AMOTHY CORPORATION
1085 RIVERSIDE TRACE
ATLANTA, GA 30328
March 17, 2004
Mr. John Creel
Chairman and Chief Executive Officer
Rapidtron, Inc.
3151 Airway Avenue, Building Q
Costa Mesa, CA 92626
Dear Mr. Creel:
This letter agreement (Agreement) confirms the understanding and agreement
between Amothy Corporation (Amothy) and Rapidtron, Inc. (Company or RPDT) as
follows:
1. During the term of this Strategic Services Agreement (Agreement),
Amothy shall provide advice to, and consult with, the Company concerning
business and financial planning, corporate organization and structure, financial
matters in connection with the operation of the business of the Company, private
equity and debt financing, acquisitions, mergers and other similar business
combinations ("Strategic Services"). Amothy shall make qualified personnel
available for at least four (4) hours per month to provide such services. Such
Strategic Services shall include the following, at the request of the Company:
(a) Facilitate high-impact growth by assisting the Company to
maintain focus and execute its defined strategic objectives.
(b) Review and recommend revision, as appropriate, of the company's
business plan to remain consistent with its strategy.
(c) Evaluate strategic relationships with partners, customers, and
suppliers.
(d) Assist the Company with any project that could have a quantum
impact on value creation.
(e) Advise in the establishment of procedures and processes for
review and action by senior management.
(f) Advise in the evaluation, selection and recruitment of
professional advisors, including accounting, investor relations
focused in North America, and legal advisors.
(g) Advise as to such other matters as the Company may reasonably
request.
Amothy shall provide such advice and consultation to the Company in such
form, manner and place as the Company reasonably requests. Amothy shall not
by this Agreement be
prevented or barred from rendering services of the same or similar nature,
as herein described, or services of any nature whatsoever for, on or behalf
of, persons, firms, or corporations other than the Company. Similarly, the
Company shall not be prevented or barred from seeking or requiring services
of a same or similar nature from persons other than Amothy.
2. As compensation for the Strategic Services to be rendered by Amothy
hereunder, RPDT hereby issues to Amothy warrants (Warrants) to purchase one
million shares of RPDT common stock at $1.46 per share. Six Hundred Thousand
(600,000) Warrants shall vest upon the mutual execution of this Agreement; Two
Hundred Thousand (200,000) Warrants shall vest on July 1, 2004, unless this
Agreement is sooner terminated as set forth in Section 6; and Two Hundred
Thousand Warrants shall vest on October 1, 2004, unless this Agreement is sooner
terminated as set forth in Section 6. The Warrants shall be exercisable for five
years from the date they become fully vested. The Warrants Shares shall have
piggyback registration rights. If the Warrants Shares are not registered at any
time 12 months after the respective vesting dates of the Warrants, then the
Warrants shall have a cashless exercise provision at Amothy's option until such
time that the Warrants Shares are registered with a current prospectus
available. The Company shall deliver to Amothy the certificates for the Warrants
in the form of Exhibit I attached hereto within five business days of the mutual
execution of this Agreement.
3. The Company will reimburse Amothy for its actual, approved and
reasonable expenses (including, without limitation, travel expenses and
professional and legal fees) incurred in connection with its engagement
hereunder. Amothy agrees not to incur reimbursable expenses without prior
written approval by the Company.
4. "Confidential Information" as used in this Agreement, is broadly
defined and shall mean, except as set forth below, any and all information
delivered by the Company or any of its agents or employees to Amothy, whether
received by Amothy in writing or orally, including without limitation, all of
the following information about the Company or any subsidiary or affiliate of
the Company: all information related to property, products, financials,
marketing, strategy, organization, techniques and other information relating to
or referring to the Company, its subsidiaries or affiliates, and summaries
thereof. The term Confidential Information does not include information which
is made public by the Company or otherwise generally available to the public.
Amothy shall make use of any and all Confidential Information for the sole
purpose of performing the services under this Agreement. Amothy shall not
disseminate, or in any way disclose, to any person, firm or business, any
Confidential Information. Amothy may disclose Confidential Information if
required by law, regulation or legal process upon at least ten (10) business
days advance written notice to the Company. Amothy hereby acknowledges and
agrees that the Company shall deliver Confidential Information to Amothy for the
purposes set forth herein. Amothy shall immediately give notice to the Company
of any unauthorized use or disclosure of any Confidential Information. Amothy
shall be responsible for the acts of its agents and employees with respect to
the Confidential Information and shall assist the Company in remedying any
unauthorized use or disclosure of the Confidential Information by Amothy's
agents or employees. All Confidential Information delivered to Amothy shall
remain the property of the Company and no license or other rights to such
information is granted or implied by its delivery to Amothy. All written
materials furnished to Amothy or any of its agents by the Company regarding any
Confidential Information shall
be immediately returned to the Company at the expiration or earlier termination
of this Agreement, together with any copies of such materials.
5. The Company agrees that it will consult with Amothy, as an owner of
the Company's equity securities with respect to all material corporate actions.
6. The initial term of Amothy's engagement hereunder will be for two
years commencing on April 1, 2004 . Subject to paragraphs 2 through 11, which
shall survive any termination of this Agreement, either party may terminate
Amothy's engagement effective at any time commencing June 30, 2004 by giving
the other party at least 10 days' prior written notice.
7. The Company and Amothy agree to the indemnification and other
provisions set forth in Exhibit II.
8. This Agreement supersedes all prior agreements between the parties
concerning the subject matter hereof. This Agreement may be modified only with
a written instrument duly executed by each of the parties. No waiver by any
party of any breach of this Agreement will be deemed to be a waiver of any
preceding or succeeding breach. This Agreement may be executed in more than one
counterpart, each of which will be deemed to be an original, or by facsimile or
electronic signature, and all such counterparts together will constitute but one
and the same instrument. The invalidity or unenforceability of any provision of
this Agreement will not affect the validity or enforceability of any other
provisions of this Agreement, which will remain in full force and effect. This
contract shall inure to the benefit of the parties hereto, their heirs,
administrators and successors in interest.
9. This Agreement will be governed by the internal laws of the state of
California. Any proceeding related to or arising out of the engagement of
Amothy pursuant to this Agreement shall be commenced, prosecuted or continued in
any court of the State of California located in Orange County or in the United
States District Court for the Central District of California. The Company and
Amothy waive all rights to trial by jury in any such proceeding
10. Both the Company and Amothy agree that Amothy will act as an
independent contractor in the performance of its duties under this Agreement.
Nothing contained in this Agreement shall be construed to imply that Amothy, or
any employee, agent or other authorized representative of Amothy, is a partner,
joint venturer, agent, officer or employee of the Company. Neither party hereto
shall have any authority to bind the other in any respect vis a vis any third
party, nor represent to anyone that it has such authority, it being intended
that each shall remain an independent contractor and responsible only for its
own actions.
11. All notices, requests, demands, and other communications under this
Agreement shall be in writing, sent either by hand delivery, facsimile, or
overnight mail, and notice is given for the purposes of this Agreement upon
receipt by the receiving party.
If to the Company: Rapidtron, Inc.
3151 Airway Avenue, Bldg. Q
Costa Mesa, CA 92626
Facsimile (949) 474-4550
Attn: Chairman and Chief Executive Officer
If to Amothy: Amothy Corporation
1085 Riverside Trace
Atlanta, GA 30328
Facsimile (404) 255-2218
With Copy to: David A. Rapaport, EVP
333 Sandy Springs Circle, Suite 230
Atlanta, GA 30328
Facsimile (404) 257-9150
If the foregoing correctly sets forth the understanding and agreement between
Amothy and the Company, please so indicate in the space provided for that
purpose below, whereupon this letter will constitute a binding agreement as of
the date hereof.
Amothy Corporation
By:
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David A. Rapaport, Executive Vice President
Date:
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AGREED:
Rapidtron, Inc.
By:
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John Creel, President and Chief Executive Officer
Date:
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EXHIBIT II
INDEMNIFICATION
1. The Company will:
(a) indemnify Amothy and hold it harmless against any and all losses,
claims, damages or liabilities to which Amothy may become subject
arising in any manner out of or in connection with the rendering of
services by Amothy hereunder , unless it is finally judicially
determined that such losses, claims, damages or liabilities resulted
from acts outside the scope of Amothy's authority under this Agreement
or directly from the gross negligence or willful misconduct of Amothy;
and
(b) reimburse Amothy promptly for any reasonable legal or other expenses
reasonably incurred by it in connection with investigating, preparing
to defend or defending, or providing evidence in or preparing to serve
or serving as a witness with respect to, any lawsuits, investigations,
claims or other proceedings arising in any manner out of or in
connection with the rendering of services by Amothy hereunder
(including, without limitation, in connection with the enforcement of
this Agreement and the indemnification obligations set forth herein);
provided, however, if it is finally judicially determined that such
losses, claims, damages or liabilities resulted from acts outside the
scope of Amothy's authority under this Agreement or directly from the
gross negligence or willful misconduct of Amothy; then Amothy will
remit to the Company any amounts reimbursed under this subparagraph
1(b).
The Company agrees that the indemnification and reimbursement commitments
set forth in this paragraph 1 will apply whether or not Amothy is a formal
party to any such lawsuits, investigations, claims or other proceedings and
that such commitments will extend upon the terms set forth in this
paragraph to any controlling person, affiliate, shareholder, member,
director, officer, employee or consultant of Amothy (each, with Amothy, an
"Indemnified Person"). The Company further agrees that, without Amothy's
prior written consent (which consent will not be unreasonably withheld), it
will not enter into any settlement of a lawsuit, claim or other proceeding
arising out of the transactions contemplated by this Agreement (whether or
not Amothy or any other Indemnified Person is an actual or potential party
to such lawsuit, claim or proceeding) unless such settlement includes an
explicit and unconditional release from the party bringing such lawsuit,
claim or other proceeding of all Indemnified Persons.
The Company further agrees that the Indemnified Persons are entitled to
retain separate counsel of their choice in connection with any of the
matters in respect of which indemnification, reimbursement or contribution
may be sought under this Agreement.
2. The Company and Amothy agree that if any indemnification or reimbursement
sought pursuant to the preceding paragraph 1 is judicially determined to be
unavailable, then the Company will contribute to the losses, claims,
damages, liabilities and expenses for which such indemnification or
reimbursement is held unavailable (i) in such proportion as is appropriate
to reflect the relative economic interests of the Company on the one
hand, and Amothy on the other hand, in connection with the transaction or
event to which such indemnification or reimbursement relates, or (ii) if
the allocation provided by clause (i) above is judicially determined not to
be permitted, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) but also the relative faults of
the Company on the one hand, and Amothy on the other hand, as well as any
other equitable considerations; provided, however, that in no event will
the amount to be contributed by Amothy pursuant to this paragraph exceed
the value of the compensation actually received by Amothy hereunder.
3. Amothy will:
(a) indemnify the Company and hold it harmless against any and all losses,
claims, damages or liabilities to which the Company may become subject
arising in any manner out of or in connection with the rendering of
services by Amothy hereunder (including any services rendered prior to
the date hereof) or the rendering of additional services by Amothy as
requested by the Company that are related to the services rendered
hereunder, unless it is finally judicially determined that such
losses, claims, damages or liabilities resulted directly from the
gross negligence or willful misconduct of the Company; and
(b) reimburse the Company promptly for any reasonable legal or other
expenses reasonably incurred by it in connection with investigating,
preparing to defend or defending, or providing evidence in or
preparing to serve or serving as a witness with respect to, any
lawsuits, investigations, claims or other proceedings arising in any
manner out of or in connection with the rendering of services by
Amothy hereunder or the rendering of additional services by Amothy as
requested by the Company that are related to the services rendered
hereunder (including, without limitation, in connection with the
enforcement of this Agreement and the indemnification obligations set
forth herein); provided, however, if it is finally judicially
determined that such losses, claims, damages or liabilities resulted
directly from the gross negligence or willful misconduct of the
Company; then the Company will remit to Amothy any amounts reimbursed
under this subparagraph 3(b).
Amothy agrees that the indemnification and reimbursement commitments set
forth in this paragraph 3 will apply whether or not the Company is a formal
party to any such lawsuits, investigations, claims or other proceedings and
that such commitments will extend upon the terms set forth in this
paragraph to any controlling person, affiliate, shareholder, member,
director, officer, employee or consultant of the Company (each, with the
Company, an "Indemnified Person"). Amothy further agrees that, without the
Company's prior written consent (which consent will not be unreasonably
withheld), it will not enter into any settlement of a lawsuit, claim or
other proceeding arising out of the transactions contemplated by this
Agreement (whether or not the Company or any other Indemnified Person is an
actual or potential party to such lawsuit, claim or proceeding) unless such
settlement includes an explicit and unconditional release from the party
bringing such lawsuit, claim or other proceeding of all Indemnified
Persons.
Amothy agrees that the Indemnified Persons are entitled to retain separate
counsel of their choice in connection with any of the matters in respect of
which indemnification, reimbursement or contribution may be sought under
this Agreement.
4. Amothy and the Company agree that if any indemnification or reimbursement
sought pursuant to the preceding paragraph 3 is judicially determined to be
unavailable, then Amothy will contribute to the losses, claims, damages,
liabilities and expenses for which such indemnification or reimbursement is
held unavailable (i) in such proportion as is appropriate to reflect the
relative economic interests of Amothy on the one hand, and the Company on
the other hand, in connection with the transaction or event to which such
indemnification or reimbursement relates, or (ii) if the allocation
provided by clause (i) above is judicially determined not to be permitted,
in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) but also the relative faults of the
Amothy on the one hand, and the Company on the other hand, as well as any
other equitable considerations; provided, however, that in no event will
the amount to be contributed by Amothy pursuant to this paragraph exceed
the value of the compensation actually received by Amothy hereunder.
5. Nothing in this Agreement, expressed or implied, is intended to confer or
does confer on any person or entity other than the parties hereto or their
respective successors and assigns, any rights or remedies under or by
reason of this Agreement or as a result of the services to be rendered by
Amothy hereunder. The parties acknowledge that Amothy is not acting as an
agent of the Company or in a fiduciary capacity with respect to the Company
and that Amothy is not assuming any duties or obligations other than those
expressly set forth in this Agreement. The Company further agrees that
neither Amothy nor any of its controlling persons, affiliates, directors,
officers, employees or consultants will have any liability to the Company
or any person asserting claims on behalf of or in right of the Company for
any losses, claims, damages, liabilities or expenses arising out of or
relating to this Agreement or the services to be rendered by Amothy
hereunder, unless it is finally judicially determined that such losses,
claims, damages, liabilities or expenses resulted directly from the gross
negligence or willful misconduct of Amothy.
6. The provisions of this Exhibit II shall survive any expiration or
termination of this Agreement or Amothy's engagement hereunder.