[GRAPHIC OMITTED]
October 10, 2001
Netgateway, Inc.
000 X. Xxxxxxxxxx Xxxxxx
Xxxx, XX 00000
Attention: Xxx Xxxxx
Chairman of the Board of Directors and
Chief Executive Officer
Gentlemen:
1. We understand that Netgateway, Inc., (the "Company") intends
to pursue a merger agreement with Category 5 Technologies, Inc. ("Category 5")
(collectively, the "Merger"):
2. The purpose of this letter is to confirm the agreement (the
"Agreement") through which SBI E2-Capital (USA) Ltd. ("SBI") is engaged to serve
as a financial advisor ("Advisor") to the Company previous to and during the
Merger.
3. During the term of this Agreement, the Advisor will provide the
Company with (1) such regular and customary advice as is reasonably requested by
the Company, provided that the Advisor shall not be required to undertake duties
not reasonably within the scope of the advisory service contemplated by this
Agreement, and (2) a fairness opinion (the "Fairness Opinion") to be provided to
the Board of Directors of the Company relative to the proposed merger. In
performance of these duties, the Advisor shall provide the Company with the
benefits of its best judgment and efforts. It is understood and acknowledged by
the parties that the value of the Advisor's advice is not measurable in any
quantitative manner, and that the Advisor shall be obligated to render advice,
upon the request of the Company, in good faith, but shall not be obligated to
spend any specific amount of time in doing so.
4. In connection with our activities on your behalf, the Company agrees
to cooperate with us, to furnish or cause to be furnished to us such information
and data as we may reasonably request, and to give us reasonable access to the
Company's officers, directors, employees, appraisers, and independent
accountants. The Company represents that all information made available to SBI
by the Company will be complete and correct in all material respects and will
not contain any untrue statement 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 statement are made. The Company further
represents and warrants that any projections provided by it to SBI will have
been prepared in good faith and will be based on assumption which, in light of
the circumstances under which they are made, are reasonable. The Company
acknowledges and agrees that in rendering its services hereunder, SBI will be
using and relying on the Information (and information available from public
sources and other sources deemed reliable by SBI) without independent
verification thereof by SBI, and SBI does not assume responsibility for the
accuracy or completeness of the information or any other information regarding
the Company or the Engagement.
5. For our services in connection with serving as Advisor, the Company
shall pay, or cause to be paid, to SBI a fee equal to two percent (2%) of the
Merger transaction value of $37,500,000. The fee shall be paid to us as follows:
(a) An aggregate cash fee of $150,000.00. This fee shall be
payable to SBI E2-Capital upon delivery of the Fairness
Opinion.
(b) 2,333,333 shares of common stock of the Company to be issued
in the name of SBI E2-Capital or its designees, free of
restrictive legend or any encumbrance. The shares shall be
issued upon execution of the definitive merger agreement.
6. If (i) the Merger is not consummated within six months of the date
of this letter or (ii) the form of consideration to be offered in the Merger is
materially changed, SBI's continuation of its engagement hereunder shall be
subject to additional compensation to be mutually agreed upon.
7. In addition to the fees described in paragraph 5 above, the Company
agrees to promptly reimburse SBI, upon request from time to time, for all
out-of-pocket expenses incurred by SBI, (including, without limitation, fees and
expenses of counsel, and other consultants and advisors retained by SBI) in
connection with the matters contemplated by this Agreement.
8. The Company agrees to indemnify SBI in accordance with the
indemnification provisions (the "Indemnification Provisions") attached to this
Agreement which Indemnification Provisions are incorporated herein and made a
part hereof.
9. The benefits of this Agreement shall inure to the respective
successors and assigns of the parties hereto and of the indemnified parties
hereunder and then successors and assigns and representatives, and the
obligations and liabilities assumed in this Agreement by the parties hereto
shall be binding upon their respective successors and assigns.
10. Either party hereto may terminate this Agreement at any time upon
30 days prior written notice, without liability or continuing obligation, except
as set forth in the following sentence. Neither termination nor completion of
this assignment shall effect: (i) any compensation earned by SBI up to the date
of termination or completion, as the case may be, (ii) any compensation to be
earned after termination pursuant to paragraph 5 hereof, (iii) the reimbursement
of expenses incurred by SBI up to the date of termination or completion, as the
case may be, (iv) the provisions or paragraphs 5 through 12 of this Agreement
and (v) the Indemnification Provisions hereof which are incorporated herein, all
of which shall remain operatable and in full force and effect.
11. The validity and interpretation of this Agreement shall be governed
by, and construed and enforced in accordance with, the laws of the State of
California applicable to agreements made and to be fully performed therein.
12. For the convenience of the parties, any number of counterparts of
this Agreement may be executed by the parties hereto. Each such counterpart
shall be, and shall be deemed to be, an original instrument, but all such
counterparts taken together shall constitute one and the same Agreement. This
Agreement may not be modified or amended, except in wring signed by the parties
hereto.
If the above terms are in accordance with your understanding, please
sign the enclosed copy of this letter and return it to us.
Very truly yours,
SBI E2-CAPITAL (USA) LTD.
By: _________________________________
Name: Xxxxxx Xxxxxxx
Title: Managing Director and
Executive Vice President
Confirmed and Agreed to this
_____ day of October, 2001:
NETGATEWAY, INC.
By: ___________________________
Name:
Title:
INDEMNIFICATION PROVISIONS
The Company (as such term is defined below) agrees to indemnify and
hold harmless SBI against any and all losses, claims, damages, obligations,
penalties, judgments, awards, liabilities, costs, expenses, and disbursements
(and any and all actions, suits, proceedings, and investigations in respect
thereof and any legal and other costs, expenses, and disbursements in giving
testimony or furnishing documents in response to a subpoena or otherwise),
including, without limitation, the costs, expenses, and disbursements, as and
when incurred, of investigating, preparing, or defending any such action, suit,
proceeding, or investigation (whether or not in connection with litigation in
which SBI is a party) directly or indirectly caused by, relating to, based upon,
arising out of, our in connection with (a) SBI's acting for the Company [and/or
the Special Committee], including without limitation, any act or omission by SBI
in connection with its acceptance of or the performance or nonperformance of its
obligations under the agreement, between SBI and Netgateway, Inc., as it may be
amended from time to time (the "Agreement"), (b) any untrue statement or alleged
untrue statement of a material fact contained in, or omissions or alleged
omissions from, any information furnished by the Company to SBI, or (c) any
Merger (as such term is defined in the Agreement), however, such indemnity
agreement shall not apply to any portion of any such loss, claim, damage,
obligation, penalty, or judgment by a court of competent jurisdiction (not
subject to further appeal) to have resulted primarily and directly from the
gross negligence or willful misconduct of SBI. The Company also agrees that SBI
shall not have any liability (whether direct or indirect, in contract or tort or
otherwise) to the Company for, or in connection with, the engagement of SBI,
except to the extent that any such liability is found in a final judgment by a
court of competent jurisdiction (not subject to further appeal) to have resulted
primarily and directly from SBI's willful misconduct.
These indemnification provisions shall be in addition to any liability
which the Company may otherwise have to SBI or the persons indemnified below in
this sentence and shall extend to the following: SBI, its affiliated entities,
directors, officers, employees, legal counsel, agents, and controlling persons
of SBI within the meaning of the federal securities laws. All references to SBI
in this Indemnification Agreement shall be understood to include any and all of
the foregoing.
If any action, suit, proceeding, or investigation is commenced, as to
which SBI proposes to demand indemnification, it shall notify the Company with
reasonable promptness; provided, however, that any failure by SBI to notify the
Company shall not relieve the Company of its obligations hereunder. SBI shall
have the right to retain counsel of its own choice to represent it, and the
Company shall have the right to retain counsel of its own choice to represent
it, and the Company shall pay the fees, expenses, and disbursements of each such
counsel; and such counsel shall to the extent consistent with its professional
responsibilities cooperate with the Company and any counsel designated by the
Company. The Company shall be liable for any settlement of any claim against SBI
made with the Company's written consent, which consent shall not be unreasonably
withheld. The Company shall not, without the prior written consent of SBI,
settle or compromise any claim, or permit a default or consent to the entry of
any judgment in respect thereof, unless such settlement compromise or consent
includes, as an unconditional term thereof, the giving by the claimant to SBI of
an unconditional release from all liability in respect of such claim in respect
of such claim.
In order to provide for just and equitable contribution, if a claim for
indemnification pursuant to these indemnification provisions is made, but it is
found in a final judgment by a court of competent jurisdiction (not subject to
further appeal) that such indemnification may not be enforced in such case, even
though the express provisions hereof provide for indemnification in such case,
then the Company, on the one hand, and SBI, on the other hand, shall contribute
to the losses, claims, damages, obligations, penalties, judgments, awards,
liabilities, costs, expenses, and disbursements to which the indemnified persons
may be subject in accordance with the relative benefits received by the Company,
on the one hand, and SBI, on the other hand, and also the relative fault of the
Company on the one hand, and SBI on the other hand, in connection with the
statements, acts, or omissions which resulted in such loses claim, damages,
obligations, penalties, judgments, awards, liabilities, costs, expenses, and
disbursements relevant equitable considerations shall also be considered. No
person found liable for a fraudulent misrepresentation shall be entitled to
contribution from any person who is not also found liable for such fraudulent
misrepresentation. Notwithstanding the foregoing, SBI shall not be obligated to
contribute any amount hereunder that excess the amount of fees previously
received by SBI pursuant to the Agreement.
Neither termination nor completion of the engagement of SBI referred to
above shall affect these indemnification provisions which shall then remain
operative and in full force and effect.
