EXHIBIT 4.1
ENGAGEMENT AGREEMENT
February 7, 2000
Xx. Xxxxx X. Xxxxxx
President & COO
Aztec Manufacturing Co.
X.X. Xxx 000
000 Xxxxx Xxxxxxx
Xxxxxxx, XX 00000
1. This letter agreement will confirm the understanding between Aztec
Manufacturing Co. and/or its affiliates and successors (the "Company" or
"AZZ") and RCG Capital Markets Group, Inc. and/or its affiliates and
successors ("RCG") with respect to the matters set forth herein. RCG will
provide consulting and other services, as more particularly described
herein and in the attachment hereto entitled Financial Relations Services
Attachment (the "Financial Relations Services"), to the Company and will
represent the Company during the engagement as exclusive Financial
Relations Consultants with respect to the Financial Relations Services, on
the terms and conditions set forth herein and in the attachments hereto,
all of which are incorporated herein by reference and form a part hereof.
The period during which RCG will perform the Financial Relations Services
for the Company will commence on February 7, 2000 (the "Commencement Date")
and, unless otherwise terminated as provided in this paragraph or in
paragraph nine of this letter agreement, will terminate on the date which
is Eighteen (18) months following the commencement date (the "Termination
Date"). The period beginning on the Commencement Date and ending on the
Termination Date is hereafter referred to as the "Engagement Term". As more
particularly described in paragraph 9 below, either party may terminate
this agreement at any time after the initial Six (6) month anniversary of
the Commencement Date upon thirty (30) days prior written notice to the
other party. (the "Early Termination Date")
2. During the Engagement Term, the Company agrees to furnish or cause to be
furnished to RCG all information concerning the Company as RCG reasonably
requests and deems appropriate for purposes of providing the Financial
Relations Services. The Company represents that all information, with
respect to the Company, provided to RCG 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 statements are made. Aztec understands that in rendering the Financial
Relations Services required hereunder, RCG will be using and relying on
publicly available information and the information furnished to RCG by
Aztec without independent verification thereof. RCG will treat as
confidential any non-public information provided to it hereunder and will
not disclose the same to third parties at any time unless required by
applicable law. In the event disclosure has been or will be made by RCG,
RCG will use its reasonable best efforts to cooperate as requested by the
Company in minimizing any potential loss or injury to the Company as a
consequence of any such necessary disclosure. In addition, RCG will use its
reasonable best efforts to comply with all applicable state and Federal
securities laws in the performance of this agreement.
3. During the Engagement Term, RCG and its employees, consultants and
contractors will be generally available to Aztec Manufacturing Co., in
connection with its rendering of the Financial Relations Services.
Specifically, RCG (a) will outline, develop and implement a financial
relations program to assist the Company in creating and/or enhancing a
positive and more visible public image, (b) may contact existing and future
shareholders, broker/dealers, potential investors, registered
representatives, institutions, mutual fund managers, investment banking
sources, securities analysts, independent portfolio managers, and other
professional investment community
February 7, 2000
Page 2
contacts including certain financial media sources for the purpose of
enhancing the Company's public image and perceived value, (c) will assist
the Company in the creation, production and distribution of certain
financial markets and investor/shareholder corporate image materials,
including corporate profiles, due diligence materials and investor
packages, as well as all financial press releases; (d) assist the Company
in its endeavor to secure research analyst coverage through a targeted
securities professionals campaign and (e) otherwise perform the services
described in the Financial Relations Services Attachment.
4. During the Engagement Term, the Company will afford RCG the opportunity and
reasonable time period to review and/or comment on any disclosure, prior to
its release, which the Company plans to make to any of the sources
described in paragraph (3) and which relates to the Financial Relations
Services to be provided hereunder. In addition, RCG will be responsible for
assisting the Company in writing and/or editing, producing, coordinating
and disseminating all financial industry press releases. RCG agrees that it
will not release or distribute any press release without the Company's
prior consent.
5. In consideration of RCG's services hereunder, the Company agrees to pay
RCG, promptly when due, the Compensation as described by and in strict
accordance with the attachment hereto entitled Financial Relations
Compensation Attachment. Should RCG and the Company determine to extend the
Engagement Term or change the scope of the engagement, then a mutually
acceptable amendment or supplement to that attachment shall be promptly
executed by RCG and Company. Absent any such amendment, all terms and
conditions of this letter agreement shall be binding to the parties.
6. RCG shall be entitled to such additional fees as may be mutually agreed
upon by separate agreement between the parties hereto, for additional
consulting services not anticipated in this agreement rendered during the
engagement term.
7. As more particularly set forth in the Financial Relations Compensation
Attachment, the Company agrees to pay all of RCG's direct and certain
indirect out-of-pocket expenses reasonably incurred, in connection with
this engagement. As set forth in the Financial Relations Compensation
Attachment, an expense retainer shall be utilized for this purpose.
8. The Company and RCG agree to indemnify each other (the indemnifying party
hereafter being referred to as the "Indemnitor", and the party entitled to
indemnification hereafter being referred to as the "Indemnitee") as
follows: Indemnitor agrees to defend, indemnify and hold harmless
Indemnitee, and its officers, directors, and employees against any and all
losses, claims, demands, suits, actions, judgments, awards, damages,
liabilities, costs, reasonable attorneys' fees, and expenses incurred in
investigating, preparing or defending any such action or claim, directly or
indirectly caused by, related to, or asserted by a third party, based upon
or arising out of (a) the indemnitor's breach of or the incorrectness of
any of its representations, warranties, or covenants contained in this
agreement; and/or (b) any Services rendered by RCG as defined in or
contemplated by this agreement, as it may be amended from time to time (the
"Agreement"). Notwithstanding the foregoing, the Indemnitor shall have no
obligation to indemnify or hold the Indemnitee harmless with regard to
Indemnitee's gross negligence, willful misconduct, or the material breach
of or the incorrectness of any representation, warranty or covenant of
Indemnitee contained in this Agreement.
9. Either party hereto may terminate this engagement as follows:
(a) Either party hereto may terminate this agreement at the conclusion of
Initial Six (6) months from the execution date of the agreement by
providing the other party a 30-day advance written notification of
"Intent to Terminate Agreement". Not withstanding the above, the
February 7, 2000
Page 3
Company may also terminate this Agreement after the Initial Six (6)
months at any time "without cause", upon providing RCG Thirty (30)
days advance written notice. In the event of a termination by the
Company, "without cause" after the initial Six (6) months, RCG shall
be entitled to receive Fifty (50%) percent of the remaining engagement
term period cash compensation to the extent it is unpaid, pro-rated
from the notice date of termination, along with reimbursement of any
non paid, out-of-pocket expenses up to the effective date of
termination. Additionally, RCG will be entitled to receive all
unexercised vested, and 1/12 of the remaining non-vested warrants or
stock options granted hereunder for each month past the initial Six
(6) month period, up to and including the date of termination. Such
payment is due and payable on the effective date of termination.
(c) WITH CAUSE: In addition, the Company may terminate this Agreement at
any time upon written notice to RCG:
(i) If RCG fails to cure any material breach of any provision of
this Agreement within Sixty (60) days from written notice from
the Company (unless such breach cannot be reasonably cured
within the Sixty (60) days and RCG is actively pursuing to cure
said breach).
(ii) For RCG's substantial negligence, willful misconduct, fraud,
misappropriation, embezzlement, or other dishonesty;
(iii) Upon a final and conclusive judicial ruling of RCG's failure to
have materially complied with applicable law or regulation
relating to the Services it will perform;
(iv) Upon the filing by or against RCG of a petition to have RCG
adjudged as bankrupt or a petition for reorganization or
arrangement under any law relating to bankruptcy, and where any
such involuntary petition is not dismissed within 90 days.
Upon termination under subparagraph (b) of this paragraph 9, the
Company shall have no liability to RCG for Compensation accruing after
such termination, and RCG shall have no further entitlement thereto.
Upon such termination, RCG shall be entitled to receive and retain
only accrued Compensation and vested Options to the date of such
termination, to the extent it is unpaid, together with expenses not
yet reimbursed.
(c) RCG may terminate this agreement at any time upon written notice to
the Company.
(i) If the Company fails to cure any material breach of any
provision of this Agreement with Sixty (60) days from written
notice from the Company (unless such breach cannot be
reasonably cured within the Sixty (60) days and the Company is
actively pursuing to cure said breach);
(ii) For the Company's substantial negligence, willful misconduct,
fraud or misrepresentation;
Such termination under 9(c)(i or ii) shall be deemed to be a
termination by the Company "without cause" as provided in paragraph 9
(a) above.
(iii) Upon a final and conclusive judicial ruling of Company's
failure to have materially complied with any applicable law or
regulation relating to the Services being provided;
(iv) Upon the filing by or against the Company of a petition to have
the Company adjudged as bankrupt or a petition for
reorganization or arrangement under any law relating to
bankruptcy, and where any such involuntary petition is not
dismissed within 90 days.
February 7, 2000
Page 4
(d) RENEWAL. The Company agrees to notify RCG in writing Thirty (30) days
prior to the end of the Eighteen (18) month period of its intent to
not renew. Should the Company fail to notify RCG, the contract will
revert to a month-to-month agreement until specifically renewed in
writing or terminated with the advance Thirty (30) day notice. Such
renewal or month-to-month engagement shall be on the same terms and
conditions contained herein, unless modified and agreed in writing by
both parties.
10. RCG hereby fully discloses that certain associates, affiliates, officers
and employees of RCG are:
(a) Licensed as Registered Securities Principals issued by the National
Association of Securities Dealers ("NASD"); and/or
(b) Licensed as Registered Representatives issued by the NASD.
All NASD registrations are carried by SWS Financial Services, Inc., which
is a non-RCG affiliated NASD-registered broker/dealer.
RCG further discloses and the Company specifically acknowledges that RCG is
NOT a broker/dealer registered with the NASD or any other regulatory
agency. Furthermore, in the performance of Services under the terms and
conditions of this agreement, such services shall not be considered to be
acting in any broker/dealer or underwriting capacity and therefore RCG is
not receiving any compensation from the Company as such.
11. The Company understands and acknowledges that RCG provides other and
similar consulting services to companies, which may or may not conduct
business and activities similar to those of the Company. RCG is not
required to devote its full time and attention to the performance of its
duties detailed in this agreement, and may devote only so much of its time
and attention as it deems reasonable or necessary.
12. As the services are being provided by an Arizona domiciled corporation, the
validity and interpretation of this letter agreement shall be governed by
the laws of the State of Arizona applicable to agreements made and to be
fully performed therein.
13. In the event of any controversy or dispute arising out of, or relating to
this Agreement or breach thereof, RCG and AZZ agree to settle such
controversy by arbitration pursuant to Arizona Revised Statutes, 12-1501 et
seq. and in accordance with the rules, of the American Arbitration
Association governing commercial transactions then existing, to the extent
that such Rules are not inconsistent with said Statutes and this Agreement.
Judgment upon the award rendered under arbitration may be entered in any
court having jurisdiction. The cost of the arbitration procedure shall be
borne by the losing party, or, if the decision is not clearly in favor of
one party or the other, the costs shall be borne as determined by the
arbitrator. The parties agree that the arbitration procedure provided
herein shall be the sole and exclusive remedy to resolve any controversy or
dispute arising hereunder, and that the proper venue for such arbitration
proceeding shall be Maricopa County, Arizona.
14. For the convenience of the parties, any number of counterparts of this
letter agreement may be executed by the parties hereto. Each such
counterpart shall be deemed to be an original instrument, but all such
counterparts taken together shall constitute one and the same letter
agreement.
15. Miscellaneous:
February 7, 2000
Page 5
(a) Modification: This Agreement sets forth the entire understanding of the
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parties with respect to the subject matter hereof. This Agreement may be
amended only in writing signed by both parties.
(b) Notices: Any notices hereunder shall be sent to the Company and RCG at
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their respective addresses set forth. Any notice shall be given by
registered or certified mail, postage prepaid, and shall be deemed to have
been given when received by the non-sending party. Either party may
designate any other address to which notice shall be given, by giving
written notice to the other of such change in address in the manner herein
provided.
(c) Waiver: Any waiver by either party of a breach of any provision of this
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Agreement shall not operate as or be construed to be a waiver of any other
breach of that provision or of any breach of any other provision of this
Agreement. The failure of a party to insist upon strict adherence to any
term of this Agreement on one or more occasions will not be considered a
waiver or deprive that party of the right thereafter to insist upon
adherence to that term of any other term of this Agreement.
(d) Relationship of the Parties: Nothing in this Agreement shall create any
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partnership or joint venture between the parties hereto, it being
understood and agreed that the parties are independent contractors and
neither has the authority to bind the other in any way.
(e) Entire agreement: This Agreement contains the entire agreement between the
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parties and 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.
If the foregoing correctly sets forth our agreement, please sign the enclosed
copy of the letter in the space provided and return it to us, whereupon all
parties will be bound to the terms of this engagement.
Confirmed and agreed to February 7, 2000
RCG Capital Markets Group, Inc. Aztec Manufacturing Co.
By: /s/ ILLEGIBLE By: /s/ ILLEGIBLE
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Title: President Title: President
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February 7, 2000
Page 6
FINANCIAL RELATIONS
SERVICES ATTACHMENT
As of February 7, 2000 and by the of execution of this agreement, RCG
Capital Markets Group, Inc. and/or affiliates, (collectively "RCG") will serve
as the exclusive Financial Relations Counsel for Aztec Manufacturing Co. ("AZZ"
or "Company"). RCG anticipates the following services will be attempted and/or
implemented within the scope of this engagement:
. Outline, define, establish and implement a well-coordinated "Financial
Relations" campaign.
. Create, produce, enhance existing and distribute high-quality, due
diligence and marketing materials, which specifically include, but are not
limited to a "Corporate Profile" document and the Company's "Investor
Package".
. Specifically develop, proactively execute and maintain a targeted
securities professionals telecommunications and information campaign
specifically directed toward retail brokers, institutional investors,
third-party portfolio managers and small/mid-cap mutual funds, buy and sell
side analysts and the financial media as circumstances dictate, including,
but not limited to, preparation, clearing with the Company and
dissemination of quarterly press releases and other news releases deemed
appropriate by the Company. RCG will allocate and utilize its proprietary
securities industry, small/mid cap company oriented, databases and fax-line
communications programs. (This will include responding to all incoming
investment community inquiries and fulfillment of information and data
requests.)
. RCG will attempt to secure investment recommendations and on-going
corporate research coverage from national or regional investment banking or
research firms and/or an endorsement by an investment newsletter
publication.
. When appropriate, plan, arrange and coordinate specific follow-on road-show
presentations to strategically targeted primary metropolitan financial
markets.
. RCG will be responsible for the origination and release of financial
industry data and financial media information on behalf of Aztec
Manufacturing Co. RCG will also be responsible for editing (or writing) all
press releases and coordinating information disseminated to all media
sources relating to the securities industry and capital markets.
. RCG will organize, monitor and follow-up all conference calls between the
Company and RCG's targeted segment of the investment community, in
conjunction with material press releases, through a teleconferencing
service. (RCG will be responsible for faxing and/or emailing the
invitations and will follow up with calls to the recipients in an effort to
expand the conference call participation.)
. Plan, arrange and coordinate periodic registered representative,
institutional and/or other securities professionals meetings, luncheons,
dinners or special gatherings.
. Implement periodic direct mailings which may include the most recent
statistical information reports, and any appropriate articles or press
releases that have been released during the last reported quarter.
February 7, 2000
Page 7
. Update all due diligence and marketing materials. RCG anticipates updating
Company information on a regular basis as required when there are material
changes or events that should be disseminated to the investment community.
. Implement an AZZ Internet Site on RCG's Internet Home Page, RCG Online. RCG
Online will also create an Internet link to the Company's home page. The
purpose of these inclusions will be to provide the investment community 24-
hour access site to obtain up-to-date information about the Company. There
will be an additional cost of $350 per month for this service
RCG intends to perform the services and accomplish the specified goals within
the scope of this engagement. However, due to the nature and type of services
being performed, RCG cannot guarantee, nor can it be assumed that certain
specific results will be realized with reference to increased market valuation
of AZZ securities.
February 7, 2000
Page 8
F1NANCIAL RELATIONS
COMPENSATION ATTACHMENT
In consideration of the Financial Relations Services to be rendered pursuant
hereto Aztec Manufacturing Co. agrees to promptly pay RCG the following
compensation (the "Compensation"):
(a) Cash Compensation. During the term of this Agreement, the Company shall pay
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RCG a monthly fee of $6,500 payable monthly in advance of services rendered
and beginning upon the commencement date of this Agreement (the "Retainer
Fees").
(b) Expense reimbursement. In addition, RCG shall be reimbursed for all direct
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and certain indirect prorated out-of-pocket incurred in connection with the
performance of the Financial Relations Services pursuant hereto. Aztec
Manufacturing Co., will remit $5,000 to RCG, which RCG will utilize as an
escrow deposit for the express purpose of indemnifying RCG in the event of
late payment of monthly expenses by the Company. RCG will provide the
Company with a detailed breakdown of all reimbursable expenses incurred in
the previous month by approximately the Twentieth (20th) day of the
following month of service. Aztec Manufacturing Co. agrees to reimburse RCG
within 15 days of receipt of detailed invoice each month. If Aztec is
delinquent in timely reimbursement of expenses as defined above, RCG will
have the right to withdraw from the escrow account the applicable dollar
amount to fully reimburse RCG. If reimbursement is not received by RCG by
the 25th day after the date of the invoice, Aztec will then be immediately
required to remit to RCG an amount equal to the expenses in question. RCG
will then replenish the escrow account for the amount withdrawn to cover
the delinquency. RCG can at its discretion discontinue all representation
activities on behalf Aztec Manufacturing Co. if RCG deems Aztec to be
routinely delinquent in the timely payment of expenses and/or the monthly
fees as stated above. Such discontinuance does not extinguish the Company's
obligation for reimbursement and payment of retainer fees.
RCG will obtain prior approval from the Company for all specific expense
items and any single miscellaneous expense item in excess of $750. RCG
acknowledges and understands that the Company will have specific amounts
budgeted for these expenditures and will use it's best efforts to ensure
those budget amounts are not exceeded.
(c) Stock Warrants/Options. Upon execution of this and subject to Board of
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Directors approval, the Company will grant RCG a non-forfeitable, non-
cancelable warrant/option (the "Warrants/Options") to acquire 70,000 shares
of Aztec common stock of which 30% shall vest immediately and the balance
will be subject to the performance based vesting provisions outlined below.
The Options issued will possess a Five year expiration term and will
provide RCG the right, until February 7, 2005, to purchase common shares of
the Company at a price equal to the closing price of AZZ common stock as of
the engagement agreement execution date. The Company agrees to issue an
options/warrants document which conforms to and delineates the terms and
conditions contained herein, within sixty (60) days of this Agreement's
execution date. The Warrants/options will have the following vesting
provisions:
25% - Upon confirmation of a 30% increase (10,400 shares) in the
average daily trading volume of the Company's stock over any 10
consecutive trading day period. (Baseline will be 8,000 shares.)
l5% - Upon confirmation of corporate research coverage from Two (2)
buy- or sell-side analysts or an endorsement by an appropriate
investment newsletter publication with a subscriber base in
excess of 3,000. (Vesting to be prorated at 7.5% for each
research or recommendation event).
February 7, 2000
Page 9
20% - Upon confirmation of securing at least a 12.5 P/E ratio for a
period of at least 45 calendar days.
10% - Upon confirmation of two (2) positive financial (non-trade
oriented) media events, such as articles in newspapers or
financial magazines of recognized standing such as the Barrons,
Wall Street Journal, Fortune, Forbes, Business Week Magazine,
Individual Investor magazine, Investors Business Daily or such
as source as may be mutually agreed upon in the financial and
investment community or television or radio media coverage on
well recognized financial, investment or business programs.
(Vesting to be prorated at 5% for each media event).
The shares underlying the non-forfeitable, non-cancelable warrant/option issued
will be eligible for registration by demand registration rights via a form S-3
registration statement or by non-proratable piggy-back registration rights
should the Company file an applicable registration. RCG agrees to pay 50% up to
$5,000 in costs associated with such registration. Such payment by RCG is due
upon the effective date of the registration statement. In the event that RCG
provides a written request to exercise any portion or all of its option position
the Company hereby agrees to immediately effectuate such exercise and to file
such registration statement within 15 days of the request.
In the event that AZZ is merged into or a controlling interest is acquired by
any entity, which results in a material change in AZZ management, RCG will be
immediately vested in all remaining options, including those, which to that
point have not yet been vested.