EXHIBIT (10)(xxix)
ENGAGEMENT AGREEMENT
E.MERGENT, INC. (TOGETHER WITH ITS SUBSIDIARIES AND AFFILIATES THE "COMPANY")
The parties to this Engagement Agreement (the "Agreement") include
Xxxxxxxxx, Agio, Xxxxx Securities, Inc. ("GAHS") on the one hand, and the
COMPANY, on the other hand. This is to confirm the COMPANY's retention of GAHS
for a minimum period of six months from the date hereof (the "Minimum Term"), as
its exclusive agent to assist it with a merger, sale, or any similar transaction
related to the COMPANY. After six months, GAHS will proceed on a month-to-month
basis until the COMPANY provides GAHS with written 30-day notice of termination
of this Agreement.
1. GAHS'S PERFORMANCE. Throughout the course of its engagement, GAHS will
follow all Process Guidelines set forth in Exhibit A.
2. TYPES OF TRANSACTIONS COVERED. Transactions covered under this
Agreement (individually, a "Transaction" and collectively, "Transactions")
include any sale, exchange or other disposition of all or a material (more than
20 percent) portion of the COMPANY, whether accomplished by a sale of assets or
stock by or through the COMPANY and/or its shareholders (whether effected in one
Transaction or a series of Transactions), and shall include without limitation
any merger, tender or exchange offer, joint venture, equity investment,
recapitalization, or any other Transaction, the effect of which is to change the
control or ownership of the COMPANY. Transactions shall not include acquisitions
by the COMPANY, unless more than 20 percent of the COMPANY'S stock is issued in
connection with such Transaction with a GAHS Prospect. If a Transaction is
completed during the term of this Agreement, GAHS shall be entitled to its
Accomplishment Fee provided herein.
3. EQUITABLE AGENCY PROTECTION PERIOD. If within a period of 9 months
following termination of this Agreement, the COMPANY or its shareholders enter
into an agreement in principle to consummate a Transaction with a GAHS Prospect,
GAHS's Accomplishment Fee shall be due and payable in full upon closing of such
Transaction pursuant to Paragraph 6 below. For purposes of record keeping and
monitoring only, within approximately 30 days of the expiration of this
Agreement, GAHS will provide the COMPANY with a protective list of GAHS
Prospects.
4. GAHS PROSPECT DEFINED. For purposes of this Agreement, "GAHS Prospect"
includes any party or parties that are mutually agreeable to both parties and
may include: (i) whom GAHS reasonably contact on the COMPANY's behalf and with
COMPANY'S consent hereunder; or (ii) who participate in a Transaction wherein
the services of GAHS are utilized by the COMPANY or its shareholders. GAHS
Prospects also include companies and individuals affiliated with any party
described in (i) or (ii) above.
5. ACCOMPLISHMENT FEE AND TOTAL CONSIDERATION. The amount payable by
COMPANY to GAHS at closing of a Transaction with a GAHS Prospect (the
"Accomplishment Fee") shall be calculated as provided below:
o $500,000 (the "Minimum Fee") plus the incentive fee (the "Incentive
Fee") of:
o 0 percent of Total Consideration up to $16.8 million; plus
o 5.0 percent of Total Consideration from $16.8 to $22.4 million; and
o 7.5 percent of Total Consideration over $22.4 million.
In addition, if Total Consideration is at or above $22.4 million, GAHS
shall receive an additional $50,000 bonus. In any Transaction event with a GAHS
Prospect, GAHS shall be paid the Minimum Fee.
GAHS's Accomplishment Fee shall be based upon the total consideration
("Total Consideration") paid or payable to the COMPANY, its shareholders,
employees or other security holders in connection with, or in anticipation of,
the Transaction, including amounts placed in escrow, and shall include without
limitation:
(a) Cash paid and securities transferred to the COMPANY and/or holders of
its securities at closing, including the cash value of any outstanding
stock options or warrants, whether vested or not, that are "rolled over"
or "cashed out" as part of this Transaction;
(b) In the case of a sale of stock by the COMPANY's shareholders, all
liabilities of the COMPANY, other than trade payables and operating
expenses accrued in the ordinary course of business. In the case of a
sale of assets, all liabilities of the COMPANY, other than trade
payables and accrued operating expenses, which are assumed by the buyer;
(c) The net present value (applying a discount rate equal to the then
prevailing prime rate as quoted in THE WALL STREET JOURNAL) of scheduled
payments provided for in any leases by the purchaser of assets owned and
retained by the COMPANY, its shareholders, or any affiliates thereof;
(d) The principal amount of deferred installments of the purchase price
including promissory notes;
(e) Amounts payable under above-market consulting agreements, employment
contracts, above non-compete agreements or similar arrangements;
(f) Future payments that are contingent on the future earnings or operations
of the COMPANY (or in the case of an asset sale, the underlying assets),
with the value of such payments included in Total Consideration based on
the present value of the reasonably expected amount of such contingent
payments based on COMPANY projections or in the absence of projections,
as determined in good faith by the COMPANY and GAHS, utilizing a 15
percent per annum discount rate;
(g) The fair market value of COMPANY assets retained after closing
(including accounts receivable and real property) or transferred to its
shareholders or any affiliates thereof after the date of this Agreement
(including extraordinary bonuses, dividends, or other distributions of
property or capital); provided, however, that if the COMPANY retains
more than 50 percent of its assets after closing then this paragraph (h)
shall not apply;
(h) The value of any retained or acquired interest in the COMPANY or its
successor, or the right to acquire such interest.
6. PAYMENT OF ACCOMPLISHMENT FEE. Except as otherwise provided below, the
Accomplishment Fee shall be paid to GAHS or its assigns in cash via wire
transfer at the time of closing a Transaction. In the event that all or a
portion of the Total Consideration includes securities or other property (other
than installment notes), the portion of GAHS's Accomplishment Fee attributable
thereto, shall be payable at closing in cash, based on the fair market value of
such non-cash items as determined by mutual agreement of the parties. In the
event the parties are unable to agree on the fair market value, GAHS shall have
the option to receive payment in like kind, or to cause an independent appraiser
acceptable to the COMPANY to determine fair market value, the expense of which
appraisal shall be shared equally by the parties.
7. CONSULTING FEES AND EXPENSES. The COMPANY shall pay to GAHS a one-time
upfront consulting fee of $50,000, payable at the signing of this Agreement, for
services conducted by GAHS during the term of this Agreement. The COMPANY shall
also reimburse GAHS monthly in arrears for all reasonable out-of-pocket
expenses. GAHS shall not exceed $10,000 in aggregate out-of-pocket expenses
(excluding the Confidential Memorandum and pre-approval travel) without written
permission of the COMPANY incurred on behalf of the COMPANY. GAHS shall provide
detailed monthly itemized summaries of expenses for which reimbursement is
requested by GAHS. The COMPANY agrees that any unpaid payment (or portion
thereof) of any fee, expense, consulting fee, or other amount payable to GAHS
shall bear interest payable at the highest rate of interest permissible by law,
but not to exceed 12 percent per annum, from the date that such payment is due
hereunder to the date that said payment is paid in full.
8. INDEMNIFICATION. The COMPANY agrees to indemnify and hold GAHS harmless
against and from all losses, claims, damages or liabilities, and all actions,
claims, proceedings and investigations in respect thereof (collectively,
"Losses"), arising out of or in connection with this engagement or the
performance by GAHS of services hereunder, and to timely reimburse GAHS for all
reasonable legal and other out-of-pocket expenses as incurred by GAHS in
connection with investigating, preparing to defend or defending any such Losses,
whether or not GAHS is named as a party thereto; provided, however that the
COMPANY shall not be liable to the extent such Losses are finally determined by
arbitration as herein provided to have resulted from GAHS's gross negligence or
willful misconduct. If such indemnification and reimbursement is insufficient or
unavailable pursuant to the foregoing sentence or otherwise, the
COMPANY and GAHS agree to make contributions to any Losses paid or payable in
such proportion as appropriately reflects the relative economic benefits
received by, and fault of, the COMPANY and its shareholders, on the one hand,
and GAHS, on the other hand, as well as other equitable considerations;
provided, however that the COMPANY agrees to make contributions to any Losses
paid or payable such that GAHS will not be liable for more than the
Accomplishment Fee and consulting fee received by GAHS pursuant to this
Agreement. The foregoing rights to indemnification shall not limit any other
rights that GAHS may have at law or otherwise.
9. RELIANCE. The COMPANY will furnish GAHS with such information regarding
the business and financial condition of the COMPANY as is reasonably requested,
all of which will be, to the COMPANY's best knowledge, accurate and complete in
all material respects at the time furnished. The COMPANY will promptly notify
GAHS if it learns of any material misstatement in, or material omission from,
any information previously delivered to GAHS. On an ongoing basis, the COMPANY
will inform GAHS of any material developments or matters that occur or come to
the attention of the COMPANY, its directors, officers, employees or affiliates.
In performing its services hereunder, GAHS shall be entitled to rely without
investigation upon all information that is available from public sources as well
as all other information supplied to it by or on behalf of the COMPANY or its
advisors and shall not in any respect be responsible for the accuracy or
completeness of, or have any obligation to verify, the same or to conduct any
appraisal of assets. Except in connection with potential Transaction, all
information provided by COMPANY to GAHS shall be held in confidence and shall
not be disclosed or provided to any one other than the Prospects or used for any
purpose other than the Transaction without the COMPANY'S prior written consent.
10. ARBITRATION. The COMPANY and GAHS both agree that any dispute between
them in any way relating to this Agreement shall be determined and settled by
arbitration in accordance with the rules of the American Arbitration
Association. All costs associated with any such disputes (including both
parties' legal fees) shall be allocated between the parties by the arbitrators.
All decisions and awards of the arbitrators shall be final and binding on both
parties, and may be enforced by any court with jurisdiction.
11. TERMINATION FEES. A Termination Fee of $100,000 shall be payable if
during the term of the Agreement a Qualified Proposal (defined below) is
received and the COMPANY and/or its shareholders elect not to consummate a
Transaction for any reason. For purposes of this Agreement, a "Qualified
Proposal" is defined as a binding non-contingent cash offer for the COMPANY
providing for Total Consideration of at least $16.8 million and which (i) has
been received from a party with the financial wherewithal to consummate the
contemplated Transaction, and (ii) contains terms and conditions that are
customary for the contemplated Transaction. All Termination Fees shall be paid
to GAHS upon termination of this Agreement, and shall be credited against any
Accomplishment Fees payable thereafter. However, nothing in this Agreement shall
require COMPANY to accept any Transaction.
12. FAIRNESS OPINION. At the request of the COMPANY, GAHS will undertake a
study to enable it to render its opinion with respect to the fairness from a
financial point of view of the consideration proposed to be paid to the COMPANY
or its shareholders in connection with a Transaction, subject to the execution
of a separate engagement agreement. The engagement agreement for the fairness
opinion will provide for an opinion fee of $100,000 payable at such time as GAHS
initially delivers its opinion to the Board of Directors of the COMPANY.
13. MISCELLANEOUS. All questions arising hereunder shall be determined
according to Minnesota Law. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. This Agreement incorporates the entire
understanding of the parties regarding the subject matter hereof, and supersedes
all previous agreements or understandings regarding the same, whether written or
oral. The provisions of this paragraph and Paragraphs 3, 6, 8, 10, and 11 will
survive the termination of this Agreement. GAHS agrees for the term of this
Agreement and during the Equitable Agency Protection Period, not to trade in
COMPANY stock or permit any employees or advisors of GAHS that are aware of the
existence of this Agreement to trade in COMPANY stock.
Read and agreed to this 28th day of September, 2001 by:
E.MERGENT, INC: XXXXXXXXX, AGIO, XXXXX SECURITIES, INC.:
/s/ Xxxxx Xxxxxx /s/ Xxxxxx X. Xxxxxx, Xx.
--------------------------- -----------------------------------
By: Xxxxx X. Xxxxxx By: Xxxxxx X. Xxxxxx, Xx.
Its: CEO President
EXHIBIT A
TO
ENGAGEMENT AGREEMENT
XXXXXXXXX, AGIO, XXXXX SECURITIES, INC.
AND
E.MERGENT, INC.
PROCESS GUIDELINES
In the course of GAHS's engagement hereunder, GAHS will exercise its best
efforts to:
(a) Maintain strict confidentiality of all financial and other proprietary
information, data, and materials relating to the COMPANY except as
provided below.
(b) Familiarize itself with the business, operations, physical assets,
financial condition and prospects of the COMPANY.
(c) Develop a list of potential buyers of the COMPANY whom GAHS believes in
good faith to be financially qualified and potentially interested in
participating in a Transaction.
(d) Not share with any GAHS Prospect the identity of the COMPANY or any
confidential information relating to the COMPANY unless the GAHS
Prospect has executed a CONFIDENTIALITY AGREEMENT in a form pre-approved
by the COMPANY.
(e) Contact GAHS Prospects on the COMPANY's behalf and, as appropriate,
arrange for and orchestrate meetings between GAHS Prospects and the
COMPANY.
(f) Assist in preparation of a CONFIDENTIAL MEMORANDUM describing the
COMPANY, and other analyses and data as may be reasonably requested by
GAHS Prospects, the final drafts of which will be presented to the
COMPANY for its approval (which approval will take the form of a letter,
from the COMPANY to GAHS, representing that the material in the
CONFIDENTIAL MEMORANDUM is "true and not false or misleading and there
are no omissions of material fact"); provided, however, that the
CONFIDENTIAL MEMORANDUM is the sole property of GAHS and may not be
reproduced or distributed to parties other than the COMPANY's
shareholders, officers, directors, employees and representatives without
GAHS's prior written consent.
(g) Work in the capacity outlined above with the COMPANY's legal counsel,
accountants, and other advisors as reasonably requested and directed by
the COMPANY.
(h) Present to the COMPANY all proposals from GAHS Prospects and make
recommendations as to the COMPANY's appropriate negotiating strategy and
course of conduct.
(i) Assist in all negotiations and in all document review as reasonably
requested and directed by the COMPANY.
(j) If the COMPANY requests GAHS to provide additional services not
otherwise set forth in this Agreement, the COMPANY and GAHS will enter
into an additional agreement which will set forth the nature and scope
of the services, appropriate compensation and other customary matters.
