Exhibit 10.39
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July 2, 2002
Category 5 Technologies, Inc.
0000 Xxxx Xxxxxxxxxx Xxxxxxx 0xx Xxxxx
Xxxx Xxxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx
Chairman and Chief Executive Officer
Gentlemen:
1. We understand that Category 5 Technologies, Inc., (the "Company")
intends to pursue a merger agreement with Mindarrow, Inc. ("Mindarrow")
(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 regarding an opinion of the
fairness of the consideration rendered.
3. During the term of this Agreement, the Advisor will provide the
Company with 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.
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5. For our services in connection with serving as Advisor, the Company
shall pay, or cause to be paid, to SBI a stock fee equal to 1/2% of the
transaction value of the merger and a cash fee equal to $175,000 in the
following increments:
a. $25,000 in cash upon acceptance and execution of this
agreement
b. $50,000 in cash by July 15, 2002
c. $100,000 in cash upon delivery of the fairness opinion and
closing of the merger agreement
6. 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. Total out of pocket
expenses shall not exceed $25,000 in the aggregate, and the expenses shall be
paid upon delivery of the fairness opinion.
7. 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.
8. 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.
9. 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 11 of this Agreement
and (v) the Indemnification Provisions hereof which are incorporated herein, all
of which shall remain operable and in full force and effect.
10. 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.
11. 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.
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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: Xxxx Xxxx
Title: Managing Director
Confirmed and Agreed to this
______ day of July, 2002:
CATEGORY 5 TECHNOLOGIES, INC.
By: ___________________________
Name: Xxxxxxx X. Xxxxx
Title: Chairman and CEO
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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,
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 Category 5 Technologies, 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.
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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.
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