Item 1.01. Entry into a Material Definitive Agreement.
On November 6, 2007, the Company entered into an engagement agreement for a two
year period with CapNet Securities Corporation ("CapNet")as its exclusive
financial consultant, placement Agent and finder in connection with various
financing strategies including (i) an offering and sale of securities intended
to be exempt from registration under the Securities Act of 1933, as amended (the
"Securities Act") pursuant to Rule 506 of Regulation D of the Securities Act,
and the various applicable state laws, (ii) joint venture partners and (iii)
potential acquirers. The agreement does not constitute a firm commitment by
CapNet and will be conducted on a best-efforts basis and may be terminated by
either party after six months.
As compensation for the exclusive services of CapNet hereunder, the Company
shall pay to CapNet and its Identified Parties certain fees as follows:
(a) In the event of any successful Financing provided by a CapNet Identified
Party (i)that closes during the Engagement Period or (ii) that closes
during the Residual Period, or (iii) which results from, or completes a
Financing contemplated by a written commitment letter or agreement in
principle which is entered into during either the Engagement Period or the
Residual Period, then the Company shall pay to CapNet, in cash, a fee equal
to eight percent (8%) of the gross consideration received by the Company
pursuant to the Financing (and payable out of the proceeds of the
Financing). However, if some or all of the Financing consists of indebted-
ness that is not convertible into equity securities of the Company, the fee
shall instead be four percent (4%) for that portion of the gross
Consideration received by the Company pursuant to the Financing that
relates to such indebtedness. The initial (Stage 1) contemplated equity
financing amount is approximately Ten Million Dollars ($10 million). The
secondary (Stage 2) contemplated equity financing amount is approximately
Two-Hundred and Fifty Million Dollars ($250,000,000). Fees are payable with
respect to consideration within five (5) days of receipt by the Company.
(b) In addition, if the Company (i) receives consideration of not less than
$500,000 from a Financing on or before March 31, 2008 (the "Bridge
Financing") then the Company shall issue to CapNet warrants to purchase a
number of shares of common stock of the Company equal to 1,000,000 warrants
for each $500,000 of Bridge Financing, up to a maximum of $4,000,000,
provided by CapNet and or CapNet Indentified Parties. If the Bridge
Financing is not provided by a CapNet Identified Party, CapNet shall
receive one-half of the warrants that would have been due it had the CapNet
Identified Party provided the Bridge Financing. If the Bridge Financings
are provided by CapNet Identified Parties, the exercise price shall be $.20
per share. The warrants shall expire on the third anniversary of the
closing date of the Primary Financing. The warrants shall be subject to
other customary terms and conditions.
(c) If a Transaction is consummated (i) during the Engagement Period, or (ii)
during the Residual Period with a CapNet Identified Party, or (iii) which
results from, or completes a Transaction contemplated by a letter of intent
or a definitive agreement to effect a Transaction entered into during the
Residual Period (with a CapNet Identified Party) or the Engagement Period,
then the Company shall pay to CapNet, or its designees, promptly on each
Transaction Date a transaction fee equal to:
8% of the first $1,000,000 of Consideration
7% of the second $1,000,000 of Consideration
6% of the third $1,000,000 of Consideration
5% of the fourth $1,000,000 of Consideration
4% of any additional Consideration (above $4,000,000)
(d) In the event that the Company introduces the parties for the capital
sourcing or for any joint venture or NOA Agreement, then in lieu of
compensation outlined in(a) or (c) then CapNet will be given a fee of 2.5%
of the gross consideration of the transaction.