As of August 9 , 2005 Mr. James Conway Chairman and CEO Netsmart Technologies, Inc. Great River, NY 11739 Dear Jim:
![](https://www.sec.gov/Archives/edgar/data/1011028/000114420405032870/logo.jpg)
EXHIBIT
10.1
As
of
August 9 , 2005
Mr.
Xxxxx
Xxxxxx
Chairman
and CEO
Netsmart
Technologies, Inc.
0000
Xxxxxxx Xxxxxxx, Xxxxx X000
Xxxxx
Xxxxx, XX 00000
Dear
Xxx:
This
letter agreement (the “Agreement”) confirms that Netsmart Technologies, Inc.
(“Client”) has engaged Xxxxxxx Securities, Inc. ("Xxxxxxx") to act on a best
efforts basis as financial advisor and placement agent for the Client in
connection with the issuance and sale (the “Transaction”) of common stock and
warrants (the “Securities”) for financing purposes. Xxxxxxx is an investment
banking firm registered as a broker-dealer with the U.S. Securities and Exchange
Commission (SEC), and member of the National Association of Securities Dealers
(NASD) and Securities Investor Protection Corporation (SIPC).
Accordingly,
we mutually agree as follows:
1. Transaction.
Xxxxxxx
will assist with a private placement, currently anticipated to be six million
dollars ($6,000,000), involving the sale of the Client’s Securities to
accredited investors (“Investor” or “Investors”). The actual terms and structure
of the Transaction will depend on market conditions and will be subject to
negotiation between the Client and Xxxxxxx and prospective Investors, but
will
be similar to the terms attached as Exhibit 2 to this Agreement.
2. Engagement.
In
connection herewith, Xxxxxxx shall provide the following financial advisory
and
placement agent services on a best efforts basis to Client:
a. |
advise
the Client with respect to the form and structure of the Transaction;
|
b. |
assist
the Client in developing any necessary materials;
|
c. |
identify
and make contact with prospective Investors;
|
d.
|
assist
the Client in conducting presentations and due diligence meetings
with
prospective Investors; and
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e.
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provide
such other financial advisory and investment banking services as
are
reasonably necessary to consummate the Transaction.
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Xxxxxxx
shall devote such time and efforts to the affairs of the Client as is reasonably
necessary to render the services contemplated by this Agreement. Any work
or
task of Xxxxxxx provided for herein which requires Client to provide certain
information to assist Xxxxxxx in completion of the work or task shall be
excused
(without effect upon any obligation of Client) until such time as Client
has
fully provided all information and cooperation necessary for Xxxxxxx to complete
the work or task, at which time Xxxxxxx shall promptly complete such work.
The
services of Xxxxxxx shall not include the rendering of any legal opinions
or the
performance of any work that is in the ordinary purview of a certified public
accountant. Xxxxxxx shall have no power to bind Client to any Transaction
or
contract obligation. Client shall have the right to refuse any Transaction
proposal presented to it without incurring any obligations to Xxxxxxx. However,
in the event that the Client and an Investor introduced by Xxxxxxx prior
to or
during the term of this Agreement sign a term sheet during the term of this
Agreement, Client agrees to use its commercially reasonable efforts to close
each Transaction and agrees not to use the Xxxxxxx term sheet to “shop” offers
from other financing sources.
The
execution of this Agreement shall not be deemed or construed as obligating
Xxxxxxx to purchase any of the Securities and there is no obligation on the
part
of Xxxxxxx to place the Securities. Although Xxxxxxx cannot guarantee results
on
behalf of the Client, it shall use its best efforts to provide the services
listed above.
3. Success
Fee. If
during
the term of this Agreement, Client accepts financing from any Investor
introduced (including for such purposes investors introduced by persons
introduced by Xxxxxxx) to Client by Xxxxxxx prior to or during the term of
this
Agreement (as defined in Section 6 below), or if Client should for a period
of
twelve (12) months following the termination of the term of this Agreement
accept financing from any Investor introduced by Xxxxxxx (excluding for such
purposes investors introduced by persons introduced by Xxxxxxx other than
any
such investors who purchased Securities during the term of this Agreement)
prior
to or during the term of this Agreement, there shall become due and payable
via
wire transfer to Xxxxxxx immediately upon consummation of each such Transaction,
a cash fee equal to Five percent (5%) of the gross proceeds payable to Client
from the sale of Securities.
4. Warrants. As
additional consideration for each completed Transaction, (i) upon the sale
of
Securities during the term of this Agreement to Investors introduced (including
for such purposes investors introduced by persons introduced by Xxxxxxx)
to
Client by Xxxxxxx prior to or during the term of this Agreement and (ii)
upon
the sale of Securities during the twelve (12) month period following termination
of this Agreement to Investors introduced (excluding for such purposes investors
introduced by persons introduced by Xxxxxxx other than any such investors
who
purchased Securities during the term of this Agreement) to Client by Xxxxxxx
prior to or during the term of this Agreement, Client shall promptly xxxxx
Xxxxxxx warrants for the purchase of an amount equal to five percent (5%)
of the
Securities issued in such completed Transaction. The warrants to purchase
common
stock shall be exercisable over a five (5) year period, have an exercise
price
equal to the exercise price of the Investor’s warrants and contain other
customary terms as Client and Xxxxxxx agree, including the ability to assign
the
warrants to other accredited representatives of Xxxxxxx.
5. Expenses. Xxxxxxx
shall be entitled to reimbursement from the Company for all reasonable
out-of-pocket expenses in categories and in amounts pre-approved by the Company;
provided, that such expenses shall not include the fees and expenses of counsel
to Xxxxxxx.
6. Term.
The term
of this Agreement shall be three (3) months. Additional extensions may be
negotiated as necessary at the mutual written consent of the Client and Xxxxxxx.
Upon termination, Xxxxxxx shall be entitled to collect all fees and warrants
earned pursuant to paragraphs 3 and 4, respectively, and expenses actually
incurred in accordance with paragraph 5, in each case through the date of
termination. The provisions of paragraphs 3, 4, 5, 7 and Exhibit A shall
survive
any termination of this Agreement.
7. Representations,
Warranties, and Indemnification. The
Client represents and warrants to Xxxxxxx that this Agreement has been duly
authorized, executed and delivered by the Client; and, assuming the due
execution by Xxxxxxx, constitutes a legal, valid and binding agreement of
the
Client, enforceable against the Client in accordance with its terms, except
as
such enforcement may be subject to or limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws affecting the enforcement
of creditors’ rights generally now or hereafter in effect and subject to the
application of equitable principles and the availability of equitable remedies.
The Client agrees to comply in all material respects with all applicable
securities laws, and will disclose to Xxxxxxx all information reasonably
necessary for Xxxxxxx to provide its services hereunder and to notify Xxxxxxx
promptly of any material changes to such information. Client represents and
warrants to Xxxxxxx that any offering materials prepared or disseminated
by
Client will be complete and correct in all material respects, will not contain
any untrue statement of material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein in light
of the
circumstances made not misleading and that in the event Client becomes aware
that such information does contain such an untrue statement or omission,
it will
promptly correct such information. The Client agrees that it will engage
its
legal counsel to assist in the preparation of any private placement memorandum,
subscription agreement, or other legal documents or definitive agreements
deemed
necessary to facilitate the Transaction contemplated herein; and that,
subsequent to the successful closing of the Transaction, Client and its legal
counsel will work diligently and expeditiously to issue any shares and/or
warrants purchased by, and issuable to, Investors. Additionally, the Client
agrees to indemnify Xxxxxxx and its affiliates in accordance with the terms
and
conditions contained in Exhibit A to this Agreement.
8. Confidentiality. Xxxxxxx
and Client each agree to keep confidential and provide reasonable security
measures to keep confidential any information where the release of that
information may be detrimental to their respective business interests. Xxxxxxx
and Client shall each require their employees, agents, affiliates, and others
who will have access to the information through Xxxxxxx and Client respectively,
to abide by the confidentiality provisions contained in this Agreement. Xxxxxxx
will not, either during its engagement by the Client pursuant to this Agreement
or at any time thereafter, disclose, use or make known for its or another's
benefit any confidential information, knowledge, or data of the Client or
any of
its affiliates in any way acquired or used by Xxxxxxx prior to or during
the
term of this Agreement, including the existence of this Agreement and the
transactions contemplated by this Agreement (including the terms of any proposed
Transaction). Confidential information, knowledge or data of the Client and
its
affiliates shall not include any information that is, or becomes generally
available to the public other than as a result of a disclosure by Xxxxxxx
or its
representatives. Notwithstanding the foregoing, Client hereby authorizes
Xxxxxxx
to transmit to prospective Investors, information and materials provided
by
Client and/or developed by Xxxxxxx on behalf of Client upon written approval
by
Client of such materials. Notwithstanding the restrictions of this paragraph
8,
at any time after the consummation or other public announcement of the
Transaction, Xxxxxxx may place an announcement in such newspapers and
publications as it may choose, stating that Xxxxxxx has acted as financial
advisor and placement agent to the Client in connection with the Transaction,
and may use, from time to time, the Client’s name and logo and a brief
description of the Transaction in publications and/or marketing materials
prepared and/or distributed by Xxxxxxx; provided that Xxxxxxx obtains Client’s
prior approval of any such announcement, such approval not to be unreasonably
withheld.
9. Non-Circumvention.
Client
hereby agrees that Xxxxxxx may introduce (whether by written, oral, data,
or
other form of communication) Client to one or more Investors, including,
without
limitation, natural persons, corporations, limited liability companies,
partnerships, unincorporated businesses, sole proprietorships and similar
entities (hereinafter an “Investor” or “Investors”). The identity of the subject
Investors, and all other information concerning Investors (including without
limitation, all mailing information, phone and fax numbers, email addresses
and
other contact information) introduced hereunder are the property of Xxxxxxx,
and
shall be treated as confidential and proprietary information by Client, its
affiliates, officers, directors, shareholders, employees, agents,
representatives, successors and assigns. Client shall not use such information,
except in the context of any arrangement with Xxxxxxx in which Xxxxxxx is
directly and actively involved, and never without Xxxxxxx’x prior written
approval. Client further agrees that, without the prior written approval
of
Xxxxxxx, neither it nor its employees, affiliates or assigns, shall enter
into,
or otherwise arrange (either for it/him/herself, or any other person or entity)
any Transaction or business relationship, contact any person regarding such
Investors, either directly or indirectly, or any of its affiliates, or accept
any Transaction, compensation or advantage in relation to such Investors
except
directly though Xxxxxxx. Xxxxxxx is relying on Client’s assent to these terms
and their intent to be bound by the terms by evidence of their signature.
Without Client’s signed assent to these terms, Xxxxxxx would not introduce any
Investors or disclose any confidential information to Client as herein
described.
10. Governing
Law.
This
Agreement shall be governed by and construed in accordance with the laws
of the
State of New York applicable to contracts executed and to be wholly performed
therein. The prevailing party shall be entitled to a reasonable sum of
attorney’s fees and any other reasonable costs and expenses relating
thereto.
11. Notice.
Any
notice required to be given hereunder shall be in writing and mailed by first
class certified or registered mail, sent by recognized overnight courier,
or
faxed or e-mailed (with a confirmation in writing sent by overnight courier)
to
the addresses of the parties set forth above. Either party may change such
address by like notice.
12. Entire
Agreement.
This
Agreement represents the entire agreement by and between the Client and Xxxxxxx
and supersedes any and all other agreements, either oral or written, with
respect to the subject matter hereof. Each party to this Agreement acknowledges
that no representation, inducements, promises or agreement, orally or otherwise,
have been made by any party, or anyone acting on behalf of any party, which
are
not embodied herein, and that no other agreement, statement, or promise not
contained in this Agreement shall be valid or binding. If any part of this
Agreement is found, or deemed by a court of competent jurisdiction, to be
invalid or unenforceable, that part shall be severable from the remainder
of the
Agreement. This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
shall
constitute one and the same instrument. Any modification of this Agreement
will
be effective only if it is in writing and signed by the Client and Xxxxxxx.
Please
sign below, and return an original of this letter to the undersigned to indicate
your acceptance of the terms set forth herein, whereupon this letter and
your
acceptance shall constitute a binding agreement by and between Client Inc.
and
Xxxxxxx Securities, Inc. as of the date first above written.
We
appreciate the opportunity to be of service and look forward to a cooperative
working relationship with you and your staff.
Sincerely, | Accepted and Agreed: | ||
/s/ Xxxxxx Xxxxxx | /s/ Xxxxx Xxxxxx | ||
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Xxxxxxx
Securities, Inc.
By: Xxxxxx Xxxxxx Its: President & CEO |
Netsmart
Technologies, Inc.
By: Xxxxx Xxxxxx Its: Chairman & CEO |
XXXXXXX INITIALS______
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CLIENT
INITIALS_____
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EXHIBIT
A
This
Exhibit A is a part of and is incorporated into that certain letter agreement
dated as of August 9, 2005, between Netsmart Technologies, Inc. (the "Client")
and Xxxxxxx Securities, Inc. ("Xxxxxxx"). The letter agreement and this Exhibit
A are referred to herein as the "Agreement". Capitalized terms used herein
without definition shall have the meanings ascribed to them in the letter
agreement.
The
Client agrees to indemnify and hold harmless Xxxxxxx, any affiliates and
the
respective officers, directors, partners, employees, representatives and
agents
and any other persons controlling Xxxxxxx or any affiliates within the meaning
of the Securities Act of 1933 or the Securities Exchange Act of 1934 (Xxxxxxx
and each such other person or entity each being referred to as an "Indemnified
Person"), to the fullest extent lawful, from and against, and the Indemnified
Persons shall have no liability to the Client or its owners, affiliates,
controlling persons, security holders or creditors for, all claims, liabilities,
losses, damages and expenses, including without limitation and as incurred,
reimbursement of all reasonable costs of investigating, preparing, pursuing,
or
defending any such claim or action, including reasonable fees and expenses
of
counsel to the Indemnified Person (collectively, "Losses"), whether or not
arising out of pending or threatened litigation, governmental investigation,
arbitration or other alternative dispute resolution, or other action or
proceeding (individually a "Proceeding" and collectively "Proceedings"),
directly or indirectly related to or arising out of, or in connection with
(i)
actions taken or omitted to be taken by the Client, its affiliates, employees,
directors, officers, partners, representatives or agents in connection with
any
transaction or activities contemplated by this Agreement; (ii) actions taken
or
omitted to be taken by any Indemnified Person pursuant to the terms of, or
in
connection with services rendered pursuant to, this Agreement, provided that
in
the case of this subsection (ii) the Client shall not be responsible for
any
Losses arising out of or based upon the willful misconduct or gross negligence
(as determined by the judgment of a court of competent jurisdiction, no longer
subject to appeal or further review) of or by such Indemnified Person; and
(iii)
any untrue statement or alleged untrue statement of material fact contained
in
any information or any omission or alleged omission to state a material fact
necessary to make the statements therein not misleading (other than untrue
statements or alleged untrue statements in, or omissions or alleged omissions
from, information relating to an Indemnified Person or Investor furnished
in
writing by or on behalf of such Indemnified Person or Investor expressly
for use
in such Information).
If
the
indemnification provided for under this Agreement is unavailable to an
Indemnified Person in respect of any Losses, then the Client, in lieu of
indemnifying such Indemnified Person, shall contribute to the amount paid
or
payable by such Indemnified Person as a result of such Losses (i) in such
proportion as is appropriate to reflect the relative benefits received by
the
Client on the one hand and by Xxxxxxx on the other, from the services rendered
under this Agreement, or (ii) if the allocation provided by clause (i) is
not
permitted by applicable law, in such proportion as is appropriate to reflect
not
only the relative benefits referred to in clause (i) above, but also the
relative fault of the Client on the one hand and the Indemnified Person on
the
other, as well as any other relevant equitable considerations. It is further
agreed that the relative benefits to the Client on the one hand and Xxxxxxx
on
the other hand with respect to the services rendered under this Agreement
shall
be deemed to be in the same proportion as (i) the net proceeds received by
Client bears to (ii) the fees actually paid to Xxxxxxx with respect to the
services provided pursuant to this Agreement in connection with the transaction.
The Client also agrees that no Indemnified Person shall have any liability
to
the Client for or in connection with this Agreement and the engagement of
Xxxxxxx hereunder, except for such Losses incurred by the Client to the extent
determined by the judgment of a court of competent jurisdiction, no longer
subject to appeal or further review, to have resulted from such Indemnified
Person's willful misconduct or gross negligence, and the Client agrees that
in
no event shall the Indemnified Persons be required to contribute an amount
in
the aggregate greater than the amounts actually received by Xxxxxxx in
connection with its services performed under this Agreement.
XXXXXXX INITIALS______
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CLIENT
INITIALS_____
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If
any
Proceeding is commenced as to which an Indemnified Person demands
indemnification, the Indemnified Person shall provide notice to the Client
of
the commencement of such Proceeding. The Client shall be entitled, to the
extent
it wishes, to assume the defense of such Proceeding (unless the Client is
also a
party to such Proceeding and the Indemnified Party reasonably determines
in good
faith that joint representation would be inappropriate), to assume the defense
of such Proceeding with counsel reasonably satisfactory to the Indemnified
Party
and, after notice from the Indemnifying Party to the Client of its election
to
assume the defense of such Proceeding, the Client will not be liable to the
Indemnified Party for any fees of other counsel or any other expenses with
respect to the defense of such Proceeding, in each case subsequently incurred
by
the Indemnified Party in connection with the defense of such Proceeding.
If the
Client assumes the defense of the Proceeding, the Indemnified Party will
cooperate in good faith with the Client in such defense and will have the
right
to participate in the defense of such Proceeding assisted by counsel of its
own
choosing and at its own expense. If the Client assumes the defense of the
Proceeding, (i) no compromise or settlement of such claims may be effected
by
the Client without the Indemnified Party’s consent (which consent will not be
unreasonably withheld, conditioned or delayed) unless (A) there is no finding
or
admission of any violation of law or any violation of the rights of any Person
and no effect on any other claims that may be made against the Indemnified
Party, and (B) the sole relief provided is monetary damages that are paid
in
full by the Client; and (iii) the Indemnified Party will have no liability
with
respect to any compromise or settlement of such claims effected without its
consent if such consent is required by this sentence. If notice is given
to
Client of the commencement of any Proceeding and the Client does not, within
thirty (30) days after the Indemnified Party’s notice is given, give notice to
the Indemnified Party of its election to assume the defense of such Proceeding,
the Client will be bound by any determination made in such Proceeding or
any
compromise or settlement effected by the Indemnified Party to which the Client
consents, which consent by the Client may not be unreasonably withheld,
conditioned or delayed.
The
indemnity and contribution obligations of the Client set forth herein shall
be
in addition to any liability or obligation the Client may have to any
Indemnified Person at common law or otherwise. The Client hereby consents
to
personal jurisdiction, service and venue in any court in which any claim,
which
is subject to this Agreement, is brought against Xxxxxxx or any other
Indemnified Person.
XXXXXXX INITIALS______
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CLIENT
INITIALS_____
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![](https://www.sec.gov/Archives/edgar/data/1011028/000114420405032870/logo.jpg)
EXHIBIT
B
TERM
SHEET
Confidential
& For Discussion Purposes Only
NETSMART,
INC.
(NASDAQ:
NTST)
$6,000,000
Common
Stock & Warrant Units
Amount/
Structure:
|
$6MM
of Netsmart’s Common Stock, together with Warrants to purchase additional
Common Stock (the “Units”), issued pursuant to Regulation D of the
Securities Act of 1933, as amended, to accredited investors. Each
Unit
will consist of 1 share of Common Stock and Warrants described
below.
|
Unit
Purchase Price:
|
The
Units will be sold at $9.1796 per Unit.
|
Warrants:
|
Investors
will receive a 5-year Warrant to purchase one (1) share of Common
Stock
for every four (4) Common Shares purchased, exercisable at $11
per share.
The exercise price and number of shares subject to exercise will
be
subject to adjustment pursuant to usual anti-dilution provisions.
After
the first anniversary of the Closing Date and following registration
statement effectiveness, Netsmart shall have the option to call
(the
“Call”) any outstanding Warrants if the Volume Weighted Average Price
(“VWAP”) of the Common Stock is equal to or greater than $30 per share
for
20 consecutive trading days.
|
Registration
Rights:
|
Netsmart
will agree to file a registration statement covering the resale
of the
Common Shares (and Warrant Shares) issuable in connection with
the
offering within thirty (30) days of the Closing Date, and cause
such
Registration Statement to be declared effective not later than
ninety (90)
days following the Closing Date.
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Closing:
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On
or before August 30, 2005 and simultaneously with closing of
Target.
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