, 150,000 upon signing and 150,000 upon
closing of at least $500,000 of the Financing.
4) Financing Compensation:
a) As compensation for raising funds for the company, whether as
capital or as debt and whether in the form of cash, securities
or other property (hereinafter, a "Financing"), HR will
receive a cash fee equal to 8% of the amount of funds raised
by HR (as defined below) plus a like-kind fee consisting of 8%
of any securities sold by HR in connection with the Financing.
b) Fees shall be based on the total amount of funds raised by HR
from a Source and the total amount of securities sold by HR in
connection with the financing, whether or not the Financing is
fully funded at the initial closing. Fees are payable as funds
are received by the Company or as securities are issued by the
Company. These fees shall also apply to any subsequent
Financing from a Source if such Financing is the result of an
agreement between the Company and the Source which is executed
within three-years of the date of this Agreement.
c) For the purposes of this Agreement, a "Source" shall include
and all investors, agents, investment bankers, and other
providers of capital introduced to the Company, directly by
HR. The Company is not obligated to accept any financing from
any Source introduced by Harmonics.
Page 3
d) The securities issued to HR in satisfaction of its
compensation shall be registered within 30 days of a closing
on the Financing and the Company shall use its best effort to
have the registration statement declared effective as soon as
possible thereafter.
5) Transaction Compensation:
a) If, at any time within three years after the date of this
Agreement, the Company reaches an agreement to enter into any
Transaction (as defined below) with any person or any
corporation, partnership or other entity identified to the
Company by HR during the term of this Agreement (an "Introduced
Party"), then the Company shall pay HR at the time of and from
the proceeds of the initial closing of such Transaction
Compensation equal to 10% of the first $2 million value of such
Transaction, 8% of the next $2 million Aggregate Consideration of
such Transaction, 6% of the next $2 million Aggregate
Consideration of such Transaction,, and 4% of the remaining
Aggregate Consideration of such Transaction. Transaction
Compensation shall also be payable, according to the same
formula, and under the same terms and conditions, in the event of
any subsequent Transaction between the Company and the Introduced
Party which is the result of an agreement between the Company and
the Introduced Party which is executed within three years of the
date of this Agreement.
6) Transaction: As used in this Agreement, the term "Transaction" shall
include, but not be limited to,
a) any merger, consolidation, reorganization, recapitalization,
business combination, or other transaction pursuant to which the
Introduced Party acquires, is acquired by, or combines with, the
Company,
b) the acquisition, directly, in whole or part
i) by the Company of the assets or securities of the Introduced
Party or
ii) by the Introduced Party of the assets or securities of the
Company, or
c) any other business transaction which involves an exchange of
assets, goods, or services between the Company and the
Introduced Party other than a funding described in paragraph 5
above.
Page 7
7) Aggregate Consideration: For purposes of this Agreement, "Aggregate
Consideration" shall mean the total value of all cash, securities,
other property, and any other consideration, including, without
limitation, any contingent fees or payments earned, any amounts paid in
connection with a non-competition, consulting or similar agreement, or
any other consideration, paid or payable, directly or in connection
with a Transaction.
The fair market value of any securities (whether debt or equity) shall
be determined by the closing or last sales price of such securities on
the date of the consummation of the Transaction, provided, that if any
securities are a class of newly issued, publicly-traded securities,
then the fair market value thereof shall be the average of the closing
prices for the 20 trading days subsequent to the fifth trading day
after the consummation of the Transaction. If no public market exists
for any securities issued in the Transaction, then the fair market
value thereof, as well as the fair market value of any other property
included in the Aggregate Consideration but not sold on an organized
market or exchange, shall be mutually agreed upon by the Company's
Board of Directors and HR in good faith. In the event of a dispute with
respect to the fair market value of any property included in the
Aggregate Consideration, all such property shall be evaluated by a
third party acceptable to both the Company and HR, and if no such third
party can be identified, then pursuant to the arbitration provisions of
paragraph 16.
Aggregate Consideration shall also be deemed to include the principal
value of any indebtedness, including, without limitation, pension
liabilities, guarantees and other obligations assumed, directly in
connection with, or which survives the closing of the Transaction.
If the Transaction involves a sale of all or a substantial part of the
operating assets of the Company, the term Aggregate Consideration shall
include (x) the value of any current assets not sold, minus (y) the
value of any current liabilities not assumed by the Buyer.
If the Aggregate Consideration receivable in the Transaction is subject
to increase by contingent payments related to future events, HR's fee
shall be calculated on the basis of the maximum considerations
receivable, and the entire amount of such fee shall be payable at the
closing of the Transaction.
If the Aggregate Consideration receivable in the Transaction is subject
to decrease related to future events, or any such portion of such
Aggregate Consideration is placed in escrow or otherwise withheld by
any source(s) of capital awaiting the outcome of future events, HR's
fee shall be proportionately escrowed provided however that HR shall be
paid proportionately as funds are released from escrow.
If the Aggregate Consideration to be paid is computed in any other
foreign currency, the value of such foreign currency shall, for
purposes hereof, be converted into US Dollars at the prevailing
exchange rate on the date or dates on which such consideration is
payable.
Page 5
8) Prior Notice: The Company hereby agrees to give a 15 day prior written
notice to HR before the consummation of any Financing or Transaction of
the Company with an Introduced Party and consents to inform HR of the
time and place of settlement of such Financing(s) or Transaction(s) and
permit attendance.
9) Reimbursements: In addition to the fees described above, the Company
agrees to reimburse HR for non-accountable expenses (including fees and
disbursements of counsel, and of other consultants and advisors
retained by HR for the Company's benefit) incurred in connection with
HR's acting for the Company pursuant to this Agreement. Such expenses
shall be equal to a maximum of 2% of the Financing.
10) Indemnification: Recognizing that Financings and Transactions of the
type contemplated by this engagement sometimes result in litigation and
that HR's rule is limited to acting as the Company's financial advisor,
the Company agrees to indemnify HR (and its directors, officers,
agents, employees, and controlling persons) to the full extent lawful
against any and all claims, losses and expenses as incurred (including
all reasonable fees and disbursements of HR's and such persons counsel
and all out-of-pocket expenses incurred in any connection with
investigation of any preparation for any such pending or threatened
claims and any litigation or other proceedings arising therefrom, such
fees, disbursements and expenses to be reimburse quarterly as incurred)
arising out of any actual or proposed Financing or Transaction or HR's
engagement hereunder (provided, however, there shall be excluded from
such indemnification of any such claim, loss or expense that is found
in a final judicial determination, or a settlement tantamount thereto,
to constitute willful misconduct on the part of HR). The foregoing
agreement shall be in addition to any rights that any indemnified party
may have a common law.
11) Term: The term of this Agreement shall be for a period of three months
from the date of execution hereof and shall automatically renew for
additional 90 day periods unless terminated in writing by either party
prior to the end of each 90 day period. Paragraphs 4, 5, 9, 10 and 15
of this Agreement shall survive the termination thereof.
12) Independent Contractor: HR shall at all times act as and be an
independent contractor, and in no event shall either HR or any of its
employees, agents, or representatives be deemed to be an employee of
the Company. HR shall have no authority to bind the Company to any
obligation, express or implied to any third party.
13) HR's Right to Conduct Business with Competitors: HR may at all times
enter into any other agreement of any kind with any third party,
whether or not such party may be a competitor or otherwise adverse to
the Company provided that HR shall maintain the confidentiality of all
information concerning the Company which it receives from the Company
unless such information is or becomes available to the public. HR shall
devote such time as it deems necessary as to the performance of its
duties hereunder and without any direct supervision of the Company.
Paage 6
14) Validity: The validity and interpretation of this Agreement shall be
governed by the law of the State of New York application to agreements
made to and be fully performed therein.
15) Arbitration: Any dispute, claim or controversy arising out of or
relating to this Agreement, or the breach thereof, shall be settled by
Arbitration in New York, NY in accordance with the Commercial
Arbitration Rules of the American Arbitration Association before one
neutral arbitrator. The arbitrator may xxxx the successful party
recovery of its expenses incurred in connection with the arbitration,
including reasonable attorney's fees. The parties hereto agree that
they will abide by and perform any award rendered by the arbitrator(s)
and that judgement upon any such award be entered into any court, state
or federal, having jurisdiction over the party against whom the
judgement 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 judgement 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.
16) Assigns: The benefits of this Agreement shall inure to the respective
successors and assigns of the parties hereto and of the indemnified
parties hereunder and their successors and assigns and representatives
and the obligations and liabilities assumed in this Agreement by the
parties hereto shall be binding upon their representative successors
and assigns.
17) Suitability: HR makes no representations or warranty with respect to
the condition (financial or otherwise), investment or credit history,
background or any other suitability of any potential investor.
18) Counterparts: For the convenience of the parties hereto, any number of
counterparts of this Agreement may be executed by the parties hereto.
Each such counterpart shall be, and shall be deemed to be, an original
instrument, but all such counterparts taken together shall constitute
one and the same Agreement. This Agreement may not be modified or
amended except in writing signed by the parties hereto.
19) Miscellaneous: This Agreement constitutes the entire agreement of the
parties pertaining to the subject matter hereof, and the parties have
made no agreements, representations or warranties relating to the
subject matter of this Agreement that are not set forth herein.
Page 7
If the foregoing correctly sets forth our Agreement, please sign the enclosed
copy of this letter in the space provided and return it to us.
Very truly yours,
Harmonic Research, Inc.
By: /s/
Xxxxx Xxxxxx
Chairman
AGREED TO AND ACCEPTED:
EWRX Internet Systems, Inc., xxxxxx accepts the terms provisions of, and agrees
to be bound by the terms and provisions of the foregoing letter, as of this 15
day of July, 1999.
EWRX Internet Systems, Inc.
By: signature on file
Xxxxxx X. Xxxxx
President and CEO
