ENGAGEMENT AGREEMENT
This Agreement is effective as of the date of execution, by and between
FiberChem, Inc. 0000 Xxxxx Xxxxx, Xxxx X., Xxx Xxxxx, XX 00000 (referred to
as "Company"), and entrenet Group, LLC, 0000 Xx Xxxxxxx Xxxxxxx, Xxxxx X,
Xxxxx Xxxx, Xxxxxxxxxx 00000 (referred to as "entrenet").
In this Agreement, the party who is contracting to receive services shall be
referred to as "Company," and the party who will be providing the services
shall be referred to as "entrenet".
Company desires to have services provided by entrenet.
Therefore, the parties agree as follows:
1. DESCRIPTION OF SERVICES. Beginning on the Effective Date, entrenet will
provide the services, (collectively, the "Services") as described in
Exhibit A attached hereto and incorporated herein by reference.
2. PERFORMANCE OF SERVICES. The manner in which the Services are to be
performed and the specific hours to be worked by entrenet shall be
determined by entrenet. entrenet shall, and the Company will rely on
entrenet's promise to work as many hours as may be reasonably necessary
to fulfill entrenet's obligations under this Agreement.
3. PAYMENT. Company will pay a fee to entrenet for the Services in an
amount and under terms and conditions as described in Exhibit A.
4. TRANSACTION. For purposes of this agreement, the term "Transaction"
shall mean, whether in one or a series of transactions: Any capital
financing, including without limitation, any financing for debt, equity,
capital stock (common or preferred), convertible instruments, lines of
credit and secured and/or unsecured debt; Any merger/acquisition activity
including without limitation, (i) the acquisition, directly or indirectly,
through purchases, sales, or otherwise, of any or all portions of the
securities of the Company by an investor or (ii) any merger,
consolidation, reorganization, recapitalization, restructuring or other
business combination involving the Company and an investor.
5. CONSIDERATION. For purposes of this agreement, the term "Consideration"
means the total proceeds and other consideration paid and to be paid or
contributed directly or indirectly, in connection with a Transaction
(which consideration shall be deemed to include amounts paid or to be
paid into escrow) to the Company and its shareholders, including,
without limitation: (i) cash; (ii) notes, securities, and other property
(including all options, warrants or other instruments or arrangements
convertible into or exercisable for any of the foregoing) at the fair
market value thereof; (iii) liabilities assumed; (iv) payments to be made
in installments; (v) amounts paid or payable under management, consulting,
supply, service, distribution, technology transfer or licensing
agreements, and real property or equipment lease agreements, and
agreements not to compete, and other similar arrangements (including such
payments to management), entered into other than in the ordinary course
of business; and (vi) contingent payments (whether or not related to
future earnings or operations). The fair market value of non-cash
consideration consisting of securities shall be determined based upon
(A) the closing sale price for such securities on the registered national
securities exchange providing the primary market therein on the last
trading day prior to the date of receipt thereof by the Company or its
shareholders, (B) if such securities are not so traded, the average of
the closing bid and asked prices, as reported by the National Association
of Securities Dealers Automated Quotation System on the last trading day
prior to the date of receipt thereof by the Company or its shareholders,
or (C) if such securities are not so traded or reported, agreement
between the Company and entrenet. The fair market value of any non-cash
Consideration other than securities shall be determined by agreement of
the Company and entrenet. If all or any portion of the Consideration is
to be paid over time, then that portion of the Transaction Fee
attributable thereto shall be
payable, in the sole discretion of entrenet, either (i) as and when such
payments are made or (ii) upon consummation of a Transaction, calculated
based on the present value of such Consideration utilizing a discount
rate of 7% per annum.
6. ACCOUNTING AND INSPECTION RIGHTS. For all compensation referred to in
Exhibit A, it is further agreed that Company shall maintain written
records in sufficient detail for purposes of determining the amount of
Fees due entrenet. Company shall provide to entrenet a written accounting
that sets forth the manner in which Fee payments were calculated. Upon
15 days notice, entrenet or entrenet's agent shall have the right to
inspect Company's records for the limited purpose of verifying the
calculation of Fee payments, subject to such restrictions as Company
may reasonably impose to protect the confidentiality of the records.
Such inspections shall be made at the company's principal place of
business during regular business hours as may be set by the Company.
7. EXPENSE REIMBURSEMENT. entrenet shall be entitled to reimbursement from
Company for the following pre-approved "out-of-pocket" expenses: travel
expenses, airfare, hotel, meals, postage and delivery, copying,
long-distance telephone calls, or other expenses as shall be mutually
agreed upon.
8. TERM/TERMINATION. This Agreement shall be effective upon signing and
shall have an initial term and such renewal terms as shall be described
in Exhibit A. The termination of this engagement is also defined in
Exhibit A.
9. RELATIONSHIP OF PARTIES. It is understood by the parties that entrenet
is an independent contractor with respect to Company, and not an employee
of Company. Company will not provide fringe benefits, such as health
insurance benefits, paid vacation, or any other employee benefit, for
the benefit of entrenet.
10. INDEMNIFICATION AND CONTRIBUTION. (a) If, in connection with the
services or matters that are the subject of this agreement, entrenet
becomes involved in any capacity in any action or legal proceeding,
the Company agrees to reimburse entrenet, its affiliates and their
respective directors, officers, employees, representatives and
controlling persons (each an "Indemnified Person") promptly upon request
for all expenses (including without limitation, fees and disbursements of
legal counsel and the cost of investigation and preparation) as they are
incurred. In the event a determination is made to the effect set forth
below holding that entrenet is not entitled to indemnification hereunder,
entrenet shall promptly refund to the Company all amounts advanced under
this Section in respect of reimbursement of expenses. The Company also
agrees to indemnify and hold each Indemnified Person harmless against all
losses, claims damages or liabilities, joint or several (collectively,
"Damages"), to which such Indemnified Person may become subject
(i) arising out of or based upon any untrue statement or alleged untrue
statement of a material fact contained in any offering materials or any
other written or oral communication provided to any investor of securities
of the Company or arising out of or based upon the omission or alleged
omission to state in any such document or communication a material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were
made, not misleading; or (ii) in connection with the services or matters
which are the subject of this agreement, provided that the Company
shall not be liable under the foregoing indemnity in respect of any
Damages to the extent that a court having jurisdiction shall have
determined by a final judgment (not subject to further appeal) that
such damages resulted directly and primarily from the gross negligence
or willful misconduct of entrenet or any other Indemnified Person. The
Company also agrees that no Indemnified Person shall have any liability
to the Company for or in connection with this engagement, except for
any liability which results directly and primarily from the gross
negligence or willful misconduct of the Indemnified Person. (b) The
Company and entrenet agree that if, for any reason, any indemnification
sought pursuant to this Section is unavailable or is insufficient to
hold any Indemnified Person Harmless, then, whether or not entrenet is
the person entitled to indemnification, the Company and entrenet shall
each contribute to amounts paid or payable in respect of the Damages for
which such indemnification is unavailable or insufficient in such
proportion as if appropriate to reflect (i) the relative benefits to the
Company, on the one hand, and entrenet, on the other and (ii) their
relative fault, in connection with the matters as to which such Damages
relate, as well as any relevant equitable considerations; provided that
in no event shall the amount to
2
be contributed by entrenet exceed the amount of fees actually received by
entrenet hereunder (excluding any amounts received by entrenet as a
reimbursement of expenses). The Company and entrenet agree to consult in
advance with one another with respect to the terms of any proposed
waiver, release or settlement of any claim, action or proceeding to which
entrenet or an Indemnified Person may be subject as a result of the
matters contemplated by this agreement and further agree not to enter
into any such waiver, release or settlement without the prior written
consent of one another (which consent shall not be unreasonably
withheld), unless such waiver, release or settlement includes an
unconditional release of entrenet or such indemnified Person, as the case
may be, from all liability arising out of such claim, action or
proceeding. (c) The agreements of the Company under this Section shall be
in addition to any liabilities the Company may otherwise have and shall
apply whether or not entrenet or any other Indemnified Person is a formal
party to any claim, action or legal proceedings. ANY RIGHT TO A TRIAL BY
JURY WITH RESPECT TO ANY CLAIM FOR INDEMNIFICATION OR CONTRIBUTION
HEREUNDER OR IN RESPECT OF ANY CLAIM, ACTION OR LEGAL PROCEEDING ARISING
OUT OF OR RELATED TO THE SERVICES OF entrenet HEREUNDER OR IN ANY OTHER
MANNER IS HEREBY WAIVED BY EACH INDEMNIFIED PARTY AND BY THE COMPANY.
11. COOPERATION, CONFIDENTIALITY, ETC. (a) The Company shall furnish
entrenet with all information and data which entrenet shall reasonably
deem appropriate in connection with its activities on the Company's
behalf, and shall provide entrenet full access to the Company's officers,
directors, employees and professional advisors. Further, the Company
shall involve entrenet in all discussions between the Company and
potential investors and shall make available to entrenet all information
regarding potential investors which the Company receives from any source
whatsoever. The Company recognizes and confirms that entrenet in acting
pursuant to this engagement will be using information in public reports
and other information provided by others, including information provided
by the Company, and that entrenet does not assume responsibility for, and
may rely without independent verification upon, the accuracy or
completeness of any such information. (b) the Company agrees that
entrenet's advice is for the use and information of the Company's
management and Board of Directors only and the Company will not disclose
such advice to others (except the Company's professional advisors and
except as required by law) or summarize or refer to such advice without,
in each case, entrenet's prior written consent. Notwithstanding anything
to the contrary contained in the foregoing, in the event the Company is
required by law to make any filings with any governmental authority
(including without limitation the Securities and Exchange Commission)
which mention entrenet or any disclosure to the holder of its securities
concerning entrenet, the Company shall afford entrenet the opportunity to
review such disclosure in advance and to approve the form thereof, such
approval not to be unreasonably withheld or delayed. entrenet agrees that
it will not, without the prior written consent of the Company, disclose,
to any third party any confidential information provided by the Company
to entrenet in connection with this engagement, except to the extent (i)
such disclosure is required by applicable law, regulation or legal
process, (ii) such information becomes publicly known other than as a
result of the breach by entrenet of its obligations set forth in this
sentence, and (iii) such disclosure is requested or required by any bank
regulatory authority having jurisdiction over entrenet.
12. OTHER TRANSACTIONS. The Company acknowledges that entrenet and its
affiliates may have and may in the future have investment and commercial
banking, trust and other relationships with parties other than the
Company, which parties may have interests with respect to a Transaction.
Although entrenet in the course of such other relationships may acquire
information about the Transaction, potential investors or such other
parties, entrenet shall have no obligation to disclose such information
to the Company or to use such information on the Company's behalf.
Furthermore, the Company acknowledges that entrenet may have fiduciary or
other relationships whereby entrenet may exercise voting power over
securities of various persons, which securities may from time to time
include securities of the Company, potential investors or to others with
interests with respect to a Transaction. The Company acknowledges that
entrenet may exercise such powers and otherwise perform its functions in
connection with such fiduciary or other relationships without regard to
its relationship to the Company hereunder.
3
13. ACKNOWLEDGMENT OF SERVICES PROVIDED. entrenet may include descriptions
of services provided by entrenet to the Company in entrenet's promotional
materials. entrenet shall also have the right to place notices
("Tombstones") in financial or other newspapers and journals at entrenet's
own expense describing its services to Company under this Agreement. The
Company may not otherwise be publicly referred to by entrenet without
Company's prior consent.
14. NOTICES. All notices required or permitted under this Agreement shall
be in writing and shall be deemed delivered when delivered in person or
deposited in the United States mail, first class postage prepaid,
addressed as follows:
IF FOR COMPANY: IF FOR entrenet:
--------------- ----------------
FiberChem, Inc. entrenet Group, LLC
Xxxxx X. Xxxxxx Xxxxxxx X. Xxxxxx
President/CEO Chief Financial Officer
0000 Xxxxx Xxxxx, Xxxx. B. 0000 Xx Xxxxxxx Xxxxxxx, Xxxxx X
Xxx Xxxxx, XX 00000 Xxxxx Xxxx, XX 00000
Such addresses may be changed from time to time by either party by
providing written notice to the other in the manner set forth above.
15. ARBITRATION AND CONSENT TO JURISDICTION. Any dispute and/or
controversy relating to or arising from the interpretation and/or
application of this Agreement shall be submitted at the request of the
Company or entrenet to a neutral arbitrator selected by the parties from
the J.A.M.S/Endispute panel of arbitrators for a determination which
shall be final and binding as to the parties thereto. Arbitration shall
take place in Santa Xxxx, located in the county of Sonoma, state of
California for a determination which shall be final and binding as to the
parties thereto. The decision and award of the arbitrator may include the
cost of the arbitration proceedings and may include reasonable attorney
fees for the successful party. The arbitration shall be conducted in
accordance with California Arbitration Act (CCP Section 1280 et seq.)
and not by court action except as provided by California law for the
judicial review of arbitration proceedings. Nothing herein contained
shall be deemed to affect the rights of any Party to serve process in any
manner other than as permitted by law.
16. ENTIRE AGREEMENT. This Agreement, along with any Exhibits attached
hereto, contains the entire agreement of the parties with respect to the
subject matter and supersedes any other agreement whether oral or written
which are not fully expressed herein, except for carryover provisions of
any previous executed agreements between entrenet and Company.
17. AMENDMENT. This Agreement may be modified or amended if the amendment
is made in writing and is signed by both parties.
18. SEVERABILITY. If any provision of this Agreement shall be held to be
invalid or unenforceable for any reason, the remaining provisions shall
continue to be valid and enforceable. If a court finds that any provision
of this Agreement is invalid or unenforceable, but that by limiting such
provision it would become valid and enforceable, then such provision
shall be deemed to be written, construed, and enforced as so limited.
19. WAIVER OF CONTRACTUAL RIGHT. The failure of either party to enforce
any provision of this Agreement shall not be construed as a waiver or
limitation of that party's right to subsequently enforce and compel
strict compliance with every provision of this Agreement.
20. APPLICABLE LAW. This Agreement shall be governed by the laws of the
State of California, excluding that body of law known as conflict of laws.
4
COMPANY entrenet GROUP, LLC
By: /s/ Xxxxx X. Xxxxxx By: /s/ Xxxx Xxxxxxxxxx
------------------------------ ----------------------------
Xxxxx X. Xxxxxx Xxxx Xxxxxxxxxx
President/CEO Vice President
Date Executed: 10/2/97 Date Executed: 10/2/97
------------------- -----------------
5
Exhibit A
ADVISORY SERVICES PROVIDED BY ENTRENET
As a corporate advisor, entrenet will use its best efforts to assist in
achieving a successful Transaction. Such Transaction, as defined in
paragraph four (4) of this agreement, includes without limitation any
capital financing, debt financing, and/or merger/acquisition
transactions.
entrenet may act as exclusive corporate advisor in providing services to
the management of the Company. Services shall include ADVICE and COUNSEL
in the following areas:
- Financing strategies.
- Strategic partnerships, acquisition and merger strategies.
- Securing placement agents.
- Corporate positioning.
- Business plan development.
- Executive Placement.
- Preparation for, and participation in Financial Meetings ("Road
Show").
entrenet will not act as a broker, but will assist in locating brokerage
services if required. entrenet will not participate in general
advertising of solicitation of the Company. Investors brought to the
Company will be accredited investors to the best of entrenet's knowledge.
entrenet may provide additional direct consulting services to the
Company beyond its role as corporate advisor (egs. business plan
preparation, corporate presentation development, financial pro-forma
preparation, private-placement or public offering administrative/
contractual/financial services, interim management, etc.) at the Company's
request. Such additional direct consulting services would be charged at
entrenet's prevailing consulting rates at the time of the assignment(s) or
as agreed to separately in the future.
entrenet COMPENSATION.
TRANSACTIONS. Upon the successful completion of a Transaction, as
defined in paragraph four (4) of this agreement, initiated at any time
prior to the termination of the contract, the fees paid to entrenet
shall be five percent (5%) (payable in cash) of gross Consideration as
defined in paragraph five (5) of this agreement. Compensation is due
entrenet regardless of the origination of the Transaction source. This
paragraph shall apply to all transactions except for the Rights Offering
currently being prepared by the Company to be presented to the current
share holders of the Company. However, the Company has offered entrenet
the opportunity to participate on a standby basis in the Rights
Offering and should entrenet agree to participate, the Company agrees
to include the Rights offering as a transaction under this paragraph.
ADVISORY SERVICES. At signing of this engagement agreement, entrenet
shall earn compensation of $120,000 for the twelve-month term. Form of
payment shall be fifty percent (50%) payable in cash and fifty percent
(50%) payable in convertible notes (as defined below). Payments due
entrenet as follows: $5,000 cash and $60,000 note payable upon signing
of this agreement. The balance of $55,000 cash is payable upon completion
of a transaction, or at the rate of $5,000 per month for 11 additional
months, whichever comes first.
DIRECT INTRODUCTION OF FINANCING SOURCES. In addition to fees for
successful Transactions and advisory services, entrenet's fees for
direct introduction of a financing source or referral of principal
parties, shall be five percent (5%) (payable in cash) of the gross
consideration provided by such source. This paragraph shall
6
apply to all introductions except for financing directly related to the
consummation of any merger or acquisition transaction and, additionally,
shall not apply to the transactions already in progress by the Company
as listed on Exhibit B.
EXECUTIVE PLACEMENT. In addition to other applicable fees, if entrenet
introduces an executive-level candidate for management, who is
subsequently hired by Company during the term of this Agreement (or
within one year from introduction), then entrenet's fee shall be fifteen
percent (15%) (payable in cash) of the candidate's total first year
Consideration.
WARRANTS. For all successful Transactions and Direct Introduction of
Financing Sources, the Company shall grant to entrenet a five-year
warrant to purchase shares of Company's stock valued at the exercising
price as defined in the following sentence equal to the total of all
fees paid to entrenet in conjunction with all such transactions. These
warrants shall contain all standard provisions, as well as stock split
adjustments and piggy-back registration provisions and shall have an
exercise price equal to the lower of market or the purchase price of the
stock issued in conjunction with any such transaction.
FORM OF NOTES PAYABLE. Notes shall take the form of non-transferable 2
year subordinated convertible Note with 10% interest rate, with interest
and principal due upon maturity. The note and accumulated interest is
convertible by entrenet into common shares. The conversion price for
publicly traded companies shall be a 20% (30% if trading of underlining
shares is restricted under rule 144 of the Securities and Exchange
Commission) discount of the moving 21-day average for the immediate
period preceding the signing of this agreement. The conversion price for
non-publicly traded companies shall be a 35% discount from the price of
the most recent financing completed. Any notes associated with renewals
will be in the same form as the notes for the initial term. The Company
agrees to provide piggy-back registration rights to register
aforementioned common shares underlying the conversion of the notes in
the Company's next registration statement filed with the Securities and
Exchange Commission, for which the shares can be registered.
ESCROW. All Fees, Common Stock Warrants, or other consideration earned
in conjunction with Advisory Services and Direct Introduction of
Financing Sources are to be paid through the escrow account at time of
funding.
NON-ACCOUNTABLE EXPENSE ADVANCE. To offset local auto travel, long-distance
telephone calls, postage, delivery, copying, faxing and other office
costs, entrenet shall be advanced a non-accountable $1500 for the
six-month term. Form of payment shall be $750 payable in cash upon
signing of this agreement. The balance of $750 is payable in cash upon
completion of a Transaction, or in 90 days, whichever comes first.
TERM
The term of the Agreement shall be twelve (12) months from the date of
signing. The Agreement shall automatically renew for successive twelve
(12) month terms, unless either party provides 60 days written notice to
the other party prior to either the termination of the applicable
initial term or any renewal terms.
Upon termination of this Agreement, payments under this paragraph shall
cease; provided, however, that entrenet shall be entitled to payments
for periods or partial periods that occurred prior to the date of
termination and for which entrenet has not yet been paid.
For any sources introduced to the Company prior to termination, the
above entrenet compensation schedule will remain in effect for one (1)
year following the termination date of this agreement.
7
EXHIBIT B
LIST OF EXCLUSIONS FROM COMPENSATION FOR DIRECT INTERODUCTION OF FINANCING
SOURCES
8
EXHIBIT B -- ENTRENET EXCEPTIONS
Whessoe Varec/Xxxxxxx+Xxxxxx
Xxxxx, plc
Hoechst Celanese
AIG
Xxxxxxx Corp.
ABB
Texas Instruments
Thermo Electron
Halma Corp.
Shell Oil (Pipeline) Co.
Osmonics, Inc.
Great Britain Petroleum
Horiba Corp.
Xxxxxxx Xxxxx & Company
Xxxxxxxx Xxxxxx & Xxxxx, Ltd., et. al.
