Financial Advisory and Non-Exclusive Investment Banking Services - Canaccord International Ltd. and China Broadband Corp.
CANACCORD INTERNATIONAL LTD.
VALE VERDE, NO. 1 LANCASTER
ST. THOMAS, BARBADOS
July 25, 2000
Mr. Matthew Heysel
Chairman and CEO
China Broadband Corp.
2080, 440 - 2nd Avenue S.W.
Calgary, AB
T2P 5E9
Dear Mr. Heysel:
RE: FINANCIAL ADVISORY AND NON-EXCLUSIVE INVESTMENT BANKING SERVICES
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This letter outlines our proposal by which Canaccord International Ltd. (the
"Agent") will work with the principal shareholders ("Principals") of China
Broadband Corp. ("the Company") to develop a framework and financing plan for
the Company to achieve its corporate development goals.
The Company agrees to appoint the Agent as sole and exclusive agent outside the
United States and Asia to advise the Company subject to the following basic
terms and conditions expressed herein.
The Agent will:
a) work with the Principals and the Company to determine the best route to
raise the funds to allow management to develop the Company's business plan;
b) advise the Principals and the Company with respect to such corporate
transactions as:
i) negotiations with respect to the Company's current partner Softnet,
including renegotiating original partnership agreement, and
ii)negotiations with potential strategic partners for either vendor
financing, equity financing and technical support, etc.
c) advise the Company on potential merger and acquisition opportunities or
other changes to the corporate structure.
I. CORPORATE FEES
The corporate fees compensate the Agent for its merchant banking, advisory
services, involvement with management's ownership and growth plans, due
diligence, evaluation and fiscal agency costs as follows:
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July 25, 2000
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a) a commencement fee for the Agent's fiscal advisory work of US$200,000 due
within 15 days of the execution of this letter agreement;
b) the Agent will work with the Company to advance its business objectives and
provide financial advisory and investment banking services as are customary
with raising capital. As compensation for the Agent's fiscal advisory
services, the Company will pay the Agent 12 monthly advances
(non-refundable) of US$5,000 for the work undertaken.
c) a success fee, payable at the conclusion of any transaction contemplated
herein where the Agent was involved. The fee will be payable as 2% cash fee
of the value of the transaction, plus Agent's warrants of 3% exercisable at
the per share equivalent of the value of the transaction. The Agent's
warrants will be exercisable for two years from date of issue.
II. GENERAL UNDERTAKINGS
1. The Company and the Agent will enter into written agreements prepared
according to the Agent's standard form concerning any transaction and any
potential equity financing.
2. The Company will agree to establish with the Agent's approval:
(a) a public relations program, and
(b) a market maintenance program.
3. The Company will grant the Agent observer status at Directors' meetings to
be held until a period ending one year from the date of execution of this
letter agreement.
4. The Company will provide the Agent on a timely basis with monthly unaudited
financial statements following execution of this letter agreement and
continuing for a period of one year.
III. RIGHT OF PARTICIPATION
The Company herein agrees that it will work exclusively with the Agent outside
of the United States and Asia regarding its financing requirements. Furthermore,
the Agent will have the right of participation up to 25% of all worldwide future
debt or equity financings of the Company, whether public or private and whether
or not an investment dealer is or proposes to be involved, for a period of 12
months from the date of this letter agreement. The Agent will have 10 business
days to express its
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China Broadband Corp. Page 3
July 25, 2000
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intention to participate, after which the Company is released from this right of
participation.
IV. EXPIRATION OF THIS OFFER
The Agent hereby notifies the Company that this agreement is only offered for a
limited time. This agreement and all terms and conditions referred to herein
will expire by 4:00 p.m. on July 28, 2000 unless signed and returned to
Canaccord International Ltd. by mail or fax.
V. OTHER
The Company covenants and agrees to indemnify the Agent as provided for in
Schedule A attached hereto.
This letter agreement will be governed by and construed in accordance with the
laws of Canada and the parties submit to the non-exclusive jurisdiction of the
Canadian courts.
If this letter accurately reflects your understanding of the terms of our
engagement and you agree to be legally bound thereby, please execute this letter
(in counterparts, if necessary) where indicated below and return a copy thereof
(by facsimile and by courier) to Canaccord International Ltd., Attention:
Elizabeth A. Watkins.
Yours truly,
CANACCORD INTERNATIONAL LTD.
Per: Elizabeth A. Watkins
President
The foregoing accurately reflects the terms of the transaction which the Company
hereby agrees to enter into and agrees to be legally bound to.
Acknowledged and agreed this ____________ day of __________________, 2000
CHINA BROADBAND CORP.
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July 25, 2000
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Per: ______________________________
Authorized Signatory
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July 25, 2000
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SCHEDULE "A"
China Broadband Corp. (the "Indemnitor) hereby agrees to indemnify and hold
Canaccord International Ltd. and/or any of its subsidiary companies and/or
divisions (hereinafter referred to as the "Agent") and each and every one of the
directors, officers, employees and shareholders of the Agent (hereinafter
referred to as the "Personnel") harmless from and against any and all expenses,
losses, claims, actions, damages or liabilities, whether joint or several
(including the aggregate amount paid in reasonable settlement of any actions,
suits, proceedings or claims), and the reasonable fees and expenses of its
counsel that may be incurred in advising with respect to and/or defending any
claim that may be made against the Agent to which the Agent and/or its Personnel
may become subject or otherwise involved in any capacity under any statute or
common law or otherwise insofar as such expenses, losses, claims, damages,
liabilities or actions arise out of or are based, directly or indirectly, upon
the performance of professional services rendered to the Indemnitor by the Agent
and its Personnel hereunder or otherwise in connection with the matters referred
to in the attached letter agreement, provided, however, that this indemnity
shall not apply to the extent that a court of competent jurisdiction in a final
judgement that has become non-appealable shall determine that:
i. the Agent or its Personnel have been negligent or dishonest or have
committed any fraudulent act in the course of such performance; and
ii. the expenses, losses, claims, damages or liabilities, as to which
indemnification is claimed, were directly caused by the negligence,
dishonesty or fraud referred to in (i).
If for any reason (other than the occurrence of any of the events itemised in
(i) and (ii) above, the foregoing indemnification is unavailable to the Agent or
insufficient to hold it harmless, then the Indemnitor shall contribute to the
amount paid or payable by the Agent as a result of such expense, loss, claim,
damage or liability in such proportion as is appropriate to reflect not only the
relative benefits received by the Indemnitor on the one hand and the Agent on
the other hand but also the relative fault of the Indemnitor and the Agent, as
well as any relevant equitable considerations provided that the Indemnitor shall
in any event contribute to the amount paid or payable by the Agent as a result
of such expense, loss, claim, damage or liability any excess of such amount over
the amount of the fees received by the Agent hereunder.
The Indemnitor agrees that in case any legal proceeding shall be brought against
the Indemnitor and/or the Agent by any governmental commission or regulatory
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July 25, 2000
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authority or any stock exchange or other entity having regulatory authority,
either domestic or foreign, shall investigate the Indemnitor and/or the Agent
and Personnel of the Agent shall be required to testify in connection therewith
or shall be required to respond to procedures designed to discover information
regarding, in connection with, or by reason of the performance of professional
services rendered to the Indemnitor by the Agent, the Agent shall have the right
to employ its own counsel in connection therewith, and the reasonable fees and
expenses of such counsel as well as the reasonable costs and out-of-pocket
expenses incurred by the Agent and its Personnel in connection therewith shall
be paid by the Indemnitor as they occur.
Promptly after receipt of notice of the commencement of any legal proceeding
against the Agent or any of its Personnel or after receipt of notice of the
commencement of any investigation, which is based, directly or indirectly, upon
any matter in respect of which indemnification may be sought from the
Indemnitor, the Agent will notify the Indemnitor in writing of the commencement
thereof and, throughout the course thereof, will provide copies of all relevant
documentation to the Indemnitor, will keep the Indemnitor advised of the
progress thereof and will discuss with the Indemnitor all significant actions
proposed.
The indemnity and contribution obligations of the Indemnitor shall be in
addition to any liability which the Indemnitor may otherwise have, shall extend
upon the same terms and conditions to the Personnel of the Agent and shall be
binding upon and enure to the benefit of any successors, assigns, heirs and
personal representatives of the Indemnitor, the Agent and any of the Personnel
of the Agent. The foregoing provisions shall survive the completion of
professional services rendered under the attached letter of agreement or any
termination of the authorization given by the attached letter of agreement.
___________________________ for Canaccord International Ltd.
___________________________ for China Broadband Corp.