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EXHIBIT 10.1
[MITANI & CO., LLC LETTERHEAD]
CONFIDENTIAL
Somanetics Corporation
0000 Xxxx Xxxxx Xxxx
Xxxx, XX 00000-0000
Re: Engagement Agreement
Gentlemen:
This letter agreement (the "Agreement") confirms the engagement of Mitani &
Co., LLC (collectively with its Affiliates, referred to herein as the "Agent")
to provide investment banking and advisory services to Somanetics Corporation
(collectively with its Affiliates, referred to herein as the "Company") in
connection with a strategic transaction (including a joint venture,
partnership, acquisition, financing, sale of securities or assets, and/or
licensing or granting of rights to technology, intellectual property,
distribution, import, marketing and manufacturing) relating only to those
markets listed in Schedule I hereto (the "Target Markets") (such transaction
shall be referred to herein as a "Transaction"). This Agreement confirms the
engagement of the Agent during the term hereof as the Company's sole and
exclusive representative to arrange such Transactions and does not authorize
the Agent to arrange any transactions unrelated to the Target Markets.
1. Services: During the term of this Agreement, the Agent will provide the
Company with the following services:
a. financial advice and assistance with respect to the Target
Markets and structuring, planning, and negotiating any
Transactions;
b. identification, evaluation, and solicitation of potential
counterparties to Transactions, (collectively with their
Affiliates, referred to herein as "Counterparties") to be
communicated to the Company periodically in writing;
c. negotiation with Counterparties that indicate interest in a
potential Transaction; and
d. assistance in consummating any potential Transactions. All
decisions relating to any Transaction and the terms thereof
shall be made by the Company in its sole discretion.
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February 20, 1997
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As a condition of the Agent's sole and exclusive representation of the Company
hereunder, the Company agrees and acknowledges that (i) it shall promptly
direct to the Agent any inquiry (either solicited or unsolicited, and
originating either directly or indirectly from Counterparties located or doing
business in the Target Markets) relating to a Transaction and received by the
Company during the term of this Agreement, and (ii) the Agent shall be entitled
to the full Fee hereunder for any Transaction consummated with such
Counterparty. Notwithstanding the foregoing, the Agent agrees and acknowledges
that in no event shall Xxxxxx, Limited or Dong Bang Healthcare Products Co.,
Ltd. be deemed Counterparties; provided, that the Company agrees that it shall
refrain from negotiating with Xxxxxx, Limited or Dong Bang Healthcare Products
Co., Ltd. in any manner regarding the Target Markets during the term of this
Agreement.
2. Fees: In consideration of our services as your Agent in connection with a
Transaction as described in Section 1, the Company agrees to compensate the
Agent pursuant to the following fee schedule (the "Fee"):
a. Immediately upon the receipt, in connection with a Transaction,
of Consideration, as defined below, other than a purchase of
equity in the Company, the Company agrees to pay the Agent a
Fee in cash equal to: 10% of Consideration up to and including
$2 million; 8% of Consideration in excess of $2 million and up
to and including $4 million; and 6% of Consideration in excess
of $4 million and up to and including $6 million; and 4% of
Consideration in excess of $6 million.
b. Immediately upon receipt of Consideration, in connection with a
Transaction, for the purchase of equity in the Company, the
Company agrees to pay the Agent a Fee in cash and five (5) year
warrants to purchase shares of common stock in the Company in
accordance with the following schedule:
CONSIDERATION CASH WARRANT TOTAL
Up to and including
$2 million: 5% 5% 10%
In excess of $2 million
and up to and including
$4 million: 4% 4% 8%
In excess of $4 million
and up to and including
$6 million: 3% 3% 6%
In excess of $6 million: 2% 2% 4%
The warrant portion of the Fee shall be calculated by
multiplying the "Warrant" percentage above by a fraction, the
numerator of which is the Consideration, as defined below, and
the denominator of which is the Exercise Price. The "Exercise
Price" per share of such warrant will equal one hundred ten
percent (110%) of (i) the price per share of the Company's
common
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Somanetics Corporation
February 20, 1997
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stock sold in connection with the Transaction, or, if other equity
securities are sold, (ii) the average of the closing prices of the
Company's shares of common stock for the 90 trading days prior to the
day of announcement of the Transaction. Such warrant will have
antidilution protection (including for stock splits, reverse splits,
reclassifications, rights offerings, stock dividends and similar
transactions), cashless exercise provisions, and piggyback
registration rights.
Notwithstanding the foregoing piggyback registration rights shall not be
available in the next underwritten public offering of the Company's
securities proposed in the Company's Letter Agreement dated January 17,
1997 with Xxxxx Xxxxxx & Co., Inc., including any amendments or renewals
thereof (the "Underwriting Agreement"). Additionally, no Fee shall be
payable in connection with the issuance or sale of any securities of the
Company pursuant to the Underwriting Agreement.
c. The Company agrees to pay the Agent a cash Fee equal to a percentage
of Transaction Revenues, as defined below, pursuant to the following
schedule:
(i) For Transaction Revenues that are royalties or fees, 10%
of such Transaction Revenues.
(ii) For Transaction Revenues that are product sales revenues
or any revenues other than royalties or fees, 6.5% of
Net Sales Revenues received by the Company, as such term
is defined below.
The foregoing Fee shall be payable with respect to (i) the Company's
Cerebral Oximeter monitoring system, (which, collectively with any
later generation products or relabeled products, shall be referred to
as the "Cerebral Oximeter") and (ii) separate products or technologies
sold in connection with a Transaction, for a period of fifteen (15)
years after the date of first commercial sale of such respective
product or technology by a Counterparty in connection with such
Transaction. The expiration of such fifteen-year period with respect
to one product or technology, such as the Cerebral Oximeter, shall not
affect or terminate any fifteen-year period relating to other products
or technologies sold in connection with such Transaction. The parties
agree to establish a mutually acceptable arrangement for the regular
payment of such cash Fee to the Agent or to an entity designated by
the Agent, and the Company agrees to provide the Agent with current
information relating to the payment of such Fee, including the basis
for calculation of the Fee, promptly and subject to audit upon the
Agent's reasonable request.
"Consideration" shall be defined as (i) any form of payment for the securities
or assets of the Company (including the fair market value of any assets, net of
any liabilities, contributed to a joint venture); (ii) license fees, technology
access fees, milestone payments, research and development payments, option
payments, deposits or any other form of payment to the Company related to the
Transaction; (iii) the repayment or assumption by the Counterparty of
obligations of the Company, including without limitation indebtedness for money
borrowed or amounts owed by the Company to inventors or owners of technology;
and (iv) the cash, assets or debt assumption received by the Company in any
separate transactions affecting assets of the Company (e.g., purchase or lease
of any real estate or other assets owned by the Company or its shareholders)
that are related to the Transaction. Consideration shall not include any
Transaction Revenues.
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February 20, 1997
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"Transaction Revenues" shall be defined as the gross payments actually made to
the Company relating to products, services or technologies sold, marketed or
distributed in connection with a Transaction, including without limitation
royalties, fees, product sales revenues, joint venture revenues (net of the
initial capitalization by the Company) and any other revenues.
"Net Sales Revenues" shall be defined as the gross amount billed for products
sold pursuant to a Transaction, net of (i) any actual documented freight,
packaging, crating, transportation insurance, sales taxes, or other shipping
charges collected by the Company; and (ii) actual documented discounts,
rebates, returns, allowances, and credits.
3. Subsequent Acquisition: In the event that the Company is substantially
acquired by, merges into, or combines with a Counterparty located or doing
business in the Target Markets with whom a Transaction is consummated hereunder
within four (4) years after the closing date of such Transaction, the Company
will pay to the Agent the full Fee on such transaction as a separate
Transaction calculated in accordance with Section 2.a., notwithstanding the
expiration or termination of this Agreement, provided, that the Agent shall
agree to negotiate exclusively on behalf of the Company if requested to do so
by the Company in its sole discretion. If the Company elects in its sole
discretion to engage another advisor in connection with such acquisition, the
Agent and such other advisor shall split the Fee as they mutually agree, and
absent such agreement, they shall share such Fee equally. If the Agent
represents another party in such acquisition, then the Agent shall waive its
rights to any Fee under this Section 3.
4. Expenses: The Company agrees to reimburse actual and reasonable
out-of-pocket expenses and advance travel expenses incurred by the Agent in
connection with this engagement during the term of this Agreement, subject to
the prior approval of the Company. This shall include a non-refundable expense
advance of $7,500 to be paid upon the execution of this Agreement. The parties
acknowledge that $8,000 has been additionally budgeted for the initial
presentations by the Agent to Counterparties in Korea.
5. Indemnification: The Company and the Agent agree to indemnify and hold
harmless the other and each of their directors, officers, agents, employees and
controlling persons to the extent and as provided in Addendum A attached hereto
and incorporated herein by reference. The provisions of this Section 5 and
Addendum A incorporated herein by reference shall survive the termination of
the Agent's engagement under this letter and shall be binding upon any
successor or assigns of the parties hereto.
6. Term: This Agreement shall expire six months after the date of your
signature hereto, and shall automatically renew for successive six month terms
thereafter unless either party elects not to renew by written notice to the
other 10 business days prior to the expiration of such term. This Agreement
may be terminated by either party at any time upon ten (10) business days'
prior written notice to the other party. The indemnification provisions of
Section 5 and Addendum A, and the obligation of the Company to pay the Agent the
Fee pursuant to Sections 2 and 3, and to reimburse expenses incurred pursuant
to Section 4 shall survive the expiration or termination of the Agreement. In
addition, if this Agreement expires or is terminated prior to the consummation
of a Transaction and the Company consummates a Transaction, (i) within
twenty-four months after such expiration or termination, with a Counterparty
approached by the Agent during the term hereof with the consent (as defined
below) of the Company; or (ii) within three months after such expiration of
termination, with any Counterparty domiciled in Korea, then the Company will
pay the Agent the full Fee calculated pursuant to Section 2 with respect to
such Transaction. "Consent" shall be deemed given by the
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Somanetics Corporation
February 20, 1997
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Company if the Agent notifies the Company of a Counterparty in writing pursuant
to Section 1 and the Company does not object to such Counterparty within five
working days of delivery of such notice by telecopy or mail.
7. Due Diligence: The Company agrees to provide the Agent with relevant
information requested by the Agent concerning the Company and will provide the
Agent with reasonable access to the Company's officers, accountants and
counsel. The Agent acknowledges that the information provided and its
activities hereunder are highly confidential and will execute an appropriate
Confidentiality Agreement if requested to do so by the Company. The Agent will
not disclose to any person, firm or corporation, nor use for its own benefit,
during or after the term of this Agreement, any trade secrets or other
confidential information of the Company to the extent any such information is
not generally available to the public other than as a result of an unauthorized
disclosure by the Agent. This Agreement is subject in its entirety to the
satisfactory completion of due diligence by the Agent, and if such due
diligence is not favorably completed by March 15, 1997, this Agreement shall
terminate without any obligation by the parties hereto.
8. General: This Agreement, and the rights and obligations of the parties
hereto, shall be governed by and construed in accordance with New York law
(without regard to any rules or principles of conflicts of law that might look
to any jurisdiction outside of New York). This Agreement supersedes all prior
discussions, negotiations and agreements, if any, between the parties hereto,
and shall be binding upon the parties hereto and their respective Affiliates,
legal representatives, agents, successors and assigns, including any party that
succeeds to, is assigned or acquires all or substantially all of the Company's
interest in or control of any product, compound, technology or intellectual
property related to any Transaction. This Agreement and the transactions
contemplated herein have been duly authorized by each party in accordance with
all necessary corporate action on its part. This Agreement may be assigned by
the Agent in its sole discretion to an Affiliate thereof. This Agreement may
not be modified other than by a written amendment signed by the parties hereto.
For the purpose of this Agreement, the term "Affiliate" shall mean an
executive, director or subsidiary of such entity or any entity or person that
controls, is controlled by, or is under common control with such entity.
Affiliate shall also include any joint venture, partnership, investor
consortium, business group or other similar entity, not included in the
foregoing, to which such entity or any of its Affiliates is currently a party
or becomes a party.
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Somanetics Corporation
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If the foregoing letter is in accordance with your understanding of the terms
of our engagement, please sign and return to us the enclosed duplicate hereof.
Very truly yours,
MITANI & CO., LLC
/s/ Xxxxx X. Xxxxxxx
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Xxxxx X. Xxxxxxx
President
AGREED AND ACCEPTED:
SOMANETICS CORPORATION
/s/ Xxxxx X. Xxxxxxx
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Xxxxx X. Xxxxxxx
President
Dated: Feb. 21, 1997
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SCHEDULE I
TARGET MARKETS
South Korea
North Korea
Taiwan
China (including Hong Kong)
Philippines
Indonesia
Malaysia
Singapore
Vietnam
Myanmar
Mongolia
Cambodia
Brunei
India
Laos
Thailand
Pakistan
Bangladesh
Nepal
Sri Lanka
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ADDENDUM A
Somanetics Corporation (collectively with its Affiliates, the "Company") agrees
to indemnify and hold harmless Mitani & Co., LLC ("the Agent"), its officers,
directors, employees and agents, and each person, if any, who controls the Agent
(all of the foregoing are referred to as an "Indemnified Party"), from any and
all losses, claims, damages or liabilities, joint or several, as they are
incurred (including, without limitation, any reasonable legal or any other
reasonable expenses incurred by any Indemnified Party in connection with the
preparation for or defense of any such action, claim or proceeding subject to
indemnification hereunder, whether or not resulting in any liability) to which
such Indemnified Party may become subject under any statute, common law or
otherwise, relating to or arising out of this Agreement, this assignment or any
transactions referred to in this letter or any transactions arising out of the
transactions contemplated by this letter; provided, however, that the Company
shall not be liable to an Indemnified Party in any such case to the extent that
any such loss, claim, damage or liability resulted from said Indemnified
Party's bad faith, willful misconduct or gross negligence, or any information
furnished by the Indemnified Party to the Company. Promptly after receipt by an
Indemnified Party of notice of any claim or the commencement of any action or
proceeding in respect of which indemnity may be sought against the Company,
such Indemnified Party will notify the Company in writing of the receipt or
commencement thereof, and the Company shall assume the defense of such action
or proceeding (including the employment of counsel reasonably satisfactory to
the Indemnified Party and the payment of the fees and expenses of such
counsel). Notwithstanding the preceding sentence, the Indemnified Party will
be entitled to employ its own counsel in such action if the Indemnified Party
reasonably determines that a conflict of interest exists which makes
representation by counsel chosen by the Company not advisable. In such event,
the fees and disbursements of one separate counsel will be paid by the Company,
in connection with such action or proceeding subject to indemnification
hereunder.
The Agent agrees to indemnify and hold the Company, its officers, directors,
employees and agents, and each person, if any, who controls the Company (all of
the foregoing are referred to as a "Company Indemnified Party") from any and
all losses, claims, damages or liabilities, joint or several, as they are
incurred (including, without limitation, any reasonable legal or any other
reasonable expenses incurred by any Company Indemnified Party in connection
with the preparation for or defense of any such action, claim or proceeding
subject to indemnification hereunder, whether or not resulting in any
liability) to which such Company Indemnified Party may become subject under any
statute, common law or otherwise, relating to or arising out of the Agent's bad
faith, willful misconduct or gross negligence in connection with its duties
under this Agreement; provided, however, that the Agent shall not be liable to
a Company Indemnified Party in any such case to the extent that any such loss,
claim, damage or liability resulted from said Company Indemnified Party's bad
faith, willful misconduct or gross negligence, or any information furnished by
the Company Indemnified Party. In no event shall the Agent or any Indemnified
Party have any liability to the Company or Company Indemnified Party in
connection with any Transaction consummated in connection with this Agreement.
Promptly after receipt by a Company Indemnified Party of notice of any claim or
the commencement of any action or proceeding in respect of which indemnity may
be sought against the Agent, such Company Indemnified Party will notify the
Agent in writing of the receipt or commencement thereof, and the Agent shall
assume the defense of such action or proceeding (including the employment of
counsel reasonably satisfactory to the Company Indemnified Party and the
payment of the fees and expenses of such counsel). Notwithstanding the
preceding sentence, the Company Indemnified Party will be entitled to employ
its own counsel in such action if the Company Indemnified Party reasonably
determines that a conflict of interest exists which makes representation by
counsel chosen by the Agent not advisable. In such event, the fees and
disbursements of one separate counsel will be paid by the Agent, in connection
with such action or proceeding subject to indemnification hereunder.
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If for any reason the foregoing indemnity, hold harmless and reimbursement
provisions, rights, remedies and protections are unavailable to any Indemnified
Party or Company Indemnified Party, or insufficient to hold any Indemnified
Party or Company Indemnified Party harmless, then the Company and the Agent
shall contribute to the amount paid or payable by such Indemnified Party or
Company Indemnified Party as a result of such losses, claims, damages,
liabilities or expenses in such proportion as is appropriate to reflect the
relative fault of the Company or the Agent on the one hand and the Indemnified
Party or Company Indemnified Party on the other hand, as well as any relevant
equitable considerations. It is hereby further agreed that the relative fault of
the Company or the Agent on the one hand and an Indemnified Party or Company
Indemnified Party on the other hand, with respect to the transactions shall be
determined by reference to, among other things, whether any untrue or alleged
untrue statement of a material fact or incorrect opinion or conclusion or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or the Agent on the one hand or by the Indemnified Party
or Company Indemnified Party on the other hand, as well as the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement, opinion, conclusion or omission.
The indemnity, contribution and expense reimbursement agreements and
obligations set forth herein shall be in addition to any other rights, remedies
or indemnification which any Indemnified Party or Company Indemnified Party may
have or be entitled to at common law or otherwise, and shall remain operative
and in full force and effect regardless of any investigation made by or on
behalf of any Indemnified Party or Company Indemnified Party.
