February 2, 1999
PRIVATE & CONFIDENTIAL
Xxxxxxx X. Xxxx
NHancement Technologies Inc.
00000 Xxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxx, XX 00000
Dear Xx. Xxxx:
We are writing this letter to confirm our agreement ("Agreement") that
JWGenesis Capital Markets, LLC ("JWGenesis") is exclusively authorized to
represent NHancement Technologies Inc. and its affiliates and related
entities (collectively, the "Company") and to assist the Company as its
exclusive financial advisor in connection with the possible sale of the
Company or any of its assets, business or equity, debt or other securities or
any other business combination. This authorization covers such a sale by
means of any merger, consolidation, recapitalization, business combination,
exchange offer or purchase or sale of securities or assets. Also covered by
this authorization is any other transaction resulting in a change of control
of the Company or its assets, securities or business. For the purposes of
this Agreement, any of the foregoing shall constitute a "Transaction."
This Agreement shall become effective upon the execution hereof by the
Company and JWGenesis, and the term of this Agreement and the exclusive
appointment provided for herein (the "Term") shall end on the first
anniversary of the date of such execution by the Company. The Company agrees
to use reasonable efforts to effect a Transaction acceptable to it during the
term.
I. PERFORMANCE OF SERVICES
Under this Agreement, JWGenesis will work with the Company and use
reasonable efforts to attempt to consummate a satisfactory Transaction,
subject to a final review (prior to marketing the Company and or its
securities) by JWGenesis and the Company which concludes that the Transaction
being considered is financially feasible, including the following services as
reasonably requested by the Company:
1. Provide corporate finance professionals as reasonably required to assist in
this engagement.
2. Advise and assist the Company in estimating a fair market value for the
Company and identifying and screening potential acquirers or merger
candidates.
3. Discuss and evaluate with the Company various alternative marketing
strategies and advise on how to structure and implement a Transaction
designed to further the Company's stated objectives.
4. Assist the Company in preparing a descriptive memorandum of the Company, if
appropriate, for use in discussions with potential acquirers or merger
candidates.
5. Submit the names of potential acquirers or merger candidates to the Company
for the purpose of establishing which potential acquirers or merger
candidates should be approached.
6. Contact acceptable potential acquirers and merger candidates and establish
and attend exploratory meetings, when appropriate.
7. Develop judgments as to the relative values and financial implications to
the Company of any proposed Transactions, and then, in consultation with
the Company and legal, accounting and/or tax advisors, advise the Company
on appropriate negotiating strategies and, to the extent deemed
appropriate, assist and/or direct negotiations leading to a conclusion of
the proposed Transaction.
8. Assist the Company in evaluating various financing alternatives.
II. COMPENSATION OF SERVICES
A. In partial payment for its services hereunder, JWGenesis shall receive from
the Company a nonrefundable $25,000 performance fee within 45 days from the
execution date of this agreement, payable upon the execution hereof which paid
amount shall be credited in full against the initial Transaction Fee (as
hereinafter defined) payable hereunder.
B. In addition, the Company shall issue to JWGenesis upon the execution hereof
300,000 warrants pursuant to Appendix B hereto.
C. If any Transaction is consummated during the Term or within twelve (12)
months after the end of the Term with a party introduced to the Company by
JWGenesis or contacted by JWGenesis or the Company during the Term, the Company
shall pay JWGenesis in cash at the closing of each such Transaction, a
transaction fee ("Transaction Fee") equal to the sum of: (i) ten percent (10%)
if equity (five percent (5%) if merger or acquisition) of the first ten million
dollars of the aggregate consideration of a Transaction (the "Aggregate
Consideration"); (ii) seven percent (7%) if equity (three and a half percent
(3.5%) if merger or acquisition) of the next ten million dollars of the
Aggregate Consideration; (iii) five percent (5%) if equity (two and a half
percent (2.5%) if merger or acquisition) of the next ten million dollars of the
Aggregate Consideration; and (iv) four percent (4%) if equity (two percent
(2%) if merger or acquisition) of the balance of the Aggregate Consideration,
subject to a minimum Transaction Fee of $500,000 on each completed Transaction.
Aggregate Consideration is defined and computed as follows:
1. The total sale proceeds and other consideration received by (i) the
Company, (ii) participants in the Company's phantom or other equity plans, (iii)
recipients of a share of the Transaction proceeds or similar incentive
arrangements and/or (iv) holders of the Company's stock, options, warrants and
convertible securities ((i), (ii), (iii) and (iv) collectively being defined as
the "Stakeholders") upon the consummation of any Transaction (including payments
made in installments, paid into escrow and/or deferred), inclusive of cash, debt
and equity securities, notes, property, shareholder payables and indebtedness
assumed or retired, agreements not to compete, consulting agreements and unusual
employment contracts, plus the total value of any interest-bearing liabilities
and long-term liabilities assumed or retired, the net value of any current
assets not sold in an assets Transaction, the aggregate amount of any dividends
(except regular dividends paid in conformity with past practice) or other
distributions paid by the Company to the Stakeholders after the date hereof and
the imputed value of any stock retained by the Stakeholders in a sale,
recapitalization, leveraged buyout or similar transaction.
2. If a portion of such consideration includes contingent payments,
Aggregate Consideration shall also include the value of such payments; provided
that if the Company and JWGenesis cannot in good faith agree on such value, then
the portion of the Transaction Fee attributable to such contingent payments
shall be paid as such payments are received by Stakeholders. If the
Aggregate Consideration for the Transaction consists in whole or in part of
securities or other property, for the purposes of calculating the amount of
Aggregate Consideration, the value of such securities or other property will
be the value thereof on the day preceding the consummation of the Transaction
as the Company and JWGenesis agree, provided, however, that in the case of
securities for which there is a public trading market, the value will be
determined by the average last sales prices for such securities for the last
twenty trading days prior to such consummation or the average used for
calculating the merger consideration value, if used. In the case of debt
securities for which there is no public trading market, the value thereof
shall be the principal amount thereof. If there is no public trading market
for securities or other property other than debt securities received or
receivable as part of Aggregate Consideration and the parties are unable to
agree on their value, then each of JWGenesis and the Company will select an
investment banking firm respected in the merger and acquisition field to
determine a value and the midpoint between the two values established by the
two independent experts will be the fair market value for the purposes hereof.
D. If the Company and/or its shareholders receive a bona fide Transaction
proposal and the proposal is accepted by the Company from one or more third
parties with Aggregate Consideration with a value of at least five million
dollars, or the Company and/or its shareholders enter into a letter of intent
or other agreement with one or more third parties with respect to a
Transaction, and (except due to a breach by or failure of condition under the
control of each such third party) no Transaction is consummated by the
earlier to occur of the dates set forth in clauses (i) or (ii) of this
paragraph D whereby JWGenesis is paid a Transaction Fee by the Company, then
the Company shall pay JWGenesis an additional performance fee (the "Seller's
Remorse Fee") of $250,000 at the earlier of (i) twelve months after the Term
of this Agreement or (ii) when the Company has ceased using reasonable
efforts to consummate a Transaction.
E. The Company agrees to reimburse JWGenesis for all reasonable
out-of-pocket expenses incurred in carrying out the terms of this Agreement,
including telephone, travel, facsimile, courier and computer time charges,
attorneys' fees and disbursements and sales, use and similar taxes. Such
reimbursable expenses shall not exceed $25,000 without the Company's
approval, provided, however, that such limitation shall not apply to Appendix
A. These out-of-pocket expenses will be payable from time to time upon
invoicing by JWGenesis at any time after the commencement of this Agreement.
F. The provisions of this section II shall survive the termination and
expiration of this Agreement.
III. INDEMNIFICATION
The Company and JWGenesis hereby agree to the terms and conditions of
the Indemnification Agreement attached hereto as Appendix A with the same
force and effect and as if the terms and conditions were set forth at length
herein.
IV. COORDINATION OF EFFORTS AND EXCLUSIVITY
In order to coordinate the efforts of both JWGenesis and the Company,
and to maximize the possibility of completing a satisfactory Transaction
during the term of this Agreement, JWGenesis shall have the exclusive
authority to initiate discussions with potential acquirers. In the event the
Company, its directors, officers, employees or shareholders receive any
inquiries or conduct any discussions concerning the availability of the
Company for purchase, such inquiries and discussions shall be promptly
referred to JWGenesis.
V. DISCLOSURE
Any financial or other advice, descriptive memoranda or other
documentation rendered by JWGenesis pursuant to this Agreement may not be
disclosed publicly or to any third party in any manner without the prior
written approval of JWGenesis. All non-public information provided by the
Company to JWGenesis will be considered as confidential information and shall
be maintained as such by JWGenesis, except as required by law or as required
to enable JWGenesis to perform its services pursuant to this Agreement, until
the same becomes known to third parties or the public without release thereof
by JWGenesis. The provisions of this paragraph shall survive the termination
and expiration of this Agreement.
The Company agrees to provide to JWGenesis, among other things, all
reasonable information requested or required by JWGenesis or a potential
acquirer, including, but not limited to, information concerning historical
and projected financial results and possible and known litigious,
environmental and other contingent liabilities of the Company. The Company
also agrees to make available to JWGenesis such representatives of the
Company, including, among others, directors, officers, employees, outside
counsel and independent certified public accountants, as JWGenesis may
reasonably request. The Company will promptly advise JWGenesis of any
material changes in its business, finances or shareholdings. The Company
represents that all information made available to JWGenesis by the Company,
including, without limiting the generality of the foregoing, any descriptive
memorandum or other information materials prepared by or approved by the
Company, will be complete and correct in all material respects and will not
contain any untrue statements of a material fact or omit to state a material
fact necessary in order to make the statements therein not misleading in
light of the circumstances under which such statements are made. In rendering
its services hereunder, JWGenesis will be using and relying primarily on such
information without independent verification thereof or independent appraisal
of any of the Company's assets. JWGenesis does not assume responsibility for
the accuracy or completeness of the information to which reference is made
above.
The Company authorizes JWGenesis to make public notice in the form of a
"tombstone," at JWGenesis' expense, of any Transaction concluded under this
Agreement.
VI. OBLIGATIONS OF JWGENESIS SOLELY TO THE COMPANY
The services herein provided are to be rendered solely to the Board of
Directors of the Company. They are not being rendered by JWGenesis as a
fiduciary of the shareholders of the Company and JWGenesis shall not have any
liability or obligation with respect to its services hereunder to such
shareholders or any other person, firm or corporation.
VII. ENTIRE AGREEMENT, GOVERNING LAWS AND JURISDICTION, ETC.
This Agreement sets forth the entire understanding of the parties
relating to the subject matter hereof and supersedes and cancels any prior
communications, understandings and agreements between the parties. This
Agreement cannot be terminated or changed, nor can any of its provisions be
waived, except by written agreement signed by all parties hereto. This
Agreement shall be binding upon and inure to the benefit of any successors,
assigns, heirs and personal representatives of the Company, the undersigned
shareholders and JWGenesis.
This Agreement shall be governed by and construed to be in accordance
with the laws of the State of New York applicable to contracts made and to be
performed solely in such state by citizens thereof. Any dispute arising out
of this Agreement shall be adjudicated in the courts of the State of New York
or in the
federal courts sitting in the Southern District of New York, and the Company
hereby agrees that service of process upon it by registered or certified mail
at its address set forth above shall be deemed adequate and lawful. The
parties hereto shall deliver notices to each other by personal delivery or by
registered or certified mail (return receipt requested) at the addresses set
forth above.
VIII. ACCEPTANCE
Please confirm that the foregoing is in accordance with your
understanding by signing upon behalf of the Company and returning an executed
copy of this Agreement, with an acknowledgment check for $25,000 drawn in
favor of "JWGenesis Capital Markets, LLC," will be sent in 45 days, whereupon
after execution by JWGenesis it shall become a binding agreement among the
Company, JWGenesis and the Company's shareholders. A telecopy of a signed
original of this Agreement shall be sufficient to bind the parties whose
signatures appear hereon.
Very truly yours,
JWGENESIS CAPITAL MARKETS, LLC
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------------
Xxxxxxx X. Xxxxxx
Director of Corporate Finance
ACCEPTED AND AGREED TO:
NHANCEMENT TECHNOLOGIES INC. AND
ITS AFFILIATES AND RELATED ENTITIES
By: /s/ Xxxxxxx X. Xxxx
-----------------------------------------
Xxxxxxx X. Xxxx
CEO, President and CFO
Date: February 2, 1999
-----------------------------------------
APPENDIX A
INDEMNIFICATION AGREEMENT
Appendix A to the letter engagement agreement (the "Agreement") dated
January 8, 1999 by and among Nhancement Technologies and its affiliates and
related entities (collectively, the "Company"), JWGenesis Capital Markets,
LLC ("JWGenesis") and the Company's shareholders.
The Company agrees to indemnify and hold JWGenesis and its current and
future affiliates, control persons, directors, officers, employees and agents
(each an "Indemnified Person") harmless from and against all losses, claims,
damages, liabilities, costs or expenses, including those resulting from any
threatened or pending investigation, action, proceeding or dispute whether or
not JWGenesis or any such other Indemnified Person is a party to such
investigation, action, proceeding or dispute, arising out of JWGenesis'
entering into or performing services under this Agreement or arising out of
any matter referred to in this Agreement. This indemnity shall also include
JWGenesis' and/or any such other Indemnified Person's reasonable attorneys'
and accountants' fees and out-of-pocket expenses incurred in, and the cost of
JWGenesis personnel whose time is spent in connection with, such
investigations, actions, proceedings or disputes which fees, expenses and
costs shall be periodically reimbursed to JWGenesis and/or to any such other
Indemnified Person by the Company as they are incurred; provided, however,
that the indemnity herein set forth shall not apply where a court of
competent jurisdiction has made a final determination that JWGenesis acted in
a grossly negligent manner or engaged in willful misconduct in the
performance of its services hereunder which gave rise to the loss, claim,
damage, liability, cost or expense sought to be recovered hereunder (but
pending any such final determination the indemnification and reimbursement
provisions hereinabove set forth shall apply and the Company shall perform
its obligations hereunder to reimburse JWGenesis and/or each such other
Indemnified Person periodically for its, his or their fees, expenses and
costs as they are incurred). The Company also agrees that neither JWGenesis
nor any other Indemnified Person shall have any liability (whether direct or
indirect, in contract or tort or otherwise) to the Company for or in
connection with any act or omission to act by JWGenesis as a result of its
engagement under this Agreement except for any such liability for losses,
claims, damages, liabilities or expenses incurred by the Company that is
found in a final determination by a court of competent jurisdiction to have
resulted from JWGenesis' gross negligence or willful misconduct.
If for any reason, the foregoing indemnification is unavailable to
JWGenesis or any such other Indemnified Person or insufficient to hold it
harmless, then the Company shall contribute to the amount paid or payable by
JWGenesis or any such other Indemnified Person as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect
not only the relative benefits received by the Company and its shareholders
on the one hand and JWGenesis or any such other Indemnified Person on the
other hand, but also the relative fault of the Company and JWGenesis or any
such other Indemnified Person, as well as any relevant equitable
considerations; provided that in no event will the aggregate contribution by
JWGenesis and any such other Indemnified Person hereunder exceed the amount
of fees actually received by JWGenesis pursuant to this Agreement. The
reimbursement, indemnity and contribution obligations of the Company
hereinabove set forth shall be in addition to any liability which the Company
may otherwise have and these obligations and the other provisions hereinabove
set forth shall be binding upon and inure to the benefit of any successors,
assigns, heirs and personal representatives of the Company, JWGenesis and any
other Indemnified Person.
The terms and conditions hereinabove set forth in this Appendix A shall
survive the termination and expiration of this Agreement and shall continue
indefinitely thereafter.
NHANCEMENT TECHNOLOGIES JWGENESIS CAPITAL MARKETS, LLC
AND ITS AFFILIATES AND RELATED ENTITIES
By: /s/ Xxxxxxx X. Xxxx By: /s/ Xxxxxxx X. Xxxxxx
------------------------------------ ----------------------------------
Xxxxxxx X. Xxxx, CEO and President Xxxxxxx X. Xxxxxx, Director of
Corporate Finance
