November 20, 2006
Exhibit
10.1
c. Transactions.
For
the
purposes of this Agreement, any of the following transactions shall constitute
a
“Transaction”:
the
event
the Company or any affiliate of the Company sells in any public or private
offering of the Company’s equity or equity derivative securities during the Term
of this Agreement
or within one (1) year thereafter to any purchaser introduced to the
Company
by
Sequence during the Term, the Company will pay Sequence a fee as set forth
in
this Section 3(f). A fee with respect to any sale or distribution of securities
arising from this engagement will be paid as follows:
(B)
actions or failures to act by an Indemnified Person with the Company’s consent
or in reliance on the Company’s actions or failures to act, or (ii) otherwise
related to or arising out of the Agreement or Sequence’s performance thereof,
except that this clause (ii) shall not apply to the extent that any Losses
resulted from Sequence’s intentional misconduct
November
20, 2006
Xxxxxxxxx
Holdings, Inc. 000 Xxxxxxx Xxxxxx
Xxxxxxxxxx,
XX 00000 Attn: Xxxx X. Xxxx, CEO
Dear
Xxxx;
This
engagement letter (the “Agreement”) is made and entered into as of the date
above (the “Effective Date”), by and between Sequence Investment Partners, LLC,
a South Carolina limited liability company (“Sequence”) and Xxxxxxxxx Holdings,
Inc., a Delaware corporation, and its subsidiaries and affiliates (collectively
hereinafter the “Company”), for the purpose of defining and acknowledging the
terms of this Agreement.
1. Engagement.
The
Company hereby engages Sequence on an exclusive basis for the term specified
in
Section 5 hereof to render services to the Company as its corporate finance
consultant and investment banker upon the terms and conditions set forth
herein.
2. Services
to be Provided.
a. During
the Term of this Agreement, Sequence shall provide the Company with such regular
and customary consulting advice as is reasonably requested by the Company,
provided that Sequence shall not be required to undertake duties not reasonably
within the scope of the investment banking services contemplated by this
Agreement. It is understood and acknowledged by the parties that the value
of
Sequence’s advice is not readily quantifiable, and that Sequence shall be
obligated to render advice upon the request of the Company, in good
faith.
b. Sequence’s
duties may include, but will not necessarily be limited to, providing
recommendations and assisting in the following:
(i) rendering
advice with regard to corporate finance matters, including changes in the
capitalization of the Company, changes in the Company's
corporate structure, redistribution of shareholdings of the
Company's
stock,
sales of securities in private transactions, alternative uses of corporate
assets, and structure and use of debt;
(ii) rendering
advice, assistance and introduction to third parties with regard to merger,
acquisition, joint venture or strategic alliance activities, including the
acquisition and/or merger of or with other companies, joint ventures or
strategic alliances with other companies, divestiture or any other similar
transaction, and the sale of the Company itself (or any significant percentage,
assets, subsidiaries or affiliates thereof);
000
Xxxx Xxx Xxxxxx, Xxxxx 000, Xxxxxxxxxx, XX 00000
(V)
843-853-8222 (F) 000-000-0000
xxx.xxxxxx.xxx
November
20, 2006
Page
2
(iii) rendering
advice and/or assistance with regard to capital raising activities, including
bank financing or any other financing from financial institutions
or individuals (including but not limited to revolving credit
facilities,
lines of
credit, term loans, credit facilities, senior and junior loans, whether secured
or unsecured); and
(iv) subject
to the limitations herein, act as placement agent for any private
offering of the Company's securities and act as underwriter in any
public
offering
of the Company's securities.
c.
Sequence shall conduct its due diligence with respect to the Company and the
foregoing services. To perform such services, Sequence shall require that the
Company:
(i) furnish
to Sequence any and all information and data concerning the Company and its
affiliates which Sequence deems appropriate;
(ii) provide
Sequence and its representatives with reasonable access during normal business
hours to the Company’s officers, directors, employees, appraisers, independent
accountants, legal counsel and other consultants and advisors; and
(iii) take
such
commercially reasonable actions as may be reasonably requested by Sequence
to
effect the purposes of this Agreement.
d. This
Agreement does not constitute an expressed or implied commitment
or
undertaking on Sequence’s part to provide any part of any financing and does not
ensure the successful arrangement or completion of any financing or other
transaction contemplated hereby. Unless waived by Sequence after the date
hereof, Sequence’s willingness to underwrite any public offering or to arrange
any private placement or other exempt offering of the Company’s securities or
otherwise to effect any financing is subject to the execution of a final,
definitive underwriting agreement or placement agent agreement, as the case
may
be, in Sequence’s standard form, containing customary representations,
warranties, covenants, indemnification provisions and closing conditions, and
the satisfaction of such conditions, as well as the absence of any events set
forth therein which would permit Sequence to terminate such
agreement.
e. The
Company represents and warrants to Sequence that (i) the Company
is not
subject to any agreement or arrangement with any investment banker or finder
or
similar
person providing services substantially the same as the services to be provided
by
Sequence
herein, and (ii) the Company is not obligated to pay, or may become obligated
to
pay, under any agreement or arrangement, any person any fee substantially
similar to any of the fees which may be payable to Sequence herein, except
as
such agreement or arrangement has been previously disclosed to Sequence in
writing.
3. Compensation.
In
consideration for the services rendered by Sequence to the Company
pursuant to this Agreement (and in addition to the expenses provided for in
Section 11
hereof),
the Company shall compensate Sequence as follows:
a. Merger
and Acquisition, Joint Venture, Strategic Alliance
Transactions. If
any
Transaction (as hereinafter defined) is consummated during the Term of
this
November
20, 2006
Page 3
Page 3
Agreement
or within one (1) year thereafter with any party introduced to the Company
by
Sequence during the Term, except for those companies named on the schedule
annexed hereto, the Company shall pay at the closing of or as received on each
such Transaction a cash fee equal to the sum of:
(i) five
percent (5%) of the first five million dollars of the Aggregate Consideration
(as herein after defined) of a Transaction;
(ii) four
percent (4%) of the second five million dollars of the Aggregate Consideration
of a Transaction;
(iii) three
percent (3%) of the third five million dollars of the Aggregate Consideration
of
a Transaction; and
(iv) two
percent (2%) of the Aggregate Consideration over fifteen million
dollars.
b. Aggregate
Consideration. Aggregate
Consideration is defined and computed as follows:
(i) The
total
sale proceeds and other consideration received (which shall be deemed to include
amounts paid into escrow) by the Company and/or its shareholders or by a target
and/or its shareholders upon the consummation of the Transaction (including
payments made in installments), inclusive of cash, securities, notes, consulting
agreements and agreements not to compete, plus the total value of liabilities
assumed.
(ii) If
a
portion of such consideration includes contingency payments (whether or not
related to future earnings or operations), Aggregate
Consideration
will include the face value of such payments without regard to whether the
conditions for the payment of such contingent amounts have been or may be
satisfied.
(iii) If
the
Aggregate Consideration for the Transaction consists in whole or in part of
securities, for the purposes of calculating the amount of Aggregate
Consideration, the value of such securities will be the value thereof on the
day
preceding the consummation of the Transaction as the Company and Sequence 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 price
for
such securities for the last twenty (20) days prior to such consummation as
determined by Sequence and communicated by Sequence to the Company. If there
is
no public trading market for such securities but securities have been sold
in a
private placement within the past twenty-four (24) months, the fair market
value
shall be based upon the gross sales price in the last such private
placement.
(iv) For
other
property received or receivable as a part of the Aggregate Consideration and
the
parties are unable to agree, then each of Sequence 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 purpose
hereof.
November
20, 2006
Page
4
(i) the
sale,
outside of the ordinary course of business, of the Company or a material portion
of its assets, securities, or business by means of a merger, consolidation,
joint venture, exchange offer, licensing or purchase or sale of stock or assets,
or any transaction resulting in any change of control of the Company or its
assets or business; or
(ii) the
purchase by the Company, outside of the ordinary course of business, of another
company or a material portion of its assets, securities or business by means
of
a merger, consolidation, joint venture, exchange offer, licensing or purchase
or
sale of stock or assets.
(iii) The
entering into of any joint venture or strategic alliance for sales
of
or development of markets for the company’s products or services.
The
transaction value to be calculated as the gross amount of related transactions
realized as a direct result of such joint venture or strategic
alliance.
d. Third-Party
Debt Placements. In
the
event the Company obtains a debt facility, inclusive of revolving credit
facilities, lines of credit, term loans, credit facilities, senior and junior
loans, whether secured or unsecured, (a “Credit Facility”) during the Term of
this Agreement or within one (1) year thereafter with a bank or other
institutional lender (the “Lending Source”) introduced to the Company by
Sequence during the Term, the Company will pay Sequence a fee of two percent
(2%) of the maximum amount of the Credit Facility. In the event Sequence is
involved during the Term of this Agreement in arranging an increase in any
existing Credit Facility during the Term of this Agreement or within one (1)
year thereafter, the Company will pay Sequence a fee of two percent (2%) of
the
increase from the maximum amount of the existing Credit Facility to the maximum
amount of the new Credit Facility.
e. Sales.
In
the
event the Company obtains during the Term of this Agreement or within one (1)
year thereafter a customer or a client introduced to the Company by Sequence
during the Term, the Company will pay Sequence a fee of ten percent (10%) of
the
gross revenue derived from such customer or client or its affiliates for two
(2)
years after such origination. In the event Sequence is involved during the
Term
of this Agreement in arranging an increase in gross revenues derived from any
customer or client of the Company, the Company will pay Sequence a fee of five
percent (5%) of the increase in gross revenue derived from such customer or
client or its affiliates for two (2) years after such origination. The Company
shall pay such amounts within five (5) business days of the earlier of (i)
when
such gross revenue is received in cash or other property or services, or (ii)
when the gross revenue is recognized by the Company for financial accounting
purposes.
f. Equity
Placements and Underwritings (“Equity
Financing
Transaction”).
The
Company hereby grants Sequence a right of first refusal (i) to act as placement
agent for any private offering of the Company's equity and equity derivative
securities for the account of the Company or any affiliate of the Company,
and
(ii) to act as underwriter in any public offering of the Company's equity and
equity derivative securities for the account of the Company or any affiliate
of
the Company. In addition, in
November
20, 2006
Page
5
|
(i)
Private Placement
|
|||
|
Placement
Agent Fee
|
Eight
percent (8%) of gross proceeds
|
||
|
Warrant
Coverage
|
Amount
equal to twenty percent (20%) of gross proceeds
|
||
|
Non-Accountable
Expense Allowance
|
Two
percent (2%) of gross proceeds
|
||
|
(ii)
Public Offering
|
|||
|
Transaction
Fee
|
Eight
percent (8%) of gross proceeds
|
||
|
Warrant
Coverage
|
Amount
equal to twenty percent (20%) of gross proceeds
|
||
|
Non-Accountable
Expense Allowance
|
|
Two
percent (2%) of gross
proceeds
|
(iii) All
Warrants shall expire five (5) years from the date of issuance and shall have
“piggy back” registration rights, cashless exercise rights, customary
anti-dilution provisions on any stock splits and dividends and weighted average
adjustments for issuances below the exercise price, reasonably acceptable to
Sequence. The determination of value shall be made by agreement between Sequence
and the Company, but, failing such agreement, by reference to the offering
price
of the Company’s securities being offered.
g. Fairness
Opinions, Valuations and Other Services. Fees
and
expenses payable to Sequence with regard to fairness opinions, valuations and
services not specifically
set forth herein will be determined by mutual agreement in writing at
such
time as
the nature and terms of such transactions are determined.
h. Payment
of Fees. All
fees
to be paid pursuant to this Agreement are due and payable to Sequence in cash.
The Company hereby agrees to, and hereby does, irrevocably
authorize and instruct third-party funding sources, including Lending
Sources
and
private equity groups, and counter parties to any Transaction under Section
3(a)
or any customer or client under Section 3(e) (the “Counter Parties”), to pay
directly to Sequence cash sums provided for in Section 3 or 4. The Company
authorizes Sequence to notify the Counter Parties of this provision and the
terms of this Agreement for purposes of this provision and payment of the sums
due under Section 3 or 4 of this
November
20, 2006
Page
6
Agreement.
The Company agrees that Sequence is a direct beneficiary of any eventual
agreement between the Company and the Counter Parties, and that Sequence is
an
intended third party beneficiary of any agreement between the Company and any
Counter Party. The Company hereby expressly agrees that in the event any dispute
or disagreement arises with respect to the payment to Sequence of the sums
due
under Section 3 or 4 of this Agreement, including any dispute regarding the
amount due Sequence under this Agreement, that the Financing Sources shall
immediately place all disputed sums in an interest bearing escrow account
pending resolution of the dispute. The Company hereby irrevocably authorizes
and
instructs the Counter Parties to escrow such disputed sums. The Company further
agrees that any sums due under this Agreement which are not in dispute shall
not
be escrowed, but shall be paid upon closing to Sequence by the Counter Parties
as provided for under the terms of this Agreement.
4.
Exclusivity.
a. In
the
event that the Company engages in any Transaction during the Exclusivity Period
other than through Sequence, the Company shall pay Sequence, as a reasonable
estimate of the value of Sequence’s services under this Agreement, two percent
(2%) of the Aggregate Consideration from such Transaction.
b. In
the
event that the Company obtains a Credit Facility during the Exclusivity Period
other than through Sequence, the Company shall pay Sequence, as a reasonable
estimate of the value of Sequence’s services under this Agreement, one percent
(1%) of the maximum amount of such Credit Facility.
c. In
the
event that the Company or any affiliate of the Company engages in any Equity
Financing Transaction during the Exclusivity Period other than through Sequence,
the Company shall pay Sequence, as a reasonable estimate of the value of
Sequence’s services under this Agreement, (i) three percent (3%) of the gross
proceeds raised in the placement or offering, and (ii) the Warrant Coverage
as
defined in Section 3(f) as if Sequence had placed such Equity Financing
Transaction.
d. Sequence
shall not be entitled to continue its right to exclusivity under this Agreement
if Sequence materially breaches this Agreement and fails to reasonably cure
such
breach within sixty (60) days after written notice from the Company to Sequence,
which such notice shall specify such breach. Sequence shall be entitled to
any
fee arising under this Section 4 for (i) any transaction that closes prior
to
the end of such cure period or (ii) if it is finally judicially determined
that
(A) Sequence did not materially breach this Agreement or (B) Sequence reasonably
cured within the requisite period.
5.
Term
and Termination. This
Agreement shall be effective for a period of one (1) year (the “Exclusivity
Period”), commencing upon the Effective Date of this Agreement and may be
extended as the parties shall mutually agree in writing (the “Term”), subject to
the establishment of arrangements for additional compensation and other
appropriate terms for such extension.
6.
Confidentiality.
The
Company acknowledges that all opinions and advice (written or oral) given by
Sequence to the Company in connection with Sequence’s engagement are intended
solely for the benefit and use of the Company in considering the transaction
to
which they relate, and the Company agrees that no person or entity other than
the Company shall be
November
20, 2006
Page
7
entitled
to make use of or rely upon the advice of Sequence to be given hereunder, and
no
such opinion or advice shall be used for any other purpose or reproduced,
disseminated, quoted or referred to at any time, in any manner or for any
purpose, nor may the Company make any public references to Sequence, or use
Sequence’s name in any annual reports or any other reports or releases of the
Company without Sequence’s prior written consent.
7. Independent
Contractor; Conflicts. The
Company acknowledges that Sequence is in the business of providing investment
banking services to others. Nothing herein contained shall be construed to
limit
or restrict Sequence in conducting such business with respect to others, or
in
rendering such advice to others. Sequence shall perform its services hereunder
as an independent contractor and not as an employee of the Company or an
affiliate thereof. It is expressly understood and agreed to by the parties
hereto that Sequence shall have no authority to act for, represent or bind
the
Company or any affiliate thereof in any manner, except as may be agreed to
expressly by the Company in writing from time to time. In no event shall
Sequence be construed as a fiduciary of the Company. In the course of Sequence’s
activities, it or its affiliates may hold long or short positions, and may
trade
or otherwise effect transactions for its own account in debt or equity
securities or senior loans of the Company.
8. Reliance.
The
Company recognizes and confirms that, in advising the Company and in fulfilling
its engagement hereunder, Sequence will use and rely on data, material and
other
information furnished to Sequence by the Company and that Sequence may rely
upon
the data, material and other information supplied by the Company without
independently verifying the accuracy, completeness or veracity of
same.
9. Notices.
Any
notice or communication permitted or required hereunder shall be in writing
and
shall be deemed sufficiently given if hand-delivered or sent (i) postage prepaid
by registered mail, return receipt requested, or (ii) by nationally-recognized
overnight courier, or (iii) by facsimile, to the respective parties as set
forth
below, or to such other address as either party may notify the other of in
writing:
|
If
to the Company, to:
|
If
to Sequence, to:
|
|
Xxxxxxxxx
Holdings, Inc.
|
Sequence
Investment Partners, LLC
|
|
000
Xxxxxxx Xxxxxx
|
000
Xxxx Xxx Xxxxxx, Xxxxx 000
|
|
Xxxxxxxxxx,
XX 00000
|
Xxxxxxxxxx,
XX 00000
|
|
Attention:
Xxxx X. Xxxx
|
Attn:
Xxxxx Xxxx
|
|
Title:
CEO
|
Title:
Managing Director
|
|
Fax:
|
Fax:
|
10. Indemnification.
a. The
Company agrees to indemnify and hold harmless Sequence and its affiliates,
the
respective managers, directors, officers, partners, agents and employees of
Sequence and its affiliates, and each other person, if any, controlling Sequence
or any of its affiliates (collectively, “Indemnified Persons”), from and
against, and the Company agrees that no Indemnified Person shall have any
liability to the Company or its owners, parents, affiliates, security holders
or
creditors for, any losses, claims, damages or liabilities (including actions
or
proceedings in respect thereof) (collectively “Losses”) (i) related to or
arising out of (A) the Company’s actions or failures to act (including
statements or omissions made, or information provided, by the Company or its
agents) or
November
20, 2006
Page
8
or
gross
negligence. If such indemnification is for any reason not available or is
insufficient to hold Sequence harmless, the Company agrees to contribute to
the
Losses involved in such proportion as is appropriate to reflect the relative
benefits received (or anticipated to be received) by Sequence and by the Company
with respect to this Agreement or, if such allocation is judicially determined
unavailable, in such proportion as is appropriate to reflect other equitable
considerations such as the relative fault of Sequence on the one hand and of
the
Company on the other hand; provided, however, that, to the extent permitted
by
applicable law, the Indemnified Persons shall not be allocated relative fault
which in the aggregate is in excess of the amount of all fees actually received
by Sequence in connection with this Agreement. Relative benefits to Sequence,
on
the one hand, and the Company, on the other hand, shall be deemed to be in
the
same proportion as (i) the total value paid or proposed to be paid or received
or proposed to be received by the Company or its security holders, as the case
may be, pursuant to the transaction(s), whether or not consummated, contemplated
by this Agreement bears to (ii) all fees paid to Sequence in connection with
this Agreement.
b. The
Company will advance each Indemnified Person all expenses (including reasonable
fees and disbursements of counsel) as they are incurred by such Indemnified
Person in connection with investigating, preparing for or defending any action,
claim, investigation, inquiry, arbitration or other proceeding (“Action”)
arising out of a third party claim. The Company further agrees that the Company
will not settle or compromise or consent to the entry of any judgment in any
pending or threatened Action in respect of which indemnification may be sought
hereunder (whether or not an Indemnified Person is a party therein) unless
the
Company has given Sequence reasonable prior written notice thereof and used
all
reasonable efforts, after consultation with Sequence, to obtain an unconditional
release of each Indemnified Person from all liability arising therefrom. In
the
event the Company is considering entering into one or a series of transactions
involving a merger or other business combination or a dissolution or liquidation
of all or a significant portion of the Company’s assets, the Company shall
promptly notify Sequence in writing. If requested by Sequence, the Company
shall
then establish alternative means of providing for the Company’s obligations set
forth herein on terms and conditions reasonably satisfactory to
Sequence.
c. If
multiple claims are brought against Sequence in any Action with respect to
at
least one of which indemnification is permitted under applicable law and
provided for under this Agreement, the Company agrees that any judgment,
arbitration award or other monetary award shall be conclusively deemed to be
based on claims as to which indemnification is permitted and provided. The
Company’s obligations hereunder shall be in addition to any rights that any
Indemnified Person may have at common law or otherwise. Solely for the purpose
of enforcing this Section 10, the Company hereby consents to personal
jurisdiction and to service and venue in any court in which any claim which
is
subject to this Agreement is brought by or against any Indemnified
Person.
d. The
provisions of this Section 10 shall apply to the Agreement (including related
activities prior to the date hereof) and any modification thereof and shall
remain in full force and effect regardless of the completion or termination
of
the Agreement.
November
20, 2006
Page
9
11. Expenses.
a. All
costs
and expenses incident to the performance by the Company of its obligations
hereunder shall be paid by the Company. All costs and expenses incident to
the
performance by the Company of its obligations hereunder and paid by Sequence
shall be reimbursed to Sequence by the Company and shall be due upon
request.
b. All
out-of-pocket costs and expenses of Sequence incident to the performance by
Sequence of its obligations hereunder, including fees and expenses of counsel
for Sequence, shall, upon submission of reasonable documentation therefore
to
the Company, be reimbursed by the Company, up to an aggregate amount of $15,000,
unless otherwise agreed in writing by the Company. As an advance against the
expenses expected to be incurred by Sequence under this Agreement, the Company
will, upon execution
of this Agreement, pay Sequence $10,000. Any amounts owing to Sequence
in
excess
of this amount shall be due upon request.
12.
Publicity.
Following
consummation of any financing and during the Term, consistent with applicable
securities laws, Sequence shall have the right to place advertisements in
financial and other newspapers and journals, at Sequence’s own expense,
describing its services to the Company hereunder and, in that regard, shall
have
the right to include therein the name and corporate logo of the
Company.
13.
Counterparts.
This
Agreement may be executed in any number of counterparts, each of which together
shall constitute one and the same original document.
14.
Assignability
and Modification. This
Agreement is not assignable and cannot be
modified or changed, nor can any of its provisions be waived, except by the
mutual agreement
in
writing of all parties.
15.
Choice
of Law; Venue; Jury Trial. The
laws
of the State of South Carolina shall govern the validity of this Agreement,
the
construction of its terms, and the interpretation of the rights and duties
arising hereunder. Any legal action shall be brought in federal or state court
located in the City of Charleston, State of South Carolina. The
parties hereto irrevocably waive to the extent permitted by law, all rights
to
trial by jury in any action, proceeding or counterclaim arising out of or
relating to this Agreement.
16.
Severability.
Each
section, paragraph, term or provision of this Agreement shall be
considered severable and if, for any reason, any paragraph, term or provision
is
determined to
be
invalid or contrary to any existing or future law or regulation, such will
not
impair the operation, or affect the remaining portions, of this
Agreement.
If
you
are in agreement with the foregoing, please execute and return the enclosed
copy
of
this
letter to the undersigned no later than 5:00 p.m. (Eastern time) on Wednesday,
November
22,
2006, after which time this letter will expire if not so accepted. We are
delighted to be working with you and look forward to a successful
outcome.
November
20, 2006
Page
10
Very
truly yours,
SEQUENCE
INVESTMENT
PARTNERS,
LLC f'
By: 
Xxxxx X. High
Managing
Director
Agreed
and accepted:
XXXXXXXXX
HOLDINGS,
INC.
By:
____________________________
Name:
Xxxx X. Xxxx
Title:
CEO
Date:
November
20, 2006
Page
11
Section
3(a) List
[to
be
provided by Company]
