INVESTMENT BANKING AGREEMENT
AGREEMENT made as of the 24th day of November, 2000 by and between
Surge Components, Inc. (the "Company") with an address at 1016 Grand Boulevard,
Deer Park, New York 11729 and Equilink Capital Partners, LLC (the "Consultant")
a Delaware limited liability company having an address at 488 Madison Avenue,
New York, New York 10022.
W I T N E S S E T H
WHEREAS, the Company desires to compensate the Consultant for
investment banking services rendered to date on behalf of the Company and to
retain the Consultant to provide ongoing investment banking services; and
WHEREAS, the Consultant desires to be retained to render such services.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, the parties hereto hereby agree
as follows:
1. Prior Agreement
This Agreement replaces and supersedes the agreement known as
the "Investment Banking Agreement" between the parties hereto dated September
13, 1999, as amended on February 1, 2000 (the "Agreement") .
(a) The Consultant was retained by the Company in or
about November 1998 to act as its investment banker in connection with the
Company's proposed merger (the "Orbit Merger") with Orbit Network, Inc.
("Orbit"). The Company agreed to reimburse the Consultant for all expenses which
it incurred in connection with such transaction. The parties agreed, at such
time, that there was no other compensation owed to the Consultant since it would
receive stock in Orbit. The Orbit Merger was terminated in August 1999 and the
Consultant represents and warrants that it was not paid any compensation by any
party, nor was it reimbursed for its expenses incurred on behalf of the Company
in connection with the Orbit Merger.
(b) On September 13, 1999, the Company and the Consultant
executed the Agreement pursuant to which Equilink acted as the Company's
investment banker with regard to the merger and/or acquisition (the "Global
Acquisition") of Global DataTel, Inc. ("Global"). Pursuant to the terms of the
Agreement, the Company was to pay the Consultant 3,000,000 registered common
shares only upon the completion of the transaction.
(c) Pursuant to an Addendum dated February 1, 2000, the
Company and the Consultant modified the September 1999 Agreement and agreed to
pay the Consultant 1,000,000 Class B Common Shares (which was the equivalent of
2 million Class A Shares). On November 3, 2000, the Company notified Global that
it had terminated the Asset Purchase Agreement pursuant to which it was to
complete the Global Acquisition. To date, the Consultant represents and warrants
that it has not been paid any cash compensation by any party or reimbursed any
expenses incurred on behalf of the Company in connection with the Global
Acquisition.
2. Past and Continuing Services. The Company and the Consultant
hereby desire to terminate the Agreement, as amended, and to compensate
Consultant for its services rendered from the beginning of the world to date. In
that regard the Company acknowledges that Consultant's services commenced in
November 1998 in connection with the proposed Orbit Merger which services
continued through termination of same in August 1999. The Consultant's services
continued in September 1999, in connection with the proposed Global Acquisition
which continued through termination of same in November 2000. Consultant's
continuing services include, but are not limited to, investment banking services
concerning the pending merger transaction (the "Transaction") with
MailEncrypt.com, Inc. ("Mail"); the pending Recapitalization into Superus
Holdings, Inc.; (as defined in the Company's September 13, 2000 Proxy
Statement/Prospectus); and the termination and unwinding of the Global
Acquisition. The Consultant's investment banking services specifically included
the introduction of Mail as a merger/acquisition candidate for Surge, and
consulting in furtherance of the completion of the Transaction; the introduction
of Adam Epstein as Chairman of the Board; advice on the structure of the
Recapitalization; coordination with McKenzie and Company, Continental Stock
Transfer & Trust and ADP in connection with such third parties' solicitation of
proxies for the September 26, 2000 shareholders meeting, as adjourned; and the
termination of the Global Acquisition. The parties to this Agreement recognize
that as a result of Equilink's services to date in the investment banking
community the market capitalization of Surge has increased dramatically.
However, the Company understands that the Consultant is not in any securities
related business as defined by federal and state securities laws, and does not,
and will not, provide any services hereunder constituting securities brokerage,
market-making, placement agency or underwriting.
3. Future Services. The Company hereby retains the Consultant
and the Consultant hereby accepts such retention to continue to perform the
consulting services referred to in paragraph 2 above. In addition, upon request
by the Company, Consultant shall perform services related to:
(a) assisting in the preparation of capital and operating
expense budgets and business plans for the Company;
(b) analyzing the Company's short and long term debt
position and its capital requirements;
(c) analyzing potential merger and acquisition candidates
for the Company;
(d) assisting the Company in the structuring of any
required financings, including, but not limited to, the determination of whether
any such financing should be for equity or debt securities of the Company or a
combination thereof;
(e) assisting the Company in screening, evaluating, and
recommending commercial and investment bankers, underwriters and professional
consultants in order to carry out the Company's goals, including but not limited
to, when necessary, finding an appropriate direct source or broker-dealer to
raise funding. In that regard, the Consultant will render
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investment banking services in connection with the Company's $750,000 interim
financing for working capital purposes as soon as possible following the
execution of this Agreement. Thereafter, subject to market conditions, upon the
Company's request for permanent equity and/or debt financing and upon the
Company's delivery of expense budgets and business plans to Consultant,
Consultant will again devote all time that is reasonably required to assist the
Company in facilitating the exercise of the Company's existing public warrants,
as well as financing for proposed mergers or acquisitions through the public or
private placement of securities of the Company or a combination thereof, or
directly placing such securities with a private group;
(f) advising the Company on the preparation of
appropriate presentations and documents to consummate any desired financing,
acquisition or merger;
(g) establishing and fostering relationships between the
Company and the financial community, including brokers, investment bankers,
financial analysts, institutional investors and stockholders;
(h) In regard to the foregoing, subject to the terms set
forth below, the Consultant shall furnish to the Company advice and
recommendations with respect to such aspects of the business and affairs of the
Company as the Company shall, from time to time, reasonably request upon
reasonable notice; and
(i) In addition, the Consultant shall hold itself ready
to assist the Company in evaluating and negotiating particular contracts or
transactions, if requested to do so by the Company, upon reasonable notice.
Nothing herein shall require the Company to utilize the Consultant's services in
any particular transactions, no exclusivity is being given to Consultant by the
Company, nor shall it limit the Company's obligations arising under any other
agreement or understanding.
4. Compensation.
(a) The Consultant hereby waives any right, claim, or
entitlement to the reimbursement of expenses incurred on behalf of the Company
from the beginning of the world to date, incurred under the agreements referred
to in paragraph 1 above, or otherwise, and in lieu thereof hereby accepts
600,000 fully paid and non-assessable Common Shares of the Company. However,
until the Company receives shareholder approval (the "Shareholder Approval") for
the issuance of such shares, the Company shall issue to the Consultant 60,000
shares of non-voting convertible preferred stock (the "Preferred Stock")
convertible on a one-for-ten basis into 600,000 Common Shares. These shares
shall be subject to the registration rights described in subparagraph 4(c)
below.
(b) As compensation for the services rendered by
Consultant from the beginning of the world to date on behalf of the Company upon
the closing (the "Closing") of the Transaction, Surge shall issue 900,000 fully
paid and non-assessable Common Shares; 10,000 fully paid and non-assessable
shares of Preferred Stock convertible into 100,000 Common Shares
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and warrants (the "Equilink Warrants") to purchase 2,000,000 shares of Common
Shares exercisable at $3.00 per share to Equilink or its assignees or designees.
The Equilink Warrants shall expire five (5) years from the date of issuance, and
shall be subject to redemption on the same terms and conditions as the
outstanding warrants, as they may be modified.
(c) The Company shall register the underlying 600,000 and
1,000,000 Common Shares referred to in subparagraphs (a) and (b) respectively,
and the 2,000,000 Common Shares underlying the Equilink Warrants referred to in
subparagraph (b) above on the next registration statement filed by the Company
with the Securities and Exchange Commission ("SEC") which permits the
registration of such securities and shall maintain the effectiveness of such
registration, as long as at least 20% of the Equilink Warrants remain
outstanding.
(d) In any event, no Preferred Stock, Common Shares or
Equilink Warrants shall be due and owing to Consultant under subparagraphs (a)
and (b) above, unless and until the additional share listing application has
been filed with Nasdaq as soon as possible following the execution of this
Agreement to list all securities issued hereunder to Consultant. In the event
that further Shareholder Approval is required, in order to issue the Common
Shares issuable to the Consultant, the Company hereby agrees to use its best
efforts to file a proxy statement for such approval as soon as possible but no
later than December l5, 2000, and to use its best efforts to have same disclosed
effective as soon as possible, subject to the Company's pending change of
accountants and the completion of the Company's November 30, 2000 fiscal year
end audit if required by the SEC's rules and regulations.
(e) It is acknowledged by the parties hereto that the
foregoing compensation is in lieu of all other compensation owed by the Company
to Consultant under the Agreement on the basis of Quantum Meruit or otherwise.
5. Obligations. All obligations of the Consultant contained
herein shall be subject to the Consultant's reasonable availability for such
performance, in view of the nature of the requested service and the amount of
notice received. The Consultant shall devote such time and effort to the
performance of all of its duties specified in paragraphs 2 and 3 hereunder as
the Consultant shall determine is reasonably necessary for such performance. The
Consultant may look to such others for such factual information, investment
recommendations, economic advice and/or research, upon which to base its advice
to the Company hereunder, as it shall deem appropriate. The Company shall
furnish to the Consultant all information relevant to the performance by the
Consultant of its obligations under this Agreement, or particular projects as to
which the Consultant is acting as advisor, which will permit the Consultant to
know all facts material to the advice to be rendered, and all material or
information reasonably requested by the Consultant.
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6. Restrictions. Nothing contained in this Agreement shall limit
or restrict the right of the Consultant or of any partner, employee, agent or
representative of the Consultant, to be a partner, director, officer, employee,
agent or representative of, or to engage in, any other business, whether of a
similar nature or not, nor to limit or restrict the right of the Consultant to
render services of any kind to any other corporation, firm, individual or
association other than a direct competitor of the Company engaged in the same
business as the Company is today.
7. Confidentiality. The Consultant will hold in confidence any
confidential information which the Company provides to the Consultant pursuant
to this Agreement unless the Company gives the Consultant permission in writing
to disclose such confidential information to a specific third party.
Notwithstanding the foregoing, the Consultant shall not be required to maintain
confidentiality with respect to information which (i) is or becomes part of the
public domain; (ii) it had independent knowledge prior to disclosure; (iii)
comes into the possession of the Consultant in the normal and routine course of
its own business from and through independent non-confidential sources; or (iv)
is required to be disclosed by the Consultant by governmental requirements. If
the Consultant is requested or required (by oral questions, interrogatories,
requests for information or document subpoenas, civil investigative demands, or
similar process) to disclose any confidential information supplied to it by the
Company, or the existence of other negotiations in the course of its dealings
with the Company or its representatives, the Consultant shall, unless prohibited
by law, promptly notify the Company of such request(s) so that the Company may
seek an appropriate protective order. For the purposes set forth in this
Paragraph, Consultant shall also mean any affiliate of Consultant. Affiliate
shall mean any person, firm or corporation which controls or is controlled by
Consultant.
8. Term. This Agreement is for a term of six (6) months from the
date hereof, unless mutually agreed to and extended in writing.
9. Notices. Any notices hereunder shall be sent to the Company
and to the Consultant at their respective addresses set forth above. Any notice
shall be given by registered or certified mail, postage prepaid, and shall be
deemed to have been given when deposited in the United States mail. Either party
may designate any other address to which notice shall be given by giving written
notice to the other of such change of address in the manner herein provided.
10. Indemnification. The Company shall:
(a) indemnify Consultant and hold it harmless against any
and all losses, claims, damages or liabilities to which Consultant may become
subject arising in any manner out of or in connection with the rendering of
services by Consultant hereunder, unless it is finally judicially determined
that such losses, claims, damages or liabilities resulted directly from the
gross negligence or willful misconduct of Consultant or directly from
information provided or written by Consultant, in which event Consultant shall
indemnify and hold the Company harmless;
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(b) reimburse Consultant immediately for any reasonable,
documented legal or other expenses reasonably incurred in connection with
investigating, preparing to defend or defending, or providing evidence in or
investigations, claims or other proceedings arising in any manner out of in
connection with the rendering of services by Consultant hereunder (including,
without limitation, in connection with the enforcement of this Agreement and the
indemnification obligations set forth herein) with respect to which Consultant
is entitled to indemnification hereunder; provided, however, that in the event a
final judicial determination is made to the effect specified in subparagraph
10(a) above, Consultant will remit to the Company any amount reimbursed under
this subparagraph 10(b). Thus subparagraph 10(a) shall not apply to any claims,
liability or proceedings which originate primarily from acts or omissions by
Consultant;
(c) indemnify and hold harmless Consultant for any final,
adjudicated and non-appealable losses, claims, damages, expenses or liabilities
to which Consultant may become subject in connection with any untrue or
misleading statements or representations made by or information provided by the
Company to Consultant; and
(d) The Company agrees that the indemnification and
reimbursement commitments set forth in this paragraph 10 and the contribution
obligations set forth in paragraph 11 shall apply whether or not Consultant is a
formal part to any such lawsuits, claims or other proceeding, that Consultant is
entitled to retain separate counsel of its choice in connection with any of the
matters to which such commitments relate and that such commitments shall extend
upon the terms set forth in this paragraph to any controlling person, affiliate,
director, officer, employee or agent of Consultant (each, with Consultant, an
"Indemnified Person"). The Company further agrees that, unless a final judicial
determination is made to the effect specified in subparagraph 10(a) above or the
final sentence of paragraph 10(b) hereof is applicable or Consultant breaches
paragraph 11 hereof, any settlement of a lawsuit, claim or other proceeding
against the Company arising out of the transactions contemplated by this
Agreement which is entered into by the Company shall include an explicit and
unconditional release from the party bringing such lawsuit, claim or other
proceeding of all Indemnified Persons, which release shall be reasonable
satisfactory to Consultant.
11. Survivability. The provisions of paragraphs 7, 10 and 11 of
this Agreement shall survive any termination or expiration of this Agreement.
12. Beneficiaries.
(a) The Company and Consultant each represent to the
other that there is no person or entity that is entitled to a fee or any type of
compensation in connection with execution and delivery of this Agreement, other
than Consultant and its designees. Consultant hereby represents and warrants to
the Company that none of the Preferred Stock, Common Shares or Equilink Warrants
issuable under this Agreement shall be transferred or assigned to any of Barry
Witz, Lynn Tanner, Richard Baker, Joe T. Logan Jr., Ada Garay or their
associates or affiliates.
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(b) 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, and to the extent expressly
set forth herein, the Indemnified Persons, any rights or remedies under or by
reason of this Agreement or as a result of the services rendered by Consultant
hereunder. The Company further agrees that neither Consultant nor any of its
controlling persons, affiliates, directors, officers, employees or agents shall
have any liability to 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 Consultant 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 Equilink.
13. Termination. This Agreement may be terminated at any time
prior to the Closing of the Transaction as follows:
(a) By mutual consent of Surge and Consultant, if the
Closing has not occurred by November 30, 2000.
(b) By Company, if (i) any regulatory proceedings are
instituted against Consultant or its officers, directors and shareholders,
alleging that contrary to the representation made by Consultant in Section 2
above, that Consultant is not in securities related business as defined by
federal and state securities laws, (ii) any officer, director or shareholder of
Consultant is convicted of a felony, or (iii) as set forth in Section 10(a) it
is judicially determined that Consultant was grossly negligent, committed
willful misconduct or provided written information to the Company which resulted
in any losses, claims, damages or liabilities to the Company, and for which
conduct Consultant hereby agrees to indemnify and hold harmless and reimburse
the Company for its reasonable expenses incurred arising out of said conduct by
Consultant.
(c) By either the Company or Consultant, if there shall
be any law that makes consummation of the Transaction illegal or otherwise
prohibited, or if any order enjoining either party from consummating the
Transaction is entered and such order shall have become final and
non-appealable.
14. Miscellaneous.
(a) The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, which shall remain in full force and effect.
(b) This Agreement shall be governed by and construed in
accordance with the laws of the State of New York. The Company and Consultant
hereby irrevocably and unconditionally consent to submit to the exclusive
jurisdiction of the courts of the State of New York and of the United States
District Courts located in the City of New York for any lawsuits, claims or
other proceedings, arising out of or relating to this Agreement and agree not to
commence any such lawsuit, claim or other proceeding except in such courts. The
Company and Consultant hereby irrevocably and unconditionally waive any
objection to the laying of venue of
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any lawsuit, claim, or other proceeding arising out of or relating to this
Agreement in the courts of the State of New York or the United States District
Courts located in the City of New York, and hereby further irrevocably and
unconditionally waive and agree not to plead or claim in any such court that any
such lawsuit, claim or other proceeding brought in any such Court has been
brought in an inconvenient forum. Any right to trial by jury with respect to any
lawsuit, claim or other proceeding arising out of or relating to this Agreement
or the services to be rendered by Consultant hereunder is expressly and
irrevocably waived.
(c) This Agreement may not be transferred, assigned or
delegated by any of the parties hereto without the prior written consent of the
other party hereto.
(d) The failure or neglect of the parties hereto to
insist, in any one or more instances, upon the strict performance of any of the
terms or conditions of this Agreement, or their waiver of strict performance of
any of the terms or conditions of this Agreement, shall not be construed as a
waiver or relinquishment in the future of such term or condition, but the same
shall continue in full force and effect.
(e) This Agreement contains the entire agreement between
the parties, may not be altered or modified, except in writing and signed by the
party to be charged thereby, and supersedes any and all previous agreements
between the parties relating to the subject matter hereof.
(f) This Agreement shall be binding upon the parties
hereto, the Indemnified Persons referred to in Section 10, and their respective
heirs, administrators, successors and permitted assigns.
IN WITNESS WHEREOF, this Agreement has been executed by the parties
hereto as of the date first above written.
SURGE COMPONENTS, INC.
By: /s/ Ira Levy
--------------------------
Ira Levy, President
EQUILINK CAPITAL PARTNERS, LLC
By: /s/ Robert Depalo
--------------------------
Robert DePalo, CEO
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