EXHIBIT 10.4
ADMINISTRATION AND MARKETING AGREEMENT
THIS ADMINISTRATION AND MARKETING AGREEMENT is made and entered into and
effective this ___ day of December, 2000, by and between Capston Network
Company, a Delaware corporation with an office 1612 N. Osceola Avenue
Clearwater, Fl 33755, hereinafter called "Manager," Win or Lose Acquisition
Corporation, a Delaware corporation with an office at 1612 N. Osceola Avenue
Clearwater, Fl 33755, hereinafter called the "Company," and John L. Petersen,
Rachel A. Fefer and Mark R. Dolan, who collectively own 100% of the Company's
issued and outstanding common stock and are hereinafter called the "Founders.".
W I T N E S S E T H
WHEREAS, the Company is a newly organized Delaware corporation that has
been formed for the purpose of conducting a registered public offering of
securities and subsequently attempting to negotiate a business combination with
another company that has both business history and operating assets; and
WHEREAS, the Founders collectively purchased 1,500,000 shares of the
Company's common stock (the "Founders Shares") for $45,000 in cash in connection
with the organization of the Company; and
WHEREAS, the Company has not engaged in any business activities to date
and has no specific plans to engage in any particular business in the future;
and
WHEREAS, the Company intends to file a Form S-1 Registration Statement
under the Securities Act of 1933 for a public offering of securities that will,
if successful, result in the classification of the Company as a "Blank Check
Company" or "Reporting Public Shell" that can be used to effect a business
combination with suitable privately-held enterprise (a "Target"); and
WHEREAS, Capston has significant experience in the development and
implementation of reorganization and business combination plans in connection
with other public shells and has offered to (a) take such actions as may be
necessary to position the Company for a business combination with a suitable
Target, (b) manage the administration of the Company's business affairs during
its search for an acquisition Target, (c) manage the administration of the
Company's regulatory compliance functions during its search for an acquisition
Target, and (d) assist in the negotiation of a business combination between the
Company and a Target; and
WHEREAS, the parties hereto desire to enter into a formal agreement for
the operation and management of the Company's affairs and the implementation of
the Plan;
NOW THEREFORE, in consideration of the mutual covenants and agreements
herein contained, it is agreed that Capston shall provide certain administrative
and marketing services for the Company in accordance with the terms and
provisions of this agreement, which are as follows, to-wit:
Article I
Compensation to Manager
1.1 As its sole compensation for services to be rendered in connection
with the development and implementation of the Plan and the operation of the
Company pursuant to this agreement, the Founders agree to pay a cash fee to the
manager equal to:
o 80% of the first $150,000 in cash proceeds from the sale of founders' shares;
plus o 50% of the second $150,000 in cash proceeds from the sale of the
founders' shares; plus o 20% of any additional cash proceeds received from the
sale of the founders' shares.
Except as specifically provided in this Agreement, the Manager shall not be
entitled to receive any direct or indirect cash compensation from the Company,
any common stock or other securities of the Company, or any options, warrants
appreciation rights or similar instruments that will or might entitle the
Manager to receive direct or indirect compensation from the Company in the
future.
Article II
Powers of Manager
2.1 Subject at all times to the supervision, direction and control of the
Company's board of directors, Manager shall have all necessary power and
authority to, manage, supervise and administer the day-to-day business affairs
of the Company and shall use reasonable commercial efforts to seek, investigate
and, if the results of such investigation warrant, assist in the negotiation of
a business combination with a suitable Target that seeks the perceived
advantages of a business combination with a Reporting Public Shell.
Article III
Operations
3.1 The Manager shall discharge all of its obligations to the Company in
a professional manner. The Manager shall maintain a competent professional staff
and the Company's board of directors shall, at all times, have the authority to
approve or disapprove the Manager's proposed assignment of administrative staff
to the affairs of the Company. In connection with all operations on behalf of
the Company, the Manager shall adhere to the standard of care that is customary
and usual in the activities of similarly situated Reporting Public Shells who
are seeking to effect a business combination with a Target.
3.2 The number of employees, the selection of such employee, the hours of
labor and the compensation for services to be paid any and all such employees
shall be determined by Manager, and all such employees shall be the employees of
and paid by the Manager.
3.3 The Manager shall retain such consultants, subcontractors, employees
and agents as may be necessary to discharge the duties set forth in this Article
III in a prompt, professional and timely manner. Except as specifically set
forth herein, all fees, wages, charges and expenses incurred by the Manager in
connection with the performance of its duties hereunder shall be the
responsibility and obligation of, and paid by, the Manager, and the Manager
hereby expressly agrees to indemnify and hold the Company harmless from and
against all costs and expenses, including attorney's fees, judgments and amounts
paid in settlement, which may be paid or incurred by any such person in
connection with or as a result of any claim, demand, action or right of action
which in any way arises from or relates to the performance of any duty of the
Manager under the terms of this Agreement.
Article IV
Employment of Professionals and Finders
4.1 In connection with the investigation of potential Targets and the
negotiation of a business combination agreement with at Target Company, the
Manager shall be authorized, subject to the approval of the Company's Board of
Directors, to retain such attorneys, accountants and other professionals to
represent and assist the Company as the Manager deems reasonable and prudent
under the circumstances. The fees of such professionals shall be treated as
direct operating expenses of the Company and paid by the Company from its
available cash resources. Notwithstanding the generality of the foregoing, the
Manager shall have no authority to bind the Company to any professional service
agreement and all proposed agreements must be submitted to and approved by the
Company's Board of Directors.
4.2 In connection with the investigation of potential Targets and the
negotiation of a business combination agreement with at Target Company, the
Manager shall be authorized, subject to the approval of the Company's Board of
Directors, to enter into such agreements with third party finders as it deems
reasonable and prudent under the circumstances. In connection with the
engagement of such finders, and subject at all times to the approval of the
Company's Board of Directors, the Manager may negotiate fee agreements that
provide the payment of fees to unrelated third party finders who introduce the
Company to a suitable Target. All finder's fees shall be treated as operating
expenses of the Company and paid by the Company from its available resources,
provided, however, that no fees may be paid to any finders retained by the
Manager without the express written consent of both the Company's Board of
Directors and the management of the Target.
Article V
Specific Duties of Manager
5.1 The Manager shall have the primary responsibility for conducting all
of the Company's existing and proposed operations in a good and professional
manner with due regard for the rights and interests of all of the Company's
Stockholders In furtherance, and not in limitation of the foregoing, the Manager
shall:
a. Conduct all of the Company's existing and proposed operations
in accordance with applicable law and the provisions of this
Agreement;
b. Conduct all of the Company's existing and proposed operations
in a good and workmanlike manner as would a prudent manager
under the same or similar circumstances;
c. Keep the Company's Board of Directors informed with respect to
all operations of the Company, all investigations of or
negotiations with potential Target Companies, all other
matters which they are entitled to know under applicable law
and all additional matters it deems to be important under the
circumstances;
d. Keep the Company's Stockholders informed of all matters which
they are entitled to know under applicable law and all
additional matters it deems to be important under the
circumstances;
e. Keep the Company and its properties, if any, free from all
liens and encumbrances occasioned by the operations
contemplated hereby;
f. Retain at its sole cost, risk and expense such employees,
experts and consultants as may be necessary or desirable in
the discharge of the duties of the Manager set forth in this
Agreement;
g. Maintain complete, correct and accurate books, records and
accounts and furnish to the Company's Board of Directors
periodic reports in such detail as may be reasonably required
to permit the Company to fully discharge its reporting
obligations under the Exchange Act and other applicable law;
i. Make all information concerning the Company available for
inspection by the Board of Directors or the authorized
representatives of the Stockholders.
Article VI
Payment of Expenses
6.1 All direct costs and expenses accruing or resulting from the
operation of the Company pursuant to this agreement and the implementation of
the Company's business plan shall be paid from the existing capital resources of
the Company.
6.2 In the event that the available cash resources of the Company are
insufficient to provide for the payment of the direct costs and expenses
incurred by Company, the Manager may, but shall not be obligated to advance such
funds to the Company. If the Manager elects to advance funds to the Company for
any reason, such advances shall be treated as unsecured subordinated loans to
the Company that may only be repaid by a Target upon completion of a business
combination. All such advances shall be fully subordinated to the rights of the
Company's stockholders under Securities and Exchange Commission Rule 419 and
shall not give rise to any legal, equitable or other claim that the Manager is
or may be entitled to reimbursement from the funds on deposit in the Company's
Rule 419 escrow.
6.3 In the event that the available cash resources of the Company are
insufficient to provide for the payment of the direct costs and expenses
incurred by Company, the Manager may ask the Founders to contribute additional
cash to finance the ongoing operations of the Company. The Founders may advance
such additional funds at their sole discretion, but shall not be obligated to
do. If the Founders elect to advance funds to the Company for any reason, such
advances shall be treated as unsecured subordinated loans to the Company that
may only be repaid by a Target upon completion of a business combination. All
such advances shall be fully subordinated to the rights of the Company's
stockholders under Securities and Exchange Commission Rule 419 and shall not
give rise to any legal, equitable or other claim that the Founders are or may be
entitled to reimbursement from the funds on deposit in the Company's Rule 419
escrow.
Article VII
Rights of the Company
7.1 The Company's Board of Directors shall have access to Manager and the
Manager's employees at all reasonable times to inspect and supervise the
operations of the Company and shall have access at all reasonable times to all
information pertaining to the operation thereof. Manager, upon request, shall
furnish the Board of Directors with any information that may be reasonably
requested pertaining to operations of the Company, including copies of
accounting records, correspondence, due diligence materials provided by
potential Targets, and reports on the status of discussions and negotiations
with potential Targets. The Company's Board of Directors shall have the right to
inspect at all reasonable times during business hours, the books and records of
Manager pertaining to the Company; provided, however, that Manager may destroy
or otherwise dispose of any books and records relating to matters that are more
than seven years old, except records with respect to items in dispute.
Article VIII
Liability of Manager
8.1 The judgment and discretion of Manager exercised in good faith shall
be the limit of the liability of Manager to Company. Manager shall never be
liable to Company for any act taken, or omitted to be taken, in good faith in
the performance of any of the provisions of this agreement. Manager shall not be
liable to Company for any failure to perform or for any loss caused by strikes,
riots, fires, tornadoes, floods or any other cause including requirements of
governmental agencies, whether of like character or not, beyond the control of
Manager and which the exercise of reasonable diligence could not avoid.
Article IX
Notices
9.1 All notices, reports and correspondence permitted or required to be
given to any party hereunder, except as otherwise specifically provided herein,
shall be given in writing by U.S. mail or by telegram, postage or charges
prepaid, addressed to such party at the address listed above. Any party may
change his or its address by appropriate written notice to the other party
hereto.
Article X
State and Federal Laws, Rules and Regulations
10.1 All of the terms and provisions of this agreement are hereby
expressly made subject to all federal and state laws and to all valid rules and
regulations and orders of any duly constituted authority, having jurisdiction in
the premises. Manager shall prepare and the Company shall file all such
applications, notices, reports and other information concerning the operations
of the Company as may be required under the Exchange Act or other applicable
law. The Manager at its sole cost, risk and expense shall pay all costs and
expenses incurred by Manager in preparing periodic and other reports for the
benefit of the Company. Notwithstanding the foregoing, all professional fees
associated with the preparation of the Company's regulatory reports and all
filing fees associated therewith shall be treated as direct expenses of the
Company. Nothing herein contained, however, shall obligate the Manager to
prepare any applications, notices, reports and other information concerning the
operations of the Company from and after the closing date of a business
combination transaction of the type contemplated by the Plan.
Article XI
Force Majeure
11.1 If any party is rendered unable, wholly or in part, by force
majeure, to carry out its obligations under this Agreement, other than the
obligation to make money payments, that party shall the other party prompt
written notice of the force majeure, with reasonably full particulars concerning
it; thereupon, the obligation of the party giving the notice, so far as they are
affected by the force majeure, shall be suspended during, but no longer than,
the continuance of the force majeure. The affected party shall use all
reasonable diligence to remove the force majeure as quickly as possible. The
term "force majeure" as here employed shall mean an Act of God, strike, lockout
or other industrial disturbance, act of the public enemy, war, blockade, public
riot, lightning, fire, storm, flood, explosion, governmental restraint,
unavailability of equipment, and any other cause, whether of the kind
specifically enumerated above or otherwise, which is not reasonably within the
control of the party claiming suspension.
Article XII
Term
12.1 Subject to other provisions hereof, this agreement shall remain in
full force and effect until the earlier of (a) the closing date of a business
combination transaction of the type contemplated by the Plan, or (b) the
expiration of the 18 month period specified in Section 1.2 hereof, at which time
all powers and responsibilities of the Manager shall terminate.
Article XIII
Other Provisions
13.1 Notwithstanding anything to the contrary contained in this
Agreement, the following items pertaining to the management of the Company shall
not be considered as administrative overhead, and Manager shall be entitled to
make a direct charge to the Company or the Target Company for same:
a. Fees for third-party legal services, costs and expenses incurred in
connection with preparation and filing of a Current Report on From 8-K
to reflect the consummation of a business combination transaction of
the type contemplated by the Plan.
b. Fees for third party professional and contract services of personnel
directly connected with or engaged in the consummation of a business
combination transaction of the type contemplated by the Plan, provided,
however, that all agreements with such professional service providers
or contract service personnel shall be subject, in all events, to the
prior approval of the Company's Board of Directors.
13.2 This agreement and of the terms and provisions hereof shall extend
to and be binding upon the parties hereto, their respective heirs,
representatives, successors and assigns, and shall be enforceable by the parties
in any court of competent jurisdiction.
Article XIV
Representations and Warranties
14.1 Organization and Qualification. The Company is a corporation, duly
organized, validly existing and in good standing under the laws of State of
Delaware and has all requisite power and authority to own, lease and operate its
properties and to carry on its business as it is now being conducted, and is
duly qualified and in good standing to do business in each jurisdiction in which
the nature of the business conducted by it or the ownership or leasing of its
properties makes such qualification necessary.
14.2 Articles of Incorporation and By-Laws. The Company has heretofore
furnished to Manager a complete and correct copy of the Articles of
Incorporation and the By-Laws, as amended or restated to the date hereof. The
Company is not in violation of any of the provisions of its Articles of
Incorporation or By-Laws.
14.3 Capitalization. The authorized capital stock of the Company consists
of 25,000,000 shares of common stock, $.001 par value and 5,000,000 shares of
preferred stock, $0.001 par value. As of the date hereof (before giving effect
to the transactions contemplated herein) (i) 1,500,000 shares of common stock
are issued and outstanding, all of which are duly authorized, validly issued,
fully paid and nonassessable and not subject to preemptive rights created by
statute, the Company's Articles of Incorporation or By-Laws or any agreement to
which the Company is a party or is bound and (ii) no shares of the Company's
Preferred Stock are outstanding. There are no options, warrants, calls or other
rights (including registration rights), agreements, arrangements or commitments
presently outstanding obligating the Company to issue, deliver, sell or register
shares of its capital stock or debt securities, or obligating the Company to
grant, extend or enter into any such option, warrant, call or other such right,
agreement, arrangement or commitment.
14.4 Subsidiaries. The Company does not have any subsidiaries or own any
interest in any enterprise (whether or not such enterprise is a corporation).
The Company has either sold to third parties, or dissolved in accordance with
applicable law, all corporations, partnerships and other incorporated or
unincorporated enterprises in which it has previously had an interest,
regardless of whether such interest arose from stock ownership, management
control or otherwise.
14.5 Authority. Each of the Company and its Board of Directors has all
requisite corporate power and authority to execute and deliver this Agreement,
to perform its obligations hereunder and to consummate the transactions
contemplated herein. The execution and delivery of this Agreement and the
consummation of the transactions contemplated herein have been duly authorized
by all necessary corporate action and no other corporate proceeding on the part
of the Company (including, without limitation, any approval by the shareholders
of the Company of this Agreement or the transactions contemplated herein) is
necessary to authorize this Agreement or to consummate the transactions
contemplated herein. This Agreement has been duly executed and delivered by the
Company and its Board of Directors and, assuming the due authorization,
execution and delivery hereof by Capston, constitutes the legal, valid and
binding obligation of the Company enforceable in accordance with its terms (i)
except as limited by bankruptcy, insolvency, reorganization, moratorium or other
similar law now or hereafter in effect relating to or affecting creditors'
rights generally, and without limitation, the effect of statutory or other laws
regarding fraudulent conveyances and preferential transfers and (ii) subject to
the limitations imposed by general rules of equity (regardless of whether such
enforceability is considered at law or in equity).
14.6 No Conflict; Required Filings and Consents. (a) The execution and
delivery of this Agreement by the Company does not, and the performance of this
Agreement by the Company will not (i) conflict with or violate the Company's
Certificate of Incorporation or By-Laws, as amended or restated, (ii) conflict
with or violate any Laws in effect as of the date of this Agreement applicable
to the Company or by which any of its properties is bound, or (iii) result in
any breach of or constitute a default (or an event that with notice or lapse of
time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or require payment
under, or result in the creation of a lien or Encumbrance on, any of the
properties or assets of the Company pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Company is a party or by which the Company
or any of its properties is bound or subject except for breaches, defaults,
events, rights of termination, amendment, acceleration or cancellation, payment
obligations or liens or Encumbrances that would not have a material adverse
effect on the business, properties, assets, condition (financial or otherwise)
operations or prospects of the Company, taken as a whole, or on the transactions
herein contemplated.
(b) The execution and delivery of this Agreement by the Company and the
performance of this Agreement by the Company does not require the Company to
obtain any consent, approval, authorization or permit of, or to make any filing
with or notification to, any Governmental Entities, except for applicable
requirements, if any, of (i) the Securities Exchange Act of 1934, as amended
(the "Exchange Act") or the securities laws of any other jurisdiction (the "Blue
Sky Laws") and the National Association of Securities Dealers, and (ii) where
the failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, would not, either individually or in the
aggregate, prevent the Company from performing its obligations under this
Agreement.
14.7 Permits; Compliance. The Company is in possession of all franchises,
grants, authorizations, licenses, permits, easements, variances, exemptions,
consents, certificates, approvals and orders necessary to own, lease and operate
its properties and to carry on its business as it is now being conducted
(collectively, the "the Company Permits"), and there is no action, proceeding or
investigation pending or, to the knowledge of the Company, threatened, regarding
suspension or cancellation of any of the Company Permits. The Company is not in
conflict with, or in default or violation of (a) any Law applicable to the
Company or by which any of its properties is bound or subject or (b) any of the
Company Permits.
14.8 No Undisclosed Liabilities. There are no liabilities of the Company,
whether accrued, contingent, absolute, determined, determinable or otherwise,
and there is no existing condition, situation or set of circumstances which
could reasonably be expected to result in such a liability.
14.9 Absence of Litigation. There is no claim, action, suit, litigation,
proceeding, arbitration or, to the knowledge of the Company, investigation of
any kind, at law or in equity (including actions or proceedings seeking
injunctive relief), pending or, to the knowledge of the Company, threatened
against the Company or any properties or rights of the Company and the Company
is not subject to any continuing order of, consent decree, settlement agreement
or other similar written agreement with, or, to the knowledge of the Company,
continuing investigation by, any Governmental Entity, or any judgment, order,
writ, injunction, decree or award of any Governmental Entity or arbitrator,
including, without limitation, cease and desist or other orders.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first set forth above
Win or Lose Acquisition Corporation Capston Network Company
(the Company) (the Manager)
By: /s/ Sally A. Fonner By: /s/ Sally A. Fonner
------------------------------- -------------------------------
Sally A. Fonner, President Sally A. Fonner, Sole Director
John L. Petersen, as a Founder and beneficial
Owner of 500,000 Founders' Shares
/s/ John L. Petersen
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John L. Petersen
Rachel A. Fefer, as a Founder and beneficial
Owner of 500,000 Founders' Shares
/s/ Rachel A. Fefer
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Rachel A. Fefer
Mark R. Dolan, as a Founder and beneficial
Owner of 500,000 Founders' Shares
/s/ Mark R. Dolan
---------------------------------------------
Mark R. Dolan
